Scottish Court of Session Decisions

James Ranken of Glenlogan and Whitehill, in the county of Ayr, died in 1848, leaving a trust-disposition and settlement, dated 12th December 1845, and recorded in the Books of Council and Session 7th June 1848.

By his trust-disposition and settlement Mr Ranken conveyed his whole estate, heritable and moveable, to trustees, and directed them, after making provision for payment of his debts and the expenses of managing the trust, and for delivery of certain articles and a certain liferent to his sister Jane Ranken, to “divide the clear annual income of his whole estate before conveyed into ten equal shares, and that half-yearly as the same shall be realised,” and to pay them to the different beneficiaries therein described; and on the failure by death of all the parties to whom he had directed a share or shares of the income of his property to be paid, he directed his trustees “to convey and pay over the fee of my whole property, heritable and moveable, to the person who shall, on that event taking place, be heir-male of George Ranken of Whitehill, my father, and to his heirs and assignees whomsoever.”

The trust estate under the management of the trustees consisted of two landed properties—Glenlogan and Whitehill—situated about fifteen miles apart. Both of these estates contained coal of considerable value. At the date of the testator's death the coal in the estate of Glenlogan was being worked, and it had continued to be worked ever since. The coal in the estate of Whitehill had not been worked or let before the testator's death, but subsequent thereto it was let by the trustees for a fixed rent of £200 or royalties. The tenants paid the fixed rent but did not begin to work the coal. They were tenants of an adjoining property upon which they had a pit, through which they proposed to work the coal in Whitehill. It was not expected, however, that they would begin to work it for a considerable time. In these circumstances, questions having arisen as to the disposal of the mineral rent from Whitehill, a special case was presented.

The parties to the case were (1) John Mackenzie Bow and others, the testator's trustees, first parties; (2) Thomas Ranken, heir-male of the said George Ranken of Whitehill; who was also heir-at-law of the testator; and who was also the eldest son of the testator's deceased nephew George Ranken, mentioned in his trust-disposition and settlement, and as such in receipt of certain shares of the income of the testator's estate, second party; (3) Robert Limond Ranken and others, the persons by whom the liferents of the remaining shares of income were being enjoyed, third parties.

The parties of the first and second part maintained that as the minerals of Whitehill had never been worked prior to the death of the testator, and as his trust-disposition and settlement contained no direction to work them, the rents and lordships payable therefor did not fall to be paid over to the parties entitled to the income. The parties of the first part maintained further that said rents and lordships being the proceeds of the corpus of the estate were in their nature capital, and fell to be retained by them with a view to being paid over to the person ultimately entitled to conveyance of the estate. The party of the second part further maintained that said shares of income derived from the rents and lordships payable in respect of the minerals of Whitehill were not disposed of by the testator in the circumstances which had occurred and had fallen into intestacy, and that he as heir-at-law of the testator for the time being was meantime entitled thereto. The parties of the third part maintained that said mineral rents and lordships were income of the estate, and fell to be divided and paid over to them and the second party accordingly. Separatim, they contended that so long as the coal in Whitehill remained unworked they were entitled to the fixed rent paid by the tenants in respect of the tenancy of said minerals.

The questions of law submitted for the decision of the Court were—“(1) Are the mineral rents and lordships payable from Whitehill income of the trust, and do they fall to be paid over to the second and third parties accordingly? or (2) Are said mineral rents payable to the second and third parties as income of the trust only so long as the said minerals are not worked? or (3) Do said mineral rents and lordships form part of the corpus of the estate, and do they accordingly fall to be retained by the first parties for the purpose of being ultimately paid over to the person entitled to a conveyance of the estate? or (4) Is the accumulation of said rents and lordships struck at by the Thellusson Act, and do they accordingly fall to be paid over in the meantime to the second party as possessing for the time the character of heir-at-law of the testator, and heir of George Ranken, entitled to conveyance of the estate?”

Argued for the first parties—(1) The rents and royalties of minerals which had not been worked prior to the testator's death were not income but capital— Campbell's Trustees v. Campbell, March 15, 1882, 9 R. 725, 19 S.L.R. 498, affd. July 6, 1883, 10 R. (H.L.) 65, 20 S.L.R. 748. They were part of the corpus of the estate— Gowans v. Christie, February 14, 1873,

Page: 12↓

11 Macph. (H.L.) 1, per Lord Cairns at p. 12, 10 S.L.R. 318. The fact that the coal was not yet being worked, and that a fixed rent and not royalties was being paid, made no difference. The fixed rent was part of the price for being allowed to take away coal. (2) The fixed rent being capital and not income, the Thellusson Act (39 and 40 Geo. III, cap. 98), section 1, made applicable to heritable property in Scotland by the Rutherfurd Act 1848 (11 and 12 Vict. cap. 36), section 41, had no application.

Argued for the second party—(1) If the fixed rent were to be regarded as in no different position from royalties, he adopted the argument of the first parties that it was not income but capital. The settlement had not disposed of rents for coal which was not being worked. As heir-at-law he was entitled to the fixed rent as being undisposed of. Reference was made to In re Scarth, L.R., 1879, 10 Ch. D. 499. (2) Fixed rent was not in the same position as royalties. No coal had been taken away, and there was no obligation to work the coal. Accordingly in this state of matters the fixed rent paid was not the price paid for a wasting subject, but was similar to money paid for an option, and the accumulation of it was struck at by the Thellusson Act. The rents fell therefore to be paid to the second party as the party who would have been entitled to the beneficial enjoyment of the estate had not accumulation been directed.

Argued for the third parties—No coal had been taken away. The £200 did not represent the price for the exhaustion of the corpus of the estate, but represented the natural increase in the value of the property, and was income not capital, like duplicands of feu-duty— Ross's Trustees v. Nicol, November 22, 1902, 5 F. 146, 40 S.L.R. 112—and fell to be paid to the third parties.