[IN THE HOUSE OF LORDS.] 1899. GREVILLE-NUGENT AND ANOTHER Nov. 20. v. MACKENZIE AND OTHERS.*

Minerals-Life Rent-Rent and Royalties of Mines-"Opened" Mines-Income or Capital.

The rents and royalties of "opened" mines-which mines are the subject of a settlement in the form of a trust for sale and for division, after the death of the tenant-for-life, according to the exercise of a power of appointment—are to be treated as income and not capital, and the term "opened mines" is not confined to mines worked for the first time by the settlor or

testator.

Decision of the First Division of the COURT OF SESSION in Scotland (25 Rettie, 475) reversed.

This was an appeal against the opinion and judgment of the First Division of the Court of Session (the Lord President, Lord Adam, Lord McLaren, and Lord Kinnear), dated January 25, 1898, and given on a Special Case which raised the question whether certain rents and royalties payable under a lease and received by

*Coram, The Lord Chancellor (Earl of Halsbury), Lord Macnaghten, Lord Morris, Lord Shand, and Lord Brampton.

VOL. 69.-P.C.

the marriage settlement trustees of Mr. and Mrs. Greville-Nugent, in respect of stone quarries on the estate of Cove, were to be treated as capital or income.

The facts were thus stated by Lord Adam in the course of his judgment: The questions in this case arise upon the construction of a deed of settlement on the marriage of Mr. and Mrs. GrevilleNugent, dated June 3, 1882, and which we should call an ante-nuptial marriage contract. At that date Mrs. GrevilleNugent, then Miss Ogilvie, was proprietrix of the estate of Cove, in Dumfriesshire, and by the contract she bound herself to convey that estate to the trustees therein named, upon trust, at the request of her husband and herself during their joint lives, or of the survivor of them, and after the death of both, at the discretion of the trustees, to sell the same, and all necessary powers of sale were given them for that purpose. Power was also given to them in the meantime to lease the unsold parts of the lands, and they were directed to hold the proceeds of the sale and the net rents and profits of the Cove estate until sale upon the trusts therein declared. These were that they should hold certain investments, including the net moneys to arise from the sale of the estate, but not including the rents and profits of the estate until sold, in

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GREVILLE-NUGENT v. MACKENZIE, H.L. trust to pay the annual income thereof to Mrs. Greville-Nugent for her sole and separate use, and after her death to her husband under certain conditions which need not be mentioned, and after their death for the children of the intended marriage. As regards the rents and profits of the estate until sold, or of so much thereof as should not have been sold, the trustees were directed to pay and apply them to the person or persons for the purposes and in the manner in which the annual income of the residue or net money to arise from such sales would be payable or applicable if the sale and investment thereof were then actually made. Mrs. Greville-Nugent is the person who would at present be entitled to the annual income of the moneys arising from the sale of the estate. These being the provisions of the trust settlement, the facts which raise the present questions are that, the estate not having yet been sold, the trustees on June 11, 1895, let certain quarries in the estate to tenants who pay therefor a fixed yearly rent of 1007. and a royalty of one-twelfth of all stone quarried. These yielded in the year ending July 1, 1896, a rent or profit of 2257. 19s. There is only one child of the marriage, Miss Greville-Nugent, who is the party of the second part, and the question is whether Mrs. Greville-Nugent is entitled to receive the rent and royalties received in respect of the quarries so let, or whether the rent and royalties are to be regarded as capital, of which she is only entitled to the income.

The Court of Session adopted the view that the rent and royalties were capital, of which the life-renter was only to receive the interest.

Mrs. Greville Nugent appealed to this House.

The Lord Advocate (Graham Murray, Q.C.) (with him A. S. D. Thomson, of the Scottish, and E. J. Elgood, of the English Bar), for the appellants.-The question whether the rents and royalties of mines or quarries are to be treated as income or capital is one of intention to be gathered from the will or settlement. One element is whether they were opened or not at the inception of the trust-Campbell v. Wardlaw

[1883]. But that is not decisive. Here the intention is clear that they were to be treated as income. The First Division was misled by the power of sale, which in English conveyancing does not, import that the property is to be immediately sold, but is inserted for the purpose of ultimate division. These quarries had been worked intermittently for a long period before the settlement; and power to lease is given by the Trusts (Scotland) Act, 1867 (30 & 31 Vict. c. 97), s. 2, sub-s. 3.

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[He also cited Elias v. Snowdon Slate Quarries Co. [1879] and Bagot v. Bagot [1863]]

Guthrie, Q.C. (with him J. Taylor Cameron), both of the Scottish Bar, for the respondent, Miss Greville-Nugent.These are not "opened" quarries, having for long been left unworked and not having been worked by the settlors. In such circumstances, the fair inference is that in the case of mines formerly worked but not dealt with by the settlor, no reservation is intended of the profits-Clegg v. Rowland [1866] is to this effect.

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[See also Campbell v. Wardlaw [1882]," in the Court of Session, Stair, pp. 2, 3, 74, and Wardlaw v. Wardlaw [1875].

Methold, for the respondents, the trustees, referred to Clavering v. Clavering [1726].7

THE LORD CHANCELLOR (EARL OF HALSBURY). With the greatest respect to the learned Judges who have decided this case in the Court below, I have not been able to follow the reasoning by which they have arrived at their conclusion. I rather conjecture that what the Lord Advocate has suggested has been the foundation of the judgment (indeed, it was stated by the Lord President to have been the foundation of his judgment)— that he thought the main purpose of the instrument was to create a power of sale, as the form of English conveyancing had somewhat misled the learned Judge as to (1) 8 App. Cas. 641.

(2) 48 L. J. Ch. 811; 4 App. Cas. 454.
(3) 33 L. J. Ch. 116; 32 Beav. 509.
(4) 35 L. J. Ch. 396; L. R. 2 Eq. 160.
(5) 9 Rettie, 725.
(6) 2 Rettie, 368.
(7) 2 P. Wms. 388.

GREVILLE-NUGENT v. MACKENZIE, H.L. what was the main purpose of the settlement. The machinery by which, in the event of there being children, the property should be equally divided between them being provided for by a power of sale so as to turn realty into personalty-because that is the substance of it-is a device familiar in the ordinary form to the English conveyancer; and I think the learned Judge has been misled by that into assuming what he has more than once in the course of his judgment saidthat the main purpose of the settlement was a sale, and all the other provisions were intended to be temporary. That has now been explained, and I observe that Mr. Guthrie has not dealt with that part of the argument at all, but has allowed it to pass without observation. Therefore I think we may dismiss that as being decisive of this case, one way or the other, and we must look to see what has been the intention of the parties to this settlement apart from any such considerations as arise from the power of sale.

Now, as to that proposition, which is the one which your Lordships are called upon to decide, it appears to me that it is covered by authority. There is given what includes both the mineral estate and the other estate, whatever there may be; and the question is, what those words convey. Now, whatever might have been the case originally, and I am not prepared to defend the logic of some of the reasons given in the earlier decisions, at all events, for obvious reasons-and I think if the Courts had the power by law to do it they were most useful and cogent reasons-they have treated in this class of case the produce of the soil as including that which is in truth what Lord Cairns has described as the substance of the soil itself. In speaking of coal, for instance, we talk constantly about the "rent" and "royalty" of coal. The phrases are figurative: you pay rent in one sense it is true; but rent generally has been understood to be a return from the soil, and not to be a consumption or taking away of the soil; whereas, of course, where the soil consists of coal and other minerals you are actually taking it away. But whatever may have been the original view of such questions, the matter has

now become so perfectly well ascertained by a long course of decisions that, wherever those general words are used and the question is whether the tenant for life is entitled to what, in one sense, is called the usufruct, but I suppose in more strict language would be called part of the soil itself-where you are dealing with minerals, it has always been held, so far as I know, without doubt or question, for centuries, that the proceeds of opened mines form part of that which may go to the tenant for life, and that he is entitled to take them as part of the proceeds of the soil. As I have said, I am not quite certain that if this matter were res integra, and if we were sent back two hundred or three hundred years, would be quite able absolutely to follow all the reasoning by which that result is arrived at; but it is immaterial to do so now, because that point has been ascertained and adjudicated upon over and over again, and finally in this House.

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That being the state of the law, now for the first time, so far as I am aware, a new limitation is sought to be placed on that principle, and the proposition comes somewhat in this form. In dealing with a settlement or a will the Courts have said that you must put in the words opened mines" as being part of what is settled or bequeathed; by construction you are to put in those words; whether the words occur or not they are imported into it by the construction which the law has placed on instruments of that kind. Now for the first time it is suggested that the words "opened mines are not sufficient to convey what the law assumes to be the state of things, and you must add to them "mines opened by the settlor or testator." The learned counsel for the appellants has given us a case in Peere Williams which goes a good deal further; but I was prepared without that case to say that the suggestion is absolutely a novelty. In all the cases the question has always been, What is the thing bequeathed or settled? And if there are opened mines the consequence follows. The diligence and learning of Mr. Guthrie, which is certainly not likely to leave anything unsaid or unsearched for, has not been able to produce a single case in which any