(A) died a couple of weeks later, leaving his will which left all his estate to his wife (C). The shares in Jimmy's Bakery were still registered in (A)'s name, although among (A)'s paperwork was a stock transfer form in favour of (B), signed by (A).
Who gets the shares, (B) or (C)??
In this situation it appears that (A)was trying to make a gift. From the facts provided one can infer that 3 of the 4 requirements have been satisfied (from the facts); (A) appears to have a satisfactory mental capacity to make such a gift; (A)‘s intention can be reasonably drawn from his letter to (B) and the subject matter and object has been clearly identified. The gift fails on the final requirement of a valid gift which is the gift must be transferred using the correct formalities.
For this gift of share to be complete at law (A) would need to complete a stock transfer form and post this, together with his share certificate to the holding company (Stock Transfer Act 1963). The company would then transfer the legal title of the shares to the new owner that (A) had specified in the stock transfer form.
Clearly (A) has failed to transfer the shares to (B), but does (B) have a chance of getting their hands on the shares?
There are exceptions that should be explored when dealing with an imperfect gift that could allow (B) to acquire the legal title of the property and stop the gift being distributed to the other beneficiaries mentioned in (A)’s will.
The every effort test established in Re Rose states: If the donor has done everything to divest himself of the property in question, than the gift will be complete in equity (or something to that effect). (A) has done everything in his power to divest himself of the trust property; (A) neglected to send the certificate and the transfer form to the company to transfer the legal title to (A). In light of these facts the rule in Re Rose does not apply to the current case.
The next avenue we will explore for (B) will be the exception in Pennington v Wain (2002). Similarly to the Re Rose this case involved a donor that had done everything she could do to complete the gift, so much so that it would have been unconscionable for the company to retract the gift. However this case should be distinguished from the present situation for two reasons: firstly, as mentioned above (A) did not send the relevant forms off to the holding company, and secondly (A) did not tell the company about his intention to make a gift to (B).
(B) has one more shot to perfect this imperfect gift by using the rule in Strong v Bird. This
rule sets out three criteria, which if satisfied activates the rule. The three conditions are: the Donor must have intended to make an immediate gift inter vivo (in lifetime)(Re Freeland 1952); the donor must have had that intention up until his/her death; and the donor appointed the donee as the executor or the administrator in their will.
This situation satisfies the first two conditions set out above in Strong v Bird, or more accurately, on the facts the this situation satisfies the those conditions. The last condition requiring (B) to have been appointed the executor or the administrator to (A)’s estate is unobtainable from the facts provided.
In conclusion if (B) has been appointed the executor or administrator (or the personal representative) of (A)’s estate the legal title will, by an operation of law, transfer to (B) completing the gift. Conversely if (B) has not been named as (A)’s personal representative the gift fails and along with the rest of (A)’s estate will be inherited by (C).
Additional information required: the question does not make it clear when the will was created. This may be helpful in establishing whether or (A)’s intention remained the same up until his death. For example if (A) had mad the will after promising (B) the shares one could infer that he still believed the shares were in fact his to leave to (C) in his estate, in which case it could be inferred that his intention to give (B) his shares had changed, which would void the gift Re Gonin 1979.
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