Scottish Court of Session Decisions

The fund in this multiplepoinding consisted of the free residue of the trust-estate of the deceased William Gilmour, merchant in Glasgow. The claimants were the two sons of the truster, John and William Gilmour. By the terms of the trust-disposition and settlement of the deceased William Gilmour senior, his four sons were constituted his residuary legatees, share and share alike. By arrangement with the two younger brothers, their shares were assigned to the two elder brothers, John and William, who became their father's sole residuary legatees. After their father's death John and William carried on business in partnership, and in 1850 they assumed a third partner, William Gilmour Cuthbertson. In 1856 an arrangement was made with three of the daughters of the deceased Mr Gilmour, by which they discharged their provisions under their father's settlement to the extent of £7000, the money being credited to the firm of William Gilmour & Company, that firm, and its three partners, granting personal bonds to the lenders for the sums discharged by them. In security of this £7000 William and John Gilmour assigned their interest in their father's estates. On 11th August 1857 an agreement was entered into by the three partners for the retirement of William Gilmour from the firm as at 1st February 1858. This agreement provided, First, “That on the 1st February 1858. William Gilmour shall retire from the firm of William Gilmour & Company as a partner, on having a full discharge from all his liabilities as a partner, or a satisfactory security to cover all his responsibilities, with the exception of the lease of the premises, but his discharge by the landlord is to be procured if possible, but the London agency is to remain unchanged until the same 1st February. Second, That William Gilmour shall relinquish all claim on the policy on his life for £1000, lodged with the Union Bank of Scotland, the new firm paying future premiums and

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relieving William Gilmour's security to the bank for the future payment thereof; also, that William Gilmour relinquish £300 of the £500 at the credit of Mr John Millar, of Orchard, the new firm paying the balance of £200 belonging to his son William; Mr William Gilmour to give up the balance of £1440 or thereabouts, being his moiety of the account in name of John and William Gilmour. Third, That William Gilmour shall retain his household furniture and plate, and the new firm shall relinquish any balance at his debit. Fourth, That until the 1st of February next, Mr William shall continue to manage the London branch of the business as hitherto; but on the 1st of February Mr William Gilmour shall give up the London agency, and be at liberty to commence business on his own account, and shall receive, in the meantime, not more than £60 per month, which shall be continued to him for three months afterwards, to allow him a reasonable time to seek a new business. The formal documents necessary to carry this agreement into effect, and to announce the dissolution of the partnership in the London Gazette, to be prepared by Messrs Drew & Maclure of Glasgow, between both parties.” On 4th February the firm of William Gilmour & Company stopped payment. Prior to the stoppage the parties had by letters agreed to postpone the date of the dissolution to 1st July 1858. Thereafter a composition was paid of 11s. in the pound, and the creditors received bills to that amount. On 17th March 1858 the three partners agreed to refer all claims of whatever nature to Mr Balderslie, accountant, and on 20th March he made the following award:—“With reference to the above, it may be stated that the claims therein referred to arise out of an agreement, of date 11th August 1857, entered into between John Gilmour and William G. Cuthbertson, on the one part, and William Gilmour on the other, sole partners of the old firm of William Gilmour & Company, wherein it was stipulated:— ( First) That, on the 1st day of February 1858, William Gilmour should retire from the firm of William Gilmour & Company as a partner, on having a full discharge from all liabilities as a partner, or a satisfactory security to cover all his responsibilities, with exception of lease of the premises, but a discharge from the landlord to be procured to him if possible, &c. ( Second) That William Gilmour shall relinquish all claim to policy on his life of £1000, lodged with the Union Bank of Scotland, the new firm paying future premiums, and relieving William Gilmour's security to the bank for the future payment thereof; also, that William Gilmour relinquish £300 of the £500 at the credit of John Millar of Orchard, the new firm paying the balance of £200 belonging to his son William; and William Gilmour shall further relinquish the sum of £1440 or thereabout, being his moiety of account in name of John and William Gilmour. ( Third) That William Gilmour shall retain his household furniture and plate, and the new firm shall relinquish any balance at his debit; and ( Fourth) That till 1st February 1858, William Gilmour shall continue to manage the London branch of the business; but that, on 1st February 1858, he shall give up the London agency, and be at liberty to commence business on his own account, and shall receive, in the meantime, not more than £60 per month, which shall be continued to him for three months afterwards, to allow him a reasonable time to seek out a new business. It was at a later period arranged by interchange of letters, and particularly at the request of the new firm, that the date of dissolution should be extended till 1st July 1858; in all other respects the terms of the minute of agreement to remain intact. On the 4th February 1858, the firm of William Gilmour & Company suspended payment, and having exhibited statements and met their creditors, an offer of 11s. per pound, payable 4s. at four months, 4s. at eight months, and 3s. at twelve months, the last instalment, with security, was made, and all but accepted. To this, as a matter of course, William Gilmour is held a party responsible with the other two partners. It was still resolved, however, that the minute of agreement betwixt themselves as partners should be carried out, and the difficulty arose how this was to be amicably effected. Hence this reference, and, as sole arbiter named and appointed, I find and award as follows:— First, That the first head of minute of agreement, dated 11th August 1857, shall be maintained in its entirety, including a full discharge from the lease of the premises. Second, That the second head of agreement shall also be fully implemented, with exception of the payment of £200 to William Gilmour, part of the sum of £500, which latter sum he shall relinquish in full. Third, That the third head of agreement shall remain intact and binding in all its obligations; and Fourth, That the dissolution of the contract of copartnery shall be held as of 1st February 1858, the date originally stipulated. That in lieu of the allowance of £60 per month, and of the £200 additional to be relinquished by William Gilmour, in terms of the second head of this finding, and in discharge of all other demands arising out of his connection with the old firm, or demands of the new firm, William Gilmour shall be paid the sum of £400, free of any deduction, one-half thereof as of the date of this award, and the other half on the expiry of six months thereafter, with interest on both sums respectively from these dates till paid.

On 23d and 25th March the following agreement was entered into between the three partners:—

“With reference to the within award, the subscribing parties, videlicet, John Gilmour and William Gilmour Cuthbertson, first party, and William Gilmour, second party, do hereby agree as follows, That is to say— First, The first parties hereby surrender all claim competent to them in and to the second party's household furniture and effects, and agree to grant at his expense any further writing that may be necessary for completing that surrender. Second, That the first party having agreed to pay to the second party the sum of £200 within mentioned, by four equal instalments of £50, and that on the first day of April and on the first day of each of the three following months, which settlement of the said sum of £200 is agreed to be accepted by the second party in lieu of the payment thereof in one sum; and having granted their bill at six months date from the 20th of March current for the other sum of £200, also within mentioned, and interest thereon,—the second party hereby acknowledges the receipt of the said bill, and upon payment of the said bill, and upon payment of the said instalments, discharges the first party accordingly. Third, That the second party hereby surrenders all right and claim to the policy of £1000 on his life within referred to as held by the Union Bank, and shall grant any assignment or other deed needful for completing that divestiture, and also surrenders

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the sum of £500 standing in the books of William Gilmour & Company at the credit of John Miller of Orchard, as well as any interest remaining to him in the sum of £1440 or thereby, also mentioned within, as his moiety of the account kept in the books of William Gilmour & Company, in name of John and William Gilmour, it being understood that the first party shall pay the premiums upon the said life policy accruing from and after the date at which the last annual premium was paid, and obtain the discharge of the bank of any obligation of the second party held by them for the regular payment of the said premiums. Fourth, That a notice of the retirement of the second party from the co-partnership of William Gilmour & Co., with consent of his co-partners, as at 1st February 1858, having been signed of even date herewith, the same shall be published in the Gazettes and in two of the Glasgow newspapers in the usual form, at the mutual expense of the parties; and that so soon as the composition bills of the said William Gilmour & Co. have been issued to their creditors, or at all events not later than the 15th April 1858. And lastly, In consideration of the said retirement, and of the covenants hereby mutually undertaken by the parties, they have discharged, and hereby mutually and respectively discharge and acquit each other of all claims and demands whatsoever, competent to either party against the other, and arising out of or connected with the foresaid co-partnership of William Gilmour & Co.; and in particular, the said first party shall obtain and deliver to the second party a release, under the hand of the landlord, of his obligations as a partner undertaken by the tacks of the premises occupied by the company in Argyle Street and Adam's court Lane, Glasgow, as soon as practicable; declaring that all claims and demands subsisting prior to the date hereof, are hereby for ever extinguished; reserving only the due implement of this agreement, which the parties bind themselves to fulfil in favour of each other, according to the true spirit and meaning thereof.—In witness, whereof,” &c. The residue of old Mr Gilmour's estates, owing to the increase in value of certain lands, unexpectedly turned out to be of the value of upwards of £16,000. Of this residue William Gilmour claimed one half, free and disburdened of any sums paid to his sister, while John Gilmour claimed the whole residue as assignee under the deeds produced, and the facts and circumstances connected with the composition.

On 26th May 1874 the Lord Ordinary ( Gifford) issued the following interlocutor and note:—

“ Edinburgh, 26 th May 1874.—The Lord Ordinary having heard parties' procurators, and having considered the closed record, documents founded on, proof adduced, and whole process; finds that the claimant William Gilmour junior, is, under the trust-disposition and settlements of his father William Gilmour senior, and under the other deeds and agreements founded on, entitled to one-half of the free residue of the trust-estate of the said William Gilmour senior, and that free and disburdened of the sum of £5877, 3s. 3d. paid by the trustees of the said William Gilmour senior, to Mrs Somerville, Mrs Hall, and Mrs Cuthbertson, three of the daughters of the said William Gilmour senior; therefore ranks and prefers the claimant, the said William Gilmour junior, in terms of the first alternative branch of his claim; ranks and prefers the claimant John Gilmour to the remainder of the free fund in medio, and quoad ultra repels the claim of the said John Gilmour and decerns; appoints the case to be enrolled, that the amount of the fund in medio, and the sums due to the claimants respectively, under the present decree may be ascertained and decerned for; finds the claimant William Gilmour junior entitled to expenses in the composition, and remits the account of said expenses, when lodged, to the Auditor of Court, to tax the same and to report.

Note.—The fund in medio in the present case is the free residue of the trust-estate of the late William Gilmour senior, merchant in Glasgow. The only two claimants are two of the truster's sons, John Gilmour and William Gilmour junior, all the other sons and daughters of the truster having been settled with. No question or difficulty has arisen under the terms of old Mr Gilmour's trust-deed, but questions of considerable difficulty have arisen between the claimants John and William Gilmour, in consequence of complicated transactions between them in reference to the dissolution of the firm of William Gilmour & Company, of which they were partners, and also in reference to their father's estate, and in reference to the provisions due to three of their sisters, Mrs Somerville, Mrs Hall, and Mrs Cuthbertson.

Proof was led at the close of last session, and the whole case would then have been disposed of, but at the request of both parties the case was continued. A day was fixed for hearing in vacation, but again, at the request of both parties, the hearing was adjourned. The Lord Ordinary now disposes of the whole case.

By the terms of the trust-disposition and settlements of the late William Gilmour senior, his four sons were constituted his residuary legatees, share and share alike. By private arrangements with the two younger sons, James and David, their shares were assigned to their two elder brothers, John and William, who thus became their father's sole residuary legatees, each entitled to one-half of the free residue.

The claimants, John and William Gilmour, after their father's death carried on business in partnership, and in 1850 they assumed as a third partner their nephew William Gilmour Cuthbertson, and these three partners carried on business under the old firm of William Gilmour & Company. In 1856, apparently with the view of enlarging the capital of William Gilmour & Company, a family arrangement was made with three of the daughters, Mrs Somerville, Mrs Hall, and Mrs Cuthbertson, whereby these ladies, who were entitled to payment of considerable provisions under their father's settlement, discharged these provisions to the extent of £7000, but instead of getting payment thereof the money was handed or credited to the firm of William Gilmour & Company, and that firm and its three partners granted personal bonds to the three ladies for the sums discharged by them. These bonds expressly bear that the sums therein mentioned, in all £7000, were advanced to, and for behoof of, the company, and the company and its individual partners became bound for the repayment thereof. This £7000 thus became a company debt, although necessarily the individual partners were liable therefor. In security of this £7000, William and John Gilmour, then their father's sole residuary legatees, assigned their interests in their father's estate.

On 11th August 1857 a deed of agreement

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was entered into by the three partners of William Gilmour & Company for the retirement of William Gilmour junior from the firm as at 1st February 1858. This agreement provides that the two remaining partners John Gilmour and W. G. Cuthbertson shall discharge William from all his liabilities as a partner, and give him security for his relief, he giving up, besides his share of the company assets, certain specified sums or claims which belonged to himself as an individual. The terms of this agreement are extremely important, as in the Lord Ordinary's view the main questions in the present competition turn thereon. It was admitted and proved in evidence that at the date of the agreement all parties acted in optima fide, and believed the firm of William Gilmour & Company to be perfectly solvent. The Lord Ordinary holds therefore that at its date this agreement formed a binding contract whereby, in consideration of William Gilmour's retirement and of his giving up his share of the company assets, and the special sums mentioned as belonging to him individually, the other two partners became bound to relieve him of all company liabilities. Now it is only necessary to notice in the meantime that by this agreement William Gilmour junior did not give over his half of the residue of his father's estate. His half of the residue was not a company asset, nor was it part of the individual estate which he assigned. Farther, the debts due to the three sisters were company debts, and of these debts William Gilmour was entitled to be relieved. If the agreement then had been in terminis carried out, and no insolvency had supervened, the result would have been that the remaining partners, that is the new firm, would have paid the debts due to old Mr Gilmour's three daughters, and William Gilmour would have retained, disburdened, his half of the residue of his father's estate, whatever that residue might turn out to be. If the Lord Ordinary is right in this conclusion, it goes a long way to settle the whole present dispute, for, in his opinion, the whole subsequent occurrences and arrangements really made no difference on the result.

On 4th February 1858, being three days after the agreed-on date of dissolution, the firm of William Gilmour & Company was compelled suddenly and unexpectedly to stop payment.

This event took everybody, including the partners, by surprise. It led to investigations, which showed that the firm was insolvent and unable to pay more than from 11s. to 12s. per pound. Now, it might have been a question of some difficulty, whether this unexpected occurrence and this state of matters, unknown to the parties, did not terminate or cancel the agreement of dissolution of 11th August 1857. Prior to the stoppage the parties had, by letters, arranged to postpone the date of dissolution from 1st February to 1st July 1858. It is unnecessary to consider this question, however, for after the company had settled with its creditors by a composition of 11s. per pound, it was fixed, under a reference to Mr Alexander Balderston, accountant in Glasgow, by Mr Balderston's award and by special agreement following thereon, No. 210 of process, that the agreement of dissolution of 11th August 1857 should still subsist, and that William Gilmour junior should, in terms thereof, retire from the firm as at 1st February 1858, the date originally stipulated.

Some variations were made by the arbiter and by the parties on the special conditions on which William Gilmour should retire as at 1st February 1858, and these variations require to be minutely attended to; but although there are important variations in detail, the Lord Ordinary is of opinion that the substance of the agreement of 11th August 1857 remains untouched, or rather, that it is renewed and ratified in all its essential points.

In particular, the Lord Ordinary is quite unable to find, either in the original agreement of 11th August 1857, or in the award of Mr Balderston, or in the subsequent agreement following thereon, any undertaking, either express or implied, that William Gilmour shall assign to the new firm, or any of its partners, his half of the residue of his father's estate. Nor can he find any agreement, express or implied, that the debts due to the three sisters, which undoubtedly were company debts, should become or be held to be to any extent the debts of William Gilmour junior, the retiring partner. On the contrary, the whole substance and purview of the award and agreement seem to show that, excepting the sums and subjects specially mentioned, the individual estates of the partners shall remain untouched, and the ultimate incidence of company obligations shall not be interfered with. The very enumeration of particulars leads to this result. A special condition, that certain enumerated particulars of William Gilmour's individual estate shall pass to the firm, implies that nothing else shall pass, and it is quite inconceivable that, if it had been really meant that William Gilmour should assign his share of residue either to the two remaining partners or to his brother John, this should not have been expressly said.

The Lord Ordinary, therefore, without hesitation, holds that, in the deeds and agreements produced there is no assignation, either express or implied, by William Gilmour, either to his brother, or to his brother and nephew jointly, of his half of the residue of old William Gilmour's estate.

But the argument of John Gilmour was rested not merely on the agreements and award, but on facts and circumstances connected with the composition arrangement, under which William Gilmour & Company paid their creditors 11s. in the £. These facts and circumstances appear from the parole proof, and from the states and documents produced and referred to therein.

The argument for John Gilmour, shorty stated, is that, as at common law the whole individual estates of the partners, as well as the company estates, were liable to the company creditors, and as, under the agreement of dissolution, the two remaining partners, John Gilmour and Mr Cuthbertson, paid the whole composition of 11s., so the individual estates of the whole three partners, as well as the company estates, must be held in law to have been assigned to them.

There is a good deal of plausibility in this argument, stated in a general form, but the Lord Ordinary is of opinion that no such absolute general rule can be laid down, and that it utterly fails when the special circumstances of the present case are taken into account.

One striking circumstance in the present case, and which indeed may be said to have given rise to all this litigation, is that at the date of the composition arrangement of 1858 it was not expected by any party that old William Gilmour's estate would produce any free residue at all. In

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short, all parties assumed that the free residue of old Mr Gilmour's estate was worth nothing. In the state of affairs of William Gilmour & Company, or in the report relative thereto, there is a note showing that the assets of old Mr Gilmour's trust were less than the trust liabilities by a deficiency of £863, 14s. 3d.; and it is added that John and William Gilmour are ‘thus deprived of the fortune which they at one time looked for from their father's estate.’ Accordingly, in estimating the composition offered, 11s. in the £, no sum whatever is put on the residue of old Mr Gilmour's estate. It is not taken into account. It is not taken from the individual partners John Gilmour and William Gilmour, but it is left untouched, as a spes or chance belonging to these gentlemen individually.

The Lord Ordinary thinks that the result is that, after the composition arrangement was carried through, John Gilmour retained his half of the residue as his individual and personal estate, and that William Gilmour did the same.

If the question had arisen with Mr Cuthbertson, for example, it is thought that he could not have maintained that both John and William Gilmour had made over to him, as a partner of the new firm, half of their respective shares of the residue of old Mr Gilmour's estate, but this would be the necessary consequence of John Gilmour's argument. Owing to the increase in value of the lands of Oatlands, it now turns out that, instead of there being no residue of old Mr Gilmour's estate, there will now be a free residue of upwards of £16,000. The Lord Ordinary holds that this residue has not been assigned to anyone, either by John Gilmour or by William Gilmour, but is still vested in them respectively, each to the extent of one-half, as part of their individual and personal estate. It never became company property, and they never came under any obligation to make it such. This leads to the repelling of the claim of John Gilmour to the whole fund in medio.

Even if there was an implied obligation to make over their whole individual assets to the new firm, the Lord Ordinary thinks that this must be held as altered and cancelled by the award of Mr Balderston and the agreement following thereon. That award and agreement, as has been shown, ratified and renewed the agreement of dissolution of August 1857, and fixed that certain individual assets should go to the new firm, and nothing more. This agreement is undoubtedly binding, and must receive effect. In short, the right to one-half of the residue of his father's estate having undoubtedly and fully vested in William Gilmour, and he having never parted therewith, or come under any obligation to denude thereof, it still remains vested in him as his individual and absolute property.

In like manner, the Lord Ordinary is of opinion that the debt due to the three sisters was, and never ceased to become, a proper company debt, of which William Gilmour was entitled to be absolutely relieved. The sisters accepted composition bills for 11s. in the pound of part of their debt, and these bills seem to have been paid, although they have not been recovered, but this did not discharge the assignment in security contained in the bonds. There was no mercantile sequestration, and no obligation to value and deduct securities. The case might have been otherwise had the whole estates been sequestrated and vested in a trustee. When, by the sale of Oatlands, the residue of old Mr Gilmour's estate fortunately became valuable, the daughters recovered the balance of their debt from the residue, and this was done with the consent of both John and William Gilmour. But this did not convert the company debt into an individual debt of William Gilmour. The balance of the debts, just like the composition bills, were debts of the company, and as William Gilmour was to be relieved of all company debts, it follows that his share of the free residue must be disburdened of this company debt.

It follows that the claimant William Gilmour is entitled to one-half of the residue, free and disburdened of the £5877, 3s. 3d. paid to his sisters under the company's bonds. William Gilmour is, therefore, entitled to be preferred in terms of his claim. The balance of the free residue belongs of course to John Gilmour. As William Gilmour has been successful, he is entitled to expenses.”

John Gilmour reclaimed.

At advising—