Question: 'The decision in Hunter v Moss is inconsistent with the decision in Re Goldcorp, and both cannot stand as good law.' Discuss.
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Introduction
The requirement of certainty of subject matter is fundamental to the creation of an express trust. A trust cannot exist unless the property held on trust is sufficiently identified. The decisions in Re London Wine Co (Shippers) Ltd [1986] PCC 121 and Re Goldcorp Exchange Ltd [1995] 1 AC 74 established that a trust of unascertained chattels fails. Yet in Hunter v Moss [1994] 1 WLR 452, the Court of Appeal upheld a trust of 50 unappropriated shares out of a larger holding, purportedly distinguishing tangible and intangible property. This essay examines whether these decisions are reconcilable and, if not, which should prevail.
*The Principle in Re Goldcorp***
In Re Goldcorp, customers purchased gold bullion from a dealer, paying in advance but receiving only certificates. The dealer held stock of bullion but never appropriated specific bars to individual customers. On insolvency, customers claimed equitable ownership of the remaining stock. The Privy Council held no trust arose. Lord Mustill emphasized that 'the purchasers… could not… show that any particular bullion was theirs'. Without appropriation, there was no identifiable subject matter.
The reasoning rested on the proprietary nature of the trust. Equity 'fastens upon' specific property. A beneficiary's equitable title is to identified assets, not a contractual claim. In the absence of appropriation, it was impossible to say which bullion was trust property and which belonged to the dealer. This applies the principle from Palmer v Simmonds (1854) 2 Drew 221 ('the bulk of my residuary estate' too uncertain) and Re London Wine (unappropriated wine cases failed).
*The Decision in Hunter v Moss***
Mr Hunter orally declared a trust of 50 of his 950 shares in a private company. No shares were segregated or specifically appropriated. The Court of Appeal held the trust valid. Dillon LJ distinguished Re London Wine on the basis that shares are intangible and indistinguishable. He analogized to a bequest of '50 of my shares', which would be valid as a testamentary gift. Hirst LJ agreed, adding that the same reasoning would apply to 'other intangible property such as government stock'.
The court reasoned that because all shares in a company are identical (within a class), it makes no difference which 50 are held on trust. Unlike chattels, which may differ in condition or location, shares are legally indistinguishable. Therefore, appropriation is unnecessary.
The Alleged Inconsistency
Critics argue that the distinction between tangible and intangible property is unprincipled. In both Goldcorp and Hunter v Moss, a person purported to create a trust of part of a larger, undifferentiated mass. In both cases, it was impossible to identify which specific items were subject to the trust. The fact that shares are intangible does not alter the fundamental problem: equity requires identifiable trust property.
Hayton has argued forcefully that Hunter v Moss 'makes a nonsense of property law'. If Hunter sells 900 shares, which 50 remain in trust? If a bonus issue is declared, how are new shares allocated? The absence of answers demonstrates that the subject matter was never certain. By contrast, Goldcorp correctly applied the principle that trust property must be identified.
Further, the testamentary analogy is misleading. A bequest of '50 of my 950 shares' operates as a general legacy; the executor must appropriate shares to satisfy it. This is not a trust operating inter vivos. The analogy also fails because testamentary gifts are treated generously to avoid intestacy, a policy inapplicable to inter vivos trusts.
*Arguments in Defence of Hunter v Moss***
Defenders argue that the tangible/intangible distinction is not merely formalistic but reflects real differences in property law. Shares (and other intangibles like government stock or money in an account) are inherently fungible. The law treats one share as interchangeable with another. Therefore, a trust of '50 shares' can be understood as a trust of a proportionate interest (50/950), which is conceptually certain. On this view, the problem in Goldcorp was not the intangible nature of the property (ownership of gold) but the failure to create any proprietary interest at all, even a proportionate one.
Penner supports this analysis, arguing that shares should be understood as proportionate interests in the company's capital, not discrete items. A declaration of trust over 50 shares is a declaration over a 50/950 fractional share, which is definite. This avoids the practical difficulties: if Hunter sells 900 shares, the trust automatically attaches to the remaining 50; if a bonus issue occurs, the trust extends proportionately.
Moreover, commercial necessity supports flexibility. Trusts of shares, government stock, and bank accounts are commonplace. Insisting on physical appropriation or segregation would invalidate many long-accepted arrangements. The decision in Re Harvard Securities Ltd [1997] 2 BCLC 369 applied Hunter v Moss to bearer securities, suggesting the principle is now embedded.
Re Lehman Brothers and the Regulatory Context
In Re Lehman Brothers International (Europe) [2012] UKSC 6, the Supreme Court considered complex pooling arrangements for client assets under regulatory requirements. While the court did not directly address Hunter v Moss, it upheld the validity of trusts over pooled intangibles where the regulatory framework and parties' intentions supported this. Lord Dyson JSC emphasized that 'the question is whether [the arrangements] gave rise to a trust'. The decision suggests a functional approach: where commercial arrangements clearly intend to create equitable interests and regulatory or contractual mechanisms provide for allocation, courts will uphold the trust.
This may point towards reconciliation. Goldcorp can be read as a case where no proprietary interest of any kind was created: the customers were unsecured creditors. Hunter v Moss involved a clear declaration of trust over a defined proportionate interest. The distinction is not tangible vs. intangible but whether a proprietary interest (even if proportionate) was created.
Theoretical Foundations and Policy
The debate ultimately concerns the trust's nature. If trusts are fundamentally proprietary, identifying specific property is essential. Equity cannot create rights in the abstract. On this view, Goldcorp is correct and Hunter v Moss wrongly decided.
If, however, trusts can encompass proportionate or co-ownership interests, then Hunter v Moss is defensible. This accords with the modern understanding of co-ownership and equitable interests as capable of subsisting in undivided shares. Section 34 of the Law of Property Act 1925 presumes tenancy in common (undivided shares) for co-owned personalty; equity has long recognized such interests.
Policy considerations also matter. Upholding Hunter v Moss facilitates commercial transactions and aligns with reasonable expectations. Invalidating such trusts would unsettle practice and may produce unjust results (e.g., where a settlor clearly intended to create a trust but failed to segregate shares).
Conclusion
The apparent inconsistency between Hunter v Moss and Re Goldcorp can be reconciled if the former is understood as recognizing trusts of proportionate interests in intangible fungibles, while the latter addressed a complete failure to create any proprietary interest. Nevertheless, theoretical difficulties with Hunter v Moss persist, particularly in identifying which specific shares are trust property for purposes of sale or bonus issues.
On balance, both decisions can stand, but the law requires clarification, ideally from the Supreme Court. Hunter v Moss should be confined to intangible fungibles where a proportionate analysis is possible. Goldcorp correctly applies to cases involving undifferentiated chattels or where no proprietary interest was ever created. Courts should focus on whether the arrangement, viewed objectively, creates an identifiable proprietary interest—whether in specific items or as a defined proportion of a homogeneous mass. This approach preserves doctrinal coherence while accommodating commercial reality.
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