Certainty of subject matter and the critcisms of hunter v moss When creating an express trust knight and knight articulated that there must be certainty of subject matter, certainty of intention and certainty of objects. Certainty of subject matter is where there must be an identification of the trust property and certainty as to whom is which part of the trust property to be held. In relation to uncertainty of beneficial interests, the trust will fail where the method of distribution is stipulated by the sethlow but cannot take effect (Boyce v Boyce).
However the trust will not fail where the method of distribution is not stipulated by the sethlow leaving the court to intervene (re napton). If there is an effect of lack of certainty in respect of the beneficial interests in the trust property a resulting trust will be imposed because equity hates a vacuum, the trust property will therefore be held on trust for the sethlow or if he is dead for his estate.
In regards to identification of the trust property If there is a lack of a proper identification of the trust property, the trust will fail because the property never leaves the sethlow and there is no need for a resulting trust. However the term residue estate will not fail a trust because it means all the remaining trust property. It is quantifiable
A problem occurs where the wording used is not sufficiently certain as to know what property is intended to be held on trust and where the property that is held on trust is not segregated by the sethlow from a larger amount of similar property he owns. . If a trust fund is not segregated then there will be no certainty of subject matter and the trust will fail. The problem is identifying the property that constitutes the trust fund.
The property must be identifiable otherwise the courts would not know which property is to be distributed to the beneficiaries. It must be shown that the sethlow intended to create a trust over specified property. In Palmer v Simmons ‘the bulk of her estate’ was not sufficiently certain and ‘remaining part of what is left’ also (sprange v barnard). However in Re Golay the court looked at the tester’s intention’. To deduce what ‘reasonable income’ meant Oliver J articulated the orthodox approach or rule in re London wine where property must be segregated form a lager mass of similar property for there to be a valid trust he said “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.”
“The ‘mere declaration that a given number of animals out of the flock would be held on trust would not create a trust’. This approach was followed in re Goldcorp which affirmed that property must be separately identifiable before it can be held on a valid trust. The contention arose with Hunter v Moss which did not follow the orthodox approach where Hunter was entitled 50 out of moss’s 1000 shares. Under the Goldcorp rule there would be no trust because the property was not separated however Dillon J said there was a valid trust.
The rationale for this controversial decision was that it would have made no difference which 50 shares would have been given because they were all identical. So here there was no need to segregate the property if it was intangible. The problem with this case is that Dillon is giving the trustee of the will who only has legal title subject to the terms of the trust an executor status, i.e. putting him in the shoes of the sethlow.
This is a problem because the executor acquires legal title in all of the deceased’s person’s property with a power to make a division of property in accordance with the terms of the will as personal representative of the deceased. Whereas the inter vivos trustee makes a division subject to the terms of the trust. So inter vivos trustee cannot know what property falls under his remit whereas the executor knows that he has title in the whole property formally vested in the testator so there is no uncertainty of subject matter.
Dillon did not make a distinction between tangible and intangible property. But did say that “the London wine case concerned chattels and this case concerned a title over shares” This case has been applied in Holland v Newbury where the securities were intangible property and therefore did not require segregation.
This may mean that Hunter v Moss is precedent because it was resolved in the C of A whereas Goldcorp was decided in the Privy Council and can only be deemed a persuasive authority. However the earlier case of MacJordan v Brookemount may have supported Dillon because the judge thought it was not necessary to segregate part of the bank account from a larger amount of money in the same account. However here there was no identifiable bank account in the first place to establish a trust so it was void. Other problems with Hunter v Moss is that it ignores traditional property law which requires there to be specific and identifiable property which is the subject to a trust.
There was only a valid trust because there were sufficient shares to satisfy the claim. The C of A could not have decided this in Goldcorp because there were more claims than there was property to satisfy them. If there was a distinction to be made between cases in which it would be valid to hold one trust valid despite insufficient segregation and another trust invalid on grounds of insufficient segregation it would not be based on whether the property was tangible or intangible but rather whether the legal owner of that property was solvent or insolvent which in Goldcorp he was insolvent.. So it seems Dillon lj's reasoning is ill founded. Another problem is that why should there be a specific rule for intangible property.
Tangible property could be subject to the same rules. In Caswell v Powell “bushels of wheat are indistinguishable” and that in relation to a 1000 ball bearings it does not matter if 500 were separated because they would be all the same. So the distinction based on tangible and intangible property is weak and that it would be better to base a distinction on whether the trustee was solvent or insolvent. The reaction to Hunter v Moss has been mixed Alistair Hudson says that “Hunter v Moss is concerned with achieving justice between the parties”.
Because Goldcorp concerned the allocation of property whereas HAUNTER V Moss the court was concerned with preventing the employer from benefiting from a breach of contract. However David Hayton argues that Dillon’s judgment may well come to be stigmatised as determined perilously close to vacation. He highlights questions left open by hunter v Moss Because, Moss declared himself trustee of 50 of his shares, an obvious problem arises because there is no certainty as to which 50 of the 950 shares the trust relates.
Thus, if Moss subsequently sells 50 shares how do the Revenue know whether he is selling his own shares, so that he is chargeable to capital gains tax, or if he is selling Hunter's shares so that Hunter is so chargeable?
If the proceeds of sale are profitably or detrimentally reinvested does the new investment belong in equity to Hunter or Moss, bearing in mind that it is only if Moss is acting wrongfully in respect of specific shares that Hunter can take advantage of the equitable tracing rules to apply whichever of them suits him best? Can Hunter obtain an injunction to prevent Moss selling or mortgaging any shares or only more than 900 shares? Does Hunter really have any specific proprietary interest capable of assignment?
Despite these criticisms Jill Martin says that Hunter v Moss appears fair, sensible and workable also Allison Jones says the decision is a sensible one. She says it seems absurd that there could be a valid trust of the entire contents of a bank account which could then be traced wrongly into another account of the trustee but that there cannot be a valid trust of part of the funds in an account. But even Therese Villiers says that “the flexibility provided by Hunter v. Moss may yet prove to have deleterious effects” Hancock v Watson exception? Whitehall v shortfall? Hemmons case?