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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Royal Burgh of Renfrew v. Murdoch [1892] ScotLR 29_742 (2 June 1892)
URL: http://www.bailii.org/scot/cases/ScotCS/1892/29SLR0742.html
Cite as: [1892] SLR 29_742, [1892] ScotLR 29_742
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SCOTTISH_SLR_Court_of_Session
Page: 742↓
Court of Session Inner House First Division.
[
v.
Facts:
A burgh which had adopted the Burgh Harbours (Scotland) Act 1853, borrowed a sum of money for the extension and improvement of its harbour, and granted a bond and disposition in security, in the form prescribed by Schedule B of the Act, which contained an obligation to repay the money lent, and assigned the harbour rates in security. The harbour rates proved insufficient to repay the loan.
Held that under the bond and assignation the burgh was bound to repay the money out of the common good.
The Burgh Harbours (Scotland) Act 1853 (16 and 17 Vict. c. 93), upon the preamble that “Whereas the harbour and other dues leviable at the harbours belonging to many of the royal burghs in Scotland have … become inadequate for the maintenance of such harbours, and it is expedient that further provision should be made for the extension, improvement, and regulation of such harbours and for the increase of the rates and duties leviable thereat, Be it enacted” … Sec. 17. “From and after the adoption of this Act in any burgh, the whole future revenue of the harbour shall be applied and expended by the town council in the maintenance, improvement, and extension of the harbour, and in no way and for no other purpose whatever.” … Sec. 18. (With rubric “Town Council may borrow money on the security of the rates”)—“It shall be lawful for the town council from time to time to borrow for the purposes of extending or improving the harbour, such sum or sums as they shall deem expedient … and to assign the rates by this Act authorised to be levied in security of the repayment of the sum so borrowed … provided always that intimation shall be given by the town council of their intention to borrow money … by the insertion of a notice to that effect, and stating the sum proposed to be borrowed … once in a newspaper published in the burgh … provided also that the resolution to borrow any sum of money … shall be approved of by at least two-thirds of the members of the council who are present” at the meeting, authorising the loan, ‘and that the whole sums so borrowed … shall be applied and expended in the extension and improvement of the harbour, and in no other way and for no other purpose whatsoever.” Sec. 19. “The bonds and assignations to be granted for securing the repayment of the sums to be borrowed or advanced as aforesaid shall be in the form of Schedule B hereunto annexed, and shall be signed by the provost or acting chief magistrate of the burgh, and by the treasurer and town clerk at an open meeting of the town council, and two of the councillors present shall sign as witnesses thereto, and such bonds and assignations shall be recorded in the minute-book of the town council … and in case of competition, such bonds and assignations shall have priority and preference, according to the dates of such registration, and until repayment of the sums so borrowed or advanced, and interest thereon, such sums, and the bonds and assignations granted therefor respectively, shall form a lien on the rates by this Act authorised to be levied preferable to all other debts and claims against the burgh, and the creditors in right of such sums shall be entitled to receive the same from the town council or their officers out of the first and readiest of such rates.”
The Act 3 Geo. IV. c. 91 (Sir William Rae's Act 1822) by sec. 11 enacts “That it shall not be lawful for the magistrates or the town council of any burgh to contract any debt, grant any obligation, make any agreement, or enter into any engagement, which shall have the effect of binding them or their successors in office, unless an act of council shall have been previously made in that behalf; and any such contract, obligation, agreement, or engagement, made or entered into without such act of council, shall be void and null as against the common good of the burgh.” …
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Upon 2nd August 1886 the Town Council of Renfrew, after due intimation by advertisement, unanimously resolved to borrow the sum of £1300 from Mr James Murdoch, 2 Lennox Place, Whiteinch, Partick, in terms of the Burgh Harbours (Scotland) Act 1853, for the extension and improvement of the harbour of Renfrew, and minuted their resolution.
Thereafter a bond and disposition in security was executed upon the same day in the following terms:—“The Royal Burgh of Renfrew has this day borrowed the sum of £1300 from James Murdoch, clerk, residing at No. 2 Lennox Place, Whiteinch, Partick, for the extension and improvement of the harbour of the said burgh, which sum we hereby bind the said burgh to pay to the said James Murdoch, his heirs, executors, and assignees, at the term of Whitsunday 1891, within the Council Chambers of the said burgh, with interest thereof at the rate of £4, 10s. per centum per annum from the date hereof, payable half-yearly at the terms of Whitsunday and Martinmas in each year until paid: … And we hereby assign to the said James Murdoch and his foresaids the rates authorised to be levied at the said harbour by the Act 16th and 17th Victoria, chap. 93rd, entitled an Act to enable burghs in Scotland to maintain and improve their harbours, in security of the repayment of the foresaid sums, principal and interest, which are herby declared a lien on the said rates: And we contsent to the registration hereof for preservation and execution: In witness whereof.”
This bond and disposition in security was in the form prescribed by Schedule B of the Act. No interest was paid upon this bond after Whitsunday 1887, and upon 23rd May 1891 the creditor charged the burgh of Renfrew to repay the loan with interest.
A note of suspension of the charge presented by the Magistrates of Renfrew having been passed, a record was made up in which the complainers averred—“The charger's loan in 1886 is the last in date and in ranking of the said loans upon the harbour rates. He was certiorated before and at the time of the loan that his security covered only the harbour rates, and in no way affected the common good…. The burgh borrows at the rate of 4 per cent, on the common good. The security over the harbour rates, as in the charger's bond, not being so good, the harbour bonds carry 4
per cent. The burgh in session 1878–79 promoted unsuccessfully a private bill for power to give the security of the common good in addition to the harbour rates in loans to the extent of £20,000, for the extension and improvement of the harbour.” 1 2 The complainers pleaded—“(1) The charger's security being limited to the harbour rates, and there being no funds to meet his charge, the complainers are entitled to suspension. (2) The charge being given wrongfully for the purpose of attaching the common good or other funds of the burgh, in and to which the charger has no right, the same should be suspended.”
The respondent pleaded—“(2) In respect of the personal obligation of the said royal burgh contained in the bond upon which the charge now sought to be suspended proceeds, the charge, being orderly proceeded, ought not to be suspended, and, in any event, can only be suspended upon caution or consignation of the sum due under the bond. (3) The complainers being bound by the terms of the bond founded upon to repay the sum therein contained, and the term of payment being come and bygone, the charge ought not to be suspended.”
Upon 17th February 1892 the Lord Ordinary (
“ Opinion.—The royal burgh of Renfrew is proprietor of the harbour of Renfrew, and in 1875 it adopted the Burgh Harbours (Scotland) Act 1853. The purpose of that Act was to make further provision for the extension, improvement, and regulation of harbours belonging to royal burghs in Scotland, and for the increase of rates and duties leviable thereat. Accordingly it enabled town councils to adopt the Act, and thereupon to prepare a schedule of rates not exceeding the maximum rates appended to the Act, and, on the schedule being approved by the Board of Trade, to exact the rates therein specified. It further provided (sec. 17) that from and after the adoption of the Act in any burgh the whole future revenue of the harbour should be applied and expended by the town council in the maintenance, improvement, and extension of the harbour, and in no other way, and for no other purpose whatsoever. It also, by section 18, enabled the town council, from time to time, to borrow for the purpose of extending or improving the harbour such sums as they might deem expedient, and to assign the rates in security of the repayment of the sums so borrowed. By section 19 it provided a form of bond and assignation, and declared that, until repayment of the sums so borrowed, and interest thereon, such sums, and the bonds and assignations granted therefor, should form a lien on the rates preferable to all other debts and claims against the burgh, and that the creditors in right of such sums should be entitled to receive the same from the town council and their officers out of the first and readiest of the rates.
The burgh of Renfrew seems to have exercised its borrowing power under the Act to the extent of £6500. The respondent's bond for £1300 was the last of those issued, and was granted in 1886, bearing interest at 4
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“The question is, does this obligation extend to the whole burgh property (except, of course, such as is specially appropriated to other purposes), or is it limited to the harbour rates?
In support of the latter view, the complainers are not able to point to any express words of limitation in the statute, but they appeal to its general scope and tenor, and especially to the dedication of the whole future revenue of the harbour to harbour purposes, and the provision that the lenders shall be entitled to get their money out of the first and readiest of the rates.
In order to test this argument, it is necessary to consider what was the state of the law as regards burghs having a grant of harbour before the passing of the Act. The harbour and its dues formed a part of the common good. The right to levy dues had its counterpart in the obligation to maintain and improve the harbour, but the dues could not be increased without statutory authority, and the burgh could not be compelled to expend its general funds for harbour purposes. If, however, it chose to do so, the debt so incurred was, I apprehend, an ordinary debt of the burgh, and was recoverable out of the common good, provided the proceedings were taken in compliance with Sir William Rae's Act (3 Geo. IV., cap. 91), sec. 11.
“In that state of matters the Act was passed, on the preamble that the dues leviable at many of the burgh harbours in Scotland had, by reason of the change in the value of money and other causes, become inadequate for the maintenance of such harbours. The contemplation of the statute was, not that harbours were a source of revenue to burghs, but that they were either a burden if properly maintained, or if not, that they had fallen into a condition of disrepair. The leading purpose therefore was to improve the harbours, and as a means to that end to raise the rates. It would have been rather surprising if the Act had not taken care to provide that the increased rates should be entirely devoted to harbour purposes. But that seems to me to afford no ground for holding that if a burgh chose to adopt the Act (which it was not bound to do), and chose to borrow money (which it was not bound to do), the common good should be relieved of all responsibility for the money so borrowed. Presumably before the Act was passed the common good derived no benefit from the existence of the harbour. Assuredly after the adoption of the Act it could derive none. But the general prosperity of the burgh might gain largely by the harbour being put into a satisfactory state, and it might be a perfectly prudent act of administration in the true interests of the community to pledge the common good for such a purpose. That was the view of municipal policy which led to the enactment of section 7 of the Public Works Loan Act of 1882, and that was the view which the burgh of Renfrew itself took when it promoted unsuccessfully in session 1878–79 the private bill mentioned in the condescendence. I think the burgh was wrongly advised in supposing such a bill to be necessary, but the mere fact of its introduction is enough to show that in the estimation of the municipal authorities the common good might well be burdened with liability for harbour loans, though it could derive no direct pecuniary benefit from harbour expenditure.
Neither do I think that the provisions in the statute for assigning the rates in security of harbour loans necessarily or even naturally imply that no other fund is available for repayment. Where a harbour authority has no property except the works and the rates which they produce (as in the case of the Elgin and Lossiemouth Harbour Company, 6 R. 987, and the Greenock Harbour Trustees, 15 R. 343), the fund for repayment and the subject of security may be one and the same. But in such cases the document granted to the lender is simply an ‘assignment,’ not as here ‘a bond and assignation.’ The case is very different where the harbour belongs to a body like a burgh having other funds of its own. The natural meaning of binding a burgh to repay money is that the existing town council and their successors in office are to make forthcoming the whole available property of the burgh, and there is nothing inconsistent with that in assigning a particular portion of the property of the burgh as a security to the lender. I think it would require either express words, or (to use Lord Eldon's classical phrase) ‘implication plain,’ to limit the effect of general words of obligation. Admittedly the statute contains no such express words, and the implication seems to me to be all the other way.
I assent to the complainers' argument that the respondent's bond derives its whole efficacy from the statute, and that apart from the statute it would not be in a form to bind the burgh or to affect the common good. But the bond is in the form prescribed by the statute, and the whole question is as to the effect of a bond so conceived. In the solution of that question it is of no moment to say that it is not in the form prescribed by the earlier Act of 3 Geo. IV. c. 91.
I am therefore of opinion that the charge was orderly proceeded, and that the note of suspension must be refused, with expenses.”
The complainers reclaimed, and argued—They had not intended to pledge, nor had they in fact pledged, the credit of the burgh. In borrowing as they had done, they had acted as Harbour Trustees dealing with a special fund—the harbour rates—quite separate from the common good. The bond was not in the form employed when the credit of the common good was pledged, nor had a formal Act of Council been passed as required by Sir William Rae's Act. The bond was in the form prescribed by the Act of 1853, which throughout its provisions contemplated harbour rates, and harbour rates alone. Had these rates yielded a surplus, the common good could not have been benefitted.
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Argued for the respondent—The question was simply whether a royal burgh possessed of ample funds, which had borrowed money upon a personal obligation to repay, was to be relieved of that obligation because the additional security of the harbour rates had failed, and because the purpose of the loan was to benefit the harbour. The argument of the complainers, if given effect to, would render the clause prescribed by statute, which contained a personal obligation, an empty form. In cases where only the harbour rates were assigned in security, no personal obligation was granted. The loan had been made by virtue of the 18th section of the 1853 Act, whose requirements had been complied with. It was unnecessary to attend to the requirements of Sir William Rae's Act, although these had in fact been practically complied with—cf. Leslie v. Magistrates of Dundee, December 2, 1840, 3 D. 164.
At advising—
Now, it cannot be disputed that, occurring anywhere else, the plain legal effect of the words—“We hereby bind the said burgh”—these words being used by the Magistrates, the proper custodiers of the burgh estate—is to bind the whole burgh estate.
But then it is said that occurring as these words do in this statutory form, they must be held to have some meaning different from and short of their proper and natural legal import. I am decidedly against that contention. I assent to the reasoning of the Lord Ordinary. His Lordship has first considered how the matter stood before the Act of 1853, and then what effect the Act of 1853 has upon a bond so conceived, or rather I should say upon words so conceived. There is no doubt that prior to the Act of 1853—and I take leave to say since the Act of 1853 also—a bond granted in the terms I have read would unquestionably have affected the last shilling of the burgh's property, the only condition of that being, what really does not weaken the general force of the statement, that the burgh complied with the requisite formalities which entitle it to affect the common estate, including among others the provision of the Act of Sir William Rae.
When the Act of 1853 was passed it no doubt provided for certain rates being levied on the harbour, and the rates being applied in a particular way, and for publication being made of the accounts of the harbour, other persons than burgesses being interested in seeing that the recipts of the harbour were properly applied, and the disbursements made in accordance with the general interests which are attended to by this Act of 1853. But the Act of 1853, when it comes to deal with the subject of borrowing money, recognises this separate fund arising from the dues, and it authorises the magistrates when they borrow money to assign those rates in security of the loans. That is given effect to in what I have called the second clause of the statutory form—the right which is to be granted when money is borrowed. There is an assignment of the rates. But then the statute says you are not merely to assign the rates, you are to bind the burgh in payment of the money.
Now, the contention of the reclaimer is that those words are to receive no effect whatever—that is to say, they say that the legal effect of this instrument, composed as it is of two parts—one a personal obligation and the other an assignment—is to be just the same as if it consisted of but one of them—that is to say, an assignment and no personal obligation.
The Legislature is familiar with appropriate forms of giving a creditor that amount of right over his debtor, because in numerous Scottish and English Harbour Acts there are provisions for the document which is given to the creditor containing simply an acknowledgment that his money has been received, and an assignment of the rates. That is the sort of case which occurred with reference to the Elgin and Lossiemouth harbour, which is mentioned by the Lord Ordinary here. There the style was:—“We,” the magistrates, “in consideration of the sum of advanced to us by, do hereby sell, assign, and make over to the said aforesaid the harbour and other works and rates,” &c.
Therefore if that thing is to be done, and a limited right to be conferred upon the creditor, then the Legislature does not bring in absurdly inappropriate words of obligation upon the burgh, but simply confines itself to what is the latter part of his bond.
Now, it appears to me that we should be treating pro non scripto the words which the Act of Parliament has ordered shall be put into this bond if we were to give effect to the reclaimers' contention. It appears to me, it being admitted that the legal result of those words used elsewhere is to bind the common good, that no other legal effect is intended by those words when they occur in this statutory form.
I have only to add as regards Sir William Rae's Act,—and this is quite a separate matter—that the provisions of Sir William Rae's Act have been complied with in the present instance. It may be that the Act of 1853, by prescribing certain formalities which are to be gone through, covers the same ground as Sir William Rae's Act, and
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Now, when the Legislature authorised muncipal corporations not only to pledge the harbour rates, but also to use obligatory language binding the burgh in express terms for payment of the debt, I can give no other construction to such authority but that it meant the obligation to receive all the effect which an obligation by corporations should have according to the law of Scotland. Such an obligation would certainly not render the corporators liable to personal diligence, but it would be the foundation of diligence against the estate of the corporation, and it is in order that it may receive such effect, I presume, that this charge has been given. I agree with the Lord Ordinary that no grounds have been shown for suspending the charge, and I agree that the Lord Ordinary's interlocutor should be adhered to.
It is said that its effect must be limited because the word “burgh” as used in this Act of Parliament means merely the corporation qua harbour trustees, and therefore the obligation imposed upon the burgh by the Act is an obligation not upon the common good or upon the magistrates in their general capacity, but upon the harbour trustees. But, in the first place, we
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I only add that the respondent's application depends for its efficacy entirely on the Act of Parliament of 1853. I think it is most probable that apart from that Act it might have been supported by Sir William Rae's Act, but I think it is satisfactory to find that the Act of 1853 is perfectly sufficient to support the application.
The Court adhered.
Counsel for the Complainers and Reclaimers— Vary Campbell— Greenlees. Agents— Kirk Mackie & Elliot, S.S.C.
Counsel for the Respondent— H. Johnston— G. W. Burnet. Agents— Carmichael & Miller, W.S.