Key point
- This case laid down the general principle that there is no equity to perfect an imperfect gift, in other words, courts should not imply a trust simply because an intended gift was not completed
Facts
- The settlor, Mr Medley, executed a deed to transfer 50 shares in the Bank of Louisiana for Mr. Lord (L) to hold on trust for Eleanor Medley (M), Mr. Medley’s niece.
- The settlor also handed the relevant share certificates to L.
- However, the shares were never registered in L’s name by the bank as L failed to hand over the deed of transfer and share certificates to the bank.
- Registration is required under company law for legal title in shares to be transferred.
- When the settlor died the shares still remained in his name.
- M sought to argue that the shares had been held on trust by the settlor for L, who then held such beneficial interest on a sub-trust for herself.
Issue
- Did the settlor hold the shares on trust for L?
Held (Court of Appeal)
- No, the legal and beneficial title remained with the settlor.
Turner LJ
Equity will not perfect an imperfect gift: p. 1189 – 1190A
- To perfect a gift, the transferor must do everything necessary according to the nature of the property.
- Property may be gifted in one of three ways:
- Transfer of absolute title;
- Transfer to a trustee; and
- Settlor declaring himself as trustee.
- If the gift is intended to take effect one way, equity will not allow it to take effect by another, thus a transfer of absolute title will not take effect as a declaration of trust.
Current case: p. 1190B
- The shares were intended to be held on trust by L for M and it was never intended by the settlor that he himself will hold it on trust.
- The court will not convert the deed to a different transaction.