Re Boden. Boden v Boden
| Jurisdiction | England & Wales |
| Year | 1907 |
| Date | 1907 |
| Court | Court of Appeal |
Will - Annuity - Direction to Pay out of Income - Alternative Gift - Charge on Corpus - Continuing Charge on Income.
A testator gave all his residuary real and personal estate to trustees upon trust for sale and conversion and investment, and to hold the same “In case I shall leave any child living at my decease then upon trust to pay to my said wife during her life and so long as any child of mine shall be living such a sum out of the income of my residuary trust funds as with the income which my said wife shall from time to time receive under or by virtue of the settlement made on our marriage shall make up the total annual income of 8000l. But in case I shall leave no child surviving me or leaving such every such child shall die in the lifetime of my wife then upon trust to pay to her during her life such further sum as with the income to be derived from the said settlement shall make up the annual sum of 10,000l. and I direct that the said annual sums of 8000l. or 10,000l. as the case may be shall be deemed to commence and be payable as from my death and subject to the trusts aforesaid in trust to divide my said residuary trust funds unto and equally between all and every my children” who shall attain twenty-one or marry. “But in case I shall leave no child surviving me who shall take a vested interest in my said residuary trust funds then subject to the trusts aforesaid I give and bequeath the same to my nephew H.” There was no child of the marriage, and the income of the testator's residuary estate was insufficient to pay the annuity:—
Held by Vaughan Williams and Buckley L.JJ. (dissentiente Fletcher Moulton L.J.), that the direction to pay out of income, though expressed only in the case of the 8000l. annuity, applied also to the 10,000l. annuity, and that this direction charged the annuity only on income during the widow's life, and did not create either a charge on the corpus or a continuing charge on the income.
WALTER BODEN by his will dated December 7, 1904, after giving certain charitable and pecuniary legacies, including a legacy of 500l. to his wife, gave all the furniture and chattels which should be in or about his residence at his death to trustees upon trust to permit his wife to possess, use and enjoy the same during her life, and after her death he declared that the same should sink into his residuary estate, and he gave his mansion-house known as the Pastures and the lands belonging thereto to his trustees upon trust for his wife for life, and after her decease he directed that the same should fall into his residuary estate; and he gave all the rest, residue, and remainder of his real and personal estate upon trust for sale and conversion as therein mentioned, and out of the proceeds to pay his funeral and testamentary expenses and debts, and to invest the residue of the said moneys and “to stand possessed of the said residuary trust moneys and the investments for the time being representing the same (hereinafter called the residuary trust funds) Upon the trusts and for the purposes hereinafter expressed that is to say In the first place to pay and discharge the interest on any mortgages that may be subsisting on my Pastures estate it being my wish that my said wife shall have the unincumbered income of such Pastures estate during her life And in the next place In case I shall leave any child living at my decease Then upon trust to pay to my said wife during her life and so long as any child of mine shall be living such a sum out of the income of my said residuary trust funds as with the income which my said wife shall from time to time receive under or by virtue of the settlement made on our marriage shall make up the total annual sum of 8000l. But in case I shall leave no child surviving me, or leaving such every such child shall die in the lifetime of my wife, then Upon trust to pay to her during her life such further sum as with the income to be derived from the said settlement shall make the total annual sum of 10,000l. and I direct that the said annual sums of 8000l. or 10,000l. as the case may be shall be deemed to commence and be payable as from the date of my decease And subject to the trusts aforesaid In trust to pay and divide my said residuary trust funds unto and equally between all and every my children who being sons or a son shall attain the age of twenty-one years or being daughters or a daughter shall attain that age or marry under that age But in case I shall leave no child surviving me who shall take a vested interest in my said residuary trust funds then subject to the trusts aforesaid I give and bequeath the same to my nephew Henry Walter Degge Shuttleworth Boden for his own use and benefit.” The will contained the usual power of advancement, and a power for the trustees to postpone sale and conversion and to carry on the testator's business either in partnership with the persons who should be his partners at his death or otherwise.
The testator died on September 16, 1905, leaving his wife him surviving. There were no issue of the marriage. The income received by Mrs. Boden under the marriage settlement was about 1150l. a year. The settlement contained a covenant by the testator to make this income up to 1500l.
The testator's income from his business for some years before the date of his death had been 11,000l. and upwards, but on his death his partners paid out his share of capital under the provisions of the partnership deed, and the result was that his net residuary estate was only of the value of 68,000l., and wholly insufficient to provide out of income the sum required to make up the widow's income to 10,000l. a year.
This summons was taken out by the trustees for the determination of the questions whether, on the true construction of the testator's will, the annuity of 10,000l. thereby directed to be paid to the widow, or so much thereof as for the time being should be payable, was (a) charged upon the corpus of the testator's estate, or (b) charged as a continuing charge in favour of the defendant, her executors or administrators, on the income of the estate until all arrears thereof should have been paid in full. The widow and the nephew were made defendants.
The case came before Joyce J. on June 21, 1906, and he decided that the annual sum necessary to make up the widow's income to 10,000l. a year was a charge upon the corpus of the testator's residuary estate.
The nephew appealed.
Levett, K.C., Younger, K.C., and Christopher James, for the appellant. The amount necessary to make up this 10,000l. annuity is payable out of income; as a question of construction the words “out of income” in the earlier part of the gift apply to the alternative trust to make up the annuity to 10,000l. in the event of there being no children. The larger annuity is substituted for the smaller in an event which has happened; the general rule as to a substitutionary gift being subject to the same conditions as the original gift does not depend on the original gift being by will and the substituted gift by codicil — In re BoddingtonF1 — but from the natural inference from a gift being given by way of substitution or in lieu of another. The substituted gift is as a rule subject to the same conditions and payable out of the same fund as the first gift: Leacroft v. MaynardF2; Crowder v. Clowes.F3 The fact that the second gift is not in terms expressed to be in substitution for the first makes no difference: Johnstone v. Earl of Harrowby.F4
[VAUGHAN WILLIAMS L.J. referred to In re Mores' TrustF5 and Haley v. Bannister.F6
BUCKLEY L.J. Johnstone v. Earl of HarrowbyF4 appears to have been followed in In re SmithF7, In re Gibson's TrustsF8, and Fisher v. Brierley.F9]
There never was any intention to charge either of these annuities on corpus; the first is expressly made payable out of income, and the second, also payable out of income, is substituted for it in a certain event.
Upjohn, K.C., Hughes, K.C., and Vaughan Hawkins, for the respondent. The 10,000l. annuity is an independent alternative gift; there is nothing in the will to indicate that it is to be payable only out of income: it is probable that the testator did not mind this annuity being made up out of corpus if, as has happened, there were no children. In this will there are two several distinct gifts mutually exclusive. Johnstone v. Earl of HarrowbyF4, Leacroft v. MaynardF2, and Crowder v. ClowesF3, relied on by the appellant, were all cases of a will and codicil, or codicil followed by a later codicil, and throw no light on the present case, where both gifts are in the same instrument and are unconnected.
These annuities are both charged upon the whole estate, which is given over, “subject to the trusts aforesaid,” to the children or the nephew; the corpus, therefore, is at the least liable to make up the deficiency of the 10,000l. annuity: Phillips v. GutteridgeF10; Birch v. SherrattF11; Ex parte Wilkinson.F12
[VAUGHAN WILLIAMS L.J. referred to Foster v. SmithF13 and Phillips v. Gutteridge.F14]
We go so far as to contend that the 8000l. annuity is a continuing charge on the income, which is equivalent to a charge on corpus, for there is nothing to shew that this annuity is to be confined to the income of each year; if this is so, then, even according to the appellant's construction, the 10,000l. annuity would in like manner be a continuing charge on the income, and the arrears would be a continuing charge after the death of the annuitant: Booth v. CoultonF15; Forbes v. Richardson.F16
George Lawrence, for the trustees.
Levett, K.C., in reply. The cases cited to shew that there is a charge on the corpus, or a continuing charge on the income, are all cases where the charge is on rents and profits, which words have a special legal meaning as part of the real estate, or...
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