The application of doctrine that equity will not assist a volunteer

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Love and Affection’ as Sufficient Consideration in Conveyance Matters

In both contract law and conveyancing matters it has been agreed for several centuries that one of the fundamental elements of the formation of a legally recognized relationship between two parties (in a contract) is the existence of consideration. The basic definition of consideration was based on the exchange of money or money's worth so that after an offer has been made and it has subsequently been duly accepted, the exchange seals the contract and it partly shows that the parties had the intention of being legally bound by it. In instances where consideration does not exist, the contract can easily be seen as a gift.[1] There are, however, exceptional instances when other forms of consideration, like love and affection have been used in place of the above-mentioned conventional form of consideration. One such instance relates to matters of resulting trust. This paper will discuss how the presence of consideration in the form of ‘love and affection’ has been rendered sufficient to warrant the court's intervention when it comes to matters of resulting trust.

The Court’s Intervention Arises Due to the Distinctiveness between Valuable Consideration and ‘love and affection’

In order to have an understanding of why love and affection is considered sufficient consideration in matters relating to resulting trust, it is firstly important to outline the meaning of the latter term. A resulting trust arises when an individual holds property for the beneficial enjoyment of another person as directed or implied by a court.[2] Under such instances, the person who acquires title to the property is not expected to have any beneficial or equitable interest in the property.[3] Such situations exist in conveyancing transactions wherein a spouse may transfer certain interests in property to the other spouse and the consideration that would be exchanged would be in the form of love and affection. This is distinctive from a purely commercial transaction wherein valuable consideration is provided. In numerous instances within the Australian jurisdiction, the existence of ‘love and affection’ as a form of consideration has been deemed sufficient. This has particularly been the case when it comes to resulting trust matters. It is important to note in this regard that the fundamental underlying factor that must be met with respect to the aspect of consideration is sufficiency, rather than adequacy.[4] In this regard, for the consideration to be deemed sufficient it must confer a real benefit on the promisor and this benefit is in this regard in form of natural love and affection. However, unlike valuable consideration which can easily be quantified, natural love and affection is often difficult to quantify or verify and the extent to which a promisor gets a real benefit can come to question. Due to the distinctive nature between valuable consideration and ‘love and affection as a form of consideration’, and the extent to which the latter cannot unquestionably be verified under certain circumstances, the courts are often willing to intervene so as to protect the sanctity of the conveyance transaction.

The court’s intervention arises due to the fact that the sufficiency of love and affection may come to question.

As alluded to above, consideration should not be adequate, but sufficient. The question of the sufficiency of natural love and affection in meeting the obligation of consideration during conveyancing transactions was outlined in the case of Director of Public Prosecutions for Victoria v Phan Thi Le (DPP v Le). The High court of Australia was charged with the task of considering whether "natural love and affection could constitute sufficient consideration".[5] In this case, the respondent's husband had been charged with several offences which as per the underpinnings in the Victorian Confiscation Act would result in the forfeiture of his property to the Minister upon conviction.[6] Section 35 (1) of the Act in this respect indicates that after an accused person has been convicted for a Schedule 2 offence, the restrained property (wherein the illegal transaction had taken place) would be automatically forfeited to the Minister.[7] An exception only applies when the property is subject to an exclusion order.[8] In the present case, the accused person pleaded guilty to the charges that had been presented and the process of forfeiture followed. The respondent, however, contended that her interests in the property should be excluded from the forfeiture. An order for such exclusion could only arise if the so called 'tainted property' was inter alia duly acquired by the applicant through the remission of sufficient consideration.[9] The judges, therefore, determined whether love and affection constituted sufficient consideration. In the above-mentioned case, the judges unanimously agreed that love and affection was sufficient consideration in the conveyancing transaction. There were, however, divergent views with respect to whether within the circumstance, ‘love and affection’ would be sufficient. Whereas a majority of the judges agreed that 'natural love and affection' was existent in the present circumstances, Gummow and Hayne JJ presented dissenting views while noting that although the definition of 'love and affection' has not been statutorily provided, the existence of such a consideration could not be seen in the present circumstances notwithstanding the fact that the respondent was in fact legally married to the convicted individual.[10] Based on the conclusion drawn by Gummow and Hayne JJ, it is apparent that unlike valuable consideration, other forms of consideration (such as love and affection) cannot be seen as being absolute and as such the intervention of the court has been required. It was arguable that no real benefit was being received by promisor thus the mention of ‘love and affection’ as a form of consideration was not serving its legally recognized purpose.

The court’s intervention is required when analysing the context of the use of ‘love and affection’ as consideration

The need for incorporation of the court's intervention when it comes to the issue of 'love and affection' as sufficient consideration has also to be analyzed in light of the context of the applicability of the said type of consideration. ‘Love and affection’ as a form of consideration cannot always be uniformly applied in all contexts. This partly arises from the extent to which its nature is distinctive from that of valuable consideration.   In the case of DPP v Le, Gummow and Hayne JJ indicated that although 'love and affection' is indeed sufficient consideration in conveyancing matters, the said form of consideration was not to be included in the definition of 'sufficient consideration' within the meaning of the Section 52 of the Victorian Confiscation Act (the Act mainly makes provision for the instances when a person’s property can be forfeited by the government and one such instance as alluded to above arises when a person is convicted for selling prohibited substances that lead to dependence).[11] Section 52 notes inter alia that if a person acquired the tainted property for sufficient consideration and they are innocent with respect to the illegality that was taking place within the property, their interest can be exempted from the forfeiture order. Gummow and Hayne JJ argued that ‘love and affection’ as a form of consideration does not fit with the meaning of ‘sufficient consideration’ was contemplated in the Victorian Confiscation Act. It was further noted that no matrimonial obligation had been imposed upon Mr. Le to "create a proprietary interest in favor of his wife".[12] The same interpretation was arrived at by Lord Wilberforce in National Provincial Bank Ltd v Ainsworth where it was indicated that a “wife has no specific right against her husband to be provided with any particular house, nor to remain in a particular house...she has a right to cohabitation and support".[13] Her rights are only of a personal kind and they ought not to extend the transfer of proprietary rights. This form of interpretation shows that 'love and affection' are not conclusively seen as sufficient consideration and that depending on the circumstances of the case, the court may be called upon to intervene.

The court will intervene if the form of consideration is being used for a fraudulent purpose

The court will also intervene to declare the above-named type of consideration inconsequential in cases where a transfer of property from one person to another is being conducted for fraudulent purposes. This is also the case where the property is being transferred without the knowledge of the transferee. In the case of Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2015] VSCA 124, property was transferred by Mr. Fitzgerald to Ms Xiao (his wife) who had no knowledge of the transfer and who was not conversant with the English language.[14] Mr. Fitzgerald transferred the property with the aim of obtaining credit from the plaintiff since he could not obtain the credit in his own name due to an unfavorable credit history.[15] Later on he defaulted on the loan. The court ruled that Ms Xiao completely held the property in trust for Mr. Fitzgerald and in that regard Mr. Fitzgerald was due to pay damages for the outstanding loans including interest.[16] It was apparent that Ms Xiao was not to benefit from the transfer and was merely holding the property in trust. In line with the foregoing, it is apparent that the court will intervene in instances when the transfer of property with ‘love and affection’ as the consideration is merely meant to serve a fraudulent purpose.

Although consideration as one of the fundamental elements of a valid contract is often paid in form of money-based resources, there are instances when other forms of consideration accrue. One such instance is in conveyancing transactions. To the extent that the nature of ‘love and affection’ as a form of consideration is distinctive from valuable consideration, the courts will always intervene to protect the sanctity of the legal transaction. Some of the instances when the court will intervene include; when the form of consideration is clearly insufficient, when the context of the applicability of the consideration is inconsistent with the draftsman’s intended purpose, and when the consideration is being used to fulfill a fraudulent purpose. The use of ‘love and affection’ as a form of consideration is, therefore, not absolute and the court will often intervene to question the sufficiency of the form of consideration.

[1] M Bryan, V Vann, and SB Thomas, ‘Equity and Trusts in Australia’ (2007) Cambridge University Press, 132.

[2] Ibid, 355.

[3] Ibid, 355.

[4] Ibid, 132.

[5] Director of Public Prosecutions for Victoria v Le [2007] HCA 52.

[6] Ibid, 52.

[7] Ibid, 53.

[8] Ibid, 53.

[9] The Victorian Confiscation Act of 1997 Section 52(1)(a).

[10] Director of Public Prosecutions for Victoria v Le [2007] HCA 52.

[11] Ibid, 53.

[12] Ibid, 52.

[13] National Provincial Bank Ltd v Ainsworth [1965] A.C. 1175.

[14] Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2015] VSCA 124.

[15] Ibid, 124.

[16] Ibid, 124.

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