Hunter v Moss

A person may declare an immediate oral trust over a specified number or proportion of identical shares held in a single company. The trust property is sufficiently certain although the particular shares have not been numbered, segregated or otherwise identified.

This differs from an attempted trust of unappropriated tangible assets or money within a mixed fund. Once the shares are held on trust, the beneficiary’s proprietary interest attaches through ordinary tracing principles to the corresponding proportion of the consideration received when they are sold.

The defendant appealed from orders of a Deputy Judge of the High Court, Chancery Division. The judge found that the defendant had orally declared himself trustee for the claimant of 5% of the issued ordinary shares in a company. When the company was sold, the judge awarded the claimant a corresponding proportion of the cash and shares received by the defendant.

The appeal raised three issues: whether the defendant had shown an immediate intention to declare a trust; whether the trust property was uncertain because no particular 50 shares had been identified from the defendant’s larger holding; and whether the financial award had been calculated on the correct basis.

1. Disposition. The Court of Appeal unanimously dismissed the appeal, subject to reducing the judgment sum by £698.95 to reflect excess dividends and related interest. Dillon LJ delivered the judgment. Mann and Hirst LJJ agreed.
2. Intention. The Deputy Judge’s repeated factual finding was that the defendant had stated, in substance, that he would immediately hold 5% of the company’s issued shares for the claimant and account for the dividends. The arrangement was intended to operate pending a solution to perceived tax difficulties. Its commercial purpose required immediate effect. It was unnecessary for the defendant to have used the words “in trust”.
3. Certainty of subject matter. The company had one class of identical shares. Five per cent represented 50 shares, and the defendant personally held more than that number. A declaration that 50 of those shares were held on trust therefore identified the subject matter with sufficient certainty. The principle in Knight v Knight, 49 ER 68, was satisfied.
4. Milroy v Lord, (1852) 4 De G F & J 264, confirmed that a trust of personal property may be declared orally. This was an immediate declaration of trust, not an attempted transfer which equity was being asked to perfect. The validity of bequests and completed transfers of a specified number of identical shares also supported the conclusion that further identification by share number was unnecessary.
5. Re London Wine Company Shippers Limited, (1986) PCC 121, concerned unappropriated chattels within bulk wine stocks. Mac-Jordon Construction Limited v Brookmount Erostin Limited, (1991) 56 BLR 1, concerned retention money which had never been segregated from a general bank account. Those cases did not govern an immediate declaration of trust over identical shares whose legal title remained with the declaring trustee.
6. Proceeds and relief. The claimant’s beneficial interest attached, through ordinary tracing principles, to the proportion of the cash and shares received by the defendant for the trust shares. At trial, both parties had accepted that method of calculation. It was correct in principle, and their consent displaced other possible arguments about the form of relief. The judgment sum was nevertheless reduced by £498.95 for excess dividends and by an agreed £200 interest adjustment. Leave to appeal was refused.

1. Court of Appeal: The defendant’s appeal was dismissed unanimously, subject to a reduction of £698.95 in the judgment sum. Leave to appeal was refused.
2. High Court, Chancery Division: A Deputy Judge found that the defendant had declared an express oral trust over 50 shares, awarded the claimant £112,723.70 including interest, and subsequently rejected an application to reverse the order for uncertainty of subject matter. No citation is stated.