Certainty of Subject Matter (Hunter v Moss)

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  • Certainty of Subject-matter
    • Introduction
      • Knight v Knight 1840, Lord Langford stated that the three certainties must be established to create a valid express trust.
      • The leading case regarding certainty of subject-matter is Hunter v Moss.
        • Although it is considered a significant case, it does not come without it's problems. There has been both academic and judiciary criticisms.
    • Before Hunter v Moss
      • Re London Wine Co 1986: LWC was an owner of a large stock of wine and declared it would hold parts of the stock on trust for various buyers, but no steps were taken to set apart the wine from the bulk of the stock.
        • The court held that the trust was invalid - a failure to segregate the wine rendered the subject matter uncertain. When LWC became insolvent, the buyers had no priority over its creditors. Subject matter must be specific in that it is segregated from the mass.
      • Re Goldcorp Exchange 1995: Dealer in gold went into liquidation and the customer sought delivery of gold he had previously purchased. The court held that there was no trust. Subject matter was uncertain as the bullion had not been separated or set aside.
      • These cases would be different today due to the s.20A and s.20B of the Sale of Goods Act 1979 which provides that the purchaser of part of a bulk of goods becomes an owner in common of a share of the bulk.
    • Hunter v Moss
      • Moss owned 950 shares in a company and declared himself a trustee of 50 shared for H, without specifying which of these 50 shares. CA held (Dillion LJ) held that the trust was valid, despite the shares not being segregated.
        • They distinguished this case by:
          • Clarifying identity on death: if the shares were left in a will this would have been valid as the executors of the will would have been able to resolve the uncertainty as to the identity of the subject matter.
          • Types of shares: It was recognised that there had been a lifetime declaration of trust by a settlor of 50 shares and the settlor held shares in two companies then it would be void for uncertainty. However, because the settlor owned identical shares in the same company then this was not held as void.
            • Penner states that this has plunged trust law into turmoil.
          • In Re London Wine it concerened the appropriation of chattles and the passage of legal title, whereas Hunter v Moss concerned shares and the declaration of trust, in respect of which there was no suggestion that legal title had passed.
          • Distinction between intangible and tangible property: if there was 200 identical bottles of wine, or 200 identical black sheep it is unclear as to whether they would be identical as even though they look the same, the wine may have a faulty cork, or one of the sheep may have a disease. Whereas, shares and money are the exact same.
            • Mac Jordan was decided after Hunter V Moss so surely money is fungible?
              • Different from MacJordan Construction v Brookmount Erostin: just because the property is intangible does not mean that subject-matter is certain. In this case the building contract provided that the client would retain 3% of the contract price as trustee for the builder depending on the work being satisfactory. However, the client had never assumed an obligation to establish the retention fund from that account. Hunter v Moss had intention that the shares were held on trust for the claimant.
        • Despite Hunter v Moss being followed by Re Harvard Securities 1998 and Pearson v Lehman Brothers 2010, there have been many criticisms of the law in this area. Hayton in 1994 raises a number of criticisms.
          • The decision causes some practical difficulties, primarily because it is not possible to identify any clear rationale as to how the trust works in practice
            • Although it might not matter at the time the trust is declared which shares are held on trust, it may matter subsequently. Where have those shares been sold? What if the shares have increased in value should they be presumed to belong to the beneficiary?
              • If the tracing principle illustrated by Martin is a such a brilliant remedy for identifying intangible property why should it not work for tangible property?
                • Alastair Hudson agrees. He says that it contradicts the element of property law which states that there be specific identifiable property to be subject to a property right. He further states that he proclaims the distinction between tangible and intangible 'spurious.'He states that having different rules for tangible and intangible property is unnecessary and will contribute to uncertainty in the law.
            • David Hayton states that Dillion J ignored the crucial difference between testamentary bequests and inter vivos trusts
            • Professor Hudson stated that the only way to reconcile with the two cases is public policy - Re Gold was insolvent but the employer in Hunter was not. In Re Gold cases, it is public public concern that if there is a trust then it would put the beneficary interest above the creditors interest. However, this is not satisfactory disclosure of the law.
          • Some argue that although it was accepted in Re Harvard it was applied reluctantly. It appears that Hunter can only be followed if it is applied to intangible property only.
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