Scottish Court of Session Decisions

The late George Borthwick, merchant in Jedburgh, and the late Richard Robison, were appointed trustees under the settlement of Elizabeth and Agnes Waugh, executed in 1792, which directed them to convert the trust estate into money and to lend out and secure the proceeds for behoof of Gavin Elliot in liferent, and his heirs in fee. Borthwick and Robison accepted and acted. The trust-funds, amounting to upwards of £1100, were realized and lent on heritable security. Richard Robison having died, George Borthwick assumed James Robison into the trust in 1816. The debtors in the heritable bonds paid them up in 1817. The sum of £500 was immediately reinvested on heritable security. William Borthwick, the son of George Borthwick, and his partner in business, got possession of the remainder of the trust-funds. A state of these funds was prepared on March 3, 1818, which bore that £661, 14s, 3d, were “in William Borthwick's hands at 23d September, 1817.

“Whereof to be lent Mr John Robison on heritable security, bearing interest from 23d September,	£400 0 0
To be lent William Borthwick on ditto, bearing interest from same date,	230 0 0
In the hands of William Borthwick of interest subsequent to the 15th May, 1816, which either has or will fall to be accounted for by him to Gavin Elliot,
		£661 14 3”

This state was signed by George Borthwick and James Robison, the two trustees.

The person mentioned as John Robison was a brother of James the trustee. The document containing the above state also contained, subjoined thereto, a “State between John Robison and William Borthwick, respecting the foregoing.” It purported to be an arrangement between William Borthwick and John Robison, bearing that, of the £400 to be lent to John Robison, £300 had already been advanced, and a bill was to be granted by William Borthwick for the balance. It was signed by William Borthwick and John Robison, William Borthwick retained the sum of £230, but without granting heritable security. The arrears of interest were duly paid to Gavin Elliot, and the subsequent interests were also paid.

George Borthwick, besides moveable property, possessed also a tenement of houses in Jedburgh. At the marriage of his son, William, in 1809, George Borthwick became a party to the contract of marriage, and conveyed the whole estate, heritable and moveable, that should belong to him at his death, and particularly the above tenement, to William Borthwick and his spouse, and the longest liver of the two in liferent, and to the children of the marriage; whom failing, the heirs of William Borthwick, in fee. George Borthwick farther, in the contract, appointed William Borthwick his executor, and declared him bound to pay all his debts, and also four provisions of £250 to each of his daughters. George Borthwick reserved his liferent of the whole estate, with full power of disposal, and also of altering the provisions of his daughters. He subsequently, in 1811, restricted the provision of his daughter Jenny to £200, not payable till one year after his death. He died in 1822, leaving considerable personal property besides the tenement of houses already mentioned. His estate was sufficient to have paid all his debts even if these included the £230 of trust-funds lent to William Borthwick; and also to have satisfied the provisions to his children, and to have still left a considerable surplus to William, who now took infeftment under the marriage-contract and entered on the management of the estate, and had universal intromission. The estate was, at his death, immediately tangible and available to that extent. ^* He proceeded to pay off his father's ordinary debts, and the provisions of the other younger children, excepting Jenny. After a few years he got into pecuniary embarrassments, and ultimately became bankrupt. James Robison, the co-trustee of George Borthwick, under the Waugh trust, died in 1822, or 1823, and no trustee was appointed in their room until 1828, when George Hilson, senior, manufacturer in Jedburgh, was appointed, apparently in virtue of powers conferred on Gavin Elliot, in the event of all the trustees deceasing. In 1830, William Borthwick granted to Hilson a bond and disposition in security of the debt of £230, already mentioned, over the tenement in Jedburgh which had belonged to his father. The deed narrated that a state of trust-funds had been made up in 1818; that John Robison held £400 of the balance of trust-funds, “for which he engaged to grant heritable security; and that I, the said William Borthwick, held £230 sterling, the remaining part of said capital, for which I also then agreed to grant heritable security; and seeing that the said sum of £230 sterling, with interest from Whitsunday last, is still resting unpaid by me, and that I have not hitherto granted the security stipulated,” &c.; therefore he now bound himself to pay £230 to Hilson, as trustee, and in security thereof granted the disposition in question.

In 1836 Jenny Borthwick, daughter of George Borthwick, alleging that she had never received payment of her provision of £200, and that

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* In the Inner House, the case was expressly pleaded on this footing; and the record bore, in substance, the same thing.

William Borthwick was a bankrupt at the date of granting the security, raised a reduction of it on the act 1696, c. 5, as granted in security of a prior debt, to the prejudice of his just creditors.

Hilson, besides other defences, stated as his second plea, that as George Borthwick was “responsible for the sum secured by the disposition challenged, the pursuer, as a legatee or gratuitous creditor of George or William Borthwick, could not compete with the defender, or question any security granted for the defender's claim, over the property which descended from George Borthwick.” The defender stated as his third plea, that “George Borthwick's consent to the arrangement, and agreement under which William Borthwick granted the heritable security in question, was an implied exercise of George Borthwick's power or faculty under the contract of marriage, and the pursuer's provision being thereby postponed to the defender's claim, and heritable security provided for said debt, the pursuer cannot now compete with the defenders, or challenge their security.”

In making up a record, the pursuer alleged that there had been negligence on the part of Waugh's trust in not sooner demanding payment or security while William Borthwick was still solvent.

The defender answered, that negligence was more properly imputable to the pursuer, in not taking payment of her provision; and that as the trust had remained without a trustee in consequence of the failure of George Borthwick and his co-trustee to assume trustees, the pursuer could not found on any plea of mora against the trust-estate.

After the record was closed, the pursuer pleaded—

1. The late George Borthwick left an ample estate to meet all his debts, and liabilities, besides satisfying the provisions to younger children. William Borthwick, the eldest son, took up the whole estate, and became debtor to the pursuer, and other younger children, for their provisions. In so far as Hilson was a creditor merely of William Borthwick, the pursuer, being equally a creditor of his, was entitled to challenge the security. And the late George Borthwick was not debtor to the Waugh trust in the sum for which the security was granted. He and his co-trustee had agreed to lend that sum to William Borthwick, and had done so. William Borthwick was, therefore, the sole debtor to the Waugh trust; and though he had failed to grant heritable security during the lifetime of his father, George, still he alone had received the money, and was debtor for the amount.

2. But even if George Borthwick had been debtor to the trust-estate for the sum in question, still, after the lapse of three years from his death, the trust-estate lost all right of preference in competition with the creditor-proper of the son. By the son's infeftment in the heritage, and intromitting with the moveables, the whole estate which had been his father's became his own. In order to claim against that estate, the beneficiary under the trust must have first constituted the debt against the son, and then, as creditor of the son, have proceeded to attach the estate. To preserve any preference for such a creditor, in competition with the creditor-proper of the son, the act 1661, c. 24, was passed; but it limited the preference to three years. After the son had been for three years fully vested in the estate and effects which had been his father's, no such preference remained, and all his creditors, whether they were creditors-proper, who had never been creditors of his father, or whether they had also been creditors of his father in his lifetime, stood on an equal footing. The whole estate of the son, whether derived from his father, or otherwise acquired, formed one blended estate, upon which all his creditors, of every class, ranked pari passu. Therefore, as the pursuer must have been entitled to compete pari passu with any of the creditors-proper of William Borthwick, and these, after the three years, must have been entitled to compete pari passu with any of the creditors of the father, it necessarily followed that the pursuer must have the same right to challenge a security granted to create a preference to a creditor of the one class, as of the other. These views were supported by the case of Remington and Company, ¹ Dec. 10, 1829, which applied a fortiori, as the eventual defalcation there occurred in the proper estate of the father, which, before being realized, was insolvent. The subsequent case of Bruce, ² June 9, 1831, was no precedent of a contrary tendency, as it was there expressly stated in the note of the Lord Ordinary (Moncreiff), which was adopted by a majority of the Court, that the whole estate of the father (or its proceeds) were still extant; that the question did not arise out of the bankruptcy of the heir; that the widow and children were not creditors of the heir; and that there was no question on the act 1661. And in the case of Wallace, it did not appear that the father's estate had ever been solvent. ³

3. There was nothing in the special circumstances to support the plea that George Borthwick had bound himself that the special security over the tenement in Jedburgh should be granted; or that it was an implied condition in the provisions to younger children, that these should be postponed to the granting of the security in question. He left ample funds for payment of these provisions, and meeting all other liabilities, and was therefore entitled to consider that his younger children would become creditors of William for their provisions, and would possess every right and privilege of any other creditor-proper of William.

Pleaded by the Defender—

1. George Borthwick was debtor for the sum in question, as well as his son. After uplifting the trust-funds, George and his co-trustee authorized them to be lent to the amount of £230, the sum in question,

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¹ Ante, VIII. 215.

² Ante, IX. 695.

³ See Observations on Bench, in Wallace, May 16, 1821 (ante, I. 13; or I. 9, new ed.)

to William Borthwick, the son and co-partner of George, on condition of heritable security being granted for it. George, however, allowed William his son, and partner, to uplift and retain it, without granting the security, and undoubtedly became liable himself for the amount.

2. But as George Borthwick was debtor in this sum, and as part of the estate of George Borthwick was still extant, the defender had a preferable claim against it, to any which could be advanced by the pursuer, who was merely a legatee of the debtor. And this preference was inherent in the nature of their respective rights, so as not to be affected by the lapse of three years from the death of the party who was a debtor quoad the defender, but a mere gratuitous testator quoad the pursuer. These views were supported by the case of Bruce and Others, June 9, ¹ 1831, which expressly took away the authority of the previous case of Remington ² and Company, December 10, 1829; and they were also supported by the case of Wallace. ³

3. In the special circumstances, as there was only one heritable subject, the tenement in Jedburgh, in which William Borthwick had any interest, and as that interest arose to him under George's disposition in the marriage-contract 1809, it must be held that it was in the contemplation of both George and William, at the date of lending the trust-funds to William, that the security stipulated from William was to be granted over that tenement. It was only specific implement of that obligation which William had ultimately made, and it could not be challenged by the child and legatee of George, who was bound to see it fulfilled. George retained, while he lived, full power to alter the provision to the pursuer; and thus it became, in the circumstances, an implied condition of her provision, that it should be postponed to the granting of that security for the debt to the Waugh trust,

The Lord Ordinary pronounced this interlocutor:—“Finds, 1mo, That the debt for which the security under reduction was granted, arose from the bankrupt, William Borthwick, having received, at or prior to 1818, from his father, George Borthwick, and James Robison, as trustees under the trust-settlement of Elizabeth and Agnes Waugh, now under the administration of the defender, the sum of £230 sterling, which sum could only have come into his (William's) hands by the prior receipt and intromission of the said George Borthwick and his co-trustee. 2do, That the trustee, the said George Borthwick, by being a party to, and subscribing the State, dated 3d March, 1818, must be held to have acknowledged and agreed, in 1818, that heritable security was to be given for the said sum by his son, the said William Borthwick. 3tio, Finds, that in March 1818, the said William Borthwick was a co-partner in trade with his father. 4 to, Finds it admitted, that the said William Borthwick

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¹ Ante, IX. 695.

² Ante, VIII. 215.

³ Ante, I. 13. See also F.C.

was possessed of no other property at the date of the said State in March 1818, over which he could grant an heritable security, except the property in Jedburgh, over which the security under reduction was granted by William Borthwick in 1830, which property was then held by William Borthwick under a conveyance previously granted by his father, the said George Borthwick, as a party to his son William's contract of marriage, under reservation of his own (George's) liferent, and of a full power to alter and dispose of the subjects as specified in Article 1st of Condescendence. 5to, Finds it presumable, from the fact stated in the preceding finding, that the said George Borthwick directed, or consented that the security intended for Waugh's trust-money, was to be given by himself or his son over the very property now in question. 6to, Finds that George Borthwick, the trustee, having lived for upwards of four years subsequent to the date of the said State, without getting any heritable security prepared and completed by his son and co-partner, while he allowed the money, during all that time, to remain in that party's hands unsecured, must be held as having become personally liable to the trust-estate for the said fund, and that the same had become an onerous debt of George Borthwick's prior to his death: Therefore, and in respect that the pursuer's sole title is founded on a provision stipulated in her favour in the marriage-contract of William Borthwick, dated in 1809, to which his father, the said George Borthwick, was a party, whereby the latter obliged the said William Borthwick, after satisfying and discharging the granter's debts, to pay the pursuer (the granter's daughter) a provision of £200 at his death, but alterable and revocable by him at pleasure; and in respect that the pursuer, as a legatee under such a deed, cannot compete with, or challenge the right of the defender, as an onerous creditor of the said George Borthwick: And further, in respect that the said George Borthwick subscribed the said State, dated 3d March, 1818, Sustains the second and third pleas in defence stated for the defender, and assoilzies the defender from this action, and decerns: Finds it unnecessary, in hoc statu, to give any judgment on the other pleas: And finds the defender entitled to expenses.” ^*

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* “ Note.—The grounds on which the preceding judgment is founded, being articulately set furth in the interlocutor, require no illustration. Of course, if the facta are in any respect misapprehended, this will affect the conclusion. Upon the supposition that George Borthwick became indebted to the Waugh trust for the defender's debt, it is thought that the preference of the defender over George Borthwick's property is clear in law, as in competition with the pursuer, a mere legatee. The pursuer, no doubt, in a very able argument, pleaded that she was an onerous creditor, at least of William Borthwick; and as the term specified in the act 1661 had long ago elapsed, she was entitled to rank pari passu with the creditors of the ancestor. In support of this plea, reference was made to the case of Remington and Crawford Bruce (10th December, 1829, Shaw's Reports). But the present case differs from that in the most essential points. In the case of Bruce, the children had bonds of provision, on which infeftment was taken after the death of the ancestor. The Court held that equivalent to the heir giving payment. There was not only no such specialty here; but the very provision of the pursuer was payable under a deed, the primary purpose and condition of which was, that the disponee should pay the debts of the deceased. The pursuer was thus postponed to the debts of the granter, by the very deed on which the pursuer claims.

“The facts founded on in support of the 3d plea might, in an ordinary case, be thought insufficient to infer the exercise of a reserved faculty to alter or burden a subject, previously disponed to a son; but, when the very peculiar circumstances of this case are considered, it seems due to George Borthwick himself, to draw the conclusion adopted in the interlocutor. Here he was a trustee, acting for parties at a distance, and apparently unable to control him; in that situation, he gave his son and co-partner a portion of a trust-fund under his charge, and set forth, in a regularly docqueted state, that the son was to give heritable security; while the only heritable estate which his son was then possessed of, was that property which George had reserved a power to burden; in such a case, the Judge seems to be driven to the alternative of holding, either that the father meant to deceive and cheat his co-trustee and constituents, by allowing his son to bold the money without any security, or that he truly intended and agreed to burden the property himself, or at least to consent to his son (who had got the money) granting the security, as he afterwards did. The latter conclusion is supposed to be that which is most consistent, both with law and with a charitable consideration of the motives and character of the deceased.”

The pursuer reclaimed, and the Court, after hearing counsel, considering the case to be attended with difficulty, delayed giving judgment for a few days.

The following opinions were thereafter given.