Playing for keeps

If Mr A goes into a jewellers and buys an expensive diamond necklace for his girlfriend, Ms B, few would dispute that this was a gift. But what if Mr A buys a property and puts it in Ms B's sole name? Does it make any difference?

What is a gift? Sometimes it is easy to decide but, particularly with property transactions, the application of legal principles to real life can seem like a witches brew.

The essence of a gift is that the recipient receives something for nothing. There must be an intention on the part of the giver to confer bounty. That is often where the battleground lies. If the parties are married, there is a legal presumption of advancement.

Once a gift, always a gift?

A wife can invoke this presumption in respect of property purchased or funds provided by her husband, in order to assert that there was a presumption of a gift. This presumption can be rebutted by evidence of a contrary intention, but it is a starting point. If the couple are not married and have never been engaged, there is no presumption. A recent example shows the importance of clear written evidence of intention.

During their nine year relationship, John Hoggins lavished his girlfriend, Greta Cerniauskaite with expensive gifts. According to newspaper reports, he bought her a £160,000 Bentley, paid her a £93,000 salary from his plumbing company even though she did no work, and bank rolled shopping sprees. The dispute was over a property in Sawbridgeworth, Hertfordshire, bought in 2009.

Hoggins put down the £100,000 deposit and met all the mortgage costs, but the property was registered in Cerniauskaite's sole name. After the relationship broke down, she claimed that the property was hers. Hoggins disputed this. He argued that the property was not a gift and had been placed in her name in order to get a mortgage more easily because he had other debts. He may well have tried to assert that Greta held the property on resulting trust for him.

The beneficial interest in any land is presumed to correspond to the legal interest, but that presumption can be rebutted by evidence that somebody else provided the whole, or contributed to, the purchase price. In that situation, there is a presumption of a resulting trust, but that presumption can itself be rebutted by evidence that the money contributed was provided by way of a gift or a loan.

Clearly, it is best to avoid this 'ping pong' of presumptions by having unambiguous, contemporaneous evidence of what exactly was agreed.

The facts speak for themselves

The adjudicator to the land registry ruled in favour of Cerniauskaite. She stated: 'I accept Greta's evidence and in particular, that John reassured her that, whatever happened, she would have the property.' The adjudicator added: 'In my judgment, it is clear from all the evidence that John intended that Greta should own the property legally and beneficially.'

John had clearly been very generous towards Greta. However had he wanted to ensure that his investment in the property was not treated as a gift, he should have ensured that Greta entered into a formal agreement or declaration of trust, confirming his interest in the property.

That type of arrangement can be
of crucial significance for cohabitants
or joint owners of property. Cohabitants may also benefit from having a cohabitation agreement dealing with the ownership of their less valuable chattels, in the sense of recording who owns what.

In Stack v Dowden [2007] UKHL 17, Lady Hale stressed that each case will turn on its own facts. In the absence of incontrovertible written evidence of what was agreed, the court needs to search for the parties' intentions and the 'tenderest exchanges' may be examined under equity's microscope as observed by Waite J. in Hammond v Mitchell [1991] 1 W.L.R 1127.

Interestingly in Stack v Dowden,
Lady Hale also raised the possibility that the parties' intentions as to the beneficial shares may alter over time. Lord Neuberger did not seem so enthusiastic about this possibility,
but should it be relied upon, it would seem sensible for the variation to be documented in writing.

John Darnton is a partner at Bircham Dyson Bell