Scottish Court of Session Decisions

A Special Case was presented by (1) Malcolm Ferguson, farmer, Iona, and others, the testamentary trustees of the late John M'Leod, stableman, Partick, first parties, (2) Mrs Elizabeth Scott or M'Leod, the widow of the said John M'Leod, second party, and (3) Mary M'Leod or Love and others, the whole surviving children of the said John M'Leod, third parties. John M'Leod died on 22nd July 1912, leaving (1) a trust-disposition and assignation, dated 18th January 1893, duly delivered to the trustees thereunder and registered in the Books of Council and Session on 20th October 1908, and (2) a deed of appointment, dated 18th March, and registered in the said books on 30th July both in the year 1912.

By the said trust-disposition and assignation

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the truster disponed his whole estate to trustees, and directed them to pay the income of it to himself during his life, and on his death to hold the trust funds for such persons as he should appoint.

The deed of appointment was in these terms—… I hereby appoint and direct that after my decease the trustees acting under the said trust-disposition and assignation shall hold the trust funds conveyed thereby, so far as undisposed of, so that the whole free annual income and produce thereof may be held, applied, and disposed of ( a) as to three-fifths for the benefit of my wife in liferent for her liferent alimentary use only, paying the same to her half-yearly, quarterly, or at such other times and in such proportions and instalments as the trustees acting under the said trust-disposition and assignation may consider suitable or may find most convenient; and ( b) as to two-fifths thereof for behoof of my whole children of my present and former marriage, and the survivors and survivor of them equally among them if more than one, and that for their liferent alimentary use only during the lifetime of my wife, the same to be payable to my said children half-yearly, quarterly, and by such shares and instalments as the trustees acting under the said trust-disposition and assignation may find most suitable or convenient; and in the case of any of my children being in pupillarity or minority at or after my death, it shall be within the power and right of the said trustees in paying their shares of revenue to expend the same for their behoof as the said trustees may think most desirable; and subject to the above-written provisions I direct the said trustees, on the death of my wife, to hold the capital of the trust funds under their charge for the benefit of my whole lawful children then surviving jointly with the whole lawful issue of such of them as may have died leaving issue, the division being always per stirpes or the issue taking equally among them if more than one the share which their parent would have taken on survivance. And I provide that the provision in favour of my said wife and children respectively shall be in full satisfaction to them of all terce, jus relictæ, and legitim, and generally of all claims legally competent to them on my decease, and I declare that these presents shall supersede, so far as inconsistent therewith, the said trust-disposition and assignation, which, however, in all other respects shall receive full force and effect: And I consent to registration hereof for preservation.”

At the truster's death the capital of the trust estate consisted of £1000 redeemable debenture stock of James Nimmo & Company, Limited.

In answer to the first three questions submitted, with which this report is not concerned, the Court found (1) that the trust-disposition and assignation was revocable, and that the provisions of the deed of appointment were of a testamentary nature, and (2) that the trust estate was heritable in a question between husband and wife, and that the children were entitled to claim one-half as legitim.

The fourth question of law was—“4.… ( a) Is the second party entitled to a liferent of three-fifths of the undivided trust estate, to the effect of postponing any payment of legitim out of the said three-fifths until her death? or (b Are the first parties bound or entitled, during the lifetime of the second party, to encroach annually on the capital of the said estate destined under the said deeds of the truster to the children electing to take legitim to the extent necessary in each year to provide to the second party a sum equivalent in amount to three-fifths of the whole free annual income and produce of the total trust estate? or (c) Will the representatives of the second party at her death be entitled to payment out of the said capital of a sum equal to the total amount by which her income from the trust estate has, in consequence of legitim being claimed, fallen short of what she would have received if three-fifths of the whole free annual income and produce of the trust estate had been paid to her?”

Argued for the second party—The widow having received a reasonable provision by a deed ex facie inter vivos, that provision was entitled to stand and legitim was excluded from it—Fraser, Husband and Wife, 1009, 1011; Lawrie v. Edmond's Trustees, 1816, Hume 291; Balmain v. Graham, 1721, M. 8199; Johnston v. Johnston, 1697, M. 8198; Ersk. iii, ix, 16. In any event, the trustees were bound to make up the widow's income annually out of the capital of the lapsed shares of children taking legitim to an amount equivalent to three-fifths of the income of the undivided trust estate— Scott v. Graham, 1913 S.C. 467, 50 S.L.R. 299.

Argued for the third parties—These deeds were testamentary in character, and could not affect a claim for legitim— Henderson v. Henderson, 1728, M. 8199; More's Notes to Stair, cccliii; Fraser, H. & W., 1005. In regard to equitable compensation, the principle underlying that doctrine was that where a person claimed legitim he must restore to the estate an amount equal to what he had taken out. Here the capital of the estate did not vest till the death of the widow, and the contingent shares of beneficiaries who might never take at all could not be used to compensate the estate. Consequently, until it was ascertained who the ultimate beneficiaries would be, there were no persons liable to compensate the widow and no estate from which she could be compensated.