Scottish Court of Session Decisions

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Cite as: [1871] ScotLR 8_445_2, [1871] SLR 8_445_2

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SCOTTISH_SLR_Court_of_Session

Page: 445↓

Court of Session Inner House Second Division.

Saturday, March 18. 1871.

8 SLR 445_2

Special Case—Ewen Menteith Tod and General Tod's Trustees.

Subject_1Trust
Subject_2Clause
Subject_3Powers of Trustees
Subject_4Annuity — Alimentary.
Facts:

Terms of a settlement which were held not to import an imperative direction to trustees to invest a fund in an alimentary annuity for a son of the truster; and observed, that even if they did, as the truster's intention of securing an alimentary annuity could not be made effectual by following the directions of the deed, the trustees were entitled to pay over the capital of the fund to the son, as the sole party interested in the same.

Headnote:

General Suetonius Tod died in September 1861, survived by a widow and two sons. Mrs Tod died in April 1866. In 1859 General Tod executed a trust-settlement of his whole estate. After certain provisions in favour of his widow, the trust-deed proceeded;—“ Fourth, I direct and appoint my said trustees to divide the residue of my said means and estate among my two sons, Suetonius Macdonald Tod and Ewen Menteith Tod, equally between them or the survivor of them, in manner following, viz.:—Should my said trustees consider it prudent and proper to advance to each of my said sons, for the purpose of setting them up in business, or of advancing their prospects in life, such a sum as shall not exceed the one-half of the share of the free residue of my said means and estate, to which each of them might be entitled in the event of my death, and the other half or balance of the said free residue shall be invested when my said trustees shall consider it proper and prudent to do so, in the purchase of two separate annuities for each of my said sons, or the survivor of them, declaring that, as said annuities are intended by me solely for their respective aliment and personal support, the same shall not be assignable, arrestable, or affectable, for the debts or deeds, legal or voluntary, of the said Suetonius Macdonald Tod or Ewen Menteith Tod.” General Tod left no heritable estate. The value of his moveable estate was about £12,000, one-half of which the trustees paid over to the two sons absolutely in equal portions, and the other half stood invested in the name of the trustees, who paid the interest to the sons. Mr Ewen Tod, who was now about thirty-two years of age, was desirous of entering into business, and accordingly requested payment of the remaining capital of his share of
Page: 446↓
the trust-estate. The trustees were doubtful whether they were not hound by the trust-deed to invest at least one-half of each son's share in an alimentary annuity. A Special Case was consequently laid before the Court, in which it was stated that the trustees were satisfied that payment of his whole share would be of great advantage to Mr Ewen Tod, but that, in consequence of the manner in which the fourth purpose of the trust-deed was expressed, they were advised that it was doubtful whether they were entitled to make such payment.

The questions submitted to the Court were—

‘1. Whether the trustees are bound to convey to Mr Ewen Menteith Tod the remaining capital of his share of his father's trust-estate?

“2. Whether (supposing the first question answered in the negative) the trustees are entitled and in safety, if they consider it prudent and proper, to make payment to Mr Ewen Menteith Tod of the said remaining capital?”

Gillespie, for General Tod's trustees, argued, that the direction of the truster to invest at least one-half of each son's share in an alimentary annuity, was imperative.

Lees, for Mr Tod, argued—No one except Mr Tod has any interest in the manner in which his share is dealt with. If he died, his children would be entitled to the uninvested funds; and the terms of the deed are not sufficient to protect the produce of the funds from being arrested by his creditors. He could sell the annuity, and so defeat the purpose of the trust; and in the principles of English Law and the analogy of the Cluny Entail case, he is therefore entitled to have the trustees restrained from implementing directions which he can defeat. As there is no destination over, no one could have any interest to challenge a conveyance of the capital by the trustees, if he gave them a formal discharge. A trust can always be terminated where fiar and liferenter concur, and are the only parties interested. Even if the trustees are not bound to convey, it is a matter for their discretion. They may never think it necessary to purchase an annuity, nor would they do so with propriety if the annuitant were ill of a mortal sickness. The terms of the trust-deed do not entitle them to retain the annuity in their own charge. Trustees are only justified in keeping up a trust where it is for the protection of some person's interest. Authorities— Nisbet v. Tod, 15 Jan. 1848; Wood v. Begbie, 7 June 1850; Gordon v. Gordon, 2 March 1866; Stokes v. Cheek, 2 July 1860, 29 L. J. (Ch. K.) 922; Browne, 29 July 1859, 27 Beavan's Rep. 324.

At advising—

Judgment:

The Lord Justice Clerk—The question in this case is in regard to the bequest of residue, whether the trustees under the settlement of General Tod are entitled to hand over Mr Ewen Tod's share in money, or are bound to invest it in an annuity. The trustees substantially say, that as far as they have any discretion in the matter, they do not consider that it would be for the advantage of Mr Ewen Tod to risk his share in an annuity. I am of opinion, in the first place, that there is no distinct injunction on the trustees to purchase an annuity, and secondly, if there was, it is an injunction which could be defeated, and in fact by following out the words of the deed, the trustees would not accomplish the object of the truster. I am inclined to rest my opinion on the first point. The direction is to divide the residue between his sons, no doubt qualified by the words “in manner following.” But there is no time fixed for making the investment. If the trustees came to the conclusion that at no time it would be prudent to purchase an annuity, I think there is nothing in the words to prevent their acting on that conclusion. I think that Mr Ewen Tod could have tested on his share, provided it had not been previously sunk in an annuity. If the trustees thought it desirable to purchase an annuity, they were entitled to do so. But it would have been necessary to create a second trust. Merely declaring an annuity not assignable would not have the desired effect. I am therefore of opinion that the second question is to be answered in the affirmative.

Lord Benholme—I concur. As an additional ground in support of your Lordship's opinion, I may adduce the principle laid down in the case of Burnet v. Craigie, 17 June 1837, 15 S. 1157, where it was held that a mother and son, who concentrated in themselves the whole interests in a certain property, were entitled to deal with it as they pleased. Mr Ewen Tod here concentrates the whole interest in one half of the residue, and therefore it appears to me that, as the fund is appropriated to his advantage, he is entitled to a large share in determining the form which the fund is to take. In the case of Burnet v. Craigie, the Court disregarded the contingency of the son dying, and the mother having another heir. The contingent interests in such a case are held to be merged in the existing interests. The trustees in this case have acted wisely in geting the extent of their powers ascertained.

Lord Neaves—It is quite plain that the beneficial interest in the residue belongs to General Tod's two sons. Perhaps the words of actual bequest are not so explicit as they would otherwise have been from the fact that they were the truster's next of kin. The trustees have a certain discretion, but I am not prepared to say that they would have been entitled to purchase an annuity in all cases. If one of the sons had a wife and family, and was dying, it would not have been proper for the trustees to benefit an insurance office, by purchasing an annuity for him. I concur.

Lord Cowan absent.

The Court answered the second question in the affirmative, and in the circumstances found it unnecessary to decide the first.

Solicitors: Agents for Mr Tod— Gillespie & Paterson, W.S

Agents for General Tod's Trustees— Dalgleish & Bell, W.S.

1871