Rule Against Perpetuities Flashcards
Where does modern rule/perpz come from
The Duke of Norfolk’s Case 1963, provides: no interest is valid unless it must vest if at all, no later than 21 years after the expiry of a life in being in existence at the creation of the interest
Allows to continue to control in the future but only up until a certain point in time.
Formulation of the rule reflects 3 generations: grandparents, parents, grandchildren. After those 3 generations the grantor cannot control beyond.
Howells thoughts on the rule against perpz
Howell says we need a rule against perpetuities but we dont need the current structure. Others would say we dont need any and it should all be abolished. Saskatchewan has recently abolished and so has NB.
In the 60s- 70s jurisdictions decided that there needed to be a reform of the rule against perpetuities. Solution was to enact legislation similar to what we see in our perpetuity act here. Theory behind this legislative reform was to keep the rule but provide a safety net so that when the rule kicked in persons who were caught by the rule potentially could be saved by the safety net.
First section you go to under act
Section 2:
The Act applies to instruments taking effect after December 31, 1978 (if in a will, takes effect on death of testator and not on creation of the will, and if inter vivos takes effect on execution and delivery of instrument, or at a date specified in the instrument, or if there is a revocation clause then effective date is when can’t revoke anymore e.g. after death). Note if instrument took effect prior to Dec 31, 1978, might have to consider the old common law rule from Whitby v. Mitchell. So, determine if the Act applies – did instrument take effect after December 31, 1978
Rule from Whitby v Mitchell
The rule in whitby v mitchell was a rule that attempted to achieve in a different way a measure of control over how far a grantor or testator could govern into the future. Set out in s6(2) of Perpetuity Act. Key was if you made gift to an unborn person you could not make another gift to another unborn in the same disposition. This rule is abolished according to 6(2).
if instrument took effect prior to Dec 31, 1978, might have to consider the old common law rule from Whitby v. Mitchell. So, determine if the Act applies – did instrument take effect after December 31, 1978
Section to go to after s2? (ie second)
Now go to s.6:
i) 6(2) abolished the old rule from Whitby v. Mitchell
ii) S.6(1) says, except as provided by this act, the modern common law rule against perpetuities continues to have effect. So, apply the (modern version of the) common law rule against perpetuities:
(1) Divide the gift into its parts i.e. the various interests being given
(2) Determine whether each interest is vested in interest (or possession) or contingent and say why
(3) For each contingent interest:
(a) When does the perpetuity period start (i.e. on testator’s death, or on execution and delivery of deed, or on a date specified in instrument)
(b) Who are the lives in being (recall must be alive/ascertainable when instrument takes effect and cannot be an open class)
(c) When does the period end (21 years after the last life in being)
(d) What contingencies/limitations does the gift depend upon. Look at each contingency independently:
(i) Can the contingency possibly happen after the perpetuity period has ended – if yes, then entire gift is invalid by the all or nothing rule (so return to Act to look at the safety net)
What if the gift is invalid at CL? (step 3 - after s6)
S.7: 80 year period – ok if the interest must vest (either by express terms of the disposition creating it or by necessary implication of the disposition) within 80 years of it’s creation
Go to s.3 for the order of application of the other remedial provisions of the Act:
A) s14 capacity to have kids
B) s9 wait and see
C) s10 if s9 used (specifies life in beings)
D) s11 - age reduction
E) s12 Class Splitting
F) s13 General Cy Pres (discretion)
What section tells you the order of remedial provisions?
SECTION 3 A) s14 capacity to have kids B) s9 wait and see C) s10 if s9 used (specifies life in beings) D) s11 - age reduction E) s12 Class Splitting F) s13 General Cy Pres (discretion)
s14 of Perpz Act
s. 14: capacity to have children – if a question turns on whether or not someone can have children:
(a) s.14(1) presume can only have children if: 14 <= male, 12 <= female <= 55
(b) s.14(2) evidence may be given to show that a living person incapable of having children
(c) s.14(5) the possibility that someone may have a child by adoption or legitimation must not be considered
s9 of Perpz act
s. 9: wait and see – (under common law, couldn’t do this, had to determine if valid at fixed time when came into effect) – every contingent interest is not invalid until actual events show the interest is incapable of vesting within perpetuity period
s10 perpz act
S.10 specifies who should be used as the lives in being if s.9 applies:
(i) S.10(1)(a) must use the following people as lives in being, and they must have been alive or conceived but unborn at the start of the perpetuity period
(ii) E.g. s.10(2)(b)(i) since can now wait and see by s.9, can use individual members of a class i.e. not restricted to only classes closed at the start of the perpetuity period
(iii) Also note s.10(2)(c), (d), (e)(iii)
Note there is also an interpretation problem: suppose waiting and seeing what will happen by s.9, and during that time a female goes over 55 years old, is it then possible to go back and apply s.14 to close the class of her children? Currently this is unknown (perhaps not since s.3 specifies order, and as example 19 below shows, this might allow lives in being to change, going against s.10)
s11 Perpetuities Act
s.11: age reduction – if disposition creates an interest contingent upon attainment of an age over 21, and that is what makes the gift violate the common law rule, but would not have been void if age had been 21, then that age specification should be reduced to the nearest age to avoid the violation i.e. reduce by the minimum amount necessary
S12 Perpz Act
s. 12: class splitting for dispositions:
(a) s.12(1) for s.11, if members or potential members of a class prevents s.11 from saving the gift those persons should be excluded and then s.11 applied (so s.12(1) is no use if there are no ages over 21, but s.12(2) might still be useful)
(b) s.12(2) general, if there are still too many members in class making it void, then those should be excluded as well (note error in legislation: last part “and s.11 has effect accordingly” should read “and the gift takes effect accordingly”)
s13 Perpz Act
s.13: general cy pres – discretion of the court to vary a disposition as it sees fit, to make a gift valid when it is invalid solely on the ground that it violates the rule against perpetuities if it can be done within the testator’s intention (which must be ascertainable) – does not save gifts that are invalid for other reasons (e.g. uncertainty)
