Scottish Court of Session Decisions

This was an action at the instance of Mrs Camilla Soady or Maclean, wife of John Dalziel Maclean, residing at 5 Spring Gardens, Kelvinside, Glasgow, with consent of her husband, and John Dalziel Maclean for his interest, against John Turnbull, Writer to the Signet, Edinburgh, sole accepting and surviving trustee under the last will and testament of the late Mrs Dickson Soady, mother of the female pursuer, dated 29th January 1863, as such trustee and as an individual,

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the conclusions of the summons being for declarator “that the defender has incurred personal liability for the sum of £3000 belonging to the trust-estate of the said Mrs Dickson Soady, together with interest thereon at the rate of five per centum per annum from and after the term of Martinmas 1884 until payment, and that the defender in his accounts with the said trustestate, and with the pursuer Mrs Camilla Soady or Maclean as beneficiary under her mother's said testament, is bound, out of his own funds, to replace and make good the said sum of £3000, with interest thereon as aforesaid, to the said trust-estate, and thereafter to invest and to administer the said sum, with the accruing interest thereon, in terms of the said testament, and in accordance with his duty as trustee: And the defender ought and should be decerned and ordained, by decree foresaid, to make payment to the pursuer the said Mrs Camilla Soady or Maclean of the interest of the said sum of £3000 at the rate of five per centum per annum for the period from and after the said term of Martinmas 1884 until the said sum of £3000 shall be duly inrested on proper security or securities, in terms of the conclusions herein written: And the defender ought and should be decerned, by decree foresaid, to deposit and consign in any Scottish bank having its head office in Edinburgh the sum of £3000 as belonging to the said trust-estate, and subject to the trust purposes set forth in the said testament, and thereafter to invest the said sum on such security or securities as may be approved of by our said Lords, or as may be found and selected to the satisfaction and at the sight of any man of business to be appointed by our said Lords, the said security or securities to be. taken and expressed in such terms as are usual and necessary for the due administration .of the said sum of £3000, and the interest that may accrue thereon, for behoof of the female pursuer, in terms of the said testament, and in accordance with the defender's duty as trustee foresaid: Or otherwise, the defender ought and should be decerned and ordained, by decree foresaid, to pay to the female pursuer the sum of £4000 in name of damages.”

Mrs Soady's will directed that the interest of the trust funds should be paid to the female pursuer for life, for her sole and separate use and benefit without power of anticipation, the fee, if not otherwise appointed by the testatrix, to go to Mrs M'Lean's children. The amount of the trust funds falling under the will was £2500. There was a further sum of £500 left by Mrs Soady for the same purpose, which the defender, though not named as a trustee, administered in terms of an inter vivos trust-deed granted by Mrs Soady in 1862. Mrs Soady died in 1863, and the defender's co-trfistee died in 1865.

The defender acted as sole trustee after that date. He also acted as law agent in thetrust. Prior to l881 the trust funds were invested as follows:—The sum of £2500 on the security of the lands of Tand-law in Roxburghshire, and the sum of £500 over houses in Merchiston Avenue, Edinburgh. In 1881 the defender purchased the lands of Tand-law, and paid up the bond for £2500 on 6th September 1881. About the same time the bond for £500 was also paid up, so that the defender had the whole £3000 in his hands. That sum he then lent at 4 per cent, to Mr F. L. Roy upon a bond and disposition in security over the estate of Nenthorn in the counties of Roxburgh and Berwick, the bond being dated 7th and recorded 8th September 1881. The interest on this bond was paid up to and including Martinmas 1884, but after that date no interest was paid. In the beginning of 1885 Mr Roy, finding his financial position embarrassed, granted a trust-deed in favour of Mr James Haldane, C.A., Edinburgh, who thereafter continued to manage the estate, and was managing it at the date of this action.

The pursuers pleaded—“(l)The sum of £3000, belonging to the trust-estate of Mrs Dickson Soady, having been improperly lent out, owing to the negligence and breach of duty of the defender (1) as trustee, and (2) as law agent for the trust, the defender is personally liable for the said sum, with the arrears of interest thereon from and after Martinmas 1884.”

The evidence led in the case showed that at the time the loan in question was made there were the following burdens on the estate of Nenthorn:—

1. Fourteen prior bonds, amounting in all to	£……49,525
2. An annuity of £260 to Mrs Roy senior, the capital value of which in 1885 was	2,700
3. A contingent annuity of £300 to Mrs Roy junior, the capital value of which in 1885, on the assumption that it came at once into operation, was

The interest on the prior bonds varied from 3 1 2 to 4 per cent., and amounted in all to about £1845. The estate was exposed for sale in August 1881, just before the loan in question was made, in 1882, and in 1884. In 1881 the upset price was £100,000, in 1882 £90,000, and in 1884 there was no upset price. Overtures with a view to purchase were made by one party early in 1881, and by another in 1882. The price suggested by the party desirous to buy in 1881 was from £80,000 to £85,000, and by the party in 1882, £80,000. The negotiations did not result in a definite offer, Mr Roy thinking the prices suggested too low. The defender had between 1865 and 1879 acted ! as agent in making five loans to Mr Roy over Nenthorn, amounting in all to £12,000. In making the loan in question he had the rentals used in connection with these former loans to guide him, and in addition a statement referred to as “Particulars of Sale,” which was prepared with a view to the property being exposed for sale in August 1881. With reference to the “Particulars” the defender had been consulted in certain matters by his country correspondent Mr Tait, the agent for Mr Roy, but without such information being given him as would have enabled him to revise the rental. In regard to the “Particulars” Mr Turnbull in his evidence said—“I did not revise that document. I saw it after it was prepared, but I cannot say I revised it. I had no knowledge wherewith to revise it. Mr Tait asked me to look it over for him. It is referred to in the correspondence. I did not look it over as under any professional responsibility to Mr Roy, simply as a friend of Mr Tait, and making no charge for what I did.” The rental of the estate as appeared from the “Particulars” was £3137. This

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rental included £200, the value of the mansion-house, polioies, and shootings, which was in the proprietor's occupation; £650, the rent of the farm of Whitehill, which was in the proprietor's hands, and which had previously been let at £840; and £650, the rent of the farm of Blintbonny, the lease of which, by an arrangement with the tenant, was to terminate at Whitsunday 1882.

With reference to the giving of the loan and his reasons for giving it the defender deponed—“I made the loan in September 1881, because Mr Roy wanted it in consequence of his having been unable to sell Nenthorn. I did not act as agent for Mr Roy, he was not my client. I negotiated with Mr Tait, Mr Roy's agent, in the matter of the loan. I was Mr Tait's correspondent in Edinburgh. … I was satisfied with the ‘Particulars.’ I have no doubt I examined them with a view to this loan. I was the sole person who determined whether the loan should be given. I don't think I consulted with any of the beneficiaries, at least I can find no trace in writing that I did so, but Mr Maclean was often in my office and I probably spoke to him about it. I looked for a margin of income from the estate after providing for the prior bonds. I thought there was enough to pay interest on this bond and still leave a margin. After providing for everything before this bond there was a margin of £1000. I have no doubt I made a calculation at the time bringing out that, but I have no record of the calculation. My information was derived from the ‘Particulars.’… I assumed the statement of public burdens in the ‘Particulars’ to be correct. There is no entry of any charge for roads or bridges under the Roads and Bridges Act, the Act had not then come into force. The Act had been passed. I don't think the charges under that Act required to be in the contemplation of a lender, because proprietors were paying tolls and statute labour, which came in place of the assessments under the Roads and Bridges Act…. I did not take into account the property tax, or any taxes not stated in the ‘Particulars.’ I made an allowance from the rental for management, repairs, insurance, &c. I cannot stats what the allowance was; I made no note of it. I should think I made a calculation as to what margin there would be after this loan was given, but I have no note of it. I assumed that the whole of the statements in the ‘Particulars’ were correct. In doing so I relied on the statements of Mr Tait…. (Q) Is it the case that the loan was made only in consequence of your confidence in Mr Tait's management?—(A) If I must tell it, I will. Mr Roy was a most troublesome individual to deal with, and a man with whom it was most difficult to get on, and unless the estate had been in the management of some one in whom I had confidence, and who I was sure would pay the interest without objection when the term came, I would have recommended my clients not to lend the money whatever the security was… . I think Mr Tait must have intimated to me that he required a loan if the estate was not sold, and knowing that the loan was in the market, I considered it an eligible security for the money which I had to invest. In making the loan I did not act for anybody but Mrs Maclean. Mr Tait acted for the borrower, and he alone. I had before me in making the loan all the usual information, and in dealing with that information I proceeded in every respect in the usual way, applying my mind to the question as to whether the margin was or was not sufficient. I did not go over every item in the rental and criticise it, but I satisfied myself upon an examination of the rental that there was an ample margin, otherwise I would not have given the loan. In deciding as to whether there was an ample margin I had recourse to all the knowledge which was then available as to the prospects of agriculture and of rents in that county. I have no doubt that I took all the knowledge that I had at the time into account in deciding upon the loan and judging of the rental.” Mr Turnbull was a landed proprietor in Berwickshire, and had bought and sold land in that and the neighbouring counties. “In considering as to the loan in question I took the interest on the prior bonds at 4 per cent., which gave £1981. Adding to that the amount of the annuity to Mrs Roy senior, £260, the total annual burden on the estate was £2240. In that way there was upon the rental of 1881, as appearing upon the ‘Particulars,’ a margin of £900, and taking the actual rates of interest paid, the margin was £1032.

I had no doubt as to the existence of that margin, and I had no reason to suppose that it was likely to diminish.… Mr Roy is not a friend of mine, he is merely an acquaintance. I had no notion of accommodating him or Mr Tait in the matter of this loan. I had no motive in making the loan except to get what I considered a good investment for my client.” It appeared from the evidence that the £3000 was to stock the farm of Whitehill, which had fallen into the proprietor's hands. The defender had at first intended to make the advance from funds in the hands of the trustees of the late Lord Majoribanks, and a draft bond was prepared in their favour. The proposal, however, was never submitted to them, and the loan was made by Mr Turnbull as Soady's trustee instead. Two bonds over Nenthorn were subsequently granted, one for an advance of £3000 at 4 1 4 per cent, by Longmore's trustees in 1883, clients of the defender, and one for the sum of £1250 in favour of the National Bank. By March 1885 the rental of Nenthorn had fallen, owing to the agricultural depression, to £2512, and the burdens were £225, leaving a net rental of only £2287.

Mr Molleson, chartered accountant, who was examined for the pursuers, stated that a fair and moderate estimate of the income as shown by the “Particulars,” when properly criticised, was £2579, a reduction of £558. “With a margin like that there was no room for a loan of £3000,

I should have felt very anxious indeed if I had held any of the more recent of the prior loans.”

The estate of Nenthorn possessed great amenity, and Mr John Clay of Kerchester, who was examined for the defender, deponed that residential amenity often made a difference of five or ten years purchase in the price of an estate.

The Lord Ordinary ( M'Laren) on 25th January 1888 pronounced the following interlocutor:—“Finds that the investment on the estate of Nenthorn was not a safe or suitable investment for trust money: Finds that said investment was accepted by the defender as trustee without due inquiry having been made as to the sufficiency and suitability of the security as a security for the investment of trust money, and that the

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defender has incurred personal responsibility by reason of negligence, whereby loss has accrued to the trust-estate: Finds that the defender is bound to replace the said sum of £3000, he being always entitled to an assignation of the bond in order that he may effect his relief if possible: Therefore finds and declares and decerns against the defender in terms of the conclusions of the summons other than the conclusion for damages: Finds the pursuers entitled to expenses, &c.

“ Opinion.—This case was heard in October last, and was allowed to stand over because of the dependence of a case involving similar considerations in the Inner House. But the case referred to has been put out for a re-hearing, and one of the parties to the present case, in answer to my inquiry, has expressed the wish that it should now be disposed of. It is also my own impression that I ought not to leave the decision longer in suspense.

The pursuer Mrs Maclean, who sues with her husband's concurrence, has a beneficiary interest in the trust-estate, consisting of £3000, whereof the defender is sole trustee. As regards the sum of £2500, part of this fund, the defender derives his authority from the will of Mrs Maclean's mother, Mrs Soady. As regards the remaining £500, which is part of a sum provided to meet a marriage obligation, the defender has no formal title of administration, but he states that he agreed to act as trustee of this fund to oblige the pursuer, and he does not raise any distinction as to the degree of his responsibility for the two sums which make up the £3000. It is necessary to notice that the defender, who is a Writer to the Signet, has also, with the approval of Mr and Mrs Maclean, undertaken the duties usually performed by a law agent in relation to the investment of the trust funds. The case maintained against the defender is that the trust fund has become irrecoverable by reason of its being lent out on insufficient security under circumstances which amount to negligent administration. It is therefore contended that the defender is under obligation to replace the unpaid capital and interest, subject to a right on his part to an assignation of the security in order that he may work out his own relief or indemnification in the event of the security becoming productive.

It is always with the greatest reluctance that a judge must approach a question involving the personal responsibility of a trustee who has been acting in good faith, and except for the purpose of clearly defining the conditions of the question, it would be unnecessary to state that such is the character of the present case.

In the argument before me no imputation was made regarding the professional skill of the defender, or his attention to the interests of his clients. All that is said against him is that he too easily accepted statements put before him regarding the value of the security on which the £3000 was lent instead of instituting an independent inquiry, and exercising his own judgment on the facts as they would have appeared had proper inquiry been made.

“The money was lent in September 1881 on the security of the estate of Nenthorn, Berwickshire, the property of Mr F. L. Roy. According to the defender's evidence—‘The prior bonds on the estate amounted to £49,525, and in addition there was a jointure to the widow of the late proprietor, and a contingent jointure to the present Mrs Roy if she should become a widow. The jointure actually payable was valued at £2700, and the contingent jointure, supposing Mr Roy were to die at the moment, was taken at £5000.’ (Mr Roy's life, it is added, was not considered a good life.)

The sum of these incumbrances, together with the £3000 lent from the trust-estate in question, is £60,225, and the first question is as to the sufficiency of the security. The defender considers that the value of the estate for the purposes of a security holder was £90,000 in September 1881.

Mr Roy became in 1885 unable to meet his engagements, and granted a trust-deed. Since then it has not been found possible to effect a sale of the estate at a price which will cover the heritable debt affecting it. It is proper to notice that the loan in question is the fifteenth bond over Nenthorn, a circumstance which would naturally suggest to a man of business that the proprietor was gradually eating up his estate, and which ought at all events to have induced caution in making an advance from trust funds.

It is not easy to give a definition of what is a proper security for the investment of trust funds. It may, however, be assumed that a security is not shown to be a good security for trust funds by proving that other persons were willing to lend on the same security. A prudent man of business, dealing with his own money, may be willing to lend it on doubtful security, either because he is offered a special rate of interest, or even without this inducement, because he is willing to incur some risk rather than leave his money uninvested. Indeed we know that persons of good commercial credit have no difficulty in obtaining money from the banks without security of any kind. But I understand it to be the law that a trustee may only lend the money of the trust on safe security, and the only meaning which I can attach to the rule is that the security must be such as offers reasonable assurance that the principal and interest will be recovered out of the estate in case the obligant should be unable to meet his engagements. It is in all cases desirable that the rental should exceed the annual incumbrance. I do not say that this is essential, because an estate may be entirely in the proprietor's hands, as is the case with many Highland properties, and may yet be a safe security for a first bond.

I. In a case like the present, looking to the amount of the previous incumbrances and other circumstances, I conceive that the trustee was not justified in lending on ‘amenity value,’ or the prospects of a good price being eventually obtained under a sale, but ought to have seen that the current return in the shape of rents was sufficient to meet the interest on heritable debt.

On this point the facts are easily stated. The defender founds upon the rental given in a ‘Statement of Particulars,’ prepared in 1881 with a view to sale; in other words, an advertisement prepared for general circulation, and intended to call the attention of purchasers of land to the suitability of Nenthorn as a residential and rent-yielding property. According to

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this paper I make out the nominal rental to be £3560, and I understand the net rental (according to the same paper) to be £3327. In such a paper it is not to be expected that anything would be said suggesting doubts as to the permanence of the rental. That is a matter which the pursuer is supposed to consider or to find out for himself. The defender, if he had applied his mind to the question, would have seen that under the conditions which existed in 1881 the nominal rental could not possibly be maintained, and that a statement of nominal rental was no true criterion for determinating the sufficiency of the security. Mr Molleson, O.A., a witness for the pursuers, gives reasons for reducing the nominal rental by the sum of £558. In these reasons I fully concur, and I must add that as the farm of Whitehill was in the natural possession of the proprietor I do not consider that the supposed rental of this farm ought to be reckoned at all in an estimate of rental as a security for payment of interest, and for this reason that it would not be possible for the heritable creditor to make this rental available as a security by means of an action of maills and duties. This is a very material element in the case, because this farm, the profits of which went directly into the proprietor's pocket, is set down in the particulars, or at all events was treated by the defender, as a security for interest to the extent of £840 per annum, when, according to the actual mode of management, it was not available as a security for interest at all. This was found out as soon as Mr Roy's affairs became embarrassed, but I think it ought to have been foreseen. On this point of the case I am clearly of opinion that the annual return from Nenthorn in the year 1881 was insufficient to sustain a new loan of £3000, or to provide for the punctual payment of the interest on such a loan.

II. I have next to consider the question whether the capital value of the estate in 1881 was such as would constitute a safe security. As before observed, the defender estimates its value at £90,000 for sale at that date. It is satisfactorily proved that the price of from £80,000 to £85,000 might have been obtained for it had the proprietor been willing to sell. But now this possibility of the proprietor refusing his consent to a voluntary sale is one of the things which a postponed bondholder has to consider before advancing his money. It is not said by any one that Nenthorn if put up to sale by a bondholder would have brought £80,000 or anything like that sum. But it seems that Nenthorn is a very desirable residential estate, and it is in evidence that £80,000 might have been got for it by private bargain from a gentleman of fortune who was on the look-out for a residence, and also from a body of trustees who were directed by their trust to purchase lands in the south of Scotland. Therefore the position to be taken by the proprietor was vital to the security, so far as depending on the probability of a sale before the market for heritable property had become still further reduced, as was at least probable in 1881.

Now, what is Mr Turnbull's opinion of Mr Roy as a gentleman whose co-operation in such a matter was to be depended on? I give it in his own words—‘Mr Roy was a most troublesome individual to deal with, and a man with whom it was most difficult to get on; and unless the estate had been in the management of some one in whom I had confidence, and who I was sure would pay the interest without objection when the term came, I would have recommended my clients not to lend the money, whatever the security was.’

In point of fact Mr Roy took up the position that he would not allow the estate to be sold under £100,000, or something near that figure—a very unreasonable position no doubt, but a position for which I think the defender would not be altogether unprepared, according to the opinion which he thus frankly expressed in his evidence.

Apart from this speciality I must say that amenity value is not the kind of value on which it is proper that trustees should lend when the chance of obtaining repayment depends on the fancy of a purchaser. In the case of a first mortgage I do not say that it may not legitimately enter as an element of the margin. The question whether a postponed security should be accepted as a trust investment is a question of circumstances, and here I think that the aggregate of all the circumstances—insufficiency of cash rental, speculative value, large prior incumbrances, and a proprietor difficult to deal with, and verging on embarrassment, ought to have stamped the transaction in the judgment of a professional man as one lying outside the limits of safe investment of trust moneys.

III. There remains for consideration the question of negligence. If this were a kind of trust investment prohibited by some positive rule of law the mere infringement of the rule would create personal liability. But it is not so. The law of Scotland does not as at present interpreted prohibit trustees from lending on the security of a second bond. If a second bond may lawfully be taken, I see no reason why a fifteenth bond (which is the present case) may not also be accepted by trustees, always assuming that there is an ample margin. The question is then one of circumstances in which the law requires a trustee to use his best judgment, assisted where necessary by professional advice, and I am not of opinion that a trustee is personally responsible for the consequence of a mere error of judgment. A man may be appointed a trustee who has neither professional skill nor average ability, and if such a trustee, after due inquiry, and making the best use of the limited faculties which nature has given him, makes an investment of the trust money which turns out to be unsound, I see no sufficient reason why the loss should be thrown upon him.

But in the present case my opinion is that the defender did not make due inquiry. He is a man of ability and of professional experience, but in this case, from some error or oversight, he just trusted to the statement of particulars of Nenthorn, and agreed to give the loan because that statement showed an apparent surplus. This is the kind of negligence for which the law holds trustees responsible. I cannot look upon this as a case of misadventure arising from unforeseen causes, because I think that the defender had the means of procuring more reliable information regarding the worth of Nenthorn as a security, and that if he had been fully informed he would

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not have lent the trust money on the security of that already heavily mortgaged estate.

No question has been raised as to the computation of damages. The judgment will find the defender accountable for the £3000, he retaining the present security for his personal indemnification.

The defender reclaimed, and argued—In considering whether this was a prudent investment of trust funds the question must resolve itself into one of margin. The defender's estimate of the value of this estate was £90,000, and the proprietor had an offer of £85,000, which left a margin of about £35,000, an ample cover for £3000. Margin divided itself into (1) margin of rental for payment of interest, and (2) margin of capital value for payment of the sum lent. As to the former—margin of rental—it was urged that because the farm of Whitehill was in the proprietor's own hands it therefore was not a good security for trust funds, but though the rents could not be attached, yet the stock might be poinded. [ Lord President—If the rent of the land in the proprietor's hands and the value of the mansion-house be deducted the rental is reduced to £1700, and you say the interest on the prior bonds amounts to £1800.] It was not fair to put the land in the proprietor's hands and the mansion-house in his occupation down at nothing; these were lettable subjects, and if let would put money into the creditors' pockets. In negotiating this loan the defender could not be said to have acted without full information; he had lent previous sums over the estate shortly before, and he had then made the fullest inquiries. He had all that information before him, and in addition he had personal knowledge, which, as a neighbouring proprietor, was considerable. With all these details before him could the defender be said to have been so culpably negligent as to render him personally liable for the loss that had taken place? In considering the evidence of Mr Molleson it was clear, on his own showing, that his estimate of the rental of the mansion-house was a random one, because he knew nothing about the estate and had never been there. The farms were taken at the current rents which, except as regarded one or two small items, were being received. In considering how far unlet subjects could be looked upon as productive, there were three categories, into one or other of which they fell to be classed—1st, shops, which were the worst class; 2nd, a mansion-house in the proprietor's occupation, which, though it did not yield any actual return, yet might be let, and so could fairly be looked upon as a source of revenue; and 3rd, farms worked by the proprietor which yielded produce if not rent. It was nowhere laid down that if a proprietor farmed a portion of his own land a lender was not entitled to estimate this at a reasonable sum in considering a proposed loan over the estate, otherwise no money could be lent over houses in town in the occupation of the borrower. Taking this into account, the defender considered he had a clear margin of £900 per annum, and taking this as the basis of his calculation, could it be said that no man of ordinary prudence would have lent on this margin? The pursuers must bring their case up to this. The objection to Mr Molleson's evidence was that he treated the whole transaction in the light of the present day and argued back. Even if the defender's action was viewed as an error of judgment he was entitled to be freed, because all that he could be called upon to show was that he acted with ordinary prudence and foresight. He was law agent for the trust, but made no charges, and acted solely for the lender. In such a case he was limited to a certain class of investments—this was one of the sanctioned class—and as far as the sufficiency of the investment appeared from the rental sheet there was a fair margin. If the capital value of the security was such as to make the capital and interest of the loan safe, then the question of whether or not the loan should have been made was one of discretion. The question of security arose when the interest ceased to be paid, but there was no absolute rule requiring that in trust investments there must be a margin of rental as well as a margin of value. As regards the margin of capital value—The property was estimated as being worth from £80,000 to £90,000 and £85,000 was offered for it. At the time of the loan in question the state of the property was as follows:—

Lent in cash over the estate.	£49,525
Capitalised value of annuities
Total burdens	£57,225
Offered for estate
Margin

or less the amount of the loan in question, and as security for it £24,775— Kennedy v. Kennedy Dec. 9, 1884, 12 R. 275. Money was subsequently advanced upon this security. There might have been error of judgment, but error of judgment was not culpa. The Lord Ordinary thought the defender had not made sufficient inquiry, but being a local proprietor he was in a peculiar position, and had peculiar and ample sources of knowledge. He had full information before him, and after making all reasonable and necessary deductions he applied his judgment and came to the conclusion there was security for the loan. He might have committed a mistake, but it was in full knowledge of the facts, and after full consideration of all details. There was no vestige of culpa or negligence here. In considering whether this was a judicious loan at the time when it was made, subsequent events must be kept out of view, and the actings of the defender considered in the light of the information then before him, and so considered, the judgment of the defender in 1881 was sound— Learoyd v. Whiteley, L.R., 12 App. Cas. H. of L. 727, and Lord Watson, 733; Godfrey v. Faulkner, L. R., 23 Ch. Div 483.

Replied for the respondents—This was a postponed bond taken by a trustee at a period of commercial depression, when any prudent man might have suspected things had not reached their worst, and should have made allowance accordingly. Special caution was required in such a case, but the evidence showed that the defender had not looked into this matter as he should have done. In determining the question as to the margin of security, both as to capital and interest, the defender took as his guide a state drawn up to induce a sale of the property, and which he himself had assisted the proprietor to prepare.

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At the time of this loan one-half of the estate was in the proprietor's own hands, the rental of this portion being £1500, and if amenity was not taken into account, little or no margin could be shown. The fault the defender committed was in taking matters too easily. Seeing that he was acting without any skilled advice, he ought to have been the more careful and vigilant. The very object for which this loan was required—to stock a farm—ought to have put the defender on his guard. In order to make a loan of this kind secure there should have been 30 per cent, of free income. It was urged that the defender's actings in this case fell under the category of errors of judgment, but what the pursuers complained of was that this was a case of positive negligence, as the defender had omitted to take into account circumstances well within his own knowledge. The contention on the other side was that little heed needed to be paid to the interest so long as the capital was safe. But trustees were bound to look at the productive value of a subject so as to enable them to hold the balance fairly between a liferenter and a fiar. The true position of the defender was he was financing this estate over which he had lent a great deal of money, and the interests of the pursuers were sacrificed for this purpose. It was the defender's duty to have taken the advice of a valuator before making this loan; he did not do this, and must be held liable for all that had occurred through his negligence— Sanders v. Sanders' Trustees, Nov. 7, 1879, 7 R. 157; Raes v. Meek, June 29, 1886, 13 R. 1036; Forsyth, Jan. 28, 1853, 15 D. 345; Millar's Trustees v. Millar's Factor, Nov. 2, 1886, 14 R. 22; Fry v. Lapsley, L.R., 28 Oh. Div. 278; Whiteley v. Learoyd, L.R., 33 Ch. Div. 347; 12 App Cas 727; Olive v. Westerman, L.R., 34 Ch. Div. 70.

At advising—