Facts: This was a case of a pension fund which provided a pension for Air Jamaica employees on retirement and for their widow and designated beneficiaries after death.
Held: The Privy Council held that each employee’s pension fund was a separate trust, established at the time that the employee joined the scheme. The power to provide benefits to widows offended against the rule against perpetuities, as it was possible for a person to marry, after the constitution of the trust, a person who had not been alive at the date of constitution.
⇒ So the Privy Council held each employee’s pension fund was a separate trust that had to comply with the rule against perpetuities
⇒ The trouble was that the power to provide benefits for a life time to the employer as well as to the widow until her death offended the rule against perpetuities because it was possible for a person to marry, after the trust had been formed, a person who was not a life in being at date trust was constituted
⇒ So because it was possible an employee could have constituted the trust before his future wife was even born (and therefore would not be a life in being), the only way the trust could be valid is if she died within 21 years of the employer’s death; as it was a possibility a widow could live longer than that, that would invalidate the trust
⇒ As a result, Lord Millett said that every single pension fund under the scheme was invalid because under the old rule pre-1964 the mere possibility was sufficient to invalidate a trust
Facts: In this case the father was a beneficiary under a trust (i.e. he was a life tenant of the trust). His daughter had a remainder in trust (i.e. she would come into the property when her father died and she had reached at least the age of 21)
⇒ The father wanted to set up a new trust for his daughter
⇒ The trustees had a power of advancement (allowing the trustees to give the property to someone who will become entitled in the future) i.e. the trust said the daughter would be entitled to the trust capital when her father died, but the power of advancement meant she could get up to half of the trust capital before he died
⇒ He was happy for the trustees to exercise this power so the money could be taken out of the trust fund to settle a new trust for his daughter’s benefit (who was 5 at the time) during her lifetime and for the benefit of her children
Held: The resettlement is fine, but there was a problem → the daughter was not born when the first trust was set up → and if you take money out of an existing trust and use it to set up a new trust the perpetuity period must come from the old trust
⇒ In other words, as property was taken out of one trust to set up a new trust the House of Lords held the perpetuity period should date from the formation of the original trust and not the new trust → So you cannot create a new trust out of the old trust to get around the perpetuity rules
⇒ As the daughter was only 5 years old, and not born when the father’s trust fund was set up, she was not a life in being so the trust failed/void for perpetuity → so the money went back to the original trust
⇒ The reason was, was that there was a possibility, or rather a probability, that the daughter would outlive her father by more than 21 years → in which case the perpetuity period, and it was his life that founded the original perpetuity period, would be exceeded
⇒ So, and it could have been a specific response to this case, in 1964 parliament passed the Perpetuities and Accumulations Act 1964 → it was in this the wait and see rule was introduced
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Held: Sir Joseph Jekyll MR said that it is contrary to public economic policy that property be held in trust, unable to be bought or sold, for too long a period
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