Scottish Court of Session Decisions

This case came up by reclaiming note against an interlocutor of the Lord Ordinary ( Giffofd), in an action of multiplepoinding and exoneration at the instance of the marriage contract trustees of the late Lieut.-Col. John M'Donald of Dalchosnie (afterwards General Sir John M'Donald, K.C.B.), and the late Adriana M'Inroy (afterwards Lady M'Donald), against Colonel M'Donald (the reclaimer), eldest son of Sir John and Lady M'Donald, A. W. Robertson, C.A., Edinburgh, trustee on the sequestrated estate of John Alan M'Donald, (their second son) the said John Alan M'Donald, and the three Misses M'Donald, daughters of the trusters.

The fund in medio was the trust-estate, conveyed to the trustees by an ante-nuptual contract of marriage, dated 8th and recorded 27th September 1826, by the then Colonel M'Donald and Miss M'Inroy, The fund formed Miss M'Inroy's fortune, and amounted to about £50,000. The question for the determination of the Court was whether a settlement and deed of division, executed by the spouses on the 8th July 1837, was a valid exercise of the powers reserved to them under the antenuptial contract. When this antenuptial contract of marriage was entered into Colonel M'Donald was possessed of the heritable estate of Dalchosnie, which, on his part, he settled upon the children of the marriage, with the provision that he should have power to execute an entail of the estate, calling in the first place the children of the marriage, in their order. The lady, Miss M'Inroy, on her part conveyed her fortune to the trustees under the marriage contract for these purposes, inter alia, that after the death of the trusters the trustees should pay over or assign the whole property and accumulations to the children to be procreated of the marriage, and that in such proportions, at such times, and under such conditions, as the trusters should by deed appoint; and failing such deed of apportionment, the money should be divided between the surviving children in such a manner that the share of each son should be in proportion to that of each daughter as six is to four, — none of the daughters, however, to be entitled to more than £10,000. The particular clauses of the marriage contract are given verbatim in the opinion of the Lord President as subjoined. Six children, one of whom predeceased the parents, were born of the marriage.

Soon after the execution of the marriage contract Sir John purchased the two estates of Loch-Garry and Kinloch-Rannoch at the price of £28,000, of which he paid £3000, while he borrowed the remaining £25,000 from the marriage contract trustees, who took an heritable bond over the two estates in security for the amount. The estates thus purchased, together with that of Dalchosnie, were entailed. In these circumstances, Lady M'Donald, on 16th March 1837, executed a holograph deed of settlement and division, having reference to the marriage contract. This deed was recorded on 27th November 1872. The leading clauses were as follows:—“I do now hereby declare that it is my will that Colonel M'Donald shall have the liferent use of my whole property during all the days of his life if he survives me, just as I myself would have if I survive him: That it is my will, in regard to the division of my property amongst my family after his death, that the estates of Kinloch-Rannoch and Loch-Garry, purchased by my said husband, and of the price of which £25,000 was paid from my funds, shall be settled on my eldest son and other members of our family in succession, our boys and their heirs-male having priority according to the dates of their birth, and our girls and their heirs-male in like manner: This sum of £25,000, being the share of my property which I allot to my eldest son or heir. And as to the remainder of my property, I will that after the death of Colonel M'Donald my whole funds, beyond the sum of £25,000 settled as above, shall be equally divided among our younger children; it being provided that in case such funds may exceed £10,000 to each younger child, the excess above £10,000 Shall all fall to the eldest son or heir as above, with the view to its being laid out in the purchase of land for him, and entailed with the other estates upon his heirs for ever: And further, considering that my said husband proposes to alter the destination of the paternal estate of Dalchosnie from that fixed by our contract of marriage by entailing it upon our heirs-male and female in succession, I therefore do hereby give, grant, and dispone my whole estate, heritable and moveable, to and in favour of my said husband and his heirs whomsoever, failing heirs-male and female of our marriage, and of which estate, both heritable and moveable, I have already declared that he is to have full and free liferent use during all the days of his life.” Subsequently, Sir John and his wife executed a joint deed of division, also having reference to the marriage contract; this was dated July 18, 1837, and was recorded on November 2, 1866. These deeds were challenged on the ground of being in excess of the powers reserved under the contract of marriage, and as not fairly carrying out its provisions in regard to the children of the marriage. By this deed of division, also quoted verbatim in the Lord President's opinion, it was provided, inter alia, that the £25,000 secured over the two estates in question should be settled on and belong to the eldest son of the marriage (the reclaimer), and the other members of the family in succession, being heirs in possession of the entailed estates—the same being declared to be his share of the £50,000 in question; and the trustees were directed on the truster's death to renounce and discharge their bond for that amount over the said estates. The rest of the £50,000 was directed to be divided equally among the other children of the marriage, but it was provided that any sum in excess of £10,000 to each of the said other children should fall to the eldest son or heir of entail, with the view of its being laid out for the purchase of land to be entailed upon him and his successors. General Sir John M'Donald died on June 24, 1866, and his widow on November 7, 1872.

The pursuers, as trustees, pleaded that under the marriage contract they were liable only in once and single payment of the trust-estate, and that on payment thereof to those found entitled thereto they should be discharged. Colonel Alastair M'Iain M'Donald, the eldest son of the marriage, claimed to be ranked and preferred on the fund in medio to the sum of £25,000, to be paid to him absolutely, either under the joint settlement and deed of division of 18th July 1837, or under the holograph deed of division of 16th March 1837. Otherwise he claimed the £25,000 under the conditions specified in the deed of division; or finally,

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he claimed one-fourth of the £25,000 as his share under the marriage-contract, on the footing that the share of a son was to be in proportion to that of a daughter as six to four.

Colonel M. Donald pleaded—“(1) Under the settlement and deed of division executed by Sir John and Lady M'Donald, the claimant is entitled to payment of the sum of £25,000, without the limitations and conditions attached to the appointment thereof, in respect that the said limitations and conditions are ineffectual, not being authorised by the power of appointment in the marriage-contract. (2) If the said limitations and conditions are held to be well imposed, effect falls to be given to the appointment of the said sum by the spouses in terms of the said deed. (3) In the event of its being held that the said settlement and deed of division does not contain a valid exercise of the joint power of appointment by the spouses, the claimant is entitled to payment absolutely of the sum of £25,000, under the holograph deed of settlement and division executed by Lady M'Donald on 16th March 1837. (4) In the event of its being held that neither of the said deeds of settlement and division constitutes a valid exercise of the reserved power of appointment, the claimant is entitled under his father's and mother's contract of marriage to one-fourth of the fund in medio.”

The pleas of the Misses M'Donald were—“(1) Lady M, Donald's deed of 16th March 1837 is ineffectual as a deed of division, in respect that it was executed by her Ladyship alone in the lifetime of her husband. (2) The deed of Sir John and Lady M'Donald of 18th July 1837 is also ineffectual as an apportionment, in respect that it gives a large portion of the fund to persons not objects of the power. (3) No valid deed of division or apportionment having been executed either by Sir John and Lady M'Donald jointly, or by Lady M'Donald as the survivor, the marriage-contract funds fall to be divided among the children of the marriage who survived Lady M'Donald in the proportions specified in the marriage-contract, and the claimants are consequently entitled to be ranked and preferred in terms of their claim. (4) In the event of any of the deeds condescended on being held to constitute an effectual apportionment, the claimants ought to be ranked for the shares to which they are entitled under such deed or deeds.”

The Lord Ordinary ( Gifford) pronounced the following interlocutor and note:—

“ Edinburgh, 2 6th June 1873.—The Lord Ordinary having heard parties' procurators, and having considered the closed record, deeds produced,, and whole process—Finds that there was no valid or effectual exercise of the power of direction and appointment reserved to the late Sir John M'Donald and Dame Adriana M'Inroy or M'Donald, his spouse, or to the said Lady M'Donald, if survivor, in the contract of marriage between them, dated 8th September 1826; and finds that the estate of the said Lady M'Donald, settled by the said marriage — contract, being all and whole Lady M'Donald's whole share and interest of every kind in the estate of or under the will of the deceased James M'Inroy, her father, falls now to be paid, divided, and assigned to and among the surviving children of the marriage in the same manner as if no division or appointment had been made or attempted under the said power: Finds accordingly that the fund in medio in the present action, being the estate of the said Lady M'Donald, settled by the said marriage-contract, falls to be paid or assigned to and among the claimants, Colonel Alastair M'lain M'Donald, John Alan M'Donald, Miss Elizabeth Moore Menzies M'Donald, Miss Adriana M'Donald, and Miss Jemima M'Donald, being the whole children of the marriage between the said Sir John M'Donald and Lady M'Donald who survived the said Lady M'Donald, or to and among the respective assignees, legal or voluntary, of the said children, and that in the following shares and proportions, namely, that the share of each son of the marriage shall be in proportion to the share of each daughter of the marriage as six is to four, declaring that none of the daughters of the said marriage shall be entitled to more than £10,000: Reserves meantime all questions of expenses; and with these findings, appoints the case to be enrolled that the other points in the case may be disposed of, and final decrees of preference pronounced; and grants leave to any of the parties to reclaim against this interlocutor.

Note.—The chief, and indeed the only serious question in this case, relates to the validity and effect of the attempted exercise of the power of division and appointment reserved to Sir John and Lady M'Donald in their antenuptial contract of marriage. There are other questions as to the effect of assignments, and of John Alan M'Donald's sequestration, but these do not appear to be attended with any serious difficulty, and if the question of division were settled they could at once be disposed of. It is thought best to determine the questions arising on the exercise of the power of division and appointment first, leaving the others over in the meantime.

The Lord Ordinary had the advantage of a full and able argument as to the validity of the various deeds of appointment, with an ample citation of authorities. The view which he has taken admits, however, of being explained very shortly.

The power of division and appointment is a power to divide and appoint the payment of Lady M'Donald's estate to and among the children of the marriage surviving Lady M'Donald. Nothing vested in predeceasing children, and by the terms of the contract of marriage they are out of the case.

By the marriage contract the trustees are expressly directed, on the death of the surviving spouse, ‘to pay over or assign’ the whole of the sums and property in question to the surviving children. No doubt there is a power reserved to divide, and to affix time and conditions to the payment; but still this power must be so exercised as to be consistent with the leading and governing direction that the whole fund is actually to be paid over or assigned to the children. In the Lord Ordinary's view, therefore, there is no doubt either about the objects of the power—they are the surviving children—or about the subject-matter of the power—that is, the proportions, the time, and the conditions in, at, and under which the whole fund is to be paid or assigned to the children.

Now the Lord Ordinary is of opinion that this power, so understood and read, has not been validly or legally exercised either by Sir John and Lady M'Donald jointly, or by Lady M'Donald alone, as the surviving spouse.

(1) The Lord Ordinary is disposed to lay out of view altogether the holograph deed by Lady M'Donald alone, dated 16th March 1837. That deed was executed during the subsistence of the

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marriage, and as the Lord Ordinary reads the power, it could only be executed during the subsistence of the marriage by the joint act of both spouses. Then the deed bears on the face of it to have been executed for a temporary purpose, and while the formal deed was being adjusted. The formal deed was executed by both spouses on 18th July 1837, and thereupon the temporary deed of March 1837 was superseded, and became unavailing. The Lord Ordinary does not think the temporary deed of March 1837 could ever be revived by implication, or indeed otherwise than by the express act of the spouses, or of Lady M'Donald, reviving or renewing it; for even although the subsequent deeds of appointment should turn out to be inept in law, these deeds, and not the temporary deed of March 1837, express the last act and will of the appointers. The deed of March 1837 is no longer the deed left by the appointers as their exercise of the power. Still further, the Lord Ordinary thinks that the deed of March 1837 is in law subject to the same objections as the subsequent deeds.

(2) There is a further question, whether the deed of declaration by Lady M'Donald, dated 25th August 1866, can be read as a deed of appointment under the power, seeing that the whole power had been previously exercised and exhausted by the joint deed of division and appointment executed by both Sir John and Lady M'Donald on 18th July 1837. The Lord Ordinary inclines to think that if the power of division and appointment had been duly and validly exercised by Sir John and Lady M'Donald stante matrimonio, then Lady M'Donald could not alter or revoke the joint deed after her husband's decease. It is true the power is given by the marriage-contract, not only to the two spouses, but to Lady M'Donald, if she be the survivor; but the Lord Ordinary inclines to think that the true meaning of this is, that it is only failing the exercise of the power by the two spouses that the surviving wife may exercise it alone. To give the surviving wife a power of revoking the joint deed would be to read the power of division as giving to the wife alone, the husband only consenting during the subsistence of the marriage. This does not seem to be the fair meaning of the deed.

It does not appear necessary, however, to decide this question, for, in the Lord Ordinary's view, the same kind of legal objections which apply to the joint deed of 18th July 1837 apply also to Lady M'Donald's deed of 25th August 1866. Both, therefore, may be considered together.

(3) The Lord Ordinary is of opinion that these deeds are invalid in law, in respect that they give a part of the fund, and a material part of the fund, to persons who are not objects of the power. It seems quite settled in England, and the rule is equally applicable to Scotland, that a power to appoint in favour of children will not authorise an appointment to grandchildren. The leading authority is Brudenell v. Elwes, 1 East, 442, 7 Vesey, 382, in which case the deed contained the same expressions as to conditions, &c. as the marriage-contract in the present case; but see a great number of other cases quoted and commented upon in Sugden on Powers, 8th Edition, p. 664 to p. 673. The fair result of these cases seems to be, that unless a contrary intention is indicated, grandchildren are not embraced in a power to appoint among children. So the rule is broadly stated by Lord St Leonards. See also, among Scotch cases, Cuninghame v. Cuninghame, 2 Paton's Appeal Cases, 434.

Now if this be so, the deeds of July 1837 and August 1866 are both bad. The first virtually constitutes the eldest son the mere liferenter of £25,000, the sum being invested in land, and settled by a strict entail upon a long series of heirs, embracing not only grandchildren but collaterals of Sir John M'Donald, not blood relations of Lady M'Donald at all. The other deed constitutes John Alan M'Donald a mere liferenter for his alimentary liferent allenarly, and his children in fee. This seems ultra vires of the spouses, or either of them. Even if grandchildren were included as objects of the power (and the Lord Ordinary does not see how this can be made out from the deed), one-half of the fund—£25,000—is by the deed of directions so entailed and tied up that neither children nor grandchildren might ever get one sixpence of the fee. This is not to divide and appoint among children, but to divert from and exclude children altogether.

A class of cases was adverted to where appointments to grandchildren were supported, or limited settlements on the children upheld, the child interested consenting. The principle of these cases is, that the appointment of the sum to the child himself stands good as an appointment, and then the settlement or limitation is effectual, not as the act of the appointers, but as the act and settlement of the child himself. These cases are inapplicable to the present case, because the children were not consenters to any of the deeds of appointment, and do not even yet assent thereto, but, on the contrary, in the present action repudiate and dispute the same.

Another class of cases was referred to, where the appointment was held to stand good, and the illegal condition or limitation was held pro non scripto. The Lord Ordinary thinks that these cases also do not apply here, for it is not a condition attached to an appointment that is challenged, but an absolute diversion of a large portion of the fund, or of the fee thereof, from the proper objects of the power. The whole of these questions and cases are fully discussed in Lord St Leonards' book, to which reference is made.

(4) The Lord Ordinary thinks that any of the children may object to the invalidity of the deeds of appointment, and he is further of opinion that if the deed of appointment is invalid by reason of giving a large portion of the fund to persons not the object of the power, then the appointment is void altogether. It is so, because it can never be told how the appointers would have appointed the diverted portion of the fund.

No doubt there may be a partial appointment, as was ruled by the House of Lords-in Smith Cunninghame v. Anstruther (H. L., 25th April 1872; L. R., 2 Scotch Appeals, 223); but that is where a portion of the fund is not appointed at all, and where the partial appointments are made from time to time. But where the appointers deal with the whole fund, and illegally divert a considerable portion of it from the objects, there seems no alternative but to set aside the appointment altogether. It would be unsafe, and might be inequitable, to hold the illegally diverted portion as simply unappointed, and to divide it equally or rateably among the objects of the power.

Among other authorities, the following cases

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bearing on these points were referred to:— Watson v. Marjoribanks, 17th February 1837, 15 S. 586; Marder's Trustees v. Marder, 30th March 1853, 15 D. 653; Ormiston v. Ormiston, 24th January 1809, Hume, 531; Baikie's Trustees v, Oxley, 14th February 1862, 24 D. 589.

Appearance was very properly made at the debate for the trustees, who called attention to the possible interest which the unborn children of Mr John Alan M'Donald might have under Lady M'Donald's deed of 25th August 1866. The Lord Ordinary thinks that it was ultra vires of Lady M'Donald to limit John Alan M'Donald's right to a liferent allenarly, and give the fee to his children. But seeing that this point could not be stated by John Alan M'Donald himself, he taking an opposite view, it was quite right for the trustees to call attention thereto.

Mr John Alan M'Donald and his trustee made a motion for a payment to account. If the present views of the Lord Ordinary are affirmed, the Lord Ordinary thinks this motion reasonable; but so long as it is doubtful whether Mr M'Donald has more than a mere liferent, it would not be safe to give him or his trustee a payment of capital.”

This interlocutor was reclaimed against by Colonel Alastair M'lain M'Donald, the eldest son; and, after hearing parties, the Second Division appointed the cause to be reheard before seven Judges.

Argued for the Reclaimer—(1) The real question here is whether this condition was one which might be fairly annexed. (2) If Sir John and Lady M'Donald had no right to make this condition, what would be the result? Then we maintain that in point of fact they tried to make it a condition, but that, having failed, we become entitled to the £25,000. If the condition is bad it simply flies off, and we must get this sum of money. (Sugden on Powers; Carver v. Bowes; Campf v. Jones; Hewitt v. Lord Daere; Woolrych v. Woolrych; Churchill v. Churchill.) (3) Assuming that the condition was not a good one, we have next the question whether the younger children had any right to state the objection. These younger children do not say that their share is too small or too large, their rights are in no way effected; all they do say is that the eldest son has too little—that in place of getting this fund of £25,000 absolutely placed under his control, he has only a restricted and qualified right to it. This is not in the mouth of the younger children, the eldest son having said, These conditions may be bad, but I am willing to take under them. ( Crawford v. Graham.) The case which is mainly founded on ( Watson v. Majoribanks) as establishing the doctrine that the objection competent in the mouth of one child can be equally insisted in by another, does not bear out that view.” Colonel M'Donald can take this if he chooses, the objection is in his mouth and his alone. The money would be at once applied in paying off the debt on Loch-Garry if he takes it under the conditions, and the arrangement otherwise entered into by his consent cannot alter this. ( Moir's Trs.; Craik v. Craik; Traill v. Traill; Douglas v. Douglas; Thomson; Halkett; Stuart; Erskine; Dicks.) There is an uncontradicted series of cases warranting the support of this deed, unless there be any challenge on the ground of bona fides, and there is none here.

The gift of the son must be read without the condition. There are here two elements—(11 A distinct gift of the value; (2) A direction how it is to be paid; but the clause is distinct in itself as to allotment.

Authorities for Reclaimer— Moir's Trs., 9 Macph. 848, Scot. Law Rep.; Sugden on Powers, 515–6, 8th ed; Carver v. Bowes, 2 R. and M. 304; Campf, v. Jones, 1837, 2 K. 756; Hewitt v. Lord Dacre, 1838, 2 K. 622; Woolrych v. Woolrych, 1859, Johnstone's Reports, 63; Churchill v. Churchill, 1867, 5 L.R. Eq. 44; Crawford v. Graham, 6 D. 589, and Lord Justice-Clerk there; Erskine iii., 8, 39; Craik v. Craik, 1728, M. 12,894; Traill v. Traill, 1737, M. 12,985; Douglas v. Douglas, M. 13,002; Munro, Feb. 18,1810; Macneil, Jan. 27,1826; Thomson v. Children, 1762, M. 13,018; Dicks, 1776, 5 Br. Suppl. 420; Halkett v. Halkett, 5 Br. Suppl. 625, M. 15,416, rev. 2 Pat. 231; Stuart v. Stuart, 2d March 1815, F.C.; Erskine, 4 S. 357, 17th Jan. 1826.

Argued for the Respondents—We may consider four questions. (1) What is the first construction of this marriage contract? (2) Is the joint deed a valid exercise of the powers conferred by the marriage contract? (3) What is the effect of the joint deed? (4) Who are entitled to object?

On the first point we maintain that a just construction of the marriage contract was that each child should have a share in the fee which the parents could not effect, and that consequently any such act on the part of one or both of the parents by which any part of the fund was taken away from the children is invalid.

On the second point, that the deed is not a valid exercise of the powers because (a) it limited the eldest son's right to what was practically a liferent, and ( b) it gave a share to persons (viz., the heirs of entail, Sir John's collaterals), not included in the power under the marriage contract.

On the third point; the effect is to vitiate the attempted exercise of the power in toto and to cause an equal division (Gerrard v. Butler.) There was not a valid exercise with a superadded condition, the condition itself was such as to completely vitiate the whole deed.

On the last point; all persons who are objects of the powers are entitled to object.

Authorities for Respondents— Lassense v. Tierney, 1 Macnaughton and Gordon, 562; Gerrard v. Butler, 1855, 20 Bevan, 541; Watson v. Majoribanks, 15 S. 586, and Lord Corehouse there; Stevenson v. Hamilton, 1 D. 181; Baikie's Trs. v. Oxley, 24 D. 589, 14th Feb. 1862; Marsden's Trs., 28 L. J. Chancery, 906; Birley v. Birley, 27 L.J. Chancery 569; Lady Mary Topham, 32 L.J. Chancery 81. And cases referred to by the Lord Ordinary in his note.

At advising—