First Party: Maclean; Shepherd & Wedderburn

Second Party: Small; Archibald Campbell & Harley

Third Party: Agnew of Lochnaw, Q.C.; Simpson & Marwick

3 November 2010

The trust deed
[1] On 27 September 1929 Colonel Patrick Young CBE executed a trust deed which, in its preamble, narrated that it was "for behoof of my children". After providing first for the payment of the expenses of the trust, the deed set out three further trust purposes. The first of those was the payment of the annual income of the trust fund "to or for behoof of my said children and the survivors and survivor of them equally among them....for their alimentary use...and for their maintenance, education and upbringing". In the event that any of the sons were to die before attaining majority, leaving lawful issue, such issue were to be entitled to the share of interest which would otherwise have been payable to their father. The entitlement of the children to receive such income was to come to an end "as and when my said children receive their share of capital in terms of the immediately succeeding purpose hereof".

[2] In terms of the next trust purpose, namely purpose THIRD, the truster directed his trustees "to pay to each of my children as and when they attain the age of twenty one years complete in the case of sons and as and when they marry in the case of daughters the sum of Four thousand pounds". Provision was again made for the possibility that a son might die before receiving his share of capital, leaving lawful issue. In that eventuality, such issue were to be entitled, on attaining majority, to the capital to which their father would otherwise have been entitled. Purpose THIRD concluded:

"And in the event of any of my said sons or daughters dying before receiving their respective shares of capital without leaving lawful issue such share or shares shall form part of the balance of the Trust Fund and shall be dealt with in terms of the last purpose hereof".

[3] The final trust purpose provided:

"(LASTLY) On all my surviving children attaining majority in the case of sons or marrying in the case of daughters I direct the said Trustees to pay and make over any balance of the Trust Fund remaining to my said children equally among them share and share alike and the survivors and survivor of them the lawful issue of any of my children who may have predeceased leaving lawful issue taking equally among them the share or shares original and accrescing to which their parent would have been entitled if in life".

[4] At first sight, at least, the truster's intentions appear to be clear. His children were to receive an alimentary liferent until, in the case of sons, they came of age, or, in the case of daughters, they married. At that point they were each to receive capital of £4,000, a substantial sum in 1929, to support the sons at the outset of their careers and provide the daughters with a dowry. Once all the surviving children had received their capital payment, any remaining balance was to be distributed among the survivors. At each stage, the share of sons who had predeceased could pass to their lawful issue. At the final stage, a similar provision was made for the lawful issue of predeceasing daughters.

The relevant events

[5] At the time when he executed the trust deed, the truster had six children: Patrick, aged 19; Archibald, aged 17; Charles, aged 16; Elizabeth, aged 7; Norah, aged 4; and Frances, aged 1. No further children were born. All three sons reached the age of majority. Patrick died in 1943, leaving lawful issue. Archibald and Charles died in 1944 and 2003 respectively. Neither left any issue. Elizabeth never married. She died in 2007. Norah and Frances both married, and are both still living. The truster himself died in 1951.

The issue

[6] A question has arisen as to what is to happen to the balance of the trust fund following the death of Elizabeth. On one view, the trustees should distribute the balance of the trust fund in accordance with purpose LASTLY. On that view, the balance is payable in equal shares to Patrick's issue, Norah and Frances. An alternative view is that purpose LASTLY has no application, since the truster's surviving children did not all attain majority in the case of sons or marry in the case of daughters. That view is based on the premise that Elizabeth falls within the class of "my surviving children". On that view, the balance of the trust fund is payable to the truster's executors, to be distributed as part of his estate in accordance with his will.

[7] In those circumstances, the trustees, the potential beneficiaries under purpose LASTLY and the executors have presented this special case to the court, requesting answers to the following questions:

1. Whether upon the proper construction of the Lifetime Trust, one of Colonel Young's daughters having died without having married, the remaining capital is disposed of by purpose LASTLY?

2. If the answer to Question 1 is in the negative, whether the said capital reverts to Colonel Young and falls to be disposed of under and in terms of his testamentary instructions?

Discussion

[8] As we have explained, the basic purposes of the trust are apparent from its terms. The truster intended his children to enjoy an income until they came of age, in the case of sons, or married, in the case of daughters. At that point they would lose the income but would receive a lump sum of capital. Once the surviving children were all of age, or all married, the trust would be wound up and any balance of the fund distributed. That is because the earlier trust purposes would be exhausted once there was no surviving child who might yet satisfy the conditions for entitlement to a share of capital. That situation came about upon Elizabeth's death. So long as she was alive, she was entitled to income until her marriage; and she might yet marry and become entitled to capital. Once she had died, all the surviving children - Norah and Frances - were daughters who had married, and purpose LASTLY therefore applied. That reading of the deed is supported by the final clause of purpose THIRD, which applied "in the event of any of my said sons or daughters dying before receiving their respective shares of capital without leaving lawful issue": an event which occurred when Elizabeth died without ever having married. In that event, the share of the child in question was to form part of the balance of the trust fund and be dealt with in terms of purpose LASTLY. That provision is inconsistent with the view that, in the event in question, purpose LASTLY could not apply.

[9] In support of the alternative interpretation of the trust deed, counsel for the executors submitted that the words "all my surviving children", in purpose LASTLY, referred to the six children in life at the time when the deed was executed. They were also the children referred to as "my children" in the preamble to the deed. If any of the three sons living in 1929 died before attaining majority, or any of the three daughters then living died without marrying, it followed that purpose LASTLY failed, and those children who had attained majority or married could not benefit under it. Equally, any children who might have been born after 1929 could not benefit under the trust deed. The final clause in purpose THIRD did not apply to Elizabeth: it was concerned only with daughters who had married, since only married daughters were capable of having lawful issue. That clause must therefore be concerned with daughters who had married but had then died prior to payment of their share of capital. So ran the argument.

[10] We are unable to accept this interpretation. Fundamentally, it is inconsistent with any rational intention which might be attributed to the truster. It also requires a strained and implausible construction of a number of specific clauses and expressions used in the deed. The words "my children", as used in the preamble to the deed, would ordinarily and naturally be taken to be capable of extending to any child who was alive at the time of the deed or who might be born subsequently. The words "my surviving children" would ordinarily be taken to refer to a sub-group from within that broader category. A daughter who died without ever having married would ordinarily and naturally be taken to fall within the scope of the words "daughters dying...without leaving lawful issue". In the context of purpose THIRD, the words "without leaving lawful issue" are in any event referable only to sons, since it is only the lawful issue of sons who can become entitled to a share of capital under that provision. Moreover, the construction of purpose THIRD proposed on behalf of the executors is inconsistent with the view that a daughter's share of capital vests on her marriage, contrary to the apparent implication of the direction that the capital is to be paid "as and when" a daughter marries. In short, for a number of reasons, some fundamental and others of a more technical character, we cannot accept the interpretation put forward on behalf of the executors.

Conclusions

[11] We accordingly answer Question 1 in the affirmative. Question 2 is superseded.