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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Baxters v. Baxter's Trustees [1909] ScotLR 743 (27 May 1909)
URL: http://www.bailii.org/scot/cases/ScotCS/1909/46SLR0743.html
Cite as: [1909] SLR 743, [1909] ScotLR 743
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SCOTTISH_SLR_Court_of_Session
Page: 743↓
Court of Session Inner House First Division.
v.
Facts:
The Entail Amendment (Scotland) Act 1868, section 17, provides that it shall be competent to constitute by trust or otherwise a liferent interest in move — able estate in favour only of a party in life at the date of the deed (in the case of a testamentary deed, the death of the grantor), and where any moveable estate shall, by virtue of any deed dated after the passing of the Act, be held in liferent by or for behoof of a party of full age born after the date of such deed, such moveable estate shall belong absolutely to such party.
A testator who died in 1871 directed his trustees to apportion his estate among his children, declaring that the shares should not vest in them or their children (his grandchildren) but that they should only receive the interest, the fee of a share on a grandchild's death to be paid to his or her issue (testator's great grandchildren). The funds, however, were to be held by the trustees as one cumulo fund. Certain of his grandchildren, born after his death and having attained majority, founding on the Entail Amendment (Scotland) Act 1868, claimed payment of their shares in fee.
Held (1) that the Act applied, and that they were entitled to payment— Shiell's Trustees v. Shiell's Trustees, May 26, 1906, 8 F. 848, 43 S.L.R. 623; and MacCulloch v. M'Culloc's Trustees, November 24, 1903, 6 F. (H.L.) 3, 41 S.L.R. 88, distinguished; and (2) that the valuation of their shares fell to be made as at the date of payment.
The Entail Amendment (Scotland) Act 1868 (31 and 32 Vict. cap. 84), section 17, enacts—“From and after the passing of this Act it shall be competent to constitute or reserve, by means of a trust or otherwise, a liferent interest in moveable and personal estate in Scotland in favour only of a party in life at the date of the deed constituting or reserving such liferent, and where any moveable or personal estate in Scotland shall, by virtue of any deed dated after the passing of this Act (and the date of any testamentary or mortis causa deed shall be taken to be date of the death of the grantor, and the date of any contract of marriage shall be taken to be the date of the dissolution of the marriage), be held in liferent by or for behoof of a party of full age born after the date of such deed, such moveable or personal estate shall belong absolutely to such party, and where such estate stands invested in the name of any trustees, such trustees shall be bound to deliver, make over, or convey such estate to such party.…”
On 21st November 1908 Miss Evelyn V. Baxter and Captain N. E. Baxter, the children, who had attained majority, of the late John Henry Baxter of Gilston, Fife, first parties; Charles W. Baxter and Ralph F. Baxter, his remaining children, who were still in pupillarity, and their tutors and curators, second parties; and Edward G. Baxter of Teasses, Largo, Fife, and others, trustees of the late Edward Baxter of Kincaldrum, Forfarshire, father of the said John Henry Baxter, third parties, brought a Special Case for the determination of the first and second parties' rights in the estate of the said Edward Baxter of Kincaldrum, their grandfather.
By his trust-disposition and settlement the late Edward Baxter of Kincaldrum, who died on 26th July 1871, directed his trustees to “set aside, divide, and apportion the whole residue and remainder of my said means and estate … and that among the whole of my children … in the following proportions.… Declaring that the shares of my said means and estate set apart to my said children other than the said William Edward Baxter, and any accretions to such shares, shall not vest in them or their children (my grandchildren).… And I accordingly appoint my trustees to pay to my said children … during their respective lives the interest, dividends, and yearly profits of their said respective shares or portions of the said residue … so divided and set apart.… Declaring that in case any of my children … shall die, whether before or after me, leaving lawful issue, then such issue shall be entitled to payment of the interest of their deceased parents' shares of my said means and estate and all accretions thereto, and shall also be entitled to the interest of all subsequent accretions as in the room of their deceased parents.… Notwithstanding of the rights of my sons other than the said William Edward Baxter being hereby restricted to a life—rent merely, yet I do hereby specially authorise and empower my trustees … to pay such son or sons the fee of one-third
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of their said respective shares or portions and all accretions thereon so soon as they shall attain the age of twenty-one years,… and on my sons attaining the age of twenty-five years complete … I hereby farther specially authorise and empower my trustees to pay to my said sons a further sum not exceeding one-third of the share of my said means and estate. … I direct my trustees, on the death of my grandchildren, to pay to their issues (my great-grandchildren) the principal sum of the shares of such deceasing grandchildren, including all accretions as aforesaid, equally among them, share and share alike, and that on such issue (my greatgrandchildren) attaining majority or being married, and in the event of any such issue (great-grandchildren) being in minority or unmarried at the time of their parent's death, I direct my trustees to apply the interest of their respective shares for their support, maintenance, clothing, and education, so long as they shall respectively be minors or remain unmarried.” With the view of simplifying accounts the testator directed that the whole of his estate remaining in the hands of his trustees from time to time should be managed and invested as a common or aggregate fund. In exercise of their discretionary powers the trustees paid over to John Henry Baxter the fee of two-thirds of his share. At the time of his death, viz., 30th March 1908, the said John Henry Baxter was entitled to the income of the balance of his share representing a capital sum of about £24,000.
In these circumstances the first parties maintained that, having been born subsequent to the date of the death of the truster (the said Edward Baxter, their grandfather) and both being of full age, they were each entitled to the fee of one-fourth of their father the said John Henry Baxter's share of the trust estate of the truster, and that they were entitled to receive from the third parties immediate payment of their said respective shares thereof (so far as the same were presently exigible) together with the accrued income thereon.
The second parties maintained, that having been born subsequent to the date of the death of the truster (the said Edward Baxter their grandfather) they had each acquired a vested right to one-fourth of their father the said John Henry Baxter's share of the trust estate of the truster, and that they were entitled to receive payment thereof, so far as might be exigible, together with the accrued income thereon, upon their respectively attaining majority.
The third parties maintained that they were bound, in terms of the said Edward Baxter's trust-disposition and settlement, to hold the share of the said trust estate of the truster falling to the children of the said John Henry Baxter, for their liferent alimentary use and for their respective issue in fee.
The third parties further maintained that in the event of the first parties being found entitled to the fee of their respective shares of the portion of the trust estate effeiring to their said father John Henry Baxter they (the third parties) were bound to value said shares as at the date of the said John Henry Baxter's death, and to pay over the same so valued to the said first parties. And in the event of its being found that the second parties had each acquired a vested right to their respective shares of said portion of the said Edward Baxter's trust estate, the third parties maintained that they were likewise bound to value said shares as at the date of the said John Henry Baxter's death, and to set aside and hold for behoof of the second parties particular securities representing the value of their said respective shares. The first and second parties contended that the value of their shares or portions fell to be ascertained and fixed as at the date of payment.
The questions of law included the following:—“(1) Have the first parties an absolute right, within the meaning of section 17 of the Entail Amendment (Scotland) Act 1868, each to one-fourth share of that part of the moveable and personal estate of the truster, the said Edward Baxter, liferented by the said John Henry Baxter, and if so, are the third parties bound to make over to the first parties the said shares of said estate? (2) Have the second parties a similar absolute right to one-fourth share each of the said part of said estate, or have they any vested right to said shares? In the latter event, are the third parties bound to hold said shares for behoof of the second parties until they respectively attain majority, in terms of the 17th section of the Entail Amendment (Scotland) Act 1868?… (4) In the event of the first question being answered in the affirmative, does the value of the first parties' portions of the trust estate of the said Edward Baxter, effeiring to the said John Henry Baxter, fall to be ascertained and fixed as at the date of the death of the said John Henry Baxter or at the date of payment?”
Argued for first and second parties—(1) As regards the major children the Entail Amendment (Scotland) Act of 1868, section 17, was directly in point, and they were therefore entitled to the capital of their shares in fee. (2) As regards the minor children the case was admittedly premature, and would not now be insisted in. (3) The valuation fell to be made as at the date of payment, otherwise the result would be, where the estate had diminished in value, to debit the remaining beneficiaries with the loss.
Argued for the third parties—(1) Section 17 of the Entail Act was inapplicable as its effect would be to interfere with the interests both of the younger children and of the ultimate fiars. The interests of the former would be prejudiced by the risks attending the investment and management of a smaller capital sum. The section therefore did not apply— Shiell's Trustees v. Shiell's Trustees, May 26, 1906, 8 F. 848, 43 S.L.R. 623. (3) The date of valuation should be that which is least burdensome to the remaining beneficiaries, whose common
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law rights were being interfered with. That dace in the present instance was the date of J. H. Baxter's death.
I do not think there is any answer to that demand, because the case seems to be precisely the case contemplated by the statute. The only authority which was quoted against that was the case of Shiell's Trustees ( 1906, 8 F. 848), which proceeded upon the case of McCulloch's Trustees ( 1903, 6 F. (H.L.) 3) in the House of Lords. Now as I read M'Culloch's Trustees, the reason why an immediate conveyance was not there granted was that the interests of third parties would have been affected—and by the interests of third parties I mean not merely the interests of persons who would have eventually become fiars, but the interests of parties who would during their lifetime have taken some of the shares if the provisions of the testator were allowed to be carried out. In both these cases the testator had himself fixed a period of division at which the interests of certain persons, inter se, were to be fixed, and therefore of course, if you took away a share before that period came, you frustrated the possibility of certain beneficiaries getting the shares which they would otherwise get. Now the House of Lords has held that that is not struck at by the Act, and accordingly to apply the Act to such a case as that would be to defeat the perfectly proper object of the testator, which it was not intended to defeat. Here there was nothing of that sort, because the shares vesting in each family are not affected by any survivorship clause in favour of anyone. No doubt, in one sense, of course, somebody must always be defeated by allowing a liferenter to take a fee instead of a liferent, because if he had only taken a liferent there would have come in somebody else entitled to take the fee. That must always be. Accordingly I think this is clearly a case where the statute applies.
There was a question put originally about the younger children, but that was quite properly given up, because the simple answer is that the statute does not apply to them, as they are not in a position to make the demand, they not being of full age.
Then there is a supplementary question whether the estate is to be valued as at the death of the said John Henry Baxter or as at the date of payment. Quite apart from the provision that the whole estate was allowed to be managed in cumulo, I think it is clear that the date of valuation must be the date of payment, because otherwise there might be a most obvious injustice. In the present case the estate seems to have increased in value. But supposing it had decreased in value, then the effect of allowing the valuation to be made as at the date of the death of John Henry Baxter would really be to debit the unfortunate beneficiaries who are left with the whole of the losses in the cumulo trust estate. That is quite out of the question. If that is true with regard to an estate which has fallen in value, it is equally true of the reverse. The share of the estate to be taken must therefore be valued as at the date when the demand is made.
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Accordingly, I am of opinion that we should answer the first question in the affirmative, the second in the negative, the fourth (in its second branch) in the affirmative, and find all the others superseded.
The Court answered the first question of law in the affirmative, the second question in the negative, the fourth question in the affirmative of its second alternative, and found it unnecessary to answer the other questions.
Counsel for First and Second Parties— Craigie, K.C.— King. Agents— Henderson & Jackson, W.S.
Counsel for Third Parties— Blackburn, K.C.— D. Anderson. Agents— W. & J. Cook, W.S.