• Home   /  
  • Archive by category "1"

Rule Against Perpetuities Wait And See Examples Of Essays

You are here:  NZLII >> Databases >> Otago Law Review >> 2007 >> [2007] OtaLawRw 9Database Search | Name Search | Recent Articles | Noteup | LawCite | Download | Help

Clark, Kellee --- "Joshua Williams Memorial Prize Essay - The Rule Against Perpetuities" [2007] OtaLawRw 9; (2007) 11 Otago Law Review 495


Joshua Williams Memorial Essay Prize Winner 2005

The Rule Against Perpetuities

Kellee Clark[*]

I. Introduction

It has been said that “[t]he Rule against Perpetuities has always seemed to be a modern labyrinth in need of a golden thread.”[1]Alternatively, what might really be needed is a chainsaw. This paper reflects on the latter proposition. To do so, it will examine the most commonly posited justifications for the rule against perpetuities, before going on to catalogue some of the asserted problems with the rule. In light of this, consideration will be given to whether acting on these perceived deficiencies is necessary. The paper will thus outline the responses recommended in England[2] and in Ireland,[3] as well as some of the issues which would be relevant in applying these recommendations in New Zealand. First, however, it is necessary to begin with a look at the law as it stands.

II. The Present Law

In New Zealand the rule against perpetuities is found in both the common law and in statutory law, primarily the Perpetuities Act 1964.[4]

1. At common law

The rule can be traced to Lord Nottingham LC’s decision in the Duke of Norfolk’s Case[5] in the seventeenth century, which settled the two basic aspects of the rule: first, that the validity of a future interest in property depends on whether it is possible that it will vest outside the perpetuity period; and second, that this perpetuity period is defined by a life in being.

Vesting at common law

The rule against perpetuities focuses on when an interest vests. In this context, vesting requires three things to have occurred:

(i) the beneficiary of the interest is ascertained;

(ii) the satisfaction of any condition precedent has been achieved; and

(iii) if the interest is a class gift, the exact amount or percentage of each member’s entitlement must be known.[6]

Note however that vesting does not require the beneficiary to be in possession of the interest, only that the gift be vested in interest: the recipient of the gift must be ascertained, actual delivery is not required.[7] Thus, an interest “to X when he reaches the age of 21” will vest when he reaches that age, irrespective of whether he actually receives the gift then or must wait, for example, until a prior life interest determines.

The perpetuity period at common law

The initial perpetuity period of a life in being was later extended to a life in being plus 21 years and any period of gestation in fact.[8] The 21 years is based on the age of majority.[9] The inclusion of any gestation period means that a child in the womb at the time the instrument came into being can be a measuring life, and a child in the womb at the end of the perpetuity period can be a valid beneficiary.[10] Clearly the life or lives in being must be living at the time that the instrument takes effect.[11] If they are not expressly identified in the instrument, they must be “relevant” in that they affect when the interest will vest.[12] For example, in the case of a gift “to X, my husband for life, then to Y and Z”, X would be a relevant life in being as he affects when the interests of Y and Z vest. Alternatively, an express measuring life may be stated and here the life need not have any connection to the interest.[13] Thus it became relatively common to use royal lives clauses, resulting in a perpetuity period that ends 21 years after the death of the last surviving descendant of the specified monarch, who was alive at the time the instrument came into effect.[14] However, non-relevant measuring lives must be relatively practicably ascertainable.[15] As Dukeminier has stated: “[T]he perpetuities period cannot be measured by lives in being that cannot be traced or that can be traced only at unreasonable cost. It must be feasible to say when the perpetuities period ends.”[16] Finally, Morris and Leach comment that the life must be human and cannot be that of an animal or corporation.[17] This was cited with approval by Gallen J in New Zealand Dairy Board v New Zealand Co-Operative Dairy Co Ltd, who held that the corporation in issue could not be regarded as a life in being.[18]Where there are no applicable lives in being (as was the case in New Zealand Dairy Board) the perpetuity period at common law is simply 21 years.[19]

Certainty of prediction

Under the common law the important question is whether, at the time the instrument creating the interest takes effect, the interest is sure to vest (if it does so at all) within the perpetuity period; if there is any chance that it will vest outside this period, the interest will be void.[20]Therefore, the actual facts are irrelevant – even if the court’s decision is made subsequently, and it knows that the possibility did not come to pass.[21] This aspect of the rule has been widely criticised.

Effect of breach of the rule against perpetuities

An interest that infringes the rule against perpetuities is void ab initio.[22] Moreover, all ensuing interests that are dependent on the voided interest also fail.[23] Any other interest comes into being as if the voided interest(s) had never

been, and, as such, may be accelerated.[24]

In the case of a class gift, all members of the class had to be sure to be ascertained within the perpetuity period or the whole gift was voided.[25] However, this particular tenet has been somewhat circumvented by the so-called “class closing rule”.[26]This states that the class closes when the first member of the class is entitled to take their share, so that all living potential members of the class can still be included (if they satisfy the conditions) but no others.[27]However, the modification only applies in the absence of a contrary intention in the terms of the instrument.[28]

2. Under the Perpetuities Act 1964

In 1964 New Zealand enacted a statute to reform the rule against perpetuities.[29] This Act, though, was generally not retrospective, and thus the common law still applies to instruments which came into effect before its commencement.[30]

The perpetuities period under the 1964 Act

The 1964 Act retains the common law perpetuity period of a life or lives in being plus 21 years,[31] and explicitly states that where there are no such lives the perpetuity period is simply 21 years.[32]Moreover, section 8(5) lists the persons who are capable of acting as lives in being. As an alternative, the Act additionally introduces a provision whereby the settlor or testator can instead specify a fixed perpetuity period of up to eighty years.[33]

Wait and see

In direct contrast to the common law’s fixation on certainty of prediction, the 1964 Act introduced a mechanism whereby the court, before declaring an interest to be void as possibly vesting outside the perpetuity period, could “wait and see” if it actually did so in fact.[34]During this “wait and see” period, the interest is to be treated as valid, and if later held to be invalid, this “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.”[35] This significantly reduces the harshness and rigidity of the rule.

Rule of remorseless construction abolished

The Act also abolishes the rule of remorseless construction, providing that, in situations where more than one construction of an instrument is available, the court may have regard to the fact that the settlor or testator would most likely have intended the construction under which the disposition would be valid.[36] An example is Re Beckbessinger (Deceased)[37]where it was argued that the terms of the will could be taken to describe a gift of income only and that the trustees were to hold the capital indefinitely. While explicitly rejecting that this was even a possible construction, Tipping J held that, in any event, section 15 would apply to support the alternative construction – that it was an immediately vesting gift of capital.

Presumptions about future parenthood

One of the main absurdities the common law rule fostered was its disregard of the biological fact that there are certain ages at which a person cannot conceive a child. Thus there were the cases of the “fertile octogenarian”[38] and the “precocious toddler”.[39] To avoid situations like these, section 7(2) of the 1964 Act affords presumptions that women over 55 years of age and both sexes under 12 years of age are incapable of creating a child. These presumptions are only that, however, and can be rebutted “by sufficient evidence to the contrary tendered at the time at which the matter falls for decision, but not subsequently.”

The unborn widow

Gifts such as “to X and his widow for life, then to X’s children alive at the deaths of X and his widow” could be voided at common law in that X might marry someone yet unborn at the time the instrument came into effect (thus not constituting a life in being), who may out-live X by more than 21 years.[40] Here, the 1964 Act provides that the surviving spouse of a person who is a life in being is deemed also to be a life in being for the purpose of certain gifts.[41] Thus, in the above example, as X’s widow would be a statutory life in being, even if she lived in excess of 21 years more than X, the gift to X’s children would still vest within a life in being plus 21 years.

Cy-près modification

The Perpetuities Act 1964 also provides for modification by the court if, despite the legal amendments, a gift still contravenes the rule. Thus, section 10 of the Act states that if a disposition would be invalid solely by reason of breaching the rule against perpetuities, and if “the general intentions originally governing the disposition can be ascertained by the instrument”, the court may reform the disposition “so as to give effect, if possible and as far as possible, to those general intentions within the limits permitted under the rule against perpetuities.” This power was considered in Re Westphal (Deceased).[42] There, however, Woodhouse J declined to apply the section as it was impossible on the facts to give effect to the testator ’s intentions within the limits of the rule. The straight gift of income in perpetuity could not be transformed into a gift of capital.[43] Moreover, the section 10 power is qualified, so as to ensure that it does not unfairly impact on other interested parties – for example, the recipient of a gift-over in the event that the interest is void.[44]

The Act also provides for two specific areas of cy-près modification, namely age reductions and exclusion of class members.[45]The latter does away with the common law’s “all-or-nothing approach”, by providing statutory class closing rules.[46]These can be seen in operation in New Zealand Dairy Board where they were used to close the class of beneficiaries of a trust, enabling a cancellation deed to have been consented to by all relevant parties.[47]

Effect of breach of the rule against perpetuities under the 1964 Act

Unlike the common law where a breach of the rule renders the interest void ab initio,[48] a breach of the rule where the Act applies triggers the “wait and see” provision. Thus, the interest is void only if and from the time it becomes certain that it will not vest within the perpetuity period.[49]

III. Rationales for the Rule

According to Woodhouse J in Re Westphal, it is “elementary that the perpetuities rule was evolved to ensure that capital sums would not be withheld for over- long periods of time.”[50] However, this does not explain why it has been felt necessary to do so. Expanding on this then, there are two principal justifications posited: to limit dead hand control and strike a balance between competing interests, and to promote free alienability. Conversely, it has also been argued that the rule’s economic implications are (or should be) the real explanation.

1. Dead hand control

The phrase “dead hand” was fashioned by Simes to refer to “the hand of the man who is continuing to control the devolution of his property after he is dead either by the terms of his will or by some other instrument which effectuates the same purpose.”[51] He reasoned that wealth should be controlled by the living, as the dead are unable to react to changing circumstances. Expanding on this, the Law Reform Commission of Ireland referred to possible changes in families’ positions, taxation policies and society and the economy in general, all of which the settlor will be unable to predict.[52]

Equally, however, freedom of testation is an elemental principle in property law. Thus most versions of this argument (and indeed the rule) promote not absolute prevention of dead hand control, but striking a “balance between on the one hand the freedom of the present generation and, on the other, that of future generations to deal as they wish with the property in which they have interests.”[53]

2. Alienability of property

Alternatively, the rule against perpetuities is sometimes justified as securing the unfettered alienability of property. The main consideration here is that the ability to freely transfer property (which has the necessary pre-condition of full ownership) aids the economy by fostering an active property market.[54] Moreover, dynastic ownership can result in deteriorating and ultimately unproductive assets, as not all generations or members of the family will have any interest in and/or funds to deal with the property.[55] A “reformulated and updated version” of this argument also posits that too much of the country’s capital being tied up in trusts is bad for the economy in that trustees are less likely to invest in riskier enterprises, thus reducing the supply of risk capital on hand.[56]

3. An economic argument

Professor Thomas Gallanis has questioned the English Law Commission’s reliance on the dead hand rationale for the rule on the basis that it gives a just outcome.[57] He contends that this basis is both descriptively and normatively flawed.[58] He argues that there is no empirical support for the claim that the satisfaction of all property owners will be maximised in a jurisdiction with such a rule.[59]Furthermore, “the normative argument fails to explain, and indeed cannot explain, its assertion that maximising satisfaction necessarily produces the most just result.”[60] Thus, Gallanis submits that, as the rule against perpetuities cannot be justified by abstract notions of justice, its validation must depend on its economic consequences.[61]

This approach was explicitly rejected by the Law Commission because it was thought impossible to obtain sufficient evidence as to the rule’s economic effects.[62] However, Gallanis points out that “[a] growing number of jurisdictions have abolished the rule (or have created large exceptions to it). We are therefore gaining real-world laboratories in which the economic consequences of abolition can be examined.”[63]Hence he concludes that these developments should be chartered and the Commission should be prepared to change the rule in response to the events that unfold.[64]

IV. Defects in the Rule

Recently assessing the rule against perpetuities, the English Law Commission[65] and the Law Reform Commission of Ireland[66]have discussed several areas in which the rule was perceived as defective. Due to the similarity of New Zealand’s law in this area,[67]these shortcomings might arguably present in our law as well.

1. Complexity

According to the Law Reform Commission of Ireland, the rule is inherently complex and over-subtle,[68] both because of its ingrained minutiae, and the difficulties experienced in applying it, especially with regard to ascertaining the lives in being.[69] Moreover, the English Law Commission draws attention to the multiple regimes still in force, meaning that both the common law and statutory rules need to be known, as well as when each applies.[70] This “creates the potential for confusion”,[71] and results in the contemporaneous presence of three different perpetuity periods: the common law period, the common law period as amended by statutory wait and see, and the statutory fixed period, not exceeding eighty years.[72]

2. Inconsistency

There are arguably two main areas in which the rule against perpetuities leads to inconsistent results. Firstly, Professor Leach has observed that (in America and England at least) the cases going to court do not actually involve overly controlling testators or settlors. Instead they concern largely reasonable people who have breached the rule simply because of the “ignorance or oversight” of their lawyer – thus, “our courts in applying the rule are not protecting the public welfare against the predatory rich but are imposing forfeitures upon some beneficiaries and awarding windfalls to others because some member of the legal profession has been inept.”[73] If the only difference between those who are breaching the rule and those who are not is the competence of their lawyer, the widely disparate results (abiding by their intentions versus disregarding them) appear neither just nor consistent. second source of inconsistency ensues from the exceptions to the rule against perpetuities, in that there is “difficulty in finding any clear guiding principle.”[74]

For example, some pension schemes are excluded from the ambit of the rule whereas others are not, and the dividing line does not seem to be at all connected with the underlying policies.[75] This problem is prevalent in the commercial context where, because the rule seems so unnecessary, exceptions are often granted “by reference to some rather arbitrary distinctions.”[76] To take just one example, there is authority suggesting that rights of pre-emption do not attract the rule against perpetuities, but options to purchase land do.[77]According to the Law Reform Commission of Ireland: “It seems difficult as a matter of principle to justify the striking consequences that ensue depending on where this fine line [between options and rights of pre-emption] is drawn.”[78]

3. Application in the commercial context

While the rule against perpetuities originates in the family law context, the criterion for its application is simply that the interest in question is proprietary.[79]

Therefore, it is widely applicable in the commercial context, which is open to criticism on two levels. In the first place, the rule’s extension may be objectionable as a matter of principle. This is largely because, in the commercial context, the “one sustainable rationale [restricting dead hand control] for it is absent.”[80] Thus, its harsh consequences are apparently uncalled for.[81] Moreover, the rule arguably “represents an unwarranted interference with the freedom of contract of parties dealing at arm’s length.”[82]

There are also practical problems associated with its operation in this area. One example is that there is often no applicable life in being so, unless a fixed perpetuity period is specified under the Act, the period is often restricted to 21 years.[83] Furthermore, the rule against perpetuities has been a real problem with regard to future easements and options to purchase land and shares.[84] For example, in Dunn v Blackdown Properties Ltd[85] the (common) granting of a right to use drains and sewers “now passing or hereafter to pass” under land retained by the grantor was held to be void for breaching the rule against perpetuities. As the development of the facility over which the easement is granted will often take place outside of 21 years after the date of the instrument, the grantee’s rights will be completely obviated.[86]Lastly, inconsistency is a major problem. As a case in point, the rule against perpetuities does not apply to all options, with varying rules depending on whether the options are contractual or proprietary, contained in a lease, and/or subject to specific legislation.[87]

4. Redundancy and inability to adapt

Some have argued that the rule against perpetuities is now obsolete. For instance, it is suggested that the creation of perpetuitous limitations on property is no longer a problem – that testators and settlors no longer have any real desire to create family dynasties and are instead usually only interested in providing for their children and grandchildren.[88] This though, as shall be discussed, is very much a jurisdiction-specific argument.

Even if perpetuities are still an issue, the problem might be adequately dealt with by other rules of law.[89] A common illustration offered is that taxation laws are sufficient to deter settlors from establishing over-long trusts,[90] though as New Zealand does not have estate duties or capital acquisition tax this argument is somewhat weakened when applied here. Another relevant rule of law which does apply equally here, however, is the judicial power to vary trusts – a power which can greatly ameliorate the consequences of rigidly limited dispositions.[91]

The rule against perpetuities has also been equally criticised as being unable to adapt, particularly in relation to societal changes. This is especially so with regard to settlors’ intentions and the law. For example, even the more recent 80year period is arguably too short in relation to present day length of life. Moreover, a concern that is of increasing importance here is that the rule does not allow for recent changes in reproductive technology.[92] A specific issue is whether a cryopreserved embryo is (and/or should) be classified as a ‘child in the womb’, so that it can be a life in being or a valid beneficiary – in other words, whether it fits within the actual gestation interval included in the traditional definition of the perpetuity period.[93] This question is still very much open, and again illustrates the uncertainty associated with applying the rule in practice.

5. Harshness of the rule and expense

The effect of a breach of the rule against perpetuities is to void the violating interest (and possibly others). This results in the testator ’s intentions being disregarded,[94] and the specified beneficiaries losing out – and often the testator is entirely innocent of any perpetuitous design.[95] Moreover, when the common law still applies,[96] the interest(s) will be void ab initio on the basis of a mere possibility.[97] Thus, the application and consequences of the rule can be quite harsh.

Lastly, the complexities and potential pitfalls of the rule against perpetuities can significantly increase the cost of the drafting and construction of dispositions which include future interests.[98]Therefore, the rule creates arguably unnecessary costs for the testator or settlor, and so also the beneficiaries of the gifts. It may also lead to societal costs in that a possible way to avoid the rule against perpetuities is to set up the trust in a different jurisdiction which does not have an equivalent rule.[99] Thus, the property is removed from the jurisdiction at issue, depriving the economy of all the attendant business.[100]

V. Possible Responses to the Criticisms

In light of the perceived deficiencies with the present rule against perpetuities, it therefore becomes pertinent to consider potential responses. As such this paper will sketch briefly the solutions proposed by both the English and Irish Law Reform Commissions. However, a threshold issue is to reflect more deeply on the actual need for reform.

1. Inaction

To do nothing was rejected by both the English Law Commission[101]and the Law Reform Commission of Ireland.[102] The possibility was most seriously considered in the preceding English Law Commission Consultation Paper.[103]

The Commissioners pointed to the fact that there had been few reported cases on the subject in the last decade and the consequent implication that, in practice, the rule is not causing too many problems.[104] They did acknowledge though, that the dearth of cases might be due to other factors, such as proceedings not reaching the court, trusts being moved to other jurisdictions, and/or simply that breaches of the rule have not yet come to light or are being disregarded.[105] In the end, because of the criticisms that the paper also canvassed (primarily therule’s complexity, uncertainty, inconsistency and application in the commercial context),[106]they decided some form of action was required. This position was strengthened by such factors as the perceived lack of a need for the rule (partly because of the similar effects of other rules), the ability to avoid the rule in practice, and the desires to simplify the rule and enhance freedom of contract.[107]

In line with the English experience, there have been relatively few cases on the rule against perpetuities in New Zealand. Moreover, in those cases there have been, the perpetuities issue is often not the main question and the court seems to have no problem in applying the law.[108] On the other hand, the criticisms listed by the English Law Commission largely apply with relation to New Zealand law as well. Likewise, the rule’s potential obsolescence and practical ineffectiveness, as well as the ideals of simplification and free contracting, are also germane, with the one exception being that New Zealand’s taxation law might not perform such a significant role in discouraging perpetuitous limitations.[109]

Arguably, the main difference between the law in New Zealand and that in England, that might give rise to a need for different responses, is the provision in New Zealand’s Perpetuities Act 1964 for general cy-près modification.[110] Thus, there is perhaps less scope for the rule to catch innocent testators or settlors. However, this type of reform was rejected by the English Law Commission as a solution to the acknowledged problems, because it would make the law “more complicated and at the same time less predictable” and so add to the complexity.[111] They also observed that respondents to the earlier Paper thought that such a provision would be used infrequently and that it might be difficult to ascertain the settlor ’s intentions and how far the court could go.[112] The foremost case in New Zealand to have applied the general cy-près section is R Westphal.[113] Woodhouse J declined to exercise the given power in that the testator ’s intention could not be accomplished within the limits of the rule. However, he seemed to have no trouble understanding and applying the law, nor in determining the testator ’s intentions. The rarity of resort to section 10 is, though, clearly indisputable – yet it may not be unsurprising or problematic in light of the general paucity of cases.

Taken as a whole it is arguable that there are deep, unnecessary problems with the state of our law as at present. The scarcity of cases may thus be the result of other influences or even be merely temporary, as considered possible by the English Law Commission.[114]

2. Two potential responses

There are numerous viable ways in which the law concerning the rule against perpetuities could be changed. However, due to space constraints, this paper will consider just two: abolition and the particular reformation proposed by the Law Commission of England. It will then discuss some of the considerations New Zealand will need to address when debating the importation of such responses to our jurisdiction.

Abolition: The Irish model

The Law Reform Commission of Ireland has recently proposed abolition of the rule against perpetuities.[115] In doing so, they considered and negated three possible arguments for keeping the rule. The first was that the rule ensures alienability. But the Report argues that in the present legal context, “there is almost always a power to sell the entire estate comprised in the trust or settlement” and, where there is not, variation of trusts legislation could (and should) be adopted to enable it.[116]

Secondly, the idea that the rule against perpetuities is needed to preserve a balance between the generations can be queried because, in most cases, the practical reality involves a contest between a specified beneficiary and the person who is entitled on default.[117] In other words, the rule is usually used as a weapon in a fight between two possible beneficiaries of the same generation. Moreover, the restriction on the settlor ’s ability to do what they wish with their property deviates from the general principle of freedom of testation.[118] Finally, the Commission further contended that the rationale that the rule impedes dead hand control is also suspect, in that the rule is of quite limited use here: “All it does is to preclude extremely remote contingent interests…[I]t is evident that the rule is of assistance in a very small fraction of the possible circumstances.”[119]

Other rules of law are of much greater utility.[120]Thus the Law Reform Commission concluded that the rule could not be justified. They then went further and pointed to the ways in which it can be actively attacked – primarily, that it can catch innocent gifts by settlors and testators who have perfectly reasonable intentions,[121]and it is complex and difficult to apply in practice.[122]

Additionally, the Commission rejected the view that abolition would be likely to lead to people taking advantage of it and creating over-long contingent interests.[123] This was based on two main considerations. First, it was emphasised that Ireland’s socioeconomic background is quite different to England’s. Ireland does not have the “long-established landed gentry” who made the rule necessary in the first place and to whom the creation of lengthy limitations on family property may still appeal.[124] Moreover, practitioners consulted in Ireland argued that their taxation law sufficiently discourages over-long settlements.[125]

In light of all this, the Commission decided that abolition was preferable to reformation. This view was supported by the consideration that no such rule (however designed) could avoid the problems associated with the vesting element. These arise from the difficulty, in practice, of determining when an interest has ceased to be contingent and has “vested”.[126] The Law Reform Commission stressed that retaining the rule in any form would involve “basing decisions on this shaky distinction.”[127]

In conclusion, the Law Reform Commission of Ireland postulated that a fear of the unknown and the natural hesitation to repeal a long-established law do not in themselves justify the retention of the rule in the light of the arguments for its abolition.[128] They therefore recommended that the rule be abolished,[129]

with limited retrospectivity.[130]

Reformation: The English model

An alternative to abolition is reformation of the rule against perpetuities. This was the solution proposed by the English Law Commission in their Report in 1998.[131] In substance, they recommended two main changes. First, when the rule against perpetuities should apply would be substantially tightened.[132] The Commission propounded an “inclusionary” approach, in which only the stated interests would be subject to the rule (as opposed to all future proprietary interests, with stated exceptions).[133] According to the Commission, it could be ensured that the rule would only apply where the justification (impeding dead hand control) is present. The practical result would be to exclude commercial interests, thus negating that perceived deficiency.[134]They also recommended that a power should be conferred on the Lord Chancellor

to stipulate any further exceptions which might become necessary.[135]The second main area of reformation concerned what the rule against perpetuities should be.[136] Because of the weighty problems associated with lives in being, the Commission recommended a single perpetuity period of 125 years.[137] Moreover, the wait and see approach was to be retained, thus substantially reducing the chances of a disposition breaching the rule.[138] The considerable length of the period was justified in that it replicated the probable maximum length capable under the present law, recognised the force of some of the arguments for abolition, and that it would effectively operate as a “long- stop”, with other factors (for example, taxation) likely to lead to vesting well before the end of the 125 years.[139]

The English Law Commission thought that, in combination, these changes would sufficiently meet the perceived deficiencies with the rule – such as its application where it is not sustainable and is causing practical difficulties, and the complexity resulting from the lives in being concept. It would also simplify the law by creating a “comprehensive statement of the law in one statute.”[140] Of note, however, is that the changes were largely to be confined to prospective instruments (chiefly because of the reliance that both parties and default beneficiaries may have placed on the law being as it is).[141] Thus the complexity and uncertainty of having more than one regime would continue.

The Commission did not support abolition, despite it being considered as a viable option in the earlier Consultation Paper.[142] A majority of the replies the Commission received to the Paper opposed it, perceiving the rule as continuingly vital to control the dead hand. Evidence was given that, if the rule against perpetuities was abolished, future interests would be created that would at present fall foul of the rule.[143]Therefore, at least in England, it does not appear that the rule (in one form or another) is redundant.

The New Zealand context

Conclusively determining the better of these two options – and indeed all the other possible avenues of reformation – is a bigger issue than this paper purports to address, especially as it would require canvassing the views of those actually working at the interface with the present law. Thus, in this section it is sought only to draw attention to some of the pertinent considerations when undertaking such a task.

After (or, if) the need for change is accepted, the first and main consideration is to determine whether there exists an actual need for a rule against perpetuities in New Zealand – a question which has been answered in the affirmative in England but negatively in Ireland. New Zealand, like Ireland, does not have a history of a landed aristocracy. Moreover, there are few (known) cases in which the rule against perpetuities is applied to void a future interest,[144] perhaps indicating that settlors and testators are not pushing at its restrictions. Furthermore, it may be relevant that New Zealand has a much higher rate of home ownership than England or Ireland: the ability to invest in land already has fewer restrictions (in that there is more supply and less demand), and thus promoting free alienability and an active property market does not press quite so demandingly. Conversely, though, this is not something we would want to imperil. Also, the rule may act to partially thwart the present and increasing disparity between those who are wealthy and those who are not. Hence its bearing on this issue should also be borne in mind.

Another relevant consideration might be that Mäori land trusts are often exempted via statute.[145] However, the whole aim there is to ensure that the property is tied up for the future benefit of the iwi. Thus these statutory exemptions are probably only relevant in other like contexts, and are largely inconclusive as indications of a general need (or lack thereof) of a rule against perpetuities.

A second consideration is whether a perceived need (if any) for some sort of restriction on perpetuitous dispositions can be achieved satisfactorily by other rules of law. The Irish Law Reform Commission felt their taxation laws constituted a sufficient deterrent. However, New Zealand’s tax regime is different, and perhaps of less value here – for example, we have no comparable capital acquisitions tax.

Yet, we do have other rules of law that may inhibit dead hand control and promote free alienability. Firstly, New Zealand has provided for the variation of trusts and statutory powers of sale so that capricious and inflexible limitations on trusts can be set aside by the court.[146] If necessary, this could be extended to deal with any problems that abolishing the rule against perpetuities may bring.[147] Secondly, we have a strong Family Protection Act 1955, through which the courts are empowered to make financial provision from the settlor ’s estate for certain parties closely related to the settlor, who were not reasonably provided for.[148]This, it has been argued, goes a long way to restricting dead hand control.[149]

If these other rules are deemed insufficient, however, so that a rule against perpetuities is indeed required, the next consideration must be as to the form the reformation should take. Using the English approach as a model, there are two major areas in which reformation is likely to be considered crucial.

To begin with, the interests that should be subject to the rule need to be clarified. This will involve the vital preliminary question as to whether the legislation should list the interests to which it is applicable or whether it should apply to all future proprietary interests, except in so far as they are explicitly exempted. The English Law Commission preferred an inclusionary approach because it is arguably the easiest and best way to ensure that the rule applies only where it is justified. However, the Law Reform Commission of Ireland considered that the legislation resulting from such an approach would be both difficult to draft and inevitably elaborate. Yet they did also acknowledge and emphasise the inappropriateness of the rule applying in the commercial context and, short of abolition, an inclusionary approach seems to be the best means of avoiding this.

In addition, a decision must be made as to the length of the perpetuity period and the applicability of the wait and see principle. Under the recommended English model, this was 125 years with wait and see. However, this was explicitly only intended to work as a long-stop, with other rules of law encouraging much earlier vesting. Again, the utility of other legal mechanisms is significant – albeit, given the long-stop, these rules need not do all the work of the current rule.

Lastly, whether these changes should be retrospective must be established. The English Law Commission decided, subject to a few exceptions,[150]against retrospectivity on the basis that it might validate dispositions that had been treated as void and it would interfere with commercial contracts that had been entered into on the basis of the current law.[151] The Law Reform Commission of Ireland, on the other hand, recommended that abolition have “limited retrospective effect” so that it applied retrospectively except where the recipient of a gift-over had already taken ownership or where action had been taken in reliance on the rule’s application and the actor ’s interests would be harmed. The difference in approach was rationalised in that they were not introducing new rules, but simply removing old restrictions, and they further highlighted that every jurisdiction that had recommended abolition had also proposed some retrospectivity.[152]

Retrospectivity would have the considerable advantage of remedying the complexity and inconsistency of there being more than one regime in existence. Moreover, arguably the compromise proposed by the Law Reform Commission of Ireland strikes an appropriate balance between this need for simplicity, and the general principle that people should know the law that applies to their transactions at the time they enter into them. However, it should be noted that the Perpetuities Act 1964 was largely prospective,[153] and that this might be indicative of the tendency of the New Zealand legislature in this area.

VI. Conclusion

The rule against perpetuities has been the subject of multi-jurisdictional criticisms, giving rise to arguments for its serious reformation or even abolition.

To examine this contention, this paper has studied the current law in New Zealand and concluded that it is, indeed, complex. Consequently, the various rationales for the rule (primarily inhibiting dead hand control and promoting alienability) are worthy of consideration, as are the various defects said to be causing the problems. This further raises the issue of how these deficiencies could be responded to – for example, via inaction, abolition or reformation such as that proposed by the English Law Commission. In assessing the complex nature of the problem, the inescapable conclusion reached is that more information, particularly with regard to the views of those practitioners who are involved in the day-to-day operation of the rule, is essential before any decision can be reached as to the path that New Zealand should adopt. Therefore, this paper has attempted to elucidate some of the relevant considerations, with the hope that further reflection on the state of our law – and perhaps much needed improvements – might be facilitated.


[*] Final year LLB(Hons) student, University of Otago, 2006. This essay was written for Laws 462 Wills and Trusts, University of Otago, 2005. I wish to thank Professor Nicola Peart for her support and constructive feedback.

[1] Jesse Dukeminier, “A Modern Guide to Perpetuities” (1986) 74 California Law Review 1867.

[2] English Law Commission, The Rule Against Perpetuities and Excessive Accumulations, Report No 251 (1998).

[3] Ireland Law Reform Commission, Report on the Rule Against Perpetuities and Cognate Rules, Report No 62 (2000).

[4] Specific exceptions to the rule can be found in various other statutes: for an example see below n 145.

[5][1681] EngR 204; (1681) 2 Swans 454. For a detailed discussion of this case see above n 3, [1.16].

[6] Above n 3, [2.02].

[7] K R Ayers, Variation of Trusts, (Brookers, New Zealand, 2000) 147.

[8] Cadell v Palmer [1832] EngR 299; (1883) 1 Cl & F 372. See above n 3, [1.16].

[9] S F C Milsom, Historical Foundations of the Common Law, (2nd ed, Butterworths, London, 1981) 232.

[10] Dukeminier, above n 1, 1872.

[11] Cadell v Palmer [1832] EngR 299; (1883) 1 Cl & F 372.

[12] Ayers, above n 7.

[13] Thellusson v Woodford (1798) 4 Ves Jnr 227; affd. (1805) 11 Ves 112.

[14] English Law Commission, The Rules Against Perpetuities and Excessive Accumulations, Consultation Paper No 133 (1993), [2.23].

[15] Thellusson v Woodford (1798) 4 Ves Jr 227; (1805) 11 Ves 112.

[16] Dukeminier, above n 1, 1874.

[17] JHC Morris and WB Leech, The Rule Against Perpetuities, (2nd ed, Sweet & Maxwell, London 1962) 63.

[18][1999] 2 NZLR 355, 378.

[19] Dukeminier, above n 1, 1873.

[20] Laws NZ, Perpetuities and Accumulations, para 7.

[21] Dukeminier, above n 1, 1875.

[22] Above n 2, [2.9].

[23] Hinde, McMorland and Sim, Land Law, (2nd ed, Butterworths, New Zealand, 1978, vol 1), [4.065].

[24] Ibid.

[25] Ibid [4.073].

[26] Ibid [4.074].

[27] Andrew v Partington [1791] EngR 1535; (1791) 29 ER 610, 611.

[28] Above n 3, [2.46].

[29] Note that England also enacted a statute on the rule against perpetuities at this time, which has largely the same effect: the Perpetuities and Accumulations Act 1964 (UK).

[30] Perpetuities Act 1964 s 4.

[31] Perpetuities Act 1964 s 8(4)(a).

[32] Perpetuities Act 1964 s 8(4)(b).

[33] Perpetuities Act 1964 s 6(1).

[34] Perpetuities Act 1964 s 8.

[35] Perpetuities Act 1964 s 8(1).

[36] Perpetuities Act 1964 s 15. This section is one of the few in the Act with retrospective effect.

[37][1993] 2 NZLR 362.

[38] For example: Jee v Audley (1787) 1 Cox 324, 29 ER 1186; Ward v Van Der Loeff [1924] AC 653.

[39] For example: Re Gaite’s Will Trusts [1949] 1 All ER 459.

[40] Dukeminier, above n 1, 1878.

[41] Perpetuities Act 1964 s 13.

[42][1972] NZLR 792.

[43] Ibid 796.

[44] Perpetuities Act 1964 s 10(2).

[45] Perpetuities Act 1964 s 9.

[46] See the Explanatory Note to the Bill as quoted in Garrow & Kelly The Law of Trusts and Trustees, (5th ed, Butterworths, New Zealand, 1982) 83.

[47] New Zealand Dairy Board v New Zealand Co-Operative Dairy Co Ltd [1999] 2 NZLR 355, 378.

[48] Above n 2, [2.9].

[49] Perpetuities Act 1964 s 8(1).

[50] Re Westphal (Deceased) [1972] NZLR 792, 794.

[51] Simes, Public Policy and the Dead Hand, (University of Michigan Law School, 1955) 58–63, quoted in above n 14, para 5.13.

[52] Above n 3, [4.09].

[53] R Deech, “Lives in Being Revived” (1981) 97 Law Quarterly Review 593, 594, quoted in above n 2, [1.9]. Note also that Professor A I Ogus has propounded a more practical reason for striking such a balance: the more the law interferes with the ability of a testator to deal with their property on their death, the more likely they are to change their behaviour inter vivos: “The Trust as Governance Structure” (1986) 36 University of Toronto Law Journal 187, 216.

[54] Above n 14, [5.15].

[55] Ibid, [5.16].

[56] Above n 3, [4.05].

[57] T P Gallanis, “The Rule Against Perpetuities and The Law Commission’s Flawed Philosophy [Law Commission Report No 251: The Rules Against Perpetuities and Excessive Accumulations.]” Cambridge Law Journal (2000) 59(2) 284.

[58] Ibid 287.

[59] Ibid 288. Note that, as the argument is utilitarian, this is required if it is to work.

[60] Ibid 289.

[61] Ibid 292.

[62] Above n 2, [2.30–2.32].

[63] Gallanis, above n 57, 292.

[64] Ibid 292–293.

[65] Above n 2 and n 14.

[66] Above n 3.

[67] There is one major difference in that New Zealand has a general cy-près provision: see below n 110 and surrounding text. Moreover, unlike both England and New Zealand, Ireland has no wait and see: above n 3, [2.06–2.07].

[68] Above n 3, [4.18].

[69] See also above n 2 [8.3–8.6].

[70] Above n 14, [4.4].

[71] Above n 2, [8.7].

[72] Ibid [8.8].

[73] Leach, “Perpetuities: Staying the Slaughter of the Innocents” [1952] 68 Law Quarterly Review 35, 36, quoted in above n 3, [4.17].

[74] Above n 14, [4.12].

[75] Above n 2, [7.6(2)].

[76] Above n 3, [3.51].

[77] Ibid [3.26]. The authority mentioned comes from Pritchard v Briggs [1980] Ch 338, though it has been criticised on various grounds and recognized to be obiter.

[78] Ibid [3.27].

[79] Above n 2, [1.11].

[80] Ibid.

[81] Above n 3, [3.49].

[82] Ibid.

[83] Above n 14, [4.13].

[84] Above n 3, [3.50].

[85][1961] Ch 433, cited in above n 3, [3.03].

[86] Above n 3, [3.06].

[87] See generally ibid [3.12–3.22].

[88] Above n 14, [5.18].

[89] See above n 14, [5.24–5.30].

[90] Above n 3, [4.21].

[91] The effect of such powers on the necessity of the rule against perpetuities is discussed in above n 14, [5.27–29]. For an examination of the law in New Zealand, see Ayers, above n 7.

[92] Above n 14, [4.17].

[93] Above n 2, [8.32].

[94] Above n 14, [4.15].

[95] See Part II(2).

[96] The legislation being largely not retrospective: Perpetuities Act 1964 s 4.

[97] See Part II(1). Note that this will still be so after any change in the law, unless that change is made retrospective.

[98] Above n 14, [4.18].

[99] For example, it has been said that “Alaska [having recently abolished the rule against perpetuity and changed their law of taxation] is positioning itself as the newest and most sophisticated ‘offshore’ trust jurisdiction for wealthy US citizens”: JG Blattmacher & BJ Crawford, “Wilderness no more: Alaska as the new ‘offshore’ trust jurisdiction” (1999) 22 Amicus Curiae 30.

[100] Above n 14, [4.19].

[101] Above n 2, [2.19]

[102] Above n 3. It appears that the possibility of inaction was not even considered as a possible response, the only real question that they ask being whether to abolish or reform.

[103] Above n 14, [5.8–5.10].

[104] Ibid [5.9].

[105] Ibid.

[106] Ibid Part IV.

[107] Ibid [5.17–5.47].

[108] For example, the latest reported case to consider the rule against perpetuities was Latimer & Ors v CIR [2002] I NZLR 535. The main issue related to income tax, namely whether the income derived by the trust in question was derived for charitable purposes. It was held that the trust continuing for a fixed perpetuity period under section 6 of the Perpetuities Act 1964 did not help either side. 109 Tax legislation is listed as one of the four other rules of law which may do much of the work of the rule against perpetuities: above n 14, [5.23–5.30]. New Zealand does have equivalent rules as to the other three: variation of trust legislation, statutory powers of sale, and family protection legislation.

[110] Perpetuities Act 1964 s 10.

[111] Above n 2, [8.31].

[112] Ibid.

[113] Re Westphal (Deceased) [1972] NZLR 792.

[114] See above n 103 and surrounding text.

[115] Abolition has also been proposed in South Australia, Manitoba and Saskatchewan: Law Reform Commission of South Australia, Report No 73 (1984) 16–17; Law Reform Commission of Manitoba, Report No 49 (1982) 84–87; Law Reform Commission of Saskatchewan (1987) 27–28.

[116] Above n 3, [4.04].

[117] Ibid [4.08].

[118] Ibid [4.07].

[119] Ibid [4.10].

[120] Ibid [4.11].

[121] Ibid [4.14].

[122] Ibid [4.18].

[123] Note that this is in direct contrast to the belief of English commentators: see below n 143 and surrounding text.

[124] Above n 3, [4.20].

[125] Ibid [4.21].

[126] Ibid [4.30].

[127] Ibid.

[128] Ibid [4.31].

[129] Ibid [4.32].

[130] See ibid [4.33–4.36].

[131] Above n 2.

[132] Ibid Part VII.

[133] Ibid [7.21].

[134] Ibid [7.31].

[135] Ibid [7.52].

[136] Ibid Part VIII.

[137] Ibid [8.13].

[138] Ibid [8.25].

[139] Ibid [8.13].

[140] Ibid [7.25].

[141] Ibid [7.53] and [8.18]. Two exceptions are provided for [8.19–8.23].

[142] Above n 14, [5.18–5.47].

[143] Above n 2 [2.25].

[144] The only real notable exception to this being Re Westphal (Deceased) [1972] NZLR 792, discussed above n 42 and surrounding text.

[145] See Ngati Ruanui Claims Settlement Act 2003s 19(1); Ngati Tama Claims Settlement Act 2003s 16(1).

[146] See Ayers, above n 7.

[147] This was the view of the Law Reform Commission of Ireland (above n 3) who, in a contemporaneous report, recommended introducing variation of trusts legislation: Law Reform Commission of Ireland, Report on Variation of Trusts, Report No 63 (2000).

[148] For an example of its application, see Re Alexander (Deceased) [1990] BCL 468; 13 TCL 20/8.

[149] Above n 14, [5.30].

[150] See above n 142 and surrounding text.

[151] Above n 2 [7.53].

[152] Above n 3, [4.33].

[153] Perpetuities Act 1964 s 4, with the cy-près provisions being notable exceptions.


NZLII: Copyright Policy|Disclaimers|Privacy Policy|Feedback
URL: http://www.nzlii.org/nz/journals/OtaLawRw/2007/9.html

The rule against perpetuities is a rule in the Anglo-American common law that prevents people from using legal instruments (usually a deed or a will) to exert control over the ownership of property for a time long beyond the lives of people living at the time the instrument was written. Specifically, the rule forbids a person from creating future interests (traditionally contingent remainders and executory interests) in property that would vest at a date beyond that of the lifetimes of those then living plus 21 years. In essence, the rule prevents a person from putting qualifications and criteria in a deed or a will that would continue to affect the ownership of property long after he or she has died, a concept often referred to as control by the "dead hand" or "mortmain".

The basic elements of the rule against perpetuities originated in 17th century England and were "crystallized" into a single rule in the 19th century. The rule's classic formulation was given in 1886 by the American scholar John Chipman Gray:

No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.

— John Chipman Gray, Rule Against Perpetuities §201

The rule against perpetuities serves a number of purposes. First, English courts have long recognized that allowing owners to attach long-lasting contingencies to their property harms the ability of future generations to freely buy and sell the property, since few people would be willing to buy property that had unresolved issues regarding its ownership hanging over it. Second, judges often had concerns about the dead being able to impose excessive limitations on the ownership and use of property by those still living. For this reason, the rule only allows testators (will-makers) to put contingencies on ownership upon the following generation plus 21 years. Lastly, the rule against perpetuities was sometimes used to prevent very large, possibly aristocratic estates from being kept in one family for more than one or two generations at a time.

The rule against perpetuities is famous as one of the most difficult topics encountered by law school students. It is notoriously difficult to properly apply: in 1961, the Supreme Court of California ruled that it was not legal malpractice for an attorney to draft a will that inadvertently violated the rule.[4] Therefore, in the United States it has been abolished by statute in Alaska, Idaho, New Jersey, Pennsylvania,[5] Kentucky,[6] and South Dakota.[7] The Uniform Statutory Rule Against Perpetuities validates non-vested interests that would otherwise be void as violating the common law rule if that interest actually vests within 90 years of its creation;[8] it has been enacted in 29 states (Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Indiana, Kansas, Massachusetts, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Oregon, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington, West Virginia), the District of Columbia, and the U.S. Virgin Islands, and is currently under consideration in New York.[9][10] Other jurisdictions apply the "wait and see" or "cy-près doctrine" that validates contingent remainders and executory interests that would be void under the traditional rule in certain circumstances.[7] These doctrines have also been codified in the United Kingdom by the 1964 statute.[11]

Historical background[edit]

The rule has its origin in the Duke of Norfolk's Case of 1682.[12] That case concerned Henry, 22nd Earl of Arundel, who had tried to create a shifting executory limitation so that some of his property would pass to his eldest son (who was mentally deficient) and then to his second son, and other property would pass to his second son, but then to his fourth son. The estate plan also included provisions for shifting property many generations later if certain conditions should occur.

When his second son, Henry, succeeded to his elder brother's property, he did not want to pass the other property to his younger brother, Charles. Charles sued to enforce his interest, and the court (in this instance, the House of Lords) held that such a shifting condition could not exist indefinitely. The judges believed that tying up property too long beyond the lives of people living at the time was wrong, although the exact period was not determined until another case, Cadell v. Palmer, 150 years later.[13]

The rule against perpetuities is closely related to another doctrine in the common law of property, the rule against unreasonable restraints on alienation. Both stem from an underlying principle or reference in the common law disapproving of restraints on property rights.[14] However, while a violation of the rule against perpetuities is also a violation of the rule against unreasonable restraints on alienation, the reciprocal is not true.[15] As one has stated, "The rule against perpetuities is an ancient, but still vital, rule of property law intended to enhance marketability of property interests by limiting remoteness of vesting."[16] For this reason, another court has declared that the provisions of the rule are predicated upon "public policy" and thus "constitute non-waivable, legal prohibitions.[17]

Common law[edit]

Black's Law Dictionary defines the rule against perpetuities as "[t]he common-law rule prohibiting a grant of an estate unless the interest must vest, if at all, no later than 21 years (plus a period of gestation to cover a posthumous birth) after the death of some person alive when the interest was created."[18]

At common law, the length of time was fixed at 21 years after the death of an identifiable person alive at the time the interest was created. This is often expressed as "lives in being plus twenty-one years." Under the common-law rule, one does not look to whether an interest actually will vest more than 21 years after the lives in being. Instead, if there exists any possibility at the time of the grant, however unlikely or remote, that an interest will vest outside of the perpetuities period, the interest is void and is stricken from the grant.

The rule does not apply to interests in the grantor himself. For example, the grant "For A so long as alcohol is not sold on the premises, then to B" would violate the rule as to B. However, the conveyance to B would be stricken, leaving "To A so long as alcohol is not sold on the premises." This would create a fee simple determinable in A, with a possibility of reverter in the grantor (or the grantor's heirs). The grant to B would be void as it is possible alcohol would be sold on the premises more than 21 years after the deaths of A, B, and the grantor. However, as the rule does not apply to grantors, the possibility of reverter in the grantor (or his heirs) would be valid.

Statutory modification[edit]

Many jurisdictions have statutes that either cancel out the rule entirely or clarify it as to the period of time and persons affected.

  • In the United Kingdom, dispositions of property subject to the rule before 14 July 1964 remain subject to the rule.[11] The Perpetuities and Accumulations Act 1964 provides for the effect of the rule of interests created thereafter. This act codifies the "wait and see" doctrine developed by courts.

See also: Perpetuities and Accumulations Act 2009

  • In the Republic of Ireland,[19] the rule was abolished as of 1 December 2009.[20]
  • The states of the United States have differing approaches.
    • Some states follow the "wait-and-see approach," or "second look doctrine," and/or apply the "cy pres doctrine." Under the wait and see approach, the validity of a suspect future interest is determined on the basis of facts as they now exist at the end of the measuring life, and not at the time the interest was created.[21] Under the cy pres doctrine, if the interest does violate the rule against perpetuities, the court may reform the grant in a way that does not violate the rule and reduce any offensive age contingency to 21 years.[22]
    • Other states have adopted the Uniform Statutory Rule Against Perpetuities (or some variant of it) which extends the waiting period typically to 90 years after creation of the interest.[23]
    • At least six states have repealed the rule in its entirety, and many have extended the vesting period of the wait-and-see approach for an extremely long period of time (in Florida, for example, up to 360 years for trusts).[24]
  • In Australia, each of the states has followed the UK approach to perpetuities, with statutory modification. In NSW for example, The Perpetuities Act 1984 limits perpetuities for 80 years,[25] but also adopts the United States "wait and see" methodology.[25]

Illustrations[edit]

Main article: Illustrations of the rule against perpetuities

Several famous illustrations reflect some of the bizarre outcomes possible under the rule against perpetuities including the "fertile octogenarian," the "unborn widow," and the "precocious toddler."

A common example of the rule in application would be as follows. T writes a will. T already has great-grandchildren, has met them, and likes them. T also has an estate home called Blackacre. It is T's desire to leave Blackacre for her family to enjoy, and to ensure that her great-grandchildren, whom she knows, will get to enjoy Blackacre as well without the great-grandchildren's elders, such as T's children and grandchildren, selling Blackacre. After her great-grandchildren, T really has no interest in who enjoys Blackacre, as she does not know them.

T goes to her lawyer and explains her desire. T's lawyer drafts a will with the following clause:

Blackacre to my children for their lives, then to their children for their lives, then to their children their heirs and assigns.

What the lawyer has created is a life estate in Blackacre to T's children, a successive life estate in Blackacre to T's grandchildren, followed by a fee simple future interest in T's great-grandchildren. However, the rule against perpetuities would void the interest to T's great-grandchildren, and leave the will creating the successive life estates with a reversionary interest in T's estate.

Why? The rules states that any interest must vest, if at all, within 21 years of a life in being at the time of the instrument. The instrument here is a will, so the time of the instrument is T's death, not when the will was drafted. Next, we need to find every possible person, whether named in the instrument or not, who could, regardless how remote the possibility, affect the instrument. T's children, grandchildren etc. are our possible measuring lives because they control who will take Blackacre. For a measuring life to be valid, it must be a life in being at the time of the interest. For a class, such as children or grandchildren, to be valid measuring lives, it must be a closed class, meaning it must be impossible, not merely highly unlikely, for another class member to come into existence after the time of the instrument.

In the above example, T's children are a valid measuring life. T's children are a class, so the class must be closed at the time of the instrument for T’s children to be valid measuring lives. Here, the class that consists of T's children would be closed at the time of the instrument as it is impossible for T to have any children after T dies and after the applicable period of gestation. The class that consists of T's grandchildren is not a valid measuring life as T's children are free to reproduce after T dies, meaning the class is not closed at the time of the instrument. Obviously, the same goes for T's great-grandchildren for the same reason.

Now that we know our valid measuring lives, we can see which interests in Blackacre are valid. Obviously, the life estate to T's children is valid as they are the measuring lives. The life estate to T's grandchildren is also valid. Why? Because all of T's grandchildren must be born within 21 years of a measuring life. T's children are our measuring lives, all of T's grandchildren must be born before the last of T's children dies (or, at least be in the womb, which counts as being alive for rule against perpetuities purposes), meaning their interest would vest within 21 years of a measuring life. T's great-grandchildren's interest is invalidated by the rule. Why? Because T's grandchildren are free to reproduce after all of T's children have died. It is possible that one of T's grandchildren could have a child more than 21 years after T's last child dies, meaning the interest might not vest within 21 years of a life in being and thus the gift is to that extent void under the rule.

Applications[edit]

In 1919, Wellington R. Burt died, leaving a will that specified that apart from small allowances, his estate was not to be distributed until 21 years after the death of the last of his grandchildren to be born in his lifetime. This condition was met in 2010, 21 years after his granddaughter Marion Landsill died in November 1989. After the heirs reached an agreement, the estate, which had reached an estimated value of $100 million to $110 million, was finally distributed in May, 2011, 92 years after his death.[26]

Charity-to-charity exception[edit]

The rule never applies to conditions placed on a conveyance to a charity that, if violated, would convey the property to another charity. For example, a conveyance "to the Red Cross, so long as it operates an office on the property, but if it does not, then to the World Wildlife Fund" would be valid under the rule, because both parties are charities. Even though the interest of the Fund might not vest for hundreds of years, the conveyance would nonetheless be held valid. The exception, however, does not apply if the conveyance, upon violation of the condition, is not from one charity to another charity. Thus, a devise "to John Smith, so long as no one operates a liquor store on the premises, but if someone does operate a liquor store on the premises, then to the Roman Catholic Church" would violate the rule. The exception would not apply to the transfer from John Smith to the Roman Catholic Church because John Smith is not a charity. Also, if the original conveyance was "to John Smith and his heirs for as long as John Smith does not use the premises to sell liquor, but if he does, then to the Red Cross" this would violate the rule because it could be more than 21 years before the interest in Red Cross would vest, and therefore, their interest is void. Thus leaving John with a fee simple determinable and the grantor a possibility of reverter.

A famous example of this exception applies to Harvard's Widener Library. Eleanor Elkins Widener, the library’s benefactor, stipulated that no “additions or alterations” could be made to the façade of the building.[27] If the university ever changes the façade, it loses the building to the Boston Public Library. Because both Harvard and the Boston Public Library are charities, the restriction can apply indefinitely.

Saving clause[edit]

To avoid problems caused by incorrectly drafted legal instruments, practitioners in some jurisdictions include a "saving clause" almost universally as a form of disclaimer. This standard clause is commonly called the "Kennedy clause" or the "Rockefeller clause" because the determinable "lives in being" are designated as the descendants of Joseph P. Kennedy (the father of John F. Kennedy), or John D. Rockefeller. Both designate well-known families with many descendants, and are consequently suitable for named, identifiable lives in being.

In order to satisfy the rule against perpetuities, the class of people must be limited and determinable.[28] Thus, one cannot say in a deed "until the last of the people in the world now living dies, plus 21 years." For a time, it was popular to use a Royal lives clause, and make the term of a deed run until the last of the descendants of (for example) Queen Victoria now living dies plus 21 years.

Related rules[edit]

Jurisdictions may limit usufruct periods. For example, if a corporation builds a ski slope, and gives rights of use (usufruct) as gifts to corporate partners, these cannot last in perpetuity, but must terminate after a period that must be specified, e.g. 10 years. A perpetual usufruct is thus forbidden and "perpetual" might mean a long, but finite period, such as 99 years. Here usufruct is distinct from a share, which may be held in perpetuity.

Cultural references[edit]

The rule against perpetuities figures as a prominent plot point in the 1981 film Body Heat. It also figured as a secondary plot line in the 2011 film The Descendants.

See also[edit]

References[edit]

[edit]

  1. ^Lucas v. Hamm, 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685 (1961).
  2. ^For interests created on, or after, January 1, 2007. (20 Pa. Cons. Stat. § 6104)
  3. ^KRS 381.224
  4. ^ abMoynihan, Cornelius J.; Kurtz, Sheldon F. (2002). Introduction to the Law of Real Property (3rd ed.). Saint Paul, Minnesota: West Group. p. 248. ISBN 978-0-314-26031-4. OCLC 49800778. 
  5. ^Uniform Law Commissioners, Uniform Statutory Rule Against Perpetuities
  6. ^Assembly Bill A1737: Creates the Uniform Statutory Rule Against Perpetuities in New York
  7. ^Uniform Law Commissioners, Legislative Fact Sheet - Statutory Rule Against Perpetuities
  8. ^ ab"The Rules Against Perpetuities and Excessive Accumulations (LC251)"(PDF). Sixth Program of Law Reform: The Law of Trusts. Law Commission. 1998-03-31. 
  9. ^3 Ch. Cas. 1, 22 Eng. Rep. 931 (Ch. 1682)
  10. ^1 Cl. & Fin. 372, 6 Eng. Rep. 936 (H.L. 1832, 1833)
  11. ^Cole v. Peters, 3 S.W.3d 846 (Mo. Ct. App. W.D. 1999)
  12. ^Cole, 3 S.W.3d 846.
  13. ^Wedel v. American Elec. Power Service Corp., 681 N.E.2d 1122 (Ind.App. 1997). See also Matter of Estate of Kreuzer, 243 A.D.2d 207, 674 N.Y.S.2d 505 (N.Y.A.D. 3d Dept. 1998) (the law favors the vesting of estates as early as possibility).
  14. ^Symphony Space, Inc. v. Pergola Properties, Inc., 88 N.Y.2d 466, 669 N.E.2d 799 (N.Y. 1996).
  15. ^Black's Law Dictionary, Deluxe 8th Ed.
  16. ^Land and Conveyancing Law Reform Act, No. 27 of 2009, section 16
  17. ^"Land and Conveyancing Law Reform Act 2009". Dublin: A&L Goodbody. 2009-07-22. Retrieved 2009-12-14. 
  18. ^http://legal-dictionary.thefreedictionary.com/Wait-And-See+Doctrine
  19. ^http://legal-dictionary.thefreedictionary.com/cy+pres+doctrine
  20. ^Statutory Rule Against Perpetuities Summary
  21. ^Fla. Stat. § 689.225(2)(f) (2008)
  22. ^ abThe Perpetuities Act 1984 (NSW) s7.
  23. ^"Millionaire's heirs get inheritance after 92 yrs: Lumber baron Wellington R. Burt finally parts with his fortune, 21 years after his last grandkid died". CBS News. Saginaw, Michigan. Associated Press. May 8, 2011. Retrieved May 13, 2011. 
  24. ^Zachary M. Seward, "Widener Library Bridge Coming Down, The Harvard Crimson, November 18, 2003; accessed 2017.03.07.
  25. ^McPhail v DoultonMcPhail v Doulton [1971] AC 424

Works cited[edit]

External links[edit]

The rule against perpetuities voids the interest to T's great-grandchildren.

One thought on “Rule Against Perpetuities Wait And See Examples Of Essays

Leave a comment

L'indirizzo email non verrà pubblicato. I campi obbligatori sono contrassegnati *