Residuary beneficiaries of the estate of a man who died in 1987 were not time barred in seeking an accounting from the deceased's trustees, despite a deed of variation (to which the pursuers were not parties) agreeing that the estate would be passed to the deceased's widow as her absolute property, in place of a liferent interest under the will, a sheriff has ruled.
Sheriff Philip Mann at Banff Sheriff Court gave his decision in an action of count, reckoning and payment by Emma Shand and others, beneficiaries under the will of George Shand, seeking an accounting of the residue of the deceased's estate.
By a deed of variation entered into in 1987 the deceased’s executors and his widow agreed that the executors would wind up the estate as if the deceased in his will had instructed the defenders to pay over the whole residue of his estate to his widow as her own absolute property. The pursuers were not aware of this, but the defenders nevertheless argued that the action was time barred by the operation of the 20 year prescription in s 7 of the Prescription and Limitation (Scotland) Act 1973. The deed of variation was a valid document which, in altering the terms of the deceased’s will, had the effect of a breach of the terms of the trust. Prescription ran from that date and the defenders’ obligation to account for that breach was extinguished after 20 years, regardless of the state of knowledge of the pursuers.
Sheriff Mann did not accept this analysis, which he said would produce a result that was "harsh in the extreme". The deed of variation did not alter the terms of the will, but had effect "as if" the will had made such provision. "In a situation where the pursuers were not parties to the agreement there is simply no room to argue that it could have any effect on the rights of the pursuers or on the trustees’ obligations to them in terms of the will", he observed. "The pursuers’ right to claim the residue of the estate and the trustees’ obligation to account to the pursuers for that residue emerged only on the death of the widow."
The sheriff added that as it was the trustees who legally had the right to seek restoration by the executors of assets wrongly transferred, "the state of the pursuers’ knowledge as to the deed of variation is irrelevant unless, perhaps, it gave rise to acquiescence or personal bar; but no argument was addressed to me on that point".
He concluded: "I simply do not accept that in the circumstances of this case the law allows the deceased’s wishes to be disregarded without the knowledge or consent of those whom the deceased intended to benefit.
"The conclusion that I reach on the deed of variation is that it is simply a contract between the executors and the widow. If it has binding effect it has binding effect only between those parties. It can have, and has, no binding effect as between the pursuers and the trustees. Fundamentally, it cannot have the effect of varying the terms of the deceased’s will. No issue of prescription in respect of the deed of variation arises as between the parties to this action."
The cause was continued to a procedural hearing.