Question 1: Who has what interests in the Mustang?
This question requires an analysis of the co-ownership of a chattel, the Ford Mustang, and whether an attempted gift of an interest in that chattel was effective.
1. Initial Co-ownership
Initially, Michael, James, and Eddie purchased the Mustang together, with each contributing one-third of the purchase price. This makes them co-owners of the car. In property law, co-ownership can take the form of a joint tenancy or a tenancy in common. While a joint tenancy includes a right of survivorship (where a deceased owner’s share automatically passes to the surviving owners), equity generally presumes a tenancy in common where parties contribute to the purchase price, as they are seen to intend to hold distinct shares (Lake v Craddock (1732) 3 P Wms 158). Their practice of keeping detailed accounts to ensure costs were shared equally further supports the intention to hold separate, one-third shares. Therefore, it is most likely that Michael, James, and Eddie held the Mustang as tenants in common in equal one-third shares.
2. Michael’s Attempted Gift
Before his death, Michael attempted to make an immediate gift of his one-third share to James and Eddie. For a gift of a chattel to be valid, the donor must have donative intent, the gift must be delivered to the donee, and the donee must accept it (Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR 14).
Michael’s intention was clear and immediate, as evidenced by his words: “I’m giving you two my share of the Mustang… as of right now.” Acceptance can be presumed as the gift is beneficial, and James and Eddie did not reject it. The main issue is delivery.
Because Michael only owned a one-third interest, he could not physically deliver the entire car. The law recognises constructive delivery, where the donor transfers the means of control over the property. In this case, Michael placed his set of keys to the shed and the Mustang on the table in front of James and Eddie. Given that the car was in a shared location and the other co-owners already had access, this act, combined with his explicit words of gift, can be argued to be sufficient constructive delivery. By relinquishing his keys, Michael did all he could to transfer his rights and control over his share of the chattel. This symbolic act, witnessed by Jane, likely satisfies the delivery requirement for his undivided share.
3. Conclusion on the Mustang
Based on the analysis, it is likely that Michael made a valid inter vivos (lifetime) gift of his one-third interest in the Mustang to James and Eddie. Consequently, at the time of Michael’s death, he no longer had an interest in the car. James and Eddie became the sole owners, holding the Mustang as tenants in common, each with a one-half share. Michael’s estate, and therefore Tony, has no interest in the Mustang.
Question 2: Who has what interests in the rust proofing process and/or the Patent?
This question concerns the ownership of intangible property—the intellectual property in the rust proofing process and the associated right to apply for a patent—and the validity of Michael’s attempted gift of his share.
1. Nature of the Property and Initial Ownership
The rust proofing process and the right to apply for a patent are forms of intangible personal property, known as choses in action. As the process was developed jointly by the three friends, they are co-owners. Under the Patents Act 1990 (Cth), co-owners of a patent are presumed to be tenants in common (s 16). It is therefore clear that Michael, James, and Eddie held the rights to the process and patent as tenants in common in equal one-third shares.
2. Michael’s Attempted Gift
Michael attempted to gift his one-third share in the "Patent and whatever comes of it" orally. The transfer of legal ownership of a chose in action is governed by statute. In New South Wales, section 12 of the Conveyancing Act 1919 (NSW) requires that any absolute assignment of a debt or other legal chose in action must be in writing and signed by the assignor. Michael’s declaration was oral; it was not in writing or signed. Therefore, the attempted gift fails as a legal assignment.
The gift might still be effective in equity. According to the principle in Milroy v Lord (1862) 4 De GF & J 264, as clarified in Australia by Corin v Patton (1990) 169 CLR 540, a gift will be complete in equity if the donor has done everything that they alone must do to put the transfer beyond their recall. For a legal chose in action that is assignable under section 12, this requires the donor to, at a minimum, execute a written instrument of assignment.
Michael did not create or sign any document to assign his interest. He only made an oral statement. As he failed to take the necessary step of putting the assignment in writing—a step only he could perform—the gift is incomplete. Equity will not perfect an imperfect gift.
3. Conclusion on the Patent
Michael’s attempted oral gift of his one-third share in the rust proofing process and potential patent was ineffective both at law and in equity. Because the gift failed, Michael still owned his one-third interest at the time of his death. This interest now forms part of his deceased estate. As Tony is the sole executor and beneficiary of Michael’s will, he inherits Michael’s one-third share.
The result is that James, Eddie, and Tony are now co-owners of the intellectual property as tenants in common, each holding a one-third share.
References
Conveyancing Act 1919 (NSW)
Patents Act 1990 (Cth)
Corin v Patton (1990) 169 CLR 540
Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR 14
Lake v Craddock (1732) 3 P Wms 158; 24 ER 1011
Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185
