Scottish Court of Session Decisions

Lord Justice-Clebk—This is a somewhat novel question, but I have no doubt in my mind what is the proper answer to be made. The testator here ordered his trustees to set aside a capital sum of £16,000 out of his estate for certain alimentary liferents, and for other purposes which it is unnecessary to enumerate. He also directed that the residue should be divided in a certain way, and the trustees have carried out that direction, and have distributed the whole remainder of the estate, with the exception of a sum of £900 which they have retained in their hands to meet the gift that was given to them by the testator, for their trouble, in his will, namely, twenty-five guineas to be divided annually among the trustees.

Now the beneficiaries who are entitled to the residue maintain that this £900 ought not to be reserved, but ought to be paid to them as being part of the residue, the practical result of which will be that if the gift to the trustees is to continue to be paid, it must be paid out of the annual proceeds of the £16,000. The present trustees state their willingness to give it up altogether, and that would remove any difficulty as regards them personally, but then it is said that these trustees may gradually disappear, and that the heir of the last survivor is to be the trustee in the event of their all dying without assuming other trustees, and that he then accepting the trusteeship must assume certain other trustees. Therefore the present trustees point out that a renunciation by them might not bind their successors.

I am decidedly of opinion that the trustees are not entitled to retain this sum of £900 in their hands for the purpose stated. It is part of the residue, and in my opinion must be divided among the beneficiaries. The purpose of the trust being to pay liferents out of the proceeds of the £16,000, I think the income derived from this sum must suffer deduction of all the expenses which the trustees have to meet, including the payment to themselves, before distribution of the balance among the persons entitled to it.

Lord Salvesen—I entirely agree. I think the key to the problem that is presented to us for solution is what is meant by “residue.” Mr Wilton contended that you can only ascertain residue after you have made provision, for the expenses of executing the trust by setting aside a capital sum for this purpose, and that accordingly it was the trustees' duty to retain the sum of £900, the income of which would suffice to pay the annual sum of twenty-five guineas which the testator said they should receive for the performance of their trust duties. I asked Mr Wilton whether he could refer us to any case in which it had been held that in ascertaining residue you had first to make an estimate of the annual expenses of the trust, and capitalise that and deduct it from whatever the trustees had in their hands, but he was unable to refer us to such a case. The truth is that the expenses of a trust are a continuing charge which will vary according to the amount of the estate which the trustees hold, and which are properly a charge upon whatever estate the trustees happen to be in possession of at the time. Now here, according to the scheme of the testator, the whole of his estate was to be divided amongst his children after £16,000 had been set aside as an alimentary provision for them. He contemplated that that trust would continue for an indefinite period—and it may be a very long period—and it is admitted that the expense of collecting the revenue and of having the accounts audited forms a deduction from the revenue payable to the alimentary liferenters. I see no distinction between that and the sum which is to be paid to the trustees in accordance with the testator's expressed direction. I think that also, in this particular trust, forms just part of the expense of administration of this trust estate which remains. Of course the testator might have directed that the sum payable to the trustees should be reduced after so many of the trust purposes had been fulfilled, but he gave no such direction, and we must therefore interpret his will as meaning that during the subsistence of the trust the trustees are entitled to charge this sum for their trouble in connection with the trust management. So reading the settlement I have no difficulty in arriving at the same conclusion as your Lordship in the chair.

Lord Guthrie—I agree. This trust has lasted for some years, but the question before us has only arisen since the beneficiaries attained the age of twenty-five and became entitled to a division of the residue. Up to the present no part of the annual fund of twenty-five guineas payable to the trustees has been charged against the fund which was set aside by the trustees on the testator's death as an alimentary provision for his children, and it is not necessary to decide whether that was right or not—whether a proportion of that sum ought in accounting to have been charged against that provision. The question arises now because the trustees have paid away all the residue except a sum of £900 which they have set aside to meet that payment, and, as stated in the case, to meet that payment only, not, that is to say, in addition to meeting the expenses of the trust.

I agree that the view presented by Lord Salvesen as to the meaning of the word “residue” is sound. Further, if one considers the clause providing for payment of the expenses of executing the trust, I am not at all clear that on a true construction of the settlement that was intended to include anything except the ordinary expenses of executing every trust in every case. I do not think that the subsequent purpose at the end of the will, by which the truster makes this unusual but extremely appropriate and proper provision

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