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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Donaldson and Others (Mackinnon's Trustees) v. Dunlop (Mackinnon's Trustee) [1912] ScotLR 193 (28 November 1912) URL: http://www.bailii.org/scot/cases/ScotCS/1912/50SLR0193.html Cite as: [1912] ScotLR 193, [1912] SLR 193 |
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Page: 193↓
Sheriff Court at Glasgow.
Facts:
In his antenuptial contract of marriage a husband undertook to pay to his trustees before his death, “at such times and in such sums as he finds it convenient,” a sum of £4000, and until the said sum was paid over to pay to the trustees or his wife half-yearly interest at 4 per cent. The contract provided that the said sum and the profits and produce thereof were (1) to be held for behoof of the wife in liferent for her liferent alimentary use allenarly till her death or second marriage, and on her death, in the event of her predeceasing her husband, then to him in liferent as an alimentary provision for himself and the children of the marriage, and (2) on the death of the survivor of the spouses or the wife's second marriage, were to be held for behoof of, or paid over to, the children of the marriage. The husband's estates were sequestrated and the marriage-contract trustees, to whom the £4000 had never been paid, claimed that sum in the sequestration.
Held that as the husband retained command of the sum of £4000, the interest never going directly to the children, no jus crediti was conferred on the trustees entitling them to rank therefor in the sequestration.
Herries, Farquhar, & Company v. Brown, March 9, 1838, 16 S. 948, and Fair v. Hunter, November 5, 1861, 24 D. 1, commented on.
Opinion ( per the Lord President) that the wife had a good claim to the actuarial value of her liferent.
William Henderson Donaldson and others, the trustees acting under the antenuptial marriage-contract between Thomas Neil Mackinnon and Rachel Catherine Donaldson dated 26th and 27th September 1882, pursuers, raised an action in the Sheriff Court at Glasgow against William Dunlop, C.A., Glasgow, trustee on the sequestrated estates of the said Thomas Neil Mackinnon, defender.
The antenuptial contract of marriage between Thomas Neil Mackinnon, first party, and Rachel Catherine Donaldson, second party, provided, inter alia—“The first party hereby undertakes within six months from the date hereof. … ( tertio) to pay to the said trustees before his death, at such times and in such sums as he finds it convenient, a further sum of £4000, and
Page: 194↓
until the said sum is paid over to pay to the said trustees or the second party half-yearly at Martinmas and Whitsunday interest thereon at the rate of 4 per cent. per annum, all which subjects and the profits and produce thereof shall be held by the said trustees in trust as follows— (first) for behoof of the second party in liferent for her liferent alimentary use allenarly till her death or second marriage, and on her death in the event of her pre-deceasing the first party, then to him in liferent as an alimentary provision for behoof of himself and the children of the marriage, for the proper upbringing, education, and maintenance of such children, and that in such sums or proportions as the said trustees shall deem proper, and of which they shall be the sole judges; (second) on the death of the survivor of the said spouses or the second marriage of the said Rachel Catherine Donaldson, the said trustees shall hold the said estate for behoof of, or pay and convey the same to, the children of the said marriage and the issue of any child or children who may have predeceased leaving issue, in such proportions and on such conditions and subject to such restrictions as the first party, whom failing the second party, may appoint by any writing, whether testamentary or otherwise, and failing such appointment, then equally among the said children per stirpes, the issue of any predeceasing child or children taking equally among them the share which would have fallen to their parent if in life.” There were eight children of the marriage. The estates of Thomas Neil Mackinnon were sequestrated on 28th February 1911, and on 4th April 1911 the defender was appointed trustee. The bankrupt had not paid the £4000 to the trustees, and they lodged a claim, inter alia, for this sum. On 4th March 1912 the defender rejected this claim in respect that “the terms of the obligation for payment of the £4000 to the claimants do not import a jus crediti in the trustees entitling them to rank in the sequestration.”
The pursuers appealed to the Sheriff, and on 2nd July 1912 the Sheriff-Substitute ( boyd) recalled the deliverance and found them entitled to be ranked in terms of their claim. Note.… [After stating the claim] … The bankrupt has not paid the £4000 to the pursuers, who accordingly lodged on oath an account of debt claiming this sum. The defender rejected this claim on 4th March 1912, in respect that “the terms of the obligation for payment of the £4000 to the claimants do not import a jus crediti in the trustees entitling them to rank in the sequestration”
The pursuers appealed to the Sheriff, and on 2nd July 1912 the Sheriff-Substitute (Boyd) recalled the deliverance and found them entitled to be ranked in terms of their claim.
Note—“…[After stating the claim] … The bankrupt has not paid the £4000 to the pursuers, who accordingly lodged on oath an account of debt claiming this sum. The defender rejected this claim on 4th March 1912, in respect that ‘the terms of the obligation for payment of the £4000 to the claimants do not import a jus crediti in the trustees entitling them to rank in the sequestration…’
Is there a jus crediti in the trustees in respect of the obligation to pay £4000? I think there is. The authorities are numerous, and after comparing them and the above provisions I conclude that in a competition with creditors the wife in this marriage contract has a jus crediti. With regard to the children, I think I may conclude from the authorities that when a father undertakes obligations in their favour to be performed after his death, but with interest to run on it before his death, then there is a jus crediti in the children, and not a mere spes successionis. The sum may be retained for the father's convenience, but the right of the children in it is so real that interest is due on it. If interest is due, it seems to follow that the capital sum must be a debt of the father. Here there is an obligation to pay to the trustees before death, and interest is to run. A fortiori I think a jus crediti is established.
“The principles applicable are to be found in Erskine, b. 3, t. 8, p. 40, to b. 3, t. 9, p. 22; Bell's Commentaries, 682–685; Bell's Principles, s. 1946; Fraser, Husband and Wife, 1355–1358; M'Laren, Wills and Succession, ss. 1209, 1211, 1215, 1217, 1219.
The earlier cases which start in Morrison, voce Provisions to Heirs and Children, with Lyon v. The Creditors of Easter Ogle, 12,909, Douglas 12,910, Ballingall 12,919, Mackenzie 12,904 (where the sum was not due till the father's death, but interest was due from the majority or marriage of the children), seem to have been all considered and given effect to in the leading case of Wilson's Trustees v. Pagan or Wilson, 2nd July 1856, 18 Dunlop 1096.
“The defender's view is that no action was competent against the father during his lifetime to compel performance, and unless the provisions conferred a jus exigendi a jus crediti did not exist. So far as I am aware the case of Wilson's Trustees has never been overruled, and I think from it and the cases that precede it I may conclude that, although the right of action may never come, yet a jus crediti may be conferred. I think it was conferred in the present case.…”
The defender appealed, and argued—There was no jus crediti conferred on the children in a question with their father's onerous creditors. As regards them the children were by the marriage-contract put in the position of heirs and not of creditors; the children did not get the interest of the £4000. The result of the cases on the subject was that the test to be applied was whether or not the husband had abridged his power of adminstration. If not, no jus crediti was conferred—Ersk. iii, 8, 39; Bell's Comm. (7th edn.), vol. i, pp. 682 and 685, and the cases there cited, viz., Children of Mactavish v. His Creditors, 1787, M. 12,922; Creditors of James Lockhart v. Anna Lockhart, 1741, M. 12,914; Creditors of Kenneth Mackenzie v. His Children ( Redcastle case), 1792, M. 12,924; Goddard v. Stewart's Children, March 9, 1844, 6 D. 1018, esp. Lord Moncreiff at 1023–4; Wilson's Trustees v. Wilson, July 2, 1856, 18 D. 1096; Creditors of Strachan v. Strachan, 1754, 5 Br. Sup. 814. Herries, Farquhar, & Company v. Brown, March 9, 1838, 16 S. 948, as appeared from the opinions in Wilson's Trustees (cit. sup.) was not really against their contention. In Fair v. Hunter, November 5, 1861, 24 D. 1, there was
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an antecedent obligation on the father to pay; moreover, it was decided on a different branch of law. They admitted that the succession was here protected but not against onerous creditors. Argued for the respondents—The marriage-contract trustees were entitled to a ranking for the £4000 pari passu with other onerous creditors. “At such times and in such sums as he finds it convenient” was not equivalent to “at his pleasure.” It was a suspensive condition similar to “as soon as I have it in my power,” and it flew off at death or bankruptcy— Fair v. Hunter (cit. sup.) esp. Lord Justice-Clerk Inglis at p. 9. “Convenience” meant mercantile convenience— Crawshaw v. Hornstedt, 1887, 3 T.L.R. 426. No doubt it lay on the creditor in the obligation to show that the condition was purified — Shaw v. Kay, March 24, 1904, 12 S.L.T. 6, aff., 12 S.L.T. 262—but this onus the trustees might have been able to discharge in the father's lifetime. The condition was in no different position from one to operate on majority or marriage. Where there was an obligation undertaken by the father upon which the children (or the trustees) might be able to sue in his lifetime with the effect of either transferring the fee to the children or even impairing the father's right of administration, then there was a jus crediti— Herries, Farquhar, & Company v. Brown ( cit. sup.); Creditors of Kenneth Mackenzie v. His Children ( Redcastle case) ( cit. sup.); Wilson's Trustees v. Wilson (cit. sup.). The obligation to pay interest could not be split up according to the persons at different times entitled to receive it.
At advising—
The bankrupt entered into an antenuptial marriage contract under which he became bound to make good certain provisions in favour of his wife and children. As to some of these provisions no question arises, but the one upon which the whole matter turns is this—He bound himself “ (tertio) to pay to the said trustees before his death, at such times and in such sums as he finds it convenient, a further sum of £4000, and until the said sum is paid over to pay to the said trustees or the second party” (his wife) “half-yearly at Martinmas and Whitsunday interest thereon at the rate of 4 per cent. per annum, all which subjects and the profits and produce thereof shall be held by the said trustees in trust as follows— (first) For behoof of the second party in liferent for her liferent alimentary use allenarly till her death or second marriage, and on her death, in the event of her predeceasing the first party, then to him in liferent as an alimentary provision for behoof of himself and the children of the marriage, for the proper upbringing, education, and maintenance of such children, and that in such sums or proportions as the said trustees shall deem proper, and of which they shall be the sole judges; (second) on the death of the survivor of the said spouses or the second marriage of the said Rachel Catherine Donaldson, the said trustees shall hold the said estate for behoof of, or pay and convey the same to, the children of the said marriage, and the issue of any child or children who may have predeceased leaving issue, in such proportions and on such conditions and subject to such restrictions as the first party, whom failing the second party, may appoint.”
The marriage-contract trustees claimed for this £4000, which de facto had never been paid to them, and the trustee in the sequestration rejected the claim. The learned Sheriff-Substitute recalled the trustee's deliverance and ranked them in terms of their claim, and he states the question thus—“Is there a jus crediti in the trustees in respect of the obligation to pay them £4000?” He thinks there is. He gives a general citation of authorities, but he particularly calls attention to the fact that when a father undertakes obligations in favour of his children to be performed after his death, “but with interest to run on it before his death, then there is a jus crediti in the children and not a mere spes successionis.” He says—“If interest is due, it seems to follow that the capital sum must be a debt of the father. Here there is an obligation to pay to the trustees before death, and interest is to run. A fortiori I think a jus crediti is established.” I think there the learned Sheriff-Substitute made a slip. It may follow from the fact that interest is to run that a jus crediti is created, but only if interest is to run in favour of the same people to whom the principal is payable, in this case the children. Now the Sheriff-Substitute has not noticed here that the children directly never get any of this interest at all. The wife gets it so long as she is alive, and after her death the father gets it, or else nobody gets it; and accordingly that ground of judgment fails as soon as that is explained.
We had a very good and very able argument on the general question with which the Sheriff-Substitute does not more particularly deal than by a citation of authorities, and the whole question comes to be whether in this marriage contract there is a, jus crediti or not.
I am not going through all the cases that have been decided upon this matter, which would indeed be a lengthy proceeding. I could not possibly put the general result so well or with the same authority as was done long ago by Mr Bell in his Commentaries (7th ed. vol. i, p. 682). He puts the point that applies to this case in one single sentence in the middle of p. 684. After stating all the ways in which a husband may be able to provide for a wife and children in case of his own bankruptcy, he says—“(6) It is quite incongruous to attempt to give to the husband the command
Page: 196↓
I think that would be enough, and I could now stop, were it not for the case that is mentioned in the opinion of the consulted Judges in Herries, Farquhar, & Company, which would certainly, as they put it, seem to go the other way, and although it seems almost sacrilegious to touch this opinion, which has always been looked on as a very great authority, and which I think is a very great authority still, none the less I feel bound to point out what I think is an undoubted slip in the opinion. In that opinion a certain case is discussed, and if that case can be used as it is used there it would go against the doctrine I have laid down and against its application to the present case. In the opinion of the Consulted Judges it is said (16 S. at p. 965)—“A case still more applicable to that which is now before the Court is noticed in the case of Gordon v. Sutherland (1748, M. 12,915)—‘In a contract of marriage in which the husband “became bound to join the sum of 3000 merks with 17,000 merks of portion received with his spouse, and to lay out the same upon security to himself and spouse and longest liver in conjunct fee and liferent, and to the children of the marriage in fee; and how often the sum should be uplifted, that he should so often re-employ the same in the above terms;” the man having died bankrupt, action was brought against the cautioner who was bound with him in the contract. His defence was that the obligation barred only gratuitous deeds, and was no impediment to the husband from laying out the money upon trade though it should be sunk thereby. But the Court found the import of the obligation to be that in all events this sum should be secured to the children of the marriage, and therefore sustained action against the cautioner for replacing the same.’” So far quotation from the notice of the case in Gordon v. Sutherland. Then the opinion of the Consulted Judges proceeds—“In that case there was not only no stipulation that the father should denude of the fee in his lifetime; but it was necessarily implied that he should not denude, for it is contemplated that he might employ and re-employ—that is, that after having employed the sum, he should have the power of uplifting it at his pleasure. Neither was it stipulated that any part of the sum, nor of the interest accruing upon it, should be payable during the father's lifetime. But the Court held the obligation that the father should employ, and if he uplifted that he should re-employ, to import that he was bound to make the provision effectual to the children after his death, and consequently that they were proper creditors to the father.” Now if that case had decided that, I quite agree it would be contrary to what my view of the true meaning of the restriction of the father's power of disposal is, and to the application to this case; but I think it is clear that that was not decided in that case. It is quite evident that the learned Judges in referring to that case did not know what case it was, because when referring to it as “noticed in” Gordon v. Sutherland they would have given the name of it if it was known, and it is only referred to in the argument in Gordon v. Sutherland (M. at p. 12,917). I notice, to begin with, that the decision in Gordon v. Sutherland was to the opposite effect. It is perfectly well brought out by the rubric—“A settlement in a contract of marriage is in dubio not understood to give more to the heirs nascituri than spes successionis;” and the obligation there was as to land instead of as to merks in this other case, but it was an obligation to provide for the spouse in liferent and to the children in fee, But it is not impossible,
Page: 197↓
Now, having got the case, it is perfectly clear that it was not decided upon the ground stated by the learned Judges in Berries, Farquhar, & Company, viz., that the children were proper creditors to the father, but what the case was decided upon is rightly set forth by Mr Erskine in his Institutes (iii, viii, 40), where, after having dealt with this question of jura crediti, he says—“Though such marriage settlements when executed in the ordinary form are postponed to every onerous debt of the granter”—that is to say, do not create a proper jus crediti—“even those contracted after, and so cannot come in competition with his extraneous creditors, they are nevertheless effectual against a cautioner who has engaged himself in the marriage-contract for the father's performance of his obligation. For the plain language of that engagement is that he shall make the provision effectual to the heir in case the father himself shall fail; so that the claim competent to the heir of the marriage in such case is not as heir to his father but as creditor to the cautioner.” Then he cites the case of Dickson ( 1717, M. 12,938), and the case of Fotheringham ( M. 12,941). 80 that, in other words, the case of Fotheringham was decided against the cautioner upon the hypothesis that there was no proper jus crediti in favour of the children against their father's estate. That I think ends the matter, and leaves it precisely as Mr Bell put it, namely, Can you find any proper restriction upon the power of the husband? Here I find none, and in point of fact, if the argument upon the other side is right, the husband here would have succeeded in doing what Mr Bell says above all things he cannot do—he would have reared up a claim on behalf of his children which never could incommode him, because he need never pay except when he liked, but which would always incommode his creditors, because it would be a jus crediti the moment he became bankrupt.
Counsel for the respondent in a very able argument particularly appealed to the ease of Fair v. Hunter (24 D. 1), in which it was held that an obligation to pay “as soon as I have it in my power” was a proper debt. Well, all depends on what one means by proper debt. The truth is there are three forms of obligations in such matters. There is the form of an ordinary debt which you are bound to pay the moment that you are sued upon it. It is not suggested that there is such a debt here. Then, on the other hand, there is a form of quasi-obligation which is truly no obligation at all, which simply says, “I promise to pay if I like to pay,” and I agree with the learned counsel that the obligation here is not of that kind. But there is the third and intermediate case, of which I think Fair v. Hunter was an instance, in which a debtor may be bound in the sense that the obligation is good against him and yet it cannot come into competition with his ordinary and proper creditors, and that is just where the respondents' case fails, because there is no proper jus crediti which will destroy the father's power of disposal.
The circumstances in Fair's case were that Mr Hunter had a son through whom Fair had lost money, and the father was very anxious to make up to Fair the money which his son had lost. He was not in a condition at the time to do so. He had not any ready money—his money being locked up in Australia—and he was a member of
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Now here I am not doubting that this would have been a good obligation against the estate of this gentleman supposing he had never paid the sum during his lifetime and had died leaving free executry; and I am not doubting, under the authority of Fotheringham, that if a cautioner had been bound along with him, it would have been a good obligation against the cautioner; but that is a different thing from saying it is a jus crediti ranking along with the claims of present creditors in bankruptcy, and upon the doctrines I have examined, that depends on whether the father is or is not maintained in full possession of his funds. I think he is, and I am of opinion that the judgment of the learned Sheriff-Substitute should be recalled and the deliverance of the trustee replaced.
I ought to state, and I think it follows from the judgment, that if the wife chooses to make a claim, which she has not done at present, for the actuarial value of her liferent right to the interest which is due, that would be a perfectly good claim against the sequestration; that indeed was admitted by the learned counsel who appeared for the trustee.
This statement of the law applicable to this question I take from the opinion of Lord Moncreiff in the case of Goddard, 6 D. 1018, at p. 1023, and from Lord Deas' summary in Wilson's Trustees, 18 D. 1096, at p. 1136, which is the law laid down in 1 Bell's Com., 684 (6), and Herries, Farquhar, & Company, 1 6 S. 964. A father cannot secure his children against his other creditors without securing them against himself. He cannot secure them against himself without making such a provision that his own powers of administration or beneficial enjoyment are or may come to be abridged in his own lifetime. It is because the provision in question here fails to satisfy, on any reasonable construction, this condition, that it cannot be regarded as conferring a jus crediti. If this fund had been made payable at majority or marriage of the children, even though this should happen in the father's lifetime, or if it had been provided that interest was to run from a term which might happen in his lifetime, the children would then have had a jus crediti.
There is, however, no such provision here in favour of the children. We are not concerned in the present case with the interests of the wife, whose provision is of a different character.
So far as regards the rights of the children the father does not appear to me to have tied his hands in any way.
It was argued on the authority of Fair v. Hunter, 24 D. 1, that the proper construction to be put upon this clause is that it contains an absolute obligation to pay money, qualified only to this extent that it was only to be paid if and when it should be convenient in a commercial sense to do so. The opinion of the Lord Justice-Clerk in Fair's case was founded on to the effect that the death or bankruptcy of the debtor puts an end to all such conditions. The case of Fair was however different from the present. As the Lord Justice-Clerk
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The Court recalled the interlocutor of the Sheriff-Substitute, dated 2nd July 1912, and affirmed the deliverance of the trustee, dated 4th March 1912, in so far as it dealt with the claim for £4000.
Counsel for Mackinnon's Marriage-Contract Trustees, Pursuers and Respondents— Sandeman, K.C.—Normand. Agents— J. & J. Ross, W.S.
Counsel for the Trustee on Mackinnon's Sequestrated Estates, Defender and Appellant— Chree, K.C.—T. G. Robertson. Agents— Carmichael & Miller, W.S.