Beware 'invisible' gifts

The recent High Court decision of King v Dubrey and 20 Ors [2014] is an interesting first-instance decision that considers the principle of donation mortis causa (DMC). As the judge put it, DMC is “an historic and anomalous exception to the requirements of the Wills Act”. It is also a legal concept that does not necessarily leave any tangible clues about its existence for an executor administering an estate.

The conditions essential to a DMC were set
out in In Re Craven’s Estate [1937] and echoed in
Sen v Headley [1991]:

1. The gift must be made in contemplation, although not necessarily in expectation, of impending death.

2. The gift must be made on the condition that it is to be absolute and perfected only on the donor’s death, being revocable until that event occurs and ineffective if it does not.

3. There must be a delivery of the subject matter
   of the gift (or the essential indicia of title thereto), which amounts to a parting with dominion and not mere physical possession.

It is also important to note that a genuine DMC must be distinguished from a failed attempt to make a testamentary gift. With regard to ‘contemplation of impending death’, it is not enough to merely contemplate death ‘at some time or the other’
but, rather, it should be a death in ‘the near future’.

Most cases deal with circumstances in which the donor died within a matter of days. In Vallee v Birchwood [2013], however, a period of five months between the gift and the death of the donor did not defeat a DMC claim.

As can be seen, an executor may have no inkling that such a gift has been made unless, or until, it is brought to their attention by the purported donee.
At that point, they will potentially be relying entirely on the word of that purported donee, who, of course, has a vested interest in asserting a DMC.

For this reason, the Privy Council has acknowledged that “cases of this kind demand the strictest scrutiny”.

One clue for executors may be the location of the item alleged to be the subject of the gift. For unregistered land, causing the title deeds to be put under the control of the donee is sufficient to constitute delivery, even if the donor continues to live at the property.

In King, the claimant claimed a DMC of his aunt’s house, described as the principal asset in her estate. Such a DMC would seemingly have the effect of extinguishing or substantially reducing a residuary gift to seven animal charities, all of which positively defended the case.

The claimant’s case was that the deceased had, on a number of occasions, told him that the property would be his after her death. And on one such occasion, she presented him with the deeds to the property (retrieved from her solicitors or bank), which he then kept in a wardrobe in the part of the house used by him.

On hearing the evidence, the majority of which came from the claimant, the judge concluded that a DMC did occur. One aspect that appears to have particularly influenced the judge’s decision was the fact that, in addition to the oral representations, the deceased had also written various documents purporting to leave the property to the deceased, albeit that they did not create a valid testamentary disposition.

The charity defendants raised various challenges both as to the credibility of the claimant’s evidence and the legal basis of his claim, but the judge was convinced by his claim.

Therefore, elderly client practitioners should be alive to their clients possibly making such a gift or to such a claim being brought against an estate that they are administering.

Matthew Evans is a partner at Hugh James

He writes the regular vulnerable clients comment in Private Client Adviser