“Let no one speak of the law’s delays if one of the most deeply rooted tenets of equity can crumble in the space of two years!”  , however dramatic a statement, Morris makes a valuable point. It seems that the longstanding mantra, “equity will not perfect an imperfect gift”  , is made vulnerable by the decision in Pennington v. Waine  , at threat of being ostracised for a new equitable maxim: “Although equity will not aid a volunteer, it will not strive officiously to defeat a gift”  . In deciding the validity of a gift or completely constituting a settlement, the question now seems to turn on the elusive concept of ‘unconscionability’, a far cry from established equitable principles and the timeworn authority of Milroy v. Lord  . Arden L.J. contested that, “the principle against imperfectly constituted gifts (has) led to harsh and seemingly paradoxical results,”  adding that equity had “tempered the wind to the shorn lamb,” evoking ample criticism.  In contrast, Garton submits that the ruling in Pennington v. Waine should not be accredited to the forging of a new exception, but be seen as “an opportunity to recast Re Rose in a theoretically sound fashion by shifting the focus …into the conscience of the transferor.”  However, the more compelling approach adopted by Delany and Ryan would find it challenging to consider this use of unconscionability as “theoretically sound”  . Of course in order to critically analyse the true divergence of Pennington v. Waine from established authority and to determine the practicality of employing ‘unconscionability’, the facts of the case and justifications afforded for the ruling should be presented.
The issue argued before the Court of Appeal concerned the transfer of 400 company shares to the donor’s nephew (Harold Crampton) as a means of satisfying company policy that the director was to hold a qualifying share. Harold had signed a form of consent to act as director, countersigned by the donor (Ada Crampton). The share transfer form, however, was retained by the company’s auditors and was not sent to Harold. The question was raised by the donor’s executors (Pennington) as to whether an effective transfer of the shares had been made despite the share transfer form not being delivered to Harold or the company for registration. Howard J held that the delivery of the form was not necessary to give effect to the gift and that it was in fact effective upon signing  , the Court of Appeal agreed . Arden L.J. found a clear intention to make an immediate gift and deemed it ‘unconscionable’ for Ada to have rescinded, a judgment fuelling ample criticism. Clearly, there had been no transfer at law as legal transfer requires both completion of the form and registration. Was Arden L.J. therefore correct in shedding the charitable light of equity upon the case to obtain a ‘just’ outcome? Her Ladyship’s verdict stems from three essential elements of the case; that Harold was assured that he need not take further action to effect the gift, that he was to take up directorship of the company and the alleged ‘continued intention’ of Ada. Clarke L.J. agreed that donative intention was clear and a signed transfer form was capable of effecting the gift without delivery. This runs against the grain of pre-existing case law and established principles.
Presiding authority set out by Turner L.J in Milroy v. Lord had formed sufficiently clear-cut principles regarding the transfer of property, “… the settlor must have done everything which…was necessary to be done… for there is no equity in this court to perfect an imperfect gift”  . A lack of consideration in return for the settlor’s promise will deem a beneficiary a ‘volunteer’ and equity will not assist a volunteer under the premise that its one-sided nature cannot impose an obligation. In strictly applying Milroy v. Lord, the trust would undoubtedly fail at law and in equity as the shares were not registered, in fact they were not even delivered to the company. The ruling in Re Fry confirmed the principles laid down in Milroy where the donor has completed all legal formalities but had not complied with additional requirements, rendering the transfer incomplete at law and in equity. Clarke L.J. framed the bulk of his judgment in Pennington on the assessment of the donor’s intention, a dangerous approach with a potentially clouding effect on established doctrine. Intention as a flagship for the creation of a perfect gift will be explored in greater depth later. As the Court of Appeal held the transfer in Pennington to be valid, it would be fair to say that the ruling thus far undermines well established authority. However, as Halliwell submits, the Milroy principle should only be deemed “relatively straightforward”  as numerous exceptions have subsequently materialised, most influentially in Strong v. Bird  , Re Rose (dec’d), Rose v.IRC  and Choithram  .
The dictum that the settlor must have done that which is ‘necessary’ to constitute a valid trust was effectively employed by the High Court in Re Rose, Rose v. IRC. The court held that transfer occurred when the transfer form was signed by the donor and given to the donee and not when the title of the property was registered. The justification being that the donor was deemed to have done everything in his power to effect transfer  . The judgment did not come without it’s body of criticism  . However, justification may be drawn from the maxim that, ‘equity does what ought to be done’  ; the donor had done all that he could have in order to effectively construct the trust, it was out of his hands. Academics seem to agree that the Turner L.J’s judgment was “ameliorated”  by the new limb of trust construction developed in Re Rose. Lord Evershed also noted the inequity of nullifying a gift once the donor had performed all of formalities required of him. The case was to be read as an exception to Milroy v. Lord simply reading Milroy in a distorted light to satisfy trust criteria. To state that Re Rose perfected the gift would be inaccurate as no new principles were read in to existing authority. Although to a certain extent, it could be said that the volunteer was assisted here in that the formalities were read in such a way as to ‘assist’ the volunteer. Applying Re Rose to the facts in Pennington, since the share transfer form remained in Ada’s possession, without delivery there could be no basis on which to create a constructive trust. According to Re Rose, the question should have been whether the donor had done everything that was expected of her, the answer to which would be no. It would seem Pennington is an exception to the exception  . Attention should also be drawn to the subsequent case of Choithram which paved the way for the ruling in Pennington with Lord Browne-Wilkinson’s judgement. The Privy Council debated whether a trustee could vest trust property in himself as well as his co-trustees despite not all trustees having completed the legal provisions to effect vesting. Lord Browne-Wilkinson made the ‘novel’  declaration that “although equity would not aid a volunteer, it would not strive officiously to defeat a gift.” His Lordship’s judgment was heavily criticised as having “extended beyond the former boundaries”  of Milroy. Choithram obiter dicta, despite having an obvious influence on how Pennington was to be decided, was also said to have been “applied completely out of context”  . Arden L.J. exercised the Choithram ruling as having validated a transfer deemed ‘unconscionable’ in the eyes of equity to withdraw  . Clarke L.J. did not view the conclusion as having perfected a gift nor had it undermined equitable principles.  Despite claims that the decision in Choithram had not dispelled equity’s maxim that it will not aid a volunteer, obiter submitted by Lord Browne-Wilkinson cannot be strictly viewed as an extension or mere elaboration of established principles. One would be more inclined to read it as yet another exception, an entirely new limb unacceptably open to the forging of new principles. Which is exactly what happened. Arden L.J. seemed to view Lord Browne-Wilkinson’s judgment as a platform for the development of the new principle of ‘unconscionability’. The judgment in fact was most probably intended as a subtle cross-reference to a fellow maxim, that equity will do what ought to be done, a transparent attempt to justify a decision that otherwise undermines established principle. In contrast to Choithram, unconscionability in Pennington is being used as the freestanding instrument from which a trusteeship is drawn.
It is evident from following the trail of jurisprudence that the principle, ‘equity will not perfect an imperfect gift nor assist a volunteer’ had already been twisted, strained and overstretched. An ambiguous foundation would inevitably lead to an ambiguous ruling.  Pennington is a small step from its predecessor, but a strenuous leap from its foundations. A ruling such as Pennington’s was inevitable. The straw that broke the camel’s back was Arden L.J’s liberal application of ‘unconscionability’ as a measure of enforcing a trust otherwise void in equity. Essentially, treating incomplete actions as having been completed and hence, perfecting an imperfect gift. Ironically, Arden opened by stating that, “the principle that equity will not assist a volunteer must be applied and respected.  ” Authority from Lord Browne-Wilkinson in Westdeutsche Landesbanke  , dictates that a constructive trust could arise should the defendant be aware of the factor which imposes trusteeship, subsequently affecting his conscience. His Lordship later developed this reasoning in Choithram and cited that “it would be unconscionable and contrary to the principles of equity to allow such a donor to resile from his gift  “. This was surely intended as a question of practicality rather than morality. However Arden read this to have imposed an active role upon ‘unconscionability’ to give rise to a constructive trust. As Garton notes, such an approach could have a detrimental effect on the donor’s protection afforded by the legal formalities  . Whats more, her Ladyship declared that “there can be no comprehensive list of factors which makes it unconscionable for the donor to change his or her mind: it must depend on the court’s evaluation of all the relevant considerations”  . Freestanding, this statement could read convincingly as a criticism of the Choithram ruling! However, it essentially gave way to deciding the validity of a gift on moral grounds. The test was now subjective, turning equitable principles on their head. Arden L.J. placed significance on several key facts of the case; that the gift was made of “her own free will”, the signed form was delivered to her agent for registration, Harold was aware of the gift and was told that “he need take no action”. Harold also took up the position of director and under company policy, the position required him to hold a qualifying share  . Morris derived two questions in determining the valid transfer of property from the judgment; is the donor’s conscience affected? if not, does the gift meet either of the old Milroy v. Lord tests?  Equitable doctrine aside, the assessment of unconscionability brings with it myriad problems. “If it is to be the touchstone for liability… it is essential to be clear on what… unconscionable means.”  Justice cannot turn on a variable, clear-cut tests and principles are integral in equity, as ‘fairness’ by definition turns on adopting the same stance across the board – it requires “the cold neutrality of an impartial judge  “. The burden on the courts must therefore be taken into account, “…to ensure that the concept is not used in such a way as to grant unfettered judicial discretion.”  The word ‘equity’ itself stems from ‘equality’, no equity can be said to exist where it is at the judge’s whim as to whether the denial of a transfer is deemed ‘unconscionable’. Both Garton and Halliwell emphatically agree that for the concept to function without unpredictability, it requires the direction of coherent tests and a clear definition  . It is suggested that “the days of the justice varying with the size of the Lord Chancellor’s foot will have returned”  . However, Halliwell gives value to ‘unconscionability’ in certain equitable contexts  , as does Garton  , this is to be contrast to Yeo and Tijo who challenge the employment of the concept at all  . Gummow states that the ill defined and “opaque judicial construct” is “… employed on occasion as if plucked from the air and applied to describe particular facts  .”It can be agreed that the concept of ‘unconscionability’ is in desperate need of definition if it is to function efficiently as an equitable tool. However, to employ the arbitrary concept at all is debatable in this area of law. In following Arden L.J.’s use of ‘unconscionability’, it seeks to abolish any pre-existing equitable principles. Delany and Ryan strive towards a fitting definition, a search in which four distinct categories of applying ‘unconscionability’ arise  . Pennington was appropriately deemed to have sculpted the fourth category of unconscionability as a “vehicle for arriving at a desired result even in circumstances where the employment of the concept appears to be very far removed from the substantative equitable principle under consideration”  . Even if it were agreed that ‘unconscionability’ should be applied to the facts of the case to find a legitimate transfer, it is difficult to draw such ‘unconscionability’ from the facts in Pennington. In cases relating to equitable estoppels, courts have drawn ‘unconscionability’ from such characteristics as party conduct  and effect on third parties  . In the present case, Harold had not incurred any expenditure, suffered any detriment nor had he relied on his acquisition of the shares  . This is further highlighted by Arden L.J. declaring it ‘unconscionable’ to have recalled the gift, despite it being quite obvious that Ada could have simply instructed her agent to tear up the relevant form, halting transfer. Pennington sets an unworkably low threshold for what would be deemed an ‘unconscionable’ denial of transfer. As there had been no actual delivery of the completed and signed form, the matter remained in the hands of the donor, Ada retained the power to do all that was necessary of her, importantly, she retained the power to renege on her pledge. The delivery element embodies established equitable principle in that it unequivocally evidences donative intention without the need to strain inferences from more questionable aspects of the case. Nevertheless, Clarke L.J. insisted that delivery “has never been necessary to effect a transfer of shares, whether at law or in equity”  . A conclusion made even more unconvincing by his Lordship’s reference to Standing v. Bowring  , an irrelevant case as the legal title successfully passed. Clarke L.J.’s reasoning turns on intention as the trigger effecting transfer, even in the absence of the requisite formalities  . Inferring intention without credible testimony draws parallels to inferring unconscionability in that neither are supported by principles and both are subject to judicial discretion. If both intention and unconscionability are established by the mere completion of a form, when would it be unconscionable to allow the donor to change his mind? If we are to apply Pennington, a gift may have transferred without the donor’s knowledge  . One could argue that for a gift to pass without the donor’s unequivocal consent would be more unconscionable than to deny it where it fell short of the requisite formalities. Granted this being a radical example, it however demonstrates the potential to give rise to an unintended and legally binding gift.
There is little debate as to the fairness of the outcome in Pennington, the majority would agree that justice prevailed  , however, the manner in which it was obtained was convoluted, strained and unsupported by any substantial or principled reasoning. There have been several alternative suggestions as to how the outcome may have been obtained without undermining established doctrine and respecting jurisprudence. Chee Ho Tham’s sympathetic take on Pennington makes a modest attempt at providing an alternative by imposing a constructive trust from potential contractual obligations. He suggests that Pennington’s assurance to Harold that he need not take further action to complete the gift could be read as a unilateral offer to effect transfer, especially in light of Harold’s completion of the 288A form at Pennington’s request. This in turn would hold Ada as contractually bound to complete transfer  . However, the question is not whether a fair ruling may have been obtained without breaching equitable principles. The question is whether the decision in Pennington did undermine the principle that equity will not assist a volunteer nor will it perfect an imperfect gift.
In its introduction of ‘unconscionability’ as a freestanding trigger to effect an imperfect gift, it cannot be argued that the decision in Pennington undermines pre-existing case law and the governing principles which would otherwise have produced a clear and coherent ruling.  Although there may be a place for ‘unconscionability’ alongside Re Rose, for it to function as a justification to assist a volunteer, the development of clear-cut tests and an articulate definition of the word are essential to avoid excessive judicial discretion. As Robert Walker L.J. submits, unconscionability should be used “as a function of assurance, it has no independent existence”  . It should be duly noted that the maxim ‘equity will not assist a volunteer’ will more often than not endure should a donor rescind his offer  so for those seeking to override Pennington, there is substantial counter authority  . The transfer of property cannot turn solely on the vagaries of whether the court considers it ‘unconscionable’ for the donor to change his mind. As Halliwell concludes, “If we are left with a maxim that equity will not assist a volunteer unless it is unconscionable to do so, then we are left with a very unruly beast.” 
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have your work published on LawTeacher.net then please: