The rule in Phipps v Ackers (1842) 9 CI & Fin 583 was
described as follows by Lord Denning in Re Kilpatrick's Policies
Trusts, Kilpatrick v IRC [1966] Ch 730
"When property is given in these terms: to A "if" or "when"
or "as soon as" a time is reached, but that if A dies before that
time, then the property is to go to B; in such a case A takes not a
contingent interest, but a vested interest which passes to him at
once as soon as the gift is made but is liable to be defeated if he
dies before the time."
The rule is based on an intention ascertained as a matter of
construction - see
Re Penton's Settlement [1968] 1 WLR 248. It does
not apply where there is a contrary indication. It is therefore
often difficult to say whether a future interest is vested but
defeasible or contingent - see
Re Mallinson's Consolidated Trusts [1974] 1 WLR
1120.
As the rule is concerned with the construction of a gift of
capital it is not affected by any directions in the settlement as
to the destination of intermediate income unless they are
inconsistent with the existence of a vested interest - see
Brotherton v IRC [1978] 1 WLR 610.
The rule has no counterpart in Scotland. Under Scots law a
trust for A if living at the death of the life assured, and if not
for B, would be regarded as postponing vesting until the death of
the life assured. A trust for accumulation of any income arising
before that event would be implied and there would therefore be no
interest in possession. Even where, under Scots law, the interest
of a beneficiary has vested in them subject to defeasance, that
would raise no entitlement in them to intermediate income - see
Russell's Trustees v Russell [1959] SC 148.
Most policies, however, contain a specific provision designed
to create an income interest in possession (
IHTM16061).
