Scottish Court of Session Decisions

By his trust-disposition and settlement, dated 17th February 1898, and relative codicils dated respectively 24th and 25th January 1899, James Martin conveyed his whole estate, heritable and moveable, to trustees for the purposes therein mentioned. Inter alia he directed his trustees to pay an annuity of £500 to his wife Mrs Mary Spence Christie or Martin, and in addition to pay to her the “free annual proceeds of the residue of my whole means and estate” after payment of certain legacies and annuities.

The testator died on 2nd July 1899, survived by his widow. The trustees entered on the administration of the trust, and in succeeding years were in use to make up their accounts annually as at 2nd July. The revenue of the trust was variable, and certain items of income (consisting of rents and of interests on loans) which became due and payable in one trust year were not received until a succeeding year.

In these circumstances a question arose between the trustees and Mrs Martin as to whether in calculating the revenue of each year the above items should be treated as belonging to the income of the year in which they became due or of the year in which they were received.

For the settlement of this, among other points, a special case was presented to the Court by, inter alios, (1) the trustees, and (2) Mrs Martin.

The questions of law were—“(12) In ascertaining and disposing of the income of each year, are the first parties bound to have regard only to the income which has actually been received during the year? or (13) Are they bound to include income becoming due during the year but not paid to them until after its close?”

Argued for the first parties—In ascertaining and disposing of the income of each year they were bound to have regard only to the income actually received during the year, and not to income becoming due but not received during the year. In striking the “free annual proceeds” of the residue it was impossible for the trustees to take account of sums which although due might never be paid.

Argued for the second party—The first parties in ascertaining and disposing of the income of any one year were bound to take into account all the sums that became due and payable during that year, although the same might not be received till afterwards. Such sums were part of the free annual proceeds of the year in which they became due and payable. The trustees might not be able to pay them till they received them, but that did not change the character of such sums. In the case of the death of a liferentrix, her representatives would be entitled to all revenue which became due and payable before her death whether it had been received by her or not, and the same principle applied to sums which had become due but had not been paid before the date of making up the trust accounts.

At advising—