FUTURE INTERESTS AND PERPETUITIES

Future interests

- Are either remainders or reversions – they are estates that are vested in interest but not presently rested in possession - = where possession and enjoyment is deferred to a future date - Presently existing estates, but the right to possession is postponed until the termination of a prior limited (death of someone) - E.g X grants land to Y for life – Y receives a entitling Y to immediate possession – X retains estate (if X dies, goes back to X’s estate) - E.g: X to ‘Y for life and then to Z in fee simple’ – will give Z a fee simple estate in (Z gets possession after Y dies) - While a present interest gives the grantee a right to immediate possession, a will grant , but defer possession until a later date - Deal with situations where a life estate or leasehold is created and there is an expiration period that necessitates future dealings with that interest - E.g. devises land ‘to my husband for life and on my husband’s death to B – B’s right to possession is postponed until finalisation of the life estate

Remainder and reversion interests and definitions

- With remainder interest – grantor sets out that the remainder of the estate will pass to a 3rd party - Reversion interest arises where the grantor has not set out exactly where the remainder of the estate will go 2 classifications of estate in remainder 1) vested remainder: present interest (2) Contingent remainders: no interest until particular conditions are fulfilled Contingency must be met before the vesting can occur - An is either (a) estate in possession – gives an immediate right to possession and enjoyment of the land (b) Estate in remainder – gives a future right to possession and enjoyment (c) estate in reversion – a future right to possession and enjoyment by the original grantor of his heirs after the termination of a prior estate granted or a failure to dispose of an ultimate interest – e.g. leasehold comes to an end - reversionary interest can occur when someone rents out their property - With a remainder interest, the grantor sets out that the remainder of the estate will pass to a third party, while a reversion interest arises where the grantor has not set out exactly where the remainder to the estate will go. - The reversion, by presumption, goes back to the grantor

Legal Remainder Rules

- Must never be a gap in possession (Seisin must never be in abeyance) - Grantor was limited by the nature of the schemes of estates and such, grantor could not changes expressed rights - Any remainder or reversion after a fee simple estate was void - Y in fee simple, but if Y dies without children in the lifetime of Z, then to Z in fee simple – Z void - Y and his heirs for long as the land shall be used as a school, and then to Z and his heirs – Z void here as well - Can’t give 100% of something and then attempt to give 100% to another - A remainder was void unless it followed a prior particular estate created by the same instrument - Y and her heirs commencing in 2 years: Void as gap in seisin – cannot have 2 year gap under legal remainder rules - Remainder was void if it was designed to take effect in possession before the natural determination of the particular estate - The following is void: Y for life But if she remarries then to Z and his heirs remainder to Z – Void as illegal attempt to cut short Y’s estate - Compared to: Y for life Or until she remarries, then to Z and his heirs: okay as inherently liable to determination (Life estates can be subject to a condition) - Abeyance of seisin (possession) is not allowed; contingent remainder must be capable of vesting a must in fact vest during the continuance of the prior possessory estate or at the very moment of its determination - By X to Y for life and after his death to such of Y’s children that graduate in medicine – revert back to X after Y’s death: illegal remainder rules here as ‘after death’ creates a gap - Y for life and then to such of Y’s death – remainder capable of vesting – no gap here= valid

Immediate v Future interests

- Estates in land may be classified based on whether the right to occupy the land is immediate or sometime in the future - An estate is the right to possess and use the land for the period of time for which it has been granted - An estate in land with the right to possession postponed to the future, is just as much an interest in land as an estate that is entitled to immediate possession – it is a pre-existing title to land

Vested or contingent interests

- A vested interest is one that is certain to take effect in possession – identity known – no pre- condition – if vested, no Perpetuities Act - A contingent interest may never fall into possession E.G Y for life and then Z in fee simple – gives Z a vested remainder (no precondition) (Vested) VS - Y for life and then to Z in fee simple if A reaches the age of 21, assuming Z has not already reached 21, gives Z a contingent remainder: Pre-condition here is turning 21 (contingent)

Destructibility of Legal Contingent Remainders

- Even if remainder is valid from the start, it can still be destructive

Natural Destruction: Y for life and then to Z in fee simple if Z graduates in : where Y dies before Z graduations the exception of en ventre samere applies (in your mothers’ womb) ‘coming along’ Surrender: X for life, then to Y for life if she graduates in law, then to Z in fee simple; X could at any time convey his life interest to Z and thus destroy Y’s interest

Merger: Y for life, then to Z for life if she attains the age of 21= If X, as the fee simple reversionary, conveyed their interest to Y before Z attained 21, then Z’s contingent remainder would fail

Forfeiture: Y for life, remainder in to the heir male of Y = where the male heir is not yet born and Y purports to convey to Z in fee simple, then Y ‘forfeits’ his life estate and thereby destroys the contingent remainder to his son= tortious conveyance

Disclaimer: where the holder of a prior ‘particular estate’ disclaimed or disowned the estate, which could occur at any time, the contingent remainder supported by the ‘particular estate’ would fail – if fail, likely to go back to grantor

Hamesley v Newton

- Q to the court was would the surrender of the life estate accelerate the vested interest - Malcolm Hamesley devised Fairfield – Great nephew Leonard Collin for life and remainder to Leonard’s eldest living son (Leonard had two sons) - Court held that remainder vested rather than contingent

Conditions precedent v conditions subsequent

- Precedent or subsequent to the vesting of the interests - Condition precedent: Y for life and then to Z in fee simple if Z reaches the age of 45 - Conditions subsequent: X grants purple acre to Y in fee simple if she remains a law lecturer

Rule in Shelley’s case

- Related to policy ideas: words of purchase v words of limitation - When the ancestor takes an estate of freehold by or conveyance, and in the same gift or conveyance an estate is limited, either immediately or later on, to that ancestor’s heirs in fee simple or fee tail - The words ‘to [ancestor’s] heirs’ are words of limitation of the estate given to the ancestor – Not words of purchase conferring any interest upon the ancestor’s heirs - To X for life and then to the heirs of X was construed as bestowing a fee simple estate on X = fee simple as grantor tried to create fee simple here - Rule used to prevent a narrowing down of the estate into the future Example in Horden v Permanent Trustee co: ‘To the use of Elizabeth Slater for her life and the heirs of her body lawfully to begotten under the same uses’ – gave Elizabeth a fee tail estate - Shelly rule abolished in Act 1919 S17 - Gifts such as the remainder in this case, left on the basis that they will go to one of several children to be identified when the life tenant dies, is seen as a gift where the limitation is restricted to the protection of the prior interest, which if terminated, ca then allow the subsequent gift to take effect according to the circumstances prevailing at the time of cessation of the earlier interest

Intervention of equity

- Feudal dues – most onerous taking place upon the death of the holder of freehold - Prohibition against the disposal of land by will - Rigid rules for the conveyance of land - ‘the use’= a trust in modern world - A gift by X to Y and his heirs to the USE of Z and his heirs in fee simple gave the legal estate to Y who held it on trust for the beneficial enjoyment of Z’ Springing uses: (defied gap rule) X and his heirs to the use of Y and his heirs in 2 years time Shifting use: To X and his heirs to the use of Y and his heirs BUT if Z marries then to the use of Z and his heirs (‘But’ is valid in equity) The executory devise: defied rule against disposition of land by will NOTE: the above three equity interventions are only valid in equity, i.e. void under legal remainder rules

Statute of Uses and Statute of wills 1540

- Statute co-verted the beneficial equitable interests into legal interests (legal executory interest took over) - The springing and shifting uses became valid legal interests - Statute of Wills – created a broad power to devise land and the devises took a legal estate whereas before 1535, they had taken an equitable interest

Use upon Use

- Idea of trust - Use upon use led to development of the trust - After Statute Of Uses 1535, no longer possible to have an equitable interest in land - Did not stop a use where person was seised to their own use and the statute didn’t stop a use upon use - To X and his heirs to the use of Y and his heirs to the use of Z and his heirs – prior to 1535, the grant to Z’s heirs was entirely void (dividing property into various interests) - After 1535, initially the purported grant to Z was also ignored (Tyrrels’ Case) - 1600 onwards: X’s grant was stopped by the Statute of Uses 1535 and X thus took no legal interest as case of 1535, Z took equitable interest = Use Upon Use - To Y and his heirs to the use of Y and his heirs to the use of Z and his heirs: here Y=legal interest and Z=equitable interest

Rule in Purefory v Rogers

- Affected springing uses by defying the gap rule – 2 years time - To avoid ruling beyond the grave - Rule held that if a gift or devise was contained in a legal executory interest and if from the outset there was a possibility of complying with the legal remainder rules, then such an interest was to be treated as a legal contingent remainder - To X and his heirs to the use of Y for life, then to the use of Z when Z graduates from law (capable of existing as legal or contingent under Purefoy v Rogers rules - To X and his heirs to the use of Y and his heirs in 2 years time – not capable of being seen in legal remainder – seen under equity

White v Summers

- 1908 - To his nephew John and Owen for life - After john’s death to the use of his first and other sons severally and successively according to their respective seniority in tail made - In default of such issue to the use of Frances Hannah Eliza Summers (daughter of James Summers) for life - After Frances’s death to the use of her first and other sons severally and successively according to their respective seniority in tail made - One issue is the uses mentioned upon trust after the failure of the prior estates to sell the land and distribute accordingly back to trustees - P in this case was the eldest son of Frances – Argued limitations of attaining 21 was contingent remainder and failed on the death of John - Court held limitation applicable – Purefoy v Rogers applied and P received interest

Transferability of future interests

- Legislation now provides for the alienation of both vested and contingent future interests by conveyance and will (conveyancing Act s50, succession Act 2006 NSW , s4)

Future interests – summary of current position

- S44 of Probate and Administration Act 1898 (position of estate) - Executor takes legal estate , beneficiaries under will only get equitable interest and later on, legal interest - Rule in Purfory and Rogers Abolished in Conveyancing Act 1919 (s16(1)) - Rule in Shelly’s Case abolished under s17 of Conveyancing Act - X to Y and her heirs commencing in two years’ – void at C.L yet valid under legislation - Statute of Uses Act 1535 abolished – makes the law relating to legal executory interests irrelevant – Imperial Acts Application Act 1969 - Position in NSW – To Y in fee simple on trust for Z in fee simple

Future interests and

- Torrens title = title by registration - Life estates and future estates including estates in remainder or in reversion - S100 of Act 1990 - ‘where persons are entitled to be registered as proprietors of a life estate and an estate in remainder in, or as tenants in common of shares in land under provisions of the Act’

Destruction of contingent remainders and rule of Purefory v Rogers

- A contingent remainder existing at any time after commencement of this Act shall be capable of taking effect notwithstanding the want of a particular estate of freehold to support it in the same manner as it would take effect if it were a contingent remainder of an equitable estate supported by an outstanding legal estate in fee simple (Conveyancing Act 1919) - In NSW, the Statute of Uses has been abolished by the Imperial Acts Application Act 1969 - Thus legal executory interests can no longer be created

Restrictions on executory limitations

- Y and his heirs, but if Y should die without issue, then to Z and his heirs - Conveyancing Act 1919 S29B – legislation makes the limitation void once a child of Y turns 18 – fact that Y may die childless is immaterial

Rule against perpetuities - Stops people ruling from beyond the grave – land should be alienable and go to someone as possession - Methods include contingent remainders and trusts: e.g.: A grant ‘To X for life, remainder to x’s son for life, remainder to that son’s son, and so on – Attempts to keep land in family yet restricts what they can do with land e.g. at the bank – a life estate does not equal a security – affects economy - C.L - 1) interest could only be valid when it vested within the defined perpetuity period - 2) Perpetuity period was defined under C.L by reference to a life in being - Contingent Remainder is treated as void from the outset if there is a possibility that it could vest in title outside the perpetuity period - Aim is to prevent estate holders from controlling their estates ‘from the grave’

Scope and purpose of the rule restraining alienation

- Each estate is viewed as conferring upon the holder a ‘’ and C.L holds that there are some rights that are so fundamental that they cannot be removed

Hall v Bosst

- Considered whether the repugnancy principle applicable to conditions amounting to restrictions of alienation that are attached to title should also be extended to contractual restraints on alienability - ‘around for denying validity it is a principle of the law that private property should be fully alienable’

Old rule against perpetuities

- Whitby v Mitchell (1890) - Aimed to restrict what one could do after death - C.L intervened to permit the conversion of a fee tail into a fee simply by barring the entail - To X for life, remainder to X’s son for life, remainder to X’s grandson in fee simple - Rule abolished under S23 of Conveyancing Act

Modern rule against perpetuities

- In Duke of Norfolks case (1681) - Valid to miss one generation, but not the next as impossible for present land owner to foresee the capabilities and competencies of the succeeding generations and thus should not be allowed to control the vesting of interests in land to them - Rule acts to impose a limit on the time between the creation of a future interest and the ultimate vesting of that interest

Statement of the rule

- Creation of interest= when transfer property under or leave in a will - ‘no interest is good unless it must vest if at all, not later than 21 years, after some life in being at the time at the creation of the interest

Break down of statement of the rule

Vest

- Final owner identifiable of the estate - Only thing preventing final owner from taking possession is the normal determination of a prior estate - Where interest is part of a class gift (e.g. ‘to all my sons’ ‘to all my nephews’), the exact proportionate share is ascertainable/can be known within perpetuity period - Rule does not apply to vested interests - To X for life, then to Y for life = X and Y have vested interests as they are identified – only thing preventing it from going to Y is X being alive

‘Life in being plus 21 years’

- Life in being acts as a measuring stick - Equates to the duration of the perpetuity period at C.L - Life must be in existence at time of creation of the interest - Life in being may be expressed or implied - Child can be unborn – period of gestation included - Life must be human - Class of lives must not be capable of increase e.g. if have grandchildren – class capable of increase.

‘At the creation of the interest’

- Crux of rule - Perpetuity period runs from the fate of the instrument coming into effect e.g. date of the trust deed (later of the date of execution or the date the deed is delivered), the date a gift is effective, or the date of death of the for a will

‘Must vest if at all’

- Initial certainty rule - Possibilities, not probabilities or actual events - Must be absolute certainty of vesting of the interest within the vesting period – if uncertainty, interest will fail at time perpetuity period begins to run - V devises purple acre to ‘all my grandchildren in fee simple. At the time of V’s death, he had 2 children, W and X, with no grandchildren at that time = W and X must have grandchildren - Yet gift to the grandchildren does not offend rule against perpetuities as modern rule = can skip a generation but not the other - Lives in being are W and X, and upon their death, have to have children – must vest if at all’