Milroy v Lord (1862) 4 De GF & J 264

Facts

  • Mr. Medley sought to transfer fifty shares in the Bank of Louisiana to Mr. Lord to be held on trust for Mr. Medley’s niece, Eleanor Medley.
  • Mr. Medley executed a deed of transfer and handed over the share certificates to Mr. Lord.
  • The shares, required by company law to be registered, were not registered in Mr. Lord’s name; the transfer deed and certificates were not submitted to the bank.
  • Mr. Medley died with the shares still legally registered in his name.
  • Eleanor Medley argued the shares were held on trust, relying on a chain of trust from Mr. Medley to Mr. Lord to herself.
  • The central legal question was whether a trust had been validly created given the failed completion of share transfer.

Issues

  1. Whether Mr. Medley’s actions constituted a valid transfer of shares to Mr. Lord as trustee for Eleanor Medley.
  2. Whether equity would intervene to perfect an imperfect gift by construing a failed outright transfer as a trust.
  3. Whether the incomplete formal steps in share transfer negated the creation of a trust.

Decision

  • The Court of Appeal held that no valid trust was created since legal and beneficial titles remained with Mr. Medley at death.
  • The court confirmed that equity will not perfect an imperfect gift; the donor must perform all legal steps required for a valid transfer.
  • Turner LJ identified three separate methods for gift transfer: outright transfer, transfer to trustees, or self-declaration of trust.
  • The court refused to recharacterize the failed transfer to trustees as a self-declaration of trust, holding the chosen method must be followed and completed as intended.

Legal Principles

  • Equity will not assist a volunteer by completing an incomplete gift.
  • For a trust to be valid, the settlor must transfer legal title by the required method or make an effective self-declaration of trust.
  • The three methods of transferring a gift are: outright transfer; transfer to trustees; or self-declaration of trust.
  • Later cases, including Re Rose [1952] Ch 499, modified this strict position by holding that if a donor does all that is required of them, equity may treat the gift as complete.
  • Pennington v Waine [2002] 1 WLR 2075 further qualified the rule, permitting equity to perfect an imperfect gift where it would be unconscionable for the donor to rescind the gift.

Conclusion

Milroy v Lord established the enduring principle that equity will not intervene to perfect an imperfect gift, requiring strict compliance with formalities for valid trusts; later cases have softened the rule in particular circumstances, but its core principle remains central in English trust law.

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