Scottish Court of Session Decisions

Alexander Morrison, solicitor in Elgin, was appointed judicial factor on the estate of Mrs Elizabeth Spence on 5th July 1879. She left a will by which she bequeathed the residue of her estate to her husband Dr Spence, but as he predeceased her that bequest lapsed, and her estate became divisible among her next-of-kin. These were (1) her brother Dr Laurie, who was entitled to the half of the estate, and (2) the two children of a deceased brother, viz., James Dryden and Harris Dryden, who was entitled to the other half of the estate. The factor having realised the estate, made up an account of his intromissions, which were submitted, at the request of Dr Laurie, and of trustees appointed by James Dryden, and of the judicial factor, to Mr Wm. Moncreiff, Accountant of Court, who on 14th April 1881, after meeting with the agents for the parties, found that the commission of the judicial factor for his management of the estate and his whole duties and responsibilities, inclusive of the final distribution of the balance of funds in his hands, should be fixed at £105.

The amount of the estate being ascertained, the judicial factor paid half of it to Dr Laurie and quarter to James Dryden's trustees, who granted discharges therefor, in which the commission as fixed by the Accountant of Court was specially mentioned. No sum was paid to Harris Dryden, who had sometime before gone abroad, and had not since been heard of, and her share, amounting to £1019, 1s., remained in the hands of the judicial factor.

On 17th July, by judgment of the Second Division, James Dryden was found entitled to the estate of Harris Dryden under the Presumption of Life Act.

On 27th July 1888 Mr Dryden presented a note to the Court objecting to the factor's management of the estate and the nonproduction of factory account, which was answered by the judicial factor. Mr Dryden in a supplementary note prayed the Court to make a remit with a view to a report on the factor's management. Answers to this supplementary note were not lodged, but on 26th February the factor presented the present petition for authority to pay the balance of the estate in his hands to Mr Dryden and for exoneration and discharge.

Answers were lodged by James Dryden and William Moncur, the sole acting trustee under a trust-disposition by Dryden, and after certain procedure the Lord Ordinary remitted the accounts of the factor to the Accountant of Court to examine and report.

The Accountant of Court reported, inter alia—“3. That the judicial factor was entitled to the fee of one hundred guineas (taken credit for) as commission on the capital transactions, in terms of finding by Mr William Moncreiff, accountant, on 14th April 1881, but to no further commission.

“4. That although the estate had not been managed in strict accordance with the enactments of the statutes, it had not suffered there from; and, subject to the taxation of two untaxed business accounts, on payment of the above balance to the person entitled thereto, less such of the expenses of the present petition, and the actions leading thereto, as might be found chargeable against the estate, the judicial factor might be exonered and discharged of his actings, and his bond of caution delivered up.”

Note.— The factor explains that the non-lodgment of annual accounts occurred through an oversight on the part of his agents, who had overlooked the provisions of the Act, and for which he and they express regret.

The appended progressive state of intromissions shows the cash balances on hand for the period embraced by the fore-said amended account. The factor explains that the funds were looked after and attended to by Messrs Gatherer (of which firm his cautioner is a member), he having no actual intromissions therewith; and that it was difficult to obtain a suitable investment on heritable security for the accumulations of interest, &c. He is debited with interest at 4 1 2 per centum on the daily balances on hand, made up as shown by said progressive state, a similar rate to that received on the sums lent on heritage.”

It appeared from the report and the accounts annexed thereto, that the factor had lodged no accounts between March 1881 and August 1888, and that after investing the bulk of the capital of the estate, the factor in June 1881 had a small sum of £25, 3s. remaining in the hands of his agents, which he allowed to be increased by the annual interest on the estate from 1881 to 1888, and

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also by the amount of a loan of £300 paid up to the estate in 1886, till in August 1888 the amount so retained in the hands of his agents reached £600.

Mr Dryden and Mr Moncur objected to the report, inter alia, on the ground that the factor should have been charged with 5 per cent. interest on the sums retained uninvested in the hands of his agents.

On 28th January 1890 the Lord Ordinary ( Kincairney) repelled the objections to the Accountant's report and approved of the report.

“ Opinion.— 3. The objectors objected to the mode in which the reporter had dealt with the sums in the factor's hands. He has credited the estate with simple interest at 4 1 2 per cent. The objectors maintained that he should have credited compound interest at 5 per cent., and referred to the cases of Cranstoun v. Scott, December, 1, 1826, 5 S. and D. 60; Blair v. Murray, July 4, 1843, 5 D. 1315; and Buchanan v. Mackersy, February 13, 1849, 9 D. 700.

This objection raises a question of greater difficulty. In repelling it I have regard to the special circumstances of this case, and do not consider that I am deciding any general question. It may be that in many cases the proper mode of debiting a factor for funds which he retains in his hands may be that contended for by the objectors. In the case of Blair, which was the chief case quoted, a curator bonis had retained in his hands the whole curatorial funds, which he ought to have invested. In that case he was dealt with strictly, and debited with accumulations of interest at 5 per cent. But the case here is quite different. The whole of the capital of the estate, or almost the whole of it, was advantageously invested, and yielded 4 1 2 per cent. It appears from the appendix to the Accountant's report that at 30th June 1881 there was in the hands of the judicial factor, or of his agents, a sum of £25, 3s. uninvested, and that this sum in hand increased from year to year. The reason why it so increased was apparently that the factor or his agent did not invest or lodge in bank the sums of interest on the estate as they fell due. These were small sums, and I can readily believe that it would have been difficult, if not impossible, to find investments for sums so small, although no doubt they ought, if not invested, to have been lodged in bank; but if they had been lodged in bank of course they would not have produced to the estate anything like the 4 1 2 per cent. with which the factor has been debited, whether interest was accumulated annually or not. It may also be noticed that no commission beyond the £105 fixed in 1881 has been allowed. The judicial factor and his agent are chargeable with considerable laxity, but there is no suspicion that either of them had any corrupt motive. The estate has not suffered. The judicial factor or his cautioner are apparently called on to account for more interest than they received.

On the whole, I do not think that this is a case in which I ought to disturb the conclusion on this point at which, after careful consideration, the Accountant has arrived.”

The respondents reclaimed, and argued—The factor had failed to observe the rules laid down in the Act of Sederunt of 13th February 1730, and was liable in compound interest at 5 per cent. on the sums kept by him in his own hands. It was a wholesome rule that a factor allowing factory funds to be mixed up with his own funds should be subjected to such a penalty. The case of a factor earning a commission was different from that of a gratuitous trustee. Cases cited in Lord Ordinary's note— Nairn v. Robertson ( Nairn's Factor), March 4, 1863, 1 Macph. 515; Thoms on Factors, 563.

Argued for the petitioner—The factor had been debited by the accountant with 4 1 2 per cent. interest, and there was strong reason to abide by his report. The estate had not suffered from the factor's irregularity, and he on his part had derived no benefit from the way in which he had dealt with the estate — Wellwood's Trustees v. Boswell, December 17, 1856, 19 D. 187; Lamb v. Ritchie, December 14, 1857, 16 Sh. 219.

At advising—