Void Trusts
Bankruptcy Act
Avoidance of fraudulent preferences.
(1872, s. 53; 33/1963, sch. 11, para. 1.)
57.—(1) Every conveyance or transfer of property or charge made thereon, every payment made, every obligation incurred and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor or of any person in trust for any creditor, with a view to giving such creditor, or any surety or guarantor for the debt due to such creditor, a preference over the other creditors, shall, if the person making, incurring, taking or suffering the same is adjudicated bankrupt within six months after the date of making, incurring, taking or suffering the same, be deemed fraudulent and void as against the Official Assignee; but this section shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt.
(2) (a) Where a person is adjudicated bankrupt and anything made or done is void under subsection (1) or was void under the corresponding provisions of the law in force immediately before the commencement of this Act as a fraudulent preference of a person interested in property mortgaged or charged to secure the bankrupt’s debt, then (without prejudice to any rights or liabilities arising apart from this section) the person preferred shall be subject to the same liabilities and shall have the same rights as if he had undertaken to be personally liable as surety for the debt to the extent of the charge on the property or the value of his interest, whichever is the less.
(b) The value of the said person’s interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the charge for the bankrupt’s debt was then subject.
(c) On any application made to the Court in relation to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Court shall have jurisdiction to determine any questions relating to the payment arising between the person to whom the payment was made and the surety or guarantor, and to grant relief in respect thereof notwithstanding that it is not necessary so to do for the purposes of the bankruptcy, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of an action for the recovery of the sum paid.
(d) Paragraph (c) shall apply, with the necessary modifications, in relation to transactions other than the payment of money as it applies to payments.
Avoidance of certain transactions.
(New)
58.—(1) If within three months before he is adjudicated bankrupt a debtor commits an act of bankruptcy and thereafter either sells any of his property at a price which, in the opinion of the Court, is substantially below its market value or enters into or is a party to any other transaction which, in the opinion of the Court, has the effect of substantially reducing the sum available for distribution to the creditors, such transaction shall be void as against the Official Assignee, unless the transaction was bona fide entered into and the other party had not at the time of the transaction notice of any prior act of bankruptcy committed by the bankrupt.
(2) Subsection (1) shall not affect the rights of any person making title in good faith and for valuable consideration through or under a person (other than the bankrupt) who is party to a transaction mentioned therein.
(3) Subsection (1) shall not apply to any transaction mentioned in section 57 (1) or 59 .
Avoidance of certain settlements.
59.-(1) Any settlement of property, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, shall-
(a) if the settlor is adjudicated bankrupt within two years after the date of the settlement, be void as against the Official Assignee, and
(b) if the settlor is adjudicated bankrupt at any subsequent time within five years after the date of the settlement, be void as against the Official Assignee unless the parties claiming under the settlement prove that the settlor was, at the time of making the settlement, able to pay all his debts without the aid of the property comprised in the settlement and that the interest of the settlor in such property passed to the trustee of such settlement on the execution thereof.
(2) A covenant or contract made by any person (in this section called the settlor) in consideration of his or her marriage, either for the future payment of money for the benefit of the settlor’s spouse or children, or for the future settlement, on or for the settlor’s spouse or children, of property wherein the settlor had not at the date of the marriage any estate or interest, whether vested or contingent, in possession or remainder, shall, if the settlor is adjudicated bankrupt and the covenant or contract has not been executed at the date of the adjudication, be void as against the Official Assignee, except so far as it enables the persons entitled under the covenant or contract to claim for dividend in the settlor’s bankruptcy under or in respect of the covenant or contract, but any such claim to dividend shall be postponed until all the claims of the other creditors for valuable consideration in money or money’s worth have been satisfied.
(3) Any payment of money (not being payment of premiums on a policy of life assurance) or any transfer of property made by the settlor in pursuance of a covenant or contract to which subsection (2) applies shall be void as against the Official Assignee in the settlor’s bankruptcy, unless the persons to whom the payment or transfer was made prove that:
(a) the payment or transfer was made more than two years before the date of the adjudication of the settlor, or
(b) at the date of the payment or transfer, the settlor was able to pay all his debts without the aid of the money so paid or the property so transferred, or
(c) the payment or transfer was made in pursuance of a covenant or contract to pay or transfer money or property expected to come to the settlor from or on the death of a particular person named in the covenant or contract, and was made within three months after the money or property came into the possession or under the control of the settlor;
but, in the event of any such payment or transfer being declared void, the persons to whom it was made shall be entitled to claim for dividend under or in respect of the covenant or contract in like manner as if it had not been executed at the date of the adjudication.
(4) ln this section “settlement” includes any conveyance or transfer of property.
Land and Conveyancing Law Reform Act 2009
Fraudulent dispositions.
74.— (1) Subject to subsection (2), any voluntary disposition of land made with the intention of defrauding a subsequent purchaser of the land is voidable by that purchaser.
[CA 1634, ss. 1 to 5, 10, 11 and 14][VCA 1893]
(2) For the purposes of subsection (1), a voluntary disposition is not to be read as intended to defraud merely because a subsequent disposition of the same land was made for valuable consideration.
(3) Subject to subsection (4), any conveyance of property made with the intention of defrauding a creditor or other person is voidable by any person thereby prejudiced.
(4) Subsection (3) does not—
(a) apply to any estate or interest in property conveyed for valuable consideration to any person in good faith not having, at the time of the conveyance, notice of the fraudulent intention, or
(b) affect any other law relating to bankruptcy of an individual or corporate insolvency.
Cases
Re Blake
Lynch v. Lombard
[1955] IR 89
DIXON J “The first question arising in this case is whether the conditions attached to the trusts in favour of the infant defendants (the children of the deceased’s daughter, Mary Rosamund) in respect of the income and capital of the “trust legacy” of £6,000 bequeated by the will are void for uncertainty or as being contrary to public policy or for any other reason. This legacy was given by the will in these terms:- “I bequeath a sum of £6,000 to my trustees upon the trusts and with and subject to the powers and provisions hereinafter expressed that is to say my trustees shall invest the said sum of £6,000 with power to vary the investment thereof and shall stand possessed thereof and of the investments representing the same (hereinafter called ‘the trust legacy’) in trust to apply the income thereof for or towards the maintenance and education of the children of my daughter Mary Rosamund provided they shall be brought up in the Roman Catholic faith and subject to the application of the said income in trust for all the children of my said daughter Mary Rosamund provided they shall have been brought up in the Roman Catholic faith who being sons attain the age of twenty-one years or being daughters attain that age or marry under that age in equal shares and if there shall be only one such child the whole to be for that one and if the said children shall not be brought up in the Roman Catholic faith and no one of them shall live to attain a vested interest in the trust legacy the same shall fall into my residuary estate.”
At the date of the will, the testator’s daughter had been already married to
a member of the Church of Ireland and since her marriage has adhered to that Church. There are three infant children of the marriage, all of whom have been baptised as members of the Church of Ireland. All the children were born in the lifetime of the testator, two of them before the date of the will. The present position is that the daughter and her husband have brought up their children in the Church of Ireland and it is not their intention to make any change ‘in that respect. The children are now aged ten, seven and three years respectively.
I do not think there is any uncertainty about the requirement that a child
should be brought up or should have been brought up in the Roman Catholic faith. Analogous expressions have been considered in several cases and it was not held that there was insufficient certainty in ascertaining the meaning of such phrases as “be a Roman Catholic”: In re May; Eggar v. May [1932] 1 Ch 99; “become a convert to the Roman Catholic religion”: In re Evans; Hewitt v. Edwards [1940] 1 Ch 629; “marry a Roman Catholic”: In re McKenna; Higgins and Others v. Bank of Ireland and Others [1947] IR 277; “become a Roman Catholic”: McCausland and Others v. Young and Others [1949] NI 49. In the last-mentioned case, the Court of Appeal in Northern Ireland was considering the terms of a settlement but the words of Andrews L.C.J. (at p. 57) as to ascertaining the meaning of the expressions used by the settlor are fully as apt in the case of a will:- “Why should they not bear the meaning in which they would naturally be used by the settlor – the meaning assigned to them in ordinary every-day speech?”
The expressions used in the will in this case, and those used in the wills considered in the cases just cited, do not suffer from the ambiguity inherent in the use of phrases such as “be openly or avowedly Protestant”: In re Borwick; Borwick v. Borwick [1933] 1 Ch 657; “at all times conform to and be members of the Established Church of England”: In re Tegg; Public Trustee v. Bryent [1936] 2 All ER 878; “cease to practise the Roman Catholic religion”: Burke and O’Reilly v. Burke and Quail [1951] IR 216. There is a subjective element latent in such conditions which is, I think, absent in the requirement in the present case. Nothing active is required of the children and they do not have to hold or profess any particular beliefs. What is required is that they should be brought up in the Roman Catholic faith – a matter for those responsible for their religious education while under age. If the children are baptised and received into the Roman Catholic Church, receive the appropriate instruction and fulfil, so far as it can be secured, their appropriate religious duties, I do not think there could be any doubt, in the mind of any reasonable person, that that is what the testator contemplated by the words he used. I feel I may echo, and apply to the present case, the very cogent observations of Gavan Duffy P. in considering the expression, “shall marry a Roman Catholic,” in In re McKenna; Higgins and Others v. Bank of Ireland and Others [1947] IR 277, at p. 285:- “I have only to construe the plain words used by a plain man in a sense plain to all of us; and I shall not make the law justly ridiculous in the eyes of persons of common sense by declaring a current expression, which the People knows and understands, to be unintelligible in the High Court of Justice in Ireland.”
It is true that it can be plausibly suggested that there might be uncertainty
in particular circumstances, for example, while any child was too young to understand or profit by any form of religious instruction or where the instruction had only been intermittent or had not extended over the whole period of minority. Any such difficulties, however, seem to me to relate to the ascertainment of whether the intention of the testator had been fulfilled rather than to any uncertainty in that intention. It is significant that the parents of the children evidently felt that there was no difficulty or ambiguity in their stating to their solicitor that their children had been brought up in the Church of Ireland, although two of the children are now only aged seven and three respectively. A Court which had to consider the matter would probably take the view that, so far as the gift of the capital was concerned, the process of bringing up the children in the Roman Catholic faith was one which at least required to be in operation at the time of each child attaining his or her majority, but, subject to that, any difficulties in determining the question would be merely those created by some special or peculiar circumstances. Again, it has to be borne in mind that each requirement, so far as it is a condition, is in the nature of a condition precedent rather than a condition subsequent; and it was laid down in England by the Court of Appeal in In re Allen, Deceased; Faith v. Allen [1953] 1 Ch 810, that in the case of a condition precedent or a qualification it was not necessary that its scope should be capable of exact definition. All that a claimant had to show was that he, at least, was within the requirement. This is a view which I respectfully adopt. Accordingly, in my view, neither requirement in the present case is void for uncertainty.
The testator’s intention is manifest. He wished to secure, so far as the promise or gift of his bounty could do so, that his grandchildren should be brought up in the Roman Catholic faith and that only those grandchildren who were so brought up should benefit either during their minority or on coming of age. To take the last event first, there is only a gift of the capital to those who shall have been brought up in that faith. I am not at the moment concerned with the ambiguity that the gift is to “all the children” provided they shall have been so brought up, and that questions might arise as to the proper interpretation if only one or some of the children qualified for the gift, although I hardly think a Court would find these questions insoluble. A more fundamental difficulty arises from the nature of the condition itself. No child can take a vested interest in the capital unless the prescribed condition is fulfilled and this indicates the nature of it as being a condition precedent or a qualification antecedent to taking any benefit. No question of a voluntary choice or election on the part of the children arises, since the condition must be fulfilled at latest at the attainment of twenty-one years of age, that is, before any child would be legally capable of making a binding choice or election. This circumstance distinguishes the case from those in which an election was required of a minor and the requirement was held either not to be binding during minority or to be capable of being postponed until majority. Examples are In re May [1917] 2 Ch 126; [1932] 1 Ch 99; McCausland and Others v. Young and Others [1949] NI 49. What is involved in the present case is that the parents or other persons responsible for the upbringing of the children should have brought up the children in the Roman Catholic faith, irrespective of any independent volition on the part of the children and irrespective of the degree of success achieved in such upbringing. The testator was evidently sufficiently confident of the result of such upbringing not to impose any penalty, by way of defeasance or forfeiture – as was attempted to be done in many cases – if any child, after attaining the age of choice, changed his religion or ceased to practise or profess the religion in which he was brought up. As already pointed out, the testator was fully aware of the circumstances of his daughter’s marriage and of the birth and baptism of two of his grandchildren, at the date of his will; and he must be taken to have made his will in the light of those circumstances.
Given the natural desire of parents to secure the welfare and material prosperity of their children, a provision such as the present could only operate, and be intended to operate, as an inducement to the parents and a form of indirect pressure on them to change the religion of their children from that which they themselves professed or had adopted and in which they had baptised the children. Similar provisions have been considered in a number of cases and have been held void as being contrary to public policy in tending to interfere with the parental right and duty of providing for and prescribing the manner of education, including the religious instruction, of children. This view was taken by Bennett J. in In re Barwick; Barwick v. Barwick [1933] 1 Ch 657. An earlier case, which he followed, was In re Sandbrook; Noel v. Sandbrook [1912] 2 Ch 471, a decision of Parker J. There, the condition was directed against the children living with their father and it was held void because it was inserted with the object of deterring the father from performing his parental duties. Another example of an analogous provision was In re Boulter; Capital and Counties Bank v. Boulter [1922] 1 Ch 75, where Sargant J. held a condition against living abroad void as being against public policy in tending to the possible separation of the parents from their children. A more recent example was Re Tegg; Public Trustee v. Bryant [1936] 2 All ER 878, where Farwell J. held that a condition aimed at preventing the children being sent to any Roman Catholic school was void as being a fetter upon the right of the mother to do what she might think best for the welfare and education of her children. See also Re Piper [1946] 2 All ER 503, referred to later. While I accept and respectfully adopt the reasoning and conclusions in these cases, I have no need to have recourse to them, as the same result would follow from a recent decision of Gavan Duffy P. in our own Courts – the only case here to which I was referred – that seems to have touched on the point. This was Burke and O’Reilly v. Burke and Quail [1951] IR 216, where the learned President held that a direction in a will that the selection of a school should be in the absolute discretion of the trustees was inoperative and must be ignored since it tended to override the parental authority and right and duty of education declared by Article 42 of the Constitution.
This Article puts the matter on a different and higher plane in this country, as the parental right and duty is declared and guaranteed by our fundamental law. Under it, the State “guarantees to respect the inalienable right and duty of parents to provide, according to their means, for the religious and moral, intellectual, physical and social education of their children.” It is clear that any attempt to restrict or fetter that right would be contrary to the solemnly declared policy and conceptions of the community as a whole and therefore such as the Courts established under that Constitution could not and would not lend their aid to. The provision in the will that the children to benefit should have been brought up in the Roman Catholic faith is, therefore, void as against public policy and cannot be given effect to. It is hardly necessary to add that this principle applies and must be applied irrespective of the particular religion involved.
It makes no difference, in my opinion, to this view whether the provision in the will as to the capital is called a condition precedent or a qualification. If it is regarded as a qualification, in the sense that the claimant to the capital must show at the prescribed age that he answers the particular description, this involves that, during all or some of the period when the matter was one for his parents and not for himself, he had been brought up in the Roman Catholic faith.
If the condition is void, is the gift void also or can it be allowed to take effect, whether the condition is fulfilled or not? Can the condition be simply disregarded, as could be done in the case of a void condition subsequent intended to operate by way of defeating or divesting, upon the happening ofa given event, a previously vested interest? As pointed out by Gavan Duffy P. in Burke’s Case [1951] IR 216, at p. 224, a condition precedent is one which must be fulfilled before the gift can take effect at all and a gift made subject to a condition precedent fails altogether, as a rule, if the condition is found to be void. The use of the words, “as a rule,” in this passage may have been intended
to leave open the possibility of there being an exception to the rule – the point did not arise for decision in Burke’s Case [1951] IR 216 – and it has been argued in the present case that the gift in question here belongs to an exceptional class which the law allows to take effect notwithstanding the general rule. Before dealing with this question, I think it preferable to consider the provision in the will as to the application of the income of the property during the minority of the children.
The intention and effect of this provision seems to be that the income should be applied for the maintenance and education of the children so long as they are being brought up in the Roman Catholic faith and only so long as they are being so brought up. That seems to me to be the plain, ordinary meaning of the words used by the testator. It is implicit in them that before the income should be so applied it should be reasonably clear to the trustees that the children were being so brought up. It is, I think, also implicit that should it become equally clear to the trustees that there had been any fundamental or radical change in the religious upbringing of the children, the income should cease to be so applied. The provision would, thus, imply something in the nature ofa series of intermittent or alternating conditions precedent and conditions subsequent, but such a series has never received legal recognition. The true view, I think, is that the provision constitutes a limitation of the income for the benefit of the children during a specified period or specified periods, that is, so long as the children are being brought up in the specified faith. Here, however, the element of an unlawful attempt to dictate the religious education of the children and to trammel the exclusive responsibility of the parents again obtrudes, and again it is an attempt which the Court will not aid. It was clearly not the intention of the testator that the income should be applied for the benefit of the children unless they were being brought up as he desired, and therefore they cannot have the income during the whole of their minority on the basis of disregarding his definition of the period of enjoyment except so far as it contemplated minority. This would not only disregard that definition and tum a limited gift into an unqualified one but would defeat his clear wishes.A
similar question arose before and was decided by the Court of Appeal in England in In re Moore; Trafford v. Maconochie (1887) 39 Ch D 116. There the testator had made provision for a weekly payment to his sister during such time as she might live apart from her husband, and it was held that the payments were to be made during a period the commencement and duration of which were fixed in a way which the law does not allow and the gift was void. The principle and authority of this decision were not questioned by P.O. Lawrence
J. in In re Lovell; Sparks v. Southall [1920] 1 Ch 122, but he distinguished it on the ground that, in the case before him, the husband and wife were already separated at the date of the will and the bequest by the testator was intended to provide for the wife while so separated rather than to induce her to live apart from her husband, which would have conflicted with public policy.
I am of opinion, therefore, that the gift of the income fails by reason of the manner in which it is limited being contrary to public policy.
It is necessary now to return to the question whether the gift of the capital also fails, the condition upon which it depends being void. If it does not, the curious result would ensue that, by some over-refinement of the law, the children would become entitled to the capital, but not to the income, in circumstances in which it appears reasonably plain the testator never intended them to have either. I have no hesitation in saying that I should require to feel coerced by the weight and logic of an argument to this effect, before I would subscribe to such an absurd result, involving, as it would, disregarding or paying the merest lip-service to the consideration that the object of these proceedings, and the Court’s function, is to endeavour to ascertain, and, so far as legally possible,
to carry out the intentions of the testator as to the disposal of his property after his death.
The argument, for which some judicial sanction can be shown, is that there is an exception to the general rule of a gift dependent on a void condition precedent being also void where the condition contemplates or requires something which is malum prohibitum as opposed to something which is malum in se. This is a curious and somewhat pedantic distinction to introduce in ascertaining the wishes of testators who, in the vast majority of cases, would be quite unaware of the existence of the distinction and, even if they were aware of it, might be unable to obtain from lawyers any very precise idea of the nature and limits of the distinction. I feel ram entitled to say this because I have the authority of an eminent, contemporary English judge in a recent case on the topic. This is Re Piper [1946] 2 All ER 503, where Romer J. said (at p. 505):- “The difference between malum prohibitum and malum in se has never been very precisely defined or considered.” Notwithstanding this uncertainty, he felt satisfied that the condition in question in the case before him – directed against children residing with their father – was malum prohibitum and not malum in se with the result that the gift took effect freed and discharged from the void condition. For the principle involved, he relied on a passage in Jarman on Wills (7th ed., vol. 2, at p. 1443), which was also relied on in other recent cases on the matter and which states the proposition in these terms:-“… the civil law, which in this respect has been adopted by courts of equity, differs in some respects from the common law in its treatment of conditions precedent; the rule of the civil law being that where a condition precedent is originally impossible, or is illegal as involving malum prohibitum,the bequest is absolute,just as if the condition had been subsequent. But where the performance of the condition is the sole motive of the bequest, or its impossibility was unknown to the testator, or the condition which was possible in its creation has since become impossible by the act of God, or where it is illegal as involving malum in se, in these cases the civil agrees with the common law in holding both gift and condition void.”
Romer J. also derived assistance from a passage in Sheppard’s Touchstone (vol. 1, at p. 132) which he quoted and which may be quoted here, before returning to the passage from Jarman. It is as follows:- “All conditions annexed to estates, being compulsory, to compel a man to do any thing that is in its nature good or indifferent; or being restrictive, to restrain or forbid the doing of anything which, in its nature, is malum in se, as to kill a man, or the like; or malum prohibitum, being a thing prohibited by any statute, or the like; all such conditions are good, and may stand with the estates. But if the matter of the condition tend to provoke or further the doing of some unlawful act, or to restrain or forbid a man the doing of his duty; the condition for the most part is void.”
I must confess I can derive no assistance whatever from this last passage on the question I am now concerned with, possibly because it does not seem to be concerned with that question. As I understand it, the author was distinguishing between conditions which were good from those which were “for the most part” void. In the former class he placed together those restraining or forbidding either mala prohibita or mala in se, thus treating the matter from the point of view of negative conditions. He was not considering at all the question of positive conditions directed to the procurement of either type of malum, nor was he considering the effect of a condition being void on the validity of the gift dependent on it. He says nothing as to this last matter and it is unlikely that he intended to convey any distinction in this respect, as the reference to “estates” suggests that he was dealing with devises of real property where the rule seems to be invariable that if the condition, being a condition precedent, is void, the devise is void. The passage is of some help as to the difference between the two types of mala, although, even here, the qualification imported in each case by the use of the words, “or the like,” detracts from precision.
The passage from Jarman already quoted appears to depend in the main, as
do some of the later cases, on the authority of Reynish v. Martin (1746) 3 Atk 330, a decision of Lord Chancellor Hardwicke in reference to a legacy given to a daughter on condition of her marrying with the consent of trustees and in which he held that the legacy held good although she had married without consent. He first considered the matter as a personal legacy to be paid out of the personal estate only and said (at p. 331):- “I apprehend that taking this as a mere personal legacy, the plaintiff by the rules of the civil and ecclesiastical law, and which have been constantly adhered to in this court, will be intitled [sic] to the legacy; for it is an established rule in the civil law, and has long been the doctrine of this court, that where a personal legacy is given to a child on condition of marrying with consent, that this is not looked on as a condition annexed to the legacy, but as a declaration of the testator in terrorem.”
This passage shows a sufficient ground for the decision and, to that extent, renders the subsequent passage, on the question in issue, obiter. This later passage, after referring to the difference in effect of a condition precedent being void and of a condition subsequent being void, continues:- “but this difference only holds where the legacy is a charge on the real assets, and therefore, if this had been merely a personal legacy, I should have been of opinion that as the marriage without consent would not have precluded Mary of her right to this legacy in the ecclesiastical court, no more would it have done so here; and to this purpose several cases were cited, which are taken notice of in the case of Harvey v. Aston (1737) 1 Atk 361, and which I shall not repeat, but refer to that case for them.”
This reference to Harvey v. Aston is significant as that case dealt only with conditions and limitations concerned with marriage with consent, and it shows, as the passage itself would suggest, that the Lord Chancellor was not dealing with any wider question. The remainder of his judgment dealt with the question whether, on the terms of the will, the legacy was a charge on the real estate, and having found that it was not, he concluded:- “this case must be considered as a mere personal legacy, and as such to be governed by the rules of the civil and ecclesiastical law.”
Reynish v. Martin, therefore, appears to be no more than authority for the
proposition that, in the case of a personal legacy subject to a condition precedent as to marriage with consent, the legacy is not avoided by breach of the condition where there is no gift over. There is no reference anywhere in the case to malum prohibitum or malum in se.
Neither is there any such reference in the case of Brown v. Peck (1758) 1
Eden 140, which is cited as an authority in Roper on Legacies for the proposition which is relie.d on in support of the present argument. This is as follows (4th ed., at p. 757):- “When, however, the illegality of the condition does not concern anything malum in se, but is merely against a rule or the policy of law, the condition only is void, and the bequest single and good; for the condition not being lawful, it is held in the phrase of the Civil law pro non adjecta.”
As he had been speaking, in the preceding paragraph, of a condition precedent requiring the performance of an act malum in se, a cursory reading of the passage cited might suggest that he was there dealing with mala prohibita, as being the natural opposition to mala in se. Closer attention to it, however, makes it, I think, plain that this was not the meaning or intention of the passage. If this particular distinction had been intended, the learned author would probably have expressed it with his usual clarity. Instead he referred to things “merely against a rule or the policy of law.” Such things are not necessarily mala prohibita (they are, in my view, entirely different) and it seems highly unlikely that the author intended to suggest that they were the same. By referring to the conditions as not being lawful, he may have meant no more than that they were unenforceable. This view of the passage is reinforced by turning to the case of Brown v. Peck itself, where it will be found that the decision was that a condition as to a married woman living apart from her husband was contra bonos mores and void but the gift dependent on it was good. There is, quite understandably, no reference in it to mala either prohibita or in se, the condition belonging to neither category.
If Brown v. Peck is an authority for anything, it is for the proposition that,
if a condition precedent attached to a personal legacy is void as being against public policy, the gift may still be good. It is, however, a very doubtful authority. The report is short and not too easy to follow and it was subjected to some criticism by the Court of Appeal in In re Moore; Trafford v. Maconochie (1887) 39 Ch D 116, already referred to. Cotton L.J. (at p. 129) said that “the report is not clear either as regards the facts or the principle laid down”; and Bowen
L.J. (at p. 132) said it “appears to have been compromised after an expression of opinion by the Court.” In the Court of first instance in In re Moore, Kay J. had said (at p. 124) of it and of Wren v. Bradley (1848) 2 De G & Sm 49:- “I confess that I find it difficult to understand these two decisions”; andI respectfully echo his words. The latter case – Wren v. Bradley- was interpreted by the Court of Appeal as having being a decision on the basis of the condition being a condition subsequent and therefore inapplicable in the case before them as it is also, for the same reason, inapplicable in the present case. Brown
v. Peck I regard as too obscure and doubtful a case to follow.
The proposition contended for has, as we have seen, been adopted in Re Piper [1946] 2 All ER 503, already referred to, and also in a later case of In re Elliott, Deceased [1952] 1 Ch 217, decided by Harman J. Neither of these cases is, of course, binding on me although entitled to the greatest respect as persuasive authorities. In In re Elliott, Deceased, Harman J. decided thata bequest of personalty subject to an illegal condition precedent is void if the condition be malum in se, but if the condition be only malum prohibitum, the bequest will be effective and unfettered by the condition; and this is a clear statement of the principle contended for in the present case. In that case, the condition offended against the rule against perpetuities and Harman J. held that this was malum prohibitum. He took the view that the principle he enun ciated had been imported into equity from the civil law on the authority of Reynish v. Martin, quoted and accepted by Bowen L.J. in In re Moore.I have
already suggested that Reynish v. Martin is not an authority for this proposition; and the Court of Appeal decided In re Moore on the ground that they were concerned with a limitation and that, if any such principle applied in the case of a condition, it did not apply to a limitation: see Cotton L.J., at p. 129. What Bowen L.J. said, as to the matter, was (at p. 131):- “Accepting that as law with respect to legacies of personal estate on a condition, the question remains whether this is a legacy on a condition”; and he found that it was, instead, a limitation. I do not think therefore that In re Moore could be rightly regarded as adopting or approving the supposed principle. It is difficult to see why, if a limitation which is contrary to public policy avoids a gift, a condition which is contrary to public policy should not do so also. It was, however, sufficient for the decision in In re Moore that the provision was found to be a limitation. Harman J. in In re Elliott, Deceased, may possibly have intended to convey some doubt on the matter in his own mind by saying (at p. 222):- “… if this doctrine of the civil law has been imported into the English law, the condition can be disregarded.” He then went on to say:- “Mr. Roper is of the opinion that this rule was imported into equity … “; and he referred to Reynish
v. Martin and In re Moore. As has been seen, the basis of Roper’s assertion was Brown v. Peck.
I have devoted some time to this question because of the support to be apparently found for the proposition in textbooks and in high judicial decision; but there is a more fundamental consideration which would have disposed of the matter, in my view, more shortly, if it had not been for the decisions referred to. This is the question whether, assuming the proposition to be sound, the provision in question here is malum in se or malum prohibitum or neither. In my view it is neither. As already noted, the precise nature of the distinction is somewhat indefinite and elusive, but it seems reasonably certain that it is a distinction between different types of crime or offence according to the origin of their sanction. Thus, Holland, Jurisprudence (7th ed., p. 34), says:- “Acts prohibited by positive law, but not by the so-called natural law, are said to be ‘mala prohibita,’ not ‘mala in se.’ Thus a government may find it expedient to forbid certain acts, such as the planting of tobacco, which are not regarded as odious by the public sentiment.” Byrne, Law Dictionary, says:- “Mala in se are acts which are wrong in themselves, such as murder, as opposed to mala prohibita (mala quia prohibita), that is to say, those acts (such as smuggling) which are only wrong because they are prohibited by law.” Cf the passage already quoted from Sheppard’s Touchstone, where malum prohibitum is referred to as “a thing forbidden by any statute, or the like.” This limitation in scope of the distinction is borne out by recalling the matters in which the distinction was or might be of any importance. These appear to be chiefly the question of ambassadorial exemption from criminal process and the question of the degree of mens rea requisite in the case of some offences.
An attempt to influence or fetter parents in their discretion as to the choice of religion and religious instruction for their children is not, so far as I am aware, a crime or offence of any kind. It is simply opposed to the policy of the law – now written into the fundamental law of this country. What this means was pointed out by Kekewich J. in Re Hope Johnstone; Hope Johnstone v. Hope Johnstone [1904] 1 Ch 470, at p. 479 – and quoted by Romer J. in Re Piper [1946] 2 All ER 503 at p. 505 – in these words:- “The phrase means no more than that the provision is not enforceable by anyone or in any court.”
So far, therefore, as the contention depends on the provision belonging to one branch rather than the other of this archaic distinction, I am of opinion that the contention fails for the reason that the provision belongs to neither branch. Could it, however, be said that the proposition has validity if it were put in a different way, namely, that, if a condition precedent is contrary to public policy, a gift of personalty dependent on the condition is nevertheless good? This might be the meaning of Brown v. Peck, in which the condition was stated to be contra bonos mores, and it seems to be the approach to the matter of Kay J. in In re Moore, where he quoted from Swinburne on Wills and, later, refers to “the doctrine that conditions precedent as well as conditions subsequent which are against the policy of the law are treated as void in cases of legacies of personal estate, and that the legacy ‘stands pure and simple.”‘ He quotes the second of Swinburne’s four classes of impossible conditions, being those “which be contrary to law or good manners” and the two examples, respectively, given by Swinburne, i.e., “if he murder such a man or deflower such a woman”; but he does not quote the next part of the sentence, which is: “this condition is unlawful and unhonest, and consequently to be deemed unpossible” (Part IV, sect. 5, para. 8). Swinburne then states his rule that, with certain exceptions, when a condition is impossible the legacy may still be recovered; and proceeds to consider the exceptions. Amongst these occurs one set out in the following words (also quoted by Kay J.):- “When the condition is both impossible and unhonest, for then the disposition is thereby void; and that in disfavour of the testator, who added such a condition. Whereas if the condition had been only impossible or unlawful, the disposition had been good, and that in favour of the testament.”
This last sentence is the only one that could possibly lend any support to the proposition now under consideration and such support would depend solely on the meaning to be given to the words “or unlawful” as used by the author. The disjunctive cannot have been intended to suggest an alternative to an impossible condition, as the whole section is only dealing with such conditions, and I confess I find it very hard to know what meaning could or should be given to the word, “unlawful.” The sense of the passage, taken as a whole, would have led one to expect an opposition between “impossible and unhonest” conditions on the one hand and “impossible but not unlawful” conditions on the other hand; but it would be rather late in the day now to suggest a typographical error in a work of such antiquity. Whatever the meaning of the words, there is a clear and unambiguous statement that the disposition is void when the condition is “impossible and unhonest”; and the earlier passage made it equally clear that Swinburne included in this category of condition one “contrary to good manners,” which is equivalent to one contra bonos mores or opposed to the policy of the law. The second example he gives also makes this clear, as it contemplates something which is not necessarily any crime or offence but merely disapproved by public morality. I cannot find, therefore, that Swinburne’s statement of what the ecclesiastical law was lends any support to the principle enunciated in Brown v. Peck, or the cases which have followed or applied its supposed principle. Swinburne seems to me to be authority for To summarise:- the provisions in the will as to bringing up the children in the Roman Catholic faith are not too uncertain in their meaning not to be given effect to, if this were the only matter in issue. The phrase is one generally used and popularly understood, and an individual, or the Court if necessary, would not have too much difficulty in determining whether a particular child was being brought up or had been brought up in a particular faith. The provisions, however, constitute an attempt to interfere with or fetter the right and duty guaranteed to parents by the Constitution to provide for the education, including the religious education, of their children. As such, they are opposed to the policy of the law and cannot be enforced or given effect to in any Court in this country. Being, thus, void and unenforceable, the gifts, both of capital and income, dependent on their being carried out, are also void and unenforceable. The gifts to the children therefore fail and the legacy falls into the residue of the estate.
In my view, the principle stated to have been imported from ecclesiastical law, that even though the condition upon which a legacy is given is contrary to public policy the legacy may still take effect, is not borne out by the authorities cited for it nor was it a rule of ecclesiastical law. If it had been part of ecclesiastical law, as applied to wills in the Church Courts in England, it might have been necessary to enquire as to when the principle was adopted, as those Courts retained a large part of their jurisdiction even after the Reformation and were not finally deprived of their temporal jurisdiction in testamentary and other matters until 1857. Rules adopted or laid down during the last two centuries of the functioning of those Courts could not be accepted without question as part of the law of this country. No Irish case was cited, nor do I know of one, which decided the point at issue.
On another ground, if necessary, I should have been inclined to hold that, the condition being contrary to public policy, the bequest failed. This is that the performance of the condition was the sole motive of the bequest. This is an admitted exception to the supposed principle that the bequest may hold good. Reading the will as a whole, it is impossible to escape the conclusion that the paramount object of the testator, so far as his grandchildren were concerned, was that they should be brought up in his own faith and that only on that basis should they benefit. There is no indication that he intended them to benefit even if his wishes could not be carried out and, therefore, as the law will not enforce the condition, it would be defeating his real intention to uphold the gift while allowing the condition to be disregarded or rejected.
For these reasons, the gift fails.”
Re Moroney
(1887) 21 LR Ir 27
PALLES CB stated at pp.58-64: “I also am of opinion that the payment by the appellant of £25 to the trustees of the “Plan of Campaign” and the sale by him of his cattle amounted to acts of bankruptcy. In expressing this opinion, I must entirely disclaim yielding to one of the arguments of the learned counsel for the respondents, in which he asked us to overrule the long line of authorities, commencing in the time of Lord Kenyon and continuing to the present time, of which Wood v. Dixie (1845) 7 QB 892, is a typical example. In arriving at the conclusion I have mentioned, I do not overrule any authority. I do no more than ascertain the well-known principles of bankruptcy law, and apply them to the admitted facts of the particular case before us.
The clause of the statute upon which the question arises is s. 21, sub-section 2, of the Bankruptcy Act (Ireland), 1872, which enacts that if a debtor has, in Ireland or elsewhere, made a fraudulent conveyance, gift, delivery, or transfer of his property, or of any part thereof, he shall be held to have committed an act of bankruptcy. This sub-section occurs in a code of bankruptcy law, which regulates the rights, in bankruptcy administration, of creditors against their debtors, and of creditors inter se. Its interpretation is well expounded by Mellish, L.J., in Re Wood (1872) LR 7 Ch App 302. Speaking there of the corresponding section in force in England, the Lord Justice says:- “Now, against whom must the conveyance be fraudulent? Why, clearly against creditors, because a man may make fraudulent conveyances of other kinds, as, for instance, with intent to defraud a purchaser, which it would be absurd to treat as acts of bankruptcy.” I therefore read the clause as if the description of the avoided conveyance was one “fraudulent against creditors.” We have heard a vast amount of argument as to the words “intent to defraud creditors,” and we are told that we are bound to read the section as if those words were contained in it. In one sense, I agree in this contention. I agree that the words “fraudulent conveyance” in the section must now receive the same interpretation as the words in the former statutes, “conveyance with intent to defeat or delay creditors,” formerly bore. I agree that there is no difference between a conveyance fraudulent against creditors and a conveyance with intent to defeat or delay them. But in my view, and as held by the Court of Appeal in Re Wood, the reason the words were omitted was, not because they were to be implied by construction, but because they were “superfluous and misleading.” The words “intent to defeat or delay creditors” in the former Bankruptcy Acts had, as pointed out by Lord Justice Mellish, a different interpretation according as they were applied to different acts of bankruptcy. “All were described as acts with intent to defeat or delay creditors; but as to some, it was necessary to prove, as matter of fact, that the act was done with an intent in the mind of the bankrupt to defeat or delay his creditors – as, for instance, departing from the realm, or absenting himself, or keeping house – all these were in themselves innocent actions, and to make them acts of bankruptcy it was necessary to prove an intent to delay or defeat creditors. If the case was tried at law, the Judge would leave to the jury
. . . whether the debtor had done the act with intent to delay or defeat his creditors? But, as respects a fraudulent conveyance, the rule was quite different, for the mere act was necessarily an act of bankruptcy, and the law assumed the intent to defeat or delay creditors as a necessary consequence of the act.”
Thus the expression “fraudulent conveyance,” in section 21, sub-section 2, includes two distinct classes of conveyance – one, the class of conveyance fraudulent in fact; secondly, conveyances of such a character that their necessary or probable result was to defeat or delay creditors; and in such cases the inference that they were fraudulent was a conclusion of law, not a matter of
fact.
Taking, then, the subject-matter of this sub-section to be conveyances and
transfers fraudulent against creditors, we are asked to limit the operation of the sub-section, so far as relates to conveyances to strangers, as distinguished from conveyances to one or more particular creditors, to conveyances which are within the 10th Charles I, sess. 1, c. 3 (Irish), corresponding to the English Act, 13th Elizabeth, c. 5. I am far from saying that Mr. Carton is wrong in this contention; but ifhe be right in it, it is only because the latter statute comprises, as in my opinion it does, frauds against creditors of every kind. Lord Justice James, in Ex parte Pearson (1873) LR 8 Ch App 673, thus refers to the wide reaching effect of the English sub-section corresponding to our second sub section of section 21:- “I am of opinion that Lord Mansfield, and the other eminent judges who established the law as to fraudulent preference and fraudulent assignments by a debtor, would not have any difficulty in applying that law to a case like the present. I am of opinion that the power and the duty which have been exercised by our fathers have not been abdicated or repudiated by the Courts in later times, and that the Legislature, is adopting the old decisions, and crystallizing them into positive enactments, have in no way abrogated the duty of this Court to apply the same principles in proper cases.” That, in my view, is the true interpretation of this sub-section. I need not, however, discuss this matter further, for whether it does or does not comprise fraudulent conveyances or tranfers to strangers, not within the statute of Charles, there can be no doubt, and it was so expressly admitted by the learned counsel for the appellant, that any conveyance fraudulent within the former Act, is
also within the latter, and is consequently an act of bankruptcy.
This brings me to the interpretation of the statute of Charles, and I confess that until the argument of this appeal, I thought it as well settled as the construction of any statute could be determined by judicial decision. But there has been, during the argument of this appeal, that which, in my opinion, is such a misinterpretation of the leading cases upon the subject, and one so likely, if not corrected, to lead to mischief, that I shall take the liberty of stating, what I should otherwise have deemed to be wholly unnecessary, my general view as to the interpretation of this statute, as uniformly adopted during the period of nearly three hundred years, which have elapsed since it became law. The statute avoids “conveyances, &c., devised and contrived of fraud, covin, &c, to the intent to delay, hinder, or defraud creditors of their just and lawful actions, debts, &c.” Therefore to bring a conveyance within the statute, first, it must be fraudulent; secondly, the class of fraud must be an intent to delay, hinder, or defraud creditors. Whether a particular conveyance be within this description may depend upon an infinite variety of circumstances and considerations. One conveyance, for instance, may be executed with the express intent and object in the mind of the party to defeat and delay his creditors, and from such an intent the law presumes the conveyance to be fraudulent, and does not require or allow such fraud to be deduced as an inference of fact. In other cases, no such intention actually exists in the mind of the grantor, but the necessary or probable result of his denuding himself of the property included in the conveyance, for the consideration, and under the circumstances actually existing, is to defeat or delay creditors, and in such a case, as stated by Mellish, L.J., in Re Wood, the intent is, as matter of law, assumed from the necessary or probable consequences of the act done; and in this case, also, the conveyance, in point of law, and without any inference of fact being drawn, is fraudulent within the statute. In every case, however, no matter what its nature, before the conveyance can be avoided, fraud, whether expressly proved as a fact, or as an inference of law from other facts proved, must exist. What, then, is the nature of this fraud which will avoid a conveyance? The object of the statute was to protect the rights of creditors as against the property of their debtor. It was no part of its object to regulate the rights of creditors inter se, or to entitle them to an equal distribution of that property. One right, however, of the creditors, taking them as a whole, was that all the property of the debtor should be applied in payment of the demands of them, or some of them, without any portion of it being parted with without consideration, or reserved or retained by the debtor to their prejudice. Now, it follows from this, that security given by a debtor to one creditor, upon a portion of or upon all his property (although the effect of it, or even the intent of the debtor in making it, may be to defeat an expected execution of another creditor), is not a fraud within the statute; because notwithstanding such an act, the entire of the property remains available for the creditors, or some or one of them, and as the statute gives no right to rateable distribution, the right of the creditors by such an act is not invaded or affected. This is the true ground of the decisions, so much relied on by the appellant, of Ho/bird v. Anderson (1793) 5 Term Rep 235; Pickstock v. Lyster (1815) 3M & S 371; Darvill v. Terry (1861) 6 H & N 807; and Alton v. Harrison (1869) LR 4 Ch App 622.
Again, the right of the creditors is, not that the debtor shall not part with any of his property, but that no such parting shall be without consideration.”If,” says Alderson, B., in Siebert v. Spooner (1836) 1 M & W 714, “an equivalent is given, there is only a change in the nature of the property which the party has, but not a conveying of it away.” When, therefore, there is a bona fide sale for value of part of the property of the debtor really intended to have effect and operation between the parties to it, the right of the creditors is not invaded. No doubt the property sold has ceased to be available for their demands; but in lieu of it, there has been been substituted the consideration for the sale, which may be assumed to be a substantial equivalent. Such a sale, therefore, would not be a fraud within the statute, merely because it was made with the express intent to defeat or delay the execution of a creditor. Were there nothing more in the case, the consideration would remain capable of being made available, not under the intended execution, but by some one or other of the modes known to the law; and, therefore, in such a case, there would not be a fraud within the statute. This was the ground of the decisions in the only other cases cited by the appellant on this branch of the argument, viz. Wood v. Dixie and Hale v. Saloon Omnibus Company (1859) 4 Drew 492. It is to be observed, however, that the decision in Wood v. Dixie, goes no further than determining that an intent to defeat a particular creditor in the case of a bona fide sale for value, does not per se, and as a matter of law, render the conveyance fraudulent. If, however, in such a case, the intent were not only to sell the property, but forthwith to abscond with the proceeds, so as in effect to withdraw the property from the fund available for the creditors without providing an equivalent, I should entertain no doubt that in such a case there would be an intention to defraud creditors, which, if the purchaser had notice of, would avoid the sale, and which, whether he had notice or not, would be an act of bankruptcy by the vendor.
If I be right in this view of these decisions, not one of them is an authority for the proposition that a parting with, without consideration, of any substantial part of the debtor’s property, with an intent to defeat or delay a particular creditor, is not a fraud within the statute. Mark here the distinction between such a case and those to which I have already referred. In such a case, the property is withdrawn from the fund available for payment of all the creditors. It passes, not to one of the creditors, but to a stranger. No equivalent is provided for it, and it is a direct invasion of the right of all the creditors, as against the property of their debtor. It must be borne in mind that every allocation of part of the debtor’s property which is made to a stranger, without an equivalent being provided, may injuriously affect all of them, by diminishing the fund applicable for payment of all, although the particular intent, and more immediate effect, may be to defeat that creditor only who has been most pressing. Again, if the conveyance reserve, either expressly, or by some collateral or secret arrangement, any interest, no matter how small, to the grantor, under such circumstances as to make it impossible or difficult to resort to it if the deed be binding, the conveyance would be a fraud within the statute, because by it that interest in the debtor would be reserved for him in preference to his creditors, and so withdrawn from the fund to which they were entitled to resort.
The authorities upon the two classes of frauds I have last referred to have been always uniform. Since Twyne’s Case (1601) 3 Co Rep 80b downward, no one has ever doubted that reserving an interest to the grantor was a badge of fraud; and in Holbird v. Anderson (1793) 5 TR 238 and Alton v. Harrison (1869) LR 4 Ch Ap 622, the circumstance that no benefit was reserved to the grantor is pointedly referred to in the judgments upholding the transactions.
It remains but to refer to the decisions upon voluntary deeds, made with intent to avoid one creditor only, but the effect of which, as I have already pointed out, must be to prejudice all creditors. The decisions upon these instruments have uniformly been that they are fraudulent within the statute. Of the many decisions which can be referred to, it is unnecessary to mention more than Coulston v. Gardiner 3 Swanst 279, Blenkinsopp v. Blenkinsopp (1850) 12 Beav 568; on appeal 1 De GM & G 496, Bott v. Smith (1856) 21
Beav 511, and Barling v. Bishopp (1860) 29 Beav 417.
Applying these principles to the £25 given under the “Plan of Campaign,” it seems to me clear that this parting with a substantial part of the debtor’s property without consideration, and with express intent to defeat and delay the plaintiff, was fraudulent under the statute of Charles, and therefore an act of bankruptcy.”
Bryce v. Fleming
[1930] IR 376
MEREDITH J “This is an appeal against the judgment of Circuit Court Judge Power, by which an assignment, dated the 9th March, 1928, whereby certain lands of Ballybroney and Balladallagh, in the County of Mayo, were assigned by the defendant, Thomas Fleming, to the defendant, Mary Gilvarry, was declared void as against the plaintiff and all other the creditors of the defendant, Thomas Fleming, and was ordered to be delivered up to be cancelled.
The declaration and order purported to be made under the Irish statute, 10 Chas. 1, Sess. 2, c. 3, against covinous or fraudulent conveyances, which corresponds to the English statute, 13 Eliz. c. 5. The assignment was an out and-out assignment. There was no reservation of any kind, express or secret, in favour of the vendor, Thomas Fleming, and the price was determined as the result of genuine bargaining, and reflected simply the estimate which the parties placed on the value of the lands. The assignment was, therefore, unquestionably for good consideration, and bona fide. But at the time it was made Patrick Bryce, the plaintiff, had obtained judgment against the defendant, ThomasFleming, for necessaries supplied to his wife, and, as Fleming had unsuccessfully appealed against this judgment, the plaintiff was a creditor of Fleming to a considerable amount – apparently nearly half the value of the lands assigned. The learned Judge was satisfied that Fleming’s intention in selling the lands was to divest himself of the only property on which the plaintiff, Bryce, could levy execution, and that, accordingly, the assignment came within sect. 10 of the statute. He further refused to believe the evidence of the defendant, Mary Gilvarry, that she had no notice of the fraudulent nature of the transaction. Accordingly, he held that the assignment to her was not protected by sect. 14, which contains a proviso in favour of bona fide conveyances for good consideration without notice, and so he declared the deed void as against the creditors of Thomas Fleming. The order further directed the assignment to be delivered up to be cancelled. That, of course, was a mistake; for it is quite clear that sect. 10 only makes an assignment which is fraudulent against creditors void as against them, and that in the present case Mary Gilvarry is in any event entitled to the benefit of her purchase, subject to the claim of the plaintiff. The proper form of order is set out in Bott v. Smith (1856) 21 Beav 511.
The circumstances under which a bona fide conveyance for valuable consideration might yet be fraudulent within sect. 10 are indicated in a passage in the judgment of Palles C.B. in In re Moroney (1887) 21 LR Ir 27, at p. 63. Dealing with the case of a bona fide sale for value, he says that if “the intent were not only to sell the property, but forthwith to abscond with the proceeds, so as in effect to withdraw the property from the fund available for the creditors without providing an equivalent, I should entertain no doubt that in such a case there would be an intention to defraud creditors, which, if the purchaser had notice of, would avoid the sale.” As a matter of fact, the point that a conveyance might be within sect. 10, or, rather, the corresponding English section, though for valuable consideration, had been well settled as far back as the time of Lord Mansfield, who states the position with great clearness in his judgment in Cadogan v. Kennett (1776) 2 Cowp 432, at p. 434: “But if the transaction be not bona fide, the circumstance of its being done for a valuable consideration, will not alone take it out of the statute. I have known several cases where persons have given a fair and full price for goods, and where the possession was actually changed; yet being done for the purpose of defeating creditors, the transaction has been held fraudulent, and therefore void. One case was, where there had been a decree in the Court of Chancery, and a sequestration. A person with knowledge of the decree, bought the house and goods belonging to the defendant, and gave a full price for them. The Court said the purchase, being with a manifest view to defeat the creditor, was fraudulent; and therefore, notwithstanding a valuable consideration, void. So, if a man knows of a judgment and execution, and, with a view to defeat it, purchases the debtor’s goods, it is void: because the purpose is iniquitous. It is assisting one man to cheat another, which the law will never allow.” Later cases, where deeds for valuable consideration were held within the section, are referred to in Bott v. Smith; see also the more modern case of In re Johnson; Golden v. Gillam (1881) 20 Ch D 389, at p. 393. The difficulties, however, in the way of a creditor who seeks to impugn a deed for valuable consideration are emphasised in Harman v. Richards (1852) 10 Hare 81, at p. 89. There Turner L.J. said: “A deed, though made for valuable consideration, may be affected by malafides. But those who undertake to impeach for malafides a deed which has been executed for valuable consideration, have, I think, a task of great difficulty to discharge.”
These authorities indicate under what circumstances a creditor’s claim under the statute will be good even against an assignee for valuable consideration. No such circumstances exist in the present case. If a man has lands, and can only pay his debts by selling his lands, the honest thing for him to do is to sell them. It is also the prudent thing to do; for if he sells them himself he will probably get a better price, and avoid unnecessary costs. Consequently, the mere fact that a man in such a position is selling his lands is no evidence whatever that his intention is to defeat his creditors rather than to obtain the wherewithal to pay his debts. Still more is it obvious that mere knowledge of such a simple fact is not a sufficient ground for imputing to a purchaser knowledge of a fraudulent intention on the part of his vendor. Voluntary assignments by a debtor stand on one footing. But once valuable consideration is given a new element enters into the case. As Fry J. says in In re Johnson; Golden v. Gillam, at p. 393, it is always “a material ingredient in considering the case, and for very obvious reasons: the fact that there is valuable consideration shows at once that there may be purposes in the transaction other than defeating or delaying creditors, and renders the case, therefore, of those who contest the deed more difficult.”
Now, unquestionably the only knowledge bearing on the question of Fleming’s intention that was brought home to the mind of Mary Gilvarry was the simple fact that Fleming probably could not satisfy the plaintiff’s claim without a sale of the lands. Further, Mary Gilvarry’s testimony was that she had no knowledge of or notice of any fraudulent intention on Fleming’s part. The learned Judge, however, took the view that the onus of proving absence of knowledge lay on Mary Gilvarry, and, as he did not regard her as a creditable witness, he rejected her testimony, and so he considered that she had failed to discharge the onus, with the result that he avoided the deed. In this way the task which Turner L.J. described as so difficult to discharge was performed with such ease that Mary Gilvarry most probably left the Court in a state of utter bewilderment at the extreme simplicity of the proceeding by which, despite her uncontradicted testimony, she was deprived of all benefit of her £200.
Now, on this appeal, we are pressed with the point that the defendant’s onus of proving that she had no notice cannot be discharged by her testimony if it is not to be believed, and that the question of the creditability of a witness is for the Judge of first instance. But, even assuming that the onus was on Mary Gilvarry of showing absence of notice, I am inclined to think that the onus was shifted once she swore that she had no notice, and that the learned Judge was not entitled to reject her testimony in the absence of any positive evidence whatever of anything from which knowledge should be imputed to her. This is not a case of conflict of testimony, and it is not like the case of the testimony of a claimant in support of a claim against the estate of a deceased. A number of authorities on the analogous case where absence of notice is averred to support the equitable plea of purchase for value without notice will be found collected in the note to Jones v. Thomas (1733) 3 P Wms 243; see also Vane v. Vane (1872) 8 Ch App 383, at p. 398, where Sir Wm. James L.J. (having stated that the plaintiff alleged in so many words that he never did know or suspect at the time anything of the alleged fraud) said: “That we must take to be true, unless we are enabled judicially to conclude from other statements of his in the bill that that allegation is false.” In general, “the defence of a purchase without notice is one which ought to be specifically alleged as well as proved by those who rely upon it”: per Thesiger L.J. in Attorney General v. Biphosphated Guano Co. (1874) 11 Ch D 327, at p. 337. The question, however, is one of some difficulty, as the learned Judge gave as his reason for disbelieving Mary Gilvarry that she denied having heard of the result of the unsuccessful appeal, heard in Dublin, in the action already referred to, taken by Bryce against Fleming, in respect of necessaries supplied to Mrs. Fleming. The learned Judge held that that was in itself an incredible statement, and so he said he would reject her evidence entirely.
If, however, the onus was on the plaintiff to prove that the defendant was aware of the intention of Thomas Fleming, then that onus could not be discharged by rejecting the evidence of the defendant that she had no knowledge. Hence, instead of examining the authorities as to the position if the defendant was to prove absence of notice, I prefer to turn to the question of whether, in the case of a purchase for valuable consideration, the onus is not on the creditor to prove that the purchaser was aware of his vendor’s fraudulent intent. The answer to that question must depend upon whether an innocent purchaser is saved by reason of his conveyance not originally coming within sect. 10 at all, or only by reason of his being protected by the proviso contained in sect. 14. It may be anticipated that it will not prove an altogether easy matter to clear up this question by reference to the authorities, as a certain amount of confusion in the older authorities is recognised in the observation of Parker J. in Glegg v. Bromley (1912] 3 KB 474, at p. 492, that “There is, however, a proviso for the protection of a purchaser for good consideration without notice of the illegal intention. In the authorities which deal with the statute it is not always clear whether the Judges are dealing with the operative part of the Act or with the proviso.” An example of one of the many passages which Parker J. must have had in view is the following, in French v. French (1855) 6 De GM & G 95, at p. 101:- “Mr. Gibbons had no knowledge of the state of Mr. French’s affairs, therefore the transaction, as far as he is concerned, ought not to be impeached.” Does Lord Cranworth mean that the transaction, as far as he is concerned, is not avoided under the operative section, or that his estate or interest is protected under the proviso? There is a similar difficulty in respect of the observation, already cited, of Palles C.B. in In re Moroney (1887) 21 LR Ir 27, for it is implied that if the purchaser had no notice the sale would not be avoided. Are we entitled to press the implication, that it is the sale itself that would not be avoided, as against a suggestion that it is only the estate or interest of the purchaser that would be protected? Numerous other instances might be cited of passages in which an expectation of a clear statement on the point is disappointed. It must be admitted, however, that, from Twyne’s Case (1601) 1 Smith’s LC 1 down, there are several passages in the authorities which assume, but without considering any alternative view, that it is the proviso which protects a purchaser for value without notice. But these obiter dicta cannot have very much weight, since it was not until Halifax Joint Stock Banking Co. v. Gledhill [1891] 1 Ch 31 that it was clearly decided that the proviso covered the case of a subsequent transfer; and, of course, if the proviso was not dealing with subsequent transactions it must have been dealing with the original transaction. Hence the assumption to which I have referred.
Turning to the wording of the operative section, it is obvious that the question whether or not it hits a bona fide purchaser for valuable consideration without notice must depend on whether the “intent” referred to in the section is solely the intent of the vendor in such a case or is the intent of the transaction as a whole, so as to make the intent of the purchaser material. Certainly, on the plain reading of the section itself, it is the latter view that would commend itself. But the authorities on which one most readily lights seem in favour of the former- as far as dicta go. Thus, in Nunn v. Wilsmore (1800) 8 TR 521, at
p. 530, Le Blanc J. says: “Whether or not a deed is to be considered as fraudulent with respect to creditors must depend on the motives of the party making the deed.” But it does not seem that deeds for valuable consideration were here in contemplation. The same may be said of the observations of Kindersley V.C. in Thompson v. Webster (1859) 4 Drew 628, at p. 632: “The principle now established is this:- The language of the Act being, that any conveyance of property is void against creditors if it is made with intent to defeat, hinder, or delay creditors, the Court is to decide in each particular case whether, on all the circumstances, it can come to the conclusion that the intention of the settlor in making the settlement was to defeat, hinder, or delay his creditors.” But I have not found any passage in which the case of a purchase for valuable consideration is expressly considered, and in which the intention of the purchaser is treated as immaterial. But there is authority to the contrary. In Cadogan v. Kennett(l 776) 2 Cowp 432LordMansfield, in the passage already cited, stresses throughout the intention of the purchase and of the purchaser. In the case where the creditor had obtained a decree, he says: “The Court said,
I he purchase” – not the sale – “being with a manifest view to defeat the creditor, was fraudulent; and, therefore, notwithstanding a valuable consideration, void.”
He uses similar language in the second instance which he gives:- “So, if a man knows of a judgment and execution, and, with a view to defeat it, purchases the debtor’s goods, it is void: because the purpose is iniquitous. It is assisting one man to cheat another, which the law will never allow.” Cadogan v. Kennett does not appear to have been cited in In re Johnson; Golden v. Gillam (1881) 20 Ch D 389, but in that case Fry J. arrives independently at the same view as to the materiality of the purchaser’s intention. He says (at p. 394): “I therefore proceed to inquire, looking to all the circumstances of the case and at the nature of the instrument itself, whether I can or ought to infer an intent to defraud creditors in the parties to the deed. I say in the parties to the deed, because it appears to me to be plain that whatever fraudulent intent there may have been in the mind of Judith Johnson, it would not avoid the deed unless it was shown to have been concurred in by Alice, who became the purchaser under the deed. It has not been contended, and it could not be contended, that the mere fraudulent intent of the vendor could avoid the deed, if the purchaser were free from that fraud.” Accordingly, the action was dismissed, and it is clear that the learned Judge was relying on his interpretation of the operative section, not on the proviso. The case is, therefore, an authority for the proposition that where there is a bona fide purchase for valuable consideration the transaction cannot be impeached under the operative section unless the purchaser is shown to have been privy to the vendor’s intention. Hence this appeal must be allowed, since the onus lay on the plaintiff, and he certainly made no attempt to discharge it himself, and it certainly was not discharged by the learned trial Judge not accepting the defendant’s denial.
Although it would be sufficient for me to rely on the clear decision of Fry
J. in the case to which I have referred, I should like to add that to my mind that decision is in accord with the plain reading of the sections. Once it is seen that at all events the primary object of sect. 14 was to protect a certain class of transferees under assignments subsequent to the original fraudulent conveyance, there is no incentive to construe sect. 10 in such a way that it will not already safeguard an original innocent purchaser. Similarly, if the purchase in such a case is not within sect. 10 there is no reason for not construing sect. 14 as dealing exclusively with subsequent transactions, and, in my opinion, sect. 14 does not deal with the original transaction at all, but only with subsequent transfers. First of all, it does not seem to me that sect. 14 is appropriately worded to meet the case of the original conveyance. For, if the original purchase is to be protected, then sect. 10 does not operate at all, and the provision should be that sect. 10 should not extend to, or be construed to, impeach the conveyance in such a case. The wording we should expect would be similar to that in sect. 4 of 27 Eliz. c. 4, viz.: “Provided also … that this Act … shall not extend or be construed to impeach, defeat, make void or frustrate any conveyance … made upon or for good consideration and bona fide,” &c. But sect. 14 does not exempt the fraudulent conveyance from the operation of sect. 10; in fact, it does not deal directly with any conveyance at all, but only with estates or interest conveyed in the manner stated. That is appropriate to a subsequent alienation, for what is alienated may only be a portion of the property originally conveyed or only a limited interest, and it is only such estate or interest that is protected in the case provided for, while, subject to the protection afforded to the estate or interest in question, sect. 10 operates on the original conveyance. Broadly, the effect of sect. 10 is only to charge the estate conveyed by the original conveyance, but the charge does not affect a subsequent bona fide purchaser for good consideration without notice. The case of Halifax Joint Stock Banking Co. v. Gledhill [1891] 1 Ch 3 shows how appropriate sect. 14 is to a subsequent transfer, and sect. 4 of 27 Eliz. c. 4 shows how inappropriate it would be in the case of the original conveyance. Further, it may be said that the nature and circumstances of the original transaction and of a subsequent transfer generally stand on such a different footing that it seems unlikely that they would have been grouped together. Now that it has been definitely decided that the original purchase is not hit by sect. 10, and that subsequent purchases are dealt with by sect. 14, the way is clear, despite observations in the older authorities, to hold that sect. 14 only deals with subsequent transfers.
The appeal must, therefore, be allowed, and the action dismissed with costs.”
Moore v. Kelly
[1918] 1 IR 169
SIR IGNATIUS J. O’BRIEN C stated at pp.174-180: “By indenture, made on the 11th October, 1888, between John Moore, of the first part; Joseph Kelly and Christopher Moore, of the second part; and Christopher Moore, of the third part, Christopher Moore purported to convey to Joseph Kelly and Christopher Moore part of the lands of Finnea, to hold to them upon trust to pay the income to John Moore and his assigns during his life, and after his death for Christopher Moore absolutely; but, in the event of Christopher pre deceasing John Moore without leaving issue him surviving at the decease of John Moore, it was provided that the lands should be held upon a series of trusts which it is not necessary to consider, as the events provided for did not happen. It was also provided that John Moore should grant to Rose Moore, his wife, if she survived him, a rent-charge of £40 per annum; and the lands were charged by him with the payment of the following sums of money: – £150 for his daughter Mary, £100 each for his daughters Kate and Anne, and £100 for each of his sons Peter, Thomas, John, Luke, and Owen – in all £750, to be payable on the death of John Moore. There was a provision for the maintenance, education, and advancement of his sons and daughters under the age of twenty one, with power to pay to the daughters, on marriage, their portions.
Christopher Moore was married in September, 1901, to Julia White. She had a fortune of £300, and a settlement was made on the 14th September between John Moore, father, Rose Moore, his wife, Christopher Moore, son, and Julia White, the intended wife. It recited the indenture of the 11th October, 1888, and after the following recital:- “Whereas all the charges on the said lands of Finnea have been paid off and satisfied by the said John Moore,” it was witnessed that in consideration of the marriage and of the sum of £300 to be secured to the said John Moore by the promissory note of Julia White and her brother, the lands were conveyed by John Moore to Christopher Moore and Julia White upon limitations which in effect conferred life estates upon them and the survivor of them with remainder to their children as appointed. The recital that the charges created by the earlier deed had been paid off was not true in fact. Mary, a daughter of John Moore, appears to have been paid a portion of the fortune of Julia White; but the other members of the family had not in fact received their portions; it may, however, have been thought that, although not paid, they had been, in fairness, settled with. Now, however, the father having died, the plaintiffs have brought the present action for a declaration that the sum of £750 provided by the settlement of 1888 – in so far, of course, as any claims may not have been paid or discharged – may be raised out of the lands.
One cannot help having very great sympathy with the defendant Christopher Moore; and, certainly, it is very hard that the fortune of his wife should have been parted with, and that the provision which was intended to be made for her may, to a great extent, if not altogether, fail. But one cannot decide a case having regard merely to sympathy. If, therefore, the claims of some of these children are good in law, and if the voluntary settlement made by their father must be regarded as an honest dealing with the property, they also have got rights which in justice ought not to be disturbed. It is to be regretted that the honest efforts which were made to effect an adjustment of the rights of all the parties, irrespective of strictly legal considerations, did not succeed. This cannot affect the decision.
This defence in substance is this: It is not admitted that the deed of 1888 was a voluntary settlement; but it is contended that the 14th September, 1901, placed the defendants in the position of purchasers for value, so that if the first deed was voluntary (and as everything had taken place prior to the statute 56 & 57 Viet. c. 21), the first deed should be treated as fraudulent and void as against those claiming under the second deed. I assume in my judgment that the first deed was voluntary. I have so clear an opinion of the legal question involved that I prefer to treat the case on that footing although it may be otherwise in fact. The Voluntary Conveyances Act, 1893, has, however, made a vital alteration in the law; and the contention on behalf of the respondents is that it operates as a complete answer to the defence.
Several questions of law have been argued before us on behalf of the appellants, the defendants in the action; and one question of pure fact has also been discussed, It was urged by the appellants that at the date of the execution of the deed of 1888, John Moore, the settlor, was indebted in a large sum of money to a man named Carson; that he was in embarrassed circumstances and financial difficulties; and that the deed was executed with the object of hindering and defeating this particular creditor, along with other creditors; that it was never intended to be acted upon, and was never acted upon; and that this arrangement was made with the consent of all the parties, and to aid in the carrying out of the fraudulent object in view.
Assuming the true view of the facts to be as suggested, and that the object of the deed was to hinder and defeat the creditors of John Moore, it was then argued as a matter of law that the deed was avoided by the second deed, even though none of the parties could be regarded as a creditor of John Moore; that, in order to bring the deed within the statute of 1893, it was necessary for the plaintiffs to negative the existence of any mala fides; and that if the object of the deed was to hinder, defeat, and delay creditors, a fraudulent intent was established, which would make it void in favour of a subsequent purchaser, even though there was no attempt to commit a fraud on a purchaser, as distinguished from a creditor, and although no creditor had elected to treat the deed as fraudulent as against him.
The Master of the Rolls held, as a fact, that there was no evidence from which he could infer any intention to defeat Carson or any other creditors, and I agree with him in that view. This, of course, is a complete answer to the appellants’ case in so far as it is based on the argument that an intent to defeat creditors under the 13 Eliz. will enable a deed to be avoided as against a purchaser under the 27 Eliz. I do not, however, assent to the legal contention put forward, which I will deal with later on. There remains the other view, namely, that under the Act of 1893, the plaintiffs were bound, affirmatively, to prove that the deed as executed by John Moore, had been executed bona fide. I may say at once that I do not see any evidence from which to infer that this deed was not intended to be an operative instrument, or that there was in fact, and as distinguished from legal presumption, any intent to hinder or defeat any future purchasers.
It is true that the deed was not delivered to one of the trustees, and it
certainly appears to have remained in the house of the settlor; but when inquiries were made with regard to it, on the occasion of the marriage of Christopher Moore, it was treated as being a deed fully in operation, and the only question raised was whether the terms of it had been satisfied. Indeed the defendants are precluded, I think, from contending that the deed was a mere pocket instrument, inasmuch as it is treated in the deed under which they themselves take as having been a perfectly good instrument, although by an unhappy but innocent representation an error was made as to the beneficiaries under the first deed, in fact, having been satisfied. As for the contention which appears on the pleadings, that the beneficiaries had abandoned all claim under the deed, the evidence is all the other way. A case is sought to be made against one member of the family on the ground that she wrote letters which brought home to her mind the inaccuracy of the statement contained in the deed, but she was very young; moreover, she acted only as an amanuensis, and, in the circumstances, I can see no reason for binding her to any waiver of the trusts in her favour.
I do not think it is necessary to go into the details of the evidence which satisfies me as to the correctness of the inference which the Master of the Rolls has drawn, and which I also draw. I propose now to deal with the questions of law which were raised, and which I have already indicated. It was decided by the Master of the Rolls in National Bank v. Behan [1913] 1 IR 512 that on the true construction of the Voluntary Conveyances Act, 1893, the onus of proving that a voluntary deed was made bona fide and without fraudulent intent lay upon the party seeking the protection of the Act. I need hardly say that the opinion and judgment of so experienced a lawyer as the Master of the Rolls would never be overruled by me unless I considered that I was absolutely bound to come to a different conclusion. The fact that a similar view of the law is stated in May on Fraudulent and Voluntary Conveyances does not, of course, add any authoritative weight to the judgment of the Master of the Rolls; but it is, at the same time, a statement which I should not be disposed to treat in any other way than with respect.
Let us consider what was the position of affairs with regard to voluntary deeds under 27 Eliz. c. 4, apart from the Act of 1893. The purpose of that Act was to protect purchasers of lands against gifts and conveyances “meant and intended by the parties that so make the same to be fraudulent and covenous of purpose and intent to deceive such as have purchased or shall purchase the same” and then for remedy it was enacted that every such conveyance had or made or to be had or made “for the intent and of purpose to defraud and deceive” such persons as had purchased or should purchase, should, as against such purchasers, be deemed to be utterly void. What, to many lawyers appeared to be a singular and unreasonable construction was put on an Act which, on the face of it, might be regarded as fairly clear. Although voluntary conveyances were not mentioned in the Act, it was ultimately determined judicially, that the mere fact that a conveyance was voluntary and without consideration made it ipso facto void as against anyone who might afterwards become a purchaser of the lands dealt with by the voluntary conveyance. A fraudulent intent was presumed by the courts; and this presumption was conclusive and irrebuttable, so that, however honest, reasonable, fair, or just a voluntary conveyance was, it became mere waste paper on the production of a conveyance for value to a subsequent purchaser. A Statute which was framed to prevent injustice was so read as to do grave and serious injustice. Against this construction of the statute the feeling both of the profession and the public became in the end so strong that in 1893 the statute at present under consideration was passed.
The Act 27 Eliz. c. 4, of course, is not repealed, and it remains in operation to prevent fraud of the character described in the statute; but a presumption of fraudulent intent, wholly the outcome of judicial decision, has been got rid of by the Act of 1893. By sect. 2 of the Voluntary Conveyances Act, 1893, the rule of law, which defeated, irrespective of fairness, a voluntary conveyance, was abrogated, and the statute 27 Eliz. c. 4 was allowed to speak for itself and to avoid deeds, the real object of which was proved to be to defeat a future purchaser; but the onus of proving fraud is always on the person alleging it, though in many cases its existence may be an almost certain inference. And it seems to me that it would defeat the very object of sect. 2 of the Act of 1893, which was intended to destroy the former rule of law, to hold that it was only intended to modify it to the extent that a party, supporting an honest deed, might be at liberty to show as a substantive case that the deed was made bona fide. How such an onus could be discharged it is difficult to see. It seems to me that practically it could only take the form of swearing to a negative – a perfectly futile proceeding. The words “if in fact made bona fide and without any fraudulent intent” appear to me to have been inserted lest the latter part of question. I think it could never have been intended that there was to be read into the statute of 27 Eliz. c. 4 what in substance would be this: “voluntary conveyances shall be deemed to be fraudulent unless the contrary is proved.” The intention was, I think, to get rid of an inequitable rule with regard to voluntary conveyances, leaving them to be destroyed by evidence of fraudulent intent; and, ordinarily, I should have thought that the person on whom the onus of proof would lie under 27 Eliz. c. 4, once the irrebuttable presumption to which I have referred was swept away, was the person alleging fraud, just as under 13 Eliz, c. 5, where an actual intent to defraud the grantor’s creditors is alleged, the burden of proving such intent falls on the person alleging it. The two classes of deeds appear to me to be placed on the same footing in this respect; and the Act of 1893 might, in many cases, wholly fail to get rid of the evil it was intended to remove if it was held to have set up a new role quite as artificial, if not more artificial, than that which it was designed to destroy.
The same method of reasoning induces me, without hesitation, to decide against the appellants’ contention with regard to the second question argued by them, namely, that “without any fraudulent intent” did not mean a fraudulent intent to defeat purchasers. The expression “if in fact made bona fide and without any fraudulent intent” must, to my mind, be read as referring to 27 Eliz. c. 4. Of course, there may have been cases where a voluntary deed could have been avoided under 13 Eliz. c. 5 as well as under 27 Eliz. c. 4, where it was found simpler to apply the irrebuttable legal presumption which got rid of it under 27 Eliz. c. 4. But if the latter Act and that of 1893 are read together, as they must be, I cannot read into 27 Eliz. words which would extend the operation of that statute in a direction, to my mind, never contemplated. Gifts intended to defeat purchasers are the transactions that are avoided. The fraudulent intent in 27 Eliz. is a fraudulent intent to defeat purchasers. Why should I read fraudulent intent in the Act of 1893 in a different sense from what it bears in the statute 27 Eliz. c. 4?
If sect. 2 of the Act of 1893 was to be taken as a perfectly independent
enactment affirmatively avoiding all voluntary conveyance unless any kind of fraudulent intent was negatived, then the contention of the appellants on both grounds might be right; but once I treat it as a statute to get rid of certain effects, of judge-made law, and to be read with the Act of 27 Eliz. c. 4, and not as an independent enactment, the construction put upon it by the appellants, to my mind, is not sustainable.”
Re O’Neill
[1989] IR 544
The bankrupt conveyed his interest in premises to his daughter for slightly below the market value less than two years prior to being adjudicated bankrupt. The official assignee applied to have the conveyance set aside on the grounds that it had not been entered into bona fide and for valuable consideration. Hamilton P held, in granting the application, that while the daughter must be regarded as a purchaser for valuable consideration, she had not purchased the premises in good faith as she must have been aware of her father’s financial position and of the fact that the object of the transaction was to hinder, delay and defraud his creditors.
HAMILTON P stated at pp.549-553: “In the absence of evidence to the contrary, I must accept Miss O’Neill’s averment that she had, in May and June, 1985, paid to her father and mother the sums of £7,000 and £5,000 respectively and that she had guaranteed her father’s liability of approximately
£16,000 to Lombard and Ulster Banking Limited by way of letter of lien over her deposit account with that company and that she had suffered a loss of
£3,738 upon the giving of that guarantee and that these payments were reflected in the purchase price, though these facts would appear to be at variance with the averment contained in paragraph 10 of her affidavit that:-
“It would never have occurred to me, prior to the sale aforesaid, and up to the time when I became aware of his bankruptcy, to question my father’s solvency.”
I am satisfied that at the time of the transaction sought to be set aside by the Official Assignee:
(1) The bankrupt was insolvent;
(2) Judgment against him in the sum of £63,000 had been obtained by the petitioning creditor;
(3) The terms upon which the stay of execution had been granted had not been honoured.
(4) The injunction granted on the 23rd July, 1984, and continued by the order made on the 17th October, 1985, remained in force;
(5) The said Susan O’Neill was at all times fully aware of the action by the petitioner against Central Financiers Ltd. and the bankrupt, her father; of the injunction granted by the High Court; of the terms of the order made on the 17th October, 1985; of the amounts payable in accordance with the consent executed by the parties, the dates of such payments and, at least in a general way, of her father’s financial position.
In support of this application, the Official Assignee relies on the provisions of three Irish Statutes namely, the Fraudulent Conveyances Act, 1634 (10 Chas. 1, sess. 2, c. 3), s. 1, the Irish Bankrupt and Insolvent Act, 1857, and the Bankruptcy Ireland (Amendment) Act, 1872.
By the statute of 10 Chas. 1, sess. 2, c. 3, s. 1 it is enacted that every feoffment, gift, grant, alienation, bargain and conveyance of lands, tenements, hereditaments, goods and chattels, or of any lease, rent, common or other profit out of the same or any of them, by writing or otherwise; and every bond, suit, judgment and execution made for the purpose and intent to delay, hinder or defraud creditors and others of their just and lawful debts, rights and remedies shall be henceforth deemed and taken (only against that person or persons, his or their heirs, successors, executors, administrators and assigns whose debts, rights and remedies are, shall or might be in any way disturbed, hindered, delayed or defrauded) to be clearly and utterly void.
But it is further provided that this Act shall not extend to any estate or interest in any lands, tenements, hereditaments or chattels assured upon good consideration and bona fide to any person not having, at the time of such
conveyances or assurances to them made, any manner of notice or knowledge of the intended fraud.
Section 314 of the Irish Bankrupt and Insolvent Act, 1857, provides:
“If any bankrupt or insolvent, being at the time in insolvent circumstances, shall (except upon the marriage of any of his children or for some valuable consideration) have conveyed, assigned, or transferred to any of his children or to any other person any hereditaments, offices, fees, annuities, leases, goods or chattels or have delivered or made over to any such persons any bills, bonds, notes, or other securities, or have transferred his debts to any other person or into any other person’s name, the Court shall have power to order the same to be sold and disposed of for the benefit of the creditors; and every such sale shall be valid against the bankrupt or insolvent and such children and persons, and against all persons claiming under him.”
Section 52 of the Bankruptcy (Ireland) Amendment Act, 1872, provides that:
“Any settlement of property made by a trader after the commencement of this Act, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, or a settlement made on or for the wife or children of the settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of such settlement, be void as against the assignees or trustee of such bankrupt under the said Act or this Act, and shall, if the settlor becomes bankrupt at any subsequent time within ten years after the date of such settlement, unless the parties claiming under such settlement can prove that the settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in such settlements, be void against such assignees or trustee….
‘Settlement’ shall for the purposes of this section include any conveyance or transfer or property.”
As I am satisfied that the conveyance sought to be set aside was made for some valuable consideration, the provisions of s. 314 of the Irish Bankrupt and Insolvent Act, 1857, do not apply or assist, in any way, the application of the Official Assignee in this case.
The provisions of s. 1 of 10 Chas. 1., sess. 2, c. 3, ands. 52 of the Bankruptcy (Ireland) Amendment Act, 1872, do not extend to conveyances made in good faith and upon good or valuable consideration. Both statutes protect conveyances if they have been made for valuable consideration and bona fide and to secure this protection it is necessary that the conveyance should be both for valuable consideration and bona fide.
I am not for the purposes of this application concerned with the adequacy or otherwise of the consideration, save and in so far as the adequacy or otherwise of the consideration is relevant to the question whether the transaction sought to be impugned was made in “good faith” as I am, as already stated, satisfied that the sum of £48,000 was paid by Susan O’Neill to the bankrupt and his wife in consideration of the assignment of the premises to her. Susan O’Neill must, in my opinion, be regarded as being a purchaser for valuable consideration and consequently the fundamental issue for determination by me in this case is whether in entering this impugned transaction Miss O’Neill acted in “good faith” because it is sufficient if Miss O’Neill acted in good faith and for valuable consideration.
In the course of his judgment in Mackintosh v. Pogose [1895] 1 Ch 505 at
p. 509, Stirling J. stated:
“But was the settlement made in good faith? Here I have not the same clear guidance. In Hance v. Harding (1888) 20 QBD 732 the Court were unanimously of opinion that all the parties had acted in good faith, and it is said that here one of the parties at least (Mr. Pogose) did not so act, and that, consequently Mrs. Pogose is not a ‘purchaser in good faith’ within the meaning of the Act. Now, I am of opinion that a person is a ‘purchaser in good faith’ within the meaning of section 47 of the Bankruptcy Act of 1883, if he himself acts in good faith, and it is not necessary that both parties should act in good faith.”
Though this statement dealt with the interpretation of “purchaser in good faith” within the meaning of s. 47 of the Bankruptcy Act, 1883, I am satisfied that it applies with equal validity to the terms of the two Irish statutes which I have quoted.
In the course of his said judgment, Mr. Justice Stirling further stated at p.
510 that:
“Lastly, in the case of Butcherv. Stead (1875) LR 7 HL 839, the House of Lords held that the words “in good faith” in sect. 2 of the Bankruptcy Act of 1869 must be taken to mean without notice that any fraud or fraudulent preference is intended.”
With regard to the use of the term “bona fide” or “in good faith” in the statute of 10 Chas. 1, sess. 2, c. 3, s.1, I am satisfied that the use of the term must be taken to mean without notice of the intention to delay, hinder or defraud creditors of their lawful debts, rights and remedies.
As stated by Mr. Robb in his book “The Law and Practice of Bankruptcy and Arrangements in Ireland” at p. 19:
“It will be noticed that the element always necessary to avoid any conveyance under this statute is, that it should have been made ‘with intent to delay, hinder or defraud creditors of their just debts’. Now where such intent can be established by direct proof the conveyance or settlement can always be set aside, notwithstanding that it has been made for valuable consideration for in this latter case it has not been made bona fide, although there is valuable consideration, for both are necessary. But in most cases it is not possible to give direct proof of the fraudulent intent, and those impeaching the deed, bi1l of sale,
or other transaction have to ask the Court to presume the intent from the circumstances.”
The onus is on the Official Assignee to establish as a matter of probability that the conveyance sought to be set aside was made by the bankrupt with intent to delay, hinder or defraud creditors of their lawful debts, rights and remedies. It is impossible to expect the Official Assignee to provide evidence by way of direct proof of such intent and it is open to the court to infer such intent from the circumstances.
Due to the failure of the bankrupt to disclose his whereabouts and to file a statement of affairs or otherwise co-operate with the Official Assignee, I am not in possession of all the circumstances relevant to this transaction. However, on the basis of the facts established by the Official Assignee, I have no doubt whatsoever that the intention of the bankrupt in executing the deed of conveyance sought to be impugned and set aside was to hinder, delay and defraud his creditors including the petitioning creditor herein. The circumstances upon which I rely in being satisfied as to this intent are as set out in the course of this judgment, and it is not necessary for me to repeat them.
I am, as I have said, satisfied that the intention of the bankrupt in entering into this transaction and the subsequent transaction entered into on the 15th January, 1986, whereby he conveyed to his daughter Jacqueline his interest in the other premises of which he was joint owner with his wife, namely, the apartment situate at No. 12 The Orchard, Grove House, Milltown in the City of Dublin, was to hinder, delay and defraud his creditors.
These transactions were entered into at a time when there was due and payable by him a sum of £63,000 to the petitioning creditor and when he was subject to the terms of an injunction granted by the High Court on the 23rd July, 1984, and continued by the terms of the order made by the High Court on the 17th October, 1985.
As the conveyance was made within two years of the adjudication of Thomas O’Neill as a bankrupt, the Official Assignee was entitled by virtue of the provisions of s. 52 of the Bankruptcy (Ireland) Amendment Act, 1872, to a declaration that the conveyance dated the 31st December, 1985, is void unless the conveyance was made in good faith and for valuable consideration.
The finding by me that the conveyance was made by the bankrupt with intent to hinder, delay and defraud his creditors does not decide the matter.
It must be established that the conveyance was not made in good faith and for valuable consideration.
It is submitted on behalf of the Official Assignee that the onus in this regard rests on Susan O’Neill and it is submitted on her behalf that the onus rests on the Official Assignee.
In Halsbury’s Laws of England (4th ed.) Vol. 3, para. 901 it is stated that:-
“A purchase for value, but not made in good faith, that is, where the purchaser is privy to an intention to defeat creditors, is voidable. The onus of proof that the transaction was not made in good faith and for valuable consideration lies on the trustee in bankruptcy.”
Without deciding finally on whom the onus on this issue rests, I am prepared to deal with this particular case on the basis that the onus is on the Official Assignee to establish the lack of good faith on the part of Susan O’Neill in this transaction because I am satisfied from the evidence available to me that Susan O’Neill must have been aware of the financial position of her father, the terms of the order made by the High Court on the 17th October, 1985, the obligations of her father on foot thereof and that the object of the transaction was to hinder, delay and defraud his creditors particularly the petitioning creditor. She has failed to make herself available for examination by the court in connection with this transaction though a subpoena was served on her through her solicitor to attend such examination and she further failed to attend at the hearing of this application.
No affidavit was filed by her in reply to the grounding affidavit of the Official Assignee. In fairness to her, I have had regard to the affidavit sworn by her on the 30th September, 1987, grounding an application to set aside an injunction made by me restraining her from dealing with or disposing of the property, No. 1, Ardilea Downs.
Consequently, I am satisfied that:-
1. The conveyance was made by the bankrupt with intent to hinder, delay and defraud his creditors including the petitioning creditor.
2. Susan O’Neill had due notice of his intention in that regard.
3. The purchase of the premises was not made by her in good faith.
Being so satisfied, the Official Assignee is entitled to a declaration that as regards the interest of the bankrupt in the said premises, the conveyance of such interest is void and should be set aside.”
Re McCrohan
(1893) 31 LR Ir 225 (Bankruptcy Court)
Miller J: This matter has come before me upon charge and discharge, and the charge requires me, in substance, to declare that the bankrupt, who was, previous to and at the time of his marriage, engaged as a trader in carrying on the business of a wine and spirit merchant and general grocer at Killarney, and by a marriage settlement executed upon that occasion so far back as the 25th July 1883, which reserved to the bankrupt himself (as regarded the facts disclosed in this matter) the full entire and absolute personal control over his whole property and business of every kind which he continued to exercise, under the provision of that settlement, up to the date of the adjunction in this matter, so late as the 10th May 1892, effectually charged not only the premises in which he had thus carried on his trading business and any chattels thereon at the date of such settlement which were thereby assigned, but also his after acquired property of every kind whatsoever, to which he was in any manner entitled at the date of his adjudication, with the payment of a principal sum of £600 advanced to the bankrupt as the marriage portion of his wife, so far back as that year 1883, notwithstanding the provisions of the 52nd section of the Bankruptcy (Ireland) Amendment Act 1872, as against the assignees under the adjudication in this matter.
That charge was filed on the 6th July 1892, by the surviving trustee under that marriage settlement of the 25th July 1883, above referred to (alone), which after setting forth the title under which the premises in Main-street, Killarney, in which the bankrupt had carried on his business up to the time of his marriage were held, put forward in very full detail the terms and provisions of the marriage settlement of 1883, as the foundation of his claim as set forth by it; and the relief, as sought by that charge which followed is, that the sum of £600 might be declared well charged on the house and premises, and on the licence thereof, and on all the stock-in-trade, fixtures, furniture, goods, chattels, and effects, and all other the personal property of or belonging to the bankrupt at the time of his bankruptcy, and on debts due and owing to him at said date; and that charge then went on to apply for directions as therein set forth, which were consequential upon the relief as thus sought.
The discharge to that charge was filed by the assignees in this matter, on the 8th July 1892, and they do not appear to have therein seriously disputed the claim as put forward by the charge in respect of the house and premises in Main-street, Killarney, in which the bankrupt had carried on his business, or to the licence attached thereto, or to such fixtures as properly belonged thereto as the bankrupt’s fixtures, which have been already very laudably disposed of and realized under a consent order for that purpose, as duly sanctioned by this Court for the benefit of the parties who might thereafter be declared to be entitled thereto; but the assignees by that discharge repudiate altogether the claim as put forward by that charge, so far as it seeks that any residue of that sum of £600, purporting or alleged to be charged thereon which might remain after the application of the proceeds of the premises, &c, in Main-street, Killarney, as already mentioned, and properly applicable towards the payment of that sum of £600 (which are admittedly insufficient for that purpose), so far as the same would extend, formed any charge upon, or was payable out of the after-acquired personal property (or money) of which the bankrupt was possessed at the time of his bankruptcy, in the manner as set forth in their said discharge, as against them as such assignees, and thus the issue is substantially raised between the parties. It must here be observed at the outset that scarcely any questions have engaged more attention or have been the subject-matter of more legislation as well as of judicial investigation and decision in comparatively modern times than the relative rights or claims as between holders of bills of sale, in which character the said settlement of the year 1883, purported (apparently by the copy of it sent to me) to have been registered, and assignees in bankruptcy in respect of the personal property of their respective debtors from the period (as I may state) of the earliest Act relating to bills of sale, and as a natural consequence very numerous authorities, including even some lengthened utterances of my own, have been quoted and referred to during the argument in this case, all of which I have again carefully read over; but as many of those cases contain careful reviews of all the previous authorities and Acts of Parliament up to their respective dates, and the question as presented to me upon the facts of this case is, in my opinion, for the most part very different, and much more narrow in its nature, I will not enter upon any such detailed review of the authorities referred to, but will keep within them.
It must further be observed in reference to the facts of this case that it would be a very startling and alarming statement to make that the bankrupt in this matter, as a trader, had been enabled for a period closely bordering upon nine years (which might as likely have been twenty years) by means of any instrument, whether settlement or otherwise, known to or within the compass of the law, to exhibit and hold himself out to the general public as the absolute owner, who apparently carried on an extensive trading business in the house in which he resided, and had in the course, as well as by means of, such trading during a period of nine years obtained on credit those very goods which had been found upon the premises of the bankrupt at the date of his bankruptcy, then remaining unpaid for, or had constituted the very foundation of and consideration for the very debts which were owing to that bankrupt at the date of his bankruptcy, and yet that the sole surviving trustee under that settlement by the bankrupt trader, executed nine years previously, through whose aid or co-operation such a state of things had been thus brought about, should, notwithstanding, sweep away even from merchants, who had supplied to such an apparently trustworthy trader such their goods on credit, not only the entire proceeds of those merchants’ goods that remained (at that time), but also the very debts which had arisen from and been created by means of the disposal by the bankrupt of portions of those merchants’ goods to the debtors to the bankrupt, as his (the bankrupt’s) customers who had not paid the bankrupt for such their goods at the date of his bankruptcy.
It will now be seen how far any of the preliminary observations as above set forth are justified or supported by the facts of the case now before this Court, which, if sustainable in the present state of the law would seem calculated to bring about results inconsistent with and repugnant to all the principles of sound bankruptcy legislation which has been rightly designed for the general protection of fair dealing as well as the due administration of debtor’s estate, and would necessarily exhibit a very grave injustice loudly calling for a speedy remedy. The bankrupt in this matter was adjudged a bankrupt in manner as hereinafter stated, on the 10th May 1892, and thereupon, by the 267th section of the 20 & 21 Vict c 60 (ie, in the year 1857), being the earliest Act under which this Court was constituted, all his, the bankrupt’s personal estate and effects, present and future, wheresoever the same might be, and all property which he might purchase, and all debts due or to be due to him, became absolutely vested in the assignees for the time being, for the benefit of his creditors, and the assignees had thereby absolute power to recover the same in their own names.
In antagonism to the powers and rights of assignees in bankruptcy, as thus declared, Acts of Parliament were from time to time, subsequently to that year 1857, passed in relation to bills of sale which were properly conversant with and applicable to personal estate alone; and during the same period various decisions were from time to time pronounced by different Courts, and in various directions, relating to the manner and extent of, and as regarded, charges as they properly affected such personal estate; and it thus became necessary as regarded assignees in bankruptcy, in protection of their proper powers and rights as well as of the rights of the creditors whom they represented under that Act of 1857, to pass an Amended Act known as “the Bankruptcy (Ireland) Amendment Act 1872,” which followed an enactment in that behalf in England, similar in substance, and these respective Acts would plainly appear to have been thus severally passed in the true and better interests of fair dealing and of trade, and accordingly it was enacted by the 52nd section of that Act of 1872, that any settlement of property made by a trader not being a settlement of three kinds – 1st, before and in consideration of marriage; 2nd, in favour of a purchaser or incumbrancer in good faith and for valuable consideration; and 3rd, on or for the wife or children of the settlor of property which had accrued to the settlor after marriage in right of his wife; should, if the settlor become bankrupt within two years after the date of such settlement, be void as against the assignees of such bankrupt under the said Act or this Act, and should, if the settlor became bankrupt at any subsequent time within ten years after the date of such settlement, unless the parties claiming under such settlement could prove that the settlor was, at the time of making such settlement, able to pay all his debts without the aid of the property comprised in such settlement, be void.
Thus far that 52nd section recognized, the validity as against assignees in bankruptcy of settlements made before and in consideration of marriage, as well as when such settlements were made in good faith, and for valuable consideration, and also as regarded a class of settlement in respect of any property which might accrue to the settlor in right of his wife (as to the existence of which last mentioned property there has not been any proof whatever given in this matter): and then that same 52nd section contains the most specific and conclusive provision in terms as follows: Any covenant or contract made by a trader in consideration of marriage for the future settlement upon or for his wife or children of any money or property wherein he had not at the date of his marriage any estate or interest, whether vested or contingent, in possession or remainder, and not being property of or in right of his wife, shall, upon his becoming bankrupt before such property or money has been actually transferred or paid pursuant to such contract or covenant, be void against his assignees under the said Act or that Act.
The wisdom of man, with all the aid of previous experience up to that time, could scarcely have better covered all the grounds for complaint, regarded the just claims of rights on the part of assignees in bankruptcy, or have produced a better defined and at the same time comprehensive statement than is contained in that concluding portion of that 52nd section in that behalf, while the earlier portion of that section indicated in the clearest manner what settlements by a trader of property would prevail against his assignees in the event of such a settlor becoming bankrupt, and, on the other hand, what settlements by a trader of such could not stand or be maintained against such his assignees in bankruptcy, and I would especially direct attention to the fact that in that concluding provision as lastly set forth in that section it is expressly declared to be an indispensable requisite for the maintenance of any such settlements as might fall within that section that the property or money of such a trader should have been actually transferred to the claimants thereof, and the debts due to such a trader paid, before he became bankrupt, and that no stronger expression could have been used for the purpose of conveying that meaning than the words “actually transferred or paid” such as have been used therein.
Several years subsequently to the passing of that Act of 1872, the marriage settlement of the bankrupt, to which brief reference has been already made, and upon which alone the claim of the chargeant as the surviving trustee thereunder is based, was executed, which contains as the only recitals some particulars of the lease under which the said premises of the bankrupt, situated in Main-street, Killarney, were held, and that in consideration of the then intended marriage, and of the sum of £600 as the marriage portion paid to the bankrupt, he agreed to assign, and thereby afterwards purported to have assigned, over to the trustees thereof those same premises in Main-street, together with all other the property of the bankrupt of every description that might have been acquired after the date of such settlement until the sum of £600 thereinafter mentioned should have been raised, and the very first trust thereby declared in respect of all the property purported to be comprised in or assigned by that settlement was for the said bankrupt himself until he should die or omit an act of bankruptcy, or be adjudged a bankrupt, or as an insolvent debtor could obtain the benefit of some Act or Acts of Parliament for the relief of insolvent debtors. That settlement then purports thereby to authorize the trustees thereunder upon the happening of any of the said events as thus particularized, without any notice to the bankrupt, by sale or mortgage or any other of the ways and means of realizing properties or securities, to raise, levy, and realise out of the said property, chattels, and premises thereby assigned the said sum of £600; and it was thereby declared that upon the happening of any of those events it should be lawful for the trustees to enter upon the premises and chattels thereby assigned, and to seize the same in manner as therein until they should have received the said sum of £600 in manner as therein.
I must here observe that it is not necessary for me to discuss any such question as what would have been the effect of that settlement if the bankrupt had died instead of being adjudged a bankrupt, as in the former event of the death of the bankrupt different considerations would have been presented, and the bankrupt is still alive. That settlement then concludes with a declaration as follows:
“That all the future property hereinbefore expressed to be assigned shall be subject to the trusts of these presents, and to the powers, covenants, and provisions, hereinbefore contained, although the same or any part thereof may not be capable of passing at law by the assignment hereinbefore contained; and the expression the chattels hereby assigned or expressed so to be used in these presents shall in all cases extend to such future property.”
I have set forth at length that concluding paragraph of that settlement of 1883, inasmuch as it has been strongly relied upon as adding force to the previous provision in that settlement as regarded the future acquired property of the bankrupt, solely for the purpose of stating explicitly that I cannot attach or give any such effect to that concluding paragraph in respect of the question and consideration as presented to me for decision in this matter.
This is the proper time for stating plainly that no such settlement as that executed in 1883 by the bankrupt as a trader could have conferred any title at law or (as may be better termed) legal title upon the trustees thereunder to the after-acquired property or money as purported to be comprised therein and assigned thereby, and still further that no such settlement could have conferred any other or higher title upon such trustees in respect of any such after-acquired property or money than a contract in equity, or it might be a covenant by and on the part of the bankrupt, that upon the happening of any of the events as stated in that settlement in that behalf (which was in this matter the adjudication of the bankrupt), he, the bankrupt in the character of and purporting to be the owner and assignor thereof, would transfer to the trustees, as the assignees thereof under such settlement, the interest of the bankrupt, such as it then might be, in and to the possession of such after-acquired property, including (as it must) property of merchants as received by the bankrupt in the course of his trading still unpaid for, or money arising from or produced by debts (at that time) payable or accruing to the bankrupt in the course of his trading, to go in satisfaction to that extent of such contract or covenant under that settlement.
This brings me to the evidence which has been offered in support of that charge by the surviving trustee under that settlement which consists in the first instance of the production of that settlement of 1883, such as I have briefly described it and next an affidavit by the chargeant himself, made no so lately as the 16th July 1892, being eight days after the filing of the discharge by the assignees, by which he the chargeant neither, on the one hand, alleged that he had himself taken, or had authorized any other person on his behalf to take, possession of such the after-acquired property or debts of the bankrupt, or of any portion thereof, at any time and it further appears from that same affidavit that he, the chargeant, does not thereby deny that he, the chargeant, had left all such after-acquired property and debts in the order and disposition of the bankrupt, subsequently as well as previously to his adjudication, although the assignees had then previously by their discharge so plainly challenged and denied any such alleged title of, or as existing in, the chargeant to any such after-acquired property or debts, as against them as such assignees, and that such affidavit of the chargeant is altogether silent in those respects.
On the other hand, affidavits have been severally filed by the assignees and by the bankrupt himself, by which they have severally testified to the fact that the bankrupt had remained in the absolute ownership and possession of all such after-acquired property and debts apparently up to the time of the adjudication, and subsequently up to the time when he, the bankrupt, was dispossessed by the assignees in this matter.
It must have been under circumstances and upon facts such as I shall show to be presented in this matter that the Legislature rightly, and with a true spirit of equity (in order to guard to some extent at least against a glaring injustice being effected), declared in substance by that 52nd section already mentioned so far as it is here necessary to refer to it in general terms: That unless there had been not alone an actual transfer of the after-acquired property referred to in that section, which under the circumstances of this matter must have been obtained by the bankrupt under the delusive appearance of being a solvent trader, but also in like manner that all such debts as had been thus subsequently become payable to the bankrupt, had been actually paid at the time of the adjudication of the bankrupt, the assignees in bankruptcy alone in that behalf, as trustees for the general creditors of the bankrupt, had the proper title to such after-acquired property, which under the circumstances of this case, as I shall also presently show, must have been for the most part supplied by such general creditors, and with whom also, for the most part, the debts also thus subsequently becoming similarly payable had been incurred and then remained unpaid, for the benefit of such general creditors, amongst whom may eventually be included in this matter those deriving under such prior settlement if they established any proof of debt therein, who would in that event become entitled to an equal distributive share of such after-acquired property with the other creditors whom the assignees represent.
The bankrupt had originally filed a petition for arrangement in this Court on the 9th April 1892, and filed his statement of affairs therein on the 25th April 1892 (which he duly verified on the 19th May 1892), and in that statement he returned his unsecured creditors at no less a sum than about £2400, exclusive of the sum as claimed by the chargeant in respect of the £600, the marriage portion of the wife of the bankrupt, and to meet those entire liabilities, amounting to £3107 7s 2d; he, the bankrupt, thereby only estimated his stock-in-trade and chattels at £63 1s 10d, while he thereby returned the debts owing to him at the date of his adjudication as amounting to £1011 3s 3d, estimating that they would produce no more than £410, and he thereby estimated his freehold and leasehold estates as being altogether of no greater value than £50, as per Schedule H annexed to or embodied in that statement, and when that Schedule H is referred to, he therein estimated the very same licensed house and premises in Main-street, Killarney, which was the only real property of the bankrupt purported to have been expressly transferred by the settlement of 1883, and thereby vested in the trustees thereunder by way of the consideration for the marriage portion of £600 by the wife of the bankrupt in that respect, as being of no value whatever; and he thereby introduced for the first time his shop in New-street, Killarney, and estimated it as not being of any value, and he the bankrupt then further introduced and estimated in Schedule H certain stores and two cottages situated in Well Lane, Killarney, as being held by him under a promise of a lease for sixty-two years as being of the value of £50, but he does not state therein any further particulars in relation to either of such last mentioned premises, except that it was to be at a rent of £8 10s annually, or return any other assets.
On the other hand, a still further inspection of that statement of affairs such as had been thus verified by the bankrupt, exhibits at once (as might have been expected) the fact that by far the largest proportion of the debts due by the bankrupt to his creditors (exclusive of the marriage portion of £600 already referred to), as well as of the debts due and owing to the bankrupt by his debtors to him at the date of his adjudication, had been for the most part contracted very recently, and even so lately as the years 1891 and 1892; and when the bankrupt, relying upon such a statement in substance of his affairs made an offer of but 1s in the £, as a composition for his unsecured creditors upon the amount of such their respective debts, that arrangement-matter was forthwith turned into bankruptcy, and thenceforth formed this present matter in bankruptcy.
If the facts which next follow alone should be looked at and taken into consideration, namely, that the bankrupt himself only estimated in such his statement of affairs, his place of business, and premises in Main-street, Killarney (which was the only real property actually assigned by the settlement of 1883) as being of no value whatever in the year 1892, and that the same property when sold afterwards in the same year 1892, in this matter only produced the gross sum of £50, while the only means available for estimating the value of the stock-in-trade and furniture actually assigned by the settlement of 1883 are that the stock-in-trade and furniture of the bankrupt found at the date of his adjudication were sold in this matter, for the sum of only £60, being severally coupled with the elaborate nature of the settlement of 1883, no other conclusion could be arrived at under the circumstances disclosed in this matter, than that a case which bore a close resemblance to an attempt at a fraud throughout, against all subsequent creditors who might be induced to give credit to the bankrupt owing to or upon his trading reputation cloaked (as it must here be deemed to be) by the settlement of 1883, had been thereby presented to this Court, which can only at this late period be frustrated to some partial extent by means of that very salutary provision in that 52nd section as already referred to.
At the same time it must be observed that if such contrivances as are indicated by the settlement of 1883 could have led to the full accomplishment of the apparent object of the parties to it, such a result, under the circumstances of this case, could only be fairly regarded as being antagonistic to all proper bankruptcy administration, inasmuch as by that settlement of 1883 the bankrupt was enabled to retain the full possession and control of that property (of which he had by the same settlement previously purported to have altogether divested himself) in the most ample manner; and he, the bankrupt, was thereby armed with a power of effecting widespread mischief, as appears by the results, in holding himself out and exhibiting himself to the community as an apparently absolute owner of such property and as a solvent trader, by means of which he acquired a ready opportunity for preying upon the public for a full period of nine years, at the end of which period the whole proceeds of all such property as purported to have been embraced by that settlement of 1883 would not, according to the valuation of the bankrupt himself, have amounted to more in the whole than a gross sum of £528 1s 6d, which sum, if realized and applicable to such a purpose, would not be sufficient even for the payment of the sum as claimed by the chargeant alone under such settlement of 1883.
In order the better to understand with what matters and figures this Court has in reality to deal, it may be well here to state that it appears from a report of the official assignee of so late a date as the 16th December 1892, that the stock-in-trade and furniture of the bankrupt at the date of his adjudication, which was then forthcoming, was sold by auction subsequently to that adjudication for a gross sum of £60 7s 7d also that the dwelling-house, shop, and premises in Main-street, Killarney, as already referred to, were likewise sold since that adjudication for a gross sum of £50.
It will thus be seen that the 52nd section of the Bankruptcy Amendment Act of 1872 is in perfect harmony in its spirit and intention with the 313th section of the Bankruptcy (Ireland) Act of 1857, commonly known as “the order and disposition clause”; and extends in a very essential particular the protection for general creditors such as had been designed by that 313th section against any injury being done to them by the apparent reputation of ownership, which might be acquired by persons claiming or deriving through instruments of which such creditors had no previous notice whatever; and also in direct confirmation of the 267th section of that same Act of 1857, conferring such an absolute and complete title as it does upon assignees in bankruptcy as already stated, even to the extent of suing for debts in their own names. And as regards the assignment of debts as purported to have been made by that settlement of 1883, which would appear to have been separately referred to in the charge, this special observation must be made apart from the operation of the 52nd section as referred to, namely, that all such debts as were due at the time of the adjudication appear also to have been incurred subsequent to the date of the settlement of 1883; and that it does not appear that any power was thereby (in terms) conferred upon the trustees thereunder enabling them to sue in the name of the bankrupt for the recovery of any of such debts such as was possessed by the assignees in this matter under the 267th section of the Act of 1857; and further, that no such stamp as would have been required for such a purpose was ever placed upon that settlement of 1883, and therefore it would be difficult to discover upon what possible ground the trustees under that settlement could rest or seek to establish their pretension or claim as against the assignees to any of such debts as were due and owing to the bankrupt and remained still unpaid at the date of the adjudication of the bankrupt, when it does not anywhere appear in evidence that any notice whatever was given even of the existence of such settlement of 1883 on the part of the trustees thereunder to any of those specific debtors, by whom any of such debts were owing to the bankrupt, either prior or subsequent to the date of the adjudication of the bankrupt.
It is only necessary now to mention that this Court has been placed under some difficulty as to pronouncing a complete judgment in this matter, from the fact that there does not appear from the copy of the settlement of 1883 placed before its as purporting to have been a bill of sale, that there ever had been any schedule of the stock-in-trade or furniture purporting to have been directly assigned to the trustees thereunder, at any time annexed to that settlement of 1883, and that there is therefore at this time no means of ascertaining with precision whether or not stock-in-trade or furniture as lately sold in this matter, as above stated, consisted of any portion of the stock-in-trade or furniture which belonged to the bankrupt at the date of the settlement of 1883, and had been included in it; and also, further, by reason of no evidence whatever having been offered, and not even any mention made either in respect of the shop in New-street or as to the stores and two cottages of the bankrupt severally situated in Killarney, and described in Schedule H in the statement of affairs as filed as aforesaid by the bankrupt on the 25th April 1892, other than is set forth in that Schedule H. However, I will for the purpose of disposing of this case, as it is now before this Court, by reason of the insignificant amount of the sum realized by the sale of the furniture and stock-in-trade in this matter, as far as it is in my power, assume without further inquiry, save as hereinafter mentioned, on the one hand, that the furniture as seized under the adjudication and subsequently sold in this matter, as already stated, was the same furniture which had belonged to the bankrupt at the date of the settlement of 1883, and had been assigned by it; and, on the other hand, I will for the same reason assume that the stock-in-trade, as a whole, as likewise seized under the adjudication, and similarly sold along with the furniture, had been so acquired by the bankrupt after the date of the settlement of 1883, and I will leave any question as to those specific articles of furniture and stock-in-trade open for further direction (if any), giving liberty to either party to take such steps as they may be advised for obtaining further inquiry on their behalf in those respects or either of them before or up to the final audit in this matter.
I shall therefore declare that the chargeant is entitled to the proceeds of the premises in Main-street, Killarney, with the fixtures therein, such as properly belonged to the bankrupt, as the tenant thereof, and also to the proceeds of any chattels belonging to the bankrupt which had been on the premises in Main-street at the date of the settlement of 1883, and were subsequently sold in this matter; but I will declare my opinion that the 52nd section of the Act of 1872 was designed and framed for the very purpose of affording protection to creditors against the injustice which would otherwise be caused by such a state of facts as has been presented to this Court in this matter, to the extent as specific in that 52nd section; and that, accordingly, the chargeant has not any claim whatever against the assignees in this matter to any portion of the property or money of the bankrupt which had been acquired by him after the date of the settlement of 1883, and belonging to the bankrupt at the date of his adjudication, and which had not been at the date of the adjudication actually transferred or paid; and, further, that the chargeant had not any claim as against the assignees to any such debts which had accrued due and became payable to the bankrupt after the date of the settlement of 1883 and which were due and owing to the bankrupt, and had not been paid at the date of the adjudication, save such claims (if any) as the chargeant may be able to establish against the proceeds of any such after-acquired property, money, or debts, under or by means of the reservation hereinafter contained in respect of any claim by way of proof of debt that may be put forward on the part of the chargeant.
I will reserve to the chargeant liberty, if necessary, to put forward in this matter a claim by way of proof of debt in the usual manner, without any declaration of right in that respect here, for any balance that may remain unpaid to him after the application of the funds to which he is hereby declared entitled, if so advised, against the general funds in this matter. I direct the proper officer to take all necessary accounts and reserve all further directions. The chargeant must have his costs incurred in his charge and discharge, along with his demand, out of the trust funds to which he is hereby declared entitled, when taxed; and the assignees must have their costs out of the funds in this matter; and I may mention here the ground for my direction as to costs, namely, that although the chargeant might have been entitled if he had confined his charge to his claim for the premises and chattels actually assigned by the settlement of 1883 to the costs of an undefended charge out of the bankrupt’s estate, as one of the incidents occasioned by the bankruptcy; and it must be assumed from the nature of the discharge, as filed by the assignees, that there would not have been in such case any discharge at all filed, yet when the chargeant put forward the still larger claim as against the assignees, extending in fact to all the after-acquired property, which he had failed to sustain, the estate has been put to costs fully equivalent to the costs of an undefended charge; and I will, in order to stop expense where the assets are so small, set off such costs against each other as the most expedient course which I can adopt, in preference to giving specific declaration and direction in respect of each class of costs. I have pronounced the above judgment as between the parties on the record before me, reserving all questions that may arise upon any application hereafter for payment from time to time of any moneys then standing to the credit of this matter.
Thompson v Thomas
(1891) 27 LR Ir 457 (Chancery Division)
Porter MR: I am of opinion that Joseph Thompson, if he is still living, as to which I have considerable doubts, is entitled to share in the proceeds of the mortgage money under the deed of October 27th 1863.
As regards the deed of March 3rd 1863, which deals with the distribution of the policy moneys, it provides that the trustees are to stand possessed of the said policy for £2000 and the moneys assured thereby “to the use of Henry BH Thompson, and Elizabeth Neville Thompson, being the two children now living of her the said Elizabeth Margaret Hargrave Thompson, and to all or every other child or children of the said Elizabeth Margaret Hargrave Thompson, hereafter to be born, and as may be living, at the time of her decease in equal shares and proportions.”
From this it is plain that Joseph Thompson was not then born, and according to Occleston v Fullalove LR 9 Ch 147, and other similar cases, if the instrument in question had been a will, Joseph Thompson would have taken a share under it. It is, however, not a will but a deed and unless the principle laid down in Occleston v Fullalove LR 9 Ch 147 applies to the case of a deed it is impossible to hold that Joseph Thompson took under the terms of this instrument.
Since the case of Blodwell v Edwards Cro Eliz 509 it has never been questioned that a provision by deed for future illegitimate children is void. I do not say that a deed containing such provision would be void for all intents and purposes, or in so far as it was not merely a provision for future illegitimate children. There is nothing in Occleston v Fullalove LR 9 Ch 147 contrary to this view, which has been adopted by the profession and by the textwriters, as well as being the considered opinion of the judges in Blodwell v Edwards Cro Eliz 509. Occleston v Fullalove LR 9 Ch 147, when examined, appears to have been decided on two grounds: first, that as the will speaks from the death of the testator there was no uncertainty as to who would take under it; and secondly, that as a will was an ambulatory instrument capable of being revoked at any time, the provision in it did not tend to encourage immorality in the same way as if it had been in a deed. I need only refer to what Mellish, LJ, says in that case, in which he recognizes to the full extent the authority of the earlier cases as to such a provision in a deed. He says:
“I agree that the earlier authorities, and in particular Blodwell v Edwards Cro Eliz 509, as reported, do go a long way to establish that a settlement of property by deed on future reputed children, of bastards, is void, as being contrary to public policy. If a man, at the commencement of an illicit intercourse with a particular woman” (whether it is at the commencement or not to my mind makes no difference), “could make a valid settlement upon illegitimate children, this would, I think, manifestly encourage the immoral connexion, and discourage marriage, which the law favours. The present case, however, is the case of a will, and it is necessary to consider how far the same doctrine applies to wills.”
A distinction is sought to be made in the present case, inasmuch as the provision in the instrument in question is made by the mother, and not by the father; but, in my opinion, that circumstance makes no real difference. Here the putative father was a party to the deed, was a trustee under it, and was aware of all the circumstances under which the deed was executed. A provision for the future issue of an improper intercourse must have the same tendency to encourage immorality, whether that provision be made by the father or by the mother. It is equally contrary to public policy whether the consideration proceeds from the man or from the woman. I am therefore, clearly of opinion that the provision in this deed is good as regards the two children named in it, but bad as to Joseph Thompson.
Mr Brady then expressly argued that the words would include a child en ventre sa mère, and that Joseph was en ventre sa mère at the time of the execution of the deed. That he was so is highly probable. He is mentioned by name in the deed of October 27th 1863, while the deed of March contains no express reference to him, and only mentions the two other children, Henry and Elizabeth. If the deeds are accurate in their facts and dates, and the child was born within ordinary time, it would be a very strong circumstance in favour of this contention, but it is at best a matter of uncertainty, and the child might have been born prematurely. Certainly the mother, when she executed this deed, did not contemplate making a specific provision for this child as then being en ventre.
This point, therefore, in my opinion, is not open on the facts of the case; and I arrive at the conclusion that the provision is good as regards the two children named in the deed, but void as regards the other. Joseph Thompson therefore takes no part of the policy moneys, which are divisible in moieties; on the other hand, the mortgage moneys are divisible in thirds between Henry, Elizabeth, and Joseph.
Re Blake
[1955] IR 89 (High Court)
The facts are set out in the judgment.
Dixon J: The first question arising in this case is whether the conditions attached to the trusts in favour of the infant defendants (the children of the deceased’s daughter, Mary Rosamund) in respect of the income and capital of the “trust legacy” of £6,000 bequeathed by the will are void for uncertainty or as being contrary to public policy or for any other reason. This legacy was given by the will in these terms:
“I bequeath a sum of £6,000 to my trustees upon the trusts and with and subject to the powers and provisions hereinafter expressed that is to say my trustees shall invest the said sum of £6,000 with power to vary the investment thereof and shall stand possessed thereof and of the investments representing the same (hereinafter called ‘the trust legacy’) in trust to apply the income thereof for or towards the maintenance and education of the children of my daughter Mary Rosamund provided they shall be brought up in the Roman Catholic faith and subject to the application of the said income in trust for all the children of my said daughter Mary Rosamund provided they shall have been brought up in the Roman Catholic faith who being sons attain the age of twenty-one years or being daughters attain that age or marry under that age in equal shares and if there shall be only one such child the whole to be for that one and if the said children shall not be brought up in the Roman Catholic faith and no one of them shall live to attain a vested interest in the trust legacy the same shall fall into my residuary estate.”
At the date of the will, the testator’s daughter had been already married to a member of the Church of Ireland and since her marriage has adhered to that church. There are three infant children of the marriage, all of whom have been baptised as members of the Church of Ireland. All the children were born in the lifetime of the testator, two of them before the date of the will. The present position is that the daughter and her husband have brought up their children in the Church of Ireland and it is not their intention to make any change in that respect. The children are now aged ten, seven and three years respectively.
I do not think there is any uncertainty about the requirement that a child should be brought up or should have been brought up in the Roman Catholic faith. Analogous expressions have been considered in several cases and it was not held that there was insufficient certainty in ascertaining the meaning of such phrases as “be a Roman Catholic”: In re May; Eggar v May [1932] 1 Ch 99; “become a convert to the Roman Catholic religion”: In re Evans; Hewitt v Edwards [1940] 1 Ch 629; “marry a Roman Catholic”: In re McKenna, Higgins and Others v Bank of Ireland and Others [1947] IR 277 “become a Roman Catholic”: McCausland and Others v Young and Others [1949] NI 49. In the last-mentioned case, the Court of Appeal in Northern Ireland was considering the terms of a settlement but the words of Andrews LCJ (at p 57) as to ascertaining the meaning of the expressions used by the settlor are fully as apt in the case of a will: “Why should they not bear the meaning in which they would naturally be used by the settlor – the meaning assigned to them in ordinary every-day speech?”
The expressions used in the will in this case, and those used in the wills considered in the cases just cited, do not suffer from the ambiguity inherent in the use of phrases such as “be openly or avowedly Protestant”: In re Borwick; Borwick v Borwick [1933] 1 Ch 657; “at all times conform to and be members of the Established Church of England”: Re Tegg, Public Trustee v Bryent [1936] 2 All ER 878; “cease to practise the Roman Catholic religion”: Burke and O’Reilly v Burke and Quail [1951] IR 216. There is a subjective element latent in such conditions which is, I think, absent in the requirement in the present case. Nothing active is required of the children and they do not have to hold or profess any particular beliefs. What is required is that they should be brought up in the Roman Catholic faith – a matter for those responsible for their religious education while under age. If the children are baptised and received into the Roman Catholic Church, receive the appropriate instruction and fulfil, so far as it can be secured, their appropriate religious duties, I do not think there could be any doubt, in the mind of any reasonable person, that that is what the testator contemplated by the words he used. I feel I may echo, and apply to the present case, the very cogent observations of Gavan Duffy P in considering the expression “shall marry a Roman Catholic,” in In re McKenna, Higgins and Others v Bank of Ireland and Others [1947] IR 277, at p 285:
“I have only to construe the plain words used by a plain man in a sense plain to all of us; and I shall not make the law justly ridiculous in the eyes of persons of common sense by declaring a current expression, which the People knows and understands, to be unintelligible in the High Court of Justice in Ireland.”
It is true that it can be plausibly suggested that there might be uncertainty in particular circumstances, for example, while any child was too young to understand or profit by any form of religious instruction or where the instruction had only been intermittent or had not extended over the whole period of minority, any such difficulties, however, seem to me to relate to the ascertainment of whether the intention of the testator had been fulfilled rather than to any uncertainty in that intention. It is significant that the parents of the children evidently felt that there was no difficulty or ambiguity in their stating to their solicitor that their children had been brought up in the Church of Ireland, although two of the children are now only aged seven and three respectively. A Court which had to consider the matter would probably take the view that, so far as the gift of the capital was concerned, the process of bringing up the children in the Roman Catholic faith was one which at least required to be in operation at the time of each child attaining his or her majority, but, subject to that, any difficulties in determining the question would be merely those created to some special or peculiar circumstances. Again, it has to be borne in mind that each requirement, so far as it is a condition, is in the nature of a condition precedent rather than a condition subsequent; and it was laid down in England by the Court of Appeal in In re Allen, Deceased, Faith v Allen [1953] 1 Ch 810, that in the case of a condition precedent or a qualification it was not necessary that its scope should be capable of exact definition. All that a claimant had to show was that he, at least, was within the requirement. This is a view which I respectfully adopt. Accordingly, in my view, neither requirement in the present case is void for uncertainty.
The testator’s intention is manifest. He wished to secure, so far as the promise or gift of his bounty could do so, that his grandchildren should be brought up in the Roman Catholic faith and that only those grandchildren who were so brought up should benefit either during their minority or on coming of age. To take the last event first, there is only a gift of the capital to those who shall have been brought up in that faith. I am not at the moment concerned with the ambiguity that the gift is to “all the children” provided they shall have been so brought up, and that questions might arise as to the proper interpretation if only one or some of the children qualified for the gift, although I hardly think a Court would find these questions insoluble. A more fundamental difficulty arises from the nature of the condition itself. No child can take a vested interest in the capital unless the prescribed condition is fulfilled and this indicates the nature of it as being a condition precedent or a qualification antecedent to taking any benefit. No question of a voluntary choice or election on the part of the children arises, since the condition must be fulfilled at latest at the attainment of twenty-one years of age, that is, before any child would be legally capable of making a binding choice or election. This circumstance distinguishes the case from those in which an election was required of a minor and the requirement was held either not to be binding during minority or to be capable of being postponed until majority. Examples are In re May [1917] 2 Ch 126; [1932] 1 Ch 99; McCausland and Others v Young and Others [1949] NI 49. What is involved in the present case is that the parents or other persons responsible for the upbringing of the children should have brought up the children in the Roman Catholic faith, irrespective of any independent volition on the part of the children and irrespective of the degree of success achieved in such upbringing. The testator was evidently sufficiently confident of the result of such upbringing not to impose any penalty, by way of defeasance or forfeiture – as was attempted to be done in many cases – if any child, after attaining the age of choice, changed his religion or ceased to practise or profess the religion in which he was brought up. As already pointed out, the testator was fully aware of the circumstances of his daughter’s marriage and of the birth and baptism of two of his grandchildren, at the date of his will; and he must be taken to have made his will in the light of those circumstances.
Given the natural desire of parents to secure the welfare and material prosperity of their children, a provision such as the present could only operate, and be intended to operate, as an inducement to the parents and a form of indirect pressure on them to change the religion of their children from that which they themselves professed or had adopted and in which they had baptised the children. Similar provisions have been considered in a number of cases and have been held void as being contrary to public policy in tending to interfere with the parental right and duty of providing for and prescribing the manner of education, including the religious instruction, of children. This view was taken by Bennett J in In re Borwick; Borwick v Borwick [1933] 1 Ch 657. An earlier case, which he followed, was In re Sandbrook, Noel v Sandbrook [1912] 2 Ch 471, a decision of Parker J. There, the condition was directed against the children living with their father and it was held void because it was inserted with the object of deterring the father from performing his parental duties. Another example of an analogous provision was In re Boulter; Capital and Counties Bank v Boulter [1922] 1 Ch 75, where Sargant J held a condition against living abroad void as being against public policy in tending to the possible separation of the parents from their children. A more recent example was Re Tegg, Public Trustee v Bryant [1936] 2 All ER 878, where Farwell J held that a condition aimed at preventing the children being sent to any Roman Catholic school was void as being a fetter upon the right of the mother to do what she might think best for the welfare and education of her children. See also Re Piper [1946] 2 All ER 503, referred to later. While I accept and respectfully adopt the reasoning and conclusions in these cases, I have no need to have recourse to them, as the same result would follow from a recent decision of Gavan Duffy P in our own Courts – the only case here to which I was referred – that seems to have touched on the point. This was Burke and O’Reilly v Burke and Quail [1951] IR 216, where the learned President held that a direction in a will that the selection of a school should be in the absolute discretion of the trustees was inoperative and must be ignored since it tended to override the parental authority and right and duty of education declared by Article 42 of the Constitution.
This Article puts the matter on a different and higher plane in this country, as the parental right and duty is declared and guaranteed by our fundamental law. Under it, the State “guarantees to respect the inalienable right and duty of parents to provide, according to their means, for the religious and moral, intellectual, physical and social education of their children.” It is clear that any attempt to restrict or fetter that right would be contrary to the solemnly declared policy and conceptions of the community as a whole and therefore such as the Courts established under that Constitution could not and would not lend their aid to. The provision in the will that the children to benefit should have been brought up in the Roman Catholic faith is, therefore, void as against public policy and cannot be given effect to. It is hardly necessary to add that this principle applies and must be applied irrespective of the particular religion involved.
It makes no difference, in my opinion, to this view whether the provision in the will as to the capital is called a condition precedent or a qualification. If it is regarded as a qualification, in the sense that the claimant to the capital must show at the prescribed age that he answers the particular description, this involves that, during all or some of the period when the matter was one for his parents and not for himself, he had been brought up in the Roman Catholic faith.
If the condition is void, is the gift void also or can it be allowed to take effect, whether the condition is fulfilled or not? Can the condition be simply disregarded, as could be done in the case of a void condition subsequent intended to operate by way of defeating or divesting, upon the happening of a given event, a previously vested interest? As pointed out by Gavan Duffy P In Burke’s Case [1951] IR 216, at p 224, a condition precedent is one which must be fulfilled before the gift can take effect at all and a gift made subject to a condition precedent fails altogether, as a rule, if the condition is found to be void. The use of the words, “as a rule,” in this passage may have been intended to leave open the possibility of there being an exception to the rule – the point did not arise for decision in Burke’s Case [1951] IR 216 – and it has been argued in the present case that the gift in question here belongs to an exceptional class which the law allows to take effect notwithstanding the general rule. Before dealing with this question, I think it preferable to consider the provision in the will as to the application of the income of the property during the minority of the children.
The intention and effect of this provision seems to be that the income should be applied for the maintenance and education of the children so long as they are being brought up in the Roman Catholic faith and only so long as they are being so brought up. That seems to me to be the plain, ordinary meaning of the words used by the testator. It is implicit in them that before the income should be so applied it should be reasonably clear to the trustees that the children were being so brought up. It is, I think, also implicit that should it become equally clear to the trustees that there had been any fundamental or radical change in the religious upbringing of the children, the income should cease to be so applied. The provision would, thus, imply something in the nature of a series of intermittent or alternating conditions precedent and conditions subsequent, but such a series has never received legal recognition. The true view, I think, is that the provision constitutes a limitation of the income for the benefit of the children during a specified period or specific periods, that is, so long as the children are being brought up in the specified faith. Here, however, the element of an unlawful attempt to dictate the religious education of the children and to trammel the exclusive responsibility of the parents again obtrudes, and again it is an attempt which the Court will not aid. It was clearly not the intention of the testator that the income should be applied for the benefit of the children unless they were being brought up as he desired, and therefore they cannot have the income during the whole of their minority on the basis of disregarding his definition of the period of enjoyment except so far as it contemplated minority. This would not only disregard that definition and turn a limited gift into an unqualified one but would defeat his clear wishes. A similar question arose before and was decided by the Court of Appeal in England in In re Moore; Trafford v Maconochie 39 Ch D 116. There the testator had made provision for a weekly payment to his sister during such time as she might live apart from her husband, and it was held that the payments were to be made during a period the commencement and duration of which were fixed in a way which the law does not allow and the gift was void. The principle and authority of this decision were not questioned by PO Lawrence J in In re Lovell, Sparks v Southall [1920] 1 Ch 122, but he distinguished it on the ground that, in the case before him, the husband and wife were already separated at the date of the will and the bequest by the testator was intended to provide for the wife while so separated rather than to induce her to live apart from her husband, which would have conflicted with public policy.
I am of opinion, therefore, that the gift of the income fails by reason of the manner in which it is limited being contrary to public policy.
It is necessary now to return to the question whether the gift of the capital also fails, the condition upon which it depends being void. If it does not, the curious result would ensue that, by some over-refinement of the law, the children would become entitled to the capital, but not to the income, in circumstances in which it appears reasonably plain the testator never intended them to have either. I have no hesitation in saying that I should require to feel coerced by the weight and logic of an argument to this effect, before I would subscribe to such an absurd result, involving, as it would, disregarding or paying the merest lip-service to the consideration that the object of these proceedings, and the Court’s function, is to endeavour to ascertain, and, so far as legally possible, to carry out the intentions of the testator as to the disposal of his property after his death.
The argument, for which some judicial sanction can be shown, is that there is an exception to the general rule of a gift dependent on a void condition precedent being also void where the condition contemplates or requires something which is malum prohibitum as opposed to something which is malum in se. This is a curious and somewhat pedantic distinction to introduce in ascertaining the wishes of testators who, in the vast majority of cases, would be quite unaware of the existence of the distinction and, even if they were aware of it, might be unable to obtain from lawyers any very precise idea of the nature and limits of the distinction. I feel I am entitled to say this because I have the authority of an eminent, contemporary English judge in a recent case on the topic. This is Re Piper [1946] 2 All ER 503, where Romer J said (at p 505): “The difference between malum prohibitum and malum in se has never been very precisely defined or considered.” Notwithstanding this uncertainty, he felt satisfied that the condition in question in the case before him – directed against children residing with their father – was malum prohibitum and not malum in se with the result that the gift took effect freed and discharged from the void condition. For the principle involved, he relied on a passage in Jarman on Wills (7th ed Vol 2, at p 1443) which was also relied on in other recent cases on the matter and which states the proposition in these terms:
“… the civil law, which in this respect has been adopted by courts of equity, differs in some respects from the common law in its treatment of conditions precedent; the rule of the civil law being that where a condition precedent is originally impossible, or is illegal as involving malum prohibitum, the bequest is absolute, just as if the condition had been subsequent. But where the performance of the condition is the sole motive of the bequest, or its impossibility was unknown to the testator, or the condition which was possible in its creation has since become impossible by the act of God, or where it is illegal as involving malum in se, in these cases the civil agrees with the common law in holding both gift and condition void.”
Romer J also derived assistance from a passage in Sheppard’s Touchstone (Vol 1, at p 132) which he quoted and which may be quoted here, before returning to the passage from Jarman. It is as follows:
“All conditions annexed to estates, being compulsory, to compel a man to do any thing that is in its nature good or indifferent; or being restrictive, to restrain or forbid the doing of anything, in its nature, is malum in se, as to kill a man, or the like; or malum prohibitum, being a thing prohibited by any statute, or the like; all such conditions are good, and may stand with the estates. But if the matter of the condition tend to provoke or further the doing of some unlawful act, or to restrain or forbid a man the doing of his duty, the condition for the most part is void.”
I must confess I can derive no assistance whatever from this last passage on the question I am now concerned with, possibly because it does not seem to be concerned with that question. As I understand it, the author was distinguishing between conditions which were good from those which were “for the most part” void. In the former class he placed together those restraining or forbidding either mala prohibita or mala in se, thus treating the matter from the point of view of negative conditions. He was not considering at all the question of positive conditions directed to the procurement of either type of malum, nor was he considering the effect of a condition being void on the validity of the gift dependent on it. He says nothing as to this last matter and it is unlikely that he intended to convey any distinction in this respect, as the reference to “estates” suggests that he was dealing with devises of real property where the rule seems to be invariable that if the condition, being a condition precedent, is void, the devise is void. The passage is of some help as to the difference between the two types of mala, although, even here, the qualification imported in each case by the use of the words, “or the like,” detracts from precision.
The passage from Jarman already quoted appears to depend in the main, as to some of the later cases, on the authority of Reynish v Martin 3 Atk 330, a decision of Lord Chancellor Hardwicke in reference to a legacy given to a daughter on condition of her marrying with the consent of trustees and in which he held that the legacy held good although she had married without consent. He first considered the matter as a personal legacy to be paid out of the personal estate only and said (at p 331):
“I apprehend that taking this as a mere personal legacy, the plaintiff by the rules of the civil and ecclesiastical law, and which have been constantly adhered to in this court, will be entitled to the legacy; for it is an established rule in the civil law, and has long been the doctrine of this court, that where a personal legacy is given to a child on condition of marrying with consent, that this is not looked on as a condition annexed to the legacy, but as a declaration of the testator in terrorem.”
This passage shows a sufficient ground for the decision and, to that extent, renders the subsequent passage, on the question in issue, obiter. This later passage, after referring to the difference in effect of a condition precedent being void and of a condition subsequent being void, continues:
“but this difference only holds where the legacy is a charge on the real assets, and therefore, if this had been merely a personal legacy, I should have been of opinion that as the marriage without consent would not have precluded Mary of her right to this legacy in the ecclesiastical court, no more would it have done so here; and to this purpose several cases were cited, which are taken notice of in the case of Harvey v Aston 1 Atk 361, and which I shall not repeat, but refer to that case for them.”
This reference to Harvey v Aston 1 Atk 361 is significant as that case dealt only with conditions and limitations concerned with marriage with consent, and it shows as the passage itself would suggest, that the Lord Chancellor was not dealing with any wider question. The remainder of his judgment dealt with the question whether on the terms of the will, the legacy was a charge on the real estate, and having found that it was not, he concluded: “this case must be considered as a mere personal legacy, and as such to be governed by the rules of the civil and ecclesiastical law.”
Reynish v Martin 3 Atk 330, therefore, appears to be no more than authority for the proposition that, in the case of a personal legacy subject to a condition precedent as to marriage with consent, the legacy is not avoided by breach of the condition where there is no gift over. There is no reference anywhere in the case to malum prohibitum or malum in se.
Neither is there any such reference in the case of Brown v Peck 1 Eden 140, which is cited as an authority in Roper on Legacies for the proposition which is relied on in support of the present argument. This is as follows (4th ed, at p 757):
“When, however, the illegality of the condition does not concern anything malum in se, but is merely against a rule or the policy of law, the condition only is void, and the bequest single and good; for the condition not being lawful, it is held in the phrase of the Civil law pro non adjecta.”
As he had been speaking, in the preceding paragraph, of a condition precedent requiring the performance of an act malum in se, a cursory reading of the passage cited might suggest that he was there dealing with mala prohibita, as being the natural opposition to mala in se. Closer attention to it, however, makes it, I think, plain that this was not the meaning or intention of the passage. If this particular distinction had been intended, the learned author would probably have expressed it with his usual clarity. Instead he referred to things “merely against a rule or the policy of law.” Such things are not necessarily mala prohibita (they are, in my view, entirely different) and it seems highly unlikely that the author intended to suggest that they were the same. By referring to the conditions as not being lawful, he may have meant no more than that they were unenforceable. This view of the passage is reinforced by turning to the case of Brown v Peck 1 Eden 140 itself, where it will be found that the decision was that a condition as to a married woman living apart from her husband was contra bonos mores and void but the gift dependent on it was good. There is, quite understandably, no reference in it to mala either prohibita or in se, the condition belonging to neither category.
If Brown v Peck 1 Eden 140 is an authority for anything, it is for the proposition that, if a condition precedent attached to a personal legacy is void as being against public policy, the gift may still be good. It is, however, a very doubtful authority. The report is short and not too easy to follow and it was subjected to some criticism by the Court of Appeal in In re Moore; Trafford v Maconochie 39 Ch D 116, already referred to. Cotton LJ (at p 129) said that “the report is not clear either as regards the facts or the principle laid down”; and Bowen LJ (at p 132) said it “appears to have been compromised after an expression of opinion by the Court.” In the Court of first instance in In re Moore 39 Ch D 116, Kay J had said (at p 124) of it and of Wren v Bradley 2 De G & Sm 49: “I confess that I find it difficult to understand these two decisions”; and I respectfully echo his words. The latter case – Wren v Bradley 2 De G & Sm 49 – was interpreted by the Court of Appeal as having being a decision on the basis of the condition being a condition subsequent and therefore inapplicable in the case before them as it is also, for the same reason, inapplicable in the present case. Brown v Peck 1 Eden 140 I regard as too obscure and doubtful a case to follow.
The proposition contended for has, as we have seen, been adopted in Re Piper [1946] 2 All ER 503, already referred to, and also in a later case of In re Elliott, Deceased [1952] 1 Ch 217, decided by Harman J. Neither of these cases is, of course, binding on me although entitled to the greatest respect as persuasive authorities. In In re Elliott, Deceased [1952] 1 Ch 217, Harman J decided that a bequest of personalty subject to an illegal condition precedent is void if the condition be malum in se, but if the condition be only malum prohibitum, the bequest will be effective and unfettered by the condition; and this is a clear statement of the principle contended for in the present case. In that case, the condition offended against the rule against perpetuities and Harman J held that this was malum prohibitum. He took the view that the principle he enunciated had been imported into equity from the civil law on the authority of Reynish v Martin 3 Atk 330, quoted and accepted by Bowen LJ in In re Moore 39 Ch D 116 at p 131. I have already suggested that Reynish v Martin 3 Atk 330 is not an authority for this proposition; and the Court of Appeal decided In re Moore 39 Ch D 116 on the ground that they were concerned with a limitation and that, if any such principle applied in the case of a condition, it did not apply to a limitation: see Cotton LJ at p 129. What Bowen LJ said, as to the matter, was (at p 131): “Accepting that as law with respect to legacies of personal estate on a condition, the question remains whether this is a legacy on a condition”; and he found that it was, instead a limitation. I do not think therefore that In re Moore 39 Ch D 116 could be rightly regarded as adopting or approving the supposed principle. It is difficult to see why, if a limitation which is contrary to public policy avoids a gift, a condition which is contrary to public policy should not do so also. It was however, sufficient for the decision in In re Moore 39 Ch D 116 that the provision was found to be a limitation. Harman J in In re Elliott, Deceased [1952] 1 Ch 217, may possibly have intended to convey some doubt on the matter in his own mind by saying (at p 222) : “… if this doctrine of the civil law has been imported into the English law, the condition can be disregarded.” He then went on to say: “Mr Roper is of the opinion that this rule was imported into equity …”; and he referred to Reynish v Martin 3 Atk 330 and In re Moore 39 Ch D 116. As has been seen, the basis of Roper’s assertion was Brown v Peck 1 Eden 140.
I have devoted some time to this question because of the support to be apparently found for the proposition in textbooks and in high judicial decision; but there is a more fundamental consideration which would have disposed of the matter, in my view, more shortly, if it had not been for the decisions referred to. This is the question whether, assuming the proposition to be sound, the provision in question here is malum in se or malum prohibitum or neither. In my view it is neither. As already noted, the precise nature of the distinction is somewhat indefinite and elusive, but it seems reasonably certain that it is a distinction between different types of crime or offence according to the origin of their sanction. Thus, Holland, Jurisprudence (7th ed., p 34), says: “Acts prohibited by positive law, but not by the so-called natural law, are said to be ‘mala prohibita,’ not ‘mala in se.’ Thus a government may find it expedient to forbid certain acts, such as the planting of tobacco, which are not regarded as odious by the public sentiment.” Byrne, Law Dictionary, says: “Mala in se are acts which are wrong in themselves, such as murder, as opposed to mala prohibita (mala quia prohibita), that is to say, those acts (such as smuggling) which are only wrong because they are prohibited by law.”
Cf the passage already quoted from Sheppard’s Touchstone, where malum prohibitum is referred to as “a thing forbidden by any statute, or the like.” This limitation in scope of the distinction is borne out by recalling the matters in which the distinction was or might be of any importance. These appear to be chiefly the question of ambassadorial exemption from criminal process and the question of the degree of mens rea requisite in the case of some offences.
An attempt to influence or fetter parents in their discretion as to the choice of religion and religious instruction for their children is not, so far as I am aware, a crime or offence of any kind. It is simply opposed to the policy of the law – now written into the fundamental law of this country. What this means was pointed out by Kekewich J in Re Hope Johnstone; Hope Johnstone v Hope Johnstone [1940] 1 Ch 470, p 479 – and quoted by Romer J in Re Piper [1946] 2 All ER 503 at p 505 – in these words: “The phrase means no more than that and the provision is not enforceable by anyone or in any court.”
So far, therefore, as the contention depends on the provision belonging to one branch rather than the other of this archaic distinction, I am of opinion that the contention fails for the reason that the provision belongs to neither branch. Could it, however, be said that the proposition has validity if it were put in a different ways namely that, if a condition precedent is contrary to public policy, a gift of personalty dependent on the condition is nevertheless good? This might be the meaning of Brown v Peck 1 Eden 140, in which the condition was stated to be contra bonos mores, and it seems to be the approach to the matter of Kay J in In re Moore 39 Ch D 116, at p 122, where he quoted from Swinburne on Wills and, later, refers to “the doctrine that conditions precedent as well as conditions subsequent which are against the policy of the law are treated as void in cases of legacies of personal estate, and that the legacy ‘stands pure and simple’”. He quotes the second of Swinburne’s four classes of impossible conditions, being those “which be contrary to law or good manners” and the two examples, respectively, given by Swinburne, ie, “if he murder such a man or deflower such a woman”; but he does not quote the next part of the sentence, which is: “this condition is unlawful and unhonest, and consequently to be deemed unpossible” (Part IV, s 5, para 8). Swinburne then states his rule that, with certain exceptions, when a condition is impossible the legacy may still be recovered; and proceeds to consider the exceptions. Amongst these occurs one set out in the following words (also quoted by Kay J):
“When the condition is both impossible and unhonest, for then the disposition is thereby void; and that in disfavour of the testator, who added such a condition. Whereas if the condition had been only impossible or unlawful, the disposition had been good, and that in favour of the testament.”
This last sentence is the only one that could possibly lend any support to the proposition now under consideration and such support would depend solely on the meaning to be given to the words “or unlawful” as used by the author. The disjunctive cannot have been intended to suggest an alternative to an impossible condition, as the whole section is only dealing with such conditions, and I confess I find it very hard to know what meaning could or should be given to the word, “unlawful.” The sense of the passage, taken as a whole, would have led one to expect an opposition between “impossible and unhonest” conditions on the one hand and “impossible but not unlawful” conditions on the other hand; but it would be rather late in the day now to suggest a typographical error in a work of such antiquity. Whatever the meaning of the words, there is a clear and unambiguous statement that the disposition is void when the condition is “impossible and unhonest”; and the earlier passage made it equally clear that Swinburne included in this category of condition one “contrary to good manners,” which is equivalent to one contra bonos mores or opposed to the policy of the law. The second example he gives also makes this clear, as it contemplates something which is not necessarily any crime or offence but merely disapproved by public morality. I cannot find, therefore, that Swinburne’s statement of what the ecclesiastical law was lends any support to the principle enunciated in Brown v Peck 1 Eden 140, or the cases which have followed or applied its supposed principle. Swinburne seems to me to be authority for the directly contrary proposition.
To summarise: the provisions in the will as to bringing up the children in the Roman Catholic faith are not too uncertain in their meaning not to be given effect to, if this were the only matter in issue. The phrase is one generally used and popularly understood, and an individual, or the Court if necessary, would not have too much difficulty in determining whether a particular child was being brought up or had been brought up in a particular faith. The provisions, however, constitute an attempt to interfere with or fetter the right and duty guaranteed to parents by the Constitution to provide for the education, including the religious education, of their children. As such, they are opposed to the policy of the law and cannot be enforced or given effect to in any Court in this country. Being, thus, void and unenforceable, the gifts, both of capital and income, dependent on their being carried out, are also void and enforceable. The gifts to the children therefore fail and the legacy falls into the residue of the estate.
In my view, the principle stated to have been imported from ecclesiastical law, that even though the condition upon which a legacy is given is contrary to public policy the legacy may still take effect, is not borne out by the authorities cited for it nor was it a rule of ecclesiastical law. If it had been part of ecclesiastical law, as applied to wills in the Church Courts in England, it might have been necessary to enquire as to when the principle was adopted, as those Courts retained a large part of their jurisdiction even after the Reformation and were not finally deprived of their temporal Jurisdiction in testamentary and other matters until 1857. Rules adopted or laid down during the last two centuries of the functioning of those Courts could not be accepted without question as part of the law of this country. No Irish case was cited, nor do I know of one, which decided the point at issue.
On another ground, if necessary, I should have been inclined to hold that, the condition being contrary to public policy, the bequest failed. This is that the performance of the condition was the sole motive of the bequest. This is an admitted exception to the supposed principle that the bequest may hold good. Reading the will as a whole, it is impossible to escape the conclusion that the paramount object of the testator, so far as his grandchildren were concerned, was that they should be brought up in his own faith and that only on that basis should they benefit. There is no indication that he intended them to benefit even if his wishes could not be carried out and, therefore, as the law will not enforce the condition, it would be defeating his real intention to uphold the gift while allowing the condition to be disregarded or rejected.
For these reasons, the gift fails.
The next question which arises is whether the pecuniary legacies are liable to pay the whole or any part of certain duties, in the nature of succession duty, payable to the dominion and a provincial government of Canada in respect of portion of the assets situate, at the death of the testator, in Canada. Some of these legacies were expressed to be left “free of legacy duty” but it was not disputed that, in the absence of any contrary indication in the will, this phrase must be taken to have been intended to refer only to the legacy duty payable in this country to our own Government. Accordingly, the use of these words does not affect the present question and all the pecuniary legacies are on the same footing as regards the foreign duties.
The general law as to the liability for such duties as between the different classes of beneficiaries under a will is stated by Jarman (8th ed. 1951 at p 1842) in these words: “In the absence of a contrary direction, local duties in respect of foreign property specifically devised or bequeathed are payable out of that property”; and again (at p 1892): “Testamentary expenses are expenses incident to the proper performance of the duty of an executor in connection with the personal estate, including the estate duty on personal property, the costs of proving the will, of obtaining legal advice as to the distribution of the estate, the expenses of ascertaining the person entitled to a legacy or specific fund, and the expenses of getting in property abroad.” It would seem to follow from these two passages that, except in the case of a specific bequest, foreign duties payable in respect of personal estate situated abroad are part of the testamentary expenses and payable out of the general personal estate in exoneration (except so far as the estate may prove insufficient and the legacies may have to abate) of the pecuniary legacies. Another way of viewing the matter, as a question of principle, is that the pecuniary legacies are payable (subject to bearing their own local duty) out of the general personal estate before the existence or amount of any residue can be ascertained. To make them liable for even a proportionate part of the foreign duties would put the residue on at least an equal footing with the legacies.
The statement quoted from Jarman is supported by the cases there cited of Peter v Stirling 10 Ch D 279 and Re Maurice 75 LT 415. The former case, which was not unlike the present, was considered and distinguished by Warrington J in In re Scott [1914] 1 Ch 847, at p 854, where he said:
“… when that case comes to be looked at it seems to me that it is not an authority for the proposition contended for here, which is that the duty payable on a specific legacy is to be treated as an expense incurred by the executors.”
He held that, in the case of a specific legacy, the duty was not such an expense, and pointed out that Malins VC had held in Peter v Stirling 10 Ch D 279 that the duties he was concerned with were part of the expenses which had to be incurred by the executors in getting in and repatriating the foreign assets to complete the total of the estate which they had to administer. Similarly, here, no specific bequests are involved and the pecuniary legacies are not given out of the Canadian assets as such or in any way by specific reference to them. If there were no pecuniary legacies, the executors would still be under the duty of getting in the Canadian assets and, in order to do so, paying whatever local duties had to be paid in respect of them.
It is clearly different in the case of a specific bequest, unless there is a deficiency of other assets to meet debts and other liabilities.
The authority of Peter v Stirling 10 Ch D 279 and Re Maurice 75 LT 415 was recognised in the latest case on the subject to which I was referred, a decision of the Court of Appeal in England in In re Goetze [1953] 1 Ch 96. This was a case in which the principle of those cases could possibly have been applied, but the Court arrived at the same result – the exoneration of the legatees and annuitants – by reason of the existence of a provision for double taxation relief. The Court did not profess to question or overrule the earlier cases. Jenkins LJ alone referred to the matter and he did so in these words (at p 113):
“… there is nothing in the judgment of Swinfen Eady J in In re Brewster [1908] 2 Ch 365 or of Warrington J. [1914] 1 Ch 847 or the Court of Appeal in In re Scott [1915] 1 Ch 592, to suggest that Peter v Stirling 10 Ch D 279 and In re Maurice 75 LT 415 were wrongly decided … As the point has not been argued in the present case, and if made good would lead to the same conclusion as I have reached on other grounds, I express no opinion about it one way or the other, but merely refer to it lest this judgment, which is framed in accordance with the arguments presented, should be regarded a simplicity concluding it if raised in any future case.”
Two other cases only need be mentioned, as they were relied on in argument In re Norbury [1939] 1 Ch 528, a decision of Bennett J, did not deal with a foreign tax payable in respect of the foreign assets of the deceased but with a personal tax payable by the beneficiary, by reason of his nationality, on succession. The other case – In re Cunliffe-Owen, Deceased [1951] 1 Ch 964, decided by Wynn-Parry J turned mainly on the special provision in the will in question there. There does not appear to be anything in it conflicting with the principle of the earlier cases but, if there is, I feel I should follow those cases. Accordingly, I hold that the pecuniary legacies are not liable to the foreign duties, these being an expense of administration.
The remaining question concerns an artificial category of “heirlooms” created by the testator in his will. These articles are not necessarily heirlooms in the accepted or established sense, the testator merely having indicated certain articles which he desired to be held and enjoyed as heirlooms, that is, with, and, so far as possible, on the same trusts as, the mansion house; and the only question is to what articles does this provision extend. The terms of the relevant provision are as follows: “I bequeath my gold whip and all my plate jewels, watches, pictures, glass, books and furniture which shall at my death be in or about my said capital messuage or mansion house called Ballyglunin Park or belong or be appropriated thereto unto my trustees in trust to permit the same to be held and enjoyed as heirlooms by the person or persons for the time being entitled to the said capital messuage or mansion house under the limitations of my will as nearly as the rules of law and equity will permit.” He has already devised this mansion house to his son for life and then in tail, and the intention was clearly that, so far as possible, the mansion house and its contents should be preserved and kept up as a family residence.
At first sight, a little difficulty is created by an earlier provision in the will, under which he bequeathed to his son “my wines liquors table and house linen and household effects other than those hereinafter bequeathed as heirlooms and all saleable stores and all livestock farming implements produce carts horses motor cars and all outdoor effects of every kind in or about or belonging to Ballyglunin Park, Brooklodge Demesne and Corbally North.” As the only dwelling is at Ballyglunin Park, the intention to limit the class of “heirlooms” to indoor articles in the mansion house is emphasised. The only apparent conflict is created by the reference to household effects, but it is not a real conflict, as these household effects are defined by way of exception, that is, the bequest is not of all the household effects but only of such household effects as are not bequeathed as heirlooms. The governing description, is therefore that of the “heirlooms” and this comprises several classes of articles, the widest of which is “furniture.” Even if the latter word were interpreted in a wide sense there would still be a residue of articles which would be household effects rather than furniture. The scheme of the will, however, suggests “furniture” is not to be given too wide an interpretation. The scheme seems to be to make an absolute bequest of articles which, by reason of their nature or of the effect of constant use, will be consumed nor will deteriorate comparatively quickly, such as the wines, linen, saleable stores and farm stock and equipment. The gift of “heirlooms” is of more durable articles. This is clear as to the gold whip and plate, jewels, watches and pictures. It is reasonable to take the view that the same approach was intended as to the glass, books and furniture, that these articles were only intended to be considered as heirlooms so far as they were more durable and permanent in character or had some special value either intrinsically or by association. An inventory has been prepared which includes a number of articles as to which there is a difference of opinion, but I do not propose to deal with the inventory in detail. I apprehend that, in the light of what I have indicated as being, in my view, the proper approach, there should not be any great difficulty in the parties interested making their own segregation. If a solution cannot be found as to any particular item or items, application can be made to the Court. The order will reserve liberty to apply.
Smyth v Smyth
Unreported (High Court) (1975 No. 4369 P) (Judgment delivered 22 November 1978)
Costello J: The plaintiff had the good fortune to be given by the will of a wealthy uncle two valuable properties in the Finglas area of Dublin. 1 Beaupark Villas is a dwelling house with a dairy yard attached to it and the plaintiff became absolutely entitled to this property. The position in relation to the other gift was different. His deceased uncle had been a farmer and part of his lands had consisted of a large field of a little over 11 acres on the Jamestown Road to the north-east of Finglas village. The deceased gave a life interest in this field to a brother of his (the defendant herein) and the remainder interest to the plaintiff absolutely. This action concerns the sale by the plaintiff to the defendant for the sum of £1500 of this remainder interest. The agreement for sale was made in 1968, when the plaintiff was just 23 years of age. He now seeks to have the sale set aside. Firstly he relies on the equitable doctrine of undue influence. But as the defendant was not only a life tenant of the field but also one of the trustees of the will the plaintiff in addition claims that the sale infringed the equitable principles which apply to transactions between a cestui que trust and a trustee. Furthermore the plaintiff says that the bargain was an unconscionable one and that it is vitiated by the equitable rules relating to such bargains.
There is a sharp conflict of evidence on a number of the important issues of fact which I have to determine in this case. In addition there is a quite remarkable difference between the valuations placed on the land by the expert valuers who gave evidence. I will examine the expert evidence later. As to the rest of the evidence, I will proceed now to give the conclusions which I have reached on it and then turn to the legal principles which are applicable to them. In doing so I should preface what I have to say by pointing out that it is not surprising that recollections should differ on events that occurred many years ago but that I am satisfied that all who have testified have done their best to tell the truth.
The plaintiff was born on 4th November 1945. His father was a farmer, but his drinking habits became excessive and he was forced to sell his lands some years prior to his death. The plaintiff’s schooling finished at the age of 14. Thereafter he took up a number of casual jobs in England and in this country until at the age of 18 he was taken on by Messrs Morrissey and Sons (the well-known Auctioneers) as a trainee Auctioneer in the machinery-sales side of their business. He left this firm for a short while after his three years training period had expired, but returned to it again in the year 1968. He stayed with Messrs Morrisseys until 1969, in which year he went to London. On his return he was again employed by Messrs Morrisseys until the end of 1973. In the beginning of 1974 before he had reached his twenty-ninth birthday he was admitted to St Patrick’s Hospital, Dublin suffering from alcoholism and anxiety depression.
The plaintiff’s drinking habits and the effect which they had on his personality have prominently featured in this case and it will be convenient if I, at the outset, set out the conclusions which I have reached about them. The plaintiff’s local doctor, Dr Moroney, was satisfied that the plaintiff was suffering from alcoholism in 1972 and in the month of May of that year endeavoured, without success, to persuade the plaintiff to consult a psychiatrist about his problems. Early in 1974 Dr Cooney diagnosed the plaintiff as an alcoholic and he was of the opinion that it was a condition from which the plaintiff would have been suffering for two or three years prior to admission to St. Patrick’s and that it was possible that it went back to an even earlier date. It will be recalled that the agreement which is now impugned was entered into in 1968 – to be precise, in the month of August of that year. I am quite satisfied that on the occasion it was entered into the plaintiff had not been drinking. I am equally satisfied that although he had by that time started to drink more than was good for him he had not yet reached the stage when he could be regarded as an alcoholic.
The parties differ as to how the agreement for sale came about. Save for one detail, I prefer the evidence of the defendant, his wife and Mr Melvin to that of the plaintiff. What happened was this. The defendant (who is about thirty years older than the plaintiff) got married in the month of May 1968. He was on very good terms with the plaintiff and they agreed that the defendant and his wife would come to live for a time with the plaintiff in 1 Beaupark Villas (into which the plaintiff had moved when he reached the age of twenty-one) and pay him £5 per week by way of rent. In addition the defendant’s wife kept house for the plaintiff, cooking for him and doing his laundry. The plaintiff at this time decided that he would like to sell his remainder interest and approached Mr Melvin, who he knew was on friendly terms with the defendant, and tried to enlist his help as a go-between. Mr Melvin accepted the assignment but made no progress with the defendant. The defendant was himself a farmer but he had in 1967 sold his interest in 21 acres Finglas and had taken them back on a conacre letting from the Purchaser. In addition he had bought further land at St. Margaret’s. So he told Mr Melvin that he had enough land; and Mr Melvin advised the plaintiff of the defendant’s attitude and that he would have to approach the defendant himself about the matter if he wanted to do a deal. This the plaintiff did. In the middle of an August day in 1968 the defendant was resting in bed. His wife was out at work (she was helping-out during the holidays in her former employer’s shop in Finglas) and the plaintiff and the defendant were alone. The plaintiff asked the defendant would he buy out his interest in the field at Finglas; the defendant replied that he was not very interested and that he had enough land; the plaintiff then pointed out the advantage to him of a purchase drawing his attention to the fact that if he bought his interest that the defendant could then do what he liked with the land. The defendant then asked the plaintiff: “What do you want for it?”: “£3,000”, was the reply. The defendant said that this was too high, to which the plaintiff replied, “What will you bid me for it?”: The defendant then offered him £1500. But this was refused and the plaintiff left the house. He returned in an hour or so later and agreed to sell at the figure suggested by the defendant, but asked for a deposit. The defendant gave him a cheque for £300.
This then, was how the bargain came about. The defendant’s co-trustee was Mr McGonagle, a principal of the firm of Messrs Kennedy and McGonagle Solicitors, then practising in O’Connell Street, and Mr Mathews, a member of that firm, acted as the defendant’s solicitor. He was also at that time acting as the plaintiff’s solicitor, principally in relation to lettings which the plaintiff made of the yard and outoffices attached to 1 Beaupark Villas. It was agreed that a formal contract would be drawn up and as it was natural for the parties to decide to allow Mr Mathews to look after the legal arrangements the defendant (not the plaintiff) contacted Mr Mathews and told him about the bargain. Mr Mathews prepared a written agreement and the defendant and the plaintiff went into his office and signed it. The document is undated, but I am satisfied that it was executed in the month of August 1968.
Having heard all the evidence I am quite satisfied that the defendant made no attempt to persuade the plaintiff to sell him his interest in the field – he was in fact a rather unwilling Purchaser. He in no way influenced the plaintiff’s decision to sell – that decision was the plaintiff’s own. The defendant has neither an aggressive or domineering personality. He struck me as being a quiet, straightforward, decent man who would not attempt to take unfair advantage of anyone.
The transaction took an inordinate length of time to complete. Again, controversy surrounds the execution of the deed of transfer. The plaintiff says that he entered St. Patrick’s in January 1974, and that he got special leave to go to his solicitor’s office to execute the transfer, and that this was on the 14th March 1974. It is quite clear that the plaintiff is mistaken about this – the contemporary records from Mr Mathews’s files and Mr O’Shea’s evidence establishes his error without doubt. The transfer was executed on 23rd August 1973. The papers had been prepared by Mr Mathews prior to his going on holiday and the transfer was witnessed by his assistant, Mr O’Shea. In relation to the execution of this document I find that at this time the plaintiff was certainly suffering from alcoholism, but that he was not drunk when he signed it nor had he drink taken when he went to Mr O’Shea’s office. I also find that the defendant in the years from 1968 onwards had not in any way brought pressure on the plaintiff to have the transaction completed. The plaintiff himself, not surprisingly, was anxious to obtain the balance of the purchase price (a further instalment of it had been paid in 1969 by the defendant discharging some of the plaintiffs debts leaving a balance due to him of £1,000) and he had on his own volition from time to time contacted Mr O’Shea about the completion of the sale.
The issues of law which have to be considered in this case, require me to refer again to certain aspects of the plaintiff’s medical history and to his financial circumstances. The plaintiff has had an unhappy life. He has, with great perseverance avoided alcohol since 1974 but unfortunately he has since then continued to suffer from anxiety depression for which he has had treatment both as an in-patient and as an out-patient. But on more than one occasion in the witness box the plaintiff described himself as being “mad” in certain periods of his early life. I am sure that he had commenced to drink at any early age, but I do not think that his faculties had been impaired by drink when he originally entered into the bargain with his uncle; nor was he otherwise psychologically disturbed at that time. It is quite clear that he was in need of money, notwithstanding the fact that he had a steady job, and that he had an income from the yard at Beaupark Villas and had received nearly £2,000 from his uncle’s estate. But it does not follow from this that the plaintiff was in an impecunious state at the time or that he was driven to the agreement by pressing financial needs. It is equally clear that the plaintiff in no way suggested to the defendant that he was in urgent need of money; nor did he leave the defendant with the impression that he was anything but a normal healthy young man. There is no question therefore in this case of a purchaser seeking to take advantage of a seller’s infirmity or straitened financial circumstances.
I now come to one of the parts of this case which present considerable difficulties; namely the claim that the sale I am considering was at a gross undervalue. To arrive at the value of the plaintiffs reversionary interest in the lands it is agreed that it is firstly necessary to ascertain their open market value with vacant possession in August 1968. An experienced member of the firm of Messrs Lisney and Son (Mr Molloy) gave evidence on the plaintiff’s behalf and valued the lands at £30,000 (or about £2,727 per acre) on the relevant date. Mr Ganly, one of the best known auctioneers in the country, valued them as of the same date, at £5,300 (or about £488 per acre). How can this extraordinary variation be explained? I think it is clear how it came about. In the year 1968 the area around Finglas village was developing at a fast rate. Mr Molloy’s evidence was that the Dublin Corporation had acquired by agreement in May 1968 90 acres of land in Finglas South for the sum of £230,000 which works out at about £2,555 per acre. He was also aware of land which was sold near the premises of Merville Dairies on the Finglas Road (opposite the Corporation’s purchase) in March 1970 at a price which worked out at close to £9,000 per acre. I think Mr Molloy was influenced in his valuation of the plaintiff’s land by these figures. But these prices were paid for land which (a) was close to main drainage and so was capable of being developed for housing and (b) was zoned under the Planning code so as to permit its use for building purposes. The plaintiffs land was to the North of Finglas in a very different area to the lands referred to by Mr Molloy. There was no main drainage near it and it was zoned for agricultural purposes only. Mr Ganly approached the valuation of the land on the basis that it was good agricultural land, that it would be sold as such, but with an added factor, namely its “hope value” which would take into account the fact that some buyers might consider that there would be a chance that it might be rezoned under some future Planning Scheme which would allow its development for commercial purposes. He supported his valuation with sales of non-residential holdings of agricultural land as follows: land near Ashbourne which produced £250 per acre in May 1968; further land near Ashbourne which sold at £642 per acre in August 1968 land near Castleknock which sold in May 1969 for £1,325 per acre; land at St. Margaret’s which fetched £571 per acre in April 1969. I think that Mr Ganly’s approach is the correct one, and that the special features to which I have referred make comparison with lands south of Finglas almost meaningless.
There is a further piece of evidence of relevance to land values to which I should refer. The defendant owned Herbuxton House which is a house with 21 acres of land on the opposite side of the road to the field now in dispute. He sold it to a firm of builders in 1967 for £55,000 but took back the land by means of conacre lettings for a number of years. In 1968 he purchased 70 acres of land at St. Margaret’s for £23,000 or about £330 per acre. Having considered this evidence I do not think that it requires me to reject Mr Ganly’s opinion. The defendant’s sale was in respect of a residential holding, and there was a special feature in relation to it involved in the leasing-back provision. It is not therefore of assistance in ascertaining the open market value of the plaintiffs field. I should also point out that Mr Molloy did not base his opinion on the Herbuxton House sale. The plaintiff was well aware of it and I think that if it was relevant Mr Molloy would have used it to support his opinion. I conclude therefore that I can accept Mr Ganly’s valuation. Purchasers would have been well aware of the restrictions on its development which were then placed on the land. Whilst they might have been influenced by the fact that it was closer to the expanding city than, say, lands at St. Margaret’s or Ashbourne, I do not think that this factor would have greatly affected its price. Its market price in 1968 would have been primarily based, as Mr Ganly says, on its value as good agricultural land.
If its open market price with vacant possession was in the region of £5,300 in 1968 then the value of the plaintiff’s reversionary interest was not more than £1,200 approximately. This follows from the actuarial evidence called by the plaintiff which values the reversionary interest at about 23% of the vacant possession market value. I conclude therefore that the plaintiff did not sell at an undervalue. This conclusion gets some support from the fact that at no time after the bargain did the plaintiff suggest that it was a bad one. I appreciate that from 1968 onwards his health was deteriorating, but he was in the auctioneering business (albeit on the machine-sales side of it) and would have had a good idea of land values in the Finglas area and I think that if the plaintiff had believed that he had made a bad bargain notwithstanding his worsening condition he would have mentioned it to either his uncle or his aunt (with whom he had remained on very good terms) or to his solicitor with whom he had regular dealings. I should add that in reaching the conclusion which I have just stated I have not overlooked the fact that the sale was by a reversioner to the life tenant and that a vendor in such a position might expect to get an enhanced price from such a purchaser. But I do not consider that in the present case this is a factor which establishes that the sale was at an undervalue, as the life tenant was not a particularly eager purchaser: therefore when considering the price he paid I am satisfied to be guided by Mr Ganly’s figures.
I turn now from the facts of the case to the law. As I have already pointed out various equitable principles have been relied on to defeat the 1968 sale and 1973 transfer. For reasons which will become clear later, I will defer dealing with the undue influence claim until I have firstly considered the relevant principles applicable by reason of the fact that the transaction between the plaintiff and the defendant was a sale by a cestui que trust to a trustee.
I start by taking the following statement from Lewin on Trusts (16th ed. p 697-698):
“While a purchase by a trustee conducting the sale, either personally or by his agent, cannot stand, a purchase by a trustee from a cestui que trust of the interest of the latter in the trust may stand, if the trustee can show that the fullest information, and every advantage were given to the cestui que trust. However, a purchase by a trustee from his cestui que trust is at all times a transaction of great nicety, and one which the Courts will watch with the utmost jealousy and will set aside if the consideration was insufficient.”
One of the authorities relied on to support the statement which I have just quoted is Denton v Donner 23 Beav 290. This was a case in which the plaintiff sought to set aside a sale of his remainder interest to the defendant, to whom he owed money on foot of a mortgage. The Court held that in the particular circumstances of the case the defendant was in the position of a trustee and the Court had to consider what, as such trustee his duties were. Romilly MR pointed out (p 290):
“No doubt where a person is a trustee for sale, and he sells the estate to himself, the transaction is absolutely and ipso facto void, but if a trustee purchases from his cestui que trust his reversionary interest which he is liable to pay, I do not assert it is absolutely void, but certainly the burden of proof lies on the trustee to show that every possible security and advantage were given to the cestui que trust, and that as much as possible was gained for him in the transaction, as he could have gained under any other circumstances. There is in this respect, an absence which is strongly unfavourable to the defendant. It does not appear that any estimate was made of the value of this reversionary property for the purpose of the sale. If it was intended to be sold, the plaintiff ought to have been told what was the value, and the estimate that had been made of the value of the reversion of this property.
… I think the burden of proof necessary falls upon the defendant to show the bona fides of the transaction throughout, and that everything was done for the plaintiff which could have been done if the property had been sold to a stranger, and that the utmost that could possibly have been produced was obtained.”
In addition to these authorities I should refer to a recent decision of the Court of Appeal in England on which Mr O’Hanlon relied. Lloyds Bank v Bundy (1975) 1 QB 326 concerned the validity of a guarantee and charge given by an elderly farmer in relation to a company owned by his son. The Court held that in the particular circumstances of the case a fiduciary relationship existed between the Bank and the defendant (against whom proceedings for possession had been taken on foot of the charge); that the defendant had reposed confidence in the Bank and as a result the Bank had a duty of care towards the defendant; that in the particular circumstances of the case that duty imposed an obligation on the Bank to ensure that the defendant had the benefit of independent legal advice: that it had been guilty of breach of that duty. The charge and guarantee were set aside, the Court holding that the absence of independent legal advice resulted in the transaction being voidable on the ground of undue influence. I am prepared to hold for the purposes of the present case that there may be circumstances in which a breach by a trustee-purchaser of a duty to ensure that the cestui que trust had obtained independent professional advice would justify the court in setting aside a sale by a cestui que trust apart from any question of undue influence that may arise in the case. I will now consider whether the present is such a case.
The authorities which I have quoted make it clear that the onus of proving the bona fides of the transaction I am considering is on the defendant, and that I am required to examine it with very great care for the purpose of ascertaining whether any unfair advantage was taken by the defendant in his dealings with the plaintiff. I am required to consider the particular duties which the defendant owed to the plaintiff in the circumstances of the fiduciary relationship which existed between the parties and to ascertain whether that duty was breached by the defendant. The findings of fact which I have made (arrived at by bearing in mind where the onus of proof lay in this case) enable me to reach the following conclusions on this part of the case. The defendant paid what he considered was a fair price for the land; and the price was in fact a fair one. The defendant had no special knowledge about its value of which the plaintiff was ignorant, and he made no effort either to take advantage of his special position as trustee of the plaintiff’s property or to influence the plaintiff’s decision to sell. What remains, however, to be considered (and this is perhaps the second most difficult aspect of the case) is whether the defendant owed a duty to the plaintiff to ensure that he obtained professional advice of some sort before he entered into the purchase agreement with him. The plaintiff was a young man of only twenty-three; the bargain was struck in a very casual and informal way. But it is clear that the parties envisaged that a formal contract would be required and the defendant was aware that the plaintiff would have available to him the advice of a solicitor before the formal contract was executed. This case is, therefore, different from those cases (including Bundy) in which the impugned transaction was completed before any professional advice was available to the grantor of the advantage contained in it. In this case the plaintiff had available to him the benefit of Mr Mathews’s advice before he signed the contract. Is the defendant’s duty affected by the fact that Mr Mathews acted for both the defendant and the plaintiff? In other words, should the defendant have ensured that the plaintiff had independent legal advice? I do not think he was so obliged. It is of course clear that the defendant gave no thought to the notion that he should advise his nephew to get separate advice, but if he had, I think he would have been entitled to conclude not only that Mr Mathews was an experienced solicitor but that if he (Mr Mathews) considered that separate advice was necessary he would have so advised the plaintiff. That brings me to Mr Mathews’s duties and responsibilities. There is no doubt that Mr Mathews’s double role would have imposed on him a duty to inform the plaintiff of the necessity to get independent advice if he thought that a conflict of interest existed. If he failed in this duty the defendant would be liable for it. Naturally, Mr Mathews cannot recall what precisely was in his mind ten years ago, but I think I am entitled to conclude that if he considered that a conflict had existed he would have advised the plaintiff accordingly. Mr Mathews had acted in the administration of the estate of which the lands formed part. He says that he would have been aware of its value sworn for probate purposes (£2,400) and that if he had considered the transaction an improvident one from the plaintiff’s point of view he believes he would have said so. I accept this evidence, and I conclude that in the particular circumstances of this case there was in fact no duty on the defendant or his agent (Mr Mathews) to advise the plaintiff to obtain the advice of an independent solicitor. Nor were either under a duty to advise an independent valuation prior to execution of the formal contract. The defendant and Mr Mathews thought the price a fair one and in my view they were right.
The deed of transfer was not executed until August 1973 at which time, of course, the value of the land had greatly increased. This fact would have been known to the defendant but I do not think it affects in any way his duty to the plaintiff. If a valid contract had been entered into in 1968 the plaintiff was legally bound by it, and the delay in completion did not impose any new obligations on the defendant.
I will now deal with the plaintiff’s claim that the transaction is vitiated by the undue influence exercised by the defendant over him. This I can do shortly. The findings of fact which I made, make it clear that the defendant did not in fact attempt to influence the plaintiff’s decision to sell, and that this decision was arrived at freely by the plaintiff. But it has been urged in this case that the relationship of trustee and cestui que trust is one of those fiduciary relationships which give rise to a presumption of undue influence and that this presumption operates to defeat the sale I am considering. I am quite satisfied that the presumption of undue influence does arise in the present case. I am equally satisfied that it is one which can be rebutted (see for example decision of Black J Provincial Bank v McKeever [1941] IR 471: and Gavan Duffy J Grealish v Murphy [1946] IR 35) and that it has been rebutted in this case. The test applied by Mr Justice Budd (In Gregg v Kidd [1956] IR 183) was to ascertain whether the gift he was considering had resulted from the free exercise of the donor’s will. Applying that test to the present case the evidence satisfies me that the plaintiff freely and with an independent will entered into the bargain with the defendant. It is, however, argued that even if this were so his judgment was not an “informed judgment”, because of the failure of the defendant to ensure that the plaintiff had independent professional advice. It is submitted that I should apply the principles enunciated by the Court of Appeal in England in Bundy and hold that this failure rendered the transaction voidable by reason of the doctrine of undue influence. I have already decided that the defendant was not required to ensure that the plaintiff obtained independent professional advice. It is unnecessary for me to consider whether if he was so required, this would render the translation invalid for undue influence as well as by virtue of the equitable principles relating to purchases by trustees from cestui que trusts. I should add that when the presumption of undue influence arises the absence of independent professional advice does not necessarily render the transaction invalid and draw attention to a recent example of the application of this principle in England (see In re Brocklehurst’s Estate (1977) 3 WLR 696.). The claim of undue influence therefore fails.
Finally, I should refer to the submissions that the transaction in this case attracts the equitable principles relating to unconscionable bargains. This submission can be considered under two separate headings. As pointed out by Mr Justice Gavan Duffy in Grealish v Murphy [1946] IR at p 49. Equity comes to the rescue whenever the parties to a contract have not met on equal terms and if it is shown that an infirm grantor could not adequately protect himself the Court will inquire whether he was given the protection which was his due by reason of his infirmity. I have, however, already recorded my conclusion that the plaintiff was not suffering from any physical or mental infirmity when the agreement was entered into in 1968 such as would attract the equitable doctrine to which I have referred. It is true that in 1973 when the transfer was executed the plaintiff’s health had seriously deteriorated – he was by then an alcoholic. But if the agreement he had earlier entered into was a legally valid one the subsequent deterioration in his health would not invalidate it, or entitle him to set aside the deed of transfer which it was his legal obligation to execute. Secondly, under the heading of unconscionable bargains, Equity will set aside sales by reversioners in certain circumstances. But the sale in this case was not at an undervalue, nor in the light of the findings of fact I have already made could it otherwise be regarded as unconscionable.
The result, therefore, is that the various attacks mounted on the transaction I have considered fail and I must dismiss this claim.
Re Blake
[1955] IR 89 .
Dixon J: The first question arising in this case is whether the conditions attached to the trusts in favour of the infant defendants (the children of the deceased’s daughter, Mary Rosamund) in respect of the income and capital of the “trust legacy” of £6,000 bequeathed by the will are void for uncertainty or as being contrary to public policy or for any other reason. This legacy was given by the will in these terms:
“I bequeath a sum of £6,000 to my trustees upon the trusts and with and subject to the powers and provisions hereinafter expressed that is to say my trustees shall invest the said sum of £6,000 with power to vary the investment thereof and shall stand possessed thereof and of the investments representing the same (hereinafter called ‘the trust legacy’) in trust to apply the income thereof for or towards the maintenance and education of the children of my daughter Mary Rosamund provided they shall be brought up in the Roman Catholic faith and subject to the application of the said income in trust for all the children of my said daughter Mary Rosamund provided they shall have been brought up in the Roman Catholic faith who being sons attain the age of twenty-one years or being daughters attain that age or marry under that age in equal shares and if there shall be only one such child the whole to be for that one and if the said children shall not be brought up in the Roman Catholic faith and no one of them shall live to attain a vested interest in the trust legacy the same shall fall into my residuary estate.”
At the date of the will, the testator’s daughter had been already married to a member of the Church of Ireland and since her marriage has adhered to that church. There are three infant children of the marriage, all of whom have been baptised as members of the Church of Ireland. All the children were born in the lifetime of the testator, two of them before the date of the will. The present position is that the daughter and her husband have brought up their children in the Church of Ireland and it is not their intention to make any change in that respect. The children are now aged ten, seven and three years respectively.
I do not think there is any uncertainty about the requirement that a child should be brought up or should have been brought up in the Roman Catholic faith. Analogous expressions have been considered in several cases and it was not held that there was insufficient certainty in ascertaining the meaning of such phrases as “be a Roman Catholic”: In re May; Eggar v May [1932] 1 Ch 99; “become a convert to the Roman Catholic religion”: In re Evans; Hewitt v Edwards [1940] 1 Ch 629; “marry a Roman Catholic”: In re McKenna, Higgins and Others v Bank of Ireland and Others [1947] IR 277 “become a Roman Catholic”: McCausland and Others v Young and Others [1949] NI 49. In the last-mentioned case, the Court of Appeal in Northern Ireland was considering the terms of a settlement but the words of Andrews LCJ (at p 57) as to ascertaining the meaning of the expressions used by the settlor are fully as apt in the case of a will: “Why should they not bear the meaning in which they would naturally be used by the settlor – the meaning assigned to them in ordinary every-day speech?”
The expressions used in the will in this case, and those used in the wills considered in the cases just cited, do not suffer from the ambiguity inherent in the use of phrases such as “be openly or avowedly Protestant”: In re Borwick; Borwick v Borwick [1933] 1 Ch 657; “at all times conform to and be members of the Established Church of England”: Re Tegg, Public Trustee v Bryent [1936] 2 All ER 878; “cease to practise the Roman Catholic religion”: Burke and O’Reilly v Burke and Quail [1951] IR 216. There is a subjective element latent in such conditions which is, I think, absent in the requirement in the present case. Nothing active is required of the children and they do not have to hold or profess any particular beliefs. What is required is that they should be brought up in the Roman Catholic faith – a matter for those responsible for their religious education while under age. If the children are baptised and received into the Roman Catholic Church, receive the appropriate instruction and fulfil, so far as it can be secured, their appropriate religious duties, I do not think there could be any doubt, in the mind of any reasonable person, that that is what the testator contemplated by the words he used. I feel I may echo, and apply to the present case, the very cogent observations of Gavan Duffy P in considering the expression “shall marry a Roman Catholic,” in In re McKenna, Higgins and Others v Bank of Ireland and Others [1947] IR 277, at p 285:
“I have only to construe the plain words used by a plain man in a sense plain to all of us; and I shall not make the law justly ridiculous in the eyes of persons of common sense by declaring a current expression, which the People knows and understands, to be unintelligible in the High Court of Justice in Ireland.”
It is true that it can be plausibly suggested that there might be uncertainty in particular circumstances, for example, while any child was too young to understand or profit by any form of religious instruction or where the instruction had only been intermittent or had not extended over the whole period of minority, any such difficulties, however, seem to me to relate to the ascertainment of whether the intention of the testator had been fulfilled rather than to any uncertainty in that intention. It is significant that the parents of the children evidently felt that there was no difficulty or ambiguity in their stating to their solicitor that their children had been brought up in the Church of Ireland, although two of the children are now only aged seven and three respectively. A Court which had to consider the matter would probably take the view that, so far as the gift of the capital was concerned, the process of bringing up the children in the Roman Catholic faith was one which at least required to be in operation at the time of each child attaining his or her majority, but, subject to that, any difficulties in determining the question would be merely those created to some special or peculiar circumstances. Again, it has to be borne in mind that each requirement, so far as it is a condition, is in the nature of a condition precedent rather than a condition subsequent; and it was laid down in England by the Court of Appeal in In re Allen, Deceased, Faith v Allen [1953] 1 Ch 810, that in the case of a condition precedent or a qualification it was not necessary that its scope should be capable of exact definition. All that a claimant had to show was that he, at least, was within the requirement. This is a view which I respectfully adopt. Accordingly, in my view, neither requirement in the present case is void for uncertainty.
The testator’s intention is manifest. He wished to secure, so far as the promise or gift of his bounty could do so, that his grandchildren should be brought up in the Roman Catholic faith and that only those grandchildren who were so brought up should benefit either during their minority or on coming of age. To take the last event first, there is only a gift of the capital to those who shall have been brought up in that faith. I am not at the moment concerned with the ambiguity that the gift is to “all the children” provided they shall have been so brought up, and that questions might arise as to the proper interpretation if only one or some of the children qualified for the gift, although I hardly think a Court would find these questions insoluble. A more fundamental difficulty arises from the nature of the condition itself. No child can take a vested interest in the capital unless the prescribed condition is fulfilled and this indicates the nature of it as being a condition precedent or a qualification antecedent to taking any benefit. No question of a voluntary choice or election on the part of the children arises, since the condition must be fulfilled at latest at the attainment of twenty-one years of age, that is, before any child would be legally capable of making a binding choice or election. This circumstance distinguishes the case from those in which an election was required of a minor and the requirement was held either not to be binding during minority or to be capable of being postponed until majority. Examples are In re May [1917] 2 Ch 126; [1932] 1 Ch 99; McCausland and Others v Young and Others [1949] NI 49. What is involved in the present case is that the parents or other persons responsible for the upbringing of the children should have brought up the children in the Roman Catholic faith, irrespective of any independent volition on the part of the children and irrespective of the degree of success achieved in such upbringing. The testator was evidently sufficiently confident of the result of such upbringing not to impose any penalty, by way of defeasance or forfeiture – as was attempted to be done in many cases – if any child, after attaining the age of choice, changed his religion or ceased to practise or profess the religion in which he was brought up. As already pointed out, the testator was fully aware of the circumstances of his daughter’s marriage and of the birth and baptism of two of his grandchildren, at the date of his will; and he must be taken to have made his will in the light of those circumstances.
Given the natural desire of parents to secure the welfare and material prosperity of their children, a provision such as the present could only operate, and be intended to operate, as an inducement to the parents and a form of indirect pressure on them to change the religion of their children from that which they themselves professed or had adopted and in which they had baptised the children. Similar provisions have been considered in a number of cases and have been held void as being contrary to public policy in tending to interfere with the parental right and duty of providing for and prescribing the manner of education, including the religious instruction, of children. This view was taken by Bennett J in In re Borwick; Borwick v Borwick [1933] 1 Ch 657. An earlier case, which he followed, was In re Sandbrook, Noel v Sandbrook [1912] 2 Ch 471, a decision of Parker J. There, the condition was directed against the children living with their father and it was held void because it was inserted with the object of deterring the father from performing his parental duties. Another example of an analogous provision was In re Boulter; Capital and Counties Bank v Boulter [1922] 1 Ch 75, where Sargant J held a condition against living abroad void as being against public policy in tending to the possible separation of the parents from their children. A more recent example was Re Tegg, Public Trustee v Bryant [1936] 2 All ER 878, where Farwell J held that a condition aimed at preventing the children being sent to any Roman Catholic school was void as being a fetter upon the right of the mother to do what she might think best for the welfare and education of her children. See also Re Piper [1946] 2 All ER 503, referred to later. While I accept and respectfully adopt the reasoning and conclusions in these cases, I have no need to have recourse to them, as the same result would follow from a recent decision of Gavan Duffy P in our own Courts – the only case here to which I was referred – that seems to have touched on the point. This was Burke and O’Reilly v Burke and Quail [1951] IR 216, where the learned President held that a direction in a will that the selection of a school should be in the absolute discretion of the trustees was inoperative and must be ignored since it tended to override the parental authority and right and duty of education declared by Article 42 of the Constitution.
This Article puts the matter on a different and higher plane in this country, as the parental right and duty is declared and guaranteed by our fundamental law. Under it, the State “guarantees to respect the inalienable right and duty of parents to provide, according to their means, for the religious and moral, intellectual, physical and social education of their children.” It is clear that any attempt to restrict or fetter that right would be contrary to the solemnly declared policy and conceptions of the community as a whole and therefore such as the Courts established under that Constitution could not and would not lend their aid to. The provision in the will that the children to benefit should have been brought up in the Roman Catholic faith is, therefore, void as against public policy and cannot be given effect to. It is hardly necessary to add that this principle applies and must be applied irrespective of the particular religion involved.
It makes no difference, in my opinion, to this view whether the provision in the will as to the capital is called a condition precedent or a qualification. If it is regarded as a qualification, in the sense that the claimant to the capital must show at the prescribed age that he answers the particular description, this involves that, during all or some of the period when the matter was one for his parents and not for himself, he had been brought up in the Roman Catholic faith.
If the condition is void, is the gift void also or can it be allowed to take effect, whether the condition is fulfilled or not? Can the condition be simply disregarded, as could be done in the case of a void condition subsequent intended to operate by way of defeating or divesting, upon the happening of a given event, a previously vested interest? As pointed out by Gavan Duffy P In Burke’s Case [1951] IR 216, at p 224, a condition precedent is one which must be fulfilled before the gift can take effect at all and a gift made subject to a condition precedent fails altogether, as a rule, if the condition is found to be void. The use of the words, “as a rule,” in this passage may have been intended to leave open the possibility of there being an exception to the rule – the point did not arise for decision in Burke’s Case [1951] IR 216 – and it has been argued in the present case that the gift in question here belongs to an exceptional class which the law allows to take effect notwithstanding the general rule. Before dealing with this question, I think it preferable to consider the provision in the will as to the application of the income of the property during the minority of the children.
The intention and effect of this provision seems to be that the income should be applied for the maintenance and education of the children so long as they are being brought up in the Roman Catholic faith and only so long as they are being so brought up. That seems to me to be the plain, ordinary meaning of the words used by the testator. It is implicit in them that before the income should be so applied it should be reasonably clear to the trustees that the children were being so brought up. It is, I think, also implicit that should it become equally clear to the trustees that there had been any fundamental or radical change in the religious upbringing of the children, the income should cease to be so applied. The provision would, thus, imply something in the nature of a series of intermittent or alternating conditions precedent and conditions subsequent, but such a series has never received legal recognition. The true view, I think, is that the provision constitutes a limitation of the income for the benefit of the children during a specified period or specific periods, that is, so long as the children are being brought up in the specified faith. Here, however, the element of an unlawful attempt to dictate the religious education of the children and to trammel the exclusive responsibility of the parents again obtrudes, and again it is an attempt which the Court will not aid. It was clearly not the intention of the testator that the income should be applied for the benefit of the children unless they were being brought up as he desired, and therefore they cannot have the income during the whole of their minority on the basis of disregarding his definition of the period of enjoyment except so far as it contemplated minority. This would not only disregard that definition and turn a limited gift into an unqualified one but would defeat his clear wishes. A similar question arose before and was decided by the Court of Appeal in England in In re Moore; Trafford v Maconochie 39 Ch D 116. There the testator had made provision for a weekly payment to his sister during such time as she might live apart from her husband, and it was held that the payments were to be made during a period the commencement and duration of which were fixed in a way which the law does not allow and the gift was void. The principle and authority of this decision were not questioned by PO Lawrence J in In re Lovell, Sparks v Southall [1920] 1 Ch 122, but he distinguished it on the ground that, in the case before him, the husband and wife were already separated at the date of the will and the bequest by the testator was intended to provide for the wife while so separated rather than to induce her to live apart from her husband, which would have conflicted with public policy.
I am of opinion, therefore, that the gift of the income fails by reason of the manner in which it is limited being contrary to public policy.
It is necessary now to return to the question whether the gift of the capital also fails, the condition upon which it depends being void. If it does not, the curious result would ensue that, by some over-refinement of the law, the children would become entitled to the capital, but not to the income, in circumstances in which it appears reasonably plain the testator never intended them to have either. I have no hesitation in saying that I should require to feel coerced by the weight and logic of an argument to this effect, before I would subscribe to such an absurd result, involving, as it would, disregarding or paying the merest lip-service to the consideration that the object of these proceedings, and the Court’s function, is to endeavour to ascertain, and, so far as legally possible, to carry out the intentions of the testator as to the disposal of his property after his death.
The argument, for which some judicial sanction can be shown, is that there is an exception to the general rule of a gift dependent on a void condition precedent being also void where the condition contemplates or requires something which is malum prohibitum as opposed to something which is malum in se. This is a curious and somewhat pedantic distinction to introduce in ascertaining the wishes of testators who, in the vast majority of cases, would be quite unaware of the existence of the distinction and, even if they were aware of it, might be unable to obtain from lawyers any very precise idea of the nature and limits of the distinction. I feel I am entitled to say this because I have the authority of an eminent, contemporary English judge in a recent case on the topic. This is Re Piper [1946] 2 All ER 503, where Romer J said (at p 505): “The difference between malum prohibitum and malum in se has never been very precisely defined or considered.” Notwithstanding this uncertainty, he felt satisfied that the condition in question in the case before him – directed against children residing with their father – was malum prohibitum and not malum in se with the result that the gift took effect freed and discharged from the void condition. For the principle involved, he relied on a passage in Jarman on Wills (7th ed Vol 2, at p 1443) which was also relied on in other recent cases on the matter and which states the proposition in these terms:
“… the civil law, which in this respect has been adopted by courts of equity, differs in some respects from the common law in its treatment of conditions precedent; the rule of the civil law being that where a condition precedent is originally impossible, or is illegal as involving malum prohibitum, the bequest is absolute, just as if the condition had been subsequent. But where the performance of the condition is the sole motive of the bequest, or its impossibility was unknown to the testator, or the condition which was possible in its creation has since become impossible by the act of God, or where it is illegal as involving malum in se, in these cases the civil agrees with the common law in holding both gift and condition void.”
Romer J also derived assistance from a passage in Sheppard’s Touchstone (Vol 1, at p 132) which he quoted and which may be quoted here, before returning to the passage from Jarman. It is as follows:
“All conditions annexed to estates, being compulsory, to compel a man to do any thing that is in its nature good or indifferent; or being restrictive, to restrain or forbid the doing of anything, in its nature, is malum in se, as to kill a man, or the like; or malum prohibitum, being a thing prohibited by any statute, or the like; all such conditions are good, and may stand with the estates. But if the matter of the condition tend to provoke or further the doing of some unlawful act, or to restrain or forbid a man the doing of his duty, the condition for the most part is void.”
I must confess I can derive no assistance whatever from this last passage on the question I am now concerned with, possibly because it does not seem to be concerned with that question. As I understand it, the author was distinguishing between conditions which were good from those which were “for the most part” void. In the former class he placed together those restraining or forbidding either mala prohibita or mala in se, thus treating the matter from the point of view of negative conditions. He was not considering at all the question of positive conditions directed to the procurement of either type of malum, nor was he considering the effect of a condition being void on the validity of the gift dependent on it. He says nothing as to this last matter and it is unlikely that he intended to convey any distinction in this respect, as the reference to “estates” suggests that he was dealing with devises of real property where the rule seems to be invariable that if the condition, being a condition precedent, is void, the devise is void. The passage is of some help as to the difference between the two types of mala, although, even here, the qualification imported in each case by the use of the words, “or the like,” detracts from precision.
The passage from Jarman already quoted appears to depend in the main, as to some of the later cases, on the authority of Reynish v Martin 3 Atk 330, a decision of Lord Chancellor Hardwicke in reference to a legacy given to a daughter on condition of her marrying with the consent of trustees and in which he held that the legacy held good although she had married without consent. He first considered the matter as a personal legacy to be paid out of the personal estate only and said (at p 331):
“I apprehend that taking this as a mere personal legacy, the plaintiff by the rules of the civil and ecclesiastical law, and which have been constantly adhered to in this court, will be entitled to the legacy; for it is an established rule in the civil law, and has long been the doctrine of this court, that where a personal legacy is given to a child on condition of marrying with consent, that this is not looked on as a condition annexed to the legacy, but as a declaration of the testator in terrorem.”
This passage shows a sufficient ground for the decision and, to that extent, renders the subsequent passage, on the question in issue, obiter. This later passage, after referring to the difference in effect of a condition precedent being void and of a condition subsequent being void, continues:
“but this difference only holds where the legacy is a charge on the real assets, and therefore, if this had been merely a personal legacy, I should have been of opinion that as the marriage without consent would not have precluded Mary of her right to this legacy in the ecclesiastical court, no more would it have done so here; and to this purpose several cases were cited, which are taken notice of in the case of Harvey v Aston 1 Atk 361, and which I shall not repeat, but refer to that case for them.”
This reference to Harvey v Aston 1 Atk 361 is significant as that case dealt only with conditions and limitations concerned with marriage with consent, and it shows as the passage itself would suggest, that the Lord Chancellor was not dealing with any wider question. The remainder of his judgment dealt with the question whether on the terms of the will, the legacy was a charge on the real estate, and having found that it was not, he concluded: “this case must be considered as a mere personal legacy, and as such to be governed by the rules of the civil and ecclesiastical law.”
Reynish v Martin 3 Atk 330, therefore, appears to be no more than authority for the proposition that, in the case of a personal legacy subject to a condition precedent as to marriage with consent, the legacy is not avoided by breach of the condition where there is no gift over. There is no reference anywhere in the case to malum prohibitum or malum in se.
Neither is there any such reference in the case of Brown v Peck 1 Eden 140, which is cited as an authority in Roper on Legacies for the proposition which is relied on in support of the present argument. This is as follows (4th ed, at p 757):
“When, however, the illegality of the condition does not concern anything malum in se, but is merely against a rule or the policy of law, the condition only is void, and the bequest single and good; for the condition not being lawful, it is held in the phrase of the Civil law pro non adjecta.”
As he had been speaking, in the preceding paragraph, of a condition precedent requiring the performance of an act malum in se, a cursory reading of the passage cited might suggest that he was there dealing with mala prohibita, as being the natural opposition to mala in se. Closer attention to it, however, makes it, I think, plain that this was not the meaning or intention of the passage. If this particular distinction had been intended, the learned author would probably have expressed it with his usual clarity. Instead he referred to things “merely against a rule or the policy of law.” Such things are not necessarily mala prohibita (they are, in my view, entirely different) and it seems highly unlikely that the author intended to suggest that they were the same. By referring to the conditions as not being lawful, he may have meant no more than that they were unenforceable. This view of the passage is reinforced by turning to the case of Brown v Peck 1 Eden 140 itself, where it will be found that the decision was that a condition as to a married woman living apart from her husband was contra bonos mores and void but the gift dependent on it was good. There is, quite understandably, no reference in it to mala either prohibita or in se, the condition belonging to neither category.
If Brown v Peck 1 Eden 140 is an authority for anything, it is for the proposition that, if a condition precedent attached to a personal legacy is void as being against public policy, the gift may still be good. It is, however, a very doubtful authority. The report is short and not too easy to follow and it was subjected to some criticism by the Court of Appeal in In re Moore; Trafford v Maconochie 39 Ch D 116, already referred to. Cotton LJ (at p 129) said that “the report is not clear either as regards the facts or the principle laid down”; and Bowen LJ (at p 132) said it “appears to have been compromised after an expression of opinion by the Court.” In the Court of first instance in In re Moore 39 Ch D 116, Kay J had said (at p 124) of it and of Wren v Bradley 2 De G & Sm 49: “I confess that I find it difficult to understand these two decisions”; and I respectfully echo his words. The latter case – Wren v Bradley 2 De G & Sm 49 – was interpreted by the Court of Appeal as having being a decision on the basis of the condition being a condition subsequent and therefore inapplicable in the case before them as it is also, for the same reason, inapplicable in the present case. Brown v Peck 1 Eden 140 I regard as too obscure and doubtful a case to follow.
The proposition contended for has, as we have seen, been adopted in Re Piper [1946] 2 All ER 503, already referred to, and also in a later case of In re Elliott, Deceased [1952] 1 Ch 217, decided by Harman J. Neither of these cases is, of course, binding on me although entitled to the greatest respect as persuasive authorities. In In re Elliott, Deceased [1952] 1 Ch 217, Harman J decided that a bequest of personalty subject to an illegal condition precedent is void if the condition be malum in se, but if the condition be only malum prohibitum, the bequest will be effective and unfettered by the condition; and this is a clear statement of the principle contended for in the present case. In that case, the condition offended against the rule against perpetuities and Harman J held that this was malum prohibitum. He took the view that the principle he enunciated had been imported into equity from the civil law on the authority of Reynish v Martin 3 Atk 330, quoted and accepted by Bowen LJ in In re Moore 39 Ch D 116 at p 131. I have already suggested that Reynish v Martin 3 Atk 330 is not an authority for this proposition; and the Court of Appeal decided In re Moore 39 Ch D 116 on the ground that they were concerned with a limitation and that, if any such principle applied in the case of a condition, it did not apply to a limitation: see Cotton LJ at p 129. What Bowen LJ said, as to the matter, was (at p 131): “Accepting that as law with respect to legacies of personal estate on a condition, the question remains whether this is a legacy on a condition”; and he found that it was, instead a limitation. I do not think therefore that In re Moore 39 Ch D 116 could be rightly regarded as adopting or approving the supposed principle. It is difficult to see why, if a limitation which is contrary to public policy avoids a gift, a condition which is contrary to public policy should not do so also. It was however, sufficient for the decision in In re Moore 39 Ch D 116 that the provision was found to be a limitation. Harman J in In re Elliott, Deceased [1952] 1 Ch 217, may possibly have intended to convey some doubt on the matter in his own mind by saying (at p 222) : “… if this doctrine of the civil law has been imported into the English law, the condition can be disregarded.” He then went on to say: “Mr Roper is of the opinion that this rule was imported into equity …”; and he referred to Reynish v Martin 3 Atk 330 and In re Moore 39 Ch D 116. As has been seen, the basis of Roper’s assertion was Brown v Peck 1 Eden 140.
I have devoted some time to this question because of the support to be apparently found for the proposition in textbooks and in high judicial decision; but there is a more fundamental consideration which would have disposed of the matter, in my view, more shortly, if it had not been for the decisions referred to. This is the question whether, assuming the proposition to be sound, the provision in question here is malum in se or malum prohibitum or neither. In my view it is neither. As already noted, the precise nature of the distinction is somewhat indefinite and elusive, but it seems reasonably certain that it is a distinction between different types of crime or offence according to the origin of their sanction. Thus, Holland, Jurisprudence (7th ed., p 34), says: “Acts prohibited by positive law, but not by the so-called natural law, are said to be ‘mala prohibita,’ not ‘mala in se.’ Thus a government may find it expedient to forbid certain acts, such as the planting of tobacco, which are not regarded as odious by the public sentiment.” Byrne, Law Dictionary, says: “Mala in se are acts which are wrong in themselves, such as murder, as opposed to mala prohibita (mala quia prohibita), that is to say, those acts (such as smuggling) which are only wrong because they are prohibited by law.”
Cf the passage already quoted from Sheppard’s Touchstone, where malum prohibitum is referred to as “a thing forbidden by any statute, or the like.” This limitation in scope of the distinction is borne out by recalling the matters in which the distinction was or might be of any importance. These appear to be chiefly the question of ambassadorial exemption from criminal process and the question of the degree of mens rea requisite in the case of some offences.
An attempt to influence or fetter parents in their discretion as to the choice of religion and religious instruction for their children is not, so far as I am aware, a crime or offence of any kind. It is simply opposed to the policy of the law – now written into the fundamental law of this country. What this means was pointed out by Kekewich J in Re Hope Johnstone; Hope Johnstone v Hope Johnstone [1940] 1 Ch 470, p 479 – and quoted by Romer J in Re Piper [1946] 2 All ER 503 at p 505 – in these words: “The phrase means no more than that and the provision is not enforceable by anyone or in any court.”
So far, therefore, as the contention depends on the provision belonging to one branch rather than the other of this archaic distinction, I am of opinion that the contention fails for the reason that the provision belongs to neither branch. Could it, however, be said that the proposition has validity if it were put in a different ways namely that, if a condition precedent is contrary to public policy, a gift of personalty dependent on the condition is nevertheless good? This might be the meaning of Brown v Peck 1 Eden 140, in which the condition was stated to be contra bonos mores, and it seems to be the approach to the matter of Kay J in In re Moore 39 Ch D 116, at p 122, where he quoted from Swinburne on Wills and, later, refers to “the doctrine that conditions precedent as well as conditions subsequent which are against the policy of the law are treated as void in cases of legacies of personal estate, and that the legacy ‘stands pure and simple’”. He quotes the second of Swinburne’s four classes of impossible conditions, being those “which be contrary to law or good manners” and the two examples, respectively, given by Swinburne, ie, “if he murder such a man or deflower such a woman”; but he does not quote the next part of the sentence, which is: “this condition is unlawful and unhonest, and consequently to be deemed unpossible” (Part IV, s 5, para 8). Swinburne then states his rule that, with certain exceptions, when a condition is impossible the legacy may still be recovered; and proceeds to consider the exceptions. Amongst these occurs one set out in the following words (also quoted by Kay J):
“When the condition is both impossible and unhonest, for then the disposition is thereby void; and that in disfavour of the testator, who added such a condition. Whereas if the condition had been only impossible or unlawful, the disposition had been good, and that in favour of the testament.”
This last sentence is the only one that could possibly lend any support to the proposition now under consideration and such support would depend solely on the meaning to be given to the words “or unlawful” as used by the author. The disjunctive cannot have been intended to suggest an alternative to an impossible condition, as the whole section is only dealing with such conditions, and I confess I find it very hard to know what meaning could or should be given to the word, “unlawful.” The sense of the passage, taken as a whole, would have led one to expect an opposition between “impossible and unhonest” conditions on the one hand and “impossible but not unlawful” conditions on the other hand; but it would be rather late in the day now to suggest a typographical error in a work of such antiquity. Whatever the meaning of the words, there is a clear and unambiguous statement that the disposition is void when the condition is “impossible and unhonest”; and the earlier passage made it equally clear that Swinburne included in this category of condition one “contrary to good manners,” which is equivalent to one contra bonos mores or opposed to the policy of the law. The second example he gives also makes this clear, as it contemplates something which is not necessarily any crime or offence but merely disapproved by public morality. I cannot find, therefore, that Swinburne’s statement of what the ecclesiastical law was lends any support to the principle enunciated in Brown v Peck 1 Eden 140, or the cases which have followed or applied its supposed principle. Swinburne seems to me to be authority for the directly contrary proposition.
To summarise: the provisions in the will as to bringing up the children in the Roman Catholic faith are not too uncertain in their meaning not to be given effect to, if this were the only matter in issue. The phrase is one generally used and popularly understood, and an individual, or the Court if necessary, would not have too much difficulty in determining whether a particular child was being brought up or had been brought up in a particular faith. The provisions, however, constitute an attempt to interfere with or fetter the right and duty guaranteed to parents by the Constitution to provide for the education, including the religious education, of their children. As such, they are opposed to the policy of the law and cannot be enforced or given effect to in any Court in this country. Being, thus, void and unenforceable, the gifts, both of capital and income, dependent on their being carried out, are also void and enforceable. The gifts to the children therefore fail and the legacy falls into the residue of the estate.
In my view, the principle stated to have been imported from ecclesiastical law, that even though the condition upon which a legacy is given is contrary to public policy the legacy may still take effect, is not borne out by the authorities cited for it nor was it a rule of ecclesiastical law. If it had been part of ecclesiastical law, as applied to wills in the Church Courts in England, it might have been necessary to enquire as to when the principle was adopted, as those Courts retained a large part of their jurisdiction even after the Reformation and were not finally deprived of their temporal Jurisdiction in testamentary and other matters until 1857. Rules adopted or laid down during the last two centuries of the functioning of those Courts could not be accepted without question as part of the law of this country. No Irish case was cited, nor do I know of one, which decided the point at issue.
On another ground, if necessary, I should have been inclined to hold that, the condition being contrary to public policy, the bequest failed. This is that the performance of the condition was the sole motive of the bequest. This is an admitted exception to the supposed principle that the bequest may hold good. Reading the will as a whole, it is impossible to escape the conclusion that the paramount object of the testator, so far as his grandchildren were concerned, was that they should be brought up in his own faith and that only on that basis should they benefit. There is no indication that he intended them to benefit even if his wishes could not be carried out and, therefore, as the law will not enforce the condition, it would be defeating his real intention to uphold the gift while allowing the condition to be disregarded or rejected.
For these reasons, the gift fails.
The next question which arises is whether the pecuniary legacies are liable to pay the whole or any part of certain duties, in the nature of succession duty, payable to the dominion and a provincial government of Canada in respect of portion of the assets situate, at the death of the testator, in Canada. Some of these legacies were expressed to be left “free of legacy duty” but it was not disputed that, in the absence of any contrary indication in the will, this phrase must be taken to have been intended to refer only to the legacy duty payable in this country to our own Government. Accordingly, the use of these words does not affect the present question and all the pecuniary legacies are on the same footing as regards the foreign duties.
The general law as to the liability for such duties as between the different classes of beneficiaries under a will is stated by Jarman (8th ed. 1951 at p 1842) in these words: “In the absence of a contrary direction, local duties in respect of foreign property specifically devised or bequeathed are payable out of that property”; and again (at p 1892): “Testamentary expenses are expenses incident to the proper performance of the duty of an executor in connection with the personal estate, including the estate duty on personal property, the costs of proving the will, of obtaining legal advice as to the distribution of the estate, the expenses of ascertaining the person entitled to a legacy or specific fund, and the expenses of getting in property abroad.” It would seem to follow from these two passages that, except in the case of a specific bequest, foreign duties payable in respect of personal estate situated abroad are part of the testamentary expenses and payable out of the general personal estate in exoneration (except so far as the estate may prove insufficient and the legacies may have to abate) of the pecuniary legacies. Another way of viewing the matter, as a question of principle, is that the pecuniary legacies are payable (subject to bearing their own local duty) out of the general personal estate before the existence or amount of any residue can be ascertained. To make them liable for even a proportionate part of the foreign duties would put the residue on at least an equal footing with the legacies.
The statement quoted from Jarman is supported by the cases there cited of Peter v Stirling 10 Ch D 279 and Re Maurice 75 LT 415. The former case, which was not unlike the present, was considered and distinguished by Warrington J in In re Scott [1914] 1 Ch 847, at p 854, where he said:
“… when that case comes to be looked at it seems to me that it is not an authority for the proposition contended for here, which is that the duty payable on a specific legacy is to be treated as an expense incurred by the executors.”
He held that, in the case of a specific legacy, the duty was not such an expense, and pointed out that Malins VC had held in Peter v Stirling 10 Ch D 279 that the duties he was concerned with were part of the expenses which had to be incurred by the executors in getting in and repatriating the foreign assets to complete the total of the estate which they had to administer. Similarly, here, no specific bequests are involved and the pecuniary legacies are not given out of the Canadian assets as such or in any way by specific reference to them. If there were no pecuniary legacies, the executors would still be under the duty of getting in the Canadian assets and, in order to do so, paying whatever local duties had to be paid in respect of them.
It is clearly different in the case of a specific bequest, unless there is a deficiency of other assets to meet debts and other liabilities.
The authority of Peter v Stirling 10 Ch D 279 and Re Maurice 75 LT 415 was recognised in the latest case on the subject to which I was referred, a decision of the Court of Appeal in England in In re Goetze [1953] 1 Ch 96. This was a case in which the principle of those cases could possibly have been applied, but the Court arrived at the same result – the exoneration of the legatees and annuitants – by reason of the existence of a provision for double taxation relief. The Court did not profess to question or overrule the earlier cases. Jenkins LJ alone referred to the matter and he did so in these words (at p 113):
“… there is nothing in the judgment of Swinfen Eady J in In re Brewster [1908] 2 Ch 365 or of Warrington J. [1914] 1 Ch 847 or the Court of Appeal in In re Scott [1915] 1 Ch 592, to suggest that Peter v Stirling 10 Ch D 279 and In re Maurice 75 LT 415 were wrongly decided … As the point has not been argued in the present case, and if made good would lead to the same conclusion as I have reached on other grounds, I express no opinion about it one way or the other, but merely refer to it lest this judgment, which is framed in accordance with the arguments presented, should be regarded a simplicity concluding it if raised in any future case.”
Two other cases only need be mentioned, as they were relied on in argument In re Norbury [1939] 1 Ch 528, a decision of Bennett J, did not deal with a foreign tax payable in respect of the foreign assets of the deceased but with a personal tax payable by the beneficiary, by reason of his nationality, on succession. The other case – In re Cunliffe-Owen, Deceased [1951] 1 Ch 964, decided by Wynn-Parry J turned mainly on the special provision in the will in question there. There does not appear to be anything in it conflicting with the principle of the earlier cases but, if there is, I feel I should follow those cases. Accordingly, I hold that the pecuniary legacies are not liable to the foreign duties, these being an expense of administration.
The remaining question concerns an artificial category of “heirlooms” created by the testator in his will. These articles are not necessarily heirlooms in the accepted or established sense, the testator merely having indicated certain articles which he desired to be held and enjoyed as heirlooms, that is, with, and, so far as possible, on the same trusts as, the mansion house; and the only question is to what articles does this provision extend. The terms of the relevant provision are as follows: “I bequeath my gold whip and all my plate jewels, watches, pictures, glass, books and furniture which shall at my death be in or about my said capital messuage or mansion house called Ballyglunin Park or belong or be appropriated thereto unto my trustees in trust to permit the same to be held and enjoyed as heirlooms by the person or persons for the time being entitled to the said capital messuage or mansion house under the limitations of my will as nearly as the rules of law and equity will permit.” He has already devised this mansion house to his son for life and then in tail, and the intention was clearly that, so far as possible, the mansion house and its contents should be preserved and kept up as a family residence.
At first sight, a little difficulty is created by an earlier provision in the will, under which he bequeathed to his son “my wines liquors table and house linen and household effects other than those hereinafter bequeathed as heirlooms and all saleable stores and all livestock farming implements produce carts horses motor cars and all outdoor effects of every kind in or about or belonging to Ballyglunin Park, Brooklodge Demesne and Corbally North.” As the only dwelling is at Ballyglunin Park, the intention to limit the class of “heirlooms” to indoor articles in the mansion house is emphasised. The only apparent conflict is created by the reference to household effects, but it is not a real conflict, as these household effects are defined by way of exception, that is, the bequest is not of all the household effects but only of such household effects as are not bequeathed as heirlooms. The governing description, is therefore that of the “heirlooms” and this comprises several classes of articles, the widest of which is “furniture.” Even if the latter word were interpreted in a wide sense there would still be a residue of articles which would be household effects rather than furniture. The scheme of the will, however, suggests “furniture” is not to be given too wide an interpretation. The scheme seems to be to make an absolute bequest of articles which, by reason of their nature or of the effect of constant use, will be consumed nor will deteriorate comparatively quickly, such as the wines, linen, saleable stores and farm stock and equipment. The gift of “heirlooms” is of more durable articles. This is clear as to the gold whip and plate, jewels, watches and pictures. It is reasonable to take the view that the same approach was intended as to the glass, books and furniture, that these articles were only intended to be considered as heirlooms so far as they were more durable and permanent in character or had some special value either intrinsically or by association. An inventory has been prepared which includes a number of articles as to which there is a difference of opinion, but I do not propose to deal with the inventory in detail. I apprehend that, in the light of what I have indicated as being, in my view, the proper approach, there should not be any great difficulty in the parties interested making their own segregation. If a solution cannot be found as to any particular item or items, application can be made to the Court. The order will reserve liberty to apply.
Re Butterworth
(1882) 19 ChD 588
SIR GEORGE JESSEL MR: …The principle of Mackay v Douglas LR 14 Eq 106, and that line of cases, is this, that a man is not entitled to go into a hazardous business, and immediately before doing so settle all his property voluntarily, the object being this: ‘If I succeed in business, I make a fortune for myself. If I fail, I leave my creditors unpaid. They will bear the loss.’ That is the very thing which the statute of Elizabeth was meant to prevent. The object of the settler was to put his property out of the reach of his
future creditors. He contemplated engaging in this new trade and he wanted to preserve his property from his future creditors. That cannot be done by a voluntary settlement. That is, to my mind, a clear and satisfactory principle.
Now, as I understand the evidence in this case, the baker did very well as a baker, and probably he
may not have recollected the old proverb ne sutor ultra crepidam.When he went into business as a gro cer he was going into a business which it appears he did not understand, and it is obvious that the object was-(1am taking that as a fair inference)-to save his property for his wife and children in case the new business did not succeed. Well, that actually happened. The new business did not succeed; he lost money by it, and it probably brought him to bankruptcy.
His object was, as I have said, to make himself safe against that eventuality, and, if that was his object, then I think the principle of Mackay v Douglas applies, and that the deed was void also under the statute of Elizabeth. But, as I have said before, it is not really necessary to decide this point, because I am clearly of opinion that the deed is void under the 91st section of the Bankruptcy Act
Beckenham MC Ltd v Centralex Ltd
[2004] EWHC 1287
HART J: The respondents raise a number of points on the construction and effect of s 423 initsapplica tion to the case where the debtor (D) is trustee of property for another (B) and at B’s direction transfers the bare legal estate in the property for no consideration to a third party (T). The first is whether D has entered into a transaction at an undervalue within s 423(1) on the footing that it is a transaction “with
[T] on terms that provide for (DJ to receive no consideration” withins 423(1)(a). On the literal reading of s 423(1) he has. I see no reason not to apply the literal reading:the transaction will in the normal course be protected from attack by application of the conditions ins 423(2). Unless D’s creditor has for some reason a right to enforce against the trust property he will be unaffected by the transaction.[para. 23]
D’s creditor will have a right to enforce against the trust property in two possible situations.The first is where D has himself a right to be indemnified against his liability out of the trust property. The cred itor may then be entitled by subrogation to stand in the D’s shoes as against the trust property: see the cases discussed in Lewin on Trusts, 17th edition at pp. 543-546.The second is wheres 2(1 )(b)(i) of the Charging Orders Act 1979 applies. [para. 24] …
I turn therefore to s 2(1 )(b)(i) of the Charging Orders Act 1979. Section 2(1) provides so far as material asfollows-
“(1) … a charge may be imposed by a charging order only on
(a) any interest held by the debtor beneficially-
(i) in any asset of a kind mentioned in subsection (2) below, or
(ii) under any trust; or
(b) any interest held by a person as trustee of a trust (“the trust”), if the interest is in such an asset or is an interest under another trust and-
(i) the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust, or
(ii) the whole beneficial interest under the trust is held by the debtor unencumbered
and for his own benefit …”
Blathwayt v Baron Cawley
[1976] AC 397
LORD WILBERFORCE:…Finally, as to public policy. The argument under this heading was put in two alternative ways. First,it was said that the law of England was now set against discrimination on a num ber of grounds including religious grounds, and appeal was made to the Race Relations Act 1968 which does not refer to religion and to the European Convention of Human Rights of 1950 which refers to free dom of religion and to enjoyment of that freedom and other freedoms without discrimination on ground of religion. My Lords. I do not doubt that conceptions of public policy should move with the times and that widely accepted treaties and statutes may point the direction in which such concep tions, as applied by the courts, ought to move. It may well be that conditions such as this are, or at least are becoming, inconsistent with standards now widely accepted. But acceptance of this does not per suade me that we are justified, particularly in relation to a will which came into effect as long ago as 1936 and which has twice been the subject of judicial consideration, in introducing for the first time a rule of law which would go far beyond the mere avoidance of discrimination on religious grounds.To do so would bring about a substantial reduction of another freedom, firmly rooted ih our law, namely that of testamentary disposition. Discrimination is not the same thing as choice: it operates over a larger and less personal area, and neither by express provision nor by implication has private selection yet become a matter of public policy.
LORD SIMON OF GLAISDALE: My Lords, on all the points dealt with in his speech, save as to the princi pal issue of construction, I agree with my noble and learned friend, Lord Wilberforce. In particular, I agree with what he has said about public policy as applied by the law to a religious forfeiture clause such as your Lordships are concerned with. The actual personal circumstances can differ so greatly in these matters from case to case that it is difficult to apply a general rule of public policy which is not either practically unreal in many cases or open to some logical objection. Creed or religious observance or sectarian adherence cannot be isolated from other human activities or ideologies. ‘Attempt to rule the living from the grave’ is a vivid phrase apt to cause revulsion from the conduct referred to: but it is difficult to see why, if public policy is invoked, a particular disposition should be more objectionable if made by will than if made inter vivas. Moreover, it would appear that the policy of English law is to allow a testator considerable freedom in the way in which he disposes of his estate: modern English law knows nothing (apart from taxation and discretionary intervention under the Inheritance (Family Provision) legislation) of a part of a deceased’s estate reserved from his disposition. Balancing these various matters, I agree with my noble and learned friend, Lord Wilberforce, that in these days society’s interest in a parent’s conscientious choice as to what influence should be brought to bear on his own child during minority is sufficiently vindicated by the rule that a forfeiture clause shall not operate till after the lapse of a reasonable period after the child reaches the age of majority. This also accords with the contemporary view that it is for a youth himself to take the crucial decision on such a matter. He can not hope to do so emancipated from conflicting influences and interests.
I must not be taken thereby to be implying that it is for courts of law to embark on an independent and unfettered appraisal of what they think is required by public policy on any issue. Courts are concerned with public policy only in so far as it has been manifested by parliamentary sanction or embodied in rules of law having binding judicial force. As to such rules of law your Lordships have the same power to declare, to bind and to loose as in regard to any other judicial precedent. Rules of law expressing principles of pub licpolicy therefore fall to be treated with the same respect and circumspection, the same common sense and regard to changing circumstances, as any other rules of law. So approaching the authorities express ing public policy with regard to forfeiture clauses-specifically those relating to religious and other ide ologies-I agree that the law is as stated by my noble and learned friend, Lord Wilberforce.
LORD CROSS OF CHELSEA: . . The summons issued by the trustees of the will on 23 February 1940, asked two questions-first, whether Christopher forfeited his life interest in the property settled by the will on being received into the Roman Catholic Church on 10 November 1939, and, secondly, if the answer to the first question was ‘Yes,’ how the trustees were to deal with the income of the property pending the birth of a son to Christopher. I do not suppose that the legal advisers of the family at that time expected the first question to be answered otherwise than as Farwell J answered it-that is to say in the affirmative; for before the decision of this House in Clayton v Ramsden [1943] AC 320 few if any Chancery practitioners would have thought it seriously arguable that a condition subsequent forfeiting a life interest on the life tenant becoming a Roman Catholic was void. The decision in Clayton v Ramsden turned primarily on a condition for forfeiture on the beneficiary marrying a person ‘not of Jewish parentage’ but four of the members of the House expressed the view that a condition against marriage with a person ‘not of the Jewish faith’ was also void for uncertainty. If that be so then it is cer tainly arguable that a condition for forfeiture on the beneficiary becoming a Roman Catholic is void. That point was not however taken on behalf of Mark on the hearing of the summons taken out after his birth in 1949. That proceeded on the footing that Christopher forfeited his life interest in 1939 and that the only point to be determined was whether the interest in the income to which Justin then became entitled in possession had come to an end on Mark’s birth. Your Lordships refused Mark leave to raise the issue of Christopher’s forfeiture on this appeal; but the question whether the condition is or is not void emerges again in its application to Mark’s estate tail. In agreement, I believe, with all your Lordships, I am clearly of opinion that the condition was not and is not void either for uncertainty or, as applied to a person of full age at the date of the will, on grounds of public policy. I accept, of course, that by the law of England a stricter test of certainty is applied to a condition subsequent than to a condition precedent but I agree with the judges both in the Irish Republic and in Northern Ireland that it would be an affront to common sense to hold that a condition for forfeiture if the beneficiary should become a Roman Catholic is open to objection on the ground of uncertainty: see In re McKenna [1947] IR 277 and McCausland v Young [1948] NI 72; [1949] NI 49. If I had been a member of the House which heard Clayton v Ramsden, I might well have agreed with Lord Wright that a condition for forfeiture on marriage with a person ‘not of theJewish faith’ was valid.But it is a vaguer conception than being or not being a Roman Catholic and acceptance of the view of the majority does not involve the consequence that a condition of forfeiture on becoming a Roman Catholic is open to objection on the score of uncertainty. Turning to the question of public policy, it is true that it is widely thought nowadays that it is wrong for a government to treat some of its citizens less favourably than others because of differ ences in their religious beliefs; but it does not follow from that that it is against public policy for an adherent of one religion to distinguish in disposing of his property between adherents of his faith and those of another. So to hold would amount to saying that though it is in order for a man to have a mild preference for one religion as opposed to another it is disreputable for him to be convinced of the importance of holding true religious beliefs and of the fact that this religious beliefs are the true ones.
NOTE: As is clear from the extract from Lord Cross’s speech, above, conditions subsequent can alternatively be struck down on the grounds of uncertainty, as in Clayton v Ramsden [1943] AC 320, which concerned a forfeiture on marriage to a person ‘not of Jewish parentage and of the Jewish faith’. This was held to be conceptually uncertain. But it seems that so long as a clause is not uncertain the courts will be slow to strike it down on grounds of public policy, and a some what similar clause to the above was upheld by the Court of Appeal in Re Tuck’s ST [1978] Ch 49, where ‘an approved wife’ of Jewish blood was precisely defined, cases of dispute being dealt with by the Chief Rabbi in London. Names and arms clauses (such as the other clause in Blathwayt) have also been upheld, for example: Re Neeld [1962] Ch 643 (CA).
Re Lysaght (dec’d)
[1966] 1 Ch 191
BUCKLEY J:InClayton v Ramsden [1943] AC 320,a condition subsequent under which a beneficiary was to forfeit a benefit in the event of her marrying a person not of Jewish parentage and of the Jewish faith was held void for uncertainty,but different considerations apply in this respect to a forfeiture provision from those applicable to a condition precedent or a qualification to take a benefit (Re Allen, Faith v Allen [1953] Ch 810). In the one case the person liable to suffer a forfeiture must be able to know with cer tainty what will cause a forfeiture: in the other all that any person claiming to benefit has to do is to establish that the condition or qualification is satisfied in his particular case.The fact that someone else might have difficulty in demonstrating this with certainty does not prevent someone who clearly satis fies the appropriate test from claiming to be entitled or eligible to benefit. In the present case there would be a wide field open to any trustee of the endowment fund for the selection of students who manifestly satisfy the qualification of being neither of the Jewish nor of the Roman Catholic faith. Accordingly, I do not think that this part of the trust is affected by the vice of uncertainty. Nor, in my judgment, is it contrary to public policy, as counsel for the personal representativessuggests. I accept that racial and religious discrimination is nowadays widely regarded as deplorable in many respects, and I am aware that there is a bill dealing with racial relations at present under consideration by Parliament, but I think that it is going much too far to say that the endowment of a charity, the benefi ciaries of which are to be drawn from a particular faith or are to exclude adherents to a particular faith, is contrary to public policy. The testatrix’s desire to exclude persons of the Jewish faith or of the Roman Catholic faith from those eligible for the studentship in the present case appears to me to be unami able, and I would accept the suggestion of counsel for the Attorney-General that it is undesirable, but it is not,I think, contrary to public policy.
Re Cleaver
[1981] 1 WLR 939,
NOURSE J: This is a case in which it is alleged that mutual wills are enforceable. By that I mean that it is one where it is alleged that two persons (in this case husband and wife) made an enforceable agree ment as to the disposal of their property and executed wills in substantially identical terms in pur suance thereof. The husband died first without having revoked his will. The wife accepted benefits under the husband’s will and later made her last will in substantially different terms. She is now dead. The question is whether the persons who would have been the beneficiaries under the wife’s original will can claim that her estate should be held on the trusts of that will and not of her last will.
The foundations of the plaintiff’s claim is the well-known case of Dufour v Pereira (1769) 1 Dick 419, 21 ER 332. That case is fully discussed in Hargrave’s Juridicial Arguments (1799, vol 2, pp 304ft). That was a case where Lord Camden, relying as it appears only on the terms of a joint will executed by a hus band and wife, concluded that there had been a prior agreement. There have not been so very many cases on the subject since, but in one of them, Grayv Perpetual Trustee Co. Ltd (1928] AC 391, (1928] All ER Rep 758, the Privy Council decided in clear terms that the mere simultaneity of the wills and the simi larity of their terms are not enough taken by themselves to establish the necessary agreement. I will read what appear to me to be the material passages in the judgment of the Board, which was delivered by Viscount Haldane. The first reads as follows ((1928] AC 391 at399-400, (1928] All ER Rep 758 at761):
In Dufour v Pereira the conclusion reached was that if there was in point of fact an agreement come to that the wills should not be revoked after the death of one of the parties without mutual consent, they were binding. That they were mutual wills to the same effect was at least treated as a relevant circumstance, to be taken into account in determining whether there was such an agreement. But the mere simultaneity of the wills and the similarity of their terms do not appear, taken by themselves, to have been looked on as more than some evidence of an agreement not to revoke. The agreement, which does not restrain the legal right to revoke, was the foundation of the right in equity which might emerge, although it was a fact which had in itself to be estab lished by evidence, and in such cases the whole of the evidence must be looked at.
…
Their Lordships agree with the view taken by Astbury J.The case before them is one in which the evidence of an agreement,apart from that of making the wills in question, is so lacking that they are unable to come to the conclusion that an agreement to constitute equitable interests has been shown to have been made. As they have already said, the mere fact of making willsmutu ally is not, at least by the law of England, evidence of such an agreement having been come to. And without such a definite agreement there can no more be a trust in equity than a right to damages at law.
As to the penultimate sentence of that passage it must, in the light of the earlier passage, be read as meaning that the mere fact of making mutual wills is not by itself sufficient evidence of such an agree ment having been come to.
It is therefore clear that there must be a definite agreement between the makersof the two wills, that that must be established by evidence, that the fact that there are mutual wills to the same effect is a relevant circumstance to be taken into account, although not enough of itself, and that the whole of the evidence must be looked at.
I do not find it necessary to refer to any other English case, but I have derived great assistance from the decision of the High Court of Australia in Birmingham v Renfrew (1936) 57 CLR 666. That was a case where the available extrinsic evidence was held to be sufficient to establish the necessary agreement between two spouses. It is chiefly of interest because both Latham CJ and more especially Dixon J exam ined with some care the whole nature of the legal theory on which these and other similar cases pro ceed. I would like to read three passages from the judgment of Dixon J, which state, with all the clarity and learning for which the judgment of that most eminent judge are renowned, what I believe to be a correct analysis of the principles on which a case of enforceable mutual wills depends. First (at 682-683):
I think the legal result was a contract between husband and wife. The contract bound him, I think, during her lifetime not to revoke his will without notice to her. If she died without altering her will, then he was bound after her death not to revoke his will at all. She on her part afforded the consideration for his promise by making her will. His obligation not to revoke his will during her life without notice to her is to be implied. For I think the express promise should be under stood as meaning that if she died leaving her will unrevoked then he would not revoke his. But the agreement really assumes that neither party will alter his or her will without the knowledge of the other. It has long been established that a contract between persons to make correspon ding wills gives rise to equitable obligations when one acts on the faith of such an agreement and dies leaving his will unrevoked so that the other takes property under its dispositions. It operates to impose upon the survivor an obligation regarded as specifically enforceable. It is true that he cannot be compelled to make and leave unrevoked a testamentary document and if he dies leaving a last will containing provisions inconsistent with his agreement it is neverthe less valid as a testamentary act. But the doctrines of equity attach the obligation to the prop erty.The effect is, I think, that the survivor becomes a constructive trustee and the terms of the trust are those of the will which he undertook would be his last will.
Next (at 689):
There is a third element which appears to me to be inherent in the nature of such a contract or agreement, although I do not think it has been expressly considered. The purpose of an arrange ment for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. That is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is tobequeath what is left in the manner agreed upon. It is only by the special doc trines of equity that such a floating obligation, suspended, so to speak, during the life-time of the survivor can descend upon the assets at his death and crystallize into a trust. No doubt gifts and settlements, intervivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivas, is, therefore, notunqualified. But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor’s own bene fit and advantage upon condition that at his death the residue shall pass as arranged.
Finally (at 690):
InIn re Oldham, Astbury J, pointed out, in dealing with the question whether an agreement should be inferred, that inOufourv Pereira the compact was that the survivor should take a life estate only in the combined property.It was, therefore, easy to fix the corpus with a trust as from the death of the survivor. But I do not see any difficulty in modern equity in attaching to the assets a construc tive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallized on his death and disabled him only from voluntary dispositions inter vivas.
I interject to say that Dixon J was there clearly referring only to voluntary dispositions inter vivas which are calculated to defeat the intention of the compact. No objection could normally be taken to ordinary gifts of small value. He went on:
On the contrary, as I have said, it seems rather to provide a reason for the intervention of equity. The objection that the intended beneficiaries could not enforce a contract is met by the fact that a constructive trust arises from the contract and the fact that testamentary dispositions made upon the faith of it have taken effect. It is the constructive trust and not the contract that they are entitled to enforce.
It is also clear from Birmingham v Renfrew that these cases of mutual wills are only one example of a wider category of cases, for example secret trusts, in which a court of equity will intervene to impose a constructive trust. A helpful and interesting summary of that wider category of cases will be found in the argument of counsel for the plaintiffs inOttaway v Norman [1972) Ch 698 at 701-702. The principle of all these cases is that a court of equity will not permit a person to whom property is transferred by way of gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particu lar way for the benefit of a third person, to deal with that property inconsistently with that agreement or understanding. If he attempts to do so after having received the benefit of the gift equity will inter vene by imposing a constructive trust on the property which is the subject matter of the agreement or understanding. I take that statement of principle, and much else which is of assistance in this case, from the judgment of Slade J in Re Pearson Fund Trusts (21st October 1977, unreported; the statement of principle is at p. 52 of the official transcript). The judgment of Brightman J in Ottaway v Norman is to much the same effect.
I would emphasise that the agreement or understanding must be such as to impose on the donee a legally binding obligation to deal with the property in the particular way and that the other two cer tainties, namely those as to the subject matter of the trust and the persons intended to benefit under it, are as essential to this species of trust as they are to any other. In spite of an argument by counsel for Mr and Mrs Noble to the contrary, I find it hard to see how there could be any difficulty about the sec ond or third certainties in a case of mutual wills unless it was in the terms of the wills themselves. There, as in this case, the principal difficulty is always whether there was a legally binding obligation or merely what Lord Loughborugh LC in Lord Walpole v Lord Orford (1797) 3 Ves 402 at 419, 30 ER 1976 at 1084 described as an honourable engagement.
Before turning in detail to the evidence which relates to the question whether there was a legally binding obligation on the testatrix in the present case or not I must return once more to Birmingham v Renfrew. It is clear from that case, if from nowhere else, that an enforceable agreement to dispose of property in pursuance of mutual wills can be established only by clear and satisfactory evidence. That seems to me to be no more than a particular application of the general rule that all claims relating to the property of deceased persons must be scrutinised with very great care. However, that does not mean that there has to be a departure from the ordinary standard of proof required in civil proceedings. I have to be satisfied on the balance of probabilities that the alleged agreement was made, but before I can be satisfied of that I must find clear and satisfactory evidence to that effect.
In the result, and perhaps contrary to my expectation when the case was opened, I am driven to the conclusion that the plaintiffs are entitled to succeed in this action ..
McCormick v Grogan
(1869) LR 4 HL 82, House of Lords
Facts: In 1851, the testator had left all his property by a three-line will to his friend Mr Grogan. In 1854, he was struck down by cholera. With only a few hours to live, he sent for Mr Grogan. He told Mr Grogan, in effect, that his will and a letter would be found in his desk. The letter named various intended beneficiaries and the intended gifts to them. The letter concluded with the words:
I do not wish you to act strictly on the foregoing instructions, but leave it entirely to your own good judgment to do as you think I would, if living, and as the parties are deserving.
An intended beneficiary (an illegitimate child), whom Mr Grogan thought it right to exclude, sued.
Held: Although in principle the courts will enforce secret trusts, the terms of the let ter in this particular case were not such that equity would impose on the conscience of Mr Grogan, and the secret trust alleged would not be enforced.
LORD HATHERLEY LC: … Now this doctrine has been established, no doubt, a long time since upon a sound foundation with reference to the jurisdiction of Courts of Equity to interpose in all cases of fraud; and therefore if, for example, an heir said to a person who was competent to dispose of his property by will, ‘Do not dispose of it by will, I undertake to carry into effect all such wishes as you may communi cate to me.’ And if the testator, acting on that representation, did not dispose of his property by will, and the heir has kept the property for himself, without carrying those instructions into effect, the Court of Equity has interposed on the ground of the fraud thus committed by the heir in inducing the testator to die intestate,upon the faith of the heir’s representations that he would carry all such wishes as were confided to him into effect. And the Court has said that the heir shall not be allowed to hold the prop erty otherwise than as trustee for those with regard to whom the testator gave him the directions in question. So again, if a legatee states to the testator that upon the testator’s confiding his property, apparently disposing of it, to him, the legatee, by a regular and formal instrument, he will carry into effect all such intentions as the testator shall confide to him, then that legatee, although he apparently may be held in law to take the whole interest, shall have fastened upon his conscience the trust of car rying into full effect those instructions which he received upon such representations as I have described. And, farther than that, such an undertaking or promise on the part of the legatee has been held, in some cases, to be capable of being inferred from the conduct of the person when secret instructions have been communicated to him by the testator, which conduct has been held by the Court to be equivalent to an undertaking or promise on his part that he will abide by the instructionsso communicated to him.
But thisdoctrine evidently requires to be carefully restricted within proper limits. It is initself a doctrine
which involves a wide departure from the policy which induced the Legislature to pass the Statute of Frauds, and it is only in clear cases of fraud that this doctrinehas been applied-cases in which the Court has been persuaded that there has been a fraudulent inducement held out on the part of the apparent beneficiary in order to lead the testator to confide to him the duty which he so undertook to perform.
Now, in the case before us, Mr Grogan, the Respondent, undoubtedly stands in a very favourable position in thismatter.The will was made three years before it was communicated to him.He in no way induced the testator to appoint him sole executor and sole legate of the whole property. On the contrary, it appears from the evidence that he was somewhat surprised when he was informed of the fact. Thereis therefore no anterior act on the part of Mr Grogan which should induce the Court to come to the conclusion upon imperfect evidence of any fraud having been meditated and perpetrated on his part. He is therefore entitled to the benefit of having his conduct regarded as that of a man who stands perfectly rectus in curia at the outset of the transaction.
LORD WESTBURY: My Lords, the jurisdiction which is invoked here by the Appellant is founded altogether on personal fraud. It is a jurisdiction by which a Court of Equity, proceeding on the ground of fraud, converts the party who has committed it into a trustee for the party who is injured by that fraud. Now, being a jurisdiction founded on personal fraud, it is incumbent on the Court to see that a fraud, a ma/us animus, is proved by the clearest and most indisputable evidence. It is impossible to supply pre sumption in the place of proof, nor are you warranted in deriving those conclusions in the absence of direct proof, for the purpose of affixing the criminal character of fraud, which you might by possibility derive in a case of simple contract. The Court of Equity has, from a very early period, decided that even an Act of Parliament shall not be used as an instrument of fraud; and if in the machinery of perpetrating a fraud an Act of Parliament intervenes, the Court of Equity, it is true, does not set aside the Act of Parliament but it fastens on the individual who gets a title under that Act, and imposes upon him a per sonal obligation, because he applies the Act as an instrument for accomplishing a fraud. In this way the Court of Equity has dealt with the Statute of Frauds, and in this manner, also, it deals with the Statute of Wills. And if an individual on his deathbed, or at any other time, is persuaded by his heir-at-law, or his next of kin, to abstain from making a will, or if the same individual, having made a will, communicates the disposition to the person on the face of the will benefited by that disposition, but, at the same time, says to that individual that he has a purpose to answer, which he has not expressed in the will, but which he depends on the disponee to carry into effect, and the disponee assents to it, either expressly, or by any mode of action which the disponee knows must give to the testator the impression and belief that he fully assents to the request, then, undoubtedly, the heir-at-law in the one case, and the disponee in the other, will be converted into trustees, simply on the principle that an individual should not be benefited by his own personal fraud. You are obliged, therefore, to shew most clearly and dis tinctly that the person you wish to convert into a trustee acted malo animo. You must shew distinctly that he knew that the testator or the intestate was beguiled and deceived by his conduct. If you are not in a condition to affirm that without any misgiving, or possibility of mistake, you are not warranted in affixing on the individual the delictum of fraud, which you must do before you convert him into a trustee.
Blackwell v Blackwell
(1929) AC 318, House of Lords
VISCOUNT SUMNER:For the prevention of fraud equity fastens on the conscience of the legatee a trust, a trust, that is, which otherwise would be inoperative; in other words it makes him do what the will in itself has nothing to do with; it lets him take what the will gives him and then makes him apply it, as the Court of conscience directs, and it does so in order to give effect to wishes of the testator, which would not otherwise be effectual.
To this two circumstances must be added to bring the present case to the test of the general doc trine, first, that the will states on its face that the legacy is given on trust but does not state what the trusts are, and further contains a residuary bequest, and, second, that the legatees are acting with per fect honesty, seek no advantage to themselves, and only desire, if the Court will permit them, to do what in other circumstances the Court would have fastened it on their conscience to perform.
Ottaway v Norman
[1972] 1 Ch 698, Chancery Division
BRIGHTMAN J: .. It will be convenient to call the person upon whom such a trust is imposed the ‘pri mary donee’ and the beneficiary under that trust the ‘secondary donee’. The essential elements which must be proved to exist are: (i) the intention of the testator to subject the primary donee to an obliga tion in favour of the secondary donee; (ii) communication of that intention to the primary donee; and
(iii) the acceptance of that obligation by the primary donee either expressly or by acquiescence. It is immaterial whether these elements precede or succeed the will of the donor. I am informed that there is no recent reported case where the obligation imposed on the primary donee is an obligation to make a will in favour of the secondary donee as distinct from some form of inter vivas transfer. But it does not seem to me that there can really be any distinction which can validly be taken on behalf of the defend ant in the present case. The basis of the doctrine of a secret trust is the obligation imposed on the con science of the primary donee and it does not seem to me that there is any materiality in the machinery by which the donor intends that that obligation shall be carried out.
Mr Buckle, for Mr Norman, relied strongly on McCormick v Grogan (1869) LR 4 HL 82 Founding himself on Lord Westbury Mr Buckle sought at one stage to deploy an argument that a person could never succeed in establishing a secret trust unless he could show that the primary donee was guilty of deliberate and conscious wrongdoing of which he said there was no evidence in the case before me. That proposition, if correct, would lead to the surprising result that if the primary donee faithfully observed the obligation imposed on him there would not ever have been a trust at any time in existence. The argument was discarded, and I think rightly. Mr Buckle then fastened on the words ‘clearest and most indisputable evidence’ and he submitted that an exceptionally high standard of proof was needed to establish a secret trust. I do not think that Lord Westbury’s words mean more than this: that if a will contains a gift which is in terms absolute, clear evidence is needed before the court will assume that the testator did not mean what he said. It is perhaps analogous to the standard of proof which this court requires before it will rectify a written instrument, for there again a party is saying that neither meant what they have written.
Grey v IRC
[1960] AC 1, House of Lords
LORD RADCLIFFE: Where opinions have differed [in the courts below] is on the point whether his direc tion, i.e. Mr Hunter’s oral direction to his trustees was a ‘disposition’ within the meaning of s.53(1)(c) of the Law of Property Act 1925, the argument for giving it a more restricted meaning in that context being thats. 53 is to be construed as no more than a consolidation of three sections of the Statute of Frauds, ss. 3, 7 and 9. So treated, ‘disposition’, it is said, is merely the equivalent of the former words of
s. 9, ‘grants and assignments’, except that testamentary disposition has to be covered as well, and a direction to a trustee by the equitable owner of the property prescribing new trusts upon which it is to be held is a declaration of trust but not a grant or assignment. The argument concludes, therefore, that neither before 1 January 1926 nor since did such a direction require to be in writing signed by the disponor or his agent in order to be effective.
Inmy opinion, it is a very nice question whether a parol declaration of trust of this kind was or was not
within the mischief of s. 9 of the Statute of Frauds.The point has never, I believe, been decided and per haps it never will be. Certainly it was long established at law that while a declaration of trust respecting land or any interest therein required writing to be effective, a declaration of trust respecting personalty did not. Moreover, there is warrant for saying that a direction to his trustee by the equitable owner of trust property prescribing new trusts of that property was a declaration of trust. But it does not neces sarily follow from that that such a direction, if the effect of it was to determine completely or pro tanto the subsisting equitable interest of the maker of the direction, was not also a grant or assignment for the purposes of section 9 and therefore required writing for its validity. Something had to happen to that equitable interest in order to displace it in favour of the new interests created by the direction:and it would be at any rate logical to treat the direction as being an assignment of the subsisting interest to the new beneficiary or beneficiaries or, in other cases, a release or surrender of it to the trustees.
I do not think,however, that that question has to be answered for the purposes of this appeal. It can
only be relevant ifs. 53(1) of the Law of Property Act 1925, is treated as a true consolidation of the three sections of the Statute of Frauds concerned and as governed, therefore, by the general prin ciple, with which I am entirely in agreement, that a consolidating Act is not to be read as effecting changes in the existing law unless the words it employs are too clear in their effect to admit of any other construction. If there is anything in the judgments of the majority of the Court of Appeal which is inconsistent with thisprinciple I must express my disagreement with them. But, in my opinion, it is impossible to regards.53 of the Law of Property Act 1925 as a consolidating enactment in this sense.It is here that the premises upon which Upjohn J and the Master of the Rolls founded their conclusions are, I believe, unsound.
For these reasons I think thatthere is no direct link betweens.53(1)(c) of the Act of 1925 and section 9 of the Statute of Frauds. The link was broken by the changes introduced by the amending Act [Law of Property (Amendment) Act] of 1924, and it was those changes, not the original statute, thats.53 must be taken as consolidating. If so, it is inadmissible to allow the construction of the word ‘disposition’ in the new Act to be limited or controlled by any meaning attributed to the words ‘grant’ or ‘assignment’ ins. 9 of the old Act.