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Gifts Over on Death Before Receipt

Testators sometimes include strange provisions in their wills. One is a provision that gives a gift in the following terms: “To Mary, but if she dies before receiving the gift, then to John”. Judging by the reported cases, such “before receipt” provisions are remarkably common. In some cases it is clear that the testator actually intended it, but I wonder if in most it is perhaps something that the drafter inserts because it is in his wills precedents. It is not unlike a gift “To my wife if she survives me for 30 days and if she does not, to my sister”. Such provisions are used to avoid having the property pass through two estates and attracting two sets of administration costs (and also, in former times, attracting succession duty twice). So the “survives me by 30 days” provisions are defensible and useful. I find the “before receipt” provisions less defensible, if only because they are productive of unnecessary litigation.

The validity of a “before receipt” provision arose in the recent Saskatchewan case, Leason v. Malcom.[1] In my opinion this case runs counter to established principle. Consequently, I shall first explore the history of “before receipt” provisions and the principles the courts have developed to deal with them. That will make it easier to understand why the Leason decision is incorrect.

In an earlier time the law regarded “before receipt” provisions as void for uncertainty. However, in Gaskell v. Harman[2] Lord Eldon held that they are valid if clearly expressed. But he added that the court does not go out of its way to find such an intention. In Johnson v. Crook[3] Jessel M.R. held that the law continued to take the view that such provisions are valid and in Re Mitchell[4] Middleton J. agreed with that view. However, the cases also show that the law places limits on the length of time during which the provision will be allowed to operate.[5]

The cases begin with applying the presumption that a gift that is not subject to a condition precedent (such as a gift “to John when he attains age 21”) vests on the death of the testator (or a morte testoris) as the older cases refer to it). Browne v. Moody,[6] a case often cited in “before receipt” cases did not involve a “before receipt” provision. Rather, it concerned a gift to a son for life with remainder to others, but if any of the remainderers[7] predeceased the son leaving issue, the child or children of the predeceased remainderer would take her share. The Board noted that the interests of the remainderers were not contingent and that the only reason for the postponement of the division was to permit the son to enjoy the income during his life. In those circumstances the gift over vests on the death of the testator.[8] The gift over to the issue of a remainderer who predeceases the son means simply that the gift to the remainderers, while vested, is subject to divestment.[9]

Browne v. Moody did not specifically refer to the presumption of early vesting, but many of the cases that deal with a “before receipt” provision do.[10]

In passing, I note that although the default rule is that gifts are vested at the death of the testator, in fact we probably need to regard all testamentary gifts as defeasible. This is because the whole estate is vested for the time being in the executor, who will need to use some or all of the property in the estate to pay debts and administration expenses. I have written elsewhere about this principle and stated there that the executor’s title supersedes the rights of all beneficiaries, including all non-residuary ones, until the executor issues an assent. In other words, even if we regard the interests of non-residuary beneficiaries as vested from the testator’s death, they ought to be described as vested subject to divestment.[11] This is evident in any event from s. 2(1) of the Estates Administration Act,[12] which says that when a person dies all her property (other than jointly held property) devolves to and vests in her personal representative, who must first pay the person’s debts and then distribute the net remainder to the persons entitled to it. In the same article I pointed out that the statutory trust imposed by that section is not a true trust. In other words, it does not give the beneficiaries an equitable interest in the property.[13] Of course, calling non-residuary gifts vested does have certain implications. Among others, it means that they are, absent a contrary intention, entitled to receive interest from the date of the testator’s death.[14]

Clearly, if the gift over is subject to a condition precedent that is personal to the beneficiaries or if the will contains a contrary intention, it is impossible to refer to the interest of the beneficiaries under the gift over as being vested.

A gift over “before receipt” presents a practical difficulty in that delay in obtaining probate and in administration could mean a postponement of payment for a significant period of time. The courts have recognized this problem and have resolved it, absent a contrary intention, by interpreting the “before receipt” provision as meaning “before the end of the executor’s year”. That was the decision in the early case, Re Arrowsmith’s Trust.[15] Vice Chancellor Kindersley held in that case that the words “dying before receiving their respective shares” should be interpreted as meaning dying before the end of the executor’s year, which is the period the law normally requires executors to pay legacies. Early cases state that a beneficiary has a right de jure to receive his gift by the end of that year. In other words, he is entitled to receive his gift at law by that time. Consequently, if the beneficiary survives for one year after the testator’s death, she is entitled to the property that is the subject matter of the gift, even though actual receipt may happen later. Many other cases have followed this principle[16] and the courts have in some instances stated that beneficiaries should not be held subject to the whims or tardiness of the executor,[17] or even to his flagitious behaviour if he should delay distribution to prevent certain beneficiaries from taking. Of course, if the beneficiary dies during the executor’s year, the gift over will take effect.[18] Re Hill[19] falls into the latter category. The testator directed that the net residue should be distributed in equal shares among four named niblings,[20] but that if any of them predeceased the testator or died before receiving his or her share, it would go over to the deceased nibling’s children, and failing children to the surviving niblings. The court applied the executor’s year rule and since one nephew died without issue during that year without receiving his share, his share went to the surviving niblings.

Another important case is Royal Trust Co. v. East.[21] The testator left his estate in trust to pay all just and reasonable payments from the estate to his wife for life. After his wife’s death, he directed the trustee to divide the remaining residue among seven named individuals, a charity, and two fraternal organizations. However, he provided further that if any of the named individual beneficiaries should have died before the time of distribution, that share should revert to the estate and be divided in equal amounts among five other named persons. The testator’s wife died in June 1976 and, Freda, one of the named remainderers died three months later. At that time the executor had not yet completed the administration of the estate The court followed the above-mentioned “before receipt” cases and held that Freda’s interest vested at the testator’s death, that it was subject to being divested, and that such a divesting clause is valid if expressed with sufficient certainty. The court also followed the above cases in holding that the expression, “before receipt”, must be interpreted as “before becoming entitled to receiving the gift”, that is, by the end of the executor’s year. Since Freda died before the end of that year, the gift to her was divested, the property reverted to the estate, and went out under the gift over to the other named persons.

Prevost Estate v. Prevost Estate,[22] is a case in which the court of first instance came to a different conclusion because of the way it interpreted the will. The testator left his estate to his surviving siblings, except one, to be divided equally amongst those who were alive “at the time of division”. The executors failed to apply for probate for 10 years. One brother died during the executor’s year and another died several years later before probate. The will directed that if a sibling died before the testator, the executor was to set aside that sibling’s equal share and divide it among the sibling’s issue. Because of that, the court held that the testator wanted to benefit all siblings (except one) and therefore it did not apply the executor’s year principle. The Court of Appeal affirmed.

Re Campbell Estate[23] involved a different fact situation and that led the court to come to a different conclusion. The testator left the residue in two equal shares to pay the income to his son and his daughter for life, with a gift over on their respective deaths to their issue or failing issue to the other child. Then he went on to provide that if those trusts should fail, the executor was to divide the trust fund into four equal shares and pay one share to each of four niblings, with a gift over to issue if any should die “before his or her portion vests”. The testator’s son died first without issue, so his share went to his sister, the testator’s daughter. Three of the four niblings died over a period of time without issue. The other nibling also died but was survived by one son. The last to die was the testator’s daughter, the surviving life tenant. The court held, correctly I believe, that the gift to the niblings was contingent, because it would take effect only if the trusts to the two children failed, which was not a certainty. It followed that the presumption of early vesting did not apply. Moreover, the niblings could take only when their interests vested, which would have been on the death of the surviving life tenant. Since they did not survive her, the gifts to them failed. The one surviving grandnephew could take under the gift over to issue, but he could only take his parent’s one quarter share. The other three quarters went out on intestacy to the estates of the testator’s son and daughter.

Clearly therefore the accepted rule in “before receipt” cases can be ousted by a contrary intention in the will.

That brings me finally to the case mentioned above, Leason v. Malcom.[24] The testator left his estate in equal shares to his surviving siblings and named those living at the date of the will. Then he went on to provide that if any of them “predecease me or die before having benefited in whole or in part from this my estate” that share should not be redirected to any spouse of child of the deceased sibling but should be redistributed among the surviving siblings. One of the named siblings, Jennie Leason, died 15 weeks after the testator, survived by two sons. The sons claimed her share. The executor applied for probate while Jennie was still living. The executor took the position that in light of the language of the will Jennie was no longer a beneficiary and that her estate was not entitled to her share.

Despite the great cloud of witnesses that surrounded him in the form of the foregoing “before receipt” cases, Justice Currie came to the conclusion that a bequest once vested cannot be divested. Therefore, Jennie’s estate was entitled to her share. Justice Currie reached this astonishing conclusion by purporting to rely on a quotation from Justice Stirling in In re Sampson; Sampson v. Sampson,[25] which he took in part from Re Freeth.[26] In the quotation from Sampson Justice Stirling stated that a divesting provision will be valid if it is certain, but that it cannot be allowed to have effect for an indefinite period of time. That is, it cannot have effect beyond the time the gift is receivable at law, namely, the executor’s year. That is also what McRuer decided in Freeth and this principle is in total agreement with all of the above cases. However, Justice Currie stated:

26  Justice Stirling set out the principle that a bequest, once vested cannot be divested. He said that once a gift becomes de jure receivable – once it vests according to law – it is not subject to divesting.

After referring, inter alia, to the presumption of early vesting, he went on to conclude:

30  I conclude, then, that in law a testamentary direction that purports to reverse a gift that earlier had become effective is not enforceable. Put another way, a bequest once vested may not be divested.

Justice Currie then went on in para. 31 to find that the gift to Jennie Leason “was effective at the moment of the testator’s death. The gift vested – was de jure receivable – on his death” and could not be divested by her death before she received her share.

With great respect, this conclusion is incorrect. Justice Currie seems to have misunderstood the “de jure receivable” principle. The above cases make it clear that a beneficiary is not entitled to receive her gift on the testator’s death, even though her interest is vested at that point. They hold rather that the beneficiary must be regarded as being at law entitled to receive her gift by the end of the executor’s year, even though she hasn’t actually received the property yet. Thus, the Leason decision is contrary to established principle upheld in the many cases discussed above. Those cases all hold that a gift is receivable in law at the end of the executor’s year. They also hold in consequence that if the beneficiary dies during the executor’s year her gift is divested, but if she survives the executor’s year it is not and can no longer be divested.

Since Jennie died during the executor’s year, the court should have held that the gift to her was divested.

[1]    2020 SKQB 102.

[2]    (1805), 77 Ves. 489 at 497, 32 E.T. 117.

[3]    (1979), 12 Ch. D. 639.

[4]    (1918), 42 O.L.R. 340.

[5]    For a summary of the history, see, e.g., Re Graham, [1946] D.L.R. 357 at 361-63, quoted in Re Ramsden; Borrie v. Beck, 1974 CarswellBC 173, 46 D.L.R. (3d) 758, at para. 7.

[6]    (1936 CarswellOnt 92, [1936] 4 D.L.R. 1 (P.C. Ont.).

[7]    The term is convenient shorthand to replace a repetition of the names or descriptions of the people who take after the life interest. I use this gender-neutral term in preference to remainderman. Some time ago in another context I wrote: “Remainderman is clearly no longer appropriate [today]; the circumlocution, ‘the persons entitled to the remainder’ is awkward; and one certainly doesn’t want to employ the silly remainder person, although I have seen it used. Moreover, the suffix –er (or –yer in some cases) is a very convenient one, with strong Anglo-Saxon antecedents, to convert inanimate objects into animate ones involving human actors, e.g., park/parker, hunt/hunter, law/lawyer, farm/farmer, etc. And we already have a well-known cousin of remainderer that employs that suffix, namely, reversioner. Quod erat demonstrandum.”

[8]    Browne v. Moody, footnote 6, supra, paras. 11-12. To the same effect see Vea Estate v. Clemson Estate, 2014 BCSC 1970, in which the testator left his house to his wife for life with remainder to his daughter. The daughter died before the wife. The court held that her remainder interest vested at the testator’s death and was not divested by her death before the wife. Thus, the daughter’s estate was entitled to the proceeds of the house, which had been sold in the meantime.

[9]    Browne v. Moody, ibid. para. 19.

[10]   See, e.g., Re Sampson: Sampson v. Sampson, [1896] 1 Ch. 630; Re Freeth, 1946 CarswellOnt 151, [1946] 2 D.L.R. 414

[11]   See Albert H. Oosterhoff, “Locus of Title in an Unadministered Estate and the Law of Assent” (2018), 48 Adv. Q. 41.

[12]   R.S.O. 1990, c. E.22 and comparable legislation in other Canadian common law jurisdictions.

[13]   Oosterhoff, footnote 11, supra, §2.7 and Excursus.

[14]   See Rivard v. Morris, 2018 ONCA 181, leave to appeal to S.C.C. refused 2019 CarswellOnt 1210 (S.C.C.)

[15]   (1860), 29 L.J. 774, affirmed 30 L.J. Ch. 148, 45 E.R. 705.

[16]   See, e.g., Re Collison; Collison v. Barber (1879) 12 Ch. D. 834; Re Chaston; Chaston v. Seago (1881), 18 Ch. D. 218, pp. 224-26 Re Petrie; Lloyd’s Bank Ltd. v. Royal Nat. Institute for the Blind, [1962] Ch. 355; Re Mitchell, 1918, 42 O.L.R. 340, per Middleton J.; Hamilton v. Hart, 1919 CarswellBC 43, 47 D.L.R. 231; Re Perrin (1925), 28 O.W.N. 173, affirmed 28 O.W.N. 289 (C.A.); Re Wass (1926), 31 O.W.N. 291; Re Freeth, 1946 CarswellOnt 151, [1946] 2 D.L.R. 414; Re Paterson Estates, 1957 CarswellMan 28; Re Ramsden; Borrie v. Beck, footnote 5, supra; Re Allen, 1980 CarswellPEI 104

[17]   See, e.g., Re Williams; Spencer v. Duckworth (1881), 18 Ch. D. 634 at 637; Sampson v. Sampson, footnote 10, supra.

[18]   Re Graham Estate, footnote 5, supra.

[19]   1977 CarswellOnt 389, 1 E.T.R. 38 (H.C.).

[20]   This is a convenient word to replace the cumbersome “nephews and nieces”. It is gender-neutral word that seems to have been coined in the 1950s and although not yet included in dictionaries, it makes such perfect sense (like sibling), that it ought to be.

[21]   1978 CarswellBC 468, 3 E.T.R. 55 (S.C.).

[22]   2012 CarswellNS 362, affirmed 2013 NSCCA 20.

[23]   2005 BCSC 1561, 20 E.T.R. (3d) 134.

[24]   Footnote 1, supra.

[25]   Footnote 10, supra.

[26]   Footnote 16, supra.

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