1 Milroyv Lord (1862) 4 De GF & J.
2642 3 JHopkins, ‘Constitution of trusts- a novel’ C.L.J. 2001, 60(3), 483 at 4834 ReFry 1946 1 Ch. 3125 MargaretHalliwell, Perfecting imperfect gifts and trusts: have we reached the end ofthe Chancellor’s foot? Conv.
2003, May/June 1936 JonathonGarton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003,Sept/Oct, 3647 Asper Romer J in Re Fry 1946 1 Ch. 312 at 319-3208 Rosev Inland Revenue Commissioner 1952 Ch. 4999 MargaretHalliwell, Perfecting imperfect gifts and trusts: have we reached the end ofthe Chancellor’s foot?, Conv. 2003, May/June 19710 20021 W.L.R. 2075 Para 6011 Penningtonv Waine 2002 1 WLR 2075In conclusion, it could be claimed thatthe judges are making the test of “equity will not act to perfect an imperfectgift or to assist a volunteer” far to flexible introducing exception whichallows to abandon the maxim causing equity to perfect an imperfect gift andassisting volunteers to forceful take what was promised.
The test of ‘unconscionability’has caused legal uncertainty, allowing judges to apply their discretion and implementingexpectations to cases on what they believe is fair ignoring good maxim laydownin Milroy and Re Rose. The ‘test of unconscionability’ will continue to causelegal uncertainty and could be criticised that instead of improving the alreadyexisting 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 anyuncertain judgements of the existing maxim, the Supreme Court should consider overrulingor clarifying the test of ‘unconscionability’ creating a foundation for thejudges to apply the judgement to individual cases still having flexibility but moreimportantly a consistent outcome without having a conflict with other areas ofthe law causing legal conflict. Halliwell states that the decision hasleft the law in ‘disarray’; and Lord Brown-Wilkinson decision in Choithram, isapplied out of context. She also mentions that the decision An additional factor that may beconsidered for appeal is the decision of the CA on the grounds of formalitiesfor policy reasons. This could be argued to ensure the prevention of fraud and certaintyof the matter of entitlement over the share of the property. The argument couldbe that the CA focus on the matter of ‘unconscionability’ instead of thenecessary formalities.
The CA not following the formalities may encounter fraudand the danger of opening the floodgates producing more litigation for thedonee to claim entitlement of the property when the donor has not done ‘everyeffort’ for the property to transfer by equity and in law.Furthermore, another appeal against theCA on the matter of principle could be successful. The CA relied heavily on’unconscionability’ and stated, ‘it would be unconscionable for the donor tochange his mind once he has made a promise’. it could be argued that the CA hasundermined the concept of a property owner in which have a ‘right to repent oftheir promise’ upon till the stage of ‘no return’ may the donor would not beable 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 propertyunless it could be proven that the property owner ‘conscience’ been burned bythe promisee.
This could be performed by the promisee acting to his detrimenton the reliance of the property. Applying it to Pennington, the donee justbelieving that the property will transfer to him would not be enough, but thedonee must act in reliance to the promise made by the donor in exchange of thegift. Therefore, it could be seen that the donee in Pennington has not actedupon his detriment in exchange of the property.
However, if it could be proventhat the donee acted upon his detriment for an exchange of the gift the casewould have been decided on the matter of proprietary-estoppel.There are many grounds for appeal thatis likely to succeed due to the outcome of the decision created by the CA inthe case of Pennington. Firstly, the CA abandoned the principal of followingprecedents of previous good law cases which are commonly used in English law.The CA decided the case of Pennington without the precedence outlined in ReRose. However, the CA shadowed the decision created by the privy council in thecase of Pagarani 2001. Itcould be argued that privy council as they are a merely persuasive decisionwhich is not binding by the law.
Following, the approach taken by CA from theprivy council would be deemed incorrect. A factual distinction which could beoutlined between the case of Pagarani and Re Rose is that Pagarani caseinvolves the intention to create a trust and Re Rose involved the intention tocreate a gift. It could be argued that Re Rose and Pennington was similar asthey both involved gifts to the donee. Therefore, the CA applying Pagarani toPennington was decided incorrectly and not following the precedence of Re Rosemade the outcome uncertain. The ground of appeal on this matter will besuccessful.The rule further expanded in the case ofPennington v Waine11 which was set up in Re Rose, whichstated, ‘even if every effort has not been met by the donor, the transactionwill still be deemed as complete’. In relation to Re Rose, the doctrine of ‘everyeffort rule’, the donor must complete the share form and deliver the form toeither 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 doctrinelaydown in Re Rose. The CA stated, equity will see the transaction to becompleted, even if the donor delivered the form to a third person who is notthe 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 nodelivery of the form to the company or the donee but only to the donor’s agent whereasin Re Rose the form was delivered.
However, the decision created in the caseformed view point from different judges such as LJ Arden who stated, “a gift iscomplete in equity if the stage has been reached where it would have beenunconscionable to retract”, but this was criticised by Ryan and Delaney onthe ground that ‘unconscionability’ was low. Halliwell shown signs of disappointmentof the result in Pagarani stating that it was ‘wrong and we are left with and ‘unfetteredjudicial discretion’. She elaborated onthis by stating, the CA analysis of the case was wrong as it had not ‘made any referenceto trusts’. She expanded on this by stating “…this obiter dictum wasapplied completely out of context in Pennington v Waine, where the facts weredifferent and indeed similar in the circumstances in some of the previous caseswhere the potential donee had died having demonstrated a continuing intentionto transfer property”9. Therefore, CA should havenot interpreted this case for dealing with the transfer of an imperfect giftwith the matter of declaration of a trust.
Garton, However, that case ofPagarani would be more justifiable in the of Pennington by stating the quote ofArden LJ, that the principle of ‘benevolent construction’ to treat the donor’swords 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 ofwords 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.
Thisdecision was applied in relation to Re Rose, because the donor had done allthat was necessary of him to create a trust and therefore, equitable titleshould pass. The rule in Re Rose was stated to create a constructive trust, andthe formalities is not necessary to create that trust. Lord Brown-Wilkinsonstated, “Although equity will not aid to volunteer, it will not striveofficiously to defeat a gift”. He abbreviated on this by stating, “TCP wasnot trying to establish an outright gift”.
The case of Strong v Birdwas also considered regarding to the outcome, it was stated, “the donors’conscience’ was affected and it would be ‘unconscionable’ for the donor toopt-out from his gift. Following, Jenkin LJ judgementin Re Rose, Ho Tham, stated the decision gave a ‘relevantly clearunderstanding’ to this area of law. However, Hunter, states that the decisionin Re Rose is ‘questionable’ and the decision should be ‘overruled’. He backhis claim by quoting the statement used by Todd, which stated, the transfer wasnot foregone conclusion, as the donor has not done everything in his power totransfer his shares because the company possessed a power to refuseregistration of the donee. It could be argued that the decision in Re Rose is inconsistentto that in Re Fry. The facts of the case in Re Rose was not evident that thedonor 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 nothave.
George Jessel, stated in Richardv Delbridge, “for a donor to take himself as a trustee, there must bean express trust of his intension to become a trustee. Hence, Garton tries tojustify between the case of Re Rose and Re Fry, by stating, Re Rose should belimited in the cases where the company director has no discretion to refuseregistration over the transfer and Re Fry the test should be similar to Richardv Delbridge where the donor intention is to deprive himself if its beneficialownership, and declares to hold it on trust for others. Halliwell agreed to the exceptioncreated by Lord Evershed to be a valid exception to the rule created in Milroyas it is far too strict of an approach and can be at times problematic. She also referred to Lord Evershed outlininga clear distinction between Re Rose and Milroy by stating, the transferor inMilroy could have ‘done much more’ that was required for him to divest himselfof the property. If this was achieved, then the transfer would have been deemedcomplete in equity as was in Re Rose, regardless of third party registrationwhich was seen in the case of Mascall v Mascall.Following thecase of Re Rose8,applied exception which altered the factor considered in Milroy creating slightflexibility and applied that the donor could either deliver the share form tothe company or to the donee himself, completing the transaction. A conflictbetween Re Rose and Milroy in accordance with the doctrine could be argued tobe an incomplete trust, results in the legal title not pass to the donee as anoutright gift.
However, Re Rose has changed the ruling of Milroy throughintroducing the ‘every effort rule’ created by Lord Evershed which states, ‘ifthe donor has done everything in his power to diverse legal and equitableownership’, known as the ‘last act’ of registration is beyond the control ofthe owner even when the registration was incomplete the transfer will still beeffective’. Theintroduction of every effort rule may create some certainty for the donor ifthe third party fails to register the share form, equity will still see thetransaction as effective.Hopkinregards this area as “trite law3”.The approach was extracted from the case of ReFry4,he stated, although the necessary transfer form was complete by the donor, theshares will only transfer to the donee if it was registered by the Treasury. Itcould be argued the harshness upon the donor if he has done everything that wasnecessary in order to transfer the shares, it will be in the hands of athird-party to register the share, which appears unfair.
Halliwell approach tothe methods created by LJ Tuner, seems to accept the formalities are necessaryfor a fair outcome. However, she expands on the matter quoting the methods createdin Milroy is too strict by relating the case of Re Fry which she used to demonstratethe outcome resulting from Milroy to be challenging 5,therefore, will cause uncertainty on the matter. Garton, however, feels thatthe Court of Appeal (CA) showed regrets in the concluding parts of the decisionresulting from the case. Therefore, it could be claimed that Garton’s recognisesthat the courts did not agree upon the decision they have reached andintroduced the decision outlined in the case of Re Rose6.Romer J, also agreed and recognised the harshness, outlining the potentialunfair result of his reasoning of the case. He then stated, “he had arrived athis decision ‘with regret’ and went on to state he had ‘no alternative’7.The old maximwas established in the case of Milroyv Lord1.To ensure a gift is perfectly constituted, LJ Tuner outlined the three-methodin which this could be created: “1) As an outright transfer of legal title ofthe property or an existing equitable interest; 2) transferring property to thetrustee to be held on trust; or 3) the donor declares himself a trustee of theproperty”2.
Ensuing the methods are correctly constituted; the donor must complete thecorrect form of any of the three methods above and deliver the form to the relevantcompany ensuring the registration has taken place of the new owner. If the donorfails to comply with the necessary formalities the transfer will be deemedineffective. Historically, the doctrine established would be considered asstraightforward. However, the methods created some uncertainty on the matterwhere the donee has done everything in his power to transfer the share, but athird-party failure to register the shares will result to an imperfect gift. Thisessay intends to primarily outline key areas of Equity and Trust in relation togifts and trusts, extracting the fundamental debates between academics on theprinciple of the old maxim “equity will not act toperfect an imperfect gift or to assist a volunteer”. However, the principleappears to be heavily modified from cases to cases introducing exceptionforming leeway and flexibility to cases causing conflict with the maximresulting in equity perfecting an imperfect gift.
The test of’unconscionability’ allows volunteers to forcefully take their promise made, asthe donor has shown to be restricted from falling back to his promise. Academic articles outlining individualsproposition regarding the constitute of equitable interests and trusts inregards 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 abandonthe principles of the maxims. The context of this essay will also evaluatewhether the exceptions created in cases are justifiable and whether the introductionof ‘unconscionability’ has been taken out of content increasing flexibilitywhich can be argued to be a right approach by the judges or whether it hascaused legal conflict and uncertainty in the law.