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 amends its rigorousness in the sense that it now includes where a gift is attempted to be given to a trustee to hold but it ends up being held by the trustee in a different capacity the gift is still valid. Similarly, this exception is further expanded by the courts in Re Rallis Will Trusts (1964) where they decided that a continuing intention of the transferor to make the gift is no longer needed. Both of these judgements may be criticised for adding more confusion, removing the strength of the maxim however, it may be argued that these judgements have appeared to clarify some common problems. Further amendments to the principle have been demonstrated with the “doctrine of proprietary estoppels” used in Dilwyn v Liwellyn. In this case, a father promised a house to his son who took possession and spent vast amount of money in improving and re-building the property. Despite, the fact that the the father never actually transferred the house to the son, upon the father’s death it was held that the son was the equitable owner and thus, the court ordered testamentary trustees to convey the land to him. This appears to be an example of an exception which appears to be practical and feasible for the courts to apply, which arguably is not the case for applying the complex “test of unconscionability”.
Before critically discussing the judgement and exception in Pennginton v Waine, it may be beneficial to analyse the crucial judgement in Re Rose as it was this case which led to the exception being expanded (arguably too far) in Pennington. Re Rose concerned a voluntary deed to transfer shares where the directors, who had powers to “refuse to register transfers”, registered the transfer 2 months later. The question that arose in court was whether the transfer was valid either at the date of the deed or whether it was only valid once directors had actually registered it. The court decided that the deed was valid on the initial transfer (before shares were actually transferred) and not on the later date, accordingly, the defendant did not have to pay tax on the shares. The court further held that vesting takes place once the transferor has done everything in his power to divest himself of the property, even if the law requires some further tasks (“such as registration”), to be performed by a third party. This judgement can be criticised on the grounds that a company or the directors of a company should be lawfully permitted to refuse if they want to however, under this new judgement, they are not permitted. Hence, it appears that equity is “jumping the gun” in order to assist a volunteer; it is giving the equitable title before the legal title is transferred and consequently, ignoring the fact that directors could refuse to register the transfer.
Moreover, it was this exception that the courts ultimately took too far and expanded beyond necessity in Pennington v Waine resulting in an apparent “contradiction to the established principle”. In Pennington, the transferor executed a share transfer form to transfer shares to her nephew however, the transfer form was not delivered to the nephew and, therefore, he was not registered as a shareholder at the time the transferor died. Accordingly, the question that the courts were asked in Pennington was whether equitable interest in shares was transferred at the time of transfer? In making their judgement, the courts distinguished between the facts in Re Rose and dismissed it on the grounds that they did not help in Pennington as there was no delivery of the documents to the transferee or to the company, only to the transferors agent, whereas in Re Rose there was. Thus, on the facts of the case, Arden LJ came to the conclusion that “a gift is complete in equity if the stage has been reached where it would have been unconscionable to retract”, a view which was accepted by Schiemann LJ. Although, some may justify this judgement on the facts of the case (Pennington) the transferor had told the transferee of the transfer, and had appointed as a director on the strength of the transfer, and also the transferors agent had informed her nephew he did not need to do anything on his part. However, Delaney and Ryan have openly criticised the judgement claiming that “Arden L.J.'s conception of “unconscionability” is concerned; the threshold is a relatively low one”. However, it appears that the judgement overtly undermines the established principles and therefore third judge (Clarke LJ) in the Court of Appeal did not completely accept the idea of an “unconscionability test” and saw the case as a valid equitable assignment of the beneficial interest. Clarke LJ also saw “strong indications” in Re Rose, delivery was not essential to transfer the beneficial interest and therefore he did not see the need for a test for unconscionability to be created as we could have just used Re Rose in this case. However, this argument can be rebutted as it would be contrary to the judgement in Milroy v Lloyd and thus, must be wrong. Despite what Clarke LJ says, modern legal academics have generally accepted that Pennington v Waine expands the rule in Re Rose by creating the rule about unconcionability. However, this is potentially an enormous exception to the maxim because the courts appear to be explicitly contradicting the maxim by stating that equity will perfect an imperfect gift and will assist a volunteer under the “unconscionable test”.
However, it may be argued that the judgement in Pennington was a positive step in the right direction in terms of easing the pressure on the courts and further clarifying the law. Legal commentator, J Garton is in favour of the exception created in Pennington stating that it has resulted in increased flexibility for the courts which he argues will result in a higher amount of “fairer judgements” in subsequent cases. This statement can be criticised on the grounds that it is extremely delusional to suggest that a complex and ambiguous “test of unconscionability” will somehow result in the courts making “fairer judgements”. It may even be rebutted that the “test of unconcionability” will actually hinder and achieve less fairer judgements as there are so many qualifications and exceptions to the general principle which the courts are now having to further clarify time and time again. However, Garton goes on to argue that the judgement rightfully recognises the parties’ intention which he believes is “a crucial aspect” of the test and may be further developed by the courts. This argument appears to be valid and one may also argue that although the term and test for “unconcionability” is currently unclear and ambiguous, it can be clarified through the aid of subsequent case law. A comparison can be made to the financial provisions made on divorce (in family law) which requires a satisfaction of “the test of fairness”. This test was at the centre of vast criticism for being just as vague and unclear as the “test of unconscionability” currently is. However, the courts acknowledged the ambiguity and hence developed and clarified the test through subsequent cases. Hence, it may be argued that a similar approach can be taken by the courts in terms of developing and clarifying the test for unconcionability to ensure that it does not “dangerously undermine” the established principle.
On the other hand, the controversial judgement in Pennington can be, and has been, criticised immeasurably for the legal confusion it has subsequently caused. The most common criticism is that there has been not been detailed or clarified guidance by the judges regarding the point at which it becomes unconscionable. This has been further limited and restricted as there have been no subsequent judgements in this area clarifying or building further on from Pennington. One must note that the exception created in Pennington was built on the judgement in Re Rose and thus, it may be argued that the only way to clarify the confusion caused by the judgement in Pennington is through the aid of case law where judges can explicitly give guidance on how and at what point it becomes “unconscionable to retract”. Another criticism of the “unconscionability test” is that it clearly contradicts the established rule in Milroy v Lord, which had subsequently become accepted as the “general rule”. This is because it creates the exception that in certain circumstances equity will assist a volunteer if it appears to be “fair” or “conscionable” to do so and thus, suggesting that equity will perfect an imperfect gift. Further consideration should be given to the practicality of this newly established “test of unconcionability” as the test will involve policy considerations which arguably should not be up to the judges to decide; primarily for the reason that their decisions in this area of law might also affect the rules on estoppels. Consequently, the evidence suggests that even if the judgement in Pennington is justified on the facts of the case, it still does not mean the unconscionability test should have been created as it appears to be an example of “a hard case making bad law”. This criticism appears to be sensible and valid in the sense that the courts were faced with a tricky and unusual set of facts which they believed could only be solved by creating an exception to the long established principle, oblivious to it conflicting many previous acknowledged judgements such as Milroy v Lord and Strong v Bird.
In conclusion, the evidence suggests that the court’s decision along with the creation of the “test for unconcionability” has caused and inevitably will continue to cause an extensive amount of legal uncertainty and ambiguity within the law. In particular, as it appears to allow judges to decide themselves when they believe it is fair to ignore the maxims and the established principle in Milroy v Lord. Furthermore, the judgement can be further criticised on the basis that instead of improving and clarifying the already extraordinarily complex law on equity, Pennington v Waine has made it even more unclear and uncertain, more so than it previously was. Thus, in order to rectify this judgement and clear up the “dangerous” judgement, we need either the Supreme Court to overrule the decision or we need subsequent cases to deeply clarify what is and what is not considered “unconscionable”. It may be argued that the first option is preferred as the second option may go on to further “dangerously undermine” what is left of the established principle as subsequent cases may ultimately achieve the aim of rectifying the confusion, however, they may do even more damage and cause even more confusion in the interim. In close, it is accepted that the Pennington v Waine not only “dangerously undermines” the established principle but also explicitly contradicts the established principle and clearly conflicts with countless previous judgement which support the principle that that equity will not act to perfect an imperfect gift nor assist a volunteer.
Total Word Count (Excluding Footnotes and Bibliography) = 2,821
Bibliography of Sources Used
Cases
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Ellison v Ellison (1802) 6 Ves 656
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Milroy v Lord (1870) (1870) LR 5 QB 5
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Strong v Bird ( 1874 ) LR 18 Eq 315
- Re Rose Ch 499 (CA)
- Pennington v Waine [2002] EWCA
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T Choithram International SA v Pagarani and Others [2001] 2 All ER 492
- Re Rallis Will Trusts (1964)
- Dilwyn v Liwellyn [1862] EWHC Ch J67
Books
- R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
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John Duddington, Equity and Trusts, (Law Express 2nd Edition), Pearson Longman Publishing - 2009.
- Mohamed Ramjohn “Unlocking Trusts”(Third Edition) (Hooder Arnold Publishing - 2005)
Legal Articles and Journals
- M. Halliwell, “Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?” [2003] 67 Conv. 192;
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H. Tjio and T.M. Yeo, “Re Rose revisited: the shorn lamb's equity” [2003] L.M.C.L.Q. 296,
- H. Delany and D. Ryan Conveyancer and Property Lawyer, Unconscionability: a unifying theme in equity, (2008)
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Doggett, “Explaining Re Rose: the search goes on?” [2003] C.L.J. 263;
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R. Meagher, D. Heydon, M. Leeming, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (4th edn, Butterworths LexisNexis, Australia, 2002)
Internet and Online Sources
Ellison v Ellison (1802) 6 Ves 656
Milroy v Lord (1870) (1870) LR 5 QB 549
Strong v Bird ( 1874 ) LR 18 Eq 315
Page 205, Para 2, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Pennington v Waine [2002] EWCA Civ 227
Ellison v Ellison (1802) 6 Ves 656
Milroy v Lord (1870) (1870) LR 5 QB 549
Page 212, Para 4, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
T Choithram International SA v Pagarani and Others [2001] 2 All ER 492
Page 250, Para 8, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Milroy v Lord (1870) (1870) LR 5 QB 549
Page 250, Para 9, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Page 208, Para 7, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Pennington v Waine [2002] EWCA Civ 227;
Strong v Bird ( 1874 ) LR 18 Eq 315
Page 208, Para 8, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Re Rallis Will Trusts (1964)
Dilwyn v Liwellyn [1862] EWHC Ch J67
Pennington v Waine [2002] EWCA
Page 12, Paragraph 2 Legal Journal H. Tjio and T.M. Yeo, “Re Rose revisited: the shorn lamb's equity” [2003] L.M.C.L.Q. 296,
Pennington v Waine [2002] EWCA P
Page 217, Para 6, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Pennington v Waine [2002] EWCA P
Pennington v Waine [2002] EWCA
Page 15, Paragraph 2, Hilary Delany and Desmond Ryan, Conveyancer and Property Lawyer, “Unconscionability: a unifying theme in equity”, [2008]
Page 38, Paragraph 8, R. Meagher, D. Heydon, M. Leeming, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (4th edn, Butterworths LexisNexis, Australia, 2002)
Milroy v Lord (1870) (1870) LR 5 QB 549
Pennington v Waine [2002] EWCA
Equity will not perfect an imperfect gift and will not assist a volunteer
Pennington v Waine [2002] EWCA
Page, 120, J. Garton, “The role of the trust mechanism in the rule in Re Rose”, Liverpool University [2003]
Pennington v Waine [2002] EWCA
A. Doggett, “Explaining Re Rose: the search goes on?” [2003] C.L.J. 263;
Page 211, Para 8, R. Pearce, J. Stevens and W. Barr, The Law of Trusts and Equitable Obligations 5th ed. Oxford Publishing
Milroy v Lord (1870) (1870) LR 5 QB 549
Pennington v Waine [2002] EWCA
Milroy v Lord (1870) (1870) LR 5 QB 549
Strong v Bird ( 1874 ) LR 18 Eq 315
Milroy v Lord (1870) (1870) LR 5 QB 549