Discuss the statement; "The court of appeal decision in Pennington v Waine [FN1] is inconsistent with all previous authorities on imperfect gift and trusts and suggests a shit in policy towards volunteers."

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In this essay we are going to discuss the statement; “The court of appeal decision in Pennington v Waine [FN1] is inconsistent with all previous authorities on imperfect gift and trusts and suggests a shit in policy towards volunteers.”

As Arden LJ put it at paragraph 52 of Pennington v Waine [FN1] “This appeal raises the question of what is necessary for the purpose of a valid equitable assignment of shares by way of a gift;” Thus in this essay we shall assess the extent to which this judgment is consistent or inconsistent with regards to the constitution of gifts and trusts. In order to do so we shall first have to establish the law with regards to the constitution of gifts and trusts prior to Pennington v Waine [FN1].

Though this is not the full extent of the statement in consideration, in addition we must address the position of volunteers post Pennington v Waine [FN1]. As Arden LJ put it: “…the principle that equity will not assist a volunteer at first sight looks like a hard-edged rule of law, not permitting much argument or exception which led to harsh and seemingly paradoxical results but that equity has tampered the wind to the shorn lamb.” In accordance we must assess how the wind changed the position of volunteers.

This consequently leads to the question; has there been a shift in the policy of the courts or has there been the establishment of a new equitable principle?

The law prior to Pennington v Waine [FN1]; can be said to be ‘tolerably clear.’[FN2] The law of perfect gifts and perfectly constituted trusts stems form the much sighted statement by Turner LJ in Milroy v Lord [FN3]:

“…in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may, of course, do this by actually transferring the property to the person for whom he intends to provide and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purpose of the settlement, or declares that he himself holds it on trust for those purposes: …” “…as I under stand the law of this court, be resorted to, for there is no equity in this court to perfect an imperfect gift. The cases, I think go further to this extent: that if a settlement is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.”

Thus it was held that there are three ways in which a settlor can transfer the benefits to the beneficiary:

  1. An out right gift.
  2. By the settlor declaring himself as trustee of the property to hold in favour of the beneficiary.
  3. By the settlor declaring a trust in favour of the beneficiary, but by transferring the property to a trustee.

 From the judgment of Turner LJ it can be derived that:

  1. The property must be transferred by the appropriate method laid down by the law.
  2. There may be a transfer in one of three ways (A) (B) (C) as mentioned above. (Though if consideration is given, then equity need not be required to perfect an imperfect gift or trust.)
  3.  If the settlor has clearly intended one of these three methods, the court will not hold that another of them applies so as to give effect to the transfer.
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As the substance of Pennington v Waine [FN1] is the transfer of shares, it seems appropriate to mention that the transfer of shares has seemingly its own difficulties. The transfer can be split into four distinct phases;

  1. Execution of the share transfer form.
  2. Delivery of the share transfer form and share certificates to the donee.
  3. Delivery of the share transfer form and share certificates to the company.
  4. Registration of the transfer by the company.

If one were to strictly interpret Milroy v Lord [FN3] then it would seem that the actual transfer must be registered in the company ...

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