Introduction

• depending on the intention of the transferor property may be loaned or ownership transferred
• gifts can be made in a person's lifetime or on death
• general rule: if an intended gift is ineffective the donee has no recourse

Benefits

• there are three methods of gratuitously benefiting (voluntary settlement) another

  Milroy v Lord (1862) 4 De GF&J 264

  • settlor can benefit another through:
    outright gift
    transfer to trustees (express trust)
    declaration of self as trustee (express trust)
• outright gift: donor transfers property to donee (absolute ownership & control of property)
• express trust: settlor transfers property to trustee (legal title & management) on behalf of beneficiary(equitable interest & enjoyment of benefit)
• valid transfer: perfect gift or constituting a trust
• inheritance tax advantages of lifetime gifts:
  on death assets over nil rate band (£325,000) subject to inheritance tax (40%)
  lifetime gifts potentially exempt transfers (PETs), if donor survives at least 7 yrs no inheritance tax owed
  lifetime trust inheritance tax charged at 20% if settlor survives at least 7 yrs

Validity of gifts

• once a valid gift is made it cannot be revoked by the donor

  Standing v Bowring (1885) 31 ChD 282

  • an incomplete (invalid/imperfect ) gift can be revoked by the donor at any time
  • gift is complete/perfect: once the donor has put the thing given out of his power
• invalid or imperfect gift describes purported gift which fails

  Richards v Delbridge (1874) LR 18 Eq 11

  Facts:

  • grandfather wrote on lease he owned: This deed and all thereto I give to [grandson] from this time henceforth

  Issue:

  • was the lease validly transferred?

  Held:

  • Court of Appeal: not valid as failed to use correct method to transfer ownership
• generally a intended recipient of an imperfect gift has no recourse
• except: if there was contract between intended donee & donor,& donee could show consideration (unlikely as gift usually gratuitous benefit)
• equity will not assist a volunteer : volunteer is intended donee who has provided no consideration for purported gift

Types of property

• formalities required depend on whether:
  is a lifetime gift (inter vivos) or gift on death
  nature of property (land, shares) & donor's interest (legal or equitable)
• legal interest in land
• legal interest in chattels (choses in possession): tangible moveable assets
• choses in action (intangible assets) rights can be enforced through court action not taking physical possession
• equitable interests: beneficiary under trust
• an expectancy: something which a person expects to own in future

Lifetime gifts

• There are four conditions for a valid gift:
  donor: necessary mental capacity to make gift
  donor: intention, manifested in word or by conduct, to make gift
  donor: ensure certainty of subject matter & objects
  property: transferred in correct manner to donee

Mental capacity

• donor must understand nature of transaction & implications
• degree of understanding corresponds with value of gift (smaller gift lower degree of understanding)
• higher degree of understanding sometimes required

  Re Beaney [1978] 1 WLR 770

  Facts:

  • mother suffering from senile dementia gift her house (main asset) to one daughter
  • effect of gift: disinheriting her two other children

  Issue:

  • did donor have sufficient mental capacity?

  Held:

  • insufficient mental capacity: gift void
  • donor did not understand the claims of all potential donees (other children)

Intention

• intention of transferor at time of transfer of property
• can be inferred even if not express word gift if made at time gifts common (Christmas) or to friends or relatives
• if intention of donor equivocal: court determination from circumstances

Certainty

• subject matter of gift must be certain
• donee must also be certain

Correct transfer

• if donee knows of gift he must accept
• correct method depends on type of property & whether donor owns legal title or equitable interest
• every effort test: if donor takes all required steps, equity regard gift as complete & perfect even if legal title not yet passed
• every effort test often applied if donor has taken steps but also requires third party action to effect legal transfer (if legal owner needs to be registered)

Transfers of legal title

• if donor owns legal title certain steps must be taken to transfer

Company shares

• shareholders are owner of companies, same rules apply to large companies (many shareholders) & small companies (fewer shareholders)
• shareholders must be correctly registered

  Companies Act 2006

  • s.770: person who has legal title to shares is named as shareholder of shares in Register of Members
  • s.771: companies must keep Register of Members
• shareholder holds share certificate as evidence he is registered
• possession of share certificate is evidence of ownership but registration constitutes legal ownership
• transfers of shares are governed by legislation

  Stock Transfer Act 1963

  • s.1: transferor signs form of transfer (stock transfer form) to transfer shares
• method to transfer shares:
  transferor signs stock transfer form
  transferor gives stock transfer form & share certificate to transferee
  transferee sends documents to company to be registered (legal title passes once transferee is registered)
  alternatively transferor can send stock transfer form & share certificate to company on transferee's behalf
• if company member of CREST system (computerised share transfer system shareholders of quoted companies): shareholders recorded electronically on instructions of shareholder & no need to sign a stock transfer form
• problems arise if company's articles of association give directors power to refuse to register a transferee

  Re Rose [1952] Ch 499

  Facts:

  • settlor made transfer of shares on 30 March 1943
  • transfers not registered until 30 June 1943
  • settlor's death, meant date of completion had to determined to establish whether estate duty (inheritance tax) owed

  Issue:

  • when did completion take place?

  Held:

  • court implied a constructive trust: settlor regarded as trustee for donee in period before registration
  • transfer created equitable proprietary interest even though legal title had not passed: donor had done all he could & was relying on third party to finalise
• transfer of intended gift (which was not legally effective until registration) can be validated by imposition of a trust

  Mascall v Mascall (1985) 50 P & CR 119

  • basic principle: equity will not come to the aid of a volunteer
  • however in equity gift is complete once settlor or donor has done everything that donor has to do
  • donee has under his control everything necessary to constitute his title completely without any further assistance from the donor, assistance from equity not needed
• despite seeming inconsistencies with approach under Re Rose, as followed in Mascall v Mascall & principle equity will not come to the aid of a volunteer

  Milroy v Lord [1862] EWHC J 78

  • an intended gift cannot become effective via a trust imposed by a court
  • Turner LJ: if the settlement is intended to be effectuated by one of the modes... the court will not give effect to it by applying another of those mode

Imperfect gifts and unconscionability

• certain circumstances where procedure for transfer not followed may be unconscionable to allow retraction of gift

  Pennington v Waine [2002] 1 WLR 2075

  Facts:

  • A owned legal title to shares in company
  • A informed P (company auditor) to she wished to transfer 400 shares to H
  • H wanted to become a director in company & company articles required directors to be shareholders
  • A signed stock transfer form & sent it P, P placed in company's file
  • P wrote to H to inform him A wanted to transfer shares & no further action was needed on H's part
  • A died

  Issue:

  • was gift complete in equity even though no documents were delivered to H?

  Held:

  • Court of Appeal: gift complete in equity
  • A (donor) had done all required of her
  • in certain circumstances delivery of documents not necessary to make perfect gift
  • A intended to make an immediate gift, H had been informed & after certain point would be unconscionable for A to have recalled gift
• it has been suggested Pennington v Waine decision is an example of detrimental reliance (so not inconsistent with principles in Milroy v Lord & Re Rose)

  Curtis v Pulbrook [2011] EWHC 167

  • High Court: Pennington v Waine example of proprietary estoppel ( well-established exception to rule that equity will not assist a volunteer)
  • A bound as she told H he was being gifted shares & H acted to his detriment by becoming director of the company

Cheque payable in favour of the transferor

• cheque is a negotiable instrument, title is transferred by the payee (transferor)
• title is transferred by transferor signing back of cheque in favour of transferee (endorsing the cheque)
• modern cheques state pay A only or account payee only preventing transfer

Cheque payable in favour of transferee

• cheque is a revocable mandate to the donor's bank to pay the amount to the donee on presentation (to donee's bank)
• revoked: donor stops the cheque before it is presented by donee or if donor dies before donee presents cheque (no application of Re Rose principle)

Sterling bank notes issued by Bank of England

• title is transferred by delivery of the note to transferee

Debt owed to transferor

• assignment: A is owed sum by B & wishes to transfer sum to C

  Law of Property Act 1925

  • s.136: assignment of debt should be in writing & notice given to debtor

Land

• all transfers of land or interests in land must be in writing (s.52 Law of Property Act 1925)
• registered land: prescribed form (Land Registry form TR1) is signed as a deed by transferor (previously it was also necessary to deliver the deed) completion of legal title: transferee as registered proprietor

  Mascall v Mascall (1985) 50 P & CR 119

  • once a gift is perfect & complete (transferee has in his control all things necessary to enable him to complete the title by registration) it cannot be untied by the donor

Chattels

• usually title to chattels (choses in possession) is passed by physical delivery of asset to transferee
• title can be passed by deed

  Jaffa v Taylor Gallery Ltd, The Times, 20 March 1990

  • title can be passed by deed without physical delivery of chattel
• court has to be satisfied there was intention to give & delivery of the subject matter of the gift

  Thomas v Times Book Company [1966] 1 WLR 911

  Facts:

  • widow of Dylan Thomas (DT) claimed possession of original manuscript of the play Under Milk Wood against present possessor
  • present possessor asserted that DT gifted manuscript to his predecessor in title Mr Cleverdon (C)
  • DT had lost the manuscript in one of several pubs
  • C had made copies of the manuscript, when DT collected a copy he told C he could keep the original manuscript if he could find it (DT was then travelling to America to promote the play)
  • C found the original manuscript whilst DT was in America, DT died during his trip to America

  Issue:

  • was there intention to make a gift & satisfactory delivery?

  Held:

  • sufficient intention to make a gift: DT promised C the manuscript & DT had told C potential locations
  • effective delivery: C succeeded in finding the manuscript from one of mentioned locations
  • onus on defendants to prove gift rather than plaintiff to disprove: on evidence found a gift was made

Transfers of title when donor owns an equitable interest

• trusts property (land or personalty) held by trustee upon trust for beneficiary
• legal & equitable interests are separate: title (trustee) & equitable (beneficiary)
• equitable interest is a proprietary interest piece of property in its own right
• if equitable interest is being transferred separately from legal title special procedure must be followed

  Law of Property Act 1925

  • s.53(1)(c): equitable interest or trust subsisting at time of disposition, must be in writing signed by person disposing, authorised agent or by will
• T hold property on trust for B, to transfer equitable interest:
  B can assign (in writing) his equitable interest directly to C
  B can direct T to hold property on trust for C
• s.53(1)(c) LPA 1925 applies to dispositions of subsisting equitable interests but not to creation of new equitable interest (legal owner declares a trust)

  Grey v IRC [1960] AC 1

  Facts:

  • 1949: Mr Hunter (H) transferred assets to trustees (T) to hold on trust for his 6 grandchildren (G)
  • 1955: H transferred 18 000 shares to T telling them to hold them on bare trust for himself)
  • to try & avoid stamp duty (payable on written transfer of equitable interest to G) he orally told T to hold shares on trust for G
  • Ts wrote to H confirming instructions & Inland Revenue assessed documents to stamp duty

  Issue:

  • was oral instructions a disposition of an equitable interest or trust subsisting at the time of the disposition?

  Held:

  • oral instruction was a disposition within meaning of s.53(1)(c): the full equitable interest in the eighteen thousand shares concerned, which at the time was his, was... diverted from his ownership into the beneficial ownership of the [G]
  • disposition ineffective: as not in writing
• s.53(1)(c) LPA 1925 may not apply if equitable interest is transferred along with the legal title

  Vandervell v IRC [1967] 2 AC 291

  Facts:

  • Mr Vandervell (V) wanted to donate £150 000 to the Royal College of Surgeons (C)
  • V transferred 100 000 shares in the family business to C, until the shares had paid £150 000 in dividends
  • once dividends paid out, a separate company (a family trust) (T) was given option to purchase shares from C for £5000
  • V's chares were held on bare trust for him by a bank
  • V told bank to transfer chares to C, bank did so by stock transfer form & dividends were then paid to C
  • Inland Revenue (IR) assessed V for income tax on dividends earned on shares after legal title was transferred to C
  • legislation stated if V still owned any interest in the shares he would be liable for surtax
  • as V had not disposed of his equitable interest in writing (as required by s.53(1)(c) LPA 1925) he still owned it

  Issue:

  • had V disposed of his equitable interest?

  Held:

  • noted written requirement under s.53(1)(c) LPA 1925 origins in Statute of Frauds 1677: trustees need to know identity of beneficiary, therefore dealing with equitable interest need to be in writing (but no obligation to notify trustees)
  • s.53(1)(c) only relevant when: dealings with the equitable estate are divorced from dealings with the legal estate
  • if beneficiary of bare trust directs trustee to transfer legal estate to third party (with intention third party take equitable interest too) s.53(1)(c) does not apply, as transfer of legal title also effects transfer of equitable interest
• distinction: Grey v IRC (transfer of equitable interest only) & Vandervell v IRC (transfer of legal title carries the equitable interest & trust is extinguished)
• s.53(1)(c): applies in Grey v IRC situations but not in circumstances of Vandervell v IRC
• expectancies: not a proprietary interest (a hope of future ownership - legacy under will of person still alive)
• transfer of expectancy ineffective: pragmatic approach, cannot transfer something which you do not own, however, can enter binding contract to transfer future property

Succession

• law of succession applies when a person dies

Administration

• when a person dies his estate (all property person had a vested interest in) is dealt with by personal representatives (PRs)
• PRs: use estate to pay inheritance tax & debts then distribute remainder to beneficiaries
• PRs: legal & beneficial owners of estate of deceased when he dies
• executors: named PRs who have to obtained a Grant of Probate (confirmation from court they are authorised PRs by will)
• administrators: PRs who have obtained Grant of Letters of Administration (authorised PRs by court when no will)

Wills

• testator: person who makes a will

  Wills Act 1837

  • s.9 valid will must normally:
    be in writing
    signed by testator in joint presence of two witnesses
    witnesses must sign will in testator's presence
• codicils: can alter will but must also be witnessed as prescribed under s.9 WA 1937
• will takes effect on death of testator, until which beneficiary has mere expectancy
• types of gifts under wills: devise - gift of freehold land or realty
  legacy or bequest - gift of personal property or personalty
  specific - gifts of an asset or group of assets distinguished in will from all other assets of the same kind
  pecuniary legacies - gifts of money
  residuary gift - gift of what remains (after payment of taxes, debts other specific legacies)
  gifts on trust - property given to trustees for benefit of beneficiaries

Failure of gifts

• gifts left in valid wills can fail
• ademption: specific gifts fail if testator no longer possesses the specified property when he dies
• lapse: gifts will fail if beneficiary dies before testator, subject to some exceptions
• lapsed specific or pecuniary gifts fall into residuary estate & passes under intestacy rules
• gifts to witnesses are invalid

  Wills Act 1837

  • s.15: if will is witnessed by beneficiary or beneficiary's husband, wife or civil partner, will is validly witnessed but gift to witness fails
• will may be wholly or partly revoked by testator before his death by:
  marriage or civil partnership of testator
  destruction of the will with intent to revoke
  making a new will which deals with the same property
  individual gifts may be revoked by codicil

Intestacy rules

• intestacy rules apply if:
  deceased made no will (to whole estate)
  will contains no residuary gift (to residuary estate)
  residuary gift has failed or is revoked (to residuary estate)
• all deceased's estate passes to PRs to pay debts & tax (& distribute valid gifts if any valid will exists)
• remainder shared between deceased relatives in accordance with formula
• beneficiaries on intestacy are statutory next of kin

Trustees and PRs

• similar functions for trustees (Ts) & PRs: many statutory powers apply to both
• when administration of estate is completed PRs cease to hold subject matter of trust as PRs, must assent (transfer using appropriate method) trust property to Ts appointed by deceased in will
• if trust property is land assent must be in writing

Exceptions to rule equity will not assist a volunteer

• limited situations court will assist a purported donee even if transferor has failed to transfer legal title

Strong v Bird rule

• general rule: donee can have no benefit from an imperfect gift
• exception set out in Strong v Bird (1874)

  Strong v Bird (1874) LR 18 Eq 315

  • on death of donor gift becomes perfect & donee has priority claim to property over beneficiaries of will
• for Strong v Bird rule to apply four conditions must be met
• 1. donor intends to make immediate gift to donee, but gift is imperfect because relevant formalities are not followed
• 2. immediate gift must be intended

  Re Freeland [1952] 1 Ch 110

  Facts:

  • P's car was not working
  • F said she would give P her car, but the car was currently at garage being fixed
  • car never delivered to P & F died

  Issue:

  • was P assisted by exception?

  Held:

  • exception not apply: gift was not immediate
• 3. intention must continue unchanged until donor's death

  Re Gonin [1979] 1 Ch 16

  Facts:

  • M allegedly attempted to give house & garden to daughter
  • M failed to sign deed & subsequently sold part of garden

  Issue:

  • was intention unchanged?

  Held:

  • changed intention: by selling garden M still considered herself the owner
• 4. donor dies & donee appointed as personal representative, legal title to property now vested in donee & gift is perfect

Donatio mortis causa

• donatio mortis causa (DMCs): a gift in contemplation of death
• during donor's lifetime transfers property to donee (on condition it will take effect on donor's death)
• if formalities not complied with (imperfect on donor's death) donee can ask court to order personal representatives to transfer property to him
• DMC valid if:
  gift made in contemplation, not necessarily expectation, of death
  delivery to donee of subject matter of gift
  gift made under circumstances showing that subject matter of gift reverts to donor should he recover (conditional on death)

Contemplation

• DMCs are only valid where lifetime transfer (conditional on donor's death) is made in contemplation of death
• must be some risk to donor which justifies donor contemplating comparatively early death

  Wilkes v Allington [1931] 2 Ch 104

  Facts:

  • 1922: uncle (U) told he cancer & refused operation
  • subsequently U was seriously ill & considered himself close to death
  • 1927: U gave envelope (containing financial documents) to nieces (N) marked to be given up at death
  • 1928: U died from pneumonia whilst still suffering from cancer

  Issue:

  • was gift made in contemplation of death?

  Held:

  • gift was made in contemplation of death
  • fact he died from different cause than expected immaterial as cancer still threatened

  Thomson v Mechan [1958] OR 357

  Facts:

  • Canadian case
  • donor feared flying & made gift on contemplation of death on a planned flight
  • donor survived flight but died two days later of heart attack

  Issue:

  • was gift made in contemplation of death?

  Held:

  • original risk (flying) has passed so DMC failed

Delivery

• delivery: donor must have parted with dominion over property (donor no longer have practical power to alter the subject-matter of the gift in some way)
• donor parts with dominion: making perfect gift conditional on death or if transfer was imperfect, but donor passed to donee not property itself but means to control it
• chattels: passed to transferee by physical delivery or deed of gift

  Re Lillingston [1952] 2 All ER 184

  Facts:

  • 6 Feb 1950: Mrs Lillingston (L) had been ill for several months & stated to Mrs Pembery (P) that she felt done for it
  • L said she would give P her jewellery & gave P a key for safes to access the items
  • L stated: Keep the key it's yours now
  • 12 Feb 1950: L died

  Issue:

  • was there sufficient delivery?

  Held:

  • sufficient delivery: by handing over key P had access to gift

  Woodard v Woodard, The Times, 15 March 1991

  • hospitalised donor gave donee keys to his car stating: You can keep the keys, I won't be driving it any more
  • sufficiently parted with dominion despite not delivering log book
• choses in action (intangible property) cannot be passed by physical delivery
• DMC: sufficient if donor delivered document of title to donee or given donee dominion over the document

  Birch v Treasury Solicitor [1951] Ch 298

  • document must be: the essential indicia or evidence of title, possession or production of which entitles the possessor to the money or the property purported to be given
• DMC valid: in relation to unregistered land

  Sen v Headley [1991] Ch 425

  Facts:

  • donee given keys to box containing deeds

  Issue:

  • was dominion to property passed or just to deed themselves?

  Held:

  • deeds were indicia of title to house & transfer of deeds can constitute passing with dominion

Conditional

• can be implied from deceased statements
• prior to death gift can be revoked (as conditional)