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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Mackenziet v. Mackenzie's Trustees [1877] ScotLR 14_596 (29 June 1877) URL: http://www.bailii.org/scot/cases/ScotCS/1877/14SLR0596.html Cite as: [1877] ScotLR 14_596, [1877] SLR 14_596 |
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A testator by trust-deed conveyed to trustees his whole means and estate other than certain lands of which he was heir of entail in possession, and directed that the residue should be laid out in the purchase of land to be entailed as therein directed. The purchases were to be made from time to time, as was judged most eligible, and the other purposes of the trust were not to postpone the fulfilment of this. The rents of lands so purchased were to go to the heir of entail in possession of the existing entailed estate, and, in the event of no purchase being made, three-fourths of the profits of the accumulated fund were to be paid to that heir, “the surplus interest being applied to increase the amount of disposable funds.” Held (1) that this last direction, viz., to accumulate one-fourth of the profits with capital, was, after the lapse of twenty-one years from the testator's death, “null and void,” under the Thellusson Act (39 and 40 Geo. III. cap. 98); and (2) ( revg. Lord Rutherfurd Clark, Ordinary — diss. Lord Deas) that they fell to be paid to the person “who would have been entitled thereto if such accumulation had not been directed,” viz., to the heir of entail, and not to the testator's next-of-kin, as intestate succession.
The late Colin Mackenzie, Esq. of Newhall, by his trust-disposition and deed of settlement, dated. 1st August 1838, and registered in the Books of Council and Session 14th October 1842, on the narrative of his having of the same date executed a deed of entail of the lands of Drumcudden, Easter St Martins, and others, in favour of his nephew, the pursuer, and the heirs-male of his body, whom failing the other heirs of tailzie therein mentioned, and that it was his desire and intention that the said entailed estates should not only be freed of all debts and burdens, but that the same should be increased by new purchases from his free means and estate, after the several other purposes therein mentioned should be fulfilled, gave, granted, and disponed to certain trustees his whole means and estate, heritable and moveable (excepting the lands and heritages mentioned in the said deed of entail). After providing for the payment of the testator's debts and funeral charges, legacies, and annuities, the truster directed his trustees, in the ninth purpose of the trust, “to lay out and invest the whole free proceeds of my trust-estate, with the interest which may accrue thereon (subject to the explanations underwritten), in the purchase of lands and estates as near to the foresaid lands of Easter St Martins and Drumcudden as they can conveniently be had, and shall afterwards settle
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and secure the lands and estates so to be purchased by a valid and formal deed or deeds of entail upon the same series of heirs (so far as then subsisting), and under the same provisions, limitations, restrictions, clauses irritant and resolutive, and other clauses, as are contained in the foresaid deed of entail executed by me: Declaring, in explanation of the foregoing appointment to invest the free proceeds and interest accruing thereon, that purchases may be made by my said trustees from time to time, as they may judge most eligible, according to the state of the trust funds and the opportunities which may offer of making suitable and convenient purchases, and that they shall not be bound to wait till the whole of the foregoing other purposes are fulfilled before making their first purchases, but that, so soon as they shall at any time have realised any free disposable sum or sums of money and a favourable opportunity of making a purchase or purchases shall occur, the same may be immediately so applied from time to time, but no purchase shall be made with any sum or sums of money necessary to be retained for answering any of the foregoing purposes till such purposes are completely fulfilled; and likewise declaring that when any purchase shall be made, the free rents and profits of the lands so purchased, after deducting the public burdens and expenses of collection, shall be payable by my said trustees to the heir of entail in possession for the time of the said entailed estates of Easter St Martins and Drumcudden; and further declaring, that in the event of any free disposable sum or sums of money being at any time realised, and no opportunity of making an eligible purchase occurring at the time, my said trustees shall be bound to make payment to the heir in possession of the said entailed estates of three-fourths of the free interest or profits of such disposable sum or sums of money until a purchase shall be made, the surplus interest being applied to increase the amount of disposable funds, but the amount of the said three-fourths shall be fixed and determined periodically by my said trustees themselves, and their statement thereof shall be final and conclusive against the said heir of entail and all other persons in his right.” The truster, Colin Mackenzie, died on 1st October 1842, and at his death the estate falling under the administration of the trust was entirely moveable. In the execution of the purposes of the trust the trustees paid over three-fourths of the interest or profits as realised to the heir of entail in possession of Drumcudden. The remaining one-fourth was retained as part of the capital, to be invested in land.
This was an action at the instance of Colin Lyon Mackenzie, the heir of entail in possession of Easter St Martins and Drumcudden, against (1) Colin Mackenzie's trustees, (2) Colin Mackenzie's next-of-kin, and (3) Colin Lyon Mackenzie junior and others, the three nearest heirs of entail of Easter St Martins and Drumcudden. The summons concluded for declarator (1) that the direction that the one-fourth part of the profits of the estate free to be disposed in the purchase of lands to be entailed under the trust-deed should be applied to increase the capital, was null and void under the Thellusson Act (39 and 40 Geo. III. cap. 98); and (2) that the pursuer was entitled to the accumulations from 1st October 1863 of the one-fourth part of the profits, and of the surplus of the profits accrued thereon prior to that date, and accumulated therewith in terms of the trust-deed, including interest. There were further conclusions for payment.
The Thellusson Act (39 and 40 Geo. III. cap. 98) was entitled—“An Act to restrain all trusts and directions in deeds or wills, whereby the profits or produce of real or personal estate shall be accumulated, and the beneficial enjoyment thereof postponed beyond the time therein limited;” and enacted, “That no person or persons shall, after the passing of this Act (28 July 1800), by any deed or deeds, surrender or surrenders, will, codicil, or otherwise howsoever, settle or dispose of any real or personal property so and in such manner that the rents, issues, profits, or produce thereof shall be wholly or partially accumulated for any longer term than the life or lives of any such granter or granters, settler or settlers, or the term of 21 years from the death of any such granter, settler, devisor, or testator … and in every case where any accumulation shall be directed otherwise than as aforesaid, such direction shall be null and void, and the rents, issues, profits, and produce of such property so directed to be accumulated shall, so long as the same shall be directed to be accumulated contrary to the provisions of this Act, go to and be received by such person or persons as would have been entitled thereto if such accumulation had not been directed.”
The pursuer averred that he was entitled to be paid these accumulations by the trustees, as he was the person who would have received them but for the direction to accumulate.
Colin Mackenzie's trustees stated that they were willing to administer the funds in dispute as the Court might direct.
Colin Mackenzie's next-of-kin pleaded that the accumulated funds were intestate succession, and therefore fell to be divided amongst them.
Colin Lyon Mackenzie junior pleaded, inter alia —(1) That the pursuer's claims were not maintainable with reference to the terms of the Thellusson Act and the trust-deed in question; and “(2) The pursuer having aquiesced in the trustees' administration under the said deed, and received payment in terms thereof of three-fourths of the free interest or profits realised since 1st October 1863, is barred from insisting in his present claim; and the interest or surplus profits so accumulated fall to be invested forthwith, along with the funds from which they are derived, in the purchase of lands to be entailed, as directed by the trust-deed of the late Colin Mackenzie.”
At the date of the action only one of the annuitants survived, and the amount of the profits affected by the action amounted to about £6600.
The Lord Ordinary assoilzied the defenders from the conclusions of the action, and added this note to his interlocutor:—
“ Note.—The Lord Ordinary is of opinion that the Thellusson Act applies. There is no allegation that the trustees have not acted in conformity with the trust, and the accumulations are the result of a direction to accumulate, express or implied, contained in the trust-deed.
The question remains, Who is entitled to the accumulations? They are claimed by the pursuer
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as the person who would be entitled thereto if the accumulations had not been directed. The pursuer is the heir of entail in possession of the entailed estates of Easter St. Martins and Drumcudden. The trustees are directed to employ the trust-funds in the purchase of lands and estates as near to St. Martins and Drumcudden as they can conveniently be had, and thereafter to settle them by a valid deed of entail on the same series of heirs, so far as then subsisting, as is contained in the entail in which St. Martins and Drumcudden are held. The trust-deed declares that when any purchase is made, the rents and profits of the lands shall be payable to the heir in possession for the time of the estates of St. Martins and Drumcudden, and that until the purchase the heir in possession of the estates shall be entitled to three-fourths of the interest of the trust-funds and accumulations. The truster therefore provides by express direction for the event which has happened, of no purchase being made. Till the purchase is made, three-fourths of the income of the trust-funds is payable to the heir in possession of St. Martins and Drumcudden. The remainder is to be accumulated, and it is only when lands are bought that the full income becomes payable to the heir in possession for the time.
Under the trust-deed, therefore, the pursuer cannot claim more than three-fourths of the income of the trust-funds. But he contends, that as the direction to accumulate is illegal, he is in the same position as if the truster had simply directed the lands to be purchased and settled on him as the institute of entail, so that, on the principle of Lord Stair's case ( 2 W. and S. 416), he is entitled to the income of the trust-funds until the lands are bought. In the opinion of the Lord Ordinary this argument is not well founded. The trust-deed in this case fixes the interest of the heirs of entail until the lands are purchased, and there is no room for the presumption on which the case of Lord Stair proceeded. Hence the Lord Ordinary conceives that the pursuer cannot claim the accumulations. He cannot do so under the trust-deed, and he has no other right. It seems to the Lord Ordinary that the accumulations are to be dealt with as intestate succession, on the principles recognised in the case of Lord Keith's Trustees ( 19 D. 1040), and Lord v. Colvin ( 23 D. 111, 3 Macph. 1083). There is no disposal of residue into which would fall any bequests which failed, from whatever cause.”
The pursuer reclaimed, and argued—(1) The Thellusson Act applied. The deed resulted in accumulations which it was the object of the Act to prevent. It was true there was no direction to accumulate, but it was the result which was to be looked at. (2) It was not to be assumed that the result was intestacy. In Lord Stair's case it had been held that the primary intention of the truster should be looked at. If there had been no direction to accumulate, the pursuer would have got all. The money was to be invested in land to be entailed on him, and if there had been no direction how the income was to be expended before the purchase, it would have gone, on the authorities, to the pursuer.
Authorities— Lord Stair v. Stair's Trustees, June 19, 1827, 2 W. and S. 614 (Lord Redesdale, p. 618); Howat's Trustees v. Howat, Feb. 17, 1838, 16 S. 622; Campbell's Trustees v. Campbell, June 30, 1838, 16 S. 1251; Dickson's Tutors v. Scott, Nov. 2, 1853, 16 D. 1; Moncrieff v. Menzies, Nov. 25, 1857, 20 D. 94; Lord v. Colvin, Dec. 7, 1860, 23 D. 111, and July 15, 1865, 3 Macph. 1083; Ogilvie's Trustees v. Kirk-Session of Dundee, July 18, 1846, 8 D. 1230; Combe v. Hughes, Jan. 27 and May 2, 1865, 34 L.J. Chanc. 344; Green v. Caseoyne, Dec. 10, 1864, 34 L.J. Chanc. 268; Macpherson v. Macpherson's Trustees, June 1852, 1 Macq. 243.
At advising—
I am of opinion, with the Lord Ordinary, that the Thellusson Act does apply, and that the accumulations since 1863 are in violation of the Act. The question now comes to be, what is to be done with the profits so accumulated? and that depends on the words of the Act itself, which provides for that event—[reads Act ut supra]. The question we have to solve is, who is the person who would have been entitled to these events and profits if they had not been directed to be accumulated? On the one hand, it is maintained that the rents and profits so directed to be accumulated become intestate succession. On the other hand, the pursuer maintains that they belong to him, because if there had been no direction to accumulate he would have been entitled to them under the trust-deed.
I am of opinion that this latter contention is right, and I differ from the Lord Ordinary. I think that the pursuer is the person who would have been entitled to the interest if there was no direction to accumulate. Observe what the capital sum is. It is money which the trustees are to invest in land, to be entailed on the pursuer as institute, and the heirs of his body afterwards. If there had been no direction as to the disposal of the income during the period which elapsed before the purchase of land was made, it cannot be doubted that the income would have gone to the pursuer. That is the inevitable result of the case of Lord Stair and the cases which followed on it. The same view of the rights of an institute of entail may be illustrated by reference to the provisions of the Entail Amendment Act. If the heir in possession had been in a position to disentail his lands, he might equally have disentailed this very money which has produced the rents and profits. That shows that, subject to the conditions of the existing entail, the pursuer is absolute owner of the money and of the entailed lands. He is no more limited as to the money than as to the land.
The ground of the Lord Ordinary's judgment is that this is not the ordinary case of a direction to purchase land without any provision as to what is to be done with the money in the meantime. After the lands are purchased, the rents are to go to the heir of entail in possession of Easter St. Martins and Drumcudden, but before that only three-fourths are to go to the heir and one-fourth is to be accumulated. Does that make any difference? I do not think it does. He restricts the right of the heir of entail to three-fourths, in order
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The only question under the Act is, whether, where there is no residuary legatee, the testator's next-of-kin will take the fund? That was so decided in the well-known case of Lord v. Colvin. For reasons which I need not repeat, I expressed no opinion in that case on its merits, and I had occasion to refer to my reasons for that in my opinion in the case of Ferrier v. Angus, Jan. 21, 1876, 3 Rettie, 396. I then stated that I held it settled that that was the law, and that I concurred in it. But what is here proposed is not to give this fund to the residuary legatee or the next-of-kin, but to the person to whom the testator intended it to go, and for whom the testator directed the accumulations to be made. The case of Ogilvie's Trs., and the English case of Combe v. Hughes, which were cited, proceed on the footing of giving to the residuary legatee what is illegally accumulated.
The only object of the statute was to prevent testators from doing what your Lordships now propose by the operation of the statute to do. I entirely concur in the interlocutor and views of the Lord Ordinary.
I think that is decided by the clause in the statute which declares that they shall go “to such person or persons as would have been entitled thereto if such accumulation had not been directed.” They are to get them to do what they please with them. They may purchase lands with them, or apply them to any other purpose. It appears to me therefore that they belong to the pursuer here, because by force of the trust-deed they would have gone to him along with the other three-fourths if there had been no direction to accumulate the remaining one-fourth. The leading purpose in this part of the trust-deed is a gift to the pursuer of the proceeds of the monies to be invested in lands to be entailed. They would have gone to the pursuer in the absence of such a provision, under the authority of the cases of Lord Stair and Ogilvie's Trs. The whole free proceeds belonged to the heir of entail one year after the death of the previous heir. I think the observations of Lord Romilly (Master of the Rolls) and of Lords Justices Knight, Bruce, and Turner, in the case of Combe v. Hughes, clearly apply. There is a gift to the heirs of entail of the proceeds of this fund.
But it is said, on the other side, that the truster has taken the disposal of the one-fourth which is reserved here into his own hands. But, in the early part of the clause the whole proceeds are said to belong by force of gift to the heirs of entail, and in the result I quite concur in the opinion expressed by your Lordship in the chair.
The question remains, assuming that the accumulations are prohibited, to whom do they go? It appears to me that the whole series of cases, beginning with that of Lord Stair v. Lord Stair's Trustees, have a material bearing on this question. By these decisions it is settled that where there is a direction to purchase lands to be entailed, which comes into operation at once on the death of the truster, and is not deferred till the occurrence of some future event, and where it is the duty of the trustees therefore to proceed to purchase and to entail without delay, the institute and other heirs in their order are entitled to receive the income of the fund after the lapse of a year, just as they would draw the rents if the purchase had been made. However long a time may elapse before the purchase is made, the heir of entail is entitled to the income of the fund.
The general direction in this deed as to the application of the residue of the estate is in the ordinary terms which have been the subject of decision in the cases I have referred to. The truster directs his trustees to lay out and invest the whole proceeds of his trust-estate and interest thereon in the purchase of lands to be entailed, and the trustees evidently contemplated that the purchase might take place within a short time after his death. In the absence of a direction to accumulate, the interest of the whole fund would thus have gone to the pursuer as the first person
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The deed, however, contains a subsequent and separate clause, providing that the surplus interest exceeding three-fourths of its amount should be accumulated with the capital, so as to increase the amount of the fund to be applied in purchasing lands. This clause, though effectual for twenty-one years, is struck at by the statute for all time thereafter. The direction, so far as regards the time after the lapse of twenty-one years, is declared to be null and void, and the interest is directed by the statute to “go to and be received by such person … as would have been entitled thereto if such accumulation had not been directed.”
Who would have been entitled to this surplus interest “if such accumulation had not been directed?” I think the answer to this inquiry must be the heir of entail in possession. The deed must be read as if expressed in all respects as it is, but without this illegal direction to accumulate a part of the interest, and, so read, the surplus interest belongs to the heir of entail for his own personal benefit and use.
The view I take is very well illustrated by the cases of Ogilvy v. Kirk-Session of Dundee, July 18, 1846, 8 D. 1230, and Combe v. Hughes, May 2, 1865, 34 L.J., Ch. 344, to which reference was made in the course of the argument. I cannot express the principle better than in the language of Lord Justice Knight-Bruce in the latter case:— “We must, I think, consider that, had the will not contained any direction as to accumulation, but had been in other respects as it is, or had it been expressly confined in its direction for accumulation to the period of twenty-one years next after the testator's death, and had been in other respects as it is, the income of the share called by the testator his daughter's share would in the first case, of the residue, have belonged to herself during the husband's lifetime.” So the test is to consider what the result would have been here if there had been no direction to accumulate, and the deed had been in other respects as it is. The heir of entail would then have received this money.
In giving the money to him we are giving direct effect to the literal interpretation, and, as I think, to the true meaning of the statute. The Lord Ordinary says in his note—“The trust-deed in this case fixes the interest of the heirs of entail until the lands are purchased, and there is no room for the presumption on which the case of Lord Stair proceeded.” It seems to me that in this way the Lord Ordinary gives effect, contrary to the statute, to the direction to accumulate, because it is in the clause directing accumulation that he finds the expressions which enable him to reject the claim of the pursuer. Without that clause of direction, which the statute declares shall be null and void, there is nothing limiting or fixing the interest of the heirs of entail in the interest so as to alter the ordinary rule. I think we must read the deed as if that direction to accumulate after twenty-one years were not contained in it.
I only desire further to distinguish this case from those which have weighed with the Lord Ordinary in coming to his decision that the surplus interest must be dealt with as intestate succession. I think there is an obvious distinction between the present and the cases of Lord Keith's Trustees, 19 D. 1040, and Lord v. Colvin, 23 D. 111, 3 Macph. 1083. Here the direction to purchase and entail might at once have been carried out. In the other cases there was a direction which necessitated a postponement of the purchase of lands, with this result, that till the defined date there could be no heir of entail interested either in the capital or interest. If that had been the case here, I should have agreed with the Lord Ordinary. A single passage from the opinions of Lord Ivory and Lord Curriehill will illustrate my meaning. Lord Ivory says ( 19 D. 1062): — “As the case stands, the entail cannot be executed until the death of the Countess Flahault. Therefore Mrs Villiers cannot take anything under the directions of the deed. She is not an heir of entail until the very moment when the entail is ordered to be executed. It is not like the case of a trustee being directed to entail from this moment, and where the heir during the period—that it is impossible to purchase lands gets the interest of the money. She has no interest or legal right until the time that the trustees are directed to execute the entail, and they are forbidden to execute it until the Countess Flahault dies. The effect of that is, that the accumulated rents (which are now made null by force of statute) belong to nobody. They are intestate, and therefore must go to the two daughters.” So too Lord Curriehill says:—“The distinction between this case and that of Ogilvie's Trustees is this—In that case the accumulation was directed to take place merely for the purpose of increasing the amount of the fund; and at the period when the accumulation was to cease the fund was to be invested. But here that is not the case. The trustees are forbidden to make any investment until the arrival of an event which has not yet taken place; and it is still a matter of uncertainty who will be the institute under the entail when that contingency shall be purified. In the meantime, neither Mrs Villiers nor any other person can claim this yearly revenue under the settlement; and there being no direction at all regarding them to which effect can be given, these fall to the legal representatives as intestate succession.” The facts were similar in the case of Lord v. Colvin. I concur entirely in the law laid down in these cases. But there was in these cases a postponement of the right of any one even in the capital sum, and there being no provision about the payment of the accruing interest on that fund, the accumulations would have gone to residue had there been a destination of residue. In the absence of a clause of that kind they become intestate succession. Here there is a direction to purchase and entail at once, and when the direction to accumulate flies off, and is practically struck out of the deed, it follows that the fruit of the fund belongs to the heir of entail. I am therefore of opinion that the interlocutor of the Lord Ordinary should be recalled, and that the pursuer should be found entitled to the surplus interest in question.
The following interlocutor was pronounced:— “The Lords having heard counsel on the reclaiming note for Colin Lyon Mackenzie against Lord Rutherfurd Clark's interlocutor of 8th February 1877, Recal the said interlocutor:
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Counsel for the Pursuer (Reclaimer)— Balfour —Guthrie. Agents— Gibson-Craig, Dalziel, & Brodies, W.S.
Counsel for Colin Mackenzie's Trustees and Miss Mackenzie (Defenders)—Rutherfurd. Agents — Murray, Beith, & Murray, W.S.
Counsel for Colin Lyon Mackenzie jr. (Defender)—Moncreiff—Keir. Agent— J. W. Moncreiff, W.S.
