Chapter 3e: Transfers Requiring Registration

In the previous section it was seen that different types of property are transferred by different means. In the case of some forms of property, namely registered land and shares, it was seen that legal ownership is only transferred if the transferee is registered as owner of the property concerned.

Such registration cannot be effected by the transferor of the property. In the case of a legal estate in land, the state provides a register of land titles and the process of registration is conducted by the Land Registrar. In the case of company shares the company itself maintains and operates a register of share ownership.

In both cases the act of a third party other than the transferee or the transferor is required to perfect an intended transfer of the property concerned. Thus technically a gift of the legal title to such property remains incomplete until the transferor is registered as the new owner.

Problems Associated With Transfers Requiring Registration

Where the legal title to property can only be transferred by registration problems arise in determining the moment at which the property is transferred. Consider the following situation:

Eric owned a large number of shares in a private company. On March 30th he executed a deed transferring 10,000 shares to his wife, Rosamund. The transfers were not registered by the company until June 30th.

When do you think the transfer of the shares was completed?

(a) March 30th

(b) June 30th

Answer: (a) March 30th

This was the conclusion that the Court of Appeal came to in Re Rose [1952] 1 Ch. 499.

The central question in Re Rose was as to the date that date that the transfer of the shares had been completed. Both the deed of transfer and the registration of the transfer had taken place in 1943. Eric had died in 1947. If the transfer of the shares had been complete on 30th March 1943 (i.e. before the end of the tax year) his widow would not have been liable to pay estate duty on their value. However if the transfer was not complete until 30th June she would have incurred liability.

The Principle in Re Rose

By now you should have read the case of Re Rose [1952] 1 Ch 499.

Which of the following statements best summarises why the Court of Appeal held that the transfer of the shares was completed on the 30th March and not the 30th June?

(a) The registration on 30th June was deemed retroactively to having taken place on 30th March

(b) The transfer was complete on 30th March because Eric had done everything within his power to transfer the shares

(c) Legal title to the shares passed to Rosamund on 30th March

(d) The ineffective transfer of 30th March was construed as an effective declaration of trust in favour of Rosamund

(e) From the execution of the deed of transfer Eric held the shares on constructive trust for Rosamund

Answer: (b) The transfer was complete on 30th March because Eric had done everything within his power to transfer the shares

Evershed MR and Jenkins LJ both stressed that by executing a deed of transfer and delivering it to Rosamund, along with the share certificates, Eric had done everything within his power to transfer his entire interest in the shares to her. Thus, although Rosamund did not technically become the legal owner of the shares until she was registered as such on 30th June, the transfer was practically completed on 30th March. From that date Eric could not change his mind and prevent Rosamund being registered as the owner of the shares. From the date of the execution and delivery of the deed of transfer, until the date of her subsequent registration as owner, Eric held the legal title to the shares on trust for Rosamund.

This understanding of the principle applied in Re Rose was confirmed by Lord Wilberforce in Vandervell v IRC [1967] 2 AC 291.

The principle applied by the Court of Appeal was not entirely novel, but had been adopted in a number of earlier cases, including Re Fry [1946] Ch 312 and another case coincidentally also named Re Rose [1949] Ch 78.

(1) Summary of the Rule in Re Rose

The decision of the Court of Appeal in Re Rose [1952] Ch 499 thus establishes the principle that, where the nature of property is such that the legal title cannot be transferred expect through a process of registration by a third party, the transfer is treated as having been completed from the moment that the transferee had done "everything within his power" to transfer the property. This was explained by Jenkins LJ. The rule was more recently re-stated by Browne-Wilkinson LJ in Mascall v Mascall (1985) 50 P & CR 119.

(2) Requirements of the Rule in Re Rose

It is important to grasp that the rule in Re Rose only applies if the transferor of property has done absolutely everything that he was required to do to effect a transfer of the legal title. It is not sufficient that he had done all he was able to do to transfer the property. He must have put the transferee into such a position that he could require the third party operating the register of ownership to register him as the substitute owner.

Usually this will require him to have completed the appropriate transfer documents instructing the registrar to register the transferee as owner, and to have either sent that form to the registrar or to have put it into the possession of the transferee. In the case of a transfer of shares Judge Paul Baker QC has summarised the cases as requiring the transferor to hand over to the transferee both a completed share transfer form and the relevant share certificates. This was also implicitly in the judgement of Dillon LJ in Hunter v Moss [1994] 3 All ER 215.

Application of the Rule in Re Rose

(1) Application to absolute gifts

The rule in Re Rose clearly operates where a transferor of property seeks to make an absolute gift to a transferee. The gift will be treated as complete in equity from the moment that the transferor has done everything within his power to transfer the property. The gift of shares from Eric to Rosamund examined by the Court of Appeal in Re Rose was in the nature of an absolute gift.

(2) Application to trusts

The rule in Re Rose clearly has application in the context of the creation of a trust. If the transferee of the property concerned was intended to hold it on trust the trust remains unconstituted until the title is effectively transferred. If the rule in Re Rose applies the transfer of the trust property will be effective form the moment that the settlor has done everything in his power to transfer it, and the trust will thus be completely constituted from this moment.

In Re Rose itself a second transfer of 10,000 was made by Eric to Rosamund to be held upon trust for their son. This transaction was not discussed by the Court, since as Evershed MR remarked (at p. 505-506):

"It will be sufficient and convenient for me now to confine myself to...the transfer from the deceased to his wife, Mrs Rose. A decision on that matter will necessarily involve a similar decision on the other."

It follows from the decision of the Court that the transfer of the 10,000 shares to Rosamund was likewise completed on 30th March and from that date the trust was completely constituted.

Thus a trust will be regarded as fully constituted whenever the settlor has done everything within his power to transfer trust property to the intended trustee so that the rule in Re Rose operates. In Hunter v Moss [1994] 3 All ER 215 Dillon LJ gave a hypothetical example illustrating how the rule in Re Rose can operate to create a fully constituted trust of shares.

(3) Re Rose as an exception to the rule that "equity will not assist a volunteer"?

Some commentators classify the operation of the rule of Re Rose in the context of the constitution of trusts as an exception to the rule that "equity will not assist a volunteer." This view was recently expressed by Judge Paul Baker QC. However whilst the rule does operate to the advantage of volunteer beneficiaries, it does so because it has the consequence that the trust is found to have been completely constituted in their favour because the relevant transfer of the trust property from the settlor to the trustee was in fact complete in equity, if not at law. As such it is not a proper exception to the rule that "equity will not assist a volunteer." Equity does not enforce an incompletely constituted trust but recognises the creation of a fully constituted trust, under which the beneficiaries enjoy enforceable rights.

Applying the Principle of Re Rose

Consider the following situation:

A father executed a transfer transferring the ownership of his house (title to which was registered) to his son. He handed the transfer to his son, along with the land certificate of the house. Before the son had sent the transfer form to the Land Registry so that he would be registered as proprietor he had a serious row with his father and left the country. The father sought a declaration that the transfer was void and of no effect.

Do you think the gift of the house had been completed?

(a) Yes

(b) No

Answer: (a) Yes

These facts were considered by the Court of Appeal in Mascall v Mascall (1985) 50 P & CR 119. Lawton LJ explained that the transfer was already complete against the father because he had done everything within his power to transfer title to the house to his son. As such he could not change his mind and prevent his son being registered as the proprietor.

Perhaps you might like to read the case for yourself before going any further. The rule in Re Rose was also applied in Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd [1996] Ch 51 where it was held that the assignment of a legal lease was completed when the conveyancing documents were executed, not at the date when the assignment was registered.

Consider the following situation:

In his will Edward bequeathed 5,000 shares in a company to Ernest "if such...shares have not been transferred to him previously to my death." Prior to his death Edward had executed a transfer of the shares in favour of Ernest, which he had handed to him together with the relevant share certificates. Ernest was not registered as the owner of the shares until after Edward's death.

Do you think that Edward had transferred the shares to Ernest prior to his death?

(a) Yes

(b) No

Answer: (a) yes

These were the facts of the earlier case of Re Rose [1949] Ch 78. Jenkins J explained that the shares had been transferred to Ernest prior to his death because Edward had done everything in his power to transfer them.

The case did not involve a trust, but if Edward intended Ernest to take the shares as a trustee, the trust would have been fully constituted from the moment that the executed share transfer form and certificates were handed over.

Consider the following situation:

Ambrose lived in America. In 1940 he executed transfers of shares he owned in an English company in favour of his son, Sydney. The transfers were executed by the transferees and sent to the company along with the share certificates for registration. The company refused to register Sydney as owner because regulations then in force prevented any transfer of the securities without the consent of the Treasury. Such consents could only be obtained after various forms and declarations were signed by the transferor and transferee. The transferor was also required to personally complete a questionnaire. The forms, declarations and other documents were eventually completed, but Ambrose died before the requisite consent had been obtained from the Treasury.

Do you think that the shares had been transferred to Sydney before the death of Ambrose?

(a) Yes

(b) No

Answer: (b) No.

The facts were considered in Re Fry [1946] Ch 312. Romer J explained that the equitable interest in the shares had not been transferred because the transferor had not done everything within his power to complete the transfer because he had not obtained the necessary Treasury consent.
The previous pages have examined cases which have considered the scope and application of the rule in Re Rose, so that you should now have a good understanding of how it operates. Consider the following hypothetical example:

Mary is the owner of 1000 shares in British Telecom. She decides that she wants to transfer the shares to her son Norman so that he can hold them on trust for her grandchildren. She executes a share transfer form in favour of Norman and places it in an envelope, together with the relevant share certificates, intending to give it to him when he next visits her. However the day before he is due to visit she is take into hospital and dies of a heart attack. In her will she has left all her property to the RSPCA.

Do you think she has created a fully constituted trust of the shares?

(a) Yes

(b) No

Answer: (b) No

We think that the requirements of the rule in Re Rose would not have been met in this situation. She has not yet given the executed transfer form to the transferee of the shares, and therefore she has not given him everything necessary to enable him to perfect his title. As such she has not done "everything within her power" to transfer the shares.

This may seem like a harsh result, but she had not yet performed an irrevocable act effective to pass title to the shares to the trustee. She might have decided to change her mind before Norman visited and chosen not to give him the transfer form.

The trust thus remains incompletely constituted.

The requirement that the transferee must hand over a completed transfer form and the share certificates was also implicitly regarded to be a requirement of the operation of the rule by Dillon LJ in Hunter v Moss [1994] 3 All ER 215.

Introducing the Rule in Strong v Bird

You should now be aware that a trust will only be completely constituted if a settlor who intends to create it by transferring his property to a trustee does in fact transfer the intended trust property to the trustee. The rule in Re Rose operates where a transfer of the legal title of property can only be accomplished by a process of registration by a third party such that a transfer is treated as complete from the time that the transferor did everything within his power to effect a transfer of the title.

The rule in Strong v Bird provides another means by which a seemingly incomplete transfer may be perfected. Before proceeding to the next page you familiarise yourself with the facts of the case: Strong v Bird (1874) LR 18 Eq 315.

Strong v Bird (1874) LR 18 Eq 315 Equity

Debt - Appointment of Debtor as Executor - Intention to forgive Debt - Incomplete Gift - Release.

B. borrowed GBP1100 from his step-mother, who lived in his house, paying GBP212 10 a quarter for board; and it was agreed that the debt should be paid off by a deduction of GBP100 from each quarter's payment. Deductions of this amount were made for two quarters, but on the third quarter-day the creditor refused to make any further deduction, and paid the full amount of GBP212 10, and continued down to the time of her death (which took place more than four years afterwards) to pay to B. the like quarterly sum. B. was appointed sole executor of his step-mother, and proved the will: and a suit for administration was instituted:-

Held, that the debt was gone: first, because the appointment of B. as executor released the debt at law, and any claim in equity was rebutted by evidence of a continuing intention on the part of the testatrix to give; and, secondly, because the intention of the testatrix to give B. the sum of GBP900 was completed by nine quarterly payments of GBP212 10 each.

The rationale of Strong v Bird

You should now be aware that in Strong v Bird Mrs Bird had failed to release her step-son from the debt that he owed her because she had not complied with the necessary formalities of an effective release. However Jessel MR held that he was not required to repay the outstanding amount of the debt to her estate after her death.

Which of the following statements best summarises why Jessel MR held that Mr Bird was not required to repay the outstanding sum?


(a) Because all debts are automatically cancelled on the death of the creditor

(b) Because Mrs Bird had intended to release him from the debt

(c) Because Mrs Bird had done everything within her power to release him from the debt

(d) Because Mrs Bird had appointed her step-son executor of her estate

(e) Because Mrs Bird had made a perfect inter-vivos gift of the outstanding amount

Answer: (d) Because Mrs Bird had appointed her step-son executor of her estate

This is the best summary of why Mr Bird was released from his debt.

Jessel MR explained that although the oral release was imperfect to release Mr Bird from his debt at law, the fact that he was appointed as her executor meant that on her death her estate was vested in him in his capacity as such. This had the consequence of perfecting the imperfect gift, so that the debt was released.

The requirements of the rule in Strong v Bird

You have now seen how the rule in Strong v Bird operates so as to perfect an imperfect gift in certain specialised circumstances. Form your knowledge of that case, which of the following requirements must be satisfied before the rule will operate?

1) The donor must have promised to make the gift in writing

2) The donee must have had a continuing intention to make the gift at the time of his death

3) The donor must have intended to make an immediate intervivos gift

4) The donor must have intended the gift to take effect only in the event of his/her death

5) The donee must have been appointed an executor of the donor's estate

6) The donee must have been a close relative of the donor

Answer: (2), (3), & (5)

Application of the Rule in Strong v Bird

(1) Application to absolute gifts

The rule in Strong v Bird operates as a mechanism by which an imperfect inter vivos gift will be completed without the donor having done everything necessary to transfer the property to the donee. Some commentators regard the operation of the rule as an exception to the twin principles that "equity will not perfect an imperfect gift" and that "equity will not assist a volunteer." However in reality equity does not intervene to perfect the gift or to assist the donee. The gift is in fact completed by operation of law because the donee is the executor of the donor's estate. This was recognised by Jessel MR. It is therefore better not to regard the rule in Strong v Bird as an exception to the rule that equity will not assist a volunteer.

Where the rule in Strong v Bird applies the imperfect gift will often have been perfected without the deliberate or conscious act of the donor. The donor will rarely have appointed the donee his executor with the object of perfecting the gift, since in most cases the donor will not have been aware that the gift was imperfect. It is thus often merely a coincidence that the donee happens to have been appointed the donor's executor. This coincidental nature of the perfection of the imperfect gift was also recognised by Jessel MR, and was not held to be a barrier to the perfection of the gift. It was re-iterated by Walton J in the more recent case of Re Gonin [1979] Ch 16.

(2) Application to trusts

The rule in Strong v Bird clearly has application in the context of the creation of a trust. If the transferee of the property concerned was intended to hold it on trust, but the settlor failed to make a perfect inter vivos transfer, the trust remained unconstituted. However if the settlor retained a continuing intention to transfer the property to the trustee, and the trustee was appointed as his executor, on the death of the settlor the rule in Strong v Bird would operate to perfect the imperfect transfer and the trust would be completely constituted without the intervention of equity to enforce it. In such circumstances the beneficiary will enjoy enforceable rights over the trust property from the moment of the death of the settlor.

Applying the rule in Strong v Bird

Consider the following situation:

Sarah was the housekeeper of James for nineteen years. She had received no payments from him for her work during those years, but from time to time he had stated that his house and furniture were to be hers on his death. After his death James' son John inherited his father's property. He gave Sarah the title deeds to the house. He then died having named Sarah as sole executor in his will.

Do you think Sarah obtained good title to the house? Yes No

Answer: Yes.

As a matter of principle the rule in Strong v Bird would have applied in this case so as to perfect John's imperfect inter vivos gift of the house to Sarah. This gift was imperfect because the mere delivery of the title deeds was ineffective to transfer the legal title of the house to Sarah, despite the fact that she enjoyed possession of it. A perfect transfer would have required John to execute a conveyance in the form of a deed.

However since John had a continuing intention make a gift of the house until the date of his death, her receipt of the legal title to the property in her capacity as his executor would have the effect of perfecting the imperfect gift. She would thus become the absolute legal owner of the house.

The fact that the subject matter of the imperfect gift was land does not prevent the rule in Strong v Bird operating. In Re James [1935] Ch 449 it was held that the rule operated in the context of an imperfect gift or real property.

Consider the following situation:

Jane was the mother of Lucy. Lucy had been born illegitimate but was legitimated by virtue of the Legitimacy Act 1959 when her mother married her father. She returned home to look after her parents in 1944. They promised that she would be entitled to have their house when they died. After the death of her father she remained with Jane. Jane believed that because her children had been born illegitimate she could not make a will in their favour. This belief was incorrect. She therefore drew a cheque for £33,000 which she left in an envelope addressed to Lucy. She died intestate and the envelope was not discovered until after her death. Lucy was subsequently granted letters of administration over her mother's estate.

Do you think Lucy was entitled to the house by virtue of the rule in Strong v Bird? (a) Yes (b) No

Answer: NO.

Walton J reached the same conclusion on these facts in Re Gonin [1979] Ch 16.

Although you should be aware that there are no conceptual problems with the application of the rule in Strong v Bird to a gift of land, in these circumstance the essential requirements for the operation of the rule were not satisfied. Walton J explained that Jane did not have a continuing intention to make an immediate inter vivos gift of the house to Lucy until her death. Thus the fact that Lucy had become the administrator of her estate did not perfect any imperfect gift in her favour.

Do you think that Lucy was entitled to £33,000 by virtue of the rule in Strong v Bird? (a) Yes (b) No

Answer: NO.

This was also the conclusion of Walton J in Re Gonin [1979] Ch 16.

There are two reasons why there could not be a perfect gift of the £33,000 payable according to Jane's cheque. Firstly, as in the case of the land, there was no intention to make an immediate inter vivos gift of that sum of money. Thus the rule in Strong v Bird could have no application. Secondly a cheque is not a form of property which is capable of enduring the death of the drawer, unless it has been indorsed by the payee so as to become a negotiable instrument. As Walton J explained the cheque was simply a mandate to her bank to make the payment which was terminated by her death.