Lord the case Re Rose [1952] EWCA Civ 4

Lord Nicholls in the case Royal
Brunei Airlines Sdn Bhd v Tan Kok Ming 1995 2 A.C 378 at 392, describes
how the principle of unconscionability is central to equity but notes caution
that it is potentially an uncertain concept.1  This paper will consider the statement
“equity’s role as a ‘court of conscience’ and its flexibility ensures a more
just legal system” with analysis to the above reference. A vast number of cases
will be discussed in light of this to reach a conclusive verdict, together with
critical discussions of key themes around this area, such as the willingness of
equity to perfect an otherwise imperfect transaction through the ‘every effort’
rule, from the case  Re Rose 1952
EWCA Civ 4 , and extensions of that principle through other cases and
equitable exceptions; the circumvention of the Wills Act 1837 and the Law
of Property Act (LPA) 1925 in inter vivos property transactions; some
debate around the litigation on section 53 (1) LPA, donationes mortis
causa (DMC) and equitable rights and remedies that are granted without strict
legal formalities, such as beneficial interests under a trust.

The maxims of equity are general
legal principles that have been adopted following precedent. This body of law governs
equity, and all maxims are discretionary in nature which means courts have
authority on whether to apply them or not to any case. An imperfect transaction
cannot be perfected by interpreting the donor to be a trustee of the property
which would be the subject matter of that gift2,
nor will an incompletely constituted trust be rendered effective so as to aid a
volunteer:3 in either
case equity will not perfect an imperfect transfer of property. It is relevant
to discuss the case Milroy v Lord 1862 4 De GF & J 264 whereby the
general rule ‘equity will not perfect an imperfect gift’ has been derived from,
as this rule has been to some extent relaxed in other cases to allow exceptions,
which clearly illustrates a demonstration of equity’s flexibility to ensure
that cases have a fairer and just legal outcome, should the rule have been
applied in its literal terms.

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 Lord Justice Turner in this case confirmed
three situations where a gift should be recognised by equity, and these are if:
(1) the donor arranges an outright transfer of legal title to the property; (2)
that the donor transfers the legal title of the property to the trustee to hold
on trust; or (3) that the donor declares himself as the trustee of the property
in question.4
The prospect of an imperfect gift only arises in the first two situations,
where the formalities governing the transfer of property are not satisfied,
leading to the property not being vested in the trustee or donee. In this case,
it was held that no transfer of the shares were recorded in the company’s
accounts, and because of such failure to observe the formalities that were
required, the trust was incompletely constituted. 5

Another case Richards v Delbridge
1874 L.R. 18 Eq. 11 ,
whereby the strict ruling of Milroy v Lord 1862 4 De GF & J 264  was applied, had a similar outcome, in that
the gift was considered imperfect as the property in question was not passed
via a deed, which is a necessity when it comes to dealing with property
transfers. In Re Fry 1946, Justice Romer refused to perfect an
imperfect transfer of shares because although the testator had executed a share
transfer certificate, the testator did not obtain the treasury approval which
was required, which in effect held there to be no effective transfer. In order
to render a voluntary settlement valid and effectual, Lord Justice Turner
stated, “the settlor must have done everything which, according to the nature
of the property comprised in the settlement, was necessary in order to transfer
the property and render the settlement binding upon him… there is no equity in
this court to perfect an imperfect gift” 6
Through the analysis of the three cases mentioned above, it is seen again that
when formalities are not complete, the trust cannot be fully constituted,
therefore, once again confirming the rule that equity will not perfect an
otherwise imperfect gift/transaction.

The strict application of the rule in
Milroy v Lord 1862 4 De GF & J 264  had been relaxed in other cases such as Re
Rose 1952 EWCA Civ 4, and Mascall v Mascall 1985 50 P & CR 119.
In Re Rose 1952 EWCA Civ 4, it was held that the transfer of legal
title to shares was ineffective; but the equitable title had sufficed to pass
as the settlor had “done everything in his power by executing the transfers to
transfer his legal and beneficial interest in the shares to the
donee.” This is known as the ‘every effort’ mechanism or rule; where
the settlor does everything that is required of him in order to divest himself
of the property resulting in the transfer being seen as ‘complete in equity’.
The ratio of Re Rose 1952 EWCA Civ 4 was approved in the House of
Lords and upheld in case Mascall v Mascall 1985 50 P & CR 119, where
it was held that the father had held the property on trust for his son, as the
father had done everything required of him to transfer the property, satisfying
the every effort rule in Re Rose 1952 EWCA Civ 4, to which the gift
had been constituted and could not be irrevocable even when the father had
changed his mind, as it would be unconscionable for him to do so.

On the other hand, at times, courts
may deviate from this rule to combat its strictness. In T Choithram
International SA v Pagarani (2001) 1 WLR 1 Lord Browne-Wilkinson stated:
“although equity will not aid a volunteer, it will not strive officiously to
defeat a gift”.7
In this case, it was held that there was a valid trust even though the donor had
not transferred the legal title in the trust property to all nine trustees as
trustees. The justification given by the court was that the ‘Re Rose principle could be applied so that the
settlor could be taken to have done all that was necessary to create a trust
and therefore that the equitable interest in his property should be taken to
have passed automatically.’8
This case introduced the idea of “unconscionability”. Lord Justice Arden
explains that in relation to the interests of legal certainty, it is vital to
establish exactly when the equitable assignment of shares took place. This idea
moves away from the “every effort rule” by not accentuating when the
settlor has done everything that he needs to but in its place, ‘Lord Justice
Arden concluded that equitable assignment occurred when it becomes
“unconscionable” for the donor to go back on his promise…detrimental
reliance is required so that “donor’s conscience is affected and it would be
unconscionable and contrary to the principles of equity to allow such a donor
to resile from his gift.” 9

In the case Pennington v Waine
2002 EWCA Civ 227, following the Re Rose principle, the execution of the
transfer form with intention to transfer was to have immediate effect. The
Court of Appeal held: that mere completion of the relevant transfer documents
may be capable of giving rise to an equitable assignment of the property
concerned, even when the transferor had not strictly done everything in his/her
power to transfer the property. In this case the aunt had intended to make an
immediate gift of shares to her nephew and it would have been unconscionable
for her to recall the gift. Lord Justice Arden stated in this case: “There can
be no comprehensive list of factors which makes it unconscionable for the donor
to change his mind; it must depend on the court’s evaluation of all the
relevant considerations”.10
The decision was heavily criticised and the courts had been reluctant to follow
this through in other cases.

In order to make a perfect gift, the
donor must transfer the property to the donee, with the intention of making a
gift of that property to the donee. The transfer must be effectuated by
fulfilling the formalities appropriate to the subject matter of the gift but in
limited circumstances the court is willing to assist a would-be donee of the
property despite the fact that the transferor has failed to transfer the legal
title to the donee.

Wills must comply with section 9 of
the Wills Act 1837. For there to be a valid will, the will must be in
writing, signed and attested.11  Will trusts are constituted on death, and
upon death, all the property vests in the executors. Executors are under a duty
to transfer it to the trustees in a proper manner.

An important case to consider is Strong
v Bird 1874 LR 18 Eq 315. In this case, the donor intends to make an
immediate lifetime gift, which is an inter vivos gift, of specified property to
a donee but the gift is imperfect as the donor did not comply with the legal
requirements for an effective transfer of the legal title. However, if the
donor’s intention to give continues unchanged until his death and the donee is
appointed as a personal representative of the donor’s estate thereby receiving
the legal title to the property, then this in effect perfects the gift.

 The application of the rule in Strong v Bird
1874 LR 18 Eq 315 can be seen in the following cases:  Re Stewart 1908 2 Ch 251 – where the
principle applies to imperfect gifts as well as releases of debts and where the
donee is one of a group of personal representatives. Re James 1935 104 LJ
Ch 247, the rule extended to cover administrators and not just executors. Re
Ralli’s Will Trusts 1964 Ch 288 where an extension of the principle was
to cover the incompletely constituted trust situation. A trust may become
completely constituted when property vests in the trustees, even though they
acquire it in a capacity other than their office of trustee of the trust in
question. In Re Gonin 1979 Ch 16 Justice Walton expressed difficulties
in accepting that the rule could apply to administrators as well as executors.
This is because the appointment of an executor is the deliberate act of the
deceased donor and that the appointment of an administrator is an act of law where
the court chooses an administrator, and this has nothing to do with the
intentions of the donor.

A donationes mortis causa (DMC) is a
gift made in contemplation of death. The notion behind this is that it is for
people who have not been able to make a will, to react swiftly in the face of
what seems to be in death, or to allow people who have made a will, to make
last minute changes in the face of imminent death. The requirements of DMC’s
can be found through the case Cain v Moon 1896 2 QB 283: (1) the gift
must have been made in contemplation of, though not necessarily in expectation
of death, (2) there must have been delivery to the donee of the subject matter
of the gift and (3) the gift must have been made under such circumstances as to
show that the ‘thing’ is to revert to the donor in case he should recover, i.e.
conditional on death.12
However, in Wilkes v Alllington 19312 Ch 104 it was held that the rule
can still apply where the donor dies from a different cause from that which
caused the contemplation of death.

Correspondingly, the conditional on
death rule is that the gift must be subject to the express or implied condition
that it is only to be complete and perfect on the death of the donor. The fact
that the gift is conditional can be inferred and this can be seen in the case Gardner
v Parker 1818, “…there, take that and keep it”.13

Furthermore, the delivery to the donee
must be such that after the delivery, the donor must have parted with the power
to control the property. This includes delivery of the ‘thing’ itself or the
means to control it. For example, the case Re Lillingston 1952, there
were three parcels of jewellery. The first parcel was placed in a trunk and the
key was handed over to the donee, “keep the key; it is now yours”. The second
parcel was in a safety deposit locker at Harrods. Access was by key and this
was in a glove in the trunk. The locker at Harrods contained a key to a safe
deposit locker elsewhere. It was held that the delivery was effected. A similar
outcome was also found in the case Woodward v Woodward 1991 and the
subject matter for this case was a vehicle.

Likewise, In Sen v Headley 1991
2 All ER 636 finally allowed a DMC of unregistered land. It was accepted
that the PR would hold the property on constructive trust for the donee thereby
bypassing the need for evidence through the operation of Section 53 (2) of
the Law of Property Act 1925. The Law of Property Act 1925, section 53
(1) (b) states: ‘a declaration of trust respecting any land or any interest
therein must be manifested and proved by some writing signed by the settlor’. 14
In Forster v Hale 1798 30 ER 1226, it was held that the trust need not
be created by writing but declaration must be proved or evidenced thereby. In Smith
v Matthews 1861 45 ER 831, it was held that such evidence must contain
all the terms. Section 53 (2) of the LPA states:  ‘does not affect the creation, or operation
of resulting, implied or constructive trusts’.15

Not only, but also in Rochefoucauld
v Boustead 1897 1 Ch 196, it was held that where someone to whom land is
conveyed, subject to an oral understanding that it will be held on trust, seeks
to deny the trust and claims to be absolutely entitled to the land because the
requisite formalities are lacking, equity will enforce the trust. The
underlying maxim of equity here is that “equity will not allow a statute to be
used as an instrument of fraud”. This can be seen as a more fair and just
outcome.

For inter vivos declarations over
personality, no formalities are required to declare a trust over personal
property, only a sufficient intention is necessary, oral declaration can be
adequate in this situation and no words may be needed. An example of this would
be the case Paul v Constance 1977. However, an imperfect gift as in
the case Jones v Lock 1865
does not show sufficient certainty of intention. Section 53 (1) (c) of the
LPA 1925 states: ” a disposition of an equitable interest or trust
subsisting at the time of the disposition must be in writing, signed by the
person disposing of the same, or by his agent thereunto lawfully authorised in
writing or by will”. 16

A direct assignment is where a
beneficiary under a trust assigns his interest to another person. In Grey v
IRC 1960 AC 1, the settlor transferred shares to trustees on trust for
himself, later, orally instructing them to hold them for the beneficiaries.
Subsequently, the trustees and the settlor executed the documents to confirm
this. Therefore it was held that the trusts were effected by deed and not by
the earlier oral direction, and so stamp duty was payable upon the deed. A declaration
of trust by the beneficial owner may also be a disposition. Grainge v
Wilberforce 1889 – disposing of beneficial interest, held: no duties.

A transfer of both the legal and
equitable interest by beneficiary is possible. Under the rule in Saunders v
Vautier 1841 41 ER 482 , a beneficiary under a bare trust, who is of full
age and mental capacity and is absolutely entitled to the trust property, may
require the trustees to end the trusts and distribute the funds as the
beneficiary directs. In Vandervell v IRC 1967 2 AC 291, Vandervell was
a beneficiary of some shares held on trust for him by the bank. He orally
instructed the bank to transfer both the legal and equitable interest to the
Royal college of Surgeons. It was held that section 53(1) (c) of the LPA
did not apply where a beneficiary directs his bare trustees to transfer both
the legal estate and equitable interest. In Re Vandervell’s Trusts (No 2)
1974 Ch 269 3 All ER 205 there was a declaration of trust with the
consent of the beneficial owner, it was held that there was no requirement for section
53(1) (c) (in writing element).

In conclusion, in regards to the
statement made in the beginning of this paper, and the thorough analysis of
each case mentioned above, it can be said that equity as a court of conscience
does have a flexibility to ensure a more just and legal system, as equity
administers individual justice which can be seen through the outcomes of the
cases. For example in Pennington v Waine 2002, where the withdrawal of
a gift would have been an unconscionable thing to do as it would have put the
nephew of the donor at a disadvantage. To reiterate, in case Re Rose and
case Mascall v Mascall, the strict ruling of Milroy v Lord was
relaxed, to ensure  that are a more
fairer outcome could be achieved in the ruling of each case. In Re Rose
it demonstrated the willingness of equity to perfect an imperfect transaction,
which proves how equity can be fair and mitigates the severity of the common
law rules, as in the case Strong v Bird 1874 also where the imperfect
gift was perfected. Some equitable rights and remedies could be granted without
strict legal formalities, such as beneficial interests under a trust, whereby
the disposing of beneficial interest holds no duties. Equity is fair, equity is
equality.

1 Per Lord Nicholls in Royal Brunei
Airlines Sdn Bhd v Tan Kok Ming 1995 2 A.C. 378 at 392

2 Milroy
v Lord (1862) 4 De GF&J 264.

3 Re Brook’s ST 1939 1 Ch 993.

4 LT.
November 2013. The Donor Transfer The Legal Title Of The Property Law Essays.
online

5 LT.
November 2013. The Donor Transfer The Legal Title Of The Property Law Essays.
online.

6
Turner LJ in Milroy v Lord
1862 4 De GF & J 264  

7
Per Lord Browne-Wilkinson T Choithram International SA v Pagarani (2001)
1 WLR 1

8 www.alastairhudson.com/trustslaw/choithramandpenningtoncasenotes

9 LawTeacher.
November 2013. The Donor Transfer The Legal Title Of The Property Law Essays.
online.

10 Per Lord Justice Arden in case
Pennington v Waine 2002 EWCA Civ 227

11 Wills Act 1837

12 Cain v Moon 1896 2 QB 283

13 Gardner
v Parker 1818

14 The
Law of Property Act 1925, section 53 (1) (b)

15 The
Law of Property Act 1925, section 53 (2)

16 Section
53 (1) (c) of the Law of Property Act 1925

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