Scottish Court of Session Decisions

Immediately after the death of the late William Ritchie, teacher of dancing in Edinburgh, in February 1821, his widow was appointed factrix loco tutoris to their children, who were all in pupilarity. William Carmichael, assistant-clerk in the Court of Session, and the late George Lang, depute-assistant clerk in the Court of Session, became her cautioners. She did not lodge in process any rental of the heritable property, which consisted chiefly of some house-flats in Edinburgh, and a heritable bond for £1000; nor did she lodge a tutorial inventory of the estate. In 1823 she invested a sum of £1300, being almost the whole of the moveable funds of the estate, in the purchase of houses in Edinburgh, the titles of which were taken in her own name. This property subsequently fell very much in value. In 1828 she married John Ritchie, then teacher of English in Edinburgh, and in 1830 she applied to have her accounts audited and her factory recalled. Her children also afterwards presented a petition for a recall of her factory, which was conjoined with her petition, and the factory was recalled in March, 1832. In the same year, an action of count and reckoning was raised against her and her cautioners, by her four children, Catharine, now Mrs Lambe, Georgina, and others. In that action the following certificate was put into process by the clerk of process (Carmichael, one of the defenders) as to the manner in which Mrs Ritchie had lodged her factorial accounts.

“No. 1. Accounts for three years, from February, 1821, to 14th May, 1824, stitched together, were lodged by her with me in autumn vacation, 1825, docqueted by Sir Walter Scott, and signed by the Lord President at the meeting of the Court in November, 1825.

“2d. Accounts for four years from May, 1824, to May, 1828, stitched together, docqueted and signed as above, as lodged 13th November, 1828.

“3d. Account from 1828 to 1829, docqueted and signed as above, 20th May, 1830.

“4th. Account from May, 1829, to 1830, docqueted and signed as above, said 20th May, 1830.

“5th. Account from 1830 to 1831, docqueted and signed 25th May, 1832.

“6th. Account from 1831 to 1832, docqueted and signed 25th May, 1832.”

Under the petition of Mrs Ritchie, the Lord Ordinary (Moncreiff) in February, 1834, pronounced an interlocutor containing various findings as to the principles of accounting between the parties, and, inter alia, “7mo, Finds it admitted that the factrix has not complied with the provisions of A. S. 1730, in so far as she did not lodge a rental of the heritage, or any curatorial inventories, and the accounts of her intromissions were not regularly given in; but finds, that the effect of this neglect of the A. S. cannot be satisfactorily determined, until the accountant shall report on the actual state of accounts rendered, in order that it may be seen how far these accounts are full and sufficient, and how far the estate of the minors may have sustained loss by the want of exact or sufficient diligence.”

His Lordship's judgment was brought under review, and recalled in so far as inconsistent with the judgment of the Court, ¹ which settled various principles as governing the accounting. The finding above quoted was not inconsistent with any of these principles. By their judgment, the Court found that the purchase of heritable subjects with the children's money was an act of extraordinary administration, and that the factrix must hold these subjects on her own account, “and give her children credit, in her factory accounts, for the sums so expended.”

When the cause was sent back to the Lord Ordinary a report was made up by an accountant, which charged Mrs Ritchie with interest only at 3 per cent till Whitsunday, 1823, in respect the sums previously in her hands were small, and she had repeatedly advertised for borrowers, but without effect. At that date she had bought the houses as already mentioned, and the report charged her thereafter with interest at 5 per cent till Whitsunday, 1828, and thereafter at 4 per cent; in respect that the banks discounted at 4 per cent, and good heritable security bore no higher rate. The accountant accumulated the interest yearly, observing that “in this way the interest of the minor's money is accounted for as if it had been invested in loan.” In regard to the allowance of factor-fee, or commission, to Mrs Ritchie, the accountant reported, “with reference to the 7th finding in Lord Moncreiff's interlocutor, “that, in so far as he is enabled to judge, the materials afforded by Mrs Ritchie for making up a state of her factorial accounts, are sufficient”—(except as to some subordinate family expense)—and “that the estate of the minors does not appear to have sustained loss by the want of sufficient diligence”—except as to certain arrears of rent, which the Court held to have been lost without any fault imputable to Mrs Ritchie.

Both parties lodged objections to the report. The children of Mrs Ritchie, pursuers, pleaded (1.) In regard to the question of interest, she ought to be chargeable with full legal interest for the whole time during which the money was in her hands. Mrs Ritchie was now to be dealt with as a factrix, or judicial trustee, speculating with trust-funds, and lending them to herself; and whatever might be the market-rate of interest, during part of the period in question, charged by persons lending money, on good security, to approved debtors of their own selection, that could furnish no rule for a case like the present. The yearly accumulation of interest was necessary, otherwise the money would not be accounted for as an investment or loan; which was the only correct mode of accounting for it. (2) As to the factor-fee, it ought not to be at all allowed, as the factrix had not regularly lodged her accounts, and had otherwise failed to comply with the Act of Sederunt, February 13,1730. ²

Mrs Ritchie and her cautioners answered (1.) This case was one of a

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¹ June 24, 1834 (ante, XII. 775).

² Cranstoun, Dec. 1, 1826 (ante, V., 62; or, new cd. 57.)

very special nature, and of great hardship. The interest chiefly arose on the sum which she had invested in the purchase of heritage, which she bona fide did for behoof of her children, but which they, enforcing strict legal rules against her, had compelled her to keep, on her own account, the property having fallen in market-value, in the interim. And though she was thus made to account for the price as if she had borrowed the amount, she had all along two solvent cautioners, so that the loan should not bear higher interest against her, than the market-rate of interest on good security. And separately, the annual accumulation of interest was objectionable. (2.) As to factor-fee, it had recently been expressly decided, ¹ and it was the true construction of the Act of Sederunt, 13th February, 1730, that, although one-half of the commission must be disallowed for each year as to which the accounts were not regularly lodged, it was entirely discretionary with the Court whether they would deprive the factrix of the rest of the fee or commission; and in this case, where it was specially reported that no loss had arisen to the estate in consequence of the omission to lodge the accounts and comply strictly with the Act of Sederunt, the Court should not inflict any farther penalty; especially as the case was one of much hardship for the mother, in this question with her children.

By agreement of parties the accountant's report, and the objections of parties, hinc inde, were held as repeated in the process of count and reckoning.

The Lord Ordinary (Cuninghame) pronounced a finding, that the balance must be struck as at the date of the recall of the factory in March, 1832, and must bear “legal interest thereafter till payment,” ^* and, inter alia, “3tio, Finds the defenders are liable in interest on all sums uplifted by the factrix from banks, or from parties to whom sums had been lent as investments, from and after the period of intromission; and that interest is chargeable, on all sums received from ordinary debtors, from and after twelve calendar months after the sums were recovered, or ought to have been recovered by the defender; but in respect it is matter of notoriety that the usual rate of interest obtained in Scotland, either from banks or from borrowers in the ordinary course of business, during the whole period from 1822 till 1832 did not exceed four per cent, while a large part of Mr Ritchie's funds had been at one time deposited in bank at a rate of interest much below the above rate, restricts the interest to four per cent; but, in terms of the decision of the Court in the case of Mr John Hay against Scott (1st December, 1826), finds that the interest must be added to, and accumulated with, the capital, each year, and the accounts

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¹ Condie, Nov. 20, 1834 (ante, XIII., 61.)

^* His Lordship repelled a plea of the defenders, that the factory of Mrs Ritchie fell, ipso jure, on her second marriage. This was reclaimed against, but the reclaiming note, on this point, was not insisted in.

brought down accordingly to the termination of the factory, on 3d March, 1832. 4to, In respect the factrix and her cautioners failed to lodge their accounts periodically and regularly, in terms of the Act of Sederunt, 13th February, 1730, finds, in terms of the decision of the Court in the said case of Hay against Scott, that the defenders are not entitled to charge or take credit for any commission.”

Both parties reclaimed against the interlocutor, but did not press their notes, as to any other points than those contained in the findings above recited.