Introduction
The legal maxim "equity does not assist a volunteer" represents a fundamental principle within the realm of equity and trusts law. This concept stipulates that a court of equity will not intervene to perfect an imperfect gift or trust in favor of a person who has not provided valuable consideration. In other words, equity will not compel a transfer of property where the intended recipient is a volunteer, meaning they have not given anything of value in return. The principle is particularly relevant in the context of trust creation, where the settlor attempts to transfer property to trustees for the benefit of beneficiaries. Key requirements for a valid trust generally include the three certainties (intention, subject matter, and objects) and the proper constitution of the trust. This formal constitution typically necessitates the legal transfer of the trust property to the trustees. In situations where this transfer is incomplete, the court of equity will usually refrain from perfecting an imperfect gift if the recipient is a volunteer.
The Core Tenet: Equity Will Not Perfect an Imperfect Gift
The principle "equity does not assist a volunteer" is deeply rooted in the notion that equity acts upon conscience. A court of equity will intervene only where there is a moral or equitable reason to do so. In cases involving gifts, this reason usually stems from valuable consideration provided by the recipient. Consideration is defined as something of value given by one party to another in return for an act or promise. When such consideration is absent, the recipient is considered a volunteer. The courts’ refusal to aid a volunteer prevents them from obtaining a benefit without providing any return. This restraint prevents the courts from compelling the settlor or donor to complete an act they chose not to complete fully, a situation seen to create an unfair advantage. A settlor or donor must complete all necessary steps to legally transfer the property to the trustees if the beneficiaries are volunteers, otherwise the court is not mandated to intervene and perfect the gift on their behalf.
The rationale behind this maxim also serves to protect the autonomy of the property owner. The owner has complete control over their assets and must demonstrate a clear intention to transfer them and complete this transfer. The courts will not substitute this intention or the transfer with an order from the courts. Equity recognizes the individual's right to dispose of their property at their discretion, and this is why the maxim exists. Courts are cautious of actions that could potentially force a property owner to part with their assets if they have not completely satisfied the required steps for the transfer, especially in the case of volunteers.
Exceptions to the Rule: When Equity Intervenes
While the principle "equity does not assist a volunteer" is well-established, there are some exceptions to this principle where equity will intervene, even in the absence of consideration. One notable exception is the rule in Strong v Bird (1874) LR 18 Eq 315, which applies specifically to situations where an intended donor makes an imperfect gift during their lifetime. This rule states that an imperfect gift will be perfected if the intended donee obtains the legal title to the property upon becoming the executor or administrator of the donor’s estate. The rule is confined to situations in which a clear intent to give is established during the donor's lifetime and this intent continues until the donor’s death, and the donee becomes an executor or administrator. This rule does not create a cause of action for the volunteer, but rather allows the volunteer to retain the property if they obtain legal ownership.
Another important exception was developed in Re Rose [1952] Ch 499, where it was held that an imperfect gift could be treated as valid in equity if the donor has completed every act they could to make the transfer legal. The principle specifies that the donor must have done all in their power to transfer legal ownership of the property to the donee. If a third party needs to complete an action to perfect the gift, and the donor cannot force this action, then this is considered to be satisfactory for equity to enforce the transfer. This is particularly relevant for the transfer of shares in a private company, where the donor does not have control over the company’s board of directors, and where the company needs to be registered in the name of the donee.
Case Law: Re Ralli’s Will Trusts and the Strong v Bird Rule
The case of Re Ralli’s Will Trusts [1964] Ch 288 provides a significant application of the Strong v Bird rule, extending it to covenants to settle property. In this case, the court held that where the trustee of one trust, from which a covenantor is expected to receive property, is also the trustee of a future trust that the covenantor has promised to transfer property into, the second trust is automatically constituted when the property is transferred into the trustees’ name. This decision is important because it demonstrates how a trust can be constituted without the settlor actually declaring a trust over the property. In other words, if the property is already held by the intended trustee under a different capacity, it may be enough to constitute the trust if a promise has been made to transfer property into this trust.
The facts of the case involved a woman who was to receive property from her deceased father’s will trust. The trustee of the father’s will trust was also the trustee of her marriage settlement trust. The wife had declared, in a clause of the settlement, that any existing property she held was to be held on trust for the marriage settlement, which included her reversionary interest in the will trust. The question before the court was whether the trustee held the woman’s property as trustee of the will trust or trustee of the marriage settlement trust. The court decided that the property was to be held on trust for the marriage settlement, as the trustee already held the legal title to the property. This shows how the courts will not assist a volunteer in obtaining legal title, but will allow for the property to vest in the volunteer if they achieve legal ownership. This is not an application of a rule to perfect an imperfect gift, but rather to allow a trust to vest without a perfection of the gift.
The Implications of Being a Volunteer
Being a volunteer in the context of trust law carries significant ramifications. The absence of consideration means that a volunteer cannot compel the settlor to create a trust or transfer the property. In practice, this can result in a situation where the intended beneficiary does not receive the benefit of the trust. For instance, if a settlor attempts to establish a trust but fails to effectively transfer the trust property to the trustees and the beneficiaries are volunteers, equity will not compel the settlor to complete the transfer. Consequently, the intended trust fails. This highlights the absolute necessity of establishing a fully constituted trust for the purposes of benefitting the intended party.
Moreover, a volunteer cannot take advantage of certain equitable remedies, such as specific performance. Specific performance is a remedy that compels a party to fulfill their contractual obligations. It is generally not available to volunteers as they have not provided any consideration to create a legal or equitable obligation. This leaves the volunteer with no means to enforce the trust, which further reinforces the strict separation between volunteers and parties that have provided valuable consideration. Volunteers must rely on the settlor to voluntarily transfer property; courts are not mandated to complete the transfer on their behalf.
The Importance of Proper Trust Creation
The principle "equity does not assist a volunteer" serves as a warning about the necessity of proper trust creation. Settlors who intend to benefit specific beneficiaries must take all the required steps to establish a valid and fully constituted trust. This means ensuring that the three certainties are met (intention, subject matter, and objects) and that the legal title of the trust property is properly transferred to the trustees. A failure to follow these steps can result in the trust failing and the beneficiaries failing to benefit from the settlor's intentions. Lawyers play a crucial role in helping settlors to avoid these problems.
Furthermore, the presence of exceptions to this maxim emphasizes that the law in this area can be complex. While the general rule is strict, certain circumstances may trigger an exception that allows for the trust to vest in the volunteer. Thorough understanding of these principles and their applications, through case law such as Strong v Bird, Re Rose, and Re Ralli’s Will Trusts, is necessary for any professional working in the field of trusts and equity. Legal professionals must be familiar with the procedures and actions required for the correct creation of a trust, to ensure that they do not incorrectly advise a client or allow for a trust to be created incorrectly.
Conclusion
The maxim "equity does not assist a volunteer" is a vital rule in equity and trust law. The maxim states that a court of equity will not intervene to perfect an imperfect gift or trust if the intended recipient has not provided any valuable consideration. This principle protects the autonomy of property owners and ensures fairness in the distribution of assets. The law only acts on the conscience of those who have breached their obligations. However, there are exceptions, such as the rule in Strong v Bird and Re Rose, which demonstrate flexibility in particular circumstances. The application of the Strong v Bird rule in Re Ralli's Will Trusts provides an example of an expansion of this rule, to circumstances of a covenant to settle property. These cases reveal the limitations of the maxim in preventing the vesting of a trust. The core idea that courts will not assist a volunteer, though, remains, and lawyers must be fully informed of all the complexities and nuances of this principle to be effective. Correct application of these principles is necessary to ensure the proper constitution of trusts and to achieve the intentions of settlors, as well as to ensure that the courts do not exceed their jurisdiction.
