Report No. 70
The Rule Against Perpetuities
The policy of the law of favouring the free circulation of property and its alienability within reasonable limits has led to the evolution of rules relating to the vesting of estates. Circulation is thwarted if vesting is delayed unreasonably, hampered unduly or made uncertain. The doctrine that property should not remain ownerless has given rise to several interesting rules of common law and equity. It explains, in part, the doctrine under which the State takes property as the ultimate heir. It supplies, indirectly, the justification for the appointment of 'curators' in the law of intestate succession.
It is the principal basis of the English doctrine that on the death of a person, until the Administrators take charge under Letters of Administration, the estate vests in the President of the Probate, Divorce and Admiralty Division. Now Family Division. There are many other doctrines based wholly or in part upon a similar rationale. The rule against perpetuities, to which we shall now direct our attention, could be attributed to the anxiety of the law to ensure that vesting is not unreasonably delayed-with the ultimate objective that its free circulation may be facilitated.
Since medieval times, English law has been subject to the tension between two conflicting influences. Land and other property owners have desired to tie up their property indefinitely, usually for the benefit of their family or for some institution or cause, while the courts and the legislature have always felt that it is in the interest of the nation as a whole that wealth should circulate freely and that property should not be made inalienable.
The result has been a compromise. Property may be tied up indefinitely for a purpose which the law wishes to advance, namely, a charity.1 Otherwise, property may be tied up, but only for a comparatively short period. The rule which governs this is known as the rule against perpetuity.
1. Parker & Mellows Modern Law of Trusts, (1966), p. 71.
22.3. Two aspects.-
This rule has two aspects.1 First, that relating to vesting. In its basic form, it provides that property must vest in the recipient within the period of a life or lives in being at the time when the gift is made, and twenty-one years thereafter (with allowance being made where appropriate for the period of gestation).2 The second aspect is that property must not be limited in such a way that it is inalienable in the hands of the recipient.
1. (a) Cade11 v. Palmer, (1833) 1 Cl&Fin 372; (b) Wilmer's Trusts (in re:), (1903) 2 Ch 411.
2. Parker & Mellows Modern Law of Trusts, (1966), p. 71.
22.4. Section 14.-
Under section 14, no transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at the date of such transfer and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.
22.5. Succession Act.-
The corresponding section 114 of the Indian Succession Act, 1925 is as follows:-
"114. Rule against perpetuity-No bequest is valid whereby the vesting of the thing bequeathed may be delayed beyond the lifetime of one or more persons, living at the testator's decease, and the minority of some persons who shall be in existence at the expiration of that period, and to whom, if he attains full age, the thing bequeathed is to belong."
There are a few illustrations to the section:
"(i) A fund is bequeathed to A for his life; and after his death to B for his life; and after B's death to such of the sons of B as shall first attain the age of 25. A and B survive the testator." Here "the son of B who shall first attain the age of 25, may be a son born after the death of the testator; such son may not attain 25 until more than 18 years have elapsed from the death of the longer liver of A and B and the vesting of the fund may thus be delayed beyond the lifetime of A and B and the minority of the sons of B. The bequest after B's death is void.
(ii) A fund is bequeathed to A for his life and after his death to B, for his life and after B's death to such of B's sons as shall first attain the age of 25. B dies in the lifetime of the testator, leaving one or more sons. In this case the sons of B are persons living at the time of the testator's decease and the time when either of them will attain 25 necessarily falls within his own lifetime. The bequest is valid.
(iii) A fund is bequeathed to A for his life, and after his death to B for his life with a direction that after B's death it shall be divided amongst such of B's children as shall attain the age of 18; but that if no child of B shall attain the age, the fund shall go to C. Here the time for the division of the fund must arrive at the latest at the expiration of 18 years from the death of B, a person living at the testator's decease. All the bequests are valid.
(iv) A fund is bequeathed to trustees for the benefit of the testator's daughters with a direction that, if any of them marry under age, her share of the fund shall be settled so as to devolve after her death upon such of her children as shall attain the age of 18. Any daughter of the testator to whom the direction applies must be in existence at his decease and any portion of the fund, which may eventually be settled as directed must vest not later than 18 years1 from the death of the daughters whose share it was. All these provisions are valid."
1. This is not accurate by giver as a reader.
22.6. Genesis of the Rule.-
The rule in section 14 is borrowed from the English law, where1 it has been recognised from very early times.2 After property in future estates had begun to be recognised, and the limitation of estates in remainder to unborn children, as well as the creation of future estates by way of shifting use and executory devise began to be permitted, it was felt that unless some rules restraining the creation of such estates were devised, property may, by a single transfer, be tied up in perpetuity. In the case of future estates to arise by way of shifting use and executory devise, these due bounds were gradually settled by successive decisions.
Such estates were allowed to take effect at first, within the compass of an existing life,3 then within a reasonable time after.4 This reasonable time after an existing life was next extended to the period of the minority of an infant actually entitled under the instrument, by which the executory estate was conferred.5 It was then held that any number of existing lives might be taken6 Finally, it was settled that the time allowed after the duration of existing lives should be a term of twenty-one years independently of the minority of any person, whether entitled or not, with the possible addition of the period of gestation, but only where the gestation actually existed.7
2. 1 Rep 84A, 88a, 131b.
3. Howard v. Duke of Norfolk, 2 Swanst 454.
4. Marks v. Marks, 10 Mod 419.
5. Stephens v. Stephens, 1 De G&J 62.
6. Thelluson v. Woodford, 4 Ves 227: 11 Ves 112.
7. Will's R.P., (18th Edn.), 379, 380; citing Cadell v. Palmer, 7 Binch (NS), 202.
22.7. Applies to movables.-
The rule applies to all property. In England also, the rule extends to personal property as well, for, if it were otherwise, trusts of an indefinite duration might have engendered and same mischief which the rule is designed to guard against.1
The rule has been extended in India equally to moveable property.2 But, its application to personal contracts,3 such as a contract for the sale of land which creates no right in rem,4 is a matter of doubt. A covenant to do any act, as for example, to pay money, cannot it seems, be avoided by reason that the time of performance may not arise within the period allowed by the rule.5 It would, however, be otherwise if the contract created an equitable interest in property.6 As a contract for the sale of lands or for pre-exemption does not create such an interest, it would not be void as opposed to the rule, although there may be cases in which it may be void for remoteness.7
1. Gour. Cf. Accumulations Act, 1892 (55 & 56 Vict., C. 58).
2. Cowasji v. Rustomjis, ILR Born 511.
3. London and South Western Rly. Co. v. Comm., 20 Ch D 562; Borlands v. Steel Bros. & Co., (1901) 1 Ch 279.
4. Southern Eastern Rly. v. Associated Portland etc. Ltd., (1910) 1 C 12 (33); Charamudi v. Raghuvulu, 39 Mad 462 (469); Ali Hossain v. Rajkumar, AIR 1943 Cal 417.
5. Walsh v. Secretary of State for India, 10. HLC 367.
6. London & South Western Rly. Co. v. Comm., 20 Ch D 562.
7. Ramaswamy v. Chinnan, ILR 24 Mad 449 (457, 469).
As regards the application of the rule against perpetuities to charities, there seems to be some misconception. It is commonly stated that the property must vest within the specified period and that the only relaxation is that a gift over to charity is valid even if the previous gift to charity is contingent and is invalid under the rule against perpetuities. Whatever may be the position in English law, this is not true in India. As Mulla has pointed out,1 section 18 of the Transfer of Property Act relaxes the rule against perpetuities embodied in section 14 in respect of the transfer for purposes mentioned in section 18.
Therefore, the vesting of such transfers may be delayed beyond the period mentioned in section 14 in the case of charities. In contrast, in English law, charitable trusts in futuro are no exception to the modern English rule against perpetuities which deal with estates in futuro. While charitable trusts, in England, can be valid even though the property is tied up for an indefinite period, a gift to charity upon a remote event is void in England except in the case of a gift over from one charity to another. Whatever may be the position under the Indian Succession Act, section 114,2 the Transfer of property Act has relaxed the rule against remoteness of vesting in the case of charities in clear and positive terms in section 18.
1. Mulla, (1973), p. 179.
2. Jones v. Adm. General, ILR 1946 Cal 485.
22.9. This does not, of course, involve any amendment of section 14, but the matter is mentioned here by way of anticipating the provisions of section 18 which (inter alia) specifically provides that the restriction in section 14 shall not apply in the case of a transfer of property for the benefit of the public for the specified purpose.
22.10. Two senses.-
We have referred above to the two senses of 'Perpetuity'-inalienability and remoteness of vesting of future interest. The first sense is concerned with present interest and the second sense is concerned with future interest. Section 14 is concerned with the second sense which pertains to the period upto which vesting of an interest can be legitimately delayed.