Scottish Court of Session Decisions

Thomas Watt, M.D., brought an action of declarator and implement to have it declared that a contract of sale between him and the defenders Miss Ann and Miss Jessie Macpherson was entered into and concluded, and that the defenders were bound to implement that contract. The subjects of the alleged contract of sale were four houses in Aberdeen belonging to the trust-estate of the deceased John Macpherson, under whose trust-disposition the defenders were sole trustees. The contract of sale was alleged to have been constituted by the following missives:—(1) A letter written and addressed by John Watt jun., advocate in Aberdeen, the pursuer's brother, to Hugh James Macpherson, the defender's brother, dated November 9, 1875, running thus:—“Dear Sir,—I am authorised by my brother Dr Watt, Darlington, to offer the trustees of your late father the sum of One thousand nine hundred pounds sterling for the four half houses at Ann Place belonging to them, on the understanding that he shall bear the whole expense of transfers; the entry to the purchaser to be at Whitsunday next, when the price will he paid to the sellers, who will receive the Whitsunday rents, the rents falling due at Martinmas 1876 being payable to the purchaser. I shall feel obliged by your submitting the offer to the trustees, and letting me hear from you if it be accepted.—Yours truly, John Watt jun. H. J. Macpherson, Esq., Gilcomston Combworks, Aberdeen.” (2) Another letter of the same date by John Watt jun. to H. J. Macpherson, in the following terms:—“ Aberdeen, 9 th Nov. 1875.—Dear Sir,—The offer for the houses at Ann Place is made on the understanding that the feu-duty for the whole is £20 sterling per annum, and that the subjects are liable to duplicate in feu-duty every 19 years, the first duplicand being payable in 1877.” And (3) a letter by the said Hugh Macpherson to the said John Watt jun., also dated 9th Nov. 1875, in the following terms, viz:—“Dear Sir,—I am in receipt of your two letters of this day, and having duly submitted the offers for the 4 (four half) houses at Ann Place to my sisters, surviving trustees of my late father, they have authorised me to accept of the same on the conditions named—viz., One thousand nine hundred pounds, say £1900 cash, the purchaser paying all expenses connected with the transfer, a yearly duty of £20 with a duplicand every 19 years, first duplicand 1877. Purchase money payable and entry given at Whitsunday next, 4th June, for entry, the rents up to then being payable to the sellers.— Yours very truly, H. J. M'Pherson. John Watt jun., Esq., advocate.

The defenders also brought a summons against Dr Watt and John Watt jun., for reduction of the three letters above quoted. The Lord Ordinary, on the motion of both parties, held their summons as repeated in the first action.

The defenders pleaded—“(1) The pursuer not being the true purchaser, and his name having been used in the letters constituting the alleged contract of sale merely for the purpose of concealing the fact that the defenders' law agent and adviser Mr John Watt jun., advocate, Aberdeen, was the purchaser, in whole or in part, and at an inadequate price, of the property thereby proposed to be sold, the pursuer is not entitled to require the defenders to implement the said alleged contract of sale, and the defenders are entitled to absolvitor. (2) The pursuer not being the true purchaser, and his name having been used in the letters constituting the alleged contract of sale, merely for the purpose of concealing the fact that the defenders' said law agent and adviser was the purchaser of two of the four houses, being houses Nos. 3 and 4 Ann Place, Aberdeen, thereby proposed to be sold, and that at an inadequate price, the pursuer is not entitled to require the defenders to implement the said contract for the purchase of the said two houses, and in regard thereto the defenders are entitled to absolvitor. (3) The said John Watt jun. being the law agent and adviser of the defenders, and being also a trustee under the trust-deed of settlement of the deceased Mrs Ann Thomson or M'Pherson, and a trustee under the marriage-contract trust of Mrs Jane M'Pherson or Black, and as such interested in the trust-estate of the said John M'Pherson, was under a personal disqualification, disabling him from purchasing the trust-estate of which the defenders are the trustees, or at least he could not legally purchase from the defenders while the defenders were ignorant that he was interested in the contract, and while the relation of agent and client subsisted between the purchaser and the sellers.”

The Lord Ordinary allowed a proof, appointing the defenders to lead. The result of the proof is fully given in the note appended to the following interlocutor, which was pronounced by the Lord Ordinary:—

“ Edinburgh, 4 th July 1876.—the Lord Ordinary having heard the counsel for the parties, and considered the closed record, proof, and whole productions in the reduction at the instance of the defenders, M'Phereon's trustees, against Thomas

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Watt, the pursuer of the original action of declarator, implement, and damages, and against John Watt junior, advocate in Aberdeen, which has been held as repeated in this process—Reduces, decerns, and declares in terms of the conclusions of the summons, and in the said original action assoilzies the defenders, M'Pherson's trustees, from the whole conclusions of the summons, and decerns: Finds the said Thomas Watt and John Watt junior liable in expenses in both actions; appoints an account thereof to be lodged; and remits the same to the Auditor to tax and to report.

Note.—In the action of declarator and implement with which the present proceedings commenced, Thomas Watt, doctor of medicine in Darlington, asks to have it found and declared that on or about 9th November 1875 a contract of sale was entered into and concluded between the defenders Ann M'Pherson and Jessie M'Pherson, sole surviving trustees acting under the trust-disposition and settlement of their father, the now deceased John M'Pherson, comb manufacturer in Aberdeen, through Hugh James M'Pherson, their brother, and the pursuer through John Watt junior, advocate in Aberdeen, his brother, ‘whereby the defenders, as trustees foresaid, through the said Hugh James M'Pherson, agreed to sell, and sold to the pursuers, through the said John Watt junior, and the pursuers through the said John Watt junior agreed to purchase, and purchased from the defenders, as trustees foresaid, through the said Hugh James M'Pherson, the dwelling-houses, Nos. 3, 4, 5, and 6 Ann Place, Aberdeen, with the pertinents thereof, and that on the following conditions, viz., the price to be £1900, the pursuers paying the whole expense of transfer; the property to be conveyed under a yearly feu-duty of £20, with a duplicand every 19 years; the price to be payable and entry given at 4th June 1876, the rents up till then being payable to the sellers.’ The summonses contain conclusions for implement in the usual way, with an alternative conclusion for damages…..

The terms of these missives establish four points which have a material bearing upon the present question, viz.—(1) that John Watt junior, the writer of the offer, represents to H. J. M'Pherson that the party desiring to purchase the property is not himself, but his brother Dr Thomas Watt, of Darlington, the pursuer; (2) that the offer is made to H. J. M'Pherson, not as a party having authority to accept the offer, but merely in order that he might submit it to his father's trustees and inform the writer if it was accepted; (3) that the acceptance bears expressly that the offer had been duly submitted by H. J. M'Pherson to his sisters, as surviving trustees of his father, and that they had authorised him to accept the offer as made; and (4) that John Watt junior, the party making the offer, must have known that no material alteration of the contract could take place without the full knowledge and consent of the trustees themselves.

The defenders, the trustees of John M'Pherson, have refused to implement the sale; hence the present action. The main grounds of refusal are contained in article 8 of the revised defences, which is as follows:—‘The purchase of the said four houses at Ann Place, Aberdeen, by Mr John Watt junior, although made ostensibly for and on behalf of his brother, the pursuer, was really made for his own account, the name of the pursuer being used to conceal from the defenders the fact that they were dealing with their law agent and adviser. The defenders, if they had known that Mr John Watt junior was purchasing for his own account, would not have sold to him without the intervention of a neutral solicitor. The price stipulated was not a fair and adequate price.’ The defenders were allowed to repeat in this process a reduction of the missives of sale, the record was closed upon revised condescendence and defences, and a proof before answer was allowed, the defenders being directed to lead in the proof. That proof has now been taken, and I shall shortly state the facts which appear to me to be thereby established. These are as follows:—

1. The late John M'Pherson, comb-maker in Aberdeen, died in 1867, survived by his widow and a family of seven children by her, as well as by a family of several children by a former marriage. He left a trust-deed, under which the defenders Ann and Jessie M'Pherson, two of his daughters by the first marriage, are the sole surviving trustees.

2. John M'Pherson at his death possessed considerable heritable property, comprising, inter alia, the estate of Springhill, in the county of Aberdeen, of the value of about £16,000, and some feuing ground in the town of Aberdeen, on which six houses of a street, Ann Street, had been erected by the truster in his lifetime.

3. The estate of Springhill was sold by the trustees to George M'Pherson, a son of the truster. The Ann Place subjects were exposed by the trustees to sale by public roup in 1871, but no offers were made, and in the same year they sold to a Mr Brown by private bargain part of these subjects, consisting of two of the houses and a part of the ground still unbuilt upon. The other four houses remained, unsold and in the hands of the trustees, and were let by them to tenants.

4. During the lifetime of John M'Pherson his law agent was the late James Edmond, advocate, Aberdeen, who, and his subsequent firm of J. & A. Edmond, continued to be the law agents of the trustees until 1871, in which year the trustees closed their accounts with Messrs Edmond, and received up the trust papers. John Watt junior appears at that time, and until the present questions arose, to have been the law agent and adviser of the several members of the family of John M'Pherson, and particularly of his daughter Mrs Black, and of his son H. J. M'Pherson, and of Jessie M'Pherson and Ann M'Pherson, the defenders.

5. After 1871 comparatively little law agency was required in connection with the trust. H. J. M'Pherson, who had, along with his sisters Ann and Jessie M'Pherson (the trustees), succeeded his father in his business as comb-maker, seems to have managed the trust property by letting the houses, levying the rents, and drawing the interest of money lent. When the services of a law agent, however, were required, John Watt junior was the person employed, and, in particular, about the year 1872, some railway stock to to the amount of between £2000 and £3000 having been sold, the said John Watt junior, on the employment of the trustees, invested the proceeds in bonds heritably secured over the property

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of other two clients of his own, named respectively ‘Shearer’ and ‘M'Gregor.’ The instructions to procure the investment were given by H. J. M'Pherson to John Watt junior, who, although acting as agent for the borrowers in the transaction, yet acted equally as agent for the lenders, M'Pherson's trustees.

6. In the year 1874 J. Watt junior became tenant of one of the houses in Ann Place (No. 4), which he has continued to occupy ever since, at all events until Whitsunday last, 1876.

7. Under the settlement of John M'Pherson the whole of his heritable property was directed to be sold at or prior to Whitsunday 1877. The greater part was sold in and before 1871, and by a family agreement made in that year it was arranged that the unsold houses in Ann Place should be held by the trustees for behoof of the truster's second family, two of whom are H. J. M'Pherson and his sister Mrs Black.

8. In the end of October 1875 H. J. M'Pherson had a meeting with John Watt junior, as his law agent, in reference to the investment of £2000 belonging to the trustees under his own marriage-contract, in the course of which Watt stated that good investments were not easily got, as house property was rising in value, whereupon H. J. M'Pherson said that he was thinking of advertising the Ann Place trust property for sale. So far the accounts of the interview given by Watt and by M'Pherson do not materially differ; but they do materially differ in other respects. John Watt junior says that not only at this meeting, but long before its date, M'Pherson had urged him (Watt) to buy the houses, as he was now tenant of one of them, and that he declined to do so, whereupon M'Pherson asked him, if he knew any one likely to buy, to tell them about the houses. This story of Watt is not, in my opinion, a very probable one; and having seen and heard both of the witnesses, I am inclined to adopt the version of the transaction given by M'Pherson, who says that Watt requested him not to advertise because he thought he could find a purchaser. Both witnesses, however, concur in saying that M'Pherson requested Watt to look out for a purchaser, and M'Pherson expressly says:—‘I commissioned him to find a purchaser.’ It is thus, as I think, proved that John Watt junior was employed or instructed on behalf of the trustees by H. J. M'Pherson, a beneficiary in the trust, and himself a client of Watt, to sell, or at least to procure a purchaser for the trust property.

9. A day or two after this, Watt called for M'Pherson, and asked at what price the houses would be sold. M'Pherson said that he thought each block of two houses should fetch from £1100 to £1200, but that he would take £2000 for the whole four. Watt objected to that price as excessive, but said that £1900 would be a fair price; and Watt then said that he had communicated on the subject with his brother, who had money to invest on heritable property, and would be prepared to give the price. M'Pherson then said to Watt if he would give a written offer on behalf of his brother he would advise the trustees to accept, and the offer and acceptance of 9th November 1875 were accordingly written out and exchanged.

It happened that just as M'Pherson had received the offer, his sisters (the defenders) called upon him at his place of business. He showed them the offer, and they, before authorising their brother to accept of it, asked him whether the offer was truly for Dr Watt (the pursuer), and not for John Watt junior, saying that if it was John Watt junior who was buying for himself, they must have the advice of a neutral agent. M'Pherson, who believed that the offer was truly for Dr Watt, gave his sisters the required assurance, and the offer as made was then by their authority accepted.

11. Although the correspondence which passed between John Watt junior, in Aberdeen, and his brother, Dr Thomas Watt, in Darlington, with reference to the purchase, has all been destroyed, with the exception of a fragment in one letter, being the second which John Watt junior wrote to his brother on the subject, it is clearly proved by that fragment, and by the admission both of Dr Watt and of John Watt junior in the witness-box, that before the offer of 9th November was written and sent to M'Pherson, it had been proposed by John Watt junior, and agreed to by the pursuer, that two of the houses should be passed on by the pursuer to his brother, at the price of £950, being half of £1900, the price of the whole four houses. The offer, therefore, for the whole houses which was made by John Watt junior, as in name of his brother, was truly, so far as regards two of the houses, an offer for behoof of himself, John Watt junior. This fact was concealed from, or at least was not communicated to, Mr M'Pherson, or to the defenders until some time after the acceptance.

12. The pursuer Dr Watt intended to purchase and retain two of the houses as an investment, but within a day or two of receiving the acceptance from M'Pherson, John Watt junior began to negotiate with third parties for a re-sale of the two houses which were to be passed on to him by his brother, and the result was that before the end of November he had sold the houses to a person of the name of Robson for the price of £1125, being an advance of £175 upon the price which he himself was to pay. Robson again, within a day or two, sold one of the houses to Cruickshank, the tenant thereof, for £600, being a further advance of £40. The price of £950, therefore, for half of the subjects, and of £1900 for the whole, was plainly greatly below the true value of the property.

13. These circumstances were communicated by John Watt junior to Mr M'Pherson about or shortly after 19th November, and by M'Pherson (after some attempts at compromise) to his sisters, the defenders, and although M'Pherson, who seems to have been in ignorance as to the law of the case, was disposed at first to advise his sisters to submit to what undoubtedly was a bad bargain, these ladies themselves, on becoming aware of the facts, insisted upon the bargain being given up altogether, or at all events upon the difference in price obtained by John Watt junior being paid to them. Both proposals were declined.

Such being the state of the facts proved, the question is, whether the purchase can be sustained to any and, if so, to what extent? Now, although it was ostensibly in the name of Thomas Watt, it was truly to the extent of one-half a purchase by his brother John Watt junior, who was not only the law agent of the trustees and

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beneficiaries as individuals, but was on his own suggestion entrusted as law agent of the trustees with the duty of finding a purchaser for the property. But the important fact that Watt was thus buying for himself was, as I have said, not communicated to the sellers. It may be conceded to the pursuer that a purchase by an agent is not illegal in the sense in which a purchase of trust-property by a trustee is illegal. But it is a transaction which the law regards—and rightly regards—with jealousy, and in order to justify such a purchase, when challenged, an agent who has bought the property of his client—at all events, when he has been employed to sell that property—must come into Court with clean hands, and must show that his client was acting with full information upon every material matter, and that the price was adequate. The rule of law was very clearly stated by Lord Eldon in the House of Lords in the leading case of Cave v. Allen ( 2 Dow's App. 289)—‘If one not employed before as an attorney was employed for the sale of an estate, and advised his employer to sell it to himself (the attorney), the Courts of Equity would say, ‘The nature of your employment was such as rendered it incumbent on you to give the best advice to your employer;’ and unless he withdrew from that connection, or put himself completely at arm's length, he must show, in case the contract be questioned, that he had given the same disinterested advice that he naturally would have given if the contract had been made with another party.” Now, it is clear that John Watt junior, the true purchaser of at least half of the property, has failed to show that the transaction comes within the rule laid down by Lord Eldon. He did not close the confidential relation between him and his clients, or hold his clients at arm's length, and he did not give them disinterested advice. On the contrary, he dissuaded them from advertising the property for sale by public auction, thereby preventing fair and open competition for the property. He suggested that he himself should look out for a purchaser, at a price considerably lower than that which his clients thought should be asked; and he, moreover, concealed from them the important fact that he was the real, though his brother was the ostensible, purchaser. By means of this concealment he threw his clients off their guard, and induced them to believe that he was protecting their interests as their agent; and it is certain that if they had known the fact which Watt thus concealed they would have called in the services of a neutral agent. And further, the price is greatly less than the true value, because if within a week or two of the contract Watt, without trouble, and, as he says, without much desiring to resell, disposed of the property privately, at a profit of upwards of 20 per cent., the presumption is that at a public sale by the trustees a still larger price would have been realised. It is in vain to say, as the pursuer does, that the property was valued in 1871 at £1860; that a purchaser could not be found for it in that year at £1900; and that a solitary surveyor from Aberdeen is of opinion that £1900 is the fair price now. The onus of proving adequacy of price at the date of sale rests with the pursuer, and he has not discharged that onus. The valuation of 1871 forms no sound test of the value in 1876, and the profit made by John Watt junior in this very transaction is real evidence that the price at which he purchased was inadequate. I think that the presumption is very strong that had the defenders known that he was the purchaser, and employed, as they would then have done, a neutral agent to attend to their interest, a very much larger price would have been obtained. The sale, therefore—at all events in so far as John Watt junior was personally interested therein—cannot be sustained. But apart from these considerations, I think that the mere concealment of the fact that J. Watt junior was himself a purchaser is of itself sufficient to vitiate and annul the sale, at all events so far as regards the houses purchased for himself. This doctrine is implied, if not expressed, in the opinions of the Judges in Gourlay's Trustees v. Kerr (6th June 1857, 19 D. 789), and it has repeatedly been made matter of decision in England—see Woodhouse v. Meredith, 1st March 1820, 1 Jacob and Walker 204; Charter v. Trevelin, 5th September 1844, 11 Clark and Findlay, 714, where such concealment was held sufficient to set aside a purchase by an agent after the lapse of 37 years; and in Lewis v. Wilman, 25th March 1852, 3 Clark, 607, when the Lord Chancellor (St Leonards) said—‘I should lay it down as a rule, my Lords, that ought never to be departed from, that if an attorney or agent can show he is entitled to purchase, yet, if instead of openly purchasing, he purchases in the name of a trustee or agent without disclosing the fact, no such purchase as that can stand for a single moment. Such a transaction to stand must be open and fair and free from all objection. And if a man purchases, as these appellants purchased, by putting forward a clerk of his own, not as a clerk, not as an agent, but as an actual bona fide purchaser upon an absolute and independent contract, he does that which, the moment it is stated, renders the deed powerless for the purpose for which it was framed and executed, and the Court will hold the parties responsible for everything that results from it. If, therefore, a bill had been filed, and this contract had been attempted to be set up, and it had come before your Lordships, I cannot hesitate to say that you would have rescinded that contract, and thrown the whole costs of the proceedings upon the parties who had entered into it.’

Such being the rule of law applicable to cases like the present, it is clear the sale must be reduced—at all events so far as regards the houses purchased by or for John Watt junior, and that to that extent the pursuer Thomas Watt cannot demand implement of the contract. The question remains, whether the sale can stand as regards the two houses retained by himself, or can be enforced by him to that extent. That question is not free from difficulty, but I have felt myself constrained to hold that the contract cannot be enforced to any extent. The offer which was accepted was an offer by, or rather in name of, Dr Thomas Watt, for the purchase of four houses at a slump sum. It was accepted by the defenders on the footing that he, and he alone, was the purchaser. But as the contract turns out to be vitiated in an important respect by the concealment of a fact of which the pursuer himself was aware before the offer was written and presented, and which he ought to have inserted or caused to be inserted in the offer, he must take the consequences of his own want of care. He must be

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responsible for the improper concealment on the part of his brother, especially as it cannot be doubted that, if on the 9th November 1875 the defenders had ever suspected that John Watt junior was personally interested in the purchase, the offer would not have been accepted. The result of the whole case, therefore, is—that in the reduction which the defenders have been allowed to repeat in this process, decree setting aside the missives must be pronounced; and in the original action of declarator and implement, the defenders, M'Pherson's trustees, must be assoilzied, with expenses.”

Thomas Watt reclaimed, and the argument chiefly turned on the questions—Whether (1) John Watt junior was the ordinary law agent of the trust; or (2) was employed for this particular purchase by M'Pherson. From the statement given above of the Lord Ordinary's view of the facts of the case, and from the opposite view expressed by the Lord President, it will be seen what the grounds were on which either party sought to establish their contentions as to John Watt's position in reference to the trustees.

At advising—