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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Earl of Stair and Others (The Earl of Stair's Trustees), Petitioners [1896] ScotLR 33_777 (17 July 1896)
URL: http://www.bailii.org/scot/cases/ScotCS/1896/33SLR0777.html
Cite as: [1896] SLR 33_777, [1896] ScotLR 33_777
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SCOTTISH_SLR_Court_of_Session
Page: 777↓
Court of Session Inner House First Division.
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Facts:
Trustees, empowered to sell part of the trust-estate at such time as they thought advantageous or expedient, obtained an order under sec. 18 of the Judicial Factors Act 1889 for superintendence of the administration of the estate by the Accountant of Court. The trustees being in doubt as to whether it would be more for the advantage of the trust estate that they should sell the estate or delay selling, the Accountant reported to the Court for directions in the matter.
The Court declined to give the direction sought, on the ground that the question raised related neither to the “investment” nor the “distribution” of the trust-estate as required by sec. 18.
Opinion (per Lord President and Lord M'Laren) that the jurisdiction conferred by sec. 18 of the Judicial Factors Act 1889 in regard to the administration of a trust-estate is similar to that exercised by the Court in superintending judicial factors.
The Judicial Factors Act 1889, sec. 18, explained and commented on.
By trust-disposition and settlement the ninth Earl of Stair, who died in 1864, conveyed his estates of Ravenston and Cleland to trustees for certain purposes. Inter alia,
Page: 778↓
he directed his trustees to sell the said estates, except Ravenston, at such time as they thought advantageous or expedient, to apply the trust funds so realised in the purchase of lands contiguous to Ravenston, with power to build a mansion-house, and to convey the said estate of Ravenston and additions to his second son George Grey Dalrymple and the heirs whomsoever of his body. The income was to be paid to the said George Grey Dalrymple after he attained the age of twenty-five, and during the subsistence of the trust, but so long as Cleland was unsold, one-half of the proceeds of the minerals therein was to be held and applied as an addition to capital. Power was conferred on the trustees to work the minerals, to cut wood, &c., but no power of investment otherwise than in the purchase of land was conferred.
By subsequent deed of alteration, power was conferred on the trustees to sell the estate of Ravenston if they considered it advisable, and to apply the proceeds in the purchase of any other lands in Scotland to be settled in the same manner as Ravenston was directed to be settled, and in case the said George Grey Dalrymple should desire to occupy the mansion-house of Cleland, they were authorised to allow him to do so, and to delay the sale of the estate of Cleland while he should continue to occupy the house.
Ravenston was sold in 1874, but no purchase of new estate was made with the proceeds. No deed of entail was executed, and Cleland House was let since 1889.
The Judicial Factors (Scotland) Act 1889 (52 and 53 Vict. c. 39), sec. 18, enacts that “where a person deceased has left a settlement appointing trustees or other persons with power to manage his estate, it shall be competent for such trustees or other persons to apply to the Court of Session for an order on the Accountant to superintend their administration of the estate in so far as it relates to the investment of the estate and the distribution thereof among the creditors of the deceased and the beneficiaries under the settlement, and the Court may grant such order accordingly, and if such order be granted, the Accountant … at any time, if he thinks fit, may report to the Court upon any question that may arise in the administration of the estate with regard to any of the aforesaid matters, and obtain the directions of the Court thereupon.”
In June 1895 the Earl of Stair and others, trustees under the trust-disposition and settlement aforesaid, presented a petition to the Court under this section of the Act for an order on the Accountant of Court to superintend the administration of the trust, upon the narrative that various questions of difficulty had arisen relating to the investment of the estate and its distribution among the beneficiaries. The order craved was granted.
In December 1895 the Accountant of Court reported to the Court under the said section for directions as to whether the terms of the Thellusson Act applied to the direction contained in the trust-disposition and settlement to accumulate one-half of the proceeds of the minerals of Cleland.
On 14th January 1896 the Court (Lord Low, Ordinary) decided that the Thellusson Act did apply, and that Mr George Grey Dalrymple was entitled to the whole rents and proceeds of the said estate from the expiry of twenty-one years from the testator's death.
In view of this judgment the trustees resolved to take steps for selling Cleland estate and minerals.
The agricultural land and feu-duties were valued at £32,000. The minerals were valued by Messrs J. & G. H. Geddes at £26,000, and at the end of their report these gentlemen said that they “could not advise the trustees to sell the mineral portion of Cleland estate” for less than that sum.
In a subsequent letter, however, Mr G. H. Geddes stated that the unlet portion of the mineral field had been left out in arriving at that valuation, and added—“In the whole circumstances I am rather inclined to recommend the trustees to delay the sale for a time until the lower seams can be effectually proved, as I am satisfied that if they can be developed they will be likely to yield a large income for many years.”
In consequence of this recommendation by Mr Geddes the trustees asked the Accountant to report to the Court, in terms of the said section 18, for directions as to whether they should sell the lands of Cleland at once, or should delay doing so until the value of the lower seams of coal should have been proved. The Accountant accordingly reported to the Court for directions on the matter.
On July 1st 1896 the Lord Ordinary ( Pearson) reported the petition to the First Division.
Note.—“This application raises a new and wide question touching the scope of a recent statute (the Judicial Factors (Scotland) Act 1889), and the relations established by that statute between the Court and all trusts which may be brought under its superintendence.…
The question I have to report is, whether the matter thus reported by the Accountant falls within the scope of the 18th section of the Judicial Factors Act 1889. In my opinion that section ought to receive a favourable construction, and I should not hesitate to aid trustees in matters falling within the scope of it. This application, however, asks for direction on a matter which is not only a question of law, but is peculiarly within the region of discretion. It is the kind of question which would usually be left entirely to the decision of trustees acting honestly, and with the best advice that they can get. The question on the merits is, whether, having regard to the probabilities and possibilities of a certain mineral estate, the rents of which are now paid away under the previous decision as to the application of the income, the trustees ought to sell it now or to keep it? And there is the further question which has been raised on the suggestion of the eminent mining engineers whom the trustees have consulted, viz., Whether, if they are not to sell it now,
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they ought to be authorised to spend between £1000 and £2000 of the trust-estate in proving the minerals with a view of getting a more favourable sale if they should turn out to be present in workable quantity. Now, the position of trustees as regards matters falling within the ordinary limits of their discretion is that they are bound to exercise it on the best advice and honestly. Here they are aided in the exercise of their discretion by consulting the Messrs Geddes, who are among the foremost mining engineers in Scotland. It is obvious that if the Court is to do anything by way of advising or directing the trustees so as to keep them safe in the future, it must either accept the report of the men of skill whom the trustees have consulted or must invite fresh advice. The latter course would probably not advance matters much, and, on the other hand, the report and relative letter do not give a very certain sound. While the valuation, which amounts to £26,246, is arrived at apart from the unlet portion of the mineral field, Messrs' Geddes' report, read as a whole, does not leave out the unlet portion, and in advising the trustees whether they should sell or not, it balances the chances of certain mineral fields presently worked being exhausted against the chances of further minerals being developed. On the balance of these considerations Messrs Geddes report that they would not advise the trustees to sell the mineral portion of the estate now for a lower sum than £26,000. That report, taken by itself, looks as if Messrs Geddes were prepared to advise a sale if that amount could be got. But the letter which accompanied it contains these words—' In the whole circumstances I am rather inclined to recommend the trustees to delay the sale for a time until the lower seams can be effectually proved, as I am satisfied that if they can be developed they will be likely to yield a large income for many years. Now, I profess myself unable to see how the Court could in any useful way or to any useful purpose undertake to direct the trustees in a matter of that sort. It seems to me to be a matter on which the trustees must still exercise their discretion honestly, and on the best advice they can get, and unless I can find something in the section which clearly imposes such a duty on the Court, I should hesitate to undertake it. The present petition is, I suppose, one of the earliest presented under this section, and it has already furnished an instance of the usefulness of the statute, for the trustees have obtained the direction of the Court as to the application of the Thellusson Act. But if this application were granted, it seems to me that the Court would be put into the position of directing trustees upon a matter which does not fall within the intention of the statute. As I said before, the 18th section is one which ought to be widely construed, but referring to the words of the section, I doubt whether this particular application is within the limits of it at all. It is limited in its terms to the superintendence of the trustees' administration of the estate by the Accountant in so far as the administration relates to the investment of the estate and the distribution thereof among the creditors or beneficiaries. The question is whether I am to direct a sale to be made or to be deferred? That does not relate to distribution among creditors or beneficiaries, though if a sale were directed it might lead up to a stage at which questions as to distribution would arise. Is this, on the other hand, a question of administration relating to the investment of the estate? It is a question as to realisation, and realisation may be for investment or distribution. The region of investment is not reached until after realisation, except in cases where the item proposed to be dealt with is in the ordinary sense one of the trust investments, and I doubt whether that can be predicated of the mineral estate of Cleland.” The petitioners, besides discussing fully the arguments for and against sale or delay, argued—The present application for directions was competent, inasmuch as it related to the investment and distribution of the trust-estate.
At advising—
Lord President—The 18th section of the Judicial Factors (Scotland) Act 1889 introduces an entirely new and, from the point of view of trustees, a highly beneficial change in the administration of Scotch trusts. It enables the trustees acting under any private trust to obtain immunity for their acts, in the important articles of investment and distribution, by subjecting their administration to the supervision of the Accountant of Court.
It was said at the bar that the section has been sparingly made use of. If so, this must be either because trustees are not so timid of the responsibilities of administration as the complaints of recent years had persuaded the Legislature, or because they have not been informed of the remedy provided. I am not aware of any reason, in regard to expense or otherwise, which should deter honest administrators of a trust from coming under the supervision of the Accountant of Court, and thereby obtaining protection from that responsibility about investments which has frightened so many men away from the office of trustee.
I have said thus much of the importance and beneficence of the Act, because I think that much of its usefulness depends on a distinct understanding of its limits. It does not “throw into Court,” to use a popular expression, the whole administration of the trusts coming under its operation. Those trusts go on, on the responsibility of the trustees, except in the matters of investment and distribution, as to which the trustees are entitled to the direction of the Accountant and through him of the Court.
Now, in nine-tenths of the cases which arise, there can be no doubt as to what is within the section, and this is especially so as regards investment. It is purely administrative work. The word distribution seems to touch more controversial matter. Holding, as I do, that the matter now
Page: 780↓
Now, the question reported by the Accountant is, whether the trustees shall now proceed to sell the estate of Cleland which is vested in them. It is to be observed that the truster expressly directed his trustees to sell certain lands of which Cleland forms part; and I do not know very well why the sale of Cleland has been so long delayed, as the discretion allowed is only the usual one—at such time as they think advantageous or expedient. It appears, however, that there is something to be said for further delaying the sale in order to prove the lower seams of the minerals (it might be at some expense), with a view to getting a higher price if the minerals were proved to be valuable. The pros and cons of this question may easily be imagined, and show it to be one of discretion, on which skilled opinion and good judgment in balancing alternatives would be chiefly of account. The matter is, however, further complicated by the effect which the postponement would have on the relative interests of the heirs in possession and the subsequent heirs.
It seems, however, quite clear that this is not a question of investment. The trustees are not even comparing the desirableness of some contemplated investment with the land which they now hold. As the Lord Ordinary says, the stage of investment has not been reached.
On the other hand, I do not see how the question reported by the Accountant is one of distribution. It is true that by the combined action of the trust-disposition, and the Thellusson Act, so long as Cleland is unsold the whole of the minerals go to the heir in possession. But that does not affect the quality of the question—sell or delay selling.
I am therefore for finding that the matter reported does not relate to the investment or distribution of the estate, and with that finding the case would go back to the Lord Ordinary.
The Court pronounced the following interlocutor:—
“Find that the question of the sale of the estate of Cleland submitted is not a question relating to the distribution or investment of the estate, and with that finding remit to the Lord Ordinary:… Find the trustees entitled to the expenses incurred by them out of the trust-estate.”
Counsel for the Petitioners— Dundas. Agents— Dundas & Wilson, C.S.