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When a man of standing sought to create a trust for the purposes of a relative’s benefit, he was careful enough to provide specific instructions to his trustee, but unfortunately erred in putting them into action. A number of years after his death, the beneficiary challenged the assigned executor, on grounds that his written desire for her to gain lawful receipt was sufficient enough to constitute an enforceable covenant, and that the courts were inter alia wrong to deny it.
In 1852, the settlor drafted a deed-poll that enabled fifty shares of his stock held in the Louisiana Bank to be transferred to his associate, who had become his appointed trustee, on the proviso that under a number of specific conditions he was to hold the shares upon trust for the benefit of his beloved niece. During the time between his grant and the date of her marriage or his death, the trustee was to manage the trust and pay any profits arising from the dividend interest to the beneficiary.
During this period, the settlor also granted the trustee power of attorney over all of his financial matters, and so while it was possible for the trustee to complete the request, he never managed to fully execute transferral under the banking practice policy, which required the participation of either the settlor himself or a qualified solicitor, and where neither was found, that the power of attorney rested not with the trustee, but the bank instead.
When her contest was heard in the first trial, the presiding judge awarded that by virtue of the deed construction, a valid trust had existed, and that the fifty shares were to be reissued by the executor to the existing trustee, where they would be again held upon trust for the niece, as had been the case before the settlor’s death.
When appealed, the Court took the equitable view that a legally incomplete gesture cannot be enforced (equity will not perfect an imperfect gift), and that it was impossible for the settlor to become a self-appointed trustee for the shares discussed. Rather, it was declared that the funds were to be held upon trust by the executor until amendments could be made to the deed that provided for redistribution in the manner first intended, or until the trustee and beneficiary chose to take individual action against him.
“I am of the opinion that according to our law the instrument of the 2d April 1852 was not sufficient to constitute and did not constitute Mr. Medley a trustee of the bank shares.”
“[I]n order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him
“[I]n order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift.”
“If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.”
“[T]here does not appear to me to be any sufficient ground to warrant us in holding that the settlor himself became a trustee of these bank shares for the purposes of this settlement.”
“A Court of Equity could not, I think, decree the agent of the settlor to make the transfer, unless it could decree the settlor himself to do so, and it is plain that no such decree could have been made against the settlor.”
“The certificates for the shares would follow the legal title, and as to the fifty bank shares would therefore belong to the Defendant…”
“There is no express covenant in the settlement, and whatever might be done as to implying a covenant to do no act in derogation of the settlement, it would, I think, be going too far to imply a covenant to perfect it.”