Rule in Lassence v Tierney

I am reviewing an old trust deed. It provides for the trust fund to be divided between the settlor’s children and then goes onto provide, in fairly standard wording, that the share of a child will not vest in that child absolutely but he or she will receive the income for life and the share then passes to the child’s children. There is an accruer provision for a share in respect of which the primary trusts fail, but all the gifts to the settlor’s children and their children are contingent. There are separate default provisions in favour of the settlor’s wider family which are not contingent.

Before the default provisions the trust deed contains a statement that “the rule in Lassence v Tierney shall apply”. My understanding is that this is a rule of construction, used to decide whether the initial gift (to the children) should in fact take effect as an absolute gift (to the children or to their estates) if the remainder interests fail. However, I have not come across this before, and am not sure whether the rule can be expressly invoked in this way, and if it can, am not clear what the effect would be, given that the trust deed does contain a default provision.

I would be interested to hear other’s thoughts as it may be appropriate to make changes now to ensure the original intention is carried through.

Diana Smart
Gordons LLP

As a rule of construction, I do not believe that it is necessary to specifically invoke Lassence v Tierney within the trust instrument.

It may be that whoever drafted the trust instrument had recently realised the existence of the rule, and wanted to make sure it was not overlooked in the administration of the trust, or that they had come across others who were ignorant of the rule and wanted to make sure it was not overlooked.

If the trusts were set up by will, it would be possible for a child and their line to become extinct, for the default provisions to apply, I believe that all children and their lines would need to have been extinguished. However, from what is said, I anticipate the trust was a lifetime trust, in which case it seems to me that the default provision can only apply if the primary gift fails from the outset as, should it fail at any later date the rule will apply to vest the entitlement in the estate of the then deceased child.

Looking at an alternative construction - if the default gift can be construed as being within the primary trusts - any child’s share would only accrue to their estate should the default gift also fail, which seems unlikely if that gift is vested from the outset.

Ideally, it would be good to see the original instructions to understand the settlor’s intentions. I suspect, though, that as this is “an old trust deed” with the passage of time these are unlikely to be available.

I suggest that should any of the primary trusts fail, the trustees might want to protect themselves by seeking an opinion from Chancery counsel.

Paul Saunders