Scottish Court of Session Decisions

Mr George Macfarlane senior, of 65 West Regent Street, Glasgow, died on 12th February 1872. He was survived by his wife and his two children, George Macfarlane and Margaret Higgins Macfarlane or Oliver, hereinafter called Mrs Oliver. He left a trust-disposition and settlement whereby he conveyed to his son George Macfarlane and others, as trustees, his whole estate and effects. By this trust-deed he directed his trustees, inter alia, to pay to his widow a certain annuity, and otherwise to fulfil the obligations of his marriage-contract. In the fifth place, he directed the trustees “to hold and apply the whole residue and remainder of my means and estate,” including any sums set apart to meet the widow's annuity, “into two equal parts or shares, one part or share of which they shall set aside and hold for behoof of my said son George Macfarlane junior in liferent, for his liferent alimentary use and behoof allenarly, not assignable by him, nor affectable by or for his debts or deeds or the diligence of his creditors; and upon his death I direct my trustees to divide the fee thereof equally among his children, and the survivors or survivor of them, and the issue of any of them who may decease leaving issue (such issue succeeding always equally to the share to which their parent would have succeeded if in life), payable the share of each child and vesting, after the death of my said son, upon majority in the case of sons, and in the case of daughters upon majority or being married, whichever of these events shall first happen; and the other part or share of the said residue I direct my trustees to set aside and hold for behoof of my daughter Margaret Higgins Macfarlane or Oliver, wife of Andrew Oliver, draper in Kilmarnock, in liferent, for her liferent alimentary use and behoof allenarly, exclusively always of the jus mariti of her said husband, or of any future husband whom she may marry, and not assignable by her, nor affectable by or for her own or such husband's debts or deeds, or by the diligence of creditors; and upon her death I direct my trustees to divide the fee thereof equally among her children, and the survivors or survivor of them, and the issue of any of them who may decease leaving issue (such issue succeeding always equally to the share to which their parent would have succeeded if in life), payable the share of each child and vesting, after the death of my said daughter, upon majority in the case of sons, and in the case of daughters upon majority or being married, whichever of these events shall first happen; declaring that in the event of the children of my said son and daughter, or any of them, being under age or unmarried on their parents' death, I hereby direct my trustees to pay and expend the interest and annual proceeds of the presumptive shares of my estate falling to such children, or part thereof, in such way as they may think best, in and towards the maintenance and education of such children until their shares shall have vested and become payable to them.” By a subsequent codicil executed in 1870 the testator made this direction—“In the event of the failure of the whole children of my said son George Macfarlane junior, or issue thereof, when the fee of the one-half of the residue of my estate opens to them, as provided by the within trust-disposition and settlement, I direct my trustees to hold the fee of such half for behoof of the said Margaret Higgins Macfarlane or Oliver in liferent, for her liferent alimentary use and behoof allenarly, exclusive always of the jus mariti of her present husband, or of any husband she may marry, and not assignable by her, nor affectable by or for her own or such husband's debts or deeds, or by the diligence of creditors, and for her children, and the survivors or survivor of them, and the issue of any of them who may decease leaving issue, in fee, payable said portion of residue and vesting in the manner provided by the within trust-disposition and settlement in reference to the fee of the one-half of residue destined to them: And in the event of the failure of the whole children of my said daughter Margaret Higgins Macfarlane or Oliver, or issue thereof, when the fee of the other half of the residue of my estate opens to them, as provided by the within trust-disposition and settlement, I direct my trustees to hold the fee of such half for behoof of the said George Macfarlane junior, in liferent for his liferent alimentary use and behoof allenarly, not assignable by him, or affectable by or for his debts or deeds, or the diligence of creditors, and for his children, and the survivors or survivor of them, and the issue of any of them who may decease leaving issue, in fee, payable said portion of residue and vesting in the manner provided by the within trust-disposition and settlement in reference to the fee of the one-half of residue destined to them.”

The trustees named accepted the trust, and entered on the management of the estate sometime after the death of Mr Macfarlane. Mrs Oliver and her husband raised an action of count and reckoning against the trustees concluding for ascertainment and payment of her legitim, but reserving the right to elect between Mrs Oliver's legitim and the provisions in her favour contained in her father's trust-deed. In the course of this action Mr and Mrs Oliver lodged a minute, in which, on the narrative that, as they “had been well and fully advised” of their respective rights in the truster's succession, they “have repudiated, as we do hereby repudiate, the provisions left under the said settlement and codicil to me the said

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Margaret Higgins Macfarlane or Oliver, and in lieu thereof we do hereby choose and elect the legitim and provisions to which by law we or either of us may be entitled in or under the succession of the said George Macfarlane senior: Declaring, however, that this repudiation shall in no way affect or injure the rights of our children in the succession of the said George Macfarlane senior.”

Thereafter, on 15th April 1876, Mrs Oliver and her husband received and granted to the trustees a discharge for her legitim, which by interlocutor of the Lord Ordinary ( Shand) had been fixed to amount to £2175 of principal, with £231, 15s. 8d. of interest, as at July 1874, when the minute repudiating the settlement and claiming legitim was lodged, from her father's death in 1872. The total amount of legitim and interest paid to her was (under deduction of a sum for expenses) £2500, 3s. 1d. Mrs Oliver was still entitled to a share of legitim out of the sum provided for the widow's annuity, and out of the value of the widow's furniture, but these two items not having raised any dispute need not be again mentioned.

George Macfarlane, who accepted the provisions made for him by the settlement, had from the time of his father's death in 1872 received one-half the income of the residue of the estate. When therefore Mrs Oliver finally claimed and received her legitim, one-half the interest paid her on the principal sum of £2175 was repaid by him to the trustees, and by them to her.

After Mrs Oliver had received her legitim the trustees continued to pay to George Macfarlane one-half the annual income of the trust-estate still in their hands. The other half remained, and was accumulated in their hands. In consequence of Mrs Oliver, who according to the trust-deed would have received this half of the annual income, having taken her legitim, the trustees were without directions as to its disposal, and on 10th June 1876 they raised the present action of multiplepoinding for determining to whom ought to belong the sums thus accrued and annually accruing. The accumulations at Whitsunday previous to that date amounted to £1214, 8s. 1d. Claims were then lodged for (1) the trustees themselves, and (2) George Macfarlane.

The trustees claimed that “the said fund in medio should be apportioned among the said George Macfarlane in the first place, his said children in the second place, and the children of Mrs Margaret Higgins Macfarlane or Oliver in the third place, rateably and in proportion to the extent to which the provisions in favour of the said parties respectively contained in the trust-disposition and settlement of the said George Macfarlane senior have been diminished by the payment of £2175, 4s. 6d. and interest to the said Mrs Margaret Higgins Macfarlane or Oliver in satisfaction of her claim for legitim, and that the claimants shall hold the said fund, under deduction of the share thereof to which the said George Macfarlane shall be found entitled, to the extent of one-half thereof for behoof of the children of the said George Macfarlane in fee, and to the extent of the other half for behoof of the children of the said Mrs Margaret Higgins Macfarlane or Oliver, all in terms of the said trust-disposition and settlement and codicil, or otherwise for behoof of the said beneficiaries, in such proportions and subject to such conditions as the Court may direct.”

George Macfarlane claimed “that the fund in medio should be apportioned between him and his children and the children of Mrs Oliver in such proportions that the share falling to him from said fund should, along with the share of the revenue of the trust-estate already paid to him, amount to the revenue derived from one-half of the whole estate of the truster, including in said estate the sum paid to Mrs Oliver in satisfaction of her legitim; or otherwise, that the said fund in medio should be apportioned between him and his said children and the children of Mrs Oliver rateably and in proportion to the extent to which the provisions in favour of the said parties respectively contained in the trust-disposition and settlement of the truster have been diminished by the payment made to Mrs Oliver in satisfaction of her legitim.”

He pleaded that the share of income set free by Mrs Oliver's repudiation of her provisions fell to be applied primo loco in compensating him for the diminution consequent on that repudiation of the income falling to him under the trust-deed; or, in any view, that the income fell to be applied in compensating him, his children, and Mrs Oliver's children rateably for the diminution of their respective interests caused by the repudiation. This latter plea embodies the contention of the trustees.

On 16th November 1876 the Lord Ordinary (Curriehill) pronounced this interlocutor and note:—“Finds that in consequence of Margaret Higgins Macfarlane or Oliver, the daughter of the deceased George Macfarlane senior, the truster, having claimed her legitim, she has forfeited the provision of the liferent of one-half of the residue of her father's trust-estate which was made in her favour by his trust-disposition and settlement dated 16th April 1868: Finds that the sum of £2175, 4s. 6d., with interest from 12th February 1872, the date of the truster's death, has been paid to the said Mrs Oliver to account of her legitim: Finds that by Mrs Oliver having claimed her legitim the liferent of the other half of the residue provided to the claimant George Macfarlane under his father's said trust-disposition and settlement has been diminished by the loss of one-half of the interest accruing upon the said sum of £2175, 4s. 6d. from and after the truster's death; and the fee or capital of the residue appointed by said trust-disposition and settlement to be held by the trustees of the truster for behoof of the children of the said George Macfarlane and Mrs Oliver, in the manner and subject to the conditions set forth in the said trust-disposition and settlement and codicils thereto, dated 13th May 1870, has been diminished by the loss of the sum of £2175, 4s. 6d.: Finds that the liferent of the half of the residue forfeited by Mrs Oliver is to be applied in compensating the liferenters and fiars rateably and in proportion to the extent to which their respective provisions have been diminished by the payment to Mrs Oliver of the sum of £2175, 4s. 6d. and interest to account of the claim for legitim, and that the claimant George Macfarlane is not entitled to have the said forfeited liferent applied primo loco in compensating his loss as liferenter: Therefore repels the first plea-in-law for the said George Macfarlane, and refuses the first branch of his claim: And before further answer appoints the raisers to lodge a minute within eight days, stating

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the age of the said George Macfarlane and Mrs Oliver respectively at the date of their father's death, the total amount of the free residue, and the average rate of interest or annual return which has been derived from the said residue since the truster's death, and which may reasonably be expected to be realised in future,” &c.

“ Note.—The findings in the foregoing interlocutor so fully explain the grounds of judgment that it is unnecessary to do more than simply to say that the present is clearly a case for the application of the doctrine of equitable compensation. The late George Macfarlane by his trust-settlement directed his trustees to hold the residue of his estate, including the sums required or set aside to meet his wife's marriage-contract provisions, and divide the same into two equal parts, one of which was to be set aside and held for behoof of his son, the claimant George Macfarlane, in liferent allenarly, and on his death was to be divided equally among his children and the survivors at majority or marriage, until which events no vesting should take place, and the other was provided in similar terms to the truster's daughter Margaret Higgins Macfarlane or Oliver, in liferent allenarly, and exclusive of the jus mariti of her husband, and to her children in fee; and by a codicil dated 13th May 1870 provision was made for the case of George Macfarlane and Margaret Higgins Macfarlane or Oliver dying without leaving issue—who should take a vested interest in the fee. Mr Macfarlane died on 12th February 1872, survived by his widow, who still lives, and by his son George Macfarlane and by his daughter Mrs Oliver. The trust-estate appears to be of considerable amount. The requisite sum has been set aside to meet the widow's annuity of £100 sterling, and she enjoys the liferent of the furniture under the marriage-contract. Mrs Oliver repudiated the liferent of half of the residue provided for her by her father's settlement, and has claimed her legitim, which (exclusive of her prospective share of the capital reserved for payment of the widow's annuity, and the value of the furniture liferented by her) amounted as at the date of her father's death to £2175, 4s. 6d., which sum, with interest amounting to £324, 18s. 7d., has been paid to Mrs Oliver. Mrs Oliver has thereby forfeited the liferent of the half of the residue provided to her by her father's settlement.

Mrs Oliver's claim for legitim does not seem to have been adjusted for some years after her father's death, and in the meantime the trustees had paid to the claimant George Macfarlane, who stands by his father's settlement, one-half of the annual income of the free available residue. But in order to meet Mrs Oliver's claim for interest upon her share of the legitim, George Macfarlane was obliged to repay to the trustees a sum equal to one-half of the interest upon the said sum of £2175, 4s. 6d. from the date of his father's death. He as liferenter has thus suffered ever since his father's death, and will continue to suffer, a diminution of his liferent equal to half the interest of the said sum of £2175, 4s. 6d. But the fiars also have sustained a diminution of their capital to the extent of the whole of said sum of £2175, 4s. 6d. Both parties, i.e., both the liferenter and the fiars, are entitled to be compensated for their respective losses out of the forfeited liferent.

The question then is, in what proportions must the forfeited liferent be divided between George Macfarlane as liferenter of one-half of the residue, and the trustees as guardians of the fee of the whole residue, in order equitably to compensate both parties. George Macfarlane maintains that as his loss is immediate, and that of the fiars only prospective, he is entitled to have the forfeited liferent applied primo loco in making up annually the deficiency of his liferent caused by the loss of half the interest of £2175, 4s. 6d. This, however, would plainly be inequitable, because while the loss of the fiars is known to amount to £2175, 4s. 6d., the loss of George Macfarlane cannot be at present known, and can at best be approximately estimated by an actuarial calculation of the value of the annual income which he has lost. But at present there are not in process sufficient materials for making such a calculation. His age and his sister Mrs Oliver's age at their father's death, the total amount of the residue, the average amount returned therefrom since the truster's death, and the return which may be reasonably expected in future, are all material elements in the calculation, but no information on these points can be obtained from the record or from any of the documents in process. The raisers will therefore now give the required information in a minute, and after that is lodged a remit will be made to an actuary to make the necessary calculations. When the minute is lodged the parties will enrol the cause in order that the remit may be made, with or without further instructions to the actuary as to the principles on which the forfeited liferent is to be apportioned between liferenter and fiars so as to deal equitably with both parties.”

His Lordship thereafter, of consent, remitted to Mr Wyllie Guild, C.A., to report on the matters referred to in the foregoing interlocutor, and on 23d January 1877 a condescendence and claim was lodged for Mrs Oliver, in which she stated that from the report given in by Mr Guild it appeared that after making full compensation to all parties whose interests were injuriously affected by the withdrawal of her legitim there would remain a surplus, the amount of which would depend on her life. She claimed for herself in liferent the surplus which might arise and remain from the liferent destined to her after the other liferenter and the fiars had received compensation for the loss they sustained through her withdrawal of legitim, and pleaded that notwithstanding her having taken legitim she was entitled to so much of the liferent provision in her favour contained in her father's settlement as should not be required for such compensation.

The Lord Ordinary on 26th February 1877, after hearing counsel on Mr Guild's report (the nature of which will sufficiently appear from his Lordship's interlocutor, infra) and on Mrs Oliver's claim pronounced this interlocutor—“Finds that the loss of income sustained prior to 23d December 1876 by the claimant George Macfarlane, as liferenter of one-half of the residue of the trust-estate, in consequence of Mrs Oliver having claimed her legitim, and received payment thereof to the extent of £2175, 4s. 6d., with interest thereon from her father's death, amounted as at said date to the sum of £195, 16s. 7d., and that from and after said date, and during the joint lives of himself and Mrs Oliver, farther loss of

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income has been sustained and will be sustained by the said George Macfarlane to the extent of the interest upon half of said legitim, calculated at the average rate of interest realised upon the general trust-estate: (2) Finds that the loss of capital sustained by the fiars of the residue of the said trust-estate amounts to the said sum of £2175, 4s. 6d., and that one-half thereof, amounting to the sum of £1087, 12s, 3d., falls upon the share of the residue destined to the children of George Macfarlane, and that the other half, amounting to the like sum of £1087, 12s. 3d., falls upon the share destined to the children of Mrs Oliver: (3) Finds that the liferent of the half of the residue forfeited by Mrs Oliver, and received by the pursuers and real raisers, and accumulated in their hands as at 23d December 1876, amounts to the sum of £1288, 3s. 4d., including therein the interest allowed by the bank on said accumulations, and that the same forms part of the fund in medio available for immediate distribution, and should now be applied in compensating pro tanto the liferenter and fiars rateably and in proportion to the amounts of their respective losses as aforesaid: (4th) Finds that the proportion of said sum of £1288, 3s. 4d. falling to the said George Macfarlane amounts to the sum of £115, 19s. 4d. sterling, and ranks and prefers him upon the fund in medio for payment of said sum, and decerns ad interim: (5th) Finds that the proportions of said sum of £1288, 3s. 4d. effeiring to the shares of the residue directed to be set aside and held by the pursuers and real raisers for behoof of the children of the said George Macfarlane, and the children of Mrs Oliver respectively, amount each to the sum of £586, 2s. sterling, and appoints the pursuers and real raisers to add the said sum of £586, 2s. to each of said shares of the residue: (6th) Finds that the liferent forfeited by Mrs Oliver, now accruing and hereafter to accrue, shall, until the foresaid losses are fully compensated, be apportioned and distributed half-yearly at the terms of Whitsunday and Martinmas, commencing with the term of Whitsunday 1877, rateably and in proportion to the sum which at each of such terms shall be ascertained to be the actual amount of loss sustained by the said George Macfarlane (or his executors in the event of his predeceasing Mrs Oliver) and the fiars respectively, and not previously compensated: Supersedes consideration of the claim now lodged for Mrs Oliver, and of the claims by the other claimants upon the fund in medio, in so far as the same shall consist of any surplus of said forfeited liferent which may remain after the other claimants have been fully compensated, until it shall be ascertained whether any such surplus exists.”

His Lordship then discussed the proportion in which a division of the £1288 then accumulated in the trustees' hands ought to be made between George Macfarlane on the one hand and the fiars on the other, and in which the liferent thereafter to accrue should be divided, until full compensation should be made to George Macfarlane and the fiars, and then referred to the claim for Mrs Oliver as follows—“Since Mr Guild's report was lodged, Mrs Oliver has lodged a claim in support of which she maintains that notwithstanding her having claimed legitim she is entitled, after equitable compensation shall have been made to her brother George Macfarlane and the fiars of the residue, to resume her position under her father's trust as liferenter of one-half of the residue. If it had been necessary to dispose of that claim at present, I should have bad great difficulty in giving effect to it, because in the interlocutor of 16th November 1876 there is an express finding that Mrs Oliver by having claimed her legitim has thereby forfeited the liferent provision in her favour contained in her father's trust-disposition and settlement, and although Mrs Oliver had not then appeared in the process, that finding, unless and until recalled on a reclaiming note, or of consent of parties, or otherwise opened up, must be regarded by me as final and conclusive. But it is unnecessary in hoc statu to consider that claim at all, because at present the parties who have been injured by Mrs Oliver having taken her legitim have not in point of fact been compensated, and it is certain that they cannot be compensated for some years. Mrs Oliver may die while compensation is yet incomplete, and if so the claim now made for her would admittedly be of no avail. Whether in the event of her surviving the time when full compensation is made, she may be entitled to claim the liferent for the future on the grounds set forth in her claim, or whether she or any other parties may be entitled to claim the liferent on any other ground, are matters which in my opinion it is premature to decide, and I have therefore superseded in hoc statu consideration of the claim of Mrs Oliver and of the other claimants to the income of the half of the residue destined to her until it shall be seen whether any surplus exists after full compensation shall have been made.”

The case then stood over for some time until in the end of the year 1880 it became apparent that the liferent of Mrs Oliver having been applied as had been previously decided by his Lordship, would shortly make full compensation both to George Macfarlane and the fiars for the prejudice done to their interests by Mrs Oliver having taken her legitim, and full compensation was afterwards in fact made as at Whitsunday 1881. In view of these circumstances the Lord Ordinary on 16th November 1880 made a new order for claims, when renewed claims were lodged (1) by Mrs Oliver and her husband, (2) by the trustees, (3) by George Macfarlane and by two of his sons who had now reached majority, and (4) by three of Mrs Oliver's four children.

Mrs Oliver in her claim averred that she had never intended to claim her legitim, and that the minute repudiating the settlement and taking legitim had been obtained from her on false pretences by her former agent to serve a purpose of his own. This contention was, however, afterwards abandoned, and was not finally brought before the Court.

On the assumption that she was to be dealt with as having taken legitim she maintained that the payment of legitim should be regarded as being a payment to account, and in lieu of the settlement provisions in her favour for the period from her father's death to the date when full compensation was made to all parties whose interests were prejudiced by the withdrawal of her share of legitim from the estate, and that she was entitled, from and after that date, in virtue of the provisions made in her favour by the settlement, to one-half the free income of the estate, and she claimed accordingly. Alternatively, in the event of her not being found entitled to a share of the fund in medio (i. e., her liferent),

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in virtue of the provisions of the settlement, she maintained that it had become intestate succession, and that she and her brother were therefore entitled to divide it equally as her father's next-of-kin.

Her plea-in-law on the former contention was—“(2) Separatim—Even upon the footing of legitim having been claimed by and paid to Mrs Oliver, she is entitled to the surplus of the settlement provisions in her favour after the payments made to her with interest have been restored to the trust-estate, her rights under the settlement not being affected except in so far as necessary to indemnify those whose interests were prejudiced by her claim of legitim.”

The trustees claimed to uplift the income derived from the fund in medio (Mrs Oliver's liferent) and apply it in half-yearly payments to George Macfarlane, and in half-yearly additions to the children of George Macfarlane and Mrs Oliver, and that rateably and in proportion to the respective interests which they would have had in the amount paid to Mrs Oliver as legitim had that sum not been so paid, and that during the lives of Mr Macfarlane and of Mrs Oliver said sums so to be added to the capital, to be held by the trustees subject to the directions of the trust-disposition and settlement in reference to the fee of the residue of the truster's estate, or otherwise as the Court should direct.

George Macfarlane and his sons made a claim to the same effect as the claim made for them by the trustees. Mrs Oliver's children explained that they had been obliged to leave their mother's house in consequence of her habits, and that they were in distressed circumstances, being only able to earn portion of their subsistence, and being in part dependant on the liberality of their uncle George Macfarlane. They claimed (Mrs Oliver's children being, as above stated, four in number) “one-fourth each of the revenue derived from the one-half of the trust-estate which would have been liferented by their mother, the said Mrs Oliver, if she had not elected to take legitim,” i.e., they claimed to have the fund in medio treated as if their mother had died instead of repudiating the settlement and taking legitim. They therefore, as well as the trustees and George Macfarlane and his sons, pleaded that Mrs Oliver by repudiating her provisions contained in the settlement and taking legitim had forfeited all right to the provisions of the settlement.

The whole claimants lodged a joint-minute whereby they consented that consideration of the claim for Mrs Oliver, consideration of which had been superseded by that interlocutor, should not be held to be precluded by the finding in the interlocutor of 16th November 1876, before Mrs Oliver had lodged any claim, to the effect that she had forfeited the provision of liferent of one-half her father's trust-estate.

The Lord Ordinary having resumed consideration of the cause on 27th June 1881, pronounced this interlocutor:—“Finds that full compensation has been made to all the residuary legatees for all loss which they have hitherto sustained in consequence of Mrs Oliver having claimed and received payment of her legitim, and that from the state it appears that the pursuers and real raisers are in possession of funds derived from the liferent destined to Mrs Oliver up to the term of Whitsunday last, 1881, to the amount of £467, 4s. 6d., which the real raisers state is sufficient to meet Mrs Oliver's further claims to account of legitim on the death of her mother, Mrs Macfarlane, the widow of the truster, and which they state they are to hold and retain to meet these claims: Finds that by the joint-minute the parties have all consented that the claim of Mrs Oliver, consideration of which was superseded by the interlocutor of 26th February 1877, shall not be held to be precluded by the finding in the interlocutor of 16th November 1876, pronounced before Mr and Mrs Oliver had lodged their claim in the process, to the effect that Mrs Oliver had forfeited the portion of the liferent in her favour therein mentioned: Finds that in respect full compensation and provision has now been made out of the liferent destined to Mrs Oliver for all loss sustained or to be sustained by the residuary legatees in consequence of Mrs Oliver having claimed her legitim, she is now entitled to payment of that liferent from and after the date when such full compensation was made—that is to say, from the term of Whitsunday 1881—but always on the footing that in the event of any loss being sustained by the residuary legatees, or any of them, by and through Mrs Oliver having claimed and received payment of her legitim beyond the amount hitherto ascertained, the same shall be compensated to them by Mr and Mrs Oliver, or out of Mrs Oliver's liferent; and with these findings appoints the cause to be enrolled, reserving all questions of expenses: Grants leave to all parties to reclaim, if so advised.”

He added this note:—“The time has now arrived for deciding the question which has been repeatedly raised during the progress of the present multiplepoinding, but which it has hitherto been premature to decide, viz., the question, How far the doctrine of equitable compensation is to be applied in a case like the present?—Whether the liferent is forfeited absolutely by the child to whom it was bequeathed having claimed and taken her legitim? or Whether, after full compensation has been made out of the liferent to the sufferers—that is to say, to the residuary legatees—the liferent is to cease to be paid to them, and is to be paid to the child who had elected to take her legitim?

The doctrine of election and of equitable compensation is now well established in the law both of Scotland and of England. I understand it to be this, viz., that where a testator leaves a universal settlement of his whole estate, in which he bequeaths to a legatee a subject or a provision under the implied condition that if he takes that legacy or provision he is to surrender other rights or interests in the subjects included in the settlement to which he might otherwise have been legally entitled, he is put to his election between his legal rights and his conventional provision. He cannot take both. And if he prefers to stand by his legal rights, the subject or provision specially bequeathed to him must be applied in compensation to the person or persons (usually the residuary legatees) who have been injured by the displacement of the testator's settlement.

The first Scottish case in which the doctrine appears to have been mooted was the case of Kers v. Wauchope, 1 Bligh 25, where Lord Eldon said—‘In our Courts we have engrafted upon this primary doctrine of election the equity, as it may be termed, of compensation. Suppose

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a testator gives his estate to A, and directs that the estate of A, or any part of it, should be given to B. If the devisee will not comply with the provisions of the will, the Courts of Equity will hold that another condition is to be implied as arising out of the will and the conduct of the devisee; that inasmuch as the testator meant that his heir-at-law should not take his estate, which he gives A in consideration of his giving his estate to B, if A refuses to comply with the will B shall be compensated by taking the property, or the value of the property, which the testator meant for him out of the estate devised, though he cannot have it out of the estate intended for him.’ And Mr Bell in his Commentaries, i. 145, in dealing with this question, and referring to Lord Eldon's remarks, says—‘In the case which gave rise to these observations this point had not been decided in the Court of Session. It was therefore remitted for judgment by that Court, with certain observations from the Lord Chancellor, which plainly indicated his opinion that the doctrine of compensation would apply to the case. But it was not decided on that remit. It will, however, require great consideration before this doctrine in its full extent be judicially admitted in Scotland.’ Since Professor Bell wrote these words half-a-century has elapsed, and during that time there have been many cases decided in which effect has been given to the doctrine of equitable compensation. Of these examples will be found in the case of Peat, 1 D. 508; Fisher v. Dickson, 2 D. 1121, affirmed 2 Bell's App. 63; Breadalbane's Trustees, 3 D. 507, and Davidson's Trustees, 9 Macph. 995. Many other cases might be referred to, but in none of them has the question—Whether a legatee who repudiates is to forfeit his legacy in toto, or only to the extent necessary to secure compensation?—arisen purely for decision, as it does in the present case.

In England the law seems to have been more matured. In Williams on Executors the law is thus stated (p. 1455)—' Another subject of much doubt with respect to the doctrine of election has been, whether the election to take against the will induces the necessity of relinquishing the benefit taken by it in toto, or only imposes an obligation to indemnify the claimants whom it disappoints—that is, as it is sometimes expressed, whether the principle on which the doctrine of election proceeds is forfeiture or compensation? The more recent authorities are said to establish that compensation only is to be made.’ In Jarman on Wills, vol. i., 4th ed., pp. 1456 and 1457; Story on Equity, vol. ii. sec. 1083; Snell's Equity, 5th ed. p. 213, the recent application of the doctrine to its fullest extent is distinctly affirmed by all these writers. The earlier cases in support of the doctrine are all collected in a note to the case of Gretton v. Haward, 1 Swanston, 433. I think that nowhere are the doctrine and the grounds of it better stated than in the judgment of Sir William Grant in the case of Welby v. Welby, 2 Vesey and Beames, 190 and 191—‘If the will is in other respects so framed as to create a case of election, then not only is the estate given to the heir under an implied condition that he shall confirm the whole of the will, but in contemplation of equity the testator means, in case the condition shall not be complied with, to give the disappointed devisees, out of the estate over which he had a power, a benefit correspondent to that which they are deprived of by such non-compliance. So that the devise is read as if it were to the heir absolutely if he confirm the will, if not, then in trust for the disappointed devisees, as to so much of the estate given to him as shall be equal in value to the estate intended for them.’

It appears to me that as the doctrine of election which gives rise to the claim of compensation is based on equity only, it is inconsistent with absolute forfeiture. No doubt in most cases absolute forfeiture does not take place, because the subject provided by the will is of less value than that to which the legatee is otherwise entitled; and so the question of total forfeiture rarely occurs. But I can see no ground in equity for holding that the ‘disappointed devisees,’ to whom full compensation has been made, are nevertheless entitled to claim that the benefit intended for the repudiating legatee shall be absolutely forfeited by him, and shall accrue to them to the effect of conferring upon them a benefit which the testator never intended for them. Equity appears to me to demand in such cases compensation—full compensation, but nothing more—out of the bequest to the repudiating legatee, leaving him to benefit by the surplus.

It was suggested that the forfeited liferent should be dealt with as intestate succession, but in a universal settlement of the testator's whole estate, such as the present, I can see no necessity, and indeed no good reason, for holding that the testator died intestate as to any part of his estate. In the present case the result of holding the forfeited liferent to be intestate succession would lead to this strange result, that Mrs Oliver as one of her father's next-of-kin would take one-half of the liferent absolutely and unrestrictedly, whereas her father in his settlement intended her to have it only as an alimentary inalienable fund, and free from her husband's jus mariti.

On the whole, I am of opinion that the safest as well as the most equitable mode of dealing with the present question is to hold that Mrs Oliver having made complete compensation to everybody who has suffered, or who can suffer, in consequence of her having betaken herself to her legitim, she, and not those fully compensated sufferers, is now to enjoy the liferent originally destined for her by her father. It is true that she will thus have got into her hands, and perhaps spent, a capital sum of money which her father never intended her to have; but nobody is now any the worse for that, and henceforth she will receive her liferent during the remainder of her life, subject to all the conditions of the will.”

The trustees reclaimed, and the Lords of the First Division after hearing counsel, in respect of the importance and novelty of the questions involved, appointed mutual minutes of debate to be boxed to the Judges of both Divisions and to the Lords Ordinary, in order that the opinions of the whole Judges might be obtained on the questions raised by the record.

The trustees in their minute of debate argued—I. The claim of Mrs Oliver was barred by her minute of election, by which she took legitim and repudiated the will. That minute was a binding act, and when acted on constituted a completed contract. At all events, she had an option of one of two things, either to take her legal rights or conform

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to her father's will. The provision of the latter was tendered to her by him in exchange for her legal right, and when tendered it was rejected. Legitim was a debt vesting in the child at the father's death, and giving the child a claim of debt against the person representing him— Fisher v. Dixon, June 16, 1840, 2 D. 1121, aff. April 6, 1843, 2 Bell's App. 63. So firmly was this fixed that it had been held that the amount of the claim of legitim cannot be altered by the increase or diminution of the father's estate after his death— M'Murray v. M'Murray's Trustees, July 17, 1852, 14 D. 1408. Notwithstanding this, universal settlements were common and their effects fixed. In some, e.g., Nisbet's Trustees v. Nisbet, December 6, 1851, 14 D. 141, the father declared that any child interfering with the settlement should forfeit the testamentary provision, such as Fisher v. Dickson ( supra); in some he declared that that provision should be in full of the legal rights; in some he simply made a general settlement of his whole estate. In the last one the conventional provision was not so correctly said to be forfeited by the child electing against the deed as to be given subject to an implied condition which the child declined to fulfil, with the result that he could not take the provision made for him. That was just such a case as occurred in the second class of universal settlements mentioned above, where the father made it an express condition of taking benefit under the will that the legal rights should be given up. Indeed, a claim for legitim is really incompatible with an universal settlement— Young v. Buchanan, December 20, 1664, M. 6447; Riddell v. Dalton, November 28, 1781, M. 6457; Henderson v. Henderson, July 26, 1782, M. 8191, where the Court expressly held that “the settlement being a total is incompatible with the claim of legitim.” So also in Collier v. Collier, July 6, 1833, 11 S. D. 912; Stevenson and Others (Mackintosh's Trustees) v. Hamilton, December 7, 1838, 1 D. 181; Peat v. Peat, February 14, 1839, 1 D. 508; Breadalbane's Trustees v. Buckingham, January 20, 1836, 14 S. 309, and March 5, 1840, 2 D. 731. The reasoning in Fisher v. Dixon was quite to the same effect, while the case of Minto v. Kilpatrick, May 20, 1842, 4 D. 12,224, went the length of applying to a claim made under a settlement, when the person through whom the complaint was made had taken legitim, the principle of forfeiture; in Panmure v. Crockat, February 29, 1856, 18 D. 703, a child taking legitim instead of a testamentary provision is put in the position of a creditor of the disponee discharging a debt. The reasoning applied to the claim of a daughter (Miss Villiers) of the testator in Keith's Trustees v. Keith, July 17, 1857, 19 D. 1040, by which the principle of approbate and reprobate was distinctly applied to a claim similar to that of Mrs Oliver,‘and indeed one founded on a plea very similar to Mrs Oliver's, was directly in point. In Davidson's Trustees v. Davidson, July 15, 1871, 9 Macph. 995, there were, no doubt, some observations by Lord Cowan which seemed favourable to Mrs Oliver's claim, but they were not necessary to the decision of the case, and the judgment pronounced was in accordance with the argument of the trustees here. Gillies v. Gillies' Trustees, Feb. 23, 1881, 8 R. 505, was also in point. The result of all these cases was that a general settlement was construed as putting a child to his election in the same manner as he is put when a provision declared to be in satisfaction of legitim is given him. See also Bell's Comm. i. 141–145 (7th ed.), Approbate and Reprobate; Fraser on Domestic Relations, i. 564; Fraser on Husb. and Wife, ii. 1030; M'Laren on Wills, i. 482; Johnston, July 20, 1875, 2 R. 986. Mr Bell seemed to doubt whether the principle of equitable compensation is admitted into our law, but the trustees quite accepted the existence of that principle in Scotch law. This was a question of the manner and time of its application. They maintained that it came into play to compensate those whose interests Mrs Oliver had injured after she was finally out of the field, and that she could not plead. The practice as to election under universal settlements certainly was that the choice of legitim infers abandonment of testamentary provisions, and that once made election could not be revoked. Indeed, it was the duty of trustees to insist on election, and they might compel it— Lowden, 1811, Hume's Decisions, 23; Keith's Trustees; and Fraser on Husb. and Wife, ut supra. But if Mrs Oliver succeeded here, the result would be that an election against the deed would never be final, and could be revoked, and the testamentary provision taken if only the child so acting paid up the uncompensated balance of the amount withdrawn. With regard to the intention of the testator, the only possible theory of his intention must be that he made the gift conditional on legal rights not being claimed. That distinguished the case from some cases in which the doctrine of equitable compensation had been discussed in consequence of a testator having conveyed a heritable subject in ineffectual language, or on deathbed, or made a legatum rei alienœ, and in which it had been held that a person could not both take the benefit of such a deed and also reduce it so far as ineffectual. But in these cases there could be found no application of the doctrine of equitable compensation inconsistent with the trustees' contention here— Kers v. Wauchope, 1815, Hume's Decisions, 25, and (1819) 1 Bligh's App. 1; Strathmore v. Clydesdale, February 20, 1829, M. 8377; Dundas v. Dundas, January 14, 1829, 7 S. 241, aff. 4 W. & S. 460; and Bennet v. Bennet, July 1, 1829, 7 S. 817 (cases of Scotch deeds inept to convey English property). Besides, Mrs Oliver, who had done all in her power to defeat the testator's intention, could hardly found upon it now. With regard to English authorities, the proposition of the Lord Ordinary that a person electing against a will relinquishes not the whole benefit of it but only so much as will compensate the disappointed devisees, or otherwise relinquishes those benefits only until such compensation has been made, was by no means clearly deducible from the English cases. There was as much authority against as for it. The argument in favour of his view would be found in 1 Swanston 359, et seq., in which passage it was noteworthy that it was observed by the author that the civil law knew no medium between accepting and renouncing the legacy, and that simple forfeiture was the rule there applied to an election against the will. See also Theodosian Code, 1. 2, t. 19, 1. 7. Mr Jacob, Appendix to Bright's Law of Husband and Wife, ii. 486, came to quite an opposite opinion from Swanston as to the result of the English cases. Indeed, about a question of legitim English

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authority was surely a little dangerous. But assuming it to apply, there was a series of cases with regard to the custom of orphanage in London in which it had been held that a person could not take both by the custom and by the will— Morris, November 30, 1739, 1 Atk. 398 and 404; Pugh, 2 Atk. 43; Couper, 3 Peere Williams, 123. See also other analogous cases— Doe v. Cavendish, 4 L.R. 743 (Lord Mansfield); Green v. Green, 2 Merivale 86 (Lord Eldon); Greenwood, 12 Beavan 403 (Lord Langdale). While Jarman, i. 445, Story (Equity) ii. sec. 1085, and Snell's Equity, 213, seemed to favour equitable compensation as the Lord Ordinary understood it. Sugden on Powers, p. 576, was against it, and Roper on Legacies, ii. 1631, et seq., and Williams on Executors, 1455–6, were neutral on the point.

II. Mrs Oliver was not entitled to maintain that there was resulting partial intestacy and to take part of the fund in medio as one of the next-of-kin. The case of Kers ( supra), where the alternative claim of the Ladies Ker, that if they could not both reduce the will in so far and adopt it in so far, they could at least come in as next-of-kin, was rejected, would have been conclusive against Mrs Oliver's claim here if she had maintained intestacy as regarded the whole provision rejected by her, and so were the cases of Nisbet, Davidson, and Gillies ( supra). But Mrs Oliver further contended that there might be partial intestacy, i. e. as to what remained after full compensation was made. Now, that was contrary to the residuary clause and to the whole doctrine already established by the trustees' argument that the election made was a binding bargain which did not introduce any uncertainty as to the claim on the estate. The case resolved itself into the withdrawal of a claimant on residue.

III. With regard to Mrs Oliver's children, they claimed that the effect of their mother's election was to disburden the fee destined to them. They ought to be in no more favourable position than this, that Mrs Oliver repudiated for herself only, and that they were not involved in her act. They therefore shared equally with the other beneficiaries in the loss caused by their mother's act, and ought to share no more than equally in the benefit which arose to the persons entitled to profit by the fact that there was a surplus after full compensation was made. The doctrine of equitable compensation was opposed to such an inequitable claim as theirs— M'lnnes v. M'Alister, June 29, 1827, 5 S. 862; Peat (supra).

IV. The liferent interest of Mrs Macfarlane therefore fell to be apportioned among (1) George Macfarlane, (2) his children, and (3) Mrs Oliver's children, in proportion to their interests in the residue, or, what was the same thing, in the fund which Mrs Oliver had withdrawn from it.

Mrs Oliver in her minute of debate argued—Full compensation having been made, as at Whitsunday 1881, to all the beneficiaries prejudiced by her having taken legitim, she was entitled to draw her liferent after that date. That was certainly more in accordance with the intention of the testator than any other destination of the fund that could be conceived. The claimant was making no double claim, and was asking no greater benefit from the estate than the will directed she should receive. In order to effect the implied condition which the trustees contend to exist in every universal settlement “the intention to make a condition of the acceptance” of the testamentary provision must be clear beyond all doubt—Bell's Prin., sec. 1939. In the cases of Henderson, Collier, Breadalbane's Trustees, Minto, Strathmore, Kers ( supra), and Turnbull, 5 Br. Sup. 380, relied on by the trustees, nothing was decided save this, which was not now disputed, that a person cannot approbate and reprobate the same deed. These cases would have excluded the claimant from taking both her liferent from her father's death and her legitim also, but did not decide that by taking legitim she forfeited all right to her testamentary provision or any surplus of it after replacing what she had received as legitim and so compensating those who suffered by her election. The only condition that could be implied in her father's gift to her was that she should not claim both his gift and her legal rights, because the gift was meant to include them, and she was not doing so. The trustees' contention really was, that it was equitable compensation to give the disappointed legatees, as a surrogatum for the legitim carried off by the child, that child's whole provision. That was against principle, and there was no authority for it. When actual loss was compensated, there could surely be no further compensation. There ought to be no total forfeiture where total forfeiture is not necessary (as it almost always has been in reputed cases, from which circumstance a loose use of the term “forfeiture” has arisen) to make full compensation. Lord Eldon within a year of the decision of Kers v. Wauchope ( supra) decided an analogous case of Ranclyffe v. Perkyns ( 6 Dow 149), in which that was the doctrine applied—see also Dashwood v. Peyton, 18 Vesey 49. A Scotch authority to the same effect was the case of Davidson ( supra), where Lord Justice-Clerk Moncreiff and Lord Cowan clearly were of that opinion, and with the approval apparently of the other Judges. The claimant was not contending for leave to revoke her election, nor that she could have been entitled after taking her legitim to have the trust maintained till it should be seen whether the course she had taken were the more profitable. It was not such a case as Annandale v. Macniven, 9 D. 1201, or Scott, ib. 1275. In Keith's Trustees, so relied on by the trustees, Mrs Villiers was trying to get both legitim and testamentary provisions at one and the same time. The English rule was compensation not total forfeiture—1 Jarman (4th ed.) 443; Snell's Equity (5th ed.) 213; Williams on Executors (8th ed.) 1445, et seq.; Story's Equity (9th ed.) secs. 1083–5. The illustration these authors employed was no doubt often that of a legatum rei alienœee, but it was of no moment to the principle that our law on that matter differed from theirs. The leading English cases on the doctrine of compensation are Streat-field, 1 Swanston, 491, and 1 White and Tudor, 369; Noys v. Mordaunt, 1 White and Tudor, 367; Blake, 1 Vesey jr., 522; Thelusson, 13 Vesey, 209; Welby, quoted by Lord Ordinary, and cases collected by Swanston, i. 433, note; Schroder, Kay's Rep. 578. Greenwood v. Penny ( supra), though sometimes cited as an authority in favour of forfeiture, was truly an example of compensation. The same doctrine was found in Anderson, Feb. 28, 1857, 23 Beavan, 457; Willoughby, 1862, 2 Johnson & Hemming, 344; Codrington v. Lindsay, L.R., 8 Ch. App. 578,

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aff. July 12, 1875, L.R., 7 E. and I. App. 854. The English doctrine of election to which these cases were applied is the same as the Scotch approbate and reprobate— Birningham v. Kirwan, 2 Sch. & Lef. 449, and Codrington ( supra). See also Rogers v. Jones, August 3, 1876, L.R., 3 Ch. Div. 688; Pickersgill, Nov. 27, 1876, L.R., 5 Ch. Div. 163; Smith v. Lucas, May 30, 1881, L.R., 18 Ch. Div. 531. The cases cited by the trustees on the orphanage custom of London did not bear out the view for which they were cited. In England election, and in Scotland approbate and reprobate, were both founded on intention, and there was no evidence of implied intention of forfeiture. There was no authority that it must be implied.

II. As an alternative, if after full compensation has been made, that which remains cannot go to the claimant in respect of the truster's intention, it must go to her in equal shares with her brother, the other next-of-kin, as a fund which has fallen into intestacy. The two liferents of half the residue each were separate estates, and a surplus which had arisen on one could not well be said to belong to the other or to the fiars of either. It must therefore have fallen into intestacy as being unnecessary to the fulfilment of any purpose of the testator— Torrie, May 31, 1832, 10 S. 597; Leeke, 1817, 2 Merivale, 363, 1 Jarman (4th ed.) 764; Scrymsher, 1 Swanston, 566; Alves v. Alves, March 8, 1861, 23 D. 712; Sturgis v. Campbell, 23 D. 1128, aff. 3 Macph. (H.L.) 70.

Mrs Oliver's children in their minute of debate adopted the argument of the trustees as against Mrs Oliver's claim to participate in the liferent given her under the will, even after compensation had been made by her, maintaining with the trustees that her election to take legitim barred her from founding on her provisions in the deed. But in addition thereto they argued that Mrs Oliver's liferent having been intended, as was seen from the terms of the deed, to benefit her family as well as herself, they had been losers by her election of legitim, which she had dissipated as soon as she received it.

II. On the assumption that Mrs Oliver was to be excluded from taking under the deed, they argued against the Macfarlanes to the effect that they could have no share in the half of the residue destined to the Oliver family so long at least as that family survived, and that in respect of the provision of the deed that if Mrs Oliver died before the vesting of the fee in her children the annual proceeds were to be applied for their maintenance, the inference was that the liferent having come to an end, not indeed by Mrs Oliver's death as the testator expected, but by her election against the deed, the income should be applied as he directed it to be applied on her death, i.e., in alimenting and educating the claimants, who were, they alleged, in poor circumstances. In support of this view they referred to Annandale v. Macniven, June 9, 1847, 9 D. 1201; Special Case— Alexander's Trs., Jan. 15, 1870, 8 Macph. 414. Again, where the fee is destined to a family or an individual, and there is no provision for the application of the income prior to vesting and payment, that family or individual will receive the income, or at least a reasonable maintenance out of it— Special Case— Duncan's Trs., July 17, 1877, 4 R. 1093; Ogilvie v. Cumming & Boswell, Jan. 27, 1852, 14 D. 363, aff. July 15, 1856, 28 Scot. Jur. 646; Campbell v. Reid, June 12, 1840, 2 D. 1084. This contention could never prejudice the Macfarlanes, whose fee had been restored to its proper amount, while the liferent of George Macfarlane had also been fully compensated. There could be no intestacy where “the whole residue and remainder were bequeathed”— Sturgis ( supra).

The following opinions were returned by the consulted Judges:—