Lavelle v Tracy Lavelle & Ors

Beneficial ownership following a gratuitous transfer of property depends on the transferor’s actual intention. The presumption of advancement between a parent and child is only an evidential fallback where that intention cannot be determined from the evidence.

Modern equity does not apply rigid rules to evidence capable of rebutting the presumption. Conduct and statements close to the transaction, and relevant subsequent conduct, may establish that the transferee was intended to be a nominee rather than a donee. Potential inheritance-tax planning does not itself prove an outright gift.

The claimant paid the full purchase price for a flat but directed that it be conveyed into the name of his adult daughter. He subsequently occupied, furnished, improved and paid the outgoings for the flat. His daughter and son contended that the conveyance was an unconditional gift made as inheritance-tax planning.

His Honour Judge Howarth, sitting in the High Court, held that the daughter held the flat on trust for the claimant. The defendants appealed both that declaration and an order requiring them to pay 90 per cent of the claimant’s costs. The central issue was whether the evidence established an intended gift, or rebutted the presumption of advancement.

1. Appeal dismissed. Lord Phillips MR, with whom May and Jonathan Parker LJJ agreed, held that the judge was entitled to find that the claimant had not intended to give away his beneficial interest in the flat.
2. Where a purchaser gratuitously places legal title in another’s name, the decisive question is the purchaser’s subjective intention. An intended gift passes the beneficial interest; an intention to retain it makes the transferee a trustee. The presumption of advancement between parent and child applies only where the evidence does not resolve that question.
3. The older, stringent approach to rebutting advancement has diminished in force. The court should assess the whole evidential picture, without rigid admissibility rules. Statements and conduct close to the transaction may be probative. Later conduct may also rebut an otherwise available presumption, though self-serving conduct long after the event carries little weight. Where an adult transferee knows of relevant conduct and does not challenge it, that may increase its evidential weight.
4. The tax advice showed at most that placing the flat in the daughter’s name was thought beneficial for inheritance-tax purposes. It did not compel a finding that the claimant understood, or intended, an absolute gift. His sole funding, exclusive practical use, expenditure on the flat, and the children’s contemporaneous conduct supported the trial judge’s conclusion that the daughter was a nominee. The evidence therefore left no room for the presumption of advancement.
5. The rule concerning gifts with reservation under Finance Act 1986 did not introduce illegality into the appeal, because no party alleged that the claimant intended to deceive the Inland Revenue. The costs order, though a different judge might have allowed a larger reduction, was within the reasonable ambit of the trial judge’s discretion.

• Court of Appeal (Civil Division) — appeal dismissed: [2004] EWCA Civ 223.
• High Court, Chancery Division — His Honour Judge Howarth declared that the first defendant held the flat on trust for the claimant and ordered the defendants to pay 90 per cent of his costs.