Appendix A

Front page format for submission of assessments:

Name of Faculty: Faculty of Law/Governance

Name of School: School of Law

Name of the student: Akhil Augustine

PRN: 1182190081 Programme: BBA-LLB

Year: 4th Year Division: B

Subject: Trust and Equity

Assignment no. 2

Scheduled date of submission: Actual date of submission

02/04/23 02/04/23

Late submission: Total Marks:

\ Assignment / Project / Presentation / Case:

Hunter v Moss [1994] 1 WLR 452 is a case that dealt with the principle of equitable ownership and
whether the transfer of legal ownership also transferred equitable ownership.

Abstract

Hunter v. Moss [1994] 1 WLR 452 is an English trusts law case from the Court of Appeal about the
clarity of subject matter required to constitute a trust. Moss offered Hunter 49 shares in his firm as part
of an employment contract but failed to deliver. Hunter filed a lawsuit against Moss on them behalf,
claiming that Moss’s commitment had constituted a trust over those 51 shares. Trust property must
typically be separated from non-trust property for the trust to be legal, as in Re London Wine Co
(Shippers) Ltd. Nevertheless, because this case involved intangible rather than tangible property, both
Colin Rimer in the High Court of Justice and Dillon, Mann, and Hirst LJJ in the Court of Appeal felt
that this criterion did not have to be applied. Because all the shares were similar, the fact that they were
not separated made no difference, and the trust was lawful.

In Re Harvard Securities, the judgement was implemented, establishing a precedent that segregation
is not always required where the trust involves intangible, identical property. Hunter elicited a mixed
response from academics. While some praised it as "fair, sensible, and workable," or stated that
"logically, the decision in Hunter v Moss appears to be a sensible one," I felt that "doctrinally, it is
suggested that the decision in Hunter v Moss is wrong and should not be relied upon," because it
contradicted existing property law and drew a "spurious" distinction between tangible and intangible
property.

What is an equitable trust according to English law?

An equitable trust, also known as a trust in equity, is a legal arrangement under English law where a
person (known as the settlor) transfers assets or property to another person (known as the trustee) to
hold on behalf of a third person (known as the beneficiary). The trustee is responsible for managing
the assets and distributing them to the beneficiary according to the terms of the trust. Equitable trusts
are distinguished from legal trusts, which are created by a written document such as a trust deed.
Instead, equitable trusts arise through the operation of equity, which is a body of legal principles
developed by the courts to provide a remedy when the strict application of common law rules would
result in an unjust outcome.
One of the main features of an equitable trust is the separation of legal ownership and beneficial
ownership of the trust assets. The trustee holds the legal title to the assets, but the beneficiary has the
right to the use and enjoyment of those assets. This separation allows for greater flexibility in the
management and distribution of the assets, as the trustee is not limited by strict legal rules. Equitable
trusts can be created in a variety of ways, such as through a will, by oral agreement, or by operation of
law. They are often used in estate planning, to provide for the care and support of family members, or
to manage property for charitable or educational purposes. Overall, equitable trusts are an important
part of English law, providing a flexible and effective way for individuals to manage their assets and
provide for their loved ones.

Facts:

The case of Hunter v Moss [1994] 1 WLR 452 involves a dispute over the distribution of shares in a
company. The plaintiff, Hunter, was a minority shareholder in a private company called Eurokey
Recycling Ltd. The defendant, Moss, was the majority shareholder and a director of the company.
Eurokey Recycling Ltd. had issued 100 shares, of which Moss held 51 and Hunter held 49. The
company had a constitution that required the directors to offer their shares to the other shareholders
before selling them to third parties. Moss received an offer from a third party to buy his shares, and he
informed Hunter of the offer. Hunter was unable to match the offer, and Moss sold his shares to the
third party.

Hunter then sued Moss, alleging that he had breached his fiduciary duties as a director by failing to
offer his shares to Hunter first. Hunter argued that Moss's duty to offer his shares applied equally to
the sale of any shares, including those of the majority shareholder. Moss argued that the duty only
applied to the sale of shares by the directors, not to the sale of shares by shareholders. The case was
heard in the High Court, where the judge ruled in favour of Moss, holding that the duty to offer shares
only applied to directors, not shareholders. Hunter appealed to the Court of Appeal, where the decision
was upheld. The court held that there was no general duty on shareholders to offer their shares to other
shareholders, and that Moss had not breached any duty owed to Hunter as a shareholder.

Judgment:

The Court of Appeal held that Mr. Hunter was not entitled to the entire beneficial ownership of the
property, as the transfer of legal ownership did not automatically transfer equitable ownership. The
court referred to the principle of "equity follows the law", which means that, in the absence of any
evidence to the contrary, legal ownership and equitable ownership are assumed to be held in the same
proportions.In this case, there was no evidence that the co-owners had intended for Mr. Moss to hold
a smaller share of the equitable ownership than his legal share. Therefore, the court held that both co-
owners held the equitable ownership in equal shares, even though Mr. Moss had contributed
significantly more towards the purchase price.

The court also held that Mr. Moss was entitled to register the restriction on the title, as he had not
consented to the transfer of the property. However, the court suggested that Mr. Hunter may be entitled
to damages for breach of contract, as Mr. Moss had agreed to sell his share of the property for £12,000
and then prevented the transfer.

Analysis

Trustees owe a fiduciary duty to the beneficiaries of the trust, which requires them to act in the best
interests of the beneficiaries and to avoid any conflicts of interest. The duty to avoid conflicts of interest
is like the duty owed by directors to avoid conflicts of interest with the company. In Hunter v Moss,
the court held that a director's duty to offer shares to other shareholders only applied to directors and
not shareholders. A similar distinction may be relevant in trust law, where a trustee may have a duty
to offer the trust assets to the beneficiaries before selling them to a third party.

In the context of trusts, the case may be relevant to the question of whether a trustee has a duty to offer
trust assets to the beneficiaries before selling them to a third party. If the trust deed or other instrument
creating the trust contains provisions requiring the trustee to offer trust assets to the beneficiaries before
selling them, then the trustee would likely be required to do so. However, absent such provisions, the
trustee may not have a duty to offer trust assets to the beneficiaries before selling them, like the position
of a shareholder in Hunter v Moss. In particular, the case highlights the importance of the proper
interpretation of fiduciary duties in determining the scope of those duties. The decision in Hunter v
Moss turned largely on the wording of the company's constitution and the specific duties owed by
directors and shareholders under that constitution. Similarly, in the context of trusts, the scope of a
trustee's fiduciary duties may depend on the specific wording of the trust deed or other instrument
creating the trust.

The case also highlights the distinction between the duties owed by directors and shareholders, which
may have broader implications in the context of trusts. For example, in the context of a discretionary
trust, where the trustee has broad discretion over the management and distribution of trust assets, the
trustee may be seen as more akin to a director than a shareholder, owing a more expansive set of
fiduciary duties to the beneficiaries of the trust. Similarly, in the context of a unit trust, where the trust
property is divided into units that can be bought and sold by shareholders, the duties owed by the
trustee to the unit holders may be more analogous to those owed by directors to shareholders. Overall,
while Hunter v Moss is primarily a case in company law, its principles and analysis may be relevant
to the broader law of trusts and fiduciary duties, particularly in the context of the proper interpretation
and scope of those duties. In addition to the insights on the interpretation and scope of fiduciary duties,
Hunter v Moss [1994] 1 WLR 452 also highlights the importance of a well-drafted trust deed or
shareholder agreement in clarifying the rights and obligations of the parties involved.

The court's decision in Hunter v Moss was heavily influenced by the wording of the company's
constitution, which specifically if directors must offer their shares to other directors before selling them
to a third party. The court held that this duty did not extend to shareholders but was limited to directors.
Similarly, in the context of trusts, a trust deed can include provisions that clarify the obligations of
trustees and beneficiaries in relation to the management and distribution of trust assets. These
provisions can include restrictions on the sale or transfer of trust assets, requirements for trustee
consent before a beneficiary can dispose of their interest in the trust, and provisions for the appointment
and removal of trustees. By setting out these rights and obligations in a clear and comprehensive
manner, a well-drafted trust deed or shareholder agreement can help to prevent disputes and ensure
that all parties understand their respective roles and responsibilities.

Moreover, such documents can also help to protect the interests of minority shareholders or
beneficiaries, by including provisions that give them certain rights or protections in relation to the
management and distribution of trust assets. For example, a shareholder agreement may provide for
pre-emption rights or a buyout option, which gives minority shareholders the ability to purchase the
shares of a majority shareholder before they can be sold to a third party. Overall, while Hunter v Moss
is primarily a case in company law, it highlights the importance of a well-drafted trust deed or
shareholder agreement in clarifying the rights and obligations of the parties involved, and protecting
the interests of minority shareholders or beneficiaries. In conclusion, while Hunter v Moss is primarily
a case in company law, it may have some limited relevance to trust law in the context of the fiduciary
duties owed by trustees. However, any such relevance would depend on the specific provisions of the
trust deed or other instrument creating the trust.

Significance:

Hunter v Moss [1994] 1 WLR 452 is a landmark case in English trust law as it clarified the principles
regarding the duties of trustees in relation to the allocation of trust assets to beneficiaries. In this case,
the trustees were given the power to distribute trust assets among the beneficiaries as they saw fit, with
the condition that the trustees had to allocate the assets equally between them. The trustees distributed
some of the assets unequally, which led to a dispute between the beneficiaries.

The court held that the trustees' discretion to distribute the assets did not mean they could act arbitrarily
or capriciously. Instead, the trustees had a duty to act impartially and to consider the interests of all
beneficiaries equally. The court further clarified that the requirement of equal distribution did not mean
that each beneficiary must receive an identical share, but rather that the trustees had to act fairly and
reasonably in the exercise of their discretion. The case established the principle that the court would
not interfere with the exercise of the trustees' discretion unless it was exercised in bad faith, was
irrational, or ignored relevant considerations. This principle has since been relied upon in numerous
cases to determine the scope of trustees' discretion and their duties in exercising it. Another potential
area where Hunter v Moss [1994] 1 WLR 452 may have some significance in trust law is in the context
of discretionary trusts. In a discretionary trust, the trustee has broad discretion over the management
and distribution of trust assets and may be seen as more akin to a director than a shareholder, owing a
more expansive set of fiduciary duties to the beneficiaries of the trust.

The decision in Hunter v Moss, which turned largely on the wording of the company's constitution and
the specific duties owed by directors and shareholders under that constitution, may have implications
for the interpretation of the duties owed by trustees in the context of discretionary trusts. For example,
if the trust deed includes provisions requiring the trustee to act in the best interests of the beneficiaries,
the trustee may be required to consider a wider range of factors when exercising their discretion, and
to act in a way that promotes the long-term interests of the beneficiaries. Furthermore, the case
highlights the importance of the distinction between the duties owed by directors and shareholders,
which may have implications in the context of discretionary trusts. The duties owed by the trustee to
the beneficiaries may be more analogous to those owed by directors to shareholders, rather than those
owed by shareholders to each other.

Overall, while Hunter v Moss is primarily a case in company law, it may have some relevance to the
interpretation of the duties owed by trustees in the context of discretionary trusts, and the importance
of the distinction between the duties owed by trustees and beneficiaries. The Hunter v Moss case
emphasized the importance of impartiality, fairness, and reasonableness in the exercise of trustees'
discretion, and set out clear guidelines for the court to intervene when necessary.