Scottish Court of Session Decisions

By antenuptial marriage-contract dated 26th October 1896 Robert M'Queen, grocer, Milngavie, conveyed to trustees certain heritable properties for certain trust purposes. He directed the trustees, inter alia, to hold the same for the liferent use of his intended wife, Annie Mellon, school teacher, Johnstone, to make over to her if she survived him his whole household furniture and plenishing, and to provide that after her death the said subjects should belong to the children of the marriage. These provisions the said Annie Mellon (who brought no goods into the communion and undertook no counter-obligations) accepted in full satisfaction of her legal rights, and the children's right to legitim was also discharged.

Robert M'Queen was sequestrated by the Court of Session on 8th January 1897, and James M'Lay, C.A., Glasgow, was thereafter confirmed as trustee on his sequestrated estate. As at 5th January 1897 the bankrupt's affairs showed a dividend of 3s. 7 1 2d. in the £, subject to expenses, the amount of the deficiency being £785.

On 18th May 1897 Mr M'Lay raised an action against Mr and Mrs M'Queen and the trustees under their marriage-contract, concluding for reduction of that deed.

The pursuer averred—“The said pretended antenuptial contract of marriage was intended to set apart for the use of the bankrupt a substantial part of his estate, and fraudulently to remove same from the diligence of his creditors. The bankrupt was then insolvent, and the said provisions in favour of his wife and children were made and granted by him in favour of persons conjunct and confident with him, and without any true, just, or necessary cause, and without any value being given therefor, with a view to defraud his lawful prior creditors represented by the pursuer. His said wife was aware of his insolvency at the date of the said pretended antenuptial contract of marriage, and the parties formed a collusive design to defraud the bankrupt's creditors. In any event, the value of the property conveyed by the bankrupt as a provision for his said wife and children in said antenuptial contract of marriage was, in view of the station of the parties and the insolvency of the bankrupt, in excess of a reasonable provision.”

The defenders denied this averment.

The pursuer pleaded, inter alia—“(1) The provisions in question having been granted by the bankrupt in favour of conjunct and confident persons, and when in insolvent circumstances, without any value, and to the prejudice of prior creditors, the said antenuptial contract of marriage ought to be set aside. (2) The said writ sought to be reduced having been granted by the said Robert M'Queen after insolvency and without consideration therefor, and also with intent to defraud his just and lawful creditors,

Page: 569↓

is null and void, both under the Act 1621, chapter 18, and otherwise. (5) Separatim, The provisions in question having been granted during insolvency, and being excessive, the pursuer is entitled to decree, reducing them quoad excessum.”

The defender Mrs M'Queen pleaded, infer alia—“(4) The conveyance to the marriage-contract trustees having been made for true, just, and necessary causes, is not liable to reduction under the Act 1621, cap. 18, or at common law. (5) The said conveyance not being excessive or exorbitant it is not challengeable to any extent. (7) The defender the said Robert M'Queen not having been insolvent when the said conveyance was granted, and in any event the defender the said Mrs Annie Mellon or M'Queen having been in bona fide, and having no knowledge of the said Robert M'Queen's insolvency, even if he were insolvent, the conveyance is not liable to reduction.”

After sundry procedure a proof was allowed, of which the import was briefly as follows—that before the execution of the marriage-contract M'Queen was solvent, the available balance of his heritable property (amounting to about £3000) being more than sufficient to meet all his debts; that after the conveyance of his heritable estate by the marriage-contract he was insolvent, and that the pursuers failed to prove that Mrs M'Queen entered into a collusive scheme with her husband to defraud his creditors. Mrs M'Queen was called as a witness neither by the pursuer nor by the defenders.

On 21st June 1898 the Lord Ordinary ( Kincairney) (1) found that at the date of the marriage-contract the debts of the bankrupt exceeded his available personal assets; (2) found it not proved that at the date of the marriage Mrs M'Queen was cognisant of the state of her husband's affairs; (3) found it not proved that Mrs M'Queen formed a collusive design to defraud his creditors; sustained the fourth and seventh pleas-in-law for the defenders and assoilzied the defenders.

Opinion.—“This is an action by the trustee of a bankrupt, Robert M'Queen, concluding for reduction of his antenuptial marriage-contract. The contract was executed on 26th October 1896, and the estates of the husband were sequestrated on 8th January 1897. The marriage-contract bears that in contemplation of the marriage, and as a provision for Mrs M'Queen and the children of the intended marriage, the husband, Robert M'Queen, conveys the heritable property therein mentioned to trustees. But there is excepted from the warrandice a bond for £950, and also a bond ‘granted or about to be granted’ for £1400, which latter sum the granter Robert M'Queen reserves power to borrow. The deed declares that the subjects disponed shall be held by the trustees'for the liferent use and behoof of the said Annie Mellon (afterwards Mrs M'Queen), exclusive of the jus mariti and right of administration of the said Robert M'Queen, declaring that the subjects before disponed shall be in no ways answerable for the debts or deeds of the said Robert M'Queen, and that the interest and yearly produce thereof shall be paid over to the said Annie Mellon upon her own receipt alone and without the consent of the said Robert M'Queen, and shall be considered purely as an alimentary provision for herself.’ I do not think it necessary to quote the further provisions of the deed in favour of children of the marriage, and of Robert M'Queen himself in the various events specified. The effect of these provisions is not in question in this action.

The only conclusion is for the complete reduction of the marriage-contract. There is no conclusion for partial reduction or reduction quoad excessum. It is averred that the antenuptial marriage-contract was intended to set apart for the use of the bankrupt a substantial part of his estate, and fraudulently to remove it from the diligence of his creditors; that the bankrupt was then insolvent, that his wife was aware of his insolvency, and that ‘the parties formed a collusive design to defraud the bankrupt's creditors.’ Then there is a statement that the value of the property conveyed was in excess of a reasonable provision.

The first two pleas for the pursuer bear on the conduct of the bankrupt only, and are founded on common law, and on the Statute 1621, cap. 18. The third plea is based on the collusive design of Robert M'Queen and his wife to defraud his creditors. The fifth plea is that the provisions being excessive the pursuer is ‘entitled to decree reducing them quoad excessum.’ But, as already observed, there is no conclusion for such partial reduction. No case seems made in the proof bearing on that plea. The pursuer's counsel admitted that there had been no case where decree of reduction of an antenuptial marriage-contract quoad excessum had been pronounced, and he confined his demand to a decree of total reduction.

It is to be observed that there are no materials in this action for determining to what extent the bankrupt has succeeded in withdrawing his estates from his creditors; or whether or not he has retained an interest in the subjects conveyed by the marriage-contract which can be made available for payment of his creditors. No question of that kind is raised or can be decided in this action. The only question is whether the antenuptial contract, so far as it bears to convey the bankrupt's property to trustees, can be got rid of altogether.

The question is no doubt important in law, but my view of the case admits of being shortly stated; because it does not not appear to me that there can be much doubt as to the facts as disclosed in the proof. I think that it is proved that at the date of the marriage-contract the debts of the bankrupt considerably exceeded his available personal assets, and that he was quite well aware of this. The only ground for questioning this seems to be that he had a considerable number of book debts. But it appears from the proof that almost the

Page: 570↓

whole of these were so hopelessly bad that it is impossible to consider them as actual assets, and that the bankrupt could not have considered them so. If, then, the property conveyed by the marriage-contract were left out of account, the bankrupt would have been insolvent; and, after the marriage-contract was executed, assuming that it transferred the property from himself to his trustees, he was insolvent. The marriage-contract made him so.

It may be proper to notice that although the marriage-contract is dated 15th October yet it was drafted in June, to which date I suppose the engagement of the parties draws back. There is no evidence about the financial condition of the bankrupt in June. But I think the point to be considered is his financial condition when the contract was executed.

It appears from the evidence of the trustee that the bankrupt's debts increased considerably after 15th October. They increased by more than £600, and the trustee has made the serious statement that he cannot discover either goods or the proceeds of goods corresponding to any such sum. The bankrupt did not think it necessary to go into the witness-box to contradict, qualify, or explain the trustee's evidence, which I think I am bound to accept, and which I cannot help regarding as disclosing fraud on the part of the bankrupt of a very serious kind. But then fraud after the date of the marriage-contract does not directly affect its validity.

But if the question was only this, whether the conveyance of the bankrupt's property by the marriage-contract was a fraudulent act done by him with the intention of defeating his creditors, I would be inclined to hold that that was proved although not put beyond question. But I think there is no sufficient proof of the complicity of Mrs M'Queen. It is not proved that she knew of her husband's insolvency, or aided and abetted him in his fraud. One may have suspicions, but I think there is nothing like adequate proof which implicates Mrs M'Queen. The pursuer did not call her as a witness, and the defender thought it more prudent, as perhaps it was, not to offer her evidence.

In these circumstances the first question is whether the marriage-contract is reducible under the Act 1621, cap. 18, and I think that question must be answered in the negative. So far as I know there is no case in the books in which an antenuptial contract has been reduced under that Act, and I incline to think that the Act cannot apply except in very exceptional circumstances, at least where the question is about total reduction, the reason being that an antenuptial contract is necessarily an onerous deed. There may perhaps be highly exceptional cases in which it may appear that the marriage and marriage-contracts were mere frauds, the only object of which was to defeat and defraud the husband's creditors, as in Balmer v. Hunter, 1869, L.R, 8 Eq. 46. But there seems no case of that kind here. Erskine says (iv. 1,33) ‘Provisions in marriage-contracts either by the bride to the bridegroom in name of tocher, or by the bridegroom or any of his relations to the bride, are accounted onerous deeds, because it is on the faith of suitable provisions secured to the parties in marriage-contracts that they enter into the marriage state. Such deeds, therefore, are not subject to reduction under the Act,’ i.e., the Act of 1621, cap. 18. I think this passage of much importance. It was quoted by the pursuer's counsel, but appears to me altogether on part of the defenders.

In Carphin v. Clapperton, May 24, 1867, 5 Macph. 797, Lord Neaves expressed the opinion that an antenuptial contract might he reduced quoad excessum under the Act 1621, cap. 18, but his Lordship expresses this opinion in a very guarded manner, and it is not, so far as I am aware, borne out by any decision.

The defenders contended that the Act could not apply, for the further reason that the parties were not conjunct and confident, and certain dicta in the opinions in Watson v. Grant's Trustees, May 14, 1874, 1 R. 882, seem to support this view. But while it is true that the trustees were not conjunct and confident with the bankrupt, still I cannot doubt that the intending spouses were conjunct and confident, and possibly that might be sufficient to obviate that objection.

If this action of reduction cannot be supported under the Act 1621, cap. 18, can it be supported at common law? I am disposed to think that it cannot. This question is to be taken on the footing that the conveyance in the marriage-contract by the bankrupt was in defraud of his creditors, but that Mrs M'Queen was unconnected with the fraud, and that the marriage-contract must be regarded as an onerous contract. The pursuer referred to and founded on a well-known passage in Lord Fraser's Husband and Wife, vol. ii., 1350, in which the honesty and legal validity of marriage-contracts executed by insolvent husbands is (inferentially) impugned. Probably the observations extend to deeds which in the knowledge of the granter create insolvency as well as deeds by one who is antecedently insolvent. It appears to me, however, that the passage in question is open to exception. The learned author appears to assume the participation of the wife in the fraud of the husband; and to confine his attention to the position of the husband, and either to overlook the position of the wife or to underrate its strength and importance.

That the money of an insolvent is not his own, but is held by him as trustee for his creditors, is not, I apprehend, an exactly correct legal proposition, but although sanctioned by high authority appears to express in somewhat figurative language rather the insolvent's moral than his legal obligation. Such language appears somewhat misleading, especially when the granter is solvent antecedently to the deed complained of, and I agree with the view submitted by the defenders' counsel, that it was more correct to say that the bankrupt incurred a new debt

Page: 571↓

than that he conveyed property which did not truly belong to him. Now, there is no contract which our law regards as more onerous than an antenuptial marriage-contract; nor does it affect the onerosity of an antenuptial marriage-contract that the whole money is provided by the husband and none by the wife. There is no reason why the right of the wife as a creditor under such a contract should be regarded as inferior to the right of any other creditor, always, of course, assuming that the wife is clear of any practices by the husband. If someone had advanced £100 to the bankrupt, and he had granted a bond over his property, it could not have been challenged by the trustee on the bankrupt's estate; and Mrs M'Queen, assuming her bona fides, is just as clearly a creditor as one who advanced £100 would be. There is nothing unreasonable or blameable in a woman about to marry, or her parents, taking means to secure a provision for her support, and it may be plausibly maintained that a doubt about the husband's financial position would only make it the more necessary to secure the wife's provisions. On these grounds I am of opinion that this action must fail, although, certainly, I am not surprised that the creditors should feel indignant and think that they had been tricked, and I do not say what the result might have been had they called Mrs M'Queen as a witness and elicited from her an admission that she was cognisant of her husband's financial condition, and of his designs against his creditors, assuming that at that time he had such designs.

I express no opinion as to what my judgment would have been had it been shown that the provision was exorbitant, and had any case been made for a qualified reduction.

The only important cases in our books which were quoted are Carphin v. Clapperton, and Watson v. Grant's Trustees, supra, and I consider that, so far as they go, they support the opinion which I have expressed. Perhaps, however, the passage quoted from Erskine is the most important authority on the question.

The defender quoted the cases of Balmer v. Hunter, supra, Kevan v. Crawford, June 22, 1877, 6 Ch. Div. 29; Pennington, June 26, 1888, 5 Morel's Bankruptcy Reports, 216; Fraser v. Thomson, 1859, 4 De Gex and Jones, 659, as showing that in England an antenuptial contract will not be set aside on the ground of the husband's fraud on his creditors, where the wife is not participant in the fraud.

There is one point of the case which appears to me to be ill cleared up. I refer to the power reserved in the marriage-contract to M'Queen to borrow £1400. If that be an existing unexhausted power, I doubt if there could have been any question at all; and if that be so, the trustee will no doubt be able to avail himself of the reserved power. But I rather understood that the power had been exhausted. The witness Keyden gave evidence about a statement on this subject, but I do not find that the statement has been produced.”

The pursuer reclaimed. His argument upon the facts need not be reported. Upon the law he argued that undoubtedly by this marriage-contract M'Queen made himself insolvent. That was equivalent to his being insolvent before he entered into the contract—Bell's Com. ii. 172, and a man who was insolvent was a trustee for his creditors—Fraser, H. & W., ii. 1350; Bell's Com. ii. 170. The marriage-contract therefore was reducible, and it was not sufficient to plead against reduction that marriage was a just and necessary cause—Ersk. Inst. iv. 1, 33; Bell's Com. ii. 172, 176; Brodie's Stair, 98, in; Burton on Bankruptcy, 134. Marriage-contracts in fraud of creditors had frequently been reduced in England— Columbine v. Penhall, 1 Sm. & G., Chan. 255; Fraser v. Thomson, 4 De Gex & Jones, 659; Balmer v. Hunter, L. R., 8 Eq. 46. See also Watson v. Grant's Trustees, May 16, 1874, 1 R. 882, per Lord Ormidale, 887. Keeping in view the station of the wife and her circumstances before the marriage, it was, at all events, quite clear that the provision here made for her was exorbitant— M'Lachlan v. Campbell, June 29, 1824, 3 S. 132. There could be no doubt that an action of reduction quoad excessum was competent— Duncan v. Sloss, 1785, M. 987; M'Lachlan v. Campbell, June 29, 1824, 3 S. 132; Dunlop v. Johnston, March 21, 1865, 3 Macph. 758; Carphin v. Clapperton, May 24, 1867, 5 Macph. 797, per Lord Neaves, 804.

The defenders, after discussing the facts, argued that the Lord Ordinary was right. Up to the moment when the contract of marriage was entered into M'Queen was solvent. His wife knew he was solvent, but if she suspected that he was not doing well in business she was the more justified in getting the contract executed. Marriage had always been considered a true, just, and necessary cause in the sense of the Act of 1021—Watson, ut sup.; Forrest v. Robertson's Trustee, October 27, 1876, 4 R. 22, referred to. In the English cases cited for the pursuer the settlements were all “bogus” settlements made by men who married their mistresses for the express purpose of defrauding creditors.

At advising—