Update | Private client: death-bed gifts

A question which has vexed equity lawyers for some time is whether there can be a donatio mortis causa when the subject matter of the gift is land. The point was addressed by the Court of Appeal in Sen v Headley [1991] 1 Ch 425 who held that, if there was delivery of the documents of title (in the form of the title deeds), that would normally constitute a parting with dominion necessary to effect a valid death-bed gift. The point has now arisen again in the recent case of Vallee v Birchwood [2013] EWHC 1449 (Ch), which forms the basis of this article.

Basic requirements

Under a donatio, the donor parts with dominion of the subject-matter of the gift to the donee on condition that it is not to become the donee's absolutely until the donor's death. Some form of conditional ownership of the property, therefore, remains with the donor until, when he dies, the condition precedent is fulfilled and the donor's intention becomes unconditional. The principle forms an exception to the general rule that a person may only dispose of their property after death by means of an instrument executed in accordance with the Wills '¨Act 1837.

Essentially, three conditions must be satisfied for an effectual donatio. First, the gift must have been made in contemplation '¨of death meaning "not the possibility of death at some time or other, but death within the near future, what may be called death for some reason believed to be impending": Re Craven's Estate [1937] 1 Ch 423, at 426, per Farwell J. The test is subjective and, therefore, it is the donor's own state of mind which is relevant. Moreover, the fact that the death does not occur in the manner contemplated by the donor is immaterial: Wilkes v Allington [1931] 2 Ch 104. Secondly, the gift must be intended by the donor to be conditional on death. The effect of this requirement is that the subject matter of the gift will revert to the donor if he recovers from his illness and remains revocable by the donor at any time prior to his death. Thirdly, the donor must part with dominion over the property before his death. In effect, this means that there must be '¨a delivery of the subject matter of the gift, or the essential "indicia of title" thereto, during the donor's lifetime: Birch v Treasury Solicitor [1951] Ch 298. Delivery is usually effected by the physical handing over of the chattel itself to the donee or, alternatively, by giving the means of attaining the property (for example, the keys to a safe or desk). In some cases, it is sufficient if the donor delivers to the donee a document which is the essential evidence of the former's title to the property: Re Weston [1902] 1 Ch 680, (post office savings bank book).

If these conditions are satisfied, the donee has the right to call for a transfer of the land as a consequence of a constructive trust which arises once all the elements are satisfied. Accordingly, section 53(2) of the Law of Property Act 1925 will apply so as to exclude the gift from the formalities required for the transfer of land imposed by section 53(1) of the 1925 Act. In this connection, the gift falls to be classified as an inter vivos disposition (the transfer taking place in the donor's lifetime) but which remains incomplete until the donor's death.

Donatio of land

In Sen, the Court of Appeal held that a gift of land by the constructive delivery of the title deeds could be the subject of a valid donatio mortis causa. In that case, the deceased was the owner of an unregistered freehold house in Ealing, London. In 1986, he was diagnosed as having inoperable cancer and, while dying in hospital, he told the claimant in response to the question as to what she should do about the house if anything should happen to him: "The house is yours, Margaret. You have the keys. They are in your bag. The deeds are in the steel box." At some point, the deceased had slipped into the claimant's handbag the keys to the locked steel box, apparently without her knowledge. Three days later, the deceased died intestate.

Significantly, the deceased in Sen had retained a set of keys to the house, but this was held not to prevent the effective transfer of dominion over the property. Nourse J, who gave the judgment of the court, concluded that the benefits of retaining a set of keys were "wholly theoretical" given the circumstances of the case. In his lordship's words (at 438-439): "[The deceased] uttered the words of the gift, without reservation, two days after his readmission to hospital, when he knew that he did not have long to live and when there could have been no practical possibility of his ever returning home. He had parted with dominion over the title deeds. Mrs Sen had her own set of keys to the house and was in effective control of it."

The issue of the retention of a duplicate set of keys was also raised in Woodward v Woodward [1992] RTR 35, involving a death-bed gift of a car, where the Court of Appeal reiterated that the question was one essentially of evidence as to whether the deceased had the requisite intention to transfer dominion over the car to his son notwithstanding that he kept a second set of keys to it.

Again, given the circumstances, it was wholly unreal to suggest that the deceased had not parted with dominion in view of his presence in hospital suffering from terminal leukaemia, from which he died a few days later.

In August 2003, the claimant (who lived in France) went to visit her elderly father at his home in Reading. He was in poor health and coughing badly. She told him that she would next visit him at Christmas, to which he replied that he did not expect to live much longer and might not be alive by then. He also said that he wanted her to have his house when he died and gave her the title deeds, a key and some personal belongings. He later died intestate just before Christmas.

The primary question was whether dominion in the house had passed to the claimant despite the four-month interval between the gift and the date of death and the fact that the claimant had not enjoyed any control over the house during this period. On this latter point, it was argued by the deceased's administrator that, unlike Sen, the deceased was not in hospital but remained living in the property until his death. Accordingly, it could not be said that control of the property had passed to the claimant.

Contemplation

The first question was whether the gift had been made in contemplation of impending death. On this point, Mr Jonathan Gaunt QC (sitting as a deputy judge of the High Court) agreed with the trial judge that the deceased had made the gift because he feared that he was unlikely to live until the claimant's next visit at Christmas. What was important here was not whether the deceased was actually suffering from an illness likely to prove terminal, but whether his motive for the gift was that he subjectively contemplated the possibility of death in the near future. Moreover, it was not one of the conditions for a valid donatio that the donor should be shown not to have had an opportunity to make a will. Although this was the apparent justification for the doctrine, it was not a pre-requisite to its operation: Hedges v Hedges (1708) Prec Ch 269.

The next question was whether there had been a sufficient delivery of dominion of the property either by some overt act of physical transfer or, alternatively, the handing over of its essential indicia of title meaning "the document or thing the possession of which entitles the possessor to the money or property purported to be given": ibid, at [19].

On this issue, the deputy judge concluded that the notion of "dominion" meant something other than mere possession but equally did not signify absolute ownership. It was best under-stood as a form of conditional ownership: ibid, at [29].

Because the gift does not become effective until death, the property remains both in law and in equity the property of the donor who remains entitled to continued enjoyment of it without this being necessarily inconsistent with the intention to make the gift effective only on death: ibid, at [37].

Accordingly, in the instant case, the delivery of the title deeds and key to the house to the claimant was a sufficient delivery of dominion notwithstanding that the deceased had remained living in the property until his death. Although the delivery of the deeds would have put it out of his power (without revoking the gift) to transfer the legal title to someone else, the fact that he might still be in a position to create equitable interests under a contract for sale or a trust (or grant a tenancy) taking priority over the gift would not be fatal.
Similarly, the giving of a key to the donee, which allows access to the house, may well diminish the donor's control over it, but this again would not necessarily be incompatible with the conditional nature of gift: ibid, '¨at [40]. In the result, the gift '¨was held to be a valid donatio mortis causa.

Delivery

The deputy judge openly acknowledged that the concept of dominion in this context was a "slippery" one. Essentially, the donor must do something by way of delivery of the property or its essential indicia of title which shows that the gift is conditional upon death and not an outright transfer.

The mere retention of physical possession or control over the land will not preclude a valid donatio provided that the donor's acts do not amount to an unequivocal reservation of the ability to retrieve the property prior to death.
Conversely, it is not necessary that the donee be given total control over the property as partial dominion will be enough so long as the donor suffers a corresponding deprivation of power to deal with the gift. SJ