"It is submitted that this case [i.e. Pennington v Waine] dangerously undermines the established principles that equity will not act to perfect an imperfect gift nor assist a volunteer. The effectiveness of an alleged transfer of property should not depen

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"It is submitted that this case [i.e. Pennington v Waine] dangerously undermines the established principles that equity will not act to perfect an imperfect gift nor assist a volunteer. The effectiveness of an alleged transfer of property should not depend on the vagaries of whether the court considers that it would be 'unconscionable' for the transfer [or] to change his or her mind"

Critically evaluate this statement

  1. The long established and conventional principle that “equity will not act to imperfect an imperfect gift or to assist a volunteer” can be traced back to the 19th century in particular Ellison v Ellison (1802) and Milroy v Lord (1870). However, the principle appears to have been diluted in subsequent cases such as Strong v Bird and Re Rose where the courts have created several exceptions conflicting with the principle and resulting in equity perfecting an imperfect and consequently allowing a volunteer to force the transferor to give the promised gift. Although, both Strong v Bird and Re Rose have created “significant exceptions”, the widest and most controversial exception was established in the case of Pennington v Waine where the Court of Appeal laid down a “test of unconscionability”. This test stated that a transferor cannot go back on his promise to give a gift once it becomes unconscionable. This essay will look at the effect that these exceptions have had, focusing in particular on the “test of unconcionability” and the contentious exception in Pennington v Waine. This essay will argue that while the exception created in Re Rose can be justified, the courts appear to have gone too far in Pennington v Waine. Although some may rebut this argument and claim that the increased flexibility for the court is a good thing, the uncertainty and legal confusion caused by the decision substantially outweighs any possible advantages.

Although the principle dates back to Ellison v Ellison (1802), it has been cited in many cases as the general rule of law, most notably in Milroy v Lord, where the transferor (Milroy) had signed a voluntary deed purporting to transfer shares in the Bank of Louisiana to Mr Lord. However, in order for the shares to be transferred, it was necessary to sign an appropriate form and register. Consequently, it was held that even if the transferor had the intention, the transferor must evidently vest the gift in the beneficiary/trustee in order to be valid. Thus, the court held that Mr Lord could not force Milroy to give him the shares as the trust had not been “perfectly constituted”. Furthermore, Turner LJ further clarified this judgement stating that there were 3 ways in which a voluntary gift is valid. These are; if the transferor transferred the property to the beneficiaries, if the transferor transferred the property to a trustee for the purposes of the settlement or if the transferor clearly declared that he/she holds the property on trust for the purpose of the settlement. It is this third method which has inevitably caused a great deal of cases arising in which the courts have been asked to decide if words used to declare oneself as a trustee were valid or not.  In Choithram v Pagarani, it was held that the words “I now give all my wealth to this foundation” were clear and explicit enough to constitute a trust. Nevertheless, Turner LJ concluded his judgement in Milroy stating that if the property has been properly constituted in one of the 3 way then the transferor cannot change his mind and beneficiary can force the transferor to give the gift. However, the courts were asked this question in Re Bowden where a nun who had donated all worldly possessions to “the mother superior” of the church, the claimant (the nun) wanted to reclaim her assets after deciding to leave the church. Conversely, the court held that as vesting (the effective transfer) had already occurred and so the claimant could not reclaim her assets. One must take note that once vesting has occurred, the transferee becomes an absolute owner and thus can enforce his/her interests against any party, even the transferor itself. Thus, declaring that if there is an intention to make a gift, once the property has been transferred and vesting has occurred, known as the “point of no return”, the set law or transferor can no longer change their mind and reclaim their property.

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Additionally, the principle appears to have been further amended and diluted through subsequent case law even before the controversial judgement in Pennington v Waine. The first exception is demonstrated In Strong v Bird where it was held that where there is a purported gift (an incomplete gift) to a transferee during the transferor’s lifetime, providing the transferee subsequently obtains a legal title to the property in capacity of a personal representative, the gift is then seen to be perfected by appointment of a debtor as an executor or administrator. Although this judgement does not “explicitly change the principle”, it appears to ...

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