Gifts

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This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 321-324 [4.50-4.55]; 333-341[4.69-4.73]

Introduction

[1] A gift is where one person transfers consideration to another without receiving consideration in return. They are not enforceable by common law.

Equitable titles and the doctrine of Part performance are examples of how equity attempts to achieve 'what is fair' even in the absence of adherence to legal requirements. However, the position is different with gifts:[2]

  • General rule: where a person (donor) gives a gift to another (donee) but fails to meet the legal requirements to transfer legal title, equity will not intervene.
    • In other words, it will not create a constructive trust where equitable interest transfers to the donee.
    • Exception: if the donor declares himself trustee for a named beneficiary, then the beneficiary can enforce the gift notwithstanding the absence of consideration.

This means that if the donor has a legal interest in the land and fails to abide by the requirements (ie, conveyance etc), the donee will not have a remedy in equity or the law - the gift is an imperfect gift and will not be pefected by equity.[3]

  • However, if the donor has an equitable interest and fails to abide by the requirements, the donee will have a remedy in equity, so long as there is a clear manifestation of intention to transfer the interest.[4]

Imperfect Gift

[5] However, the meaning of ‘imperfect’ is difficult to define. Whilst gifts of chattels and general law land are quite straightforward, the legal requirements to transfer title on a gift may involve several steps.

  • The donor may have performed some, but not all of the steps.
  • The question thus arises whether equity will regard the steps as complete.
  • Equity may complete the steps by holding that the donor retained the legal interest of the property whilst holding it on trust for the donee.[6]

This was discussed in Milroy v Lord:[7]

  • Facts: the donor intended to establish a trust of shares for his niece. He executed a deed poll, but never executed a document transferring the shares to the trustee. He also gifted some dividends to his niece.
  • Held: the test is whether the donor has done everything necessary (according to the nature of the property) to transfer the title. In this case, the transfer of shares was incomplete because he never executed the transfer document, but the gift of dividends was incomplete but remedied by equity, since everything ‘necessary’ (to transfer shares) had been done to complete the gift.

This rule principle was further refined in the following case, Re Rose:

  • Equity will intervene and remedy a donor and donee who have done everything within their own power necessary to transfer the gift, even if acts to be performed by third-parties have not been completed.

This principle was first considered in Australia in Anning v Anning.[8] In this case, the three judges there differed considerably in their approaches:

  • Griffith CJ (approach A): only the donor had to have done everything necessary to complete the gift.
  • Higgins J (approach B): both the donor and the donee had to have done everything necessary to complete the gift.
  • Isaacs J (approach C): as well as the donor and donee having to have done everything necessary to complete the gift, all third parties involved also had to have done everything necessary to complete the gift, such as registering a document.

The approaches are clearly listed in an ascending order of severity, approach A being the broadest interpretation and approach C being the narrowest. In Corin v Patton , the High Court adopted Griffith CJ’s approach:

  • For equity to recognise a gift, the intending donor has to do all that is necessary to transfer the legal title, such that the legal transfer could be effected without any further action on his/her part.
  • This means that if the donor has something else to do to complete the transaction, it will not be recognised in equity.


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End

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References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. Textbook, p. 321 [4.50-4.51].
  2. Jones v Lock (1865) 1 Ch App 25.
  3. Macedo v Stroud [1922] 2 AC 30.
  4. Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 514.
  5. Textbook, pp. 321-4 [4.51-4.55].
  6. Milroy v Lord (1862) 45 ER 1185, 1189-90.
  7. (1862) 45 ER 1185, 1189-90.
  8. (1907) 4 CLR 1049.
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