Scottish Court of Session Decisions

This action was raised to determine what allowance ought to be made by the Crown to the defender, the Earl of Glasgow, on settling with him for the duties to which he became liable in respect of his succession to the late Earl.

The facts were as follows:—By agreements in 1855 and 1866 between the late Earl of Glasgow, as heir of entail in possession of the estate of Hawkhead and others, and his brother the present Earl, as the heir of entail next in the order of succession, along with the two heirs of entail following in the order of succession, the necessary steps were to be taken to enable the late Earl to charge the entailed estates with the sums of £20,000 and £9440, to be borrowed by him on the security of the entailed estates in virtue of the statutes referred to in the record. By the agreements it was provided that, while the late Earl was to retain as his own funds and property £19,000 of the £20,000 and £6940 of the £9440 so to be borrowed, he was to pay over to the present Earl the remaining £1000 of the former sum and £2500 of the latter, besides £1425 to one and £300 to the other of the consenting heirs, and was also to execute and deliver to the present Earl personal bonds of annuity for £1250 and £500, to be paid during their joint lives, and to terminate at the death of the first deceaser, of them. The sums of £20,000 and £9440 were accordingly borrowed by the late Earl, and charged by him as encumbrances on the entailed estates. He alone executed the bonds and disposition in security which were granted to the lenders of the money, the present Earl not being a party to them at all. And the transaction was completed by the late Earl delivering to the present Earl bonds of annuity, and paying to him and the other consenting heirs the sums stipulated for in the agreements as the price or consideration in respect of which their consents were given.

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The pleas in law for the pursuer were—“(1) The sums charged upon the estates of Hawkhead, Crawford Lindsay, and others, in manner aforesaid, were in the sense of the ‘Succession Duty Act, 1853,’ encumbrances created or incurred by the defender, and in estimating the value of the succession he is not entitled to any allowance in respect thereof. (2) The sums with which the said estates were charged as aforesaid were alienations of the succession, and, to the extent to which the defender benefited thereby, were accelerations of his title to the succession, within the meaning of the ‘Succession Duty Act, 1853.’ (3) In no view of the case is the defender entitled, in estimating the value of the succession, to an allowance in respect of the sums charged upon the estates as aforesaid, in so far as he has benefited by the creation of these encumbrances.”

The pleas for the defender were—“(1) In estimating the value of the succession to the entailed estates above-mentioned, under the provisions of the ‘Succession Duty Act, 1853,’ the defender is entitled to an allowance for the encumbrances libelled, amounting to £29,440. (2) The defender is entitled to have allowance made for said encumbrances, in respect that the same were not ‘created or incurred’ by him within the meaning of the statute. (3) In any view, the defender is entitled to an allowance in respect of the encumbrances condescended on, in so far as he has not benefited thereby. (4) Further, under the 38th section of the ‘Succession Duty Act, 1853,’ the defender is entitled to an allowance in respect of the annuities of £1275 and £500, which came to an end on the death of the late Earl, as being property of which he was deprived on taking up the succession.”

Authorities cited—Ersk. 3, 8, 29; Lord Saltoun v. Advocate General, 3 Macq., 659: Lord Braybrooke v. Attorney-General, 9 Clark, H.L. 150; Peyton, 7 Hurlst and Norman's Exchequer Reports, p. 256; Attorney-General v. Floyer, 9 Clark, H.L. 477., Commissioners of Inland Revenue v. Harrison; L.R., Appellate Series, vii. 1.

The Lord Ordinary ( Gifford) pronounced the following interlocutor:—

“ Edinburgh, 23 d June 1874.—The Lord Ordinary having heard parties' procurators, and having considered the information by the Right Honourable the Lord Advocate, as amended with the closed record, with additional plea for the respondent: Finds that in estimating the value of the succession of the late Earl of Glasgow, upon which succession succession-duty is chargeable against the defender or respondent, the Right Honourable George Frederick Boyle, Earl of Glasgow, allowance must be made in respect of the following encumbrances affecting the said succession, that is to say,— First, Bond and disposition in security for £10,000 by the late Earl of Glasgow in favour of Miss Catherine Elizabeth Scott Douglas; Second, Bond and disposition in security for £4000 by the late Earl of Glasgow in favour of the marriage-contract trustees of Mr and Mrs Allan Eliott Lockhart; Third, Bond and disposition in security for £6000 by the late Earl of Glasgow in favour of the trustees of the late Robert James Hay Cunningham, Esquire, all which bonds are dated 23d April and recorded 31st May 1856; and Fourth, Bond and disposition in security for £9440 by the late Earl of Glasgow in favour of Thomas Graham Murray and James Auldjo Jamieson, both writers to the Signet, dated 27th July and recorded 15th November 1866—and with this finding appoints the cause to be enrolled for further procedure: Finds the respondent entitled to the expenses hitherto incurred by him, and remits the account thereof when lodged to the Auditor of Court to tax the same and to report; meantime grants leave to reclaim against this interlocutor.

Note.—The question in this case arises principally under the 34th section of ‘The Succession Duty Act, 1853’ (16 and 17 Vict. cap. 51). By this statute heritable successions were made chargeable with succession duty according to certain rules fixed and prescribed by the statute. Provision is made for estimating the value of the succession in a certain way, and for the amount and manner of payment of the succession-duty thereon.

Section 34 of the statute enacts, inter alia, ‘In estimating the value of a succession no allowance shall be made in respect of any encumbrance thereon created or incurred by the successor not made in execution of a prior special power of appointment, but an allowance shall be made in respect of all other encumbrances.’ It is under this provision that the present question arises. The respondent, the present Earl of Glasgow, claims that allowance shall be made for the four bonds and dispositions in security mentioned in the preceding interlocutor as encumbrances diminishing or affecting the succession, the Lord Advocate and the Inland Revenue authorities maintaining that the respondent is not entitled to any allowance for these encumbrances, on the ground that, whatever be their form, they were in the sense of the statute ‘created or incurred’ by the respondent himself.

There is no dispute that the late Earl of Glasgow is, in the sense of the statute, the ‘predecessor,’ and that the respondent, the present Earl of Glasgow, is, in the sense of the statute, the successor,’ and parties are agreed as to the rate at which succession-duty is to be charged. The respondent is the brother and heir of entail of the late Earl, and succeeded as such under the various deeds of entail.

It appears that in 1855, and again in 1866, the late Earl of Glasgow wanted to borrow money on the security of the entailed estates. To accomplish this under the provisions of the Entail Amendment Act he required the consent of the defender as the next heir of entail (the heir presumptive) and of the next two heirs of entail then in existence after the defender. To obtain these consents the late Earl entered into the agreement set forth on record with the defender and with the other two succeeding heirs of entail. By these agreements the defender and the succeeding heirs consented to the late Earl borrowing upon the estates, and in consideration of such consents the late Earl agreed, inter alia, to grant certain bonds of annuity in favour of the respondent.

The late Earl then applied to the Court, under the Entail Act, for power to charge the entailed estates. The defender and the other heirs consented. The Court then granted authority, and the late Earl of Glasgow executed the power by granting bonds for £29,440, which sums were validly and effectually charged as incumbrances upon the entailed estates. The late Earl of Glasgow is the sole granter of the said bonds and dispositions in security, and he alone received the sums borrowed. Neither the defender nor the

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succeeding heirs of entail were ex facie partners to the deeds. About the same time, however, the late Earl implemented the obligations in the agreements, and, inter alia, granted personal bonds of annuity to the respondent, the annuities under which have been duly paid.

The question is, Are the bonds and dispositions in security of 1855 and 1866 incumbrances which in the sense of the statute have been created or incurred by the respondent himself? The Lord Ordinary is of opinion that they are not, and he has therefore found the respondent entitled to an allowance therefor.

It is not immaterial, to begin with, that the respondent is no party to the bonds creating the incumbrances. It was not the respondent, but his late brother, who acknowledged receipt of the money, and who bound himself, the heirs of entail, and his ‘own heirs, executors, and representatives whomsoever’ to repay the same. On the face of the deeds, the debts were incurred by the late Earl alone. It was not seriously disputed, however, that the Lord Advocate was entitled to get behind the deeds and to show what was the real nature of the transaction, in order to see who it was in reality that created the incumbrance.

Accordingly the whole agreements have been recovered, and the exact nature of the arrangements disclosed; but the Lord Ordinary is of opinion that neither in form nor in substance were the incumbrances created or incurred by the respondent.

No doubt the respondent's consent was absolutely necessary under the Entail Acts, and there may be cases where he who consents to a deed may be held as the doer of it, but this principle seems to have no application to the present case. If the consent had been given gratuitously, it would have been very difficult to hold that all the bonds are, in a question of succession, to be dealt with as the respondent's own debts, although an ingenious argument going this full length was submitted for the Lord Advocate.

In like manner, although the subsequent heiresses of entail apparently gratuitously consented to the late Earl's petition, they could hardly be held as the creators or granters of the incumbrance. None of them might ever succeed to the estate. Even the respondent himself was only heir-presumptive; and if the late Earl had left a son the rights of all the consenting parties would have been excluded. In such case the incumbrances beyond all doubt would have been held as created by the late Earl alone, although he had to buy and pay for the necessary statutory consents.

In truth, the transaction between the late Earl and the present respondent was of the nature of an inter vivos purchase. The late Earl wanted to raise money for his own purposes, and he had to buy the respondents' consent. He did so, whether for a large sum or for a small sum is quite immaterial, and having obtained such consent, the late Earl, and no one else, borrowed the money and burdened the estates.

If, instead of burdening the lands under the Entail Act, the late Earl had disentailed and sold a part of the lands, it would have been difficult to hold that the present Earl would have been liable in succession-duty on the lands disentailed and sold.

The true meaning of the 34th section of the statute is that a successor is not to be allowed deduction for his own debts, e.g. post obit bonds which he has granted anticipating the succession. But the reason of the clause does not reach the present case.

The Lord Advocate strongly relied, however, on certain important judgments which have been pronounced in England, some of them in the House of Lords, under the statute now in question. The principal cases relied on were the following:— In re Peyton, 7 Hurlst and Norman, p. 265; Attorney-General v. Floyer, 7 Hurlst and Norman, 238,—in H.L. 9 Clark's Appeal Cases, 477; Attorney-General v. Sibthorpe, 3 H. and N. 424; Attorney-General v. Braybrooke, 5 H. and N. 488; and Braybrooke v. Attorney-General, 9 Clark's H. L. Cases, 150; Attorney-General v. Lord Lorton, 11 Irish Common Law Reps. 429; Commissioners of Inland Revenue v. Harrison, as decided in the House of Lords 2d May 1874 (see 2d vol. of Law Times, 274).

Many of these cases bear upon the respondent's alternative plea added during the debate, but they were mainly relied upon as showing that when under the English law of entail a tenant for life combines with the tenant in tail or remainder man to re-settle the estate and create burdens thereon, the burdens or incumbrances are held, under sec. 34 of the Succession Duty Statute as being ‘created or incurred,’ not by the tenant for life, but by the tenant in tail or remainder man. The attempt was made, with great ingenuity, to assimilate the position or legal character of a tenant for life with that of an heir of entail in possession, and the remainder man was said to hold the same position as the next heir of entail. On carefully considering the cases quoted, the Lord Ordinary is of opinion that the analogy urged by the Lord Advocate does not hold, and that the English cases, when their true nature is examined into and seen, are, instead of being authorities for the Lord Advocate, really authorities for the respondent. For the question always was, Who is the party who has really incurred the debt or incumbrance, according to the substance of the transaction? In the English cases referred to it was held to be the tenant in tail or in remainder, and not the mere liferenter. On the very same principle, and applying as far as he can the tests and reasonings which governed the English decisions, the Lord Ordinary holds that in the present case the incumbrances were really created and incurred not by the contingent presumptive or remote heirs of entail, to whom the succession had not opened, and to whom it might never open at all, but by the heir of entail in possession, who was, in the eye of the law, and in the substance of the transaction in question, the fiar of the whole entailed estates.

The alternative plea added by the respondent during the debate raises considerations of considerable nicety and interest; and if the respondent's first contention had failed, equity strongly supports the respondent's view. The cases above cited embrace those relating to this plea also. As the Lord Ordinary, however, has sustained the first pleas of the respondent, no decision is required on the alternative plea.”

The Lord Advocate reclaimed.

At advising—