In CASE you missed it…

It’s time again for “in case you missed it”, where we examine key cases in relation to will writing and other estate planning activities to keep you up to date on recent developments in the law. This time we’ll look at Naylor & Amat v Barlow & Others [2019] EWHC 1565 (Ch).

The facts

In this case the testator was a farmer who by his will gifted his interest in his farm to his wife and two of his sons, who were also his business partners, as tenants in common in equal shares. The son’s part of the gift was subject to a condition that they each paid £15,000 to each of his other two children within 9 months of his death. If they failed to comply with the condition then their gifts would fail and their interest in the farm would pass to the other two children instead.

One of the sons predeceased the testator. He died intestate leaving a spouse and two children. These two children were not informed of the condition within 9 months of the testator’s death.

The second son failed to comply with the condition and make the £30,000 payment to his other siblings. As a result, the gift to him failed and passed to the siblings instead.

The first question to consider was whether section 33 applied to the gift to the son who predeceased. If so, then the second question was did the same condition apply to his children inheriting under section 33?

The law

A well-established exception to the doctrine of lapse is section 33 of the Wills Act 1837 (WA 1837). This section provides that where a testator makes a gift in their will to their own child or remoter descendant this gift will not fail if the beneficiary dies leaving issue of their own, subject to any contrary intention in the will. This means that if a testator makes a gift to their child and said child dies before them leaving children of their own who are living at the testator’s death then those grandchildren of the testator will take the gift instead. If there are multiple surviving issue then they will take in equal shares between them (section 33(3)).

It is accepted that section 33 applies to contingent gifts, so even if the beneficiary survives the testator but their gift fails because they fail to meet the contingency (usually an age condition) section 33 will still prevent the gift lapsing. Until now it has not been clear whether the issue are subject to the same contingency as the original beneficiary. Due to this uncertainty, will drafters have been encouraged to be very clear when drafting contingent gifts to make it clear whether any issue inheriting as a result of section 33 must also meet the same age condition.

Decision

In Naylor v Barlow the High Court confirmed that where a testator makes a gift subject to a contingency and section 33 applies to prevent the gift from lapsing, then the substitute beneficiaries are subjected to the same contingencies as the original beneficiary. In this case the deceased son’s children were therefore unable to inherit their fathers share of the farm as they had not complied with the condition to pay out the £30,000 to compensate those of the testator’s children who were not inheriting the farm.

In his judgement HHJ Hodge QC also confirmed that this is the case even if the condition is seemingly impossible for the substitute beneficiary to perform. In this case the children were not made aware of the condition within 9 months of the testator’s death, but it was held that ignorance of the condition does not make it impossible to perform and it would be contrary to testamentary freedom to make the gift free of the condition that the testator had so clearly intended. The condition looked set to fail from the outset, considering that probate was not taken out until 3 years after the testator had died.

What do we do?

Be careful when drafting conditions and make sure that the implications of a condition or its failure are fully understood. In this case had the testator made it clear whether or not the condition was intended to apply only to the gifts to the sons or whether it should apply to those taking in substitution then this could have been avoided. If there is a timescale for fulfilling a condition make sure that it is clear when the clock starts and when the executors are obliged to inform a beneficiary of the condition by.

It’s also important that drafters appreciate the impact of section 33 WA 1837. Don’t rely on section 33 if this is likely to conflict with the testator’s wishes. If there is a condition attached to a gift clarify whether the testator wishes for this to apply to substitute beneficiaries. In either case, to avoid any confusion consider excluding section 33 from the will and drafting express provisions instead.

The full judgement can be read here:

https://www.bailii.org/ew/cases/EWHC/Ch/2019/1565.html

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