Scottish Court of Session Decisions

In 1828, Sir William Eliott of Stobs and Wells executed a trust-disposition of the estate of Stobs for behoof of his creditors. The creditors, however, being dissatisfied with the provisions of the deed, and at the same time being desirous of a trust-management, appointed a committee to report as to the proper measures to be taken. The committee reported, inter alia, on the two following points:—1st, “That Sir W. Eliott should appropriate, for the purposes of the trust, a clear yearly sum of £700 from the rents of Wells, and for which an heritable bond of annuity shall immediately be granted in favour of the trustees, upon which they shall be infeft.” 2d, “That, for the security of the creditors that Wells shall not be burdened to their prejudice prior to the expiry of the three years during which their real diligence is restrained under the proposed arrangements, Sir William shall immediately execute a bond for the sum of £30,000, on which inhibition shall be used in name of the trustees.” The report of the committee was approved of by the creditors, 14th January, 1829.

An arrangement was concluded in terms of this report between Sir W. Eliott, his trustees, and the creditors, which was carried into effect as follows:—

Sir William executed, on 31st January, 1829, a supplementary trust-disposition engrossing the heads of arrangement above quoted, and stating, as the cause of granting the deed, his anxiety to comply with the wishes of his creditors as expressed in the report. Of the same date he executed in favour of the trustees a personal bond for £30,000, and a bond of annuity (both in one deed) for £700. The £30,000 bond proceeded also upon the narrative of the report of the committee of creditors, and of the arrangement consequently adopted, making express reference to the supplementary trust-deed. The annuity was conveyed to the trustees under a similar reference, and with a precept of sasine, upon which they were infeft in February, 1829.

Of the same date the trustees granted a “declaration and obligation relative to the personal bond for £30,000, and the heritable bond of annuity,” stating the granting of the trust-disposition and of those bonds, “and considering that the object of granting the said bond was in order to enable us the said trustees to raise all manner of legal diligence thereon for behoof of the creditors of the said Sir William Francis Eliott, and for their security against any debts hereafter to be contracted by him;” and seeing it was reasonable that it ought to be granted “in fulfilment of the agreement under which the above bonds were executed,”—the trustees therefore bound and obliged themselves to “use such diligence as may be necessary on the said bond, only in security and for behoof of the said creditors, and that no ultimate diligence by caption shall follow thereon at the instance of us or our successors against him;” and also that the £700 annuity should not commence to run till Sir William was legally entitled to enter into possession of the estate of Wells.

Of equal date with these deeds, and as part of the same trust-arrangement, Sir William had prepared a deed of accession, which was then executed by himself, and of subsequent dates by his creditors. It proceeded on the same narrative as the others, the creditors thereby acceding to and ratifying the foresaid deeds and instruments, and the trust so constituted, and binding themselves “to supersede and refrain from using any diligence, either real or personal, for recovery of our said debts, until the said trust shall be brought to a termination, except as against the estate of Wells, or any other lands or estates to which I the said Sir William Francis Eliott may hereafter succeed, as to which we reserve our right to proceed with real diligence upon the expiration of three years after the period when the said Sir William Francis Eliott shall become legally entitled to enter into possession of the lands and estate of Wells, in the event of our debts not being fully paid during the intermediate period: Declaring, that immediately after the lapse of the said period, it shall be competent and lawful to us and our foresaids (and we hereby accordingly expressly reserve the power), to proceed with our diligence against such lands and estates, and to follow out the same to a conclusion,” &c.

After the personal bond above-mentioned had been granted, and the trust acceded to, the trustees raised and executed letters of inhibition against Sir W. Eliott, whereby the creditors were secured against debts to be contracted by him for the space of three years after his obtaining possession of the estate of Wells. Sir William soon afterwards came into possession of Wells, and no other diligence was used by the trustees during the three years thereafter. Among the creditors acceding to the trust, under the conditions and qualities above set forth, were the claimants, Yates and Macallan, who accordingly, during the same period, refrained from using diligence against the estate of Wells.

In March, 1833, after the three years had expired, Yates raised an adjudication against Sir W. Eliott, on the intimation of which as a first adjudication of the estates, Macallan also brought an adjudication, and the trustees raised a similar process on the £30,000 bond, which, as well as two other processes by creditors who had not acceded to the trust, were conjoined with the leading adjudication at the instance of Yates. The decreets of adjudication were all pronounced on the same day, the Court adjudging from Sir W. Eliott certain portions of the estate of Wells. Thereafter Yates and Macallan raised an action of maills and duties against Sir William, and the tenants of the adjudged lands, and obtained decree December 11, 1833. The trustees used arrestments against the tenants, and likewise brought processes of maills and duties on their decreet of adjudication, and on their heritable bond of annuity, in which they obtained decree February 18, 1834.

In these circumstances the tenants on the adjudged lands brought an action of multiplepoinding to ascertain who had right to the rents.

In this process the trustees claimed, 1st, In virtue of the heritable bond of annuity and their infeftment, and the decreet of maills and duties following thereon, to be preferred for certain sums of annuity due to them; 2d, In virtue of the £30,000 bond and the arrestments which had been used, and also of the decreets of adjudication and of maills and duties following thereon, to be preferred on the rents in medio preferably to the other claimants.

Yates and Macallan claimed to be preferred to the trustees, pleading; 1. The adjudication and other proceedings under the personal bond founded on by Sir William Eliott's trustees, do not confer any preference or right over the fund in medio, in respect—1st, The bond on which the adjudication, &c. proceed having been granted for a special and different, and a temporary purpose, could not be made the foundation of diligence after that purpose was served; 2d, No valid adjudication could proceed for the individual creditors, upon the indefinite bond for £30,000, none of the debts being specified in the adjudication—none of the documents being produced or libelled on—no opportunity afforded of investigating the claims of the creditors, or their right of competition, and many of said claims not being legally constituted as against Sir William Eliott, nor ranked upon the estate.

2. Looking to the nature and terms of the whole trust-arrangement, the deeds must be taken together as affording evidence of the purposes and conditions of the compact, the personal bond having it in view to prevent Sir William from contracting debts which might affect the estate during a certain period, and not having been granted as an absolute obligation for payment of the sum therein contained.

The trustees pleaded in answer (their claim to the sums of annuity not having been seriously objected to)—That the £30,000 bond was upon the face of it an absolute bond for payment of the contents, and the creditors whom the trustees represented were actual bona fide creditors; that the only qualification in the relative deed of declaration was, that the trustees should use such diligence as might be necessary on the bond, only in security and for behoof of the creditors, and that no ultimate diligence by caption should follow thereon; that, whether the bond be taken by itself or along with the declaration, there is no ground for holding that the trustees were precluded from leading an adjudication upon it so as to be conjoined with other adjudications then in progress, or that they are now precluded from founding upon it to the effect of recovering payment out of the rents.

The Lord Ordinary pronounced the following interlocutor, adding the subjoined note ^*:—“Finds that no relevant or sufficient objection has

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* “On reconsidering this case, with the aid of the able argument in the revised cases, the Lord Ordinary is satisfied that the adjudication of the trustees cannot be sustained in competition with the adjudications of the other claimants, legally deduced in terms of the express right reserved to them. He is of opinion, that from the terms of the bond, proceeding expressly on the previous arrangements, and specially from the terms of the supplementary trust-deed, and deed of accession, with which it must be held to stand inseparably connected, it affords no warrant, according to its true meaning and purpose, for adjudging the estate of Wells, after the expiry of the three years, to the prejudice of the individual creditors, who, in consideration of the trust, and of that very bond, consented to waive their own right to use diligence during that period. He thinks that the limited purpose of it, to protect the creditors against the contraction of future debts, or the diligence of any creditors not parties to the trust, during the period for which they engaged to supersede diligence at their own instance, is very plainly expressed in the bond itself, considered in connexion with the supplementary trust-deed, and the report of the committee expressly referred to, on which the whole transaction proceeded. There can be no room for the supposition of any change of intention in the parties, because the report is in express terms adopted as the basis of every one of the deeds at the dates of them. With regard to the declaration of trust, the claimants, Yates, &c, seem to be in a mistake in stating that it was not under the notice of the committee. But this is of no real consequence. For though that deed, the particular purpose of which was to prevent the use of personal diligence against Sir William Eliott even within the three years, is expressed more loosely in other respects than the other deeds, the effect of it is wholly dependent on the true character of the supplementary trust, and the bond in connexion with it; and the Lord Ordinary is of opinion that the words relied on by the trustees, in relation to the object of the bond, as being to enable them ‘to raise all manner of legal diligence thereon, for behoof of the creditors of Sir William Eliott,' cannot be separated from the words which follow—‘ and for their security against any debts hereafter to be contracted by him,' or from the express declaration that it is only ‘in fulfilment of the agreement under which the said bonds were executed’ that this deed is granted at all. The true meaning seems to be, that the trustees were to be enabled to use diligence, for behoof of the creditors, and for their behoof in securing them against future debts—the latter clause, with reference to the agreement, merely explaining in what respect and to what end it was to be used for their behoof. At any rate, it seems to be impossible to bold that a deed of this kind was meant, or can be construed to control or alter the purpose and limited object expressly declared by the other substantive deeds which constitute the agreement of the parties.

“The manner in which the trustees proceeded by using inhibition immediately, and abstaining from any other measure, strongly confirms this as the truth and justice of the case. The proceedings quoted by them as tending to show the contrary, appear to have taken place after the idea was suggested, probably from imperfect acquaintance with the real transaction, of turning the bond to a different purpose.

“The Lord Ordinary is far from being satisfied with the answer made to the separate objection to the validity of the adjudication from the indefinite nature of the bond. He doubts whether it is any good answer to say, that the adjudication is only used for security, and that the amount of the debts may be ascertained in the ranking. The difficulty is, that however legally effectual the bond might be in itself, it may have required constitution of a specific debt before adjudication of real estate, whether for security or payment, could proceed. But he only expresses this as a serious doubt; and means to put his judgment on the other ground—the true meaning and legal import of the deeds.

“With regard to the question concerning the arrears of annuity, the Lord Ordinary thinks, that in the circumstances no relevant objection has been condescended on. The claimants merely say that no diligence was used for their annuities. In this they appear not to be correct, as arrestments were used. But, independent of this, these annuities were secured by infeftment; and it would be a great deal too sharp to say, that the trustees had lost such a security because they did not use and proceed with diligence upon every failure of the debtor to pay. There might be a case in which negligence would infer such a forfeiture. But there must be much stronger facts than any thing stated in this case to warrant such a result.”

been condescended on to the claim of preference advanced by Eliott's trustees for the sums of annuity due to them under the bond of annuity for £700, referred to in the proceedings, their infeftment thereon, and the arrestments used by them; and to this extent prefers them accordingly primo loco: Finds that the claimants, Joseph Brookes Yates and James Macallan, are by their adjudications preferable to the claimants, the trustees of Sir William Francis Eliott, Baronet, in so far as the claim of the latter is founded on their adjudication led on the bond for £30,000 granted in their favour by the said Sir William F. Eliott; and prefers the said claimants, Joseph Brookes Yates and James Macallan pari passu accordingly; and with these findings appoints the case to be enrolled: Finds the claimants, Yates and Macallan, entitled to the expenses of the principal discussion, subject to modification in respect of the point raised regarding the annuities hereby decided against them.”

Eliott's trustees reclaimed as to the second part of their claim which had not been sustained; and Yates and Macallan reclaimed as to the sums of annuity and expenses.