Head 9: Destinations Flashcards
What are the two different species of destination?
⁃ Destination-over (in testament)
⁃ Special destination (in inter vivos conveyance)
What is a destination-over?
The classic destination-over is where there is a legacy by Adam to Beth whom failing to Charles. [So property is to go to X, but if X dies, the property is to pass to Y]
Where is a destination-over to be found?
It is found in a testament, or trust, as part of the terms of a legacy or beneficial right. Any type of property may be involved.
Who is the conditional institute and who is the substitute?
⁃ Beth (primary legatee) is known as the “institute”
⁃ Charles (secondary legatee) is either the “conditional institute” or “substitute” but he cannot be both.
⁃ A conditional institute is an alternative legatee.
⁃ A substitute is a successive legatee.
What is the difference between a conditional institute and a substitute?
The key difference between a conditional institute and a substitute relates to the way in which and when the institute dies. This is concerned with the way the legacy vests. The best way to understand this is to consider examples (using the above destination over):
⁃ 1) If when A dies C is dead but B is alive then B takes the subject of the legacy (straightforward)
⁃ 2) If when A dies B is dead but C is alive, C takes the subject of the legacy this is the destination-over taking effect)
⁃ 3) If when A dies both B and C are alive. B (institute) dies one day later. [This is where, whether you are a substitute or conditional institute becomes very important.]
⁃ Should the executor convey to C? Or to B’s executor (since she was alive when the testator dies? This depends on whether C is a conditional institute or a substitute.
⁃ If C is a conditional institute then B’s estate will receive the legacy. C will not take anything, his right is said to “fly-off”.
⁃ If C is a substitute then C might still be able to receive the substance of the legacy.
How can you tell whether someone is a conditional institute or a substitute?
⁃ A number of rules are used to try and determine this:
⁃ 1) Interpretation of the wording of the legacy
⁃ It may be that the wording of the legacy makes it obvious/clear by express terms as to whether the legacy is a substitution or a conditional institution. [This is possible but unlikely.]
⁃ 2) If the wording is not clear, then there are presumptions based on the type of property that the legacy concerns:
⁃ Heritable property: substitution presumed.
⁃ Moveable / mixture property: conditional institution presumed.
What are the cases which observe the operation of the presumptions?
1) Brown’s Trs v Smith (1900)
2) Crumption’s Judicial Factor v Barnardo’s Homes 1917
Brown’s Trs v Smith (1900)
⁃ The deceased (James Brown) had left a testament which left a legacy in favour of his children. It is left in equal shares, whom failing to the other surviving children. The testament instructed trustees to invest that share in heritable property. The court applies the presumptions and held that this must be a substitution because the content of the legacy was heritable.
⁃ This meant the the surviving children took the share of the deceased daughter directly - it did not pass to the deceased daughter’s estate. They were considered to be substitutes. The surviving took the share of one of the institutes, Mary Brown (a child who had survived him and then died).
Crumption’s Judicial Factor v Barnardo’s Homes 1917
⁃ SC left sums of money to her nephew whom failing to a number of charities. The legacy concerned money which is moveable property, so the court applied the presumption that this was a conditional institution. The effect of this is that the charities were unable to claim since the legacy went to the estate of the institute.
- The nephew had survived and then later down, the charities as conditional institutes did not receive the money.
- [So it makes a difference if the institute survives the trustee]
What are special destinations?
These are destinations contained in dispositions and entered into the Land Register or Sasine Register, that create substitutions (they are never conditional institutions since they always deal with land).
⁃ Example: ⁃ Alfred dispones heritable property to Bernard whom failing to Cassandra" ⁃ This is a special destination. - Bernard is the institute ⁃ Cassandra is the substitute
Where might special destinations be used?
There are two main situations in which they are used:
1) Where an executor transfers heritable property as part of a substitutive legacy.
⁃ In this case there has been a legacy which has left to Bernard whom failing to Cassandra. The executor must give effect to this when Alfred dies - the executor will create a disposition which says “to Bernard whom failing to Cassandra.” This creates a special destination. This means that in the very title of the property, this will be made to happen.
⁃ The executor will only do this if he is giving effect to a substitution.
2) An inter vivos special destination
⁃ This happens where there is a situation where the person transferring the property includes a special destination at the request of the transferees. The most common example of this is a husband and wife buying a house. They will often request a special destination being inserted into the disposition by the granter. They will often opt for a survivorship special destination (i.e. where one spouse predeceases the other that half of the house will go to the other.)
⁃ This is not technically part of a legacy since it was inserted into the title by the person transferring.
How effective are special destinations?
They do not always take effect and do as the parties initially plan
- In order for a special destination to be effective there are conditions that must be met:
⁃ i) The institute must still own the property in question at their death
⁃ ii) The substitute must still be alive when the institute dies
Can the effect of special destinations be avoided?
One way to avoid the effect of special destinations is by evacuation.
How does evacuation occur?
This can occur in 5 ways:
1) Disposal of the property
⁃ The institute is the owner[ Must be owner for a special destination to take effect ] of the property and therefore can dispose of it - if disposed of then there is nothing for the destination to carry.
Posey v Povey’s Trs 2014
This case explains the moment property transfers in Scots law. Explains that if the institute has agreed to sell his interest but the transfer is not yet completed (I.e. Not registered in Land Register) then that will not be sufficient to defeat the special destination. It is merely a contractual obligation transfer.
2) Death of the substitute
⁃ If the substitute predeceases the institute then the destination falls.
3) Substitute renounces the destination
⁃ The substitute may choose not to accept the subject of the special destination.
4) If there is a legacy by the institute [sometimes happens - this is tricky]
This is the situation where:
⁃ Special destination left the property to Bernard then to the survivor Cassandra. If Bernard sells or Cassandra is dead / renounces then she won’t receive it.
- But what happens if Bernard has a will which contains a legacy that leaves the share of the house to somebody else?
- It depends. He still owns the house but his testament has left the legacy to someone who is not Cassandra. In effect there is a competition between the legacy and the special destination. Who will ‘win this competition’ depends:
(1) You need the power to do so
(2) You need to ensure they have followed requisite formalities.
A special destination might be evacuated by the institute’s testament if both 1 and 2 are satisfied:
1) The institute has the power to evacuate the destination by the legacy.[arises only in testate case].
⁃ It might say in the deed itself whether the institute has the power to evacuate the special destination.
⁃ If the deed is silent then presumptions are used.
⁃ If there is a survivorship special destination and both parties involved (Bernard and Cassandra) contributed towards the price the law presumes that there is no power to evacuate by either co-owner Perret’s Trs 1909: This case contains the most important presumption. It states that if there is a survivorship special destination and both parties contributed towards the price of the house then evacuation is NOT allowed.
- There is no power to evacuate a special destination if there is a survivorship destination and both parties contributed towards the price of the house [in most situations this covers co-owning married couples]. So it is not open to institute to evacuate the destination.
2) Does it conform to the Succession (S) Act 1964 s 30
⁃ s 30 states that a testamentary disposition executed after the commencement of this Act shall not have effect so as to evacuate the special destination unless it contains specific reference to the destination and a declared intention on the part of the testator to evacuate it. [In other words, not only do you need to have the power but the legacy itself must be very clear that you are evacuating the special destination — you must specifically refer to the destination itself.]
5) Divorce
⁃ By statute, where there is a survivorship special destination between spouses it will be evacuated by divorce (FL(S)A 2006 s 19). The same applies if a civil partnership is dissolve for annulled (CPA 2004 s 124A).
What happens if the institute (e.g. Bernard) is insolvent, what is the effect on the substitute?
C is going to receive the property but it will be burdened.
