‘[The] principle which animates the answer to the question whether an apparently

incomplete gift is to be treated as completely constituted is that a donor will not be

permitted to change his or her mind if it would be unconscionable, in the eyes of

equity, vis-à-vis the donee to do so.’ (Arden LJ in Pennington v Waine). Discuss

I. INTRODUCTION

In Milroy v Lord1, Turner LJ opined that “there is no equity… to perfect an imperfect

gift”2. However, equity has moved on since this decision. In Re Rose3, Jenkins J

introduced the exception that if a donor has done everything in her power to effect a

gift, equity will step in to perfect it. The majority decision of the Court of Appeal in

Pennington v Waine4 takes the exception still further, standing for the proposition

that a gift will be valid in equity if it has become unconscionable for a donor to resile

from it, whether or not the rule in Re Rose is satisfied.

Evidently, the departure from Milroy has been significant, but it is yet not clear how it

may be justified. Three main rationales are suggested. The justification espoused in

Pennington is that equity steps in to prevent unconscionable conduct on the part of

the donor5. The two alternative rationales are that (a) the donee has obtained the

power to complete the transaction, and/or that (b) giving effect to the gift responds to

the donor’s intentions. The purpose of the author is to show that neither

unconscionability nor any of the alternative justifications proposed are satisfactory.

The search for principle must continue.

1 [1861-73] All ER Rep 783

2 Ibid, at 789
3 [1949] Ch 78, affirmed [1952] Ch 499
4 [2002] 1 WLR 2075
5 Ibid, [64]
 II. UNCONSCIONABILITY – PENNINGTON v WAINE

It is apt to begin the discussion with a consideration of the unconscionability-based

justification set out in Pennington v Waine, before moving on to the alternative

justifications. Subsection (a) presents a summary of the decision, while subsection

(b) provides an analysis thereof, arguing that unconscionability is not a satisfactory

justification for the equity to perfect an imperfect gift.

a. The decision of the Court of Appeal in Pennington v Waine

In this case, a donor wished to make a gift of four hundred shares in a company to

her nephew so that he could become a director thereof. The share transfer form was

signed and given to the company’s auditor, however the transaction remained

incomplete as the form was not delivered to the company itself before the donor

died. In these circumstances, the rule in Re Rose could not assist the donee: as the

transfer form was not handed over to him to present to the company, the donor had

not done everything in her power to complete the transaction. Nevertheless, Arden

LJ (with whom Schiemann LJ agreed) opined that “equity had tempered the wind to

the shorn lamb (i.e. the donee)”6 since the decision in Milroy. Her ladyship held that

a donative transaction will be complete in equity if the circumstances are such that it

would be unconscionable, vis-à-vis the donee, to permit a donor to change his or her

mind7, and that this requirement was satisfied on the facts.

6 Ibid, [54]
7 Ibid, [64]
 b. Analysis

The decision has a few supporters, among which the most prominent is Garton8,

who supports the decision on two grounds. Firstly, in that it aligns with the general

principles surrounding constructive trusts, thus recasting the Re Rose doctrine “in a

theoretically sound fashion”. This point seems correct - it is certainly true that the

principle animating the imposition of constructive trusts in other contexts is the

prevention of unconscionable conduct (see e.g. Pallant v Morgan9). Secondly, he

asserts that this approach is more flexible, avoiding some “practical difficulties” by

allowing judges more discretion to ensure fairness on the facts. After all, equity is

meant to intervene to soften the rigours of the common law, such that some flexibility

should be welcome in this context.

However, it is submitted that the unconscionability approach is unsupportable. This

is for three reasons. Firstly, it is unclear whether it could ever be unconscionable for

a donor to resile from a gift before it is completely constituted. As Jenkins LJ noted in

Re McArdle10, a donor retains a locus poenitentiae before completion. In this period,

there can arguably be no question of unconscionability vis-à-vis the donee: the latter

will not normally have provided consideration in expectation of the gift, and “there is

nothing dishonest on the part of an intending donor if he chooses to change his mind

at any time before the gift is complete”11. A response to this might be that

recognising the donor’s locus poenitentiae can, paradoxically, frustrate the donor’s

intentions to make the gift. This would occur, for example, where the donor dies

8 Jonathan Garton, “The Role of the Trust Mechanism in Re Rose” [2003] Conv 364,
376
9 [1953] 1 Ch 43
10 [1951] 1 Ch 669
11 Ibid, at 677
before the gift is completed: as property rights crystallise upon death, the gift could

no longer be completed, even if the donor had manifested no intention to resile from

it12. However, this objection can be dealt with by pointing out that the donor, if she

does not wish to exercise her locus poenitentiae, can avoid this possibility by

immediately declaring a trust over the gift pending its completion13. In any case, the

objection attaches undue importance to the donor’s intentions. As is argued in

section III(b) below, a donor’s intentions are not, and should not be, regarded as

paramount in this context.

Secondly, the reasoning in Pennington is dubious. Arden LJ based the requirement

of unconscionability largely on the decision of the Privy Council in T Choithram

International SA v Pagarani14. However, the analogy between the cases is inapt. In

that case, it was held to be unconscionable for the donor to resile from his gift on the

basis that he had already declared himself to be a trustee of the relevant property,

and therefore his conscience was already bound. In Pennington, on the other hand,

the entire issue was whether or not the donor was a trustee of the property. As such,

Davies and Virgo rightly argue that the reasoning is “irretrievably contaminated and

should not be followed”15.

Thirdly, this approach has introduced unacceptable uncertainty into the law.

Assuming, contrary to the first point, that it can be unconscionable for a donor to

resile from a gift before it is completely constituted, the circumstances that will be

relevant to a finding of unconscionability must be set out. However, Arden LJ failed

12 Paul Davies and Graham Virgo, Equity & Trusts: Text Cases and Materials, 2nd ed
(OUP 2019), p. 151, 156
13 Re Ralli’s Will Trusts [1964] Ch 288, 298
14 [2000] 1 WLR 1
15 No. 12, p. 158
to do this, arguing that “no comprehensive list” of these can be given16. It is not even

clear which facts gave rise to unconscionability in Pennington itself. There could be

detriment in the sense that the intended donee spent time and energy in discharging

his directorial duties and exposed himself to potential lawsuits by the company and

others for any breach of duty qua director17. However, as Ladds notes18, there is an

insurmountable problem in this reasoning: the donee could not be a director until he

acquired the shares, and this acquisition itself would, under this approach, be

predicated on the detriment suffered by him as a director. In the absence of clarity,

this approach significantly undermines the formality requirements prudently imposed

by the common law, ignoring their evidentiary, cautionary and channelling function.

In short, the unconscionability approach is supported by weak reasoning and unduly

undermines certainty in the law, and therefore cannot be the basis for the perfection

of incompletely constituted gifts in equity.

III. ALTERNATIVE JUSTIFICATIONS

It has so far been argued that the “principle” that it would be unconscionable for a

donor to resile from her gift is not a satisfactory basis for the perfection of

incompletely constituted gifts in equity, contrary to Pennington v Waine. It is now apt

to consider two alternative justifications, viz. (a) that the donee has obtained a power

to complete the transaction and (b) that giving effect to the gift responds to the

donor’s intentions. It will be argued that both of these alternative justifications are

also unsatisfactory.

16 No. 4, [64]
17 See e.g. Curtis v Pulbrook [2011] EWHC 167 (Ch) at [43] (Briggs J)
18 David Ladds, “Pennington v Waine [2002] EWCA Civ 227” (2003) 1 TL 35
 a. The donee’s power to complete

It has been suggested that, at least in relation to the exception in Re Rose, the

relevant principle is that the donee has obtained a power to complete the

transaction. As put by Garton19, in doing everything in her power to effect the gift, a

donor has relinquished her right to stop the legal transfer, which is now in the

donee’s power to complete. Such an approach is arguably supported by the decision

of Browne-Wilkinson LJ in Mascall v Mascall20. His Lordship opined there that a

donee in these circumstances requires no assistance from equity, such that

completing the gift would not breach the “equity does not aid a volunteer” maxim21.

However, there are two crucial problems with this approach. Firstly, such an

approach fails to explain why the trust should continue if the donee loses the factual

power to give legal effect to the transfer (as, indeed, occurred in Mascall itself22).

Furthermore, this view entirely fails to explain the decision in Pennington, where

the donee never received the share transfer form, and as such was at no point in a

position to effect the transfer. Secondly, it is difficult to see how policy considerations

might support this approach; a mere ability to effect a legal transfer should not allow

an individual to circumvent the formality requirements for that transfer. Otherwise,

these requirements would be entirely void of application. As such, this approach fails

to explain the cases and is not supported by principle or policy. It must therefore also

be rejected.

19 No. 8, 374-5
20 (1984) 50 P & CR 119
21 Ibid, at 126
22 The donee lost possession of the land certificate required for registration, but this

was held to be irrelevant: ibid, at 128 (Browne-Wilkinson LJ)

 b. The donor’s intentions

Another policy consideration identified by Arden LJ23 as operating against the Milroy

rule is the idea that completing a gift would give effect to a donor’s clear intentions.

In some cases, it is conceded, it is intuitive that the result might accord with the

donor’s intentions. A key example is Pennington itself: it is not suggested that the

donor wished at any point to resile from her gift, as she promptly executed the share

transfer form and countersigned the donee’s “consent to act” form on the assumption

that the transfer would be valid. This focus on intention seems especially important

when the donor has passed away, as the courts are generally averse to frustrating

the intentions of the deceased24.

However, there are two major objections to this approach. Firstly, the premise is

false: the trust remedy does not correspond to a donor’s intentions. What the donor

intended in (e.g.) Pennington was to give away property to the donee, which is quite

a different thing from holding property on trust for the donee. As Maitland noted25,

“the latter intention is far rarer than the former”, since it carries with it the onerous

duties of trusteeship26. Furthermore, if the trust remedy did respond to a donor’s

intention, it would follow that the courts would never award a remedy contrary to

these. However, this was exactly the result in Mascall, where a father unsuccessfully

sought to resile from his donation to his son after a dispute. Secondly, even if the

result in the cases did correspond with the donor’s intention, policy would shun this

approach. The mere frustration of a donor’s intentions is not enough of a reason to

23 No. 4, [63]
24 No. 12, p. 151
25 Frederic William Maitland, Equity, A Course of Lectures, 2nd edn (CUP 1936), p.73
26 cf. Graham Virgo, The Principles of Equity & Trusts, 3rd ed (OUP 2018), p. 130-1,

arguing that the trust will be a bare constructive trust. Even if this is correct, the
objection does not respond to the further arguments presented in this section.
circumvent the requisite formality rules. Taking this argument to its logical

conclusion, formality rules should not exist at all, to ensure that parties’ intentions are

never frustrated by a failure to comply with them. This is obviously an undesirable

outcome having regard to the value of the various functions of formality rules. In

sum, this approach is no more satisfactory than the previous two.

IV. CONCLUSIONS

It has been argued that none of the three main explanations of the exceptions to the

Milroy rule are satisfactory. All three fail to explain the cases, are unprincipled and/or

are out of step with the relevant policy considerations in this area. Accordingly, there

seems to be no coherent explanation for the court’s perfection of an imperfect gift in

equity. In the words of Abigail Doggett, “the search for an explanation continues”27.

27Abigail Doggett, “Explaining Re Rose: The Search Goes on?” [2003] 62 CLJ 263,
26
BIBLIOGRAPHY

Primary Sources:

Milroy v Lord [1861-73] All ER Rep 783

Re Rose [1949] Ch 78

Rose v IRC [1952] Ch 499

Pennington v Waine [2002] 1 WLR 2075

Pallant v Morgan [1953] 1 Ch 43

T Choithram International SA v Pagarani [2000] 1 WLR 1

Curtis v Pulbrook [2011] EWHC 167 (Ch)

Mascall v Mascall (1984) 50 P & CR 119

Secondary Sources:

Jonathan Garton, “The Role of the Trust Mechanism in Re Rose” [2003] Conv 364

Paul Davies and Graham Virgo, Equity & Trusts: Text Cases and Materials, 3rd ed

(OUP 2019)

David Ladds, “Pennington v Waine [2002] EWCA Civ 227” (2003) 1 TL 35

Frederic William Maitland, Equity, A Course of Lectures, 2nd edn (CUP 1936), p.73

Graham Virgo, The Principles of Equity & Trusts, 3rd ed (OUP 2018)

Abigail Doggett, “Explaining Re Rose: The Search Goes on?” [2003] 62 CLJ 26