Imperfect Gifts in Equity Law

This essay discusses the case of Re Rose. The essay provides a background of facts and then discusses the judgment of the court in the light of the previous caselaw and the new principles laid down in Re Rose, which took a departure from the earlier case law.

The facts of Re Rose are as follows. Mr Eric Rose wished to transfer shares to Mrs Rose and he filled in the share transfer forms in March 1943, and handed them to the Mrs Rose, who then gave the transfer forms to the company. The company registered the claimants as shareholders in Mr Rose’s place in June 1943. In the subsequent case involving tax and estate duty, the question as to when the transfer was effected came before the court. The question was whether the transfer was effective in March 1943 when the share transfer forms were filled in and given to the company, in which case no tax would be due or whether the transfer was effected in June 1943 when the company registered it, in which tax would be due. The Court of Appeal decided that the transfer took place in March 1943 when the donor had filled in the transfer form because the beneficial title in the shares passed at this time itself. It is the legal title that passed in June 1943 when the shares were finally registered by the company. The principle laid down by the court was that once Mr Rose had filled in the transfer form in March 1943, he could not have thereafter cancelled the transfer, and the shares were then held on constructive trust for Mrs Rose. Therefore, despite the legal title passing in June 1943, no tax was due on the transfer.

The decision of the Court of Appeal in Re Rose is an exception to the maxim ‘equity will not perfect an imperfect gift’, which is the general principle in the law of trust which represents the position that unless the transfer to the donee involves the correct formalities for making such a gift, it would fail. In other words, legal formalities for making a specific gift must be abided by for the gift to be effective otherwise it would fail. The maxim ensures consistency and certainty in the law relating to gifts. However, even apart from the Re Rose case, courts have taken exception to the maxim when its application in a particular case was found to be too rigid and leading to a perverse outcome which is contrary to the donor’s intention or is inequitable. The question then is whether the gift should be allowed to fail only on the basis of mere technicality, when the rigid application of the maxim equity will not perfect an imperfect gift’ leads to perverse outcomes. In Re Rose, the court laid down the ‘every effort’ test. It may be mentioned that there two other notable exceptions to the maxim ‘equity will not perfect an imperfect gift’: the first is the rule in Strong v Bird, where the court held that if the donor intends to make an immediate lifetime gift of a property, the appointment of the donee as the executor of the donor’s will or administrator of the donor's intestate estate will have the effect of perfecting the gift even where certain formalities not being met in the case. The second is the principle of Donatio Mortis Causa, which allows the donor to make a gift in contemplation of death, when such a gift is conditional on death, and involves delivery of property, be it real or otherwise. Thus, Re Rose is not an isolated case where the court has perfected an imperfect gift.

Prior to Re Rose, the case of Milroy v Lord, saw the court refusing to effect a gift on the ground that equity will not perfect an imperfect gift. In Re Rose, Lord Evershed MR distinguished Milroy v Lord on the ground that in this case the donor had not done all that he could do from his side to effect the transfer of the gift. On the other hand, in Re Rose, Mr Rose had done all that he could do in his own power to transfer the shares to Mrs Rose when he filled in the transfer form and sent the documents to the company. In Milroy v Lord, the court held that equity cannot save a gift where the donor intending to gift something using a particular method, does not do all that is necessary to make that transfer effective.

1. Re Rose [1952] EWCA Civ 4.
2. Emma Ford, ‘Incomplete Gifts in Equity’ (2002) 13(2) King's Law Journal 222.
3. Strong v Bird (1874) LR 18 Eq 315.
4. Sen v Headley [1991] Ch. 425.
5. Milroy v Lord [1862] EWHC J78.

Another important point that needs to be made here with respect to how Re Rose took some divergence from established law is related to how the court held that the donor does not have to do all that is necessary to make the transfer effective, but only all that is in his power. The distinguishing factor that allows the perfection of the imperfection is that the donor should have done everything that is necessary to constitute the trust as per the decision in Milroy v Lord. Thus, the established law was that although equity does not perfect an imperfect gift, if the donor does everything necessary to make the transfer, then the gift will not fail even if there is some technical requirement that is not met. In Re Rose, the court took a divergence from even this law and held that the gift will pass if the donor has done everything in his power to constitute the trust. The difference between Milroy v Lord on one hand and Re Rose on the other is that while the former requires the donor to ensure that all the formalities are complied with including formalities to be completed by others, Re Rose merely requires that the donor should have everything in his own power and make ‘every effort’ to transfer the gift. The donor is not responsible for the formalities to be completed by others. Thus, in Re Rose, the transfer in shares was effected for the purpose of beneficial interest in March itself while the company registered the transfer in June.

In Re Rose, the court allowed the title to be passed even before the legal title was passed in the shares, which demonstrates that the courts are likely to give effect to the intended transfer whenever it is possible for them to do so. It may also be noted that Milroy v Lord and cases decided prior to it, saw the courts adopt a much more rigid and strict stance on the fulfilment of the legal formalities for making the transfer, which was also based on the idea that this would bode well for certainty in dealings. In the cases after Milroy, courts adopted the same stance; in Jones v Lock, the court refused to perfect an imperfect gift of cheque by a father to his son. Re Rose took a different approach by emphasising more on the intention of the donor and allowing this intention to be given effect to so long as the donor had done everything in his power to make that transfer. In this context, the principle of Re Rose emphasises on the significance of the last act. In this, the court approved an earlier decision in the case of Midland Bank Executor and Trustee v. Rose, where the court had held that the transfer of preference shares had taken effect prior to the death of the testator even though the registration of the transfer occurred at a later date; the principle was that the testator in that case had done all he could to transfer the shares before his death.

To conclude, Re Rose led to the development of a new exception to the maxim that equity does not perfect an imperfect gift by emphasising on the significance of the last act. In doing so, Re Rose diverged from Milroy v Lord because unlike that case, the court did not think that it was required for the donor to do all that is necessary to make the transfer as long as he had done everything in his power to make it. It can be said that the court adopted a more lenient approach to transfer of gift which was aligned with giving effect to the intention of the donor and not necessarily with the aim of increasing certainty of dealings.

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1. Milroy v Lord [1862] EWHC J78.
2. Gary Watt, Trusts and equity (Oxford University Press 2018).
3. Richard Clements and Ademola Abass, Equity and Trusts: Text, Cases, and Materials (Oxford University Press 2015).
4. Jones v Lock [1865] LR 1 Ch App 25.
5. Sarah Lowrie and Paul Todd, ‘Re Rose Revisited’ (1998) 57(1) The Cambridge Law Journal 46.
6. Midland Bank Executor and Trustee Company Limited v. Rose [1949] Ch 78.
7. Ibid.

Table of cases

Jones v Lock [1865] LR 1 Ch App 25.

Midland Bank Executor and Trustee Company Limited v. Rose [1949] Ch 78.

Milroy v Lord [1862] EWHC J78.

Re Rose [1952] EWCA Civ 4.

Sen v Headley [1991] Ch. 425.

Strong v Bird (1874) LR 18 Eq 315.

Books

Clements R and Ademola Abass, Equity and Trusts: Text, Cases, and Materials (Oxford University Press 2015).

Watt G, Trusts and equity (Oxford University Press 2018).

Journals

Ford E, ‘Incomplete Gifts in Equity’ (2002) 13(2) King's Law Journal 222.

Lowrie S and Paul Todd, ‘Re Rose Revisited’ (1998) 57(1) The Cambridge Law Journal 46.