Beware The Conditional Gifts – High Court Rules Children Of Beneficiary Take Gift Subject To Conditions Subsequent In Will Despite Lack Of Knowledge

A recent decision of the High Court clarified that where a beneficiary of a will predeceases the testator and the gift vests in the beneficiary's children under s. 33 of the Wills Act 1837, those children take the gift subject to the same condition subsequent that would have bound the beneficiary. The ruling also confirmed that a beneficiary's (or their issue's) ignorance of a condition subsequent does not make the condition impossible to fulfil, and provides useful guidance for practitioners in respect of drafting conditions subsequent in wills.

Background

The case was brought by the executors of the estate of a Mr Hine to determine the correct distribution of the trust funds. Mr Hine was the owner of a family farm, and had four children; John, Philip, Beryl and Basil. Clause 3 of his will devised Mr Hine's interest in the farm to his wife and two sons (John and Philip) in equal proportions, but the gift to his sons was made subject to the condition that within the period of nine months from the testator's death, John and Philip each had to pay £15,000 to Mr Hine's other children; Beryl and Basil. If either son failed to satisfy this condition, their interest in the farm would pass to Beryl and Basil (the "clause 3 condition").

Mr Hine passed away in 1992, and the nine month time period for satisfying the clause 3 condition expired on 4 October 1992. John did not satisfy the clause 3 condition by the deadline, and his interest therefore passed to Beryl and Basil. This was not disputed in these proceedings.

The principal questions in the proceedings related to the treatment of Philip's share of the farm under the will. Philip passed away in 1990, predeceasing his father. Thus he was unable to satisfy the condition in his father's will. His surviving children, Judith and Janet, who were two of the defendants in the case, argued either that Philip's share vested in them free from the condition, or alternatively that they were relieved of the consequences of their non-compliance with it because they had not known about it in time to satisfy it, and compliance was therefore impossible.

Hodge J considered that there were two "interesting and difficult" questions on the law of wills arising on the facts of this case:

Where issue succeed to the interest of a parent who predeceased the testator under s. 33 of the Wills Act 1837, do they take subject to any condition subsequent which would have bound that parent? If so, what is the effect of their failure to fulfil the condition because...