1. Explain the case of Hunter v. Moss.

(5m)

HUNTER v. MOSS - [1993] 1 WLR 934 & [1994] 1 WLR 452

FACTS

The defendant, Mr. Moss was the founder of Moss Electrical Co Ltd and was the
registered holder of 950 shares in the company with an issued share capital of 1,000
shares, and one day he said to Hunter,the finance director that he could have 5% (i.e
50) of these shares as part of his employment. However the other 900 shares he
owned was not mentioned at all. Eventually, due to tax concerns, and mainly
because Moss had second thoughts, this 50 shares was never enforced . Hunter
then sued Moss claiming his promised 50 shares. The claim was rested on two
factors which are; whether the language used was sufficient to create a trust, and
whether or not the trust failed to provide the three certainties because of the lack of
separation between the 900 and 50 shares.

The deputy judge, in a following trial, held that on the facts, the defendant had
made a valid oral declaration of trust constituting himself trustee for the plaintiff of 5%
of the company's issued share capital, which applied to 50 of the defendant's 950
shares. The defendant applied by motion to the deputy judge, within 28 days, for the
judgment to be recalled and set aside on the ground that the purported trust had
failed for want of certainty of the subject matter, which had not been argued at trial.

JUDGEMENT

On the hearing of the motion in the lower court, the motion is held dismissed,
that a purported declaration of trust was sufficiently certain as to subject matter if,
immediately after the purported declaration, the court could have made an order for
the execution of the trust; that in the case of a trust of intangible assets the
requirement of certainty did not necessarily entail segregation or appropriation of the
specific property which was to form the subject matter of the trust; that, since the
shares were of such a nature as to be indistinguishable one from another and were
therefore all equally capable of satisfying the trust, it was unnecessary to identify any
particular 50 shares; and that, accordingly, the trust was not void for uncertainty of
subject matter.

The defendant appealed. In the Court of Appeal, the court dismissed the appeal,
that in the case of a declaration of trust of personalty the requirement of certainty of
subject matter did not necessarily entail segregation of the property which was to
form the subject matter of the trust; that the declaration of trust by the defendant was
sufficiently certain as to subject matter, since the shares held by the defendant were
of such a nature as to be indistinguishable from each other and were all therefore
capable of satisfying the trust without identifying any particular 50 shares; and that,
accordingly, the trust was not void for uncertainty of subject matter.

How lower court and Court of Appeal in Hunter v. Moss distinguished re

London Wine?

Both judgments in lower court and court of appeal in Hunter v. Moss (modern
approach of trust) were distinguished re London Wine Co. (Shippers) Ltd. [1986]
P.C.C. 121(traditional principle).

In re London Wine Co. (Shippers) Ltd. [1986] P.C.C. 121, it concerned a contest
between the purchasers of consignments of wine from a company whose business
was one of dealers in wine and the claimants under a floating charge granted by the
dealers. Re London Wine Co (Shippers) Ltd were unsecured creditors of
a bankrupt wine trading company who demanded that they should be able to claim
the wine they had bought.

The problem was that, the bottles of wine were not individually identifiable. Even
though the purchasers had paid for their consignments and the dealers had in stock
sufficient wine to answer the purchasers' respective purchases, the dealers, however
had not segregated or identified specific cases to the respective purchasers' various
contracts as no title had passed to the purchasers. The issue was whether a trust for
a number of bottles of wine would satisfy the certainty of the subject matter if they
were kept together with other bottles of the same wine. Oliver J determined that as
the chattels were not necessarily the same, the certainty was not satisfied . He stated
that as all chattels are not identical, the property must be segregated from the mass.
Furthermore Oliver J held that: I appreciate the point taken that the subject matter is
a part of a homogeneous mass so that specific identity is of as little as importance as
it is, for instance, in the case of money. Nevertheless, as it seems to me, to create a
trust it must be possible to ascertain with certainty not only what the interest of the
beneficiary is to be but to what property it is to attach. It was held that the trust
failed.

In lower court, Hunter v Moss distinguishes Re London Wine on the basis that
the concern in Re London Wine was solely tangible assets meanwhile in Hunter
case, shares are intangible. The judicial approach to tangible property is enclosed in
Re London Wine Co as Oliver J explained "it seems to me that in order to create a
trust it must be possible to ascertain with certainty not only what the interest of the
beneficiary is to be but also to what property it is to attach" he also stated that "I
cannot see how for instance a farmer who declares himself a trustee of 2 sheep
without identifying them can be said to have created a perfect trust.

In Hunter v. Moss, the deputy High Court judge in the Chancery Division, Colin
Rimer QC, however, do not consider that the principle, which Oliver J. applied with
regard to the certainties requisite for the purposes of a trust relating to tangible
assets, is one which is necessarily also applicable by analogy to trusts of intangible
assets. Colin Rimer QC held that since the shares were all identical, the lack of
segregation between the shares did not invalidate the trust. The judge distinguished
the precedent set by Re London Wine Co Ltd because the subject matter which is
the wine, were potentially different and require identification, while all of Moss shares
were of such a nature as to be all identical therefore identification was unnecessary
and irrelevant as each of them could satisfy the trust. Rimer J instead cited
Rollestone v National Bank of Commerce in St. Louis, a decision of the Supreme
Court of Minnesota where it was held that separation of goods was not needed in
such a situation, in this case I cannot leave the point open, in my judgment the
decision in Rollestone, reflected the correct principle and I approach the present case
in the same way. In the result, I conclude that the trust which I have found the
defendant to have declared was not void for the lack of certainty as to its subject
matter

On appeal, the Court of Appeal followed the Rimers decision and stated a valid
trust had been created. The Court of Appeal was concerned with the status of the

declaration by the employer as to whether or not he had declared himself as a

trustee. Dillon LJ held that in the case of a declaration of trust of personalty, the
requirement of certainty of subject matter did not necessarily entail segregation of the
property which was to form the subject matter of the trust. A trust made by oral
declaration was not void for uncertainty of subject matter simply because it referred
to a number of shares in the company, and did not refer to the specific shares.
Therefore the subject matter in the declaration was sufficiently certain because the
shares were indistinguishable from each other and capable of satisfying the trust
without identifying any particular 50 shares. The trust was also required for Moss to
enforce the terms of the employment contract. In Re London Wines, the aggrieved
customers were attempting to use the trust institution to side step the rules for the
passing of property contained in the Sales of Goods Act 1979 because if a buyer has
paid for unascertained goods, the buyer is deemed to have property rights in them
regardless

of

the

segregation.

There

could

be

no

award

for specific

performance because the Sale of Goods Act required similarly that any goods be
ascertained. Therefore, the Court of Appeal made a distinction between the nature of
the subject matter which is a contract to transfer fungibles, and goods. Hunter applies
to fungible property meanwhile Re London applies to non-fungible property. Re
London differs from Hunter because the former is in a sale of goods context, where
special considerations may exist and each sale differs from another, while in the
latter, shares are ultimately the same bundle of rights in a company even though
different prices may be paid for them.

Dillon LJ also distinguished Re London Wine by saying it was different from the
case on hand because it concerned with the appropriation of chattels and when the
property in chattels passes. He said that the case on hand concerned with a
declaration of trust, accepting that the legal title remained in the defendant and was
not intended, at the time the trust was declared, to pass immediately to the claimant.
On the subject of a possible creation of an equitable charge over a mixed fund rather

than a trust Dillon LJ said that the case was not concerned with a mere equitable
charge over a mixed fund. He said there was a similarity between giving, by will, a
specified number of shares of a certain class in a certain company and the
defendants declaration of becoming himself a trustee of 50 of ordinary shares in
MEL as both are effective to give a beneficial proprietary interest to the beneficiary
under the trust. Accordingly, Dillon dismissed the appeal, holding that the trust was
not void for lack of uncertainty of the subject matter.

Other than that, the Court of Appeal distinguished Re London Wine stating that
the case "involved the appropriation of chattels and when the property in the chattels
passes" and "was not concerned with a declaration of trust." In addition, a practical
effect of Hunter v Moss is that it prevents the employer from benefiting from his own
breach. As a result, a defendant employer cannot pull out of a promise to provide the
claimant employee with the shares which are the subject matter of the dispute.

Hunter v Moss determined that where the property is money, shares or chose in
action (intangible assets of identical value), then it does not need to be segregated.
In determining so, the Court of Appeal distinguished Re London Wine on the basis
that that whilst the shares in Hunter v Moss were identical, the wines of bottles in Re
London Wine were not identical.