“A legal solution to a human need”: deathbed gifts in a cyber world

Rahman v Hassan [2024] EWHC 1290 (Ch) & Rahman v Hassan & Ors (Re Consequential Matters) [2024] EWHC 2038

Earlier this year, the High Court considered the long established legal principle of donatio mortis causa, ie “gifts in contemplation of death”, or “deathbed gifts” as they are more commonly known, in the case of Rahman v Hassan [2024] EWHC 1290 (Ch).

To make a gift that takes effect upon a person’s death almost always requires that person to make a Will that is compliant with the formalities established by the Wills Act 1837 (ie in writing, with two witnesses etc.). The doctrine of donatio mortis causa, however, provides a narrow exception to this rule whereby a living person can, in contemplation of their own impending death, make a lifetime gift that avoids the need for those formalities provided that it is conditional upon their death. Only on the person’s death will the gift become absolute and, crucially, override any contrary provisions in an existing Will or under the Intestacy Rules.

The requirements for a valid deathbed gift have been established over more than a century of case law and include the following:

1. The gift must be made by a living person (the donor) in contemplation of their impending death.
2. The gift is conditional on death and is therefore revocable by the donor at any time until they die.
3. The asset must be one that is capable of forming the object of a deathbed gift, ie chattels, “choses in action” (including sums held in bank accounts) and interests in land.
4. The donor must take a sufficient step to implement the gift and “part with dominion" over the asset by physically delivering to the recipient either the asset itself, some means of accessing or controlling the asset (eg the set of keys to a car), or documents evidencing entitlement to possess it (eg a share certificate).

In Rahman v Hassan [2024] EWHC 1290 (Ch), the Claimant argued that the Deceased had made a valid deathbed gift of a number of assets, including (i) property, (ii) cash held in online bank accounts and (iii) shares held in an online share-dealing account. The effect of this deathbed gift, the Claimant said, was that this would render obsolete much of the Deceased’s final Will (which predated the deathbed gift). The Defendants, who stood to inherit these assets under the terms of the Deceased’s Will, by contrast argued this deathbed gift had not been valid and that the final Will should govern instead how the deceased’s assets should be distributed.

The facts required the High Court to consider a number of novel points of law, as discussed below. Indeed, the High Court has recently granted the Defendants permission to appeal on several grounds, including that “the issues raised in this case regarding bank accounts and registered land are novel, and the decision in this case will set a precedent of importance”.

“Parting with dominion” of online assets

The High Court was invited to consider how the doctrine of donatio mortis causa applies to modern online financial accounts which are accessed by electronic pins and passwords rather than the tangible methods historically used such as deposit notes and passbooks which could be physically handed over to a recipient.

Prior to his death, the Deceased had handed over to the Claimant a list of usernames and passwords for each of his various online bank and share-dealing accounts. While previous case law suggested that a donor must render his own access to the gifted asset impossible in order to “part with dominion”, the Court clarified that the most important question was actually one of intention.

By giving his list of login details to the Claimant, the Court found that the Deceased had intended to make it impossible for himself to access those accounts again because there were more usernames and passwords than he could reasonably memorise. The Court found that this was sufficient to demonstrate that the Deceased had “parted with dominion” over the online accounts, ie they had left his possession.

Based on their application for permission to appeal, the Defendants are seeking to challenge this finding on the grounds that the Court was wrong (i) to hold that login details were akin to legal ownership and (ii) to conclude the Deceased could not have memorised all the login details to his different accounts.

Deathbed gifts of registered land

Previous case law had established that an interest in land could be the subject of a deathbed gift by handing over the title deeds. Whilst this method would still be applicable to unregistered land, the question of whether registered land could be the subject of a deathbed gift had not been considered by the High Court before.

On these facts the Deceased handed the land certificate for his house (on registered land) to the Claimant, having already given the Claimant the house keys on a previous occasion. The Court held that this was sufficient for the Deceased to have “parted with dominion” over the house, despite the fact that land certificates no longer demonstrate title for registered land following the introduction of the Land Registry Act 2002. Again, the Court held that the key question here was that of the Deceased’s intention when handing over the land certificate (as opposed to whether there was any actual, practical effect of doing so). Additionally, the Court found for the first time that there was no in principle reason to distinguish between registered and unregistered land for the purposes of donatio mortis causa even though the two types of property are subject to different rules of transfer.

On appeal the Defendants seek to challenge this finding on the basis that the Court should not have held evidence of intention to be the key factor in determining transfer of dominion.

Costs

After the hearing, the High Court dealt with consequential matters on paper and considered both the effects of Part 36 offers in non-monetary claims and requests to vary costs budgets after trial.

Part 36 offers in non-monetary claims

The Claimant had offered to accept some furniture, personal chattels and bank accounts in January 2023. The offer was not accepted, but the Defendants agreed that it was a Part 36 offer within CPR 36.17. At trial, the Claimant was awarded two properties which were significantly more valuable than the contents of this Part 36 offer.

The Defendant argued that in receiving the properties, no monetary award had been made and the wording of CPR 36.17 restricted its application to monetary claims only. The Court strongly disagreed, holding that “more advantageous” and “at least as advantageous” should be interpreted in their ordinary sense and do not have a “money-based” meaning. Consequently, the Claimant was entitled to the significant benefits outlined in CPR 36.17, including interest and costs on an indemnity basis.

Varying a costs budget after trial

CPR 3.15A provides that “a party must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions”. The Claimant sought to increase his previously approved costs budget of £320,648.50 by £134,931.55 after the trial had concluded, citing five significant developments. These included a road accident and additional costs incurred for making amendments to the Particulars of Claim, preparing written submissions as ordered at trial, and a delay of more than six months in the finalisation of the draft judgment.

The Court dismissed the application, ruling that none of these developments were significant enough to warrant a budget variation under CPR 3.15A.

Lessons for practitioners

• The appeal is expected to take place next year and should provide further clarification on the requirements for a valid deathbed gift, particularly in respect of online bank accounts and registered land. In the meantime, practitioners should be aware that it may be possible for valid deathbed gifts of registered land to be made even where the formalities normally required to effect such a transfer have not been complied with. This is a development with potentially far-reaching implications given that the majority of land in England and Wales is now of course classified as registered land.
• Given the ever-increasing number of assets that now exist in online form (eg bank accounts, intellectual property, cryptocurrencies), we can expect to see the Court continuing to grapple with long established principles of probate law and their application in the modern world. Practitioners should give careful thought as to how testators ought to deal effectively with these types of digital assets which they may own.
• Notwithstanding that the Claimant succeeded on his claim, his request to vary his costs budget upwards after trial was dismissed by the Court. This highlights the importance of preparing a well-considered costs budget before trial which accounts for some degree of uncertainty in respect of the post-trial court timetable. It also demonstrates that the threshold for the Court to grant such a request is set high. Though the Court acknowledged that a formal application to vary was not necessary, a party seeking to vary their costs budget should consider submitting robust evidence (including a witness statement) in support of their request.
• Part 36 offers are a powerful tool in a litigator’s toolbox which must be borne in mind at every turn, not only to encourage settlement but also because the penalties of rejecting such an offer can be severe.
• Finally, it’s worth noting that the Law Commission last considered the doctrine of donatio mortis causa in their 2017 Consultation Paper. The report emphasised that the strict formality requirements for making a Will and for gifting certain assets provide important legislative safeguards against, for example, fraud and undue influence. Given that donatio mortis causa allows these formalities to be circumvented, it has been suggested that the doctrine could be open to potential abuse. Though the report did not make any specific recommendations, it noted there have been calls for the codification of the doctrine to address these uncertainties, and even for its abolishment altogether. When viewed in conjunction with this case and its upcoming appeal, it is clear that practitioners must continue to monitor this area for new developments, including possible legislative changes.

With thanks to Felicity Miles, a current trainee in the team, for her help preparing this article.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, December 2024