Trusts Law Arguments by Jones Garton and Margaret Halliwell - Essay Example

Trusts Law Arguments by Jones Garton and Margaret Halliwell Introduction English trusts law is a unique element of English legal system. Trusts represent an intention of a ‘settlor’ to transfer his assets (land, realty or securities etc) to a trustee in order the latter could represent settlor’s interests or become the owner of the assets. Trusts law was an extraordinary phenomenon to the legal system of England. This country propagated Roman ideas on ‘indivisible entity’ of property. When trust law appeared, it was strictly criticized as the norm violating generally accepted principles of property cases. The articles by modern authors Jones Garton and Margaret Halliwell consider this phenomenon from a modern perspective. They refer to the most well-known cases in this field: Milroy v Lord, Re Rose, Pennington v Wayne and some others. In order to define the level of trust in perfect/imperfect gifts, it is relevant to refer to additional reading from previous years and to current sources (Substantial Change in Trust Tax Law, 2006; Diamond, 2002). A complicated nature of gift is the absence of contract basis, i. e. there is no special consideration of gift transfer (Langbein, 1995; McKendrick, 1992). Moreover, if a giver fails to complete required formal stages or has no legal title, gift may fail. Courts refer to the generally accepted motto in this kind of cases: “equity will not perfect an imperfect gift” (Langbein, 1995). Consequently, there are a lot of controversies appearing in trust cases. That’s why it is relevant to discuss a balanced nature of trust. In other words there is a need to consider its theoretical basis and practical implementation. A consideration about constitution of trust is a vividly discussed issue for academics and researchers, because practical implementation of trust in trusts law is rather rare. The trusts law has some specific features, which have to be discussed in detail. The most striking issue is that transfer may occur even if all formalities were not followed. Re Rose case is well-known with this regard and there is even a name for ‘Re Rose’ principle taken after the case. In this case the settlor transferred shares in a private company on behalf of certain trusts. Nevertheless the authority of the company didn’t register transfer at once and the question which had to be solved by court was when the shares were transferred. The date of settlor’s decision to transfer the shares was acclaimed to be the relevant date of transfer. This principle was discussed in other cases as well (Cunningham, 1992, p. 63). Pennington v Wayne is another interesting case for discussion. In this case the concept of unconscionability appears and the court considers this concept to be a primary fact in the case discussion. This concept was taken for granted as a decisive point because not all formalities were followed in the process of gift transfer. Jones Garton’s article The articles by Garton and Halliwell present two points of view on property and securities transfer mechanism. It is relevant to note that both of these authors suggest interesting considerations about trusts law in England. Jones Garton combines the ideas on trust collected from additional sources and law cases. He speaks about constituent nature of trust. Operational mechanisms of trust are focused on the main claim that “equity will not infer a perfect trust from an imperfect gift” (Garton, 2003). The basic claim was taken from Milroy v Lord (1862) case, from more contemporary case Pennington v Waine (2002) 1 WLR 2075. In accordance with Garton there are different principles in the rule of the ‘last act’ which establishes constitution and its application. Garton’s work impresses readers by his considerations about the ‘workings’ of trusts in Rose’s case which are express and constructive. Therefore it is clearly seen that Garton is interested in a concept of trust in imperfect gifts. In Pennington v Waine unlike Re Rose case, a concept of ‘uncosncionability’ was considered as a softening method of application of these criteria (Graham 2005, p. 138). Moreover, Re Rose principle is currently described as “eminently sensible…in a context in which the liability to tax may be affected by the date on which the transfer is treated as being effective” (Graham 2005, p. 134). Thus the concept of uncoscionability is not discarded by modern researchers currently. It is considered to be an alternative for courts to make the right decision in case formal stages of gift transfer were incomplete. With this regard Garton’s claim is more contemporary than Halliwell’s claim. Garton’s claims are direct and well-structured. This conveyance claims that there are certain exact principles of trust. He is focused on certificated shares transfer; transferor should deal with certificated shares and execute the appropriate transfer form. Basically, Garton underlines that Re Rose principle shouldn’t be considered by the courts as a universal principle in dealing with controversial trust cases. Moreover, transferor must introduce the executed form and share certificate next to directors’ approval of the “transferee registration as new owner of the shares on the register of members which the company is obliged to keep” (Garton, 2003). These steps are necessary but unfortunately they are not always taken by donators. Garton underlines that there are a lot of transfers which are not perfectly fulfilled because of donator’s inability to complete the process of transfer till the end. In case ‘imperfect gifts’ occur, there is a need for perfect trusts. This idea expressed by Garton is generally supported in judicial literature. Thus in the book “Trusts” (1996) imperfect gift is enforced as trust. The following explanation of the statement is provided in this book: “Gift requires delivery of subject matter. If gift fails for want of delivery, transaction can be enforced as an oral declaration of trust by donor. Majority of courts requires clear & convincing evidence that a trust was intended” (Trusts, 1996). Therefore currently a concept of trust is promoted in modern judicial literature as imperfect gift perfection. Not unintentionally Garton appeals to Re Rose case of 1952 Ch 499. This case is a well-known example of improper gift transfer. In case transfer is delayed because of routine operations it is still effective in case donor has done everything he could do. This is sometimes called the "Re Rose principle" (Garton, 2003). ‘Re Rose’ was included in the title of Garton’s article. Consequently, Garton wanted to underline that this principle is the basis of trust enforcement in cases of imperfect gifts. Moreover, Garton supports his idea on the example of Milroy v Lord (1862) case Re Fry and others. We can complete this list by the following law case. In the case of Milroy settler could do everything necessary for property type transfer. In other cases the courts appealed to equity in order to facilitate the process. The most controversial case is Pennington v Waine [2002] 1 WLR 2075, where the court came to the conclusion that the gift is effective even though correct procedures were violated (Clements and Abass, 2008). Garton concludes that court’s decision in Pennington v Waine [2002] 1 WLR 2075 is rather problematic. On the one hand, Garton claims, it is unclear whether transferor intends to make the transfer to be effectual “immediately” or “as soon as the law allows” (Garton, 2003). Alternatively, transferor is not protected by legal principles of equity transfer (e.g. unconscionability). Another issue discussed by Garton is company directors’ relation to equity transfer. They have right not to include new members in the list of share holders, then in case of Re Rose this would be an obstacle for new members’ registration. Garton provides the following claim that trust over shares may be construed on the foundation of “either the actions of the transferor operate as a declaration of an express trust for the benefit of the transferee, or they create a situation whereby it is appropriate that a constructive trust is imposed over the shares” (Garton, 2003). The case of Pennington v Waine is an example of an unintentional challenge of the “constructive trust utilizing on the background of perfecting imperfect gifts with no violation of trust law” (Garton, 2003). At this point it is relevant to claim that the concept of ‘unconscionability’ closely is closely related to an ‘unintentional challenge’ which occurred in Pennington v Waine. Re Rose rule is complicated by the issue of unconscionability. Currently, this approach is criticized: “since a gift could be effective without the donee being aware of it, the doctrine of Re Rose cannot depend on the share transfer form or share certificate being delivered to the done” (McGhee, 2003). Consequently, approach used in Re Rose case may be considered as a separate case and not as a general principle (McGhee, 2003). Another attitude to unconscionability concept is discussed by Oakley (1996) who claims that “the continuum of equitable obligations stretches from trust and fiduciary duties at one end, owed in respect of property of or the economic interests of the beneficiary, to fiduciary duties and duties of care owed in respect of other noneconomic interests, and then on to duties at the other end, owed to others, but whose focus is on the prevention of unconscionable behavior by the obligee” (Oakley 1996, p. 188). This author underlines that a concept of unconscionability is a secondary principle in trusts law. Re Rose principle was chosen by Garton as rather complicated issue. Formalities exclusion in the process of trust transfer and transferor remains protected. Therefore in spite of the fact that the principle of Re Rose is widely used in practice, there are incongruities between fundamental law theory and current operation of the principle. Another issue which is vividly discussed is the principle of unconscionability (Garton, 2003). A flexible nature of this principle may facilitate norms and formalities of trust law theory. Courts are believed to be responsible for appropriate concept usage in order to distinguish between imperfect and perfect transfers. Nevertheless it is relevant to remember that this principle may be applied only to cases where transfer formalities were missed. Thus this principle is not of general nature and is not universal principle of trusts law. Margaret Halliwell’s article The article by Margaret Halliwell (2003) “Perfecting imperfect gifts” is based on perfected gifts discussion and constituted trust. The author provides examples from Milroy v Lord and Pennington v Waine. The latter case is considered to be by the author as “being held on trust for the intended donee” in case the transfer form was signed but never delivered. This fact was explained by Halliwell appealing to the concept of “unconscionable”, as Garton did. In the Milroy v Lord case Halliwell traces law misinterpretation. The main idea of the author is to appeal to publicity and courts in order to develop a strict and exact approach to the issues of unconscionable in equity transfer. Thus Halliwell underlines principle of unconscionability not as a secondary one in trusts law, but as underdeveloped one. From the very beginning of the article Halliwell tries to argue that the issue of unconscionable is effective enough to justify voluntary basis of gift or trust and whether it should be acclaimed by the courts of equity. In accordance with Halliwell, unconscionability should have a ‘principled reasoning’ (Halliwell, 2003). The efficiency off trust/property transfer was considered by Halliwell on the example of well-known cases (Milroy v Lord and Re Fry, Jones v Lock and Richards v Delbridge). In all the cases a transferor of the property died so he wanted to conduct voluntarily settlement but failed to conduct an effective transaction. Re Rose principle is characterized by Halliwell as ‘too straightforward’ (Halliwell, 2003). It is necessary to reconsider principles of imperfect gifts’ perfection, which depends on donator and donee (Halliwell, 2003). Halliwell underlines ‘equity will not perfect the imperfect gift” (Halliwell, 2003). There is a difference between initial and final intentions of donator to transfer a gift. Donators are able to change their minds until the transfer is completely constituted. Halliwell doesn’t support the decision reached in by courts in Re Rose al well and even names it to be the ‘bad law’ (Halliwell, 2003). Halliwell discusses the cases where there was a clear intention of transfer. Buckley J. was unaware of the inability of covenantor's personal representatives “to show that the trustee could not conscientiously withhold the property from them” (Halliwell, 2003). Thus Halliwell discusses another form of unconscionability and claims that “equity will not assist a volunteer unless it would be unconscionable to do so” (Halliwell, 2003). Halliwell underlines the legacy of Pennington v Waine. On the example of this case it is clearly seen that the courts should have followed the principle of ineffective transactions approval. Therefore Halliwell in her article tries to find out whether unconscionability has a legal background or maybe it is just a secondary tool of courts in trusts law cases. Ideas of Garton and Halliwell in a modern context The main idea of Garton and Halliwell articles concerned the issue of the incomplete procedure of gift transfer. Equity’s response to so-called imperfect gifts concerned the reliability of trust discussion in the favor of donee. In the case Pennington v Wayne the issue of donor’s resile from her gift. In the case of Milroy v Lord, this intention of a donor would be hardly discussed. As a matter of fact, Garton and Halliwel didn’t intend to summarize outcomes of the most famous cases of trusts law. These authors were focused on representation of perfecting imperfect gifts. Basically, there are 3 types of gifts giving to people: inter vivos gifts, wills and trusts (Trusts). It would be not interesting to discuss trusts law if all the steps of gift giving were made. That’s why the authors are focused on the discussion of the cases where formalities of gift giving were not completely followed. A process of gift giving via trust requires three necessary steps: “a certainty of intention, subject matter and beneficiaries” (Betrayal of trust, 2006). A constituted nature of trust implies transfer of trust assets to the intended trustees. In trusts law there is a wide-spread Re Rose principle directed on perfection of imperfect gifts (i.e. it concern exception cases). Trust will be efficient and acclaimed by the court in case initial intention of donator is proven (Mascall v Mascall and Pennington v Waine). In the modern context Re Rose principle is considered as ‘a form of constructive trust’ though previously this principle was considered as “an equitable acceptance of the unconscionability of the donor purporting to retain the shares and any dividends paid under them once he had completed and sent off the share transfer forms” (Diamond 2002, p. 26). A constructive trust is the best approach to dealing with gifts which were not properly executed. The following inconsistence happening in Pennington v Wayne case in comparison with Re Rose principle is the following: in the former case there is no reasoning of the number of consequences in comparison with Re Rose. Firstly, a giver in Pennington lacked possibility to properly consider over gift transfer. When the concept of unconscionability could happen? This question is discussed in Pennington case review (Pennington discussed). Another claim is that a giver had not completed all formal stages required for successful transfer. Thus the role of equity is in focusing transfer on an equitable interest under conditions when title transfer was absent or transfer of such title was not enforced (Trusting your family…, 2006). The role of equity is often described in the following way: “to mollify the extent of the common law and of statute” (Trust Laws 'Over-Reaction', 2006). From this perspective, Re Rose principle is considered to be the right decision to the courts. The main challenging issue is inconsistency of the facts occurring in the cases with regard to title transfer. Rose case respectively has inconsistencies of this kind of facts thus its practical implementation in courts doesn’t coincide with theoretical basis of trusts law. Conclusion Anyway, the articles by Garton and Halliwell are outstanding attempts to clarify misunderstandings in trusts law cases, where all formalities were not completed. Consequently, Halliwell underlines that unconscionability may be a good reason for the courts to discuss imperfect gifts in case this concept has a strong regulatory nature and Garton considers this concept in a more tolerant manner. Basically, Garton claims are more relevant to a modern context as we could see it in the works of other contemporary researchers. Works cited 1. A Betrayal of Trust; Changes in Trust Law in the Latest Budget Could Mean Your Will Needs a Costly Rewrite, Says Lorna Bourke. The Evening Standard (London, England) 24 May 2006: 36. Questia. Web. 20 Jan. 2011. 2. Clements and Abass. Complete Equity and Trusts, Chapter 8. [online]. Available at:[Accessed18 January 2011] 3. Commercial Aspects of Trusts and Fiduciary Obligations., 1992. Ed. Ewan McKendrick. Oxford: Oxford University. Questia. Web. 20 Jan. 2011. 4. Cunningham, M., 1992. Reliance on a Trust Agreement Requires a Reading of Local Law. The CPA Journal Aug. 1992, p. 63+. Questia. Web. 20 Jan. 2011. 5. Diamond, S. C., 2002. New York Trust Law Offers New Planning Opportunities. The CPA Journal Apr. 2002: 26+. Questia. Web. 20 Jan. 2011. 6. Garton, J., 2003. The role of the trust mechanism in the rule in Re Rose. 7. Graham, M. et al., 2005. Trusts law: text and materials. Cambridge University Press. 8. Halliwell, M., 2003. Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot? 9. Langbein, J. H., 1995. The Contractarian Basis of the Law of Trusts. Yale Law Journal, 105, p. 1+. 10. McGhee, J., 2003. The Facts of Pennington. [online]. Available at: [Accessed18 January 2011] 11. Oakley, A. J., ed., 1996. Trends in Contemporary Trust Law. New York: Oxford University, 1996. Questia. Web. 20 Jan. 2011. 12. Pennington discussed. [online]. Available at: [Accessed18 January 2011] 13. Substantial Change in Trust Tax Law, 2006. The Journal (Newcastle, England) 20 May 2006, p. 34. Questia. Web. 20 Jan. 2011. 14. Trust Laws 'Over-Reaction', 2006. The Birmingham Post (England) 31 Mar. 2006, p. 27.Questia. Web. 20 Jan. 2011. 15. Trusting Your Family with Business Assets, 2006. The Journal (Newcastle, England), 18 Oct. 2006, p. 37. Questia. Web. 20 Jan. 2011. 16. Trusts. [online]. Available at: [Accessed18 January 2011] 17. Unconscious ability in the law of trust. [online]. Available at: [Accessed18 January 2011] Read More