Phirozshaw Bomanjee Petit vs Bai Goolbai and others

Viscount Haldane, J.

This is an appeal from the High Court at Bombay, which had affirmed a decree of the same Court in its ori ginal jurisdiction. The questions decided had been raised by origi nating summons, taken out by cer tain of the present respondents, who were trustees of an inter vivos settlement dated 1st August, 1913, and made by a wealthy Parsee inhabitant of Bombay one Boman jee Dinshaw Petit, who died on the 17th December, 1915.

By this settlement the settlor had conveyed a large amount of pro perty to the trustees on trust, inter alia, and so far as is material for the purposes of the questions in this appeal, to receive the rents and profits, and after making certain other payments, to make over the balance of income to the settlor himself during his life. After his death the trustees were to realise, by sale, conversion or otherwise, of the trust premises, certain sums, and, within thirteen months after the settlor''s death, out of the ba lance of income from what remain ed, accruing within the first thirteen months, to pay to his widow, the first respondent, from time to time and in such sums as she should reasonably require and the state of the income should per mit, the total sum of Rupees 80,000 for purposes mentioned. The trus tees were then to divide the remainder of the balance of such income arising or accruing during the first thirteen months after the settlor''s death, among the respon dents, Bai Goolbai, the widow, Jehangir and Dhunjibhoy, and the appellants, Phirozshaw, the settlor''s son, in equal shares ; the capital and income, after the thirteen months, were, subject to the trusts stated, to go to other beneficiaries under the trust deed as therein provided.

The settled property consisted of land and unmoveables specified in the first schedule to the trust deed ; shares, bonds, and securities speci fied in the second schedule ; and outstanding debts due to the settlor specified in the third schedule.

Questions arose as to the inter pretation of the deed, and an originating summons was taken out by the trustees to which the beneficiaries under the trust deed and the executors of a subsequent will made by the settlor were defendants. This summons raised a number of questions, of which two only are now raised on the appeal to His Majesty in Council. The first of these two questions arose between the settlor''s exe cutors and beneficiaries under the trust deed. It was whether an ap portionment of the income of the settled properties, or any of them, should be made, as if the title to such income had accrued continuously, up to the 17th December, 1915, the date of the testator''s death.

It was contended for the exe cutors that the whole income should be treated as accruing De Die in Diem, continuously, so that although instalments, such as rents or interest, were not actually payable until after that date, the executors of the settlors who were to take during his lifetime should be held entitled to so much of what was not actually payable until after his death as was to be attri buted on this footing to his title down to the date of his death.

The second question was an analogous one. It was whether, as between those who took benefi cially the income for thirteen months after the settlor''s death, and those beneficially entitled to the income subsequently, a similar apportionment should be made as on the 17th January, 1917, being the date of termination of the thirteen months'' period.

The summons was heard by Kajiji J., who decided against the application of any principle of apportionment, excepting as to interest on the debts due to the settlor specified in the third sche dule and such of the securities specified in the second schedule as bore interest. As to these, it was not disputed by the respondents that his view was right. He gave no reasons for his judgment.

The case was heard on appeal by Scott, C. J., and Hayward, J., and these learned judges affirm ed the decision of Kajiji, J

The only question which now arises is whether there is appli cable, under Indian law, any principle of apportionment which applies to rents and periodical payments, such as rents and profits from land, and the dividends and income arising from shares carry ing income periodically payable, such as specified in the second schedule.

The point is raised on this appeal by one of the beneficiaries whose interest it might have been to contend that the principle of apportionment did not apply to the property in the first two schedules. He has, however, severed from his co-beneficiaries, and contends that the principle does apply, having regard to the terms in which the settlement is expressed, and this is the question which their Lordships have to decide.

The English Apportionment Act of 1870 provides that after its passing, all rents, annuities, and other periodical payments in the nature of income are, unless it is expressly stipulated that no appor tionment is to take place, to be considered as, like interest on money lent, accruing from day to day, and shall be apportion able in respect of time accordingly. But this Act does not apply in India, nor do any of the earlier English Apportionment Acts. It is common ground that the principle which applies in the present case is that of the original English law as it stood apart from statute.

The older English law on the subject was stated by Lord Eldon in Ex Parte Smyth (1818) 1 Swanst 337 and is amplified in the learned note appended to the report of that case by Mr. Swanston. The latter traces it to the two pro positions, that an entire contract cannot be apportioned, and that under such an instrument as, for instance, a lease with a reservation of periodically payable rent, the contract for each portion is distinct and entire.

The rule, however, while ap plicable to periodical payments becoming due at fixed inter vals, did not apply to sums accru ing De die in diem. It did not, for example, apply to annuities or to debts. The distinctions drawn were often fine. But it is not necessary, for their Lordships to discuss them, because it is plain that, however clear the principle which governed the character of proprietary and contractual rights, it was always open to a testator or settlor, with full power of disposition, to exclude its practical consequences. He had only to say that it was his intention that the person entitled to the fixed sum, payable only after the determination of the inter mediate title, should account to those in whom that intermediate title was vested or their representa tives. Such an expression of in tention had, at least, the effect of creating a trust in equity, and might, in certain cases, be operative at law by giving a special charac ter to the title to the periodical payments. It had the effect of making the question, in most in stances, one merely of construc tion of the instrument

It is common ground that the old law in England, as referred to in 1818 by Lord Eldon in Ex parte Smyth (1818) 1 Swanst 337 was the law applicable in India to the present case, and that under it the income from the property specified in the first two schedules was prima facie only apportionable if an intention to make it so was clearly discoverable in the trust deed and while the income arising from the debts specified in the third schedule was apportionable.

The only question which now arises is as to the former, and as to this there is no question of difficulty as to general principle of law. The real controversy is as to whether there is not in the trust deed langu age which, by implication, imports that apportionment was directed by the settlor to take place.

In order to answer this question their Lordships, therefore, turn to the provisions of the instrument.

Under the first trust in the settlement the trustees are to get in the income of the whole of the pro perty settled, from whatever sour ces specified in the schedules "ari sing," and to pay the balance to the settlor for and during the re mainder of his life, "and down to his death." The subsequent direc tion is contained in the trust in the deed numbered 4 (b). This is to pay to the widow within thirteen months of the settlor''s death out of the ba lance of the "income accruing within the first thirteen months the Rupees 80,000 already referred to. The trustees are further directed to divide the remaining balance of the income "arising or accruing" during the first thirteen months after the settlor''s death among four beneficiaries named in equal shares. The direction in the deed operates under the form of a trust for sale. The balance of the proceeds of sale and the income to be derived from it, are to be held as subsequently directed, "except the income arising or accruing due for and within the first thirteen months after the settlor''s death," as to which there is reference back to the direction already quoted.

It was argued for the appel lant that the juxtaposition of the expressions "arising" and "accruing," and the employ ment of them in the language of the deed as if interchangeable, indicated that the income was intended to be treated as one the title to which was contemplated as accruing continuously.

Moreover, it was said, if the trus tees were to alter the character of the investments, they might, from time to time, vary the rights of those beneficially entitled at their pleasure, and that this the settlor could not have contemplated. But their Lord ships do not think that reliance can properly be placed on these arguments. The character of payments such as those directed is prima facie discontinuous at common law. No doubt, the settlor could have given direc tions which would have modi fied this character, or at least, have deprived it of the consequences arising from its disconti nuity. But such directions would have had to be clear and unambi guous in order to have had the result of varying the rights defined by the general law. Their Lord ships can find no such distinctness in direction in the deed before them as would have been required to have this effect.

They will accordingly humbly advise His Majesty that the appeal should be dismissed. The trust estate is very large and the trus tees found it necessary to have the questions which have arisen decided by the Courts below. There the costs were allowed out of the estate. As regards the present appeal, their Lordships think that justice will be done if the appellant has no costs and the 10th and 11th respondents who contested the appeal have their costs, as between party and party, out of the estate. The trustees do not appear separately on the appeal. They will be entitled to have reimbursed to them any expenses to which they have been put by it.