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Leaseholds and the Rule in Howe v. The Earl of Dartmouth
Published online by Cambridge University Press: 16 January 2009
Extract
THE decision in Howe v. The Earl of Dartmouth, as developed and explained by subsequent cases, has long been recognized as authority for the rule that a residuary bequest of personalty to, or upon trust for, persons by way of succession, casts upon the personal representatives or trustees two duties. Of these the first is that such of this personalty as is of a wasting or hazardous nature must be sold, and the proceeds invested in authorized investments; while the second compels them, for so long as the property remains unsold, to pay to the person who is beneficially entitled to the income for the time being, only so much of the actual income as would be payable had the sale and investment already occurred. In short, the wasting or hazardous part of the personalty is held upon an implied trust for sale, and the beneficiaries are to be treated from the outset as though the conversion has already taken place.
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- Copyright © Cambridge Law Journal and Contributors 1932
References
1 (1802) 7 Ves. 137 a.
2 A very common example is a bequest of ‘all my personal estate to my trustees upon trust for my wife for life, and after her death upon trust for my children equally.’
3 Usually 4 per cent, per annum on the value of the personalty at the date of the testator's death: See Re Beech [1920] 1 Ch. 40. The balance of the rents and profits is then invested in authorized securities, and the income which the latter produce is paid out with the annual 4 per cent.
4 Pickering v. Pickering (1839) 4 My. & Cr. 289, per Lord Cottenham L.C. at p. 298; Re Bates [1907] 1 Ch. 22, per Kekewich J. at p. 26; Re Wareham, Wareham v. Brewin [1912] 2 Ch. 312 (C. A.), per Farwell L.J. at p. 317.
5 Pickering v. Pickering (supra) at p. 299; Morgan v. Morgan (1851) 14 Beav. 72, at pp. 82–3; Blann v. Bell (1852) 2 D. M. G. 775, at p. 779; Macdonald v. Irvine (1878) 8 Ch. D. 101, 124; Re Bates (supra) at p. 26; Re Wareham (supra) at p. 315.
6 Craig v. Wheeler (1860) 29 L. J. Ch. 374; Re Game [1897] 1 Ch. 881; also cases cited supra in footnotes (4) and (5) and post.
7 Jarman on Wills (7th ed.) 1209; Lewin on Trusts (13th ed.) 278; Theobald on Wills (8th ed.) 625; Williams on Executors (12th ed.) 918–9; Wolstenholme & Cherry's Conveyancing Statues (11th ed.) Vol. II, xcvii.
8 Emmet, Notes on Perusing Title (11th ed.) 1015–6; Williams on Executors (12th ed.) 916 n.
9 Apparently this principle was first applied by Lord Eldon in Gibson v. Bott (1802) 7 Ves. 89. This case was decided three days earlier than Howe v. Earl Dartmouth, and was approved (inter alia) in Caldecott v. Caldecott (1842) 1 Y. & C. C. C. 312, at p. 324. The House of Lords dealt with such an express trust for sale in Wentworth v. Wentworth [1900] A. C. 163, and neither Judge nor counsel mentioned the decision in Howe v. Dartmouth, In Brown v. Gellaty (1867) L. R. 2 Ch. App. 751, there was no express trust for sale (the headnote notwithstanding) but a mere power to convert.
10 But the rules are quite distinct. See e.g. Re Chaytor [1905] 1 Ch. 233, per Warrington J. at p. 240.
11 This is ‘subject to any direction to the contrary in the disposition on trust for sale …’; section 28, sub-section 2.
12 See note (9) supra.
13 The word ‘land’ includes land of any tenure—section 205, sub-section 1 (ix) L. P. A. 1925—and therefore covers leaseholds.
14 Section 28, sub-section 5.
15 The word ‘disposition’ here includes a testamentary gift: section 205, sub-section 1 (ii).
16 The word ‘direction’ is generally used in reported cases to denote the imposition of a duty (or trust) as opposes to a mere authority (or power) e.g. Cary v. Cary (1804) 2 Sch. & Lef. at pp. 188–9.
17 Section 25, sub-section 2.
18 But query whether this latter contention can stand. If so, it would apply equally to the words ‘in the instrument,’ as used by section 25, sub-section 2, supra. Yet there, as we have seen, the Legislature took care to use the word ‘express,’ thus suggesting that this word is necessary if directions implied in the instrument are to be excluded.
19 This power to postpone the sale is considered more fully in the succeeding paragraph.
20 Section 28, sub-section 2, L. P. A. 1925.
21 The fact that section 25, sub-section 2 protects trustees for sale, who are postponing sale, from incurring personal liability thereby does not appear to affect the matter. This protection is given only if and when they have a power to postpone; and it is available, apparently, only if they are acting in good faith: Wolstenholme & Cherry's Conveyancing Statues (11th ed.) Vol. I, 178.
22 Since the power to postpone (under section 25) does not arise unless and until there is a trust for sale, it is in no way similar to cases where a residary bequest which gives an express power to retain is therefore held to be outside the rule as showing that no implied trust for sale was intended by the testator: e.g Re Nicholson [1909] 2 Ch. 111; Gray v. Siggers (1880) 15 Ch. D. 74.
23 (1867) L. R. 2 Ch. App. 751, per Lord Cairns L.J. at pp. 758–9.
24 Per Lord Cairns L.J. at p. 758, following and approving Meyer v. Simonsen (1852), 5 De G. & Sm. 723. These two decisions were approved by the House of Lords in Wentworth v. Wentworth [1900] A. C. 163.
25 S. L. A. 1925, s. 6. See also Second Schedule, paragraph 2 (1) to the same effect, where the testator died before 1926 and the land is still in the hands of personal representatives. If it be decided that the life-tenant of residuary lease-holds is still entitled only to a proportion of the income, apparently he has not the powers of a tenant for life within S. L. A., s. 20, sub-s. 1 (viii) and the land must be vested in statutory owners: Re Frewen [1926] Ch. 580.
26 The definition of ‘trust for sale’ given by L. P. A. 1925, s. 205, is adopted by the Settled Land Act, 1925, s. 117, sub-s. 1 (xxx), and is therefore applicable to S. L. A. 1925, s. 1, sub-s. 7, which enacts that there is no ‘settlement’ within the meaning of this Act when land is ‘held upon trust for sale.’
27 Jarman (op. cit.) at p. 1208, states that the rule formerly applied ‘to short leaseholds,’ and cites Morgan v. Morgan (1851) 14 Beav. 72, Chambers v. Chambers (1846) 15 Sim. 183, and Lyons v. Harris [1907] 1 Ir. R. 32. The edition of 1910 contains a similar statement in the present tense (at p. 1243).
28 E.g. Pickering v. Pickering (1839) 4 My. & Cr. 289; Chambers v. Chambers (supra); Lyons v. Harris (supra); Craig v. Wheeler (1860) 29 L. J. Ch. 374; Green v. Britten (1872) 42 L. J. Ch. 187.
29 E.g. Morgan v. Morgan (supra); Benn v. Dixon (1840) 10 Sim. 636; Re Llewellyn's Trust (1861), 29 Beav. 171; Re Game, Game v. Young [1897] 1 Ch. 881; Re Wareham [1912] 2 Ch. 312 (C. A.)
30 Chambers v. Chambers (supra) at p. 190; Lyons v. Harris (supra) per FitzGibbon L.J. at p. 39—the other two judges in this case did not mention the lengths of the leases concerned; Re Wareham (supra) per Farwell L.J. at p. 317— neither Cozens-Hardy M.R. nor Kennedy L.J. mentioned the point here.
31 See cases cited in note (29) (supra); also Craig v. Wheeler (supra); Pickering v. Pickering (supra); Green v. Britten (supra).
32 The following words of Farwell L.J. in the Court of Appeal seem to suggest this. ‘In this particular case counsel for the appellant said that some of the leaseholds were hold for quite short terms, so that there is every probability of the tenant for life using up these leaseholds in her own lifetime. It was to prevent this that the rule was laid down …’: Re Wareham (supra) at p. 317. Another suggestion of it occurs in Gray v. Siggers (1880) 15 Ch. D. 74, at p. 77. Counsel had urged that some of the leases there concerned were ‘very short terms.’ But Malins V.C had found clear evidence in the will that the testator did not intend the rule to apply, and accordingly replied: ‘I cannot look at the question whether the leaseholds are for long or short terms.…’
33 E.g. Howe v. Earl Dartmouth (supra); Goodenough v. Tremamondo (1840) 2 Beav. 512; Bethune v. Kennedy (1835) 1 Myl. & Cr. 114; Sutherland v. Cooke (1844) 1 Coll. 498; Green v. Britten (supra); Re Llewellyn's Trust (1861) 29 Beav. 171; Macdonald v. Irvine (1878) 8 Ch. D. 101 (C. A.); Gray v. Siggers (1880) 15 Ch. D. 74; Re Game (supra); Craig v. Wheeler, 29 L. J. Ch. 374; Re Nicholson [1909] 2 Ch. 111; Re Wareham (supra). In the last-mentioned case the Court of Appeal held that many of the earlier cases (not cited here) were wrongly decided.
34 Re Moses [1908] 2 Ch. 235.
35 Query whether personal representatives are now able to exclude the rule entirely by exercising (with the necessary consents) their power of appropriation under A. E. A. 1925, s. 41. Property so appropriated will thereafter ‘be treated as an authorized investment.’ Moreover any appropriation of realty ‘in purported exercise’ of their powers under this section is deemed, in favour of a purchaser for money or money's worth, to have been duly made.