Report No. 70
22.30. Section 2.- The following is the text of section 2 of the English Act of 1964-
"2.(1) Where in any proceedings there arises on the rule against perpetuities a question which turns on the ability of a person to have a child at some future time, then-
(a) subject to paragraph (b) below, it shall be presumed that a male can have a child at the age of fourteen years or over, but not under that age, and that a female can have a child at the age of twelve years or over, but not under that age or over the age of fifty-five years; but
(b) in the case of a living person evidence may be given to show that he or she will or will not be able to have a child at the time in question.
(2) Where any such question is decided by treating a person as unable to have a child at a particular time, and he or she does so, the High Court may make such order as it thinks fit for placing the persons interested in the property comprised in the disposition, so far as may be just, in the position they would have held if the question had not been so decided.
(3) Subject to sub-section (2) above, where any such question is decided in relation to a disposition by treating a person as able or unable to have a child at a particular time, then he or she shall be so treated for the purpose of any question which may arise on the rule against perpetuities in relation to the same disposition in any subsequent proceedings.
(4) In the foregoing provisions of this section references to having a child are references to begetting or giving birth to a child, but those provisions [except sub-section (1)(b)] shall apply in relation to the possibility that a person will at any time have a child by adoption, legitimation or other means as they apply to his or her ability at that time to beget or give birth to a child."
22.31. By way of further comment, it may be stated that section 2 reverses, as to the future, the decision in Ward v. Van der Loeff, 1924 AC 653, supra by means of rebuttable presumptions as to the minimum age of childbearing, and also, in the case of a female, as to the maximum age. Evidence may, therefore, be given for the purpose of rebutting these presumptions, or for the purpose of showing that a person within the ages of childbearing is nevertheless incapable of having a child; for example, evidence of impotence.
Section 2 also applies to the right of a beneficiary to terminate accumulations of income under the rule in Sounders v. Vautier, (1841) 4 Beav 115 : Section 13, Act of 1964.
Section 2(2) empowers the court to grant a tracing order against a beneficiary who, as events turn out, has been wrongly paid on the statutory presumptions, subject to the overriding requirement that such an order is just in all the circumstances.1 In practice, distribution on the statutory presumptions will probably be effected only after insuring against the risk of the presumptions being rebutted by later even.
1. Diplock (in re:), 1951 AC 251 : (1948) Ch 465.
22.32. Act of 1964-Actual and possible events.-
The next important reform effected by the Act of 1964 relates to actual and possible events.
22.33. Common law.-
At common law, the rule is concerned with possible, not with actual, events. The slightest possibility of the period being exceeded invalidates the interest. Under the Act of 1964, one may await the outcome of actual events within the period.
The standard perpetuities doctrine (as unmodified by legislation) does not permit consideration of facts which occurred after the death of the testator or the date on which the transfer takes effect. Nevertheless, in practice, it is often seen that the contingencies on which the testator or the transferor insisted have happened well within the lives in being plus twenty-one years (in England) or attainment of age of majority (in India).
In the U.S.A., this situation was dealt with by the Supreme Court of Florida1 by holding that it will not invalidate an interest on the basis of contingencies which never happened. In England, in order to modify the common law position that the application of the rule has regard not only to actual events but to the possible events, the English Act of 1964 has made several provisions, of which the principal one dealing with this point appears to be section 3(1).
Under that sub-section-to state the matter in non-technical terms2-if a disposition is void by reason of the rule against perpetuities, even then, it is to be treated as valid until events have shown that the interest must vest (if at all) after the end of the perpetuity period. For example, the transferor or testator-T-gives property to the first daughter of A who gets married.
At common law, if A survived the testator and no daughter of A was at that time married, then the gift is too remote, because it is possible that a daughter who was born after the death of T might be the first to marry and she might not do so until more than twenty-one years after the death of A, A being the only available life in being. Under the Act of 1964, section 3(1), the gift will be valid if a daughter marries before the expiration of twenty-one years from the death of A. If necessary, we must wait and see for that length of time.3 As to the situation where ultimately the gift is found to be invalid by reason of perpetuity, a provision-though a cryptic one-is to be found in section 3(1).
1. Story v. First National Bank & Trust Company, (1934) 115 Florida 436; Leach, Perpetuities in Perspective, 65 Harvard Law Review 725, 730.
2. Section 3 is quoted later, para. 22.34.
3. Text of section 3(1) of the Act of 1964 will be quoted later, para. 22.34.
22.34. Section 3.- This is the text of section 3
"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 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 by way of advancement, application of intermediate income or otherwise.
(2) Where, apart from the said provisions, a disposition consisting of the conferring of a general power of appointment would be void on the ground that the power might not become exercisable until too remote a time, the disposition shall be treated, until such time (if any) as it becomes established that the power will not be exercisable within the perpetuity period, as if the disposition were not subject to the rule against perpetuities.
(3) Where, apart from the said provisions, a disposition consisting of the conferring of any power, option or other right would be void on the ground that the right might be exercised at too remote a time, the disposition shall be treated as regards any exercise of the right within the perpetuity period as if it were not subject to the rule against perpetuities and, subject to the said provisions, shall be treated as void for remoteness only if, and so far as, the right is not fully exercised within that period.
(4) Where this section applies to a disposition and the duration of the perpetuity period is not determined by virtue of section 1 or 9(2) of this Act, it shall be determined as follows:-
(a) where any person falling within sub-section (3) below are individual in being (or on ventre sa mere) and ascertainable at the commencement of the perpetuity period the duration of the period shall be determined by reference to their lives and no others, but so that the lives of any description of persons falling within paragraph (b) or (c) of that subsection shall be disregarded if the number of persons of that description is such as to render it impracticable to ascertain the date of death of the survivor.
(b) where there are no lives under paragraph (a) above, the period shall be twenty-one years.
(5) The said persons are as follows:-
(a) the person by whom the disposition was made;
(b) a person to whom or in whose favour the disposition was made, that is to say
(i) in the case of a disposition to a class of persons, any member or potential member of the class;
(ii) in the case of an individual disposition to a person taking only on certain conditions being satisfied, any person as to whom some of the conditions are satisfied and the remainder may in time be satisfied;
(iii) in the case of a special power of appointment exercisable in favour of members of a class, any member or potential member of the class;
(iv) in the case of a special power of appointment exercisable in favour of one person only, that person, or where the object of the power is ascertainable only on certain conditions being satisfied, any person as to whom some of the conditions are satisfied and the remainder may in time be satisfied;
(c) a person having a child or grandchild within sub-paragraphs (i) to (iv) of paragraph (b) above, or any of whose children or grandchildren, if subsequently born, would by virtue of his or her descent fall within those sub-paragraphs;
(d) any person on the failure or determination of whose prior interest the disposition is limited to take effect."
Sub-section (1) has the revolutionary effect of introducing the principle of "wait and see" into the rule against perpetuities, and sub-sections (2) and (3) extend the rule to general and special powers of appointments, options and similar rights. "Wait and see" was impossible under the old law which as a general rule concerned itself with possible, not actual, events. Thus, in Re Wood,1 the testator devised certain gravel pits to his trustees on trust to work them until the pits should be exhausted, and then on trust for sale and to divide the proceeds equally among the testator's issue then living.
The pits were exhausted six years after the testator's death and before the litigation commenced, but the gift to the issue was held void, since at the date of the gift and pits might not have been exhausted for more than twenty-one years. A fortiori, if the contingency is unsatisfied at the commencement of litigation, and might not be satisfied until after 'the perpertuity period.
Such absurdities will not arise under the Act of 1964, for the validity of a gift is now determined by the outcome of actual events; if the contingency is, in fact, satisfied within the perpetuity period, the gift is valid; if the event has still not happened when that period ends, the gift will then fail.
The question arises as to the destination of the intermediate income during the wait and see period. This appears to have been dealt with by the last sentence of sub-section (1), which provides that the ultimate invalidity of the contingency shall not affect the validity of an intermediate dealing "by way of advancement application of income or otherwise" on the footing that the interest is valid.
This seems to imply that if the interest in question carries the intermediate income, that income is payable to the contingent beneficiary under section 31(1)(ii) of the Trustee Act, 1925, and that the statutory powers of maintenance and advancement under sections 31 and 32 of the Trustee Act, 1925, will also be available. The powers were not available before the Act of 1964, since an interest which infringed the rule was void ab initio. But now, by virtue of the wait and see rule, one awaits the outcome of the events, and until the end of the perpetuity period or earlier happening of the relevant event, the interest is merely contingent and is presumptively valid.
1. Wood (in re:), (1894) 3 Ch 381.
22.36. Act of 1964 and maximum age.-
The common law rule was that the interest must vest within 21 years of the death of the last of the lives in being mentioned in the deed or will. This rule created difficulties where the testator or settlor made the vesting conditional on an age higher than 21 years, because then there is a possibility that the interval between the termination of the life and the vesting in the ultimate unborn beneficiary may exceed twenty-one years. Reform was, by legislation, affected on the subject in England first in 1925.1
Sections 4(1) and 4(2) of the Act of 1964 now read-
"4.(1) Where a disposition is limited by reference to the attainment by any person or persons of a specified age exceeding twenty-one years, and it is apparent at the time the disposition is made or becomes apparent at a subsequent time-
(a) that the disposition would, apart from this section, be void for remoteness, but
(b) that it would not be so void if the specified age had been twenty-one years, the disposition shall be treated for all purposes as if, instead of being limited by reference to the age in fact specified, it had been limited by reference to the age nearest to that age which would, if specified instead have prevented the disposition from being so void.2
(2) Where in the case of any disposition different ages exceeding twenty-one years are specified in relation to different persons-
(a) the reference in paragraph (b) of sub-section (1) above to the specified age shall be construed as a reference to all the specified ages, and
(b) that sub-section shall operate to reduce each such age so far as it is necessary to save the disposition from being void for remoteness."
1. Section 163, Law of Property Act, 1925.
2. These replaced section 163, L.P. Act, 1925.
22.37. It is important to notice that under section 4 the age can be reduced only if the disposition would otherwise be void. For example, a devise. "To such of my children as shall reach the age of twenty-one," is valid as it stands, since all the beneficiaries are lives in being. It is expressly provided in section 4(1) that the age may be reduced to the age which is necessary in order to save the gift; this implies that the "wait and see" rule enacted by section 3 must be applied first, since otherwise the only relevant age would be twenty-one.
22.38. Bombay case on age.-
Incidentally, it may be mentioned that the provisions in India-section 14, Transfer of Property Act and section 114, Succession Act-are linked up with the attainment of majority by the unborn beneficiary, and not with the length of the interval. However, problems of the nature that have arisen in England can arise in India also. A Bombay case1 furnishes illustration of the difficulty raised by the age-limit. The Will ran as follows:-
"I give the property to my son and for life and I give the property after his death to his sons in equal shares. In case he leaves no son behind him, my mukhtiar shall get a son adopted by his wife and thus perpetuate his name and they shall give the property to him (adopted son) on his attaining the age of twenty-one."
It was held that the bequest in favour of the adopted son who might be adopted at any time after the date of the son's death, was void under the rule against perpetuities. No argument was considered as to whether theoretically adoption could have been regarded as having retrospective effect.
1. Kashinath v. Chinnaji, ILR 30 Bom 437.
22.39. Act of 1964-Time of death-The unborn widow.-
Then there is the question of limitations dependent on the time of death of the survivor of two persons
(i) a person in being at the commencement of the transfer, and
(ii) his spouse.
Difficulty may arise because the spouse may not necessarily be a person in existence when the transfer takes effect.
22.40. Unborn widow.-
What has come to be known as the trap of the "unborn widow" (or unborn widower) may be referred to at this stage. Property is given to A for life, then to A's widow who may survive him for life and then to the children of a living at the death of the survivor of A and his widow. Since A may marry a woman who was unborn at the time of death of the testator, and since the woman so married may survive A by more than 21 years, the gift to be children vest too remotely and such gifts were held to be void in a number of cases decided at common law.
Even if, at the time of the death of the testator, A was married and his wife died earlier while A remained alive and did not marry again, yet the gift to the children as framed in the will would not be saved, because of the common law rule that possible and not actual events had to be considered.
In Re frost1 the testator, Frost, devised land on trust for his daughter, Emma, for life, and then on trust for any husband whom she may hereafter marry for life; and after the death of the survivor of Emma and her husband, on trust for such of her children as she should appoint, and in default of appointment on trust for all the children of Emma who should be living at the death of the survivor of her and her husband, or should have previously died leaving issue then living.
Kay J. held: "The question is, whether the limitation in favour of the children of Emma Frost is good Emma Frost was unmarried at the date of this will. She might have marred after the death of the testator a person who was not born in his lifetime, and it might therefore have been a limitation to Emma Frost for life, remainder to an unborn person for his life, with a contingent remainder over to the children of Emma Frost living at the death of that unborn person or such of them as should be then dead leaving issue then living That clearly would be a limitation which would offend against the rule of perpetuity, because it would tie up the estate, not merely during the life of Emma Frost, who was in existence at the death of the testator, but during the life of Emma Frost's husband, who might possibly not be living at the death of the testator.
So that it would not merely by tied up for a life in being and twenty-one years after, but for a life in being, with remainder for a life not in being, with a contingent given over I think, therefore, that this limitation is void, because it offends against the rule of perpetuity."
1. Frost (in re:), (1889) 43 Ch D 246.
22.41. In the case of Re Frost1 it was clear from the fact that Emma Frost was unmarried at the date of the will, and from the use of the phrase "any husband she may hereafter marry," that a possibly unborn husband was included. If, however, Emma had been already married at the date of the will, and the gift had been simply "to her husband for life," that gift would, it seems, have been construed as a gift to her existing husband alone, and the gift to their children would have been valid.
If the gift is to A for life, remainder to any husband whom she may marry for life, and who shall survive her, remainder to such of the children of A as shall attain the age of twenty-one, the gift over to the children is valid, since all A's children are ascertained at her death, and they must reach the age of twenty-one, if at all, within twenty-one years of that date.2
1. para, 22.40, supra.
2. Hancock (in re:), (1896) 2 Ch 173.