Scottish Court of Session Decisions

At advising on 7th June 1955,—

LORD PRESIDENT (Clyde).—The main question in this special case is whether there has been ademption of certain liferent and other provisions contained in the third purpose of the trust-disposition and settlement of the late Sir George A. D. Ogilvie-Forbes. The testator died on 10th July 1954, survived by his daughter, who is the second party, and by two half-brothers. One of these half-brothers and the son of the other are the third parties. The trustees of the testator's settlement, who offer no contention in the case, are the first parties.

By his settlement, which is dated 14th March 1952, the testator, inter alia, directed his trustees in the third purpose "to retain under their own control my lands and estate of Boyndlie … together with a capital sum of £2000 and offer the liferent of the free annual income arising therefrom to my said daughter together with the liferent occupation and use of the mansion house, furniture and plenishings therein and the gardens and offices and the tenancy of the home farm and liferent use of the implements, etc., belonging to me required for the garden and farm." Under the fourth purpose provision was made for the disposal of the property and assets mentioned in the third purpose if his daughter did not survive him or declined or failed to elect to accept the provisions in her favour in the third purpose. Under the fifth purpose he directed his trustees to transfer the whole residue and remainder of his estate to his said daughter as her own absolute property.

A few months after the testator signed his testamentary settlement he formed a company known as Boyndlie Estates Company, Limited, which was incorporated on 1st November 1952. By a disposition which was recorded in the Register of Sasines on 26th December 1952 he conveyed the whole of Boyndlie estate to the company at a price of £15,000, in terms of an agreement of sale entered into between him and the company. The capital of the company consisted of 15,000 £1 shares, all of which were issued, of which he held 14,700, the remaining 300 being held quoad 100 each by his two half-brothers and an estate factor. At the date of his death he and the factor were the only two directors of the company.

The first question which arises is whether the provisions of the third purpose are affected by the sale of the heritable property to the limited company, and in particular whether this operates as ademption of that bequest to any extent. In the law of Scotland the ademption of legacies is a species of revocation by legal implication, and operates in the case of special legacies. It is not, however, disputed that the legacy in question falls within this category. Moreover it is now well settled that, in determining whether the doctrine applies or not, any consideration of animus adimendi is irrelevant (M'Arthur's Executors v. Guild, perthe Lord President at p. 746). The test is an objective one, and the doctrine can operate either in a case where the change in regard to the subject-matter of the legacy has taken place owing to the actings of the testator himself (Tennant's Trustees v. Tennant ) or where that change is due to causes independent of the actings or animus of the testator altogether (e.g., Macfarlane's Trustees v. Macfarlane ). On the facts in these two cases it was held that ademption did not operate, but the test for its operation was treated as the same in both, and the criterion laid down in Oakes v. Oakes and repeated in In re Slater was accepted as accurately setting forth what that test is. In the former case the Vice-Chancellor expressed the test thus:

"The question is, whether a testator has at the time of his death the same thing existing, it may be in a different shape,—yet substantially the same thing."

Applying this test to the present case I have reached the conclusion that ademption does apply. What the testator was dealing with in the third purpose was "my lands and estate of Boyndlie." At the date of his death they were no longer "my" lands. They belonged in property to a different persona (the limited company) which had completed a title thereto. In place of having the heritable estate the testator had received shares in a limited company which owned that estate. But holding shares in such a company cannot, in my view, be regarded as "having the same thing in a different shape." A radical change had taken place in his relations with the land.

It is no doubt true that he retained by his share-holding a controlling interest in the company and therefore over the estate administered by it, but such control cannot be assimilated to and is certainly not the same thing as ownership of the property. The control is not even over the property, but over the company which owns the property. Moreover it is in vain in this connexion to point to the fact that the property (the estate) still was extant. The test is not:

"Is the subject of the bequest still there?"

The test is:

"Did the testator still have the same thing or substantially the same thing when he died?"

The matter becomes even clearer if the situation at the date of his signing his settlement is compared with the situation at the date of his death. At the former date he had a heritable right of property in the estate: at the latter date he had a moveable right of property in shares in a limited company. At the former date his liability in regard to the estate was unlimited: at the latter date it was limited under the Companies Acts. At the former date he was sole owner of the heritage, while at the latter date he only held a majority of the shares in the company which owned it.

In these circumstances I cannot regard him as having substantially the same thing at his death as he had when he signed his settlement, and, in my opinion, therefore, the bequest is impliedly revoked and ademption applies quoad the liferent of the income of the estate, the liferent of the mansion house and the tenancy of the home farm. It follows that question 1 must be answered in the affirmative.

Question 2 therefore must also be answered in the affirmative. So far as question 3 is concerned, parties are now agreed that it falls to be answered in the affirmative as ademption does not apply to the bequests therein mentioned. Of consent therefore this question will be answered in the affirmative. Question 4 we have found it unnecessary to answer as it was ultimately not argued before us. Question 5 is superseded.

LORD RUSSELL .—The leading question in this case is whether or not there has been ademption of a specific bequest which was provided in the testator's settlement to his daughter. The settlement was executed on 14th March 1952. The testator died on 10th July 1954. The specific bequest takes the form of a direction to his trustees, in the event of the daughter's survivance, "to retain under their own control my lands and estate of Boyndlie in the County of Aberdeen together with a capital sum of £2000 and offer the liferent of the free annual income arising therefrom to my said daughter, together with the liferent occupation and use of the mansion house, furniture and plenishings therein and the gardens and offices and the tenancy of the home farm and liferent use of the implements, &c., belonging to me required for the garden and farm …" By disposition dated and recorded in December 1952—that is, some nine months after executing his settlement—the testator conveyed to a company formed by himself, duly incorporated, the whole estate of Boyndlie then belonging to him at the price of £15,000, payable in cash. The capital of the company was £15,000 divided into 15,000 shares of £1 each, all of which were issued to four individuals, the testator's holding being 14,700 shares. Following on the foresaid disposition of the estate the testator continued to occupy the home farm of Boyndlie as a tenant of the company, paying an annual rent therefor; he occupied the mansion house, for which he paid no rent; and he controlled the management of the company's affairs as one of the two sole directors.

Broadly speaking I do not doubt that the test of whether a specific legacy has been adeemed is to inquire whether the specific thing bequeathed remained in bonis of the testator at his death. It is now well settled that animus adimendi is not relevant to the determination of such a question. As was pointed out by Lord President Dunedin in M'Arthur's Executors v. Guild, at p. 747:

"We have to look to see whether the trustees at the moment of death could find the thing in the truster's estate."

In the same case the principle was thus expressed by Lord Kinnear (p. 750):

"When a particular thing has been specifically bequeathed the claim of the special legatee will be defeated if the thing in question is not in existence or not within reach of the testator's executors at his death."

In In re Slater , at p. 672, the Master of the Rolls (Cozens-Hardy) expressed his view, as that taken in many cases, in these words:

"Where is the thing which is given? If you cannot find it at the testator's death, it is no use trying to trace it unless you can trace it in this sense, that you find something which has been changed in name and form only, but which is substantially the same thing."

I refer also to the opinion of Lord Dundas to the same effect in Macfarlane's Trustees (at p. 331).

The facts raising the question in this case are capable of simple statement. The bequest in question is admittedly a specific bequest—of a liferent of heritable property. When the testator executed his settlement he owned that heritable property. At his death he did not own that property or anything that could reasonably be described as "substantially the same thing." What he did own was 14,700 shares in a limited company. In character and quality these shares constituted moveable property representing perhaps part of the proceeds of sale of the heritable estate, and no more at best than a surrogatum for the heritable estate. To counter that proposition it was argued for the third parties that immediately prior to his death the testator was, through his controlling interest and share-holding in the limited company, in full control of the heritable estate, and that after his death his executors, succeeding to that controlling interest, had the right qua shareholders to have the company liquidated, and to require the heritable estate to be reconveyed to them as executors, as representing the subject of the specific bequest. In my opinion, that reasoning fails to negative ademption. It serves to demonstrate that the heritable property bequeathed was not truly in bonis of the testator as at his death; and that the shares, being moveable estate, were not substantially the same thing as the heritable property forming the subject of the specific bequest.

I accordingly agree that in the result the questions fall to be answered as proposed by your Lordship.

LORD SORN .—In a case, such as this one, in which it is not disputed that the legacy was specific, the question whether there has been ademption resolves itself into a question whether the thing bequeathed remained part of the testator's estate at the date of his death. Here the thing bequeathed was the landed estate of Boyndlie and, at first sight, it is plain that this was not in bonis of the testator at his death. He had in the meantime sold it to a limited company and granted the company a conveyance of it. So far, it is a plain case of ademption. The argument against ademption was based on certain decisions in which it had been held that the thing bequeathed did not cease to be the same thing because it had undergone a change in form—the substance always remaining the same. The suggestion was that, since the testator remained very much in the position of proprietor in virtue of being the holder of practically all the shares in the company, the estate of Boyndlie remained part of his estate in altered form. By virtue of his control he could have brought about the reconveyance of the property, and likewise his trustees, by virtue of their control, could make the property available to the legatee. It is not, however, in my opinion, correct to say that, after the sale to the company, the property remained in the testator's estate and that the transaction merely altered the form in which it so remained. In point of fact, the landed property, which was the thing bequeathed, underwent no change of form at all. It remained what it always had been before, and what the testator did was to exchange it for something else, viz., the shares in the company. The shares in a company are not identical with the assets of the company, and what the testator got was something different from the estate of Boyndlie. The decisions show that, where the thing bequeathed has been exchanged for something different, it avails nothing to trace the new thing back to the thing bequeathed. It is only when the new thing is truly the old thing, its form only being altered, that ademption is prevented. I agree that the questions should be answered as proposed.