Report No. 70

Chapter 24

Dependent Transfers

Section 16

24.1. Dependent transfers.-

Section 15 having dealt with one situation concerned with the effect of interests which become void-gifts to a class-another situation concerned with an infectious vice is dealt with in section 16, which is concerned with what are known as dependent transfers. Where, by reason of any of the rules contained in sections 13 and 14, an interest created for the benefit of a person or of a class of persons fails in regard to such person or the whole of such class any interest created in the same transaction and intended to take effect after or upon failure of such prior interest also fails.

24.2. Principle.-

The rule in the section is primarily based upon the presumed intention of the transferor. The transaction being indivisible, once a person transfers property and his whole interest is transferred, the failure of the period interest leads to the failure of the whole transaction.1 As observed by Lord St. Leonards2 in respect of a gift over, which was void:

"It was void, not because it was not within the line of perpetuity, but on the ground that the limitation over was never intended by the testator to take effect unless the persons whom he intended to take under the previous limitation would, if they had been alive, have been capable of enjoying the estate; and that he did not intend that the estate should wait for persons to take in a given event where the person to take was in actual existence, but could not take."

The rule in section 16 applies only when the two events cannot be separated; if they can be separated, then the transfer is not void, only the invalid limitation is disregarded.3

1. Gour.

2. Moneypenning v. Derring, 2 De GM&G 182.

3. (a) Evers v. Challis, 7 HLC 531 (534);

(b) Watson v. Young, 28 a D 436 (443);

(c) Jones v. Westcomb, 1 Eq Ca Ab 245;

(d) Bence, Smith (in re:) v. Bence, (1891) 3 Ch 242.

24.3. Scope of dependent transfer.-

The scope of "dependent transfer" may be illustrated from a case under the Hindu Wills Act. Though section 16 is now made independent of the Hindu law, still there does not appear to have been any conflict between the rule of that law, at any rate the rule applicable to those to whom the Hindu Wills Act1 applied and the rule en acted in the section.

In a Calcutta case2, a bequest of the trust-fund was made in these terms: "My great-grandsons shall, when they attain majority, receive the whole to their satisfaction, and they will divide and take the same in accordance with the Hindu law. God forbid, it, but should I have no great-grandsons in the male line, then my daughters' sons, when they are of age, shall take the said property from the trust-fund and divide it according to the Hindu Shastras in vogue."

Here the bequest to the daughters' son was dependent on, and not alternative to, the gift to the great-grandsons and was therefore void.

1. Now sections 255-260, Indian Succession Act, 1925.

2. Brajanath v. Anandamayi, 8 BLR 208.

24.4. Alternative gifts.-

But, if, on the other hand, the bequest is in these terms: "If, at the time when my daughters' sons come of age, the gift to my great-grandsons has not taken effect for any reason; then my daughters' sons shall take the property". Then, the gift, being in the alternative, would take effect, since it can be presumed that the grantor intended the subsequent gift to take effect in any event. The section being based on the presumed intention of the grantor, there is scope for applying a different rule where the deed shows that the intention of the testator was different. This aspect will be further illustrated later.1

1. Para. 24.6, infra.

24.5. Analysis of section 16.-

Let us now analyse the important requirements of the section. The first requisite is that the gift over must have been created in the same transaction. The gift over, being based upon a contingency which is bad, becomes itself invalid, the reason being that the persons entitled under the subsequent limitation were not intended to take1 unless and until the prior limitation is exhausted; and, as the prior limitation is void, the subsequent gift can never come into operation. It is impossible to give effect to the intentions of the settlor in favour of the beneficiaries under the subsequent limitation.2

But this limitation does not necessarily apply to limitation in default of appointment, in which usually the intention is that they should take effect unless displaced by a valid exercise of the preceding power of appointment. Thus, where the donees of a limited power of appointment purported to exercise it by appointing trustees upon such trusts as A, one of the objects of the power should, with certain consent, appoint, and in default of, and subject to, any such appointment, upon certain trusts which were within the power, it was held that, although the power of appointment purported to be conferred on A was void, the trusts in default of appointment were valid.3

1. Para. 24.2, supra.

2. (a) Robinson v. Haricastle, 2 RR 241 (151);

(b) Routledge v. Dorrie, 2 Ves 357;

(c) Beard v. Westcott, 5 B&A 801;

(d)Moneypenny v. Derring, 2 De GM & G 145 (181, 182). (e) Abbott Peacock (in re:) v. Frigout, (1893) 1 Ch 54 (57).

3. Webb v. Sadier, LR 8 Ch 419.