We have previously written articles as to the Doctrine of Lapse, and the exceptions to the rule.
This article brings to life a practical situation where it was considered.
This concerns a recent case ‘Naylor and Amat v Barlow and others (2019)’.
The facts of this case concern a situation where the testator was a farmer, who by his will gifted his interests in his farm to his wife and two of his sons, who were also his business partners, as tenants in common in equal shares.
The son’s part of the gift, was subject to a condition that they each paid £15,000 to each of his other children within nine months on his death. If they fail to comply with the condition, then their gifts would fail, and their interests in the farm would pass to the other two children instead.
One of the sons pre-deceased the testator. He died intestate, leaving a spouse and two children. These two children were not informed of the condition within nine months of the testator’s death.
The second son failed to comply with the condition, and make the £30,000 payment to his other siblings. As a result, the gift to him failed, and passed to his siblings instead.
The first question to consider was whether Section 33, applied to the gift to the son who predeceased? If so, then the second question was, did the same condition apply to his children inheriting under Section 33?
The law as it currently stands.
A well-established exception to the doctrine of lapse, is Section 33 of the wills act 1837. This Section provides that where a testator makes a gift in their will to their own child, or remoter descendants, this gift will not fail if the beneficiary dies, leaving issue of their own, subject to any contrary intention in the will. This means that if a testator makes a gift to a child, and said child dies before them leaving children of their own, who are living at the testator’s death, then those grandchildren of the testator will take the gift instead. If there are multiple surviving issue, then they will take the part of the estate in equal shares between them.
Section 33 (3).
It is accepted that Section 33 applies to contingent gifts, so even if the beneficiary survives the testator, but their gift fails because they fail to meet the contingency (usually an age condition). Section 33 will still prevent the gift lapsing. Up until now it has not been clear whether the issue is subject to the same contingency as the original beneficiary. Due to this uncertainty, professional will drafters are encouraged to be very clear when drafting contingent gifts, and to make it clear whether any issue inheriting as a result of Section 33, must also meet the same age conditions.
A decision in the ‘Barlow’ case in the High Court, confirmed that when the testator makes a gift subject to a contingency, and Section 33 applies to prevent the gift from lapsing, then the substitute beneficiaries are subject to the same contingencies as the original beneficiary. In this case the deceased son’s children, were therefore unable to inherit their father’s share of the farm, as they had not complied with the condition to pay-out £30,000, to compensate those of the testator’s children, who were not inheriting the farm.
Various things to note, but in his judgment, the judge also confirmed that this is the case, even if the condition is seemingly impossible for the substitute beneficiary to perform. In this case, the children were not made aware of the condition within nine months of the testators death, but it was held that ignorance of the condition does not make it impossible to perform, and it would contrary to the testamentary freedom, to make the gift free of the condition that the testator had clearly intended. The condition looks set to fail from the outset, considering that probate was not taken out until three years after the testator had died.
It is therefore important to be careful when drafting conditions, and to make sure that the implications of a condition, or its failure are fully understood. In this case had the testator made it clear whether or not the condition was intended to apply only to the gifts or to the sons, or whether it should have applied to those taking in substitution, then this could of all been avoided. If there is a timescale for filing a condition, one should check that it is clear when the clock starts, and when the executors are obliged to inform a beneficiary of the condition.
This is often the case when wills are drafted in such circumstances, for the will drafter to appreciate the impact of Section 33. One should not rely on Section 33, if this is likely to conflict with the testators wishes. If there is a condition attached to a gift, clarify whether their testator’s wishes for this to apply to substitute beneficiaries. In either case, to avoid any confusion consider excluding Section 33 from the will, and drafting express provisions instead. The key word for this type of matter is clarity.
If you require any advice, please do not hesitate to contact us.