1 Milroy v Lord (1862) 4 De GF & J. 264
3 J Hopkins, ‘Constitution of trusts- a novel’ C.L.J. 2001, 60(3), 483 at 483
4 Re Fry 1946 1 Ch. 312
5 Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor’s foot? Conv. 2003, May/June 193
6 Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 364
7 As per Romer J in Re Fry 1946 1 Ch. 312 at 319-320
8 Rose v Inland Revenue Commissioner 1952 Ch. 499
9 Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor’s foot?, Conv. 2003, May/June 197
10 2002 1 W.L.R. 2075 Para 60
11 Pennington v Waine 2002 1 WLR 2075
In conclusion, it could be claimed that the judges are making the test of “equity will not act to perfect an imperfect gift or to assist a volunteer” far to flexible introducing exception which allows to abandon the maxim causing equity to perfect an imperfect gift and assisting volunteers to forceful take what was promised. The test of ‘unconscionability’ has caused legal uncertainty, allowing judges to apply their discretion and implementing expectations to cases on what they believe is fair ignoring good maxim laydown in Milroy and Re Rose. The ‘test of unconscionability’ will continue to cause legal uncertainty and could be criticised that instead of improving the already existing maxim, the decision in Pennington v Waine does not only ‘dangerously undermine’ the maxim also it is foreseeable to create more uncertain and unclear decision. In order for a more certain approach decisions of later cases without any uncertain judgements of the existing maxim, the Supreme Court should consider overruling or clarifying the test of ‘unconscionability’ creating a foundation for the judges to apply the judgement to individual cases still having flexibility but more importantly a consistent outcome without having a conflict with other areas of the law causing legal conflict.
Halliwell states that the decision has left the law in ‘disarray’; and Lord Brown-Wilkinson decision in Choithram, is applied out of context. She also mentions that the decision
An additional factor that may be considered for appeal is the decision of the CA on the grounds of formalities for policy reasons. This could be argued to ensure the prevention of fraud and certainty of the matter of entitlement over the share of the property. The argument could be that the CA focus on the matter of ‘unconscionability’ instead of the necessary formalities. The CA not following the formalities may encounter fraud and the danger of opening the floodgates producing more litigation for the donee to claim entitlement of the property when the donor has not done ‘every effort’ for the property to transfer by equity and in law.
Furthermore, another appeal against the CA on the matter of principle could be successful. The CA relied heavily on ‘unconscionability’ and stated, ‘it would be unconscionable for the donor to change his mind once he has made a promise’. it could be argued that the CA has undermined the concept of a property owner in which have a ‘right to repent of their promise’ upon till the stage of ‘no return’ may the donor would not be able to change his mind which could be seen in the case of Re Bowden. A promise could be seen to not give rights to the promisee under the property unless it could be proven that the property owner ‘conscience’ been burned by the promisee. This could be performed by the promisee acting to his detriment on the reliance of the property. Applying it to Pennington, the donee just believing that the property will transfer to him would not be enough, but the donee must act in reliance to the promise made by the donor in exchange of the gift. Therefore, it could be seen that the donee in Pennington has not acted upon his detriment in exchange of the property. However, if it could be proven that the donee acted upon his detriment for an exchange of the gift the case would have been decided on the matter of proprietary-estoppel.
There are many grounds for appeal that is likely to succeed due to the outcome of the decision created by the CA in the case of Pennington. Firstly, the CA abandoned the principal of following precedents of previous good law cases which are commonly used in English law. The CA decided the case of Pennington without the precedence outlined in Re Rose. However, the CA shadowed the decision created by the privy council in the case of Pagarani 2001. It could be argued that privy council as they are a merely persuasive decision which is not binding by the law. Following, the approach taken by CA from the privy council would be deemed incorrect. A factual distinction which could be outlined between the case of Pagarani and Re Rose is that Pagarani case involves the intention to create a trust and Re Rose involved the intention to create a gift. It could be argued that Re Rose and Pennington was similar as they both involved gifts to the donee. Therefore, the CA applying Pagarani to Pennington was decided incorrectly and not following the precedence of Re Rose made the outcome uncertain. The ground of appeal on this matter will be successful.
The rule further expanded in the case of Pennington v Waine11 which was set up in Re Rose, which stated, ‘even if every effort has not been met by the donor, the transaction will still be deemed as complete’. In relation to Re Rose, the doctrine of ‘every effort rule’, the donor must complete the share form and deliver the form to either the relevant company or the donee. The CA has not compiled with the ‘every effort rule’ which could be argued to a total opposite of the doctrine laydown in Re Rose. The CA stated, equity will see the transaction to be completed, even if the donor delivered the form to a third person who is not the donee or the relevant company. It could be argued that the CA has made the ‘every effort rule’ far too flexible from the facts of Pennington as there was no delivery of the form to the company or the donee but only to the donor’s agent whereas in Re Rose the form was delivered. However, the decision created in the case formed view point from different judges such as LJ Arden who stated, “a gift is complete in equity if the stage has been reached where it would have been unconscionable to retract”, but this was criticised by Ryan and Delaney on the ground that ‘unconscionability’ was low.
Halliwell shown signs of disappointment of the result in Pagarani stating that it was ‘wrong and we are left with and ‘unfettered judicial discretion’. She elaborated on this by stating, the CA analysis of the case was wrong as it had not ‘made any reference to trusts’. She expanded on this by stating “…this obiter dictum was applied completely out of context in Pennington v Waine, where the facts were different and indeed similar in the circumstances in some of the previous cases where the potential donee had died having demonstrated a continuing intention to transfer property”9. Therefore, CA should have not interpreted this case for dealing with the transfer of an imperfect gift with the matter of declaration of a trust. Garton, However, that case of Pagarani would be more justifiable in the of Pennington by stating the quote of Arden LJ, that the principle of ‘benevolent construction’ to treat the donor’s words of a gift as a declaration of a trust10.
The introduction of ‘unconscionability’ was introduced in the case of T. Choithram International SA v Pagarani (TCP). It was held the use of words by Pagarani created a valid trust over the property due to his intention, even though Pagarani had not transferred the title to all nine trustees. This decision was applied in relation to Re Rose, because the donor had done all that was necessary of him to create a trust and therefore, equitable title should pass. The rule in Re Rose was stated to create a constructive trust, and the formalities is not necessary to create that trust. Lord Brown-Wilkinson stated, “Although equity will not aid to volunteer, it will not strive officiously to defeat a gift”. He abbreviated on this by stating, “TCP was not trying to establish an outright gift”. The case of Strong v Bird was also considered regarding to the outcome, it was stated, “the donors ‘conscience’ was affected and it would be ‘unconscionable’ for the donor to opt-out from his gift.
Following, Jenkin LJ judgement in Re Rose, Ho Tham, stated the decision gave a ‘relevantly clear understanding’ to this area of law. However, Hunter, states that the decision in Re Rose is ‘questionable’ and the decision should be ‘overruled’. He back his claim by quoting the statement used by Todd, which stated, the transfer was not foregone conclusion, as the donor has not done everything in his power to transfer his shares because the company possessed a power to refuse registration of the donee. It could be argued that the decision in Re Rose is inconsistent to that in Re Fry. The facts of the case in Re Rose was not evident that the donor intended to make himself a trustee of his shares. In Richard v Delbridge, it was mentioned there must be an express intention which the donor did not have. George Jessel, stated in Richard v Delbridge, “for a donor to take himself as a trustee, there must be an express trust of his intension to become a trustee. Hence, Garton tries to justify between the case of Re Rose and Re Fry, by stating, Re Rose should be limited in the cases where the company director has no discretion to refuse registration over the transfer and Re Fry the test should be similar to Richard v Delbridge where the donor intention is to deprive himself if its beneficial ownership, and declares to hold it on trust for others.
Halliwell agreed to the exception created by Lord Evershed to be a valid exception to the rule created in Milroy as it is far too strict of an approach and can be at times problematic. She also referred to Lord Evershed outlining a clear distinction between Re Rose and Milroy by stating, the transferor in Milroy could have ‘done much more’ that was required for him to divest himself of the property. If this was achieved, then the transfer would have been deemed complete in equity as was in Re Rose, regardless of third party registration which was seen in the case of Mascall v Mascall.
Following the case of Re Rose8, applied exception which altered the factor considered in Milroy creating slight flexibility and applied that the donor could either deliver the share form to the company or to the donee himself, completing the transaction. A conflict between Re Rose and Milroy in accordance with the doctrine could be argued to be an incomplete trust, results in the legal title not pass to the donee as an outright gift. However, Re Rose has changed the ruling of Milroy through introducing the ‘every effort rule’ created by Lord Evershed which states, ‘if the donor has done everything in his power to diverse legal and equitable ownership’, known as the ‘last act’ of registration is beyond the control of the owner even when the registration was incomplete the transfer will still be effective’. The introduction of every effort rule may create some certainty for the donor if the third party fails to register the share form, equity will still see the transaction as effective.
Hopkin regards this area as “trite law3”. The approach was extracted from the case of Re Fry4, he stated, although the necessary transfer form was complete by the donor, the shares will only transfer to the donee if it was registered by the Treasury. It could be argued the harshness upon the donor if he has done everything that was necessary in order to transfer the shares, it will be in the hands of a third-party to register the share, which appears unfair. Halliwell approach to the methods created by LJ Tuner, seems to accept the formalities are necessary for a fair outcome. However, she expands on the matter quoting the methods created in Milroy is too strict by relating the case of Re Fry which she used to demonstrate the outcome resulting from Milroy to be challenging 5, therefore, will cause uncertainty on the matter. Garton, however, feels that the Court of Appeal (CA) showed regrets in the concluding parts of the decision resulting from the case. Therefore, it could be claimed that Garton’s recognises that the courts did not agree upon the decision they have reached and introduced the decision outlined in the case of Re Rose6. Romer J, also agreed and recognised the harshness, outlining the potential unfair result of his reasoning of the case. He then stated, “he had arrived at his decision ‘with regret’ and went on to state he had ‘no alternative’7.
The old maxim was established in the case of Milroy v Lord1. To ensure a gift is perfectly constituted, LJ Tuner outlined the three-method in which this could be created: “1) As an outright transfer of legal title of the property or an existing equitable interest; 2) transferring property to the trustee to be held on trust; or 3) the donor declares himself a trustee of the property”2. Ensuing the methods are correctly constituted; the donor must complete the correct form of any of the three methods above and deliver the form to the relevant company ensuring the registration has taken place of the new owner. If the donor fails to comply with the necessary formalities the transfer will be deemed ineffective. Historically, the doctrine established would be considered as straightforward. However, the methods created some uncertainty on the matter where the donee has done everything in his power to transfer the share, but a third-party failure to register the shares will result to an imperfect gift.
This essay intends to primarily outline key areas of Equity and Trust in relation to gifts and trusts, extracting the fundamental debates between academics on the principle of the old maxim “equity will not act to perfect an imperfect gift or to assist a volunteer”. However, the principle appears to be heavily modified from cases to cases introducing exception forming leeway and flexibility to cases causing conflict with the maxim resulting in equity perfecting an imperfect gift. The test of ‘unconscionability’ allows volunteers to forcefully take their promise made, as the donor has shown to be restricted from falling back to his promise. Academic articles outlining individuals proposition regarding the constitute of equitable interests and trusts in regards with the maxim of ‘equity will not perfect an imperfect gift’ and ‘equity will not assist a volunteer’ but the exceptions can be seen to abandon the principles of the maxims. The context of this essay will also evaluate whether the exceptions created in cases are justifiable and whether the introduction of ‘unconscionability’ has been taken out of content increasing flexibility which can be argued to be a right approach by the judges or whether it has caused legal conflict and uncertainty in the law.