Scottish Court of Session Decisions

On November 18th 1890 Francis Robertson Reid granted a trust-deed for behoof of his creditors in favour of Lawrence Hill Watson, C.A., Glasgow. The deed provided that a suitable remuneration should be paid to the trustee.

The trustee died on 27th January 1893, and thereafter the Royal Bank of Scotland and the British Linen Company Bank, the principal creditors of the said Francis Robertson Reid, with his consent and concurrence presented a petition wherein they craved the Court to appoint a trustee under the trust-deed in place of the deceased Lawrence Hill Watson, or otherwise to appoint a judicial factor on the trust estate.

Section 12 of the Trusts (Scotland) Act 1867 provides—“When trustees cannot be assumed under any trust-deed, or when any person who is the sole trustee acting under any such trust-deed has become insane or incapable of acting by reason of physical or mental disability, the Court may, on the application of any party having interest in the trust-estate, after such intimation and inquiry as may be thought necessary, appoint a trustee or trustees under such trust-deed, with all the powers incident to that office.” …

The question arose whether the Trusts Amendment Act 1884 had extended the operation of the Trusts Act 1867 to trusts in which the trustees did not act gratuitously, and the Lord Ordinary ( Low), in respect of the importance of this question, reported the petition to the First Division. The provisions of the Trusts Amendment Act 1884, on which the petitioners founded, are set forth in his Lordship's note.

“ Opinion.—The petition is presented by two of the principal creditors of Mr Reid with his concurrence, and no opposition to the appointment has been offered by any of the parties interested. The prayer asks alternatively for the appointment of a judicial factor, but the parties desire that a trustee should be appointed, if that course is competent.

The application is made under the Trusts Acts, although they are not cited in the petition, and it appears to me to be

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doubtful whether a trust for creditors falls within the provisions of these Acts.

It was decided in the case of Mackenzie, 10 Macph. 749, that the Trusts Act of 1867 applied only to trusts in which trustees act gratuitously, and did not apply to a trust for creditors.

But it is said that the operation of the Act of 1867 is extended by the Trusts (Scotland) Amendment Act 1884.

It is provided by section 1 of that Act that it and the previous Trusts Acts ‘may be cited as the Trusts (Scotland) Acts 1861 to 1884, and shall be read and construed together.’

Then by section 2 it is provided that “Trust” shall mean and include any trusts constituted by any deed or other writing, or by private or local Act of Parliament, or by resolution of any corporation or public or ecclesiastical body, and the appointment of any tutor, curator, or judicial factor by deed, decree, or otherwise. “Trustee” shall include tutor, curator, and judicial factor.’

It is plain that the definition of a ‘trust’ is wide enough to include a trust for creditors, but the same thing could be said of the definition of a ‘trust’ under the Act of 1867.

Again, if the word ‘trustee’ is to include tutor, curator, and judicial factor, I think that it presumably also includes a trustee in the ordinary sense of the word, whether gratuitous or not. Further, I apprehend that the presumption is that the trustees acting under all trusts falling within the definition of ‘trust’ are included in the Acts. There is, however, no separate definition of the word ‘trustee,’ and it was held in the case of Mackenzie that that word, where it occurs in the Act of 1867, means gratuitous trustee.

The Act of 1884 has been followed by the Acts of 1887 and 1891.

By the former Act it is provided that, in addition to the powers conferred on trustees by the second section of the Act of 1867, trustees shall have power to make abatement of rent ‘in all trusts to which that section applies.’

The Act of 1891 deals chiefly with the liability of trustees who have lent money on security of property, and by section 2 it is provided that ‘trust’ and ‘trustee’ shall have the meaning assigned to them by the Act of 1884.

In the Act of 1887 there is no definition, either by reference or otherwise, of ‘trust’ and ‘trustee,’ but the 19th section of the Judicial Factors (Scotland) Act 1889 enacts that the provisions of the Trusts Act of 1887 ‘shall apply to and include all trusts and trustees as defined by the second section of the Trusts (Scotland) Amendment Act 1884.’

The language of that enactment is very emphatic, and to ascertain the scope of the Act of 1887 the definition in the Act of 1884 alone has to be looked to. As I have already said, the definition of ‘trust’ in the Act clearly covers a trust for creditors, and the word ‘trustee’ is only defined as including certain offices, the holders of which, although acting in a fiduciary capacity, are not in ordinary language termed trustees. It therefore appears to me that a trust and a trustee for creditors fall within the operation of the Act of 1887, or, in other words, that the second section of the Act of 1867 as amended by the Act of 1887, applies to such trusts and trustees. I do not think, however, that in view of the decision in the case of Mackenzie it is clear that the other sections of the Act of 1867 have been extended beyond the case of gratuitous trusts, except in so far as applicable to tutors, curators, and judicial factors, and perhaps the fact that the Legislature has specially enacted (as I think) that the second section applies to all trusts, points to the remaining sections having a more limited application.

As it is of importance that the scope of the Trusts Acts should be authoritatively declared, I have thought it right to report the case.”

Argued for the petitioners—The provisions of the Act of 1867 were extended to all trusts by the operation of the Act of 1884. The latter Act was to be read and construed along with the previous Trusts Acts. It contained no definition of gratuitous trustee, but on the contrary its provisions applied expressly to trusts in which the trustees did not act gratuitously—Sections 1 and 2 of Act of 1884. The present case was thus distinguished from the case of Mackenzie, referred to by the Lord Ordinary, in which the Judges proceeded largely upon the ground that the wide definition of “trusts” contained in the Act of 1867, being followed immediately by a definition of “gratuitous trustees,” must be limited and restricted to the scope of that definition. The Court could therefore grant the application for the appointment of a trustee under the Trusts Acts. The Court had also at common law the power of appointing trustees to fill vacancies, and would exercise that power where necessary, and a sufficient case of necessity existed in the present case—M'Laren on Wills and Succession, ii. 219, and following; Aikman, &c., December 2, 1881, 9 R. 213; Melville v. Preston, February 8, 1838, 16 S. 457.

At advising—