Virtually every common law jurisdiction has enacted legislation that avoids the lapse of a testamentary gift in certain circumstances when the beneficiary predeceases the testator and substitutes other beneficiaries for the deceased beneficiary. There are two types of this legislation in Canada.
The older type derives from s. 33 of the Wills Act 1837.[1] This type remains in force in Nova Scotia[2] and Prince Edward Island.[3] It provides that when a child or other issue of the testator, to whom any property has been bequeathed or devised, dies before the testator, the bequest or devise “does not lapse, but takes effect as if the death of such person had happened immediately after the death of the testator, unless a contrary intention appears by the will.” The problem with this legislation is that it actually prevents lapse by letting the property pass through the estate of the primary beneficiary into the estate of the substituted beneficiary. This means that the property is subject to the possible claims of two sets of creditors and can be taxed twice.
The newer type derives from the Uniform Wills Act.[4] It was adopted by the other Canadian jurisdictions The Ontario provision is as follows:[5]
- Except when a contrary intention appears by the will, where a devise or bequest is made to a child, grandchild, brother or sister of the testator who dies before the testator, either before or after the testator makes his or her will, and leaves a spouse or issue surviving the testator, the devise or bequest does not lapse but takes effect as if it had been made directly to the persons among whom and in the shares in which the estate of that person would have been divisible,
(a) if that person had died immediately after the death of the testator;
(b) if that person had died intestate;
(c) if that person had died without debts; and
(d) if section 45 had not been passed.
It does not in fact prevent lapse, but provides for statutory substitutionary beneficiaries. The legislation in the other common law provinces and territories is of the same type, but there are significant differences between them.[6] For example, the legislation in many of the provinces and territories applies to class gifts, whereas Ontario’s legislation and that of some other provinces does not. Therefore it is essential that you check the statute in your jurisdiction for its exact terms.[7]
How does the legislation operate if the gift is subject to a time-bound condition subsequent that is not carried out? Are the statutory substitutionary beneficiaries bound by the condition if they don’t know of the condition and the time for carrying it out has passed?
To my knowledge this issue has not arisen in Canada, but it arose in the recent English case, Naylor & Anor v Barlow & Ors.[8] The testator, John Thomas Hines, was the sole owner of the family farm. He entered into a partnership agreement between himself, his wife, Mrs. Hilda Muriel Hines, and two of their adult sons, John and Philip, and also granted a lease of the farm in favour of the partnership. The partnership agreement provided that on the parents’ deaths their respective shares would accrue equally to the two sons and that on the death of either son, his share would accrue to the surviving partners.
The testator and his wife had four children, John, Philip, Beryl, and Basil. Philip predeceased the testator in 1990. Since he owed the partnership money at his death, nothing was paid to his estate on account of his share in the partnership. Philip died intestate and letters of administration were granted to his widow, Ivy. Philip and Ivy had two children, Judith and Janet, who were still alive. The testator died in 1992 and his widow died in 1997. Mrs. Hines’ will left all her estate to her husband if he survived her by one month and failing that it was to be divided equally between her surviving children, with an express substitutionary clause in favour of the issue of any deceased children. Thus, when she died, one-fourth of her estate passed to each of Beryl, John, and Basil and the remaining one-fourth share passed to Judith and Janet in equal shares.
The testator’s will left one-third of his interest in the farm to each of his wife and John and Philip as tenants in common. However, he went on to provide that the gift to the two sons was conditional upon each of them paying the sum of £15,000 to Beryl and Basil within nine months of his death and if either failed to satisfy the condition he devised the interest that that son would have taken equally between Beryl and Basil. He left the residue of his estate to his wife if she survived him by one month, which she did.
John failed to satisfy the condition, so his interest passed to Beryl and Basil. The gift to Philip lapsed and passed to Judith and Janet under the English anti-lapse legislation,[9] which is similar to Ontario’s provision in that it names the predeceased beneficiary’s issue as the substituted beneficiaries. Philip obviously did not and could not satisfy the condition, since he predeceased his father. Neither did Judith and Janet satisfy the condition, but they were not aware of it and the time for satisfying it had long since passed. So the question was whether they were bound by the condition and consequently whether they forfeited the gift to their father.
The two claimants were the trustees of the wills of testator and his wife. They brought the proceedings for advice and direction about how the testator’s estate should be distributed. They took a neutral position. Judith and Janet were the first and second defendants. The other three defendants were John and Beryl and the wife of Basil, who died after his parents and left his wife as his sole beneficiary. The last three defendants did not contest the claim, but adopted the position of the claimants.
The parties agreed that the condition was a condition subsequent and His Honour Judge Hodge QC, who sat as a Judge of the High Court, concurred. His Honour distinguished a number of cases where the gift was allowed to take effect because compliance with the condition was practically impossible.[10] His Honour also distinguished Re Quintin Dick,[11] because the condition in that case was clearly and materially different from the one in this case in which the condition spoke of “failing to satisfy the condition”.
In contrast, His Honour cited Ling v. Ling[12] with approval holding that the fact that it concerned a class gift and a condition precedent (attaining age 21) made no difference to the operation of the legislation. The testator intended the gift to be subject to the condition and the fact that the legislation intervenes to save the gift to avoid the effect of lapse if the primary beneficiary predeceases the testator does not mean that the testator’s intention should not be carried out. His Honour followed Astley v. Earl of Essex,[13] which held that a beneficiary who failed to comply with a name and arms condition within the time limit imposed by the will forfeited the gift to him, even though he knew nothing about the condition until it was too late. Sir George Jessel M.R. said in that case:[14]
The principle is, that a person who takes by gift under a will cannot plead want of knowledge of the contents of the will as an excuse for not complying with its provisions.[15]
His Honour also relied on Re Hodges’ Legacy.[16] The will required a beneficiary to execute a release within a specified period, but he did not because he was serving in the army in India at the time of the Mutiny in 1857.[17]
Therefore his Honour concluded:[18]
In my judgment, the law distinguishes between the situation where a beneficiary fails to fulfill a condition (otherwise capable of fulfilment) simply because he does not know about it in sufficient time to do so and the different situation where it is physically impossible for him to fulfil the condition … The law does so because in the latter situation, neither the testator nor the beneficiary has any control over whether or not the condition can be fulfilled whilst in the former situation it had been with the testator’s power to make fulfillment of the condition contingent upon it having been notified to the beneficiary in sufficient time to enable him to fulfil the condition … The law also draws a distinction between the refusal to fulfil a condition, or neglecting to do so, and a failure to do so.
Consequently, his Honour held that ignorance of a condition does not make it incapable or impossible of fulfilment. Therefore, since the condition subsequent was not complied with, the gift over to Beryl and Basil took effect. This accords with the clearly expressed wishes of the testator. He did not want either of his sons to take a share in the farm unless they complied with the condition within nine months of the testator’s death, and not within nine months from notification of the condition.
At first blush this conclusion seems unnecessarily harsh. Why should innocent children suffer for the “sin” of their father, especially since he could not have satisfied the condition himself? However, in my opinion the decision is correct. It flows from the hallowed common law principle of freedom of testation.[19] That principle permitted the testator to impose the condition he did and therefore the court had no choice but to give effect to what the testator provided in his will. Since the Canadian legislation is similar, I believe it likely that the case will be followed in Canada if the same issue should arise here.
The problem arose entirely from the way the will was drafted. As his Honour noted,[20] drafters of a will that incorporates a condition such as the one in the testator’s will ought to consider “making the time for compliance run only from the time of notification of the condition to the relevant beneficiary.” This is one helpful “take-away” from this case.[21] But query whether such a condition is needed at all. Why not have the testator first make a direct gift to the other children out of his estate and make his gift of the farm subject to it. That avoids the problem altogether. I realize that this may not work in certain cases, such as those in which the beneficiary is required to adopt the testator’s name and arms within a specified period of time. But in such cases the drafter ought to make the time for compliance run from the time the beneficiary receives notice of the condition.
—
[1] 7 Will. 4 & 1 Vict., c. 26.
[2] Wills Act, R.S.N.S. 1998, c. 505, s. 31. For a case applying this section, see Mitchell Estate v. Mitchell Estate, 2003 NSSC 223, 4 E.T.R. (3d) 70, affirmed 2004 NSCA 140, 12 E.T.R. (3d) 16.
[3] Probate Act, R.S.P.E.I. 1988, c. P-21, s. 85
[4] http://www.ulcc.ca/en/uniform-acts-new-order/current-uniform-acts/708-wills/1677-uniform-wills-act-consolidated-2010.
[5] Succession Law Reform Act, R.S.O. 1990, c. S.26, s. 31. Section 45 of the Act referred to in clause (d) is the provision that confers a preferential share on the surviving spouse on an intestacy.
[6] Wills Act, C.C.S.M., c. W150, ss. 25.2-25.3; R.S.N.B. 1973, c. W-9, s. 32; R.S.N.L. 1990, c. W-10, ss. 18, 19; S.S. 1996, c. W-14.1, s. 22; R.S.N.W.T. 1988, c. W-5, s. 21; R.S.N.W.T. (Nu.) 1988, c. W-5, s. 21; R.S.Y. 2002, c. 230, s. 20; Wills and Succession Act, S.A. 2010, c. W-12.2, s. 32(1)(b); Wills, Estates and Succession Act, S.B.C. 2009, c. 13, s. 46(b)
[7] For a summary of the differences, see Oosterhoff on Trusts, 8th ed. by Albert H. Oosterhoff, C. David Freedman, Mitchell McInnes, and Adam Parachin (Toronto: Thomson Reuters/Carswell, 2016), pp. 596-600.
[8] [2019] EWHC 1565 (Ch). My thanks to Thomas Grozinger, who drew my attention to the case.
[9] Wills Act 1837, s. 33 as amended by the Administration of Justice Act 1982, c. 53, s. 19. The amendment replaced the original provision with legislation of the type now in force in most Canadian jurisdictions.
[10] Re Greenwood, [1903] 1 Ch. 749 (beneficiary excused from performing condition by act of God; Re Berens, [1926] Ch. 596 (condition impossible of fulfillment); Re Jones, [1947] 2 All E.R. 716 (condition could not be fulfilled because of war conditions); Watson v. The National Children’s Home Co., unrep., 9 October 1995 (condition spent because subject matter of condition (a dog) no longer existed).
[11] [1926] Ch 992 (beneficiary did not know of condition and therefore could not have “refused” or “neglected” to comply with the condition that required the beneficiary to take the name and arms of the testator within a specified period of time.
[12] [2002] WTLR 553.
[13] (1874), L.R. 18 Eq. 290.
[14] Ibid., p. 297.
[15] His Honour noted that Williams on Wills (19th ed.), para. 34.24, rightly relies on this case as authority for the proposition that “ignorance of the condition is no excuse for not fulfilling it.”
[16] (1873), L.R. 16 Eq. 92.
[17] His Honour noted that Williams on Wills, loc. cit. rightly relies on this case for the proposition that “a legatee is not entitled to notice of the condition, unless the terms of the condition expressly provide that an interested party is to give him notice thereof.”
[18] Taylor & Anor, supra, para. 21.
[19] The principle is, of course, circumscribed by certain statutes, such as those that confer rights of support on a deceased person’s dependants. It will also yield to egregious violations of principles of public policy, as in McCorkill v. McCorkill Estate, 2014 NBQB 148, 1 E.T.R. (4th) 40, affirmed sub nom. Canadian Association for Free Expression v. Streed, 2015 NBCA 50, leave to appeal refused 2015 CarswellNB 479 (S.C.C.). With respect, in my opinion, while the principle of freedom of testation should always be upheld (apart from such exceptional situations) it is doubtful that the principle (a private right) is a protected right under the Charter of Rights and Freedoms, as held in Lawen Estate v. Nova Scotia (Attorney General), 2019 NSSC 162.
[20] Ibid., para. 20.
[21] His Honour also considered and decided a couple of minor subsidiary issues about whether John owed rent for occupying the farm when he had forfeited the gift to him and whether he owed money to the estate for the sale of parts of the milk quota. I have left these issues out of consideration, since they are not relevant to the issue being discussed in this blog.
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Written by: Albert Oosterhoff
Posted on: July 29, 2019
Categories: Commentary
Virtually every common law jurisdiction has enacted legislation that avoids the lapse of a testamentary gift in certain circumstances when the beneficiary predeceases the testator and substitutes other beneficiaries for the deceased beneficiary. There are two types of this legislation in Canada.
The older type derives from s. 33 of the Wills Act 1837.[1] This type remains in force in Nova Scotia[2] and Prince Edward Island.[3] It provides that when a child or other issue of the testator, to whom any property has been bequeathed or devised, dies before the testator, the bequest or devise “does not lapse, but takes effect as if the death of such person had happened immediately after the death of the testator, unless a contrary intention appears by the will.” The problem with this legislation is that it actually prevents lapse by letting the property pass through the estate of the primary beneficiary into the estate of the substituted beneficiary. This means that the property is subject to the possible claims of two sets of creditors and can be taxed twice.
The newer type derives from the Uniform Wills Act.[4] It was adopted by the other Canadian jurisdictions The Ontario provision is as follows:[5]
(a) if that person had died immediately after the death of the testator;
(b) if that person had died intestate;
(c) if that person had died without debts; and
(d) if section 45 had not been passed.
It does not in fact prevent lapse, but provides for statutory substitutionary beneficiaries. The legislation in the other common law provinces and territories is of the same type, but there are significant differences between them.[6] For example, the legislation in many of the provinces and territories applies to class gifts, whereas Ontario’s legislation and that of some other provinces does not. Therefore it is essential that you check the statute in your jurisdiction for its exact terms.[7]
How does the legislation operate if the gift is subject to a time-bound condition subsequent that is not carried out? Are the statutory substitutionary beneficiaries bound by the condition if they don’t know of the condition and the time for carrying it out has passed?
To my knowledge this issue has not arisen in Canada, but it arose in the recent English case, Naylor & Anor v Barlow & Ors.[8] The testator, John Thomas Hines, was the sole owner of the family farm. He entered into a partnership agreement between himself, his wife, Mrs. Hilda Muriel Hines, and two of their adult sons, John and Philip, and also granted a lease of the farm in favour of the partnership. The partnership agreement provided that on the parents’ deaths their respective shares would accrue equally to the two sons and that on the death of either son, his share would accrue to the surviving partners.
The testator and his wife had four children, John, Philip, Beryl, and Basil. Philip predeceased the testator in 1990. Since he owed the partnership money at his death, nothing was paid to his estate on account of his share in the partnership. Philip died intestate and letters of administration were granted to his widow, Ivy. Philip and Ivy had two children, Judith and Janet, who were still alive. The testator died in 1992 and his widow died in 1997. Mrs. Hines’ will left all her estate to her husband if he survived her by one month and failing that it was to be divided equally between her surviving children, with an express substitutionary clause in favour of the issue of any deceased children. Thus, when she died, one-fourth of her estate passed to each of Beryl, John, and Basil and the remaining one-fourth share passed to Judith and Janet in equal shares.
The testator’s will left one-third of his interest in the farm to each of his wife and John and Philip as tenants in common. However, he went on to provide that the gift to the two sons was conditional upon each of them paying the sum of £15,000 to Beryl and Basil within nine months of his death and if either failed to satisfy the condition he devised the interest that that son would have taken equally between Beryl and Basil. He left the residue of his estate to his wife if she survived him by one month, which she did.
John failed to satisfy the condition, so his interest passed to Beryl and Basil. The gift to Philip lapsed and passed to Judith and Janet under the English anti-lapse legislation,[9] which is similar to Ontario’s provision in that it names the predeceased beneficiary’s issue as the substituted beneficiaries. Philip obviously did not and could not satisfy the condition, since he predeceased his father. Neither did Judith and Janet satisfy the condition, but they were not aware of it and the time for satisfying it had long since passed. So the question was whether they were bound by the condition and consequently whether they forfeited the gift to their father.
The two claimants were the trustees of the wills of testator and his wife. They brought the proceedings for advice and direction about how the testator’s estate should be distributed. They took a neutral position. Judith and Janet were the first and second defendants. The other three defendants were John and Beryl and the wife of Basil, who died after his parents and left his wife as his sole beneficiary. The last three defendants did not contest the claim, but adopted the position of the claimants.
The parties agreed that the condition was a condition subsequent and His Honour Judge Hodge QC, who sat as a Judge of the High Court, concurred. His Honour distinguished a number of cases where the gift was allowed to take effect because compliance with the condition was practically impossible.[10] His Honour also distinguished Re Quintin Dick,[11] because the condition in that case was clearly and materially different from the one in this case in which the condition spoke of “failing to satisfy the condition”.
In contrast, His Honour cited Ling v. Ling[12] with approval holding that the fact that it concerned a class gift and a condition precedent (attaining age 21) made no difference to the operation of the legislation. The testator intended the gift to be subject to the condition and the fact that the legislation intervenes to save the gift to avoid the effect of lapse if the primary beneficiary predeceases the testator does not mean that the testator’s intention should not be carried out. His Honour followed Astley v. Earl of Essex,[13] which held that a beneficiary who failed to comply with a name and arms condition within the time limit imposed by the will forfeited the gift to him, even though he knew nothing about the condition until it was too late. Sir George Jessel M.R. said in that case:[14]
The principle is, that a person who takes by gift under a will cannot plead want of knowledge of the contents of the will as an excuse for not complying with its provisions.[15]
His Honour also relied on Re Hodges’ Legacy.[16] The will required a beneficiary to execute a release within a specified period, but he did not because he was serving in the army in India at the time of the Mutiny in 1857.[17]
Therefore his Honour concluded:[18]
In my judgment, the law distinguishes between the situation where a beneficiary fails to fulfill a condition (otherwise capable of fulfilment) simply because he does not know about it in sufficient time to do so and the different situation where it is physically impossible for him to fulfil the condition … The law does so because in the latter situation, neither the testator nor the beneficiary has any control over whether or not the condition can be fulfilled whilst in the former situation it had been with the testator’s power to make fulfillment of the condition contingent upon it having been notified to the beneficiary in sufficient time to enable him to fulfil the condition … The law also draws a distinction between the refusal to fulfil a condition, or neglecting to do so, and a failure to do so.
Consequently, his Honour held that ignorance of a condition does not make it incapable or impossible of fulfilment. Therefore, since the condition subsequent was not complied with, the gift over to Beryl and Basil took effect. This accords with the clearly expressed wishes of the testator. He did not want either of his sons to take a share in the farm unless they complied with the condition within nine months of the testator’s death, and not within nine months from notification of the condition.
At first blush this conclusion seems unnecessarily harsh. Why should innocent children suffer for the “sin” of their father, especially since he could not have satisfied the condition himself? However, in my opinion the decision is correct. It flows from the hallowed common law principle of freedom of testation.[19] That principle permitted the testator to impose the condition he did and therefore the court had no choice but to give effect to what the testator provided in his will. Since the Canadian legislation is similar, I believe it likely that the case will be followed in Canada if the same issue should arise here.
The problem arose entirely from the way the will was drafted. As his Honour noted,[20] drafters of a will that incorporates a condition such as the one in the testator’s will ought to consider “making the time for compliance run only from the time of notification of the condition to the relevant beneficiary.” This is one helpful “take-away” from this case.[21] But query whether such a condition is needed at all. Why not have the testator first make a direct gift to the other children out of his estate and make his gift of the farm subject to it. That avoids the problem altogether. I realize that this may not work in certain cases, such as those in which the beneficiary is required to adopt the testator’s name and arms within a specified period of time. But in such cases the drafter ought to make the time for compliance run from the time the beneficiary receives notice of the condition.
—
[1] 7 Will. 4 & 1 Vict., c. 26.
[2] Wills Act, R.S.N.S. 1998, c. 505, s. 31. For a case applying this section, see Mitchell Estate v. Mitchell Estate, 2003 NSSC 223, 4 E.T.R. (3d) 70, affirmed 2004 NSCA 140, 12 E.T.R. (3d) 16.
[3] Probate Act, R.S.P.E.I. 1988, c. P-21, s. 85
[4] http://www.ulcc.ca/en/uniform-acts-new-order/current-uniform-acts/708-wills/1677-uniform-wills-act-consolidated-2010.
[5] Succession Law Reform Act, R.S.O. 1990, c. S.26, s. 31. Section 45 of the Act referred to in clause (d) is the provision that confers a preferential share on the surviving spouse on an intestacy.
[6] Wills Act, C.C.S.M., c. W150, ss. 25.2-25.3; R.S.N.B. 1973, c. W-9, s. 32; R.S.N.L. 1990, c. W-10, ss. 18, 19; S.S. 1996, c. W-14.1, s. 22; R.S.N.W.T. 1988, c. W-5, s. 21; R.S.N.W.T. (Nu.) 1988, c. W-5, s. 21; R.S.Y. 2002, c. 230, s. 20; Wills and Succession Act, S.A. 2010, c. W-12.2, s. 32(1)(b); Wills, Estates and Succession Act, S.B.C. 2009, c. 13, s. 46(b)
[7] For a summary of the differences, see Oosterhoff on Trusts, 8th ed. by Albert H. Oosterhoff, C. David Freedman, Mitchell McInnes, and Adam Parachin (Toronto: Thomson Reuters/Carswell, 2016), pp. 596-600.
[8] [2019] EWHC 1565 (Ch). My thanks to Thomas Grozinger, who drew my attention to the case.
[9] Wills Act 1837, s. 33 as amended by the Administration of Justice Act 1982, c. 53, s. 19. The amendment replaced the original provision with legislation of the type now in force in most Canadian jurisdictions.
[10] Re Greenwood, [1903] 1 Ch. 749 (beneficiary excused from performing condition by act of God; Re Berens, [1926] Ch. 596 (condition impossible of fulfillment); Re Jones, [1947] 2 All E.R. 716 (condition could not be fulfilled because of war conditions); Watson v. The National Children’s Home Co., unrep., 9 October 1995 (condition spent because subject matter of condition (a dog) no longer existed).
[11] [1926] Ch 992 (beneficiary did not know of condition and therefore could not have “refused” or “neglected” to comply with the condition that required the beneficiary to take the name and arms of the testator within a specified period of time.
[12] [2002] WTLR 553.
[13] (1874), L.R. 18 Eq. 290.
[14] Ibid., p. 297.
[15] His Honour noted that Williams on Wills (19th ed.), para. 34.24, rightly relies on this case as authority for the proposition that “ignorance of the condition is no excuse for not fulfilling it.”
[16] (1873), L.R. 16 Eq. 92.
[17] His Honour noted that Williams on Wills, loc. cit. rightly relies on this case for the proposition that “a legatee is not entitled to notice of the condition, unless the terms of the condition expressly provide that an interested party is to give him notice thereof.”
[18] Taylor & Anor, supra, para. 21.
[19] The principle is, of course, circumscribed by certain statutes, such as those that confer rights of support on a deceased person’s dependants. It will also yield to egregious violations of principles of public policy, as in McCorkill v. McCorkill Estate, 2014 NBQB 148, 1 E.T.R. (4th) 40, affirmed sub nom. Canadian Association for Free Expression v. Streed, 2015 NBCA 50, leave to appeal refused 2015 CarswellNB 479 (S.C.C.). With respect, in my opinion, while the principle of freedom of testation should always be upheld (apart from such exceptional situations) it is doubtful that the principle (a private right) is a protected right under the Charter of Rights and Freedoms, as held in Lawen Estate v. Nova Scotia (Attorney General), 2019 NSSC 162.
[20] Ibid., para. 20.
[21] His Honour also considered and decided a couple of minor subsidiary issues about whether John owed rent for occupying the farm when he had forfeited the gift to him and whether he owed money to the estate for the sale of parts of the milk quota. I have left these issues out of consideration, since they are not relevant to the issue being discussed in this blog.
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