Scottish Court of Session Decisions

John Gilchrist, wine merchant, Leith, died on 14th June 1888, survived by his wife and four children.

By trust-disposition and settlement he directed his trustees “immediately after my death, or as soon thereafter as they shall deem expedient, to realise my whole moveable means and estate, including my present business of wine and spirit merchant, and invest the proceeds thereof in good heritable security, and apply the income or annual produce thereof for the purposes of the trust.” By codicil he recalled certain provisions which he had made in favour of his son James Watson Gilchrist, and in place thereof bequeathed to him £100 in full of all his claims.

James Watson Gilchrist claimed legitim, and raised this action against the trustees.

The defenders lodged a vidimus of the deceased's personal estate as at the date of his death, including various stocks and shares in the ownership of three steamships and one sailing vessel. The estate liable for legitim was shown at £7359, one-twelfth whereof, being the pursuer's share, was £612, 10s., and the entry embracing the ship shares was as follows:—“8. Ship shares—(1) 6/64 shares of the steamship ‘Scotsman’ of Leith, at £137, 10s. per share, per Messrs Blaik & Company's valuation, £825; (2) 6/64 shares of the steamship ‘Sicilian’ of Leith, at £10 per share, per Messrs Blaik & Company's valuation, £60; (3) 6/64 shares of the steamship ‘Nicosian’ of Leith, at £20 per share, per Messrs Blaik & Company's valuation, £120; (4) 5/64 shares of the ship ‘Zuleika’ of Leith, per Thomas Law & Company's valuation, £350.”

The pursuer objected to the principle upon which the statement was made up. He alleged (1) that the vidimus represented the value of the stocks and shares as at the date of his father's death on 14th June 1888, whereas these stocks, some of which had increased in value since the death, must be estimated as at the value of the present time; and (2) that that value could only be ascertained by selling the whole of the stocks and shares.

The defenders lodged answers, and explained that they regarded the pursuer's claim of legitim as a claim of debt which emerged on the death of his father, and the amount of which was to be ascertained according to the value of the free moveable estate as it then stood. They maintained that the pursuer's claim amounted to his legal proportion of the estate, according to its fair value, as at the date of death, less the necessary expenses of realisation, or according to the amount which it would have fetched if the whole estate had been immediately realised; that his claim was not affected by subsequent fluctuations in value of investments which the defenders continued to hold; and that they were not bound to realise the whole estate under their charge in order that the amount of the pursuer's one-twelfth share might be thereafter ascertained. In explaining their principle of valuation they stated with regard to the ship shares—“ Item 8. This item represents the value of certain shares in three steamers and one sailing ship held by the deceased. At the date of his death two of the steamers were heavily burdened with debt, for which each individual owner was liable in solidum. The value of the shares in each vessel was obtained from information supplied by the managing owners, which was based upon their knowledge of the condition in which the ships were at the time, and the price received for other shares in said steamers sold during the month current at the death. Had these shares been immediately realised, the defenders believe they would not have fetched more than the sums stated, if so much. The defenders repeatedly advertised the shares for sale, but no offers were made for the steamship shares in answer to their advertisement. The shares in the sailing ship were sold on 4th September 1888 at an increase of £80 on the valued price. At this time the market price for ship property had considerably improved. The defenders, at the request of the beneficiaries, have continued to hold said steamship shares,

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and have no intention meanwhile of realising them.”

On 16th March 1889 the Lord Ordinary ( Fraser) repelled the objections stated by the pursuer to the vidimus lodged by the trustees except as regarded the value put upon the shares of the three steamships; found that these shares must be entered as of the market price of the present day; and reserved to the pursuer to move the Court to be allowed a proof that the vidimus did not correctly set forth the market price of the other stocks and shares therein referred to as at the date of death.

“ Opinion.—[ After stating the facts and the two heads of the pursuer's objections]—With regard to the first of these points, the Lord Ordinary is of opinion that in the general case the estate out of which legitim is claimable must be taken as of the value at the father's death. To this general rule there are exceptions, as where the estate consists of doubtful or contingent claims, the value of which cannot be ascertained until the money therefor has been actually received by the executor. In such a case the accounting with the claimant for legitim must of necessity be according to the amount actually received. In the present case there was no such difficulty in the way of ascertaining the value. All the stocks of companies, except one, were quoted on the Stock Exchange, and the ship shares, although of no great value at the date of death, were still marketable. The defenders state that they endeavoured to sell the shares in the steamers and could not find a purchaser, although it is said that these have now somewhat increased in value and are saleable. This is a good reason for taking the value of the steamships in estimating legitim as at the present date, instead of at the small nominal value at the date of the testator's death.

The general rule now stated rests upon this doctrine, that legitim is a claim of debt against the executry for a certain proportion of the personal estate which vests in the child claiming it at the father's death. He is entitled to that proportion and no more. If the executor delays to settle the claim, and the property sinks in value, the claim of the child is not thereby diminished, and in like manner if it increases in value the claim is not thereby enhanced in amount. If the executor without justifiable excuse delays to pay the legitim, he is liable in interest according to many decisions, and that interest is five per cent. In the case of M'Murray v. M'Murray's Trustees, 17th July 1852, 14 D. 1048, the point was very distinctly brought out and determined. It was held ‘that the legitim was a debt to be measured by the amount of the fund at the father's death, and did not infer a right to participate in profits realised by the application of the fund after the father's death.’ The whole estate had been employed in the father's business, and profits had been made of which the child claiming legitim demanded a share. Lord Ivory explained the grounds of judgment in the following terms—‘The claim of legitim is a claim of debt against the testator's estate. In the ordinary case of a debtor in business, the fund out of which the debt is to be paid is put in peril, but the creditor does not get the profits. In this case the pursuer's claim was a claim against the general fund, and was due at the moment of the testator's death. If the trustees have put the estate into peril and made profit that enlarges the estate—the measure of the creditor's security but not of the claim—the debt is the same as before, unaffected by their trading. It is still due with interest and nothing more. Legitim is a claim of debt. Suppose a party thinking he has right to dispose of his whole property, leaves all of it to one of his children and excludes another, and the child to whom the property was left enters into possession and uses the estate in trade, would that entitle the excluded child on his claiming legitim to claim a share of the profits? It would not, and he would not be worse off; for if the business turned out ill the other would be obliged, if he sacrificed the fund, to answer for it with his own funds.’ In like manner, in the case of the Earl of Dalhousie v. Crokat, March 26, 1868, 6 Macph. 659, the point was again submitted to the Court although under different circumstances. A loss was sustained of the fund from which legitim was payable in consequence of the executor having allowed his agent to embezzle it. The Court held that the executor must bear the loss, and that no part of it could be allowed to diminish the claim for legitim. ‘It appears to me,’ said Lord Ardmillan, ‘that the child entitled to legitim is a creditor of the executor for a share of the free executory estate—that is, for a share of the free moveable estate left by the father as at the date of his death, or as soon thereafter as it can be realised. … If the executor had employed the funds of the deceased in trade, the pursuer would have taken no benefit thence arising. If the executor had purchased railway or bank stock, and the stock had risen in value, I cannot think that the legitim would have been increased so as to amount to anything beyond the price paid for the stock, since if the price had fallen the legitim would not have been diminished. Legitim must be calculated as at the date of the father's death, and profit or loss arising after realisation in consequence of the executor's mode of dealing with the funds cannot augment or diminish the claim of the child.’

There are cases where, in consequence of arrangements between a child claiming legitim, or a widow claiming jus relictæ, these persons will be found entitled to a share of profits made from the application of the funds to purposes of trade, and of this class of cases there is an illustration in the case of Ross v. Masson, February 3, 1843, 5 D. 483. The judgment was not unanimous, as Lord Medwyn dissented, and held that there was not such a specialty as to take the case out of the general rule. It was a claim by a widow for jus relictæ, and Lord Medwyn said—

The widow is entitled to revert to her legal rights notwithstanding all that she has done. But then must she not take her jus relictæ according to the state of the moveables at the death of her husband? She is not tied down by the valuation then made. She may show that this is inadequate, and she will get her share estimated at their full value. I always understood that the share of the moveable estate payable out of the estate of the husband to the children as legitim, and to the widow as jus relictæ, was estimated as at the death and not as it might be at any future period. If the widow had claimed her jus relictæ

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at the time, would she have been entitled to more than the estimated value of the right according to the then rate of the market? And if by some unexpected opening of trade, or the failure of some neighbouring coal work, the value of this some years afterwards greatly increased, would she have been entitled to claim this additional value after having obtained its value at the time of her husband's death?' Lord Moncreiff assimilated the case to a contingent fund, and upon that ground allowed the widow's claim for a share of the profits. ‘If,’ he said ‘the claim had been a contingent fund which could not be realised at the time of the husband's death, there is no doubt that a widow would be entitled to claim upon it as at the time when it was realised.’ And this doctrine is not disputed, for the general rule allows of such an exception.

The second point made by the pursuer is, that the whole of the stocks and shares ought to be sold in order to pay off his one-twelfth proportion. Now, there is no such absolute right on the part of a claimant for legitim or jus relictæ. This is a matter entirely in the discretion of the Court, who are entitled and bound to look to the interests of the other beneficiaries who have claims upon the estate, and if they object to such sale the Court will give heed to such objection. To throw all these stocks and shares into the market merely to pay the pursuer's small proportion would be putting the property to the chance of loss, and would certainly be attended with very considerable expense in brokerage charges and commission. If the pursuer challenges the statement that the stocks, &c., are not entered as at the market prices of the day at the time of death, he will be allowed to prove this, but if not he must be settled with according to that market price, seeing that if the property had been all sold he would have got no more from the sale.”

On 23rd May 1889 the Lord Ordinary ( Kyllachy) pronounced the following interlocutor:—“In respect the pursuer is satisfied that the vidimus correctly sets forth the market price of the stocks and shares other than the shares of the steamships therein mentioned, Finds it unnecessary to order proof in regard thereto: Allows to the pursuer a proof of the market price at the present time of the said shares of the steamships mentioned in the vidimus, and to the defenders a conjunct probation; and appoints the proof to proceed on a day to be afterwards fixed.”

The defenders reclaimed against both interlocutors, and argued—The date of the testator's death was the only time at which legitim could be calculated. If that period were departed from great difficulties would be encountered. The claim of legitim was a claim of debt— M'Murray v. M'Murray's Trustees, July 17, 1852, 14 D. 1048. It was not necessary to fix the exact day of the testator's death for the calculation of legitim, but it ought to be about that time, and interest should run as from the day of death. The pursuer was not entitled to have the whole trust-estate realised— Earl of Dalhousie v. Crokat, March 26, 1868, 6 Macph. 659; Pringle's Trustees v. Hamilton, March 15, 1872, 10 Macph, 621; Minto v. Kirkpatrick, May 23, 1833, 11 Sh. 632; Fisher v. Dixon, June 16, 1840, 2 D. 1121 and 1138. The duty of the executors here was simply to do what they have done, to estimate the pursuer's share, and to tender the amount thereof— Chalmers' Trustees v. Chalmers and Others, March 16, 1882, 9 R. 743.

Argued for the pursuer—He was entitled to have the estate realised as at the date of litiscontestation in the present action in order that the true amount of his legitim might be determined; he was not bound to accept a random sum reached by the trustees from ex parte valuations. He was not bound to accept anything but money in satisfaction of his claims, for legitim was a money claim. He was entitled to have not only the ship shares but the whole stock valued as at present rates. There had been a considerable increase in the cumulo value of the trust-estate, and the pursuer was entitled to a share of that increased value, and was not to be prejudiced by the delay on the part of the trustees as regarded realisation—Fraser on Husband and Wife, vol. ii. p. 983; cases cited by the Lord Ordinary.

At advising—