Scottish Court of Session Decisions

William Grant, wine and spirit merchant, Dunoon, died on 14th January 1890, leaving a trust-disposition and settlement whereby he directed his trustees to hold his estate (subject to payment of two annuities) for Agnes Hood Grant, his daughter, in liferent and her issue in fee, and in the event of her dying without issue, for his two sisters equally between them, and failing them their issue.

The trustees accepted office and administered the trust, and down to 4th December 1897, the date when Agnes Hood Grant came of age, they paid to her the whole income of the trust (less annuities and expenses) amounting to £1240.

When Miss Grant came of age she at once claimed her legitim, and it was paid to her on 6th December 1897, reserving the question of interest. Miss Grant maintained that she was entitled to interest at 5 per cent. per annum on the amount of her legitim from the date of her father's death, amounting to £1445, 4s., under deduction of the income actually paid to her during her minority, viz., £1240. The trustees, however, maintained that Miss Grant was only entitled to interest at the average rate earned by the trust during her minority, which was £3, 6s. 10d. per cent., while she had been paid the whole income, amounting to £1240, which was more than 4 per cent. on her legitim.

In these circumstances Miss Grant raised against the trustees in the Glasgow Sheriff Court an action for £205, 4s., being the difference between £1445, 4s. and £1240.

The pursuer pleaded—“(1) The pursuer being entitled to interest on her legitim at five per centum, decree should be given for the sum sued for, with expenses. (2) The delay in payment of the legitim not being the fault of the pursuer, and the defenders never having put her to her election, decree should be granted as craved.”

The defenders pleaded—“(1) The pursuer is entitled to interest only at the rate of £3, 6s. 10d. per cent., being the average rate earned by the trust during her minority. (2) The pursuer having already received an amount equal to more than four per cent. is not entitled to any further payment in respect of interest.”

On 25th February 1898 the Sheriff-Substitute ( Balfour) pronounced the following interlocutor— “Repels the defences: Decerns against the defenders for payment of the principal sum concluded for.”

Note.—…“There are various decisions on the subject, and with one exception they all point in the same direction. The first case is M'Murray v. M'Murray's Trustees, 14 D. 1048, where it was held that legitim is a debt to be measured by the amount of the fund at the father's death, and the Court decerned for the legitim, with the legal interest thereof since the death. The point of this case is that legitim is treated as a debt, and is due from the date of the father's death, with the legal interest. The next case is Gilchrist v. Gilchrist's Trustees, 16 R. 1118, where legitim was characterised in the same manner as in M'Murray's case, and the Lord Ordinary (Fraser) held that if the executor, without justifiable excuse, delays to pay legitim he is liable in interest at 5 per cent. The next case is Bishop's Trustees v. Bishop, 21 R. 728, where the Court (dealing with the contention of trustees that interest was only chargeable at the average rate actually earned) held that legitim bears interest at 5 per cent. from the date of the father's decease till payment, and without remark they followed M'Murray's case. The next case (and this is the exceptional one) is Ross v. Ross, 23 R. 802, where the son, claiming legitim, was found entitled to interest at the rate of 4 per cent., that being the rate which the estate had earned. The facts of the case were that Sir Charles Ross at the time of his father's death was a minor, and thirteen years after his father's death, when he had become a major, he elected to claim his legitim, which he could not have done earlier. During his minority his mother was in possession of the estate, and 4 per cent. was taken to be a fail estimate of the actual income of the estate. There was no mora on the part of the executrix, and she had no power to accelerate her son's election. She had been in possession of the estate for thirteen years, and the amount claimed for interest was

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equal to two-thirds of the entire sum claimed for legitim. The Court held that under the circumstances it was inequitable to lay such a burden upon the widow, and that it would be really imposing a penalty on her for an administration of the estate which she had no power to prevent. It was admitted that 5 per cent. was the customary rate of interest on such a debt, but it was held that there was no fixed rule as to the interest due on claims of legitim to prevent the Court from giving effect to equitable considerations in exceptional circumstances.

It appears to me that the present case is different from Ross's case. It makes no difference that the time which has elapsed since the father's death in this case is eight years, or that there has been no mora either on the part of the daughter or on the part of the trustees, but it makes a great difference that during these eight years the income of this estate has been paid over to the pursuer herself and not to a third party, and there is no one who can be prejudiced by the payment of 5 per cent. unless in the eventuality of the death of the pursuer without issue, when the truster's sisters become beneficiaries. I do not however think that their contingent rights should be taken into serious consideration in dealing with the present question. Their possible claims are not to be compared with the claims of Dame Ross in Ross's case, she having been in possession of the estate for thirteen years in the belief that it was her own, and she would have been the instant sufferer by her son's claim for 5 per cent. interest. I understand, moreover, that in about two years the income of this estate will suffice to make up the claim now made for £205, 4s.

I therefore am of opinion that, according to the ordinary rules of practice and according to the decisions, 5 per cent. is the rate of interest chargeable on a debt like legitim, and that it is only in exceptional circumstances that the Court will give effect to equitable considerations and interfere with the ordinary rule, and these circumstances do not exist in the present case.

I may finally refer to the House of Lords decision in Kirkpatrick v. Bedford, 6 R. (H.L.) 4, which does not appear to have been referred to in the Court of Session cases, and which decides that a legacy carries interest at the rate of 5 per cent. from the death of the testator.”

The defenders appealed, and argued—It was not the case that 5 per cent. was the legal rate of interest. There was no rate fixed as the legal rate. The guiding principle in all such cases was, what was the average rate which could be earned by prudent investment of the money. The average rate earned by the trust in this case was £3, 6s. 10d. per cent. In any case the pursuer was not entitled to more than the income of the trust, which had been admittedly paid to her— Ross v. Ross, June 16, 1896, 23 R. 802; Inglis's Trustees v. Breen, February 6, 1891, 18 R. 487; Baird's Trustees v. Duncanson, July 19, 1892, 19 R. 1045; Melville v. Noble's Trustees, December 11, 1896, 24 R 243; Campbell's Executor. v. Campbell's Trustees, March 4, 1898, 35 S.L.R. 540.

Argued for the pursuer— The Sheriff-Substitute's judgment was right. Legitim was a debt. In Ross v. Ross, supra, all the judges recognised that legitim was a claim of debt. So far as decisions had gone the only exception to the rule of allowing 5 per cent. interest on legitim was Ross. That was an exceptional case, and it was plain from the opinions of the Judges that interest at a higher rate of interest than 4 per cent. would have been granted but for the exceptional circumstances of the case—see specially opinion of Lord Kinnear at 23 R. 806. The position of a trustee paying a debt like legitim was different from that of a trustee holding money for beneficiaries. Payment of a debt was not a question of administration. There was no exceptional circumstances in the present case and interest at 5 per cent should be granted.