Pennington v Waine [2002] 1 WLR 2075

Facts

• Ada Crampton intended to transfer shares in a company to her nephew, Harold Crampton.
• Ada signed the share transfer form and delivered it to the company’s auditor.
• The auditor did not forward the transfer form to the company secretary, who was responsible for registration.
• Ada passed away before the registration of the transfer was completed.
• Harold was informed of Ada's intention and signed the transfer form.
• The auditor, acting as Ada’s agent, informed Harold that no further action was required from him, on which Harold relied.
• The issue arose whether the shares formed part of Ada’s estate or were held on trust for Harold.

Issues

1. Whether the strict rule from Milroy v Lord, that “equity will not assist a volunteer” by perfecting an imperfect gift, applied in the circumstances.
2. Whether Ada had done everything in her power to transfer the shares, so that the exception in re Rose applied.
3. Whether, despite incomplete formalities, it would be unconscionable to allow Ada (or her estate) to retract the gift and thus whether equity should perfect the transfer.

Decision

• The Court of Appeal held that, although Ada had not completed all necessary formalities, it would be unconscionable to allow her to revoke the gift.
• The court found that Ada’s intent, Harold’s knowledge and reliance, and the auditor’s assurances collectively meant it would be unfair to deny Harold the shares.
• Equity intervened by imposing a constructive trust in favour of Harold, perfecting the gift despite non-compliance with formal transfer processes.
• The shares did not form part of Ada’s estate and were held for Harold.

Legal Principles

• The principle from Milroy v Lord is that equity will not assist a volunteer or perfect an imperfect gift.
• The exception in re Rose applies if the donor has done everything in their power to transfer the property.
• Pennington v Waine established that a further exception arises where it would be unconscionable for the donor (or estate) to retract the gift, even if the donor has not completed all necessary actions.
• The unconscionability exception depends on the facts, including the recipient’s knowledge, any reliance, and assurances given.
• Subsequent cases, such as Zeital v Kaye and Curtis v Pulbrook, have construed the unconscionability test narrowly, requiring clear evidence of detrimental reliance or conduct by the donee.

Conclusion

Pennington v Waine marked a significant development by permitting equity to perfect a gift in cases of unconscionability, beyond the strict formalities required by previous authorities. However, later case law has emphasized that this remains a narrow, highly fact-specific exception.