Latest Legal Update Express | Equity & Trust | The Imperfect Gift | Equity will not Perfect an Imperfect Gift

“I do not know how there can be any assignment of property... without the intention of the assignor to assign…”

- Higgins J in Smith v Perpetual Trustee Co Ltd


To resolve any trust related disputes, the parties’ original intent must be ascertained. The underlying principles which govern equity are, after all, fairness and conscionability. It is the notion of fairness (for both giver and receiver) that the courts refuse to perfect imperfect gifts by imposing trusts contrary to the giver’s intent. It is the notion of conscience, however, in the interest of justice, where one party has unjustly enriched themselves that have led the courts to impose implied trusts when fitting.

This article will endeavour to explore how intention come into play in various court decisions where trust is both struck down and imposed to protect interest of all parties

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Formalities of Gifting

It was in the case of Milroy v Lord that Turner LJ laid down the principles that “there is no equity… to perfect an imperfect gift”. The rationale was that the courts deemed it unfair to the settlor if they compel the settlor to make a gift.

“Now it is plain that it was not the purpose of this settlement, or the intention of the settlor, to constitute himself a trustee of the bank shares. The intention was that the trust should be vested in the Defendant Samuel Lord”

-Turner LJ in Milory


Turner explained that there are 3 ways to make a gift, and whichever method the settlor decided to employ, everything required by that method must be completed. Turner HELD that it was unjust and contradictory where on one hand, the settlor intended to transfer the title to a beneficiary while on the other, the courts order a trust be created to address imperfections in that gift.


This principle was later applied in Smith v Perpetual Trustee Co Ltd [1910] 11 CLR 148, the Court held that the intention of the settlor of how and when he wishes the gift to be effected is crucial.

From these cases we repeatedly see that the courts will put the settlor’s intention first. For example in Jones v Locke [1865] 1 Ch App 25, where had the courts perfected the cheque to the infant, not only would the courts have contravene the father’s intention of how the gift will be made, but would also have effectively imposed a gift to be made by the father, where there was in reality no intention to make such gift in the first place.

The Era of Formalities

The requirements of formalities set forth by the Milory would continue to be applied throught the remainder of the 19th century. In the subsequent case of Richards v Delbridge [1874] L.R. 18Eq.11, Sir Jessel famously noted that:

“It is true he need not use the words I declare myself a trustee, but he must do something which is equivalent to it and use expressions which have that meaning…”

- Sir Jessel in Richards v Delbridge

The situation that the Richards judgment made was that a trust may be created without the use of the words of ‘trust’ or ‘trustees’. Under these circumstances, it may be debatable whether the intended settlor intended on creation of a trust or direct assignment of property. The stringent practice set out in Milroy however will continue throughout the 19th century and relaxation will not come until a century later.


A century before Milroy, common law’s tradition of stringency was challenged by Lord Mansfield in the case of Loveacres d Mudge v Blight [1775] 1 Cowp 352. In this case, Mansfield criticized that the law was unsuitable for the layman’s understanding for when a layman wish to make a gift, it is unreasonable to expect him to know all the procedure necessary to make such gift.

No Imposition If No Intention | Equity Will NOT Impose Lacking Intent

The doctrine set out in Milroy and Richards would seem to contradict the Equity Maxim of “Equity regards substance rather than form” which means that equity will prevent justice from being served on the grounds of technicality. The Re Rose [1952] EWCA Civ 4, [1952] Ch 499 judgment, however, furthered this doctrine and removed its stringency.

Perfection by Intention

In the Re Rose  case, the settlor had done everything he could to perfect the gift, yet the gift was imperfected due to an operation of law. The phenomenon in Re Rose was clarified by Lord Wilkinson in T Choithram International SA v Pagarani and Ors [2001] 2 All ER 492:-

“Although equity will not aid a volunteer, it will not strive officiously to defeat a gift”

- Lord Browne Wilkinson in T Choithram

At its core equity is fair and neutral. Where the courts are content that the settlor has done everything they could, that is sufficient evidence of intention to make a perfect gift, and only under some exceptional circumstances, such gifts would have been perfected. Pennington v Waine [2002] 1 WLR 2075 illustrated this, where a perfect gift, made imperfect by a third party, was held perfected.

Key Principle:

Where the giver have done all that he could to make the gift perfect, it will be unconscionable to continue to ignore the giver’s intention and not recognize the gift.

Best Effort Rule and Intention

Many have made a case that the decision in Penningon contradicts Milory. It is this paper’s position that it is not so. While Turner in Milory have indeed stipulated the settlor must have performed all actions necessary to complete the transfer, Turner failed to clarify whether the settlor have to do all required actions related, or is restricted to only actions that is to be done by the settlor. This principle was illustrated by the Australian case of Anning v Anning [1907] 4CLR1049, where Griffith CJ in his interpretation of Milroy held that only the settlor have to do what is required of him to make the gift a perfect.

This interpretation was finally clarified in Corin v Patton [1990] 169 CLR540, where the courts states that Mrs. Patton failed to perfect her gift when she took no action, after her declaration of intent, to go through with the transfer. This transfer would have been perfected if Mrs. Patton had done what was required of her. Mason CJ in this case not only applied Anning in his judgment but also applied the Jones v Lock principle, where had the courts perfected the gift; there is a chance that they may be imposing a gift on the unintended.

Key Case:

In the subsequent case of Brunker v Perpetual Trustee [1937] 57 CLR555, Dixon J attempted to strike down the trust on the basis that, in application of Anning, the donor did not have a manifestation of intention to create a trust. The courts however held that so long as donor had done all is required of them; nonfeasance by 3rd parties cannot affect the gift


The foundation of English trust laws are based upon the 3 certainties principles established by Lord Langdale in Knight v Knight, chiefly among them is the certainty of intention. As illustrated in all of the above case, the underlying notion in equity is that the courts will not take actions against the intention of the parties.

Where Parties are Unaware

At the core of every trust agreement are the intention of the parties.  Therefore, it is imperative for the courts to determine what the property in trust was originally intended for. As mentioned throughout this paper, the courts would rarely impose a trust against the settlor’s will. But, to stay true to equity’s underlying notion of fairness and conscionability however, the courts will also look for manifestation of intention  through the settlor’s act, leading to the Re Rose principle . In turn, in order to safeguard parties’ intention, the courts have also imposed trust upon the parties where none was intended. An example of which is the Quistclose Trust.

Quistclose & Milroy

The Quistclose trust principle was established by a case under the same name . In this case, the money was advanced by Quistclose to Rolls Razor Ltd. for a particular reason (pay dividends). Unfortunately, Rolls Razor ended up being liquidated before this objective can be achieved. The courts held that the money, still retained by Rolls Razor, was held on trust for the use in a particular purpose. When that purpose failed, the money should be returned

As mentioned throughout the paper, equity is fairness and conscionability. As a result, in the Quistclose case with a view to fairness, equity intervened and imposed a trust on the parties in order to safeguard the contributor and prevent unjust enrichment.

This principle can be said to have been applied in Wong Chim Ying v Cheng Kam Wing [1991] 2 HKLR 253 where the wife sold flat and ran away with the cash. The husband, who advanced the money for the purpose of buying a home for himself to live in, was unconscionably deprived of it when the wife sold the house and unjustly enriched herself


The courts here imposed a trust due to the direct financial contribution by husband. The courts illustrated that they will not compel the husband to make a gift to the wife who is only a volunteer.

Furthermore, in this case, the courts also look at the original intent of why the money was advanced by the husband, which is for a home of which he can live in. The wife in effect only had the flat on trust, and when she sold this flat to unjustly enrich herself, the trust failed. Equity therefore intervened.

Parties here did not consciously create a trust, but it was implied by the courts to protect the husband.

Critical Factor:

The courts will also consider any Contribution Prior or During Purchase. The courts would see if the contribution was direct for the purchase of a property and not meant as a loan or gift. This principle is also illustrated in Tinsley v Milligan. As the contribution was neither meant as a gift nor loan, the courts implied and imposed a trust similar to that of the Quistclose Trust to prevent unjust enrichment.

Tinsley and Wong Chi Ying Cases illustrates that equity will recognize the existence of an implied trust when needed. The courts in both cases have balanced the rights of all parties, which include to the individual that advanced the sum of money and beneficiary.

In an attempt to challenge the Quistclose principle, Lord Millet in Twinsectra Ltd v Yardley [2002]AC 164 asked the question why should a creditor surrender property if there was no agreement to form a trust. The crux of Millet’s analysis was that trust must be based “upon the parties’ intention”, thus is contractual in nature.

This was however countered in National Westminster Bank v Spectrum Plus Limited &Ors [2005] 3 WLR 58 where the courts finally held that the courts must explore not only the parties’ intent on contract but also intent from the surrounding situation. The courts here criticized Millet’s failure to fully explore the parties’ intention, upholding the Quitclose principle.

This principle was applied in Hong Kong in Attorney of General Hong Kong v Reid [1993] UKPC 36, applying Quistclose notion of prevention of unjust enrichment, the courts also imposed a trust on the parties. In this case, Mr. Reid used bribe money to buy land. Held all property purchased by bribe money held on trust for the government.


The underlying notion of equity is fairness and conscience. In order to achieve this objective, the courts have to protect the equity of both sides.  Firstly, the courts will protect the interest of the settlor by not forcing them to make a gift when they have no intention of parting with their property.

On the other hand, where the holder of equitable interest is found to have been unconscionably deprived of their entitlement, the courts will impose a trust to ensure that the innocent party will not be robbed of their interest unaware.

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Solicitor, ONC Lawyers

Joshua Chu is a Litigation Solicitor qualified to practice in Hong Kong. Before becoming a lawyer, Joshua worked in the healthcare industry serving as the IT department head at a private hospital as well as overseeing their procurement operations.

Since embarking upon his legal career, his past legal experience includes representing the successful party in one of Hong Kong’s first cryptocurrency litigation cases as well as appearing before the Review Body on Bid Challenges under the World Trade Organization Government Procurement Agreement concerning a health care industry related tender.

Today, Joshua’s practice is mainly focused in the field of dispute resolution and technology law.

Aside from his legal practice, Joshua is currently also a Senior Consultant with a regulatory consulting firm which had been founded by ex-SFC Regulators as well as being a management consultant for the Korean Blockchain Centre.