Scottish Court of Session Decisions

On 28th March 1889 William Thomson died leaving a trust-disposition and settlement dated 20th April 1875. By this deed he disponed his whole means and estate to trustees, and directed them, after fulfilment of certain purposes, to divide the residue of the estate into three equal portions, to pay one share to each of his two sons, and to hold and apply the remaining third part to and for behoof of his daughter Mrs Sarah Thomson or Henderson for her liferent use only, and to her children in fee, which provision to his daughter was declared to be alimentary and exclusive of the jus mariti and right of administration of any husband she might marry, and not affectable by her debts or deeds or the diligence of his creditors.

The truster empowered his trustees “to sell the whole or any part of the said estate, heritable or moveable, hereby conveyed by public roup or private bargain, with power to continue the investments in any public companies in which I may have my capital invested at the time of my death, and power to invest … the funds which shall devolve upon my said daughter in heritage and in preference stocks of railways in Scotland or England, and in the stock of Scotch banks, with power to renew and alter said investments at pleasure.”

At his death in 1889 the truster was survived by his two sons, his daughter Mrs Sarah Thomson or Henderson, and five children of Mrs Henderson by her marriage with John Henderson.

The estate left by the truster included (a) 80 A shares of £100 each and 90 B shares of £25 each of the North British Rubber Company, Limited, a company registered under the Companies Acts 1862 to 1886; (b) 113 A shares of £100 each and 113 B shares of £20 each of the Scottish Vulcanite Company; and (c) 3000 shares of £5 each of the Assets Company, Limited, both of which latter companies were registered under the Companies Acts 1862 and 1867.

In the course of dividing the residue of the estate in terms of the trust-deed the trustees allocated 21 A shares and 26 B shares of the North British Rubber Company, and 16 A shares and 11B shares of the Scottish VulcaniteCompany, and 1000 shares of the Assets Company to the one-third of the residue which they were required by the trust-deed to continue to hold for behoof of Mrs Henderson in liferent and her children in fee, and on a final division of the estate a further number of shares of the Scottish Vulcanite Company fell to be set aside for the same purpose.

In these circumstances a question arose withregard to thecompetencyof the trustees holding these shares as a proper investment of the trust funds. The trustees were advised that it was doubtful whether they were entitled under the powers conferred on them by the trust-deed to hold any of these shares without incurring responsibility to the beneficiaries in the event of loss being occasioned to the trust-estate by reason of their doing so. They accordingly intimated their intention of realising at the earliest possible time, and to the best possible advantage, the shares falling to be appropriated to the one-third part of the residue to be held for behoof of Mrs Henderson in liferent and her children in fee. Mrs Henderson, however, required the trustees to retain these shares as a proper investment of the trust fundsspeciallyappioved by the testator, and which could be competently continued by the trustees without their incurring any responsibility therefor.

This special case was presented for the determination of these questions by (1) Mrs Thomson's trustees, (2) Mrs Henderson, and (3) Mr Henderson, as tutor-at-law to his children.

It was admitted that the shares in question were of a more or less speculative character. All parties were also agreed that in the event of the said shares being realised, and the proceeds invested in ordinary trust investments, the present annual income to be derived from the trust-estate paid to the second party would be considerably diminished.

The questions at law were these—“(1) Are the parties of the first part bound to sell the shares in the said companies, and to invest the proceeds ‘in heritage and in preference stocks of railways in Scotland or England, and in the stock of Scotch banks,’ or in securities authorised by Act of Parliament for the investment of funds held by gratuitous trustees? or (2) Are they entitled in the circumstances stated to retain the said shares as a proper investment of the trust funds?”

Argued for the first parties—While they were quite villing to continue to hold these

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shares if the Court decided that this was a competent course, the distinction apparently drawn in the clause between thein vestments in general and the investment of the funds devolving on the second party entitled them to refuse to incur liability without such authority.

Argued for thesecond party—Unrestricted power to continue the truster's investments in public companies was conferred by the deed. Under such a clause trustees could continue these investments as long as they thought it advantageous for the trust— Brown v. Gellatly, August 5, 1867, L.R., 2 Ch. App. 751.

At advising—