T Choithram International SA v Pagarani [2001] 1 WLR 1 (HL)

Facts

• The settlor, facing terminal illness, established a charitable trust by executing a trust deed.
• He appointed himself as one of the trustees of the charitable trust.
• The settlor expressed an intent to transfer certain assets to that trust, but failed to complete all necessary legal documentation before his death.
• As a result, the completed transfer of legal title to the assets did not occur in favour of all the trustees before the settlor’s death.
• The dispute arose over whether this incomplete transfer was effective to vest the property in the trustees, or whether it left the property in the settlor's estate.

Issues

1. Whether a trust is validly constituted where the settlor, as one of the trustees, failed to formally transfer property into the name of all trustees.
2. Whether equity will perfect an imperfect gift in circumstances where the settlor is also a trustee.
3. Whether the conscience of a donor acting as a trustee is sufficiently affected to preclude them from resiling from the intended transfer.

Decision

• The House of Lords held that the assets in question were effectively vested in the trustees of the charity.
• The court ruled that a valid trust existed even though the legal title to the property had not been formally transferred to all trustees.
• The settlor's position as both donor and trustee was sufficient to constitute an effective transfer in equity.
• The trustees were under a legal obligation to transfer the property into the name of all trustees.
• This constituted an exception to the general rule that equity will not perfect an imperfect gift.

Legal Principles

• Equity generally does not perfect an imperfect gift where legal requirements for transfer are incomplete.
• An exception exists when the donor is also one of the trustees; upon declaration, the donor’s conscience is considered affected and they are bound by the trust.
• A trustee is legally obliged to give effect to the trust, including ensuring the transfer of property into the joint names of all trustees.
• The exception is limited to scenarios where the donor and trustee roles overlap, and does not apply when the donor is not also a trustee.

Conclusion

The decision in T Choithram International SA v Pagarani established a principled exception to the rule against perfecting imperfect gifts, holding that a settlor who is also a trustee can create a valid trust even if the formal transfer process is incomplete, provided their conscience is affected by the trust declaration.