A Condition - To be or not to be?

In the recent case of Naylor & Another V Barlow & Others, the High Court at Manchester had to consider two difficult questions on the law of wills:

(1) where issue succeed to the interest of a parent who predeceased the testator under Section 33 of the Wills Act 1837 (as amended), do they take subject to any condition subsequent which would have bound that parent?

(2) if so, what is the effect of their failure to fulfil the condition because they were never informed of it before the time had passed to do so and by then it was too late?

The Testator

The testator, John Thomas Hine (“John Senior”) and his wife, Hilda Muriel Hine (“Hilda”) had four children, John, Philip, Beryl & Basil. John Senior died on 4/1/92 and his last will and testament dated 3/10/80 was entered into probate on 27/4/95.

Sadly, Philip predeceased his parents, dying in June 1990. Philip was married to Ivy and they had two grown up children, Judith and Janet (“the Children”). The Children were of majority age and as Philip died intestate his estate passed to Ivy.

Hilda herself died in May 1997 and Basil has also since died, passing in January 2013. Basil was married to Barbara. They had no children. Barbara inherited Basil’s estate in full.

The family farm

John Senior was the freehold owner of Brown Edge Farm in Stafford.

In 1981 he and Hilda entered into a partnership agreement in relation to the farm with their two eldest sons, John and Philip. The agreement was executed on 3/2/81, although took effect from 1/4/80.

The agreement provided on the death of John Senior and Hilda for their shares to accrue equally to the two sons. In the event of the death of either of the sons their shares passed to the surviving partners.
Hilda & John Senior’s wills

Hilda’s will was very straight forward. It left her entire estate to John Senior provided he survived her for one month; otherwise it passed in equal shares to the four children with a substitionary clause in favour of the issue of any child who may have predeceased her.

John Senior’s will, however, was more complicated. By clause 3 of his will he devised his interest in the farm to Hilda, John and Philip as tenants in common as to one third each but subject to the following proviso:

“the gift to my said sons … is conditional upon each of them paying within a period of nine months from the date of my death to each of my daughter, Beryl … and my son, Basil … the sum of £15,000 so that each son shall pay a total of £30,000 and in the event of either of my sons failing to satisfy the condition imposed upon such gift to that son then I devise the interest in Brown Edge Farm … equally between … Beryl … and … Basil … as tenants in common”.

Clause 4 of the will provided for the residue of the estate to pass to Hilda provided that she survived him for a period of month, which she did.

Compliance with the condition

John failed to comply with the condition in his father’s will and his interest therefore passed to Beryl & Basil.

Having predeceased his father, Philip was unable to comply with the condition. However, the Children also failed to do so, although it was clear from the evidence that they were not invited to do so nor were they even aware of the condition. The time for satisfying the condition passed on 4/10/92.

In January 1992 solicitors acting on behalf of Ivy did write to the executors’ solicitors asking whether the Children had any interest in their grandfather’s estate but it was not until July 1993 that they were forwarded a copy of the will. The following October the executors’ solicitors wrote further to Ivy’s solicitors stating that they considered the gift to be personal to Philip such that it had lapsed. Ivy’s solicitors subsequently confirmed her agreement to this. However, the Children later contended that they had not had sight of the will at that time nor were they aware of the correspondence passing between the executors’ solicitors and their mother’s solicitors, the Children only having obtained a copy of the will sometime after April 1995 when the grant of probate was obtained and the will became public.

Did the gift fail?

The court had to decide whether the gift failed completely so that Philip’s share formed part of the residuary estate and passed to Hilda in accordance with clause 4 of the will or whether it failed only because the condition was not satisfied so that Philip’s share passed to Beryl and Basil.

The starting point was Section 33 of the Wills Act 1837 (as amended) (“the Act”) which provides:

“(1)   Where:

(a)   A will contains a devise or bequeath to a child … of the testator, and
(b)   The intended beneficiary dies before the testator, leaving issue, and
(c)   Issue of the intended beneficiary are living at the testator’s death,
Then unless a contrary intention appears by the will, the devise … shall take effect as a devise … to the issue living at the testator’s death.”

Having regard to Section 33 the court found that there was no contrary intention in John Senior’s will and accordingly, the gift to Philip did not lapse and passed to the Children. It then went on to consider whether Philip’s share in the estate passed to the Children free of the condition in clause 3 or they were relieved from compliance with the same because it was impossible for them to comply as they did not know about it.

Passing of Philip’s share

In this respect, the court went on to consider firstly, whether the condition was a condition precedent or a condition subsequent. Having found that the condition was a condition subsequent, the court then considered the effect of the condition itself. In doing so, it looked at the provisions of Section 33(3) of the Act which provides:

“(3)   Issue shall take under this section through all degrees, according to their stock, in equal shares if more than one, any gift or share which their parent would have taken …”.

In this regard, the judge held that where a testator clearly intends a gift to be subject to a condition subsequent and statute intervenes so as to save the gift and pass it to the beneficiary’s issue so as to avoid the doctrine of lapse of time in the event of the beneficiary pre-deceasing the testator, there is every reason for Parliament to have provided that the substituted gift should be subject to precisely the same conditions as to that subject to which the deceased parent would have taken. This said the judge was the clear rationale and effect of Section 33(3). John Senior never intended John or Philip their one third share of the farm free from the obligation to make payment to Beryl and Basil. In the judge’s judgment the Children stepped into Philip’s shoes for all purposes.

Lastly, the court considered whether the Children should be excused from compliance with the condition in view of their lack of knowledge of the same. Having reviewed various authorities on the point, the judge held that ignorance of a condition does not make it incapable or impossible of fulfilment. The condition was not complied with and the provisions of clause 3 of John Senior’s will took effect and the share passed in default to Beryl and Basil.

Conclusion

Whilst at face value this decision may appear harsh the court went to great lengths to point out that finding otherwise would have resulted in John Senior’s will being re-written, something which the court would not entertain. John Senior’s wishes were clear, namely that neither son should inherit his share without payment of the money to their siblings, and this decision upheld his wishes.

To avoid such a decision being made again, it would be best practice to include a clause in the testator’s will expressly providing that time for compliance with a condition should run only from the time of notification of the condition to the relevant beneficiary rather than, as in this case, from the date of the testator’s death.