Creation and requirements of express trusts - Exceptions to ...

Learning Outcomes

This article outlines the key exceptions to the equitable principle that equity will not assist a volunteer or perfect an imperfect gift, including:

• How the baseline rule in Milroy v Lord operates to prevent enforcement of imperfect gifts by volunteers, and how the Re Rose exception fits within that framework.
• The precise steps that constitute “everything in the donor’s power” under Re Rose for different types of property (land, shares, chattels).
• How and when unconscionability may allow perfection even where the donor has not done everything in their power, with care over the limits of Pennington v Waine.
• The conditions for Strong v Bird to perfect an imperfect gift and how the doctrine applies beyond debts (for imperfect inter vivos gifts) and to trusteeship vesting scenarios.
• The strict criteria for a valid donatio mortis causa (specific contemplation of death, conditional nature, and delivery of dominion/indicia of title), and the limits of the doctrine with modern financial instruments and registered land.
• The elements of proprietary estoppel and the remedial flexibility of the court in crafting a proportionate remedy to satisfy the equity.
• The practical consequences for title if an exception applies (equitable title vs legal title, and how registration/formal completion follows).

SQE1 Syllabus

For SQE1, you are required to understand the equitable rule that equity will not assist a volunteer or perfect an imperfect gift and the recognised exceptions that may perfect transfers in equity, with a focus on the following syllabus points:

• The general rule that equity will not assist a volunteer or perfect an imperfect gift (Milroy v Lord).
• The requirements for the exception established in Re Rose (the 'every effort' test), including its application to land and shares.
• The limits and careful use of unconscionability in Pennington v Waine and later guidance emphasising reliance/detriment.
• The conditions necessary for the rule in Strong v Bird to apply, and its extension to imperfect gifts beyond debts.
• The specific requirements for a valid donatio mortis causa (Cain v Moon), including examples of valid indicia of title (passbooks, deeds) and cautions with registered land and modern banking.
• The elements required to establish proprietary estoppel, the overlap with constructive trusts, and the court’s remedial discretion.
• The consequences for property ownership when one of these exceptions applies, including how equitable ownership can precede formal registration of legal title.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. True or False: If a donor intends to make a gift of shares and completes the stock transfer form but forgets to hand it to the donee before dying, the gift will always fail.
2. Which exception might apply if an intended donee is appointed as the donor's executor after the donor's death? a) Donatio Mortis Causa
   b) The rule in Re Rose
   c) The rule in Strong v Bird
   d) Proprietary Estoppel
3. For a valid donatio mortis causa, the gift must be made in contemplation of what?
   a) Marriage
   b) Immediate death from a known cause
   c) The possibility of future death
   d) Making a will
4. Which case established the 'every effort' test, where equity may perfect a gift if the donor has done everything in their power to transfer the property?
   a) Strong v Bird
   b) Pennington v Waine
   c) Re Rose
   d) Cain v Moon

Introduction

As explored previously, for a trust to be properly constituted where the settlor appoints a third party as trustee, legal title to the trust property must be transferred to the trustee using the correct formalities for the specific type of property. Similarly, for an outright gift to be effective, the donor must transfer legal title to the donee. If the settlor or donor fails to complete all the necessary legal steps, the trust may be incompletely constituted, or the gift may be imperfect.

The fundamental equitable principle is that ‘equity will not assist a volunteer’ and ‘equity will not perfect an imperfect gift’. A volunteer is someone who has not provided consideration recognised in equity (such as money, money’s worth, or marriage consideration). Therefore, if a gift is imperfect, or a trust incompletely constituted, the intended recipient (who is usually a volunteer) generally cannot ask equity to compel the transferor to complete the transfer.

However, equity, seeking to achieve fairness and prevent unconscionable outcomes, has developed exceptions to this rule. These exceptions allow a transfer to be perfected in equity under specific circumstances, even where legal formalities remain outstanding.

Key Term: Volunteer
A person who has not provided valuable consideration (money or money's worth) or marriage consideration for a promise or transfer of property. Equity generally does not enforce promises made to volunteers.

Key Term: Imperfect Gift
A gift where the donor has failed to complete all the necessary legal steps required to transfer ownership of the property to the donee.

Key Term: Constitution (of a trust)
The process by which legal title to the trust property is vested in the trustee(s). A trust is 'completely constituted' when this is achieved.

This article examines the main exceptions where equity may intervene.

The 'Every Effort' Test: The Rule in Re Rose

The first exception arises where the transferor (settlor or donor) has made every effort necessary for them to make to transfer the property, and the only outstanding actions are to be performed by a third party. If the transferor has done everything in their power and put the matter beyond their control, equity may treat the transfer as complete.

This principle was established in Re Rose [1952] Ch 499. Mr Rose executed share transfer forms in favour of his wife (the donee) and delivered these forms along with the share certificates to her. The company directors needed to register the transfer for legal title to pass, which they did some months later. The court held that the gift was perfected in equity from the date Mr Rose had done everything required of him and handed over the documents, even though legal title passed later upon registration by the company.

The ‘every effort’ test complements the baseline rule in Milroy v Lord: if the donor chooses a particular method of transfer (e.g. outright gift rather than self-declaration of trust), equity will not switch methods to save the gift. Re Rose operates only where the donor has correctly initiated the chosen method and has fulfilled all personal steps; what remains is the act of a third party (e.g. the registrar or Land Registry).

In practice, the test varies with the type of property:

• For shares outside CREST, correct execution and delivery of the stock transfer form with the share certificate, followed by submission to the company, places completion beyond the donor’s control.
• For registered land, execution and delivery of a duly completed transfer (e.g. TR1) to the transferee or their conveyancer, coupled with submission to HMLR for registration, can suffice even before registration occurs.
• For chattels, unequivocal delivery to the donee (or declaration of trust) may be the appropriate step; for choses in action, compliance with statutory assignment processes applies.

Requirements for the Rule in Re Rose

For this exception to apply:

• The transferor must use the correct method of transfer for the relevant property.
• The transferor must have done everything within their own power to effect the transfer.
• The documentation must have been delivered to the transferee or put beyond the transferor's control (e.g., sent to the relevant registration authority).
• The remaining steps must be those of a third party (e.g. a company registrar or HMLR).

Where the donor retains control or fails to complete a step required of them, Re Rose will not apply. For instance, if only an equitable interest is held and the donor has not complied with the writing requirement under s 53(1)(c) Law of Property Act 1925, the exception cannot be used to bypass statutory formalities.

Worked Example 1.1

Anita wishes to gift her shares in a private company, TechStart Ltd, to her nephew, Ben. She completes and signs the correct stock transfer form and hands it, along with her share certificate, to Ben. Ben sends the documents to TechStart Ltd for registration, but Anita dies before the company registers the transfer.

Is the gift perfected in equity?

Answer:
Yes, the gift is likely perfected in equity under the rule in Re Rose. Anita used the correct form (stock transfer form) and did everything in her power by completing it and delivering it with the share certificate to Ben (or arguably, it was put beyond her control when Ben sent it to the company). The only outstanding step was registration by a third party (the company).

Worked Example 1.2

Neil executes a TR1 transferring his registered freehold to his daughter, Priya, signs it correctly, and gives it to Priya’s solicitor, who lodges the application for registration at HM Land Registry. Neil dies before registration is completed.

Does Priya acquire an equitable interest before registration?

Answer:
Yes. Neil has done everything in his power by properly executing and delivering the transfer for submission to HMLR. Registration is a third-party step. Equity treats Priya as the equitable owner from lodgement; legal title follows on completion of registration.

Limits and interaction with formalities

Re Rose does not cure non-compliance with statutory writing where required for transfer of equitable interests under s 53(1)(c) LPA 1925; nor does it permit equity to change the donor’s chosen method of transfer (Milroy v Lord). It is also constrained where the donor’s actions fall short of putting the transfer beyond recall. For shares held only beneficially, failure to comply with s 53(1)(c) (writing signed by the disponor) will normally be fatal to reliance on Re Rose. The test is practical and property-specific: the donor must have completed all personal steps required for the chosen mode of transfer.

Unconscionability: Pennington v Waine

The principle from Re Rose was extended in Pennington v Waine [2002] EWCA Civ 227. In this case, the transferor (Ada) intended to gift shares to her nephew (Harold) and signed a stock transfer form. She gave it to her agent (Mr Pennington, the company's auditor), who told Harold he need do nothing further. Ada died before Mr Pennington delivered the form to the company. The Court of Appeal held the gift was complete in equity because it would have been unconscionable for Ada (or her estate) to retract the gift, given Harold had been told it was complete and had acted in reliance by agreeing to become a director.

This decision introduces an element of unconscionability and reliance, suggesting that perfection might occur even before the transferor has done everything in their power, if it would be unfair to recall the gift. However, the scope of this extension remains debated and appears dependent on very specific facts. Later commentary has emphasised that detrimental reliance by the donee is a critical ingredient: it is not enough that a donor intended to make a gift; the donee must have changed position in reliance on that assurance.

Care should be taken in applying Pennington. It does not dispense with formalities and is a narrow, fact-dependent carve-out. Where the donee’s reliance is minimal or the donor’s conduct remains within their control, courts have been reluctant to find unconscionability.

Worked Example 1.3

Laila signs a stock transfer form to gift 1,000 shares to her cousin, Omar. She hands the form to the company’s accountant and emails Omar stating “the shares are already yours—please accept the directorship seat.” Omar accepts the board appointment. Laila dies before the form is lodged.

Is the gift likely perfected on unconscionability grounds?

Answer:
Possibly, on Pennington facts. Omar’s acceptance of the directorship in reliance on Laila’s assurance can make it unconscionable to resile, especially where Omar was told no further action was needed. However, courts will weigh reliance and overall fairness carefully; this exception is narrow and fact-sensitive.

Fortuitous Vesting: The Rule in Strong v Bird

This rule applies where a donor intends to make an immediate inter vivos gift, or release a debt, but fails to complete the necessary legal formalities during their lifetime. If the intended donee subsequently obtains legal title to the donor's property in another capacity – specifically by becoming the executor or administrator of the donor's estate – the gift may be perfected, or the debt released.

Strong v Bird [1874] LR 18 Eq 315 involved a stepmother who intended to forgive rent arrears (a debt) owed by her stepson. She died with the debt still outstanding, and he was appointed her executor. The court held that because she had a continuing intention to forgive the debt until death, and he acquired legal title to the chose in action as executor, the release was perfected.

The rule operates beyond debts to imperfect inter vivos gifts provided the intention is immediate (not merely future) and remains unchanged until death. The personal representative’s acquisition of legal title to the asset aligns the legal and equitable titles in the intended donee, perfecting the gift without further formality.

Requirements for the Rule in Strong v Bird

• The donor must have intended to make an immediate, unconditional inter vivos gift (or release a debt). A mere promise of a future gift is insufficient.
• The donor's intention must remain unchanged until their death (continuing intention).
• The intended donee must become the donor's executor or administrator, thereby obtaining legal title to the donor's property (including the intended gift).
• The property must still form part of the donor’s estate at death (not previously disposed).

Worked Example 1.4

David owes his aunt Clara £5,000. Clara tells David, "Don't worry about that £5,000, consider it forgiven as a gift". Clara takes no steps to formally release the debt. Clara dies a year later, having appointed David as the sole executor of her will. David proves the will.

Is the debt released?

Answer:
Yes, the debt is likely released under the rule in Strong v Bird. Clara intended an immediate release of the debt (treated like an immediate gift), this intention continued until her death, and David obtained legal title to her estate (including the right to sue for the debt) as her executor. The appointment perfected the intended release.

Worked Example 1.5

Anika promises her nephew Raj that she “will leave him the antique piano one day” but takes no steps during life to transfer it. Shortly before her death she changes her mind and mentions in a notebook that the piano should go to charity. Her will names Raj as her executor. On death, the piano remains in her house.

Can Raj claim the piano under Strong v Bird?

Answer:
No. Anika’s words described a future intention rather than an immediate gift, and her later note shows her intention did not continue until death. The Strong v Bird conditions are not satisfied.

The rule can also operate to constitute an incompletely constituted trust if the intended trustee becomes the settlor's executor or administrator (Re Ralli's Will Trusts [1964] Ch 288). What matters is that legal title has fortuitously vested in the intended trustee; the trust can thereby be treated as properly constituted and enforceable.

Worked Example 1.6

Marta covenants to settle shares on trust but never transfers them. Her intended trustee, Leo, later becomes her executor. On death, the shares form part of the estate and legal title vests in Leo as executor.

Is the trust constituted?

Answer:
Yes. Under Re Ralli’s Will Trusts, fortuitous vesting of legal title in the trustee (even in another capacity) can complete constitution. Leo now holds the shares as trustee for the beneficiaries.

Donatio Mortis Causa (DMC) - Deathbed Gifts

A donatio mortis causa (DMC) is a gift made during the donor's lifetime, in contemplation of impending death from a known cause, which is conditional upon death and takes effect fully on death. It is an exception to the usual rules for lifetime gifts and testamentary dispositions (requiring a valid will).

Key Term: Donatio Mortis Causa
A gift made by a person (the donor) in contemplation of their impending death, delivered to the recipient (the donee), on the condition that the gift only becomes absolute upon the donor's death from that cause.

Requirements for a DMC

Established in Cain v Moon [1896] 2 QB 283, the requirements are:

• Contemplation of Impending Death: The gift must be made in contemplation of death in the near future from a specific cause (e.g., serious illness, dangerous journey). A general contemplation of death is insufficient. The donor does not need to be in extremis (at the point of death), but death must be more than a remote possibility. Modern authority emphasises a real, specific apprehension of death; frailty alone is not enough.
• Conditional on Death: The gift must be conditional, only taking effect fully upon the donor's death. It must be intended that the property reverts to the donor if they recover from the contemplated cause of death.
• Delivery of Subject Matter: The donor must 'part with dominion' over the property. This means delivering the property itself, or the means of controlling it (e.g., keys to a car or box), or essential documents of title (e.g., deeds to unregistered land as in Sen v Hedley [1991] Ch 425, savings account passbooks). Constructive delivery may suffice.

Classic examples include delivery of a bank passbook (older passbook systems), keys to a trunk or safe deposit box containing valuable items, and delivery of the title deeds to unregistered land. Modern banking with online credentials raises unanswered questions; there is no settled authority that delivery of a bank card and PIN suffices, and courts have treated passbooks and deeds as stronger indicia.

Worked Example 1.7

Elsie is about to undergo major heart surgery with significant risks. The day before the operation, she hands her neighbour, Frank, the keys to her vintage car and says, "If I don't make it through this, the car is yours." Elsie dies during the surgery.

Is this a valid DMC of the car?

Answer:
Yes, this appears to be a valid DMC. Elsie made the gift in contemplation of impending death from a specific cause (the surgery). The gift was conditional on her death ("If I don't make it..."). She parted with dominion by delivering the means of control (the keys).

Worked Example 1.8

Meera, very elderly but not suffering from any particular illness, tells her nephew: “When I go, the house is yours,” and hands him an envelope containing a photocopy of the title register and some utility bills. Over the next six months, she signs several informal documents purporting to leave the house to him, but none is a valid will. Meera dies, and her earlier will leaves her estate to charities.

Can the nephew rely on DMC to claim the house?

Answer:
No. There was no specific contemplation of impending death from a known cause, and the items delivered were not essential indicia of title (particularly for registered land). The general frailty and informal attempts to will the property undermine any DMC; the charities take under the valid will.

Limitations

• The donor must die from the contemplated cause (or die without having recovered from that cause). If they recover, the gift fails automatically.
• Real property (land) can be the subject of a DMC for unregistered titles via delivery of deeds (Sen v Hedley). For registered land, delivery of the registered title is typically by registration, so what constitutes sufficient “indicia of title” is uncertain; delivery of old deeds or copies of the register will usually be inadequate.
• Cheques payable to the donor can be gifted via DMC (if treated as delivery of a chose in action owed to the donor), but a cheque drawn by the donor on their own account cannot, as the authority to pay is revoked by death.
• Modern bank accounts without physical passbooks pose practical evidential hurdles. Courts have accepted passbooks as indicia; whether a combination of account credentials amounts to delivery remains uncertain.

Worked Example 1.9

Kamil is trapped in a car crash and, believing he will die, hands his friend a cheque for £5,000 drawn by his employer and says “This is yours if I don’t make it.” He dies shortly after.

Does the friend take the £5,000 under DMC?

Answer:
Yes. The cheque drawn by a third party (the employer) is capable of passing by DMC. The requirements are met: contemplation of imminent death, conditional nature, and delivery of the instrument embodying the chose in action.

Proprietary Estoppel

Proprietary estoppel is another equitable doctrine that can perfect an imperfect gift or create property rights where formalities have not been met. It operates to prevent a person (A) from insisting on their strict legal rights where they have made an assurance to another person (B), who has relied on that assurance to their detriment, making it unconscionable for A to go back on their word.

Key Term: Proprietary Estoppel
An equitable doctrine preventing a property owner from denying rights to another person where that person has acted to their detriment in reliance on assurances made by the owner regarding those rights.

Requirements for Proprietary Estoppel

• Assurance: An assurance, promise, or representation made by the property owner (A) to the claimant (B) that B has or will acquire an interest in the property. This can be express or inferred from conduct. Clarity is assessed objectively; informal but persistent assurances can suffice.
• Reliance: The claimant (B) must have reasonably relied on the assurance. Reliance often takes the form of acting on the promise by contributing to property, foregoing opportunities, or making life-changing decisions.
• Detriment: The claimant (B) must have acted to their detriment as a consequence of reliance. Detriment is not confined to financial expenditure; it can include unpaid labour, caring, giving up accommodation or employment, or paying mortgage instalments.
• Unconscionability: It must be unconscionable in all the circumstances for the property owner (A) to go back on the assurance.

If estoppel is established, the court has discretion to award a remedy that is proportionate and does the minimum necessary to satisfy the equity arising from the detriment. This might range from financial compensation to the transfer of the property itself, or the grant of a lesser proprietary right (e.g. life interest or right to occupy).

Estoppel may overlap with resulting or constructive trusts in family home contexts. While constructive trust analysis focuses on common intention and detrimental reliance to infer an equitable interest, proprietary estoppel emphasises assurance, reliance, detriment, and unconscionability with a flexible remedial response.

Worked Example 1.10

Jacob repeatedly tells his niece, Amara, “You’ll have the cottage one day—make it your home.” Over a decade, Amara moves in, pays the mortgage instalments, renovates the kitchen at her expense, and gives up a job offer to stay close and care for Jacob. Jacob later seeks to evict Amara and sell.

Can Amara establish proprietary estoppel, and what remedy is likely?

Answer:
Yes. There is a sustained assurance, reliance (moving in, paying mortgage, renovating, foregoing work), and clear detriment. It would be unconscionable to allow Jacob to renege. The remedy is discretionary: transfer of the cottage, or a life interest/right to occupy with compensation, depending on proportionality and the value of detriment.

Revision Tip

While proprietary estoppel can perfect an imperfect gift, it is a distinct doctrine often involving promises about future interests rather than immediate gifts. It requires proving assurance, reliance, and detriment. Note its potential overlap with constructive trusts in family home contexts, but remember the remedies differ.

Key Point Checklist

This article has covered the following key knowledge points:

• Equity generally does not assist volunteers or perfect imperfect gifts/trusts, per Milroy v Lord, but specific exceptions allow equitable perfection in narrow circumstances.
• The rule in Re Rose allows perfection where the transferor has done everything in their power to effect the transfer and the remaining acts are by a third party; it applies across property types, with property-specific steps (e.g. TR1 and HMLR submission for land).
• Pennington v Waine introduces a limited unconscionability-based exception that may perfect a gift even before the donor has done everything, where the donee has relied to their detriment; this is applied cautiously.
• The rule in Strong v Bird allows perfection where the intended recipient becomes the deceased donor’s personal representative, provided there was a continuing intention to make an immediate gift and the property remains in the estate.
• Re Ralli’s Will Trusts demonstrates that fortuitous vesting of legal title in the intended trustee can complete constitution of an otherwise incompletely constituted trust.
• Donatio mortis causa (DMC) allows gifts made in contemplation of impending death, conditional on death, with delivery of the subject matter or essential indicia of title. Its scope with modern instruments and registered land is limited and uncertain.
• Proprietary estoppel can provide a remedy where a person has acted detrimentally in reliance on an assurance regarding property rights, making it unconscionable for the owner to retract; the remedy is flexible and proportionate.
• Where an exception operates, equitable title may pass before formal legal completion, leaving legal title to be regularised by registration or equivalent later steps.
• None of the exceptions permit avoiding statutory writing requirements for dispositions of equitable interests under s 53(1)(c) LPA 1925, nor do they allow equity to change the donor’s chosen transfer method when that method has not been properly pursued.

Key Terms and Concepts

• Volunteer
• Imperfect Gift
• Constitution (of a trust)
• Donatio Mortis Causa
• Proprietary Estoppel