Report No. 70
Transfer to A Class
23.1. Section 15.-
When a gift is made to only one person the simple provisions in sections 13-14 apply. When the beneficiaries are a class, more elaborate provisions are required. Section j.5 provides as follows on the subject:
"15. If, on a transfer of property, an interest therein is created for the benefit of a class of persons with regard to some of whom such interest fails by reason of any of the rules contained in sections 13 and 14, such interest fails in regard to those persons only and not in regard to the whole class."
23.2. Class gifts.-
The section deals with class gifts. A class gift is a gift of property to all who come within same description, the property being devisible in shares according to the number of persons in the class.
At common law, a class gift fails in toto if any beneficiary may enter the class outside the perpetuity period, for the size of the shares is not then ascertained in time.
Under the English Act of 1964, persons entering the class within the perpetuity period will take to the exclusion of persons who enter outside the period.
23.3. Amendment of 1929.-
In the great majority of cases where the rule against perpetuities is successfully invoked, the offending provisions is a gift to a class. In such a case at common law, gifts to Al, A2, A3, valid in themselves, are rendered invalid by the fact that gift to A4, is invalid. Leach has criticised this doctrine as "guilt by association". Realising that a gift which threatened to tie up a property for too long a period should not be invalidated in toto, the legislature in India in 1929 amended section 15 by substituting a rule which was thus the reverse of the rule as contained in the old section.
Before the Amendment of 1929, section 15 incorporated the rule of English law as enunciated in the leading case of Leake v Robinson, (1817) 2 Mer 633 holding that in the case of a gift to a class, any members of which may have to be ascertained beyond the limits of perpetuity-for example, a gift to the unborn children of a living person who shall attain the age of twenty five-the whole gift is void. In cases not governed by the Act at a time when the Act did not apply to Hindus, there was judicial reluctance to apply the English doctrine.1
Notwithstanding the provisions in section 102 of the Succession Act, 1865, and section 15 of the Transfer of Property Act as it then stood-provisions which were cited for invalidating the gift by way of an analogy-it was held that even though a gift to unborn grand-sons was invalid under Hindu law, that did not necessarily make the gift void so far as it was in favour of a grand-son in existence. It was pointed out that the English rule usually defeats the intention of the testator and that in any case the English rule was not a safe guide for the construction of Indian gifts.
1. Rai Bishan Chand v. Asvardia Koer, ILR 6 All 560 (PC).
When, however, the Transfer of Property Act was made applicable to Hindus, naturally the position was reversed and, by virtue of the unamended section, such gifts totally failed. It was in 1929 that the section was amended to read as it now stands. The principle under the amended section is that if there is a gift to class and the interest fails with regard to some of the members of the class by virtue of the rules contained in sections 13 and 14, such interest fails only in regard to those persons, and not in regard to the whole class.
If, therefore, the whole plan of a donor of property cannot be carried into effect, the court will yet give effect to a part of it rather than hold that it shall fail entirely. After the gift has vested in all or some members, they will hold it as tenants in common, so long as they take as members of the class unless a joint tenancy is created by express words.
23.5. English Act.-
It may, as a matter of interest, be noted that the English Act of 1964 has also now adopted the same approach by proving,1 in effect, that person who entered the class within the perpetuities period will take, while those who entered the class too late will be excluded. Writers on English law usually describe this reforming provision as an amendment providing a "class-splitting" rule. Of course, before applying this "class-splitting" beneficial rule, one has to apply the other beneficial rules enacted in the 1964 Act, namely, the "wait and see rule" and "rule for reduction of age".
Thus, take "a gift to my grand-children on their attaining the age of twenty-five," which may be void under the common law rule if the grand-children are unborn at the date of the gift. It may, in the first place, be valid if all the grand-children have reached the age of four on the death of the donor who made the will or on the death of the previous holder of the life interest. This is by virtue of the wait and see rule. Next, the age could be reduced under the statutory provision, for reduction.
The gift may still be void (even if the age is reduced to twenty-one) in the case of a grand-child born after the termination of the previous life interest. Now the class-splitting rule must be applied, with the result that any grand-child who satisfies the contingency in time-the contingency of attaining the age of twenty-five years-will take to the exclusion of grand-children who do not so satisfy the contingency.
1. Section 4(3), 4(4) and 4(5), Perpetuities and Accumulation Act, 1964.
Since the substance of section 15, as amended in 1929, is sound, the only amendment which we recommend is the deletion of the reference to section 13. This is consequential on the recommended deletion1 of section 13.
1. see recommendation as to section 13.