'Equity regards as done that which ought to be done'. Discuss this maxim making reference to the case of Pennington v Waine [2002] EWCA CIV 227.

In the cases of imperfect gifts, there has been a tendency of the courts to perfect the imperfection in order to allow the intention of the testator to take effect. This has been allowed with respect to cases where the settlor has done everything that needs to be done from his side, for making the gift. It is also allowed where it is unconscionable to not allow the gift to take place.

Introduction

Equity regards as done that which ought to be done- The Pennington decision and its effects Equity regards as done that which ought to be done (‘the maxim’), seeks place two parties in equitable positions with respect to each other. The maxim has a special significance in cases relating to specific performance. Where there is a contract or another obligation, which can be specifically enforced, then the law of equity treats the parties as being in position that they would have occupied on the completion of the performance of the obligation. The maxim has also been used by the courts to make perfect an otherwise imperfect gift. Important cases in this area are Milroy v Lord, Re Rose, Pennington v Waine.

The Re Rose doctrine provided that when the donor has done everything in his power to vest the legal interest in the property in the donee, the gift will succeed in passing on to the donee even if something had yet to be done by the donee or some third person. In the case of Pennington v Wayne, ³⁴ the facts of the case involved the transfer of shares by gift, by the deceased (the donor) to her nephew (the donee). The shares were to be transferred on the nephew being registered as the director of the company, whose shares were to be transferred to him. Although the donee filled in the prescribed form for his registration as a director of the company, the donor’s agent never gave that form to the company. Consequently, when the donor died, the donee had not as yet been registered as the company’s director and the shares could not be passed on to him. The shares then passed on to the donor’s executors. The donee contended that the gift of shares had passed to him on the death of the donor. The beneficiaries of the estate of the donor contended that because the formalities had not been completed, therefore the transfer of shares by gift was not complete, The Court of Appeal held in the favour of the donee.

To a great extent, the donee in the court, placed reliance on the case of Re Rose,³⁵ in which case, on similar facts of a gift of shares to the donee left incomplete at the time of the donor’s death, the court had held that in case where the donor had done everything possible on their end for effecting a transfer by way of gift, the transfer will take place, even when the something was left incomplete at the time of the death of the donor. It is pertinent to note that in such cases, there should be nothing left for the testator/donor to do. Whatever is left incomplete should be something that the third person is supposed to do or the donee is supposed to do. Here the maxim applies to ensure that a gift is allowed to transferred to the donee as something that was ought to be done to make the gift complete, will be considered to be done. Here the Court of Appeal applied the subjective test in Re Rose, where the question would be whether the donor knew that something more needed to be done to make the transfer complete. The court applied the test of conscionablity where the focus was whether it would be unconscionable for the donor, as against the donee to change their mind about the gift. If it was unconscionable then equity would perfect the gift, thus rendering done what ought to be done. ³⁶ The test of conscience, also laid down in T Choithram International SA v Pagarani, ³⁷ has been questioned in this case. In that case, the The reason for that is that in Pennington case, the necessary documents never reached the company. The court considered the knowledge of the donor’s intention to gift the 400 shares to donee and the donor’s agent telling the donee that there was nothing more to be done at the donee’s end to make the registration complete as sufficient to make it unconscionable for the donor to change their mind later.

Equity regards the recognition of trust in certain situations. When the settler does everything necessary that needs to be done for the constitution of the trust, equity will consider the trust to be constituted. This was the principle in the case of Milroy v Lord. ³⁸ The second situation is where the settler has done everything in his power to constitute the trust, as held in the case of Re Rose. The third situation is where it would be unconscionable in equity to deprive the intended donee of his gift. ³⁹

The Pennington decision is controversial because the test it lays down is uncertain and vague. The court used the test of conscience, but left it to judicial interpretation for the future, what constitutes unconscionable. The previous judgments, that is Milroy and Re Rose lay down principles which are narrowly interpreted, therefore, certain. On the other hand, Pennington relied upon these case but used the tests laid down in these case for a more broad interpretation.

Oliver Smith criticises Arden LJ’s approach (in Pennington) as it promotes a great degree of uncertainty in the law. Providing no real definition of when something will be unconscionable but merely submitting that it ‘must depend on the court’s evaluation of all relevant considerations’ undeniably creates unpredictability. ⁴⁰

A similar criticism of Pennington is that the Court of Appeal adopted a ‘highly cavalier attitude’ towards the principle laid down in Milroy v Lord. The latter case is based upon ‘interests of certainty’ when the wishes of the donor are to be ascertained. ⁴¹ This case has also been seen as Equity’s interventionist approach by the court. ⁴² The criticism of the Pennington decision is relevant in subsequent cases where there is a possibility of over broad interpretation. Perhaps the criticism by judiciary itself is stronger as recently in Zeital v Kaye ⁴³ the Court of Appeal refused to validate a transfer of shares and in turn, completely constitute a gift, when all necessary formalities were not fulfilled by the donor. Thus, Pennington was not followed in this case.

Conclusion

The Pennington decision has paved the way for subsequent cases that require the perfection of the imperfect gifts. In that, the decision is another step after the Re Rose case. However, the Re Rose decision was narrower in its import and the Pennington case is wider leaving too much to the interpretation of courts in deciding what is or is not unconscionable in similar cases in future.