equity & trusts example essay

Candidate Number: 116380

Advise Charles regarding the £100,000 loan, the £400,000

contained in the building society account, the company

shares and the £3 million given to the SRAA.

In 1862, Turner LJ delivered his landmark judgement in the case of Milroy

v. Lord 1 in response to a plaintiff claiming she was entitled to shares that

were not properly delivered. He affirmed that for a voluntary statement to

be valid and effectual, the settlor must have done everything that was

necessary to be completed2. This followed three examples that are now

the criteria for finding a properly constituted trust – the actual transfer of

property to the intended beneficiary, declaring oneself as trustee or

holding it on trust3 - finishing with the infamous maxim “there is no equity

in this court to perfect an imperfect gift” 4. Unless the donee has furnished

consideration, it is not possible for him to enforce the trust where no

vesting has occurred.

Charles query concerns the constitution of trusts, thus to advise him the

criteria for creating a properly constituted trust will be analysed in each

scenario. If so, then the intended beneficiary will be able to recover their

property in equity. This will be the overture of the essay – if the trusts

1 (1862) 45 E.R. 11852 Ibid, at 274 per The Lord Justice Turner3 Ibid.4 Ibid.


have not been constituted then the exceptions to the rule in Milroy will be

discussed and tested to determine if Charles and the other intended

beneficiaries may rely on them. It will finalise with a summary of the facts

and the approach Charles should take regarding each property.

A) CHARLES & £100,000For a trust to be properly constituted, the three certainties must be

present in addition to the legal title being vested in the trustee. Although

the three certainties have been fulfilled, Charles has failed to provide any

consideration in regards to Lord Marchmain striking off Charles debt,

rendering him a volunteer. Equity holds the maxim equity will not assist a

volunteer 5, however there are situations when a gift or trust that has not

been constituted can still be capable of enforcement; such as donatio

mortis causa and the rule in Strong v. Bird 6. It is possible that Charles can

recover what is left under Strong v. Bird.

The doctrine has traditionally been characterised as an exception to the

principle that equity will not perfect an imperfect gift however it remains

extrinsic. Of all the exemptions to Milroy, it cannot be justified by the

exigencies of the situation in which the donor finds himself such as

donatio mortis causa nor the fact that the perfecting of the gift lied

outside of his control (e.g. Re Rose 7)8.

It is possible to view the £100,000 as either debt as Charles gave no

consideration or a gift following Lord Marchmain disclosing to Charles “not

to worry about paying [the] loan back”. Despite substantial arguments

that Strong only applies to the former 9, the case is able to remedy both

eventualities.

When a testator appoints his debtor as executor, he is no longer liable at

law as there is no equity against him to take the property away10.

Supplementary, when a gift is incomplete, if the intended recipient is

named executor then it’s deemed completed as long as an inter vivos gift 5 Milroy v. Lord (1862) 45 E.R. 1185.6 (1874) L.R. 18 Eq. 315.7 [1949] Ch. 78, also Re Rose [1952] EWCA Civ 4.8 Jaconelli, J. 2006. Problems in the rule in Strong v. Bird. Conveyancer and Property Lawyer, Issue Sep/Oct, p. 435.9 Ibid, p. 433.10 Strong v. Bird (1874) L.R. 18 Eq. 315 at 318-319 per Sir G. Jessel, M.R.


is intended, opposed to a testamentary disposition otherwise the intention

would be ineffective as failing to comply with formalities of section nine of

the Wills Act 11. As Charles was appointed executor, any debt would be

translated to be a gift. Forasmuch a gift, he would again succeed as it’s

inter vivos – to take effect during the donor’s lifetime12. Correspondingly

Charles would be able to recover the £100,000 as a gift without being

indebted to Lord Marchmain’s estate. Despite the rule being approved as

recently as Day v. Royal College of Music13, it’s difficult to see why the

mere appointment of a personal representative should tip the scales

against those entitled under will or the law of intestate succession.

B) SEBASTIAN & £400,000Sebastian provided no consideration to the £400,000, thus creating a gift.

For a gift to be legally effective, the donor must have given donative

intent 14. There are two categories of gift – inter vivos and donatio mortis

causa (DMC). DMC is imperfect as it cannot be completed by the offeror; it

will only take effect after his death. As Lord Marchmain is stricken with a

terminal illness, it will be argued that Lord Marchmain intended a DMC

gift.

Authorities generally dictate three requirements for a valid DMC although

they have varied over time. The original formulation lies in Cain v. Moon15,

although later formulations have arisen, requiring modification of the

original formula. The accustomed approach follows that DMC must have

11 Wills Act 1837, s.9.12 Garner, B. A., 2009. Black’s Law Dictionary: 9th ed. St Paul, MN: Thomson West.13 [2014] Ch. 211.14William Ferguson v. The Commissioner for Her Majesty’s Revenue & Customs [2014] UKFTT 433 (TC) at 27 per Kevin Poole, J.15 [1896] 2 Q.B. 283, the original formulation was provided by Lord Russell of Killowen who gave the criteria of; (1) gift made in contemplation of death (2) delivery to the donee (3)made under circumstances as shew that the thing is to revert to the donor should he recover.


been made in contemplation and conditional upon the donor’s death and

the delivery of the indicia of title16.

There is no requirement of the donor being in extremis, but with death

“within the near future”17. The justification lies in Hedges v. Hedges18;

when a man lies “in extremity or being surprizes with sickness”19, he

would not have an opportunity to make his will. This is mirrored by

Marchmain seeing death in the near future due to his terminal illness. It is

also conditional that no vesting occurs until the death of the donor20. This

allows the transaction to be revocable at any time before the death of the

testator.

Finally, there must be a passing of dominion21; as it is money in a building

society it would be classed as intangible property thus the transfer of

indicia of title suffices22. Evershed MR in Birch v. Treasury Solicitor

reiterated that symbolic delivery is not enough; there must be transfer of

“the subject matter… or something [similar]”23. It was held in Re Weston 24

that a savings book could be a subject matter with proper delivery25,

however the Birch v. Treasury Solicitor allows some accounts to be valid

whilst others not. As the sort of account is not stated, it cannot be

16 A non-exhaustive list of recent cases that have followed the outlined criteria includes King v. Dubrey [2014] EWCH 2083 (Ch), Vallée v. Birchwood [2014] Ch. 271 & Re Lillington (Deceased) [1952] 2 All E.R. 184.17 Re Craven’s Estate (No. 1) [1937] Ch. 423 at 426 per Farwell, J.18 (1708) 25 E.R. 9.19 Ibid, per Lord Cowper.20 Examples from cases include “The house is yours, Margaret” in Sen v. Headley [1991] Ch 425 & “You can keep the keys, I won’t be driving [the car] anymore” in Woodard v. Woodard [1995] 3 All E.R. 980.21 Re Cole [1964] 1 Ch 175, CA. 22 Birch v. Treasury Solicitor [1951] Ch. 298.23 Ibid, at 308 per Evershed MR.24 [1902] 1 Ch. 680.25 Ibid, at 685 per Bryne, J.


determined if the DMC is valid. This fault is likely due to the law’s flirtation

with DMC in addition to its inconsistency and absence of clearly

propounded principles26.

C) CORDELIA & COMPANY SHARES As the shares in Marchmain’s company have not gone through all the

required formalities, the trust is not fully constituted. For shares to be

transferred validly such that a trustee is vested with the legal title, the

shares must be registered in the name of the trustee27.

Marchmain completed everything required of him; the reason the trust

remains incomplete is due to the negligence of Rex. Justifiably, it is

possible to rely on the rule of Re Rose28. The case turned upon a situation

in which the transfer of shares was ineffective not to any transgression of

the settlor, but due to the directors of the company retaining the right to

veto the transfer. Milroy was distinguished on the basis that the settlor

had not done “all in his power” to perfect the gift. The case held that if the

donor had done everything for him to make the gift then equity will deem

an equitable interest in the relevant property to have passed

automatically29. This is defended by Lord Evershed who stated “how could

he… deny the proposition that he had transferred the shares?” 30

26 Samuels, A. 1966. Donatio mortis causa of a share certificate. Conv, 30(295), p. 189.27 Convention on the Law Applicable to Trusts and on their Recognition, Ch. I, Art. 2(b).28There are two cases under the name of Re Rose with slightly differing facts however the ratio and principle remains the same; [1952] EWCA Civ 4; [1949] Ch 78.29 Re Rose [1952] Ch. 499 at 509 per Evershed MR.30 Ibid at 512 per Evershed MR.


A more factually similar case is that of Pennington v. Waine 31; Mrs.

Crampton (C) wished to transfer 400 shares in her company to her

nephew. She requested Mr. Pennington (P) to prepare a transfer form

which she filled and handed back to P, who then put it on file but failed to

continue his required duties. It was held, inter alia, that the gift was

perfect as there was nothing else the donor could do32 and in the

circumstances it would have been unconscionable for C to have recalled

the gift33. The maxim has been approved recently in Shah v. Shah 34.

It can be found that Cordelia has a right to the shares; Marchmain

completed everything required of him to transfer the shares; equity will

intervene and remedy a donor or donee who had done everything within

their power necessary to transfer the gift, even if acts to be performed by

third parties had not been completed35. It would be reasonable to advise

Charles that Cordelia would be entitled to the shares, although it has been

suggested that it is difficult to predict the chances of success; much

seems to depend on how the court perceives the justice of the individual

case36. On the facts given, it would appear that the party would succeed,

but further checks would need to be completed to ensure that everything

was in place or it may be subject to failure – an example being Zeital v.

31 [2002] EWCA Civ 227.32 Ibid, at 65 per Arden LJ.33 Ibid, at 66 per Arden LJ; this and the above was unanimously approved by the other sitting judges – Clarke LJ at 70-71 and Schiemann LJ at 117-118. 34 [2010] EWCA Civ 1408. 35 See Pennington v. Waine [2002] EWCA Civ 227 & Shah v. Shah, Ibid. 36 McGhee, J., 2002. All’s Fair… The Relationship between completely constituted gifts and equity. Trusts and Estates Law Journal.


Kaye 37 where the case failed due to the donor not being the registered

owner of the shares.

D) SRRA & £3,000,000Lord Marchmain intended to give £3 million to the SRRA but lapsed into

unconsciousness, therefore the formalities required to create a

constituted trust have not been met. The scenario closely resembles that

of T Choithram International SA v. Pagarani 38 which brought rise to the

extension to the Re Rose principle described above. It is possible for

Charles to rely on this recent extension to ensure the SRRA receives the

£3,000,000.

In Choithram, a man on his death bed and sought to declare an inter vivos

trust over his property. One of nine trustees, he failed to transfer the legal

title to the other eight. Under ordinary trust laws, the trust would not have

been validly constituted however it was held to be valid; the rationale

being Re Rose could apply so that the settlor could be taken to have done

all that was necessary to create a trust, therefore equitable interest in the

property passes automatically.

Despite the case being seen as the courts doing nothing more but “trying

to give effect to a dying man’s wish in spite of technical rules”39, the case

shows that the court prefers to give effect to a deceased intentions rather

than have a trust over a particularly valuable properly lapse into residue.

37 [2010] EWCA Civ 159.38 [2001] 1 WLR 1.39 Hudson, A. 2014. ‘Doing everything necessary’, not an incompletely constituted trust. In: Equity and Trusts. Oxon: Routledge, p. 442.


Choithram, with Re Rose, displays willingness on the court to depart from

strict legal formalisms and, in that sense, is in line with the approach of

Lord Wilberforce in McPhail v. Doulton 40 concerning certainty of objects in

trust powers and of Lord Cross Chelsea in Dingle v. Turner 41 concerning

public benefits in certain charitable trusts.

The maxim “equity will not assist a volunteer” is churned out as a formula

much too readily as a cloak for the avoidance of thought42. It has been

suggested that the cases have brought about a new maxim; “[a]lthough

equity will not aid a volunteer, it will not strive officiously to defeat a

gift”43, which may possibly become a classic dictum alongside the more

conventional remarks of Turner LJ in Milroy and of Lord Cransworth in

Jones v. Lock 44 45.

Although it would seem logical to advise Charles to rely on Re Rose and

assert Marchmain did everything in his power to effect the trust, the law is

too unclear to give such dry and cut advice. The decisions of Pennington

and Choithram appeared to be a godsend that rescues donees in sticky

situations46 however the recent cases of Kaye v. Zeital 47 and Curtis v.

Pulbrook 48 that attempted to follow that route failed. This has brought the

40 [1971] A.C. 424.41 [1972] A.C. 601.42 Hopkins, J. 2001. Constitution of trusts – a novel point. Cambridge Law Journal, 60(3), pp. 485.43 T Choithram International SA v. Pagarani [2001] 2 All E.R. 492 at 501 per Lord Browne-Wilkinson; quoted in Pennington v. Waine [2003] EWHC 2691 (Ch) at 52 per Arden LJ. 44 (1865-66) L.R. 1 Ch. App. 25. 45 Hopkins, J. 2001. Constitution of trusts – a novel point. Cambridge Law Journal, 60(3), pp. 485.46 Morris, J. 2003. Questions: when is an invalid gift a valid gift? When is an incompletely constituted trust a completely constituted trust? Answer: after the decisions in Choithram and Pennington. Private Client Business, Volume 6, pp. 403.47 [2010] EWCA Civ 159.48 [2011] EWHC 167 (CH).


application of Re Rose into great confusion, Briggs J commenting how he

reached his judgement “without any great comfort that the existing

rules… serve any clear identifiable or rational policy objective”49.

Furthermore, Choithram comes to the aid of an inequitable transfer into

settlements only when the settlor is one of the initial trustees50. It’s

unclear if Marchmain is indeed a trustee due to the wording “…then

declared in front of the other trustees” which can infer he is a trustee,

meaning he can rely on the extension of Re Rose. Due to this uncertainty,

as well as the vagueness of the law, it’s near impossible to determine in

Charles would be successful.

In advising Charles, it would be acceptable to inform him that he would be

likely to claim the £100,000 as a gift relying on Strong v. Bird as well as

being able to complete the incomplete transfer of shares – although with

this scenario caution will need to be taken as the facts given are not

comprehensive. The following two scenarios are extremely vague, if not

due to the facts of the case but because of the law. In advising Charles in

these areas, more information will need to be presented as to be certain

that the facts of his case meet the criteria for the exception of “law will

not perfect an imperfect gift” as well as caution – particularly in the case

concerning SRRA. The law surrounding the area seems to shift depending

on the case, thus the result will be dependant purely on the court that

judges the case.

49 Curtis v. Pulbrook [2011] 1 BCLC 638 at 47 per Briggs, J.50 Morris, J., 2003. Questions: when is an invalid gift a valid gift? When is an incompletely constituted trust a completely constituted trust? Answer: after the decisions in Choithram and Pennington. Private Client Business, Volume 6, pp. 397.


Word count: 2003.

BIBLIOGRAPHYBirch v. Treasury Solicitor [1951] Ch. 298.

Birks, P., 2000. English Private Law, Vol l. 1 ed. Oxford: Oxford University Press.

Cain v. Moon [1896] 2 Q.B. 283.

Curtis v. Pulbrook [2011] 1 BCLC 638.

Day v. Royal College of Music [2014] Ch. 211.

Dingle v. Turner [1872] A.C. 601.

Garner, B. A., 2009. Black's Law Dictionary. 9th ed. St. Paul, MN: Thomson West.


Grimke, J. F., 1797. The duty of executors and administrators ... shewing also who

are entitled by law to be the administrators of an intestate person : with full and

clear directions to a man's relations how his estate will be distributed among them,

according to the laws.... 1st ed. New York: T. and J. Swords.

Hedges v. Hedges (1708) 25 E.R. 9.

Hopkins, J., 2001. Constitution of trusts - a novel point. Cambridge Law Journal,

60(3), pp. 483-486.

Hudson, A., 2014. Perfecting Imperfect Gifts. In: Equity and Trusts. Oxon: Routledge,

p. 447.

Jaconelli, J., 2006. Problems in the rule in Strong v Bird. Conveyancer and Property

Lawyer, Issue Sep/Oct.

Jones v. Lock (1865-66) L.R. 1 Ch. App. 25.

King v. Dubrey [2014] EWCH 2083 (Ch).

McPhail v. Doulton [1971] A.C. 424.

McGhee, J., 2002. All’s Fair ... The relationship between completely constituted gifts

and equity. Trusts and Estates Law Journal.

Milroy v. Lord (1862) 45 E.R. 1185.

Moffett, W., 2014. Deathbed gifts in rude health: the recent case of Vallee v

Birchwood. Trust & Trustees, 20(5), pp. 459-468.

Morris, J., 2003. Questions: when is an invalid gift a valid gift? When is an

incompletely constituted trust a completely constituted trust? Answer: after the

decisions in Choithram and Pennington. Private Client Business, Volume 6, pp. 393-

403.

Pennington v. Waine [2002] EWCA Civ 227.

Re Cole [1964] 1 Ch 175, C.A.

Re Lillington (Deceased) [1952] 2 All E.R. 184.

Re Rose [1949] Ch. 78.

Re Rose [1952] EWCA Civ. 4.

Re Weston [1902] 1 Ch. 680.

Roberts, N., 2013. Donationes mortis causa in a dematerialised world. The

Conveyancer and Property Lawyer, Volume 2, pp. 113-128.

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189.

Sen v. Headley [1991] Ch. 425.


Shah v. Shah [2010] EWCA Civ 1408.

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T Choithram International SA v. Pagarani [2001] 1 WLR 1.

Vallée v. Birchwood [2014] Ch. 271.

Wills Act 1837.

Woodard v. Woodard [1995] 3 All E.R. 980.

Zeital v. Kaye [2010] EWCA Civ 159.

equity & trusts example essay

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