Equity and Imperfect Gifts: Rule, Exceptions and Leading Cas...

Introduction

The rule that equity will not perfect an imperfect gift sits at the centre of many trust and property disputes. Put simply: if a donor has not completed the formal steps needed to transfer title, a court of equity will not finish the job for them. The intended recipient receives nothing unless an exception applies.

The approach aims to protect certainty in property transfers and the donor’s freedom to change their mind before the gift is complete. That said, the law does not ignore fairness. Over time, limited exceptions have been recognised, notably where the donor has done everything required on their side (Re Rose), where it would be unconscionable to retract (Pennington v Waine), or where proprietary estoppel applies because the recipient relied on an assurance to their detriment (Dillwyn v Llewelyn). Cases such as Curtis v Pulbrook show the limits and the need for clear facts.

This guide explains the rule, the main exceptions, and how to apply them in problem questions and practice.

What You'll Learn

• The classic rule from Milroy v Lord and the related maxim that equity will not assist a volunteer
• The three ways to make a transfer effective: outright gift, transfer to a trustee, or self‑declaration of trust
• The Re Rose “every effort” principle and when beneficial ownership passes before legal registration
• The reach and limits of Pennington v Waine’s unconscionability approach
• How proprietary estoppel operates as a separate route where there is assurance, reliance, and detriment
• Why Curtis v Pulbrook narrows Pennington by requiring detrimental reliance
• Practical steps for gifts of shares, chattels and land, and how to document transactions to avoid disputes
• A concise checklist and quick-reference table for exams and day-to-day practice

Core Concepts

The Rule in Milroy v Lord: Making a Gift or a Trust

Milroy v Lord (1862) set out both the strict rule and the main routes for making a transfer effective.

• Equity will not perfect an imperfect gift: if the donor has not completed the formalities for the property in question, the court will not fix the omission.
• Equity will not assist a volunteer: a donee who has given no consideration cannot compel completion unless an exception applies.

Three recognised routes:

1. Outright gift: transfer legal title to the donee following the formalities for that type of property.
2. Transfer to a trustee: transfer legal title to a third party to hold on trust; formalities again depend on the asset.
3. Self‑declaration of trust: the donor retains legal title but declares that they now hold it as trustee for the beneficiary. For personal property, no deed is required; for land, writing is needed under s53(1)(b) Law of Property Act 1925.

Milroy confirms that the court will not rewrite the donor’s plan. If the donor set out to transfer assets to a trustee but failed to complete that method, the court will not re‑characterise the arrangement as a self‑declaration of trust.

Practical point: identify the asset type and the method chosen, then test whether the required steps for that route were completed.

Doing Everything Required: The Re Rose Principle

Re Rose [1952] softens the strict rule. If the donor has done everything required of them to transfer the property, equity may treat the transfer as effective even though legal title is registered later by someone else.

Key points:

• The test asks whether the donor has done all they reasonably can do to put the transfer beyond their control (e.g., executed and delivered the share transfer form and certificate).
• If yes, equity may treat the beneficial interest as having passed at that point, with the donor holding legal title on trust until formal registration.
• The remaining steps are then administrative matters for others (e.g., the company’s registrars).

This can affect priority between competing claims and timing questions (e.g., tax or dividend entitlement), because the beneficial transfer is treated as complete before registration.

Two cautions:

• The donor must genuinely have completed all steps within their power.
• Re Rose is fact-sensitive: minor omissions can break the chain.

Unconscionability After Pennington v Waine

Pennington v Waine [2002] went further. The donor had signed the share transfer form and left it with an auditor, but it was not delivered to the company or the donee. The Court of Appeal held the gift was effective because it would have been unconscionable for the donor to retract.

Factors that pointed to unconscionability:

• The donor signed the relevant form intending an immediate gift.
• The donee was told about the gift and acted on it (e.g., agreed to become a director requiring shareholding).
• A trusted intermediary assured both parties the paperwork would be handled.

Subsequent cases have treated Pennington with care. Curtis v Pulbrook [2011] reads Pennington through the lens of detrimental reliance: unconscionability usually requires the donee to have changed their position. Courts tend to resist finding unconscionability if there is no reliance and the donor retains control of the process.

Practical takeaway: do not assume Pennington saves every defective transfer. Look for clear evidence of communication to the donee and detrimental reliance; otherwise, revert to Re Rose or the strict rule.

Proprietary Estoppel: A Separate Route

Proprietary estoppel can produce a result similar to a completed gift where:

• There is a clear assurance of rights in property,
• The claimant relies on that assurance, and
• The claimant suffers detriment.

In Dillwyn v Llewelyn (1862), the son built a house on land after the father’s assurance; equity gave effect to the son’s expectation despite the lack of formal transfer. The remedy in estoppel is flexible and aims to do justice between the parties, which may include granting the property or a lesser remedy.

Important distinctions:

• Estoppel is not “perfecting” an attempted transfer; it is a separate cause of action responding to reliance and detriment.
• It is unsuitable where there is no assurance or no change of position.

Borderline territory: T Choithram International SA v Pagarani [2001] shows that where a donor intends immediate gifts to a trust and is one of the trustees, the court may treat imperfect steps as a valid self‑declaration so the trust does not fail. That is not an open invitation to bypass formalities, but it shows the court respects a clearly expressed and implemented intention.

Key Examples or Case Studies

Milroy v Lord (1862) 2 GF & J 264

• Facts: A donor executed a deed to transfer shares to a third party to hold on trust but did not complete the required company registration.
• Decision: The gift was ineffective. The court would not treat the failed transfer as a different method (self‑declaration).
• Use: Identify the route chosen and check whether all formal steps for that route were completed.

Re Rose [1952] Ch 499

• Facts: The donor executed share transfer forms and delivered them; registration followed later.
• Decision: The donor had done everything required; beneficial ownership passed before registration. The donor held legal title on trust pending entry on the register.
• Use: Ask whether the donor has done all they can; if yes, treat the beneficial transfer as complete.

Pennington v Waine [2002] 1 WLR 2075

• Facts: The donor signed a share transfer form and left it with an auditor; the company was not notified. The donee had accepted a directorship on the basis of the gift.
• Decision: The gift stood; it was unconscionable to revoke given the communication and the donee’s change of position.
• Use: Consider unconscionability where there is clear communication and detrimental reliance. Treat this as exceptional.

Dillwyn v Llewelyn (1862) 2 GF & J 517

• Facts: A father’s memorandum indicated land would go to his son. The son built a house in reliance on that assurance.
• Decision: Proprietary estoppel gave the son rights in the land despite missing formalities.
• Use: Where there is assurance, reliance and detriment, estoppel can provide a remedy even if no valid transfer occurred.

Curtis v Pulbrook [2011] EWHC 167 (Ch)

• Facts: The donor issued new share certificates to family members but did not execute proper transfer forms or deliver existing certificates.
• Decision: No effective transfers. The exceptions did not apply; there was no detrimental reliance.
• Use: Pennington is not a cure-all. Without reliance or completed steps, the strict rule applies.

Practical Applications

• Map the asset and formalities:

  • Shares in a company: execute the stock transfer form and deliver it with the share certificate; send to the company for registration.
  • Chattels: intention plus physical delivery or deed of gift.
  • Land: transfer by deed and, if registered land, application to the Land Registry.
  • Equitable choses in action: comply with s136 LPA 1925 for a legal assignment, or use a declaration of trust.

• Choose the correct route:

  • If a trust is intended, consider self‑declaration where lawful; do not rely on later re‑characterisation if a transfer to a trustee is left incomplete.

• Evidence and timing:

  • Keep dated copies of all signed forms and covering letters.
  • Record when documents are delivered to the donee or the company; this is central to Re Rose.
  • Confirm in writing any communication to the donee and any action the donee takes in response (potential reliance).

• Use intermediaries carefully:

  • If using an agent or auditor, set clear instructions and track delivery to the company. Unexplained delays risk failure.

• Assess Pennington arguments with caution:

  • Identify concrete steps the donee took on the faith of the gift (e.g., accepting a directorship, incurring costs).
  • If there is no reliance or the donor kept control, Pennington is unlikely to help.

• Consider proprietary estoppel where:

  • There is a clear assurance of rights,
  • The claimant has relied and suffered detriment, and
  • A transfer route has failed or was never completed.

• Tax and risk management:

  • The date beneficial ownership passes (under Re Rose) can affect tax and creditor issues; diarise that date.
  • For donors, complete all formalities promptly to avoid disputes or unintended tax timing.

• Problem‑question method:

  • Identify the chosen method (gift/transfer to trustee/self‑declaration).
  • Test completion of formalities.
  • If incomplete, apply Re Rose (every effort) and then Pennington (unconscionability with reliance).
  • If appropriate, analyse proprietary estoppel.
  • Conclude on whether the donee takes an equitable interest or has a separate estoppel remedy.

Summary Checklist

• What type of property is being transferred, and what formalities apply?
• Which route did the donor choose: outright gift, transfer to a trustee, or self‑declaration?
• Has the donor done everything required on their side (Re Rose)?
• If not, is there clear communication to the donee and detrimental reliance making revocation unconscionable (Pennington as read in Curtis)?
• Is proprietary estoppel available (assurance, reliance, detriment, and a proportionate remedy)?
• Have documents been executed, delivered, and, where needed, sent for registration?
• Is there proof of delivery and timing (covering letters, receipts, emails)?
• Are there facts blocking an exception (e.g., retention of certificates, incomplete forms, no reliance)?
• For land and trusts of land, is there writing where required (s53 LPA 1925)?
• Record the date when beneficial ownership arguably passed; consider tax and third‑party issues.

Quick Reference