Earl of Balfour v Keeper of the Registers of Scotland & Ors [2002] UKHL 42

House of Lords
Between
Earl of BalfourAppellantKeeper of the Registers of Scotland & OrsRespondent
Before
Lord Bingham of CornhillLord HoffmannLord Hope of CraigheadLord ClydeLord Rodger of EarlsferryDate 6 November 2002
[1]I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead, Lord Clyde and Lord Rodger of Earlsferry. I am in full agreement with them, and for the reasons which they give would allow the appeal and make the order which Lord Hope proposes. LORD HOFFMANN My Lords,[2]I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead, Lord Clyde and Lord Rodger of Earlsferry. For the reasons which they give, I too would allow the appeal and make the order which Lord Hope proposes. LORD HOPE OF CRAIGHEAD My Lords,[3]This is an appeal from an interlocutor of an Extra Division of the Court of Session (Lord Cameron of Lochbroom, Lord Macfadyen and Lord Sutherland) refusing the prayer of a petition in which the appellant had asked the court to pronounce an act and decree declaring him to be the fee simple proprietor of the lands and the barony of Whittingehame and others ("the heritable property"): 2002 SLT 981. The appellant is the Right Honourable the Fourth Earl of Balfour. The heritable property is at present held for him in liferent by the trustees acting under the trust disposition and settlement and two relative codicils of the late Arthur James Balfour, the First Earl of Balfour ("the First Earl"). The application was brought under section 48 of the Entail Amendment (Scotland) Act 1848. Following an amendment which was allowed by the Inner House the statutory basis for the application was extended to include, in the alternative, section 47 of that Act. The application is opposed by the sixth named respondent, who is a descendent of the younger brother of the First Earl, Eustace James Anthony Balfour. The facts[4]The First Earl died on 19 March 1930, leaving a trust disposition and settlement dated 1 January 1923 and two relative codicils dated 20 December 1927 and 20 September 1929, all registered in the Books of Council and Session on 24 March 1930. His estate comprised both heritable and moveable property. After making provision for the payment of expenses and estate duty, for the preservation of his books and papers, for the payment of various pensions and for the disposal of any of his pictures and works of art which might be considered to be suitable to be made heirlooms he gave directions in Purpose In the Seventh Place as to what his trustees were to do with the residue of his estate, both heritable and moveable.[5]The opening part of the directions contained in Purpose In the Seventh Place was in these terms:
"With regard to the whole rest and residue of my means and estate heritable and moveable, real and personal, wherever the same may be situated, I direct my Trustees to hold and retain the titles to the same in their own names as Trustees foresaid, and to deal with the same, subject to the conditions and provisions relating thereto hereinafter written: And to pay to or apply the whole nett revenue or income thereof for behoof of the following series of heirs in their order successively each for his or her liferent use allenarly, videlicet:- My brother, the said Gerald William Balfour in liferent, whom failing, the heir male of the body of the said Gerald William Balfour, in liferent, whom failing, the heir male of the body of my brother Eustace James Anthony Balfour (now deceased), in liferent, whom failing the heir female of the bodies of each of my said brothers Gerald and Eustace in the order of their seniority, in liferent, excluding heirs portioners, whom failing the second and other younger sons of the late Charles Barrington Balfour of Balgonie and Newton Don in the order of their seniority in liferent, whom failing Captain the Honourable Arthur Charles Strutt, Royal Navy, the second son of my sister Evelyn, Lady Rayleigh, in liferent, whom failing the second or other younger son of the then Lord Rayleigh and who at the time may not be in the enjoyment of the honours of Rayleigh or the family estates in the County of Essex, in fee, whom failing my own nearest heirs and representatives whomsoever in fee, and that in the manner for the purposes, with the faculties and subject to the powers conferred by me and after expressed."
There then followed various declarations and other provisions relating to the series of liferent rights created by this provision which it is unnecessary to set out as they are not relevant to this application.[6]The first codicil dated 20 December 1927 was in these terms:
"Having consulted my brother Gerald William Balfour and the other members of my family interested, and with his and their full approval, I hereby cancel the nomination of my said brother Gerald as the first liferenter or heir ceded to the succession of the rest and residue of my whole means and estate as provided for "
In the Seventh Place" in said Trust Disposition and Settlement, and I now instruct that in his place the heir male of his body shall be the person first entitled to succeed thereunder, and I wish to say that I have made this alteration to save my heirs as much Estate Duty as possible: And in all other respects I confirm the foregoing Trust Disposition and Settlement."[7]The second codicil dated 20 September 1929 was concerned only with the appointment of a named individual to be one of the First Earl's literary executors. It made no reference to, and did not affect in any way, the directions to the trustees which were contained in the trust disposition and settlement or the first codicil.[8]On 29 October 1931 the trustees acting under the trust disposition and settlement recorded a notice of title in the Register of Sasines for the County of East Lothian in their name in relation to the lands and barony of Whittingehame and others referred to in the trust disposition and settlement. In accordance with the directions set out in Purpose in the Seventh Place they have been holding the residue of the First Earl's estate continuously since the date of the First Earl's death in trust for the heirs male of the body of Gerald William Balfour.[9]The term "heirs of the body" denotes a limitation of the legal order of succession to heirs in the direct line of descent who are of the blood of the ancestor named, and the term "heir male of the body" means the eldest son or other male heir descended from the person named and connected with such person exclusively through males: Craigie, Scottish Law of Conveyancing, Heritable Rights , 3rd edition, p 531. Gerald William Balfour survived the First Earl and succeeded him as the Second Earl. The first member of the class comprising the heirs male of his body was the Third Earl of Balfour, who was the nephew of the First Earl and the son of the Second Earl. The Third Earl died on 27 December 1968. He was survived by his son ("the appellant"), who was born on 23 December 1925, succeeded him as the Fourth Earl, is also a member of the class and as such is the present liferenter. The 1848 Act[10]There is no rule of law in Scotland which prohibits the constitution of a trust under which trustees remain vested in the fee of the trust estate in perpetuity for the purpose of dispensing the income as directed by the truster: Mackenzie Stuart, The Law of Trusts, p 82. As Lord Thankerton observed in Muir's Trustees v Williams , 1943 SC (HL) 47, 51, the law against perpetuities in Scotland is entirely of statutory origin. The law permits a truster to create a trust for the payment of the income of the trust estate for an indefinite period, so long as he does not infringe the provisions of the statutes which deal with accumulations of income and with the creation of successive liferents. This case is concerned with the statutory restrictions on the creation of successive liferents, and in particular with the restriction which applies to the creation of successive liferents over heritable property.[11]Prior to the introduction of legislation which was designed to free the property from such restrictions, a disposition of heritable property could be granted which contained a destination to a series of heirs together with clauses which prohibited the alienation of the property by any of them, the contracting of any debt on the security of the property and any alteration in the order of succession. It was open to the person who was in possession of the lands for the time being under a disposition of that kind, which was referred to loosely as an entail, to evacuate the special destination for onerous consideration. But an entail strictly so called was a disposition of lands which contained, in addition to these three cardinal prohibitions, an irritant clause which annulled the act prohibited and a resolutive clause which annulled the right to the estate of the heir who contravened the provisions of the entail: Craigie, p 694.[12]Provisions which were designed to enable lands to be set free from the fetters of an entail were contained in the Entail Amendment (Scotland) Act 1848, commonly known as the Rutherfurd Act in recognition of the fact that its promoter was the then Lord Advocate, Andrew Rutherfurd. Section 3 of that Act enabled an heir of entail who was of full age to disentail the lands by applying to the Court of Session for authority to execute and record, under the authority of the court, an instrument of disentail. It was recognised that the provisions contained in this legislation would be capable of being defeated if it had remained possible to tie up lands in perpetuity by the creation of a series of liferents. As Lord Mackenzie observed in Erskine v Wright (1846) 8 D 863, this would soon supersede all other methods of doing so if it were competent. So there were included in the Act two further sections, sections 47 and 48, which dealt with prohibitions, conditions, restrictions and limitations on the party's right as fee simple proprietor other than those comprised in a strict entail, including those which confined the party to a liferent interest in the land or estate which was in his possession.[13]The power to create a perpetuity by a series of successive liferents in regard to heritage was restricted by section 48 of the 1848 Act. In terms of that section it is competent to grant "an estate in Scotland limited to a liferent interest in favour only of a party in life at the date of such grant". The remedy which is given to a party of full age born after the date of such deed dated on or after 1 August 1848 is to obtain and record an act and decree of the Court of Session "in the like form and manner, and in the like terms, and with the like operation and effect, as is hereinbefore provided with reference to an act and decree of the said court in the case of deeds of trust." The concluding words of this part of the section refer back to section 47 of the Act, which applies where land is in the possession of a person of full age under a trust disposition or settlement dated on or after 1 August 1848 by virtue of which he is lawful possession of the land.[14]The parties were agreed in the Inner House that there was, so far as this case is concerned, no difference in the result according to whether the appellant's application fell within the ambit of section 47 or section 48. So the court did not find it necessary to decide which of these two provisions applies to this case. But, as my noble and learned friend Lord Clyde pointed out at the outset of the hearing before your Lordships, the better view appears to be that this case falls under section 47 and not under section 48. This because the restrictions with which it is concerned are to be found not in the form of a proper liferent but in the directions to trustees which are contained in a deed of trust.[15]That is how these two sections are dealt with by McLaren, The Law of Wills and Succession , 3rd ed, para 560 and 561. In para 560 he states:
"Perpetuities by way of liferent are now prohibited by the Entail Amendment Act, which enacts that 'it shall be competent to grant an estate in Scotland, limited to a liferent interest, in favour only of a party in life at the date of such grant.'"
As a footnote to this sentence indicates, the passage which he has quoted is taken from section 48 of the 1848 Act. He then goes on in para 561, under reference to section 47 of the Act, to state:
"By the Entail Amendment Act trusts, as well as liferents, are put under the same restrictions as entails with respect to duration; and accordingly, any trust purpose in the nature of a substitution extending beyond the term of endurance allowed by the Act is defeasible by the beneficiary."
In Middleton, Petitioner 1929 SC 394, 401 Lord Blackburn, delivering the opinion of the court, said that he had always understood that section 47 applied to any trust deed dated after 1 August 1848 and that the law was so stated in Bell on Conveyancing, 3rd ed, vol ii, p 1072 and McLaren on Wills, 3rd ed, section 561; see also Wilson and Duncan, Trusts, Trustees and Executors , 2nd ed., para 8.08.[16]This view of the matter is not unanimous, perhaps because the word "liferent" as such does not appear anywhere in section47. This word is used only in section48. Mackenzie Stuart, The Law of Trusts , p 83 indicates that the section which applies to liferents which have been constituted by a deed of trust is section 48:
"Section 48 of the 1848 Act does not render a series of liferents created by a testator or truster void, or necessarily inoperative; it merely limits their effect."
In Davie v Davies' Trustees (1900) 8 SLT 28 Lord Low, sitting in the Outer House, is reported as having held that a trust disposition which had confined the pursuer to a liferent for as long as the trustees exercised the discretion which they had been given to retain the capital was struck at by section 48 of the Act. Halliday, Conveyancing Law and Practice in Scotland , vol IV, para 47-12, refers only to section 48 in his discussion of restrictions on liferents in testamentary settlements. It seems to me however that the language of the two sections as a whole points to the conclusion that the better view as to their respective application is that favoured by Lord McLaren and by Lord Blackburn. So I would hold that this case falls under section 47, as it is concerned with restrictions or limitations on the appellant's interest in the lands and estate which are contained in a trust disposition or settlement.[17]The relevant part of section 47 of the 1848 Act is in these terms:
"Where any land or estate in Scotland shall, by virtue of any trust disposition or settlement or other deed of trust whatsoever, dated on or after the first day of August one thousand eight hundred and forty-eight, be in the lawful possession, either directly or through any trustees for his behoof, of a party of full age born after the date of such trust disposition or settlement or other deed of trust, such party shall not be in any way affected by any prohibitions, conditions, restrictions, or limitations which may be contained in such trust disposition or settlement or other deed of trust, or by which the same or the interest of such party therein may bear to be qualified, such prohibitions, conditions, restrictions, or limitations being of the nature of prohibitions, conditions, restrictions, or limitations of entail, or intended to regulate the succession of such party, or to limit, restrict, or abridge his possession or enjoyment of such land or estate in favour of any future heir; and such party shall be deemed and taken to be the fee simple proprietor of such land or estate…"
The issue[18]The point which is in dispute in this case arises from the fact that, although the appellant was born after the date of the First Earl's trust disposition and settlement, he was born before the date of the first codicil. The question is whether the relevant date for the purposes of section 47 of the 1848 Act is the date of the trust disposition or the date of the first codicil. If it is the date of the trust disposition, it must follow that the appellant is entitled to the order which he seeks under that section, which is that an act and decree should be pronounced declaring that he is the fee simple proprietor of the heritable property. But he cannot succeed if it is the date of the first codicil because, if that is the correct view of the matter, he was born before, not after, "the date of such trust disposition or settlement or other deed of trust."[19]The question can, I think, be related more precisely to the terms of section 47. It reduces itself to this: what is the trust deed "by virtue of" which the appellant is in lawful possession of the heritable property to which his application relates? In my opinion the answer to it is to be found in the wording of the section itself, and by relating the facts as they were at the date of the application to the terms of the trust disposition and settlement and the first codicil. Discussion[20]An analysis of the relevant part of section 47 can be broken down into three stages. The first stage requires one to identify any land or estate which, "by virtue of any trust disposition or settlement or other deed of trust whatsoever," dated after 1 August 1848, is " in the lawful possession" of a party of full age "born after the date of such trust disposition or settlement or other deed of trust." The second stage directs attention to any prohibitions, conditions, restrictions or limitations which may be contained "in such trust disposition or settlement or deed of trust." These are the provisions by which the party who is of full age is not to be in any way affected. The third stage requires one to examine, in the alternative, any other prohibitions, conditions, restrictions or limitations "by which the same or the interest of such party therein may bear to be qualified."[21]Of these three stages the critical one, for present purposes, is the first. The trust deed to which the second stage relates is the same as that referred to in the first, as it is the deed by virtue of which the party of full age is in lawful possession of the land. The third stage relates to prohibitions, conditions, restrictions or limitations contained in some other deed, such as one made in the exercise of a power of appointment by which the interest under the trust deed of the party of full age bears to have been qualified. The critical question, then, is whether the trust deed by virtue of which the appellant is in lawful possession of the heritable property is the trust disposition and settlement or is the trust disposition and settlement read together with the first codicil.[22]The First Earl seems to have been advised that the relevant date was the date of his death, that being the date when the provisions of the trust created by his testamentary settlement were to take effect. This appears from a passage in paragraph (Sixth) of Purpose In the Seventh Place of his trust disposition and settlement, where he expressed his wish as to what should be done with the residue of his estate "upon the determination of the series of liferent rights created by and conferred by these presents in the residue and remainder of my means and estate by reason of the succession of a person who was not in life at the time of my death but who shall afterwards succeed and attain the age of twenty one years complete and who shall at his or her majority become entitled to the said residue and remainder of my means and estate as his or her absolute property." It is to be noted that section 9 of the Trusts (Scotland) Act 1921, re-enacting section 17 of the Entail Amendment (Scotland) Act 1868, provides that the relevant date for the purposes of that section, where the restriction on the creation of successive liferents applies to liferent interests in moveable property, is the date of the truster's death. The appellant accepts that he is not entitled to apply for the removal of the restrictions over his interest in the moveable property as he was born before the date of death of the First Earl.[23]In Murray v Murray's Tutor , 1915 1 SLT 34, it was held that the date of a mortis causa trust disposition and settlement for the purposes of section 48 of the 1848 Act was the date of the truster's death and not the date of its execution. But that decision was disapproved in Lord Binning, Petitioner, 1984 SLT 18, following the opinion expressed by Lord President Inglis, with which a majority of the judges in the Inner House agreed, in G W H Riddell, Petitioner (1874) 1 R 462 that the date of the deed must be taken to be the date when the trust deed was made and executed, which is the literal meaning of the words used: see also Earl of Moray, (Petitioner) 1950 SC (HL) 281, in which Lord Mackintosh held that the relevant date for the purposes of section 47 of the 1848 Act was the date when the deed was executed and not the date of the testator's death. Counsel for the sixth respondent did not challenge the correctness of the decision in Binning , with which I respectfully agree. As we are concerned in this case with restrictions over an interest in heritable property, the relevant date is the date when the deed by virtue of which that interest is held was executed.[24]Section 52 of the 1848 provides that, in construing the Act, "except where the nature of the provision shall be repugnant to such construction," all words used in the singular number shall be held to include several persons or things. The words "deed of trust" in section 47 are therefore capable of extending to more than one deed, if it is necessary to refer to more than one deed in order to discover the trust purposes by virtue of which the appellant is in lawful possession of the heritable property. But, as Lord MacDermott pointed out in Malcolm's Trustees v Malcolm, 1950 SC (HL) 17, 29, it may be necessary to choose between various documents in order to discover the deed by virtue of which the liferent which is in question was constituted.[25]For the sixth respondent Mr Moynihan's argument was that it was the combination of the trust disposition and settlement and the codicils which created the trust of which the appellant is now the beneficiary. He maintained that the relevant date was that which had created the settlement as a whole and not just part of it, and that for this purpose it was necessary to refer not only to the trust disposition and settlement but also to the first codicil. That too appears to have been the view of the judges in the Inner House. As Lord Cameron of Lochbroom put it, 2002 SLT 981, 984, para 13:
"In dealing with the residuary estate held by them in terms of the seventh purpose, the trustees were directed to hold it for behoof of the heir male of Gerald [the Second Earl], and not Gerald, by virtue of the trust disposition and settlement taken together with and as altered by the provision in the codicil of 20 December 1927 which appointed the heir male of Gerald as the first person entitled to succeed to the liferent of the residuary estate. That is to say, the trust settlement by virtue of which the first liferenter came into possession of and thereafter held the liferented estate, was composed of the two deeds taken together. The date of the deed forming the trust settlement must be taken as the date when the later of the deeds was executed, namely 20 December 1927. That deed remained the trust settlement containing the directions to the trustees in determining the further destination of the residuary estate arising on the death of the first liferenter."
[26]There is, of course, ample authority for the proposition that if a testator leaves more than one testamentary writing they are to be read together so far as possible as if they formed one deed: Black v Watson (1841) 3 D 522; Henderson, The Law of Vesting , 2nd edition, p 17. The First Earl himself invoked this principle when he declared in Purpose in the Fifth Place that instructions contained in any codicil or other testamentary writing of his were to be held and to be taken to be part of and read with his trust disposition. But that is not the issue in this case. The question is, what is the trust deed by virtue of which the appellant is in lawful possession of the heritable property? Does it, in the events which have happened, include not only the original trust disposition and settlement but also the first codicil?[27]What then did the first codicil do? Mr Moynihan accepted that, although the second codicil also fell to be read together with the first codicil and the trust disposition and settlement, it was of no significance for present purposes as all it did was to appoint a further literary executor. As for the first codicil, it did three things. It cancelled the nomination of the Second Earl as the first liferenter. It identified the heir male of his body as "the person first entitled to succeed" under the trust disposition and settlement. And it confirmed the trust disposition and settlement "in all other respects."[28]It is plain that the trust deed by virtue of which the Third Earl entered into lawful possession of the heritable property on the death of the First Earl included the first codicil, as it was necessary for the trustees to give effect to its terms in order to identify the person first entitled to succeed to the residue of the First Earl's estate under Purpose In the Seventh Place of the trust disposition and settlement. But all the first codicil did, and all it was intended to do, was to identify that person. As soon as the Third Earl entered into possession of the residue as the first liferenter its purpose was served and its effect was spent. When the appellant entered into possession on the death of the Third Earl he did so, not as a person identified in the first codicil, but as a member of the class of heirs male of the body of the Second Earl. The gift of the residue to the heirs male of the body of the Second Earl as a class is contained, and it is contained only, in Purpose In the Seventh Place of the trust disposition and settlement.[29]Although each case must depend on its own facts, it seems to me that this approach is consistent with authority. In Earl of Moray, Petitioner , 1950 SC 281, Lord Mackintosh held that section 47 of the 1848 Act applied to any estate which was heritable property at the date when the petition was presented. It had been suggested that it included only estate which had been settled in the form of heritable property at the commencement of the trust. Lord Mackintosh said at p 283 that the words "any land and estate" in section 47 covered any estate which is heritable property according to the law of Scotland at the time when the application under the section is presented to the court. I would construe and apply the words "in the lawful possession" and "his possession or enjoyment" in the present case in the same way. The section is concerned with the state of affairs at the date of the application to the court, not with events which might or might not have occurred as seen at the commencement of the trust. If the Third Earl had predeceased the Second Earl, assuming also that the Second Earl was still alive on the death of the First Earl, it would have been necessary to refer to the first codicil in order to identify the appellant as the person first entitled to into possession of the residue. But that is not what happened. The succession had already opened to the heirs male of the body of the Second Earl as a class in terms of Purpose in the Seventh Place before the death of the Third Earl.[30]Although the point was not mentioned by the reporter in Earl of Moray in his report to the Lord Ordinary as one of the difficulties in the case which required attention, the testamentary writings in that case consisted of a trust disposition and five codicils. The petitioner was born after the date of the first codicil, but before the date of the fifth and final codicil. The argument was directed to the question whether the relevant date was the date of the first codicil. But an examination of the terms of the fifth codicil, which is in the Session Papers, has shown that it dealt only with the distribution of various pictures and other items of moveable property and that it did not alter or affect in any way the provisions by virtue of which the petitioner was in possession of the lands of which he was seeking to be the fee simple proprietor.[31]The question whether it is necessary to take into account a codicil which does not alter or affect the relevant provisions in the original trust disposition and settlement was raised and answered in Miller's Trustees v Miller , 1958 SC 125. The issue in that case was whether the conditio si institutus sine liberis decesserit operated and, if so, whether two nephews who predeceased the date of a codicil which the testator made to his trust disposition and settlement were to be regarded as institutes instead of the persons whom he had instituted by his original settlement. The answer depended on which date was to be taken as the critical date - the date of the trust disposition and settlement which he executed in 1936, or the date of the codicil which he made in 1946. All that the testator did by his codicil was to vary the administrative provisions of the settlement by appointing new trustees and executors, as all but one of the persons named in the settlement had died. The codicil ended with the words "and with these alterations I confirm my said trust disposition and settlement." Rejecting the argument that the effect of these words was that 1946 was the crucial date for the purposes of the conditio , Lord Justice-Clerk Thomson said at p 129 that it seemed to him to be a highly technical and unrealistic argument, as the effect of the codicil was that the original beneficial provisions remained intact. Lord Patrick said at p 131 that it was a question of the intention of the testator. As the testamentary provisions were not innovated upon in any way by the codicil but referred to in it only in order to confirm them, he was not persuaded that the testator had any intention of telling his trustees that they were to treat his testamentary provisions as if they were made for the first time in 1946.[32]The same reasoning as that which was applied in Miller's Trustees can be applied in the present case to the first codicil. The only alteration which it made to the provisions of the trust disposition and settlement was spent as soon as the Third Earl succeeded to the residue in place of the Second Earl, whose nomination as the person first entitled to succeed had been cancelled by it. The provisions of Purpose in the Seventh Place which conferred a right of liferent in succession to the heirs male of the body of the Second Earl as a class were not altered or innovated upon in any other way, but were referred to only to confirm them. So the date of the deed by virtue of which the appellant became entitled to his interest in possession of the residue was the date of the trust disposition and not that of the first codicil. Conclusion[33]For these reasons, and for those given by my noble and learned friends Lord Clyde and Lord Rodger of Earlsferry, I would allow the appeal. I would recall the interlocutor of the Extra Division and direct the Court of Session to pronounce an act and decree in terms of section 47 of the Entail Amendment (Scotland) Act 1848 declaring the appellant to be the fee simple proprietor of the lands and the barony of Whittingehame and others, all as more fully described in the prayer of the petition, unaffected by any of the conditions, provisions, restrictions or limitations contained in Purpose in the Seventh Place of the trust disposition and settlement of Arthur James Balfour, the First Earl of Balfour.[34]The appellant and the sixth respondent are agreed that their expenses in the Court of Session and their costs in this House, taxed as between agent and client, client paying, should be paid out of the heritable part of the trust estate. The second to fifth respondents are the trustees acting under the trust disposition and settlement. They submit that expenses should follow success as between the appellant and the sixth respondent and that that trust should bear the costs and expenses of the trustees. As the appellant has agreed that his costs and expenses and those of the sixth respondent should be paid out of the heritable property of which he has been held to be the fee simple proprietor, I would make an order to that effect and I would include in that order the agreed terms as to the mode of taxation. I consider that the expenses of the trustees in the Court of Session and their costs in this House should be borne by the estate remaining in their hands as trustees. LORD CLYDE My Lords,[35]The appellant seeks a declaration under section 47 or 48 of the Entail Amendment (Scotland) Act 1848, the Rutherfurd Act, that he is the fee simple proprietor of the lands and barony of Whittingehame, all as presently held by the testamentary trustees of the late the Right Honourable Arthur James, first earl of Balfour. The first earl died on 19 March 1930 leaving a Trust Disposition and Settlement executed on 1 January 1923 and two codicils executed respectively on 20 December 1927 and 20 September 1929. The appellant, who is the fourth earl of Balfour, being the grandson of the truster's younger brother Gerald, is presently in possession of a liferent of the lands and barony of Whittingehame. The sixth respondent, who claims to be the person next entitled to succeed to the lands and barony, challenges the appellant's entitlement to seek the declaration. The second to fifth respondents, the trustees presently acting under the trust disposition and settlement, appeared in the hearing before the Court of Session but were not represented at the hearing before this House. They have adopted a neutral position on the point in dispute.[36]The great object of the Rutherfurd Act was, in the words of the Lord President in Black v Auld (1873) 1 R 133, 144, "to prevent persons making entails for the future from affecting with fetters persons not born or in existence at the date of the entail". The Act dealt primarily with entails, but, to quote again from the Lord President in Black v Auld (p 145), it also sought, in sections 47, 48 and 49:
"to prevent an evasion of the leading provisions of the statute, either by the creation of trusts, or by the creation of successive liferents, or by the creation of leasehold rights in succession."
The parties appearing before this House did not seek to make any relevant point of difference for the purposes of the present dispute between sections 47 and 48, and the argument was presented as appropriate to both section 47 and section 48. But it may well be that, as Lord Jamieson suggested in Harvey's Trustees v Harvey [1942] SC 582 at p 589, that section 48 applies to cases of proper liferents as distinct from liferents created under trust, and it seems to me preferable to deal with the present case under reference to section 47.[37]The relevant provisions of section 47 are as follows:
"Where any land or estate in Scotland shall, by virtue of any trust disposition or settlement or other deed of trust whatsoever, dated on or after the first day of August one thousand eight hundred and forty eight, be in the lawful possession, either directly or through any trustees for his behoof, of a party of full age born after the date of such trust disposition or settlement or other deed of trust, such party shall not be in any way affected by any prohibitions, conditions, restrictions, or limitations which may be contained in such trust disposition or settlement or other deed of trust, or by which the same or the interest of such party therein may bear to be qualified, such prohibitions, conditions, restrictions, or limitations being of the nature of prohibitions, conditions, restrictions or limitations of entail, or intended to regulate the succession of such party, or to limit, restrict, or abridge his possession or enjoyment of such land or estate in favour of any future heir; and such party shall be deemed and taken to be the fee simple proprietor of such land or estate, and it shall be lawful to such party to make application by way of summary petition to the Court of Session, setting forth the facts, and referring to this Act, and craving the court to pronounce an act and decree declaring him fee simple proprietor of such land or estate, and unaffected by any such conditions, provisions , restrictions, or limitations; and the court shall proceed in such petition as may be just, and shall have power to pronounce an act and decree declaring such party to be fee simple proprietor of such land or estate, and unaffected as aforesaid; and such act and decree may be recorded in the register of sasines, and being so recorded shall have the operation and effect of the most formal and valid disposition to such party and his heirs and assignees whomsoever, of such lands or estate, with infeftment thereon in favour of such party duly recorded……"
[38]By the seventh purpose of his trust disposition and settlement the truster directed his trustees to pay or apply the whole net revenue or income of the residue of his estate, which included the lands and barony of Whittinghame:
"…for behoof of the following series of heirs in their order successively each for his or her liferent use allenarly, videlicet:- My brother, the said Gerald William Balfour in liferent, whom failing, the heir male of the body of the said Gerald William Balfour in liferent, whom failing, the heir male of the body of my brother Eustace James Anthony Balfour (now deceased) in liferent, whom failing the heir female of the bodies of each of my said brothers Gerald and Eustace in the order of their seniority, in liferent, excluding heirs portioners…."
[39]By the first codicil to the trust disposition and settlement, executed on 20 December 1927, the truster provided as follows:
"Having consulted my brother Gerald William Balfour and the other members of my family interested, and with his and their full approval, I hereby cancel the nomination of my said brother Gerald as the first liferenter or heir ceded to the succession of the rest and residue of my whole means and estate as provided for 'In the Seventh Place' in said Trust Disposition and Settlement, and I now instruct that in his place the heir male of his body shall be the person first entitled to succeed thereunder, and I wish to say that I have made this alteration to save my heirs as much Estate Duty as possible: And in all other respects I confirm the foregoing Trust Disposition and Settlement."
By the second codicil, executed on 20 September 1929, the truster appointed a further person to be one of his literary executors under his trust disposition and settlement.[40]After the truster's death the trustees held the lands and barony for the third earl, being the heir male of the truster's brother Gerald, the second earl. The third earl died on 27 December 1968 and the lands and barony were then held for the appellant, the fourth earl, being the son of the third earl and the next heir male of the body of the second earl.[41]The appellant was born on 23 December 1925, after the date when the trust disposition and settlement was executed, but before the date of the first earl's death and before either of the dates on which the two codicils were executed. It is accepted by the parties to the appeal that he is of full age and that he is in lawful possession of the lands and barony of Whittingehame. The question in the appeal, to use the language of section 47, is whether he was born after the date of the deed of trust by virtue of which he is in lawful possession of the lands and barony.[42]It is agreed that in relation to a mortis causa trust section 47 looks to the date of the execution of the trust deed and not to the date of the truster's death. That view is in line with the decision in Lord Binning, Petitioner 1984 SLT 18. It is also not disputed that section 47 may apply to a plurality of deeds of trust. Indeed section 52 recognises that in providing expressly that unless the nature of the provision is repugnant to such a construction "all words used in the singular number shall be held to include several persons or things". But the question remains whether the appellant is correct in his submission that it is by virtue of the trust disposition and settlement alone that he is in lawful possession of the lands, so that he was born after the date of the relevant deed, and that no account need be taken of, in particular, the codicil of 20 December 1927 which was executed after he was born. The extra division of the Court of Session has held that this submission is unsound.[43]The question is one of the construction of section 47 and of the application of that section to the facts of the present case. The critical words in section 47 seem to me to lie in the phrase "by virtue of". The appellant argues for a strict construction of those words, confining the scope of the inquiry to the particular deed or deeds by which the truster imposed the particular fetters on the particular person who is presently in possession of the liferent and who is making the application to the court for release from those fetters. On his approach the only relevant deed is the original trust disposition and settlement. That was executed before he was born and so he qualifies under section 47. The respondent argues for a more liberal construction, extending the identification of the deed or deeds to those which created the "entail", or even to all the deeds which constituted the final expression of the truster's intentions. On that approach at least the first codicil becomes relevant and, since that was executed after the appellant was born, the appellant must fail.[44]It may be noticed at once that there is an unattractive uncertainty in the respondent's approach. To include all the testator's testamentary writings is in accordance with the well-established rule that all such writings "are to be read so far as possible as forming one deed" (Henderson on Vesting 2nd ed. p 17). But while that rule is applicable particularly to problems of interpretation of wills and problems such as those of approbate and reprobate or implied revocation, it does not seem to me to assist in resolving the problem of the construction of section 47 and in particular the identification of the deed or deeds whose dates are critical for the application of that section. Applying the rule in the present case involves including the second codicil in the deed or deeds to which the section refers. But the second codicil has nothing to do with the appellant's liferent and it is not easy to see why it should have any relevance to the application of section 47.[45]On the respondent's alternative approach, that one should look at the trust disposition and settlement and the first codicil, and not the second codicil, the sharper question arises whether any deed which has had or might have had a bearing on the successive liferents has to be treated as relevant for the purposes of section 47. The point can be focussed by considering the position which would have arisen on the hypothesis that the third earl had predeceased the first earl. If that had happened the liferent would have opened to the appellant on the death of the first earl, the second earl being excluded by the codicil. It would then be difficult to resist the view that the appellant was in possession of his liferent by virtue of both the trust disposition and settlement and the codicil (although of course the appellant would at that time have been far from being of full age). But on the appellant's approach one should not ask what might be the case if events had turned out otherwise. Such a hypothetical scenario as I have figured should be regarded as entirely irrelevant. One should look simply to the position of the present liferenter making his application to the court under the section at the present time. In that situation the codicil is matter of past history. Its effect was spent when the liferent opened to third earl and it now plays no part in the source or basis of the appellant's liferent. It is not enough to be able to say that the first codicil had something to do with the succession of liferents and so broaden the inquiry beyond the particular position of the present liferenter.[46]In my view the strict approach adopted by the appellant is correct. In Riddell, Petitioner (1874) 1 R 462 it was a literal meaning of the statutory language which was preferred in deciding whether account should be taken of the date of death or of the date of the execution of the relevant mortis causa deed. That case directly concerned section 3 of the Rutherfurd Act but the general approach there adopted seems to me applicable to section 47, a section of which the Lord President (Inglis) indeed expressly took notice (at p 467). More directly in Earl of Moray, Petitioner 1950 SC 281 at p 284 Lord Mackintosh adopted a literal meaning of the language of section 47. It further seems to me that a strict approach is appropriate to the construction of a statute which aims at securing a limitation on the extent to which restrictions may be imposed by a proprietor of lands upon those who may succeed to them.[47]The way in which the section operates also seems to me to point to the same result. It first provides that the person who qualifies under the opening provisions of the section is not in any way to be affected by the restrictions imposed by the truster. It then goes to state that the person shall be "deemed and taken to be" the fee simple proprietor. It then provides that it shall be lawful for the person to apply to the court for a declarator that he is fee simple proprietor and provides that the recording of the decree of declarator is to have the effect of a valid disposition of the lands to the person and his heirs and assignees. All of that seems to me to be looking to the particular person presently in possession of the liferent, being the particular person who is applying to the court to have what is deemed to be a fee simple proprietorship confirmed into a full and formal right of property. Thus it is to the particular situation of the applicant at the date of his application to the court that one has to pay attention, not to a more general view of the deeds which have had a bearing on the succession of interests intended by the truster. The matter has to be tested at the time when the liferenter applies to the court. It is at that time that the deed or deeds by virtue of which he is then in possession of the liferent require to be identified. That approach seems to me to have some support from the approach taken by Lord Mackintosh in Earl of Moray 1950 SC 281. One question in that case was whether the words "land or estate" in section 47 could extend to property which was moveable when the trust commenced but which had been converted into heritable property by the time when the application under the section was made to the court. It was held that the words covered any estate which was heritable property at the time when the application was presented to the court.[48]The appellant's approach to the problem also seems to me to be supported by the language of the section where it frees the liferenter from restrictions contained in any deed of trust "or by which the same or the interest of such party therein may bear to be qualified". This appears to be allowing for the possibility of a deed subsequent to an earlier principle deed, qualifying the earlier deed or the interest of the applicant in the earlier deed. That again points to the need to focus attention on the deed imposing the restrictions on the applicant, and not on all the deeds which may play a part at some time or other in identifying the various successive liferenters or even on all the deeds which comprise a testator's complete testamentary intentions. Although Lord Deas dissented from the majority of the court in Riddell the language which he uses is of interest. His concern was that the view taken by the majority might lead to difficulty where there was more than one deed. He referred to the case where "both may be necessary to give the right claimed", and said in relation to the case before the court "without the second deed the petitioner could not have claimed the position which he holds". Although his preference for the date of death as the solution to the problem was rejected by the majority it seems to me that the language he was using to describe the identity of the deed correctly reflects the kind of deed or deeds with which not only the section there under consideration but also section 47 is concerned. It is the deed or deeds which are necessary for the possession of the applicant's liferent which matter, not those which may bear on the liferents of others. The Extra Division of the Court of Session correctly recognised that it was by virtue of the trust disposition and settlement and the first codicil taken together that the first liferenter came into possession of and thereafter held the liferented estate. But if the matter is to be judged at the time of the application to the court and the standing of the applicant is to be assessed at that time the basis on which his father held the liferent is not of relevance.[49]When one turns to the first codicil it is plain that, while it did accelerate the liferent of the third earl, in the events which have happened it has not affected the liferent of the appellant. Viewed at the time of his application to the court it was in no way by virtue of the first codicil that the appellant was in lawful possession of the liferent. The first codicil did not create nor qualify his interest. In confirming the provisions of the trust disposition and settlement the truster is not to be taken as restating those provisions so as to create afresh the provision of a liferent for the appellant. He is merely indicating the extent of the changes which he was making, changes which excluded the second earl from the succession and promoted the third earl. These were not added restrictions on the provisions he had made and they left untouched the liferent which the appellant came to possess. The 'confirmation' of the earlier provisions has no greater significance than the corresponding phrase was held to have in Miller's Trustees v Miller 1958 SC 125.[50]For these reasons, in agreement with the views expressed by my noble and learned friends Lord Hope of Craighead and Lord Rodger of Earlsferry, I consider that the appeal should be allowed. I also agree that the matter of costs be dealt with in the way which my noble and learned friend Lord Hope of Craighead has proposed. LORD RODGER OF EARLSFERRY My Lords,[51]I gratefully adopt the account of the facts and submissions given by my noble and learned friend Lord Hope of Craighead.[52]The Entail Act 1685, which applies only to land and to estates that can be feudalised, permitted the creation of entails for the first time in Scots law. The Act remains on the statute book but will be repealed when section 76 and Part 1 of Schedule 13 to the Abolition of Feudal Tenure etc (Scotland) Act 2000 come into force. The rigidity which the 1685 Act introduced into the holding of land was eventually seen not only to cause hardship to owners but to prevent developments that would be of potential benefit to the community as a whole. The Entail Amendment Act 1848 ("the 1848 Act") made the first far-reaching reform of the system. Although this was changed by the Entail (Scotland) Act 1914, the 1848 Act distinguished between old entails, dated before 1 August 1848, and new entails constituted by "a deed of tailzie dated on or after" that date. In the case of new entails section 1 provided that it was lawful for any heir of entail " born after the date of such tailzie , being of full age, and in possession of such entailed estate by virtue of such tailzie, to acquire such estate, in whole or in part, in fee simple, by applying to the Court of Session for authority to execute, and executing, and recording in the register of tailzies, under the authority of the court, an instrument of disentail…" (emphasis added). By contrast, an heir of entail born before the date of the tailzie could use the procedure and so acquire the estate in fee simple only with the consent of his heir apparent.[53]An heir of entail in possession in Scots law is regarded as being vested with the full fee of the land subject only to the fetters in the deed of entail "and the sole object of the restrictions, imposed upon him as taillied feuar, is to protect and strengthen the right of inheritance which is created by the deed of entail, and to make the estate descend in succession to those heirs who are called by the terms of the destination": Macfarlane v Lord Advocate (1894) SC (HL) 28, 34 per Lord Watson. Therefore the heir of entail is, in legal theory, very different from a liferenter in whom the fee does not vest. But in practice the two figures are sufficiently similar that many at least of the effects of an entail might be reproduced by a series of liferents, as Lord Mackenzie noted in Erskine v Wright (1846) 8 D 863, 867. When Parliament came to reform the law of entails by giving the heir of entail the power to acquire the estate in fee simple, it was accordingly conscious that those reforms might be circumvented unless similar changes were introduced into the law relating to liferents. Sections 47 and 48 of the 1848 Act were enacted to introduce those changes and so to bolster the central reform of the law of entails: Black v Auld (1873) 1 R 133, 145 per Lord President Inglis; Riddell, Petitioner (1874) 1 R 462, 467 also per Lord President Inglis. Section 49 made similar provision in relation to leases.[54]Liferents can be created either by a deed of trust, so-called "improper" liferents, or by direct conveyance of the liferent estate to A and of the fee to B, so-called "proper" liferents. The language used by Parliament in section 47 is (deliberately) very wide and it may well be that it was intended to block off other prohibitions that might be included in trust deeds and might frustrate the reform. Nevertheless, I share the view of my noble and learned friends Lord Hope of Craighead and Lord Clyde that the language of section 47 is apt to cover a case such as the present where successive liferents are created in a trust disposition and settlement. Section 48, on the other hand, seems directed at proper liferents. In particular the reference to the act and decree having the same effect as "in the case of deeds of trust" suggests that section 48 is not intended to deal with a case involving a deed of trust. That being so, I prefer to approach the appeal on the basis of section 47, even though counsel were agreed that the result would be the same whichever section applied. I note in passing that section 48 has been replaced by section 18 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1968 in the case of deeds executed on or after 25 November 1968.[55]Section 47 shadows the opening provision of section 1, dealing with new deeds of tailzie, by also dealing with deeds dated on or after 1 August 1848. The aim is to give a person in possession of land under a trust deed dated on or after that day an equivalent power to rid himself of prohibitions which are similar in effect to the fetters in an entail. Whereas under section 1 the heir of entail is to apply to the court to record an instrument of disentail, under section 47 the party is to apply to the court for an act and decree declaring him to be the fee simple proprietor of the land or estate. Leaving aside certain other requirements for the moment, under section 1 the procedure is available only to an heir of entail who is in possession and was born "after the date of such tailzie"; similarly, under section 47 the procedure is available only to a party who is in lawful possession of land or estate by virtue of any trust disposition or settlement or other deed of trust and who was born "after the date of such trust disposition or settlement or other deed of trust". Section 1 is one of the sections that enshrine the policy behind the Act which Lord President Inglis identified in Riddell, Petitioner (1874) 1 R 462, 469. Holding that an entail executed before 1 August 1848 was an old entail to which section 3 applied, even though the entailer died after that date, he said:
"The leading principle of the statute is that no man is allowed under a deed of entail dated after 1 August 1848 to impose fetters on a person then unborn. This is not stated expressly, but everyone who has studied the Act and knows the history of it is aware that the object was that no man should impose fetters on persons unborn. Now, surely, carrying out this principle, it is much more reasonable that this restriction should take effect when the entailer makes the deed than when he dies."
On the same basis it can be said that the policy of section 47 of the 1848 Act was that no man was to be allowed under a trust deed dated on or after 1 August 1848 to impose prohibitions on a person who was unborn at the time when the deed was executed. This was ultimately recognised in Lord Binning, Petitioner 1984 SLT 18 when the First Division held that, for the purposes of section 47, the date of the relevant trust disposition or settlement or other deed of trust was the date of its execution, with the result that a party born after that date, but before the death of the settlor, could petition for an act and decree declaring him to be the fee simple proprietor. In the present proceedings it is common ground that a party can petition if he was born after the date of the execution of the trust disposition and settlement. The dispute between the parties is as to what makes up the settlor's trust disposition and settlement for the purpose of ascertaining its date in terms of section 47.[56]The settlor, the first Earl of Balfour, executed his trust disposition and settlement on 1 January 1923 ("the 1923 settlement"). This deed included clause In the Seventh Place under the relevant part of which he directed his trustees to hold the residue in trust "And to pay to or apply the whole nett revenue or income thereof for behoof of the following series of heirs in their order successively each for his or her liferent use allenarly, videlicet:- My brother, the said Gerald William Balfour in liferent, whom failing the heir male of the body of the said Gerald William Balfour in liferent, whom failing the heir male of the body of my brother Eustace James Anthony Balfour (now deceased), in liferent…." The appellant is the fourth Earl of Balfour. He was born in 1925. He is the son of the third Earl, who was in his turn the son of the settlor's brother Gerald who became the second Earl on the death of the settlor in 1930. The appellant became liferenter of the estate on the death of his father in 1968. It is obvious - and is in any event agreed - that the appellant is in possession of the estate as liferenter in his capacity as "the heir male of the body of the said Gerald William Balfour" under clause In the Seventh Place.[57]It follows that, if the only deed which existed were the 1923 settlement, the appellant would undoubtedly have a right to apply for an act and decree: he would be in lawful possession of the relevant lands and estate through trustees by virtue of the 1923 settlement; he was born after the date of that settlement and he is of full age. He would fulfil all the requirements of section 47.[58]The respondent contends, however, that the appellant has no right to make an application because of changes which the settlor subsequently made by codicil. In 1927, after the birth of the appellant, the settlor executed a codicil whereby, in order to minimise the liability of his estate to Estate Duty, he cancelled the nomination of his brother Gerald as the first liferenter of the residue and replaced him with "the heir male of his [Gerald's] body". But "in all other respects" he confirmed the 1923 settlement. In 1929 the settlor executed a further codicil in which he appointed an additional literary executor.[59]As I have indicated in paragraph 55, the policy behind section 47 is that no man is to be allowed under a trust deed to impose prohibitions on a person unborn at the time when the deed was executed. Here the settlor included prohibitions in the 1923 settlement. The policy behind the Act would suggest that they should not bind anyone born after the date when that settlement, embodying the prohibitions, was executed. Of course, if in some subsequent deed the settlor had "republished" the 1923 settlement, to use the terminology in Miller's Trustees v Miller 1958 SC 125, then it might well be appropriate to hold that the settlement had in effect been made of new and that its date for the purposes of section 47 was accordingly the date of that republication. But in the first codicil the settlor simply made one change and in all other respects confirmed the 1923 settlement. That is wholly inconsistent with any idea of republishing the provisions in the 1923 settlement with effect from 1927. Still less can the second codicil, which simply added a new literary executor, be regarded as republishing the 1923 settlement. In these circumstances it would seem contrary to the policy of the legislation to hold that the mere making of these codicils incidentally shifted the date of the settlement to 1927 or 1929 for the purposes of section 47, with the result that the appellant became subject to binding prohibitions, even though he belonged to a class whose members would have been free of the prohibitions when the 1923 settlement was executed.[60]Again, the position might well be different if the appellant were in possession of the estate by virtue of both the 1923 settlement and a provision in one of the codicils. The second codicil, however, has no conceivable bearing on his possession, while in the events which actually happened the first codicil has been spent since the death of the second Earl in 1945. It follows that ever since he became liferenter in 1968 the appellant has possessed the estate through the trustees by virtue only of clause In the Seventh Place of the 1923 settlement.[61]In upholding the respondent's contention, the Extra Division (2002 SLT 981, 984) noted that on the death of the settlor in 1930 the settlement which took effect comprised the 1923 settlement and the two codicils. In particular, by virtue of the first codicil, the trustees held the estate for Gerald's son as heir male of his body, rather than for Gerald himself, in liferent. Since the trust settlement by virtue of which the first liferenter came into possession of the estate comprised the 1923 settlement and the first codicil, in the view of the Extra Division that remained for all time the trust settlement containing the directions to the trustees in determining the destination of the residuary estate on the death of the liferenter.[62]In my respectful opinion, their Lordships attached undue importance to the position on the death of the settlor. Section 47 does not concern itself with the historic position but, rather, with the "trust disposition or settlement or other deed of trust" by virtue of which the land or estate "shall … be in the lawful possession, either directly or through any trustees for his behoof, of a party of full age…" who can apply to the Court of Session. The use of the future tense tends to indicate that Parliament is prescribing the circumstances that must prevail before it is lawful for the party to make that application. The whole matter must therefore be considered at the time of the application. I find support for that approach in the decision of Lord Mackintosh in Earl of Moray, Petitioner 1950 SC 281, 282 - 283.[63]As a matter of history, it is correct that, since his brother Gerald survived the settlor, the first codicil operated on the settlor's death so that Gerald's son became the first liferenter. On Gerald's death, however, the first codicil was spent and became inoperative, just as it would have been inoperative if Gerald had predeceased the settlor: in that eventuality Gerald's son would have been the first liferenter as the heir male of his body by virtue of clause In the Seventh Place alone. These are simply examples of the common phenomenon that at one time a provision in a trust deed may be relevant and at another time irrelevant as people marry, have children or die. If one asks, however, what is the trust settlement by virtue of which the appellant possesses the estate today, the answer is the 1923 settlement and nothing else - the two codicils are spent. In these circumstances it would not only be highly artificial but also contrary to the policy of the enactment to hold that the appellant is in possession under a settlement dated 1927 or 1929 so that he could not free himself of the prohibitions in the 1923 settlement. On the contrary, the appellant is in possession of the estate by virtue of the 1923 settlement and he was born after it was executed. He is of full age. He is therefore entitled to apply for an act and decree under section 47. It is not suggested that, if he is entitled to present the summary petition, there is any reason why the prayer of the petition should not be granted.[64]For these reasons as well as those in the speeches of my noble and learned friends, Lord Hope of Craighead and Lord Clyde, which I have had the advantage of studying in draft, I agree that the appeal should be allowed and that the orders proposed by Lord Hope of Craighead should be made.