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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Hagart v. The Lord Advocate [1870] ScotLR 8_280 (24 December 1870)
URL: http://www.bailii.org/scot/cases/ScotCS/1870/08SLR0280.html
Cite as: [1870] SLR 8_280, [1870] ScotLR 8_280
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SCOTTISH_SLR_Court_of_Session
Page: 280↓
Court of Session Inner House Second Division.
v.
Succession — 23 and 24 Vict., cap. 80, sec. 3 — Heritable Bonds.
Facts:
Held that a sum left by a father to his son in virtue of the power of apportionment among his children given to him by ante-nuptial marriage contract, was a debt due by the deceased for which his son was a creditor in the sense of the 23d section of 5 and 6 Vict., cap. 79.
Held that, under the above section, money heritably secured was properly inventoried along with the other personal estate of deceased, from which debts due by the deceased were to be deducted under 5 and 6 Vict., cap. 79.
This was an action brought by the trustees of the late Thomas C. Hagart, Esq., of Bantaskine, for the purpose of recovering from the Crown the sum of £300, being the amount of inventory duty paid upon the sum of £14,999 by the pursuers, and which they demanded in respect that the said sum was a debt due by the deceased payable out of his personal estate. The question arose in the following circumstances:—The ante-nuptial marriage contract, dated 20th August 1813, between the deceased Mr Hagart and his wife contained the following clauses—“For which causes, and on the other part, the said Thomas Campbell Hagart and the said Charles Hagart bind and oblige themselves, their heirs, executors, and successors whomsoever, to make payment to the said Elizabeth Stewart, during all the days of her lifetime, in case she shall survive the said Thomas Campbell Hagart, of a free liferent annuity of £800, payable at two terms in the year.… And the said Thomas Campbell Hagart and the said Charles Hagart hereby bind and oblige themselves and their foresaids to lay out such a capital sum, on good and sufficient security, or in the purchase of lands, as will secure to the said Elizabeth Stewart the foresaid free liferent annuity of £800, which shall be paid to her as aforesaid free of all taxes or deductions whatever, and to take the rights and titles thereof to the said Thomas Campbell Hagart and the said Elizabeth Stewart in conjunct fee and liferent, for her liferent use allenarly, in case she shall happen to survive him, and to the children to be procreated betwixt them; whom failing, to the said Thomas Campbell Hagart, his heirs and assignees whomsoever, in fee. And further, it is hereby expressly provided and declared that it shall be in the power of the said Thomas Campbell Hagart to divide and apportion as he shall think proper the fee of the said capital sum amongst the children to be procreated of the said marriage.”
Mr Hagart died in 1868, survived by his wife, two sons and a daughter, and he had never invested any capital sum to meet the annuity of £800, but he left ample personal estate for the purpose.
By his trust-disposition and settlement Mr Hagart, on the narrative that he had the power under the marriage contract to divide and apportion the fee of the capital sum which was to be invested to afford the annuity of £800 in any way in which he pleased among the children of the marriage, apportioned a sum of £10,000 as payable to his son James M'Caul Hagart. Upon the death of Mr Thomas Hagart his executors gave up an inventory of his personal estate and of money belonging to him secured on heritage in Scotland under 23 and 24 Vict., cap. 80, amounting to £73,143. The said sum of £73,142, 5s. 8d. of personal estate included—(1) A sum of £9000 due under a promissory-note by the late Sir John M'Donald of Dalchosnie to the Central Bank of Scotland, dated 25th September 1863; and (2) a sum of £7922, 3s. due under a personal bond by the trustees of the late Archibald Speirs, Esq. of Elderslie, in favour of the Honourable Mrs Speirs. The inventory duty paid by the trustees amounted to £1050.
They alleged in this action that they were entitled to rebate of £300, in respect that the £10,000 payable to James M'Caul Hagart was a debt due by the deceased, and payable out of his personal estate.
The Crown maintained—(1) That the two sums of £9000 and £7922, 3s. had been improperly inserted in the inventory as personal property being heritably secured; and (2) that the sum of £10,000 was a claim of succession, and not a debt due by the deceased.
The Lord Ordinary ( Ormidale) pronounced this interlocutor and note:—
Edinburgh, 24 th November 1870.—The Lord Ordinary having heard counsel for the parties, and considered the argument and proceedings, Finds that the pursuers are entitled to a return or repayment of the inventory duty which has been paid by them to the extent of £150: Therefore finds the defender liable in repayment to the pursuers of the said sum of £150, with interest thereof at the rate of five per cent, per annum, from the 1st day of November 1869 until payment; and quoad ultra assoilzies the defender, and decerns: Finds the pursuers entitled to one-half of the expenses of process incurred by them, excluding the expenses connected with the making up the record as it was first closed, and the debate which took place thereon; allows them to lodge an account of these expenses as now found due; and remits it when lodged to the auditor to tax and report.
Note.—In the present action the contention of the pursuers is, that they were due of inventory duty £750 only, in place of £1050, which was actually paid by them, and that therefore they are entitled to a return or repayment of £300.
1. The pursuers contend, in the first place, that the £10,000 referred to in the record is of the nature of a debt due by the deceased, and so falls to be deducted from the inventory of his personal estate; but this the defender disputes, and contends that the £10,000 referred to is not of the nature of a debt due by the deceased, but merely a part of succession devolving on them, and therefore does not fall to be deducted from his personal estate. The question thus raised depends in a great measure upon the view that is to be entertained of the legal effect of the ante-nuptial contract of marriage which was entered into by the pursuer General Hagart's father and mother, taken in connection with the father's trust-disposition and settlement. Having regard to these deeds, the Lord Ordinary, although not without difficulty, has come to the conclusion that the £10,000 in question must be dealt with as a debt ‘due and owing from the deceased, and due and payable by law out of his personal or moveable estate,’ and therefore that the pursuers are entitled to a return of the inventory duty corresponding to that sum, as provided for by the Act 5 and 6 Vict., cap. 79, sec. 23.
Page: 281↓
The Act referred to is quite general as to the description of debts entitling a party to a return of inventory duty. It does not limit the right to debts of any particular class, or to debts of a preferable nature. The only condition imposed is, that the debts must be ‘due and owing from the deceased, and payable by law out of his personal or moveable estate.’ The Lord Ordinary thinks the £10,000 in question is a debt of that description. It is ‘due and owing from the deceased,’ for by his ante-nuptial contract of marriage—a deed of a highly onerous character—he, in respect of a large tocher brought to him by his wife, and other stipulations come under by her, and in respect of the contemplated marriage, bound and obliged himself, his heirs and representatives, to lay out and secure a much larger sum than £10,000, the fee or capital of which was to be taken payable, and—in the circumstances which occurred—became payable, to the younger children of the marriage. By the marriage contract, of which No. 6 of process is an extract, certain individuals are named and appointed, at whose instance it was agreed ‘that all action and execution for implement of the provisions in favour of the said Elizabeth Stewart, or of the children of the marriage, shall pass.’ It is thought, therefore, that even during the lifetime of the deceased he could have been compelled to lay out and secure a sum adequate to satisfy the provisions of his children.— Bell's Prin., sec. 1971; and Hay and Carruthers v. Hay, 28th June 1709, Mor. 12,967. But that not having been done is no reason why the provision, which in terms of the power to that effect in the marriage contract the deceased apportioned at £10,000 to the pursuer, James M'Caul Hagart, should not now be ‘payable by law out of his personal or moveable estate:’ and if so payable, the Lord Ordinary thinks it must be considered and dealt with as a debt entitling the pursuers to a corresponding return of inventory duty in terms of the Act which has been referred to.
It may be that such a provision as that in question, in favour of children nascituri, is not a debt in the sense of its being entitled to be ranked in competition with ordinary creditors of the father; but still it is of the nature of a debt due by him, which it was beyond his power directly and by any gratuitous or voluntary deed to extinguish, except by payment to the creditor therein. Nor is it of any consequence that the general provision as it existed in the marriage contract was converted into a £10,000 provision in favour of the pursuer James M'Caul Hagart by virtue of the power of apportionment reserved to his father; for this, and indeed nearly all of the points which here arise in relation to the question, were fully considered, and disposed of favourably for the contention of the pursuers, in the case of The Advocate-General v. Trotter, 12th November 1847, 10 D. 56. It is true that in that case the dispute related to legacy and not inventory duty, and arose under a different statute from that which applies to the present case. But still, and although the discussion in that case turned in part upon the terms of the particular statue there under consideration, and on the question whether the sum there in dispute was not a debt but a legacy, which by the statute was defined to be a ‘gift by any will or writing,’ the general reasoning and principles of law in reference to which it was held to be a debt, apply equally, as it appears to the Lord Ordinary, to the present case, and lead to the conclusion that the £10,000 here in dispute must be considered and dealt with as a debt. The Lord Ordinary refers especially to that passage of Lord Fullerton's judgment—and it was the judgment of the Court —in which he sums up a very full exposition of his views and examination of the authorities in these terms—‘Here, then, it is found that the pecuniary provisions in favour of children by ante-nuptial marriage contract are truly rights of credit, by onerous deed inter vivos, and that is quite sufficient for the decision of the present question. It is true that these rights suffer a modification as to be postponed in competition with ordinary onerous creditors, and in that one particular they bear a resemblance to gifts by testamentary instrument; but that is not enough to identify the two rights. To effect that it would be necessary to show that the two rights resemble each other, not in one, but in every essential particular. Instead of that, it is clear that they differ in every essential particular except that one. Accordingly, the only legitimate inference is, that provisions to children by marriage contract are rights of credit created by deed inter vivos, of a peculiar and modified kind—an inference of which every one must admit the justice. But, on the other hand, it is equally clear that they are, neither in form or in substance, gifts by testamentary instruments, being the character which is indispensable to subject them to the liability for legacy duty.’
In support of the same view, reference may also be made to the authority of Mr Erskine, by whom it is stated (3, 8, 38) that a child can enforce implement of marriage contract provisions against his father, and that he may do so without serving heir to his father; for ‘it is not only unnecessary but improper for a creditor to serve heir to his debtor in order to make his payment effectual.’ Nor does the Lord Ordinary think that the cases of Pagan v. Wilson's Trs., 18 D. 1096, and M'Leod v. Leslie, 6 Macph. 445, and 2 Law Rep., Scotch Appeals, p. 44, cited for the defenders, are adverse authorities.
The result is, assuming the Lord Ordinary to be right in holding the £10,000 in question to be of the nature of a debt due and payable by law out of the personal estate of the deceased, that the pursuers are entitled to a return to the extent of £150 of the inventory duty, which has been paid by them.
2. The pursuers further contended that they were not only entitled to repayment of £150 in respect of the £10,000 debt, but also to repayment of another £150, making in all £300, as concluded for in the summons. The Lord Ordinary, however, has been unable to see any good ground on which this contention can be given effect to.
The way in which the pursuers endeavour to show that a further sum of £150 ought to be returned is by including in the proper personal estate, before deducting debts, the two sums of £9000 and £7922, 3s., as if they also had been in their own nature proper personal estate belonging to the deceased. The result, in this view, would entitle them to the full return of £300 concluded for by them, as set out in the first branch of article 20 of their condescendence. But the Lord Ordinary has been unable to see how these two sums of £9000 and £7922, 3s. are anything else but money secured on heritable estate; and if so, it follows, as shown in the second branch of condescendence 20, that the pursuers are only entitled to a return of £150, and not of £300, as concluded for
Page: 282↓
by them in their summons. That this is the correct mode of dealing with the matter he thinks is clear from the Act 23 and 24 Vict., cap. 80, and particularly sections 4 and 6 thereof. “There is another mode of dealing with the inventory, from which, in the present instance, it also appears that the pursuers are only entitled to a return of £150. According to the inventory given up by the pursuers, the proper personal estate of the deceased, after deducting the admitted debts, amounted to upwards of £50,000, for which there was payable a duty of £750. This is correctly shown in article 1 of the defender's statement of facts. And deducting the £10,000 found to be a debt by the preceding interlocutor, there would be left of proper personal estate upwards of £40,000. But to this sum there has, on the other hand, to be added upwards of £20,000 of money or debts owing to the deceased, secured on heritable estate in Scotland, making altogether upwards of £60,000 liable for inventory duty to the extent of £900, which is exactly the amount of duty that will be left in the hands of the Crown after repayment of the £150, for which the pursuers have now got decree.”
The defender reclaimed.
The Solicitor-General and Rutherfurd for him.
Shand and Lancaster in answer.
At advising—
The Solicitor-General, in his argument upon the terms of this contract of marriage, attempted to take a distinction between this case and the general question to which I have alluded. He said that there was a specialty in the present case—viz., a destination provided for whereby the fee was left in the father, and only a protected jus crediti given to the children; and therefore he maintained that the specialties in this contract entitled him to ask judgment for the Crown, leaving unsettled and undetermined the general question with reference to the ante-nuptial provisions for children in the ordinary sense. I do not think there is anything in that specialty, for it is still an ante-nuptial provision obligatory on the father, and which he is bound to implement. Be it that the fee is left in the father, it is a protected right of succession which the children interested in it, or those acting for them as trustees, were entitled to vindicate by legal procedure as against the father, or as against his estate. The decisions to which reference has been made both in the argument yesterday and today are conclusive that such provisions are not in the position of gifts or legacies or bequests, but fall under the class of debts or obligations, of a particular and subordinate character no doubt, but still debts to be ranked on the father's estate postponed only to onerous creditors. The children are in all such cases quoadammodo creditors—that is, they are heirs in a question with creditors, and creditors in a question with heirs. And this being their legal position, they can in this Court vindicate their rights where they do not interfere with the onerous creditors. Nothing can more strongly show the legal character of such rights than the decisions of this Court in the cases of Cunningham, 10th December 1810, and of Earl of Wemyss, 28th February 1815, affirmed in the House of Lords 20th May 1818. In this last case the heir of the marriage, to whom by ante-nuptial deed the succession to a particular estate was provided, was held as a creditor of his father entitled to have the value of the estate, no doubt not as at the date of the opening of the succession, but only as at the date of the sale. His position as a creditor was thus distinctly recognised, and the children generally of the marriage for their ante-nuptial provisions are in the same privileged and protected position. In every question affecting the succession of their deceased parent they are creditors, and are to be treated as such. They are creditors in every question with heirs, nor does the legislative provision affect that conclusion. What are the terms of that legislative provision? It is quoted in condescendence 17—“that it shall be proved that”—( reads provision). Therefore, the debts of the deceased are to be proved by oath, and that the executors hath paid debts due and owing from the deceased. Now, is this not a debt due and owing from the deceased? It is a debt due and owing from his estate, and therefore being a debt which could be included as a debt in preference to all the other claims upon the estate of the deceased, I think it falls within the very terms of this condition. That being the case, I hold that the Lord Ordinary's judgment is well founded upon that point.
Then, on the second point, I am equally clear that the Lord Ordinary has gone wrong. By the 5th and 6th Vic., c. 79, § 23, already referred to, the right to have rebate of inventory duty in the circumstances therein set forth was first introduced. The provision conferring this right is contingent upon the Commissioners being satisfied that certain matters have been proved to their satisfaction whereby a less inventory duty would have been leviable on the whole gross estate of the deceased had they been known ab initio than the sum actually paid. This applied to personal or moveable estate. Thus by § 6 of the Act 23 Vic., c. 15, heritable bonds are, for the purposes of the Act, to be held moveable property, and, as such, are to be included in this inventory of the moveable estate. Then when once these bonds go into the inventory of the personal estate, the statute of 5th and 6th Vict., not being revoked, as the Solicitor-General contended, but that provision standing entire to regulate the rights of parties under this Act of 23 Vict., what would have been result had the question occurred under these two statutes before the subsequent statute 23d and 24th Vict., c. 80, was passed? I think it clear that the provision of the 5th and 6th Vict. behoved to be read as if it had been imported into the Act 23d Vict., and that the rebate must have been granted. The heritable bonds would be included in the general inventory. No special inventory is there referred to, and, that being so, then under the Act 5th and 6th Vict., the debt being deducted, the claim of relief will take place, and the superfluous amount of inventory duty will fall to be rebated when claimed by the party.
Page: 283↓
Now, that being the position in which parties stood prior to the passing of the Act of 23d and 24th Vict., c. 80, do any of the sections of that Act alter this state of things? It appears to me that the sections relied on by the Crown are quite consistent with the prior provisions, and that the right which the executor had under 23 Vict. c. 15, remained entire. Whenever the executor exercised his option and his right under the fourth section of 23d and 24th Vict., c. 80, of putting the heritable bonds made subject to duty not into a special inventory, but into the general inventory, that carried with it a right to rebate under c. 15, before c. 80 was passed at all. The only words in c. 80 about which there is any difficulty are these in section 4—“And the contingent provision for return of duty hereinafter provided for in regard to the debts of deceased shall, in such cases, be applicable mutatus mutandus.” My view of that clause is this, that where a special inventory has not been adopted, but the bonds are included in the general inventory, the right to this rebate duty competent under the prior statutes shall be subject to the additional provision as to this matter introduced by the sixth section of this Act, having reference more especially to the case of the executor having stated these bonds in a special inventory. From the provision being in terms thus referable to a special inventory, it was deemed necessary in the fourth section, when the bonds were stated in the general inventory, to declare that, mutatis mutandis, this subsequent provision should be equally applicable to the one case as to the other. But whether this be so or not, it does not appear to me that this enactment detracts from the right of the executor in this matter as it stood prior to the passing of the Act 23 and 24 Vict., c. 80. For this reason, I consider that the Lord Ordinary has gone wrong on that part of the case, and that his interlocutor will require to be so far altered.
Upon the second point, I think the Lord Ordinary has gone quite wrong. I think it is clear that when the heritable bonds were made liable for duty, they were either to be given up in a special inventory by the party entitled to the succession, or the executor might merge the contents of these bonds along with the amount of the personal property. In that case there was but one inventory, and from the amount of that one inventory, I apprehend by the previous statutes the amount of the debts was to be deducted. With regard to the clause which has given rise to so much argument, and to such confusion, for I confess I could make nothing of the argument at first, and very little of the Act of Parliament, I think I can now see its meaning upon a careful consideration. So long as the debts of the deceased were less than the personal property, there is no difficulty in the case, and no necessity for any peculiar regulation as to the return of the inventory duty. The inventory duty is charged, and from that there is returned the amount corresponding to the debts of the party. But then the case may happen that the debts of the deceased exhaust the whole personal estate, and then the surplus is chargeable upon his whole heritable property, both that part of his heritable property which is liable to inventory duty and that part of his heritable property which is not liable to inventory duty. Now, I just put this case—suppose that the surplus of debt over after exhausting the personal estate is £500, and there is £10,000 of landed property, and £10,000 of heritable bonds, well, the debts are paid equally out of the two, so that there is only £250 paid out of the heritable bonds, and there is only £250 paid by the land. Now, it would never do to allow the whole abatement there, the abatement corresponding to £500, because inventory duty had been paid there upon only £250 as on the part of the estate which is liable to inventory duty. Consequently, it is only the one-half. If you look at the clause itself, you will find that it exactly corresponds with that—“And the Commissioners of Inland Revenue shall grant return”—( reads clause). Now, I suppose the debts to exceed the personal property by £500, and that an abatement has to be made corresponding to the sum of £500 between the amount of the money contained in the said special inventory, that is to say, the heritable bonds, and the other heritable property, that is to say, the landed estate. That is a case where there is a special inventory, and the mutatus mutandus is where there is no special inventory; but where the whole is to be put into one, and where the personal debts exceed the personal estate, this mutatus mutandus applies there. That is my view on the subject. I think there is no doubt in this case that there is a perfect right; and there is nothing to prevent them from lumping together the whole amount of the heritable debts and the personal estate, and making the deduction accordingly.
Page: 284↓
With regard to the other part of the case, I agree with what your Lordships have said. The facts are not very easily understood, but I think it would be repealing the privilege given to the party of lumping his inventories together, if we were to deal with it in any other way than your Lordships have proposed. With regard to the Lord Ordinary's note, I very respectfully doubt whether his Lordship had seen all the bearings of this question, because it rather occurs to me that the last part of his note, if the figures are rightly applied, would come exactly to what the pursuers contend for. I cannot say that I altogether follow it, but it seems to me to support the conclusions for which I am contending. His Lordship seems to think that the debts amount to £20,000, when they only amount to £16,000; and I think they would fairly turn the tables against the Crown altogether. I observed at the time that the Solicitor-General was extremely shy in homologating the finding of the Lord Ordinary. On that part of the case I agree with your Lordships.
Solicitors: Agent for Pursuer— Angus Fletcher, W.S.
Agent for Defender— H. G. & S. Dickson, W.S.