Scottish Court of Session Decisions

Alexander Mein junior died on 23rd June 1899, leaving a trust-disposition and settlement dated 7th May 1897, and a codicil dated 18th March 1899.

By his settlement he assigned and disponed to trustees for the purposes therein-mentioned his whole means and estate, heritable and moveable. The fourth purpose was in the following terms:—“I direct my trustees to hold and apply, pay or convey, the free annual income and produce of the residue of my means and estate for behoof of my said wife in the event of her surviving me, during all the days and years of her life, and that at such terms as they may think proper, having reference to the dates of receipt by themselves of the income, and that in liferent for her liferent alimentary use allenarly: Declaring that it shall be in the power and option of my trustees to apply from time to time, and in such way as they may think proper, in addition to the income, such portion of the capital of my means and estate as they may think necessary for the comfortable support of my wife.”

By the codicil he directed his trustees to apply and convey the residue of his estate to and for behoof of such charitable and benevolent institutions connected with Glasgow as they might select, including certain institutions named by him, in such amounts as they might think proper. By this codicil, in addition to wide powers of management, investment, and sale conferred on the trustees by the trust-disposition and settlement, the testator empowered his trustees “to carry on and continue under the superintendence of themselves, or of any party they may appoint for that purpose, for behoof of my whole estate, for such period of time, and in such manner as they may think proper, any or all of the businesses in which I alone am interested at the time of my death, and that either by themselves alone or along with a partner or partners, whom I hereby authorise and empower them to assume on such terms and conditions as they shall think proper; … and generally to do in regard to any business or businesses in which I may be interested as aforesaid whatever in the circumstances they may deem most beneficial to my estate though not herein expressed: Declaring that in connection with their transactions or intromissions in regard to said business or businesses my trustees shall be free from all blame or responsibility further than that they acted in good faith and with ordinary judgment.”

The net value of the testator's estate, including his interest in the colliery and lease after-mentioned, amounted to £26,587, 19s. 11d. At the time of his death the testator, as sole partner of the Barnsmuir Coal Company, was tenant of a coalfield in Stirlingshire undera lease from Robert Inglis, Avon—bridge, for twenty-one years from Whitsunday 1882, with power to the lessees to put an end to the lease at Whitsunday 1885, Whitsunday 1888, Whitsunday 1890, and every third year thereafter, on giving six months' written notice to the proprietor. The lease would expire at Whitsunday 1903 unless Mr Mein's trustees should avail themselves as tenants of the above-mentioned power to terminate it at Whitsunday 1902. The lease expressly excluded assignees and sub-tenants except with the consent of the proprietor. The value of the deceased's interest in the colliery at the date of his

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death, including the value of the tenant's rights under the lease amounting to £2593, was £8625, 7s. 7d. The net profits derived from the colliery for the half-year from the testator's death in the end of June 1899 to 31st December following amounted to £2062, 6s. 8d. The net profits of the colliery for the year ending 31st December 1900 amounted to £5195, 2s. 11 1 2d. In making up the accounts which brought out the said two respective sums of £2062, 6s. 8d. and £5195. 2s. 11 1 2d. as net profits, a deduction of 5 per cent. was made for depreciation of plant.

Questions having arisen as to the amount to which Mrs Mein was entitled from the profits of the colliery, a special case was presented for the opinion and judgment of the Court.

The parties to the special case were (1) the trustees, and (2) Mrs Mein.

The special case set forth—“(8) If at the expiry of the lease at Whitsunday 1903, or earlier termination thereof, the sum at which it was valued at the testator's death falls to be made forthcoming and available as capital of the estate, this can to a substantial and even to a large extent be provided from the realisation of the colliery plant and machinery; but in so far as the proceeds thereof may fall short of the said sum of £8625, 7s. 7d., that amount would fall to be made up from the profits made in carrying on the colliery. This, however, would not require the whole amount of the profits, and after laying aside a sufficient amount out of profits to provide for this there would remain a considerable sum of profits to be disposed of in accordance with the directions in the testator's settlement. (9) The second party maintains that under the direction to the trustees in the fourth purpose of the trust-disposition and settlement—to hold and apply, pay or convey the free annual income and produce of the residue of the testator's means and estate for her behoof during all the days and years of her life—she is entitled to the net profits derived from the colliery business calculated on the basis on which the respective sums of £2062, 6s. 8d. and £5195, 2s. 11 1 2d. are brought out, so long as the said colliery continues to be carried on. Alternatively, she maintains that she is entitled to said net profits after a sum is laid aside sufficient, along with the sum to be realised from the colliery plant and machinery, to secure that the amount at which the colliery business was valued at the testator's death shall be extant as part of the capital of the trust estate at the end of the lease. On the other hand, the first parties maintain that the net profits from carrying on the colliery till the expiry of the lease fall into capital, and must be retained and invested by them so as to be available for distribution amongst the residuary beneficiaries on the death of the liferenter, and that the second party is entitled only to the income or revenue which shall be derived from the investment of these profits. In the event of the questions between the parties being decided in favour of the alternative contention of the second party, the parties will arrange between themselves as to the amount to be set aside out of the profits each year to secure the value of the colliery as at Mr Mein's death.”

The questions of law were—“(1) Is the second party entitled to demand, and are the first parties bound to pay her, the net profits arising from carrying on the business of the Barnsmuir Colliery subsequent to the death of the testator Alexander Mein junior? or otherwise, Is the second party entitled to demand, and are the first parties bound to pay her, the net profits arising from carrying on the business of the Barnsmuir Colliery subsequent to the death of the testator Alexander Mein junior, after setting aside from these profits such sum as, along with the amount which shall at the expiry of the lease be realised from the colliery plant and machinery, shall then provide a sum equal to the value of the trustees' interest in the said colliery and lease, as this was ascertained at the death of the truster? (2) Is the second party entitled to demand, and are the first parties bound to pay her, only the interest which shall be derived from the investment by the first parties of the profits arising from carrying on said business subsequent to the death of Alexander Mein junior? or otherwise, What are the rights of the second party in reference to said colliery profits?”

Argued for the first parties—The profits derived from the colliery ought to be treated as capital. The case was ruled by that of Ferguson v. Ferguson's Trustees, February 23, 1877, 4 R. 532. The provisions of the will in both cases were almost exactly the same. The provisions in the codicil empowering the trustees to carry on the business “for behoof of my whole estate,” distinguished this case from Strain's Trustees v. Strain, July 19, 1893, 20 R. 1025. The latter case did not establish an absolute rule— Freer's Trustees v. Freer, June 28, 1897, 24 R. 437. The case of Ferguson had never been expressly overruled.

Argued for the second party—The present case was ruled by the decision in Strain's Trustees which had practically overruled the case of Ferguson, cit.

At advising—