Scottish Court of Session Decisions

The Free Church of Scotland, pursuers, raised an action against the trustees of the late Alexander Edward MacKnight, advocate, Edinburgh, defenders, in which, inter alia, they concluded for declarator that “the defenders, as trustees foresaid, are bound to pay over to the pursuers or their treasurer for the time being, or to such other person as may be authorised by them to receive the same, the whole free annual income of that portion of the means and estate of the said Alexander Edward MacKnight which, under the directions contained in the codicil dated 13th May 1898 to his said trust-disposition and settlement, was appointed to be administered and applied for the promotion of ‘… the Home Mission in connection with the Free Presbyterian Church of Scotland,’ for which missions it is declared in the said codicil that the residue is to form ‘the capital fund for the same,’ being the fund or moneys dealt with by the order of the Commissioners appointed for the purposes of and acting under the Churches (Scotland) Act 1905 (5 Edw. VII, ch. 12), No. 1252, entitled ‘Alexander Edward MacKnight's Trust,’ and dated 10th day of November 1909, and also referred to in a further order of the said Commissioners of the same date, numbered 1253, entitled ‘Provision for support of ministers and itinerant preachers, and for administration and management of the Free Church,’ in order that the said income may be by the pursuers or their said treasurer or other duly authorised representatives applied for such one or other or more of

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the purposes specified in the said order of said Commissioners, numbered 1253, (being those enumerated under heads 4 ( a) and 4 ( b) in the first column of the First Schedule to the Churches (Scotland) Act 1905) as the pursuers shall from time to time direct.”

The facts of the case which were not in dispute were as follows—Mr MacKnight died on 8th June 1899, leaving a trust disposition and settlement and relative codicils. By the codicil dated 13th May 1898 he directed his trustees to expend the free annual income of the residue of his estate (which amounted to £9340, 11s. 5d.) for the promotion of one or both of two missions in connection with the Free Church of Scotland, viz., (1) The Mission to the Miners of Scotland, and (2) The Free Church Home Mission, and he declared that if the said Church should depart from the Confession of Faith and standards, or adopt the false principle of abstinence and tamper with the administration of the Lord's Supper, the grant from his estate should cease and determine, and be applied by his trustees to such charitable purposes as they might think proper. There was a further declaration “that it shall be in the power of my trustees to engage Free Church missionaries, or in their discretion other workers, including laymen and lady missionaries or workers, being members of the Free Church, in the promotion of the above missions or either of them in such way as they may think proper, either through the Church or independently of it, such missionaries or other workers receiving suitable remuneration, or my trustees may, should it be deemed by them more expedient, pay over the free annual income of my estate to the respective treasurers of said missions, or one or other of them, to be applied to the purposes foresaid.” There was also a provision that if the mission to the miners should become non-existent—an event which happened—the whole of the said income should be applied for the promotion of the Home Mission. The Trustees decided to act independently of the Church in the administration of the trust fund, and they appointed a missionary—the Rev. J. Hood Wilson MacLeod—who is an ordained preacher of the Free Church, to carry on mission work among the miners at Bathgate.

The Church Commission, acting under the powers conferred upon them by the Churches (Scotland) Act 1905 (5 Edw. VII, cap 12), issued two allocation orders affecting Mr Macknight's bequest, both dated 10th November 1909 and numbered 1252 and 1253 respectively. By the first of these orders the Commissioners allocated to the Free Church “the whole rights and interests” which the Free Church had in Mr Macknight's trust estate under the said codicil, and the allocation order further declared—“The allocation … shall to the extent of £9340, 11s. 5d. (being the amount of the capital value placed upon it for the purpose) be held as to account pro tanto of a provision of £250,000 made by the Commissioners for the support of ministers of the Free Church congregations … for itinerant preachers and for the general purposes of administration and management of that Church, and which provision will be dealt with by a separate order entitled ‘Order No. 1253.’” And by Order No. 1253 the Commissioners allocated certain funds, and among others certain sums specified in a schedule annexed to said order, to make up the said sum of £250,000, being the amount of the capital fixed by the Commissioners as a provision for the support of ministers of Free Church congregations, for itinerant preachers, and for general Church purposes. In the schedule referred to in said order the sum of £9340, 11s. 5d. from Mr. MacKnight's trust was entered as being wholly allocated for the purposes specified in the order.

Notwithstanding these allocation orders, the trustees continued to act independently of the Church in the administration of the trust fund. The pursuers averred that the Bathgate mission was not in any sense a Free Church mission, and had never been sanctioned by them, and that the payment of the Rev. Mr MacLeod's salary was not a proper application of the trust funds.

The pursuers pleaded, inter alia—“(1) The fund in question having been by virtue of the Churches (Scotland) Act 1905 and the Allocation Orders of the Commissioners under said Act founded upon, affected with a statutory trust for the purposes enumerated under the fourth head in the first column of the First Schedule to said Act, and being now applicable thereto, the pursuers are entitled to decree in terms of one or other of the first two declaratory conclusions.”

The defenders pleaded, inter alia—“(3) On a sound construction of Mr MacKnight's will, and of the statute and orders founded on by the pursuers, the defenders are entitled to apply the trust revenue at their own hand and in their own discretion for the purposes specified by the testator. (4) The defenders having administered said bequest in accordance with the said trust purposes, and in terms of law, they should be assoilzied from the whole conclusions of the action.”

On 6th December 1911 the Lord Ordinary ( Dewar) sustained the fourth plea-in-law for the defenders and assoilzied them from the conclusions of the summons.

Opinion.—“… The pursuers maintain that the effect of these orders is to sweep the bequest from Mr MacKnight's estate into the general Church funds, so that it is no longer exclusively available for the purpose for which Mr MacKnight intended it, but may now be used for any of the specified purposes, viz.—Either for the support of ministers or itinerant preachers or for general purposes of administration and management, and accordingly that the defenders have no longer the right to administer the trust fund independently of the Church, as they have hitherto done; that they have been deprived of their discretion. and that it is now for the Church to decide how the money should be applied; and they conclude for declarator

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(1) that the defenders are bound to pay over to the pursuers or their treasurer the whole free annual income of the residue of Mr MacKnight's estate; or (2) that the defenders are bound to dispense the said income among the objects referred to in said Allocation Order in such manner as the pursuers may direct; and (3), and in any event, that the defenders are not entitled to pay missionaries who are not duly appointed and recognised by the Church or its agents for the purposes of home mission work.

It may be true, as the pursuers say, that the Church can administer the funds quite as efficiently and perhaps more economically without the assistance or interference of the defenders, but that is not the point. The question, and I think the only question, is whether the Allocation Orders have deprived the defenders of the discretion which Mr MacKnight reposed in them. I am of opinion that they have not.

By Order No. 1252 the Commissioners allocate the ‘whole rights and interests’ which the Free Church had in Mr MacKnight's estate at 30th October 1900. And the codicil sets forth what these rights and interests were. The trustees are directed to ‘expend the free annual income’ of the residue of the estate in manner after mentioned for the promotion of the said missions; and the manner in which it is to be expended is left absolutely to the discretion of his trustees:—‘… It shall be in the power of my trustees to engage Free Church missionaries, or in their discretion other workers, including laymen, and lady missionaries or workers … in such a way as they may think proper either through the Church or independently of it, such missionaries or other workers receiving suitable remuneration, or my trustees may, should it be deemed by them more expedient, pay over the free annual income of my estate to the respective treasurers.’ Mr MacKnight desired to benefit Free Church missions, but he did not give the Free Church control of the fund; he does not even think it prudent to permit the Church to have control of the income. He seems to have had more confidence in his trustees than in those who managed the affairs of the Church. This may have been because he thought it possible that the Church might ‘depart from the Confession of Faith or adopt the false principles of abstinence.’ But in any case he made it abundantly clear that he wished his trustees to administer his bounty, and he accordingly circumscribed and limited his bequest to the Church. All he gave was the right to have the annual income from his estate applied in the promotion of Church work at the discretion of the defenders, and it is this limited ‘right and interest’ which is allocated by Order No. 1252, and it is this limited ‘right and interest’ also which is declared by Order 1253 to form part of the fund of £250,000 which may be used for support of ministers, itinerant preachers, or general Church purposes. If the Commissioners had intended to extinguish the defender's right to exercise their discretion in the manner in which the bequest should be applied, I think they would have said so in express words, or at all events it would have been clear by necessary implication that such was their intention. But I can find nothing to suggest this in either order. On the contrary, it is specially provided that ‘nothing in this order shall prejudice or affect any rights, duties, and liabilities as regards the property hereby allocated other than those of the Free Church and the United Free Church.’ Now it is both the right and the duty of the defenders under the codicil to use their discretion as to the manner in which they shall apply the income from the trust fund, and to act independently of the Church if they think proper. They have decided to act independently, and I do not think that the pursuers can interfere with them, and I accordingly sustain their fourth plea-in-law and assoilzie them from the conclusions of the summons.”

The pursuers reclaimed, and argued—The Churches (Scotland) Act 1905 (5 Edw. VII, cap. 12), section 1 (1) authorised the Commissioners to allocate “the property in question” between the Free Church and the United Free Church. “The property in question” was defined by section 4 (1) of the Act, and Mr MacKnight's bequest fell within the definition. The Commissioners were therefore entitled to allocate the bequest. The bequest formed part of the Home Mission Fund of the Free Church. In any event it was money which the Commissioners regarded as applicable for that or similar purposes. They were therefore entitled under section 1 (3) of the Act, taken along with the First Schedule, to devote the bequest as they had done to the support of ministers, for itinerant preachers, and for the general purposes of administration and management of the Church. The objects of the trust had thus been altered by the Act and the orders of the Commissioners. The question therefore was, whether, looking to the alterations as to the beneficiary, the old machinery of the trust was not inapplicable to the present circumstances. The only practical way to carry out the new trust purposes was for the trustees to hand over the income of the trust funds to the Free Church. The duty of trustees was to exercise the machinery of a trust so long only as it was useful for carrying out the trust purposes— Miller's Trustees v. Miller, December 19, 1890, 18 R. 301, 28 8.L.R. 236. If the Act and orders had not interfered with the trustees' power of independent action, and they proceeded to spend this money independently of the Church, then the pursuers would not get £250,000 for the foresaid purposes, as the Commissioners intended, but quoad upwards of £9000 thereof would have to be satisfied with a benefit which would be wholly illusory. Section 2 (5) had no bearing on the question. It was primarily intended to save outside rights in an allocated fund, e.g., a

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right of liferent or a reversionary right. It was of course not meant to cover a trust purpose which the Act by its own terms had altered. Between these two classes of rights, administrative rights such as that claimed by the defenders occupied an intermediate position. Whether such rights would be affected by the Act and orders following thereon depended on the circumstances of each particular case. They would be saved unless, as in this case, the alteration of the trust purposes had rendered them merely cumbersome. In any event the Lord Ordinary was wrong in sustaining the fourth plea-in-law for the defenders. The trustees had not expended any of the trust funds on the Home Mission of the Free Church, it being impossible to regard the mission in Bathgate as coming within that description.

Argued for the defenders—The right conferred upon the Free Church by Mr MacKnight's will was a somewhat limited right. Not only was there a provision that the bequest should be forfeited in the event of the Church adopting certain courses, but it was in the discretion of the trustees to pay over the income of the trust funds to the Church or to promote home missions by taking action independently of the Church. The only thing that was impressed with what might be called the statutory trust was such right as the Free Church had in Mr MacKnight's property, and such right subject to every limitation that existed affecting it, of which this discretionary power of the trustees was one. All that the Act was intended to do was to discriminate between the property which was to go to the Free Church and the United Free Church respectively. It was not intended to make any other alteration on the trusts under which the property was held. The Act accordingly provided for the alteration of the person of the beneficiary without in any way altering the rights of the beneficiary. All that the Commissioners could therefore deal with, and all that they did deal with, was the limited right which the Free Church got through the administration and subject to the administration of the trustees. In order to extinguish such rights as the right of independent action conferred upon the trustees a very direct provision in the statute would have been required. Not only was there no such provision, but it was expressly provided by section 2 (5) that the orders of the Commissioners were to be without prejudice to any rights, duties, and liabilities of third parties. Esto that the trust funds must be devoted to the support of ministers, itinerant preachers, and the general purposes of administration and management of the Free Church, home missions fell under general purposes, and the defenders were perfectly able and willing, acting independently of the Church, to promote home missions. The defenders did not insist on carrying out the Bathgate scheme, and that alone. They were willing to consider any other district. On the other hand, if the pursuers got the declarator they sought they could spend every penny of the bequest on placed ministers, which would be quite contrary to Mr MacKnight's will.

At advising—