Scottish Court of Session Decisions

This was an action of declarator, implement, and payment at the instance of His Grace the Duke of Devonshire and others, trustees under

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the marriage-contract of Sir James John Randoll Mackenzie of Scatwell, Baronet, and the Right Honourable Anne Wentworth Fitzwilliam, against James Fletcher, Esq. of Rosehaugh, Roas-shire, and others.

The following narrative is taken from the note of the Lord Ordinary;—

“The pursuers, the surviving trustees under the settlement in the English form, dated 9th October 1838, entered into on the marriage of Sir James John Raudoll Mackenzie and Lady Anne Wentworth Fitzwilliam, now Mackenzie, in April and May last 1872, with consent of these married persons hereinafter called Sir James and Lady Anne Mackenzie, entered into a contract of sale with the defender, Mr Fletcher of Rosehaugh, by which they sold to him the estate of Meikle Suddie in Ross-shire, held by them as trustees under the said marriage settlement, at the price of £16,500; and the object of the present action is to try the validity of certain objections which Mr Fletcher has stated to the right and title of the pursuers to convey the lands to him, and in the event of these objections being held to be unfounded, to have Mr Fletcher ordained to implement the contract of sale, and to pay the price of the lands on delivery of a disposition to be granted by the pursuers, as trustees foresaid, with consent of Sir James and Lady Anne Mackenzie.

The marriage between the consenting pursuers took place in 1838. There has been no issue of the marriage, and Lady Anne Mackenzie is upwards of fifty-three years of age. By the marriage settlement the sum of £12,500, the portion to which Lady Anne Mackenzie was entitled as therein set forth, was settled in trust, for payment, in the first place, out of the interest and proceeds of the said fund, of a sum of £200 a-year to Lady Anne Mackenzie during the subsistence of the marriage, on her receipt, independent of her husband, and in the next for payment of the remainder of such interest or proceeds to Sir James Mackenzie and his assigns. On the death of either of the spouses, it was provided that the whole interest or proceeds of the fund should be paid to the survivor during his or her life. In regard to the capital of the fund, the deed provided that it should be held in trust for behoof of the child or children of the marriage, other than the heir of entail entitled to succeed to the entailed estates which belonged to Sir James Mackenzie. The deed further provides that, failing children, one-half the fund should be the property of Sir James Mackenzie, and the other half the property of Lady Anne, to be disposed of by deeds inter vivos or mortis causa in the case of Sir John Mackenzie, and by mortis causa deed in the case of Lady Anne Mackenzie, and failing such deeds, should devolve on their respective representatives.

At the date of the marriage settlement the sum of £12,500 above mentioned was invested on mortgage on the estates of the Right Honourable Charles William Earl Fitzwilliam, Lady Anne Mackenzie's father. The marriage settlement, however, contained powers, in the terms aftermentioned, to change the investments, and to purchase heritable property, and to dispose of the same from time to time; all with the consent and direction of Sir James and Lady Anne Mackenzie, or the survivor of them, subject, however, to the declaration that the lands to be purchased with any part of the trust-fund should, for the purposes of the settlement, be considered as money and personal estate, and should be subject in all respects to the same trust as the money laid out therein would have been subject to if the same had not been so laid out and invested.

Acting on the power thus given, the sum of £11,900, part of the said fund, was uplifted on the request of Sir James and Lady Anne Mackenzie, and was invested in the purchase of the lands of Strathgarve, in the county of Ross, and a conveyance of the lands was then granted in favour of the marriage-contract trustees, and the survivors or survivor of them, for the purposes of the marriage settlement. In 1856 the trustees, on the request of Sir James and Lady Anne Mackenzie, sold the lands of Strathgarve to Mr Murray of Touchadam and Polmaise at the price of £14,000; and that sum, along with the remaining portion of the original sum of £12,500, being £600, which had until then remained invested in mortgage on the Fitzwilliam estates, was at Martinmas 1856, on the request and requisition of Sir James and Lady Anne Mackenzie, employed in the purchase of the estate of Meikle Suddie and others above mentioned, which had previously belonged to Sir James Mackenzie. The title to these lands now stands in the persons of the marriage-settlement trustees, who have, however, lately sold the lands, at the desire and on the requisition of Sir James and Lady Anne Mackenzie, to the defender, at the price of £16,500. The pursuers allege (Cond. 33), and it is not disputed that they intend and undertake to invest the price derived from the sale of the said estate in their own names as surviving trustees under the said marriage settlement, and to hold the same, subject to the trusts in that deed, and to the burdens, charges, and attachments mentioned on record, and to be immediately referred to. The defender's objection to the pursuer's right and title to convey the lands to him arises from the fact that Sir James Mackenzie has granted to creditors various conveyances of his beneficial interest under the trust, and that diligence has been used against him of various kinds for the purpose of attaching his interest in the trust-estate. The defender maintains that in consequence of these deeds and diligences, Sir James Mackenzie has no longer any power to consent to sell the property, and that without such consent the pursuers have no power to change the investment of the trust-funds, and have therefore no power effectually either to sell or convey the estate to him.

The clause in the marriage-contract on which this question arises is in the following terms:—‘Provided always, and it is hereby agreed and declared between and by the said parties hereto, that it shall and may be lawful to and for the said William Earl of Burlington, John Charles Dundas, William Hugh Viscount Melgund, and Alexander Mackenzie, and the survivors and survivor of them, and the executors and administrators of such survivors, and they and he are and is hereby authorised and required at any time or times, after the solemnisation of the said intended marriage, by and with the consent and direction in writing of the said James John Randoll Mackenzie, and Lady Anne Wentworth Fitzwilliam, during their joint lives, and after the decease of either of them, then with the consent and by the direction in writing of the survivor of them, to make sale of the stocks or funds, or to call in the securities which shall be then vested in the said trustees or trustee for the

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time being, or any of them, or any part thereof, and by and with such consent and direction as last mentioned, to lay out and invest the monies to arise by any such calling in, sale, transfer, or disposition, in one or more purchase or purchases of freehold or copyhold messuage lands, tenements, and hereditaments, or both intermixed, in some convenient place or places in England or Wales, or in Scotland, to be conveyed, surrendered, and assured unto and to the use of the said William Earl of Burlington, John Charles Dundas, William Hugh Viscount Melgund, and Alexander Mackenzie, or the survivors or survivor of them, or the trustees or trustee for the time being of these presents, and their or his heirs and assigns for ever; which estate or estates so to be purchased shall again (by and with the like consent and direction in writing of the said James John Randoll Mackenzie and Lady Anne Wentworth Fitzwilliam during their joint lives, or of the survivor of them during his or her life, and after the decease of such survivor, then of the proper authority of the said William Earl of Burlington, John Charles Dundas, William Hugh Viscount Melgund, and Alexander Mackenzie, and the survivors or survivor of them, or his heirs) be resold to any person or persons who shall be willing to become the purchaser or purchasers thereof, and upon further trust to pay and apply the monies to arise by such sale or sales upon and for such and the same trusts, intents, and purposes as the monies wherewith such messuages, lands, tenements, and hereditaments were purchased were liable or subject to, or would have been liable or subject to in case such purchase or purchases had not been made.’

The deeds and diligences which are the grounds of the defender's objection are enumerated in the condescendence, articles 13 to 26 inclusive, and referring to these articles the Lord Ordinary deems it sufficient here to notice, that besides conveyances by Sir James Mackenzie of his beneficial interest in the trust-fund held by the pursuers, they include every species of dilligence under which Sir James Mackenzie's beneficial interest under the trust can be attached, whether his right be real or personal. In article 22 it is stated that in September 1864 Sir James Mackenzie was adjudged bankrupt according to the law of England, and although he has obtained a personal discharge, it does not appear that he has been reinvested in the bankrupt estate. It has further to be explained, as stated in article 20 of the condescendence, that an agreement or arrangement was entered into in 1864 between the marriage settlement trustees and a number of Sir James Mackenzie's creditors under the deeds and diligences above referred to, by which it was arranged that the various arresting creditors should loose the arrestments used by them in the hands of the tenants of the estate of Meikle Suddie, and that the free rents of the estate should be applied in the first place in payment of the sum of £200 per annum secured to Lady Anne Mackenzie under the marriage-settlement, and the surplus in such manner as the trustees should direct, but subject to the rights of the creditors. Since that date the free rents of the property have been applied in payment of the said annual sum of £200 to Lady Anne Mackenzie, and the balance to the North British and Mercantile Insurance Company, creditors as holders of a bond and assignation in security, granted by Sir James Mackenzie, dated in May 1859, for £1200.

The pursuers have called as defenders the whole of the parties interested as creditors of Sir James Mackenzie, under the various deeds and diligences above referred to for their interest, but none of these parties have appeared to state any defence to the action.”

The pursuers pleaded—“(1) The pursuers are entitled to decree in terms of the declaratory conclusions of the summons, in respect that under and in virtue of their title, as surviving trustees foresaid, to the lands in question, they have the full and undoubted right to sell said lands with the consent required by the trust, and in respect that none of the bonds, decrees, debts, diligences, or other writs, enumerated in the conclusions of the summons affect or burden the said lands and estate of Meikle Suddie, or any part thereof, or the pursuers' title thereto. (2) In respect that the events under which the bond of corroboration and disposition in security mentioned in condescendence, article 13, could alone become operative, are now impossible, and also that the lands and estate of Meikle Suddie are sufficiently protected from any claim under the same by the bond of indemnity second libelled, the said bond and disposition cannot be founded on as affecting the said lauds or the pursuers' right and title thereto. (3) The pursuers having implemented, or being willing to implement, their part of the contract of sale libelled, they are entitled to decree of implement against the said James Fletcher in terms of the conclusions of the summons. (4) Generally, the pursuers are entitled to decree, in terms of the conclusions of the summons; with expenses against the said James Fletcher, and also against the other parties called for their interest, in the event of their appearing and opposing the conclusions thereof.”

The defender, Mr Fletcher, pleaded—“(1) The statements of the pursuers are not relevant or sufficient to support the conclusions of the summons as against the present defender. (2) The present defender having been all along ready and willing to implement his part of the said contract of sale on receiving from the pursuers implement of their part thereof, the present action, in so far as directed against him is unnecessary, and ought to be dismissed. (3) The pursuers are not entitled to decree against the present defender as concluded for, in respect their title to the said lands and estate sold to the defender is impaired or nullified by the various securities, bonds, inhibitions, arrestments, adjudications, agreements, adjudications of bankruptcy, trust-deeds, indentures, mortgages, and others, set forth in the summons and in the condescendence annexed thereto, or some of them. (4) Under the contract of sale libelled the defender is not bound to pay the price of the said lands or to accept a disposition thereof unless and until he is satisfied with the pursuers' title to dispone the same, and until the pursuers give clear searches completed in all the registers for the prescriptive period, and purge the record of the incumbrances thereby disclosed, and obtain discharges, releases, or restrictions of the said various securities, bonds, inhibitions, arrestments, adjudications, agreements, adjudications of bankruptcy, trust-deeds, indentures, and mortgages, in so far as they affect the said lands and estate, the pursuers' title thereto, or the rents thereof. (5) The pursuers being unable to implement their part of the said

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contract of the sale, the defender ought to be assoilzied with expenses.”

The Lord Ordinary pronounced this interlocutor:—

“ Edinburgh, 5 th April 1873.—The Lord Ordinary having considered the cause—Finds that, by the provisions of the settlement dated 9th October 1838, made upon the marriage of Sir James John Randoll Mackenzie of Scatwell, Baronet, and the Right Honourable Anne Wentworth Fitzwilliam, now Lady Anne Mackenzie, his wife, power was given to the trustees acting under that deed, with the consent and by the direction in writing of the said Sir James John Randoll Mackenzie and Lady Anne Wentworth Fitzwilliam or Mackenzie, to sell to any person or persons who should be willing to be the purchaser thereof, the lands and estate in which the trust-funds therein mentioned might be laid out or invested from time to time: Finds that the power thus given to the said Sir James John Randoll Mackenzie and Lady Anne Wentworth Fitzwilliam to grant their consent and direction in writing to the sale of such lands and estate, was of the nature of a trust which could not be conveyed away or alienated by any deed executed by them, or either of them, nor attached by the diligence of their creditors as a beneficial right belonging to them: Therefore repels the third plea in law stated by the defender, and the whole defences, and decerns in terms of the conclusions of the summons, excepting as to expenses; and in the special circumstances, and with reference to the concluding part of the subjoined note, Finds the defender, Mr Fletcher, entitled to expenses; allows an account thereof to be given in, and remits the same, when lodged, to the Auditor to tax and report: Further finds, decerns, and declares in absence against the whole other defenders in terms of the conclusions of the summons.”

After giving the narrative already quoted his Lordship added:—“The argument of the defender, founded upon the clause in the marriage-settlement above quoted, is that the effect of the deeds granted by Sir James Mackenzie as above mentioned, and the diligences used by his creditors, have divested him of every power vested in him under the marriage settlement of dealing with the property in question. It is pleaded that as there can no longer be any children of the marriage, the pursuers, as trustees under the marriage settlement, hold the estate of Meikle Suddie to the extent of one-half directly for behoof of Sir James Mackenzie, who has also rights to the proceeds of the whole estate during his lifetime, after payment of the annual sum of £200 to Lady Anne Mackenzie, so long as she lives, and it is urged that as Sir James's consent to any conveyance by the trustees is necessary to its validity, he is disabled from giving such consent because his beneficial interest in the property has been transferred to his creditors. In answer to this argument, the pursuers, besides maintaining that the power or right of Sir James Mackenzie to require and consent to a change in the investment of the trust-funds is not of such a nature as to be affected by the deeds granted by him or the diligence used by creditors, have stated special grounds applicable to each particular deed or diligence, in virtue of which it is pleaded that Sir James's right to require and consent to the conveyance of the estate has been either conveyed or attached by diligence. The Lord Ordinary thinks it unnecessary to consider these special grounds in detail, for he is of opinion, on the general ground to be immediately stated, that the defender's pleas are not well founded.

If it could be correctly represented that Sir James Mackenzie, in requiring that the estate should be sold, and consenting to the disposition, was dealing as a beneficiary with his beneficial right under the marriage settlement, it is clear he would have no right to do so after having granted the conveyances above referred to, and after the use of diligence by his creditors, for there appears to be no doubt that his beneficial interest has been conveyed and attached. But it appears to the Lord Ordinary that his requisition and consent in reference to the sale cannot be properly represented in this light. His act has been that of a trustee, not of a beneficiary, although no doubt he is a beneficiary under the trust. When the fund was originally settled, it was thought to be of importance by those who acted for the lady that a discretion in the management should be committed to Sir James and Lady Anne Mackenzie. Accordingly, although the trustees only were vested with the title to the fund, it was provided that the existing investments should only be changed from time to time, ‘with the consent and direction in writing’ of Sir James and Lady Anne Mackenzie, and after the death of either of them,’ then with the consent in writing, and by the direction of the survivor of them.’ It appears to be the sound construction of the clauses of the marriage settlement on this subject that the management of the fund and the mode of its investment was devolved on the trustees, subject to this condition only, that no change should voluntarily be made, except with the approval in writing of the spouses, or the survivor of them. It does not appear to be the true construction of the marriage settlement that Sir James and Lady Anne Mackenzie could require the trustees to change the investment against their own views of what was best for the interests of the trust. Even, however, if the power were of this more extensive kind, it would be of the same nature as if limited to a veto against any change of investment. It is of the nature of a trust, the spouses being each a sine qua non on the question of a voluntary change of investment. They were constituted trustees under the deed to this limited effect, but, as such trustees, if they thought fit to accept the duty, they became entitled and bound to exercise their discretion when occasion should arise, and act accordingly. If it be assumed that a question as to the exercise of the power similar to the present had arisen after children of the marriage had come into existence, and when there was little or no prospect of either of the spouses having any beneficial interest in the capital of the fund, the nature of the power as a trust would be perhaps more apparent. The children in that case would be fairly entitled to have the benefit of their parents’ exercise of discretion as controlling or guiding the trustees as holders of the fund. It cannot make a difference in the nature of the power that there has been no issue of the marriage. Each of the spouses is entitled to the benefit of the discretionary power to be used by the other as a trust, and, in the opinion of the Lord Ordinary, cannot be deprived of that benefit either by a conveyance by the other spouse of his or her beneficial interest under the trust, nor by the diligence of his or her creditors. The power is one of which, in the opinion of the

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Lord Ordinary, the person possessing it cannot be divested either by conveyance or by the diligence of creditors, for the reason that it is a trust for the administration of the fund generally, and not a beneficial interest or right of property peculiar to the individual. The case might be different if the marriage had been dissolved, without issue, by the death of Lady Anne Mackenzie before her husband. In that case Sir James Mackenzie would have right to the liferent of the whole fund during his life, and to the fee of one-half, to be disposed of by deed inter vivos or mortis causa. But even in such circumstances the Lord Ordinary would be disposed to hold that the power in question remained as a trust, which the representatives of Lady Anne Mackenzie might require that Sir James Mackenzie should exercise, and could not be affected either by Sir James's deed conveying away his beneficial interest under the trust, or by the diligence of his creditors.

None of the creditors having appeared, the Lord Ordinary has granted decree in absence against them. It was pleaded by the defender Mr Fletcher that a decree in foro against him, repelling his defence, would not preclude any of the creditors hereafter from raising the same question, and that he was entitled to be kept absolutely safe against this, and therefore was not bound to conclude the purchase. The Lord Ordinary cannot adopt this view. He is rather of opinion that, as the defender is in a position in which he has a title to plead on the debts and deeds above referred to, as standing in the way of the conveyance with the same force as the creditors themselves could do, that the present decision would be res judicata in any question hereafter with such creditors. And, in any view, it would be more difficult for any creditor who has not appeared in this action to take any objection hereafter, in a question with the defender, to the change of investment to be made. But however this may be, the Lord Ordinary is of opinion that the defender is not entitled to refuse to implement the contract of sale because of objections which may be taken by creditors, but which, on being now stated, in the opinion of the Court are not well founded. If such a plea were to receive effect, it would be sufficient for any purchaser to shew that a claim to the property, however unfounded, might be made by a third party, and to require a decree in foro against such party before he could be called on to implement his purchase.

On these grounds, the Lord Ordinary has repelled the defences, and granted decree as concluded for. But in the circumstances, and having regard to the fact that the present question has arisen in consequence of the deeds and actings of Sir James Mackenzie, the Lord Ordinary is of opinion that the defender is fairly entitled to have the question which he has raised decided, as it might have been raised and decided in a suspension of a threatened charge, so as to clear the title of an apparent objection, and accordingly the Lord Ordinary has found the defender entitled to the expenses of obtaining this judgment.”

The defender reclaimed.

At advising—