Scottish Court of Session Decisions

The Accumulations Act 1880 (39 and 40 Geo. III, cap. 98) (Thellusson Act) enacts, sec. 1—“No person or persons shall after the passing of this Act, by any deed or deeds, surrender or surrenders, will, codicil, or otherwise howsoever, settle or dispose of any real or personal property so and in such manner that the rents, issues, profits, or produce thereof shall be wholly or partially accumulated for any longer term than the life or lives of any such grantor or grantors, settler or settlers, or the term of twenty-one years from the death of any such grantor, settler, devisor, or testator,

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… and in every case where any accumulation shall be directed otherwise than as aforesaid, such direction shall be null and void, and the rents, issues, profits, and produce of such property so directed to be accumulated, shall, so long as the same shall be directed to be accumulated contrary to the provisions of this Act, go to and be received by such person or persons as would have been entitled thereto if such accumulation had not been directed.”

Section 2—“Provided always that nothing in this Act contained shall extend to any provision for … raising portions for any child or children of any grantor, settler, or devisor, or any child or children of any person taking any interest under any such conveyance, settlement, or devise.…”

On June 9, 1908, William Reid, Viewfar, Leven, and others, trustees acting tinder the trust-disposition and settlement of the late David Mackay, Oak Lodge, Inveresk, ( first parties); Mrs Isabell Watt or Mackay, the testator's widow ( second party); Mrs Davina Margaret Mackay or Reid, wife of the. said William Reid, and others, the daughters of the testator ( third parties); and Archibald Douglas Reid and others, the children of the testator's daughters ( fourth parties), brought a Special Case for the determination of certain questions as to their rights under the settlement.

The following narrative is taken from the opinion ( infra) of the Lord President—

“The question in this Special Case arises on the settlement of the late David Mackay, who left a trust-disposition and settlement in which he conveyed his property to trustees. The third purpose of the trust was that the trustees should pay to his widow a free annuity of £100; and then the fifth purpose provided that, in the event of there being any surplus income from his estate after satisfying the aforesaid annuity, his trustees should accumulate such surplus income ‘and retain the same for behoof of my children, and they shall pay to and divide among them as they respectively attain majority equally, quarterly, half-yearly, or otherwise, the income derivable from the said accumulated surplus.’ Then, by the seventh purpose, on the death of his wife, or her second marriage, and as his children should respectively attain majority, the trustees were directed to set apart for behoof of each child an equal share of the capital estate and accumulations, if any, corresponding to the number of children. These shares were to be settled on the daughters in liferent for their liferent use allenarly and their children in fee, and in the case of sons they were to get the fee. Now what has happened has been this. The testator's widow is still alive and has survived the period of twenty-one years from the testator's death. During all this time there has been, and there still is, a certain amount of surplus income on the original residue of the estate over and above what is necessary to meet the annuity of four hundred pounds. Up to the end of the twenty-one years, of course, no difficulty arose; the annuity of four hundred pounds was paid to the widow; the surplus income from year to year was accumulated; and the interest upon such accumulations was divided among the children as they respectively came to the age which allowed them to receive it. But now that the twenty-first year has passed, a question has arisen as to what is to happen in view of the provisions of the Thellusson Act.”

The second and third parties maintained that the Thellusson Act (39 and 40 Geo. III, cap. 98) applied to the funds in question, and prohibited accumulations of surplus income subsequent to 15th September 1903—being twenty-one years from the date of the testator's death—and that the sums accumulated since that date, being otherwise undisposed of by the testator, fell into intestacy. The second party accordingly claimed that she, as the testator's widow, was entitled to one-third of the said accumulations as jus relictœ. The third parties maintained that they were entitled to the remaining two-thirds of the said accumulations as sole next-of-kin of the testator, or alternatively, that the whole surplus income subsequent to 15th September 1903 belonged to them as legatees of the liferent of the residue of the testator's estate. The fourth parties maintained that the Thellusson Act did not apply to the funds in question, in respect that the said accumulations were directed to be made for the purpose of raising pro tanto portions for the children of the testator who were alive at his death. Assuming that the said Act applied to the funds in question, the fourth parties maintained that they were the only persons to whom there was any gift of the fee, and that consequently the trustees Were bound, in terms of the seventh purpose of the said trust-disposition and settlement, to hold and invest any balance of revenue accruing from the testator's estate subsequent to 15th September 1903 for their behoof, because but for the direction to accumulate they would have been entitled to the capital of the revenue so acquired, even though the third parties might be entitled for the future to the annual income of such accumulations after 15th September 1993.

The questions of law were—“1. Is the accumulation of the income of the deceased's estate subsequent to 15th September 1903 prohibited by the Thellusson Act? 2. In the event of the first question being answered in the affirmative, does the surplus income of said estate from and after 15th September 1903 fall to be treated as intestate succession of the deceased David Mackay? 3. In the event of the first and second questions being answered in the affirmative, is the second party entitled to one-third of the said accumulations in virtue of her jus relictœ, and are the third parties entitled to the remaining two thirds of said accumulations as next-of-kin? 4. In the event of the first question being answered in the affirmative and the second in the negative, does the surplus income vest in and become payable to the third parties as legatees of the liferent of the residue of the deceased David Mackay's

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estate? Or 5. Does the said surplus revenue fall to be invested for behoof of the fourth parlies, as having, along with any other grandchildren who may come into existence subsequently, the right to the fee of the residue of the estate of the said David Mackay, and if so, are the third parties entitled to the liferent of such investment?”

Argued for second and third parties—Accumulations of income subsequent to 15th September 1903 were struck at by the Act. The exception provided for in section 2—viz., provision for raising portions—was inapplicable. “Raising portions” meant “creating portions,” not merely adding to their original amount—Hargrave on the Thellusson Act, 199; Eyre v. Marsden, 1838, 2 Keen 564. Moreover, “portion” meant a capital sum, not interest payable yearly— Edwards v. Tuck, 1853, 22 L.J. Ch. 523, aff. 1854, 23 L.J. Ch. 204, per Oranworth, L.C., at p. 200. Enhancing of residue by accumulation of surplus income was not raising a portion, There must be a direction to raise a specific sum, and that was absent here— Moon's Trustees v. Moon, November 28, 1899, 2 F. 201, at p. 206, 37 S.L.R. 140. It was impossible to say for whom the accumulations were being made, as the period of distribution was postponed till the death of the widow, and therefore this was not a provision for raising portions for children in the sense of the Act— Moon's Trustees ( cit. supra), per Lord Moncreiff, 2 F. at p. 214. Esto that the Act applied, the surplus income was estate undisposed of, and fell into intestacy— Lord v. Colvin, December 7, 1860, 23 D. III; Maxwell's Trustees v. Maxwell, November 24, 1877, 5 R. 248, per L.J.-C. Moncreiff at 250, 15 S.L.R. 155; Moon's Trustees ( cit. supra).

Argued for fourth parties—This was a case of raising portions for children in the sense of section 2. It was immaterial that provision was made for children in the meantime. “Raising portions” did not necessarily exclude provision by way of accumulation of surplus income— Colquhoun's Trustees v. Colquhoun, January 11, 1907, 1907 S.C. 346, 44 S.L.R. 269, in re Stephens, [1904] 1 Ch 322.