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House of Lords
Session 2001- 02
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Judgments

Judgments - Earl of Balfour (Appellant) v Keeper of The Registers of Scotland and Others (Respondents) (Scotland)

HOUSE OF LORDS

Lord Bingham of Cornhill Lord Hoffmann Lord Hope of Craighead Lord Clyde Lord Rodger of Earlsferry

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

EARL OF BALFOUR

(APPELLANT)

v.

KEEPER OF THE REGISTERS OF SCOTLAND AND OTHERS

(RESPONDENTS)

(SCOTLAND)

ON 6 NOVEMBER 2002

[2002] UKHL 42

LORD BINGHAM OF CORNHILL

My Lords,

    1. I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead, Lord Clyde and Lord Rodger of Earlsferry. I am in full agreement with them, and for the reasons which they give would allow the appeal and make the order which Lord Hope proposes.

LORD HOFFMANN

My Lords,

    2. I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead, Lord Clyde and Lord Rodger of Earlsferry. For the reasons which they give, I too would allow the appeal and make the order which Lord Hope proposes.

LORD HOPE OF CRAIGHEAD

My Lords,

    3. This is an appeal from an interlocutor of an Extra Division of the Court of Session (Lord Cameron of Lochbroom, Lord Macfadyen and Lord Sutherland) refusing the prayer of a petition in which the appellant had asked the court to pronounce an act and decree declaring him to be the fee simple proprietor of the lands and the barony of Whittingehame and others ("the heritable property"): 2002 SLT 981. The appellant is the Right Honourable the Fourth Earl of Balfour. The heritable property is at present held for him in liferent by the trustees acting under the trust disposition and settlement and two relative codicils of the late Arthur James Balfour, the First Earl of Balfour ("the First Earl"). The application was brought under section 48 of the Entail Amendment (Scotland) Act 1848. Following an amendment which was allowed by the Inner House the statutory basis for the application was extended to include, in the alternative, section 47 of that Act. The application is opposed by the sixth named respondent, who is a descendent of the younger brother of the First Earl, Eustace James Anthony Balfour.

The facts

    4. The First Earl died on 19 March 1930, leaving a trust disposition and settlement dated 1 January 1923 and two relative codicils dated 20 December 1927 and 20 September 1929, all registered in the Books of Council and Session on 24 March 1930. His estate comprised both heritable and moveable property. After making provision for the payment of expenses and estate duty, for the preservation of his books and papers, for the payment of various pensions and for the disposal of any of his pictures and works of art which might be considered to be suitable to be made heirlooms he gave directions in Purpose In the Seventh Place as to what his trustees were to do with the residue of his estate, both heritable and moveable.

    5. The opening part of the directions contained in Purpose In the Seventh Place was in these terms:

    "With regard to the whole rest and residue of my means and estate heritable and moveable, real and personal, wherever the same may be situated, I direct my Trustees to hold and retain the titles to the same in their own names as Trustees foresaid, and to deal with the same, subject to the conditions and provisions relating thereto hereinafter written: And to pay to or apply the whole nett revenue or income thereof for behoof of the following series of heirs in their order successively each for his or her liferent use allenarly, videlicet:- My brother, the said Gerald William Balfour in liferent, whom failing, the heir male of the body of the said Gerald William Balfour, in liferent, whom failing, the heir male of the body of my brother Eustace James Anthony Balfour (now deceased), in liferent, whom failing the heir female of the bodies of each of my said brothers Gerald and Eustace in the order of their seniority, in liferent, excluding heirs portioners, whom failing the second and other younger sons of the late Charles Barrington Balfour of Balgonie and Newton Don in the order of their seniority in liferent, whom failing Captain the Honourable Arthur Charles Strutt, Royal Navy, the second son of my sister Evelyn, Lady Rayleigh, in liferent, whom failing the second or other younger son of the then Lord Rayleigh and who at the time may not be in the enjoyment of the honours of Rayleigh or the family estates in the County of Essex, in fee, whom failing my own nearest heirs and representatives whomsoever in fee, and that in the manner for the purposes, with the faculties and subject to the powers conferred by me and after expressed."

There then followed various declarations and other provisions relating to the series of liferent rights created by this provision which it is unnecessary to set out as they are not relevant to this application.

    6. The first codicil dated 20 December 1927 was in these terms:

    "Having consulted my brother Gerald William Balfour and the other members of my family interested, and with his and their full approval, I hereby cancel the nomination of my said brother Gerald as the first liferenter or heir ceded to the succession of the rest and residue of my whole means and estate as provided for "In the Seventh Place" in said Trust Disposition and Settlement, and I now instruct that in his place the heir male of his body shall be the person first entitled to succeed thereunder, and I wish to say that I have made this alteration to save my heirs as much Estate Duty as possible: And in all other respects I confirm the foregoing Trust Disposition and Settlement."

    7. The second codicil dated 20 September 1929 was concerned only with the appointment of a named individual to be one of the First Earl's literary executors. It made no reference to, and did not affect in any way, the directions to the trustees which were contained in the trust disposition and settlement or the first codicil.

    8. On 29 October 1931 the trustees acting under the trust disposition and settlement recorded a notice of title in the Register of Sasines for the County of East Lothian in their name in relation to the lands and barony of Whittingehame and others referred to in the trust disposition and settlement. In accordance with the directions set out in Purpose in the Seventh Place they have been holding the residue of the First Earl's estate continuously since the date of the First Earl's death in trust for the heirs male of the body of Gerald William Balfour.

    9. The term "heirs of the body" denotes a limitation of the legal order of succession to heirs in the direct line of descent who are of the blood of the ancestor named, and the term "heir male of the body" means the eldest son or other male heir descended from the person named and connected with such person exclusively through males: Craigie, Scottish Law of Conveyancing, Heritable Rights, 3rd edition, p 531. Gerald William Balfour survived the First Earl and succeeded him as the Second Earl. The first member of the class comprising the heirs male of his body was the Third Earl of Balfour, who was the nephew of the First Earl and the son of the Second Earl. The Third Earl died on 27 December 1968. He was survived by his son ("the appellant"), who was born on 23 December 1925, succeeded him as the Fourth Earl, is also a member of the class and as such is the present liferenter.

The 1848 Act

    10. There is no rule of law in Scotland which prohibits the constitution of a trust under which trustees remain vested in the fee of the trust estate in perpetuity for the purpose of dispensing the income as directed by the truster: Mackenzie Stuart, The Law of Trusts, p 82. As Lord Thankerton observed in Muir's Trustees v Williams, 1943 SC (HL) 47, 51, the law against perpetuities in Scotland is entirely of statutory origin. The law permits a truster to create a trust for the payment of the income of the trust estate for an indefinite period, so long as he does not infringe the provisions of the statutes which deal with accumulations of income and with the creation of successive liferents. This case is concerned with the statutory restrictions on the creation of successive liferents, and in particular with the restriction which applies to the creation of successive liferents over heritable property.

    11. Prior to the introduction of legislation which was designed to free the property from such restrictions, a disposition of heritable property could be granted which contained a destination to a series of heirs together with clauses which prohibited the alienation of the property by any of them, the contracting of any debt on the security of the property and any alteration in the order of succession. It was open to the person who was in possession of the lands for the time being under a disposition of that kind, which was referred to loosely as an entail, to evacuate the special destination for onerous consideration. But an entail strictly so called was a disposition of lands which contained, in addition to these three cardinal prohibitions, an irritant clause which annulled the act prohibited and a resolutive clause which annulled the right to the estate of the heir who contravened the provisions of the entail: Craigie, p 694.

    12. Provisions which were designed to enable lands to be set free from the fetters of an entail were contained in the Entail Amendment (Scotland) Act 1848, commonly known as the Rutherfurd Act in recognition of the fact that its promoter was the then Lord Advocate, Andrew Rutherfurd. Section 3 of that Act enabled an heir of entail who was of full age to disentail the lands by applying to the Court of Session for authority to execute and record, under the authority of the court, an instrument of disentail. It was recognised that the provisions contained in this legislation would be capable of being defeated if it had remained possible to tie up lands in perpetuity by the creation of a series of liferents. As Lord Mackenzie observed in Erskine v Wright (1846) 8 D 863, this would soon supersede all other methods of doing so if it were competent. So there were included in the Act two further sections, sections 47 and 48, which dealt with prohibitions, conditions, restrictions and limitations on the party's right as fee simple proprietor other than those comprised in a strict entail, including those which confined the party to a liferent interest in the land or estate which was in his possession.

    13. The power to create a perpetuity by a series of successive liferents in regard to heritage was restricted by section 48 of the 1848 Act. In terms of that section it is competent to grant "an estate in Scotland limited to a liferent interest in favour only of a party in life at the date of such grant". The remedy which is given to a party of full age born after the date of such deed dated on or after 1 August 1848 is to obtain and record an act and decree of the Court of Session "in the like form and manner, and in the like terms, and with the like operation and effect, as is hereinbefore provided with reference to an act and decree of the said court in the case of deeds of trust." The concluding words of this part of the section refer back to section 47 of the Act, which applies where land is in the possession of a person of full age under a trust disposition or settlement dated on or after 1 August 1848 by virtue of which he is lawful possession of the land.

    14. The parties were agreed in the Inner House that there was, so far as this case is concerned, no difference in the result according to whether the appellant's application fell within the ambit of section 47 or section 48. So the court did not find it necessary to decide which of these two provisions applies to this case. But, as my noble and learned friend Lord Clyde pointed out at the outset of the hearing before your Lordships, the better view appears to be that this case falls under section 47 and not under section 48. This because the restrictions with which it is concerned are to be found not in the form of a proper liferent but in the directions to trustees which are contained in a deed of trust.

    15. That is how these two sections are dealt with by McLaren, The Law of Wills and Succession, 3rd ed, para 560 and 561. In para 560 he states:

    "Perpetuities by way of liferent are now prohibited by the Entail Amendment Act, which enacts that 'it shall be competent to grant an estate in Scotland, limited to a liferent interest, in favour only of a party in life at the date of such grant.'"

As a footnote to this sentence indicates, the passage which he has quoted is taken from section 48 of the 1848 Act. He then goes on in para 561, under reference to section 47 of the Act, to state:

    "By the Entail Amendment Act trusts, as well as liferents, are put under the same restrictions as entails with respect to duration; and accordingly, any trust purpose in the nature of a substitution extending beyond the term of endurance allowed by the Act is defeasible by the beneficiary."

In Middleton, Petitioner 1929 SC 394, 401 Lord Blackburn, delivering the opinion of the court, said that he had always understood that section 47 applied to any trust deed dated after 1 August 1848 and that the law was so stated in Bell on Conveyancing, 3rd ed, vol ii, p 1072 and McLaren on Wills, 3rd ed, section 561; see also Wilson and Duncan, Trusts, Trustees and Executors, 2nd ed., para 8.08.

    16. This view of the matter is not unanimous, perhaps because the word "liferent" as such does not appear anywhere in section 47. This word is used only in section 48. Mackenzie Stuart, The Law of Trusts, p 83 indicates that the section which applies to liferents which have been constituted by a deed of trust is section 48:

    "Section 48 of the 1848 Act does not render a series of liferents created by a testator or truster void, or necessarily inoperative; it merely limits their effect."

In Davie v Davies' Trustees (1900) 8 SLT 28 Lord Low, sitting in the Outer House, is reported as having held that a trust disposition which had confined the pursuer to a liferent for as long as the trustees exercised the discretion which they had been given to retain the capital was struck at by section 48 of the Act. Halliday, Conveyancing Law and Practice in Scotland, vol IV, para 47-12, refers only to section 48 in his discussion of restrictions on liferents in testamentary settlements. It seems to me however that the language of the two sections as a whole points to the conclusion that the better view as to their respective application is that favoured by Lord McLaren and by Lord Blackburn. So I would hold that this case falls under section 47, as it is concerned with restrictions or limitations on the appellant's interest in the lands and estate which are contained in a trust disposition or settlement.

    17. The relevant part of section 47 of the 1848 Act is in these terms:

    "Where any land or estate in Scotland shall, by virtue of any trust disposition or settlement or other deed of trust whatsoever, dated on or after the first day of August one thousand eight hundred and forty-eight, be in the lawful possession, either directly or through any trustees for his behoof, of a party of full age born after the date of such trust disposition or settlement or other deed of trust, such party shall not be in any way affected by any prohibitions, conditions, restrictions, or limitations which may be contained in such trust disposition or settlement or other deed of trust, or by which the same or the interest of such party therein may bear to be qualified, such prohibitions, conditions, restrictions, or limitations being of the nature of prohibitions, conditions, restrictions, or limitations of entail, or intended to regulate the succession of such party, or to limit, restrict, or abridge his possession or enjoyment of such land or estate in favour of any future heir; and such party shall be deemed and taken to be the fee simple proprietor of such land or estate…"

The issue

    18. The point which is in dispute in this case arises from the fact that, although the appellant was born after the date of the First Earl's trust disposition and settlement, he was born before the date of the first codicil. The question is whether the relevant date for the purposes of section 47 of the 1848 Act is the date of the trust disposition or the date of the first codicil. If it is the date of the trust disposition, it must follow that the appellant is entitled to the order which he seeks under that section, which is that an act and decree should be pronounced declaring that he is the fee simple proprietor of the heritable property. But he cannot succeed if it is the date of the first codicil because, if that is the correct view of the matter, he was born before, not after, "the date of such trust disposition or settlement or other deed of trust."

    19. The question can, I think, be related more precisely to the terms of section 47. It reduces itself to this: what is the trust deed "by virtue of" which the appellant is in lawful possession of the heritable property to which his application relates? In my opinion the answer to it is to be found in the wording of the section itself, and by relating the facts as they were at the date of the application to the terms of the trust disposition and settlement and the first codicil.

Discussion

    20. An analysis of the relevant part of section 47 can be broken down into three stages. The first stage requires one to identify any land or estate which, "by virtue of any trust disposition or settlement or other deed of trust whatsoever," dated after 1 August 1848, is " in the lawful possession" of a party of full age "born after the date of such trust disposition or settlement or other deed of trust." The second stage directs attention to any prohibitions, conditions, restrictions or limitations which may be contained "in such trust disposition or settlement or deed of trust." These are the provisions by which the party who is of full age is not to be in any way affected. The third stage requires one to examine, in the alternative, any other prohibitions, conditions, restrictions or limitations "by which the same or the interest of such party therein may bear to be qualified."

    21. Of these three stages the critical one, for present purposes, is the first. The trust deed to which the second stage relates is the same as that referred to in the first, as it is the deed by virtue of which the party of full age is in lawful possession of the land. The third stage relates to prohibitions, conditions, restrictions or limitations contained in some other deed, such as one made in the exercise of a power of appointment by which the interest under the trust deed of the party of full age bears to have been qualified. The critical question, then, is whether the trust deed by virtue of which the appellant is in lawful possession of the heritable property is the trust disposition and settlement or is the trust disposition and settlement read together with the first codicil.

    22. The First Earl seems to have been advised that the relevant date was the date of his death, that being the date when the provisions of the trust created by his testamentary settlement were to take effect. This appears from a passage in paragraph (Sixth) of Purpose In the Seventh Place of his trust disposition and settlement, where he expressed his wish as to what should be done with the residue of his estate "upon the determination of the series of liferent rights created by and conferred by these presents in the residue and remainder of my means and estate by reason of the succession of a person who was not in life at the time of my death but who shall afterwards succeed and attain the age of twenty one years complete and who shall at his or her majority become entitled to the said residue and remainder of my means and estate as his or her absolute property." It is to be noted that section 9 of the Trusts (Scotland) Act 1921, re-enacting section 17 of the Entail Amendment (Scotland) Act 1868, provides that the relevant date for the purposes of that section, where the restriction on the creation of successive liferents applies to liferent interests in moveable property, is the date of the truster's death. The appellant accepts that he is not entitled to apply for the removal of the restrictions over his interest in the moveable property as he was born before the date of death of the First Earl.

    23. In Murray v Murray's Tutor, 1915 1 SLT 34, it was held that the date of a mortis causa trust disposition and settlement for the purposes of section 48 of the 1848 Act was the date of the truster's death and not the date of its execution. But that decision was disapproved in Lord Binning, Petitioner, 1984 SLT 18, following the opinion expressed by Lord President Inglis, with which a majority of the judges in the Inner House agreed, in G W H Riddell, Petitioner (1874) 1 R 462 that the date of the deed must be taken to be the date when the trust deed was made and executed, which is the literal meaning of the words used: see also Earl of Moray, (Petitioner) 1950 SC (HL) 281, in which Lord Mackintosh held that the relevant date for the purposes of section 47 of the 1848 Act was the date when the deed was executed and not the date of the testator's death. Counsel for the sixth respondent did not challenge the correctness of the decision in Binning, with which I respectfully agree. As we are concerned in this case with restrictions over an interest in heritable property, the relevant date is the date when the deed by virtue of which that interest is held was executed.

    24. Section 52 of the 1848 provides that, in construing the Act, "except where the nature of the provision shall be repugnant to such construction," all words used in the singular number shall be held to include several persons or things. The words "deed of trust" in section 47 are therefore capable of extending to more than one deed, if it is necessary to refer to more than one deed in order to discover the trust purposes by virtue of which the appellant is in lawful possession of the heritable property. But, as Lord MacDermott pointed out in Malcolm's Trustees v Malcolm, 1950 SC (HL) 17, 29, it may be necessary to choose between various documents in order to discover the deed by virtue of which the liferent which is in question was constituted.

    25. For the sixth respondent Mr Moynihan's argument was that it was the combination of the trust disposition and settlement and the codicils which created the trust of which the appellant is now the beneficiary. He maintained that the relevant date was that which had created the settlement as a whole and not just part of it, and that for this purpose it was necessary to refer not only to the trust disposition and settlement but also to the first codicil. That too appears to have been the view of the judges in the Inner House. As Lord Cameron of Lochbroom put it, 2002 SLT 981, 984, para 13:

    "In dealing with the residuary estate held by them in terms of the seventh purpose, the trustees were directed to hold it for behoof of the heir male of Gerald [the Second Earl], and not Gerald, by virtue of the trust disposition and settlement taken together with and as altered by the provision in the codicil of 20 December 1927 which appointed the heir male of Gerald as the first person entitled to succeed to the liferent of the residuary estate. That is to say, the trust settlement by virtue of which the first liferenter came into possession of and thereafter held the liferented estate, was composed of the two deeds taken together. The date of the deed forming the trust settlement must be taken as the date when the later of the deeds was executed, namely 20 December 1927. That deed remained the trust settlement containing the directions to the trustees in determining the further destination of the residuary estate arising on the death of the first liferenter."

    26. There is, of course, ample authority for the proposition that if a testator leaves more than one testamentary writing they are to be read together so far as possible as if they formed one deed: Black v Watson (1841) 3 D 522; Henderson, The Law of Vesting, 2nd edition, p 17. The First Earl himself invoked this principle when he declared in Purpose in the Fifth Place that instructions contained in any codicil or other testamentary writing of his were to be held and to be taken to be part of and read with his trust disposition. But that is not the issue in this case. The question is, what is the trust deed by virtue of which the appellant is in lawful possession of the heritable property? Does it, in the events which have happened, include not only the original trust disposition and settlement but also the first codicil?

    27. What then did the first codicil do? Mr Moynihan accepted that, although the second codicil also fell to be read together with the first codicil and the trust disposition and settlement, it was of no significance for present purposes as all it did was to appoint a further literary executor. As for the first codicil, it did three things. It cancelled the nomination of the Second Earl as the first liferenter. It identified the heir male of his body as "the person first entitled to succeed" under the trust disposition and settlement. And it confirmed the trust disposition and settlement "in all other respects."

    28. It is plain that the trust deed by virtue of which the Third Earl entered into lawful possession of the heritable property on the death of the First Earl included the first codicil, as it was necessary for the trustees to give effect to its terms in order to identify the person first entitled to succeed to the residue of the First Earl's estate under Purpose In the Seventh Place of the trust disposition and settlement. But all the first codicil did, and all it was intended to do, was to identify that person. As soon as the Third Earl entered into possession of the residue as the first liferenter its purpose was served and its effect was spent. When the appellant entered into possession on the death of the Third Earl he did so, not as a person identified in the first codicil, but as a member of the class of heirs male of the body of the Second Earl. The gift of the residue to the heirs male of the body of the Second Earl as a class is contained, and it is contained only, in Purpose In the Seventh Place of the trust disposition and settlement.

    29. Although each case must depend on its own facts, it seems to me that this approach is consistent with authority. In Earl of Moray, Petitioner, 1950 SC 281, Lord Mackintosh held that section 47 of the 1848 Act applied to any estate which was heritable property at the date when the petition was presented. It had been suggested that it included only estate which had been settled in the form of heritable property at the commencement of the trust. Lord Mackintosh said at p 283 that the words "any land and estate" in section 47 covered any estate which is heritable property according to the law of Scotland at the time when the application under the section is presented to the court. I would construe and apply the words "in the lawful possession" and "his possession or enjoyment" in the present case in the same way. The section is concerned with the state of affairs at the date of the application to the court, not with events which might or might not have occurred as seen at the commencement of the trust. If the Third Earl had predeceased the Second Earl, assuming also that the Second Earl was still alive on the death of the First Earl, it would have been necessary to refer to the first codicil in order to identify the appellant as the person first entitled to into possession of the residue. But that is not what happened. The succession had already opened to the heirs male of the body of the Second Earl as a class in terms of Purpose in the Seventh Place before the death of the Third Earl.

 
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