Milroy V Lord

“….There is not equity in this court to perfect an imperfect gift”- Turner LJ in Milroy v Lord (1861)- How accurate is this statement in current English law? In order to assess the accuracy of Turner LJ’s statement, it is first necessary to consider the context of it, and discuss briefly what it refers to. It refers to trusts, which become fully set up or constituted when the trust property is in the hands of a person who is properly bound to be the trustee. Within this context, certain equitable principles come into play; specifically regarding gifts.

There are several situations where equity has developed its role, away from Turner LJ’s statement, so that in effect it will perfect an imperfect gift. A gift is any transaction which benefits an individual who has not paid, ie given any consideration for it; such an individual is called a volunteer.

In the same case which the above quotation is taken from, Milroy v Lord, Turner LJ also identified three modes of making a gift. These were an outright transfer of the legal title to a property, a transfer of the legal title of a property to a trustee to hold on trust, and a self-declaration of trust (in which case the constitution of the trust is automatic). At this point, an important maxim of equity has an effect. The maxim is equity will not assist a volunteer, and its manifestation here is that equity will not perfect an imperfect gift.

Therefore, in order for a gift to be perfected, or rather for the trust to be fully constituted, one of the three modes must be referred to. Equity will not, in itself, treat the intentions of a donor to make an outright gift as a self-declaration of trust, where the property fails to pass from the donor to the donee.

Two cases which came in the wake of the highly significant Milroy v Lord, and which seemed to confirm Turner LJ’s sentiments were Jones v Lock and Richards v Delbridge. In these cases, the crucial factor was the intention of the donor. Nor will equity (historically) perfect an ineffective transfer of the legal title to property to an intended trustee to constitute a trust by treating the intending settlor as having made a valid self-declaration of trust. 

In other words, if the property fails to get into the hands of the intended trustee, there is no trust. In this context, however, there has been a recent move away from Turner LJ’s maxim that equity will not perfect an imperfect gift.

in the 2001 case of T Choithram SA v Pagrani, the words of a businessman were generously construed to give most of his wealth on trust. his words of a mere gift were interpreted as words of declaration of trust. A second seminal case in the development of the doctrine came in Re Rose in 1952, when the rule laid down in Milroy v Lord was relaxed to the extent that equity would now treat as effective an intended transfer where the donor has done everything he is obliged to do to make the gift valid. this is a subtle distinction, but it does, nevertheless, relax the principle. This rule (in Re Rose) was applied to transfers of land in the much more recent case of Mascall v Mascall.

A recent Court of Appeal decision expanded the ambit of this rule further in the case of Pennington v Waine. In this case, unlike in Re Rose, the transeror had not done everything in their power to secure the validity of the transfer. 

The reasoning in this case was that the transferor (of shares in this case) had done all that was needed for the rule to apply by executing the transfer form with the intention that the transfer is to have immediate effect, and crucially, in circumstances where it would be unconscionable for the trasferor to renege on the transaction. The danger with this, is of course, that therre is no clear distinction as to when it would be unconscionable not to perfect a gift. Another seminal case in this context was Strong v Bird.

In this case, a comon law principle that the appointment of a debtor as executor a deceased’s estate cancelled that debt to the estate was held to prevail. The important condition, however, was that the testator had manifested an intention that this debt be released, and this intention continued up until death. This is, as Penner points out, something like the perfecting of an imperfect gift.

The rule was further extended to cover imperfect gifts (as well as imperfectly released debts) in Re Stewart. The same condition applied, that the testator must have manifested an intention and this continued until death. At this point, it seems that equity certainly is helping a volunteer, rendering Turner LJ’s comment outdated.

Deathbed gifts are properly called donationes mortis causa, and are gifts which are made inter vivos, but are conditonal upon death (ie they only take effect on death). That is to say that the gift become complete and absolute upon death, as the condition is perfected.

Transfer of possession is also needed, which poses no problem for the likes of tangible personal property. Equity intervenes, however, in the case of things which require more to transfer title, like bank balances or shares. The essential requirements for a valid donatio mortis causa were laid down in Cain v Moon. The final situation where equity will effectively perfect an imperfect gift is in certain cases of proprietary estoppel.

The court will seek to give effect to the plaintiff’s minimum equity. Such a situation occurred in the case of Pascoe v Turner when a man said to a woman (with whom he was cohabiting) that the house was hers and everything in it. 

The woman subsequently spent a good deal of her savings on the house, way of improvements and so on. When they separated, the man tried to turn the woman out. The court held that in this case, the minimum equity was that the man ought to transfer the fee simple to the woman. Although this was a case of proprietary estoppel, it was an example of equity acting in a way unenvisaged by Turner LJ in 1861.

Since the case of Milroy v Lord, then, there have been several significant developments which have rendered Turner LJ’s words somewhat outdated. The drift towards equity assisting a volunteer and perfecting an imperfect gift has been criticised at various stages throughout the development, most notably by Walton J in Re Gonin. The current state of the English law with regard to equity assisting volunteers and perfecting imperfect gifts appears to be in a state of flux, but the stringent rule set out by Turner LJ has certainly been relaxed considerably in a number of areas. 

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