Summary

An apparently incomplete gift was to be treated as completely constituted if, in the eyes of equity, it would be unconscionable to allow the donor to change his or her mind. An equitable assignment of shares by way of gift by the mere execution of a share transfer form, without its delivery to the donee or the company, was therefore valid in the present case since it would have been unconscionable for the donor to recall the gift.

Facts

Appeal by the fifth and sixth defendants ('the defendants') from the decision of HH Judge Howarth by which he held that 400 shares in Crampton Bros (Coopers) Ltd ('the Company') registered in the name of the late Ada Crampton ('C') had been transferred by her by way of gift to her nephew ('H') prior to her death. C was the holder of 1,500 of the 2,000 issued shares in the Company. In late September 1998 C instructed a partner ('P') in the Company's auditors that she wished to transfer immediately 400 shares to H. A share transfer form was signed by C and returned to P and was placed "on the company's file". No other action was taken in relation to it prior to C's death shortly thereafter. C had informed H that she was going to give him the shares, and she had also informed both P and H that she wished H to become a director of the Company, which could only occur if H were a shareholder. P wrote to H enclosing form 288A consent to act as a director for H's signature, stating that H had been appointed on 1 September 1998, that P had been instructed to arrange for the transfer of 400 shares to H, and that there was nothing more that H needed to do. Under the Company's articles of association C's shares could not be transferred to H without first being offered for sale to the existing members of the Company. Those pre-emption provisions were not complied with. By her will, dated 10 November 1998, C made specific gifts of the balance of her shareholding but made no mention of the 400 shares. The judge held that: (i) P was not the Company's agent when he received the signed share transfer form; (ii) nevertheless, the execution of that form by C gave rise to a perfectly constituted gift of the shares in favour of H, notwithstanding the want of delivery of the form to H or the Company; (iii) there was nothing in the circumstances, including the terms of the pre-emption provisions, to render the gift ineffective, with the consequence that the shares were thus held on bare trust for H absolutely and did not fall into residue.

Held

(1) The authorities did not reveal any consistent single policy consideration behind the rule that the court would not perfect an imperfect gift. (2) However, the answer to the question whether an apparently imperfect gift was to be treated as completely constituted was likely to be illuminated by the consideration of whether it would be unconscionable, in the eyes of equity, for the donor to change his or her mind. (3) On the facts of the present case, C had made the gift of her own free will in circumstances where she had not only told H of the gift but had delivered the signed form of transfer to P in order that he might effect registration. P had also advised H that he need take no action. In addition, H had agreed to become a director of the Company, which he could not have done without the shares being transferred to him. Thus, if C had sought to change her mind in November 1998, it would have been unconscionable for her to do so. (4) It was also permissible in such circumstances to dispense with the need for delivery of the share transfer form to H in C's lifetime. In the alternative, P was to be regarded as the agent of H for the purpose of securing registration of the transfer. (5) (Per Clarke LJ) There was no reason in priciple why the execution of a stock transfer form could not have effect as an eguitable assignment where the form had not been delivered to the transferee or the company.

Appeal dismissed.For related later proceedings on other shareholders' right to pre-empt H see Brian Hurst v Crampton Bros (Coopers) Ltd & Ors (2002) EWHC 1375 (Ch).