S purchased 500 gold bars from Syxx and the parties agreed that the

purchase price be paid before delivery. Syxx had 4 safety storage safe
house in Petaling Jaya & Penang. Last week T purchased from Syxx 200
gold bars and Syxx stated that the storage of his gold is from safe house no
3 in Petaling Jaya. In all the transactions there is an intention to create
trust. Advise S & T on their proprietary right.
Would your answer be different if the item purchased are share
instead of gold?
Answer :
The issue in this question is whether S and T (beneficiary) have
proprietary right over their gold bars that they have purchased from the
Syxx company (trustee)
In order to create an express private trust it involves three main
stages one of it is by satisfying the three certainties , under three certainties
one of it is about the certainty of subject matter (trust property. It is
important to have certainty of subject matter in order for the trust to be
workable administratively and court must be able to govern the actions of
the trustee in relation to the trust fund, which in turn has to be identifiable. It
is a requirement that need a property which is intended to constitute the
trust fund to be segregated from all other property so that its identity is
sufficiently certain, if no certainty of subject matter (no segregation) then
the trust will fail.
The trust is a combination of obligation between trustee and
beneficiary and of property rights in the trust fund. Therefore, it is important

that the fund need to be identifiable or else it would not be possible for the
court to know which property is to be administered.
Based on the case of Re London Wine Co (Shippers) Ltd. the
contest is between the creditor right to the wine as opposed to the
purchaser, court held that the creditor had the priority because the
purchaser could not establish a proprietary interest over the wine. It was
argued that there was an intention to create a trust and court agreed with
that however, there was still no certainty of subject matter because it could
not be ascertain which of the wine warehouse the purchaser order was to
be met as there are several warehouse and the purchaser was not told
which warehouse and which bottle of wine was belonging to the purchaser.
Besides that this sale is considered as generic sale and not ex-bulk sale.
Applying to the situation given S situation can be considered based
on the case of Re London Wine, S have purchased 500 gold bars from
Syxx however S as purchaser could not establish a proprietary interest
over the wine. Even though it can be said there is semantic certainty but no
certainty of subject matter as Syxx company have FOUR safety storage
safe house in Petaling Jaya and Penang, and Syxx company does not
mention where the gold bars or trust property of S was allocated, Syxx
company does not segregate , or make an identification as which 500 gold
belongs to S.
Next case that can be referred to is the case of Re Goldcorp where it
concern a gold bullion exchange which went into insolvency, there were
three classes of claimant, the first class of claimant was called a walker hall
claimant, the court held that this class of claimant was successfully in

demonstrating that they had equitable proprietary rights in the particular

bullion because the bullion had been segregated and was therefore
identifiable.
For the second claimant, they did not have their bullion segregated
from the bulk of bullion held by the exchange, because of that they were
not able to identify a particular stock of bullion in the vaults and show that it
was held on trust for them. This category of claimant does not satisfy the
requirement of certainty of subject matter and therefore could not acquire
right under a trust.
Lastly for the third claimant, an individual where he had placed an
order to buy maple leaf gold coin a rare form of coin of which the exchange
would not usually carry a large stock. This customer , Mr Leggatt order
those coin and keep them in its vault on safe deposit mixed in together with
other coin. The coins had not been separated from all the coins and bullion
held by the exchange, in effect it cannot be identifiable as the court said
that ignorance of the law is not an excuse.
Applying the situation faced by T it can be considered having the
same facts as the first claimant or walker hall claimant in the case of Re
Goldcorp as T have also purchased 200 gold bars from Syxx and the
company stated or identified whereabouts T gold is, as it stated that his
gold is from safe house no THREE in Petaling Jaya (PJ), basically here
there is an identification which is segregation as T can identified on which
place or where is his gold being put into. But for S his situation can be
classify as same with the second claimant in Re Goldcorp where they fail to

satisfy with the requirement of certainty of subject matter thus could not
acquire right under a trust.
Lastly looking at the case of Re Wait where the claimant have
purchased 500 out of 1000 tons of wheat of shipment which was not
segregated, so the court held that no trust was created as all he had was a
contractual right to deliver 500 tons of wheat but no equitable proprietary
right. According to UK SOGA 1893 , property in the 500 tons could not
pass to the purchaser because no ascertainment. He need not to
segregate his property and will create a trust if he bought all the wheat but
even if he bought 999 out of 1000 wheat he will not become the owner if
the property was no segregated it was stipulated that way because of the
element of RISK. These risk are risk of damage risk of stolen property and
risk of theft. Risk take precedent over ownership it is the reason behind the
identification.
Pertaining the second part of the question, we submit that our answer
would probably differ from the first part of the question however only in the
case of S. Whether the trust is void in regards to certainty of subject matter
since items have been swapped for shares is determined by the leading
case of Hunter v Moss [1994] which is said to depart from the orthodox
view in Re London Wine Co (Shippers) Ltd [1986].
In the brief facts of Hunter v Moss, the defendant failed to segregate
50 out of 950 shares which were to be the subject of the trust. Defendant
went on to say that the trust failed due to the lack of uncertainty of subject
matter. His motion was rejected by the judge. The judge decides that there
was sufficient certainty in subject matter of trust. The defendant appealed.

The Court of Appeal surprisingly held that there was a valid trust.
What happened in the Court of Appeal was that, His Lordship Dillon held
that the declaration of trust done by the defendant was sufficient enough to
certain the subject matter because shares in nature were indistinguishable.
5% was 50 shares and the defendant held more than 50 shares. The
rationale he portrayed was that, some 50 shares of the company are
capable of forming the subject matter of the trust. Therefore, it is capable of
satisfying the trust without identifying any particular 50 shares.
Looking at the case above, no doubt there is a clear distinction between Re
London Wine and Hunter v Moss in the nature of the subject matter.
Based on Re London Wine, a company had stocks of wine in various
warehouses which is sold to various customers, the intention being that the
wine should become the property of the customers, but stored by he
company at the customers expense. It was argued that the legal title had
not passed to the customers, there was a trust in their favor. The court
seems to have accepted that there was an intention to create a trust, but
held it nevertheless failed on the ground of uncertainty of subject matter, for
there was never any segregation of appropriation of the wine to a
purchaser.
Thus, it is clear that in Re London Wine, the trust failed on the ground
that there was not any trust for a number of bottles of wine which would
satisfy the certainty of the subject matter because they were kept with
many other bottles of the same wine. This view is supported by His
Lordship Oliver, who expressed that there was no certainty in the subject
matter. He contended that chattels were not necessarily the same. Hence,

since all chattels are non identical, they must be separated from the bulk.
Hunter v Moss differed from Re London Wine in the sense that the latter
deals with tangible goods a.k.a wine bottles whilst the former deals with
intangible goods a.k.a shares. The Court of Appeal departed from Re
London Wine by stating that Re London Wine involved the appropriation of
chattels and when the property in chattels passes and was not concerned
with a declaration of trust.
Subsequently, the case of Re Harvard Secuurities Ltd [1997 ] also
followed the case of Hunter v Moss. In this case, the dealer in bore
financial trust for his clients. Securities werent numbered nor were they
segregated. None of the clients were able to identify their respective
securities. In respect to this, the courts construed that trust were not invalid
for uncertainty of subject matter since it does not need to be segregated
because the shares were regarded as intangible property.
However, in the case of Mac-Jordan Construction v Brookmount
Erostin Ltd [1992], the trust failed for the uncertainty of subject matter,
although they are intangible property. The intangible property of this case is
monies in the bank. The construction contract provides that stage payment
must be made to the sub-contractor. Monies must be placed in separate
accounts to create a trust for the person paying. Conversely, they failed to
do so and the money for construction was all placed in the same account
and was not segregated. The court held that, for an existence of trust, the
expressed requirement is that the money needed to be segregated from
the rest as mentioned in the contract which both parties had agreed upon.
Since it is impossible to identify specific monies there is no trust subject to
trust obligation. Without a bulk, Hunter v Moss did not apply in this case.

The Malaysian position regarding this matter can be seen in the case of
EPSL v Radio Engineering & General Engineering Sdn. Bhd [2004]
and Fawziah Holding Sdn Bhd v Metramac [2003].
Hunter v Moss was applied to EPSLs case due to the fact that the
bulk got identified. The word bulk must be distinguished in Palmer v
Simmonds, since in EPSL it is referred as corpus. This word is defined as
a source of trust property. What amounts to bulk in the case of Palmer v
Simmonds, is ambiguous meanwhile, the bulk in Hunter v Moss is referred
to all shares own by settlor. ON the other hand, although the subject matter
in the case of Fawziah was referred to future contracts, it was regarded as
intangible property and nevertheless followed the principles laid by in
EPSL.
In application of Hunter v Moss to the question at hand, declaration of
trust would have existed between SyXX and S because shares are
involved as the subject matter of the contract following the decision made
in the Court of Appeal in the case of Hunter v Moss. Since the goods is that
of intangible assets of identical value, it does not need to be segregated
from the mass.