The main topics that will be covered include the Re ROSE principle, the Rule in STRONG v BIRD, Donationes Mortis Causa, and Proprietary Estoppel.

In this case the deceased had transferred shares in a company to X by executing a share transfer form and delivering it with the share certificate to the donee for him to register his name. The donor was said to have done everything in his power to divest himself of the shares, but one final formality remained which until completed left the donor as the legal owner of the shares.

The question was whether the gift was valid in accordance with the doctrine established under MILROY. Although it was argued that the trust was incompletely constituted as the legal title had not passed over to the donee to enable an outright gift, nor had the donor declared himself trustee over the shares, the courts held a constructive trust existed whereby the beneficial interest pass on the execution of the share form and that the settlor held the legal title on trust for the donee as for Mr Rose to refuse to acknowledge that equitable title had passed would be unconscionable.

One of the problems with this ruling is that it creates a trust merely from the transfer of equitable title once the donor has done everything necessary to divest himself of his interest, irrespective of any issues that he may not have divested himself of his interests at law, which could be construed as equity indirectly perfecting an imperfect gift when it should leave well alone, as Mr Rose had neither declared himself trustee nor transferred the shares to a third party (trustee). Another problem is that it supposes an outright transfer has taken place when in fact the settlor may have wished to retain his interest via the right to renege at law.

Justification has nonetheless been cloaked by unconscionability, and the right to renege before the final formality is performed has subsequently been destroyed as evidenced in MASCALL v MASCALL, in the form of an estoppel.

Even if it were disputable whether equity had assisted a volunteer in the above scenario as there appears to be an intention to make the gift by the donor, the following examples are clearly exceptions to the maxim.

The rule in STRONG v BIRD established by common law principles stated, that ‘the appointment of a debtor to be one’s executor had the effect of cancelling the executor’s debts to the estate’. The reason for this rule was that once the executor became the legal owner of the testator’s estate, with the same powers, obligations, and right of actions as the testator himself would have, this placed the exectuor in a peculiar position where a debt was owed by him, as he could not, nor was likely to sue himself to recover this debt.

Prior to this case situations equity would enforce the debt, but since this case, common law has prevailed, but only where the testator had manifested an intention to forgive the debt in his lifetime and this intent continued up to his death.

The debt being converted into a gift, is thus perfected by the debt being discharged without any need for formality.

Although there appears to be some logical explanation, (if only based on convenience), for the reasoning behind this rule, later extensions are more dubious.

In the case of Re STEWART, the rule in STRONG was applied to perfect an imperfectly made gift, where the testator again intended to make such a gift inter vivos, and this intent continued until his death.

This extension was not only a creation of equity, (as to let common law prevail in STRONG was more of an oblique act), but a direct helping hand to the volunteer who would have no other remedy at law to enforce any right over such property placed in his hands in the capacity of a fiduciary trustee on trust for the beneficiaries under e.g. a will, as the gift was perfected by the fortuitous vesting of the property in the hands of the executor.

While it may well be presumed that the testator has great faith in his executor, it is difficult to believe this good faith was intended be taken any further by assuming that all testator’s appoint executors in full knowledge that by doing so, they will be perfecting a gift that up until this vesting of the property remained part of the testators estate, or releasing a debt, which would otherwise be due if someone else were appointed, but this is exactly what equity has done.

Unconstituted trusts have also benefited from this rule as can be seen in Re RALLI’S WILL TRUSTS, but much of the criticism levied on this rule has been due to the inclusion of administrators, as these are appointed by the court which the testator has no control over.

Whilst Walton J in Re GONIN (who was opposed to this extension) likened the rule to ‘something in the nature of a lottery’, preferring equity’s original response of enforcing such imperfections prior to STRONG, others would be happy with the rules applied to conflicts of interests being applicable here also, as this would require a representative to either step down, or act impartially.

Another except to the maxim that equity will not assisting a volunteer is Donatio mortis causa. Under this heading, where a donor passes a gift inter vivos, made in contemplation of death, to take effect conditional upon his death, this will be valid without any further formalities.

This has been made an exception to provide for circumstances of expected death where it would not be reasonable to expect the purported donor to comply with the formalities of say, completing a shares form etc.

Certain requirements are still applicable however as not only must the gift be made in contemplation of death, but the donor must part with dominion over the property before his death, as established in CAIN v MOON. 

Although most personalty is capable of being passed before death, some are excluded, such as cheques, and promissory notes, to name but a few. Land for a time was also include as being incapable of passing under donation mortis casua, (DUFFIELD v ELWES), but recently in SEN v HEADLEY, this was settle by Nourse LJ where the indicia of title transferred was the title deeds.

Equity will thus assist the volunteer here so as to help complete a donor’s final wish, however as this rule is quite limited in it’s application and difficult to prove, the class of persons able to use this rule will be definably small.

Proprietary estoppel has also provide a back door route to the perfecting of an imperfect gift, due to the detriment suffered albeit caused by a gratuitous promise which the donee has come to rely on, as it’s role is to protect the donee from such detriment which in many cases requires the perfecting of an imperfectly made gift, as has been the case in both PASCOE v TURNER and Re BASHAM.

It is interesting to note that the donee in this scenario is not considered a volunteer in the true sense of the meaning, as the detriment is subsided for consideration which permits equity to assist, and the unconscionable behaviour of the other that encourages the donee to act to his detriment requires equity to look on as done that which ought to have been done, however the type of consideration given is outside the scope of contract and it is for this reason I conclude a gift is perfect, as not only have the formalities to perfect these gives failed, giving the donee no remedy at law, but without the subsidy, equity would not assist.

CONCLUSION

The law in this area is complicated, only by equity and common law acting as separate entities.

Although the perfecting of the gifts appear to be carrying out that which the donor intend, this intent is inconclusive, and for this reason the assistance of equity has been disapproved of.

There may well be situations in which it may be safe to presume that the donor intended the donee to benefit, but in cases like Re JAMES, where an arbitrary appointment occurs, this intent becomes obscure.

Words 1,628

Trust

Assignment 2 (Due 7th January 2003)

‘………there is no equity in this court to perfect an imperfect gift’ (Turner LJ in Milroy v Lord (1861).

Bibliography

Equity and Trusts                                                        Margaret Halliwell

Nutcases                                                                Chris Chang & John Weldon

Cases & Materials on Equity & Trusts                                Paul Todd

The Law of Trusts                                                        J E Penner

Cracknell’s Law Students’ Companion                        D G Cracknell

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