Equity's Certainties and Flexibilities: Navigating Imperfect Gifts and Trust Creation

Part A

Q3. A gift constitutes a sufficient dealing to transfer a legal title to a donee. The settlor must have done all that is necessary to effect a binding transfer, which must include an actual transferring to a trustee; a declaration of a trust; a written declaration; or parol in case of personal property. Thus, equity cannot perfect an imperfect gift if the necessary conditions are not met.

For a valid transfer, if it requires it to be made by entry in the books of the bank, it must be done. Otherwise, the transfer is imperfect and incomplete. In Fry v Lane, the donor failed to get the consent of the treasury and hence, transfer was not valid. However, courts adopted certain level of flexibility bringing an exception. A gift is effective if the testator does everything in his power to effect the transfer (transfer of the relevant shares and relevant certificates) even though the transfer is not registered. If you are seeking philosophy dissertation help, understanding legal precedents like Fry v Lane is crucial.

Further exception to the maxim “Equity will not perfect an imperfect gift” was brought by the introduction of the test of conscience (T Choithram International SA v Pagarani,) and the use of ‘equity regards as done that which ought to be done’ in contractual or other obligation (Pennington v Waine). In the former, considering the intention to gift and the statement of the donor’s agent signifying all steps are taken to complete registration of the gift will make its unconscionable to change the mind later. The latter case applied the maxim to validate the transfer of shares by gift involving a contractual or other obligation despite a formality was yet pending before the death of the donor. Accordingly, the parties in the transfer are treated as being in their respective position had the performance of their obligation was complete.

The flexibility brought by the two cases above have also created uncertainty due to its broad application. The court is left with discretion to subjective satisfaction, which may give priority to equity over the fundamental principles of company law. The result of such a broad exercise of discretion is that the courts resumed the application of the Milroy’s principle. It was seen in the case of Zeital v Kaye, where the court used the reasoning of ‘last act’. If all the formalities are not fulfilled, the transfer is not valid. The cycle that the courts adopt in applying, disapplying and reapplying equity principles creates an ambiguity. Courts, while applying equity principles, have been selective subject to different contexts. There must be a standard of equity principles that could remove possible ambiguities associated with equity. This will ensure that the principles do not conflict or override fundamental principles of legislations. As a start, the standard equity to follow is found in the manner Briggs J has laid down regarding an equitable transfer of a gift. The donor must do all that is necessary to enable a donee to enforce a beneficial claim without further assistance from the donor. The principle of detrimental reliance must be applied to govern the donor’s conscience so that the donee has a right to enforce a constructive trust in case of an ineffective gift. Principles of a liberal interpretation of words must be adopted to enforce a gift or implied declaration of trust.

1. Sarah Worthington, Sealy and Worthington's Text, Cases, and Materials in Company Law (11th edition, Oxford University Press 2016).
2. Milroy v Lord [1862] EWHC J78.
3. Fry v Lane [1946] Ch 312.
4. T Choithram International SA v Pagarani [2001] 1 WLR 1.
5. Pennington v Waine [2002] EWCA CIV 227.
6. Sarah Wilson, Todd & Wilson's Textbook on Trusts (Oxford University Press, 2013).

To conclude, the maxim ‘Equity will not perfect an imperfect gift’ is an effective standard to determine validity of a gift. It is supported by the principles of conscience, the ‘last act’ or principles that enforces the intention of the donor, the acts done in furtherance to the intention and the detrimental reliance of the done. Equity principles must not be too broadly applied that it makes the legislative intent subservient.

1. Alastair Hudson, Equity and Trusts (8th edition, Routledge, 2014).
2. Zeital v Kaye [2010] EWCA Civ 159.
3. Gary Watt, Equity and Trusts Law Directions (4th Edition, Oxfgord University Press 2014).
4. Curtis v Pulbrook [2013] EWCA 167 (Ch) per Briggs J at "31.

Part B

Q1 A. Lord Langdale MR in the case of Knight v Knight laid down three certainties for creating a valid private express trust. There must be certainty as to the intention of Paolo to create the trusts; the subject or property of the trust; and the object or beneficiaries or purposes of the trust.

In the first trust, there is evidence of intention while he declared the trust in favour of Svetlana. There is no need for any specific trust or deed. A court of equity will focus on the spirit of law. However, there must be a detailed instruction to create certainty about the trust. If otherwise, there cannot be any intention to create the trust. In this case, Paolo has not given any instruction as to how to create the trust. This creates uncertainty regarding his intention to create the trust. Hence, Paolo must ensure his instruction are clear as to the identification of the land and the transfer of the land to Svetlana.

For certainty of a subject matter, Paolo’s declaration must be clear as to what property will be held on trust and as the beneficial interest to the determination the object of trust. In this case, his oral declaration may be clear as to the beneficial interest, but he did not identify the particulars of the piece of land. Paolo must give instruction sufficient to enable Svetlana carry out the terms of the trust. For example, in Re Golay’s Wt, the instruction states that the beneficiary will get a reasonable income from the property. The trust is valid. Thus, for making it possible for Svetlana to claim the validity of the trust, Paolo must identity the land in his declaration

1. Gary Watt, Trusts and Equity (Oxford University Press 2020) 79.
2. Kirsten Edwards, Equity and Trusts (Taylor & Francis Group 2000) 8.
3. Re Williams (1897) 2 Ch 12.
4. Iain McDonald and Anne Street, Concentrate Equity and Trusts (Oxford University Press 2014), 28.
5. Ibid, 30.
6. Re Golay’s Wt [1965] 2 All ER 660.

Paolo must follow the Law of Property Act 1925, s53(1)(b) that requires the trust to be declared in writing and be signed by Paolo to make the trust enforceable in law. This creates a right to Svetlana to take legal action.

For a transfer of shares, it must be done by executing an instrument of transfer. This is provided by Section 105(1) of the Companies Act 2016 that requires a duly executed and stamped instrument of transfer and the transfer must be lodge with the company. In that regard, Sami must execute an instrument of transfer as per Section 105(1) ensuring that it is lodge with the company.

The transfer of the shares will be effective when the name of the transferee is recorded in the register of members or debenture holders. This is provided under Section 105(3) of the Act 2016. Accordingly, until Sami records Trishna in the register as mentioned here as the holder of the legal title to the share, the transfer will not be effective.

For transfer of the beneficial ownership in the shares, it is done by way of a trust deed. This deed will record the relevant arrangement to include the beneficial ownership rights, benefits of securities to be enjoyed by the beneficial owner, and the restrictions, limitations and powers associated with the legal owner.

Section 53(1)(c) of the Law of Property Act, 1925 provides that a disposition of an equitable interest or trust must be in writing signed by the person who is declaring the trust or by their will. This is a mandatory provision the non-compliance of which makes the trust void. This was seen in the case of Grey v IRC.

In regard to transferring the equitable interest in the shares to Ian and Lisa, Same must execute a trust deed and the necessary arrangement indicating the rights and benefit of Ian and Lisa over the shares and the powers and duties of Trishna in regard to the equitable interest in the shares. Sami can also execute the transfer of the beneficial interest through his will. Sami must sign the instrument to make the transfer valid.

1. Ben McFarlane, Nicholas Hopkins and Sarah Nield, Land Law: Text, Cases, and Materials (Oxford University Press 2015) 177.
2. Conroy Ellis, Project Executor Handbook (AuthorHouse UK 2015).
3. Grey v IRC [1960] AC 1 HL.

The Law of Property Act 1925, s53(1)(b) requires the trust to be declared in writing and be signed by the testator declaring to make the trust enforceable in law. This creates a right of the trustee to take legal action. The signed writing serves as the evidence of the declaration of the trust. The trustee of an express trust must register all the information about the settlor, trustee, class of objects and any person having control over the trust within 30 days of the creation of the trust.

In regard to the trust to Yvonne, it does not pass the three certainties test. The intention and the purposes of the trust are certain. However, ‘a piece of land property’ is not creation as to the identity of the property. Julie must follow the formalities to make a valid express trust.

In regard to Kevin involving an oral contract, the three certainties test is met. The intention, the property and the purposes of the trust are certain in this case. However, Julie must take all necessary steps including a signed written declaration to complete the transfer of the legal title.

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1. Ben McFarlane, Nicholas Hopkins and Sarah Nield, Land Law: Text, Cases, and Materials (Oxford University Press 2015) 177.
2. Gary Watt, Trusts and Equity (Oxford University Press 2020) 79.
3. Pennington v Waine [2002] EWCA CIV 227.

Legislation

The Companies Act 2016

The Law of Property Act 1925

Cases

Curtis v Pulbrook [2013] EWCA 167 (Ch)

Fry v Lane [1946] Ch 312.

Grey v IRC [1960] AC 1 HL.

Milroy v Lord [1862] EWHC J78.

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

Pennington v Waine [2002] EWCA CIV 227

Re Golay’s Wt [1965] 2 All ER 660

Re Williams (1897) 2 Ch 12

Zeital v Kaye [2010] EWCA Civ 159.

Books

Edwards K, Equity and Trusts (Taylor & Francis Group 2000)

Ellis C, Project Executor Handbook (AuthorHouse UK 2015).

Hudson A, Equity and Trusts (8th edition, Routledge, 2014).

McDonald I and Anne Street, Concentrate Equity and Trusts (Oxford University Press 2014)

McFarlane B, Nicholas Hopkins and Sarah Nield, Land Law: Text, Cases, and Materials (Oxford University Press 2015)

Watt G, Equity and Trusts Law Directions (4th Edition, Oxfgord University Press 2014).

Wilson S, Todd & Wilson's Textbook on Trusts (Oxford University Press, 2013).

Worthington S, Sealy and Worthington's Text, Cases, and Materials in Company Law (11th edition, Oxford University Press 2016).