1910 WARRING enable a sufficient fund to be set aside and invested in trust In re. v. BEDING- C. W. Cottrell was sixty-three years of age. F. W. W. Hopper was seventeen years of age and was a son of the testatrix by her first marriage. This was an originating summons taken out by the trustees asking for the determination (inter alia) of the questions (1.) in what manner the estate of the testatrix after payment of the funeral and testamentary expenses and debts ought to be apportioned by the trustees in respect of and amongst the said legacies and annuity, and (2.) whether and how the amount to be apportioned in respect of the said annuity ought to be invested by the trustees and in what manner such annuity and the investments representing the same and the income thereof ought to be applied (a) during the life of the said C. W. Cottrell and (b) after his death. A. Whitaker, for the summons. T. J. C. Tomlin, for the pecuniary legatees. The proper course in the present case is to value the annuity and to pay the amount of the valuation in full to the annuitant and the legacies in full to the legatees. If this is done both annuitant and legatees will be paid in full now. The difficulty I have in suggesting this course arises from the fact that the authorities seem to decide that where there is a direction in the will to set apart a sum to answer the annuity the amount of the valuation ought not to be paid over to the annuitant: Wright v. Callender. (1) That case, however, appears distinguishable from the present. There the question was how to adjust matters as between the annuitant and the residuary legatee, the annual income of the estate being insufficient but the corpus of the estate being ample to pay the annuity. The case, therefore, does not touch the present, where the real question is how to adjust matters as between pecuniary legatees and an annuitant, all of (1) 2 D. M. & G. 652. whom rank pari passu. In Miner v. Baldwin (1) an annuity WARRINGwas held to have been properly paid out of capital. TON J. 1910 COTTRELL, In re. [WARRINGTON J. In that case apparently the whole fund had been exhausted. There was only an annuitant and the rights of pecuniary legatees did not come into question. Here the BUCKLAND question is between the pecuniary legatees and the annuitant. If the annuitant receives the value of his annuity both legatees and annuitant can now be paid in full.] That is my contention. If that course is not followed, and if on the contrary a rateable part of the fund required to answer the annuity is set aside and applied in paying the annuity, the pecuniary legatees run the risk of ultimately not getting paid in full at all, although the estate is in fact sufficient to pay them. If the annuity is valued now there will be no question of abatement, as there is sufficient estate to pay the pecuniary legatees in full and the annuitant the amount of the valuation of his annuity. Owen Thompson, for F. W. W. Hopper, the residuary legatee. The residuary legatee will be very seriously prejudiced if a lump sum is taken out of the residue and paid to the annuitant, and it would be wrong in this case for the Court to direct such a payment having regard to the form of the gift of the annuity in the will. The annuitant is not entitled to payment of the amount of the valuation of his annuity out of the corpus. His right is to have a fund set aside to answer it. Where the estate is deficient and the question is one as between the annuitant and the residuary legatee the annuitant is not entitled to have his annuity valued and the amount of the valuation paid to him. If, however, the annuity is to be valued at all, it should be on the footing of the will, i.e., the sum to be set aside to produce 521. per annum should be calculated and should abate rateably with the pecuniary legacies. Where an annuity is charged on corpus the annuitant is not entitled to be paid the value of his annuity: In re Grant. (2) Gratrix v. Chambers (3), in which it was held that the annuitant was entitled to have the accruing payments of the annuity (1) (1853) 1 Sm. & Giff. 522. (2) (1883) 52 L. J. (Ch.) 552. (3) (1860) 2 Giff. 321. v. BEDING FIELD. TON J. 1910 -~ In re. v. WARRING made good, if necessary, out of capital, was distinguished by Kekewich J. in In re Sinclair (1) on the ground that the annuity there was charged on corpus. The cases are all collected in COTTRELL, Theobald on Wills, 7th ed. p. 502, but in none of them was BUCKLAND there, as here, a direction to set aside a fund to answer the annuity. Where the Court has to consider the question as between an annuitant, pecuniary legatees, and a residuary legatee it will deal with the matter in such a way as not to raise and pay a sum out of the residue. The jurisdiction to raise and pay is only exercised by the Court where it is administering the estate: In re Nicholson's Estate. (2) BEDING- H. W. Malkin, for the annuitant. The proper course is, it is submitted, to value the annuity and to pay the income of the valuation to the annuitant, making good any deficiency in the income out of capital. [WARRINGTON J. That might operate very unfairly on the pecuniary legatees.] WARRINGTON J. The question in this case is what is the proper course to adopt in order rightly to satisfy the demands of certain pecuniary legatees and an annuitant in a case in which the amount of the estate of the testatrix is not sufficient to give effect literatim to the directions of her will, but is sufficient if the amount of the annuity is to be treated as a legacy and dealt with accordingly, in which case the estate would be sufficient to pay both the legatees and the annuitant in full. Now the facts are these: [His Lordship read the material parts of the will above set forth, and continued:-] Now the amount of the estate of the testatrix is sufficient to pay in full the pecuniary legacies and the value as at the date of the testatrix's death of the annuity of 521. It is not sufficient to pay the pecuniary legacies in full and to set apart in full a fund sufficient by the income thereof to pay the annuity. If, therefore, the directions of the testatrix are to be carried into effect in the form in which they are expressed in the will the pecuniary legacies and the amount to be set aside to answer the annuity will have to abate. It is true that if the annuity did not in the (2) (1876) Ir. R. 11 Eq. 177. (1) [1897] 1 Ch. 921, 926. TON J. 1910 COTTRELL, In re. BUCKLAND V. BEDING FIELD. result exhaust the abated fund set aside the pecuniary legatees WARRINGmight in the end get paid in full-they might or they might not. Under those circumstances what is the course which the Court ought to pursue? In the ordinary case where there is a gift of an annuity to an annuitant with a direction to set aside a fund to answer the annuity, and the annuity is payable out of capital as well as income and there is a gift over of the residue, it was decided in Wright v. Callender (1), and I think it is the law, that the right of the annuitant is to have the directions of the testator carried into effect, and that if the estate is not sufficient to pay the annuity in full he is entitled to have the deficiency made up out of capital, but he must take the estate as it stands and is not entitled to have the value of the annuity paid over to him. That is the law where the question is one simply as between an annuitant and residuary legatees. But where the question is one as between an annuitant and pecuniary legatees, and the estate is insufficient for the payment of the annuity and the pecuniary legacies, then, where there is a direction in the will to set apart and invest a sufficient sum to answer the annuity, the course adopted by the Court has been to value the annuity as at the date of the testator's death, to treat the amount of the valuation as a legacy, and to make it abate in its due proportion, and then to pay the abated amount to the annuitant. In each of those two cases respectively those are the proper courses to pursue, as is shewn by Wright v. Callender. (1) But the case with which I have to deal is the intermediate case. It is this: If the course is to be pursued in the present case which is pursued in the case where the estate is insufficient to pay both the pecuniary legatees and an annuitant in full, the pecuniary legacies will be paid in full and the annuitant will receive the full value of his annuity at once. If, however, I take the amount directed to be set aside to answer the annuity and treat it as a legacy and make it abate with the other pecuniary legacies, then three courses are possible; either (1.) the annuitant is to receive the income of the abated fund, or (2.) he is to receive his annuity in full out of both income and capital, or (3.) by some intricate calculation he is to receive (1) 2 D. M. & G. 652. TON J. 1910 In re. v. BEDING- WARRING out of income supplemented by capital a yearly sum abated in proportion to the actual abatement of the pecuniary legacies. Whichever of those three courses be adopted, an injustice COTTRELL, will be done to the pecuniary legatees, which would be avoided BUCKLAND by adopting the course which is contended for on behalf of the pecuniary legatees. The right of the pecuniary legatees is to be paid at the expiration of one year from the testator's death, that is, in the present case, at once, the amounts of their legacies. If I adopt the course pressed upon me by counsel for the residuary legatee I do not pay the pecuniary legatees the amounts of their legacies in full. The annuitant may get paid in full, the pecuniary legatees may or may not be paid in full, at some time hereafter, when it is known how long the annuitant has lived, and. possibly if both the annuitant and the pecuniary legatees are paid in full there may be something left for the residuary legatee. But that course is wholly speculative. By adopting the other course I can do justice at once without any speculating to both the pecuniary legatees and the residuary legatee. The pecuniary legatees are entitled to be paid in full at once; so also is the annuitant. It is true that here the testatrix has provided a means by which the annuity can be secured, but to follow that course would be to do injustice to the pecuniary legatees. In my judgment justice can be done to all the three classes of beneficiaries by adopting the course suggested by counsel on behalf of the pecuniary legatees, namely, by valuing the annuity as at the date of the death of the testatrix according to the Government tables or according to ordinary actuarial principles and treating the amount of the valuation as a pecuniary legacy, and paying the pecuniary legatees in full and the annuitant the amount of the valuation of his annuity, if he is willing to accept it, or investing it in the purchase of a Government annuity of 521. There will thus remain a residue to which the residuary legatee will be entitled. It seems to me that there are no authorities which are of any assistance to me, except Wright v. Callender (1) and Wroughton v. Colquhoun (2), the latter of which lays down the rule applicable (1) 2 D. M. & G. 652. (2) (1847) 1 De G. & Sm. 357. |