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 an imperfect gift since it deals with the issue of declaration of a trust. Garton, however feels that this case is not distinguishable from Pennington, and therefore, the application of Pagarani is justified in the Pennington case. He states, quoting Arden L.J., that general principle of “benevolent construction” which the courts may invoke in order to treat words of gift as a declaration of trust.
Pennington v Waine – Broadening the Rule of Re Rose
Pennington v Waine has broadened the rule in Re Rose considerably and has been heavily criticised for the way it deals with the equitable maxim that if a donor has made an imperfect gift, a gift lacking the formalities required at common law, equity will not assist the intended donee. This case is controversial in the sense that although it does concern perfecting imperfect gifts, it contradicts the main aspect of the rule in Re Rose. In this case, the donor did not do what was necessary of them to complete the transfer of the gift; however, the court still held that the gift could pass in equity. Halliwell feels that earlier cases will be “superseded by an objective of effectuating rather than frustrating a clear and continuing intention of the donor”. However, Garton counter-argues this point by stating Arden, Schiemann and Clarke L.JJ. all held that equitable title would pass in the situation where the transferor has not done everything needed of them to secure the transfer if it became unconscionable for the transferor to change his mind about the transfer. Chee Ho Tham expresses his views on this case, which concurs with Garton’s view, and attempts to explain Arden L.J.’s decision in this case. He feels that Arden L.J. was “formulating an exception to Re Rose…itself an exception to Milroy v Lord”. He builds upon this and feels that this case can be distinguished from constructive trust element in Re Rose as “the requirement for delivery before the imposition of a constructive trust could be waived if, in all the circumstances of the case, it would be unconscionable to allow the donor to change his or her mind”. The question he has raised is when would it be unconscionable to allow the donor to change his or her mind?
Explanation of Unconscionability
Pagarani first introduced unconscionability, however Pennington v Waine brought in the concept of unconscionability as a means of justifying a transfer in equity. Garton feels that the question of whether the conscience of the transferor will always be so affected as to justify the result of the creation of a constructive trust. This was confirmed by Lord Brown-Wilkinson in the case of Westdeutsche Landesbanke v Islington BC as being “fundamental to the laws of trusts”. Garton states that the introduction of unconscionability as a means for the justification for separating legal and equitable title had caused Pennington to stumble “across a way of utilising the constructive trust in the context of perfecting imperfect gifts without violating elementary trust law...in which the formalities are not completed make it unconscionable for equity to deny the gift, then the conscience of the transferor will be affected”. Hilary Delany and Desmond Ryan explain the present purposes; Arden L.J. stated that if there was a “clear finding that the donor intended to make an immediate gift and that a stage had been reached when it would have been unconscionable for her to recall it”. They express that the application of unconscionability in this context has been subject to heavy criticism. Delany and Ryan also explain Garton’s perspective on this issue; Garton states that “...Pennington v Waine should not be seen as introducing a new exception to the rule against perfecting imperfect gifts; rather it is an opportunity to recast Re Rose in a theoretically sound fashion by shifting the focus away from the extent of the formalities completed and into the conscience of the transferor”. Delany also feels that although Garton also seems to hold the view the introduction of unconscionability in this context “has the potential to mitigate the harshness of legal formalities”, Garton understands that this imposes upon the courts a burden “… to ensure that the concept is not used in such a way as to grant judges an unfettered discretion to perfect imperfect transactions in an arbitrary and unpredictable fashion”.
Delany and Ryan also explain Halliwell’s view on this issue; they seem to view that Halliwell criticises the decision in Pennington as representing “unfettered judicial discretion”, stating that Halliwell builds upon this argument by saying that the “concept of unconscionability...must be based on principle reasoning”.
Delany and Ryan’s view is that the “reasoning in Pennington which can illuminate the present inquiry as to the value of having recourse to the unconscionability principle as a vehicle for arriving at a desired result even in circumstances where the employment of the concept appears to be very far removed from the substantive equitable principle under consideration.” They criticise this decision and hold the view that it “ought to be avoided if the principle is not to be irreparably damaged on the grounds of growing concerns about legitimacy and doctrinal transparency.” Another argument that they raise is on the basis the unfettered discretion, where the “court assumes in adopting such a position”. This was observed by Arden L.J. in her judgement; “...there can be no comprehensive list of factors which makes it unconscionable for the donor to change his or her mind: it must depend on the court's evaluation of all the relevant considerations.”
However, other commentators have different views about unconscionability; Chee Ho Tham has different views in how Pennington should have been decided. He feels that the gift could pass via the laws of contract. Chee Ho Tham, agreeing with Halliwell, feels that the application unconscionability is likely to be “unwieldy and unpredictable”. He states that the communications between Ada and Harold could be argued to have “amounted to a unilateral offer to complete the transfer in exchange for Harold’s execution of the form”, in which he accepted when he signed the form, being both acceptance and consideration for the promise. Therefore, not only would it have been unconscionable for Ada to change her mind for the transfer of the gift, it would also be a breach of contract. This would also lead to the conclusion that Harold’s equitable title to the shares had arisen at the time of his acceptance of the unilateral contract offer made on Ada’s behalf.
Covenants to Settle
Halliwell feels that the “policy objectives” enunciated by Arden L.J. had been “at play in the law relating to covenants to settle with trustees, where the transfer of property never takes effect”. The objective behind the maxim that equity will not assist a volunteer almost always prevails where a live settler changes their mind and does not want to transfer the property as covenanted to do so. Halliwell feels that unconscionability has become too broad in the sense that, according to Re Ralli’s WT , it is now the “case that a court of equity will not allow people to go back on their covenants because...it would be appropriate to prevent the donor from acting in such a manner which is unconscionable”.
Alternative Approaches
Garton feels that there can be a proprietary claim even where a constructive trust has not been established. He quotes Sarah Lowrie and Paul Todd suggestion that it is “possible to remove the trust mechanism from the picture altogether, following Lord Browne Wilkinson in Westdeutsche where he commented “there may be a separation of legal and equitable title without a trust in certain circumstances”. This is an alternative approach of resolving the theoretical difficulties inherent within Re Rose; Garton states that “separating title in this way would presumably operate to give the claimant a proprietary claim over the shares when transferor has done everything required of him personally to effect the transfer “. However Garton acknowledges that this does not remove the relevance of unconscionability.
Another approach that Garton suggests is giving effect to the transferor’s wishes. Unconscionability focuses upon the notion that the “transferee has somehow become entitled to the equitable title, and that it would be wrong to allow the transferor to deny him it”. However, Garton suggests that the rule should not be based upon the entitlement of the transferee, but be based upon giving effect to the wishes of the transferor; this would remove the constructive trust element since the conscience of the transferor is now difficult to be affected. He argues that “as the rationale is to give effect to the transferor's wishes, there should be an additional requirement that he display a continuing intention that the transfer go ahead”. This approach would remove the criticisms of Pennington as the intentions of the transferor would be fulfilled and not what would be right for the transferee.
Conclusion
In conclusion, these two articles put forward arguments to express their viewpoint on the issue of perfecting an imperfect gift. Halliwell concludes her article by stating that she sympathises with the Court of Appeal in the case of Pennington v Waine; she acknowledges that the outcome was fair, however she states that the outcome would be greater if the “courts use their discretion to give effect to ineffective transactions where it would be unconscionable not to do so”. She also states that
“Lord Browne-Wilkinson's remarks in respect of equity never striving officiously to defeat a gift was intended to elevate that notion into a maxim of equity and, if we are left with a maxim that equity will not assist a volunteer unless it is unconscionable not to so, then we are left with a very unruly beast”.
Garton concludes by explaining what he set out to do in his article; he states that there are
“theoretical inconsistencies between the existing operation of the rule in Re Rose and fundamental trust law theory, by demonstrating that the use of neither the express trust nor the constructive trust in this context is appropriate without a radical reappraisal of our basic understanding of the trust mechanism”.
He argues that the introduction of unconscionability has allowed a potential development in a flexible way of “mitigating the harshness of the legal formalities in the spirit of Re Rose but in a manner consistent with accepted trust law theory”. However, Garton recognises that there is a burden upon the courts to ensure that the rule is not used in such a way to grant the judges an unfettered discretion to perfect imperfect gifts in an unpredictable manner. There are many commentators which agree with aspects of these articles, since they both put forward respectable arguments. After reading both articles and critically analysing the issues raised by both authors, it can be said that my preferable article is Garton since his views seem to be more fair to the Laws of Equity.
Bibliography
Articles
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 364-379
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 192-202
Chee Ho Tham, Careless Share giving, Conv. 2006, Sept/Oct 411-431
Gerwyn Ll. H. Griffiths, Zeital v Kaye: doing everything necessary - a recent manifestation of an ongoing issue, Conv. 2010, 4, 321-323
Sarah Lowrie & Paul Todd, Re Rose revisited, [1998] C.L.J. 46-54
Hilary Delany & Desmond Ryan, Unconscionability: a unifying theme in equity,Conv. 2008, 5, 401-436
Books
Hanbury & Martin: Modern Equity, 18th edn (London: Sweet & Maxwell, 2009)
Penner, J: The Law of Trusts, 7th edn (Oxford: OUP, 2010)
Moffat, G.: Trusts Law: Text and Materials, 5th edn (Cambridge: CUP, 2009)
Webb, C. & Akkouh, T.: Trusts Law (Palgrave USA, Palgrave Macmillan, 2008)
Cases
Re Rose [1952] Ch. 499
Milroy v Lord (1862) 4 De G.F. & J. 264
T Choithram International SA v Pagarani [2001] 1 WLR 1
Strong v Bird (1874) L.R. 18 Eq. 315
Pennington v Waine [2002] 1 W.L.R. 2075
Westdeutsche Landesbanke v Islington BC [1996] A.C. 669
Re Ralli’s WT [1964] Ch.288
Statutes
Law of Property Act 1925
(1862) 4 De G.F. & J. 264
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 364
(1862) 4 De G. F. & J. 264 at 274-275
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 193
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 364
Chee Ho Tham, Careless Share giving, Conv. 2006, Sept/Oct 412
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 194
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 369
(1862) 4 De G.F. & J. 264
Hanbury & Martin: Modern Equity, 18th edn (London: Sweet & Maxwell, 2009) p.131
McKay “Article Name” [1976] 40 Conv. 139
Gerwyn Ll. H. Griffiths, Zeital v Kaye: doing everything necessary - a recent manifestation of an ongoing issue, Conv. 2010, 4, 321-323
Law of Property Act 1925 , s 53(2)
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 197
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 196
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 197
[2002] 1 W.L.R. 2075 Para 60
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 196
[2002] 1 W.L.R. 2075. per Arden L.J. para.[63]; per Clarke L.J. paras [77] & [117]; per Schiemann L.J. para.[118]
Chee Ho Tham, Careless Share giving, Conv. 2006, Sep/Oct, 414
Chee Ho Tham, Careless Share giving, Conv. 2006, Sep/Oct, 415
Sarah Lowrie & Paul Todd, Re Rose revisited, [1998] C.L.J. 47
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 374
Hilary Delany & Desmond Ryan, Unconscionability: a unifying theme in equity,Conv. 2008, 5, 431
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 376
Hilary Delany & Desmond Ryan, Unconscionability: a unifying theme in equity,Conv. 2008, 5, 432
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose, Conv. 2003, Sept/Oct, 379
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 200
Hilary Delany & Desmond Ryan, Unconscionability: a unifying theme in equity, Conv. 2008, 5, 432
Hilary Delany & Desmond Ryan, Unconscionability: a unifying theme in equity,Conv. 2008, 5, 433
[2002] 1 W.L.R. 2075 at 2090-2091
Chee Ho Tham, Careless Share giving, Conv. 2006, Sept/Oct, 415
Chee Ho Tham, Careless Share giving, Conv. 2006, Sept/Oct, 420
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 198
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 198
Sarah Lowrie & Paul Todd, Re Rose revisited, C.L.J. 1998, 57(1), 47
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose Conv. 2003, Sept/Oct, 376
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose Conv. 2003, Sept/Oct, 377
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose Conv. 2003, Sept/Oct, 378
Margaret Halliwell, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?, Conv. 2003, May/June 202
Jonathon Garton, The role of the trust mechanism in the rule in Re Rose Conv. 2003, Sept/Oct, 378