This principle was recently brought before the Cayman Islands Court of Appeal (CICA) in the case of Frederick and Smith v Smith and Anor, CICA No. 10 of 2023, in which the Court was tasked with considering land transfers in a probate and trust context, specifically addressing the question of when a gift of property is considered “complete” when the transfer has not been effected.

The main proceedings concerned a dispute involving the transfer of property once owned by the deceased, Olice Estermae Smith (Mrs Smith). The property, known as West Bay Northwest, Block 4B, Parcel 322 (the Property) was intended to be transferred from her sole name to the names of herself and her granddaughter, Hilary Shenika Frederick (Ms Fredrick) by way of Form RL1 – a Cayman Islands statutory form for land transfer. The form was executed in 2012 by both Mrs Smith and Ms Fredrick but was never registered with the Land Registry, as required by the Registered Land Act (2018 Revision) (the Act).

Upon Mrs Smith’s death in 2015, her estate (including the Property) passed to her two daughters. Ms Fredrick, who had lived in the property her entire life, claimed ownership through the unregistered transfer and sought a declaration from the Grand Court that the transfer was valid despite the failure to register Form RL1. In April 2023, Justice Walters applied the principle that equity will not perfect an imperfect gift at first instance, finding that the purported transfer was legally ineffective on the basis that (i) the relevant transfer form was incomplete as it did not specify whether the property was to be held as joint tenants or tenants in common and (ii) in any event, the transfer was not perfected as it was not registered in accordance with the Act.

On appeal, Ms Frederick argued that (i) Mrs Smith had done all that was required to effect the transfer and the lack of registration should not invalidate the transfer, which should be registered by rectification of the Land Register, (ii) equity should intervene to recognise the transfer, as Mrs Smith clearly intended to gift Ms Frederick the property, (iii) the defendant, Mrs Smith’s daughter, was estopped from denying the validity of the transfer as she had allowed Ms Frederick to rely on it, (iv) the beneficial interest in the property had passed to Ms Frederick, despite the lack of registration, (v) the transfer should be construed as a declaration of trust, with Mrs Smith holding the property in trust for herself and Ms Frederick, and (vi) the failure to specify whether the property was to be held as joint tenants or tenants in common should not affect the validity of the transfer.

In considering the appellants’ arguments, the CICA considered the development of the principle set out in Millroy¸ which had softened following the English case of Rose v Inland Revenue Commissioners  [1952] Ch. 499 such that an exception can be made if a party can demonstrate that they “have done all that was necessary to complete the gift, short of registration of the transfer.” In Rose, the transferor had done all in his power to register the transfer (in this case, the transfer of shares), meaning that the failure for the transfer to be affected was no longer within his power. The CICA distinguished the present appeal from Rose on the basis that Mrs Smith and Ms Frederick had not completed nor registered the transfer forms.

In further considering the Milroy  principle, the CICA found the Canadian case of MacLeod v Montgomery Estate  [1979] A.J. No. 857 analogous as it involved the failure to deliver the necessary documents (a duplicate title) required to register a land transfer. In MacLeod, the Alberta Court of Appeal held that the transfer was incomplete without registration, even though the transferor had signed the transfer documents. The CICA considered MacLeod  persuasive and that the outcome aligns with the Cayman Islands' requirements under the Act.

In terms of Ms Frederick’s argument that a trust has been declared in lieu of the transfer of the Property, the Court considered the need for there to be certainty of intention when establishing a trust. In this case, Ms Frederick argued that the purported transfer should be construed as a declaration of trust, however the CICA found that (i) there had been no indication that there was any intention of Mrs Smith to create a trust and (ii) legal and beneficial title to property may be held both by way of joint proprietorship and proprietorship in common, but no question of a trust necessarily arises under the Act.

The CICA expressed considerable sympathy for Ms Frederick, but held that it was unable to bring the case within the Milroy  principle. The decision, which will be of interest in other common law jurisdictions, is an example of the principle that Equity, whilst it is a flexible and developing doctrine, has parameters. Sympathy alone has never been a ground for court intervention.

This case affirms the strict principle set out in Milroy  and highlights the need for a transferor to perfect and affect a transfer of property to another, without room for doubt.

Importantly, the CICA noted the conflict that arises between the (now-softened) principle in Milroy, which suggests that a transfer may be perfected if the transferor has “done all that was necessary to complete” the transfer, as against section 37(1) of the Act, which confirms that it is not possible to attempt to dispose of land otherwise in accordance with the Act.

On this occasion, the CICA was not asked to determine which would prevail as between the principle or the Act, meaning that this remains an open question. On that basis, it was open to the CICA to assume that “if a donor has done all in his power to divest himself of the land, and the only missing element is registration in the Land Register by the donee, the gift may be regarded as complete and the court may grant any necessary relief.” This question therefore remains left for another day, and will no doubt be addressed at a later stage in future proceedings.

This case confirms the importance of ensuring that all formalities are completed in the transfer of property, particularly in land transfers. Even minor omissions can render a gift incomplete and the test to overcome these omissions and give effect to such a transfer presents a high bar for any person seeking to benefit from an imperfect or incomplete transfer.

For more information, please consult with our Private Wealth team, Henry Mander, Charlie Moore, Majdi Beji, Greg Coburn, or Samantha Conolly who can provide personalised advice.