All About Estates

Some Things Are Not Forever!

Today’s blog was written by guest blogger, Giancarlo Mignardi, Articling Student at Fasken LLP.

The rule against remoteness of vesting, more frequently referred to as the rule against perpetuities, is often viewed as one of the most notoriously difficult legal rules to apply. Its application presents such a challenge that, in a 1961 case before the Supreme Court of California, it was ruled that it was not negligent for a solicitor to have drafted a will that had inadvertently violated the rule![1] A quick Google perusal also reveals that, here in the 21st century, we millennials have even taken a liking to producing a variety of enjoyable “memes” about the rule, likely as a result of the challenges it continues to present.

A “modern” definition of the rule is often written as follows:

No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.[2]

Don’t let its brevity fool you!

Thankfully, the relevant statutes, case law, and commentary relating to the rule increasingly provide excellent references, examples, and general discussion for those seeking to understand how it would apply in tricky scenarios (e.g. fertile octogenarian hypotheticals, anyone?!). Here, I wish to contribute to the discussion by briefly reviewing a preliminary issue that can often determine whether the rule against perpetuities is even applicable to a given interest in property; namely, the issue of whether an interest in property has vested, and the relationship between vesting and the overall duration of an interest in property.

Note the wording of the definition quoted above. It states that interests must vest within the stipulated time period, and not that the duration of the interest itself must be limited to this time period. This is a major distinction that is sometimes forgotten, both in law school and in litigation.[3]

Practitioners in the estates-and-trusts sphere (and related ones, of course) should, therefore, recall that the rule is only applicable to situations in which a property interest has not yet vested. In situations where an interest has vested (normally at the time of the grant of interest itself), the rule has no application, even if the property at issue has vested for an indeterminate or otherwise exceedingly long duration. To put it simply, the rule is not at all concerned with the duration of the property interest. (After all, if this were the case, then fee simple estates–which grant rights to one’s heirs and assigns in an indefinite fashion–would cause problems in the face of the rule!)

By way of example, consider a recent Ontario Court of Appeal case, which stated that the rule did not apply to an express easement because the rights included within it vested at the time of the grant.[4] Here are some of the words of the court on this point:

“The Kokics argue that the ancillary rights under the easement are void because of the rule against perpetuities. We disagree.

It is not clear that this issue was before the application judge, but in any event, the rule against perpetuities has no application in this case. The rule does not restrict the duration of property interests, but the length of time that may elapse between the creation of a contingent interest and the vesting of that interest

An express easement includes the ancillary rights reasonably necessary for the use and enjoyment of the easement. These rights vested at the time of grant and are not contingent interests. Thus, the rule against perpetuities does not apply to them.[5] [Emphasis added]”

While it dealt with an easement, it would seem that the case serves as an authority for the broader principle that a grant which immediately vests will not attract the application of the rule. This makes good sense when it is kept in mind that such grants immediately give a grantee an interest in property that is alienable and not otherwise subject to the ongoing control of a “dead hand”.

On that note, it is important to remember that the central purpose of the rule itself was to promote alienability (e.g. selling, transferring, division) of property.[6] In this regard, allowing for vested interests to be held by a grantee for an indeterminate duration does not undermine this purpose.  The estate has vested in a grantee(s), and is therefore immediately freely alienable and marketable. The grantee can sell it, mortgage it, grant lesser property interest in it to others, etc.

Perhaps calling the rule by its other name–that is, the rule against remoteness of vesting–would assist us all in reminding practitioners that the duration of a given interest is of no concern for the purposes of the rule. This alternative name has, already embedded within it, a greatly important reminder regarding how this complex rule is to apply (or not!).

 

[1] See Lucas v Hamm (1961), 56 Cal 2d 583, 15 Cal Rptr 821.

[2] Albert H Oosterhoff et al., Oosterhoff on Wills, 8th ed (Toronto: Thomson Reuters, 2016) at 755.

[3] See for example Aldercrest Developments Ltd v Hunter, 1970 CarswellOnt 597 (CA), where an equitable interest in real property was argued to be null and void because it had purportedly endured for beyond the perpetuity period. This argument was rejected (see paras 4–5).

[4] Clarke v Kokic, 2018 ONCA 705.

[5] Ibid at paras 14–16. See also similar dicta, albeit in a different context, in Weinblatt v Kitchener (City), 1968 CarswellOnt 92 (SCC) (“[T]his is not a case where a contingent interest in property may arise outside the perpetuity period. If it is to arise at all, it must be on the date stated or within a reasonable time thereafter”: para 7).

[6] See for example 2123201 Ontario Inc v Israel Estate, 2016 ONCA 409 at para 20, citing Sutherland Estate v Dyer (1991), 4 OR (3d) 168 (Gen Div) at 172.

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About Maureen Berry
Maureen Berry is a partner in the Trusts, Wills, Estates and Charities group at Fasken. Maureen’s practice is focused on wills, estate planning, domestic and international trusts, private corporation taxation, and executive compensation. Maureen also advises charities and non-profit organizations. Working with Canadian and international families, firms, corporations and charitable organizations, she provides advice on all aspects of private client matters. She is a leading expert in the fields of tax law and estate planning. As an Adjunct Professor at Osgoode Hall Law School, she teaches Advanced Estate Planning. Maureen has previously taught corporate tax and international tax at the University of Toronto and Western University, along with the Bar Admission course for up-and-coming lawyers.

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