Scottish Court of Session Decisions

The late John Macfarlane, writer, Stirling, died on 26th December 1876, survived by a widow, but by no children. He was also survived by a sister, Mrs Downie. He left a trust-disposition and settlement, dated in 1875, by which he conveyed his whole estate to trustees, and directed them (4) to pay his wife a legacy of £5000, restrictable to £1000 in the event of her second marriage; (5) to make over to her as her absolute property the whole furniture and effects in his dwelling-house and outhouses, including his horse and carriage; (6) to retain the residue of his means and estate, and to pay the liferent of the same to her so long as she remained his widow; (7) to pay her so long as she should remain a widow as much of the capital of the residue as they should see proper, so that she might be kept comfortable and respectable. At the end of the series of provisions in favour of the widow, the settlement proceeded, “and by acceptation hereof she binds herself to execute a settlement of her own affairs, so as that my own relatives shall have at least the two-thirds of what may be at her disposal, to be invested in life annuities on the lives of my nephews and nieces free of the jus mariti of the husbands of the females, and not subject to the debts or deeds or to the diligence of their creditors, … declaring, as it is hereby expressly provided and declared, that it shall not be in the power of the children of my sister to sell, assign, or convey his or her share of … the income to be derived from my wife's settlement, the same being purely an alimentary gift, and my trustees are hereby peremptorily enjoined to apply the same for behoof of said children.” In a codicil of July 1875 he provided:—“It is to be distinctly understood that at my wife's death, or previously, she is to leave all means at her disposal, two-thirds to my sister's family, to be invested for them and not paid in cash, and the other one-third to Nina Patterson and Maggie Cook, or anyone else she thinks proper.”

On 21st February 1887 the widow executed a trust-disposition (which was registered on 12th March), by which she assigned to George Lawrie and others, as trustees for the purposes therein mentioned, a bond No. 5947, dated 5th June 1877, granted by the Trustees of the Clyde Navigation in favour of Mrs Macfarlane for the sum of £5000 sterling, but only to the extent of £2000 of the sum therein contained. The deed bore to be granted for the love, favour, and affection of the granter for the legatees therein named, and its purposes were—(1) Payment of the expenses of the trust; (2) payment to the truster of a free alimentary annuity of £70 sterling, to be increased in the event of the trustees considering the truster's total income insufficient for her proper maintenance and support, to such extent as the trustees should think reasonable and necessary; (3) Accumulation of the balance of income during the truster's life; (4) As soon as convenient after the truster's death the trustees were directed to “pay or assign and convey the residue of the said trust-estate to and between the said Robert Patterson and his sister Nina

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Patterson, wife of the said William Holbrook, equally share and share alike, or to the survivor of the said Robert Patterson and Mrs Nina Patterson or Holbrook wholly,” subject to the declaration that, if either of the residuary legatees should predecease the truster leaving issue, such issue should be entitled to the share or shares which their parent would have taken by survivance; (5) lastly, in the event of both the residuary legatees and their issue predeceasing the truster, the trustees were directed to pay over the residue to the truster's own heirs and assignees. The said deed was declared to be irrevocable.

Mrs Macfarlane also executed a trust- disposition in similar terms in November 1802, which was registered on 1st April 1893, by which she conveyed another bond of the Clyde Trustees for the sum of £1000 to another set of trustees for behoof of members of a family named Cook.

Both these assignations to trustees were duly intimated to the Clyde Trustees, and formal transfers were endorsed on the bonds. The trustees nominated accepted office, and entered upon the administration of the trusts.

In September 1892 Mrs Macfarlane executed a disposition, by which she conveyed the whole of her household furniture, as detailed in an inventory annexed, to a Mrs Miller and her heirs and assignees, with full power to the disponees to uplift and receive the said articles and effects at any time, and consented to registration of the deed for preservation and execution. The deed was duly delivered, and was registered in the Books of Council and Session on 15th December 1893, but Mrs Macfarlane remained in possession of the furniture till her death.

Mrs Macfarlane also left a trust-disposition and settlement by which she conveyed her whole estate to trustees, and after referring to her husband's wish as to the settlement of the estate at her disposal, she directed her trustees with a portion of her estate to purchase three life annuities, one of which should be made payable to each of his nephew and nieces, William, Elizabeth, and Mary Downie, the bond of annuity in each case to provide that the annuity should be strictly alimentary, and should not be assignable or terminable by the annuitant or attachable by his or her creditors, and further, in the case of Elizabeth and Mary Downie, the bond to provide that the annuity payable thereunder should be exclusive of the jus mariti and right of administration and all other rights of any husbands they might marry, and not affectable by the debts or deeds of such husbands.

Mrs Macfarlane died on 9th January 1894.

In August 1894 John Gillespie Murray, curator bonis to William Downie, nephew of Mr Macfarlane, and Mrs Downie or Macleod, niece of Mr Macfarlane, they being the only surviving children of Mr Macfarlane's sister, Mrs Downie, brought an action of declarator and reduction against Mr Macfarlane's testamentary trustees, the trustees under the Patterson trust, the trustees under the Cook trust, and Mrs Miller, in order to have it found and declared (1) that by his trust—disposition and settlement and codicil the late John Macfarlane had effectually made it a condition of the acceptance by his spouse … of the provisions therein conceived in her favour, that she should bequeath to the family of his deceased sister Mrs Mary Macfarlane or Downie … two-thirds of the estate which she, his said spouse, might have at her disposal at the time of her death; that upon the death of her husband, the said John Macfarlane, the said Mrs Macfarlane, in the full knowledge of said conditions, accepted the provisions in her favour under the said deeds, and that by her acceptance thereof she became bound accordingly to bequeath to the children of the said Mrs Mary Macfarlane or Downie, or to such of them as should be alive at her death, two- thirds of the estate which should then be at her disposal; and (2) that Mrs Macfarlane was not entitled to defeat or impair the said children's rights, or to diminish the estate upon which they were entitled to rank, by any testamentary or mortis causa deed or conveyance, or by any inter vivos deed or conveyance of a gratuitous or of a simulate or collusive character in fraud of her said obligation, and that the said William Downie and Mrs Mary Downie or MacLeod, as surviving children of the said Mrs Mary Macfarlane or Downie, and as creditors in the obligation undertaken by the said Mrs Macfarlane, were entitled to two- thirds of her estate as at her death, including therein all the estate falling under any such deeds or conveyances which the said Mrs Macfarlane may be found to have executed or granted; and (3) that the said trust-disposition, dated 2lst February … and the said trust - disposition dated 24th November 1892 … executed by the said Mrs Macfarlane, and also the conveyance of furniture executed by Mrs Macfarlane in favour of Mrs Miller, were invalid and ineffectual quoad the pursuers, and that the estate falling under them fell to be taken into account in estimating the share of Mrs Macfarlane's estate to which the pursuers were entitled. Reduction of Mrs Macfarlane's inter vivos deeds was also sought.

The pursuers pleaded—“(1) The late Mrs Macfarlane having accepted of the provisions in her favour under the settlement of her husband the late John Macfarlane, the pursuers, as the surviving nephew and niece of the said John Macfarlane, are, in respect of the condition imposed upon such acceptance by Mrs Macfarlane, entitled to decree of declarator as craved, with expenses. (2) The trust-dispositions granted by Mrs Macfarlane being truly of a testamentary nature, are incapable of affecting the rights of the pursuers over the estate thereby conveyed. (3) The conveyance of furniture granted by Mrs Macfarlane never having been followed by possession, is insufficient

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to bar the claims of the pursuers upon the estate falling thereunder. (4) In any case the said deeds and conveyance are reducible at the instance of the pursuers, in respect that ( a) they are gratuitous and in fraud of the pursuers’ rights; ( b) they are fictitious and collusive and in fraud of the pursuers’ rights; ( c) the truster was not truly divested of the estate thereby conveyed; (d) in so far as the deeds did take effect before the granter's death, the trusts thereby constituted were truly for the truster's own benefit.”

It was pleaded, inter alia, for Patterson's and Cook's trustees—“On a sound construction of the said testamentary writings, Mrs Macfarlane was entitled to dispose inter vivos of the whole funds belonging to her; and the estate conveyed to these trustees having been vested in them by her under an irrevocable deed duly recorded and intimated, the conclusions for reduction of the said deed are incompetent.”

Mrs Miller pleaded—“(6) The said conveyance of furniture being an effectual transference to this defender of the articles therein mentioned, or of the right thereto in question with the pursuers, the pursuers have no claim thereto.”

Upon 13th February 1895 the following interlocutor was pronounced by the Lord Ordinary (KYLLACHY) “The Lord Ordinary having considered the cause—neither party having moved for a proof—Finds, decerns, and declares in terms of the first declaratory conclusion of the summons: Finds it unnecessary to deal with the second declaratory conclusion, and dismisses the same: Quoad ultra assoilzies the defenders from the conclusions of the summons, and decerns, &c.

Opinion.—In this case the first question is as to the construction of Mr Macfarlane's settlement. I am of opinion that upon its just construction it imposes an obligation on Mrs Macfarlane in the event of her accepting the provisions in her favour which it contains, to leave to her husband's relatives two-thirds of whatever estate might-be at her disposal at the time of her death, including in that category not only what might remain of her own separate estate, or of such capital sums as might be advanced to her by her husband's trustees under the seventh purpose of his settlement, but all estate, howsoever derived, of which she at the time of her death had the power to dispose. In particular, I see no reason for excepting from the obligation the legacy of £5000 left to her by her husband, nor do I find sufficient ground for excepting the furniture also left to her by her husband's settlement.

The next question is as to the pursuers’ title to sue for reduction of the special dispositions made by Mrs Macfarlane after her husband's death, in so far as these dispositions encroach on the two-thirds of her estate which she was bound to leave to the pursuers. This point was raised by one of the defenders, but was disclaimed by the others. I need only say that it does not appear to me that there is any doubt as to the pursuers’ title to sue for declarator and for reduction to the effect set forth in the summons.

I may dispose similarly of another objection of a technical character, viz., that the pursuers should have concluded for reduction of Mrs Macfarlane's settlement. I see no necessity for such a reduction. I do not know that the pursuers’ claim is necessarily adverse to that settlement, which does not profess to deal with specific subjects or specific funds. But if it is adverse, it is no more so than any other claim of debt by which the general succession of the deceased may be diminished.

The real and substantial question in the case is, whether the three special dispositions executed by Mrs Macfarlane after her husband's death, and in the form of inter vivos deeds, are to be taken into account as reducing the estate at her disposal at the time of her death. Ex facie they have, or profess to have, that effect, but the pursuers maintain that they cannot be allowed so to operate (1) because they were gratuitous; (2) because they were on their just construction revocable and testamentary; and (3) because if that character cannot be attached to them upon their construction, that was yet their true character, anything else being nominal and fictitious, and understood by all the parties to be so.

I have considerable doubt as to the relevancy of the pursuers’ averments with respect to the last of these grounds of reduction. It is averred in general terms that the various deeds were simulate and fictitious, but with the exception of the fact which is admitted with respect to the furniture, viz., that it remained in the deceased's possession, no facts or circumstances are set forth in support of those general averments.

Indeed, I rather inferred from the debate that the fictitious character of the deeds was deduced from the deeds themselves. In any case, the pursuers did not move for a proof, but asked a judgment on the deeds as they stand, coupled with the admissions on record, and as the defenders appeared to concur, I have taken the case upon that footing.

Two of the dispositions (which were granted in favour of trustees) relate to specific investments, viz., a bond and part of a bond by the Clyde Trust. The third is a disposition of furniture in favour of the defender Mrs Miller.

It is not disputed that all these deeds were gratuitous, and I have first to consider whether it was in Mrs Macfarlane's power to diminish the sum at her disposal by gratuitous deeds. On this point I am of opinion in the affirmative. The obligation imposed upon her, and which she undertook, applied only, in my opinion, to what she was free to dispose of at her death. If she chose—with respect to any part of her estate—to divest herself during her life absolutely and irrevocably of the power of disposition, she was, I think, free to do so onerously or gratuitously.

The question, therefore, comes to be whether it can be

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affirmed upon the terms of the deeds—taken along with the admission of parties—that the three deeds in question, or any of them, were truly revocable and testamentary. On this matter the question arises differently with respect to the two trust-deeds, and with respect to the conveyance of the furniture.

The two trust-deeds are in similar terms, and both convey to trustees—in the one case a bond and in the other case part of a bond by the Clyde Trust. Their purposes are, speaking generally—(1) Payment to the truster during her life of an annuity, not exactly, but closely corresponding, with the annual interest on the security; (2) increase of the annuity if, in the trustees’ opinion, necessary for the truster's maintenance and support; (3) payment of the residue, after the truster's death, to certain of her relatives, and, in the event of their predecease, to the truster's heirs and assignees. The trustees were directed to intimate the conveyance to the Clyde Trust, and they did so. They were also directed to enter at once into possession and administration, and they appear to have done so. Both trust-deeds were expressly declared to be irrevocable.

I am not able to hold that these deeds were, on their just construction, testamentary—that is to say revocable—and intended only to regulate the lady's succession. Reference was made to the cases of Spalding v. Spalding's Trustees, 2 R. 237, and Forrest v. Robertson's Trustees, 4 R. 22. I do not consider that the present case can be assimilated to either of these cases. It comes nearer to the case of Turnbull v. Tawse, 1 W. & S. 80, and Smitton v. Tod, 2 D. 225. The dispositions here were in each case of specific funds, not of the universitas of the truster's estate, or of her estate at her death. They were deeds intended to take effect, and did take effect, during the truster's life. There was no postponement of the trustees’ possession and administration; and (what is at least an element) there was in each case an express declaration of irrevocability. I consider, in these circumstances, that Mrs Macfarlane could not have revoked either of these trust-deeds, and therefore that the securities conveyed were no longer at her disposal in the sense of her husband's settlement.

It remains to consider the case of the furniture. The deed here is not a trust- deed, nor can it be suggested that it is, on its just construction, testamentary. It bears to be an absolute and irrevocable disposition of the furniture, as per inventory annexed, and it is provided that the disponee may uplift and receive the articles and effects at any time. There is no reservation in the granter's favour, and it is not alleged that the deed was not delivered to the grantee, or was delivered under any suspensive or other condition. On the other hand, it is alleged and admitted that no delivery of the furniture was ever made. It is admitted that it remained in Mrs Macfarlane's use and possession until her death.

Now, it is not, I think, enough to make the deed inoperative that delivery under it was postponed. The property in the furniture did not pass. It might, no doubt, have been attached by Mrs Macfarlane's creditors. But although the property did not pass, yet if the transaction was a real transaction, the furniture was no longer at Mrs Macfarlane's disposal. The question, therefore, is whether it can be inferred, from what is admitted as to the old lady's continued possession and use, that the true transaction was different from what was expressed—that is to say, that it was understood and agreed between her and Mrs Miller that the deed should only operate as a will, and that she should still be at liberty to deal with the furniture as her own.

Now, I do not think I should be justified, from the mere fact that the possession of the furniture was in fact retained, to draw the inference suggested. That fact, with other facts, might go to support such an inference; but, again, there might be facts tending the other way. All I can say is that upon the materials before me I see no sufficient ground for negativing the genuineness of the transaction which the deed expresses.”

The pursuers reclaimed, and argued—(1) No one took under Mrs Macfarlane's trust- deeds until her death; these deeds were therefore of a testamentary character, and as such revocable. They were not absolute inter vivos conveyances. Mrs Macfarlane not only reserved to herself an annuity for her lifetime, but power was given to the trustees to increase it to any extent. It was thus plain that the property really remained her own. Although a trust was constituted in the truster's lifetime if no one took an immediate benefit, it was revocable at the instance of creditors— Forrest v. Robertson's Trustees, October 27, 1876, 4 R. 22; Spalding v. Spalding's Trustees, December 18, 1874, 2 R. 237. The rights conferred were of the nature of spes successionis, which did not bar the truster from revoking— Fernie v. Colquhoun's Trustees, December 20, 1854, 17 D. 232. The case of Smitton v. Tod, December 12, 1839, 2 D. 225, relied on by the Lord Ordinary, was really in the pursuer's favour; there the deed was only held irrevocable because it followed upon a marriage-contract, and made provisions for children which were immediately enforceable. (2) There was no delivery of the furniture. Where that was the case the authorities show that the Court would hold that the deed was not intended to operate a present transfer.

The respondents maintained the soundness of the Lord Ordinary's judgment on the grounds stated by his Lordship.

At advising—