Constitution and formalities — SQE1 Trusts question
A worked single-best-answer question on constitution and formalities, with why each wrong option is wrong — the way SQE1 traps candidates.
Graham owned 5,000 shares in Moorfield Ltd, a private company. Wanting to give them to his daughter Helen, he signed a stock transfer form in her favour and handed it to her together with the share certificate. Helen posted the documents to the company the next day. Before the directors met to consider registering the transfer, Graham died. His will leaves everything to his second wife, who claims the shares.
Which of the following best describes who is entitled to the shares?
- AGraham's widow, because legal title had not passed and equity will not perfect an imperfect gift.
- BGraham's widow, because a gift of shares in a private company must be made by deed.
- CHelen, because Graham had done everything in his power to transfer the shares, so the gift was complete in equity.
- DHelen, because she will be Graham's executor and so the gift is perfected when legal title vests in her.
- EHelen, because the gift was made in contemplation of Graham's death.
Show answer and reasoning
Rule: A gift is complete in equity once the donor has done everything within his own power to transfer legal title, even though a third party has yet to act.
- A The general rule in Milroy v Lord is displaced where the donor has done everything in his power to transfer title (Re Rose). (right rule, wrong facts)
- B Shares are transferred by a stock transfer form and registration, not by deed. (wrong rule)
- D Nothing in the facts makes Helen the executor, so the rule in Strong v Bird does not arise. (answers a different question)
- E Nothing suggests Graham made the gift in contemplation of impending death, so a donatio mortis causa is not established. (right rule, wrong facts)
Source: Re Rose [1952] Ch 499; Milroy v Lord (1862) 4 De GF & J 264