Scottish Court of Session Decisions

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Thomas Smith, C.A., Glasgow, judicial factor on the trust estate of the deceased Archibald Macpherson, spirit merchant, Glasgow, first party; Mrs Mary J. M. Macpherson or Mackay, wife of Daniel D. Mackay, Dunblane, with her husband's consent and concurrence, and others, the surviving children of the testator, and those in their right, second parties; and Francis Patrick Long, solicitor, Dublin, and another, trustees acting under the marriage settlement of Hugh Peter Macpherson, a son of the testator, and his wife, third parties, brought a Special Case for the opinion and judgment of the Court as to the right of the third parties to payment from the first party of £1000 as in a question with the second parties.

The Case stated, inter alia—By the third purpose of his trust-disposition and settlement the testator directed his trustees to pay over to his wife, in the event of her surviving him, the whole annual produce and rents of the residue of his estate under burden of maintaining and educating the children of the marriage. By the fourth purpose the testator directed that on the death of his wife the trustees should ‘hold, apply, divide, and convey the whole residue and remainder of my means and estate, heritable and moveable, real and personal, to and for behoof of my children, equally among them, and such provisions shall be payable, in the case of sons, on their respectively attaining to majority, … and declaring further that it shall be in the power of my trustees to advance and pay, before the arrival of the term of payment, to and for behoof of my children, or any of them, any part not exceeding in all one-half of the fee or capital of the provisions hereby made in their favour by way of capital wherewith to commence business, or for outfit on marriage, or otherwise for behoof of my children, but only with consent of my wife during the subsistence of her liferent.’…

The testator was survived by his wife Mrs Margaret Macdonald or Macpherson (hereinafter referred to as ‘the liferentrix’), and by six children of the marriage, viz., Hugh Peter Macpherson, James Aloysius Joseph Macpherson [and four others].… The testator's widow Mrs Macpherson died on 27th April 1908. Hugh Peter Macpherson died on 15th November 1912, and Archibald Joseph Aloysius Macpherson in August 1911.…

The original trustees appointed by the testator under the said trust-disposition and settlement were the liferentrix, James Stewart, writer and banker, Glasgow, and John M'Lean of Glenuig, Strontian. By deed of assumption dated 15th February 1893 the said Hugh Peter Macpherson was assumed as trustee and acted as such until his death. The said Archibald Joseph Aloysius Macpherson was also assumed as trustee, conform to deed of assumption in his favour dated 18th and 31st January 1908. The said James Stewart died on 30th December 1903, and the said John M'Lean died on 1893, each having continued to act as a trustee until his decease. The said Hugh Peter Macpherson and the liferentrix acted as sole trustees from 30th December 1903 to 31st January 1908, when the said Archibald Joseph Aloysius Macpherson was assumed as aforesaid. From the date of the death of the liferentrix on 27th April 1908 as aforesaid the said Hugh Peter Macpherson and Archibald Joseph Aloysius Macpherson acted as sole trustees. On the death of the said Archibald Joseph Aloysius Macpherson as aforesaid in August 1911 the said Hugh Peter Macpherson became sole trustee, and he acted as such until his death as aforesaid on 15th November 1912. The first party was thereafter appointed judicial factor on the petition of certain of the testator's surviving children, conform to act and decree in his favour dated 6th December 1912.…

By marriage settlement dated 31st January 1902, and executed according to the forms of Irish law, the said Hugh Peter Macpherson, in view of an intended marriage between him and Miss Alice Long, Dublin, … assigned to the trustees [of his marriage settlement] one undivided sixth part or share of the said residue [in his father's estate] to which he was entitled as aforesaid, but that only to the extent of £1000.… The said marriage settlement was duly intimated to the trustees of the testator on 12th April and 12th May 1902.…

The third parties now claim payment from the first party of the said sum of £1000 with interest thereon … from the date of her death. The estate in the hands of the trustees of the testator at the date of the said intimation was more than sufficient to meet the said sum of £1000 on account of the interest of the said Hugh Peter Macpherson after allowing for the sum of £650 advanced to him prior thereto as after mentioned.

In the course of the administration of the estate various advances of capital were in the exercise of the powers contained in the trust deed made by the trustees to the testator's children through the hands of the law agents in the trust. These advances so made amounted in all to £3400, and were all made with consent of the liferentrix with the exception of £100, which was paid to the said Mrs Mackay after the liferentrix's death. These advances were all duly authorised by the trustees. Of this sum of £3400 £650 was advanced to the said Hugh Peter Macpherson, and said sum of £650 was advanced to him prior to the date of the said intimation of the marriage contract. The said sum was advanced to the extent of £250 in 1899, when the same amount was paid to each of the other members of the family, and £400 in view of his marriage. In addition to the said advances of £3400 made to the testator's children as aforesaid, further sums amounting to £5791, 15s. 6d. were withdrawn from the trust funds by the said Hugh Peter Macpherson and Archibald Joseph Aloysius Macpherson while acting as trustees, to the extent of £2630, 8s. 7d. for and on behalf of the said Hugh Peter Macpherson, to the extent of £1813, 18s. for and on behalf of the said Archibald Joseph Aloysius Macpherson, and to the extent of £1347, 8s. 11d. for and on behalf of their brother and sisters, and as to which last sum no

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question arises in this case. The said withdrawals, amounting to £5791, 15s. 6d., were not authorised by any minute of the trustees or by the other beneficiaries.

The whole purposes of the trust have now been carried out except the final division of the estate among the family of the testator or those in their right. The assets of the trust have been realised, or are in course of realisation. The total residue for division, including sums advanced to beneficiaries or due by them to the trust, will amount approximately to £12,216 (subject to expenses), one-sixth equal part of which amounts to £2036. The sums advanced to or withdrawn by the said Hugh Peter Macpherson from the trust funds amount to £3280, which is in excess of his one-sixth share by £1244. The advances made to the said Hugh Peter Macpherson prior to the said intimation of his marriage settlement to the trustees amount as aforesaid to £650, and the sums drawn by him prior to the said date as aforesaid to £6, 6s., leaving a balance due to him as at the date of the said intimation of £1379, 14s. No other money was due by him to the trust at the said date.…

In these circumstances questions have arisen as to whether it is the duty of the first party to admit the said claim of the third parties as assignees of the said Hugh Peter Macpherson and to allow them to rank preferably or otherwise for the amount of their claim, or to reject the said claim on account of the depletion of the trust estate through the intromissions of the said Hugh Peter Macpherson with the trust funds, and of the advances to him. The said Hugh Peter Macpherson left no estate.

The second parties maintain that the first party is bound to set off against the sum due by the trust estate in respect of the said Hugh Peter Macpherson's share the whole of the sums advanced to him or withdrawn by him out of the trust estate, and that as the advances made by the trustees to the said Hugh Peter Macpherson and the sums withdrawn by him from the trust estate exceed the amount of his share, the claim of the third parties is excluded. In the event of its being held that the third parties are entitled to a claim on the trust estate in respect of the said obligation of the said Hugh Peter Macpherson and the said assignation or charge upon his interest in the said trust estate and intimation thereof, the second parties maintain that the third parties are not entitled to any preferable ranking upon or payment from the trust estate in respect of their said claim as in a question with the second parties, and are not entitled to any interest on such claim.

“The third parties maintain that the said marriage settlement operated, from the date of the said intimation, as a valid assignation to them of the said Hugh Peter Macpherson's interest in the trust estate to the extent of £1000 thereof; that they became entitled to payment of the sum of £1000 as at the date of the death of the liferentrix, and that they are creditors of the trust estate as in a question with the second parties for that sum, together with interest thereon from the date of death of the liferentrix at the rate of five pounds per centum per annum. They contend that their assignation is not affected or prejudiced by the intromissions of the said Hugh Peter Macpherson after the date of its said intimation, and that the said contention of the second parties as to their alleged right of set-off is unsound.”

The questions of law for the opinion and judgment of the Court were, inter alia—“1. Are the third parties, in virtue of the assignation granted by Hugh Peter Macpherson in his marriage settlement, entitled to payment from the first party of the principal sum of £1000 preferably as in a question with the second parties? or 2. Are the third parties only entitled to payment of the said sum from the first party pari passu with the second parties in respect of their shares in the residue of the testator's estate? or 3. Are the third parties, in respect of the said Hugh Peter Macpherson's intromissions with the trust estate subsequent to the date of intimation of the said marriage settlement to the trustees of the testator, barred from claiming the said sum from the first party?”

Argued for the second parties—Even though the assignor was not a defaulter at the time of the assignation, if he subsequently became a defaulter his act drew back to the time when he made the assignation to the effect of rendering it invalid— Doering v. Doering, 1889, 42 ChD 203; in re Towndrow, [1911] 1 Ch 662; Hooper v. Smart, 1875, 1 ChD 90, per Hale, V.C., at p. 98; Menzies on Trustees, 2nd ed., section 1075. There was no difference between English and Scots law on this matter. Intimation was only necessary to complete the title, and any difference as to intimation in the laws of the two countries did not affect the question. What was assigned in the present case was not £1000 but a share in the estate, which could only be ascertained on the death of the liferentrix, and which might be diminished before it was ascertained. The subject of this assignation was therefore a risk in the hands of the assignee, who took subject to that risk. In Edgar v. Plomley, [1900], A.C. 431, the rule of Doering v. Doering ( cit. sup.) was assumed. There the distinction was made between where an estate was still in bulk and where a portion had been assigned and put into a separate account, and the distinction was recognised. There being no rule in Scots law to the contrary, the rule should be applied.

Argued for the third parties—The rule in question might be good according to English law, but it did not apply to Scotland. There was no mention of this principle in any Scots text book prior to Menzies on Trustees. Authority in Scots law so far as it went was all the other way—Stair, iii, 1, 6; iv, 40, 21; Erskine, iii, 5, secs. 3 and 9; Camp bell v. Campbell, December 13, 1860, 23 D. 159; Hope & M'Caa v. Waugh, June 12, 1816, F.C.; Shiells v. Ferguson, Davidson, & Company, December 22, 1876, 4 R. 250, per L.P. Inglis, p. 254, 14 S.L.R. 172. It was settled law in Scotland

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that intimation divested the cedent and invested the assignee. That being so, it was impossible to apply a rule of English law that the defalcations of a cedent subsequent to assignation and intimation affected the assignee. In any event the English rule was strictly qualified. It did not apply where there was a separate legacy assigned apart from the residue fund, or in such circumstances as occurred in the case of Fox v. Buckley, 1876, 3 ChD 508.