Scottish Court of Session Decisions

On June 12, 1877, the Baroness de Virte, heiress of entail in possession of the lands and estate of Benholm, in the county of Kincardine, presented a petition to the Court under the 3d section of the Rutherfurd Act, 11 and 12 Vict. cap. 36, for leave to disentail these estates, the value of which was £31, 000. On the previous day, the 11th June, the petitioner, who was the wife of Jean Thomas de Virte, Baron in the kingdom of Italy, had obtained a private Act of Parliament containing letters of naturalisation for her husband, herself, and her daughter Emma Maria de Virte, who was the next heir of entail after her mother. In order to entitle the petitioner to disentail it was necessary for her to obtain the consents of the three next heirs, who were her daughter the said Emma Maria de Virte, and her two sisters Miss Elizabeth Macleod and Mrs Anna Maria Macleod or Wilson. The first two gave their consents, but Mrs Macleod refused hers.

Answers were lodged for Mrs Wilson, objecting to the petition on the ground (1) that the petitioner's daughter was an alien, and unable to give any valid consent to the prejudice of the respondent's rights; (2) that no notice had been given to her of a private Act of Parliament which had been passed and by which the petitioner and her husband and daughter had been naturalised; and (3) that being a female, Miss de Virte was not the heir-apparent of the petitioner, and so not entitled to consent to a disentail.

The Lord Ordinary on the Bills ( Shand) had, on 6th August 1877, repelled these objections, the petitioner consenting that the application should be disposed of on the footing that her daughter, though next heir entitled to succeed to her, was not heir-apparent to the estates.

By the same interlocutor a remit was made “to Mr Spencer C. Thomson, accountant and actuary, to hear the parties interested, and to inquire and report as to the value in money of Mrs Wilson's expectancy or interest as substitute heir of entail in said lands and estate.”

Both parties objected to this report when issued, and on the 13th October Lord Rutherfurd Clark in the Bill Chamber issued an interlocutor of new remitting to Mr Spencer Thomson to value the respondent's expectancy, having regard to the principles indicated in the following note:—

Note.—The only matter remaining to be ascertained is the value of Mrs Wilson's expectancy or interest in the entailed estate as the third substitute heir of entail. A remit was made to Mr Spencer Thomson, who has made a report. Mr Thomson does not in name value the expectancy or interest of Mrs Wilson, but returns £837 as the value of her consent to the disentail.

Both parties have objected to the report. On one point, however, they came to be agreed. Mrs Wilson withdrew her objections to the value of the estate. It may be taken therefore at £31, 000. The accuracy of the rental was not disputed.

The parties were at variance as to the principles on which Mr Thomson had proceeded. In consequence the Lord Ordinary had an interview with him, and received the necessary explanations.

Mr Thomson first ascertained the value of what he terms the life interest of the heir in possession and the three next heirs. These values were calculated on the footing that their respective rights were equivalent to the possession of and succession to an annuity of the same amount as the rents of the entailed estate.

The sum thus brought out was deducted from the fee-simple value of the estate, and after debiting the surplus with the capitalised value of a drainage charge terminable in ten years, and the value of a contingent annuity granted by the petitioner in favour of her husband, the remainder is divided in different portions among the three next heirs. In effect, therefore, leaving out of view the burdens, which are an accident, Mr Thomson has distributed amongst the three substitute heirs the entire fee-simple value of the estate, after deducting the life-interest of the heirs calculated on the terms above referred to.

As the result of his calculations Mr Thomson reports the value of Mrs Wilson's consent to be £837. The two first heirs have consented to the disentail, and therefore it was not necessary to make any report as to their interests. But as the value of Mrs Wilson's consent or interest could not be ascertained without considering theirs, Mr Thomson has brought out the value of the consent of each. The one is reported to be £19, 418, the other £203.

The reporter explained to the Lord Ordinary that he took the ‘life-interest’ of the petitioner as the full amount of her interest in the estate, and that he assumed that he was bound to divide the surplus among the three substitute heirs. He assigned a large share of the surplus to the next heir, because she was born after August 1848, and could acquire the estate in fee-simple by executing a deed of disentail, and because the estate ‘may fall to her own issue should she marry and predecease’ the petitioner. He gives no share of the surplus to the second heir, because she is unmarried, and is now of such an age that there is no prospect or indeed possibility of issue, and in consequence the balance of the surplus is assigned to the third heir, who has children. The reason of this apportionment, as stated in the report, is that ‘she represents her son or other descendant not called to disentail, ’ and, as the reporter more fully explained to the Lord Ordinary at the personal interview, he held that the interest of a substitute heir ‘represented’ or included the interest of descendants. On this principle it will be seen that the interest of the third heir is reported as four times greater than the interest of the second heir, though there is no material difference between their ages.

It appears to the Lord Ordinary that the principles on which the reporter has proceeded are not sound. He makes a nominal error in valuing the consent instead of the expectancy or interest. These will be the same if the same elements go to the computation of both. But the error is real if the reporter, as the Lord Ordinary thinks he does, takes into account elements which may be of the greatest consequence in fixing the value of a consent, but do not form any part of the heir's expectancy or interest according to the legal construction of these words.

Under the law as it stood before the Act of 1875, the petitioner could not have disentailed without the consent of the three nearest heirs. Such consent they were entitled to give or withhold as they thought proper, and by the refusal of their consent they might protect not only their own interests but the interests of remoter

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heirs. Thus the respondent might have refused to consent, not because she had much or any prospect of succeeding to the estate, but because she desired to preserve the succession for her children.

But the Act of 1875 has made an important change in the position of the second and third heir. Provided that he obtains the consent of the nearest heir, the heir in possession is entitled to disentail on paying to the second and third heirs the value of their ‘expectancy or interest.’ This means, as the Lord Ordinary conceives, their own individual expectancy or interest, or, in other words, the value of their own chance of succession.

It was urged by the respondent that the words should be construed as equivalent to consent; that the true meaning of the Act is that the heir shall be forced to consent on being paid the fair value; and that in computing the value there shall be taken into account all the considerations which might reasonably weigh with a prudent person in giving or withholding his consent. But the Act has not said so. It dispenses with the consent of the second and third heirs, and substitutes for it the value of their expectancy or interest. The interest of all succeeding heirs is cut off, and cannot, it is thought, be protected or taken into account in fixing the expectancy or interest of those heirs who, for the purpose of dis-entailing, are alone recognised by the statute.

To the Lord Ordinary, therefore, it appears that the reporter has fallen into error in taking into account the interests of the respondent's children. He has practically introduced the interest of a fourth heir.

He has also, in the opinion of the Lord Ordinary, erred in assuming that the surplus, after deducting the life-interest of the heir in possession, must be divided among the three substitute heirs. There are, it is thought, two fallacies in this view—the first, that the interest of the heir in possession is equivalent to a mere annuity; and the second, that the surplus belongs to the three next heirs. The interest of the four does not necessarily absorb the fee-simple value of the estate. It may never do so; but it manifestly will not when all are of a very advanced age. Again, the interest of the substitute heirs is not necessarily equivalent to the surplus after deducting the liferent interest of the heir in possession. It may or it may not be; but it will depend on age and other considerations. But it was asked—If there be a surplus, who is to get it? The answer is that it will enure to the heir in possession. He is not a liferenter, but proprietor, though subject to fetters, and when by following the statutory conditions he gets rid of the fetters, he becomes the proprietor in fee-simple, and he must, as a necessary consequence, obtain all the advantage arising from the change, under deduction of the payments which he has to make in order to effect it. The amount which he has to pay to the next heir must be a matter of arrangement; but he can force the others to accept the value of their expectancy.

It remains to notice the principles on which, in the opinion of the Lord Ordinary, the valuation should be made. The heir in possession is the proprietor of an entailed estate burdened with the drainage charge and the contingent annuity to which reference has been made. The expectancy or interest of the substitute heirs is their chance of succeeding to that estate, and the rights which they will possess on such succession. If they never succeed, they can have no rights at all. If they do succeed, they become proprietors, with the right to exercise all the powers competent to them as heirs of entail, as, for instance, to grant provisions to husbands or wives and younger children, and with the right to take such proceedings as are open to them for disentailing. Were the Court engaged in valuing the expectancy or interest of Miss de Virte, it would be valued as her chance of succession to a fee-simple estate, because she is entitled by her own act to disentail. It is different in the case of the respondent, who was born before 1848. But it is thought that there may be taken into account her chance of being able to disentail, and the facilities which she will have for disentailing by the fact of having issue. Thus the value of the expectancy or interest of any heir of entail is the value of the chance of succession, comprehending therein the value to him of such powers as he may exercise on the succession opening to him. These powers must be valued in relation to the possessor of them. For instance, the power of granting provisions to younger children may be of great value to an heir who has or may have issue, but they can be of none to one to whom issue may be held to be an impossibility.

“The Lord Ordinary need hardly point out that the respondent's chance of succession is liable to be defeated not only by her death, but by the power which Miss de Virte has of disentailing if the succession shall open to her.”

Mr Spencer Thomson then issued another report in which the value of Mrs Wilson's expectancy was settled at £291, and that sum was thereafter eon-signed in bank by the petitioner. Of this sum £91 was the value put upon Mrs Wilson's chance of succeeding to the estate, and £200 was the value of the power she might exercise if she should come into possession.

The actuary stated the following as his under standing of the principle for ascertaining the interests of heirs who, as in the present case, refused to consent to a disentail, but whose consent could be compelled:—“In the first place, as far as these heirs are concerned, no distribution is to be made of the value of the estate, and in calculating the interest of a non-consenting heir it is not necessary to take into consideration the position of the other heirs, except as directly modifying the value of the interest of the dissenting heir in question.

Secondly, The value of the heir's “chance of succession” must be estimated. The Lord Ordinary does not define more minutely the principle on which this has to be done. The heir's expectation as defined by his Lordship is not that of a liferenter, but of becoming a fettered proprietor, with, of course, a prospective right, should a disentail take place in the time of his possession, to take the fee of the estate after discharging the then existing fetters. As, however, there can be but seldom sufficient data for calculating with accuracy the value of this contingency, the actuary assumes that the value of the heir's prospective liferent interest in the income of the estate (less any deductions in favour of preceding heirs) is all that it is intended he should receive under this head, any further claim as an entailed

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proprietor being allowed for in considering his powers of disentailing.

Thirdly, The prospects of the heir's being able to burden the estate for an annuity to his widow and provisions for his younger children have to be taken into account. In the case of heirs more remote than the heir next in succession, it is extremely difficult, if not impossible, to estimate these claims with any pretension to accuracy. In the case before the reporter, for instance, the following elements of consideration enter:—1. The prospect of Mrs Wilson succeeding to the estate, in itself a very complicated one to estimate. 2. Whether her husband will survive her, or if she will be survived by any future husband she may marry? 3. Whether she will be survived by one, two, or more children? 4. What will be the free rent of the estate when these changes take effect?

Indeed, the estimate of this claim cannot but be in almost all cases a very arbitrary one, and in hardly any case can it be the subject of accurate mathematical calculation.

Fourthly, The heir's prospects of disentailing have to be taken into account. In the case of an heir born before 1st August 1848, the determination of the value of these prospects is also one of difficulty, and in many cases the allocation given by the actuary must be greatly an arbitrary one.

The actuary has restated the value of the interest of Mrs Wilson on these principles, and has the honour to submit his results as follows:—

Value of Mrs Wilson's chance of succession, being her life interest under the former calculations,	.£18200
Less, for the probability of the estate being disentailed by Miss de Virte before Mrs Wilson's succession, say 50 per cent.,	9100
	£9100

The annuity here valued is the full interest of Mrs Wilson in the income of £974, 4s. 4d. per annum from the entailed estate. What, in fact, Mrs Wilson will receive will not in all probability be the whole of this sum, but the residue after any existing burdens have been deducted.

On the other hand, Mrs Wilson has the right of burdening the estate for those who come after her with provisions for her own younger children and for her husband, should they survive her. In the absence of any more accurate means of estimating these two claims against and in favour of Mrs Wilson respectively, the reporter proposes to set them off against one another, and to retain the value of Mrs Wilson's ‘chance of succession, ’ with her power of charging the estate of her husband and children at the above sum of £91.

There still remains to be added to Mrs Wilson's share whatever sum represents the value of her chance of being able to disentail—that is to say, whatever sum represents, after the price of consent of the next heir, and the interest or expectancy of the other heirs called to disentail, as well as any other burdens, are provided for, the balance of the value of the estate over and above her own liferent which would fall to her should she ever be in a position to disentail.

“The actuary regrets that he has no means of arriving at any accurate valuation of this claim, and in proposing that the heir's shares should be increased by £200 on account thereof it must be understood that the suggestion is to a very great extent arbitrary. If the suggestion is accepted, the complete value of Mrs Wilson's interest and expectancy in the entailed estate will be £291.”

Objections were lodged by both the petitioner and the respondent to this report, but they were repelled, and the value of Mrs Wilson's interest found to be £291 byinterlocutor of the Junior Lord Ordinary ( Adam), dated 14th November. The money was further directed to be consigned in bank, and in respect of the consignation the Lord Ordinary, on 17th November, granted warrant to record the instrument of disentail.

Mrs Wilson reclaimed, and argued—That upon a sound construction of the Entail Amendment Act 1875 there ought to be taken into account, in ascertaining the value of the expectancy or interest of a substitute heir of entail, all the elements of value which, according to the practice of actuaries, were included in ascertaining the value of consents prior to the passing of that statute; and that the principle of valuation adopted in the said report was inequitable, and did not give to the respondents the full value of their expectancy or interest.

Argued for the petitioner—That on the question of the actuary's report the valuation of Mrs Wilson's expectancy was too great, as her chance of succeeding was very remote, she being only a year or two younger than the Baroness de Virte, the heiress in possession. It was not to be kept out of view that the second heir, Miss de Virte, might marry and have heirs. It was urged that under the Act of 1875 it was not consents given voluntarily that were to be valued, for in that case the heir could dictate his own terms, but the expectancy of succession of an heir who was obliged to give his consent on his interests being valued.

At advising—