J. KEKEWICH discharge and release the hereditaments comprised therein from all claims (if any) of any creditor of Richard. And they pleaded the provisions of the Real Property Limitation Act, 1874. 1897 PRIESTLEY V. ELLIS. The infant defendant, Claude, alleged in his defence that the so-called deed of arrangement did not purport to have been made, and in fact was not made, as part of any agreement with, or for any consideration moving from, and was never communicated to, Catherine or any other creditor of Richard, but was in fact, as it recited, part of a "family arrangement only, and was not enforceable by any creditor of Richard; that the trustees of that deed did not, during Richard's lifetime, either with or without his concurrence, make any order or determination with regard to the payment of the debt due to Catherine or of any other of Richard's debts; that, having regard to the terms of Richard's residuary bequest, his debts were, after his death, payable out of his personal estate primarily and in exoneration of the liability of any of the lands comprised in the deed to be sold to raise such debts, and that neither Richard's estate nor Francis's was entitled to any indemnity out of his, the infant's, settled estate. The infant also claimed that, under the circumstances, he and the other persons interested in the settled estate were entitled to indemnity out of Richard's residuary personal estate, and also (so far as Francis's estate was indebted to Richard's estate) out of Francis's estate in respect of, as well all sums which had already been raised, as also all sums (if any) which thereafter should be raised, out of the settled estate and applied in payment of any of Richard's debts. And he submitted that the effect of the conveyance of November 12, 1889, was to discharge and release the settled estate from all further claims (if any), whether of any creditor of Richard's or Francis's estate, and whether personally or as executor of Richard, to have any then outstanding debt of Richard raised and paid out of the settled estate. He also pleaded the Statutes of Limitations. their reply the plaintiffs joined issue with the defendants, and stated that interest on Catherine's debt was duly paid to her by Richard during his life, and after his death by Francis until the latter's death in 1890. In KEKEWICH The action now came on for trial. J. 1897 v. ELLIS. Renshaw, Q.C., and F. T. Procter, for the plaintiffs. This case does not fall within Garrard v. Lord Lauderdale (1) and PRIESTLEY Walwyn v. Coutts (2), the principle of which cases was that creditors are not cestuis que trust under, and therefore capable of enforcing, a deed executed by the debtor without bargain or communication with the creditors and vesting his property in trustees for the purpose of discharging his debts. In such a case the trustees are mere agents for the debtor: there is no privity between those agents and the creditors; and the debtor may at any time revoke the authority given to his agents. The principle of Garrard v. Lord Lauderdale (1) is fully explained by James L.J. in Johns v. James. (3) This case falls within another class of authorities altogether, illustrated by Synnot v. Simpson (4), a case which decides that where, as here, the trust for payment of debts is to come into operation only on the death of its author, the property charged can only come to the ultimate taker as it was given to him, that is, subject to the payment of the debts. Here the author of the trust was Richard, and it was only to come into operation after his death: therefore, according to Synnot v. Simpson (4), the defendant, the infant tenant in tail, can only take subject to the liability of satisfying Richard's debts. It has been expressly laid down by the Court of Appeal in In re Fitzgerald's Settlement (5) that the doctrine of Garrard v. Lord Lauderdale (1) does not apply to provisions for creditors which do not come into operation till after the death of the settlor. Frewen v. Law Life Assurance Society (6), and also the reasoning in Godfrey v. Poole (7), are in favour of our contention that, the deed of arrangement having become irrevocable by the death of the settlor Richard, and also having already been acted upon, the trust for payment of his debts is binding on the settled estate. We say therefore, first, that (1) 2 Russ. & My. 451. (4) 5 H. L. C. 121, 141. (7) (1888) 13 App. Cas. 497, 502. J. 1897 PRIESTLEY KEKEWICH where, as here, trusts are declared, subject to the payment of debts, for other beneficiaries after the death of the settlor, the settlement is not revocable but binding upon the settlor and all persons taking under the settlement, and that the trusts of it can be enforced by creditors; and, secondly, that here, as in Synnot v. Simpson (1), the tenant in tail comes in under the trust for creditors and can only take what is given to him, namely, the estate subject to the debts. v. ELLIS. Warrington, Q.C., and Robertson-Macdonald, for the defendants, Ellis and Evans, the trustees of the settlement of 1867, referred to in the deed of arrangement, and of the conveyance of 1889. [KEKEWICH J. The only question is whether the case comes within the principle of Garrard v. Lord Lauderdale (2), or within the exception to that principle in Synnot v. Simpson (1) and In re Fitzgerald's Settlement. (3)] Our contention is that this case is within the principle of Garrard v. Lord Lauderdale. (2) Was the effect of the deed of arrangement to make the creditors beneficiaries under that deed, or was the deed intended for the benefit of the father and son, or of the father alone? The deed was part of an arrangement for the resettlement of the family estate by the father and son. The resettlement was not by the father alone, but by the father and son, and the substance of the arrangement between them was that the son consented to such part of or interest in the estate as belonged to him as tenant in tail being applied in payment of the father's debts, so that the arrangement was really for the benefit of the father. There was no intention to make the creditors cestuis que trust. The persons who under the deed of arrangement took subject to the trust for payment of debts, namely, Richard, Francis, and Claude the first tenant in tail, took, not by the bounty of any one, but by virtue of the resettlement of the family estate. In Synnot v. Simpson (1) Lord St. Leonards not only differed from Lord Cranworth, but said (4) that he considered the case (1) 5 H. L. C. 121. (2) 2 Russ. & My. 451. (3) 37 Ch. D. 18. (4) 5 H. L. C. 150. J. stood by itself and depended upon special circumstances; and KEKEWICH further, payment of interest on the debts was continued after the death of the first tenant for life by the parties interested in the settled estate, thus affirming the trusts. [KEKEWICH J. In Montefiore v. Browne (1) Lord Cranworth stated what he meant in Synnot v. Simpson. (2)] Montefiore v. Browne (1) was stronger than Synnot v. Simpson (2), for the creditor claiming was a party to the deed. As in Walwyn v. Coutts (3), the deed in the present case was a mere voluntary trust deed for the payment of creditors, which might at any time be varied or revoked by the settlors. Here we say that not only could Richard and Francis have revoked this deed, but that the deed was in fact revoked. Richard himself did not revoke it, but Francis, as executor of Richard and also as tenant in possession, revoked it by executing the conveyance of 1889. As to the argument that this case. comes within In re Fitzgerald's Settlement (4) because the trust is to be executed after the death of Richard, the trust is one that according to the terms of the deed might in fact have been executed in his lifetime. Upon the whole we submit that the trust for payment of debts is now gone. W. B. Heath, for the infant defendant. The deed of 1867 was, as is expressed on the face of it, a "family arrangement"; the creditors were not parties to or cognizant of it, and none of them could enforce it. Francis was as much a settlor as Richard, and in fact had a larger interest in the estate, and was therefore himself entitled to treat the deed as one of agency only, and therefore not enforceable by creditors. Again, after Francis's death the trustees had nothing more than a discretion as to the payment of Richard's debts. F. T. Procter, in reply. Trustees have no equity to disregard their trusts, where they are clearly declared, at the instance, not of the settlor, but at the instance of a person who claims from the bounty of the settlor: per Cotton L.J. in In re Fitzgerald's Settlement. (5) (1) (1858) 7 H. L. C. 241, 266. (3) 3 Sim. 14; 3 Mer. 707. 1897 PRIESTLEY v. ELLIS. (5) 37 Ch. D. 24. KEKEWICH J. 1897 PRIESTLEY v. ELLIS. KEKEWICH J. The question which falls for decision may fairly be stated thus: Is this case within the principle of Garrard v. Lord Lauderdale (1), or is it within the exception to that principle illustrated by the case of Synnot v. Simpson? (2) I refer to Garrard v. Lord Lauderdale (1) for the principle there stated, although it is a case by no means standing alone, nor was it the first case affirming the principle, because it was laid down by Lord Eldon in the case of Walwyn v. Coutts (3), which was affirmed in Garrard v. Lord Lauderdale (1); and, again, in many subsequent cases, especially in the well-known case of Acton v. Woodgate. (4) Again, Synnot v. Simpson (2), if it does not stand alone-and I am not prepared to say it does not—may yet fairly be treated as constituting a class by itself, and as illustrating the principle of Garrard v. Lord Lauderdale (1) in this way, that it shews what are the limits of the application of that principle and of some of the cases to which it does not extend. In order to decide this case, I have to consider what that principle is. Fortunately I am not here dealing with a question which has been raised more than once, and on which different opinions have been expressed, namely, whether, by specifying creditors or by communicating to them the provisions made in their favour, a binding trust is created or not; and, as regards Garrard v. Lord Lauderdale (1), it is only necessary to bear in mind the principle and broad lines on which it was decided. Not only are they to be found stated in the judgment of Shadwell V.-C. (5), and in the judgment of the Lord Chancellor affirming it (and also in the other cases I have mentioned, Walwyn v. Coutts (3) and Acton v. Woodgate (4)), but they have been expounded again by Lord Cranworth in moving the judgment of the House of Lords in Synnot v. Simpson. (2) Without pretending to improve on what is so well stated by Lord Cranworth, I will, for the purposes of this case, venture to state the principle in my own language. A debtor, minded (1) 2 Russ. & My. 451. (3) 3 Sim. 14; 3 Mer. 707. (5) (1830) 3 Sim. 1. |