In the recent case of Nomchong -v- Vey-Cox the Court considered whether a life interest was forfeited when the life tenant (i.e. the beneficiary of the life interest) failed to comply with their obligation to repair and maintain the property.

The will used reasonably common drafting in setting up a life interest and included that the interest was “on the condition” that the life tenant pay rates and other outgoings and keep and maintain the property in good repair.

There was some argument as to whether such drafting meant that they are conditions precedent or subsequent to the legal right or benefit obtained. Failure to meet such a condition would cause forfeiture of the benefit.  The alternative was to find that instead it was not a condition, but a personal equitable obligation, meaning that whilst there may be rights to compensation if the obligations are not met, the interest is not forfeited.

In this case the property was in a poor state of repair and rates had not been paid. However the Court was reluctant to find that the life tenancy ended despite the use of the words “on the condition“.  The Court held the usual rule that the context of the entire will, and not just the relevant clause, must be considered to determine the meaning of the subject clause.  When this was done, the Court found that it was not the intention of the testator that the defendant would lose her right to reside in the home if she failed to meet the repair obligation.  The Court noted this would not be the case if there was an express provision in the will stating that failure to repair would result in the end of the life interest.

There was also discussion over whether a fund set up for expenses of the property could be used to pay the repairs and rates given that the repairs and rates were the obligation of the life tenant.

The Court found that the fund could not be used for this purpose given that it was not the trustee’s obligation but instead the life tenant’s obligation.

Lastly, of note was the Court’s acceptance of case law relating to the interpretation of commercial leases as an appropriate standard by which to consider obligations under life interests. Many estate planners will find this helpful given that the case law on the obligations of trustees and life tenants mostly hails from the 19th Century and is quite alien to the current context.

Lesson

The lesson from this case, as is the lesson from most construction cases, is that clarity in drafting provides certainty in application.

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