Using case law explain and examine the equitable maxim “Equity will not perfect an imperfect gift”
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Course
Equity and Trusts Law
Institution
Staffordshire University
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Using case law explain and examine the equitable maxim “Equity will not perfect an imperfect
gift”
An Equitable maxim is a principle that guides the courts on how equity should be used. There
are many maxims with some that interlink while there are others that remain completely
unrelated. ‘Equity will not perfect an imperfect gift’ represents a classic maxim that some argue
had begun to erode over time with the flow of subsequent cases that seem to introduce
exceptions such as the ‘every effort rule’ or ‘unconscionability’. These developments have led
to criticism over the discretion judges hold with the argument that it could become an issue for
the equitable system of the UK. When exploring this maxim, it is important to distinguish the
difference between a gift and a trust: A gift is the transfer of all legal title whereas a trust is the
transfer of assets to a trustee for the benefit of a beneficiary or for a specific purpose. The
word ‘imperfect’, in this sense, refers to when a gift that has not met its requirements of
successful transfer/ having not confirmed the three certainties: Certainty of intention, Certainty
of subject matter and certainty of object. Trusts are relevant here as; Equity will not turn an
imperfect gift into a trust. When Equity does not ‘perfect’ this imperfection, it means the court
will not ignore the unmet criteria and so no trust or gift should exist.
The maxim ‘Equity will not perfect an imperfect gift’ was articulated in Milroy v Lord1 with the
following comment from Lord Turner LJ; “… in order to render a voluntary settlement valid and
effectual, the settlor must have done everything which, according to the nature of the property
comprised in the settlement, was necessary to be done in order to transfer the property and
render the settlement binding upon him…. for there is no Equity in this court to perfect and
imperfect gift”. This comment also acts as a reminder that, in order for a gift to be considered
successful and valid, it must be complete and unconditional. The case of jones v lock2
demonstrated the operation of this maxim perfectly. This case concerned a situation in which
a father wanted to gift a cheque of money to his son. This failed as a gift because it was not
signed and thus not payable to anyone. As the cheque was not complete, it was merely an
implication of a trust rather than the Successful creation of one. Therefore, it was not possible
for the court to, as a result of this failure, rule that the father held the cheque in a trust due to
the fact that “Equity does not perfect an imperfect gift”.
The judgement in Milroy was strictly followed in several later cases, thus demonstrating not
only the impact of the maxim it’s self but the traditional values of the judges. Chase National
Executors and Trustees Corp v Fry3 continued to walk within the boundaries of Milroy but did,
, however, thus offering further insight into the workings of the maxim. Re Fry a concerned a
settlor that intended transfer shares. He had completed a shares transfer form and attached
its certificate. However, at the time, there was a restriction in foreign national dealing in English
shares. Therefore, Fry had to obtain the consent of the treasury. Fry applied to the treasury
but died. died before consent was given. The court held that the gift was incomplete, and that
Equity will not complete it despite the clear intention to transfer property.
Despite the stringent following of the ruling in Milroy v Lord, almost 10 years later, the
‘fortuitous vesting rule’ was established in Strong v Bird4. This case concerned a son borrowed
money from his stepmother who lived in the same house. Before the borrowing of this money,
she paid him £212 quarterly as rent. They decided that he would pay her back by reducing the
amount of rent she pays However, before the debt was fully repaid, the stepmother died. The
stepson subsequently became responsible for his stepmothers’ affairs (The executor). The
fact that Bird became the executor meant that the loan given to Bird was a gift. This is because
the Bird is responsible for calling in debts to his stepmothers’ estate. Therefore, this case
established that the debt is only released if it was the intention of the testator; and that this
intention continued until death. Though, this rule can also be used to complete an imperfect
gift: if a person has an intention that continues until death but does not complete the gift before
death; the legal title is then placed on the recipient. This is considered enough to complete the
gift. Furthermore, when explaining ‘Equity will not perfect an imperfect gift’ it is important to
note that, as established by Lord Browne-Wilkinson ‘Equity will not assist a volunteer’. A
volunteer is anyone who receives a gift or benefit but has given no consideration. Thus, Equity
will not perfect an imperfect gift as it would then be assisting a volunteer. Notedly, the ruling
in Strong v Bird is also an exception to ‘Equity will not assist a volunteer’.
The ruling in Rose v IRC5 further demonstrated a widening of the scope of this maxim. It
involved Mr Rose who transferred shares to his wife using transfer forms which were duty
stamped and registered before his death. However, legal title was not transferred until after
the estate duty deadline. It was held that because the deceased had done everything in his
power to transfer his legal and beneficial interest, the gift was ‘perfect’ in Equity. This exception
became known as the ‘Every effort rule’. It is reasonable to argue that the ruling in Re Rose
was not a ‘proper’ exception to the maxim due to the fact that it is consistent with the words of
Lord Turner; ‘must have done everything…. According to the nature of the property… was
necessary to be done in order to transfer the property’ as the legal title was transferred before
the death of Mr Rose. The ‘Every effort rule’ was developed further in Mascall v Mascall6. A
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