Greenlees' Trustees v. Greenlees and Others

Factual and Procedural Background

A testator executed a trust-disposition and settlement conveying his entire estate to trustees, providing for an annuity to his widow and certain legacies. The residuary estate was to be divided equally among his children, with the shares of his sons to be paid at the first annual business balance after his death, and the shares of his daughters to be held in trust for their benefit or that of their children. The trustees were to pay the annual income of the daughters' shares to them, subject to their full powers of disposal by family settlements and with powers for the trustees to advance capital on proper occasions such as marriage. If any child died before the division leaving children, those children would inherit their parent's share; if a child died without issue, their share would be divided among surviving children.

Following the testator's death, questions arose concerning whether the daughters had vested fee simple ownership of their shares at the testator's death and whether they were entitled to immediate payment of those shares, notwithstanding the trustees' directions to hold the shares. A special case was presented by the trustees and some daughters against the executors of a deceased daughter and the other daughters to determine these issues.

Legal Issues Presented

1. Did the testator's daughters acquire a vested right to the fee simple ownership of their shares of residue upon the testator's death?
2. If so, are the daughters and the representatives of the deceased daughter entitled to immediate payment of their shares, subject only to securing the widow's annuity?

Arguments of the Parties

First Parties' Arguments

• The daughters' interest was limited to a life interest (liferent) in their respective shares, with a power of disposal only at their death in favour of their children.
• No fee simple ownership vested in the daughters at the testator's death.
• The will of the deceased daughter did not constitute a "family settlement" within the meaning of the trust.
• The limited power of disposal and trustees' discretionary power to advance capital indicated an intention not to vest fee simple ownership in the daughters.
• Relied on precedent that a direct gift of fee simple was not contained or implied in the deed (Sanderson's Executors v. Kerr).
• The term "family settlement" was strictly construed as a settlement by a married person in favour of children and did not apply to the deceased daughter's will.

Second and Third Parties' Arguments

• The daughters' shares vested and became divisible at the testator's death, subject only to retaining capital for the widow's annuity.
• The trustees were obliged to pay over the shares on demand to the surviving daughters and representatives of the deceased daughter.
• The words "divide, apply, pay, or convey or hold … for behoof of" constituted a gift of fee simple ownership.
• If there was any repugnancy between the gift and subsequent restrictions, the restrictions would be disregarded as repugnant to the free gift.
• The daughters' power of disposal was inconsistent with a mere life interest.
• The machinery of the trust was administrative only, not limiting the daughters' ownership.
• The deceased daughter's will was a valid "family settlement," broadly construed to include such instruments.
• Relied on precedents holding similar language constituted a gift of fee simple ownership (Brown v. Brown's Trustees, Lawson's Trustees v. Lawson, Wilkie's Trustees v. Wight).

Table of Precedents Cited

Court's Reasoning and Analysis

The court closely examined the terms of the trust-disposition and settlement, focusing on the residuary clause. It found that the testator intended the division of the residue to occur at his death, with the trustees then paying or holding shares for the children accordingly. The trustees' direction to pay the sons at the first annual balance after death implied that the shares were already vested and only payment was postponed.

Regarding the daughters' shares, the court reasoned that the direction to hold for their benefit was equivalent to a gift to them, with no further disposition of the fee simple. The daughters therefore acquired a vested fee simple interest at the testator's death. The trustees' instructions to hold the capital and pay income, along with the daughters' power to dispose by family settlement and the trustees' power to advance capital, were seen as limitations inconsistent with the vested fee and thus ineffective.

The court relied on established principles that where a testator gives shares in unqualified terms and then imposes administrative directions on trustees without expressly limiting the fee simple, the fee simple vests in the beneficiaries. Limitations that repugn the fee simple are disregarded unless the fee is given to another person. The daughters' power of disposal further supported the conclusion that they held fee simple ownership, not merely life interests.

The court thus answered affirmatively that the daughters' shares vested at the testator's death and that they were entitled to immediate payment, subject only to securing the widow's annuity.

Holding and Implications

The court held that the daughters acquired a vested fee simple interest in their shares of the residuary estate at the testator's death (a morte testatoris) and were entitled to immediate payment of their shares notwithstanding the trustees' directions to hold the capital and pay income only.

The direct effect of this decision was to require the trustees to pay the daughters and the representatives of the deceased daughter their shares promptly, deducting only sums necessary to secure the widow's annuity. No new precedent was established beyond the application of existing principles regarding the vesting of fee simple interests and the effect of administrative trust directions.