Gifts made in contemplation of death – the ‘DMC’

Definition

A Donatio Mortis Causa (DMC) is ‘a gift made in contemplation of death’. The gift is put in motion by the donor, but it only becomes complete on the donor’s death. A DMC is therefore a hybrid. It is not exactly a lifetime gift nor a testamentary gift; it is a bit of both.

A DMC is often described as a deathbed gift, but the structure of a DMC is more subtle and complicated than that. In order to be effective, a DMC must fulfil three separate tests, as follows.

Component one

The gift must be made in contemplation of death.

To meet this requirement, the donor must actually believe that he is close to death. Usually, this will be because of a serious illness (particularly if that illness is, or may be, terminal) or because of approaching major medical treatment.

A legal presumption can arise that this part of the test has been made out, if the transaction took place during the donor’s final illness and was only a few days, or a week or two, before death.

Component two

The gift must be conditional on death. In other words, while the gift is put in motion by the donor on his deathbed, it only takes effect when he dies. If the donor recovers, the DMC is revoked.

Component three

The donor must part with what is legally described as ‘dominion’ over the property. The concept of dominion is quite difficult to define, but it appears that the donor must hand either the property itself, or something representing it or giving control over it, to the donee.

Where the property is tangible and portable, it is often straightforward to prove actual delivery. This would apply, for example, to jewellery, other chattels or cash.

The authorities suggest that handing over a key to a jewellery box, or to a safety deposit box, could be sufficient to make a DMC of the contents of that box, as long as the other parts of the test are made out. For example, in the Court of Appeal case of Sen v Headley [1991] Ch 425, dominion over the donor’s house was held to have been handed over by virtue of the deceased giving the recipient a key to the deed box in which he kept the house deeds, as well as a set of keys to the house and the keys to the cupboard where the deed box was kept.

Where there cannot be actual delivery of the property, it is possible to have constructive delivery. This is achieved by handing over something that gives dominion over the asset and that also represents ‘the essential indicia of title’ to the property. It is difficult to pin down exactly what will represent indicia of title, but, in simple terms, it appears that proof of title and the ability to deal with the item are needed.

In the past, where many (or most) accounts were regulated by a savings book, or passbook, which had to be produced for withdrawal of the cash, a DMC of such an account could be made by handing over the passbook. See, for example, the judgment of the Court of Appeal in Birch v Treasury Solicitor [1951] 1 Ch 298. There are also old authorities that established the same principle in respect of bonds, where the certificate had to be produced on encashment.

Changing times may mean that the legal position is less clear (and possibly more favourable to those defending DMC claims, for example, residuary beneficiaries where the value of residue will be diminished if a DMC is upheld). I dealt with a case a couple of years ago where the claimant had acquired various bond certificates from the deceased, but kept quiet about this for several months. Unknown to him, the estate solicitors were able to cash in the bonds without production of the certificates. When the claimant realised that the bonds had already been cashed in, he alleged that he was entitled to the proceeds. Fortunately, the head of legal services of the building society in question wrote a letter, confirming that the bond certificates were not conclusive proof of title, and that they were effectively a mere aide-memoire. This led to a settlement on favourable terms for the residuary beneficiary.

Land can be the subject of a DMC. After many years of uncertainty, this was confirmed by the Court of Appeal in Sen v Headley. Interestingly, that case dealt with land where the legal title was unregistered and there had been deemed delivery of the title deeds (as outlined above). Lord Justice Nourse stated, “it cannot be doubted that title deeds are the essential indicia of title to unregistered land”.

Nowadays, unregistered title is becoming less and less common. There may be grounds for arguing that, if there are no title deeds to a property (in other words, if the legal title was registered at any time after land certificates stopped being issued in the autumn of 2003), it is no longer possible to have a DMC of such land. It seems impossible to give a clear answer about this, until a case relating to a DMC of registered land (with no land or charge certificate) goes to a hearing.

Revocation

A DMC can be revoked by the donor at any time prior to death. It is revoked, in any event, if the donor recovers from the serious illness or the major medical treatment, which was the cause of his contemplation of death in the first place.

The standard of evidence required

The Court will be vigilant in scrutinising the evidence where a DMC is alleged. This stems from a 1862 Privy Council case, Cosnahan v Grice. The facts (extracted from the head note) were these: “A person having a considerable amount of bank notes concealed in her stays being on her deathbed, took the stays and said to G, her cousin, who was standing by her bedside, that ‘she was longing to give her these’… Immediately after the deceased’s death, G ripped up the stays, took out the bank notes, and replaced the stays in the box. She also took away a watch and several trinkets belonging to the deceased from the deceased’s house, of which she gave no immediate account, nor did she mention the amount she had found in the stays.”

It is clear that the Court was uncomfortable with the conduct of the recipient of the alleged DMC, not least in her returning the stays to their box (which, by implication, looked like an effort to conceal the removal of the bank notes). In addition – and this seems to be quite common in DMC cases – the deceased was urgently making a new will at about the same time. The Court found it puzzling that she should have made such a large gift, thereby substantially undermining the effect of her will, at the same time as she was making that will.

The wording (as so often with 19th century judgments) is rather over-elaborate, but it makes an important point: “Cases of this kind demand the strictest scrutiny. So many opportunities, and such strong temptations, present themselves to unscrupulous persons to pretend these deathbed donations, that there is always danger of having an entirely fabricated case set up. And, without any imputation of fraudulent contrivance, it is so easy to mistake the meaning of persons languishing in a mortal illness, and, by a slight change of words, to convert their expressions of intended benefit into an actual gift of property, that no case of this description ought to prevail, unless it is supported by evidence of the clearest and most unequivocal character.”

It is only fair to make the point, however, that a DMC can be established on the evidence of the recipient alone, if that evidence is deemed to be trustworthy.

Capacity

The test for capacity to make a valid DMC is the same as the test for capacity to make a lifetime gift. In the light of Re: Beaney [1978] 1 WLR 770, this means that a ‘sliding scale’ applies, in proportion to the size of the gift. If the gift is of a modest amount, then only a modest degree of understanding is required. If the gift is of such a large amount that it will substantially override the terms of the will, then the level of capacity required is the same as that required to make a will, as laid down in Banks v Goodfellow [1870] LR 5 QB 549.

In practice, capacity is almost always an area of concern in DMC cases, which merits close investigation. To assess whether or not the donor had capacity, it may be worth obtaining:

A copy of the death certificate and finding out the registered cause of death. Check whether one of the causes of death is dementia or a serious illness such that the donor is likely to have been on powerful medication at the time of the alleged DMC;
The medical (GP) notes;
The hospital and nursing notes, if the deceased was in hospital at or around the time of the DMC;
An expert assessment of the various medical notes; and,
Any other evidence of capacity that is available from third parties, such as friends of the deceased.

An alleged DMC, made when the donor did not have a sufficient level of capacity, would not be valid.

Undue influence

A presumption of undue influence can arise automatically in respect of lifetime transactions (gifts), depending on the relationship between the donor and the recipient. The same is not true of wills, where the burden of proof is the other way around, and the disappointed beneficiary has to satisfy the Court that there was undue influence. An increasing number of commentators regard this as unsatisfactory.

It is unclear whether, for the purpose of establishing undue influence, a DMC would count as a lifetime transaction (in which case the presumption of undue influence could arise automatically), or a testamentary disposition (in which case undue influence would have to be specifically proved). Unfortunately, I have been unable to trace any decided cases on the point. While undue influence could certainly be pleaded in an application to overturn or invalidate a DMC, it is apparently impossible to say on whom the burden of proof would lie.

In summary

When dealing with any claim presented as a DMC, there are a number of aspects that will need to be investigated. Above all, it is always vital to check that all three parts of the legal test for a DMC have been made out. More general issues of evidence, and in particular the donor’s capacity, must also be carefully checked. It is difficult to imagine circumstances in which a private client lawyer, acting for elderly clients, would ever advise a client to make a gift by means of a DMC rather than a testamentary gift. The doctrine continues to flourish, however, and its importance should not be overlooked.

Peter Jeffreys is a partner in the charities and education department of Wilsons. He can be contacted at peter.jeffreys@wilsonslaw.com