Perpetuities Act 1984

The Act primarily affects any person who creates, receives or administers a future interest in property under a settlement (defined in s 3(1) to include wills, exercises of powers of appointment and any other instrument effecting a disposition). Testators and settlors are the most obvious group: their solicitors must now draft wills and trust deeds against the statutory 80-year period and the remedial provisions rather than the old lives-in-being measure.

Trustees are directly affected by the validation of administrative powers (s 11) and remuneration rights (s 12), and by the continued operation of their powers under the Trustee Act 1925 (s 18(2)). Beneficiaries, both born and unborn, fall within the class-membership rules in s 3(3) and may have their entitlements adjusted by age reduction or exclusion under s 9. Appointors and objects of powers of appointment are governed by the re-characterisation rules in s 6.

Superannuation fund trustees, employers and self-employed persons establishing provident or pension schemes benefit from the blanket validation in s 13, which extends to spouses, children, grandchildren, dependants and nominated persons. Charities are advantaged by the exemption for gifts over from one charity to another (s 14(4)) and by the fact that charitable purpose trusts remain outside the reformed rule against perpetual trusts (s 16(4)).

The Crown is bound in all capacities so far as legislative power permits (s 5(1)), although settlements made by the Crown itself are unaffected (s 5(2)). Lawyers and conveyancers advising on leases must note that options to renew, rights of pre-emption and other options given for value or by will are removed from the rule (s 15). Courts and judicial officers are required to apply the wait-and-see rule, the mandatory order in s 10, and the dependent-interest rules in s 17 when determining validity.

Because the Act is expressed to operate on "settlements" taking effect on or after the appointed day (s 4(1)), it does not disturb vested rights arising under judgments, orders or agreements made before that day (s 20(1)). Persons taking under pre-commencement wills that are saved by s 4(3) continue to enjoy the benefit of the old law.

The Act creates few positive duties but confers significant rights of validation. The central right is that an interest which might have been struck down at common law is now treated as valid until it is certain that it must vest outside the 80-year period (s 8(1)). A corresponding right exists for powers of appointment and other rights exercisable within the period (ss 8(2)–(3)).

Settlers and testators have the right to have their dispositions construed in the remedial sequence mandated by s 10, so that age reduction is considered only after wait-and-see has been exhausted, and class exclusion only after both. Where age reduction occurs, the ulterior interest remains intact (s 9(2)), giving later beneficiaries certainty that their gifts are not accidentally defeated.

Trustees enjoy an absolute right to exercise administrative powers (s 11) and to receive remuneration (s 12) without fear of perpetuity invalidity. Contributors to, and beneficiaries of, superannuation and like funds have a statutory right that the fund and any associated investment trust will not be invalidated (s 13(2)–(2A)).

Owners of land retain the full benefit of lease-renewal options, reversionary options, pre-emption rights and other options granted for value or by will (s 15). Charities possess the right to receive gifts over from other charities without the determining event being struck down (s 14(4)).

Persons entitled to terminate accumulations retain that power (s 18(2)), and courts keep their jurisdiction to authorise maintenance or advancement from accumulations. Ulterior interests that depend on an invalid prior interest are not invalidated merely by that dependence (s 17(1)), and acceleration of vesting is not disturbed (s 17(2)).

The Act imposes no new reporting or registration duties; compliance is achieved by drafting and, where necessary, by seeking judicial determination of when an interest "becomes certain" to infringe (ss 8(1), 16(3)).

The Perpetuities Act 1984 contains no offence provisions or civil penalties. Invalidity is the sole sanction. If a disposition ultimately infringes after wait-and-see and remedial provisions have been applied, the interest is simply void. Enforcement occurs through declaratory proceedings in the Supreme Court of New South Wales seeking determination of validity, construction of the settlement, or directions to trustees.

Because s 8(1) provides that becoming certain that an interest infringes "does not affect the validity of any thing previously done in relation to the interest", trustees who have distributed income or dealt with property on the basis of apparent validity are protected. The same protection appears in s 9(5) and s 16(3). There is therefore no exposure to personal liability for trustees who act in accordance with the law as it stands before the remote vesting becomes certain.

The repealed sections of the Conveyancing Act 1919 that previously contained accumulation limits are saved only for pre-appointed-day settlements (s 20(2)); post-commencement accumulations are governed solely by s 18, which ties validity to the validity of the ultimate disposition of the accumulated income. Breach of that limit renders the direction to accumulate void, but again without monetary penalty.

The Act is expressly tied to the Trustee Act 1925 (definitions of "trust" and "trustee" in s 3(1); preservation of trustee powers in s 18(2)) and the Conveyancing Act 1919 (repeal of ss 31, 31A and 36 by Schedule 1; continued application to old settlements under s 20(2)). It does not disturb the general law of charities, as charitable purpose trusts remain outside the rule against perpetual trusts (s 16(4)) and charitable gifts over are protected (s 14(4)).

Common-law rules against perpetuities and perpetual trusts continue to operate except to the extent modified by the Act (see the definitions in s 3(1) and the "except as provided" language in ss 8, 11, 12, 13, 15 and 16). The Act binds the Crown (s 5(1)) but does not affect Crown settlements (s 5(2)), preserving prerogative rights where relevant.

Section 4(2) ensures that the Act can validate an exercise of a power of appointment even if the creating settlement pre-dates the appointed day. Section 4(3) prevents the Act from invalidating interests under pre-commencement wills that would have been valid at common law. Section 6 reclassifies powers of appointment for perpetuity purposes, interacting with the general law of powers.

The accumulation provision (s 18) must be read with any specific accumulation directions in the settlement and with the court’s inherent jurisdiction preserved by s 18(2). Because the Act is not expressed to bind other Australian jurisdictions, cross-border trusts may require separate analysis under the perpetuity legislation (if any) of the governing law.

The only legislative change recorded in the text is the 1991 amendment (1991 No 57, s 3) which inserted s 13(2A). The new subsection states that the rule against perpetuities does not invalidate a trust established to invest the assets of a fund protected by s 13(2), whether or not that trust also invests other assets. It expressly does not limit the generality of s 13(2).

The amendment was a targeted response to doubt whether an investment vehicle holding mixed assets might fall outside the protective umbrella of the original superannuation-fund exception. By clarifying that such investment trusts are also immune, the legislature removed a technical risk that could have destabilised the administration of employee-benefit and self-employed-person funds. No other amendments appear in the supplied text, and the core 80-year period, wait-and-see mechanism and remedial order have remained unchanged since commencement.

The source text itself contains no reported cases or judicial commentary. However, the structure of the Act raises several points of construction that have proved fertile in other Australian perpetuity-reform jurisdictions and must be approached with care. The phrase "becomes certain" in ss 8(1), 8(2) and 16(3) requires a court to determine the moment at which future facts have crystallised sufficiently to show that vesting must occur outside the 80-year period. Because s 8(1) protects prior acts even after that moment, the timing of any declaratory relief can affect the validity of intermediate distributions.

The mandatory sequencing in s 10 has generated debate about whether a court may consider evidence of actual events before applying age reduction. Because s 8 must be applied first, a judge cannot shortcut to s 9(1) even if an age reduction would immediately save the gift. The interaction between s 9(4) class exclusion and the definition of "potential member" in s 3(3)(b) can produce surprising results: an unborn person who satisfies only some qualifying conditions may be excluded even though, had he or she been born earlier, the gift might have been saved by wait-and-see.

Section 14’s treatment of determinable interests has been criticised for converting determinable fees into absolute interests whenever the determining event is too remote, potentially frustrating the settlor’s clear intention. The charity-to-charity exception in s 14(4) is narrowly worded and does not extend to non-charitable purpose trusts, producing an asymmetrical outcome.

The preservation of the common-law rule against perpetual trusts except as modified by s 16 leaves open the question whether a hybrid trust with both charitable and non-charitable purposes falls entirely outside s 16 or is severed. The Act supplies no express severance mechanism.

Finally, the interaction between the 80-year statutory period and choice-of-law clauses in offshore trusts has produced uncertainty when NSW law is chosen as the proper law but the trust assets are situated elsewhere.

Most practitioners assume that the 80-year period is a safe harbour and that any gift vesting within it is automatically valid. That is not quite right: the period is measured from the date the settlement takes effect (s 7(1)), but "takes effect" for a will is the date of the testator’s death (s 3(2)). A will executed decades before death can therefore consume a large part of the 80 years before the clock even starts.

The order in s 10 is not optional. A lawyer who advises a client to rely on age reduction before exhausting wait-and-see risks giving negligent advice; the court must follow the statutory sequence.

Section 9(4) class exclusion can eliminate the entire class if the only remaining members are excluded, but the subsection stops short of allowing total extinguishment. The drafting trap is to assume that exclusion is always harmless; in a small class it may leave no one to take.

The "becomes certain" test in s 8 is applied at the moment the issue arises, not at the date of the settlement. Subsequent births, deaths or other events can move the goalposts. Trustees who distribute on the basis of current certainty may later discover that new facts render the interest invalid, although the protection for things "previously done" (s 8(1)) mitigates personal liability.

Options granted by will are exempt under s 15(d), but only if the will itself creates the option. An option created by a later deed exercising a testamentary power may fall outside the exemption. The distinction between administrative and distributive powers in s 11(1) is narrower than many trustees realise; a power to apply capital in satisfaction of a beneficiary’s interest is expressly excluded and remains subject to the rule.

The 1991 insertion of s 13(2A) is easily overlooked. Pre-1991 fund deeds that created separate investment trusts may still be challenged if the investment trust is not itself a "fund" within the original s 13(2) definition.

Section 4(3) saves only the interest created by the pre-appointed-day will; it does not save powers of appointment exercised after the appointed day under that will. The saving is narrower than it first appears.

Compliance begins at the drafting stage. When preparing a will or trust after the appointed day, insert an express statement that no interest shall vest outside the 80-year period measured from the date the settlement takes effect. Although the Act supplies the period automatically, an express clause assists construction and avoids disputes about when the settlement "takes effect".

For class gifts, define the class so that all members must be ascertained within the 80-year period or, if that is impossible, rely on the s 9(4) exclusion mechanism by ensuring the deed contains language allowing trustees to treat remote persons as excluded. Age contingencies should be set at 21 or 25 rather than 30 or 35; the lower the age, the less likely s 9(1) adjustment will be needed.

Trustees should maintain a file note recording the date the perpetuity period commenced and the factual matrix at that date. When a question of remoteness arises, they should obtain senior counsel’s opinion on whether it has "become certain" that the interest must vest outside the period. Distributions made before that certainty arises are protected.

For superannuation and employee-benefit funds, ensure the deed expressly brings the fund within s 13(2) categories and, if a separate investment trust is used, that it is identified as an investment vehicle for the protected fund so that s 13(2A) applies.

Leases containing options to renew or purchase the reversion should recite that they are granted for valuable consideration; this brings them squarely within s 15(a)–(b). Rights of pre-emption should similarly record the consideration or that they are conferred by will.

When reviewing pre-appointed-day settlements, note that the old rules continue to apply (s 4(1)) and that the repealed Conveyancing Act sections still govern accumulations (s 20(2)). Do not assume the 80-year period or wait-and-see applies.

In court proceedings or applications for directions, always address the s 10 order of remedies and lead evidence of all facts known at the date the application is heard, because the "becomes certain" test is applied prospectively from that moment.

Finally, when the Crown is involved, confirm whether the settlement was "made by the Crown" (s 5(2)); if so, the common-law rules apply untrammelled. For all other cases, the Act binds the Crown and the statutory regime is mandatory.

By systematically checking each disposition against the definitions in s 3, the application rules in s 4, the classification of powers in s 6, the 80-year clock in s 7, the remedial hierarchy in ss 8–10, and the specific exceptions in ss 11–17, practitioners can minimise the risk of invalidity and give clients the certainty the 1984 reforms were designed to deliver.