Scottish Court of Session Decisions

Certain questions involving the law of Scotland having arisen in a suit in the Court of Chancery for the distribution of the estate of an English testatrix, the Lord Chancellor ordered a case to be adjusted for opinion of the Court of Session.

R. M. Trappes, one of the parties to the suit, presented the present petition to the Court to appoint an early day for the hearing of the case.

The case was stated as follows:—“Mrs Graham, a testatrix domiciled in England, by her will, dated the 16th of February 1863, after reciting that she ‘was enabled to appoint by will (subject to the life interests of her mother, Anna Maria Payne,’) certain property, which she referred to in her will as ‘the trust-premises,’ bequeathed and appointed the same to trustees, upon trust, that the said trustees should out of the trust-premises pay certain legacies; and then the will proceeded as follows (being, for convenience of reference, divided into clauses).

“Clause 1. And upon further trust, that my said trustees shall, out of the income of the said trust-premises, or if that shall be insufficient, then out of the principal thereof, pay to my husband an annuity of £100 during his life (but subject to the provisoes with respect to the said annuity hereinafter contained), the said annuity to be paid by equal half-yearly payments, the first of such payments to be made at the expiration of six calendar months after the decease of the survivor of and my said mother.

Clause 2. Provided always, and I hereby declare, that if my said husband shall become bankrupt, or shall assign, charge, or incumber, or attempt or affect to assign, charge, or incumber, the said annuity of £100, or do or suffer any act whereby the same annuity, or any part thereof, would, if belonging absolutely to him, become vested in any other person or persons, then and in such case the said annuity shall not be payable, or shall cease to be payable, as the case may require, in the same manner as if my said husband were dead.

Clause 3. Provided also, and I hereby further declare, that it shall be lawful for my said trustees or trustee, if they or he shall, in their or his absolute discretion, think fit, and without assigning any reason for so doing, at any time or times, to refuse or discontinue the payment to my said husband of the said annuity of £100, or any part thereof, during the whole or any portion of his life, and in such case the said annuity, or such payment or payments thereof as my said trustees or trustee shall refuse to make to my said husband as aforesaid, shall sink into the income of the said trust-premises for the benefit of the person or persons for the time being entitled to such income, it being my wish and intention that the payment of the said annuity to my said husband shall be according to the discretion of my said trustees or trustee in all respects.

The facts are as follows:—On the 7th May 1861, Mr Graham, the husband of the testatrix, whilst residing at Portobello, was sequestrated on

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his own petition by the Court of Session. On the 20th May 1861 Mr Balgarnie was appointed trustee under the sequestration. Mr Graham, under 19 and 20 Vict, cap 79, sec. 81, made up and delivered a statement of his affairs, in which he stated that he had no assets of any value, and that his debts amounted (as the fact was) to more than £1500. The entire assets recovered by the trustee did not exceed £10, and debts to the extent of more than £1500 remain unsatisfied. Mrs Graham's will, as before stated, was dated the 16th February 1863. Mrs Graham died the 21st June 1864. Mrs Payne, the mother of the testatrix, on the expiration of six months after whose decease the first payment of the annuity was to become due, died on the 4th of April 1868. The first half-yearly payment of the annuity, therefore, became payable on the 4th of October 1868. Mr Graham never offered to his creditors any composition, in terms of the 137th and 139th sections of 19 and 20 Vict. cap. 79. Mr Graham never at any time notified to Mr Balgarnie, the trustee, the fact of the bequest of the said annuity. No such petition was presented by the trustee under the sequestration as is referred to in section 103 of the said Act. Under the circumstances above-mentioned, Mr Graham, on the 29th day of August 1868, before the first payment of the annuity fell due, obtained his discharge without any consent of creditors or composition, from the Sheriff of Edinburgh, in terms of the 146th and 147th sections of 19 and 20 Vict. cap. 79, having previously, as required by the 147th section of the 19 and 20 Vict. cap. 79, made a declaration upon oath before one of the Sheriff-Substitutes of Edinburgh that he had made a full and fair surrender of his estate. On the 10th February 1869, Mr Balgarnie, the trustee, believing that Mr Graham had made a fair discovery and surrender of his estate as mentioned in the 146th section of the Act, and that there were no further assets, applied for and obtained his discharge as trustee. On the 13th day of May 1870, a petition was presented to the Court of Session by John Christie and Son, clothiers in Edinburgh, creditors of the said Mr Graham, for the purpose of obtaining the appointment of a new trustee or new trustees under the said sequestration. On the 1st June 1870 Mr Graham filed his answer to the said petition. On the 19th July 1870 the petitioners were allowed to withdraw their petition on the payment to the respondent of £5, 5s. of expenses. There is now no trustee under the sequestration.

The opinion of the Court of Session is desired by the Court of Chancery in England on the following questions:—

(1) Whether the annuity given by clause 1 of the said will to Graham, assuming it to be by the English law an interest capable of legal alienation at and from the death of Mrs Graham on the 21st June 1864, would, if clauses 2 and 3 had not been contained in the said will, have fallen under the sequestration; and whether, under the circumstances hereinbefore stated, supposing clauses 2 and 3 had not been contained in the will, the said annuity could now be claimed under the sequestration, regard being had to sections 102 and 103 of 19 and 20 Victoria, chapter 79, and the interpretation of the word ‘estate’ in section 4 of the same Act?

(2) Assuming the first question to be answered in the affirmative, whether clause 3 has any effect, by the law of Scotland, in preventing the annuity from falling under the sequestration, the fact being that the trustees of the will had not, prior to June 27, 1870, made, or refused to make, any payment to Graham in respect of the said annuity?

(3) Whether the omission by Mr Graham to give notice to Mr Balgarnie, the trustee under the sequestration, of the fact of the bequest of the annuity having been made, would have any and what effect upon the discharge obtained by Mr Graham?

(4) Has a discharge, obtained without consent of or composition with creditors, the effect of annulling the sequestration with respect to property vested in and disposable by a bankrupt before discharge, but not actually payable to him until after the date of the discharge?”