Equity Coursework

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07188777        Equity Coursework

Equity Coursework

Introduction

The two articles by Jonathon Garton and Margaret Halliwell both address the decision in Re Rose on the issue of perfecting imperfect gifts. Prior to Re Rose, Milroy v Lord was the main case on this issue, where Turner L.J. stated, “…the court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be effectual by being converted into a perfect trust.” These two articles, however, have different view points on this issue and present arguments as to whether the decision in this case is correct or not; there has also been some suggestion that it has opened the floodgates for future cases to argue that the courts should perfect the passing of imperfect gifts. There are many legal experts who agree with one article over the other; however, there are many other experts that agree with certain issues raised in both the articles. I will look at both articles, critically analysing both of them, and suggest which article takes preference.

Starting Point - Milroy v Lord

Milroy v Lord is the starting point for which to understand the main aspects of both these articles. In this case, the settlor delivered up the executed transfer form and share certificates but the defendant’s name was never entered on the bank’s register of members and so legal title had not been transferred to the defendant. It was held that equity would not allow the intended transfer to take effect as a declaration of trust in favour of the plaintiff, lest all imperfect gifts operate as perfect trusts and remove the need to comply with the formalities for transfer at law. Halliwell feels that this case establishes that a voluntary settlement may occur by an outright transfer by way of gift, by way of a transfer to trustees to hold on trust or by a declaration of trust. She builds on this view by stating, “It is axiomatic from Turner L.J.'s statement of the law that an unsuccessful attempt to achieve a voluntary settlement by one of the three methods will not be construed as a successful attempt via the other methods.” She concludes this point by stating that the methods of achieving a settlement by transfer will depend on the type of property involved. Garton, however, feels that the Court of Appeal showed expressions of regret in the concluding parts of the case at the decision they were compelled to arrive at. Therefore, it is my view that Garton feels that the Court did not agree with the decision that they reached and, therefore, made the decision in Re Rose foreseeable.

Impact of Re Rose

The decision in Re Rose mitigated the general rule that a gift which fails at common law for want of formalities will not take effect in equity. This case led to the rule that equitable title to certificates would pass by way of gift from the transferor to a volunteer transferee once the donor had completed all the steps necessary to pass legal title. Halliwell feels that prior to this decision, the law was relatively straightforward. She argues that ineffective transfers where the transferor had covenanted with a trustee or trustees to transfer the property are problematic. However, Garton feels that the rule in Re Rose should only “operate to allow a transfer to take effect in equity before registration in the case of those public limited companies where registration is a rubberstamping exercise; however, even here it is still possible that additional information will be sought from the transferor”. This would then narrow the rule of Re Rose down and therefore reduce the problems stated by Halliwell.  Griffiths, agreeing with Halliwell, feels that the rule, even though a significant and sensible decision in its particular context, it is not without criticism or difficulty regarding the theoretical basis on which it rests. She states that, in addition “to not at all dealing with convincingly with the clear statement in Milroy v Lord that a transfer is either an outright gift, a transfer on trust or a declaration of trust by the settlor himself and that the lines between these should not be blurred, it has the potential to impose upon an the donor a trusteeship which is both unintended and potentially permanent.” In other words, she is stating that the rule in Re Rose imposes a trust upon the donor, which is unintentional and therefore may undermine the donor’s purpose for making the transfer.

T.  Choithram International SA v Pagarani (TCP) – Introduction of Unconscionability

 Unconscionability has been said to first be introduced in this case. In this case, Pagarani wanted to transfer a gift to a charity, by use of words. His intention was that he would become one of nine trustees over the property, however he failed to transfer legal title before his death and therefore the trust had not been validly constituted. It was held in this case that the use of words by Pagarani created a valid trust over the property that he intended even though he had not transferred the title over to all nine trustees. The reasoning for this decision was that the Re Rose principle could be applied so that the settler had done all that was necessary of him to create the trust and therefore equitable title should pass immediately. The rule of Re Rose has been understood as creating a constructive trust, in which no formality is necessary to create that trust. Lord Browne-Wilkinson reiterates this point by stating, “Although equity will not aid to volunteer, it will not strive officiously to defeat a gift”. The builds upon this by stating, “TCP was not attempting to establish an outright gift.” This case also considered Strong v Bird; “in both cases, his conscience was affected and it would be unconscionable and contrary to the principles of equity to allow such a donor to resile from his gift”.

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This point is the main aspect of Halliwells argument; she feels “… the Court of Appeal's analysis of the Choithram case was wrong” since it had “made no reference to trusts”. She explains this further by stating:

“…this obiter dictum was applied completely out of context in Pennington v Waine, where the facts were very far from novel and indeed mirrored closely the circumstances in some of the previous cases where the potential donees had died having demonstrated a continuing intention to transfer property”.

In other words, this case should not be used as a case for dealing with the transfer of ...

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