McGrorty v O'Neill

JurisdictionIreland
Judgment Date06 May 1914
Date06 May 1914
Docket Number(1905. No. 375.)
CourtKing's Bench Division (Ireland)
O'Neill
and
McGrorty.

M. R.

(1905. No. 375.)

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1915.

Administration — Executor — Assets of Testator — Power of Executor to carry on Business — Right of Manager appointed by the Court to Indemnity out of General Assets — Right of Trade Creditors to Payment out of General Assets — Subrogation — Effect of carrying Fund to Separate Credit.

A manager appointed by the Court in an administration action to carry on the business of a testator in the place of the executor, who had an implied power to carry it on, no particular assets being devoted by the wll for that purpose, is entitled to be indemnified by the general assets against liabilities incurred by him in carrying on the business, and the trade creditors are consequently entitled to resort to such assets for payment of their debts. The fact that funds have been carried to the separate credits of legatees does not free such funds from liability in this respect.

The effect of carrying funds to a separate credit considered.

Adjourned Summons.

The following statement of the facts is taken from the judgment of the Master of the Rolls:—

“This action is one for the administration of the estate of William McGrorty, who carried on a general business in Killy-gordon in the county of Donegal. He made his will on the 10th March, 1893. By it he appointed the Rev. Vincent Grogan, the Rev. Dominick T. O'Neill, and Alexander McGrorty, his executors. He devised and bequeathed to his executors, whom he also appointed his trustees, all his real and personal property, including fee-simple property, farms held under judicial tenancies, moneys invested in the British funds, money in bank, his business premises, business, stock-in-trade, and book accounts due to him, upon trust to pay a certain annuity of £100, and, as to seven sums of £2000 each, to pay to each of the seven daughters of his niece, Catherine McGrorty, the interest on the said sum of £2000, arising from the investment of each such sum for life, and, after the death of each such daughter, to pay the principal to her children, as she should appoint, and, as to all the rest, residue, and remainder of his property, the testator directed it to be held upon trust, subject to the annuity and legacies, for his nephew, Alexander McGrorty, who was the father of the legatees. The testator further directed his executors to sell his interests in certain farms, and to withdraw the sum of £5000 out of his business in instalments of £1000 yearly, or in such larger instalments as they might consider his business could afford, and to invest the proceeds and the said sum of £5000 in consols, and to retain the same as security with his other property for payment of the annuity and legacies.

The testator made two codicils to his will. The first does not require notice, because it only gives a few pecuniary legacies. The second is dated the 22nd July, 1898. It recites that since the execution of the will and first codicil, his nephew, Alexander McGrorty, had had born to him a son, John McGrorty, and two more daughters, and that the testator was desirous of making provision for them. He revoked the devise of his real estate, and he devised and bequeathed all his lands, tenements, and hereditaments, and all his freehold and chattel real estate to the trustees named in his will, and two others, viz. the Rev. Gregory John Callaghan and Thomas J. Callaghan, whom he constituted executors and trustees, in trust as to the real estate, to hold the same for Alexander McGrorty during his life, or till his bankruptcy, and subject thereto for John McGrorty on his attaining the age of twenty-five years. The testator further, by this codicil, gave to each of the two daughters who were born to the said Alexander McGrorty since the date of the will a sum of £2000.

The testator died on the 3rd December, 1900, and his will and two codicils were proved by the Rev. Dominick Thomas O'Neill and Alexander M'Grorty.

I may mention here that in the course of the action it was decided that the testator's chattel real property passed under the second codicil, and was held on the trusts thereof, and that the legacies were payable out of the pure personal estate. This consisted of moneys in the funds, moneys in bank, the business, the stock-in-trade, and debts due to the business, a mixed fund, of which the business assets formed a part.

After the testator's death the business was carried on by Alexander McGrorty until his death, which occurred on the 23rd February, 1904. The business was subsequently carried on by the survivor of the executors who had proved, viz. the Rev. Dominick T. O'Neill, until the commencement of the action.

The necessity for the action arose from breaches of trust committed by Alexander McGrorty. This gentleman appears to have had no great respect for the testator's regard for consols as a sound investment. He withdrew large sums from the business, but instead of investing them in consols, as directed by the will, in the joint names of himself and his co-executor, he invested them in his sole name, or in his own name and that of his wife, principally in South African mines, with the usual disastrous result. The shares depreciated, and the fund which ought to have been available for payment of the legacies was considerably below what was required. In these circumstances the action was instituted by the surviving executor, and a decree for administration was made on the 13th July, 1905; and by the decree Edward McMenamin, who had been for many years in the employment of the testator and Alexander McGrorty, was appointed the manager of the business, which was to be carried on under the authority of the Court, it being assumed, as indeed all parties now admit, that the will authorized the continuance of the trading. It is quite clear that the Court sanctioned the continuance of the business and appointed the manager, principally in the interest of the unpaid legatees, that is the children of Alexander McGrorty, who were entitled to legacies of £2000 each, which had not been paid or provided for. These legacies were a charge upon the business and the other personal estate.

On the 15th March, 1907, the action came on for further consideration. The business was still being carried on, and, as part of the personal estate, was liable to make good the legacies; but no order was made for a sale thereof, it being thought that it was advisable to postpone the sale. By the decree on further consideration it was declared that the legacies bequeathed to Alexander McGrorty's children were due and payable, and that the legatees were entitled to interest thereon from the testator's death.

By a subsequent order dated the 2nd July, 1907, there being then a considerable sum of consols in Court representing personal estate, it was ordered that there should be carried over to the separate credit of each of the several legacies of £2,000 a sum of consols equivalent to £1,200 cash, and it was further ordered that the dividends on three of the said sums which were so to be carried over should be paid to three of the legatees who had come of age.

The circumstances and purposes for which this order was made were set forth in the affidavit of the Rev. Dominick T. O'Neill, the plaintiff. So long as the legacies remained unpaid they carried interest at 4 per cent., which the business was liable for. This was represented to be too heavy a burden for the business, and the proposition was made that the funds in Court should be applied in part satisfaction of the legacies by carrying sums on account to the separate credits opened in pursuance of the order. The sums brought to separate credits were therefore intended to operate as payments in point of law to the same extent as if payments were made out of Court. The claims of the legatees against the general personal estate were thus reduced pro tanto. It must be considered later on how far this affects the question submitted to the Court.

The next event which requires mention is the removal of Edward McMenamin from the management of the business under the Court, and the appointment of a Mr. Fitzpatrick as receiver and manager in his stead, by an order dated the 25th October, 1910. By a later order dated the 19th June, 1911, the business was ordered to be sold; but before that order was carried out a disaster occurred. The business premises and stock-in-trade were burned on the 21st August, 1911, and the assets, which were regarded as sufficient security for the payment of the business liabilities, disappeared. These liabilities were incurred during the management of the late manager, who was acting under an order of the Court. He is personally responsible for them, with any right of indemnity which exists in his favour. The creditors are entitled to the benefit of this indemnity, whatever it may be, because it is their right to be subrogated to the right of the manager. In consequence of the destruction of the business premises, the only funds which remain under the control of the Court (with the exception of a small sum standing to the general credit of the action) are the funds which have been carried to separate credits under the order of the 2nd July, 1907. It is to determine whether these funds are available for the indemnity of the manager, and through him for the payment of the trade creditors of the business, that the matter is now before the Court.

The question has been formally raised by a summons issued on behalf of the trade creditors, asking for an order that, notwithstanding the order dated the 2nd July, 1907, directing nine sums of £1,200 each to be transferred to the separate credits of the legacies, all the trade creditors be declared entitled to be paid the amounts of their respective debts out of the assets of the testator, and, in so far...

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1 cases
  • Healy, Deceased. Healy v Oliver
    • Ireland
    • Chancery Division (Ireland)
    • 17 Mayo 1918
    ...v. GortonELR [1891] A. C. 190. Kirkwood v. HamiltonDLTR 36 I. L. T. R. 155. Moore v. M'GlynnIR [1904] 1 I. R. 334. O'Neill v. M'GrortyIR [1915] 1 I. R. 1. Re BrookeELR [1894] 2 Ch. 600. Re OxleyELR [1914] 1 Ch. 604. Administration — Executor — Assets of testator — Power of executor to carry......

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