Khan v Mahmood

Equity will not invoke the registration-gap doctrine or perfect an imperfect gift where there is no contract to transfer the property. However, an incomplete voluntary transfer may be recognised where, having regard to all the circumstances, it would be unconscionable for the donor to resile. Reliance is relevant but is not determinative.

A signed instrument intended to transfer registered land may also constitute an equitable assignment of the transferor’s beneficial interest if it manifests a clear intention to assign, identifies the equitable chose and the assignee, and satisfies Law of Property Act 1925, section 53(1)(c). A proprietary estoppel requires reliance. “Clean hands” will not defeat relief where the relevant equitable rights arise from the respondent’s unilateral gift or assignment.

The respondent and appellant, nephew and uncle, purchased a property jointly in 1997. The lower court found that they held the beneficial interest equally as tenants in common. In 2007, following the respondent’s benefit-fraud investigation, he instructed solicitors, signed a defective TR1 purporting to transfer the property to the appellant for no consideration, and showed it to him. The transfer was never registered.

The District Judge rejected arguments based on an imperfect gift, equitable assignment, proprietary estoppel and constructive trust, and declared equal beneficial ownership. The appellant appealed, while the respondent sought to uphold the order on the additional ground that the appellant lacked clean hands. The central issues were whether equity could recognise the intended transfer or assignment despite the failure of registration and whether the respondent could resile from it.

1. Appeal allowed. The Registration Gap, Proprietary Estoppel and Constructive Trust Points failed. The Imperfect Gift and Equitable Assignment Points succeeded. The lower order was set aside and the claim was dismissed.
2. The registration-gap doctrine applies where there is an agreement or contract for transfer and registration is the remaining step. It does not apply to an unsupported promise of a gift. There was no contract here, so the doctrine could not assist the appellant: Scribes West Ltd v Relsa Anstalt (No 3), [2004] EWCA Civ 1744; Walsh v Lonsdale, (1882) 21 ChD 9; Milroy v Lord, (1862) 4 De G F & G 264.
3. The correct question for an incomplete gift is whether it would be unconscionable for the donor to resile, assessed in the round. The technical defects in the TR1, the unpaid registration fee and the absence of delivery were relevant, but they were not decisive. The respondent intended to divest himself of his interest, instructed solicitors, executed the TR1 and used the asserted transfer in his own interests. The appellant understood in broad terms that the property was intended to be his alone. Those circumstances made it unconscionable for the respondent to resile. Reliance was relevant but not essential or determinative: Pennington v Waine, [2002] EWCA Civ 227.
4. The TR1 also evidenced an equitable assignment of the respondent’s beneficial interest. The requirements were certainty of intention, certainty of the equitable chose and certainty of the assignee. The signed TR1 satisfied section 53(1)(c) of the Law of Property Act 1925. Notice was not a precondition to validity, although it affected the debtor’s obligations and priority.
5. Proprietary estoppel failed because the appellant had not relied on the representation to his detriment. The constructive-trust argument added nothing to the rejected resulting-trust case.
6. The clean-hands objection failed. The relevant equitable rights arose from the respondent’s own unilateral gift and assignment, and the findings did not establish conduct sufficiently improper to bar relief.
7. The respondent was ordered to transfer his legal interest to the appellant. The appellant’s solicitor was appointed to effect the transfer under section 50 of the Trustee Act 1925, with substitute execution authorised under section 39 of the Senior Courts Act 1981.

• High Court (Chancery Division): Appeal from the order of District Judge Shorthose dated 17 July 2020, sealed on 7 August 2020. The appeal was allowed, the order was set aside and the claim was dismissed.