Scottish Court of Session Decisions

On 18th June 1873 George Gray, coalmaster, Leavenseat, by Whitburn, died leaving a trust-disposition and settlement and relative codicils. Under the said trust-deed the trustees, the Rev. James Ronaldson and others, were directed, after payment of the truster's debts, to pay the income of the estate to his sisters, and on their death to divide the fee or corpus of the estate among the appointed fiars. The trustees were left with a discretion as to the investment of the funds, but were empowered to invest on heritable securities. Mr William Drummond, one of the trustees, was appointed to be law-agent and factor for the trust, with the usual remuneration, power having been conferred on the trustees by the truster to make such a nomination, and thereafter the business of the trust was transacted by the firm of Drummond & Reid, W.S., Edinburgh, of which Mr Drummond became a partner in June 1874. In 1876, money of the trust falling to be invested, a sum of £6000 was lent to George Simpson, coalmaster, Benhar, on a bond and disposition in security over two properties in the west of Fifeshire. This bond was only a second security, but this was known to the trustees. At this date Messrs Drummond & Reid were acting as law-agents for Mr Simpson as well as for the trustees.

In May 1877 Messrs Drummond & Reid, acting on behalf of Mr Simpson, applied to the trustees for a loan to Mr Simpson of the sum of £3500, offering as security the reversion of his lands and estate of Kinglassie, Fifeshire. This proposal was rejected by them on the ground of the insufficiency of the security offered, there being prior securities over the estate to the extent of £25,500. Subsequently, however, another application was intimated to them, the security of the dwelling-house of Viewfield Villa, and offices and grounds, at Harthill, Lanark, which Mr Simpson personally occupied, being offered in addition to the lands and estate of Kinglassie. This application was agreed to by the trustees by minute of meeting dated 10th May 1877, which was in the following terms:—“Recorded that the bond and disposition in security by Mr Turnbull to the trust for £3500 was to be paid at Whitsunday, as Mr Turnbull had sold the subjects, and resolve to lend the same on bond and disposition in security by Mr Simpson over lands at Kinglassie, and dwelling-house at Harthill, there being a prior charge on the former, and the loan forming the only loan on the latter.” At the said term of Whitsunday 1877 the trust-money was paid over by Messrs Drummond & Reid to Mr Simpson, and in exchange was given a bond and disposition in security, subscribed 4th June 1877, and recorded on the 5th June 1877, over the said lands and villa and other subjects for the said sum In it George Simpson granted him to have instantly borrowed and received from the trustees the sum of £3500, which had been paid to him on the previous 15th May, and which sum he bound himself and his heirs and executors to repay, and to pay interest thereon at five per cent. It further bore that “in security of the personal obligation written in the said bond and disposition in security, the said George Simpson, in addition to the said lands and estate of Kinglassie, assigned to and in favour of the trustees foresaid, and their foresaids, heritably but redeemably as thereinafter mentioned, yet irredeemably in the event of a sale by virtue thereof—( First) A lease or tack of All and Whole that lot or piece of ground, part of the lands and barony of Harthill, lying in the parish of Shotts and shire of Lanark, consisting of 2 roods and 27 poles imperial measure or thereby, bounded as therein mentioned, and ( Second) A lease or tack of All and Whole that lot or piece of ground, part of the lands and barony of Harthill, lying in the parish of Shotts and shire of Lanark, consisting of 3 roods and 38 poles imperial measure or thereby, bounded as therein mentioned; excepting always from the subjects contained in the said leases a portion thereof extending to 3 roods and 38 poles or thereby, particularly described in an assignation by the said George Simpson in favour of the said James Watt, which is dated the 21st day of February, and recorded in the said General Register of Sasines the 5th day of March 1867.”

This deed did not convey Viewfield villa, offices and grounds.

George Simpson having become insolvent, his estates were sequestrated, and the interest on the bond and disposition in security which fell due at Martinmas remained unpaid to the trustees, who had received no interest since Whitsunday 1878. Messrs Drummond & Reid accordingly, as their agents, raised an action of poinding the ground against George Simpson; having obtained decree they raised letters of poinding and poinded effects of the bankrupt at the villa of Harthill amounting to £1200 or upwards. This, however, was inept, owing to the subjects in which it was executed not being covered by the bond, and for other causes, and the trustees were unable to realise the lands and estate of Kinglassie, which were twice unsuccessfully exposed to public roup and sale at the upset prices of £27,000 and £25,000. Thereafter, on the 29th April 1879, Messrs Drummond & Reid ceased to act as agents to the trust, and the trustees, having ascertained certain particulars connected with the loan in question, intimated to them that they held them liable for the sum of £3500 as well as the expenses connected with the action of poinding the ground. These demands were resisted, and the trustees then raised the present action against them, praying the Court to have them ordained to pay (1st) the sum of £3500 sterling, with in. terest thereon at the rate of £5 sterling per centum per annum from the 15th day of May 1878 until payment; (2d) of the sum of £10, 16s. 10d. sterling as the expenses of the poinding, with interest thereon at the rate of £5 sterling per centum per annum from the 5th day of February 1879 till payment.

The pursuers averred on record that “in agreeing to grant the foresaid loan of £3500 they relied on the defenders seeing that the money so lent was secured over the absolute property not only of Kinglassie but of the said villa, offices, and grounds at Harthill. They further relied on the defenders seeing that the security given by

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Mr Simpson was sufficient and ample. They trusted to the defenders' professional skill and capacity to examine and ascertain that the titles of the said properties were valid and correct; and they relied upon them obtaining in exchange for the said loan of £3500 a valid bond and disposition in security embracing the property of the said lands and estate and villa and offices and grounds. In place, however, of so fulfilling their duty to the pursuers, the pursuers had now ascertained that the said defenders violated their instructions, and (by themselves or their clerks for whom they are responsible) acted with gross negligence and want of professional skill and capacity in the following or one or more of the following respects—(1) They failed to observe, or at least to inform the pursuers, that the said villa, offices, and ground at Harthill did not consist of heritable estate held in fee-simple by the said George Simpson, as was relied on by the pursuers, but were only leasehold property—the portion first above mentioned being held by Mr Simpson for ninety-nine years from 1859 under said first lease, and the portion second above described for ninety-nine years from 1864 under the lease second above mentioned, and the deed they took in exchange for the said loan of £3500, so far as it affected the said villa, offices, and grounds at all, conveyed only right to leases; (2) although the solum of the ground on which the said villa, offices, and grounds at Hart-hill have been erected and laid out extend to nearly 4 imperial acres, the said bond and disposition in security only conveys to the pursuers about 2 roods and 27 poles. Nearly the half of the said villa, and the whole of the offices, consisting of coach-house, stables, washing-house, and others, and large portions of the grounds, are entirely omitted from the security in favour of the pursuers; (3) They took as security from Mr Simpson what excepting through gross negligence or want of skill they could not but have known to be worthless or at least wholly inadequate for the protection and safety of the pursuers and the trust-estate under their management.”

They pleaded—“(1) The defenders having been authorised by the pursuers to make payment of the said sum of £3500 of trust-funds to Mr Simpson only in exchange for a bond and disposition in security conveying to them (in security), first, the lands of Kinglassie, and second, the villa, grounds, and others at Harthill, and having made payment to Mr Simpson without getting such a deed, are bound to make repayment of the said sum to the pursuers, with interest. (2) The defenders having as agents for the pursuers been instructed by them to procure for a loan of £3500 ordinary heritable security over the said lands, villa, and others, and having failed to do so through gross disregard of instructions and negligence or want of skill on the part of themselves or their clerks, they are bound to restore the pursuers to the position in which they would have been had there been no such disregard of instructions or neglect of duty or want of skill. (3) The defenders having, while acting as the pursuers' agents, been guilty of gross negligence and want of skill in taking for the said loan of £3500 of trust-funds, security which by the exercise of ordinary care they would have known to be worthless, or at least grossly inadequate, they are liable to the pursuers in the loss, injury, and damage thence arising to the latter. (4) The pursuers not having given the defenders authority, and separatim not having the power, to invest on the security of leases, are in the circumstances entitled to decree as concluded for.”

The defenders replied, with regard to the extent of the ground embraced in the title, that a small part of Mr Simpson's buildings had been erected on ground outside his boundary, of which ground he had verbally arranged for a long lease, but this fact was not known to the defenders. That as soon as it was ascertained, arrangements were made for bringing within the title the whole subjects occupied by Mr Simpson, and for Mr Simpson's trustee in bankruptcy granting to the pursuers a supplementary conveyance in security. This was communicated to the pursuers' agent, but the pursuers took no advantage of it and raised the present action. Further, they averred that the estate of Kinglassie was of the value of £34,500, and pleaded the stagnation in the market and great mercantile depression at the periods of exposure to sale.

They pleaded—“(2) The averments of the pursuers being unfounded in fact, and in particular the defenders having been guilty of no negligence in the premises, the defenders are entitled to absolvitor. (3) Separatim, the defenders are entitled to absolvitor, in respect the pursuers have suffered no damage by or through any act or default of the defenders.”

After the record was closed a minute of amendment was put into process from which it appeared that on the 22d October 1879 the defenders lodged in process a supplementary assignation or disposition and security by Mr Adam Gillies Smith, the trustee on George Simpson's sequestrated estate, in favour of the pursuers, together with a copy of a lease between D. Montgomerie Bell and Adam Gillies Smith and George Simpson, dated 7th, 8th, and 13th October 1879. Its object was declared to be to place the pursuers in the same position as if the whole subjects thereby conveyed had been a initio contained in the said bond of 4th June 1877. By this the bond and disposition in security of 4th June 1877 was remedied to the following effects:—The tack of the whole of the said 3 roods and 38 poles, with the exception of 34 poles assigned to neighbouring lessees, were assigned to the pursuers, their original security having excepted the whole of the said 3 roods 38 poles. The tack of the piece of ground containing 2 acres 3 roods 1 pole and 24 square yards, on which the villa was partially built, and which had been let by Mr Montgomerie Bell, as commissioner for J. C. Craigie Halkett Inglis, to Adam Gillies Smith for ninety-nine years from Whitsunday 1874 (which had been entirely omitted from the original security), was now assigned to the pursuers. The piece of ground consisting of 1 rood 23 poles and 3 square yards which had been acquired from a Dr Clark by Mr Simpson, which formed part of the grounds and garden of the villa, and which had also been entirely omitted from the original bond, was disponed to the pursuers in security of their loan. By a joint-minute for the parties, to which the Lord Ordinary (Young) interponed authority, it was agreed that without prejudice to their rights and

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pleas hinc inde, the whole subjects at Harthill, and the furniture and other effects in Viewfield Villa and offices there, should be sold by the pursuers at public auction, the nett proceeds thereof being to be applied, firstly, towards payment of the pursuers' debt. In accordance with this agreement, Harthill Villa was sold for £2110, and as the furniture in the house under the poinding of the ground brought £1084, 18s., the difference between these two sums taken together and the £3500 with interest and expenses connected with the realisation came to be the pecuniary value of the controversy maintained in this litigation.

The import of the proof will sufficiently appear from the interlocutor of the Lord Ordinary and the Judges’ opinions.

The Lord Ordinary ( Lee) found “that on or about 10th May 1877 the defenders, as law-agents for the pursuers, as trustees under the trust-disposition and settlement, were authorised and employed by the pursuers to lend the sum of £3500 belonging to said trust to Mr George Simpson, coalmaster, Benhar, on the security of his lands at Kinglassie in the county of Fife, and dwelling-house at Harthill in the county of Lanark, known as Viewfield Villa; that in giving instructions for said loan the pursuers knew that the defenders were acting also as law-agents for Mr Simpson, were aware that there was a prior charge on the estate of Kinglassie, and were informed of the fact that the loan would form the only loan on the dwelling-house at Harthill, and that Mr Simpson had expended upwards of £10,000 on that property; that the borrower Mr Simpson was a person known to several of the trustees, and then in good credit; that the subjects at Kinglassie consisted of an estate recently purchased by him for £34,500, yielding a nett agricultural rental of over £1000 per annum, without being over-rented, and which had been accepted as affording first-class heritable security to the amount of £25,500; and the subjects at Harthill consisted of a dwelling-house and offices, with garden, greenhouse, and vinery, erected at an expense of about £12,000, upon ground extending to between three and four acres, held partly under the registered lease for the period of 99 years from 1859, partly under the registered lease for the period of 99 years from 1864, partly upon an arrangement with the proprietor to grant another 99 years' lease followed by possession, and to a small extent as a feu from the estate of Polkemmet, in terms of the disposition; that it is not proved that the defenders represented to the pursuers that the subjects at Harthill were the property of Mr Simpson by virtue of a feudal title, or that they gave the pursuers any ground for believing that the title thereto was other than that which was actually possessed, and which has been made good to the pursuers by the supplementary disposition and assignation; that the defenders having obtained the completion of a title to the dwelling-house, &c., at Harthill, in the persons of the pursuers, as trustees foresaid, in terms of said supplementary disposition and assignation and writs therein referred to, and having offered before the action was raised to obtain such a title, cannot be held to have failed to obtain security for said loan in terms of their instructions; that it is not proved that the said security was insufficient, or that the pursuers, as trustees foresaid, have suffered loss and damage through negligence or want of skill on the part of the defenders in making the said loan or in taking security therefor: Therefore sustains the defences, assoilzies the defenders from the conclusions of the action, and decerns.”

The pursuers reclaimed, and in support of their pleas-in-law quoted the cases of Haldane v. Donaldson, 14 Sh. 610, affirmed, 1 Rob. 266; Campbell v. Clason, Dec. 20, 1838, 1 D. 270; Graham v. Stewart, March 4, 1831, 9 S. 543; Stuart v. Miller, Dec. 12, 1840, 3 D. 255; Sim v. Clark, Dec. 2, 1831, 10 S. 85.