Introduction
The legal concept of an imperfect gift arises when an individual intends to transfer property to another, but fails to complete all necessary legal formalities. In such situations, the principle established in Milroy v Lord dictates that equity will not assist a volunteer, meaning it will not perfect an incomplete gift. However, certain exceptions to this rule exist, seeking to mitigate the harshness of this principle. These exceptions include instances where the donor has done everything in their power to transfer the property, as articulated in re Rose, or where it would be unconscionable to retract the gift, as seen in Pennington v Waine. These principles demonstrate how courts attempt to balance the donor's autonomy with the interests of the intended recipient. The application of these principles involves a careful examination of the specific facts and the conduct of the involved parties.
The Doctrine of Imperfect Gifts: Milroy v Lord and Its Limitations
The bedrock principle governing the transfer of property without consideration is that “equity will not assist a volunteer,” a rule established in Milroy v Lord. This principle implies that if a donor fails to complete all legally required steps to transfer property, equity will not perfect the gift for the intended recipient. This rule protects the donor’s right to change their mind before the transfer is complete, and the interests of creditors if the donor becomes insolvent. However, the strict application of this principle can lead to outcomes that contradict the donor's clearly expressed intentions and may appear unjust, particularly when the donee has relied upon the promised gift. This is why the courts have developed some exceptions to the rigid application of Milroy v Lord. The primary exceptions hinge on the donor completing all required actions, as outlined in re Rose, or where it is deemed unconscionable for the donor to retract the gift, as exemplified in Pennington v Waine.
The "Everything Necessary" Principle: re Rose
The case of re Rose presents an exception to the Milroy v Lord principle. Re Rose holds that where a donor has done everything in their power to transfer the property, equity will complete the imperfect gift. The core factual context of re Rose involved a donor seeking to transfer shares to his wife. The donor executed the necessary transfer documents and delivered them along with the share certificates to the intended recipient. However, the company delayed registering the transfer, and the donor died before registration occurred. The court held that the transfer was effective, as the donor had taken all steps within his control. This decision hinged on the idea that once the transferor completes all necessary actions, they effectively hold the property on trust for the recipient, pending legal registration. Re Rose thus created a narrow but critical exception to the general rule against assisting volunteers, focusing on the practical actions of the donor in completing the transfer. It emphasizes the importance of a donor acting diligently and completing the transfer process to the best of their ability to make an effective gift.
Pennington v Waine: Unconscionability as an Exception
Pennington v Waine introduces a further exception, focused on whether it would be unconscionable for the donor to retract the gift. The facts of the case involved Ada Crampton, who intended to transfer shares to her nephew, Harold Crampton. Ada signed the share transfer form and delivered it to her company's auditor. However, the auditor did not forward the form to the company secretary, who was responsible for registration. The donor passed away. The Court of Appeal considered whether the shares should be considered part of Ada’s estate, or if they were held on trust for Harold. The court considered the fact that Ada intended to make the gift of her own free will, Harold was informed of the intended gift, and Harold signed the transfer form. Furthermore, the auditor, acting as Ada’s agent, assured Harold that the transfer required no further action on his part, on which he relied. Arden LJ concluded that, despite the absence of complete legal transfer, it would be unconscionable for Ada to retract the gift, effectively creating a constructive trust for Harold. This marks a significant departure from the strict requirement of re Rose that the donor must do "everything necessary," placing the focus instead on the fairness and reasonableness of allowing a donor to withdraw an intended gift.
Key Differences and Implications of Pennington v Waine
A crucial distinction between re Rose and Pennington v Waine lies in the threshold for perfecting a gift. Re Rose requires the donor to have completed all steps within their personal power to effect the transfer; if any further actions are required that are outside their direct control, such as registration by a company, the transfer is still considered effective. However, Pennington v Waine extends this principle. In Pennington v Waine the court focused on the concept of “unconscionability”, asking whether it would be unfair to allow the donor to resile from the gift. This implies that, even if the donor has not done everything in their power, equity may still perfect the gift if the circumstances indicate that the donor is unable to withdraw the gift. This creates a degree of uncertainty as it does not provide specific guidelines as to when a donor’s behaviour is considered unconscionable. The Pennington v Waine decision, while grounded in achieving an equitable outcome, has been criticized for its lack of clear boundaries, leaving judges with broad discretion. The decision moved the focus from the actions of the donor to the circumstances and the impact of the gift on the donee. This shift can be seen to undermine the certainty previously afforded by re Rose.
Subsequent Case Law and The Ongoing Debate
Subsequent cases have attempted to clarify the limits of the "unconscionability" exception set out in Pennington v Waine. The decision in Zeital v Kaye, a later case, demonstrates a reluctance to apply the Pennington v Waine exception broadly. Zeital v Kaye involved a purported gift of shares where the donor had neither completed the transfer form nor handed over the share certificates. The court decided that the imperfect gift could not be perfected, as the donor had not taken all the necessary steps as required by the principle in re Rose. The court distinguished Pennington v Waine on its particular facts and clarified that Pennington v Waine represents a narrow exception to the general rule. Curtis v Pulbrook also illustrates a more restrictive reading of Pennington v Waine, with the court emphasising that Pennington v Waine’s concept of unconscionability was tied to the donee's detrimental reliance. In Curtis v Pulbrook, the court found no transfer of shares occurred, even though there was a purported attempt to transfer the shares, since the transfer forms were not properly completed and share certificates not correctly handed over, further stressing the need for clear, demonstrable actions by the donor in order to effect a transfer, aligning closely with the requirements of re Rose. These subsequent decisions highlight the continuing legal conversation around these rules and their interpretation. They show that while Pennington v Waine introduced the concept of unconscionability, it remains a narrow and fact-specific exception to the fundamental principle that equity will not assist a volunteer.
Conclusion
The case of Pennington v Waine stands as a significant development in the law relating to imperfect gifts. While the principle from Milroy v Lord that "equity will not assist a volunteer" remains fundamental, the courts have created exceptions to this principle. Re Rose allows for a transfer to be deemed effective when a donor has done everything in their power to complete the gift. Pennington v Waine further broadened this exception by introducing the idea of unconscionability, suggesting that even if the donor has not taken all necessary actions, a transfer could still be effective if it would be unjust to allow the donor to retract the gift. Subsequent cases such as Zeital v Kaye have attempted to constrain the unconscionability doctrine, emphasizing the need for clear actions from the donor. The interplay of these cases shows the complexities within the law of gifts and the tension between upholding the donor’s intent and ensuring legal certainty. Pennington v Waine stands as a point of reference when evaluating the nuances of an imperfect gift.
