Central Legal Issues
Lord Browne-Wilkinson summed up the point admirably succinctly. The central and most important question was this: on the basis that Mr Pagarani intended to make an immediate absolute gift "to the Foundation", but had not vested the gifted property in all the trustees of the Foundation, are the trusts of the Foundation trust deed enforceable against the deposits and the shares, or was it (as the judge at first instance and the Court of Appeal had held) a case where there has been an imperfect gift which cannot be enforced against Mr Pagarani's estate whatever his intentions might have been?
The judge and the Court of Appeal had taken the view that a perfected gift could only be made in one of two ways, viz.
- by a transfer of the gifted asset to the donee, accompanied by an intention in the donor to make a gift; or
- by the donor declaring himself to be a trustee of the gifted property for the donee.
In case 1 above, the donor must have done everything necessary to be done which is within his own power to do in order to transfer the gifted asset to the donee. If the donor has not done so, the gift is incomplete since the donee has no equity to perfect an imperfect gift, for which there is a long line of authority. Moreover, the court will not give a benevolent construction so as to treat ineffective words of outright gift as taking effect as if the donor had declared himself a trustee for the donee, see Milroy v Lord (1862) 4 De G F & J 264.
So in this case Mr Pagarani used words of gift to the Foundation (not words declaring himself a trustee) - unless he transferred the shares and deposits so as to vest title in all the Trustees, he had not done all that he could in order to effect the gift; so under the law as it had previously been understood, the gift would have failed. Further it would not be possible to treat Mr Pagarani's words of gift as a declaration of trust, because they make no reference to trusts. Therefore if the case does not fall within either of the possible methods by which a complete gift can be made, then the gift should have failed.
Read more about this topic: T Choithram International SA V Pagarani
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