Scottish Court of Session Decisions

The late Alexander Guthrie, surgeon in Brechin, conveyed his estate to trustees, defenders of this action, for the benefit of his ten children, of whom two, Misses Clementina and Eliza Guthrie, were also defenders, their interest in the trust estate amounting to one-tenth each. The trustees in the course of realizing the trust estate exposed to public sale a house which formed part of it, at an upset price of £2000, the articles of roup providing that biddings were to advance by not less than £2 at a time. The pursuer, Mr Shiell, offered verbally £2002, and after a competition the subject was knocked down (for £2510) to Mr Lamb, banker, who thereupon declared that he had bought for the defenders, the Misses Guthrie. The pursuer then raised this action for the reduction of the sale to the Misses Guthrie, and for declarator that he was entitled to get the subject at his first bode of £2002, on the ground that the Misses Guthrie were disqualified by their beneficial interest in the subject from bidding at all.

The Lord Ordinary pronounced the following interlocutor:—

“ Edinburgh, 10th March 1874.—The Lord Ordinary having considered the cause, Finds that the pursuer's averments are not relevant or sufficient to support the conclusions of the action; assoilzies the defenders from the conclusions thereof, and decerns: Finds them entitled to expenses: Allows an. account thereof to be given in; and remits the same, when lodged, to the Auditor to tax and to report.

Note.—The defenders, Miss Clementina Guthrie and Miss Eliza Guthrie, are daughters of the late Alexander Guthrie, surgeon in Brechin, who died in August 1869, leaving estate, real and personal, the residue of which, amounting to about £30,000, is divisible under his trust-disposition and settlement amongst his ten children in equal shares.

On 30th July 1873 the other defenders, the late Mr Guthrie's trustees, exposed the house at Townhead of Brechin, in which Mr Guthrie and his family had long resided, to public sale, their purpose being to realise the whole estate of Mr Guthrie for division amongst his children, as directed by his settlement. The defenders, the two Misses Guthrie above named, having become desirous of acquiring the house as their own property,

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had instructed Mr Lamb, banker in Brechin, to purchase it for them. The upset price was £2000, and Mr Lamb had the defenders' instructions to bid up to £2700 if necessary; but having in the competition bid £2510, and no higher offer having been made, Mr Lamb became the purchaser, and, as the Minute of Enactment bears, he having thereupon declared that he made the purchase for the defenders, the judge of the roup preferred the defenders to the purchase.

Neither the trustees, nor any of the beneficiaries under Mr Guthrie's trust-disposition and deed of settlement have taken any objections to the sale. On the contrary, they desire to hold the defenders, the Misses Guthrie, to the offer made on their behalf, to whom they are ready to convey the property at the price of £2510, and these ladies are on their part desirous to complete their purchase, and obtain a title to the property.

The pursuer, however, claims to have the property conveyed to him at the price of £2002, and his claim is resisted not only by the defenders, Misses Clementina and Eliza Guthrie, but by the trustees under Mr Alexander Guthrie's settlement, on behalf of the other beneficiaries in the estate, who desire to have the benefit of the higher price at which they maintain that the property was sold.

The ground of the pursuer's claim is an alleged bid by him of £2002, being £2 above the upset price, and the statement that no other lawful offer was made for the property. He states that he and the defenders, Misses Guthrie, were the only competitors at the sale, that the offers made by these ladies were ‘wholly illegal,’ and must be disregarded, and that he is therefore entitled to have the property at his alleged first offer of £2002. There is no record in writing in the articles of roup or otherwise of any offer by the pursuer of £2002. The only offer recorded is one of £2500, which is followed by Mr Lamb's offer already mentioned, of £2510, and the declaration by the judge of the roup following on this; but the pursuer states that a number of verbal offers were made, running the price up from £2000, at which the property was exposed, and that the first of these was his offer of £2002, at which he seeks to acquire the property.

The pursuer's case is founded on the case of Faulds v. Corbet, 25th February 1859, 21 D. 587, and authorities there cited. The Lord Ordinary is of opinion that the pursuer is not entitled to succeed in the action, and that the authorities to which the pursuer has referred do not warrant his claim.

1. Assuming in the meantime that the pursuer is entitled to found on his alleged offer of £2002, although there is no writing to establish it, the defenders dispute the pursuer's right to challenge the bidding of £2510 by the Misses Guthrie, and the sale which followed on it. It is conceded, indeed settled, by the case of Faulds, and older cases, that where a property is put up to sale by auction at a fixed upset price, the proprietor or person beneficially interested in the sale is not entitled to bid for it by himself or another on his behalf, and that if he do so the bidding on his behalf will not be effectual in a competition, so that a purchaser competing with such a proprietor or beneficiary only in such a case will be entitled to take the property at the lowest bidding recorded by him. The only authorities referred to by the pursuer were cases in which the competitor was the person wholly interested in the sale; but it was maintained that the same principle must apply in a case in which the competitor has, as in the present, a partial interest in the result of the sale, being one of several beneficiaries interested in the property sold. The Lord Ordinary is not prepared to give effect to this contention.

A distinction must be drawn between the right of a party in the position of the pursuer, who claims the property as having been purchased by him in the competition, and that of the beneficiaries under a trust, having an interest to obtain the largest price that can be got for the property, to challenge such a sale as here took place. There are many cases in which beneficiaries, or persons similarly situated, in respect of their interest as sellers, may have right to challenge the sale, and have it set aside, where a competing purchaser has no such right. The case of Aberdein v. Straiton's Trustees, 29th March 1867, 5 Macph. 726, is an illustration of this. In that case it was alleged that a trustee had purchased part of the trust-estate exposed for sale; and although it was assumed that the beneficiaries under the trust interested in the sale could have challenged the sale, and set it aside, it was held that a competing purchaser had no such right. The principle to which effect has been given in questions between the sellers or others who had a material interest in the sale, and the purchaser of a property, who had been also interested in the sale, or had a duty towards the other sellers, in respect of his holding a trust relation, or other confidential relation towards them, may be stated to be, that as between parties in the position now stated, the purchaser is precluded from buying because of the duty which he owes to the sellers or seller of procuring the highest possible price for the subject. The law will not permit a party to become a purchaser where his individual interest to acquire the subject at a low price may possibly conflict with his duty to the sellers generally to do his best to procure a high price. In the first place, however, a purchase made by any one in such a position is not void, but merely voidable. The beneficiaries under a trust, or other sellers, may find it for their advantage to hold the purchaser to the transaction, and in that case it stands. And, in the next place, the objection is entirely personal to the beneficiaries or other sellers in the case supposed. It is jus tertii to a competing purchaser to take the same objection, because his competitor in the purchase is under no such duty or obligation towards him as he lies under towards the sellers. The case of Aberdein is a clear illustration of this. The same thing may be said of a purchase by one of several partners of copartnery property sold by public roup on dissolution of the company, by one of several owners of pro indiviso property, or by one of several beneficiaries interested in the sale of a trust-property. The purchase may be objected to by the other sellers or parties interested in the sale, on the ground that the purchaser's interest to obtain the subject for himself at a low price might conflict with his duty in common with the other persons interested in the sale to procure the highest price. But, certainly, the same principle does not hold as between competing purchasers in the position of the pursuer and the defenders Misses Guthrie, for the reason that the Misses

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Guthrie were not under the same duty or obligation to the pursuer as to the other members of their own family as beneficiaries in the trust. In deciding the present case it may be assumed, therefore, for the sake of argument, that the other beneficiaries might have objected to the purchase by the Misses Guthrie, although this depends on facts and circumstances which are not fully before the Court, for it may be that it was quite understood and approved of by the family that any of them might become purchasers of the property. However this may be, it does not, in the Lord Ordinary's view, give the pursuer a right to challenge the sale. The fact founded on in Condescendence 9, that the settlement of the late Mr Guthrie ‘did not confer upon any of the beneficiaries the right to offer for the said property,’ is jus tertii to the pursuer. The Lord Ordinary has farther come to the conclusion that it was not necessary, in a question with parties other than the remaining beneficiaries, that a power to bid should be reserved in order to make the sale effectual, for the case is not one in which the Misses Guthrie were the exposers, either as having the sole beneficial right in the property or as having even the largest beneficial interest in it.

In the cases which have hitherto occurred with a competing purchaser who has successfully claimed the property, the bidding by the proprietor or sole beneficiary having right to the property was entirely a fictitious proceeding, which could lead to nothing except to run up the price improperly, for it could create no contract of sale. The real seller could not sell his property to himself, for the right to it was already his. The competition was apparent only. It could not be real when it was conceded or proved that the competitor was already the owner of the property. The ground of decision in these cases was that the bidding was fictitious, and meant only to run up the price, not that the competitor bidding was under a duty or obligation of the kind lying on a trustee or joint-proprietor to the other parties interested in the estate.

To the Lord Ordinary it appears to be quite otherwise in a case like the present, and he is not prepared to carry the principle of Blackwood's case the great length which the pursuer here asks. There is this clear distinction in the present case, that the Misses Guthrie by their offer, accepted or acquiesced in by the other beneficiaries, become bound in a question with them to take the property at the sum offered. The offer was therefore not fictitious. Indeed it is not said that the Misses Guthrie offered otherwise than in bona fide, and with a true desire to get the property. The trustees and other beneficiaries are materially interested by the contract also. The circumstance that there is a new contract to which the buyers are bound, if the sellers insist on it, completely distinguishes the case from one in which the bidding creates and can create no new contract, and in which therefore the apparent competition is wholly fictitious, and must be regarded as meant only for the purpose of improperly running up the price; and it would work great injustice towards the other beneficiaries interested in the sale of the property if the sale should be set aside, with the effect of compelling them to lose the higher price which the Misses Guthrie offered. The pursuer's argument really comes to this, that if a beneficiary, or person jointly interested, even to a small extent in the property sold, should without the knowledge of the persons interested come into the field as a competitor willing to give, and actually offering, a much larger price than any one else, the sale to him at that price is bad, and the other beneficiaries must accept a much lower offer. The Lord Ordinary cannot adopt this view, nor can he see that there is any hardship to persons in the position of the pursuer in competing with others who are honestly anxious to acquire the property for themselves, even although the persons so competing have also some interest in the sale. It is quite a different case where the competing purchaser is truly the exposer, or is substantially in that position, by having the sole interest, or it may be the greatly preponderating interest, in the sale. In that case it may be said with truth that the competing offers had been made merely for the purpose of running up the property, and were thus fictitious, and not made in bona fide with the view of acquiring the property which already belonged to the proposed purchaser or competitor.

2. The Lord Ordinary is further of opinion, with reference to the grounds of decision in the case of Aberdein, above referred to, that the present action cannot be successfully maintained to the effect of enabling the pursuer to acquire the property at the price of £2002, which is the only claim made, because there is no writing on which this claim can be founded. It would be necessary, if the action were entertained to this effect, to allow a proof by parole of what occurred at the roup, and the Lord Ordinary is of opinion that such evidence is incompetent to create a contract regarding heritage which can be enforced. Even if the defenders, under a reference to oath, should admit the pursuer's statements as to the offer of £2002, it appears to the Lord Ordinary that it would still be open to them to maintain that there was locus pænitentiæ, or that they were not bound until writing intervened. A verbal contract or undertaking followed by rei interventus, will found an action of damages for non-implement, but the Lord Ordinary is not aware of any case in which it has been held that such a contract, even when followed by rei interventus, is sufficient ground for an action of implement. Even, therefore, if any rei interventus followed on the pursuer's alleged verbal offer of £2002, which the Lord Ordinary greatly doubts, he is nevertheless of opinion that an action like the present to enforce the contract cannot be maintained. The argument to an opposite effect conflicts with the rule, that writing, however imperfect, is necessary to constitute a binding and effectual contract regarding heritage.”

The pursuer reclaimed, and pleaded inter alia—

“(1) The offers and enactment of sale libelled on are reducible, in terms of the conclusions thereanent, in respect (1st) that the defenders, Miss Clementina Guthrie and Miss Eliza Guthrie, were personally disqualified for being purchasers of the said estate. (2d) That the acceptance of their offers by the defenders, the trustees, was contrary to good faith and in fraudem of the contract of sale; and (3d) that the pursuer, being the only legally qualified offerer, was entitled to be preferred to the purchase at the lowest offer made by him, in terms of the articles of roup. (2) The pursuer having purchased the said property at the price of £2002, and having implemented his part of the contract of sale, is entitled to obtain from the defenders a conveyance, in terms of the cenclusions of the libel.”

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Argued for him—The defenders, the Misses Guthrie, were disqualified from bidding by their beneficial interest in the subject of sale, which put them in the position of exposers, and it is no objection to the pursuer's claim that his first offer was not recorded. By the case of Faulds v. Corbet it is settled that in all sales by auction there is an implied contract (1) that whoever bids the upset price shall obtain the subject unless a higher bid is made; and (2) that the exposer shall not take any part in the bidding. The whole ground of Lord Wood's opinion in that case was implied contract. Does the fact that the Misses Guthrie are beneficiaries to the extent of one-fifth instead of being sole beneficiaries alter the principle laid down in Faulds v. Corbet? Take the case of two pro indiviso proprietors—would one of them be held entitled to run up the price for their mutual benefit as against the public? The only way in which the implied contract could have been overcome would have been by the insertion in the articles of roup of a provision that one or more of the beneficiaries should be entitled to bid.

Authorities— Faulds v. Corbet, Feb. 25, 1859, 21 D. 587; More's Stair, p. 91; Ivory's Ersk. iii. 3, 2; Cree v. Durie, Dec. 1, 1810, Fac. Coll.; Grey v. Stewart, M. 9560; Aberdein v. Straiton's Trs., Mar. 29, 1867, 5 Macph. 726.

The defenders (the trustees) pleaded—“(1) No title to sue. (2) The pursuer's statements are not relevant or sufficient in law to support any of the conclusions of the summons. (3) The offers of the Misses Guthrie having been made and accepted in the most perfect bona fides, the sale to them is not reducible, but is, on the contrary, effectual. (4) In no view is the pursuer entitled to obtain the said property at the price of £2002, in respect that no offer of that sum stands recorded in writing, or signed by him or the exposers. (5) The pursuer's whole material statements being unfounded in fact, the defenders ought to be assoilzied with expenses.”

The defenders (the Misses Guthrie) pleaded—“(1) No title to sue. (2) The averments of the pursuer are irrelevant and insufficient to support the conclusions of the summons. (3) The interest of the defenders in the residue of the trust-estate being only to the extent of one-tenth each, did not disqualify them from purchasing the subjects, which were sold on account of the express directions of the truster. (4) The defenders having offered with the bona fide intention of purchasing the subjects, and not in concert with the sellers, or to enhance the price, and having been preferred to the purchase, are entitled to absolvitor. (5) The defenders having purchased the subjects at a price above that offered by the pursuer, he has suffered no legitimate damage, and the defenders are entitled to absolvitor.”

At advising—