Scottish Court of Session Decisions

James Lynch, sometime coach proprietor and funeral undertaker in Glasgow, died on 19th November 1873 leaving a trust-disposition and settlement whereby he conveyed his whole estate, heritable and moveable, to the trustees and for the trust purposes therein mentioned. By this deed be directed his trustees, inter alia, to divide the residue of his estate into two equal portions; to pay £1000 to his son James Lynch junior; to retain one-half of the residue (after deducting the said sum of £1000) for behoof of James Lynch junior in liferent for his alimentary liferent use of the free annual proceeds only, and for behoof of his whole lawful children and the survivors and survivor of them equally in fee, but with a discretionary power to the trustees to pay to James Lynch junior such further sum of his share of residue as they might think proper after the expiry of four years from the date of the truster's death; to hold the other half of the residue for behoof of his daughter Mary Margaret Lynch, to pay her out of this share of residue a liferent alimentary annuity of £80 from the date of the truster's death until she attained the age of twenty-one; to accumulate the balance of revenue of the produce of her share of residue until she attained the age of twenty-one; and thereafter to hold the same for her behoof in liferent for her liferent alimentary use of the free annual proceeds only, and for behoof of her whole lawful children and the survivors and survivor of them equally in fee, but declaring that the trustees should be bound to pay to her £1000 out of her share of residue at any time she might require payment of the same from them after she attained majority, to be applied by her as she might think proper.

The truster also desired and requested his trustees to carry on a pawnbroking business carried on by him, and to retain the property in which it was carried on until his daughter attained the age of twenty-one.

The truster empowered the trustees to sell the whole or any part of the residue, to invest, inter alia, in heritable security in Scotland, or in the purchase of heritable property, and to alter and vary the investments.

The truster was survived by his son James Lynch junior and by his daughter Mary Margaret Lynch. James Lynch junior died on 10th February 1878 survived by a widow and three daughters, of whom two died unmarried and intestate in 1888 and 1894 respectively, and aged respectively sixteen and nineteen years. The only persons interested in their succession were their mother and their surviving sister.

The truster's daughter attained majority on 25th April 1883. She was married on 27th April 1880, and had issue.

The estate remained under the charge of the trustees until 18th November 1879, when Mr David Simpson Carson, chartered accountant in Glasgow, was appointed judicial factor thereon.

Prior to the last-mentioned date, the trustees had paid to the said James Lynch junior the sum of £1000 referred to in the settlement, and had also paid to him considerable sums to account of the capital of his share of the residue. They had further paid to or for behoof of the said Mary Margaret Lynch certain sums out of the income of her share, including the annuity of £80 referred to in the settlement, and had accumulated the balance of revenue of her share in terms of the settlement. They had further realised certain portions of the estate, and had carried on the pawn broking business referred to in the settlement.

At the date of the judicial factor's appointment the estate was reported as of the value of £7169, 13s. 3d., the principal items being (1) a bond and disposition in security for £2000, (2) capital invested in the pawnbroking business £3907, and (3) the property in which that business was carried on, estimated at £600.

On adjustment of the accounts between the two beneficiaries as at the said date it was found that the following were the respective interests in the estate, viz.—

1.	Representatives of James Lynch junior	£1991	0	6
2.	Mary Margaret Lynch (now Mrs Griffin)	5178	12	9
		£7169	13	3

On 24th March loot) the Court, upon a note by the first party asking for special

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powers, authorised him to pay to the testamentary trustees of the said James Lynch junior (who were also tutors and curators to such of his children as were in pupillarity and minority) the sum of £120 per annum for the board, maintenance, and education of the children of the said James Lynch junior.

The pawnbroking business was carried on under the direction of the judicial fact or until September 1883, when it was disposed of, realising a surplus on capital account over the value, as estimated at the judicial factor's appointment, of £309, 6s. 4 1 2d., which was credited to the two sets of beneficiaries in equal shares. Between the date of the factor's appointment and that date the profits and loss of the business had been credited or debited in equal shares between the truster's daughter Mrs Griffin and the representatives of her brother, and the revenue accounts between the two beneficiaries were adjusted by debiting James Lynch junior's representatives with interest at 5 per cent. on the amount paid to him in excess of what Mrs Griffin had received.

The judicial factor between 20th March and 29th August 1883 paid to Mrs Griffin the sum of £1000, directed to be paid to her on her majority.

Since 31st December 1883 the judicial factor each year made a division of the revenue of the estate between the two beneficiaries, in the proportion of the capital respectively appearing at their credit as at 31st December of the previous year. He paid Mrs Griffin the actual amount of revenue thus accruing on her share, and paid to or for behoof of the children of James Lynch various sums within the limit allowed by the Court's interlocutor. These sums, however, always exceeded the revenue belonging to their shares, with the result that their capital had gradually been reduced to a small sum.

On 15th December 1880 the judicial factor purchased two ground-annuals at the price of £920, and on 15th May 1882 he purchased two other ground-annuals at the price of £864. At 31st December 1880 the two sets of beneficiaries were interested in the estate to the extent of £1656 and £5112 respectively, and at 31st December 1882 to the extent of £1579 and £5378 respectively.

At 31st December 1898 the estate as entered in the accounts of the judicial factor was valued at £4664, 4s., the principal items being (1) the property in which the pawn broking business had been carried on, estimated at £600; (2) cost price of ground annuals, £1784; (3) bond and disposition in security for £2000, and (4) cost price of £200 Consols, £214, 15s. 11d. The respective interests of the beneficiaries at the same date as estimated by the judicial factor without allowing for profits and losses arising from the increase or decrease of the value of the assets were as follows—

1.	James Lynch's representatives	£287	7	10
2.	Mrs Griffin	£4376	16	2
		£4664	4	6

The only surviving daughter of James Lynch junior attained majority on 14th June 1898, and it became necessary for the judicial factor to pay out the balance of the share belonging to her in her own right, and to her and her mother the share belonging to them in right of her deceased sisters.

No apportionment of any of the individual items of the estate between the two sets of beneficiaries had ever been made, the estate having both during the management of the trustees and that of the judicial factor been treated as one fund, and the revenue divided as above mentioned.

The judicial factor intended to apply to the Court for leave to sell the property in which the pawnbroking business had been carried on. He had obtained a valuation, from which it appeared that it might realise a sum of £450. He desired to retain the ground-annuals as an investment. He had obtained a valuation of them, from which it appeared that as at 14th April 1899 they were worth £2340, being £556 more than the sum at which they stood in the judicial factor's accounts, and that this increase had taken place progressively between the years 1885 and 1897.

In these circumstances it became necessary that the statement of the interests of the beneficiaries as at 31st December 1898, above set forth, should be readjusted so as to give effect to the interests of the beneficiaries in the possible profit and loss on valuation of the property in which the pawnbroking business had been carried on, and in the enhanced value of the ground-annuals. The parties were agreed that the profit or loss on the valuation of the former asset should be divided equally between the two sets of beneficiaries, but certain questions arose with reference to the ground-annuals, and in these circumstances the present special case was presented for the opinion and judgment of the Court.

The parties to the special case were—(1) The judicial factor; (2) Mrs Griffin, the truster's daughter, with consent of her husband, and her children, and her husband as their tutor, curator, and guardian-at-law; and (3) the surviving daughter of James Lynch junior, and his widow.

The parties were agreed that the statement of the estate and of the beneficiaries' respective interests therein as at 31st December 1898 above set forth was correct, subject to such alterations as might be necessitated by the valuation or realisation of the assets, and by the decision of the Court on the questions submitted in this case.

The second parties maintained that the profit accruing by the increased value of the ground-annuals should be divided in the proportions of the interests of the beneficiaries as at 31st December 1898, or alternatively that it should be divided in the proportions of their respective interests as at the dates when the ground-annuals were purchased.

The third parties maintained, inter alia, “That the value of the various assets belonging to the estate should be ascertained by sale, or alternatively by valuation, as

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at the date of division of the estate (which the parties are agreed to hold as at 31st December 1898), and that the profits or losses arising from certain assets of the estate having increased or decreased in value between the date of their acquisition by the first party or his predecessors and the date of division, should be divided equally between the two sets of beneficiaries.”

The questions of law for the opinion and judgment of the Court were, inter alia, as follows—“(4) Is the profit accruing if the said ground-annuals be sold, or the enhanced value as appearing from the said valuation if they be retained, to be credited equally to the second and third parties? or (5) In what proportion is it to be credited?”

Argued for the second parties—When the ground-annuals were purchased the interest of the second parties in the estate with which that purchase was made was much greater than that of the third parties, and the difference between their respective interests continued to increase continuously thereafter. So much was this the case indeed that if the second parties had received as much out of the estate as the third parties received, the judicial factor would not have been able to retain the ground-annuals as an investment. It was only fair therefore that the second parties should get a greater benefit from the increase in value of these investments than the third parties. At most the third parties were only entitled to a share in the increase proportionate to the amount of their interest in the estate as at the date when the ground-annuals were purchased.

Argued for the third parties—There was here no specific appropriation of any particular investments to the share of any of the beneficiaries, and the whole estate was held as an unallotted whole. That being so, both sets of beneficiaries were entitled to share equally in the increase upon the value of any investment which might happen to have increased in value- Teacher's Trustees v. Teacher, January 10, 1890, 17 R. 303, per Lord Shand at page 314; Scott's Trustees v. Scott, November 1, 1895, 23 R. 52, per Lord Trayner at pp. 58 and 59.