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Report No. 70

22.11. Inalienability.-

Perpetuity in the sense of inalienability is outside the provisions of section 14, of course, as already stated, the policy of making illegal, the undue postponement of vesting has, as its ultimate objective, the end of promoting free alienation. But there is no direct prohibition against alienation in section 14. That topic is, to some extent, dealt with in sections 10 to 12, concerned with conditions or limitations prohibiting or restricting alienations. Apart from those sections, the policy of the law to promote alienability is reflected in its attitude towards restraints imposed in grants and gifts even where not governed by the Act.

Irrespective of the provisions of the Act, it was held in Calcutta that perpetuity is repugnant to Hindu law except in the case of religious and charitable endowments.1 This position was reaffirmed in a Bombay case.2

1. Sukhmai v. Manohari, 1885 ILR 11 Cal 684.

2. Vallabh v. Goverdhan Das, 1880 ILR 14 Boni 360.

22.12. Move for Reform.-

During the last forty years or so, the Rule against Perpetuities has come under fire in many parts of the world. While the rule expresses a perfectly reasonably policy-a fair balance between the desires of members of the present generation, and similar desires of succeeding generations to do what they wish with the property which they enjoy1-yet it has inevitably become 'encrusted with barnacles'. The law will be improved, and the Rule itself simplified and strengthened, it has been though, by removing these barnacles.

1. Simos Public Policy and the Dead Hand, (1955), p. 58.

22.13. Causes of dissatisfaction and some representative examples of reform.-

The main causes of dissatisfaction with the Rule are two : first, the requirement of absolute certainty that the interest will vest within the perpetuity period, and its consequent invalidity if any possible combination of events, however, improbable or fantastic, could cause it to vest outside the period; and, secondly, the harsh consequences of violating the Rule, whereby the interest fails completely instead of being 'cut down to size'. There is widespread agreement today that some statutory reform of the Rule is necessary. There is much less general agreement as to the form which is such amending legislation ought to take. The various proposals and experiments can be reduced to three main types:

(1) The first is legislation specifically directed against the well-known 'trade' which so often cause a violation of the rule when the age limit is exceeded. In England, section 163 of the Law of Property Act, 1925, reduced age contingencies to twenty-one-when this is necessary to save the gift; similar statutes were enacted in many other jurisdictions.1 Difficulties arising from 'the unborn widow trap' were sought to be remedied in New York, Western Australia and California, Administrative powers of trustees were excepted from the Rule, in Western Australia, Victoria and New South Wales.

(2) A second type of reform is to introduce a 'wait and see' rule, whereby the validity of interests depends on actual, and not on possible, events. Legislation to this effect was first introduced in Pennsylvania in 1947, and, though in a somewhat different from, later in Massachusetts, Connecticut, Maine, Maryland, Vermont, Kentucky, Washington and Western Australia.

(3) A third method is to give the courts a general discretionary power to reform limitations which would otherwise be void so as to make them approximate most closely to the testator's or settlor's intention within the limits of the Rule. This 'cypress method', as it is called, has been enacted in varying forms in Vermont, Kentucky, Washington, Idaho and California.2

In England, an elaborate measure was passed by way of reform in 1964, which we shall deal with later.

1. e.g., Victoria (1918), New South Wales (1919), Western Australia (1941), New Zealand (1944), Massachusetts (1954), Maine (1955), Connecticut (1955), Maryland (1956) and New York (1960). (The dates are those in which the reform was first enacted).

2. Information is compiled from various articles by Profesor W. Barton Leach of Harvard in the Law Quarterly Review, the Harvard Law Review and by a few others in the Yale Law Journal.

22.14. No account of the reform of the rule against perpetuities in England would be complete without a tribute to professor Leach of Harvard. It was his article published in 19521 which first attracted the attention of high authorities in England to the need for reform, and caused the Rule against Perpetuities to be referred to the Law Reform Committee. It was his tireless advocacy of the 'wait and see' doctrine that made it seem the obvious method of reform, despite some vigorous dissent. In the second reading of the debate on the English Bill in the House of Lords, Lord Evershed paid a graceful tribute both to Professor Leach's reforming zeal and to the draftsman's skill.2

1. Leach Perpetuities: Staying the Slaughter of the Innocents, (1952) 68 LQR 35.

2. Hansard, Vol. 256, Col. 246.

22.15. Need for reform in India.-

Lest this should sound pedantic and lest it should be thought that there is no need for reform in India and that all is well with our statutory provisions, we would like to refer at this stage to situations wherein difficulties could be experienced in India also. A slight disregard of the stringent statutory provisions, or a misconception about the age of majority, may lead to defeating the intention of the transferor. In one of his famous articles published in the Harvard Law Review, Professor Leach had this criticism to make of the rule-

"The Rule against Perpetuities is a technicality-ridden legal nightmare, designed to meet problems of past centuries that are almost nonexistent today. Most of the time it defeats reasonable dispositions of reasonable property owners, and often it defeats itself. It is a dangerous instrumentality in the hands of most members of the bar. It ought to be substantially, "changed by statute, and the lawyers ought to see that this is done."1

Every word of it may not apply to Indian codified law. But difficulties could arise. In fact, difficulties have arisen. Let us take a reported case.

1. Leach, in (1954) 67 HLR 1349.

22.16. Case of Soundararajan.-

The case of Soundarajan1 illustrates the anomaly resulting from the fact that a slight excess over the legally permissible age may defeat the transfer. That case was, no doubt, a case relating to succession on death, but the position would be the same in respect of a transfer during lifetime. In that case, an estate was given to the testator's daughters for their lives with the remainder for the children on attaining the age of 21 years. The age of majority in India is 18 years, unless guardians are appointed or a court of Wards takes charge.

It was held, that, as at the testator's death, it could not be certain that in the case of every child a guardian would necessarily be appointed so as to postpone the minority of the child till 21 years, there was a possibility that the bequest would be held beyond the lifetime of the daughters and the minority of some of the children of the daughters. Hence by virtue of section 102 of the Indian Succession Act, 1965, broadly corresponding to section 114 of the Indian Succession Act, 1925 and section 14 of the Transfer of Property Act, the whole bequest in favour of the children was illegal.

Of course, this case involved also another complication, namely, that of a bequest in favour of a class and the law on the subject has now been altered in amended section 15 of the Transfer of Property Act. We are not, however, concerned with that complication, but with the difficulty created by the fact that an excess of 3 years (21 minus 18) destroyed the vesting of the estate.

1. Soundararajan v. Natarajan, AIR 1925 PC 244.

22.17. There are several Indian, decision under the Succession Act which illustrate the problems that could arise under the present formulation of the rule.

Other decisions-In Putlibai v. Sorabjee, 25 Bom LR 1099 (PC), the testator devised his house upon trust to allow his daughter until her death or marriage and all his sons and their respective families including widows to reside therein until the youngest of his grandsons should attain the age of 18 years and then for sale and conversion. It was held that during the sons' lives their wives took no independent gift, but the gift to the son entitled him to reside there with his wife.

As all the sons were alive, no question arose as to the title to reside that could .be claimed for the widows of the sons and their Lordships retrained from expressing an opinion on the title of the claim of such a widow to reside if any son died. They, however, pointed out that sections 99, 100, 101 (i.e., sections 112, 113 and 114 of the present Succession Act) might give rise to difficulty in the claim of a widow if she survived the son, as it was not clear that the whole of the testator's interest was bequeathed.

22.18. Reform by judicial decisions.-

It is because of such difficulties which defeat the intentions of the testator or the transferor that need for reforming the law arises. We have briefly mentioned statutory reforms effected elsewhere, and shall deal with them in detail later. It may, however, be mentioned incidentally that in some countries, some of the anomalies have been sought to be mitigated by judicial approach in respect of the ingredients of the rule in common law.

22.19. Example from U.S.A.-

To borrow one example from the U.S.A., in 1953, the New Hampshire Supreme Court in Merchants Nat. Bank v. Curtis, 98 NH 225: 97 A 2d 207: 67 Harvard Law Review 355 (1352). The court relied principally upon 6 American Law of Property, section 24.10 (1952) determined the validity of future interests on the basis of facts existing at the end of preceding estates. The Florida court has given evidence of similar views.1

1. Story v. First Nat. Bank & Trust Co., (1934) 115 Fla 436 (156) So. 101: 67 Harvard Law Review 1352.

22.20. English rule as to possible events.-

This is a modification of the English rule. At common law, if an interest is to satisfy the Rule against Perpetuities, it must be absolutely certain to vest (if it even vests at all) within the perpetuity period; and this certainty must exist at the time when the perpetuity period starts to run or (in the case of appointments under special powers) at the time when the appointment is made. Extreme probability of vesting; within the period is not enough. Nor is it enough that the interest does, in fact vests within the period as events actually occur.

The result is that many perfectly reasonable dispositions are held void because, on some outside chance (not foreseen by the testator or his draftsman) it is mathematically possible that the vesting might occur at too remote a time. No reason for this strange rule has ever been given, except the statement that it is undesirable in property law that the validity of interests should be allowed to remain in suspense too long. This certainty is undoubtedly desirable; but it can bought at too high a price.

Statutory reform made in England now ensures that the validity of a limitation under the rule should depend not on the facts which may occur, but on the facts which do in fact, occur; the principle should be 'wait and see'. Section 3(1), (2) and (3) of the 1964 Act gives effect to this recommendation. Section 3(1) provides as follows:

"3.(1) Where, apart from the provisions of this section and sections 4 and 5 of this Act, a disposition would be void on the ground that the interest disposed of might not become vested until too remote a time, the disposition shall be treated, until such time (if any) as it becomes established that the vesting must occur, if at all, after the end of the perpetuity period, as if the disposition were not subject to the Rule against Perpetuities; and its becoming so established shall not affect the validity of anything previously done in relation to the interest disposed of by way of advancement, application of intermediate income or otherwise."

We are mentioning at this stags how courts in one country have anticipated, by judicial law-making reforms which in another country had to await legislation.

The Transfer of Property Act, 1882 Back

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