Scottish Court of Session Decisions

On the 20th December 1886 Mr Wyllie Guild, chartered accountant in Glasgow, was appointed judicial factor upon the estate of the deceased Michael M'Millan. By his last will and testament, dated 28th September 1811, Mr M'Millan directed that after payment of certain bequests the remainder of his property should be funded for the erection and endowing of a school in Glasgow for soldiers’ children, and he named a body of managers.

This estate fell within the provisions of the Educational Endowments (Scotland) Act 1882. The Educational Commissioners included it in a scheme, approved of on 19th May 1885, relating to Glasgow, and called upon Mr Wyllie Guild to make it over to them. He accordingly presented a petition to the Court of Session praying the Court to authorise him to denude and to exoner and discharge him of his office. The Lord Ordinary ordered service upon the Glasgow City Educational Board, and thereafter remitted the factor's accounts to an accountant. From the accountant's report it appeared that the factor had, among other investments, lent in February 1878 £2000 over subjects in Burnbank Gardens, Glasgow, which were at the time in course of erection. It was estimated that the building would “be worth when completed £3250. On 20th February 1878 the architect granted a certificate that £1200 might be paid to account. This was done, and in addition the balance of £800 was deposited in bank to await the requirements of the building. Shortly thereafter the borrower failed, leaving the security-subjects unfinished, and the feu-duty in arrear. The judicial factor thereafter expended the £800 balance in completing, as far as possible, the subjects, but this was insufficient to erect a portion of the buildings intended for stables, &c., estimated to produce one-fourth of the whole rental. The free rents from the property were insufficient to meet the interest at 4½ per cent. on the bond by £424, 7s. 9d., being the amount of interest in arrear at 20th June 1886.”

The Educational Endowment Board objected to the factor taking credit in his accounts for the sum of £2000 invested by him in this manner.

On 25th January 1887 the Lord Ordinary ( Trayner), having considered the accountant's report and heard parties, found that Mr Wyllie Guild in his factorial accounts was not entitled to take credit for the sum of £2000 advanced by him in loan on the security of the subjects in Burnbank Gardens, Glasgow, and granted leave to reclaim.

“ Opinion.—… In this case the loan was given over subjects still in the course of erection.

Page: 677↓

They were estimated by an architect in November 1877 as at the value of £3250 ‘when completed,’ over and above ground-annual and feu-duty. The buildings when completed were intended to be dwelling-houses, with ‘a set of private stable offices,’ and the estimated annual rental of the whole was £260. On 20th February 1878 the architect certified that £1200 of the loan might be paid to account, and that was paid, the balance of the loan, £800, being deposited in bank to await the requirements of the building. Shortly thereafter the borrower failed, leaving the subjects unfinished and the feu-duty in arrear. Mr Molleson reports that ‘the judicial factor thereafter expended the £800 balance in completing, as far as possible, the subjects, but this was insufficient to erect a portion of the building intended for stables, &c., estimated to produce one-fourth of the whole rental. The free rents from the property have been insufficient to meet the interest at 4½ per cent. in the bond by £424, 7s. 9d., being the amount of interest in arrear at 20th June 1886.’

“In this case I think the investment was one which the judicial factor had no authority to make. It is no doubt the fact that money is often lent on the security of buildings still in the course of erection, but persons who make such loans take the risk upon themselves of the building ever being completed, and of its value when completed being such as to make their security sufficient. No objection can be taken to persons who thus risk their own money, but a judicial factor is not in that position. He is managing the property of others, and his first duty is to take care that (so far as acts of management go) nothing shall be done to endanger the safety of the estate or diminish its amount. No speculation is admissible even for the benefit of the estate. In this case the investment was a speculation, and unfortunately it failed.

“I come to the conclusion that the factor must make good to the estate the loss arising out of this transaction, a conclusion which I regret, because I do not doubt that the factor did what he thought was best for the estate. Accordingly I find that the factor is not entitled to take credit in his accounts for the sum now in question. This will make the factor debtor to the estate in £2000, with interest thereon at 4 per cent., under deduction of any interest received out of which the estate has had the benefit.

“I will allow the expenses of both parties out of the estate.”

The petitioner reclaimed.

At advising—