Law of Trusts: 2005 Zone A Question 2

A piece of assignment where I scored 13. Not a “wow-that-was-amazing” mark, but for a subject like Law of trusts where we were frequently told that 1 out of 5 will fail this paper, I suppose I’ve scored reasonably well for this assignment.

‘Although equity will not aid a volunteer, it will not strive officiously to defeat a gift.’ (per Lord Browne-Wilkinson in Choithram International SA v Pagarani). Discuss.

Before a discussion on the maxim in the question is made, it is important to understand the situation in Choithram v Pagarani in order to understand why Lord Browne-Wilkinson made such a statement. In this case, Mr. PAgarani intended to leave his welath to charity by setting up a foundation to serve as an umbrella organisation to the charities which he had already established and which would receive most of his assets when he died. He had executed the foundation trust deed and immediately after signing the trust deed, Mr Pagarani said words to the effect that he gave all his welath to the trust. On his death, a grant of letters of administration to his estate was obtained by one of the trustees of the foundation trust. The question here was whether one of a larger body of trustees could vest trust property in himself by way of declaration in such a manner as to give effect to the trust, even though there had been no trasference of the trust property into the names of all trustees. In deciding, Lord Browne-Wilkinson had stated that the foundation had no legal existence apart from the trust declared by the foundation trust deed, therefore Mr Pagarani’s words “I give to the foundation” could only be understood to mean that he intended to give to the trustees of foundation trust deed to hold it on trust of the foundation trust deed. Lord Browne-Wilkinson also said that in principle, there is no difference between a case where the donor declared himself to be sole trustee for a donee of a purpose. The only relevant issue considered here is whether the conscience is affected. If it is, it is unconscionable, and the courts of equity will not allow such a donor to resile from his gift. Therefore, Lord Browne-Wilkinson concluded that although equity will not aid a volunteer, it will not strive officiously to defeat a gift.

However, could Lord Browne-Wilkinson’s decision be seen as “although equity will not aid a volunteer, it will not strive officiously to defeat a gift; and in order to do so, equity might to some extent aid a volunteer”?

Lord Browne-Wilkinson held that in this case, there was no breach of the principle in Milroy v Lord, which is settlor must have done everything which according to the nature of the property complied in the settlement which was necessary to be done to transfer the property in order to transfer the property, and this can be done by actually transferring the property to the person for whom he intends to provide, or transfer the property to a trustee, or declares himself a trustee. Mr Pagarani had declared himself as a trustee, therefore the principle in Milroy v Lord had not been breached. Therefore, it seems that in this case, equity did not strive officiously to defeat a gift, nor did equity aid a volunteer. But is this true for decisions of all cases in this area of law?

In cases like Jones v Lock and Richards v Delbridge, one can concluded that equity indeed does not aid a volunteer by perfecting imperfect gifts. However, there had been exceptions to the rule that equity will not perfect an imperfect gift.

In Re Rose, a principle was laid down: where a settlor had done all in his power to transfer the property, but something is yet to be done by a third party, the transfer will be immediately valid in equity, and the transferor will in the meantime hold the subject matter of the transfer on trust. The court held that once the transferor had done everything in his power to vest the legal interest of property to the transferee, such a gift is valid. However, this decision in Re Rose raises a few questions. First of all, it seems to breach the principle in Milroy v Lord which states that if the settlement is intended to be effectuated by one of the three modes, the courts will not give effect to it by applying another mode. In Re Rose, the settlor intends to make an outright gift. Hoewver, courts gave effect to this imperfect gift by another mode: declaration of oneself as a trustee. Aren’t the courts by not striving officiously to defeat a gift in Re Rose actually aiding the volunteer? In fact, it could even be said that courts here actually had strive officiously to assist a volunteer, because although the settlor had done everything that he can, the third party (directors of private company) can actually refuse to transfer. This will put Re Rose in a similar position of Re Fry, and in Re Fry, Romer J held that the trust is not completely constituted.

Another exception to the rule that equity will not assist a volunteer is the rule in Strong v Bird, where it is stated that if the testator had manifested an intention to forgive the debt in his lifetime and maintained this intent until his death, the appointment of the debtor as executor of an estate cancels the debt in law. The problem with the rule in Strong v Bird is that it had been extended to various situations. In Re Stewart, the rule was extended to mean that any imperfect gifts made intervivos to a person who later became the donor’s executor would be perfected if the testator manifested an intent to give the gift in his lifetime and this intent continued until his death. While the rule in Strong v Bird did not perfect an imperfect gift; in Re Stewart, equity had obviously assisted a volunteer by perfecting an imperfect gift. The rule in Strong v Bird was later extended to admistrators of the estate (Re James) and personal representatives (Re Ralli’s Wills Trust), once again demonstrating that equity by looking at substance and not form, will actually assist a volunteer by perfecting imperfect gifts.

Donatio mortis causa could also be argued to be a situation where equity assists a volunteer. These are death-bed gifts, which, as explained in Cain v Moon, are gifts made in contemplation of death, conditional on the death of the donor with some form of delivery of the subject matter of gift. Although it is arguable that equity did not assist a volunteer since the volunteer had obtained means or parts of the means by which the subject matter can be obtained, the fact remains that it is an incompletely constituted gift, as the legal title of the property is not transferred. Therefore, donatio mortis causa could actually be seen as a situation that best illustrates Lord Browne-Wilkinson’s maxim: here in this situation, equity neither aid a volunteer nor strive officiously to defeat a gift. Equity would give effect to a gift without being in conflict with both maxims.

In cases like Pascoe v Turner and Dilwyn v Llewellyn however, we do see equity perfecting imperfect gifts. Where there is assurance, reliance and detriment, a claim of proprietary estoppel will be successful. Although courts enjoy a very considerable flexibility in dealing with such cases, when it appears “right” to perfect an imperfect gift, courts will do so by aiding the colunteer.

Pennington v Waine is another case where equity had aided the volunteer in order to not strive officiously to defeat a gift. In this case, it was held that it will be unconscionable for the settlor to have recalled what was clearly intended as a gift, as a settlor will not be permitted to change his mind if it is unconscionable to do so. It seems that in order to not officiously defeat a gift, courts will assist a volunteer, even though this would mean that equity is neither looking at substance nor form, since equity is not giving effect to the settlor’s now-changed intention. It seems that equity’s main concern is to not defeat a gift when defeating a gift will lead to unconscionability.

Lord Browne-Wilkinson’s maxim is itself a paradox. A better maxim will perhaps be: equity will not strive officiously to defeat a gift and in order to do so, equity will aid a volunteer; however the general rule remains that in normal circumstances, court will not assist a volunteer.” This modified maxim clearly seems to reflect the decisions of cases in this area of law more accurately.

Posted under law of trusts by yoongshin on Wednesday 20 January 2010 at 10:26 pm

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