v, Stewart &

7, 1894

have been quite entitled to resile from his purchase.

"But at that time he did not want to resile. He was anxious to have the property, provided he could get a good title. So he entered into negotiations with the defenders with that view, and what he proposed was that the defenders should deliver to him within a reasonable time a disposition of the property, signed by them as trustees and as individuals, and also by all the remaining members of the family of the testator. He avers that this was arranged between him and the defenders, and his chief complaint and ground for resiling in the record is that there has been unreasonable delay on the part of the defenders in carrying it out.

"They, on the other hand, say that there was no completed agreement, and although parties seemed to have proceeded to act to some extent on what was proposed (for the pursuer says he lodged the purchase price in bank in terms of the arrangement, and the defenders have been taking steps to get the consents of the other members of the family, some of whom are in New Zealand and America), yet, as the terms of the arrangement were put into writing by the pursuer and sent to the defenders, but have never been signed by either party, the arrangement can hardly, I think, be looked upon as having gone further than negotiation.

"At the debate it was maintained for the pursuer that a disposition, even with the consents of all the members of the family as proposed, would not form a valid title. I think that view is sound. These are no doubt all the parties presently existing who are interested in the property in question, but it is quite conceivable that when the time arrives for executing the third purpose of the trust some of them may have given place to others who might not be bound by their present consent to a sale. So that I do not think that such consents would make up for the absence of the power of sale in the trust-deed. Whatever a private party might choose to do at his own risk, it is not for this Court to sanction what would, I think, be at best a questionable title.

"I think therefore that the pursuer is entitled to resile from his bargain, and to uplift the deposited money."

Upon appeal the Sheriff (JOHNSTON) found that the subjects sold vested in Margaret Stewart a morte testatoris, and that the trustees along with her had title and right to dispose of them, and recalled the Sheriff-Substitute's interlocutor.

The pursuer appealed, and argued-The question was whether this heritable property had vested in Margaret, or whether vesting was postponed until the widow's death. Vesting had not taken place. The only direction was to convey this property to Margaret after the death of the wife. That was almost identical with the terms of the destination in Bryson's Trustees v. Clark, November 26, 1880, 8 R. 142. In the case of M'Alpine v. Studholme, March 20, 1883, 10 R. 837, there was a direction to pay

when the favoured persons attained twentyone years, but there was no such direction here. There was, however, a destinationover. Even if it was held that the fee of the estate vested in Margaret, it could only be vesting subject to defeasance, because if she was to marry and die before the widow leaving no children, the vested right must be in the testator's own children-Snell's Trustees v. Morrison, March 20, 1877, 4 R. 709. It was therefore impossible for the widow and the other members of the family to give a good title to the pursuer, and they could not hold him to his bargain.

The respondents argued-The property vested in Margaret a morte. There was merely a postponement of the term of payment. Light was thrown upon that view by the use of the word "revert," which implied a return from the possession of Margaret. There was no proper destination-over, because the property was to go to the surviving children of the truster, and it would then be conveyed to them in their own right, and not as substitutes for Margaret. If, then, the right of property vested in Margaret a morte, she could give a good title to the subjects with the concurrence of the other members of the family interested-M'Alpine v. Studholme, March 20, 1883, 10 R. 837.

At advising

LORD RUTHERFORD CLARK-The question is, whether Margaret Stewart took a fee in the heritable property mentioned in the third purpose of the trust-deed a morte testatoris, so that the trustees with the concurrence of her and the liferenter can give a good title to the purchaser.

The truster gave to his widow a liferent of his whole estate, and on her death he directed his trustees to convey the property in question to his daughter Margaret, "but in the event of her marrying and having no issue alive at the time of her death, the same shall revert and belong to my surviving children, share and share alike."

The Sheriff-Substitute has held that the case falls under the rule of Bryson's Trustees, and that no right vested until the death of the widow. The Sheriff, on the contrary, thinks that the deed creates a mere substitution to Margaret, but only in the event of her marrying and having no issue, and that there is "not a destination-over directed to the point of time of the liferenter's death." On these grounds he has decided that the fee vested a morte testatoris.

I am far from saying that the case is free from difficulty, but I have come to be of opinion that no right of fee is vested in Margaret.

There is to be no conveyance till the death of the widow, and until that event occur the person in whose favour it is to be made cannot be known. If Margaret is then alive, the conveyance will be made to her. If she is dead, it will be made to her children, and if she marries and leaves no children, to the surviving children of the truster. I do not think that any sub

stitution is contemplated. The conveyance is to be made in favour of the person or persons who on the death of the liferenter are ascertained to have right to it.

There is no express institution of Margaret's children. It is, however, impossible to doubt that the truster meant that they should take, if their mother predeceased the period when the conveyance was to be made. For nothing is given to the surviving children of the truster except in the case of Margaret dying without issue, and the conditio si sine liberis is clearly applicable. Nor is it stated that in order to succeed, the children of Margaret must survive the liferenter. But this is the plain meaning of the trust-deed, inasmuch as there can be no conveyance in their favour unless they survive that event.

According to the words of the trustdeed, there is no institution of the surviving children of the truster, except in the event of Margaret's marrying and leaving no issue alive at the time of her death. It is doubtful whether we should read the words in their literal sense. It is difficult to imagine that the truster could intend that the succession of his own children should depend on the fact of Margaret's marrying or not marrying, and if they might succeed though Margaret never married, they might also succeed if she left issue who, by predeceasing the liferenter, could not be disponees. But it is not necessary to enter into that question. For however strictly we construe the trustdeed, I cannot accept the proposition that there is nothing more than a mere postponement of the enjoyment of the fee. It is at the present time uncertain who is to be the eventual fiar. If it happened that Margaret married and predeceased the liferenter without leaving issue, the conveyance must be made in favour of the truster's surviving children. They would take in their own right, and not as substitutes to Margaret. If Margaret died unmarried there would be intestacy. For nothing could vest in her while it was uncertain whether the disposition was to be in her favour, and nothing could vest in the other children of the truster if their right was conditioned on the marriage of Margaret.

The ground of the Sheriff's judgment is that there is nothing more than a postponement of the fee, with a substitution to Margaret in favour of the children of the truster who may survive her, though in one event only. He seems to me to leave out of account that no right is given except through a conveyance to be made on the death of the liferenter, and that until that event shall happen it is uncertain in whose favour it is to be made. So long as the uncertainty exists there cannot be vesting. The conveyance is withheld not merely for the protection of the liferenter, but also in the interest of the contingent disponee.

I have already said that in my opinion there is no substitution. When the liferenter dies the conveyance will be made to the person who on the occurrence of that

event is ascertained to be the disponee. If Margaret survives the liferenter there will be a simple conveyance in favour of herself and her heirs. There is no direction that it shall contain a destination in favour of her children, and if they are not to be included as substitutes, there cannot be a substitution of the children of the truster who might survive her, but conditional on her marrying. It is said that the direction that the property "shall revert and belong to my surviving children" indicates that it shall pass from Margaret to them, and therefore that they take as substitutes to her. To my mind there is no force in the argument. The language is inaccurate, but I cannot read a clause the evident purpose of which is to specify the person in whose favour the conveyance is to be made as directing a substitution.

Nor do I see any ground for holding that the surviving children of the truster mean the children who survive Margaret. The whole clause is conditioned on the death of the liferenter, and just as the word "surviving" must in the ordinary case be referred to the date of distribution, so in this case it must be referred to the date at which the clause comes into operation. The surviving children of the truster are only possible disponees by reason of surviving the liferenter.

LORD TRAYNER and the LORD JUSTICECLERK concurred.

LORD YOUNG was absent.

The Court pronounced the following interlocutor:-

"The Lords having heard counsel for the parties on the appeal for the pursuer against the interlocutor of the Sheriff of Ross, dated 6th April 1804, Sustain the appeal and recal the interlocutor appealed against: Find in fact in terms of the findings in fact in the interlocutor of the Sheriff-Substitute dated 29th January 1894: Find in law (1) that the fee of the subjects in ques tion did not vest a morte testatoris in Margaret Stewart, daughter of John Stewart, the truster; and (2) that the defenders as trustees of the said John Stewart, in conjunction with his widow and daughter, had no title or right to dispose of said subjects: Therefore sustain the first plea-in-law for the pursuer, and decern in terms of the conclusions of the summons," &c.

Counsel for the Appellant-Guthrie-C. K. Mackenzie. Agent-Alexander Ross, S.S.C.

Counsel for the Defenders-DundasFleming. Agents-Mackenzie & Black, W.S.

July 6, 1894.

Friday, July 6.

FIRST DIVISION.

[Lord Kyllachy, Ordinary. ELIOTT v. PURDOM.

Husband and Wife-Marriage-ContractAnnuity to Wife during Husband's Lifetime for Maintenance of his Establishment-Trust.

By antenuptial contract of marriage an annuity of £1000 was provided for the wife by the husband "to be applied by her towards the expenses of my household and establishment, and that during all the days of my life," he renouncing his jus mariti and right of administration of and in relation to his wife's estate and effects, including said annuity.

Held that the wife was truly a trustee for her husband, and was not entitled to rank as one of his creditors.

The antenuptial contract of marriage between Sir William Eliott of Stobs, Bart. and his wife Dame Hannah Birkett or Kelsall or Eliott dated 24th March and recorded 22nd July 1879 was in the form of a bond of annuity in favour of Dame Eliott, and contained the following provisions

Therefore I the said Sir W. F. A. Eliott, in terms of said agreement, and in contemplation of our said marriage, do hereby bind and oblige myself, and my heirs, executors and representatives whomsoever,... to pay to the said Mrs Hannah Birkett or Kelsall, to be applied by her towards the expenses of my household and establishment, and that during all the days of my life, an annuity or yearly sum of £1000 sterling, free of all burdens and deductions whatsoever, . . . and in security of the personal obligation before written I dispone to and in favour of the said Mrs Hannah Birkett or Kelsall heritably all and whole the lands and barony of Stobs and others, . . . and I assign the rents so far as necessary for supporting the right and security hereby granted: .. further, I bind and oblige myself, grant and deliver to the said Mrs Hannah Birkett or Kelsall a bond and disposition, .. providing and securing to her in case she shall survive me, ... a yearly annuity of £2000 sterling free of all burdens and deductions whatsoever: . . . Moreover, I do hereby renounce and discharge my jus mariti and right of administration of and in relation to the estate and effects now belonging or which may pertain and belong to the said Mrs Hannah Birkett or Kelsall, including the foresaid annuity payable to her during my lifetime, declaring that the same shall be and remain a separate estate in her person free of any right or claim on my part whatsoever."

And

to

In May 1886 Sir William Eliott executed a trust-deed in favour of creditors, the trustees under which paid Lady Eliott the annuity of £1000 until Martinmas 1887, and a lesser sum for the next two years, when

VOL. XXXI.

they stopped payment altogether on the ground that the income from Sir William Eliott's whole means and estate was insufficient to pay his creditors.

In June 1893 Lady Eliott, with concurrence of her husband, brought an action against Robert Purdom, solicitor, Hawick, sole trustee surviving and acting under said trust-deed, for payment of the arrears of the annuity with interest thereon. She averred that she had repeatedly demanded payment of the sums due to her, but had always been refused.

The defender pleaded-"(2) The said bond of annuity being ineffectual to give the pursuer a preference in a question with her husband's creditors, the defender should be assoilzied. (3) The said bond of annuity, amounting to an attempt to place a portion of the granter's means extra commercium, while retaining a participation in the enjoyment of it, is ineffectual in a question with the granter's creditors."

Upon 14th March 1894 the Lord Ordinary (KYLLACHY) assoilzied the defender.

“Opinion.—The question in this case is whether Lady Eliott is a creditor under the antenuptial contract between her and Sir William for an annuity of £1000 per annum, which is provided to her during Sir William's life. There is no dispute as to the annuity provided to her in the event of her widowhood. The question is whether she can rank as a creditor for £1000 per annum, which Sir William undertook to pay to her, 'to be applied by her towards the expenses of my household and establishment, and that during all the days of my life.'

The

"The defender, who is trustee for Sir William's creditors, contends that this is not a proper marriage-contract provision conferring upon Lady Eliott an individual and independent right, but is, on the contrary, truly a trust for Sir William's own behoof. The express purpose of the provision, he says, makes that clear. pursuer, on the other hand, contends that the purpose expressed does not qualify her (Lady Eliott's) right, but merely expresses the motive of the trust, Lady Eliott being no doubt expected to apply the money in the way mentioned, but not being bound to do so, and this being, it is said, made clear by the subsequent clause in the contract by which Sir William renounces his jus mariti and right of administration, inter alia, over the foresaid annuity, 'declaring that the same shall be and remain a separate estate in her (Lady Eliott's) person, free of any right or claim on my part whatsoever.'

"Now, I do not doubt that if this annuity had been granted to Lady Eliott simply for her separate use, she would have been a creditor for its amount. That, I understood, was conceded. Neither am I prepared to say that the result would have been different if the annuity had been granted for her separate use to be applied by her for the upkeep of the joint establishment of the spouses while they both survived and lived together. It may be (I have not considered the question) that

NO. LI.

there would thereby have been constituted an independent interest in the pursuer's person which, as one of the conditions of the marriage, she might have been entitled to vindicate. But the difficulty is that the application in fact prescribed is not even in terms an application for the lady's benefit. She might come to live apart from her husband, and yet the annuity would, I suppose, still be applicable to the upkeep of the husband's establishment. Moreover, the upkeep of the husband's establishment is after all simply payment of the husband's debts, and therefore if the application expressed is obligatory, I do not, I confess, understand how the pursuer's position is to be maintained. Accordingly the pursuer's proposition really comes to be, as I have said, that the purpose or application of the annuity is not expressed as part of the contract, but only mentioned by way of expressing the granter's motive and expectation. Now I am not able to so read the contract. I think the words used must, if possible, be read as operative, and as expressing part of the contract. And that being so, I think the result is that the pursuer has no independent right which can compete with that of her husband's creditors. I think the arrangement in question comes in fact merely to this-that Lady Eliott should receive during the marriage a fixed allowance for housekeeping, and should also be free from her husband's control in its disposal. Now, that may have been a quite good agreement between husband and wife, but it is not an agreement which in my opinion is good against the husband's creditors. I must therefore assoilzie the defender from the conclusions of the summons, with expenses."

The pursuer reclaimed, and argued-This annuity was separate estate of the wife, secured to her by onerous deed, viz., antenuptial contract of marriage. The husband had no control over it whatever, unless possibly a right to a bare subsistence. The Lord Ordinary had laid undue stress on the words "my household," as if there were some imaginary household of the husband separate from that of the wife. The adjective merely meant the household which would be set up after the marriage, but over the expenditure of which to the extent of £1000 the wife was to have unfettered control. She was not merely a trustee for her husband. She was entitled to arrears, because she had again and again demanded payment, which had apparently not been done in the case of Muirhead, relied on by the defender. If she got the money it would be expended in paying outstanding debts.

Argued for the respondent - This was merely a device to benefit the husband at the expense of his creditors. It was a trust for him. The wife was not free to expend the annuity upon herself; she got it under condition it should be applied to the keeping up of the husband's house. It is for "my household" during all the days of "my life." Lady Eliott was in no more

favourable position than any other trustee for the husband-Wood v. Begbie, June 7, 1850, 12 D. 963; Ker's Trustees v. Justice, November 7, 1866, 5 Macph. 4 (espec. Lord Deas' opinion on p. 10); Learmonth, &c. v. Miller, May 3, 1875, 2 R. 62, although no doubt there the marriage-contract was postnuptial. In any case, Lady Eliott had no right to arrears, for the annuity was alimentary. She had been alimented, and it was not averred that any alimentary debts were still unpaid - Muirhead v. Miller, July 19, 1877, 4 R. 1139.

At advising

LORD PRESIDENT-I think the interlocutor of the Lord Ordinary is right.

We have to consider the substance and effect of the provision in this bond of annuity binding Sir William Eliott to pay to his wife a yearly sum of £1000. I take it that the purpose to which this £1000 is to be applied being set out, that and that only is the purpose to which it can lawfully be applied. It is plainly expressed to be for the expenses of the husband's household and establishment during all the days of his life. If that is the condition on which alone the wife is entitled to receive this money, does the fact that she makes herself the distributor of it, make the case in any way different from what it would have been if she had stipulated that some one else should be the president or steward of the household for its administration? I think not. We were referred to the clause at the end of the deed, which says that the annuity shall be and remain a separate estate in her person, free of any right or claim whatsoever on the husband's part. But Mr Rankine justly observed that that must be read along with the clause to which it is relative. The wife is to distribute the money, but for the purposes set forth in the beginning of the deed. Free of any right on the husband's part must mean other than the right set out at the beginning. She, and not he, is to be the judge of the mode in which the money is to be expended, but the purpose for which it is spent remains the same as that at first laid down. I take it that the plain sense of the clause is simply this-The lady marries and wishes to make sure that the house shall be kept up in proper style. She therefore stipulates for an expenditure upon the maintenance of the house of £1000, and makes herself the recipient ard disburser of that part of her husband's means. She bargains that not less than £1000 shall be spent upon his establishment. But it cannot be said that the household is to be kept up at that style while the husband's creditors are unpaid.

LORD M'LAREN-I entirely agree. Lady Eliott virtually became trustee for her husband. This obligation, while obligatory as between husband and wife, does not enable the wife to claim as a creditor upon her husband's estate. By this bond of annuity the husband did not put his funds where they were no longer available for his ordinary debts. It appears to me that

,

Eliott v. Purdom, July 6, 1894.

no separate interest was here given to the wife so as to be separate estate in her person unattachable for her husband's debts, and I think therefore that the trustee for creditors was right in refusing to recognise this claim.

LORD KINNEAR-I agree. The effect of this provision was to give £1000 belonging to the husband to the wife to administer for his benefit, and I do not see how her claim to money thus set aside for her husband's benefit can be preferred to that of his creditors.

LORD ADAM was absent.
The Court adhered.

Counsel for the Pursuer and ReclaimerUre-Cullen. Agents-Dundas & Wilson, C.S.

Counsel for the Defender and Respondent Rankine - Maconochie. AgentsMaconochie & Hare, W.S.

Tuesday, July 10.

FIRST DIVISION.

[Court of Exchequer. THE BURNLEY STEAMSHIP COMPANY, LIMITED v. AIKEN (SURVEYOR OF TAXES).

Revenue-Income Tax-Profits of TradeAllowance for Depreciation of PlantIncome-Tax Act 1842 (5 and 6 Vict. cap. 35), Schedule D-Customs and Inland Revenue Act 1878 (41 Vict. cap. 15), sec. 12.

Section 12 of the Customs and Inland Revenue Act 1878 provides that in assessing the profits of any trade or adventure chargeable under Schedule D of the Income-Tax Act, the Commissioners shall allow such deduction as they may think reasonable as representing the diminished value by reason of wear and tear during the year" of any plant used for the purposes of the concern.

Held that a shipowner was not entitled under this section to an allowance for depreciation in the value of his ship caused by better vessels being built.

The Burnley Steamship Company, Limited, the owners of the steamship "Burnley, which was employed for carrying cargo for hire, were assessed, under Schedule D of the Income-Tax Acts for the year ending 5th April 1894, on the sum of £327. They appealed against the assessment to the Commissioners for General Purposes, objecting that a sufficient sum had not been allowed in respect of diminished value under the provisions of the Customs and Inland Revenue Act 1878. The depreciation allowed to the company under the assessment had been fixed on the basis of deducting 5 per cent. from the cost of the

ship for the first year of the existence, and of deducting 5 per cent. from the written down value from each subsequent year.

After hearing evidence the Commissioners found the deduction at the rate of 5 per cent. upon the written-down value from year to year reasonable in the case of a vessel such as the "Burnley," if applied as an average rate over a series of years, and accordingly confirmed the

assessment.

The company being dissatisfied with this decision, the present case was stated for the opinion of the Court of Exchequer.

The following note was appended to the case "The Commissioners in this case were asked by the appellants to take into consideration, in deciding what rate was just and reasonable, the facts (1) that ships frequently become obsolete and of less earning power before they were physically worn out; and (2) that their market or sale value might and frequently did fall below their value as fixed by the depreciation rate allowed in making the assessment or even that proposed by the appellants. Evidence was led on both these points. The Commissioners are of opinion that the words 'diminished value by reason of wear and tear,' used in section 12 of the Customs and Inland Revenue Act 1878, do not cover (a) loss of earning power owing to plant being rendered more or less obsolete through the introduction of improved or other plant, or (b) diminution in market value apart from its having been caused by wear and tear."

Section 12 of the Customs and Inland Revenue Act of 1878, provides-"Notwithstanding any provision to the contrary contained in any Act relating to incometax, the Commissioners for General or Special Purposes shall, in assessing the profits or gains of any trade, manufacture, adventure, or concern in the nature of trade, chargeable under Schedule D, or the profits of any concern chargeable by reference to the rules of that schedule, allow such deduction as they may think just and reasonable as representing the diminished value by reason of wear and tear during the year of any machinery or plant used for the purposes of the concern, and belonging to the person or company by whom the concern is carried

on.

Argued for the Burnley Steamship Company-The Act of 1812 only provided that allowance should be made for the actual cost of repairs, but under the Act of 1878 it was provided that allowance should be made for diminished value by reason of "tear and wear." These words were susceptible of construction, and should be construed liberally, for the object of the clause was to remove an injustice, and the same considerations which justified an allowance for tear and wear would justify the allowance for which the company contended. Liberally construed, the words "tear and wear" would cover depreciation caused by newer and better vessels being built. This contention derived support