Callander v Callander’s Executor [1972] UKHL 10 (19 July 1972)

CALLANDER
v.
CALLANDER’S EXECUTOR

LORD EMSLIE’S OPINION .—The basis of this action is a claim of right to legitim, out of the net moveable estate of his deceased father, by Major Henry Ronald Burn Callander. The action is directed against the only brother of the pursuer, firstly, as executor of his deceased father, and secondly, as an individual. In form it is an action of accounting and, failing an accounting, for payment by the first defender to the pursuer of the sum of £20,000. In the Procedure Roll the defenders (Major John David Burn Callander in his two capacities) moved me to dismiss the action by sustaining their first plea in law, which is a plea to relevancy.

[His Lordship narrated the facts, and continued]—Having thus set out the facts to which the defender’s first plea in law was directed, it perhaps need hardly be said that the attack upon the relevancy of the pursuer’s claim of right to legitim out of the estate of his deceased father depends primarily upon the terms, and the effect upon that claim, of the marriage settlement, no. 16 of process. For the pursuer it was not disputed that, had there been no deed of appointment, renunciation and discharge, the terms of the marriage settlement would effectively have precluded his making a relevant claim of right to legitim on his father’s death. The relevancy of his case against the defenders accordingly turns upon the meaning, and effect upon the marriage settlement, of the deed of appointment, renunciation and discharge; and it was to this question that the arguments of the parties were principally directed in the debate before me. In order, however, to provide the proper setting for these arguments it is necessary and desirable to set out clearly the significance of the marriage settlement, so far as the pursuer’s case is concerned, if it had stood alone at the date of his father’s death: and I do so now.

In dealing with the marriage settlement it was the defenders’ submission that if, in an antenuptial marriage contract entered into before 10th September 1964, the parties to the marriage made provision in favour of the children to be born of their union, and, in respect of that provision, expressly discharged the rights to legitim which would otherwise emerge on their respective deaths in any children then surviving, such a discharge was, and is, in law valid, and would, and will, effectively exclude a claim by a surviving child of the marriage to legitim out of the estate of either of his parents. The reason for the introduction of the date 10th September 1964 in this proposition is because by section 12 of the Succession (Scotland) Act, 1964, read together with section 38 (3) thereof, it is provided, inter alia, that nothing in any antenuptial marriage contract executed after 10th September 1964 shall operate so as to exclude, on the death of either party to the marriage, a child’s right to legitim out of the estate of that party, unless such child shall elect to accept, in lieu of legitim, the provision made in his favour under the contract. This submission for the defenders was not challenged by the pursuer and is in my opinion sound in law, being amply supported by the following authorities, viz., Maitland v. Maitland, 6 D. 244; Baron Panmure v. Crokat, 18 D. 703; Earl of Kintore v. Countess-Dowager of Kintore, 11 R. 1013, 13 R. (H.L.) 93; Simpson’s Trustees v. Taylor, 1912 S.C. 280; and Galloway’s Trustees v. Galloway, 1943 S.C. 339.

Having thus set out in general terms the rule of law which alone enabled parents before 10th September 1964 to prevent their children from claiming legitim out of their moveable estate on their respective deaths, it is, I think, of some importance for the purpose of my decision in this case to explore this singular rule a little further, and to record at this stage the extent and limits of the rule, so far as these can be discovered from these decided cases. In the first place, the law does not require, in order to defeat a child’s claim to legitim on the death of a parent, that the provision made for him in the antenuptial marriage contract should correspond with the value of legitim: Galloway’s Trusteesper Lord President Normand at p. 345. It is enough that by the terms of the contract some benefit is prescribed for the child which can in a reasonable sense be considered a “provision”—see Countess-Dowager of Kintore,13 R. (H.L.) 93, per Lord Watson at p. 96. In the second place, it has never been held that the right of a child to claim legitim can validly be discharged in the antenuptial marriage contract of his parents where no provision at all, or merely an illusory provision, has been made for him in that contract. Although in Maitland Lord Mackenzie made certain observations, obiter, tending to support such a proposition, a contrary view was expressed, also obiter,by Lord Fraser in Earl of Kintore v. Countess-Dowager of Kintore, 11 R. 1013, at p. 1024. In the third place, it is sufficient to validate an express exclusion of a child’s claim of right to legitim that there are provisions in the contract in favour of the children of the marriage as a whole, although the right given to any one of them is defeasible by the exercise of a power, such as a power of appointment, reserved to the father. This proposition is derived from Simpson’s Trustees and Galloway’s Trustees, and in the latter case it was held that the right to legitim had been validly discharged in the case of all the children even where, in the exercise of the reserved power of appointment, the father had directed that the whole fund should be paid to the eldest son.

I have only to add that, while the rule which enabled parents to discharge prospectively the rights of their children to claim legitim has long been settled, it must be recognised that the rule was criticised, in the most recent cases cited by the defenders, as being contrary to principle. In Simpson’s Trustees, for example, Lord Salvesen said this (at p. 286):

“The validity of such a discharge of legitim, when contained in an antenuptial contract, has been too long settled to be now challenged… That intending spouses should be able by an antenuptial contract to exclude their children, or some of them, from their legal rights of succession—which they could not do by any other deed, whether executed before or after their birth—is, in my opinion, contrary to sound legal principle; and I cannot but regret that the rule was ever established.”

As a further example I find that in Galloway’s Trustees Lord Moncrieff said this (at p. 346):

“It may thus be matter for regret that the law which has in form accorded the right has in substance withdrawn it in whole or in part, by admitting its exclusion by the sole act of prospective parents in anticipation of their marriage… Upon whatever reasoning it may have been so ascertained, it is however beyond question that the law is settled to this effect. I accordingly, or none the less, approach the decision of this question with a complete reluctance to extend the doctrine of antenuptial exclusion of legitim in any direction beyond the point to which decision and practice have already carried it.”

Standing the rule of law which I have just discussed, it is common ground between the parties that the terms of the marriage settlement in this case satisfy the requirements of that rule, and that, had the marriage settlement stood alone and entire at the date of the death of the pursuer’s father, his claim of right to legitim would, by reason of the terms of that settlement, have been unstateable. As I have already indicated, however, it is the essence of the pursuer’s case that the deed of appointment, renunciation and discharge, which was entered into in 1953, effectively withdrew the only obstacle to a relevant claim to right of legitim on his father’s death, by removing the exclusion of the right to make such a claim which was imposed by his parent in the marriage settlement.

In the foregoing circumstances the defenders supported their plea to relevancy, firstly, upon the bold proposition that, once parties to an antenuptial marriage contract have therein validly excluded the right of any children born of their future marriage to claim legitim from their estates on their respective deaths, no right can in any circumstances whatever emerge in these children on the death of either parent. In particular, said the defenders, not even by the act of the very parties who have imposed it, the parents themselves, can children ever be released from the fetters of an exclusion imposed upon them by an antenuptial marriage contract. For this, the defenders’ first proposition, no authority was cited to me and I accept from counsel that none exists. In being asked to give effect to this proposition in this case I am conscious that I am being asked to hold that the rule of law which exceptionally allowed to parents, before their marriage, the power to deprive their future children of a right which the law itself confers upon them on the death of either parent, should operate even where the parents inter vivos have made it abundantly plain that they no longer wish it to do so. So to hold would, in my opinion, extend the scope of the rule of law further than it has ever been extended before, and, having regard to the distaste in which the rule, even in its established form, appears to have been held in twentieth century judicial opinion, I would only be prepared to give effect to the defenders’ first argument if I felt compelled to do so by sound reasons why the rule should now be so interpreted. For the defenders it was contended that a right of any kind, once discharged, can never be resurrected, and, since we are concerned with the “discharge” of a “right” to legitim contained in an antenuptial marriage contract, it can be in no better position than any other discharged right. No authority for this contention was cited to me, but even if I were to assume in the defenders’ favour that existing rights once discharged are gone for ever, this would not avail to assist them in this case, since in my opinion there is here no question of any existing right having been discharged. A right to legitim is one which vests by operation of law only in those children of a marriage who survive the death of a parent. Until the death of a parent there is no existing right in any of his children which can properly be the subject of discharge, and it appears to me that, although the formula of discharge of right has commonly been used in dealing with legitim in antenuptial marriage contracts, it is more properly to be understood as the imposition of a bar upon the claim of right by children who may survive the death of a parent. Moreover, while the discharge of an existing right may affect third parties, no person, apart from the parents and their children, has any interest which can be affected when the parents by their antenuptial marriage contract deprive their children, in advance, of a legal right which can vest in them only by survivance. It is, of course, clear that no action by the children themselves can release them from the exclusion of the right to legitim validly imposed in an antenuptial marriage contract entered into before 10th September 1964. This is so even if they refuse to accept the provision under the antenuptial marriage contract in respect of which their right to legitim has been excluded by their parents (see Baron Panmureper Lord Deas at p. 708). But I can see no good reason in principle why, by the combined action of the parents and the children, or by the action of the parents alone, the obstacle to the children’s claim of right to legitim contained in an antenuptial marriage contract cannot be removed inter vivos. Indeed it would seem to me to be wholly unreasonable that this result could not be achieved in one or other of these ways. It is important to remember, as the decided cases on the subject show, that the exclusion of legitim in an antenuptial marriage contract is entirely for the benefit of the parent concerned, so that his general estate will be freely disposable by him on his death. That being so, it is difficult to see why the person in whose favour alone the exclusion is intended should be unable to release from that exclusion the persons against whose interests it operates. For this reason, and since no good reason why I should hold otherwise has been demonstrated, I reject the first of the defenders’ submissions and hold that an exclusion of the claim of right to legitim in an antenuptial marriage contract cannot survive to deprive a child of his legal right of legitim where the parties to that contract, with or without the consent and concurrence of their children, have, inter vivos, released the children from that exclusion.

The second submission for the defenders, which was presented on the assumption that their first argument was rejected, was that in any event the deed of appointment, renunciation and discharge, no. 18 of process, properly construed, did not release the pursuer from the shackles of the marriage settlement. It is the fact that the deed contains no express revocation or recall of the discharge of all claims of legitim contained in the marriage settlement. In this situation the defenders contended that the revocation or recall of that discharge could not be implied, principally because under clause (First) of the deed of appointment, renunciation and discharge the pursuer actually received the provision in respect of which the discharge in the marriage settlement was validly made by his parents. It was said, too, that the statement of intention in no. 18 of process, which I have quoted earlier in this opinion, had reference only to the ending of the marriage settlement trust, and it was submitted that the clause excluding legitim did not form part of that trust.

The problem for me is one of construction, and, while I have given full attention to the submission for the defenders, I have come to be of the opinion that it is clearly implied in the deed of appointment, renunciation and discharge that the discharge of legitim contained in the marriage settlement was no longer to operate against the interests of the sons. In reaching this opinion I attach great importance to the terms of the statement of intention. From this statement it is clear that the object of all the parties to the deed, and in particular the object of the parties to the marriage settlement, was to remove from the trust the whole funds which alone gave the purposes of the trust meaning and content, and to restore the husband and father of the pursuer to the position in which he was before clause 3 of the marriage settlement came to be written. It is in my opinion clear, too, that the clause of discharge of legitim, the validity of which depended entirely upon the provisions made in clause 3 of the marriage settlement for the sons, and which appears in clause 3 itself, must be regarded as an integral part of the trust in the marriage settlement. Against the background of the stated intention it is not difficult to appreciate that clauses (First) to (Fifth) inclusive of the deed of appointment, renunciation and discharge were designed only to secure the carrying out of the parties’ intention, and that the content of each clause should be read with this in mind. It is the case that by clause (First) of this deed the parties’ father absolutely and irrevocably appointed the trust funds and investments to his sons equally between them, but this clause must, in particular, be read in light of the statement of intention and in conjunction with clauses (Second) and (Third), under which the sons at once renounced and reassigned to their father the rights conferred upon them by clause (First). So far as the deed discloses, the sons’ participation in the deed no. 18 of process was gratuitous, and it would in my opinion be quite unreasonable to hold that by reason of clause (First) the sons have had and enjoyed the provisions made for them in the marriage settlement. In my opinion it is clear from the deed as a whole that the shares appointed to the sons were so appointed only for the purposes of immediate surrender to the father in order to achieve the result which all the parties to the deed desired. In my opinion, further, the true effect and significance of clauses (First) to (Fifth) of this deed is that they were designed only to bring about and did bring about the destruction of the provisions for the sons, in respect of which alone the discharge of legitim could claim validity. If I am right so far, it is in my opinion a reasonable inference that, since these provisions for the sons were brought to an end for the benefit of the father, with the consent and co-operation of the parties’ mother and the parties themselves, it was intended by all concerned that the clause of exclusion, which was inextricably bound up with these provisions, should also cease to have effect.

Looking at the matter in another way leads me to the same result. A discharge of legitim can take effect in law only at the time when legitim would otherwise be claimable. If at that time it is found that the children have not enjoyed the benefit of the provisions made for them in the antenuptial marriage contract of their parents, and also that there is no longer a provision for them in that contract, then, in the absence of the condition precedent to the validity of the discharge, I can see no reason why the discharge should be a valid answer to a claim for legitim when it is made.

For the foregoing reasons I also reject the second submission for the defenders.

On the whole matter I shall accordingly repel the first plea in law for the defenders, and in accordance with the wishes of parties I shall at this stage allow proof on the question of the first-named defender’s liability to account to the pursuer.

The defenders reclaimed, and the case was heard before the First Division (consisting of Lord Cameron, Lord Johnston and Lord Fraser) on 20th and 21st July 1971. On 11th August 1971, when the following opinions were issued, the Division (Lord Fraser dissenting) refused the reclaiming motion.

LORD CAMERON .—[His Lordship narrated the facts and the procedure in the action, and continued]—The reclaimers’ counsel argued that, in the first place, the effect of the discharge in the marriage contract was final and that, whatever be the nature of the right of the prospective children of the marriage, it was once and for all extinguished at that time. In the alternative, if such a claim or right to claim could be “revived” or a discharge revoked, it had not been done here. The agreement of 1953 made no mention of it, and revocation of the discharge and revival of the right to claim could not be implied or inferred from the language or the purposes of that agreement. In particular it was incorrect to hold, as the Lord Ordinary appears to have done, that, as there was no marriage contract provision available to the children at the date of death, at which time only the right of legitim could vest, this nullified the original discharge, as it was a condition precedent to the validity of a discharge of the right to claim legitim that there should be some material provision available to the child in its place at the time when the right emerged and vested. The proper course here was to dismiss the action, as the original discharge was still in operation, unaffected by the deed of 1953. In the alternative, proof should be before answer on the issue of liability to account.

The respondent maintained that the narrative preceding the executive clauses of the deed of 1953 indicated sufficiently that the desire and intention of the parties thereto was effectively to evacuate the trust and bring it wholly to an end. There was no authority which laid down that a discharge of legitim, once made, could not by consent of all parties concerned and affected be set aside at any time before the right had vested, ie. at the death of the parent from whose estate legitim could be exigible. If there was no authority against this course, then, just as any other trust could be ended by the consent and agreement of all parties who had or could have an interest, so too such a trust as this could be ended—and, once ended, it was ended in all its particulars, including the discharge of legitim. In these circumstances the sole question was whether on construction the deed did have the result of setting aside the discharge in the marriage contract trust, and it was clear on the terms of the deed that this was its effect. I have come to be of opinion that the respondent’s contentions are correct.

The reclaimers’ counsel fortified their arguments with a considerable citation of authority, but it was directed in the main to demonstrating how and in what circumstances a claim to legitim may be discharged in an antenuptial marriage contract and also to support the contention that “discharge” means not only discharge of the right to claim legitim at death—a contingent right which may never emerge—but extinction of that right once and for all and without possibility of revival. This argument, however, as advanced by Mr Elliott in his closing speech for the reclaimers, appeared to depend on the words used by eminent judges in their references to the discharge of this right—use of words such as “extinction” or “extinguished” or (as in Bell’s Principles, sec. 1582) “expiring.” But in the cases to which counsel referred the Court was not considering the point raised in this process, namely, whether a discharge once given can be retracted so as to revive the right. As Mr Keith for the respondent observed, where a presently existing right is discharged, it may well be that this is final just because a discharge in such a case may have or has the effect of enlarging the right of another. But this is not the case of a presently existing right; at best it is a contingent right which does not vest until death. I am not prepared to hold that, because in certain cases it has been said by judges of eminence that an exclusion of children’s claims to legitim or discharge of them occurring in an antenuptial marriage contract “extinguished” the right to claim at death, this meant or was intended to mean that at no time prior to death, while matters were entire and no third party rights or interest had been affected by it, could such a discharge or exclusion be revoked or withdrawn by common action of all parties interested. I certainly would not accept the proposition without authority—counsel could produce none to support it. It was suggested by Mr Elliott that testamentary beneficiaries would have an interest to maintain such a discharge, once given, as final. It is difficult to see where such an interest could arise, as these beneficiaries would not be ascertained until death and could have no title to sue in respect of anything a testator chose to do with his own estate or the rights to it during his own lifetime.

The real question in the case is as to the proper construction of the deed of 1953. The deed of appointment is executorial of an agreement which is set out at the beginning of the deed itself. This sets out plainly a desire and agreement to bring the marriage settlement trust to an end and reinvest the truster in the trust funds. What is the marriage settlement trust which is to be ended? It is on the answer to this question that I think the case at this stage turns. When the contract of 1916 is examined, the trust is found in clause 3. The trust purposes are set out in the numbered sections, and it is to enable these purposes to be effected that the trust is set up. The question then is whether the declaration at the end of clause 3 can be regarded as part of the “marriage settlement trust” which is embodied in the “marriage settlement” or is to be regarded as a contractual provision which is not affected by the agreement of 1953 either expressly or by implication. It is to be noted that the truster’s wife as well as their children is involved in this transaction. If the reclaimers are correct in their argument, then the wife surrendered her liferent and at the same time remained bound by her renunciation of any claim to legal rights out of her husband’s estate, although on the face of the marriage settlement this right to liferent of the trust funds was the consideration for her surrender of her legal rights in the truster’s estate. No doubt at any time she could do so if she so desired, and equally no doubt this was on the face of it a wholly voluntary agreement, based on a desire to bring to an end the trust under which she received benefit in exchange for a surrender in the same clause as sets up the trust. But there is nothing in the deed of 1953 which expressly refers to the wife’s discharge of her legal rights, nor is there any intention or desire expressed to bring the whole marriage settlement to an end, eg. the reference to the obligation to pay pin money, which, I understand, continued to be honoured until the death of the wife. Therefore the question comes to be as narrow as this: are the provisions as to discharge of legal rights so closely associated with the agreement to set up the marriage settlement trust, with its particular trust purposes, that, if the one is set aside by agreement, there is necessarily to be implied an agreement to abandon or discharge the other as well? In a sense the price of surrender of the wife’s legal rights is the setting up of a trust to provide and secure to her on viduity a liferent of the funds which it is agreed are to be put in trust.

If, as part of a voluntary arrangement to benefit a truster and enable him to recover the trust funds, a wife enters into an agreement to make this possible and in so doing deprives herself of the price or consideration for her surrender in the marriage contract of her legal rights in his estate, I should be inclined prima facie to the view that, if nothing is said to the contrary, the necessary inference is that this consideration is also withdrawn. But nothing is said at all in the deed of 1953 as to the effect of the wife’s contractual surrender of her legal rights in the truster’s estate, far less is it provided that the surrender is to stand effective although the price of it has been withdrawn. And the surrender of the right to liferent by the wife is crucial to the effectiveness of the agreement to end the marriage settlement trust and reinvest the truster—otherwise he could not recover the funds until the contingency of his wife’s predecease occurred. In the case of the wife there is no question of her receiving even momentarily or notionally her provision under the marriage settlement trust as part of the implementing of the agreement into which she entered. Therefore it could not be argued in the case of the truster’s wife that she received, be it only momentarily and without any benefit to her, her covenanted rights under the marriage settlement trust.

In my opinion the surrender of legal rights by the wife in this case is so plainly the counterpart of the stipulated liferent in the marriage settlement trust and so closely associated with it in the contract itself that it would be reasonable to infer that, in the absence of express statement or other plain indication to the contrary in the deed of 1953, the discharge of the one stipulation naturally and necessarily inferred the simultaneous discharge of the other. I am fortified in this by the fact that both stipulations are contractual, and also that both occur in that clause in the marriage contract which not only sets up the trust, appoints the trustees and determines their powers but also conveys to them the trust funds and prescribes the trust purposes. If the marriage settlement trust is expressly to be brought to an end, then in my opinion clause 3 is to be written out of the marriage contract and this should apply to the whole of clause 3, which is a coherent whole and a separate and separable element of the marriage contract of which it forms part. On this reasoning it would also appear to follow that the same result would obtain in the case of the truster’s sons, whose legal rights were discharged ab ante by their prospective parents in this contract. But it was strongly argued by the reclaimers that this is not so. Their argument was that the deed of 1953 makes it clear that the contractual rights of the children were enjoyed by them. The trustee (who is also the truster and the sole beneficiary of the deed of 1953) exercised his power of appointment, a power which was exercisable only by virtue of the marriage settlement trust. Whether the sons thereafter and gratuitously decided to renounce their rights in the truster’s favour was entirely a matter for them, and they did so. Therefore they had received all they were entitled to under the marriage settlement trust and the price of that was the discharge of their claims to legitim. Consequently, as the desired result of the agreement of 1953 was brought about, and could only be brought about, by use of the trust provisions in the children’s favour, this was a case in which the stipulated provision had been received in respect of which the claim to legitim had been discharged.

The fact that nothing was in fact received by either son was immaterial. The provision in the marriage settlement trust was itself a benefit contractually secured and operative from birth. It would have been in the power of the truster to exercise his power of appointment so as to deprive either of his sons of any benefit from the trust fund. In such an event the child who was so deprived could have in law no complaint. (Cf. Galloway’s Trustees v. Galloway, 1943 S.C. 339, especially per Lord President Normand at p. 345.) That is no doubt true, but the truster could not by exercise of his power of appointment deprive both or all of his children of any beneficial interest in the trust fund. It is, as counsel for the reclaimers argued, quite true that the deed of 1953 expressly bears to be a deed of appointment, ie. of appointment under the marriage settlement trust, and therefore in a strict sense a satisfaction of any right which the children could assert under the trust. If the matter ended there, or if I thought that the issue could be as narrowly viewed and the language of the deed so strictly construed, then I would think the reclaimers’ argument would be irresistible. It was said that the result must be the same whether or not an appreciable interval of time intervened between the appointment on the one hand and the renunciation and reassignation on the other. Logically I think this must be correct and is a contention of considerable force. But in my opinion the proper construction of the deed of appointment, renunciation and discharge depends upon ascertainment of the intention of parties, as that can be done from examination of the deed itself and from the interpretation to be placed upon its language and provisions in the context in which they occur. The intention as expressed was to bring the marriage settlement trust to an end. That trust is contained in clause 3 of the marriage contract, and in my opinion the provisions of clause 3 should be considered as a whole and not be compartmented or regarded as severable for purposes of construction or interpretation—unless there are reasonable grounds for such a disarticulation and dissociation of its provisions. I do not find anything in clause 3 of the marriage contract which compels me to such a conclusion. On the contrary, as I have already indicated, I think clause 3 is to be read as a whole and that the drafting of it makes clear that the conventional provisions and the discharge and renunciation of legal rights, which both appear in the same clause and are syntactically linked, make them integral and inseparable elements and provisions of the marriage settlement trust, which it was the avowed purpose of the agreement contained in and prefacing the deed of appointment, renunciation and discharge to bring to an end.

The means, or “mechanics,” as the respondents’ counsel phrased it, by which the primary purpose of the 1953 agreement was to be achieved were purely executorial. It was only as part—be it a necessary part—of these mechanics that the truster had to make use or purported use of the power of appointment conferred on the trustees of that marriage settlement trust. But the power was not used with the intent of conferring any benefit on the trust beneficiaries in whose favour the power had been created and for whose benefit it was intended. On the contrary, the exercise of the power was for the benefit of the truster, and it was exercised by the sole trustee in his own personal interest. But, in addition to the use of this mechanism in order to achieve the objective of the parties’ agreement, it was also necess- ary for the wife to renounce or surrender her liferent interest in the event (which did not occur) of her surviving the truster. This was an essential stage in the mechanics of executing the agreement, the final stage being the reinvestment of the truster in the now unencumbered fee of the trust funds by the simultaneous renunciation on the part of the truster’s two sons in the truster’s favour of the rights appointed to them by him. Thus the transaction was not one of a series of interdependent but unconnected exercises of powers and rights under the marriage settlement trust, but a combination of devices which, operating in succession, enabled the truster to get possession of the whole trust estate. There was then in no real sense an operation of the trust machinery to implement a trust purpose; on the contrary, the trust machinery was set in motion not to implement the covenanted purpose of conferring a material benefit on one or both of the children of the marriage by way of fee or liferent of part or whole of the trust funds, but to deprive them of any such benefit and transfer it wholly to the truster. This in effect was using the power of appointment not to fulfil the trust purposes but to assist in the destruction of the trust itself. While I appreciate the force of the reclaimers’ argument on construction of the deed of appointment, renunciation and discharge, I find myself unable to accept it. In my opinion it concentrates too narrowly upon one element only in that deed—the purported exercise of the trustee’s power of appointment—to the exclusion of consideration of the fact that this exercise was never intended to produce a reality of benefit, but was merely an agreed step in a process of renunciation of any benefit which an exercise of the power of appointment was designed to confer on the children of the marriage. This process itself was but one stage in a wider design, having as its object the ending of the trust but not the implement of its covenanted purposes. It is clear from the language of the preamble of the deed of 1953 that the “price” of the appointment by the trustee was immediate renunciation of the right nominally acquired by that appointment in favour of the trustee himself—who was also the truster. In these circumstances, I think it is not accurate to describe what was actually done as in any sense an exercise of the power of appointment as contemplated in the marriage settlement trust and therefore as implementing the obligation which the truster owed to his children in return for their discharge of their legal rights in his estate.

In the result, therefore, I am of opinion that the Lord Ordinary arrived at a corerct conclusion and that his interlocutor should be affirmed. I therefore move that the reclaiming motion should be refused and that proof on the issue of liability to account should be allowed. The reclaimers’ plea to relevancy was based on a construction of the deed of appointment, renunciation and discharge which, if accepted, would have disposed of the case in their favour. It was not argued on the reclaimers’ behalf that allowance of proof would or could assist in the interpretation of the deed. In these circumstances, as I am against their interpretation of that deed, I think the proper course in the circumstances is to repel that plea. As there is no other challenge to the relevancy of the plea on either side, there does not appear to me to be any reason for limiting the proof to one before answer.

LORD JOHNSTON .—Your Lordship in the chair has set out the facts which give rise to this action of accounting and it is unnecessary to recapitulate them. It is common ground that if the marriage settlement had stood alone and entire at the truster’s death, the respondent’s claim to legitim would have been excluded by reason of its terms. But the parties to the settlement, the truster and his wife, and the two children of the marriage were not content to allow the settlement to stand alone and entire, and entered into the deed of appointment, renunciation and discharge. The Lord Ordinary has held that it is implied in the deed that the discharge of legitim contained in the settlement was no longer to operate as a bar to the respondent’s claim of legitim and has repelled the reclaimers’ plea to the relevancy of the action.

In support of their reclaiming motion the reclaimers advanced two propositions: first, that a right of legitim which has been discharged in an antenuptial settlement cannot be revived; and second, assuming that the right may be revived, it was not revived by the deed.

No authority was cited in support of the first proposition, and it appears contrary to the general principles governing the waiver of rights and the modification of contracts by agreement. I agree for the reasons stated by your Lordship in the chair that the proposition should be rejected.

The second proposition concerns the proper construction of the deed, but before turning to it it is necessary to note that under the settlement the wife was entitled on the death of the truster to a liferent of the trust fund and that, subject to her liferent and the truster’s power of appointment, the children were entitled to the capital. The settlement states in express terms that it is in consideration of these provisions that the wife renounces her jus relictae and the children’s claim of legitim is discharged. It is agreed that the effect of the deed is to elide the interest of the wife and children in the trust fund, and thus, if the reclaimers’ proposition is correct, the wife, if she had survived the truster, would have been entitled neither to her jus relictae nor to her conventional provisions and the children neither to legitim nor to their interest in the capital of the trust fund.

The parties may have intended this result, but the result is so inequitable that in my opinion the intention should not be imputed to the parties if the deed can reasonably bear another construction.

In my opinion the key to the ascertainment of the intention of the parties lies in the preamble, where it is stated:

“Considering that it is desired to bring the said marriage settlement trust to an end and to reconvey the trust funds after mentioned to myself or otherwise as I should direct, therefore we, the parties hereto, agree as follows…”

The construction of the phrase “marriage settlement trust” is not without difficulty, but the considerations which I have mentioned above lead me to construe it as including the whole settlement other than the first two paragraphs. If this construction is adopted, it follows that the clause discharging the legitim in the settlement is elided by implication and the right revived.

For these reasons I am of the opinion that the reclaiming motion should be refused and the Lord Ordinary’s interlocutor affirmed.

LORD FRASER .—Two arguments were advanced in support of the defenders’ plea to the relevancy. The first argument depended upon the general proposition that, once the children’s right of legitim had been validly discharged, it could never be revived. In my opinion, that proposition is unsound and was rightly rejected by the Lord Ordinary. In a case such as the present, where the discharge applies to all claims of legitim by the children as a class, it benefits the father himself. (See Countess-Dowager of Kintore v. Earl of Kintore, 13 R. (H.L.) 93, per the Lord Chancellor at p. 94.) If the father subsequently chooses to waive or surrender that benefit, I can see no reason in principle why he should not be able to do so effectively. I agree with the reasons more fully stated by your Lordship in the chair for rejecting this proposition.

It therefore becomes necessary to consider the defenders’ second argument, which was that the children’s right to claim legitim had not in fact been revived or restored in this case. There was no dispute that the right had been validly discharged or excluded by the antenuptial marriage settlement in 1916. The only question is whether it was restored by the deed of appointment, etc., of 1953. That depends upon the exact provisions and effect of the latter deed. Mr Keith, for the pursuer, concentrated attention mainly upon the purposes of the deed as stated in the narrative clause near the beginning, in the following terms:

“Considering that it is desired to bring the said marriage settlement trust to an end and to reconvey the trust funds after mentioned to myself…”

The former of these purposes is to bring to an end only “the said marriage settlement trust,” not the whole marriage settlement. The trust was created, and its purposes set out, in numbered clause 3 of the marriage settlement, and Mr Keith submitted (in my opinion rightly) that clauses 1 and 2 of the marriage settlement continued in force unaffected by the deed of 1953. The discharge of legal rights is included in clause 3 of the marriage settlement, and at one stage of Mr Keith’s argument I understood him to suggest that the discharge of legal rights was part of the trust. In my opinion that is plainly not so. The trust purposes and the powers of the trustees are set out in clause 3, and they conclude, in my opinion, with the declaration that the trustees shall not be liable for any loss “that may result from their administration of the trust in terms of the powers hereby conferred upon them.” The immediately following passage in clause 3, beginning with the word “Furthermore” is, in my opinion, clearly no part of the trust; on the contrary, it is the counterpart or consideration given by the intended wife, and on behalf of the future children, in exchange for the provisions in their favour contained in the trust.

The central point of Mr Keith’s argument for the pursuer was to the effect that, when the marriage settlement trust was brought to an end, the discharge of legal rights, which was the counterpart of the trust provisions, must by necessary implication also have been brought to an end or cancelled. That raises a difficult question, on which my view has wavered, but I have come to the opinion that the argument for the pursuer is not well founded. It requires us to read into the purposes of the deed, in addition to the two purposes which I have quoted, a third purpose which is not expressed. The third purpose would be somewhat to the following effect:

“and to restore to the second party [ie. the wife] and to the children of the marriage the jus relictae and claim of legitim which they would have had if clause 3 of the marriage contract had never been executed.”

In my opinion no necessity for reading in such a clause has been demonstrated. If the parties had wished to achieve that result, they could easily have said so in the deed of 1953, but they did not. I recognise the force of the arguments for the pursuer which have found favour with your Lordships, but, as all parties to the deed of 1953 were of full age and not subject to any legal incapacity, I am of opinion that they should be held to the precise terms of the arrangement expressed in the deed. I regret that I find myself unable to agree with your Lordships in holding that a restoration or revival of the children’s legitim and the wife’s jus relictae should be implied. Counsel for the pursuer relied upon the presumption against donation, and submitted that the presumption was against the sons’ having surrendered their rights under the marriage contract trust gratuitously. But, having regard to the fact that the purposes desired to be achieved by that deed were expressed in the passage which I have quoted, I do not consider that there is any room for such a presumption.

The machinery by which the purposes were achieved was for the father to appoint the fee of the trust fund irrevocably to the two sons in equal shares, and for the sons to renounce and reassign to the father their interests in their respective shares, and for the wife and mother to renounce in favour of her husband her liferent interest, which was contingent on her surviving him. In that way the sole interest in the trust funds was returned to the father, who had provided the funds in the first place. I pause to notice that his exercise of the power of appointment, for the purpose of obtaining the restoration of the trust funds to himself, might have been open to criticism on the ground that it was a fraud on the power, but that point was not taken by either party, and I need not consider it further. The immediate effect of the father’s appointment was to vest the fee of one-half of the trust funds in the pursuer, and counsel for the defenders submitted that the trust had thereby been operated and the pursuer had taken a benefit under it. That is a logical submission, but, like your Lordship in the chair, I consider that the appointment was merely mechanics, and that attention should be concentrated upon the purposes which were stated in, and achieved by, the deed of 1953. Viewing the matter in that way, I agree that the pursuer cannot be said to have had satisfaction of his rights under the trust.

A separate submission was made for the pursuer to the effect that if, at the date of the father’s death, there was no existing provision for the children, and if the children had not already enjoyed a provision in their favour, then their right to claim legitim must subsist. That submission was accepted by the Lord Ordinary at the end of his opinion, but in my opinion it begs the question as to the effect of the deed of 1953. If that deed left the discharge of legitim standing, as I think it did, then in my opinion this argument necessarily fails.

For these reasons I would have allowed the reclaiming motion and sustained the first plea in law for the defenders, with the result that the action would have been dismissed.

The defenders appealed to the House of Lords, and the case was heard on 5th and 6th June 1972.

At delivering judgment on 19th July 1972,—

LORD REID .—My Lords, by antenuptial marriage contract of 16th November 1916 made by Major William Henry Burn Callander and Mrs Hermione Garforth or Callander the husband assigned certain investments to trustees on trust for purposes which I can summarise as to hold on liferent for the husband and wife in succession, and thereafter to pay the trust fund to children of the marriage as the husband and wife in succession, and thereafter to pay the trust fund to children of the marriage as the husband might appoint. At the end of the trust purposes it was provided:

“Furthermore in respect of the provisions hereby made in favour of the second party and the children (if any) of the said marriage the second party hereby renounces and discharges her jus relictae and all other claims and rights competent to her in consequence of the death of the first party, and the parties hereby discharge all claims of legitim and other claims competent to the said children in consequence of the death of the parties hereto.”

The husband died on 23rd January 1967, predeceased by his wife. He was survived by two children, one of whom is the pursuer and respondent. The other, the present appellant, is sued as sole executor of his father and as an individual. The pursuer’s claim is for legitim out of the moveable estate of their father. He does not dispute that the discharge of legitim which I have quoted from the marriage contract was a valid discharge. His case is that by reason of the provisions of a deed of 15th May 1953, to which husband, wife and both children were parties, that discharge ceased to be valid, or at least that in some way the children’s claim to legitim was revived.

Before examining the terms of that deed I must deal with the law as to discharge of legal rights by antenuptial marriage contract. Legal rights, including legitim, date far back in the law of Scotland. It has from time immemorial been recognised that, if a man leaves a widow or children, he ought not to be allowed at his death to dispose of his whole estate to their prejudice. Where, as in this case, he dies survived by children alone, the children are entitled to one half of his moveable estate as legitim.

But, for reasons which are obscure, an anomaly crept into the law some time about the end of the seventeenth century. Spouses were permitted to exclude legal rights by antenuptial contract, provided that they made some other provision for their children. Apparently this was unknown to Stair. But a passage from pp. 730–1 of Dallas’ Styles (1697), quoted by Lord Normand in Galloway’s Trustees (at p. 345), appears to show some recognition of this right. And it is also recognised to some extent in early eighteenth century cases cited by Lord Cuninghame, Lord Ordinary, in Fisher’s Trustees.I need not emphasise the objections to the existence of this right, because it has now been abolished by the Succession (Scotland) Act, 1964, and I would certainly do nothing in this case which would widen its scope.

This exclusion of legal rights originates from contract. Normally parties who make a contract are free to rescind any of its provisions by a subsequent contract, and I can see no reason why spouses who have excluded legal rights should not, if they choose, subsequently restore those rights. The exclusion is of no direct benefit to any but the spouses themselves.

So the sole question in this case appears to me to be whether the effect of the deed of 1953 was in some way to restore the rights to legitim which had been discharged or excluded by the marriage contract. I think that, although the word “discharge” has often been used in this connection, “exclusion” is more accurate. No right to legitim arises until the parents’ death, so there is nothing to discharge at the time of the marriage. But the right can be prevented from coming into existence.

The purpose and effect of the 1953 deed was to bring the trust purposes to an end and convey the whole of the trust fund to the father as his absolute property. For practical purposes all who could have any interest in the fund were parties to the deed. It is true that, if both sons had predeceased, their issue would have become entitled. But all concerned seem to have been prepared to take the risk of that. The appellant avers that this was done as part of an arrangement to avoid death duties, but that is not admitted by the respondent. So, as we are dealing with the case on relevancy, we must decide it on the footing that this was a pure gift by the sons to the father of their whole interests in the trust fund.

The respondent submits two alternative contentions. First he says that it was a necessary consequence of the destruction of the trust that legal rights revived by operation of law. Or alternatively he argues that the deed evinces an intention that the sons should have a right to legitim restored to them.

It might, I suppose, have been the law that an exclusion of legal rights is conditional on there being available at the parents’ death an adequate substitute provision. But the whole development of the law has been to the contrary. It is well established that an exclusion of legal rights is not valid unless the spouses before their marriage make some provision which is not illusory. But the substitute provision need not be adequate at the time, and the exclusion is certainly not invalidated by a subsequent increase in the wealth of the spouses or by the fund becoming worthless through mismanagement or defalcation. Moreover, the substitute provision may be made subject to a power of appointment, so that one or more children may get nothing. The respondent is constrained to argue that, even so, the result is different where the trust has been brought to an end. But I can see no ground at all for saying that, when the children, being of full age, consent to the trust being brought to an end, their right to legitim revives by operation of law. They have made a gift to their father and there is no legal implication that therefore their right to legitim must revive.

So the question depends on the true construction of the deed of 1953. That deed, after narrating various earlier deeds, provides:

“Considering that it is desired to bring the said marriage settlement trust to an end and to reconvey the trust funds to”

the father. The reference to the “said” marriage settlement trust refers back to an earlier reference to “the trust created by the marriage settlement deed” of 16th November 1916. Then the deed sets out what the four parties have agreed to do and by the deed do: the husband irrevocably appoints and renounces to his two children in equal shares the trust funds and investments; each son irrevocably renounces and reassigns to his father his whole right and title to the half share of the funds appointed to him; and the wife irrevocably renounces her contingent liferent interest. In my view that is all just machinery to enable the funds to be reconveyed to the father.

I can see nothing in the deed to indicate any intention that either of the sons or the wife should receive any quid pro quo or consideration for the renunciation of their rights, and I do not see why it should be assumed that any was intended. No doubt there is always some presumption against donation and that would have some weight if there were any ambiguous words in the deed. But obviously it was drafted by a conveyancer; and, if it had been intended to take the very unusual—perhaps unprecedented— step of nullifying a discharge of legal rights, I find it difficult to suppose that any conveyancer would leave that to implication. It has been said that the result would be inequitable if there were no quid pro quo. But we do not know the circumstances in which this deed was made: there may have been many reasons for the wife and children giving up their rights. So there appears to me to be no room for reading into the deed any implied term.

The respondent does, however, argue that bringing the marriage settlement trust to an end can properly be read as meaning bringing to an end not only the trust but also the exclusion of legal rights. It is true that there was a very close connection between the setting up of the trust and the discharge of legal rights. The discharge would not have been valid if the trust had not been set up. And the close connection is reflected in the fact that the discharge is appended to the trust provisions in the antenuptial contract. But the discharge was in no sense part of the trust provisions. They served quite different purposes and the trustees of the trust had no concern with the discharge.

What the parties to the 1953 deed desired and intended to do was to “bring the marriage settlement trust to an end” so that the funds could be reconveyed to the father. As a matter of language that does not include the discharge of legal rights and there is nothing else in the 1953 deed to indicate any intention to bring the discharge of legal rights to an end. If an intention to revive the legal rights cannot be inferred from the language of that deed, there are no other averments pointing to any such intention.

So in the end the position is that bringing the trust to an end did not revive legal rights by operation of law and there is nothing to indicate any intention that they should be revived. I would therefore allow this appeal.

LORD MORRIS OF BORTH-Y-GEST .—My Lords, in my view the determination of this appeal depends upon the construction of the deed of May 1953. Immediately before that deed was subscribed the position was that the respondent’s claim of legitim was excluded. It is not in dispute that such exclusion resulted from the provisions of the marriage settlement dated 16th November 1916. The question arises whether by the terms of the deed of 1953 the respondent was placed in the position that on his father’s death he could claim legitim. The deed recites and records what was its purpose. After a reference to “the trust created by the marriage settlement deed” it was recited that it was desired “to bring the said marriage settlement trust to an end” and to reconvey the trust funds to the father or as he should direct. The mechanism which was adopted, with the concurrence of the father, the mother and both the sons, included an irrevocable appointment by the father of the funds and investments in favour of the two sons equally, followed by irrevocable renunciations and reassignments by the two sons in favour of the father. The wife made an irrevocable renunciation in suitable form in favour of her husband. The marriage settlement trust was brought to an end. That, however, did not mean that all the provisions of the marriage settlement contract were brought to an end. Clauses 1 and 2 undoubtedly remained. The provisions concerning the trust were contained in clause 3. Then came the following words, viz.:

“Furthermore in respect of the provisions hereby made in favour of the second party and the children (if any) of the said marriage the second party hereby renounces and discharges her jus relictaeand all other claims and rights competent to her in consequence of the death of the first party, and the parties hereby discharge all claims of legitim and other claims competent to the said children in consequence of the death of the parties hereto.”

In my view the words above quoted which follow the word “furthermore” were not themselves any part of the marriage settlement trust. The use of the word “furthermore” demonstrated that, because the trust had been created, the circumstances existed which warranted the discharge (or, as it might be more aptly expressed, the exclusion) of the claims to legitim of any children of the marriage. It is powerfully argued, however, that, even if the renunciations and discharges were not a part of the trust, they were at least so bound up with it that, when the trust disappeared, so also should disappear the renunciation and discharges. So it was said that what was in effect a counterpart of the trust provisions should by necessary implication be at an end if the trust provisions came to an end. There should, so to speak, be a discharge of the discharge. This result should come about, it was contended, either as a matter of law and by operation of law or because the parties must have so intended, their intention being revealed by a study of the deed.

Powerfully as this argument was presented, I am not persuaded that it should be accepted. In agreement with Lord Fraser, I consider that its acceptance would involve reading into the deed certain provisions which are not there. They would be provisions to the effect that there should be restored to the wife and to the children of the marriage the jus relictae and claims of legitim which they would have had if clause 3 of the marriage contract had never been executed and if there had not been the renunciations which followed the creation of the trust. I agree with Lord Fraser that, if the parties had wished to achieve such a result, they could have secured it by including some express provision in the deed of 1953. They were of full age. They were under no legal incapacity. But they made no express provision, and I am left with the impression that it never occurred to them in 1953 that any excluded rights were to be restored. If the sons or the wife in 1953 had suggested that potential claims of legitim or jus relictae were being restored, would Major William Henry Burn Callander have agreed? I think not. If they had asked that a clause to such effect should be inserted in the deed in 1953, would their request have been granted? I would think not. But at the very least it is a matter of uncertainty. We certainly cannot be sure that such a request would have been conceded. The parties knew what they were about. It cannot be said that the wife and the sons were unreasonable or ill-advised in agreeing voluntarily to the arrangements whereby, in the interests of the one who was husband and father, the trust should be ended in the way in which it was ended.

I would allow the appeal.

VISCOUNT DILHORNE.—My Lords, I have read the speech of my noble and learned friend Lord Reid. I agree with it and that this appeal should be allowed.

LORD DIPLOCK .—My Lords, I have read the speech of my noble and learned friend Lord Reid, and for the reasons which he gives I would allow this appeal.

LORD SALMON .—My Lords, I have read the speech of my noble and learned friend Lord Reid. I agree with it and that this appeal should be allowed.

 

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