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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Hutchison v. Grant's Trustees [1913] ScotLR 6 (06 June 1913)
URL: http://www.bailii.org/scot/cases/ScotCS/1913/51SLR0006.html
Cite as: [1913] SLR 6, [1913] ScotLR 6
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SCOTTISH_SLR_Court_of_Session
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Court of Session Outer House.
[
v.
Facts:
The Thellusson Act (39 and 40 Geo. III, cap. 98), sec. 1, provides that no one shall thereafter settle any real or personal property by will or otherwise in such a manner that the interest thereof shall be “accumulated for any longer term than the life … of any such … settler …, or the term of twenty-one years from the death of such … settler …, and in every case where any accumulation shall be directed otherwise than as aforesaid, such direction shall be null and void.…”
By trust disposition and settlement A directed his trustees to hold the residue of his estate for B, his only daughter in liferent, and for her children in fee. On A's death B elected to take her legal rights, and the income of the estate was thereafter accumulated by the trustees in order to compensate the trust estate for the sum paid to B as legitim. At the termination of twenty-one years from A's death, equitable compensation to the trust estate having not yet been fully effected, the trustees continued to accumulate the income for that purpose. Held ( per Lord Hunter) that the accumulations of income subsequent to the expiry of twenty-one years from A's death were illegal under the Thellusson Act, and fell to be paid to B as heir ab intestato of A.
The Thellusson Act (39 and 40 Geo. III, cap. 98) enacts—Section 1—“… No person or persons shall after the passing of this Act by any deed or deeds, surrender or surrenders, will, codicil, or otherwise howsoever, settle or dispose of any real or personal property so and in such manner that the rents, issues, profits, or produce thereof shall be wholly or partially accumulated for any longer term than the life or lives of any such grantor or grantors, settler or settlers, or the term of twenty-one years from the death of any such
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grantor, settler, devisor, or testator, or during the minority or respective minorities of any person or persons who shall be living or in ventre sa mère at the time of the death of such grantor, devisor, or testator, or during the minority or respective minorities only of any person or persons who under the uses or trusts of the deed, surrender, will, or other assurances, directing such accumulations, would for the time being, if of full age, be entitled unto the rents, issues, and profits, or the interest, dividends, or annual produce so directed to be accumulated: And in every case where any accumulation shall be directed otherwise than as aforesaid, such direction shall be null and void, and the rents, issues, profits, and produce of such property so directed to be accumulated shall, so long as the same shall be directed to be accumulated contrary to the provisions of this Act, go to and be received by such person or persons as would have been entitled thereto if such accumulations had not been directed.” Section2—” … Nothing in this Act contained shall extend to any provision for payment of debts of any grantor, settler, or devisor, or other person or persons, or to any provision for raising portions for any child or children of any grantor, settler, or devisor, or any child or children of any person taking any interest under any such conveyance, settlement, or devise …, but that all such provisions and directions shall and may be made and given as if this Act had not passed.” The following narrative of the circumstances of the case is taken from the Lord Ordinary's opinion—“The pursuer in this case is the daughter and only child of the late William Grant, wine and spirit merchant, Dunoon, who died on 14th January 1890. She brings the present action against her father's trustees for payment of a sum of £255, 6s. 5d., as unlawful accumulation of interest upon her father's estate to which she as his heir-at-law is entitled. Under her father's settlement the pursuer was entitled to a liferent of his whole estate, the fee being destined to her children, with a destination-over to others named in the settlement. She elected, as she was entitled to do, upon her father's death to take her legal provisions. The result of that election was that, temporarily at all events, although as is admitted not absolutely, her liferent interest in her father's estate was set free. As there was not a forfeiture clause, she was entitled, on the estate being recouped in the amount that she had taken out in respect of her legal claims, to be restored to her interests under the will, i. e., to enjoy the remainder of her liferent interest. More than twenty-one years, however, elapsed before equitable compensation had effected restoration to the estate from the liferent interest of the amount that had been taken out in order to pay the pursuer's legal claims. Consequently there is no room in this case, I think, for considering equitable compensation at all. The question is, What is to be done with the accumulations after twenty-one years from the death of the testator?”
The pursuer pleaded, inter alia—“(1) The accumulation of income on the trust estate after 14th January 1911 being prohibited by the Thellusson Act, all such accumulations form undisposed of residue and belong to the pursuer as heir ab intestato of the testator.”
The defenders pleaded, inter alia—“(5) The defenders being bound to accumulate and apply the income set free by the pursuer's election of legitim in compensation of the parties injured by said election, and the accumulation of income for this purpose not being within the operation of the Thellusson Act, the defenders are entitled to decree of absolvitor.”
The following authorities were referred to:—By the pursuer— Lord v. Colvin, December 7, 1860, 23 D. 111; Logan's Trustees v. Logan, June 24, 1896, 23 R. 848, 33 S.L.R. 638; M'Gregor's Trustees v. Kimbell, July 14, 1911 S.C. 1196, 48 S.L.R. 950; Mathews v. Keble, 1868, 3 Ch. App. Ca. 691, at p. 696; Tench v. Cheese, 1855, 6 De G. M. &G. 453, at p. 462; Lees' Trustees v. Tinzies, January 9, 1897, 4 S.L.T. 227; in re Heathcote, [1904] 1 Ch 826; Gollan's Trustees v. Booth, July 5, 1901, 3 F. 1035, at p. 1038, 38 S.L.R. 762. By the defenders— Macfarlane's Trustees v. Oliver, July 20, 1882, 9 R. 1138, at p. 1160, 19 S.L.R. 850; Gray's Trustees v. Gray, 1907 S.C. 54, at p. 57, 44 S.L.R. 39; Lombe v. Stoughton, 1841, 12 Simon 304; Bryan v. Collins, 1852, 16 Beavan 14, at p. 17; in re Gardiner, [1901] 1 Ch 697.
When one looks at the clause of residue in this case one finds ample provision for the accumulation, and in fact the accumulation in the hands of the trustees just now is just going on in virtue of the powers conferred on the trustees by this clause. They have no power, and no right to accumulate except such as is thereby given them.
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That being so, it appears to me that the provisions of the Thellusson Act as interpreted in such a case as Logan's Trustees v. Logan, 23 R. 848, or in any other of the leading cases, apply to the circumstances here, unless it can be said that the accumulations come within certain exceptions introduced in the Thellusson Act.
The defenders have pled two of these exceptions in their answer 5, because they quote section 2 of the Act, which provides—“Nothing in this Act contained shall extend to any provisions for payment of debts of any grantor, settler, or advisor, or other person or persons, or to any provision for raising portions for any child or children of any grantor.” I must say I do not follow the argument which brings what has occurred here within the scope of these exceptions. No provision at all was made by the truster, and the first exception allows of a provision being made. Further, I don't see that what was done was in any proper sense payment of debt—debt either of the truster or of anyone else. It has not been suggested that the second exception that it was a provision for a child or children of the grantor or settler is applicable.
That being so, I hold these accumulations to be unlawful accumulations under the Thellusson Act. The Act itself provides that the illegal accumulations should go to the person or persons who would have been entitled to them if such an accumulation had not been directed. That, of course, would give these illegal accumulations to any person who under the settlement has what has been described in English legal phraseology, and I think also adopted in Scotch phraseology, as a gift in possession.
There is no such case here. In fact it is admitted by the defenders that if there are unlawful accumulations under the Thellusson Act these constitute intestate succession of the testator. The only person entitled thereto is the pursuer. I do not think that any argument has been submitted which deprives her of her right as heir of her father to take whatever was undisposed of by him. She has taken nothing under the will of her father. She merely got in the first instance her legal rights and surrendered her liferent, and now she claims the accumulations which in consequence of the operation of the Thellusson Act have become intestate succession of her father.
I therefore hold that the pursuer is entitled to decree against the defenders, but as this was a case where the trustees were entitled to bring the action, I think the expenses should come out of the unlawful accumulations.
Counsel for the Pursuer— Sandeman, K.C.— Lippe. Agents— Dove, Lockhart, & Smart, S.S.C.
Counsel for the Defenders— Blackburn, K.C.— R. C. Henderson. Agents— Cuthbert & Marchbank, S.S.C.