Scottish Court of Session Decisions

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Cite as: [1873] ScotLR 10_244, [1873] SLR 10_244

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SCOTTISH_SLR_Court_of_Session

Page: 244↓

Court of Session Inner House First Division.

Wednesday, February 5 1873.

10 SLR 244

Special Case—Kinmond and Others.

Subject_1Disposition
Subject_2Trust
Subject_3Widow
Subject_4Annuity, Payment Of — Capital.
Facts:

A testator disponed his estate to trustees. The first purpose of the trust was to pay the testator's debts, and the second was to pay an annuity to his widow, and then followed a number of bequests. The income of the trustestate being found insufficient to meet the widow's annuity— held that the trustees were bound to make up the deficiency out of capital.

Headnote:

This case was brought (1) by the trustees of the deceased Alexander Kinmond. merchant in Dundee, and (2) by Mrs Jane Wedderburn Jolly or Kinmond, his widow. The facts of the case were as follows:—Mr Kinmond left a trust-disposition and settlement and relative codicils, dated respectively 30th August 1867, 12th August 1868, and 6th September 1870.

By the second purpose of his said trust-disposition and settlement, Mr Kinmond directed his trustees to pay to his widow annually the sum of £600, payable half-yearly, commencing with the first term of Whitsunday or Martinmas after his death, and to give her the liferent use of his house in Douglas Terrace, Broughty Ferry, which liferent use is by the fourth purpose continued to his sister-in-law, Miss Marion Blair Jolly, after Mrs Kinmond's death. He further bequeathed to Mrs Kinmond the sum of £600, to be paid within three months after his death. By the third purpose of the said trust-disposition and settlement Mr Kinmond bequeathed certain special legacies, amounting to £1300, payable within three months after his death. These two latter sums of £600 and £1300 respectively were paid by the trustees before this case was raised.

By the fifth purpose of the said trust-disposition and settlement Mr Kinmond bequeathed legacies to certain of his relations, amounting to £18,500, payable only after Mrs Kinmond's death. By the sixth purpose be bequeathed legacies, amounting to £4500, to various charitable and religious institutions, likewise payable only after Mrs Kinmond's death, but declaring that in the event of his estate being found insufficient to meet the debts and legacies, &c., already provided, the deficiency should fall equally upon these bequests contained in this sixth purpose. And declaring, on the other hand, that in the event of his estate proving more than sufficient to meet the said debts, legacies, &c., the residue should go to increase proportionally the legacies left to his nephews and nieces under the fifth purpose of his trust-disposition and settlement.

By the second codicil, dated 12th August 1868, the annual payment to Mrs Kinmond was increased to £1000.

After Mr Kinmond's death it was found that there was not sufficient annual income in the hands of the trustees to pay Mrs Kinmond the full annuity of £1000, and a question arose whether Mrs Kinmond was entitled to have the sum made up out of the capital funds of the trust.

The following questions were therefore submitted to the Court:—

“I. Is the second party entitled, under the said trust-disposition and settlement and codicils, to an annuity of £1000, whether the revenue of the trust-estate yields that amount or not?

II. In the event of the first question being answered in the affirmative, are the first parties bound to make up to the second party any deficiency which there may be of income to meet the annuity out of the capital of the trust-estate?”

At advising—

Judgment:

Lord President—In this case the testator appointed his trustees, after payment of his debts, to give his wife the liferent of his house, and also to pay to her £600, and he afterwards appointed them to pay her an annuity of £600 a-year, and in a codicil he increased this annuity to £1000 a—year. Now. looking at the wording of the clauses in which these provisions are made, it would appear that the trustees are as much bound to pay the £600 annually as they are to pay the legacy of £600 once and for ever. It does not make any difference that the former payment is the payment of an annuity, for it must be remembered that there is a difference between a liferent and an annuity. A liferent is attached to a particular estate or capital fund, whereas an annuity is not, but is a sum of money to the payment of which the annuitant is entitled year by year, without reference to any fund from which it comes, whether it is paid out of interest or capital. Of course it is proper that if the annuity can be paid out of the interest the trustees should not encroach on the capital, but if the interest is insufficient then the capital must be drawn upon.

In this case there are certain small legacies which the trustees are directed to pay within three months of the death of the testator. These legacies have been paid, and it is quite in conformity with the intention of the testator that they should be so, for his direction as to the payment of these legacies shows that they were preferable even to the widow's provisions. But everything else is postponed, and must, if necessary, yield to her claims. The legacies which have been paid being out of the question, the first duty of the trustees is to pay to the widow her annuity.

Lord Deas—The truster here conveys his whole estate for certain purposes. The first purpose is

Page: 245↓

“to pay all my just and lawful debts, sick-bed and funeral charges, and the necessary expenses of managing this trust, and they are hereby specially authorised to pay all such debts, claims, or expenses that may to them seem just and proper, without requiring strict legal constitution of the same by decreet or otherwise.” Then the second purpose is “to pay to the said Mrs Jane Wedder—burn Jolly or Kinmond, my wife, annually the sum of £600.” Then by a codicil he increases the annuity by £400, and puts this further sum upon the same footing as the £600, for he provides that the trustees are—“to pay to my wife, Jane Wedder—burn Jolly or Kinmond, annually, the sum of £400, and that over and above the annuity of £600 granted to her by my settlement foresaid, making together an annuity of £1000, and such increase shall be paid to her at the same times, in the same manner, and under the same conditions and penalties, as are provided for in respect of the said annuity of £600.” It is very important to observe the order in which the testator disposes of his estate, and the fact that the widow's annuity is the second purpose of the deed of itself shows that it is preferable to the purposes which come afterwards, unless, of course, the other parts of the deed are contrary to this supposition.

We must also remember that this is not an annuity to a stranger, but to the testator's widow, to whom he is under obligations both natural and legal, and the presumption always is that an annuity to a widow is preferable to anything else. Therefore I am of opinion that this annuity must be provided for by the trustees before anything else, except the testator's debts. I therefore concur with your Lordship.

Lords Ardmillan and Jerviswoode concurred.

The Court held that the first parties were bound to make up to the second party any deficiency which there might be of income to meet the annuity out of the capital of the trust-estate.

Counsel:

Counsel for the First Parties— Watson and J. Gray Webster. Agent— Gibson— Craig, Dalziel, & Brodies, W.S.

Counsel for the Second Party— Marshall and Johnston. Agent— Alexander Howe, W.S.
1873