Wakilii

Barrett v Barrett and Others (Civil Case No. 22 of 1940 (O.S.))

East African Court of Appeal · [1940] EACA 29 · 1940 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application by surviving executor for determination of question arising from court order regarding apportionment of proceeds from deficient mortgage securities
Decision
Question determined in favour of proportionate apportionment between capital and income

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Where a settled fund is invested in mortgages that prove insufficient to pay principal and interest in full, the proceeds must be apportioned between the life tenant and remaindermen in the proportion which arrears of interest bear to the capital debt. The court applied the principle from In Re Atkinson requiring rateable equality in the incidence of loss between capital and income beneficiaries.

Outcome

Question determined in favour of proportionate apportionment between capital and income

Facts

George Russell Mayers died leaving a will devising residue to trustees to pay income to his widow for life, then to his children. Court orders in 1933 and 1935 provided for payment of a charitable trust fund of £30,000 by instalments, with interest at 5% charged against accumulated arrears of income. The estate consisted largely of agricultural mortgages. By April 1935, accumulated arrears of income from mortgages totalled Sh. 286,851/62. Subsequently, nine mortgages were realized through suits and compromises, producing Sh. 190,804/30 against total debts of Sh. 294,013/27 (principal Sh. 199,622/08). The securities proved deficient. The surviving executor sought determination of how to apportion the proceeds between principal (for remaindermen) and interest (for life tenant).

Issues

  1. Whether the aggregate sum realized from deficient mortgage securities should be applied first to principal then interest, first to interest then principal, or pro rata between principal and interest as between life tenant and remaindermen.

Orders

  • The apportionment of the sum realized by the mortgages as between the surviving executor and the Trustees of the Charitable Trust should be in the proportion which the amount due in respect of arrears of interest bears to the amount due for capital.
  • The costs will come out of the estate of the deceased.

Rules and key headnotes

Trusts — Settled Funds — Deficient Mortgage Securities — Apportionment Between Life Tenant and Remaindermen
Where a fund is settled upon a life tenant and remaindermen and is invested in mortgages which prove insufficient for payment of principal and interest in full, the sum realized by the security must be apportioned between the life tenant and remaindermen in the proportion which the amount due for arrears of interest bears to the amount due for capital.
Trusts — Settled Funds — Loss on Investment — Rateable Equality
Where there is a security for principal and interest and a loss occurs on realization, the principle to be applied is that there must be rateable equality in the incidence of that loss as between capital and income beneficiaries.

Cases cited (3)

  • In Re Atkinson, Barbers' Company v Grose-Smith (1904) 2 Ch 160
  • In re Moore (1885) 54 LJ Ch 432
  • Smith v Law Guarantee and Trust Society Ltd (1904) 2 Ch 569

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Barrett v Barrett and Others (Civil Case No. 22 of 1940 (O.S.)) [1940] EACA 29 (1 January 1940)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.