FAILURE OF PRIOR INTEREST

Explain how transfer takes effect on failure of prior interest.

Section 16 provides that in a transfer of property if prior interest fails under section 13 or 14, the subsequent interest fails. This is a common sense rule and is based on English law that limitation following upon limitations which are void for perpetuity are themselves void whether within perpetuity or not. In any transfer of property if there are two successive creation of interests one after the other, the later creation of interest would be subject to validity of the prior. This is because the latter creation of interest is dependent on the earlier one. Accordingly, a valid transfer which is subsequent to and dependent upon void transfer is itself rendered void.

For instance, A transfers property to B for life then to C for life and then to D absolutely. B is a person living at the time of transfer but C and D are unborn persons. The transfer of life interest to C is void under section 13 therefore it fails. Since this prior interest fails, the subsequent transfer to D would also fail although D’s interest is absolute and is valid under section 13.

Section 16 is applicable only where the prior transfer fails with under section 13 and 14 but not otherwise. If the prior interest fails under section 25 of the Transfer of Property Act (i.e., where the prior transfer is a conditional transfer and the condition precedent is void under section 25 of TPA) the subsequent interest would fail but not under section 16.

In Girjesh Dutt v. Data Din (1934) 147 IC 991, A made a gift of his properties to B who was her nephew’s daughter. The gift by A was made for the life of B and then to B’s male descendants absolutely if she should have any. But if she (B) had no male descendants then to B’s daughter without power of alienation and if there was no descendants of B, male or female, then to her (A’s) nephew. B died without having any issue. It was held that the gift in favour of unborn daughters was invalid under Sec. 13 because the gift was of a limited interest and subject to the prior interest in favour of B. The gift in favour of the nephew also fails under Sec. 16 which provides that if in a transfer of property the prior interest fails, the subsequent interest also fails.

In the case of Javerbai v Kablibai (1891) 16 Bom 492, A makes a transfer of his property to B and then to B’s children on their attaining the age of 21 years, and, if B has no child then he may make the gift in favour of anyone he likes. The transfer for the benefit of B’s unborn children was void as offending the rule of perpetuity, but the transfer at the pleasure of B is an alternative and independent transfer, that would commence from B, and not A, and therefore would be valid