Certain questions involving the law of Scotland having arisen in a suit in the Court of Chancery for the distribution of the estate of an English testatrix, the Lord Chancellor ordered a case to be adjusted for opinion of the Court of Session.
R. M. Trappes, one of the parties to the suit, presented the present petition to the Court to appoint an early day for the hearing of the case.
The case was stated as follows:—“Mrs Graham, a testatrix domiciled in England, by her will, dated the 16th of February 1863, after reciting that she ‘was enabled to appoint by will (subject to the life interests of her mother, Anna Maria Payne,’) certain property, which she referred to in her will as ‘the trust-premises,’ bequeathed and appointed the same to trustees, upon trust, that the said trustees should out of the trust-premises pay certain legacies; and then the will proceeded as follows (being, for convenience of reference, divided into clauses).
“Clause 1. And upon further trust, that my said trustees shall, out of the income of the said trust-premises, or if that shall be insufficient, then out of the principal thereof, pay to my husband an annuity of £100 during his life (but subject to the provisoes with respect to the said annuity hereinafter contained), the said annuity to be paid by equal half-yearly payments, the first of such payments to be made at the expiration of six calendar months after the decease of the survivor of and my said mother.
Clause 2. Provided always, and I hereby declare, that if my said husband shall become bankrupt, or shall assign, charge, or incumber, or attempt or affect to assign, charge, or incumber, the said annuity of £100, or do or suffer any act whereby the same annuity, or any part thereof, would, if belonging absolutely to him, become vested in any other person or persons, then and in such case the said annuity shall not be payable, or shall cease to be payable, as the case may require, in the same manner as if my said husband were dead.
Clause 3. Provided also, and I hereby further declare, that it shall be lawful for my said trustees or trustee, if they or he shall, in their or his absolute discretion, think fit, and without assigning any reason for so doing, at any time or times, to refuse or discontinue the payment to my said husband of the said annuity of £100, or any part thereof, during the whole or any portion of his life, and in such case the said annuity, or such payment or payments thereof as my said trustees or trustee shall refuse to make to my said husband as aforesaid, shall sink into the income of the said trust-premises for the benefit of the person or persons for the time being entitled to such income, it being my wish and intention that the payment of the said annuity to my said husband shall be according to the discretion of my said trustees or trustee in all respects.
The facts are as follows:—On the 7th May 1861, Mr Graham, the husband of the testatrix, whilst residing at Portobello, was sequestrated on
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The opinion of the Court of Session is desired by the Court of Chancery in England on the following questions:—
(1) Whether the annuity given by clause 1 of the said will to Graham, assuming it to be by the English law an interest capable of legal alienation at and from the death of Mrs Graham on the 21st June 1864, would, if clauses 2 and 3 had not been contained in the said will, have fallen under the sequestration; and whether, under the circumstances hereinbefore stated, supposing clauses 2 and 3 had not been contained in the will, the said annuity could now be claimed under the sequestration, regard being had to sections 102 and 103 of 19 and 20 Victoria, chapter 79, and the interpretation of the word ‘estate’ in section 4 of the same Act?
(2) Assuming the first question to be answered in the affirmative, whether clause 3 has any effect, by the law of Scotland, in preventing the annuity from falling under the sequestration, the fact being that the trustees of the will had not, prior to June 27, 1870, made, or refused to make, any payment to Graham in respect of the said annuity?
(3) Whether the omission by Mr Graham to give notice to Mr Balgarnie, the trustee under the sequestration, of the fact of the bequest of the annuity having been made, would have any and what effect upon the discharge obtained by Mr Graham?
(4) Has a discharge, obtained without consent of or composition with creditors, the effect of annulling the sequestration with respect to property vested in and disposable by a bankrupt before discharge, but not actually payable to him until after the date of the discharge?”
The Solicitor-General and Balfour were heard for the petitioner.
The Dean of Faculty and Rhind for Mr Graham (the annuitant).
The Court returned the following answers—
By the law of Scotland a right or estate in expectancy or spes successionis may be sold and assigned so as to give the purchaser a good title, in a question with the seller, to the right, estate, or succession when it comes to be vested in the seller. But such right or estate in expectancy or spes successionis is not attachable by the diligence of creditors of the person in expectancy or entitled to succeed, and would not be carried to the trustee in his sequestration, if he should be discharged before such right, estate, or succession was vested in him. Therefore, assuming (1) that the annuity was settled and regulated entirely by the first clause of Mrs Graham's will, and that the second and third clauses were not contained in the said will; and (2) that the right to the annuity vested in Mr Graham before the date of his discharge under the sequestration, so as, if he had been solvent, to be attachable of his creditors, the annuity would fall under the sequestration and be carried to the trustee, and could be now still claimed under the sequestration for the benefit of Mr Graham's creditors.
The third clause of the will, taken by itself, and apart from the second clause, would have no effect in preventing the annuity from falling under the sequestration, so long as the trustees under the will do not exercise the powers thereby conferred on them to refuse or discontinue payment of the annuity. But the trustee and creditors under the sequestration can take this right and interest of the bankrupt only tantum et tale as it stood vested in the bankrupt, and subject to all the conditions and qualities legally attaching to it.
The omission of Mr Graham to give notice to the trustee in the sequestration of the bequest of the annuity having been made, would have no effect on the discharge obtained by Mr Graham, because the terms of the will, and, in particular, the second clause, taken either alone or in connection with the third clause, prevented the annuity from falling under the sequestration. If the annuity had vested in the bankrupt so as to be carried to the trustee in the sequestration, the omission to notify the fact to the trustee would, under section 103 of the Bankruptcy (Scotland) Act, 1856, have had the effect of annulling his discharge as one of the “benefits of the Act,” which by that omission he forfeited. But in the circumstances of this case, and looking especially to the conditions of the will respecting the annuity, it cannot be held to be an estate acquired by the bankrupt, or descending or reverting to him within the
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A discharge obtained without consent of or composition with creditors has not the effect of annulling the sequestration with respect to property vested in or disposable by the bankrupt before his discharge, though not actually payable to him till after the date of the discharge.
Solicitors: Agents for Petitioner— C. & A. S. Douglas, W.S.
Agent for Respondent— John Latta, S.S.C.