Certainty of subject matter.

Objective definition of property, the Hunter v. Moss problem

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Note that in many of the cases considered here, the totality of some piece of property is conveyed, some of which is expressed to be on trust. If the "some" is not properly defined, then the trust will fail, and on the principles discussed in Hancock v. Watson [1902] A.C. 14 (which applies where the trust fails for any reason), the recipient will keep the property free of any trust.

Objective definition of property

The courts are very fussy about defining property precisely - e.g., Sprange v. Barnard (1789) 2 Bro. C.C. 585 - the case concerned a disposition of 300 in joint stock annuities (i.e., a wasting asset) "... for my husband ...; and at his death, the remaining part of what is left, that he does not want for his own wants and use, to be divided between ...". It was held by Arden M.R. that the husband was absolutely entitled to the 300.

In Palmer v. Simmonds (1854) 2 Drew 221, "the bulk" of my residuary estate" was held insufficiently precise. The residuary estate was left to Harrison, "for his own use and benefit, as I have full confidence in him, that if he should die without issue he will leave the bulk of my residuary estate unto ...". In rejecting the contention that any of the property was impressed with a trust, Kindersley V-C said:

"What is the meaning then of bulk? The appropriate meaning, according to its derivation, is something which bulges out ... Its popular meaning we all know. When a person is said to have given the bulk of his property, what is meant is not the whole but the greater part, and that is in fact consistent with its classical meaning. When, therefore, the testatrix uses that term, can I say that she has used a term expressing a definite, clear, certain part of her estate, or the whole of her estate? I am bound to say that she has not designated the subject as to which she expresses her confidence; and I am therefore of opinion that there is no trust created; that [the residuary legatee] took absolutely, and those claiming under him now take."

Definable shares will satisfy the test. Some, most, etc., will not.

It seems from the recent cases that the issue is whether the courts can define an objective test, or whether the meaning necessarily depends on the views of the person deciding. In Re Kolb's WT [1962] Ch. 531, "Blue chip securities" failed; although the term was generally understood by investors, no technical or objective definition exists, in the sense that not everyone would agree. But Cross J. accepted that there were terms that the courts could define, even though expert evidence on their meaning may differ.

Conversely, in Re Golay's WT [1965] 1 WLR 969, Ungoed-Thomas J took the view that "reasonable income" satisfied the test, because it could be objectively quantified by a court, even though he appears to have thought that individual trustees might differ on what that income was. The yardstick was objective, and should not be rendered uncertain because of difference in those who sought apply it.

The distinction between Kolb and Golay seems very fine, and the following observations might be made of the last two cases:

1. If in Kolb, the testator had specified somebody whose definition of the term was to decide the issue, that would have been sufficiently certain;

2. It is difficult to believe that the courts would decline to define any term, were they called upon to do so;

3. It is arguable that, given that the quantification has to be done in the first instance by the trustees, not the court, the test in Golay is too lax, unless trustees are always to be taking directions from a court.

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The Hunter v. Moss problem

A different type of problem arose in Hunter v Moss [1994] 1 W.L.R. 452 (followed in Re Lewis's of Leicester Ltd [1995] 1 B.C.L.C. 428), where an oral declaration of trusteeship of 5 per cent (i.e., 50 shares) of a company's issued share capital of 1,000 shares succeeded, even though the particular shares were not ascertained or identified (the trustee - Moss - owned 950). However, the company was precisely identified, all the shares in that company were identical, and the quantification (50 shares) was obviously precise. Moreover, as long as Moss retained all 950 shares there would be no obvious point in identifying which 50 shares were subject to the trust.

It has been pointed out, e.g., by Hayton (1994) 110 L.Q.R. 335, that difficulties in a case like Hunter v. Moss could arise if the trustee later split up the fund, sold the shares and invested some of the proceeds in fund A and some in fund B, one of which funds would then have performed better than the other. However, equitable tracing rules ought to allow this problem to be resolved. Also, even Hayton accepts (as did Dillon L.J. in Hunter v. Moss itself), that if Moss had executed a transfer of 50 shares, and handed over to his brokers the transfer and the trusts certificate for all 950 shares, in equity the transfer would take place immediately, and there would be a trust of the 50 shares: Rose v. IRC. This could give rise to exactly the same problems.

Hunter v Moss has however come under fairly heavy academic criticism, e.g., Hayton (1994) 110 L.Q.R. 335, and has been regarded as inconsistent with the Privy Council decision in Re Goldcorp Exchange [1995] 1 A.C. 74, where an argument was unsuccessfully advanced that a seller of gold bullion (who had gone into liquidation having taken money from the purchasers) had become a trustee of an undivided share in his stocks. Peter Birks ([1995] R.L.R. 83, 87) even went so far as to argue that from the reasoning of the Privy Council in Re Goldcorp Exchange Ltd:

‘One inference is that the Court of Appeal’s decision in Hunter v Moss [1994] 1 W.L.R. 452 must be wrong.’

In fact, neither case mentions the other, possibly because they were decided at virtually the same time, and there are quite significant differences between the two cases. In Goldcorp, there was no declaration of trusteeship by the vendor, so there is a certainty of intention problem; the trust property was not constant, since the vendor’s gold stocks were being traded all the time; there is also much authority, for example in Re Wait [1927] 1 Ch. 606, followed in Re London Wine Co. (Shippers) Ltd [1986] P.C.C. 121, and The Aliakmon [1986] A.C. 785, for the reluctance of the courts to import notions of equitable property into commercial sales of goods, primarily for reasons connected with certainty (and because it would significantly prejudice the security of sellers). Any of these would have been quite convincing grounds, in my view, for distinguishing between Hunter and Goldcorp, even on the assumption that both cases are correct.

A different distinction was however drawn by Neuberger J. in Re Harvard Securities [1997] 2 BCLC 369; he took the view that if he was forced to choose between Hunter and Goldcorp, he was bound to follow the decision of the Court of Appeal, in preference to that of the Privy Council, but also took the view that at any rate for dealings in shares, Hunter was a correct statement of the law. The distinction between shares and other property seems difficult to justify in principle, however, and I cannot see the difficulty with Hunter v Moss, while recognising that Goldcorp is different, for all of the other three reasons stated above.

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This page was last updated on 31 Oct 99.

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