Scottish Court of Session Decisions

Daniel Cowan, merchant, Broughty Ferry, died there on 19th December 1881. He left no children. He was survived by his widow Isabella Drummond or Cowan.

He left a trust-disposition and settlement dated 28th September 1880, whereby he conveyed to trustees the whole estate and effects, heritable and moveable, that should belong to him at his death, nominating his trustees to be the executors of his moveable estate. The purposes were—“I appoint my said trustees ( first) to pay all my just and lawful debts, sickbed and funeral charges, including suitable mournings to my said spouse, should she survive me, and the expenses of carrying these presents into effect; ( second) to deliver over to the said Mrs Isabella Drummond or Cowan, immediately after my death, in the event of her surviving me, my whole household furniture, personal and other effects whatsoever, within or about my dwelling-house at the time of my death; and ( lastly), as soon after my death as possible, to realise the remainder of my said estate and effects, and divide and pay over the nett proceeds thereof in such way and manner, and to and amongst such parties as I may direct by any writing under my hand, though not holograph or tested, found lying by me, or in the custody of any otherperson for my be-hoof

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, and which shall be construed with and form part hereof, notwithstanding it may be of an informal nature.” The deed also gave the trustees full power to dispose of the truster's estate and effects either by public roup or private bargain.

Mr Cowan on 26th October 1880 executed this holograph testamentary writing—“I, Daniel Cowan, merchant in Broughty Ferry, and residing there, desire the trustees under my settlement to dispose of the nett proceeds of my estate and effects as follows:—To my widow, an annuity as long as she lives, of £70, payable quarterly in advance, beginning as on the day of my death, for the quarter then commencing, as witness my hand at Broughty Ferry, Oct. 26, 1880.”

He left other nine separate holograph testamentary writings conferring legacies on various other persons. These legacies, which were all for £100 or £50, amounted to £700 in all. Three of them, amounting in all to £250, were to be paid at his own death, and the other six, amounting to £450, were to be paid at his widow's death.

The trustees accepted office, and entered on the management of the estate. The heritable estate consisted of a small heritable property at Broughty Ferry called Barnhill. A valuation obtained of it shortly before this process was raised showed it to be worth about £350.

The moveable estate was, conform to the inventory given up by the trustees as executors, worth £1626, 11s. 11d. in all, the total debts and funeral expenses (£539, 9s. 3d.) being deducted from it, which left the nett value of it about £1087.

Mrs Cowan survived the truster for a little more than two years, dying in May 1884, and during that period she received her annuity of £70.

The trustees administered the estate and paid the debts and legacies. It was never found necessary for the purposes of the settlement to sell the heritage, and it remained unsold at the date of this process. The rents of it were employed by the trustees for the purposes of the settlement.

The payment of the legacies and debts, and the expenses of the trust down to 23d April 1886, exhausted the moveable estate and the income of the heritage, and the accounts at that date showed a balance of £14, 16s. 2d. due to the trustees, the purposes of the settlement and codicils having been entirely fulfilled.

In these circumstances the trustees, in order to settle the rights of the truster's heir-at-law and next-of-kin in the undisposed of portion of the estate—the heritable property—raised this process of multiplepoinding and exoneration.

The next-of-kin of the truster (Henry Cowan and others) maintained that the heritable property was to be dealt with as moveable estate, that it should be sold, and that its value fell to be divided among the next-of-kiu, share and share alike, as his heirs in mobilibus.

On the other hand, James Cowan, the truster's immediate younger brother and heir-at-law, maintained that it fell to be dealt with as heritage, and to be conveyed to him on his paying the trustees the £14, 16s. 2d. which the trust owed them, and the expenses of bringing the action into Court. He claimed it or its proceeds, and pleaded—“(1) On a just construction of the trust-disposition and settlement and codicils of the said Daniel Cowan, the heritable property thereby conveyed to his trustees is not converted, and separatim, the trustees’ power to sell not having been exercised, the same remains heritable, and passes in the circumstances stated to the claimant as his heir-at-law. (2) The heritable estate remaining unsold, and the whole debts and legacies directed by the truster to be paid having been satisfied, the trustees, the real raisers, are bound to convey the said heritable estate to the truster's heir-at-law.”

The Lord Ordinary ( Trayner) on 9th November 1886 pronounced this interlocutor:—“Finds that the property in Broughty Ferry, which forms the fund in medio in the present process, is to be regarded and dealt with as moveable succession: Therefore repels the claim by James Cowan, as heir-at-law of the truster, and finds him liable in the expenses of process so far as incurred in the competition between him and the claimant Henry Cowan; and remits,&c.

“ Opinion.—The late David Cowan by his trust-disposition and settlement conveyed the whole of his estate, heritable and moveable, to the pursuers as trustees. The estate so conveyed, with the exception of a small property at Broughty Ferry, was moveable. The purposes of the trust were as follows—The truster appointed his trustees—(1) To pay debts, including the expenses of the trust; (2) to deliver to his widow the household furniture and other effects in his dwelling-house; and (3) ‘as soon after my death as possible to realise the remainder of my said estate and effects, and divide and pay over the nett proceeds thereof, in such way and manner and to and amongst such parties' as he might direct by any writing under his hand. By subsequent testamentary writings he directed payment to be made of the annuity to his widow and of the legacies mentioned in the summons.

“The trustees realised the estate, except the property in Broughty Ferry, and have paid the annuity (the annuitant is now dead) and the legacies as directed. The heritable property is still in their hands, and the present action is brought to determine to whom that property belongs, The claimant James Cowan, the heir-at-law of the truster, claims it on the ground that it has not been disposed of by the truster, and that being heritage it falls to him. The claimant Henry Cowan claims one-fourth of the fund in medio as one of the truster's next-of-kin, on the ground that the property in question must, quoad this succession, be regarded and dealt with as moveable. This he does on the ground—(1) That the truster directed the sale of the property, which operated conversion; or otherwise (2), that the truster gave a power of sale, and that the exercise of that power was necessary to the execution of the trust, which also operated conversion. The heir-at-law maintains, on the other hand, that there is no direction to sell, and that sale was not necessary to the execution of the trust.

“(1) I am of opinion that the trust-deed contains a direction to sell the heritage. After directing his trustees to deliver the household furniture to his widow, the truster directs (the word used is ‘appoint,' but that means the same thing) his trustees ‘as soon after my death as possible to realise the remainder of my said estate’—that is, everything conveyed to the trustees beyond the household furniture—‘and to divide and pay over the nett proceeds thereof,' as he should subsequently direct. The word ‘realise’ in its ordinary and popular sense—in

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which cense I think the truster must be held to have used it—is ‘to convert into money.’ I therefore come to the conclusion that when the truster directed his trustees to convert his estate into money, he expressly directed the sale of his heritage, as it could only be converted into money by a sale. The words ‘divide and pay over’ do not of themselves imply a direction to sell, because division and paying over may be accomplished by a conveyance to the beneficiaries pro indiviso. Yet when in addition to these words you have the others to be found in this deed, it becomes, I think, plain that what was to be divided and paid is money, and not the estate in forma specifica. The direction is to divide and pay over’ the nett proceeds’ of the estate. Now, the proceeds of the estate is not the estate itself, but that which it has produced by the realisation on sale thereof after deducting the expenses of sale. I think, further, that the intention of the truster that his heritage should be sold appears further from the fact that the whole of the benefits conferred by him on the beneficiaries are payments of money. The whole purpose of his settlement (with the exception of that which has regard to the household furniture) is that his trustees shall pay money. They are to pay his debts, pay the widow's annuity, pay the legacies. They are not even directed to hold the heritage in security of the annuity. They are to get the whole estate into their hands in money, and therewith to pay the annuity and legacies at the time and to the persons as directed.

“It is said that the direction I have referred to cannot be so read, because the settlement in a later clause confers a power of sale, which is superfluous if a direction to sell had already been given. I think a mere power of sale after a direction to sell would have been superfluous; but superflua non nocent. Still, as a seeming contradiction or inconsistency, this subsequent power of sale deserves notice. The alleged inconsistency disappears, I think, when the clause is fairly read. It declares that the trustees, ‘besides the powers’ conferred by statute on gratuitous trustees, ‘shall have full power to dispose of my said estate and effects, either by public roup or private bargain, in such lots and at such prices as my said trustees shall think proper.’ I pass over the fact that this is one to a great extent merely of style. Being there, it must receive effect. But to my mind it only adds to the direction already given—a power to the trustees to sell, according to their discretion, by public roup or private bargain, at such prices and in such lots as they may think proper. In short, I read this clause not so much as conferring a power of sale as conferring a discretion on the trustees to carry out the sale already directed in such mode as they think best.

“If this view of the truster's settlement is sound, the direction to sell operated conversion, and the claim of the heir-at-law is excluded.

“(2) But assuming that there was no direction to sell, but merely a power of sale, 1 am of opinion that conversion was operated, because the exercise of the power was indispensable to the execution of the trust.

“The first purpose of the trust was to pay the truster's debts, &c., ‘and the expenses of carrying these presents into effect.’ After paying the annuity, the legacies, and the expenses of the trust management up to 23d April 1886, there was a debt due to the trustees to the extent of about £15,‘to which will fall to be added the expense of the present action, and of winding-up the trust.’ This debt and these expenses fall to be provided out of the trust-estate, and to be paid out of that trust-estate by the trustees. The only part of the trust-estate still in the hands of the trustees is the property now in question. Accordingly, out of that property the trustees must provide the money to meet the debt and expenses I have mentioned. They can only do this by selling the property, for they have no power to borrow. Indeed, it is only because the trustees advanced funds of their own that they were able to fulfil the trust purposes up to 23d April last. If they had not so advanced their own funds, the property would of necessity have been sold before now to enable them to fulfil the trust purposes. The sale of the property is therefore indispensable to the execution of the trust.

“I do not take into account as of any moment the readiness of the heir-at-law to refund the trustees the amount of their advances, and to pay the expenses of the action. He is under no obligation to do so, and probably would not offer to do so, if he was not thereby, by a payment of £50 or £60, to secure to himself a property worth £350. But the trustees are not directed to take a donation from the heir-at-law, nor if they did can they thereby affect the legal rights of the next-of-kin.

“On both the grounds stated I am of opinion that the property which forms the fund in medio must be regarded and dealt with as moveable.”

James Cowan reclaimed, and argued—The question was as to the disposal of a part of the testator's property, heritable in character, which he had not given away, but which remained undisposed of. The Lord Ordinary's opinion implied that in respect of a mere direction to sell, unaccompanied by a disposal, the next-of-kin had right to succeed, which the heir was endeavouring to affect. His Lordship had treated the case as if it had been one arising in the succession of a beneficiary, but that whole class of cases was quite inapplicable to a question arising as to the succession of the truster himself. When it was a question of what right a beneficiary had the question was, Did the testator intend him to take land or money? But here the question was in the succession of the truster, and related to an interest which did not need to be converted for the purposes of the settlement. Now (1) the heir's estate could not be taken from him unless it was given to someone else, even though the form in which it was to be taken was changed, and he might have to take it in money instead of in land—a thing quite immaterial to the question of right. A skeleton trust directing a sale, and then not filled up by a declaration of purposes in the same or a subsequent deed, would leave the respective rights of heir and next-of-kin unaltered— Kers v. Wauchope, 1 Ross L.C. (Land Rights) 432 (Lord President Campbell). (2) A direction to convert heritage for purposes declared or to be declared is understood on the same reasoning to be a direction to convert it for the purposes of the settlement, but not to extend beyond what was necessary for those purposes.

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The truster in such a case preferred his legatee to his heir, but there was no ground for thinking that he preferred his next-of-kin to his heir. The whole subject, and the distinctions above taken under both heads, was considered by Lord Curriehill in Gardiner v. Ogilvie, 20 D. 110, and by Lord Neaves (Ordinary) in Neilson v. Stewart, 22 D. 646 (see also opinion of Lord President Colonsay). In neither case were these opinions necessary for the judgment, and Lord Deas doubtless declined to adopt the distinction between the question arising in the beneficiary's succession and that in the truster's own, but his opinion on that point stood alone. Dicta favourable to the reclaimer were also found in Thomas v. Tennent's Trustees, 7 Macph. 117 (Lord Barcaple, Lord Justice-Clerk Patton, and Lord Neaves). Finnie v. Commissioners of the Treasury, 15 S. 169, showed the opinion of Lord Corehouse on the point. Dick v. Gillies, infra, cited on the other side, had been overruled on another point, and the question in it was really about a beneficiary's succession—See M'Laren on Wills and Succession, i. sec. 416, and ii. sec. 1575. The English law on the point was exactly that contended for by the heir—Jarman, i. 619.

The result was that, in any view, the various parts of the truster's estate must bear their own natural burdens. The heir might have to pay the annuity or so much of it as the testator, by deferring payment of legacies till the widow died, had not laid upon these legacies, but by the application of the rents to the annuity that burden was in part borne already. That was because the annuity was properly a heritable debt. But, on the other hand, the debts and legacies were the normal burdens of the moveable estate, and it must pay them— Douglas, January 10, 1868, 6 Macph. 223 (Lord President). There was no sufficient indication in the deed to shift any of the burdens from the party who should ordinarily bear them. III. It might be that the truster had massed his whole estate for the payment of legacies, laying the burden of them both on heritage and on moveables. If so they must bear it pro rata of their value only—M'Laren, ii. 2310; Young v. Martin, February 6, 1868, 40 Jur. 181. There was considerable discussion in the law of England on that point, but it had not been hitherto applied to Scotland. In Bowie ( Hume, 765) a view favourable to the reclaimer was assumed, and in Young v. Martin, supra, the Court had repelled a plea founded on the doctrine, holding it, in any view, inapplicable.

Argued for next-of-kin—On the first point the Lord Ordinary was right. The opinion of Lord Deas in Gardiner's case was sound, and consistent with Dick v. Gillies, 6 S. 1065. That case only apparently related to the succession of a beneficiary. It truly involved the quality of the truster's own succession. It had never been overruled in any case. Its authority was recognised by Lord Corehouse in Finnie, supra. There was no decision in favour of the reclaimer. He relied only on dicta in cases on other points. II. The annuity must be borne by the heir, being heritable— Hill v Maxwell (1663), M. 5473; Crawford's Trustees, January 11, 1867, 5 Macph. 275; Mackintosh, March 2, 1870, 8 Macph. 627. This was the case even where an annuity was purely a testamentary provision— Breadalbane's Trustees v. Jamieson, 11 Macph. 912.

At advising—