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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Governors of The Inner - Peffray Mortification v. Drummond [1894] ScotLR 31_917 (30 May 1894)
URL: http://www.bailii.org/scot/cases/ScotCS/1894/31SLR0917.html
Cite as: [1894] ScotLR 31_917, [1894] SLR 31_917
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SCOTTISH_SLR_Court_of_Session
Page: 917↓
Court of Session Outer House.
[
v.
Facts:
Under a heritable bond, granted in 1696, the interest payable was 6 per cent., the highest rate then exigible, or such other rate as might thereafter be exacted as the highest legal rate. Held
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that the interest due upon the bond subsequent to the repeal of the Usury Laws was 6 per cent., being the interest originally prescribed by the bond.
In 1690 William second Viscount Strathallan and fourth Lord Madderty executed a deed of mortification of the sum of 5000 merks, to be administered by himself and his successors in the lands and barony of Innerpeffray, for the purpose of maintaining a school and library at Innerpeffray, and for payment of the salaries of a schoolmaster and keeper of the library. By a relative heritable bond Lord Strathallan bound and obliged himself and his heirs and successors “‘to make due and thankfnl payment of the annual rent of the said sum of 5000 merks to the keeper of the said library and schoolmaster, and for the other uses after-mentioned.’ And for further security bound himself ‘to duly and lawfully infeft and sease Andrew Pattoun, present of the said library, for the use thereof, and for himself and his successors, keeper of the said library and schoolmaster at Innerpeffrie, heritable, under reversion, always in manner after specified, in All and Haill ane annual rent of £200 Scots money, and in case annual rents be altered, in such ane annual rent as shall be correspondent to the foresaid principal sum of 5000 merks, conform to the laws of this kingdom made or to be made thereanent.’ The bond also contained provisions with regard to the redemption of said sum of 5000 merks, and in addition a precept of sasine in virtue of which the said Andrew Pattoun was infeft on 23d September 1701, and the infeftment recorded on 30th October 1701. In said last-mentioned year the defender, who is the third son of Thomas Robert tenth Earl of Kinnoull, succeeded to the lands and barony of Innerpeffray, and from that time until 15th October 1889 the said endowment was held and administered by him. Thereafter the administration of the mortification was transferred by an Order in Council under the Educational Endowment (Scotland) Act 1882 to the pursuers, the Governors of the Innerpeffray Mortification.”
In the present action the pursuers asked for a count and reckoning from the defender of his intromissions with the funds of the mortification from 1855 to 1889, and claimed, inter alia, that they were entitled to an annual rent of £200 Scots, or £16, 13s. 4d. sterling, representing 6 per cent. on 5000 merks, the sum mortified. Six per cent. was at the date of the bond (1696) the highest legal rate of interest, and the question raised was whether, under the terms of the bond, interest at this rate was due subsequent to the abolition of the Usury Laws by 17 and 18 Vict. c. 90, or whether the interest should, as suggested by the defenders, be fixed at the highest rate obtainable during the period in question, for money lent on first-class heritable security. On this footing the defenders offered to pay 4 per cent. on the bond.
On 30th May 1894 the Lord Ordinary (
“ Note.—The only matter which I can with advantage dispose of at present is whether, under the heritable bond (partially quoted above) the defender falls to be debited with an annual rent at rate of 6 per cent. on the sum mortified, or at the rate of 4 per cent. as offered by the defender. This depends upon the construction of the heritable bond, and raises a somewhat curious question. The sum mortified was 5000 merks, equal to £277, 15s. 6d. The heritable bond provided that the annual rent was to be ‘ane annual rent of £200 Scots money, and in case annual rents be altered, in such ane annual rent as shall be correspondent to the foresaid principal sum of 5000 merks, conform to the laws of this kingdom made or to be made thereanent.’
Now, £200 Scots money is exactly 6 per cent. on the sum mortified, being at the date of the bond (1696) the highest rate of legal interest. By various statutes the rate of interest had been reduced, first, from 10 per cent. to 8 per cent. and then from 8 per cent. to 6 per cent. The statutes in force at the date of the heritable bond were the Acts 1649, c. 29, and 1661, c. 49, which fixed the highest rate of legal interest at 6 per cent. By the Act 12 Anne, stat. 2, c. 16, the rate was reduced to 5 per cent., and by 17 and 18 Vict. c. 90, the Usury Laws were abolished, and it became lawful for parties to stipulate for any rate of interest they pleased.
There may be a question whether the Act of Queen Anne affected the interest payable under the bond, because that statute is confined to future contracts. But assuming that between the date of that statute and that of 17 and 18 Vict. only 5 per cent. was exigible, on the passing of the latter statute 6 per cent. became no longer illegal.
The defender suggests that the proper course is to allow interest at the highest rate obtainable for money lent on first class heritable security from time to time between 1855 and 1889. Although this seems a very reasonable proposal I do not think that such a course is warranted by the terms of the bond. Prior to the date of the bond the rate of legal interest had from time to time been altered and fixed by statute, and it was evidently contemplated that from time to time it might be still further altered in the same way. If such an alteration were made by statute it would be a simple thing to substitute the one statutory rate of interest for another, and that rate would remain exigible so long as the statute which effected the alteration remained in force.
But now the rate of interest obtainable on money lent on heritable security varies from time to time in each case, and is fixed according to the stipulation of parties. I do not see how it would be possible to regulate the rate of interest payable under this bond by reference to such transactions. I must deal with the question just as if it had arisen when the obligation was still prestable by the defenders; and if that had
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I therefore feel that I have no alternative but to revert to the sum named in the contract, which during the years in question was not forbidden by the laws of the Kingdom. I should add as regards the apparent hardship to the defender, that he might at any time have paid off the bond by borrowing money at 3
I shall therefore find that for the period from 1st October 1855 to 15th October 1889 the defender falls to be debited with an annual rent of £200 Scots, or £16, 13s. 4d. sterling; and with that finding I shall remit the defender's accounts to an accountant, upon whose report the remaining questions between the parties which relate to progressive interest and annual accumulations may be settled.
I venture to suggest, however, that this is a case for compromise, and the pursuers must consider whether if they get an annual rent at the rate of 6 per cent. they will not rest content with progressive interest at the rate of 4 per cent. as offered by the defender.”
Counsel for the Pursuers— Graham Murray, Q.C.— Maclaren. Agent— W. H. Curr, W.S.
Counsel for the Defender— Dundas. Agents— Dundas & Wilson, C.S.