Re London Wine [1986]

Re London Wine Co (Shippers) [1986] PCC 121 established the principle that the segregation of chattels from a bulk is necessary for the subject matter of a trust to be considered certain. In other words, the specific identification or separation of property is required to create a valid trust.

A wine dealer entered into contracts to sell wine to customers. Following the execution of the sale contracts, the wine remained stored in the wine dealer's warehouses. The wine dealer issued certificates of title to the customers, and the customers were charged for storage and insurance. However, the specific cases of wine were not segregated or identified for each individual customer. Subsequently, the wine dealer faced liquidation.

The High Court held that the customers' claim failed because no trust had been created. The crucial factor was the uncertainty regarding the subject matter of the trust. The absence of segregation or identification of specific cases of wine for each customer rendered the subject matter of the trust uncertain.

Oliver J, in delivering the judgment, emphasised the necessity of being able to ascertain both the interest of the beneficiary and the specific property to which that interest is attached in order to create a trust. He illustrated this point by using the example of a farmer who, without identifying them, declares himself a trustee of two sheep. Oliver J expressed doubt that such a declaration could be considered the creation of a perfect trust.

The judgment concluded that any alleged constructive or express trust of a certain number of bottles would be uncertain until those specific bottles were set aside for the customers. This decision underscores the necessity of certainty in identifying both the beneficiary's interest and the specific property in trust, even in cases involving fungible or homogeneous assets like wine. It is a principle that has been distinguished in subsequent cases such as Hunter v Moss [1994] and Re Harvard Securities Ltd [1997] and may not align with the general policy of insolvency law, as demonstrated in Re Lehman Brothers International (Europe) [2012].

The case underscores the importance of clarity and specificity in identifying the subject matter of a trust. It establishes that the segregation or identification of the property is a requisite for a valid trust to be formed, and failure to do so may result in the subject matter being deemed uncertain, rendering the trust invalid.
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