Scottish Court of Session Decisions

On July 19, 1910, Thomas Skene Esson, W.S., Edinburgh, and another, the trustees acting under the trust-disposition and settlement of the late Dr Andrew Vans Dunlop, sometime surgeon in the East India Company's service, and thereafter residing in Edinburgh, first parties; Jane Dunlop Fergusson Pollok, Pollok Castle, Renfrewshire, and others, children of the late William Fergusson Pollok, of Pollok Castle aforesaid, second parties; and the University Court of the University of Edinburgh, third party, presented a Special Case in which they craved the Court to determine whether the appreciation in value of certain of the trust investments which had been set apart for behoof of the second parties fell to be paid over to them or to the third party as residuary legatee.

The facts as given by the Lord President in his opinion were as follows:—“This is a Special Case presented for the disposal of a question which has arisen in the administration of the estate of the late Dr Andrew Vans Dunlop, who left a settlement by which he made various bequests. In particular, by the eleventh purpose of his trust-disposition and settlement, he provided that in case the wife of his brother-in-law, Mrs Fergusson, did not succeed to certain estates before his death or before the 1st January 1883, he left to his brother-in-law the sum of £5000 sterling ‘in liferent to be held by my trustees in Europe for his liferent use allenarly and for his lawful issue in suoh proportions as he, and failing him, as his said wife, may direct and appoint, in fee.’ That £5000 was subsequently increased by an additional £2000 being added to it. Mrs Fergusson did not succeed to Pollok estates before the death of Dr Vans Dunlop or before 1st January 1883. Dr Vans Dunlop died on 27th February 1880. After various other provisions, there was a residuary bequest by which the trustees were bound to pay over the whole residue estate to the University of Edinburgh.

“Now when the 1st January 1883 passed, the trustees set aside a sum of £7000, and they invested it in a certain way to meet the legacy which they were told to hold for Mr Fergusson in liferent and for his children in fee. They have held that investment ever since. The liferenter has now died, and the investment has appreciated in value.

In 1883, the trust purposes being generally fulfilled, the trustees made over the whole residue, retaining merely a small sum of £400 to meet some calls which were possible upon some shares which were held by the testator, and a small sum of £183 to meet eventual expenses; and they paid the whole residue as it existed to the University of Edinburgh, and they got a receipt and discharge from their commissioner.

The special bequest of £7000 being now free to be given to the fiars, the liferenter being dead, the University have put in a claim for the value of the appreciation which has taken place upon the investment held.”

Dr Vans Dunlop's settlement, after conferring power on his trustees to invest the

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trust funds in various securities therein specified, and authorising them to retain certain of his stocks and shares, proceeded as follows—“And having estimated the value of these stocks and shares at the market rate of the day, they shall divide them accordingly among the various legatees, or otherwise appropriate them for the purposes of this trust.”

The second parties contended that as Mrs Fergusson did not succeed to the Pollok estates before 1st January 1883, said legacies of £5000 and £2000 at that date vested in Mr William Fergusson in liferent and in his issue in fee, and that the University then ceased to have any interest in said sums. That said sums were at that date properly set aside and appropriated by the said William Fergusson, as trustee, for himself in liferent and his issue in fee, as distinct from the residuary estate in which the University was interested. That the debenture of the Mortgage Company of South Australia, Limited, in which said sums were invested, and the subsequent investments by which it was replaced, belonged to, and were held exclusively for, the said William Fergusson in liferent and the second parties in fee, and that the proceeds of the British Linen Bank stock which formed one of said investments belonged exclusively to the second parties, and now fell to be paid over to them.

The third parties contended that the said William Fergusson Pollok, as trustee foresaid, had no power to and did not legally set aside and appropriate the investments above mentioned to meet the said legacies of £5000 and £2000, and did not competently sever the same from the rest of the trust estate. They further contended that the second parties were now entitled to payment only of the balance of the said legacies remaining unpaid, and that the appreciation which had taken place in the British Linen Bank stock, in which the said balance had since 1892 stood invested, enured to residue and was payable on realisation to the third parties.

The questions of law were—“(1) Was the late William Fergusson Pollok, as trustee foresaid, empowered by the testator's testamentary writings to set aside and appropriate particular investments to satisfy the said legacies of £5000 and £2000, so as to sever the same from the rest of the trust estate? (2) In the event of the preceding question being answered in the affirmative, did the said deceased William Fergusson Pollok, as trustee foresaid, legally and competently set apart and appropriate the particular investments mentioned in the case to satisfy the said legacies? (3) Are the second parties entitled to the benefit of the appreciation which has taken place in the investment in British Linen Bank stock representing the balance of the said legacies? or, Are the third parties entitled, on realisation of the said British Linen Bank stock, to the difference between the price realised and the balance of the capital of the said legacies remaining due to the second parties?”

Argued for the second parties—The truster had authorised his trustees to “appropriate” the estate as the trust purposes might require. That having been done, the appreciation on the sums so appropriated fell to the parties for whom it had been set aside— Robinson v. Fraser's Trustees, August 3, 1881, 8 R. (H.L.) 127, 18 S.L.R. 740.

Argued for the third parties—The trustees though authorised to appropriate the trust securities were not directed to do so, and without such direction they were not entitled (in the absence of a clear indication to do so) to sever the interests of the various beneficiaries— Teacher's Trustees v. Teachers, January 10, 1890, 17 R. 303, 27 S.L.R. 250; Scott's Trustees v. Scott, November 1, 1895, 23 R. 52, 33 S.L.R. 65.