Constitution Essay

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Constitution Essay

‘Equity will not perfect an imperfect gift’ was illustrated in Milroy v Lord
as a strict rule that apply to law related to the transfer of gift for many years.
Yet, this rigid requirement had been significantly nrelaxed after Pennington v
Waine. This essay will evaluate the significance and the changes introduced by
Pennington./ equity was introduced to avoid the rigid legal rules./ the fact that
legal rules can be modified by equity/ exceptions to the maxims.

Taking every necessary step to transfer property

The general rule in Milroy v Lord states, if settlor (S) has not done
everything necessary to effect transfer, equity will not construe an imperfect
gift (failed transfer) as a declaration of trust. The rule has been strictly applied
in Richards v Delbridge and Re Fry where the intended trust failed as the S had
not made every effort to comply with the steps.

‘Equity will not perfect an imperfect gift’ was justified in Jones v Lock, as
the S has shown the intention to give the property away absolutely and has
evinced no intention to retain the legal estate on trust for the intended
beneficiary.

Milroy’s harshness had been relaxed since Re Rose – it would suffice for
equity to intervene if the S had done everything in his power to effect transfer
despite short of registration. Here, the Court of Appeal (COA) managed to
deviate from Milroy without creating any theoretical or practical problems. In
this sense, equity struck a welcome balance between fairness and certainty, as
well as convenience for legal practitioners.

The Rose principle was applied in Mascall v Mascall where trust arose at
the time the S placed the recipient in a position where they can take final steps
to receive the property, despite they had not done so. This shows that the
Rose principle binds the S once it takes effect, even if they want to withdraw
from the transfer.

A major extension: Pennington v Waine

However, this is not the end of the developments. Pennington has

sought to rationalise Re Rose under the single umbrella on unconscionability:
the trust will arise earlier (before the last step) if a transfer reaches a point
when it would be unconscionable for the S to withdraw.

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Constitution Essay

This innovative idea taken by Arden LJ is ‘unconscionability’ which was

derived from Choithram v Pagarani: the S’s intention was so clear that it would
have been unconscionable to revoke the gift. Arden LJ relied on Choithram,
‘equity will not strive officiously to defeat a gift’, and hence perfected the
transfer of the shares in equity. Yet, arguably, Arden LJ has misunderstood
Choithram which was a declaration instead of a constitution case.

Pennington also contravened with Milroy that ‘equity will not assist a
volunteer’. A beneficiary is a volunteer unless he has provided valuable
consideration. Here, the nephew did not give any consideration (neither
financial contribution nor any detrimental change in his position) except
becoming a director. In short, Pennington seemed to have major uncertainties.

Criticisms of Pennington’s decision

Pennington was said to have expanded on the idea of unconscionability,

but Arden LJ did not give any concrete explanation of what will satisfy
unconscionability’s requirement. Arden LJ merely explained that test is fact-
based and depended on court’s interpretation. Hence, Halliwell in
“Chancellor’s foot” argued that the “unconscionability test” is vague and
uncertain as it gives judges too much discretion in allowing equity to perfect a
transfer.

It has also been rightly criticised by Price in “Undue Influence” that the
wide discretion would cause floodgate in this area of law, as every parties may
use the point of unconscionability to argue their cases. In short, Pennington
has created more ambiguity instead of clarifying the already complex law in
equity.

Moreover, Doggett in “Explaining Re Rose” also doubted the existence

of ‘unconscionability’ in Pennington: there was no reliance to the beneficiary’s
detriment and the S had not taken any improper advantage. Simply put, it was
no different from the typical situation where Milroy says ‘Equity will not
perfect an imperfect gift’: frustration of an intention to give, and
disappointment at not receiving.

Arguably, the idea of ‘unconscionability’ in Choithram was ruled based

on public policy – the Privy Council was prepared to bend the law to avoid the
S’s intention from being frustrated, and to prevent the charitable foundation
from losing such a large bequest. This was an exceptional case per Morris in

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Constitution Essay

“Invalid Gift”. Thus, Pennington should not be compared to Choithram, the

courts should have followed Rose’s ruling instead.

Practical implication of Pennington:

Despite Pennington has been criticised as a hard case which makes bad
law, Garton in “Trust” welcomes it by saying that it did not extend Re Rose but
only justifying it. This rule imposes a constructive test which should not be
done unless the trustee’s conscience is affected. Simply put, all Re Rose trusts
must be based on preventing unconscionability. Garton has echoed that the
flexibility and conceptual clarity that an approach based on unconscionability
brings over established equitable principles.

Pennington has also relaxed Milroy’s harshness which tended to ignore

Ss’ wishes instead of favouring certainty. This appears to move towards a
vague notion of conscionability and even paternalism. While Choitram clarifies
“equity will not strive officiously to defeat a gift”, Pennington suggests a
danger: too much consideration might be given to potential beneficiaries and
might work against S’s interest. Hence, arguably, the intention in Pennington
was to effect a gift, and since equity should not strike down gifts too eagerly,
the Rose principle could be extended to protect this gift.

Making equity more certain?

It is suggested that Re Rose holds the most satisfactory approach to

clarify the law. This approach reduces judicial discretion and reintroduces
certainty, which focuses on S’s powers instead of using the ambiguous fact-
based ‘unconscionability’ test.

This can be seen in Zeital v Kaye: although it might have been

unconscionable to recall the gift, the COA focused on the steps that the S has
taken, and it was easy to see what further steps could have been taken. Simply
put, even the Rose principle still provides room for judicial discretion; it is only
up to the court to decide what steps were within the S’s power. In short, the
judicial discretion here is certainly not as wide as in Pennington’s. Thus,
undeniably, this return to Re Rose would at least make equity more certain.

Moreover, Curtis v Pulbrook marks a further step away from Pennington

and sought to narrow the concept of unconscionability by introducing the
requirement of detrimental reliance, which binds S’s conscience so as to justify
the imposition of a constructive trust. A claimant will have to show detrimental
reliance if he wants to rely on Pennington in future. Hence, this introduces a

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Constitution Essay

hurdle to the ‘unconscionability’ test and is thus a welcome development as it

restricts judicial discretion.

Yet, as abovementioned, Dogget (“Explaining Re Rose”) did not see any

detriment of the director in Pennington, he can only be regarded as a
volunteer. This would also suggest that the reliance explanation in imperfect
gift cases is simply another example of the operation of proprietary estoppel
instead of a Re Rose trust per Luxton in “Search of Perfection”.

However, this reasoning remains to be seen whether this reliance hurdle

will be accepted by courts in future as Curtis was decided by the High Court; it
may well be the case that the COA decision in Zeital will trump it. This would
leave the Rose principle as the only means of perfecting an imperfect gift.

Arguably, Curtis must still be welcomed as a further example of the

courts recognising the problems caused by, and seeking to make equity more
certain by trying to deviate from Pennington – either by reverting to the Rose
principle or by introducing a hurdle to the unconscionability approach.

To conclude, Briggs J in Curtis complained the current law hardly 'serve

any clearly identifiable or rational policy objective'. Pennington was heavily
criticised because of the inconsistency it created. Ironically, the effect of Zeital
and Curtis brought further uncertainty into the law, as it is not clear whether
future courts will favour which of them, or both. In short, it is hoped that some
much-needed clarity will soon be injected, as the current law is not of a
desirable position. Arguably, Pennington should be ignored, or to be restricted
to its facts; the approach in Re Rose should be adopted.

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