Scottish Court of Session Decisions

This was an action of multiplepoinding raised by David Handyside and another,

Page: 525↓

the testamentary trustees of James Hadden, who died on 21st August 1890, with a view to the distribution of the truster's estate. The said estate became divisible upon the death of the truster's widow, which occurred on 29th July 1896.

The facts of the case, as disclosed upon record and by the proof, were as follows:—In 1865 Robert Hadden junior, a son of the truster, and at that time about eighteen years of age, took out a policy of insurance upon his life for the sum of £500. The policy was in the usual form, and bound the insurance company to pay that sum to “the heirs, executors, administrators, or assigns” of Robert Hadden junior. The policy, when taken out, came into and remained in possession of his father James Hadden, and upon his death was found in his repositories. James Hadden paid the premiums upon the policy down to the date of his death.

On 2nd July 1890 James Hadden executed a trust-disposition and settlement, by which he conveyed his whole estate, heritable and moveable, to trustees in trust for certain purposes. By the second purpose he directed as follows:—“My trustees shall make payment out of the free income of my estate of the premium necessary to keep in force the policy of insurance belonging to me on the life of my son Robert. ( Third) On the death of my said wife my trustees shall set aside and invest the sum of £100 … for behoof of my granddaughter Margaret Stevenson Hadden, daughter of my son Robert.” By the fourth purpose he directed his trustees, on the death of his wife, to realise his estate, and divide the same among his family in eight equal shares. He revoked and recalled all previous settlements and testamentary writings.

After James Hadden's death, the trustees continued, as directed by him, to pay the premium on Robert Hadden's policy of insurance, which they retained in their possession. On 26th October 1891 they took from Robert Hadden an assignation of the policy, by acceptance whereof the trustees bound themselves “to make payment of the sum falling due and payable under the said policy, with any bonus additions which may have accrued thereon, to my daughter Margaret Stevenson Hadden, under deduction of the whole premiums paid on the policy from 1865 until the date of the said Robert Hadden's death, and of certain other sums. The assignation proceeded on the narrative that “I have been requested by said trustees to assign to them all my right and interest in said life policy upon the conditions hereinafter written, and that it is just and reasonable that I should do so.” Upon Robert Hadden's death on 19th January 1896 the trustees uplifted the sum due under the policy, the net amount of which after deducting the premiums paid on the policy and other disbursements, was £153, 6s. 3d.

This was the sum at stake in the present action, in which claims were lodged (1) by James Hadden and others, being the family of the truster James Hadden, who claimed to be ranked and preferred to seven-eighths of the residue of the trust-estate, including the proceeds of the policy, and (2) by Robert Hadden's daughter, Mrs Margaret Stevenson Hadden or Bryden, who claimed, inter alia, (2) to be ranked and preferred to the surplus of the said policy.

James Hadden and others pleaded—“(2) The said policy of insurance being the property of the said James Hadden, the proceeds thereof fall to be divided as part of the residue of his estate, and the claim by Mrs Bryden to the proceeds of said policy falls to be repelled.”

The Act 14 Geo. III., cap. 48, sec. 1, enacts that “no insurance shall be made by any person … on the life … of any person … wherein the person … for whose use, benefit, or on whose account such policy … shall be made, shall have no interest.”

After a proof the Lord Ordinary ( Pearson) on 9th July 1898 found that the policy of insurance was the property of the deceased James Hadden, and that the proceeds thereof fell to be divided as part of the residue of his estate.

Opinion.—… “The policy mentioned in the will was effected with the City of Glasgow Life Assurance Company on 2nd November 1865, when Robert was nearly 18 years of age. The proposal was written out and signed by Robert himself, and the policy, which is for £500, is taken in the ordinary form in favour of his heirs, executors, administrators, or assigns. It does not appear that the company knew anyone in the matter except the assured, and accordingly the premium receipts and the bonus notices do not disclose that the father was in any way interested in the policy.

But the proof establishes that the policy remained throughout in the father's custody, and was kept by him in his desk; and further, that the premiums were throughout paid by him. This, coupled with the father's assertion in his will that the policy belonged to him, appears to me to be sufficient, in the absence of any facts from which it can be inferred that the policy, after being issued to Robert, was handed by him to his father on the footing that the latter was to advance the premiums and to retain the policy in security.

The claimant Mrs Bryden refers in her claim to another policy of the like amount with the same office on the life of Robert's brother James, and she avers that the two policies are in pari casu. If, however, James' policy may be legitimately referred to, as I think it may, it affords a marked contrast to the other one. It was taken out when the assured was 18 years of age, as in the case of his brother, and it remained from the first in the father's custody, he paying the premiums until James' marriage in 1878. But a week or two after that event the father told James he was going to make him a present of the policy as a marriage gift, because he had ‘stuck so loyally to him for many years'; and he there and then handed the policy

Page: 526↓

and the premium receipts to James, adding that he would expect James to keep it up himself for the future. For two years after this James, being short of money, asked his father specially to pay the premium for him. But since 1880 he has kept up the policy himself. Now, the testator made no similar arrangement as to the other policy, and the proof and the terms of the will suggest that he had only too good reason for not doing so. He placed Robert's share of residue under restrictions, and he bequeathed for the behoof of Robert's only child (Mrs Bryden) a sum which (as it happens) covers the surrender value of the policy on Robert's life both at the date of the will and at the testator's death.

It is contended for Mrs Bryden that since the death of the testator the policy has been dealt with by the trustees on the footing that it belonged not to the testator but to Robert Hadden. In the inventory there is included not the policy but a sum of £362, 3s. 4d., stated as a debt due by Robert Hadden to the father's estate, that being the amount of premiums which the father had paid on this policy. And the value of the debt is stated at 98, 5s., being the surrender value of the policy. Now, that inventory was prepared by the late Mr Wallace, who was one of the trustees and acted as law-agent in the trust. But it cannot now he discovered on what grounds he treated the policy as belonging to Robert Hadden. He may have had good and convincing grounds; he may have known something which, if now available, would have been conclusive on the matter. But as things stand all this is mere conjecture. And the fact which remains, namely, that the trustees, through the law-agent, treated the policy in the inventory as not belonging to the father, is obviously insufficient in itself to solve the present question.

If the policy was truly the father's, they had no power to change that by asserting that it was the son's. The right to the policy, as far as the father's estate is concerned, must be fixed as at the date of the father's death.

The same remark may be made on the other contention of the claimant, Mrs Hadden, namely, that in October 1891, more than a year after the father's death, the then trustees took from Robert Hadden an assignation of the policy on the condition that they would keep it up and would pay the net proceeds of it to his daughter Mrs Bryden. She maintains that this deed is conclusive in her favour. But I do not see how it can be so treated in the question whether the policy belonged to the testator at his death. It may be improbable that Mr Wallace and his co-trustees should have so dealt with the policy, unless they were convinced that it belonged to Robert; but the fact that they so dealt with it goes a very little way to show that it did belong to him.

Then it is urged that if the policy is regarded as having belonged to the testator, it was an illegal contract, and void under the Statute of 14 Geo. III., the testator having had no pecuniary interest in his son's life.

I am asked to prefer the view which would make it a legal instead of an illegal contract. So far as this plea is urged as affecting the antecedent probability of a father's insuring the life of his son, and keeping the policy as his own, I am not disposed to allow it any weight.

On the other hand, if it is meant that the father's general representatives cannot vindicate the fruits of the father's illegal contract, I think that is a misapplication of the statute.

The statute in my view furnishes a defence to the insurance company if they choose to plead it; but ‘if they do not, the question who is entitled to the money must be determined as if the statute did not exist.’ (Lord Justice Mellish, in Worthington, 1875, L.R., 1 C.D. 424.)”

Mrs Bryden reclaimed, and argued—The Lord Ordinary was wrong. The policy was Robert Hadden's. It must be presumed that James Hadden, though he had the policy in his possession from the outset, had no desire to do anything illegal. But under the Act of Geo. III. it would have been illegal for him to take out a policy on his son's life. The terms of the policy itself must be referred to, and they emphatically pointed to Robert's heirs, executors, or assignees as the parties to whom the proceeds of the policy were to be paid— Dickie's Trustees v. Dickie, March 8, 1892, 29 S.L.R. 908; Worthington v. Curtis, L.R., 1 Ch. D. 419. The claimant also referred to Walker's Executor v. Walker, June 19, 1878, 5 R. 965; Connell's Trustees v. Connell's Trustees, July 16, 1886, 13 R. 1175, and Paterson's Judicial Factor v. Paterson's Trustees, February 4, 1897, 24 R. 499, as illustrating the effect of a general disposition upon a special destination in a bond or other document. No doubt it was quite competent for James Hadden's family to prove if they could that the policy was the truster's— Forrester v. Robson's Trustees, June 5, 1875, 2 R. 755; but they had failed to discharge the onus that lay upon them. There was no proof how or why the policy had come into the truster's possession, and the natural presumption was that he was merely keeping it for Robert because of Robert's youth at the time when it was taken out. Even assuming that the policy was the property of the truster, the trustees could never have acquired an active title to it without the assignation from Robert, which, moreover, gave them the only security they possessed for the repayment of the premiums. They were not entitled now to repudiate their transaction with him, especially as they had not challenged it on record.

Argued for James Hadden and others—The Lord Ordinary was right. The case must he dealt with apart from the Act of Geo. 111. altogether— Worthington, ut sup.; and it had been proved that the property was the policy of the truster. He had had possession of it, he had paid the premiums on it, and he had treated it in his settlement as his own property. Delivery would

Page: 527↓

have been necessary to make the policy Robert's. The general disposition in his will overruled the special destination in the policy, if, indeed, the words there amounted to a proper special destination at all— Hill v. Hill, 1755, M. 11,580; Balvaird v. Latimer, December 5, 1816, F.C.; Jarvie's Trustee v. Jarvie's Trustees, January 28, 1887, 14 R. 411; Walker v. Galbraith, December 21, 1895, 23 R. 347; Brydon's Curator Bonis v. Brydon's Trustees, March 8, 1898, 25 R. 708. The truster's settlement contained a clause revoking all previous settlements. As regards the assignation, it could not affect the question as to the right of property in the policy. The trustees were in error in having taken the assignation, but it would not bind them, for the policy was theirs already under the truster's settlement.