Scottish Court of Session Decisions

This was a petition at the instance of the Right Honourable Randolph Henry Earl of Galloway, &c., heir of entail in possession of the entailed estates of Galloway, Baldoon, and Newton-Stewart, for restriction of an annuity affecting said entailed estates.

The Entail Provisions Act 1824 (Aberdeen Act) (5 Geo. IV.c.87), enacts, sec. 1—“It shall and may be lawful to every heir of entail in possession of an entailed estate under any entail already made or hereafter to be made in that part of Great Britain called Scotland, under the limitations and conditions after mentioned, to provide and infeft his wife in a liferent provision out of his entailed lands and estates by way of annuity, provided always that such annuity shall not exceed one-third part of the free yearly rent of the said lands and estates, where the same shall be let, or of the free yearly value thereof where the same shall not be let, after deducting the public burdens, liferent provisions, the yearly interest of debts and provisions, including the interest of provisions to children hereinafter specified, and the yearly amount of other burdens of what nature soever affecting and burdening the said lands and estates, or the yearly rents or proceeds thereof, and diminishing the clear yearly rent or value thereof to such heir of entail in possession, all as the same may happen to be at the death of the granter.”

By bond of annuity dated 27th December 1873 and duly recorded the late Earl of Galloway granted to his wife the Right Honourable Mary Countess of Galloway a free yearly annuity of £3000 payable out of the entailed estates of Galloway, Baldoon, and Newton-Stewart, subject to all the conditions and limitations contained in the Aberdeen Act.

The late Earl of Galloway died on 7th February 1901 survived by his wife, and was succeeded in the entailed estates by the present petitioner.

The petitioner prayed the Court to find that the utmost amount with which the late Earl could competently burden the said entailed estates as an annuity to his widow under the Aberdeen Act was £2113, 4s. 6d., and that the annuity of £3000 granted by the late Earl should be restricted to £2113, 4s. 6d, and to order, declare, and restrict accordingly.

The gross rental of the entailed estates, exclusive of the mansion-house and policies, for the year current at the date of the late Earl's death, was stated in the petition to be £26,594, 1s. 6d., and the free rental, as alleged by the petitioner (after deducting assessments, public burdens, interest on heritable debts, and certain other items, including certain deductions for upkeep of estate buildings and fences, and for management and superintendence of the estate) £6339, 13s. 5d., one-third whereof, viz., £2113, 4s. 6d., was the sum to which the petitioner maintained that the annuity fell to be restricted.

Answers were lodged for the Countess of Galloway, the annuitant, objecting to the deductions sought to be made by the petitioner in estimating the free yearly rent out of which the annuity was payable. In particular she objected to the deduction of (1) a sum of £1796, 7s. 9d. for upkeep of estate buildings and fences, and (2) a sum of. £1013, 5s. 10d. for management and superintendence of the estate.

On 31st March 1902 the Lord Ordinary ( Pearson) pronounced this interlocutor—“Finds that the petitioner is not entitled in the calculations for fixing the widow's annuity to make the deductions claimed for upkeep of estate buildings and fences, or for management and superintendence of the estate, and on the motion of the petitioner grants leave to reclaim.”

Opinion.—“This is a petition by an heir of entail in possession to restrict the amount of an annuity of £3000 payable to the widow of the preceding heir. It is said that the free rental, calculated in terms of the Aberdeen Act under which the annuity was granted, will only warrant an annuity of £2113, 4s. 6d. The questions in dispute have regard to the deductions which fall to be made from the rent or value in the course of ascertaining the rental available for the annuity. To a certain extent the parties are agreed as to these deductions. Public burdens, feu-duties, annual rents, interest of heritable debts, and children's provisions are all admitted to be proper

Page: 83↓

deductions. But the petitioner also claims deduction for certain other items numbered 7 to 11 in the petition, none of which so far as I know or have heard have ever been allowed before.

In the determination of such questions it has been usual to have regard to the practice which has prevailed since the Act was passed in 1824. I should have been disposed to follow the usual course, and remit at this stage to a man of business to report. But the parties concurred in asking me to hear argument regarding the deductions which are in dispute on the general question whether they are to be taken into account at all on a sound construction of the statute.

In particular, the discussion had regard mainly to the two most important of the deductions which are now challenged, namely, £1796 for upkeep of estate buildings and fences, and £1013 for management and superintendence of the estate. I was asked to deal with these first, because, as I understand, if they are disallowed, the full annuity of £3000 will be payable.

Now, the first section of the Aberdeen Act enumerates certain deductions which have to be made in the course of the calculation, and it was argued for the petitioner in the first place that the two deductions now immediately in question could be brought within those statutory deductions. I think this attempt fails. It is true that the enumeration is followed by the general words, ‘the yearly amount of other burdens of what nature soever affecting and burdening the said lands and estates or the yearly rents or proceeds thereof, and diminishing the clear yearly rent or value thereof to such heir of entail in possession.’ And it is argued that while the upkeep of estate buildings and fences and the cost of managing the estate do not form burdens on the lands, they do ‘affect’ the yearly rents in the way of diminishing them in the hands of the heir in possession. In one sense they may be said to do so, but I think it clear that by no process of construction can they be regarded as ‘burdens affecting and burdening the said lands and estates or the yearly rents or proceeds thereof’ within the meaning of this section. These words seem to me to point to charges of quite a different nature.

But the main contention of the petitioner is this—Assuming that the deductions in dispute cannot be brought within the enumerated deductions, it is argued that those which are enumerated are to be deducted from the free yearly rent or free yearly value, and the contention is that this ‘free yearly rent’ requires for its ascertainment a previous calculation in which you start with the gross rent, and then by deducting the expenses of management, upkeep, and the like, which are necessary to earn it, you arrive at the ‘free rent.’

Now, considering the matter first apart from authority and practice, I cannot say that that is an impossible construction. I think there are three possible constructions of the clause. The first is to regard the words ‘after deducting the public burdens,’ &c., as exegetical of the word ‘free,’ as if it had been ‘the free yearly rent’—that is to say, ‘the yearly rent after making the following deductions, and no others.’ Or it might mean ‘the free yearly rent after making at all events and among others the following deductions.’ Or thirdly, it might mean what the petitioner contends for as first explained. Of these constructions I should myself prefer the first on a perusal of the section and of the Act as a whole, although I admit that it makes the word ‘free’ in a sense superfluous, as the same meaning would be reached without it. It appears to me that one difficulty in adopting the petitioner's construction arises from the circumstance that ‘public burdens’ are in the list of the express deductions, for I should have thought that these were in any view deductible before ‘free rent’ was arrived at, and therefore, on the petitioner's construction, need not have been mentioned at all.

But even if the clause were more ambiguous than I think it is, the petitioner's view is discredited by the fact that so far as I know or was informed there is neither practice nor authority in its favour since the passing of the Act in 1824, and that such authority as exists is against it. It is true that hitherto the main disputes regarding the deductions warranted by the Act have been whether the enumerated deductions did or did not include this or that item of expenditure, and not whether the expression ‘free rent’ involved a prior calculation at an earlier stage with its own appropriate deductions. But I have a strong impression that all the cases have proceeded on the assumption that the list of deductions as set forth in the statute (including the general words at the end of the list) was exhaustive, and that when these had all been made, according to the sound construction of the words used, you had arrived at the ‘free rent ’ on which the annuity was to be calculated. There is very little authority on the point more immediately raised by the petitioner, and indeed the only decision to which I was referred which bears directly on it is the case of Grierson, 1887, 25 S.L.R. 549. That, however, is a distinct authority for disallowing the proposed deduction, and as it appears to me to be sound in itself and in line with the other decisions on this section, I propose to follow it, notwithstanding that the cases there referred to by the reporter in support of his opinion may admit of being distinguished from the case he was dealing with.

I think the fallacy of the petitioner's view lies in this, that he looks at the matter too exclusively from the commercial point of view, as if the heir in possession were running a business, and the purpose of the calculation was to ascertain the nett profits. The statute regards the estate as a subject let or lettable. If it is let, the rents received are the basis of the calculation, and the deductions to be made are those specified in the statute. The matter is well illustrated by taking the alternative

Page: 84↓

case of the estate being partly in the proprietor's own hands, including farms, and, it may be, mineral workings. Thus, in the case of Leith, 1862, 24 D. 1059, the home farm was not let, and the question was, how was its yearly value to be ascer tained for calculating children's provisions? It was held that parties were not bound to accept the valuation roll as conclusive on that matter, and the Court remitted to a land valuator to report ‘as to the proper yearly value or rent’ of the farm for the year current at the death. It is plain, both from the reference to the valuation roll and from the terms of the remit, that what the Court were in search of was the true occupation-rent of the subjects. I think this also furnishes a reply to the petitioner's observations on the possible case of minerals being worked by the heir in possession. It was argued that if the respondent's view were sound, the provisions would have to be calculated on the gross output of the pits without deduction for oncost, or for the expenses of winning and raising the minerals. That, however, is not so if the lettable value is taken as the standard of ‘yearly value,’ for a tenant would take account of all such expenses before fixing the rent he was willing to pay.

I therefore find that the petitioner is not entitled to claim the deductions specified under heads nine and ten in the petition, and since, if these are disallowed, the free rental is more than sufficient to yield the annuity claimed, it is not necessary to go further.”

The Earl of Galloway reclaimed, and argued—The sums disallowed by the Lord Ordinary were proper deductions. The words of the Act were “free yearly rent … after deducting the public burdens,” &c. The word “free” was important, and must be given effect to, otherwise it would be meaningless. Therefore, before deducting the public burdens and other items enumerated in the section, the “free” rent must first be ascertained by deducting from the gross rental the expenses of upkeep and management. In the case of a mineral estate the expense of working the pits was deducted— Lord Belhaven and Stenton, Petitioner, January 23, 1896, 23 R. 423, 33 S.L.R. 299. In estimating a composition the expense of upkeep was deducted. If the lands were unlet, the yearly value was taken, not necessarily the value in the valuation roll, and that implied the deduction of expenses and management— Leith v. Leith, June 10, 1862, 24 D. 1059. The only decision on the point was an Outer House case, and therefore not binding, viz., Grierson, Petitioner, June 16, 1887, 25 S.L.R. 549, and the cases relied on by the Reporter in that case, viz., Cochrane v. Cochrane, November 25, 1846, 9 D. 173; Dunbar v. Dunbar, December 7, 1872, 11 Macph. 200; 10 S.L.R. 109; and Macpherson v. Mucpherson, May 24, 1839, 1 D. 794, aff. 5 Bell's App. 280, only showed that the deductions enumerated in the Aberdeen Act were real burdens. The case of Macpherson, cit. supra, was one dealing with a permanent improvement, and was not therefore in point.

Argued for the respondent—The expression “free yearly rent” meant the rent ascertained by deducting the burdens specified in the Act. The words “after deducting the public burdens,” &c. were exegetical of the word “free.” Practice had been uniformly against the contention of the appellants, and the case of Grierson, cit supra, was in accordance with practice. This was the first time that rule of practice had been questioned. The provision in the Entail Amendment Act of 1868 (31 and 32 Vict. c. 84), sec. 6, was analogous and bore the same construction. The case of Cochrane, cit supra, was in point in the present case, especially the opinion of the Lord Justice-Clerk (Hope), at p. 185. There were two serious objections to the argument of the reclaimer, viz., (1) No directions are given as to how the free yearly rent ought to be arrived at, and (2) the expression “free yearly rent” would be applied to a rental from which, ex hypothesi, there were still to be deducted public and real burdens, the very things that naturally fell to be deducted first of all in estimating free rental.

At advising—