Mike held the equitable interest in a thousand shares in Red Corp. On 1 October 2020, he met his old friend Joe for coffee. While chatting with Joe, Mike learned that Joe was invested in Red Corp and that he wanted to acquire more shares. Mike was feeling sentimental. He told Joe that “I am giving you my interest in the shares in Red Corp. They are yours now, right now.” Joe was very grateful. Because they were old friends, neither of them thought it necessary to put anything in writing. The value of the shares has gone up and Mike now regrets his generosity.
Mike held the copyright on a novel he had written in 2001 called Mike’s Journey. Mike’s Journey had never sold many copies. By 2016, no royalties had been payable at any time after 2010. On 1 July 2016 Mike signed a written document which stated:
“I, Mike, assign to my wife, Diane, absolutely all the royalties payable on my copyright on the book Mike’s Journey for the years 2019, 2020, and 2021.
Mike provided Diane with a copy of the document. He did nothing further. No royalties were payable in 2019 or 2021. However, in 2021, bored readers in lockdown discovered the book and sales of Mike’s Journey suddenly increased. Royalties of $3000 are payable for the tax year ending in June 2021. Mike’s tax for the 2020-2021 tax year has been assessed by the government on the $3000 in royalties on the basis that the purported assignment to Diane was invalid.
Advise Mike in regards to:
1. Whether he assigned his equitable interest in his shares in Red Corp to Joe on 1 October 2020.
2. Whether the royalties for Mike’s Journey were validly assigned to Diane in 2016. (You do not need to address any tax issues.)