Transfer and grant 487

Appeal in Thames Guaranty v. Campbell [1985] QB 210). So, any sale or mortgage of shares by me will automatically bite on my shares first: if I sell or mortgage 50 or fewer of them, it will be mine that are sold or mortgaged, and, if more than 50, the first 50 will be mine and the remainder will be yours. It is only in more complex cases that prior identification could matter. For example, if a thief manages to acquire legal title to some of the shares (for example, by stealing some of the share certificates and forging my signature on a share transfer form) and so succeeds in selling them to an innocent purchaser, it would become necessary to know whether he had stolen my shares or yours. Similarly, if, after I had sold you 50 shares or declared I held them on trust for you, I then sold the rest to your brother or declared I held them on trust for him, still keeping all the shares in my name and unallocated to either of you, there would be an identification problem if I sold ten of them to an innocent purchaser and disappeared with the money. There would be no way of telling whether the innocent purchaser had acquired ‘your’ shares or your brother’s.

However, in both these cases co-ownership in equity is clearly the best solution, and there seems no reason why the courts should not adopt it, as they did in Re Stapylton Fletcher [1994] 1 WLR 1181. In other words, both the lost shares and the remaining ones are treated as co-owned so that, in effect, losses are shared proportionately. This is what is done in the analogous situation in which identical goods belonging to different people become mixed (as in Spence v. Union Marine Insurance Co. Ltd (1868) LR 3 CP 427) and where funds of different beneficiaries are used to acquire a single asset (as in Foskett v. McKeown [2001] 1 AC 102), and there seems no reason in principle why it should not be done here. It certainly produces a better and fairer outcome for the innocent participants than the goods rule, which says that, because we cannot identify which of two possible claimants owns which item, neither of them can have it. Also, it causes no hardship to innocent third parties: since the co-ownership interest is equitable only, it will not be enforceable against a good faith purchaser without notice of the interest, as we see in Chapter 14.

In other words, the other principled reason for supporting the conclusion in Hunter v. Moss is that it produces a fairer outcome than the goods rule. This is of course an argument against the goods rule rather than an argument for distinguishing between goods and intangibles, but there is something to be said for putting a limit on the scope of a bad rule, even if the limit is logically not entirely sustainable.

Notes and Questions 12.7

Read Hunter v. Moss [1994] 1 WLR 452 and Re Harvard Securities Ltd [1998] BCC 567, either in full or as extracted at www.cambridge.org/propertylaw/, and consider the following:

1What criticisms have textbook writers made of the reasoning in Hunter v. Moss, according to Neuberger J in Re Harvard Securities? Are they convincing?