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Wk 6: Alienability of Proprietary Interests and Perpetuities - Coggle…
Wk 6: Alienability of Proprietary Interests and Perpetuities
RAP
command of law
Nemesis Aust. P/l v Commissioner of Taxation
(2005)
if an interest infringes the rule then it is void
Rule Against Perpetuities
Perpetuity
something that lasts forever
Alienability
to dispose of or transfer a land interest (voluntarily)
The rule against holding onto land (interests) forever or, otherwise, it is too remote in the future
"an interest which vests in interest at too remote at a time in the future". Hinde, McMorland & Sim, Land Law in NZ
Eventually whoever owns land will die and then their land interests will be alienated (transferred)
Even if the land is owned by a company the controllers/shareholders of that company are eventually individuals and they will also die one day
Some landowners want to control property ownership from the grave
So that the property they owned and controlled during their lifetime never actually
vests
to another person who is still alive
The courts did not like this, they preferred to promote freedom so that future generations could be autonomous and determine their own wealth
Is it simple?
Yes!
The basic rule is that eventually all land interest must vest.
That is, someone else must be legally entitled to possess/own the land interest being alienated/disposed of
** Even in the context of a company ownership eventually the controllers of all companies change hands. When individual shareholders pass away
Past/Present
Previous common law rule established by
Whitby v Mitchell
(1890) was abolished in Qld in 1973
S 216 PLA
Present/modern rules
Property Law Act 1974
(Qld)
Pt 14
ss 206 - 222
especially 209-210
QLD Approach
80 years or less - s 209(1)
Common law - aka as the modern rule against perpetuities
Elements
Vest
21 years
Life in being
At the creation of the interest; and
Must vest, if at all
Focus, Land Law
190
Vests - if the interest at a time that is not too remote the the rule has no application.
the rule is not concerned with duration, it relates to the vesting of a future interest that is not too remote.
So there must be a future interest involved (contingent remainder or future, executory interest)
The most obvious example is if the interest vests when it is created then the rule has no role (eg inter vivos gift which applies immediately upon execution of deed of gift instrument)
21 years - the perpetuity period is 21 years plus the third element
Life in being - (measuring life)
a human life
in existence the date the instrument starts operating
capable of ascertainment upon the date the instrument comes into operation
This is the maximum period. Of course, the interest can vest before this date. If it does then the RAP has no application.
Example
Carol gives all her property to her first grandchild of her friend John
John is the life in being (measuring life)
If John dies before Carol and upon his death he has no grandchildren but he has children then these children become the
implied lives in being
the life in being does not have to receive the property
However, if John did not have any children upon his death and he dies before Carol then the gift fails because the is no
life in being
element present
At the creation of the interest - the date the interest was created this is usually evidenced by way of a deed/instrument. It could be a gift (inter vivos) or a will.
This is when the clock starts ticking on the perpetuity period
Must vest, if at all - this is where the rule can lead to absurd possibilities rather than probabilities (eg the fertile octogenarian). Rule is concerned with possibilities.
Suggested steps to work through
"Determine whether there is a future interest involved in the conveyance [instrument] that falls under the rule (contingent remainder or executory interest)
If there is such a future interest, is there any limitation on when the person holding that interest can actually get the property? If there is no such limitation (it can vest any time between now and eternity), the conveyance violates the rule and it is void.
If there is a limitation, determine which person or people are relevant in deciding when the future interest vests. These people are calle the "measuring lives". [Life in Being}
Finally, determine whether it is possible that the interest vests more than 21 years after the death of all the people who are currently alive who are relevant to the vesting of the future interest
Application of wait and see approach
S 210 PLA
creates uncertainties
used to be that if a condition when an interest was first created did not exist (was not possible) then it was immediately invalid
but to mitigate aginst the harshness of this rule the 'wait and see approach' was developed
this has particular application in the context of gifts
Class gifts
What is it? A gift(s) to a class which is uncertain at the time of creation rather than a specific person
1 more item...
Consequences if RAP infringed
s 215 PLA
It depends on whether the later transfer/conveyance can be saved
Example
Tim in his will, left his farm property to Angela for the remainder of his her life. The property would then go to Simone's grandchildren. But if Simone did not have grandchildren the the property goes to James.
Under the old rule if Simone died with no grandchildren the conveyance would fail. This is because the earlier conveyance upon which it is dependant is void. (It did not matter that the will provided for an alternative)
However, s 215 allows the conveyance. So even though the earlier conveyance is void the farm property could still be given to James in accordance with the wishes of Tim's will.
RECAP
It is important to write down each transaction
It is easy to get confused, be kind to yourself!
There are a few variables particularly if there are a few conditional interests at play
Keep going back to basics
Lawexplainer