Scottish Court of Session Decisions

By antenuptial contract of marriage dated 17th March 1882, and registered in the Books of Council and Session 28th July 1885, John Findlay M'Culloch, residing at 9 Binnie Place, Glasgow, disponed to Archibald Nicol (his father-in-law), Mrs Euphemia Nicol or M'Culloch (his wife), and himself, as trustees, certain heritable property in Glasgow then belonging to him, for the following amongst other purposes, namely—“( First) for payment to the said Euphemia Nicol during her lifetime of the free annual income and revenue thereof for her liferent use allenarly; declaring that the same shall not be affectable by the debts or deeds or the diligence of the creditors of either of us, the said parties hereto.”

By the same deed Mrs Euphemia Nicol or M'Culloch conveyed to the said trustees the whole estate, heritable and moveable, belonging to her, for payment to her of the free annual income and revenue thereof for her liferent use allenarly, “declaring that the said free annual income and revenue shall not be affectable by the debts or deeds of either of the parties hereto or the diligence of their or either of their creditors.”

The contract contained provisions in fee for behoof of the children of the marriage (of whom there were six), it being declared that the fee should vest in the children on the dissolution of the marriage.

The deed further contained the following clause:—“With power also to the said trustees to lend or advance (but only if both are surviving and at the joint request of said spouses) to the said John Findlay M'Culloch such portion or portions of said whole estates hereby conveyed as they may think right and as he may desire.”

The trustees accepted office under the marriage contract, and managed the marriage contract estate.

On 26th January 1897 John Bunting M'Callum, 289 North Woodside Road, Glasgow, advanced on loan to Mr and Mrs M'Culloch the sum of £200. In security thereof the spouses, by assignation dated 26th January 1897, assigned to him and his heirs, executors, or assignees whomsoever, their and each of their whole right, title, and interest, present or future, whether of liferent or fee, under their antenuptial contract of marriage, together with all their right, title, and interest in and to the annual rents, interests, and proceeds payable from the properties therein described, with power also to him or any factor appointed by him to enter into possession of the subjects and draw the rents.

The assignation was granted under the declaration that the lender should out of the rents received from the subjects pay, inter alia, the interest due under the assignation, and also the premiums on two life

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policies assigned to him by the spouses in the assignation, and apply the balance in liquidation of the principal sum of £200, so long as that sum remained unpaid. The assignation was duly intimated to the marriage contract trustees, and a copy delivered to their agents.

On 11th January 1904 John Bunting M'Callum brought the present action against (1) the marriage contract trustees, and (2) the spouses as individuals, concluding for declarator that the pursuer had by the assignation acquired right to the whole right, title, and interest, whether of life-rent or fee, of each of the spouses under the antenuptial marriage-contract, and for payment to him by the trustees of the free annual proceeds of the trust estate until the debt due to him, which amounted in all to £425, 12s. 6d., should be satisfied.

Defences were lodged by the trustees, who admitted that no part of the sum lent had been repaid.

The pursuer pleaded—“(1) The interests of the defenders Mrs Euphemia Nicol or M'Culloch and John Findlay M'Culloch under the antenuptial contract of marriage having been validly transferred to and vested in the pursuer, decree should be pronounced as craved.”

The defenders pleaded—“(1) The action is irrelevant. (2) The assignation condescended on being invalid, and inoperative to transfer to the pursuer the interests of Mr and Mrs M'Culloch under the antenuptial marriage contract, the defenders are entitled to be assoilzied from the first conclusion of the action.”

On 4th June 1904 the Lord Ordinary ( Stormonth Darling) pronounced an interlocutor assoilzieing the compearing defenders from the conclusions of the action.

Opinion.—“This case would in my opinion be governed by the judgment of the First Division in Reliance Mutual Life Assurance Society v. Halkett's Factor, 18 R. 615, were it not for one circumstance which creates a distinction. The wife in that case had by antenuptial marriage-contract conveyed her whole estate to trustees, inter alia, for payment to herself of the free income during the subsistence of the marriage, such payment being made exclusive of the jus mariti and right of administration of her husband, and her own receipt being declared a sufficient discharge. The wife became a party to a bond and assignation granted by her husband in security of a loan, and she thereby bound herself to the extent of her own separate estate to repay the sum borrowed. In security of her personal obligation she with her husband's consent assigned to the lenders her whole right and interest, present and future, under and in virtue of the marriage-contract. In answer to an action by the lenders for declarator that they had acquired right to the whole sums of money payable to the spouses under the marriage-contract, and for payment of the income of the trust estate until the amount due to the pursuer should be paid off, the wife pleaded that her estate having been conveyed to trustees for her protection, she could not validly convey away the same stante matrimonio to her own prejudice. But the judgment was that she had power to make, and had made, an effectual assignation of the income of her estate, whether arising during marriage or after its dissolution.

“Here the pursuer's demand is substantially the same as in Halkett's case. On 26th January 1897 he lent to the spouses a sum of £200, in return for which they assigned to him the whole right and interest of each of them, present and future, whether of liferent or fee, under and in virtue of their marriage-contract, which had been entered into on 17th March 1882, and they specially assigned to him their whole interest in the annual rents and proceeds of certain house property in Glasgow, which had been put in trust by the husband. It is admitted that no part of the sum lent, or interest thereon, or expenses in connection therewith, has been repaid to the pursuer, and it is said that the sum now due to him amounts to more than double the original loan. The action is directed against the marriage-contract trustees, who are the spouses themselves, and the father of the wife, and also against the spouses as individuals. What the pursuer asks is a declarator of his rights under the assignation, and for payment by the trustees of the free annual proceeds of the trust estate until his debt shall be satisfied. I gather from the record that the trust estate consists entirely or mainly of the house properties specially conveyed by the husband. The marriage-contract also contained a conveyance by the wife of her whole estate then belonging to her or afterwards to be acquired by her during the subsistence of the marriage, but the record makes no mention of there being, as yet at least, any property of that description in the hands of the trustees.

“The trust purposes as regards the wife are for payment to her during her lifetime for her liferent use allenarly of the free annual income of the estate conveyed by the husband, and then follows a declaration ‘that the same shall not be affectable by the debts or deeds or the diligence of the creditors of either of us the said parties hereto.’ There is a similar provision for payment to her of the free annual income of her own estate, with a corresponding declaration that it shall not be affectable by the debts or deeds of either of the spouses or the diligence of their creditors, and there is a renunciation by the husband of his jus mariti and right of administration over both the estate coming from the wife and the provisions made by himself in her favour. The contract also contains provisions of fee to the children (of whom there are six), but these provisions are not material to the present question. There is, however, a clause on which counsel for the pursuer laid considerable stress, giving power to the trustees’ to lend or advance (but only if both are surviving, and at the joint request of said spouses) to the said John Findlay M'Culloch such portion or portions of said whole estates hereby conveyed as they may think right and as he may desire.

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“The decision in Halkett's Halkett's case proceeded entirely upon the ground that the income of the trust estate had been placed by the marriage-contract absolutely at the wife's disposal without any declaration that it should be alimentary or not assignable by her. In this marriage-contract there is no declaration that the income payable to the wife shall be alimentary, but there is a declaration that it is not to be affectable by the debts or deeds or the diligence of the creditors of either herself or her husband, and the question comes to be, whether that is not sufficient to take the case out of the rule applied in the case of Halkett's Factor. I think it must be conceded that an alimentary declaration would have had that effect, for the case of Cosens v. Stevenson, 11 Macph. 761, shows that a wife cannot discharge an alimentary annuity secured to her by marriage-contract even where there is no trust to protect it, her position being distinguishable from that of a wife whose liferent or annuity is not declared alimentary, as in Cowe's case, 4 R. 695. I fail to see why the declaration which we find here should not have the same effect as a declaration that the provision is to be purely alimentary. Even as regards the income of property put in trust by herself a woman can by marriage contract make her interest non-assignable, her power to do so being an exception to the general rule that property cannot lawfully be put beyond the reach of the owner's creditors without creating some right, direct or contingent, in a third party. As regards the income of property put in trust by the husband there is still less doubt of the power of the spouses to contract that the interest of the wife shall be inalienable. Where they do so it seems to me that the declaration must receive effect, and that an attempt by her to assign her interest is one which the trustees cannot recognise. If it be said that such a result is unfair to an onerous assignee who has lent his money on the faith of the wife's deed, the answer must be that if he had examined the marriage contract he would have seen that no deed of hers could affect her liferent stante matrimonio.

“It is suggested on behalf of the pursuer that the clause in the marriage contract giving power to the trustees at the joint request of the spouses to lend or advance any part of the trust estate to the husband is a clear indication that the contract was not truly intended to protect either the immediate or eventual liferent of the wife, particularly as the spouses themselves formed a majority of the trustees. The clause is certainly a peculiar one, and I am not aware that anything like it is to be found in any of the cases to which the principle of protection of the wife's interest has been held to apply. I concede that the intention of the marriage contract is material, and is to be gathered from the whole tenor of the deed. I further agree that the wife's provisions under a deed containing such a clause as this must be allowed to be very precarious. But I do not think that a mere power which has not been and may never be exercised can outweigh a positive declaration that the wife's liferent shall not be assignable.

“The result must be to assoilzie the defenders from the whole conclusions with expenses, but I shall reserve to the pursuer any claims competent to him against the spouses as individuals in respect of their personal obligation under the assignation in his favour referred to in the summons.”

The pursuer reclaimed, and argued—There was no express declaration that the liferent was to be alimentary. There was no effectual exclusion of the power to assign, as the spouses had virtually given themselves a power to get possession of the whole trust estate. That being so, there was no proper trust and no effective protection. In order to be effective the protection must be absolute. That was not so here, for the trustees could favour one creditor at the expense of others. The law did not recognise a partial protection. The assignation was therefore valid and should receive effect— Rogerson v. Rogerson's Trustee, November 6, 1885, 13 R. 154, 23 S.L.R. 102; Reliance Mutual Life Assurance Society v. Halkett's Factor, March 4, 1891, 18 R. 615, 28 S.L.R. 589.

Argued for the respondents—The assignation was invalid, as it was outwith the power of the spouses to assign the income of the trust. The marriage contract trust was effectual, for the wife's father was a trustee and could prevent anything improper being done. There was a power in the marriage contract to assume new trustees. The income was protected by the trust and could not be assigned— Ker's Trustees v. Ker, December 13, 1895, 23 R, 317, 33 S.L.R. 212; Christie's Factor v. Hardie, March 7, 1899, 1 F. 703, 36 S.L.R. 507.