Scottish Court of Session Decisions

At advising, on 28th May 1992, the opinion of the court was delivered by the Lord President (Hope).

OPINION OF THE COURT—This is an application presented under sec. 6 (vi) of the Court of Session Act 1988 by the trustees acting under an inter vivos deed of trust. They seek the directions of the court on certain questions which have arisen as to how the income and capital of the trust fund may be distributed.

The principal point at issue is whether children who were adopted after the date when the trust deed was executed are to be treated as children of the adopter for the purpose of construing references to "the beneficiaries" and to his "children" and "issue" wherever they appear. An additional complication arises because the two children who have been adopted by him were adopted by means of overseas adoptions. The question is whether effect can be given to these adoption orders, in view of the fact that it was not until after the date of execution of the trust deed that sec. 23 of the Succession (Scotland) Act 1964 was amended so as to apply to persons adopted in pursuance of an overseas adoption.

The petitioners are the trustees of a separately administered share, known as Alastair's issue's share, of funds held in trust under a deed of trust by the late Iver Ronald Stuart Salvesen dated 4th March 1947, as varied by interlocutor of the Court of Session dated 12th March 1968. That interlocutor, which was pronounced under sec. 1 (1) and (4) of the Trusts (Scotland) Act 1961, approved and authorised an arrangement for variation of the purposes of the original trust deed. Clause 3 (f) of the arrangement provided that on the operative date, following the effecting of certain policies of assurance, the whole purposes of the 1947 deed of trust were to come to an end and be determined, and that the trustees were thereafter to hold various shares of the trust fund, including Alastair's issue's share, for the trust purposes set out in a schedule to the arrangement. It is agreed that the effect of the arrangement was, in the words of Lord president Clyde in Aikman, Petr. 1968 S.L.T. 137, at p. 141, fundamentally and almost completely to supersede the original trust provisions and in effect make a new settlement in terms of the schedule. The date of execution of that new settlement, for the purposes of sec. 23 of the 1964 Act, may be taken to be the date of the interlocutor of 12th March 1968 by which the arrangement was authorised and approved.

The original trust deed predated the Succession (Scotland) Act 1964, since it was executed on 4th March 1947. It took the form of a discretionary trust, and its purpose was to make provision for the children of the truster and their issue. There was no express inclusion of adopted children among the beneficiaries of the trust, and there is no doubt that prior to its variation on 12th March 1968 adopted children were not included among the persons to whom the income and capital of the trust fund might be distributed. In Pollok-Morris, Petrs.1969 S.L.T. (Notes) 60, the court refused to give its approval to an arrangement which sought to introduce an express reference to adopted children as beneficiaries. The application was refused on the ground that to include beneficiaries who were not within the scope of the trust deed as it stood would prejudice the existing and future beneficiaries, with the result that the proposed arrangement was not one to which the court could give its approval. No such objection was taken in the present case. The 1968 arrangement did not contain an express reference to adopted children as being included among the beneficiaries, and no adoption orders were in existence or in contemplation at that date. In any event it is clear that, since the effect of the arrangement was to supersede the original trust deed by the trust purposes set out in the schedule, it is as effective for this purpose as if it had been entered into by the agreement of all the beneficiaries, being of full age and subject to no other incapacity. The questions which have now arisen must be answered without regard to any prejudice which might arise to the beneficiaries of the original trust. The answer depends upon the proper construction of the schedule to the 1968 arrangement read together with the provisions of sec. 23 of the Succession (Scotland) Act F 1964, as amended.

The relevant provisions of the schedule to the 1968 arrangement concern a share of the trust fund known as Alastair's issue's share. Alastair is the youngest son of the truster Iver Ronald Stuart Salvesen. He is married but has no natural children. He and his wife have two adopted children, Venetia Clare Joanna Salvesen, born on 13th January 1988 and adopted on 15th March 1990 by virtue of a decree of adoption pronounced by a competent court in the United States of America, and George Edward Thomas Salvesen, born on 28th September 1989 and adopted on 20th October 1989 by virtue of a decree pronounced in the same court. Both adoptions are overseas adoptions within the meaning of sec. 65 (2) of the Adoption (Scotland) Act 1978. They are adoption orders within the meaning of sec. 23 (5) of the Succession (Scotland) Act 1964, as amended by Sched. 3, para. 4 to the 1978 Act. This is because sec. 38 of the 1978 Act included an overseas adoption within the meaning of the expression "adoption order" in Pt. IV of that Act. The order which applied these provisions to adoptions effected in the United States of America was the Adoption (Designation of Overseas Adoptions) Order 1973, made under the original provisions relating to overseas adoptions in sec. 4 (3) of the Adoption Act 1968, which were repealed and re-enacted by the 1978 Act.

In terms of para. 4 of the schedule to the 1968 arrangement, read together with para. 2 (a) of that schedule, the trustees are directed to pay the income of Alastair's issue's share to such one or more of "the beneficiaries" as they think fit. This provision was subject to a power to accumulate income during the period of 21 years from 12th March 1968, but that period is now at an end and the trustees are now bound to distribute the free income of the fund as it arises to or for the benefit of the beneficiaries. Paragraph 4, read together with para. 2 (b) and (c) of the schedule, makes provision for the distribution of the capital of the fund. There is a power to make over capital to Alastair's "issue" at any time, and if on 1st January 2020 any part of Alastair's issue's share remains in their charge, the trustees are directed to hold it absolutely in fee for Alastair's "children" then in life and the issue of predeceasing children. Failing issue of Alastair then in life, the fund is to be held in fee for the grandchildren of the truster then in life and their issue per stirpes.

The effect of these provisions is that the competing interests in this application are those of the two adopted children on the one hand, whose contention is that they fall to be included among the beneficiaries as children of Alastair in terms of sec. 23 of the 1964 Act, and those of the natural children of the truster and their issue on the other hand, who would be entitled to the benefit of Alastair's issue's share in the event of there being no children or remoter issue of Alastair to whom the income and capital can be distributed. Minutes have been lodged on behalf of the curator ad litem to the two adopted children and on behalf of a separate curator ad litem who was appointed to the natural grandchildren of the truster who are presently in life. No other beneficiary has entered the process to advance any contention, but we have had the benefit of a full argument from counsel who appeared for the curator ad litem to the adopted children, and from counsel who appeared for the curator ad litem to the natural grandchildren, following an introductory submission by counsel on behalf of the trustees.

The principal difficulty which has arisen in this case relates to the meaning and effect of sec. 23 (1) when read together with sec. 23 (2) of the Succession (Scotland) Act 1964. But before we discuss this point we should deal with a F subsidiary question which was raised by counsel for the curator to the natural grandchildren. This was whether, assuming that the effect of these provisions is that references to children and issue of Alastair in the schedule to the 1968 arrangement are to be taken to include children who were adopted by him by orders made after the date of the arrangement, that result can be applied to the only adoptions which have so far taken place in this case which were overseas adoptions made in 1989 and 1990. This issue has not been clearly focused in either of the questions appended to the petition, but since we heard argument on the point it is appropriate that we should express our opinion on it for the guidance of the trustees.

Counsel pointed out that sec. 23 of the 1964 Act as originally enacted did not extend to overseas adoptions. Its provisions did not have the effect of extending to overseas adoptions until 1st February 1973 when sec. 4 (2) and (3) of the Adoption Act 1968 came into force. The Adoption (Designation of Overseas Adoptions) Order 1973 came into operation on the same date. Counsel submitted that, even if it could be said that the references to Alastair's children and issue in the schedule to the 1968 arrangement were to be construed as including any children adopted by him, that construction could not include any children adopted by means of overseas adoptions since, as matters stood in 1968, sec. 23 did not apply to them. The 1968 Act was enacted on 26th July 1968, after the date of the 1968 arrangement. Accordingly, irrespective of the date of the overseas adoptions or the date of the order by which adoptions effected under the law of that country were specified as overseas adoptions for the purposes of the 1968 Act, it could not have been the intention at the time of the 1968 arrangement that the provisions of sec. 23 were to apply to adoptions effected overseas. The answer to the question so far as the two overseas adoptions were concerned therefore was to be found in the common law as it stood at the date of the 1968 arrangement. We were referred to Spencer's Trs. and Ruggles1981 S.C. 289, where it was held, in regard to a declaration of trust which was executed in 1905, that the words "lawful child" were to be construed in the light of the law as it stood at the date of the creation of the trust, as at which there was no legal machinery for the adoption of a child in the law of Scotland. Lord Cameron pointed out at p. 295 that, since there was at that time no statutory power of adoption, the truster was not and could not have been concerned with adopted children when setting up the trust. As at the date of the 1968 arrangement the courts of this country would only recognise an adoption made in another country if the adopting parents were domiciled there and the child was ordinarily resident there at the time of the adoption: Re Valentine's Settlement [1965] Ch. 831, per Lord Denning M.R. at p. 843D. That was not the position in this case, since Alastair Salvesen was not domiciled in the United States of America at the time when the adoptions were effected. Counsel submitted that the common law was of no assistance to the adopted children in this case, and that the extension of sec. 23 of the 1964 Act to overseas adoptions came too late to be of any relevance for the purposes of the 1968 arrangement.

In our opinion the answer to this point is to be found in the wording of sec. 23 (5) of the 1964 Act, as amended by para. 4 of Sched. 3 to the Adoption (Scotland) Act 1978. In consequence of the amendment effected by the 1978 Act that subsection now reads as follows:

"In this Part of this Act the expression ‘adoption order’ has the same meaning as in sec. 38 of the Adoption (Scotland) Act 1978 (whether the order took effect before or after the commencement of this Act); and ‘adopted’ means adopted in pursuance of an adoption order."

Section 38 (1) (d) of the 1978 Act provides that an overseas adoption within the meaning of sec. 65 (2) of that Act is to be included within the meaning of the expression "adoption order", and sec. 38 (2) is in these terms:

"The definition of adoption order includes, where the context admits, an adoption order which took effect before the commencement of the Children Act 1975."

The date of the effecting of the overseas adoption order is immaterial, since the expression "adoption order" as defined by sec. 23 (5) of the 1964 Act applies whether the order took effect before or after the commencement of the Act—that is, before or after the commencement of the Succession (Scotland) Act 1964. The provisions of the 1978 Act reflect those of sec. 4 (2) of the 1968 Act by which references to overseas adoptions were first introduced. In the result sec. 23 of the 1964 Act must be read as extending to overseas adoptions, whether they took effect before or after the commencement of the 1964 Act, as respects anything done or any event occurring after 1st February 1973 when sec. 4 of the Adoption Act 1968 came into force. As matters now stand, therefore, children who are the children of a person by virtue of an overseas adoption are to be treated in the same way for all the purposes of sec. 23 of the 1964 Act as children adopted by orders made in this country, and no relevant distinction now exists between them for any of the purposes described in this section. They are in exactly the same position so far as the disposal of property in terms of the schedule to the arrangement is concerned as any other adopted children within the meaning of sec. 23.

We turn now to the principal question on which our directions are sought. The difficulty has arisen due to the fact that the children were adopted after the date of the 1968 arrangement. This is not a point of importance so far as the provisions of sec. 23 (1) of the 1964 Act are concerned, if they are read alone according to their terms. This subsection, so far as relevant, provides: [their Lordships quoted the terms of sec. 23 (1) set out supra and continued:]

That subsection must be read subject to subsec. (4), which provides that nothing in that section is to affect any deed executed before the commencement of the Act. But that does not give rise to any difficulty in the present case, because the 1968 arrangement was approved after the commencement of the 1964 Act, which was passed on 10th June 1964 and by virtue of sec. 38 (3) came into operation on 10th September 1964. The significance of the date when the children were adopted is to be seen when one turns to sec. 23 (2) which, so far as relevant, is in these terms: [their Lordships quoted the terms of sec. 23 (2) set out supra and continued:]

The 1968 arrangement was executed before the making of either of the adoption orders by which Alastair's adopted children were adopted. Accordingly, sec. 23 (2) cannot be invoked by either of them so as to enable the references to children or issue of Alastair in the schedule to the arrangement to be construed by virtue of this subsection as including his adopted children.

It is accepted on all hands that there would be no difficulty about the application of sec. 23 (1) in this case, if its provisions were to be considered alone and without reference to sec. 23 (2). The only express qualification of its effect is that to be found in sec. 23 (4), as a result of which it cannot affect any deed executed before 10th September 1964. As events happened in this case, however, it can be applied to the 1968 arrangement, and, since the expression "adopted" is now to be taken to include children whose adoption was effected by an overseas adoption whether before or after the commencement of the Act, Alastair's adopted children are, in terms of this subsection, entitled to be treated for all purposes relating to the disposal of property by virtue of the schedule to the 1968 arrangement as his children. On the other hand, for the reasons mentioned in the previous paragraph, sec. 23 (2) cannot be applied to the 1968 arrangement, since the arrangement was executed before the making of the adoption orders. The question then is how these two provisions can be reconciled. No words are to be found in either of them which assist as to their relationship, but it must be assumed that it was the intention that both subsections should receive effect. It would not do to place a construction on either of them which would deprive the other of all meaning or render either of them entirely unnecessary to the scheme of the Act.

Counsel for the curator to the adopted children submitted that sec. 23 (1) provided the complete answer to the problem, since the opening words of the subsection declared that it applied "for all purposes" relating to the disposal of both income and capital under any inter vivos deed. He accepted that sec. 23 (2) did not sit easily with sec. 23 (1), but he contended that their relationship was such that the generality of sec. 23 (1) remained unqualified. Section 23 (1) provided in general terms for the entitlement to benefit, whereas sec. 23 (2) was concerned with the construction of certain particular expressions which might otherwise give rise to difficulty. Subsection (2) was directed to the point decided in Hay v. Duthie's Trs . 1956 SC 511 about the effect of sec. 15 (2) of the Adoption Act 1950. That subsection provided that the expressions "child", "children" and "issue" in relation to any person were not, unless the contrary intention appeared, to include a person or persons adopted by that person. For the reasons given by Lord President Clyde at pp. 526–7 it was held that it was not admissible to make reference to extrinsic evidence in order to ascertain the intention of the granter of the deed. Section 23 (2) was concerned to make it clear that the presumption was reversed in relation to expressions used in deeds executed after the making of an adoption order. Counsel for the curator to the adopted children accepted that this submission, which was not disputed by counsel for the curator to the natural grandchildren, did not of itself provide a complete answer to the question which had been raised about the relationship between the two subsections. He submitted, however, that subsec. (2) had been included in the section purely to assist, if assistance was needed, in the particular case to which it referred. It was not needed where subsec. (1) clearly applied to the situation, as it did in the present case. It was enough for him, therefore, that the adopted children could take advantage of subsec. (1), especially as there was no express restriction or limitation of the provisions of that subsection to be found anywhere in subsec. (2).

Counsel for the curator to the natural grandchildren on the other hand pointed out that subsec. (2) applies to any deed whereby property is conveyed or under which a succession arises. While sec. 23 (1) contained a declaration of a general policy, sec. 23 (2) had to be read as restricting its effect by excluding from the statutory benefit all cases where the deed was prior in date to the making of the adoption order. The intention which underlay the section was to benefit children who had already been adopted at the date of the deed and whose existence might therefore reasonably be taken to have been in contemplation when the deed was executed. The opportunity was given in these cases to exclude the adopted child or children from benefit by expressing clearly an intention to that effect. It was not the purpose of the section to extend the benefit of the deed to adopted children who were not in existence at that date and whose existence had not even been contemplated. In essence here the argument was that, while sec. 23 (1) was apparently unqualified in its terms, it had nevertheless to be read as being subject to sec. 23 (2) in all cases to which that subsection applied.

The point is in the end purely one of statutory construction. No assistance is to be gained by considering what was in contemplation at the date of the 1968 arrangement, since we are not concerned here with the meaning to be placed upon the words used in the schedule to the 1968 arrangement otherwise than in terms of the Act. The critical question is the relationship between sec. 23 (2) and sec. 23 (1). Although the legislation is not as clear on this point as one might have expected, we consider that sec. 23 (2) was included in the section for a limited purpose only, the extent of which is to be found in the wording of that subsection. Section 23 (1) is not qualified in its terms by any express provision elsewhere in the section, and our examination of the section as a whole does not suggest that any qualification to its generality is to be implied.

The section as a whole begins with a declaration in the most general terms in subsec. (1) that, for all the purposes to which that subsection refers, an adopted person is to be treated as the child of the adopter and not as the child of any other person. Subject only to the limits about its retrospective effect which subsec. (4) provides, there is no indication that it is in any way relevant to the effect of the declaration to consider whether the adoption order came before or after the date when the deed was executed. The declaration in this subsection applies generally for all purposes relating to both testate and intestate succession and to the disposal of property by virtue of any inter vivos deed. The wording of the subsection, together with the order in which it appears in the section, suggests that it was designed to express the general rule to which all other provisions in the section are to be seen as ancillary or subordinate.

Subsection (2) can, and in our opinion should, be read as dealing with a particular situation only, where a deed has been executed in knowledge both of the provisions of the Act and of the existence of an adoption order. It is qualified in the case of provisions with testamentary effect by the proviso that the date of execution is to be taken to be the date of the death of the person on whose death the provision is to take effect. The particular question with which it is designed to deal is whether it was the intention of the person when making the deed, or by leaving an earlier testamentary deed unaltered until his death, knowing of the provisions of the Act and of the existence of the adoption order, that references to a natural relationship were to be construed as including relationships arising from the adoption. The effect of the subsection, on a point which it must be assumed was thought to be liable otherwise to create difficulty, is that a contrary intention must be expressed in the deed in these circumstances if it is not to have that result. In our opinion, however, it has no other effect. In particular it cannot be read as restricting the application of subsec. (1) (a) to only those cases where the inter vivos deed has been executed after the making of an adoption order. There is nothing in the wording of either subsection to indicate that it was the intention that this should be the result. We can think of no good reason why Parliament, having said all that was necessary in subsec. (4) to prevent the section from having retrospective effect, should have intended that subsec. (1) was to be further qualified. In our opinion it was intended to have effect, in accordance with its express provision, for all purposes after the commencement of the Act.

For all these reasons we shall give the directions which have been sought by the trustees by answering the two questions in the petition in the affirmative.