Equity and Imperfect Transfer

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  • Topic: Property, Trust law, Equity
  • Pages : 10 (4290 words )
  • Download(s) : 145
  • Published : April 24, 2013
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For a trust instrument to be valid and effective, it must be properly constituted. For a trust to be deemed as completely constituted, all of the relevant formalities must have been satisfied by the settlor, hence the legal title of the property must transfer to the trustees. The reason for a conveyance of property to the hands of trustee is explained in Milroy v Lord (1862) by Turner L.J. is that a valid and effectual voluntary settlement will exist, when the settlor have done everything which was necessary according to the nature of property comprised in the settlement, which is to transfer that particular property to the trustee. This requirement of constitution of trust is clear and straightforward, the law require the trust to be completely constituted, so the trust would bind the the settlor and it will be enforceable by the beneficiary. However if the formalities is not satisfied, the law will render the settlement as incompletely constituted trust. Once the settlement is deemed to be incompletely constituted trust, the beneficiary could not enforce their right in the trust. This is due to the maxim in equity “equity will not assist a volunteer” and “equity will not perfect an imperfect gift”, which meant that equity is reluctant to offer assistance to those who does not provide consideration. Hence an absolute owner must transfer the legal ownership of the property to the trustee in accordance to the relevant formalities, and if the formalities are not satisfied, there will be no transfer of property to the beneficiary. It is also important for the court to understand the meaning of an ‘imperfect gift’, as Arden L.J in Pennington v Waine [2002] would treat a gift as imperfect if it was ineffective at law; but a gift can be perfected in equity if the legal title have not transferred. Also the court is prevented from helping a volunteer beneficiary regardless of how undesirable the outcome turn out to be. The general rule is seen in the case of Jones v Lock (1865) where Lord Carnworth L.C was unable to give effect to a trust for the benefit of a baby, as the gift for the baby was deprived of a provision which his father meant to make for him. However, this is not always the case, there are exceptions to the general rule laid out by Turner L.J in Milroy v Lord (1862) which require all the relevant formalities to be satisfied in order to form a completely constituted trust. There are situations where court will uphold a trust to help a volunteer even though certain formalities is not satisfied. As per Lord Browne-Wilkinson in T Choithram International SA v Pagarini [2001] 1 WLR 1 stated that “Although equity will not aid a volunteer, it will not strive officiously to defeat a gift”. Furthermore, Arden L.J has extend the exception for the general rule that was shown in Pennington v Waine [2002] by introducing the “unconscionability” test, which Arden L.J explained that the rule against imperfect gift led to harsh and unfavorable results. The role of equity is supposed to fills the gap of common law, therefore equity should help volunteer at times to avoid unfair or injustice outcome due to unforeseen circumstances. Unforeseen circumstances would be instances such as the settlor who is required to satisfied the relevant formalities for the conveyance of property suddenly fall sick or pass away, which render the settlement to be incompletely constituted trust. Since the settlor could not complete the formalities for the conveyance of the property to the trustee to be held on trust for the intended beneficiaries, the law will not uphold the gift or trust for the volunteer, who in law did not provide any consideration. There are 3 methods which a trust will be completely constituted by the settlor. Firstly, the settlor could transfer the property to the transferee by way of a outright transfer. While the second and third method is explained by Jessell M.R. in Richards v Delbridge (1874) the...
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