The donor intended for her nephew to take up directorship in a private company. In order for him to do so, he needed to own shares in the company. Therefore, she executed a share transfer form concerning shares in the company in favour of her nephew. In contravention of the companies act, she had not delivered the share transfer form to her nephew. Neither had he been registered as a shareholder. The donor had sent the forms to her agent, the company auditor, who then told the nephew the he need not take further steps as regards the shares. The nephew then took up directorship of the company. The court held that the shares did not from part of the donor’s estate on her death as there was an equitable assignment of those shares. This was so despite the fact that the donor had not done everything in her power to transfer the shares. The court reached its decision partly on the basis that clearly the donor intended the transfer to have immediate effect and it would have been unconscionable for the donor to retract, so that the donor was considered to hold the shares on constructive trust for the nephew. Unconscionability would depend on the circumstances in each particular case but in this case, the court felt that it was because the Donor had told the nephew of her intentions and he, in taking up directorship, had acted detrimentally. What constitutes unconscionability?
Arden LJ: This approach, rather than the stricter approach of previous cases, will give effect to the overall intentions i.e. that X property will be given to Y. Yes, but this leaves the law uncertain as to when the courts will go against the established rules of when a trust arises.