Scottish Court of Session Decisions

This was an appeal against a judgment of the Court of Session in an action of multiplepoinding at the instance of the trustees of the late Earl of Strathmore.

The circumstances under which the question arose were shortly these:—The late Earl of Strathmore was heir or institute of entail in possession of the entailed estates of Glamis and others, situated in the counties of Forfar, Perth, Fife, and Kincardine

He was also absolutely seized to him and his heirs in possession in certain copyright tenements at Pauls Walden, in the county of Hertford, as tenant thereof, and was also tenant for life in remainder. immediately expectant on the decease of his mother, the Honourable Charlotte Bowes Lyon, commonly called Lady Glamis, of the manor of Pauls Walden, and other hereditaments in the parish of Pauls Walden and county of Hertford aforesaid, under an indenture of settlement dated 15th July 1847, and he was also tenant for life, in remainder, expectant on the decease of John Bowes, Esq., and default or failure of his issue (he having been at the periods after-mentioned and still being childless), of large estates in the counties of Durham, York, and Middlesex.

The late Earl having contracted large debts on the security of his interest as heir of entail in possession of the Glamis estates, and of policies of insurance on his life, he, by trust-disposition dated 28th October 1854, and three supplementary trust-dispositions, dated respectively the 19th and 20th May 1858, the 10th and 18th January 1860, and 23d and 24th March 1863, conveyed his whole estates, property, and effects, heritable and moveable, and particularly the Glamis estates, to Donald Lindsay and George Auldjo Jamieson, both accountants in Edinburgh, as trustees to act in succession in manner provided in the said trust-disposition and supplementary trust-disposition, for behoof of all his just and lawful creditors, and for the uses, ends, and purposes, with the powers and under the conditions, provisions, and declarations therein written, in virtue of which trust-disposition and supplementary trust-disposition the said Donald Lindsay and George Auldjo Jamieson were infeft in the said Glamis estates, and the said Donald Lindsay was in the year 1864 in possession and management thereof as sole acting trustee for behoof of the Earl's creditors entitled to the benefit of the trust thereby created.

By the year 1864 the debts, liabilities, and in-cumbrances of the late Earl had increased to such an amount as the agreement after-mentioned bears, “that even if his interests in the Glamis, Bowes, and Pauls Walden estates, and the policies of insurance. on his life, and all other his property, heritable and moveable, real and personal, were at once to be disposed of and converted into money, the proceeds would be wholly insufficient for satisfying the claims of the creditors; and not only is he without the means of support and maintenance from the Glamis estates, but the said estates are liable to the diligence of his creditors, who may enter into possession thereof, and waste and dilapidate the same, to the great injury of the succeeding heirs of entail.”

With the view of relieving the late Earl from his embarrassments, and preventing the creditors from entering into possession of the Glamis estates, to the injury of the next heirs of entail, who were the present appellants (Lord Strathmore and his two eldest sons, the respondents Lord Glamis and Francis Bowes Lyon), it was arranged that the said estates should be disentailed under the provisions of the Acts 11 and 12 Viet., cap. 36, and 16 and 17 Viet., cap. 94; that, as the agreement after-mentioned bears, “the said Earl shall receive an allowance of £2500 a-year, provided always the said allowance be strictly alimentary, as after-mentioned, out of the rents of the said estates, so long as the free revenue thereof shall be sufficient for payment of the same, after payment of preferable charges thereon, and that such alimentary allowance shall be increased to the extent and in manner after-mentioned, as the debt affecting the estate shall be diminished, and that the fee-simple of the said estates may be charged with a sum not exceeding £250,000, for payment of the said Earl's debts, and for the other purposes after-mentioned, on condition of the said Earl relinquishing all right and title to the estates,” and on the other conditions embodied in the said agreement.

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The late Earl accordingly presented a petition to the Court of Session for authority, under the provisions of the said Acts, to disentail and acquire in fee-simple the whole of the Glamis estates; and it was arranged that the present appellant, and the respondents, his two eldest sons, being together the three next heirs, should consent to the disentail upon certain conditions, to be afterwards mentioned. With a view to obtain the consent of the present Earl and his sons to the disentail, a deed of agreement was executed, dated 4th July 1864, whereby the late Earl agreed to convey his whole property in trust for certain purposes, and to grant bonds and dispositions in security over the estate of Inver-eighty for the sums of £26,500, and £7000 respectively, and £31,143 over his other properties, in favour of the present Earl and his sons, the next heirs of entail.

Of the same date with the said deed of agreement, the late Earl, in fulfilment of the stipulations and conditions therein contained, executed a trust-disposition, whereby he “disponed, assigned, conveyed, and made over to and in favour of the appellant and the said John Dundas, and to such other persons as might be named and appointed by them, or the survivor of them, or by the trustees acting for the time under the said trust-deed (therein after referred to under the general designation of the “Glamis Trustees”), and to their assignees, all and whole the entailed estates of Glamis and others, and also all other lands and heritable estate in Scotland belonging to him, and also his whole moveable and personal estate wherever situated, and all debts and sums of money due to him by any person or persons, and securities for the same; and particularly, without prejudice to the said general conveyance, all assurances on his the said Earl's life, and all policies of assurance and other vouchers and securities thereof, whether the same were vested in or held by him, or by any other person or persons for his behoof, or subject to his disposal, with all sums of money which might become due and payable to him in virtue thereof, and all claims competent to him to demand assignments or conveyances of the said assurances from the holders thereof, and all his reversionary interests in any such assurances, as also his reversionary rights and claims under the trust-deeds executed by him in favour of trustees for behoof of his creditors as above mentioned.”

It was, however, declared by the said trust-deed that the same was granted in trust for the purposes therein specified, being, first, for conveyance of the estate of Invereighty to the appellant, the present Earl, under the real liens or burdens above mentioned, and that the trustees should grant bonds and dispositions in security for the sum of £21,143, and £10,000 above mentioned, and in the second place, that the trustees should hold the Glamis estates, and whole other estates thereby conveyed during the life of the late Earl, and after his death, in case he should leave issue-male, until the failure of such issue, or until payment of the whole sums to be borrowed by the Glamis trustees on security of the Glamis estates as therein provided, whichever should first happen, in trust to and for the ends, uses, and purposes therein after written, the first of the said purposes being that the trustees should borrow and raise on the Glamis estates a sum not exceeding £250,000, for payment of the late Earl's debts, “and for the other purposes after mentioned.”

The first branch of the second purpose of the trust is in these words:—“That they (the trustees) may and shall borrow and raise on the Glamis estates a sum not exceeding £250,000, for payment of my debts, and for the other purposes after mentioned, at such time or times, and in such sums as they shall think proper.”

The second branch of the second purpose of the trust, is as follows:—“That of the said sum of £250,000 to be borrowed as aforesaid, they shall apply the sum of £10,000, or any part or parts thereof, in their discretion, in insuring the payment of a sum of money in the event of the said John Bowes leaving issue at his death, which sum so to be insured, if the same shall become payable, shall be applied by the trustees in or towards payment of the said sum of £250,000, and in case the insurances to be effected for that purpose shall not exhaust the whole foresaid sum of £10,000, then the surplus shall be applied in keeping up, in such way as they may think proper, some one or more of the now existing policies of assurance on my life, other than and in addition to the policies amounting to £30,000 (besides bonuses), which are to be kept up from the rents of the said estates as hereinafter provided, or otherwise as they shall think best for the immediate or ultimate reduction of the debt of £250,000 to be contracted as aforesaid, and that the residue of the said sum of £250,000 together with such sum or sums, if any, as may be received from the said Donald Lindsay and George Auldjo Jamieson, or either of them, as the balance of their intromissions as trustees foresaid, or from any assurance or assurances on my life, either by the sums assured becoming payable, or by the surrender or sale of the policy or policies, and any other funds to be received or realized by the Glamis trustees from the trust-estate, other than the rents and profits of the Glamis estates, and of any other lands to be held by them under the trust, accruing from and after the said term of Martinmas 1863, shall be applied in payment of the expenses of the said disentail and of the said deed of agreement, and of the transactions under the same, including the re-settlement of the said estates, the trust-disposition to the Glamis trustees, the disposition of Invereighty, under the real burden as aforesaid, the bonds and dispositions in security for £21,143 and £10,000, and all other proceedings and arrangements that may be necessary for carrying the provisions and arrangements of the said deed of agreement into effect, and in or towards payment or satisfaction of my present debts and liabilities, among which are to be included any outstanding debts and liabilities of the trust under the trust-deeds now held by the said Donald Lindsay and George Auldjo Jamieson, as trustees for behoof of my creditors as before mentioned, according to the rights and preferences of the creditors therein.”

The third branch of the said second purpose is in the following terms:—“That in order to meet any excess of my now existing debts beyond what is contemplated by the parties in the said deed of agreement, the said trustees may raise a further sum not exceeding £10,000, over and above the foresaid sum of £250,000, and postponed thereto, on security of the Glamis estates, but for such other sum of £10,000 they shall effect policies of assurance upon my life, or maintain policies of assurance already effected, and they may pay the interest and premiums of insurance out of the income of the Glamis estates, and may grant bonds and dispositions of the said Glamis estates in security of

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such interest and premiums, as well as for the principal sums borrowed, and they shall apply the sums so to be borrowed in or towards payment or satisfaction of any of my foresaid debts and liabilities, but the amount of premiums and interest which may be paid by the said trustees in respect of any sums to be so borrowed, shall be held as payments on my account, and shall be deducted and retained by them out of the allowance payable to me as hereinafter provided.”

By the fourth branch of the second purpose of the trust the most ample powers of sale of the trust-estate are conferred upon the trustees, it being declared that “they shall apply the prices of the lands or other estate that may be sold by them in or towards payment of the sums to be borrowed on the said estates as aforesaid, or otherwise apply such prices in the purchase of other lands which they may think it desirable to acquire, and which lands shall be held by them for the purpose of the trust.”

The fifth branch of the second purpose of the trust is directed to secure that the Earl's plate, pictures, china, books, furniture, and other personal property and effects in Glamis Castle, in so far as not sold, shall descend as heir-looms along with the Glamis estates; and the sixth branch of the said purpose provides, “that during my (the late Earl's) life, and thereafter during the existence of issue-male of my body, the said trustees shall apply the rents and profits of the Glamis estates, and of any other lands to be held by them under this trust, so long as any part of the sums to be borrowed on the estates shall remain unpaid,” in paying expenses of management, interest, and similar charges; (6) the premiums requisite for keeping in force policies of assurance on my life to the amount of £30,000 at least, independently of bonuses that may have accrued or may accrue thereon, or to such further amount as may be thought advisable by the Glamis trustee sand after all the previously mentioned payments are provided for, for payment of the alimentary allowance of £2500 to the late Earl, “subject to the deduction before mentioned for any interest and premiums to be paid on my account, and subject also to the rent, if any, charged by the trustees at the time for the castle, home farm, and park, if then possessed by me.”

The seventh branch of the said purpose provides for the application of the rents of the Pauls Walden estate; and by the eighth branch it is provided, upon my death, the Glamis trustees shall execute a new entail of the Glamis estates, or of such part or parts thereof as shall then remain unsold, in favour of the heirs-male of my body, whom failing, to the said Claude Bowes Lyon (the appellant), and the heirs-male of his body, whom failing, the other heirs entitled to succeed to the said estates under the now existing investitures thereof, but subject always to the trusts hereby created, so long as any issue-male of my body shall be in existence, or till the whole sums to be borrowed by the Glamis trustees shall have been paid and discharged, if that shall happen while my issue-male are in existence, during which period this trust shall subsist and remain in force, with the full powers of management and sale and other powers hereby conferred on the trustees as a burden upon and title preferable to the title of the institute and heirs of entail, and subject also to the trusts created by the existing trust rights in favour of the said Donald Lindsay and George Auldjo Jamieson, until the same shall be discharged or extinguished, and also under the burden of all debts and securities affecting the estate at the time.

After the execution of the said trust-disposition and of the deed of agreement therein referred to, the application at the instance of the late Earl for the disentail of the lands and estates above mentioned was proceeded with. The authority to disentail was obtained from the Court of Session on 20th July 1864, and the instrument of disentail having previously been executed, was recorded in the register of Entails on 25th, and in the General Register of Sasines on 31st August 1864. The trust created by the said trust-disposition there-upon came into operation.

After the instrument of disentail was recorded, the appellant and the said John Dundas entered on the administration of the trust created by the said trust-disposition. As directed by the first purpose of the trust, they granted and delivered to the appellant, and his heirs and assignees, a disposition of the estate of Invereighty in Forfarshire, which had formed part of the entailed estates, with right to the rents from and after Martinmas 1863, under the real burden of the sums of £26,500, payable to the respondent Claude George Bowes Lyon, and his heirs and assignees, and £7000 payable to the respondent Francis Bowes Lyon, and his heirs and assignees; and they farther granted in favour of the appellant a bond and disposition in security over the remainder of the Glamis estates for the sum of £21,143, payable at Martinmas 1864, and with interest from Martinmas 1863; and another bond and disposition in security in his favour for the sum of £10,000, payable on the late Earl's death, both of which securities were postponed to the securities granted for the sums amounting to £260,000 borrowed on the security of the estates, as after mentioned. By the execution and delivery of these deeds, the pecuniary compensation stipulated to be paid to the appellant and the respondents, his said sons, in respect of their consents to the disentail, was secured to them.

The trustees farther, in the execution of the purposes of the said trust, obtained on loan from the Royal Exchange Assurance Corporation the sum of £170,000, and from the North British and Mercantile Insurance Company the sum of £90,000, making in all the sum of £260,000, for which sums they granted bonds and dispositions in security over the Glamis estates.

After entering upon the administration of the trust, the trustees paid the whole debts of the late Earl, in so far as known to them to be subsisting. The amount paid by the trustees in respect of debts, expenses, and charges in the trust, prior to the raising of the multiplepoinding in June 1865, was £311,310, 11s. 11d., while the whole sums forming part of the trust-estate then received by them amounted to £279,573, 0s. 2d.; the excess of payments over receipts being £31,737, 11s. 9d. This excess, which arose in greater part from the payments of debts beyond the amount which had been stated by Lord Strathmore, was paid by the trustees at the time in reliance on the personal guarantee of the appellant, contained in a minute of agreement dated 10th August 1864, entered into between the late Earl of the first part, the present appellant of the second part, and Richard James Webb, Esq., of the third part. By the fourth head of the said minute of agreement, the

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appellant and the said Richard Janies Webb, upon the considerations therein specified, “do hereby guarantee the said Glamis trustees from the consequences of their paying the debts of the said Earl in full, and oblige ourselves to keep them saithless, and to relieve them of all liability in the premises. And we agree to provide them with the means of discharging the said debts in full, so far as the means already provided are insufficient; and that whether the deficiency falls short of or exceeds a sum of £11,102, there in before mentioned.” The fifth head was as follows:—“In regard to the policies of insurance on the life of the said Earl, it is declared and hereby provided, that the trustees may keep up, if possible, £40,000, and for that purpose, or for other purposes, in rem versam of the trust, they may borrow from the offices the amount they will lend, on the security of the policies, and that the sums payable under the policies, when they emerge, after meeting the advances from the offices, is to be applied as agreed on, towards reduction of the debt of £250,000, by the said deed of agreement authorised to be borrowed, and that if the policies, or any of them, are from time to time surrendered, the value thereof, under abatement of any sum borrowed from the offices on the security thereof, shall be applied towards reduction of the same debts, and shall be then, pro tanto, discharged.”

When the trust came into operation on 25th August 1864 there were subsisting policies of insurance on the life of the late Earl, to the amount, including bonuses, of £225,156, 17s. These policies were almost entirely held by creditors in security of debts due to them, and under obligations by the late Earl for payment of the premiums as they fell due.

From the time at which the trust came into operation onwards, the premiums upon the said policies of insurance fell due; and certain policies, amounting to £39,000, were surrendered by the trustees in September 1864. But, from information received by the trustees in the latter part of October of that year as to the state of the late Earl's health, the trustees resolved not to surrender, and they did not surrender any more of the policies. They paid the premiums upon those which they did not surrender.

After the trustees had paid the debts above mentioned, it was discovered that other claims existed, of which they had not been made aware. The parties who made these claims used arrestments in the hands of the trustees, and intimated that they claimed payment out of the trust-estate held by them.

These and other circumstances led the trustees to adopt the resolution to raise the action of multiplepoinding with the view of having the rights of parties determined, and they raised the action accordingly on 6th June 1865.

The health of the late Earl continued to fail, and he died, without issue, on 13th September 1865.

Upon his death the contents of the policies upon his life kept up by the trustees became payable. The trustees have received altogether £187,230, 9s. 11d. in respect of the policies.

These policies are divided into three classes, viz.:—“(1) Policies retained by the Glamis trustees, with a view to the proceeds thereof being applied towards reduction of the debt contracted by the trustees on the security of the Glamis estates, the premiums being payable out of the revenue of the trust, in terms of the Glamis trust-deed and minute of agreement between the late Lord Strathmore, the present Earl of Strathmore (then Mr Bowes Lyon), and Mr Richard James Webb, dated 10th August 1864,” the total amount of these policies, with bonus additions, being £45,406, 19s. 4d. “(2) Policies retained by the Glamis trustees to meet sum of £10,000 (in addition to the sum of £250,000) borrowed on security of the Glamis estates, on account of Lord Strathmore's debts, the premiums being payable out of his Lordship's allowance in terms of the Glamis trust-deed,” the total amount of these policies, with bonus additions, being £10,460, Is. And (3) “Policies which the Glamis trustees proposed to surrender, but which subsisted at the date of the late Lord Strathmore's death,” the total amount of these policies, with bonus additions, being £130,289, 16s. 8d.

After a proof, the Lord Ordinary ( Barcaple) pronounced the following interlocutor and note:—

Edinburgh, 20 th July 1867.—The Lord Ordinary having at avizandum resumed consideration of the former debate upon the closed record in the competition, and having considered the closed record, proof now led, with the debate thereon, and whole process—Finds that the raisers, the Glamis trustees, in the course of their trust-administration, resolved, in regard to the sum of £10,000 appointed by the trust-deed to be wholly or partially applied in their discretion in insuring the payment of a sum of money in the event of John Bowes, there mentioned, leaving issue at his death, to apply to that purpose only the sum of £1650: Finds that the policies on the life of the late Earl of Strathmore contained in branch third of the list of policies referred to in the condescendence of the fund in medio, amounting, with bonus additions, to £130,289, 16s. 8d., were kept up by the raisers paying the premiums falling due thereon after the trust came into operation out of the balance of said sum of £10,000: Finds that, on a sound construction of the trust-deed, the proceeds of said policies which accrued on the death of the Earl, in consequence of said premiums having been so paid, under deduction of the surrender value of said policies as at the date when the first premium fell due on each of them respectively after the trust came into operation, must, subject to any security or securities affecting the same, be applied in payment and extinction pro tanto of the sum of £250,000, which by the trust-deed the trustees were directed to raise, and have raised on the Glamis estates: Finds that said surrender value of said policies falls, as if said policies had actually been surrendered, to be applied under the direction contained in the second or concluding part of the second purpose of the trust-deed, that the funds there mentioned shall be applied in payment of expenses, and in or towards payment or satisfaction of the truster's then present debts and liabilities: Finds that the unapplied balance of the said sum of £10,000 remaining in the hands of the raisers after payment of the said sum of £1650 and of the premiums for keeping up said policies, must also be applied in payment and extinction pro tanto of the said sum of £260,000: Finds that the policies contained in branch first of the list of policies referred to in the condescendence of the fund in medio, amounting, with bonus additions, to the sum of £45,406, 19s. 4d., were kept up by the raisers out of the rents of the lands held in trust by them, in terms of the direction in the sixth head of the

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sixth purpose of the trust-deed, to apply said rents in paying, inter alia, the premiums requisite for keeping in force policies of assurance to the amount of £30,000 at least, independently of bonuses, or to such further amount as might be thought advisable by the trustees: Finds that, on a sound construction of the trust-deed, the proceeds of said last-mentioned policies, subject to any security or securities affecting the same, must be applied in payment and extinction pro tanto of the said sum of £250,000: Finds that the proceeds of the policies contained in branch second of the said list, to the extent of £10,000, falls to be applied in terms of the third, purpose of the trust, in paying the sum of £10,000, which the trustees were thereby empowered to raise over and above the said sum of £250,000: Finds that the claimant, the Earl of Strathmore, has right only to a proportion of the rents of the Glamis estates for crop and year 1865 corresponding to the period from 13th September 1865, when the late Earl of Strathmore died, to Martinmas 1865: Quoad ultra reserves consideration of the claims and pleas of parties: Appoints the cause to be enrolled for further procedure; and reserves all questions of expenses.

Note.—The late Earl of Strathmore having incurred debts to a large amount, entered into an arrangement with the present Earl, then next heir of entail, and his two eldest sons, represented by tutors ad litem appointed to them, by which they consented to his disentailing his estates. By that arrangement, which was embodied in a deed of agreement, the present Earl and his sons bound themselves to execute deeds of consent to the disentail: and, on the other hand, the late Earl bound himself, contemporaneously therewith, to convey to English trustees his liferent interest in certain English estates, which was chiefly in expectancy, and also to convey to Scotch trustees his entailed estates of Glamis, his whole other heritable estates in Scotland (of which he does not appear to have possessed any), and also his whole moveable estate, wherever situated, and particularly all policies of insurance on his life, and sums that might become payable under them, and his reversionary interest in any such policies. The disentail was carried through, and the trust-deeds were executed in terms of the agreement. The Scotch trust-deed was executed contemporaneously with the deed of agreement, on 4th July 1864. It came into full operation by the recording of the instrument of disentail on 25th August following.

The purposes of the Scotch, or as it is styled in the deeds, the Glamis trust, are complicated, and some of them are not of very clear application to the unexpected state of' circumstances which has arisen from the premature death of the late Earl, and the course of management adopted by the trustees, which has proved extremely lucrative to the trust. In the first place, the trustees were to convey the estate of Invereighty, part of the Glamis estates, to the present Earl in fee-simple, under the real burden of the sum of £26,500, and £7000 to his sons; and they were to constitute an heritable security on the Glamis estates for £21,143 and £10,000 in favour of the present Earl. These constituted the immediate consideration stipulated for by the three next heirs for giving their consent to the disentail; and they need not be further adverted to.

The leading objects of the trust were, that, on the one hand, the trustees should borrow on the security of the Glamis estates £250,000, or if necessary £260,000, to be applied, except to the extent of £10,000 (the special appropriation of which will be afterwards noticed), and after defraying all expenses, in payment of the late Earl's then existing debts, and should pay him out of the rents an allowance of £2500, subject to fluctuate in certain circumstances; and that, on the other hand, they should, on the death of the late Earl, execute a new entail in favour of the heirs-male of his body; whom failing, the other heirs entitled to succeed under the former entails, but subject to the trust so long as issue-male of the late Earl should be in existence, or until the whole sums borrowed by the trustees should be paid off.

After the trust came into operation, it was found that the debts of the late Earl largely exceeded what had been anticipated, and questions arising in consequence as to the duty of the trustees, they brought this process of multiplepoinding in June 1865. The late Earl was then alive, but he died without issue on 13th September 1865. Questions of great importance to the parties have arisen out of that event, in consequence of large sums being realized from policies on his life, which had been kept up by the trustees. The claims to the proceeds of these policies constitute the first and principal branch of this competition. The claimants are,—1st, Lord Glamis and his brother, as representing the interest of the future heirs of entail; 2d, the present Earl, as general disponee and personal representative of the late Earl; and 3d, creditors of the late Earl. The interests of the present Earl and the creditors are to a great extent identical. For, as the Earl claims the proceeds of the policies as representative of the late Earl, and on the ground that they constitute his estate, he can only take them on the footing of his being liable to pay all his debts.

As already noticed, the trustees were, if necessary, to borrow £10,000 in addition to the £250,000. But for this sum of £10,000 they were to effect or maintain policies on the late Earl's life, and to pay the interest and premiums out of his allowance. This additional sum was borrowed, and policies were kept up as directed, amounting, with bonus additions, to £10,460, Is. But to the extent of £10,000, required to pay off the sum for which they were kept up, no question arises in regard to them.

The sixth purpose of the trust, which relates to the application of the rents, after providing for defraying expenses of management, and for paying the interest on all the sums to be borrowed or secured by the trustees on the estate, and immediately before providing for payment to the late Earl of his alimentary allowance, contains a direction to pay out of his rents—‘(6) the premiums requisite for keeping in force policies of insurance on my life to the amount of £30,000 at least, independently of bonuses that may have accrued or may accrue thereon, or to such further amount as may be thought advisable by the Glamis trustees.’ Under this provision the trustees have kept up policies amounting with bonus additions to £45,406, 19s. 4d. The proper application of this sum is one of the questions in the competition. It will be more conveniently adverted to after considering the larger question in regard to all the other policies subsisting at the late Earl's death. But it is proper to keep in view the existence of those policies, kept up under the special direction in the sixth purpose to keep up policies out of the rents to the extent of £30,000 or up

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wards, as they are expressly referred to, though only parenthetically in the second purpose.

1. The first branch of the competition, which relates to the other policies subsisting at the Earl's death, amounting with bonus additions to £130,289, 16s. 8d., depends mainly upon the construction to be given to the provisions of the second trust-purpose. This clause of the deed relates chiefly to the application of the sum of £250,000 to he borrowed by the trustees, though in the second part of it it also includes the application of other funds which may be in the hands of the trustees. It consists of two distinct parts, the first containing directions solely for the application of £10,000 of the £250,000. The trustees are to apply that ‘sum of £10,000, or any part or parts thereof, in their discretion, in insuring the payment of a sum of money in the event of the said John Bowes leaving issue at his death, which sum so to be insured, if the same shall become payable, shall be applied by the trustees in or towards payment of the said sum of £250,000, and in case the insurances to be effected for that purpose shall not exhaust the whole foresaid sum of £10,000, then the surplus shall be applied in keeping up, in such way as they may think proper, some one or more of the now existing policies of assurance on my life, other than and in addition to the policies amounting to £30,000 (besides bonuses) which are to be kept up from the rents of the said estates, as hereinafter provided, or otherwise as they shall think best for the immediate or ultimate reduction of the debt of £250,000 to be contracted as aforesaid.’

The object of the first of these directions was to insure against the prospect of succession by the Earl and the heirs of entail to estates held by John Bowes for his life, being disappointed by his leaving issue. Owing to the high terms demanded by the offices for such an insurance, the trustees only applied £1650 to that object. It is averred by Lord Glamis and his brother that the trustees applied £4133, 5s. 2d. of the issue policy fund of £10,000, in paying premiums for keeping up the policies amounting to £130,289, 16s. 8d., now under consideration as the subject of the first branch of the competition. In this view, there still remains in the hands of the trustees a balance of the £10,000, amounting to £4216, 14s. 10d.

It is not admitted by the other claimants that the premiums for keeping up the policies of £130,289, 16s. 8d. were paid specially out of the issue policy fund. A proof in regard to that and other matters was allowed to the whole claimants, and the first question for consideration is, whether Lord Glamis and his brother have established their averments-upon that point? The only witnesses examined were the three trustees themselves. The proof establishes that, in the course of their management, and before the death of the late Earl, the trustees resolved not to invest more than the sum of £1650 in effecting policies against issue of Mr John Bowes, and also resolved to keep up all the policies which were still in subsistence in October 1864. The precise dates on which these two resolutions were taken do not clearly appear. Indeed, it would rather appear that they were gradually, though ultimately quite distinctly come to, and that no very precise date can be assigned to them. The original ground of the former resolution was, that issue policies for the purpose required could not be effected except on very disadvantageous terms. The resolution to surrender no more policies was taken in consequence of information received by the trustees in regard to the health of the late Earl. That information was received on 27th October 1864, and led to a meeting on the subject, attended by the trustees, who were then the late Earl and Sir Dundas, and by Mr Jamieson, who was then factor for the trust. On that day, a premium was paid to keep up a policy for £7000, and no policy was afterwards surrendered. The Lord Ordinary thinks it is also proved that, in the course of their management, and before the death of the late Earl, the trustees resolved to use the balance of the issue policy fund for keeping up the policies which they thus determined not to surrender. These were altogether distinct from the policies to the amount of £30,000 at least, which they were directed to keep up out of the rents of the estates, and which, in the exercise of that special power, they did keep up to the amount of £40,000, or with bonus additions, £45,406, 19s. 4d. The only free fund which they had power to apply according to their discretion was such part of the issue policy fund as they might not, in their discretion, think it expedient to invest on issue policies.

The Lord Ordinary does not think it is of any consequence when, or in what order, each of these several resolutions were arrived at, provided they were adopted in the course of trust-management, and while things still remained entire, during the life of the late Earl. Neither does he think it of importance upon which of the several bank accounts kept by the trustees the drafts were made for paying the premiums to keep up the policies. These accounts were only kept separate as matter of convenient business arrangement, and not as the separate stocking out of the interests of different beneficiaries. Any excess of drafts upon one account, whether made inadvertently or not, would properly be replaced by money drawn from the account on which they should have been originally made. If such drafts were not made inadvertently, but the trustees afterwards came to the conclusion that they had been made erroneously upon a particular account, the Lord Ordinary thinks it was their duty, and in their power, to put the matter right. The question in any such case could only he, what, according to the directions of the trust-deed, was the proper mode of administering the trust, and stating the trust-accounts?

On these grounds, the Lord Ordinary comes to the conclusion that the trustees resolved, timeously, and in a competent manner, in so far as such a resolution was within their powers, to keep up the policies in question, amounting to £130,289, 16s. 8d., out of the issue policy fund. The question is, What was the legal effect of their forming and acting on this resolution?

In considering this question it is necessary to have regard to the concluding portion of the second trust-purpose. It directs the application of the residue of the £250,000, after providing for the £10,000 issue policy fund, and also of any sums that might be received from Messrs Lindsay and Jamieson as the balance of their intromissions under a former trust executed by the late Earl, or from any assurance or assurances on his life, ‘either by the sums assured becoming payable, or by the surrender or sale of the policy or policies, and any other funds to be received or realised by the Glamis trustees from the trust-estate, other than the rents and profits of the Glamis estates, and of any other lauds to be held by them under the trust.’ All

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these funds are directed to be applied in payment of the expenses of constituting and carrying out the trust, ‘and in or towards payment or satisfaction of my represent debts and liabilities.’ The objects to which the funds dealt with in the two branches of the second trust-purpose are to be applied are thus in direct contrast. The sum of £10,000, and the policies to be effected or maintained by it, which are the subjects of the first part of the clause, are to be applied to reducing the burden of £250,000 upon the estate, for the benefit of the heirs of entail. The remaining £240,000, and the other funds dealt with in the second part of the clause, are to be applied, after defraying expenses, towards payment or satisfaction of the late Earl's then subsisting debts. That is an application mainly and primarily for his benefit.

The important part of the second branch of the clause, in relation to the present question, is that which includes assurances on the Earl's life among the funds to be applied to the latter purpose. At the date of the agreement and trust-deed the Earl had insurances on his life for the purpose of effecting securities for debt on his life interest in the entailed estate, to the extent, including bonus additions, of £225,156, 17s. Under the disentail arrangement it was not necessary to keep up any of these policies, except to the extent to which they might be made available for carrying out the directions already mentioned—1st, to keep up policies to the amount of £30,000, or such further amount as the trustees might think advisable; 2d, to keep up policies, out of the Earl's allowance, for the additional £10,000 to be borrowed over and above the £250,000; and 3d, at the discretion of the trustees, to keep up one or more policies out of the surplus of the £10,000 not employed in insuring against issue of John Bowes. It must therefore have been in the contemplation of all parties that much the larger portion of the subsisting policies would not be kept up under the trust. But they all formed a portion of the trust-estate expressly conveyed to the trustees; and, in so far as they were not to be kept up, they would of course be surrendered or sold by the trustees. Accordingly the direction, in the concluding part of the second trust-purpose, as to applying the proceeds of assurances to expenses and to the payment of the Earl's debts, relates both to sums assured becoming payable, and to sums received by the surrender or sale of policies.

The present Earl claims the proceeds of the policies thus kept up, as being estate of the late Earl undisposed of by the trust-deed. But to found such a claim to any extent, it appears to the Lord Ordinary that lie must, in the first place, show that the fund is within the direction in the second part of the second trust-purpose, under which the various trust-funds there mentioned are to be applied in payment of the truster's debts. If it can be shown that that direction applies to the fund in question, there may be room to contend that any balance of that fund remaining after payment of the debts due by the late Earl at the date of the trust, is not disposed of by the deed. But the Lord Ordinary thinks it clear that every portion of the estate conveyed in trust, of which these policies and their proceeds are undoubtedly part, is made the subject of positive direction in regard to its application; though the purposes to which the different portions of the estate were made applicable are of such a kind that they may not exhaust the funds directed to be expended upon them. He therefore thinks that the competition for the proceeds of these policies must depend upon whether it is to be held that, in the circumstances under which they have accrued to the trust-estate, they fall under the direction of the first or of the second part of the second trust-purpose. He has felt this to be a question of considerable difficulty.

If it were to be held that the policies were not kept up out of the issue policy fund, or that the trustees were not entitled so to apply that, or any other part of the trust-funds, the Lord Ordinary would be of opinion that the proceeds of the policies would fall to be applied under the second part of the trust purpose, subject to the claim of the trustees to retain the amount of the premiums by which they were kept up; which, in that view of the case, must have been advanced by them from their own funds, or from trust-funds not applicable to that purpose, and therefore requiring to be replaced. But he thinks that the trustees did hold trust-funds out of which they had power to keep up these policies, and that, in the circumstances, it was their duty to do so. The trust-deed distinctly contemplates the existence of a balance of the issue policy fund. The first direction as to that balance is, that it shall be applied in keeping up, in such way as the trustees may think proper, some one or more of the existing policies. This is a very wide direction, and probably its words are such as to cover the course adopted by the trustees. But the Lord Ordinary feels that there is force in the objection that it contemplated the selection by the trustees of one or more particular policies to be kept up permanently out of that special fund; and that that was not what the trustees did, when from October 1864, until the death of the Earl in September 1865, they acted upon the general resolution not to surrender any of the policies in the then existing state of his Lordship's health. The resolution to which they came was not to keep up out of the issue policy fund the whole policies for the lifetime of the Earl, whether that might be longer or shorter. The amount of the fund would not have admitted of any such resolution. They only resolved, for the time, and with reference to the existing state of the Earl's health, to keep up the policies in the meantime. If his health had been restored, they must have surrendered the policies, which they had not the means to keep up, and in doing so they would not have acted inconsistently with any resolution which they had formed. But the immediately succeeding context gives much greater latitude to the power of the trustees in applying the balance of the £10,000. They are to apply it in keeping up one or more of the existing policies, ‘or otherwise, as they shall think best for the immediate or ultimate reduction of the debt of £250,000.’ They had thus unlimited latitude as to the mode in which they might apply the fund for that purpose; and it was their duty, as well as within their power, to apply it in any way most calculated to accomplish the object of disburdening the estate. Looking to the whole facts of the case, the Lord Ordinary thinks it must be held that the trustees did keep up the policies out of the issue policy fund, and that they were warranted in doing so, unless the parties interested under the second part of the second trust purpose had such an interest in the policies as entitled them to object to their being so dealt with.

In considering whether these parties,—that is, the creditors and the present Earl,—had such an

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interest, it must be kept in view that if the policies had not been kept up by payment of the premiums, but had been surrendered or sold, the surrender value or price would, under the direction in the second part of the clause, have fallen to be applied to payment of debts due at the date of the trust, and beyond what was required for that purpose, would have constituted undisposed-of estate of the late Earl. That did not prevent the trustees keeping up policies in implement of the express direction to keep up one or more policies out of the issue policy fund. But, as the Lord Ordinary thinks, that was not what they did. He thinks they must be held to have made the policies the subject of a speculative, but in the event highly profitable, investment, for reduction of the debt of £250,000. That was a proceeding not expressly directed or contemplated by the trust-deed; but the Lord Ordinary thinks that under the direction to apply the surplus of the issue policy fund ‘otherwise as they shall think best’ for reduction of that debt, it was an act of management within the power of the trustees, except in so far as it might disappoint interests conferred by the trust-deed upon other parties. Taking this view of the relative rights of parties, he is of opinion that the surrender value of the policies, as at the dates when they would respectively have been surrendered, if no premiums had been paid upon them by the trustees, falls to be applied under the direction in the second part of the second trust-purpose; and that the surplus proceeds of the policies, after deducting the surrender value, falls to be applied, under the direction of the first part of that clause, to disburdening the estate of the debt of £250,000.

The present Earl and the creditors maintain that, if they cannot claim the whole proceeds of these policies, they are at least entitled not merely to their surrender value, but to the full price for which they could have been sold, in the then existing state of the Earl's health. The Lord Ordinary does not think that this claim can be sustained. There are no elements for fixing its amount, which must be entirely conjectural. But independently of that, he is of opinion that, although the trustees were warranted in acting as they did upon the information which had reached them in regard to the Earl's health, they were not bound to divulge that information, and make use of it for the purpose of effecting an advantageous sale of the policies. The mere fact that they had not done so, and had surrendered the policies as contemplated by the trust-deed, at the ordinary rate, could not he thinks, have founded any claim against them at the instance of the parties beneficially interested; and he is of opinion that as little can these parties now insist that the proceeds of the policies shall be accounted for upon the footing of their having any such claim.

2. The view now taken precludes any claim by any party for the sum expended by the trustees in keeping up these policies. The Lord Ordinary bolds that the expenditure of that sum, as well as of the sum of £1650 for an issue policy, was properly made by the trustees out of the issue policy fund. As regards the balance of the £10,000 remaining undisposed of in the hands of the trustees, there does not seem to be room for doubt as to the mode in which it must be applied. The whole purposes for which the £10,000 is directed to be applied, are purposes for the benefit of the heirs of entail. The trustees might at any time have applied any part of the unused balance of that sum to reducing the debt of £250,000; and at all events they must do so now, when no other mode remains of applying it consistently with the directions in regard to it.

3. The question as to the application of the policies, amounting with bonus additions to £45,406, 19s. 4d., is not free from difficulty. They were kept up by the trustees out of the rents, under a special direction contained in the sixth purpose of the trust, which regulates the application of the rents. But these policies are first mentioned, parenthetically, in the second trust-purpose, in connection with the direction as to the application of the surplus of the issue policy fund. In the sixth purpose, where the direction is given to keep up these policies, nothing is said as to the purpose to which their proceeds are to be applied; and the Lord Ordinary does not think that any indication of intention on that subject is to be got from the context in that trust-purpose. But it appears to him, that the way in which the mention of these policies is introduced in the second trust-purpose, strongly indicates that they were to be kept up for reduction of the debt of £250,000; and he is of opinion that, as matter of construction, that must be held to be the meaning of the deed. After directing that £10,000, of the £250,000 to be borrowed by the trustees, or any part thereof, in the discretion of the trustees, shall be applied to ensuring payment of a sum of money in the event of John Bowes leaving issue, to be applied towards payment of the £250,000, the deed goes on to direct that any surplus of the £10,000 not used by the trustees for that purpose, ‘shall be applied in keeping up, in such way as they may think proper, some one or more of the now existing policies of assurance on my life, other than and in addition to the policies amounting to £30,000 (besides bonuses), which are to be kept up from the rents of the said estates, as hereinafter provided, or otherwise as they shall think best for the immediate or ultimate reduction of the debt of £250,000 to be contracted as aforesaid.’ In the absence of any contrary indication in other parts of the deed, the Lord Ordinary thinks that the manner in which the keeping up of these policies is thus mentioned in immediate connection with the surplus of the issue policy fund, and the purpose to which it was to be applied, must be taken as indicating the intended application of these policies also.

4. There is no room for question as to the application of the policies kept up out of the rents, under the direction in the third trust-purpose, to payment of the additional sum of £10,000, which the trustees were by that clause empowered to borrow. But the proceeds of these policies amount to £10,460, Is., and the Lord Ordinary does not think that he can at present pronounce any finding as to the application of the balance of £460, Is. That may depend upon whether the rents applied to paying premiums on these policies, beyond what would have been necessary to effect policies for the precise sum of £10,000, are, on a correct view of the trust accounts, to be held to have been ‘surplus rents’ in the sense of the sixth trust-purpose, or were taken from the fund for the Earl's allowance. The point was hardly adverted to in the argument, and is of comparatively small importance.

5. In regard to the questions raised as to the division of the rents, the Lord Ordinary is of opinion that the Apportionment Act applies to the

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case. The right of the trustees, and the rights and interests of all the beneficiaries in the Glamis estates, were terminable, and were in fact terminated, by the death of the late Earl, except the right of the present Earl and the future heirs of entail to demand a conveyance of the estates in their favour. Whether the interest in the estates is held to have been in the late Earl as truster, or in the trustees, or in the whole parties for whose benefit they held, it was equally an interest which was determined by the death of the Earl. This is the description of case to which the Lord Ordinary understands the statute to apply. It expressly refers to the determination of the interest, not only by the death of the party holding it, but by ‘any other means whatsoever.’ On this point the Lord Ordinary would refer to the exposition of the statute, which is framed in the language of English law, given by Sir James Wigram, Vice-Chancellor, in Browne v. Amyot, 3 Hare 173, and 13 L. J. Ch. 232, where the case being in that respect the converse of the present one, it was held that the Act does not apply to the case of succession to a tenant in fee, whose interest is not terminated by his death.

“The Lord Ordinary only pronounces findings at present upon those points which, having been fully argued, admit of being now determined. There are other questions remaining over, which will be more conveniently disposed of when the contested rights of parties now in discussion shall have been finally determined.”

This interlocutor having been reclaimed against on 17th July 1868, the First Division pronounced this interlocutor:—“The Lords having heard counsel for the parties upon the questions raised by the various reclaiming notes, and made avizandum, and considered the closed record in the competition, productions, proof, and whole process,—Recal the interlocutor of the Lord Ordinary of 20th July 1867, and in lieu thereof, Find, 1st, that the proceeds of the policies specified in branch 2d of the list of policies referred to in the condescendence of the fund in medio, amounting, with bonus additions, to £10,460, Is., fall to be, pro tanto, applied in paying off the sum of £10,000, with which the raisers of the multiplepoinding were empowered, by the trust-deed in their favour, and relative deed of agreement, to burden the entailed estate of Glamis, in the event of the debts of the late Earl of Strathmore being found to exceed £270,000; 2d, That the proceeds of the policies specified in branch 1st of the said list, amounting, with bonus additions, to £45,406, 19s. 4d., fall to be applied, subject to any security or securities which may affect the same, in paying off and extinguishing, pro tanto, the sum of £250,000, with which the said raisers were empowered to burden and did burden the said entailed estate of Glamis; 3d, That the balance in the hands of the said raisers of the sum of £10,000, which they were empowered by the said trust-deed and relative deed of agreement to apply, wholly or partially, in their discretion, in insuring payment of a sum of money in the event of Mr John Bowes dying and leaving issue, as mentioned in the said deeds, falls to be applied in further paying off and extinguishing, pro tanto, the said burden of £250,000 affecting the said entailed estate; 4th, That after the appropriations foresaid have been made, it was and is incumbent on the said raisers to set aside or appropriate a sum of £270,000 to meet debts due by the late Earl of Strathmore at the date of the said trust-deed and relative deed of agreement, and the expenses of the trust, before any further sum is appropriated or applied towards paying off and extinguishing, pro tanto, the said burden of £250,000 affecting the said entailed estate, with the exception of sums specially directed to be so appropriated or applied by the said trust-deed and relative deed of agreement; 5th, That, subject to the effect of the foregoing findings, and to the reservation after mentioned, the balance of the capital of the trust-estate which will then remain in the hands of the raisers, including the proceeds of the policies, specified in branch third of the foresaid list, amounting, with bonus additions, to £130,289, 16s. 8d., fall to be applied, subject to any security or securities which may affect the same, in further paying off and extinguishing, pro tanto, the said burden of £250,000 affecting the said entailed estate, before any farther sum can be claimed from the raisers, either by creditors of the late Earl of Strathmore, or by the present Earl as the late Earl's general disponee: but reserving all questions as to the surplus which may remain of the proceeds of the £10,460, Is., mentioned in the first finding, after paying off the sum of £10,000, therein also mentioned, as to which surplus no judgment has been pronounced by the Lord Ordinary, and decern: Reserve all questions of expenses, and remit to the Lord Ordinary to proceed further in the cause as shall be just.”

The present appeals were presented against this interlocutor by the Strathmore trustees and by the present Earl of Strathmore and his sons, and also by certain creditors of the late Earl. The appellant and the creditors maintained that the proceeds of the policies comprised in the first and third classes fell to be applied primarily in payment of debts; and secondly, that any balance which remained after such payment fell to be made over to the appellant as executor and general disponee of his brother the late Earl, on the ground—(1) That the trust was truly a trust for payment of the late Earl's debts, and that the trust-estate, in so far as not specially appropriated to other purposes, fell to he applied primarily in payments of such debt; (2) that the contents of the policies in question were not specially appropriated to the reduction of the debt of £250,000 authorised to be charged upon the Glamis estates, or to any purpose other than the payment of debts, but that they were by the trust-deed (in the events which have occurred) expressly appropriated to such payment; and (3) that the balance of the proceeds of the policies which remained after paying the late Earl's debts, not being otherwise appropriated or destined by the trust-deed, must be held to have belonged to the truster, the late Earl, from whom the entire trust-estate flowed, and who had the radical interest under the trust, and must consequently fall to the appellant as his representative.

The respondents, the heirs of entail, on the other hand, maintained that the policies in the two classes in question had been kept up by the trustees in virtue of powers contained in the trust-deed to keep up policies for the reduction of the debt charged upon the Glamis estates, and that their contents were thus by the trust-deed appropriated to the reduction of that debt. They did not dispute that, if the policies in the third class had been surrendered or sold, the surrender value or price would have gone to the creditors.

Pearson, Q.C., and Rutherford for appellants, the Strathmore Trustees.

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Lord Advocate and Balfour for appellant, the Earl of Strathmore.

Sir Roundell Palmer, Q.C., and Adam for James Haldane.

Dean of Faculty and Mackay for Lord Glamis and Others.

At advising—