Scottish Court of Session Decisions

By antenuptial contract of marriage entered into between Mr Alexander Henderson and Mrs Agnes Elder Robertson or Henderson, Mr Henderson made certain provisions for bis wife and children, in terms of which he bound himself and his successors to make payment to his wife, if she survived him, of £250 per annum, and to make payment to the child or children of the marriage who should be alive at his death, if there should be two or more children, of the sum of £3000, payable at the term of 15th May or 11th November which should first happen after his death in the case of children then major or married and to others at the first term after their respective majorities or marriages.

In security of these provisions Mr Alexander Henderson assigned, disponed, and conveyed to the trustees under the marriage-contract, “and to the acceptors or acceptor, survivors or survivor of them, and to such persons as they shall afterwards assume into the trust in virtue of the powers hereinafter conferred on them, the majority alive and accepting being a quorum, All

Page: 14↓

and Whole the balance of his share of the succession of his said father unpaid at this date, which he is entitled to take and draw by the will of his said father, subject to the provisions of said will, in order that they no lay lay out the same on good securities, heritable or moveable, Government funds, debentures, or purchases of stocks taken to themselves as trustees foresaid, and may make payment of the interest thereof to the said Alexander Henderson during his life, and that after his death they may apply the said balance and the proceeds thereof for payment of the annuity and other provisions hereinbefore contained, in favour of the said Agnes Elder Robertson in the first place and preferably, and for the education and aliment of the said children, and for payment of the provisions to them as hereinbefore specified, and that if any residue thereof shall remain after these purposes are provided for, that they may make payment of the said residue to the said Alexander Henderson and his heirs and assignees whatsoever.”

In 1862 a sum of £961, 9s. 9d. fell to be paid to Mr Henderson as to account of the balance of his share in the succession of his father, and in that year this sum was paid to Mr Henderson directly by his father's testamentary trustees, and was invested by him in his business in Canada. In 1881 a further sum of £2756, 4s. 7d. became payable to him, and this sum, in accordance with the assignation in the marriage-contract was paid over to the marriage-contract trustees.

Mrs Henderson predeceased her husband. There were more than two children of the marriage still surviving.

In 1897 the marriage-contract trustees raised an action against Mr Henderson, concluding for payment of the above—mentioned sum of £961, 9s. 9d., with interest thereon at the rate of 5 per cent. from August 13th 1862.

The pursuers averred that the sum in question had been paid to the defender without their knowledge or acquiescence, that in security for its repayment the defender had assigned to them policies of assurance on his life, representing £515, that he had further assured his life in the pursuers' names for $2000, and that on receiving payment of the sum sued for they were willing to assign to him these policies.

They further averred—“Through diminution in the value of, or loss incurred in the investments of the said sum of £2756, 4s. 7d., which diminution and loss was incurred within the powers of the trust-deed under which the pursuers act, or at all events on investments made with the consent and concurrence of the said Alexander Henderson, the whole sum of £961, 9s. 9d., with a large part of the interest thereon, is required to make up the full sum of £3000, payable to the children of the marriage on Mr Henderson's death.”

The defender averred that the sum in question “on discharge signed by the defender on 13th August 1862 was by mutual inadvertence paid over to him by the testamentary trustees of his father.”

He further averred—“(Stat. 3) The defender Mr Henderson failing to observe the mistake which he had made in receiving payment of this sum, invested it in his business in Montreal; and when, some years later, the mistake was discovered, in order to avoid the heavy loss which realisation and repayment of the sum would have entailed to him, he was authorised by the testamentary trustees to retain the sum, and in or about the year 1874 assigned to them in security two policies of assurance on his life, namely, a policy for £100 with the United Deposit Assurance Company (now the Scottish Union and National Fire and Life Assurance Company) the premiums on which had all been previously paid up in one sum, and a policy for £415 with the Scottish Provident Institution, the premiums on which Mr Henderson undertook to pay and empowered his marriage-contract trustees to pay out of his liferent from the marriage-contract funds. These premiums have since been paid up in full by the pursuers with the defender's funds. The present surrender value of these two paid-up policies is £379, 14s. These assignations were duly intimated to the insurance companies. (Stat. 5) Early in the same year 1881 a new arrangement was made between the various parties. The marriage-contract trustees received from the testamentary trustees of Mr Thomas Henderson an assignation of the two policies of assurance previously assigned to them as narrated in article 3, and in consideration thereof, it is believed, they jointly and severally bound themselves to indemnify the testamentary trustees against any claim which might be made against them by any of the beneficiaries under the marriage-contract trust in respect of the aforesaid payment in error should Mr Alexander Henderson's trust-estate eventually prove insufficient to meet the whole purposes of the trust. (Stat. 6) About the same time the defender assigned to his marriage-contract trustees, in additional security, a new policy on his life, which he took out in their names, for the sum of 2000 dols. (about £400) with the Canada Life Assurance Company. The receipt of this policy and assignation thereof was duly acknowledged by the pursuer Mr John Henry Robertson, who thereafter paid the premiums as they fell due out of the defender's liferent of his trust-estate. In consequence of these steps it was agreed that the sum received through inadvertent error by the defender nineteen years previously (being the principal sum sued for) should not be repaid, and during the sixteen years that have elapsed since then repayment has never been mentioned till, without any prior application to the defender personally, this action was raised.”

The defender also stated that he had handed over to the pursuers in 1881 a sum of £94, 6s. 2d., being his share of the balance of liferent payable from his father's estate.

He averred further—“(Stat. 7) Ever since May 1881 the fulfilment of the defender's obligations under his marriage-contract has thus been amply secured by the

Page: 15↓

funds held by his trustees for this purpose, namely, by the two sums of £2756, 4s. 7d. and £94, 6s. 2d. paid to them as described in article 4, coupled with the paid-up policy for £100, and the policies for £415 (since paid-up) and 2000 dols. respectively, the premiums on which they are empowered to make a first charge on the liferent of the defender's funds in their hands, as narrated in articles 5 and 6. The pursuers also hold over £5500 of the funds of the defender's late wife, and pay him the interest thereof in liferent. The pursuers thus hold in security of the defender's obligation as to the £3000, £2850, 10s. 9d. in cash, £515 in paid-up policies of insurance, the present surrender value of which is £379, 14s., and a policy for 2000 dollars, besides bonuses, while in security of payment of the premiums on this last policy they have the interest of over £8000. If, therefore, the defender were to pay over the sum sued for to the pursuers, their first duty would, in terms of the provisions of the marriage-contract, be to pay it back to him, and, in any event, as he is liferented in the interest of the marriage-contract funds, any interest paid by him is due to him.”

The defender offered on record to consign the sum of £149, 9s. 3d., being the difference between the sum which he stated had been already received by the pursuers irrespective of the policies of assurance, and £3000, being the provision in favour of his children.

He pleaded—“(2) The pursuers are barred by taciturnity and mora, and by acquiescence, from insisting in the present action. (3) The pursuers have no interest to have the fund contributed by the defender in security of his obligations under his marriage-contract kept up beyond the sum of £3000, and as they hold funds and securities of the defender's to a greater amount, the present action should be dismissed, with expenses. (5) In respect of the agreement come to by parties in 1881, and of the actings of parties then and since, the present action is incompetent.”

The Lord Ordinary ( Pearson) on 2nd December 1898 pronounced the following interlocutor—“Repels the defences, decerns and ordains the defender to make payment to the pursuers of the sum of £961, 9s. 9d., as concluded for, with interest thereon at the rate of five per cent. per annum from the date of this decree, but without interest prior thereto: Finds the pursuers entitled to expenses,”&c.

Opinion.—“The pursuers are the trustees under the antenuptial contract of marriage of the defender Mr Henderson.

By that contract, dated in 1885, the defender assigned to trustees, in security of certain provisions to his wife and children, the balance of his share in the succession of his father, and this assignation was duly intimated to his father's trustees.

In 1862 a sum of £961, 9s. 9d. fell to be paid to account of the share so assigned; and in 1881 a further sum of £2756, 4s. 7d. The latter sum was duly paid to the marriage-contract trustees. But the former sum was by inadvertence paid to and received by the defender himself, who says that he invested it in his business in Canada.

The trustees now sue for payment of this sum of £961, with interest, as being part of the trust funds assigned to them, which prima facie it is.

The defence raises certain questions which make it necessary to attend more particularly to the provisions of the marriage-contract. It there appears that the provisions in security of which the above-mentioned assignation was granted, were mainly (1) an annuity of £250 to his wife if she survived him; and (2) a provision to the children of the marriage who should be alive at his death (the issue of a predeceasing child taking the parent's share) of £1500 if one child, and £3000 if two or more. The wife is dead, and there are at present more than two children of the marriage.

The trust fund so assigned in security was to be laid out by the trustees as there directed in their own names as trustees, the interest to be paid to the husband during his life, and on his death the funds were to be applied in payment of the said provisions; and if any residue remained after these purposes were provided for it was to be paid to the defender and his heirs and assignees.

The defender maintains, in the first place, that the purposes so far as extant, are already amply provided for by the trust funds in hand, and that if the trustees recovered the money their first duty would be to pay it back to him, in terms of the marriage-contract.

I cannot read the contract as imposing any such duty. It may be that where a sum assigned in security of provisions turns out to be out of all proportion larger than the provisions to be secured, the Court will set free a part for distribution. The explanations given do not suggest that this is a case of that class; and in one possible view of the case it cannot be said that the children's provision is even covered by the securities held by the trustees.

If a provision has vested, no doubt all concerned, being sui juris, can combine for immediate distribution, except in the case of alimentary trusts.

But in the present case it is at least not certain that the fee of the provision has vested; and even if it had the children are not here.

But secondly, the defender alleges that certain arrangements were made relative to the fund in question which, followed by the actings of parties, exclude the present claim by the trustees. He avers that he invested the sum in his business; and that on the discovery being made some years after that the money had been paid to him by mistake, his father's trustees, who had paid it, authorised him to retain it, on his assigning to them in security two policies of assurance on his life, the one for £100 and the other for £415, the premiums on which are now fully paid. This assignation was, it is explained, in security of his liability to repay the £961 to his father's trustees when called on.

Page: 16↓

Then in 1881 it is said a new arrangement was made between the various parties. Mr Henderson's marriage trustees hound themselves to indemnify the testamentary trustees of his father for the payment so made in error on obtaining from the latter an assignation of the two policies of assurance. About the same time the defender assigned to his marriage trustees in additional security a new policy on his life for 2000 dollars (about £400), the premiums being defrayed out of the defender's income. The averment is, that in consequence of these steps it was agreed that the sum received in error by the defender in 1862 should not be repaid, and that during the sixteen years which have since elapsed repayment has never been mentioned.

It does not appear to me that this is a relevant answer to the trustees' claim.

At the highest the averments do not amount to an allegation that the original assignation contained in the marriage—contract has received effect, or that the implied obligation to assign has been expressiv discharged. The theory of the defender's case seems to be that the policies of assurance have been accented by the trustees, not as security for implement of the defender's obligation to make good the £961, but as security for the provision to children, which is quite a different thing.

I do not think the defender's averments amount to more than this—that on the error being discovered, after he had put the money into his business, bis father's trustees, and afterwards his marriage trustees, refrained from pressing him for repayment on getting the policies in security for such repayment.

It would require much more pointed averments to support the case now suggested, namely, that, the original obligation has merged in the security arrangement, that it has been extinguished, and the security arrangement accepted in lieu of it.

In my opinion, therefore, the defences are irrelevant so far as directed against, repayment, of the capital sum. With regard to the claim for interest, T think this may be held to be extinguished by the provision that the income of the trust funds is payable to the defender. No special case is made for restitution of profits on the ground that the money has been at risk, and has earned more than the normal rate. I do not think the trustees should be better off on receiving payment than if they had received it in 1862 and put it in a safe investment.

As to expenses, I think on the whole that they must follow the result.”

The defender reclaimed, and argued—The obligation was primarily the defender's and not that, of the trustees. If he fulfilled the obligation in some other way, the whole of the assigned estate must, be restored to him. Accordinglv, as soon as the purposes were provided for, i.e., by adequate security being lodged in the hands of the trustees, the excess must be returned to him. The two questions in the case were—(1) How much were the pursuers entitled to receive? (2) How much had they received? (1) The pursuers had no interest to have the amount contributed by the defender in security of his obligation kept beyond the sum of £3000, which was the amount to which the obligation was now restricted. Where money had to be paid over at some future date, trustees were not entitled to retain any residue to provide against possible depreciation— More Gordon v. Gordon's Trustees, November 6, 1868, 41 S.J. 43. There might be a discretion where there was an annuity to be paid, but that was not the case here. The defender had tendered what would make up £3000 in cash exclusive of the policies. (2) The pursuers had in money or money's worth no less than £3717, 14s. 4d. Part of the estate had been handed over in the form of policies of insurance, and this course had been taken at the instigation of the pursuers themselves. Accordingly, they could not now turn round and demand instant payment of cash. No suggestion was made by them on record that these policies were not investments which the trustees ought to hold. In point of fact they came within the terms of the clause of investment as being “good securities.” Moreover, they were also justified as being “debentures”— Phillips v. Eastwood, 1835; Lloyd and Goold Chanc. Rep., Ir., 270 at 292. Accordingly, with the policies the pursuers had an ample margin, but if they were entitled to adequate security for £3000 and no more, they had it apart altogether from the policies.

Counsel for the respondents were not called upon.