Scottish Court of Session Decisions

By trust-deed, executed on 25th March 1847, Mr Dingwall of Rannieston conveyed his estate to the defenders, Mr John Blaikie and Mr now Sir Alexander Anderson, advocates in Aberdeen, in trust for the purposes of management and payment of creditors. The most ample powers were conferred upon the trustees. They were allowed to appoint a factor, who might be one of their own number; and it was further declared that in “the execution of the trust they should not be liable for omission nor for exact diligenge, nor for the solvency of tenants or for any factors to be appointed by them, nor singuli in solidum, but each only for his own actual intromission. Both of the defenders accepted the trust; and without any formal or written appointment Messrs Blaikie & Smith, advocates in Aberdeen, of which firm the defender John Blaikie was the leading partner, acted as factors in the trust, and continued to do so till 1849, when the duties were assumed by the firm of John and Anthony Blaikie, of which firm the defender Blaikie was the leading partner. On the 22d October 1855 Mr Dingwall executed another trust-deed in favour of the pursuer, conveying to him his whole estate, and empowering him to call upon the defenders to account and to denude. This new trust was forewith intimated to the defenders, and in 1857 the present action, founding upon it and concluding for an accounting and denuding, was raised against them. In consequence of certain claims set up and questions raised by the defenders, considerable litigation ensued; but these were finally decided in favour of the defenders by a judgment of the Second Division in November 1860, the defenders at the same time being ordered to denude. Some months before this judgment was pronounced, the firm of J. & A. Blaikie became bankrupt and was sequestrated. Intimation of the present process was accordingly made to the trustee on the sequestrated estate of the defender John Blaikie, but no appearance was made for him. A representation was then made by the other defender, Sir Alexander Anderson, that the balance of trust-funds standing at the debit of the trustees, and apparently due by them, amounting to £145, had been in the hands of Messrs Blaikie as factors for the trust at the date of their sequestration, and

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that he could not be made responsible for the loss that might thereby be sustained. Additions were in consequence allowed to be made to the record—for the pursuer, to the effect that Sir Alexander had been guilty of gross negligence in allowing the funds to remain in the hands of Messrs Blaikie when he knew they were in embarrassed circumstances; and for the defender to the effect that he believed them to be solvent, and quite able to meet their engagements. A proof having been led, the import of which was that Sir Alexander Anderson, from having granted accommodation bills in favour of the Messrs Blaikie, must have been aware of their embarrassments, and that he failed to exercise any superintendence over their actings as factors for the trust allowing them to mix up the trust-funds with their own, and calling for no examination of their accounts. The Lord Ordinary (Ormidale) decided in favour of the pursuers, finding Sir Alexander Anderson, as well as the other defenders, liable in payment to the pursuer as Mr Dingwall's trustee for the amount of the trust-funds in the hands of the Messrs Blaikie at the date of their sequestration. His Lordship observes in his note:—

“1. There having been no regular written appointment of factors in this case was in itself an irregularity; but the Lord Ordinary has not been much influenced by that circumstance, seeing that both parties have proceeded throughout the litigation and maintained their pleas on the footing that Messrs Blaikie and Smith, and afterwards Messrs J. & A. Blaikie, were in point of fact the factors for the trust, and of their having acted as such. He cannot, however, hold that the mere appointment of a factor or factors, however formal and regular, is of itself a sufficient answer or defence to a claim of liability against trustees, even where protected by an immunity clause, in the words of the Lord Justice-Clerk in Lyons v. Charles, 13th May 1830, 8 Sh. 741—‘The appointment of a factor cannot excuse trustees from responsibility.’ And so accordingly, in Hume v. Menzies, 10th July 1845, 7 D. 1010; and Robertson v. Mackenzie and Others, 14th June 1854, 26 Jurist, p. 498, issues were, notwithstanding a clause of immunity equally strong as that in the present case, sent to a jury to try the facts relating to the liability of trustees for funds lost through the insolvency of their factor

2. In the present instance it does not appear that there was any sufficient call or occasion for the trust-funds being left in the hands or under the control of the factors. The trust in favour of the defenders had practically come to an end by the constitution of the new trust in favour of the pursuer, and, so far as the Lord Ordinary can discover, although the defenders or their factors continued thereafter to collect and receive the rents or assets of the trust-estate, they neither made nor were required to make any disbursements of importance. It is difficult, therefore, to understand why the trust-funds should have been left in the hands of the factors. Not only, however, were the trust-funds so left, but no check or no control appears to have been exercised by the trustees in regard to them. There is no evidence, indeed, that the defender Sir Alexander Anderson ever inquired about them, and certain it is that he did not see to their being deposited in bank to the credit of the trustees, or secured in any other way whatever. In short, neither in reference to the trust-funds in the hands of the Messrs Blaikie, nor in regard to anything else connected with the trust-estate, does it appear that Sir Alexander Anderson ever made any inquiry, or did anything at all. What is called the sederunt book is little better than an absolute blank. The Lord Ordinary, therefore, doubts very much whether the clause of immunity in this case, intended, as it expressly bears, to be a protection to the trustees in the execution of the trust, has any application. But be that as it may, he cannot, having regard to all circumstances, hold that it affords a good defence to the trustees. On the contrary, he is of opinion that the defender Sir Alexander Anderson, as well as the other defender Blaikie, has been guilty of such culpa lata, or gross negligence, as to render him liable for the trust-funds in question.

For the reasons which have now been adverted to, the Lord Ordinary has been unable to resist the conclusion that in law the defender Sir Alexander Anderson, as well as Mr John Blaikie, is liable for the trust-funds which were in the hands, or under the control, of Messrs Blaikie at the time of their failure. He may add, however, that he has come to this conclusion with reluctance, if not with difficulty, in regard to Sir Alexander Anderson, as it does not appear that he is chargeable with any positive act or acts of personal delinquency in the matter.”

The defender Anderson reclaimed.