Facts
A testatrix by her will disposed of the residue of her estate to Thomas Harrison subject to the following stipulation: ‘that if he should die without lawful issue he will, after providing for his widow during her life, leave the bulk of my said residuary estate unto [four named persons equally].’
Held
No trust was intended for there was no identifiable property capable of being subject to a trust. Thus, Thomas Harrison’s estate was entitled to the property beneficially:
Kindersley VC: What is the meaning then of bulk? The appropriate meaning, according to its derivation, is something which bulges out. [His Honour referred to Todd’s Johnson and Richardson’s Dictionary for the different meanings and etymology of the word.] 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 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 she has not designated the subject as to which she expresses her confidence; and I am therefore of the opinion that there is no trust created; that Harrison took absolutely, and those claiming under him now take.
The test is whether the subject matter of the trust is identified or capable of being identified with sufficient precision to enable a court to attach an order to such property.
The purchase of a specific quantity of goods from a supplier, who fails to identify and appropriate stock in pursuance of the sale, will not transfer property in the goods to the purchaser. Moreover, the supplier will not, without more, be treated as a trustee for the purchaser. The property may be too imprecise for the court to attach an order.
In Re London Wine Co, property from within a bulk did not pass to purchasers under the Sale of Goods Act 1979 because the customers’ goods were not segregated, and thus no express trust of the goods arose in favour of the customers.
Re London Wine Co (Shippers) Ltd [1986] PCC 121, HC
Facts
The company had substantial stocks of wine in a number of warehouses. Large quantities were sold but in many instances remained warehoused with the company. There was no appropriation from the bulk of any wine to answer particular contracts, but the customer received from the company a ‘certificate of title’ describing the wine for which he had paid. He was charged storage and insurance periodically.
When receivers were appointed, there were sufficient stocks to satisfy all claims. The court con- sidered three types of transaction: (a) a single purchaser of the total stock of a particular wine; (b) a number of purchasers whose combined purchases exhausted the total stock of a particular wine; (c) a number of purchasers whose combined purchases did not exhaust the relevant stock. Held
The legal title had not passed to the customers under the contracts of sale. There was no ascer- tainment or appropriation of the property sold. Orders could have been fulfilled from any source, not necessarily existing stocks. There was no undivided interest.
In addition, no express trust was created for the customers for there was no certainty of subject matter. No proprietary rights arose from the payments of purchase moneys. The existence of a
right to specific performance does not necessarily imply a proprietary interest in the subject matter. Hence, the claims wholly failed:
Oliver J: Mr Wright said that a trust may be constituted not merely by direct and express declaration but also by the consequences flowing from the acts of the persons themselves to which consequences the law attaches the label ‘trust’. A trust, to put it another way, is the technical description of a legal situation; and where you find (i) an intention to create a beneficial interest in someone else, (ii) an acknowledgement of that intention and (iii) property in the ownership of the person making the acknowledgement which answers the description in the acknowledgement, then there is, at the date of the acknowledgement, an effective and completed trust of all the property of the acknowledger answering to that description. This is, in essence, the same submission as that made by Mr Stamler – he submits that where one is dealing with a homogeneous mass there is no problem about certainty. So long as the mass can be identified and there is no uncertainty about the quantita- tive interest of the beneficiary the court will find no difficulty in administering the trust if it once finds the necessary intention to create an equitable interest in property of the type comprised in the mass. I think that if the case is to be made out at all, it must be put in this way, for the submission itself is based on the premise that there are no specific or ascertained goods in which the beneficiary is interested. Were it otherwise there would be no need to invoke the concept of trust for the title would have passed under the Sale of Goods Act. If trust there be, then it must be a trust of the homogeneous whole and the terms of the trust must be that the trustee is to hold that whole upon trust to give effect thereout to the proportionate interest of the bene- ficiary. Thus if we postulate the case of the company having in its warehouse 1,000 cases of a particular wine and selling 100 cases to X the circumstances of this case indicate, it is submitted, that the company created an equitable tenancy in common between itself and X in the whole 1,000 cases in the proportions of 9/10ths and 1/10th.
It is with regret that I feel compelled to reject these submissions, for I feel great sympathy with those who paid for their wine and received an assurance that they had title to it. But I find it impossible to spell either out of the acknowledgements signed by the company or out of the circumstances any such trust as is now sought to be set up. It seems to me any such trust must fail on the ground of uncertainty of subject matter. 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 to what property it is to attach.
A farmer could, by appropriate words, declare himself to be a trustee of a specified proportion of his whole flock and thus create an equitable tenancy in common between himself and the named beneficiary, so that a propri- etary interest would arise in the beneficiary in an undivided share of all the flock and its produce. But the mere declaration that a given number of animals would be held upon trust could not, I should have thought, without very clear words pointing to such an intention, result in the creation of an interest in common in the proportion which that number bears to the number of the whole at the time of the declaration. And where the mass from which the numerical interest is to take effect is not itself ascertainable at the date of the declaration, such a conclusion becomes impossible.
In the instant case, even if I were satisfied on the evidence that the mass was itself identifiable at the date of the various letters of confirmation I should find the very greatest difficulty in construing the assertion that ‘you are the sole and beneficial owner of’ 10 cases of such and such a wine as meaning or being intended to mean ‘you are the owner of such proportion of the total stock of such and such a wine now held by me as 10 bears to the total number of cases comprised in such stock’.
The Sale of Goods (Amendment) Act 1995 introduced a significant change in the law. Today, multiple purchasers of goods are deemed to acquire interests in the subject matter as tenants in common.
In Re Staplyton, the court decided that, notwithstanding that property in the goods passed to the purchasers, the suppliers who retained possession of the goods were not automatically treated as trustees for the purchasers.
Re Staplyton [1994] 1 WLR 1181, HC
Facts
Wines kept by companies in warehouses for customers but not marked with customers’ names were treated as ‘ascertained’ for the purpose of s 16 of the Sale of Goods Act 1979.
Held
Such contracts for the sale of goods did not per se create equitable interests in favour of customers:
Judge Baker QC: We next come to the decision of the Court of Appeal in Re Wait [1927] 1 Ch 606. W bought 1,000 tons of wheat to be shipped from Oregon. He sub-sold 500 tons to the claimants, who paid in full. It was shipped but before it arrived W went bankrupt. His trustee claimed to receive the whole of the 1,000 tons, leaving the claimants to their rights in damages. The majority held that the 500 tons due to the claimants had not been appropriated and so this was not specific or ascertained goods in respect of which specific performance could be ordered under s 52 of the [Sale of Goods] Act of 1893. The interest of the case lies in the acute division of opinion in the court. Sargant LJ would have held that the claimants had an equitable assignment of part enforceable against the whole. The view of the majority can best be taken from the following passages in the judgment of Atkin LJ, at pp 629–30, 636:
In any case, however, I am of opinion that the claimants fail, and that to grant the relief claimed would violate well established principles of common law and equity. It would also appear to embarrass to a most serious degree the ordinary operations of buying and selling goods, and the banking operations which attend them . . . The rules for transfer of property as between seller and buyer, performance of the contract, rights of the unpaid seller against the goods, unpaid seller’s lien, remedies of the seller, remedies of the buyer, appear to be complete and exclusive statements of the legal relations both in law and equity. They have, of course, no relevance when one is considering rights, legal or equitable, which may come into existence dehors the contract for sale. A seller or a purchaser may, of course, create any equity he pleases by way of charge, equitable assignment or any other dealing with, or disposition of, goods, the subject matter of sale; and he may, of course, create such an equity as one of the terms expressed in the contract of sale. But the mere sale or agreement to sell, or the acts in pursuance of such a contract mentioned in the code, will only produce the legal effects which the code states.
This landmark decision demonstrates that, normally, a contract for the sale of goods takes effect at law, and gives rise to no equitable interest in favour of the buyer.
In the present case we are concerned with the buying and selling of consumables. I am bound by the decision in
Re Wait [1927] 1 Ch 606 to hold that a contract for the sale of goods does not, of itself, create equitable rights.
Furthermore, as Gault J himself commented in Liggett v Kensington [1993] 1 NZLR 257, p 279: ‘A contractual obligation to store the goods of another does not give rise to a trust.’ The respective rights and obligations of the parties are governed exclusively by the terms of the two contracts.
Specific property may be delineated as trust property, such as a pecuniary legacy or identified paintings, etc. But equally effective would be property that is subject to a clear criterion for identifying the property from a group of assets, such as the residue of the testator’s estate. In respect of a declaration of trust of part of a holding of shares, the court decided in Hunter v Moss that it is unnecessary to identify the trust shares by reference to the numbers stated in the certifi- cates. It would be sufficient if the settlor quantifies the shares to such an extent that the court is entitled to ascertain the shares that are subject to the trust.