Imperfect Gifts

There are three main ways of making gifts to people; in short these are inter vivos gifts, wills and trusts.

To ascertain if a gift is complete, one first must determine if the gift was intended and then consider whether all the steps needed to complete that type of transaction have been done.

The completion of an inter vivos gift depends on the subject matter of the gift. If the requirements have been met, the intended donor still holds legal title.

The completion of a will occurs partly by operation of law, according to the Administration of Estates Act, the main question is whether the testator left a valid will and had their affairs together, the formalities are found in the Wills Act 1837.

The completion of a trust involves similar problems to the will but with added complications, there must be the “three certainties”, a certainty of intention, subject matter and beneficiaries. Finally, the trust must be constituted, meaning that the trust assets must be transferred to the intended trustees.

The problem of constitution may arise in inter vivos trusts when the settlor and intended trustees are different people. This problem is the same for ordinary inter vivos gifts: did the settlor do what was needed to transfer legal title to the trustees?

If a donor fails to complete an intended inter vivos gift there is a temptation to give effect to it by transferring it as a valid trust, however the courts will not treat the intention to make a gift as an intention to create a a trust, as Maitland put it, “the two intentions are very different – the giver means to get rid of his rights, the man who is intending to make himself a trustee intends to retain his rights but to come under an onerous obligation”.

What the court may do however is declare that a constructive trust for the intended done has arisen by operation of law in response to what occurred. Two examples of this are the Re Rose principle and proprietary estoppel. The trust not created by the intention to create a trust, the gift is perfected by the courts creating an exceptional ways in which the volunteer can obtain a gift in equity.

Re Rose Principle

The Re Rose principle apllies in situations where the donor has done whatever he or she needed to do to complete the gift but some other essential step outside the donors control has not been completed. It is relevant in the cases Mascall v Mascall and Pennington v Waine.

In Mascall the reason for upholding the gift of the freehold property from a father to his son (because the terminally ill daughter didn’t want to live there) even though the proper steps weren’t complete (in this case to avoid capital gains tax an incorrect form had been used which held up

registry) was that there was intention and that the father had done everything in his power to transfer the house to his son and though the transfer was pending, as of Re Rose, the effect in law in this circumstance is that the donor holds the legal interest for the benefit of the done, as in these circumstances there is a trust to which the court will give effect.

In Pennington the reason for upholding the gift of shares from a deceased aunt to her nephew was that there was intention and that a stage had been reached where it would have been unconscionable for Ada to recall the gift and for these reasons delivery was unnecessary to perfect the gift in the courts eyes.

Proprietary Estoppel

Propietary estoppels applies where a volunteer has detrimentally relied on a reasonable expectation on receiving a gift and the cases Yaxley v Gotts and Gillett v Hold are relevant to it.

In Yaxley there was an agreement between the parties that was determined not to be a valid contract. The agreement was oral and was that Mr Gotts would buy a house to let it out as flats, Mr Yaxley (a self-employed builder) would get the ground floor flat which he was to convert into two in return for work on the four flats on the other floors and then act as the landlords managing agent for his upstairs flats as well as the ground floor flats which Yaxley would own. The reason the agreement was determined not to be a valid contract was that it was an oral agreement which according to section 2 of the Law of Property Act 1989 will not suffice for this type of lan agreement. If the agreement had been a valid contract the outcome would have been in favour of Mr Yaxley which does not differ from the actual outcome of this case as provision is made for constructive trusts in section 2 to provide relief against unconscionable conduct, which was deemed to have existed here (Mr Yaxley estimated that he had, in detrimental reliance, invested £9,346 into this agreement). In this decision their lordships held that entitlement to relief under proprietary estoppels was not necessarily invalidated by s2 of the 1989 act.

The nature of the agreement in Gillett was that the court felt that in the circumstances, it was reasonable for Gillett to expect Holt to leave him the bulk of his estate... this ‘agreement’ was unenforceable in the original judgement because, in the words of the judge, there was nothing that could be reasonable construed as an “irrevocable promise that the Gillett’s would inheret regardless of any change in circumstances”... In the end the appeal was allowed and proprietary estoppels granted. The detriment (an essential ingredient of proprietary estoppels) suffered by Gillett need not be confined as authorities show that it is not a narrow or technical concept. It was determined that detriment was incurred the Gillett’s devoted the best years of their lives to working for Holt and his co showing loyalty and devotion to his business interests, social life and personal wishes on the strength of clear and repeated assurances of testamentary benefits... detriment doesn’t necessarily have to be so strictly financial...