Imperfect gift of shares not saved as a declaration of trust (Milroy v Lord)
Geraldine Moss owned 500 shares in Arden Fabrics Ltd, a private company registered in England. She wrote and signed a letter to her godson, Felix Mensah, saying 'I give you my 500 shares in Arden Fabrics', and posted it to him. She never signed a stock transfer form, kept the share certificate in her desk, and continued to receive the dividends. She died six months later. Her will appoints her solicitor as executor and leaves her residuary estate, which includes the shares, to her brother. Felix argues that Geraldine held the shares on trust for him.
Which of the following best describes Felix's position?
Choose one answer to see the reasoning.
Worked answer
Correct answer E: The gift fails and the shares pass under Geraldine's will, as it was incomplete and equity will not treat it as a declaration of trust.
THE RULE TO REMEMBER
Equity will not perfect an imperfect gift for a volunteer, and an ineffective outright gift will not be treated as a declaration of trust (Milroy v Lord).
Imperfect gift of shares not saved as a declaration of trust (Milroy v Lord)
A gift is perfected either by transferring the property to the donee or by the donor declaring herself trustee of it. For an outright gift, the donor must have done everything necessary that was within her own power to transfer the asset. Otherwise the gift is incomplete, because a volunteer donee has no equity to perfect an imperfect gift (Milroy v Lord, as restated in Choithram v Pagarani). Geraldine never signed a stock transfer form or handed over the share certificate, both steps within her power, so the legal transfer was not completed. Nor can her letter be rescued as a declaration of trust. She intended an outright gift, and the court will not give a benevolent construction treating ineffective words of gift as if she had declared herself trustee. Felix is a volunteer and Geraldine's executor is her solicitor, so no exception applies. The shares remained Geraldine's and pass under her will to her brother.
Why A is wrong: Re Rose applies only where the donor has done all she can; Geraldine had not signed a transfer form or handed over the certificate.
Why B is wrong: Milroy v Lord forbids treating ineffective words of outright gift as a declaration of trust.
Why C is wrong: Clear donative intention alone does not complete a gift; the necessary steps to transfer title must also be taken.
Why D is wrong: A letter of gift is not a share transfer, so the company had nothing it could properly register.
A little more practice done.
Related questions
Gift to a trust where the donor is one of several trustees (Choithram v Pagarani)
Which of the following best describes the status of the portfolio?
The rule in Re Rose: donor has done everything in their power
Who is entitled in equity to the shares?
Imperfect gift perfected by appointment as executor (Strong v Bird)
Who is entitled to the piano?
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