Pennington v Waine [2002] EWCA Civ 227

Ada Crampton wished to give 400 shares in a private company to her nephew, Harold Pennington, who was to become a director. She signed a share-transfer form and gave it to Mr Pennington, the company's auditor, but the form was not delivered to Harold or registered by the company before her death. The auditor told Harold that Ada wanted him to become a director and that no further action was required. Harold signed a consent to act, a step that required him to hold at least one share. Ada died without having completed every step needed for legal title to pass. Her executors challenged whether the gift had nevertheless become effective in equity.

Had Ada made an effective equitable gift despite retaining the ability to obtain and destroy the transfer form, and if not, would it be unconscionable to allow her estate to revoke it?

The Court of Appeal held that the gift was effective in equity. Arden LJ accepted that Ada had not satisfied the orthodox rule that a donor must do everything necessary to transfer the property. However, Ada had signed the transfer, given it to the company's auditor for action, and allowed Harold to be told that nothing further was required. Harold had agreed to become a director in reliance on the proposed shareholding. In those circumstances it would have been unconscionable for Ada to recall the gift. The court did not formulate an exhaustive test of unconscionability. Schiemann LJ agreed in the result, while Clarke LJ reached the same result by treating the executed transfer as a valid equitable assignment on the facts.

An imperfect gift may exceptionally be treated as effective where the donor has manifested an immediate intention to give and it would be unconscionable to withdraw in the circumstances. The decision is fact-sensitive and does not abolish the orthodox requirement that a donor use the proper method of transfer.

Pennington is frequently contrasted with Milroy v Lord and the every-effort rule in Re Rose. It is important because the unconscionability reasoning potentially relaxes certainty about when a gift becomes irrevocable. Later courts have approached it cautiously and have resisted treating unconscionability as a free-standing power to perfect any failed gift. For exam purposes, the safer analysis begins with the required transfer formalities, asks whether the donor completed everything within their power, and considers Pennington only as a narrow, fact-dependent exception.