Scottish Court of Session Decisions

This was an action at the instance of Allan Edward, executor-dative qua one of the next-of-kin of Mrs Margaret Edward or Baxter, widow of Dr John Boyd Baxter, against John Cheyne and Thomas Watt Thoms, trustees and executors of Dr Baxter, for an accounting of their whole intromissions of Dr Baxter with the trust-estate of the late David Edward, merchant and flax-spinner in Dundee, and for payment of £20,000, or of such other sum as shall be found due.

Mrs Baxter was a sister of David Edward, who had died on 22d December 1857 leaving a trust-disposition and settlement under which Mrs Baxter had a liferent interest in a share of the residueof his estate, exclusive of the jus mariti and right of administration of her husband Dr Baxter. The trustees who accepted office under the settlement were the truster's brothers Alexander and Allan Edward and Dr Baxter. On 31st December 1857 Dr Baxter was appointed factor on the trust-estate, with full power to uplift all sums, grant discharges, and make payments under the supervision of the trustees. Alexander Edward died on 29th March 1863, and Allan Edward on 16th June 1874. Dr Baxter continued to act as factor or sole trustee down to the date of his death on 4th August 1882. Mrs Baxter died on 15th October 1882; from the date of her husband's death to that of her own she was unable to attend to matters of business.

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There was one child of the marriage who predeceased the spouses without issue.

The trust having lapsed by the death of Dr Baxter, a judicial factor was, on 9th February 1883, appointed to the trust-estate. The factor, in consequence of his not having obtained a full statement of Dr Baxter's intromissions with the trust funds, raised an action of accounting against the present defenders, whichalsoconcludeforpayment of £20,000, or such other sum as might be found to be due. The record in that case was closed on 18th March 1884. An account of Dr Baxter's intromissions was lodged, and on 24th February 1885 objections were lodged to this account.

The pursuer of the present action was appointed executor-dative of Mrs Baxter on 1st June 1883.

In this action he stated that having examined the account of intromissions lodged in the process of accounting at the instance of the judicial factor he had found that no proper accounts existed of the payment to Mrs Baxter of her share of the income from David Edward's estate after 11th April 1866; previous to that date the statements of alleged payments were of a very fragmentary and unsatisfactory character. They averred that “No vouchers of any kind for such alleged payments had been produced, and that the account of intromissions lodged by the defenders was, so far as regarded the receipt and payment of Mrs Baxter's share of the income of the estate, entirely supposititious, and not made up from accounts kept by Dr Baxter either as trustee or as factor; that Mrs Baxter did not receive from Dr Baxter payment of any part of the income due to her from the trust-estate, and that Dr Baxter, in place of making payment to her of such income, applied it to his own purposes without her knowledge or consent.”

The defenders admitted that no vouchers were produced for the income of that part of the trust fund liferented by Mrs Baxter. They stated that, so far as they could ascertain, that income was received by Dr Baxter as trustee and factor, and paid by him into his own bank account, or otherwise mixed with his own funds with the knowledge and full consent and approval of Mrs Baxter, and they averred that during the whole period from the truster's death in 1857 to her husband's death and her own in 1882 Mrs Baxter never expressed any objection to this course, or any desire that her separate income should be paid over to herself. “Dr and Mrs Baxter were married in 1827, and from that date till the dissolution of the marriage by the death of Dr Baxter on 4th August 1882, a period of fifty-five years, they lived in perfect harmony and unity of interest.” “The income was either contributed by Mrs Baxter to the expenditure of the spouses, and was expended for their joint purposes and with joint assent; or otherwise, the income was gifted by Mrs Baxter to her said husband. Mrs Baxter had the most ample confidence in her husband, and desired that he should have the disposal of all funds coming to either spouse.”

The pursuer denied that Mrs Baxter's income was received by Dr Baxter with her knowledge and full consent and approval. He denied that Mrs Baxter never expressed any objection to the course followed, or any desire that her separate income should be paid over to herself; and averred that Dr Baxter kept her in ignorance of the true position of matters regarding the trust, and represented that he was unable to pay her income in consequence of its position. The pursuer also averred that although Mrs Baxter was not fully aware of her legal rights with regard to the income payable to her from David Edward's estate and her separate estate generally, she knew that her husband was due her large sums of money, and she repeatedly asked her husband to make it over to her. He further stated that it was from the income of Mrs Baxter's separate estate that the money in Dr Baxter's hands at his death was in great part derived.

The defender made reference to the testamentary settlements executed by the spouses, which were as follows:—There was no antenuptial marriage-contract, but in 1828, the year after their marriage, they made a mutual settlement in each other's favour.

In 1871 Mrs Baxter executed a will by which she assigned and conveyed to her husband, “in case he shall survive me, All and Whole my estate and effects, heritable and moveable: And I do hereby, moreover, nominate, constitute, and appoint the said John Boyd Baxter, in case he shall survive me, to be my sole executor and universal intromitter with my whole moveable means, estate, and effects of every kind, and that for his own use and behoof, with full power to him to do everything competent to him as my executor, it being understood between us, in the event of his surviving me, that he will execute a deed of settlement or trust-deed to take effect at his death, in the terms and for the purposes settled and known to us both, with such necessary alterations as he may consider called for on account of any change of circumstances which may take place; with this duty he is solely and confidently entrusted, and in the discharge of it no one shall interfere.” This will did not take effect as Dr Baxter predeceased his wife.

In 1881 Dr Baxter executed a trust-disposition and settlement, by which he conveyed his whole estates to the defenders John Cheyne and Thomas Watt Thorns as trustees. Mrs Baxter also signed this settlement. The testing clause bore—“In witness whereof, I and my said wife have subscribed these presents before these witnesses,” &c. The provisions of the settlement were for payment of the income of his estate to his wife in the event of her survivance; for payment of legacies amounting to £26,750, of which £16,000 went to Mrs Baxter's next-of-kin, and £2850 to other relatives of Mrs Baxter; for payment out of the residue after the death of his wife of any further sum the trustees might think fit over and above the sum of £10,000 (paid by him before his death) to University College, Dundee, and for payment of the residue to charitable purposes in the discretion of his trustees.

The pursuer pleaded—“(I) The deceased John Boyd Baxter having acted as trustee and also as factor on the trust-estate of David Edward, and having received and intromitted with the share of the funds of that estate liferented by Mrs Baxter, the present defenders, as trustees and executors of Dr Baxter, are bound to count and reckon with the pursuer as Mrs Baxter's executor, or otherwise to pay to him the sum of £20,000 with interest as concluded for. (2) Separatim— The deceased John Boyd Baxter

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having received the sums of income payable to Mrs Baxter, exclusive of the jus mariti, as residuary legatee of David Edward, and not having accounted to her for the same, his representatives are bound to count and reckon as aforesaid.”

The defenders pleaded—“(2) The presentaction at the instance of Mrs Baxter's representatives is barred by Mrs Baxter's own acquiescence, taciturnity, and homologation down to the date of her death. (3) Dr Baxter having, with Mrs Baxter's knowledge and consent, applied the income of her funds to their joint expenditure during their lives, the pursuer as Mrs Baxter's representative is barred from making the present claim against Dr Baxter's estate. (4) If, and so far as, not so applied, Mrs Baxter having made a donation to her husband of the said income, the present claim against his estate ought to be repelled. (5) The present claim at the instance of Mrs Baxter's representatives is barred by the terms of Dr Baxter's settlement, and of Mrs Baxter's approval thereof, taken in connection with Mrs Baxter's will of 11th July 1871.”

A proof was taken, from which it appeared that the gross amount of David Edward's estate was about £68,000, and that there remained for division among his five brothers and sisters, after paying certain legacies and expenses, about £55,000. The estate was invested partly in the business of A. & D. Edward, flax-spinners, Dundee, and partly in the estate of Balruddery, which was the property of David Edward. David Edward died in 1857, and by Martinmas 1860 his trustees had realised sufficient to divide £25,000 of capital, Mrs Baxter's share being one-fifth or £5000. In 1862 Mrs Baxter got another fifth or £5000, and in 1866 there was a further division by which she got £2200—£12,200 in all. These sums were invested by David Edward's trustees, and on each occasion there was entered in the minute-book a regular declaration of trust that they held the investments for behoof of Mrs Baxter.

Mrs Baxter had besides this an interest in the estate of her father Allan Edward, who had died in 1823, which amounted to £1316, 13s. 4d. This sum remained in the firm of A. & D. Edward & Company, the interest being paid annually to her, and amounting to about £59. There was also a sum of £12,500 to the liferent of which Mrs Baxter was entitled from the estate of her brother Alexander Edward, who died in 1863 leaving a settlement in terms similar to that of David Edward. Alexander Edward's money was also in the business. After James Edward's death in 1876 there was some difficulty in realising the property of the firm, and for three years after his death Dr Baxter paid no interest to his wife upon her share of the estate, though he paid interest to other beneficiaries.

There was a separate bank account kept by Mrs Baxter with the National Bank from October 1859 to December 1860, when it was closed, and the balance transferred to a new account with the same bank in the joint names of Mr and Mrs Baxter, to be operated on by either. The balance was transferred by cheque, on the back of which was endorsed the following—“Please change this account to the form undernoted, videlicet, John B. Baxter Esq., Craigtay, and Mrs Margaret B. Baxter, payable to either.— M. B. Baxter. I concurin the above.— John B. Baxter.” This latter account was closed on 11th November 1865, and the balance transferred to Dr Baxter's separate account. There was no direct evidence of the reason for making this change in the manner of keeping the bank account. Mrs Baxter had also a series of deposit-receipts with the same bank from October 1869 down to July 1881, when the last deposit was uplifted and the money was not re-deposited.

The entire income to which Mrs Baxter was entitled from David Edward's estate, amounting to about £800 a-year, was recovered by Dr Baxter, and it was admitted by the pursuer, before the Lord Ordinary, that down to the end of 1865 he might be held to have discharged himself of the amounts received. From April 1866, however, he drew, as factor on the trust-estate, the interest due to his wife, and paid it direct into his own bank account. The interest which was thus dealt with was not spent during the subsistence of the marriage, but remained as an accumulation on Dr Baxter's death. The evidence showed that Dr and Mrs Baxter were a devoted couple, and on that point is given in detail in the opinion of Lord Mure infra, as is also the evidence bearing on Mrs Baxter's knowledge of what was done with her money.

The Lord Ordinary ( Kinnear) on 8th December 1885 assoilzied the defenders.

“ Opinion.—The present action relates exclusively to the income which the late Mrs Baxter was entitled to receive during her life from her brother David Edward's estate. It is not disputed that the entire income to which she was so entitled was duly recovered by her husband Dr Baxter as trustee and factor on the trust-estate; nor, on the other hand, that till the end of 1865 he may be held to have discharged himself satisfactorily of the amounts received. But from April 1866 until his death the whole amounts passed into his private bank account, and became mixed with his own funds, and it is conceded that if he were liable to account with his wife's representatives on the same principle as with stranger clients, the defenders could produce no sufficient vouchers to prove payment of his wife's income to herself, and therefore would have no defence to the action in so far as regards the period from 1866. But they maintain, and I think justly, that when a husband has been allowed to receive his wife's income during her life, he is not, in a question with her representatives, to be subjected to the same rules of strict accounting as if he had uplifted the income of a stranger, and that if it be a fair inference from the facts in evidence that the wife had known and assented to the manner in which her income was applied by her husband, her representatives have no claim after her death to recover moneys which she has permitted her husband to appropriate, or to apply at his discretion for their common benefit. It appears to me impossible to doubt that Mrs Baxter was perfectly well aware that her husband was receiving the income in question, or that she was satisfied that he should deal with it as he did. The case is not identical with that of Hutchison v. Hutchison [ infra], because the wife's income cannot be shown to have been paid and expended during the subsistence of the marriage. But she knew that in so far as it was not expended it was mixed with her husband's funds. This might

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probably be inferred from the bank accounts, for the income from David Edward's estate was at first paid into a separate account in Mrs Baxter's own name, afterwards from 1860 to 1865 into a joint account in the names of both spouses, and from 1866 onwards into Mr Baxter's own account. These changes could hardly have been made without Mrs Baxter's knowledge, if she knew that her husband was continuing to receive the money on her account, which she cannot but have known unless she was wilfully deceived by him, and it is conceded that there is no ground whatever for any such imputation. The mere fact, however, of her money being paid into her husband's bank account with her knowledge might not have been in itself conclusive against the pursuer's claim, but it is a very material consideration when taken in connection with the evidence as to the terms on which the husband and wife lived together, and with the evidence afforded by their testamentary writings.

Taking all the circumstances into consideration, the reasonable inference appears to me to be, that if Mrs Baxter's income was paid into her husband's bank account, this was not because he had failed to account to her for the money which he held in trust for her, but because she desired that it should be at his disposal for purposes upon which they had agreed. If it had been actually spent for the common benefit of the spouses, there could have been no further question. But it is said that the actual result has been to allow the husband to make accumulations of his wife's income, which she would have been entitled to recover from him, or from his estate. But on the other hand, if there were such accumulations, they will fall into Dr Baxter's estate, and be disposed of in accordance with his testamentary settlement, and when the terms of that settlement, to which Mrs Baxter was a consenting party, are considered along with her own will of 1871, it would appear to me that this is exactly what both spouses intended. Under the husband's settlement the wife, if she survives, has the liferent of his entire estate, and he gives considerable legacies to her relations, leaving the residue for charitable purposes. In the previous case ( 11 R. 1002) the Lord Justice-Clerk pointed out that the true inference from the facts was that this was done by arrangement with Mrs Baxter, and observed further that the will executed by her in 1871, although it can have no testamentary effect, was important as shewing beyond all doubt that all the provisions of her husband's settlement had been arranged between the spouses before that deed was executed. It appears to me to be equally important in this case, because I think it shews that the estate, as to which she says that they agreed as to the purposes for which it should be settled, included her money as well as his. If any part of her income therefore was mixed up with his funds, so as to be carried by his will in so far as extant at her death, this may reasonably be ascribed to the agreement which they had made for the settlement of both estates. The only evidence to the contrary is what is said by some of the witnesses as to Dr Baxter having stated to them, or to his wife in their hearing, that he had not paid her a farthing from either Alexander or David Edward's estate. But I do not think it doubtful that this was a mere misapprehension. It appears that after Mr James Edward's death in 1876 there was a good deal of difficulty in realising the property of the firm of which he had become the sole partner, that the debts to former partners and their representatives could not be paid till this was done, and that, in particular, there was a great deal of delay in paying Mrs Baxter the share to which she was entitled, either of her father's, or of her brother Alexander's estate. It appears that for three years after Mr James Edward's death, Dr Baxter paid no interest to his wife on account of her share of Alexander Edward's estate, although he was paying interest to other beneficiaries. But she had a double interest in the winding up of Messrs A. & D. Edward's estate, on account of her interest in her father's, and of her interest in her brother Alexander's estate. Dr Baxter, therefore, might very well have spoken of two estates from which she was receiving nothing, and it was not unnatural that her nephews, who were not fully acquainted with the circumstances, should suppose him to have referred to David Edward's estate as one of them. It is impossible, however, that he could have done so, for David's estate was in no way mixed with the realisation of the property of the firm, and he was himself uplifting, as it fell due, the income to which his wife was entitled. He could not, therefore, have represented to her or to her nephews that there was any difficulty in recovering the income from that estate, or any part of it, except with a deliberate intention to mislead; and, as already observed, it is conceded that there is no ground for imputing to him any such intention. The evidence of Mr Kenrick Edward is not so easily reconcileable with this supposition as that of the pursuer, but I cannot say that I have confidence in the accuracy of his recollection as to the particular words used by Dr Baxter, although I do not doubt that he states quite truly the impression which he believes that he received at the time.”

The pursuer reclaimed, and argued—The result of the evidence was that Mrs Baxter knew generally that she was entitled to income from David and from Alexander Edward's estates, that she was not getting it, and that she was entitled to get it. She was under the impression that owing to the difficulty of realising the business of A. and D. Edward, she could not get any payments from either estate. In order to make the defender's case complete, it would be necessary for them to prove donation—which they had not done. Acquiescence on the part of the wife, would imply that she knew what was being done with her money, and there was nothing to shew that. From Mrs Baxter's will of 1871 it appeared that she anticipated she would have money to leave; but she could only have it in the shape of accumulations. If Dr Baxter's settlement had been intended to carry both estates, it would have said so. The defenders had failed to shew that Dr Baxter had any authority to receive Mrs Baxter's income, or that he had any authority to dispose of it as he had done. There was no plea open to the defenders that in this accounting part of the wife's money should be applied to the joint expenses of the spouses. The money here survived, and had not been spent as in Hutchison v. Hutchison's Trustees, June 10, 1842, 4 D. 1399; Allan v. Hutchison's Trustees, Feb. 1, 1843, 5 D. 469; Hewats v. Robertson, Nov. 30, 1881, 9 R. 175.

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The defenders argued—Dr Baxter had received the sums due to his wife with her authority—such authority as would have been sufficient to discharge the trustee if he had been a separate person. If it were assumed that Dr Baxter had authority to collect the income, then the case on the other side must come up to this, that while Mrs Baxter supposed Dr Baxter was doing one thing, he was doing another. The true position of matters was that the spouses agreed they should have a joint purse for certain purposes. Probably donation was the foundation for the testamentary arrangements; and though there was no direct evidence of donation, yet it was to be inferred from the conduct of parties, and the way the money was treated. The fact that Mrs Baxter got interest on the £1300 due to her from her father's estate, and did not get the income of her share of David Edward's estate, led to the inference that she got the one as pin money, but that quoad the other she and her husband were to make a common purse. The will executed by Mrs Baxter in 1871 shewed that she intended her husband to get all her estate in the event of his survivance. Further, Mrs Baxter consented to the settlement by Dr Baxter in 1881, and that deed carried the funds now in question— Baxter's Trustees v. Baxter's Executor, &c., June 27, 1884, 11 R. 996; Newlands v. Miller, July 14, 1882, 9 R. 1104.