Scottish Sheriff Court Decisions

A559/13

SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH

JUDGEMENT

of

SHERIFF P.A. ARTHURSON, QC

in the cause

THE EXECUTORS OF MRS ALISON CATHERINE REZAC

PURSUERS

against

THE EXECUTRIX NOMINATE OF WILLIAM JOSEPH REZAC

DEFENDER

__________________

Act: McLellan, Solicitor

Alt: McLean, Advocate

EDINBURGH, 25 April 2014

The Sheriff, having resumed consideration of the cause, FINDS IN FACT:

1. That the Pursuers are the executors nominate of the late Mrs Alison Catherine Rezac ("the late Mrs Rezac") who resided latterly at [address] ("the Property").

2. That the Defender is the executrix nominate of her late father William Joseph Rezac ("Mr Rezac"), the late Mrs Rezac's husband, who resided sometime at the Property, thereafter at [address], and latterly at [address].

3. That the Defender is currently resident at the Property, that she has been so resident for more than three months immediately preceding the raising of this Action, that she is domiciled there, and that this court accordingly has jurisdiction.

4. That no proceedings are pending before any other court involving the present cause of action and between the parties hereto, and that there is no agreement in existence between the parties prorogating jurisdiction over the subject matter of the present cause to another court.

5. That Mr Rezac and the late Mrs Rezac purchased the Property with entry on 27^th July 1999 in terms of a Disposition by Robert Ross Auld and Mrs Maureen Auld in their favour recorded in the Division of the General Register of Sasines applicable to the County of Midlothian on 2^nd August 1999.

6. That the said Disposition contained a survivorship destination; and that, for the purposes of this action only, the parties agree that the survivorship destination was evacuated in terms of a Minute of Agreement between Mr Rezac and the late Mrs Rezac dated 2^nd and registered in the Books of Council and Session on 5^th, both dates in September 2007.

7. That, on 2^nd September 2007, the late Mrs Rezac executed a Will which was subsequently registered in the Books of Council and Session on 18^th September 2007 ("the Will"), and that in the Will she nominated Mr Rezac and the first Pursuer to be her executors and trustees.

8. That, also on 2 September 2007, the late Mrs Rezac executed a Codicil (which was registered in the Books of Council and Session along with the Will) in terms of which she recalled the appointment of Mr Rezac as trustee and executor, and nominated the second Pursuer in his place.

9. That purpose (Five)(c) of the Will contained directions to her executors and trustees in respect of the Property in the event that Mr Rezac survived the late Mrs Rezac for thirty days after her death, and that those directions were, first, to hold her interest in the Property or the property representing such interest following a sale after her death in liferent for Mr Rezac, and, secondly, on, inter alia, termination of the liferent, to make over the whole or such part of her estate which was or would have been liferented to her nephew, Fraser Cuttle.

10. That the late Mrs Rezac died on 13^th September 2007, and that the Pursuers were appointed as her executors nominate conform, first, to the nomination in the Will, and, secondly, to Confirmation issued by the Commissariot of Lothian and Borders on 18^th June 2008.

11. That the Pursuers, as executors foresaid, have recorded in their favour a Notice of Title in relation to the late Mrs Rezac's one half pro indiviso share in the Property in the said Division of the General Register of Sasines on 23^rd March 2009.

12. That Mr Rezac died on 19^th July 2011, that the Defender is his executrix nominate conform to Confirmation issued by the Commissariot of Lothian and Borders, and that the Defender, as his executrix nominate, is the uninfeft proprietrix of the remaining one half pro indiviso share in the Property.

13. That the Property is incapable of division.

14. That the Pursuers seek the sale of the Property and that the Defender refuses to agree to such a sale.

15. That production number 5/1/1 is a copy of the Certificate of Confirmation in favour of the Pursuers relative to the late Mrs Rezac dated 18^th June 2008.

16. That production number 5/1/2 is a copy of the Disposition by Miss Christian Steuart in favour of Alexander Davidson Taylor recorded in the Division of the General Register of Sasines for the County of Edinburgh on 5^th February 1920.

17. That production number 5/1/3 is a copy of the Disposition by Robert Ross Auld and Mrs Maureen Auld in favour of Mr Rezac and the late Mrs Rezac recorded in the Division of the General Register of Sasines for the County of Midlothian on 2^nd August 1999.

18. That production number 5/1/4 is a copy of the Extract Registered Minute of Agreement between Mr Rezac and the late Mrs Rezac dated 2^nd and registered in the Books of Council and Session on 5^th, both dates in September 2007.

19. That production number 5/1/5 is a copy of the Notice of Title in favour of the Pursuers recorded in the Division of the General Register of Sasines applicable to the County of Midlothian on 23^rd March 2009.

20. That production number 5/2/1 is a copy of Mrs Rezac's Will.

21. That all six documents are what they purport to be, and say what they purport to say, that the whole terms thereof are held to be incorporated in the Pleadings and this Joint Minute of Admissions for the parties, and that copies are sufficient and should be treated as equivalent to the originals.

FINDS IN LAW

1. That the pursuers having no power, right or title to insist on an action of division or sale of the Property, the defender should be assoilzied from the craves of the initial writ.

THEREFORE sustains the fourth plea in law for the defender and repels the first plea in law for the pursuers; pronounces decree of absolvitor; finds the pursuers liable to the defender in the expenses of the action as agreed or taxed; and sanctions the cause as suitable for the employment of junior counsel.

NOTE

Introduction

[1] This action called as a diet of proof on 23 April 2014. Parties tendered a joint minute at the outset of the hearing and invited, on joint motion, the court to note that they had renounced probation and agreed in terms between them the findings in fact that the court was to proceed upon as set out in paragraphs 1 to 21 inclusive of the said joint minute. The findings in fact, supra, reflect the parties' wishes in this matter.

[2] The pursuers, as executors of the late Mrs Rezac, invited the court to find that they were entitled to insist an action of division or sale of the Property and to find and declare that the Property should be sold and that the proceeds divided. Parties were agreed that the Property is incapable of division. The defender, being the executrix nominate of her late father Mr Rezac, who died on 19 July 2011, continues to live in the Property and, I was advised, is the owner of a one half share therein as the beneficiary in the estate of her late father.

Submissions for the pursuers

[3] Mr McLellan, solicitor for the pursuers, submitted that there was no general rule of law which provided that an executor could not deviate from the terms of a will: Currie on Confirmation of Executors in Scotland, 9^th edition by E M Scobbie at para 1-32; Heritable Securities Investment Association Limited v Miller's Trustees (1893) 20R 675 Lord President Robertson at 691; and Wilson and Duncan, Trusts, Trustees and Executors, 2^nd edition at paras 34.14 and 34.26. Mr McLellan illustrated this point under reference to the concept of abatement, observing that there can be circumstances where there are insufficient funds left in an estate, after taxation and payment of debts for example, and that in those circumstances specific legacies will require to abate proportionately: Barr and others, Drafting Wills in Scotland, para 4.10.

[4] Turning to the Will of Mrs Rezac, Mr McLellan observed that , on the basis that Mr Rezac had survived Mrs Rezac for thirty days after her death, the governing clause in the Will was clause (Five) (c) rather than (Six) (c), and this was reflected, notwithstanding the parties' pleadings, in the joint minute. In terms of that clause the testator directed her trustees (the pursuers):

"Liferent of house (c) to hold my interest in the house at [address] or the property representing such interest following a sale after my death in liferent for my husband the said William Joseph Rezac. Declaring that the said William Joseph Rezac shall be responsible for payment of insurance premiums and all other outgoings, annual or otherwise pertaining to any house liferented by him and for the maintenance of such house to the reasonable satisfaction of my Trustees.

Termination of liferent On the failure, termination or renunciation in whole or in part of the foregoing liferent, I direct my Trustees to make over the whole or such part of my estate which was or would have been liferented to my nephew the said Fraser Cuttle.

No apportionment There shall be no apportionment as between capital and revenue on any occasion".

[5] Mr McLellan submitted that the phrase "following a sale after my death" represented wording which showed a clear anticipation on the part of the testator that the property might be sold. Dealing with the sub clause pertaining to "termination of liferent", Mr McLellan noted that that sub clause did not specifically deal with the Property. Further, Mr McLellan submitted, clause (Nine) (a) contained a clear power on the part of the pursuers to sell any part of the estate. Also, clause (Nine) (m) gave to the pursuers a clear power to convey property in order settle matters with any beneficiary. Put short, the submission on the Will for the pursuers was to the effect that the Will plainly provided them with a power to sell the Property.

[6] Further, and in any event, Mr McLellan submitted that the pursuers had such a power in terms of the Trusts (Scotland) 1921 section 4(1)(a) which set out a power to sell heritable trust estate, so long as any acts carried out in implement of such a power were not at variance with the purposes of the trust in question. He sought to distinguish, in advancing this submission, the authority of Tennent's Judicial Factor v Tennent 1954 SC 215 on three points: (i) that authority comprised an analysis in terms of statutory powers in terms of section 4 of the 1921 Act; (ii) the Accountant of Court was involved in the process; (iii) the case dealt with a judicial factor. He observed that Lord President Cooper at 225 had, simply put, set out that a power to sell in such circumstances may or may not be at variance with trust purposes, and that this was at best neutral for the contention of the defender in the instant case. Mr McLellan also noted that the provisions of the Trusts (Scotland) 1961 section 2 gave protection to purchasers in transactions with trustees. By way of illustration of this practical point Mr McLellan referred to the Opinion in the Outer House of Lord Cameron in the case of Barclay, Petitioner 1962 SC 594.

[7] Finally, Mr McLellan referred to the authority of Craig v Fleming (1863) 1 Macph.612 which he invited the court to hold as being on all fours with the instant case and authority for the proposition that trustees such as the pursuers are entitled to raise an action of division or sale, under reference to the Opinion of Lord Justice Clerk Inglis at 614.

[8] Mr McLellan, having advanced these submissions, moved for decree under deletion of the part of his crave referring to remit to a surveyor on the basis that, parties having agreed that the property was incapable of division, the appropriate disposal was one of declarator of entitlement to sale. Mr McLellan further moved for the expenses of the action in the event of the success before the court of the submissions advanced by him.

Submissions for the defender

[9] Mr McLean, Advocate, for the defender, submitted that the pursuers had no power against the background of the agreed facts to seek the order craved by them in the initial writ, and that the defender was accordingly entitled to decree of absolvitor. Counsel invited the court to approach matters primarily as an exercise in construction of the Will. The relevant obligation upon executors was set out by the editor of Currie on Confirmation, 9^th edition, at para 1-33 as follows, "Where the deceased died intestate, his directions must be carried out meticulously." In the present action the relevant clause in terms of testamentary purpose was set out in clause (Five)(c). The first part of the clause, dealing with liferent, had as its purpose that Mr Rezac be able to reside in the property. The only mention of "sale" in the clause was in that section; the part of the clause dealing with matters on termination of the liferent was silent thereon. The operative part of the clause, counsel submitted, was the section on "termination". In that section there was a clear direction to the trustees to make over Mrs Rezac's half share to her nephew, Mr Fraser Cuttle. In such circumstances, where a deceased has provided that her executors must carry out a certain act, that act requires to be the starting point of any construction of testamentary intention, it was submitted. There was no suggestion in the clause that Mr Cuttle receive the Property "or the proceeds thereof", and counsel argued that the absence of such wording reinforced the defender's contention that the purpose or intention of the testator was purely related to the transfer of the Property to Mr Cuttle. Insofar as the pursuers relied on clause (Nine) (a) and (m), it was necessary to have regard to the full terms of the preamble of that provision, and in particular to the phrase "necessary or expedient for the administration of the trust", submitting that these provisions did not allow the pursuers as executors simply to disregard the instructions of Mrs Rezac. None of the agreed facts disclosed that it was necessary to sell the Property rather than convey it to Mr Cuttle; there was no such question, for example, of an insufficiency of funds in the estate to pay creditors. Further, there was nothing in the circumstances to show that division or sale was an expedient disposal; on the contrary, counsel submitted that it was in fact surely more convenient and practical for the executors to convey the relevant half share to Mr Cuttle. Consideration of clause (Nine)(m) disclosed that there may be circumstances where that power could operate, but these might pertain to a scenario involving a substantial amount of assets but little cash in an estate, and no such argument had been advanced for anything like that on behalf of the pursuers. The authority of Craig v Fleming required to be seen in the context, counsel submitted, of the Opinion of the Lord Ordinary in that case, at 614. The Lord Ordinary (Kinloch) had held that there were "ample powers to realise the whole property, real and personal" and that there was "a plain expediency in the present process of division". This authority was accordingly not on all fours with the instant case, and it was plain, counsel submitted, from consideration of the terms of the Will and the agreed factual background that the pursuers were not permitted to pursue the action.

[10] Turning to the submissions for the pursuers in respect of the Trusts (Scotland) Act 1921 section 4, the general powers such as the power in section 4(1)(a) to sell heritable estate, was only exercisable when such acts were not at variance with the trust purposes. Counsel referred to the Opinions of the First Division in the case of Tennent's JF, supra per Lord President Cooper at 225-226 and Lord Russell at 229. Counsel founded in particular on the dictum of Lord Russell on the primary role in terms of the construction exercise to be given to the intentions of the testator and submitted that the duty in such circumstances upon executors is to give effect to the intention of the testator. In the instant case, the intentions of Mrs Rezac were clear, counsel submitted, and had not been given effect to by the executors as they pursued the current action. Although Lord President Cooper had at the outset of his Opinion (at 225) in Tennent's JF referred to a "certain residuum of common law powers in this Court in dealing with trusts and judicial factories", counsel submitted that in the event that the pursuers were found to have failed in their contentions in terms of the Will and section 4 of the 1921 Act, there was nothing in any residual common law powers available to them to assist their cause.

[11] In all of these circumstances counsel sought decree of absolvitor in terms of his third and fourth pleas in law, observing that his second plea in law had been repelled at an earlier stage in proceedings in the absence of a supporting Rule 22 note. He sought expenses in the event of success and moved that the court certify the cause as suitable for the employment of junior counsel.

Discussion and Decision

[12] At the outset of my remarks on parties' submissions I would like to commend Mr McLellan and Mr McLean for their approach to this litigation. They have helpfully agreed, in terms of a joint minute, the findings in fact set out supra in this judgment, and both made their submissions concisely and with considerable skill. Having reflected on the submissions advanced, however, I have elected to treat the issue between the parties first and foremost as a matter of construction of the provisions of the Will of Mrs Rezac and in particular clauses (Five) and (Nine) of that Will. In considering these clauses I have sought to read them as a whole, in the context of the whole Will, and give the words used in each clause their ordinary meaning. The object of this exercise must be to construe, with a view to giving effect to, the intentions of Mrs Rezac, the testator.

[13] Clause (Five) of the Will has correctly been agreed between parties to be the operative clause, standing the survival of Mr Rezac for thirty days after the death of Mrs Rezac. The Property is dealt with in clause (Five)(c) in the following manner:

"Liferent of house (c) to hold my interest in the house at [address] or the property representing such interest following a sale after my death in liferent for my husband the said William Joseph Rezac. Declaring that the said William Joseph Rezac shall be responsible for payment of insurance premiums and all other outgoings, annual or otherwise pertaining to any house liferented by him and for the maintenance of such house to the reasonable satisfaction of my trustees.

Termination of liferent On the failure, termination or renunciation in whole or in part of the foregoing liferent, I direct my trustees to make over the whole or such part of my estate which was or would have been liferented to my nephew the said Fraser Cuttle.

No apportionment There shall be no apportionment as between capital and revenue on any occasion".

Applying the said principles of construction to this clause, I cannot accept the submission for the pursuer that the reference to sale covers the situation currently contemplated by the pursuers. The wording, and even the paragraphing, of the clause militates against such construction. It is clear that the Property is indeed the heritable subjects referred to as "such part of my estate which was or would have been liferented" and that the testator has made a clear direction to the executors to make the Property over on the termination of the liferent to Mr Cuttle. I should add that I have no difficulty in reading the clause in this manner, and observe that I do not require to give any weight to the submission made by counsel for the defender in respect of the absence of a phrase such as "or the proceeds thereof" in coming to this view.

[14] Turning to clause Nine, the relevant wording reads as follows:

"(Nine) My Trustees shall have the fullest powers of and in regard to retention, realisation, investment, appropriation, transfer of property without realisation, and management of my estate as if they were absolute beneficial owners; and shall have power to do everything they may consider necessary or expedient for the administration of the trust; and in particular and without prejudice to these general powers my Trustees shall have power:

a) to retain, sell, purchase, lease or hire the estate or any part thereof;

m) to settle with any beneficiary entitled to any part of the estate by conveying to him or her in satisfaction thereof either specific property or money, or partly one and partly the other, as to my Trustees shall seem proper and at such valuation as they shall determine and to compel acceptance accordingly."

These provisions, ex facie, set out a power inherent in the executors to sell heritable property. In so far as the pursuers as executors seek to implement that power with regard to the sale of the Property, however, I find this clause to be in conflict with the terms of clause (Five)(c), supra. This requires the court to look in detail at the wording of the preamble and in particular the phrase "shall have power to do everything they may consider necessary or expedient for the administration of the trust." This wording does not give untrammelled or unfettered power to the pursuers as executors, of course. The separate preconditions "necessary" or "expedient" require to be addressed in some shape or form by the pursuers before they can argue that they have a power to sell heritage in such circumstances. I find nothing in the findings in fact agreed between parties to support such a contention under either precondition.

[15] It is against the background of the agreed findings in fact and my construction of the operative provisions of the Will that I consider the observations of Lord Justice Clerk Inglis in Craig v Fleming, supra. The context of his remarks is set out in the Opinion of the Lord Ordinary, at 614. In that Opinion the Lord Ordinary (Kinloch) has determined that there were "ample powers" inherent in the trustees "to realise the whole property, real and personal". I have not made such a finding in this case. The Lord Justice Clerk, of course, approached matters with an assumption that there is not a power of sale, and on that hypothesis stated:

"A trustee, who, as such, is proprietor of an heritable estate of this kind, has the same proprietary right in all respects as the other proprietors, except in so far as he is disabled by the terms of the trust under which he acts, and the power of sale is withheld from him, if not expressly conferred. In all other respects he is the owner of the property for behoof of the beneficiaries."

As I read this dictum, the Lord Justice Clerk has set out a general proposition, but with an important exception in the following terms: "except in so far as he is disabled by the terms of the trust under which he acts". I have in this action construed that there is no power of sale inherent in the executors in terms of the Will. In these circumstances the Lord Justice Clerk's dictum is of no assistance to the pursuers in this action.

[16] The pursuers' esto contention for the existence of a power to sell the Property relies upon section 4 of the Trusts (Scotland) Act 1921, which is in the following terms:

"4(1) In all trusts the trustees shall have power to do the following acts, where such acts are not at variance with the terms or purposes of the trust, and such acts when done shall be as effectual as if such powers had been contained in the trust deed, viz: (a) To sell the trust estate or any part thereof, heritable as well as moveable."

This provision does not in my view aid the pursuers in their quest for decree in this case. The intentions of the testator with regard to the Property are in my opinion quite clear in terms of clause (Five)( c). Any purported statutory power to sell the Property at the instance of the pursuers in this case must therefore be seen plainly as being "at variance with the terms or purposes of the trust". In Tennent's JF, supra, the First Division considered that a proposed compromise was in at least one respect at variance with the purposes of the trust in question. Lord President Cooper at 225 observed:

"Section 4 of the Act of 1921 is not very happily expressed and has given rise to certain difficulties in the past. Even if an "act" is not forbidden by the "trust", it may still be "at variance with... purposes of the trust", and these words I read as equivalent to "involving a variation of the purposes of the trust."

Lord Russell at 229 further observed:

"While it might be that on a strict reading of those words the terms of the judicial factor's trust are contained in the decree appointing him, it seems clear that the "purposes" of his trust embraced the administration of the estate committed to his charge in accordance with the provisions and intentions of the testator".

These dicta were pronounced in the context of a judicial factor appointed to an executory, and I read them as entirely in point in the circumstances of the present case. Put short, while a judicial factor/trustee gains his power from the interlocutor of the court/Confirmation, he or she is bound to exercise his or her powers nevertheless in accordance with the purposes of the trust, or, as here, the Will. I have already ruled on the construction of trust purposes in terms of the operative provisions of the Will and conclude accordingly that there are no statutory powers to sell the Property inherent in the pursuers in this case standing that a power to sell the Property would here be at variance with the terms or purposes of the Will. I so hold in the context of the agreed findings in fact and clear testamentary provisions in the Will. No transaction with a purchaser of the subjects having taken place, I do not consider the provisions of the Trusts (Scotland) Act 1961 or the case of Barclay, Petitioner, supra, to be of assistance.

Disposal

[17] For all of these reasons, I sustain the fourth plea in law for the defender as sufficient to determine the point in issue between the parties, repel the first plea in law for the pursuers, and pronounce decree of absolvitor in favour of the defender. I further make an order for the expenses of the action against the pursuers and certify the cause as suitable for the employment of junior counsel as appropriate in all the circumstances.