Scottish Court of Session Decisions

Robert Graham, wine and spirit merchant in Glasgow, died on 10th November 1890, leaving a trust-disposition and settlement dated 13th April 1882, whereby he assigned and disponed his whole means and estate to trustees for, inter alia, the following purposes—In the first place, For payment of debts; in the second place, For implement of the provisions contained in the antenuptial contract of marriage between him and Mary Crawford or Dunbar (afterwards Graham), widow of John Dunbar, dated 31st May 1881; In the fifth place, That the first parties might deliver to Mrs Graham, in the event of her surviving him, such articles of furniture and plenishing as she might select, but not exceeding £200 in value, or, in her option, that they might pay her £200 in lieu thereof; In the sixth place, That the first parties might pay to Mrs Graham, in the event of her surviving him, the sum of £2000, or, in her option, and in lieu thereof, a share of the residue of his estate equal to that of his children; and, in the last place, he directed the first parties to hold and convey the residue of his means and estate and the income thereof for behoof of and equally to and amongst his children, Jessie Graham or Scott, Matthew Graham, Robert Dalgleish Graham, James Graham, Margaret Dalgleish Graham, and Annie Wilson Graham, and any other child or children procreated of his body.

The testator also provided and declared that the provisions should be payable to his children, in the case of sons when they respectively attained the age of twenty-one years, and in the case of daughters when they respectively attained that age or were married, whichever of these events should first happen.

He also provided that if any of his said children predeceased him leaving issue, or having survived him, died before the term of payment leaving issue, their issue should be entitled, equally amongst them, to the share to which their parent would have been entitled if he or she had survived and reached majority, and failing issue their shares should be divided equally among the survivors of the residuary legatees jointly with the issue of any of them who might have predeceased leaving issue.

Under the antenuptial contract referred to, Mr Graham, in the event of his wife surviving him, obliged himself and his heirs, executors, and successors, all jointly and severally, to allow her the free liferent use of the whole household furniture and plenishing which should belong to him at the time of his death, or so much thereof as should in the opinion of the marriage-contract trustees furnish a house suitable to her circumstances. And further, in the event of his wife surviving him, he obliged himself and his foresaids, all jointly and severally, to pay to her a free alimentary annuity of £100 sterling during all the days and years of her life after his death, payable in advance in equal proportions at Whitsunday and Martinmas. And in security of these provisions Mr Graham disponed to the marriage-contract trustees two plots of ground belonging to him. In the event of these subjects, on a sale thereof, or on a valuation by a qualified party appointed by the marriage-contract trustees, proving insufficient as a security for the annuity, Mr Graham bound himself, and his heirs, executors, and successors, within one year from the date of the marriage-contract, to provide such further security as would with the foresaid subjects, or the free proceeds thereof, produce a sum equal in amount to the value of an annuity of £100 to his wife as at the expiry of the said year.

In the marriage-contract it was declared that the trustees should have and be entitled to the fullest immunities and powers, and in particular, without prejudice to the said generality, that they should be in no way bound to see that the subjects thereby vested in them, or which might thereafter be vested in them, were sufficient to secure the provisions thereby conceived in favour of Mrs Graham, nor be bound to take any concern with the maintaining and upholding of such subjects, or the insurance thereof against fire, and that they should have power to discharge the security thereby created, and to accept in lieu thereof such other security or securities as they should see fit, and change the same from time to time.

Mrs Graham by the antenuptial marriage-contract accepted these provisions in full of her legal rights.

Robert Graham was twice married.

The children above mentioned were all children of the first marriage, and there were no children of the second marriage. Mrs Graham survived her husband. At the date when this special case was presented she was still alive and forty-six years of age.

Jessie Graham or Scott predeceased her father, and was survived by three sons—Samuel Scott, John Scott junior, and Robert Scott, who were all still alive. The other residuary legatees above mentioned all survived their father, and were all still alive, with the possible exception of James Graham. All the residuary legatees were of full age with the exception of John Scott junior, who was twenty years of age, and Robert Scott, who was nineteen years of age. Their father John Scott was their curator-at-law. James Graham, who was one of the residuary legatees if he survived his father, left this country for Australia in 1882, and was now, if alive, about thirty years of age. It was uncertain whether he was alive or dead, and if dead, whether he died before or after father, Alexander Moore junior, C.A., Glasgow, had been appointed by the Court as his factor loco absentis. Besides the properties disponed in security of Mrs Graham's annuity, Robert Graham had made over certain stocks to the marriage-contract trustees in further security. The residue of Robert Graham's estate, exclusive of the properties and stock held in security of the said annuity, amounted to about £11,800. The properties and stock referred to had been realised, and their value was about £1158, 3s. 4d., and the

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annual income derived therefrom was £18 or thereby, being bank deposit interest thereon. The whole provisions of the marriage-contract in favour of Mrs Graham exigible up till the date of this case had been fulfilled, but certain questions had arisen with regard to the implement of the obligation to pay and secure the said annuity.

The residuary legatees other than James Graham had requested the testamentary trustees, with the view of bringing the trust of Robert Graham to an end and accelerating the division of the estate and saving expense of management, to purchase an annuity for Mrs Graham from Government or an insurance company, and had offered to give such formal consent as might be required. Mrs Graham was willing for her interest to accept such an annuity, and to give formal consent if required. It was stated in the case that such an annuity could be got from a first-class Scottish insurance company for £1740, 2s., and from Government for £1833, 15s.; and that if the first parties did not purchase an annuity they would require to retain estate of the value of about £3700 to secure the annuity. The first parties proposed to purchase such an annuity taken payable to the second parties as trustees, or in such other form as would make it incapable of alienation by the widow Mrs Graham, and to hand the same to the marriage -contract trustees in implement of the obligation undertaken by Robert Graham in his marriage-contract. The marriage-contract trustees did not dispute that the security would be sufficient, and were willing to accept the same as proper implement of the obligation undertaken by the marriage-contract if they legally could.

In these circumstances the present case was presented for the opinion and judgment of the Court.

The parties to the case were (1) the testamentary trustees, (2) the marriage-contract trustees, (3) Mrs Graham, the widow, (4) the residuary legatees other than James Graham, and (5) James Graham's factor loco absentis.

The first, third, and fourth parties maintained that the purchase of an annuity would be sufficient implement of the obligation undertaken in the marriage-contract, and that the second parties were bound to accept the same and discharge the securities presently held by them.

The fifth party maintained that the first parties had no power to sink any part of the capital of the estate in the purchase of an annuity, but were bound to maintain the same intact for the benefit of his ward, who was entitled to a share thereof as a residuary legatee.

The questions for the opinion and judgment of the Court were as follows:—“(1) Whether the first parties will sufficiently implement the obligations undertaken by the said Robert Graham under the marriage-contract by purchasing a Government annuity or an annuity from a first-class insurance company for Mrs Graham's life taken in such terms as to be alimentary, and not subject to the diligences of creditors or assignable by her? or (2) Whether the second parties are entitled and bound to obtain from the first parties such security over capital of the trust-estate held by the first parties as will, along with the security-subjects already in their hands, or the proceeds thereof, be sufficient to secure a free yearly annuity of £100 to Mrs Graham? (3) Whether under Mr Graham's trust-disposition and settlement the first parties, in a question with the beneficiaries of the fee of the trust-estate, are entitled, in the exercise of their discretion and as a piece of proper trust administration, to sink part of the estate in the purchase of an annuity and wind up the trust, or are bound to keep up the trust for the purpose of paying the annuity of £100 to Mrs Graham, giving to the second parties such additional security for payment thereof as may be necessary in terms of the said antenuptial contract of marriage?”

Argued for the first and fourth parties—The difficulty here arose in consequence of the decision in White's Trustees v. Whyte, June 1, 1877, 4 R. 786. But that case was distinguished from the present in respect (1) that here it was not proposed to hand over the annuity to the annuitant herself, but to the marriage-contract trustees in order that they might pay her the annuity term by term, and (2) that the testamentary trustees were not charged with the duty of paying the annuity or seeing it paid. All that the testamentary trustees were bound to do was to implement sufficiently the obligation in the marriage-contract. No trust was interposed so far as the testamentary deed was concerned for the protection of the annuity. The testamentary trustees were therefore entitled to wind up their trust provided they made satisfactory provision for the payment of the annuity by the marriage-contract trustees, and had their consent and the consent of the widow. Both the former and the latter were quite willing to consent if they were legally entitled to do so. They were so entitled. See Standard Property Investment Company v. Cowe, March 20, 1877, 4 R. 695; and Reliance Mutual Life Assurance Society v. Halkett's Factor, March 4, 1891, 18 R. 615. This case was also distinguished from Ker's Trustees v. Ker, December 13, 1895, 23 R. 317, in respect that the annuity was not to be given to the wife herself, and that here the estate conveyed in security of the annuity was not sufficient to provide for it. (2) As regards the opposition of the fifth party, it was to be borne in mind that this was not a question whether something requiring the consent of the beneficiaries could be done without the consent of one of them, but whether something which must be done in the course of the administration of the trust, whether the beneficiaries consented or not, could be legitimately done in this particular way.

Argued for the second and third parties—The third parties were not entitled to discharge their present claim upon the testamentary trust in return for an annuity to be purchased by the first parties:— Ker's Trustees v. Ker, cit.

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See also Tod v. Tod'sTrustees, March 18, 1871, 9 Macph. 728; and Hughes v. Edwards, July 25, 1892, 19 R., (H.L.) 33. There was no case in which trustees had been allowed to adopt such a course. What the marriage-contract trustees were entitled to was “such further security” as would produce the value of an annuity of £100.

Argued for the fifth party—The testamentary trustees were not entitled in obedience to such a direction as was given here, as a piece of ordinary trust administration, without the consent of all the residuary legatees, to spend part of the residue in the purchase of an annuity. If that were so, each residuary legatee was entitled to stand upon his rights, and if something could not be done without his consent, to consent or not as he chose. No one could say what the absent son would consider his interest, and the fifth party was not entitled to give his consent to such a proposal as the present. This refusal did not prevent some such arrangement being carried through, because an annuity could be purchased out of the shares falling to the other residuary legatees.