Scottish Court of Session Decisions

Sir Nathaniel Dunlop of Shieldhill, Biggar, and others, trustees acting under the trust-disposition and settlement of the late George Smith senior, pursuers and real raisers, brought an action of multiplepoinding and exoneration against Sir George Smith Clark, Bart., and others, defenders, for the determination of certain questions arising under Mr Smith's trust-disposition and settlement. These questions concerned the disposal of two shares of residue which formed the fund in medio liferented in terms of the will by (1) Mrs Eliza Smith or Barr, a daughter of the testator, and (2) Lieutenant-Colonel James Clark, K.C., a grandson of the testator, and which were left in doubt in consequence of the liferenters having died without issue.

By his trust-disposition and settlement, dated 12th December 1873, the testator provided, inter alia—“With regard to the residue of my means and estate … I direct my trustees to hold and apply, pay, and convey the same as follows, viz., one-fifth thereof to be paid and conveyed to my son the said George Smith junior, and that absolutely and as at the date of my death; one-fifth thereof to be held and applied for behoof of the children of my daughter the deceased Mrs Jane Smith or Clark; one-fifth thereof to and for behoof of Mrs Margaret Smith or Kerr, wife of John Pinkerton Kerr, residing at Underwood, Paisley; one-fifth thereof to and for behoof of Ellen Dunlop, only child of my daughter the also deceased MrsEllen Smith or Dunlop; and the remaining one-fifth to and for behoof of my daughter Eliza Smith; the shares effeiring to the children of my daughter the deceased Mrs Jane Smith or Clark, to my daughter the said Mrs Margaret Smith or Kerr, to the said Ellen Dunlop, and to my said daughter Eliza Smith, to be held for their behoof in liferent for their liferent use only and for

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behoof of their respective children and the survivors and survivor, equally among them in fee—payable and to be conveyed to them on their respectively attaining the age of twenty-five, and on the death of their parent, the issue, however, of such of them as may decease leaving issue being entitled to the share which their parent would have taken on survivance: Declaring… (secundo) that in the event of either of my said daughters Mrs Margaret Smith or Kerr and Eliza Smith predeceasing me without leaving issue, or of her leaving issue but of such issue not surviving to take in terms of the destination hereinbefore contained, then the share hereinbefore destined to her in liferent and her issue in fee shall fall and accresce (not per capita but per stirpes) to the other residuary legatees hereinbefore mentioned, whom failing to their respective issue; ( tertio) that in the event of any of my said grandchildren (viz., the said Ellen Dunlop and the children of my daughter the said Mrs Jane Smith or Clark) predeceasing me without leaving issue, or of his or her leaving issue but of such issue not surviving to take in terms of the destination hereinbefore contained, then the share hereinbefore destined to such grandchild in liferent and his or her issue in fee shall, in the case of the said Ellen Dunlop, fall and accresce (not per capita but per stirpes) to the other residuary legatees hereinbefore mentioned, whom failing to their respective issue, and in the case of the children of my daughter the said Mrs Jane Smith or Clark shall fall and accresce to his or her surviving brothers and sisters, whom all failing, then to the other residuary legatees hereinbefore mentioned, whom failing to their respective issue (not per capita but per stirpes) provided always that all shares accrescing in manner hereinbefore specified shall in so far as devolving on females be subject to the same liferent and to the same destination, declarations, and provisions as are herein provided with regard to original shares … ( Thirdly) That notwithstanding anything hereinbefore contained, it shall be in the power of my trustees, should they think proper, as to which they shall be sole judges, to pay and convey to my said daughter Mrs Margaret Smith or Kerr and also to my said daughter Eliza, in the event of her entering into marriage, such portion of the fee of residue hereinbefore provided to them respectively in liferent as my trustees may think fit, not exceeding in all one-half thereof to each of them; and, farther, that it shall be in the power of my said trustees should they think proper, as to which they shall be sole judges, to pay and convey to any of my said grandchildren, the said Ellen Dunlop and the children of the said Mrs Jane Smith or Clark, such portion of the fee of the share of residue hereinbefore provided for him or her in liferent as my said trustees may think fit—not exceeding in all one-half thereof—payable on their respectively attaining twenty-five years of age or on being married, whichever of these events should first happen, or at such time thereafter or from time to time thereafter as my trustees may think fit.” [The power to make advances out of the capital of the shares was exercised by the trustees in the case of the beneficiaries whose shares formed the fund in medio.]

The testator died on 3rd March 1876 survived by (1) his son George Smith junior, who died on 2nd November 1899, leaving a trust-disposition and settlement under which Robert Workman Smith was the surviving trustee; (2) three grandchildren (being the issue of the testator's daughter Mrs Jane Smith or Clark, who predeceased him), namely, Lieutenant-Colonel James Clark, K.C., C.B., who was killed in action in France on 10th May 1915, and was survived by a widow but left no issue, Sir George Smith Clark, Bart., and Robert Clark; (3) his daughter Mrs Margaret Smith or Kerr, who died in 1877 or 1878 intestate, but leaving issue and survived by her husband John Pinkerton Kerr, who died in 1894 leaving a trust-disposition and settlement; (4) a grandchild Miss Ellen Smith Dunlop, only child of the testator's daughter Mrs Ellen Smith or Dunlop, who predeceased him; and (5) his daughter Mrs Eliza Smith or Barr (designed in the testator's trust-disposition as Eliza Smith), who married and died without issue on 16th April 1917 leaving a trust-disposition and settlement.

Claims were lodged for (1) Robert Workman Smith, the surviving trustee acting under the trust-disposition and settlement of the deceased George Smith junior, and for Mrs Kerr's children and the trustees of her husband John Pinkerton Kerr, (2) Robert Clark and others (Mrs Barr's trustees), (3) Mrs Clark and others (Colonel Clark's trustees), (4) Sir George Smith Clark, Bart., and Robert Clark, the two surviving brothers of the deceased Colonel Clark, with their respective children. The first claimants maintained that there was no vesting of the fund in medio in either Colonel Clark or Mrs Barr, and that the fund fell into intestacy. The second claimants maintained that Colonel Clark's share had not vested in him and fell into intestacy, but that Mrs Barr's share had vested in her subject to defeasance in the event of her leaving issue, and that in consequence of her death without issue it passed to them as her trustees. The third claimants maintained thatColonel Clark's share vested in him subject to defeasance in the event of his leaving issue and passed under his will to his trustees. The fourth claimants maintained that there was accretion by survivorship to them in respect of the share liferented by their brother Colonel Clark.

On 1st July 1919 the Lord Ordinary ( Hunter) pronounced the following interlocutor:—“Finds that the balances of the shares of the residue of the estate of the deceased George Smith senior, liferented by the deceased Lieutenant—Colonel James Clark, and the deceased Mrs Eliza Smith or Barr, vested a morte testatoris (subject to defeasance in the event of their dying leaving issue): Therefore sustains the claim for the trustees of Lieutenant-Colonel James Clark to the whole of the first portion of the

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fund in medio; Sustains the first part of the claim ( b) for the trustees of Mrs Barr to the whole of the second portion of the fund in medio.”

Opinion.—“[ After a statement of the facts]—The fund in medio consists of the shares of the truster's estate liferented by his grandson Lieutenant-Colonel James Clark, K.C., and by his daughter Mrs Barr, and not paid over to them. Colonel Clark was killed in action in France on 10th May 1915, and was survived by a widow, but left no issue. Mrs Barr died without issue on 16th April 1917. Both these beneficiaries left settlements, the trustees under which are claimants in the action.

[ His Lordship here narrated the terms of the trust-disposition and settlement.]

“The trustees acting under the wills of Mrs Barr and Lieutenant-Colonel Clark maintain that in the events which have occurred the shares of these beneficiaries had vested in them. They maintain that the provisions giving Mrs Barr and Lieutenant-Colonel Clark liferent interests were intended to operate only in the event of their surviving the testator and dying leaving issue.

For the residuary legatees alive at the date of Mrs Barr's death and for the brothers of Lieutenant-Colonel Clark who survived him it was contended that the fee of the shares in dispute passed to them under the destinations-over. The testator has, however, as I have already stated, made no direction as to what is to be done in the events that have occurred. To give effect to their contention necessitates the reading into the settlement of words which are not there. It may be that if the testator had contemplated the events which have occurred he would have made the direction which he has given applicable thereto, but for me to so hold appears to be giving effect to speculation as to what the testator would or might have done in events which he has overlooked, and not to be legitimate interpretation of the words which must afford my sole guide in ascertaining his intention. I therefore reject this contention.

These claimants have an alternative contention—and this is also the contention of others of the next-of-kin of the testator—that the shares of the estate forming the fund in medio fall to be treated as intestate estate of the truster. I think that the difficulty of construction—and it appears to me to be a real difficulty—arises between this contention and that put forward by the representatives of the deceased beneficiaries.

It appears to be perfectly well settled that if a gift of fee has initially been conferred upon a beneficiary by words used by a testator, a subsequent direction to trustees to hold for that beneficiary in liferent allenarly and for his issue in fee does not absolutely cut down the initial gift; In such a case vesting is held to take place a morte in the beneficiary subject to defeasance only in the event of his dying survived by children. This was decided in the case of Lindsay's Trustees v. Lindsay, &c., 1880, 8 R. 281, 18 S.L.R. 199, and the doctrine is explained by Lord Dunedin in the case of Tweeddale's Trustees v. Tweeddale, 1905, 8 Fraser 264, at p. 273, 43 S.L.R. 193, whose opinion was accepted as authoritative by Lord Atkinson in Donaldson's Trustees v. Donaldson, 1916 S.C. (H.L) 55, at p. 63, 53 S.L.R. 97. In the latter case both the learned Judge and Lord Parker of Waddingron quote a passage from Lord Davey's opinion in Hancock v. Watson, 1902 AC 14, at p. 22 as correctly stating a principle common to both Scotch and English law. That passage is in the following terms—‘It is settled law that if you find an absolute gift to a legatee in the first instance, and trusts are engrafted or imposed on that absolute interest which fail either from lapse or invalidity or any other reason, then the absolute gift takes effect so far as the trusts have failed, to the exclusion of the residuary legatee or next-of-kin, as the case may be. Of course, as Lord Cottenham pointed out in Lassence v. Tierney ( 1849, 1 Mac. & G. 551) if the terms of the gift are ambiguous, you may seek assistance in construing it—in saying whether it is expressed as an absolute gift or not—from the other parts of the will, including the language of the engrafted trusts. But when the Court has once determined that the first gift is in terms absolute, then if it is a share of residue (as in the present case) the next-of-kin are excluded in any event.’

The principal question in the case therefore is, Was an initial gift conferred by the testator upon his daughter Mrs Barr and upon his grandson Lieutenant-Colonel Clark? I cannot say that in my opinion this question is free from difficulty. The testator has directed his trustees to hold and apply, pay, and convey his residue in five equal shares. Pay and convey are words certainly importing an absolute gift, but in the application of the four words to the different shares their use is confined to the share going to the truster's son, on whose absolute gift no trust is engrafted or imposed. Have the words ‘hold and apply’ a similar meaning? Certain cases were cited to me. In Nicol's Trustees v. Farquhar, 1918 S.C. 358, 55 S.L.R. 303, it was held that no gift of fee had been conferred upon a beneficiary for whom trustees were ‘to hold and retain’ a share of residue with certain directions as to the disposal thereof. There is of course, as counsel pointed out, a distinction between the words ‘hold and retain’ and the words ‘hold and apply.’ In Tweeddale's Trustees v. Tweeddale Lord Dunedin said—‘In one sense it is true that no decision in this branch of the law can ever be authority for another; for as different instruments are being construed, and the sole question is what is the true meaning of each, the decision of the proper construction of the will of A can never, as authority, rule the construction of the will of B.’ His Lordship then points out the extent to which opinions in preceding decisions may afford assistance in the construction of a particular deed, but I do not think that the present point is one on which it is necessary or advantageous to go beyond the words used by the testator. If there had been nothing except a direction to the trustees to hold and apply their

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shares of residue for behoof of the beneficiaries I think this would have conferred an absolute gift upon them. That I think means an initial gift except to the extent to which it is cut down by the subsequent provisions. In my opinion these provisions do not necessarily mean that nothing more than a bare liferent was conferred upon the beneficiaries. They appear to me merely to impose or engraft trusts upon the absolute interest given, and as these trusts have failed I think that the initial words of the gift are sufficient to carry the shares of the residue to the beneficiaries in preference to allowing them to be treated as undisposed of estate of the testator. I shall therefore sustain the first part of claim ( b) for the trustees of Mrs Barr, and the first claim for the trustees of Lieutenant-Colonel Clark.”

The claimants George Smith junior's trustee and others reclaimed and argued—Vesting depended on there being an initial gift— Muir's Trustees v. Muir's Trustees, 1895, 22 R. 553, 32 S.L.R. 370. There was, however, no initial gift in this will. The words “hold and apply” were used in opposition to the words “pay and convey.” The words “hold and apply” as used in the present will were ambiguous, but read in connection with later clauses in the will undoubtedly imported a liferent. It was quite clear from these later clauses that trust purposes were adjected which were inconsistent with any vesting defeasible or otherwise. The institute was only given a right of alimentary liferent and the fee was in the children. Even under the rule of Frog's Creditors v. His Children, (1735) M. 4262, such a destination would not carry the fee to the father. It had been decided that where the word “allenarly” was added the rule of Frog's Creditors was displaced. The word “only” had the same effect. The general principles of construction of such clauses were to befound stated in Donaldson's Trustees v. Donaldson, 1916 S.C. (H.L.) 55, 53 S.L.R. 97; Tweeddale's Trustees v. Tweeddale, 1905, 8 F. 264, 43 S.L.R. 193; Nicol's Trustees v. Farquhar, 1918 S.C. 358, 55 S.L.R. 303; Cowan's Trustee v. Jardine, 1913 S.C. 927, 50 S.L.R. 711; Young's Trustees v. Young, 1901, 3 F. 616, 38 S.L.R. 434; Anderson's Trustees v. Anderson, 1904, 7 F. 224, 42 S.L.R. 167. In any event “hold and apply” was the more probable antecedent to “to and for behoof of” than “pay and convey.” This being so, there was no sufficient direction to override the engrafted trust. The word “hold” was not in any way modified by the word “apply,” and “hold” did not imply a gift. It was not necessarily inconsistent with a fee being given, but that was because other controlling words of undoubted meaning were adjected or because there was no disposal of the fee— Miller's Trustees v. Miller, 1890, 18 R. 301, 28 S.L.R. 236. That was quite a different class of case from the present, because in the present case in the later clauses of the will competing rights were given in the fee which must be held to construe the words under consideration as conferring only a liferent. The punctuation of these words was also important, and favoured the reclaimers' contention— Turnbull's Trustees v. Lord Advocate, 1918 SC (HL) 88, 55 S.L.R. 208. In the present case vesting was inconsistent with the power of the trustees to make advances out of capital— Macgregor's Trustees v. Macgregor, 1909 S.C. 362, 46 S.L.R. 296. That case was in other respects very nearly parallel to the present case and really ruled it. The difference in expression between the gifts to Mrs Barr and Colonel Clark did not really affect the meaning, which was identical. This was shown by the fact that the testator in effect separated the residue of his estate into two parcels of one-fifth and four-fifths, the latter though made up of separate bequests of one-fifth each yet subject to the same destination, and it would be illogical to override this division by engrafting on the latter parcel two separate destinations, which was what would happen if effect were given to the difference of terminology. If, further, these parties were right in their contention that there was no vesting, the result must be intestacy quoad these provisions. The will had provided for a destination-over in two specified contingencies, but not in that which had occurred. It was incompetent for the Court to re-write the settlement by reading into it a destination-over which was not there. Accordingly the clause in question could not be regarded as carrying any estate which otherwise would be intestate succession. In Fyfe's Trustees v. Duthie, 1908 S.C. 520, 45 S.L.R. 368, the Court did not really interfere with the settlement. The further directions in the will as to the share in question showed that they imported a liferent in severalty. This was clear from the use of the words “respective children,” and also from the direction as to payment on attaining the age of twenty-five or the death of the parent. These directions imported a complete severance of these parts of the estate— Macgregor's Trustees v. Macgregor. In Bartholomew's Trustees v. Bartholomew, 1904, 6 F. 322, 41 S.L.R. 256, founded on by counsel for the claimants Sir George Smith Clark and others, there was no severance till all the daughters were dead or married and therefore the general direction took effect.

Argued for the claimants James Clark's trustees—There was here vesting subject to defeasance. A gift of fee to children, with a liferent to the parents to protect the same, was not inconsistent with an initial gift— Donaldson's Trustees v. Donaldson, 1916 S.C. (H.L.) 55, per Lord Atkinson at p. 64, 53 S.L.R. 97; Tweeddale's Trustees v. Tweeddale, 1905, 8 F. 264, per Lord Dunedin at p. 273, 43 S.L.R. 193; Muir's Trustees v. Muir's Trustees, 1895, 22 R. 553, per Lord M'Laren at p. 557, 32 S.L.R. 370; Lindsay's Trustees v. Lindsay, 1880, 8 R. 281, per Lord President Inglis at p. 285, 18 S.L.R. 199. The alternative to an initial gift was intestacy, and any construction leading to intestacy the Court would if possible avoid. The words “hold and apply, pay and convey,” governed everything that followed. The words “hold and apply” were not necessarily inconsistent with an initial gift— Donaldson's Trustees v. Donaldson ( cit. sup.), per Lord Wrenbury at p. 68; Tweeddale's Trustees v. Tweeddale

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( cit. sup.), per Lord Stormonth Darling at p. 288; Greenlees' Trustees v. Greenlees, 1894, 22 R. 136, 32 S.L.R. 106. In Macgregor's Trustees v. Macgregor, 1909 S.C. 362, 46 S.L.R. 296, founded on by counsel for the reclaimers, it was provided that the share in question was to be held by the trustees subject to certain conditions. The word “apply” clearly meant divestiture of the trustees in favour of the person favoured, and there was nothing in the deed to restrict this to income as against capital. It was easy to infer an intention to give a power of testamentary disposal to the liferenter, and it was only to prevent them leaving their shares away from their issue that the testator gave them a liferent. On the question of a joint liferent parties were here under the rule of Paxton's Trustees v. Cowie, 1886, 13 R. 1191, 23 S.L.R. 830. The children in the present case were known persons at the time of the testator's death, and that was against a class gift.

Argued for the claimants Mrs Barr's trustees—These claimants were in a stronger position than the claimants James Clark's trustees, whose argument quantum valeret they adopted. The difference of terminology in the claimants Mrs Barr's trustees' gift entitled them to maintain that the whole four words “hold and apply, pay and convey,” applied to their gift.

Argued for the claimant Sir George Smith Clark, Bart., and others—These claimants did not oppose the interlocutor of the Lord Ordinary, but in the event of his interlocutor being recalled they maintained as against intestacy that a joint liferent was conferred under the will on Colonel Clark and his two brothers. The primary purpose of the will was to give a liferent to the class, and only when the class was exhausted would the children take the fees. Alternatively, it might be argued that a child of a deceased brother would get one-third of the fee, thus defeating the joint liferent to that extent— Fyfe's Trustees v. Duthie, 1908 S.C. 520, and per Lord Low at p. 527, 45 S.L.R. 368; Muir's Trustees v. Muir, 1889, 16 R. 954, 26 S.L.R. 672; Menzies' Factor v. Menzies, 1898, 1 F. 128, 36 S.L.R. 116; Bartholomew's Trustees v. Bartholomew, 1904, 6 F. 322, 41 S.L.R. 256; Binnie's Trustees v. Prendergast, 1910 S.C. 735, 47 S.L.R. 271; Fergus and Others, 1872, 10 Macph. 968. The fact that the children were known was not inconsistent with a class gift. Fyfe's Trustees v. Duthie was authority for the proposition that it was competent to read into a settlement that which was not there but which was obviously intended to be there.

At advising—