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.