Scottish Court of Session Decisions

By trust-disposition and settlement, Robert Paterson, innkeeper, Holytown, who died in 1882, conveyed his whole means and estate to trustees, directing them, inter alia, to pay the liferent thereof to his widow. The said trustees accepted office, and appointed Daniel Paterson, a son of the testator and one of their own number, to be their factor. Mrs Jane Gray or Paterson, the liferentrix, died in July 1893, and the executor nominated by her having declined office, and there being a conflict of

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interests among her next-of-kin, David Guthrie, C.A., Glasgow, was appointed judicial factor on Mrs Paterson's estate.

On 31st March 1894 the judicial factor raised an action against Mr Paterson's trustees, in which he concluded for (1) decree that the trustees should produce a full and particular account of their management and intromissions of and with Robert Paterson's estate, and of Daniel Paterson's intromissions therewith as their factor, and should make payment to the pursuer of £13,000; (2) decree that Daniel Paterson should produce an account of his intromissions with the estate of his mother Mrs Jane Gray or Paterson, and make payment to the pursuer of £13,000; and (3) declarator that five bonds granted by the Clyde Navigation Trust in favour of Mrs Jane Paterson and the defender Daniel Paterson, and the survivor of them, were the property of Mrs Jane Paterson, and formed part of her estate at her death, and now belonged to the pursuer as judicial factor thereon.

The pursuer averred that the trustees “negligently and wrongfully failed to exercise any supervision over the defender Daniel Paterson's actings as factor, or to obtain from him any accounts of his intromissions with the trust-estate. The said defender also did not account for his said intromissions to his mother Mrs Paterson.”

The pursuer further averred that on entering upon office he found Mrs Paterson's estate to amount to £3500 or thereby, whereas, taking into account a legacy of £1000 from her husband, her liferent, and the small scale of her expenditure, it ought to have amounted to £13,000. Part of her estate consisted of Clyde Navigation Trust bonds to the extent of £1950, taken in favour of herself and Daniel Paterson and the survivor, and the pursuer averred that the money invested therein belonged to Mrs Paterson, and that Daniel Paterson had taken the bonds in these terms without any authority from her.

The pursuer also averred—“(Cond. 10) The pursuer is informed, and believes and avers, that Mrs Paterson was entirely subject to the influence, control, and dominion of her son the defender Daniel Paterson. She relied implicitly upon him for guidance in all matters of business, knowing that he was one of her husband's trustees and their factor. Knowing also that it was his duty to attend to her interests, she signed any deeds, receipts, or letters which he asked her to sign without objection or inquiry. Since her husband's death the said defender has managed generally all Mrs Paterson's pecuniary and business affairs, and he has uplifted and still retains the greater part of her means and income, including the profits of the said hotel business. If in the course of the process to follow hereon the defenders Robert Paterson's trustees can produce receipts or vouchers which are held to have the effect of discharging pro tanto the said trustees and Daniel Paterson as their factor, such receipts or vouchers were obtained by the defender Daniel Paterson from Mrs Paterson without any money or other consideration being received by her therefor. He procured the said vouchers by abusing the trust and confidence which she reposed in him, and by the exercise of undue influence and dominion over her. He never gave her any account of the moneys belonging to her with which he thus intromitted.”

The pursuer likewise founded upon a deed of revocation and appointment granted by Mrs Paterson on 2nd June 1893, in the following terms—“I … do hereby revoke and cancel all deeds of settlement and codicils executed by me in their whole heads and clauses, … and I declare it to be my wish that my estate shall at my death go to my nearest heirs whomsoever, … and I appoint James Graham junior my executor.”

The defenders, the trustees, averred that by special arrangement, authorised by Mr Paterson's settlement, the income of the trust collected by Daniel Paterson was paid directly by him to the liferentrix, and they produced a statement of his intromissions with the trust-estate showing receipts and payments duly vouched down to Whitsunday 1893. They further expressed their willingness to pay to the pursuer the net balance of £5, 19s. in their hands.

The defender Daniel Paterson averred that he kept regular accounts as factor; that when Mrs Paterson executed the revocation founded on she was weak and facile; that the sums contained in the five Clyde Navigation Trust bonds were contributed in equal shares by himself and Mrs Paterson; and that Mrs Paterson was well aware of the terms of the destinations in the said bonds.

The bonds referred were taken payable “to the said Mrs Jane Gray or Paterson and Daniel Paterson, and the survivor of them, and their, her, or his executors, administrators, and assigns.”

The pursuer, in addition to pleas-in-law sustaining the conclusions for count, reckoning, and payment, pleaded—“(3) The said bonds being the property of the deceased Mrs Paterson, and the defender Daniel Paterson having had no authority to insert the said destination in his own favour, the pursuer is entitled to decree of declarator, delivery, and adjudication, as concluded for, with expenses.”

The defenders, the trustees, pleaded that the action was unnecessary.

The defender Daniel Paterson pleaded, inter alia—“(5) On a sound construction of the terms of the five bonds mentioned in the summons, the pursuer is not entitled to declarator as concluded for, and the defender ought to be assoilzied quoad the third conclusion.”

A proof before answer having been allowed, the defender Daniel Paterson deponed—“The £1950 consisted of savings from the rents and savings from my business. My mother and I agreed to put by our money in the bank in our joint names, and it was in the bank in the joint names on deposit-receipt before it went into the Clyde Trust. The deposit-receipts were in name of my mother and I and the survivor. The money was

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afterwards uplifted from the deposit-receipt and, along with any other savings we had by us, put into the Clyde Navigation Trust in name of my mother and I and the survivor. I made that investment at my mother's request. I generally uplifted the interest, and my mother and I halved it between us. I retained the one-half and paid the other half to her.” He further deponed in cross-examination that up to 1889 Mrs Paterson had taken charge of the bonds and coupons herself, but that in that year she handed them to him. In 1891 he handed the bonds to the law-agents for the trustees, retaining the coupons, which he regularly cashed for Mrs Paterson. “So far as I remember, it was not I who applied for the Clyde Trust bonds; but my mother, I think, was with me at the Clyde Trust office on one occasion. I do not think I ever got authority in writing from my mother with regard to these bonds. It was an understood thing between us that whatever savings we had should be put by in our joint names, payable to the survivor. My mother told me that each time an investment was made. I did not apply to the Clyde Trust in writing; I generally called at the office. I would fill up a slip giving the directions about the investment. When the bonds were prepared they were posted out to Woodend, addressed to me, and were placed in the safe. They were open to my mother's inspection, and she often took them out and looked at them, and counted them up. Part of the money that was invested in those bonds was taken out of the bank, where it was in the joint names of my mother and me and the survivor. The deposit-receipts were payable to my mother or me or the survivor. The bonds were made payable to the survivor also. I think the form in which it was expressed was different in the bonds from what it was in the deposit-receipts, but in each case the money was payable to either or survivor.”

James Graham junior, writer, Glasgow, called for the trustees, deponed with reference to the sale of a Clyde Navigation Trust bond to him by Mrs Paterson in 1891—“At Mrs Paterson's request I granted a cheque in favour of Daniel in payment of the bond. I do not remember the exact words Mrs Paterson used, but I understood she wished it made payable to him, because he attended to her money matters for her, and I looked upon it as a natural thing knowing that she trusted him. I am perfectly satisfied that she knew the terms in which the bond had been taken, and that she was fully aware of the nature of the transaction.”

Andrew Mather, joiner, called for the defender Daniel Paterson, deponed, with reference to a sum of money he had borrowed from Robert Paterson—“After Mr Paterson's death I called on Mrs Paterson to pay my interest. She was always pleasant when I paid it. I put the money on the table, and she whiles counted it, and at other times she did not. In March 1888 I wanted the interest reduced to 4 1 2 per cent., and I saw Mrs Paterson about it, and she said she would think over it and let me know. She agreed at the term of Whitsunday 1889 to reduce the interest. When talking over the matter she told me that she and Daniel had money invested jointly in the Clyde Trust. She mentioned that when she was talking about the interest. She said she would let me have it at 4 1 2 per cent as it was more than she was getting for her money there.… Mrs Paterson was a shrewd, careful, and saving woman. She could always look after herself in any business I had to do with her.”

It further appeared from the proof that the trustees, when called upon to account in Mrs Paterson's lifetime, had put the blame of their delay to do so on Daniel Paterson, and that after the action was raised they lodged three separate statements or accounts, the last not produced until after the case had been discussed in the Procedure Roll, but showing beyond dispute that the whole income of the trust-estate had been paid to Mrs Paterson or to Daniel Paterson as her agent. Daniel Paterson, as the proof disclosed, had kept no regular account of his administration of his mother's affairs, and when he did give in an account many of the items for which he had taken credit were unvouched.

On 30th April 1896 the Lord Ordinary ( Kyllachy) pronounced an interlocutor, in which, inter alia, he found that the pursuer, as now representing the liferentrix, “has no claim against the trustees for accounting, or at all events, for further accounts and vouchers than those already produced;” and found further that, “in so far as the pursuer has a claim of accounting against the individual defender as factor for the trustees, the accounts produced are correct and sufficiently vouched;” with respect to the Clyde Trust bonds, he found it “not proved that the said bonds were the sole property of the said Mrs Paterson: Finds further that it is not proved that the destination therein contained was inserted without Mrs Paterson's authority: Finds that in the circumstances disclosed in evidence the presumption is that she knew and authorised the terms of said destination: Finds that said destination operated as a bequest of Mrs Paterson's share of said bonds to the individual defender, and that the same was not revoked by the general revocation contained in the deed executed by Mrs Paterson on 2nd June 1893: Therefore assoilzies the individual defender from the third conclusion of the summons, and decerns,” &c.

Opinion.—“The findings of the above interlocutor perhaps sufficiently explain themselves, but the Lord Ordinary may say in a word, with respect to the matters of fact to which the proof was mainly directed, that he prefers the evidence of the defenders to that of the pursuer. In particular, he is satisfied that the late Mrs Paterson was perfectly capable of understanding and looking closely after her pecuniary rights, and that she did so, and that if her son Daniel got more from her during her life than her other children, he did so because such was her wish. The Lord Ordinary

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does not believe that she was ill-used by Daniel. Neither does he believe that from fear or otherwise she allowed him to appropriate her means. That she placed confidence in him he does not doubt, but that he abused that confidence, and that she acquiesced in his doing so, looking forward to a reckoning at some future time or at her death the Lord Ordinary does not believe.

With respect to the separate matter of the Clyde bonds, the Lord Ordinary has had some difficulty. He finds nothing in the evidence to displace the presumption that the bonds belonged to the mother and son jointly, the fact that the contributions were unequal being quite consistent with that conclusion. But he has had doubt whether there was sufficient evidence to prove or presume that the destination to the survivor was authorised by the deceased; and he has also had doubt whether the deed of revocation of June 1893 might not be held to strike at special bequests of the kind in question. On consideration, however, he has not seen his way to give effect to these doubts. There is some direct evidence that the old lady knew the terms of the bonds. Looking to the terms of her settlement as then existing, the destination therein expressed in Daniel's favour was not unnatural, and it is, the Lord Ordinary thinks, improbable that a person of Mrs Paterson's disposition would have remained or could well have been kept ignorant of the terms of the documents which represented so large a part of her capital. As to the deed of revocation, whatever may have been the intention, the language is, in the Lord Ordinary's opinion, too restricted to cover the bequest in effect constituted by the special destination in the bonds.”

On 30th July 1896 the Lord Ordinary pronounced an interlocutor in which he found that the sums taken credit for by the factor, and which fell to be disallowed, amounted to £139; therefore decerned against the defenders Paterson's trustees and the defender Daniel Paterson for payment of said sum, with interest thereon at the rate of three per cent per annum from the date of Mrs Paterson's death until payment; quoad ultra assoilzied the whole defenders from the conclusions of the summons; “finds the pursuer liable in expenses to the defenders Paterson's trustees; finds him also liable in expenses to the defender Daniel Paterson, subject to modification.”

Opinion.—“I have no doubt that the pursuer must be held liable, and personally liable, in the bulk of the expenses of this litigation. The only question is as to modification.

As against the trustees I see no ground for modifying the expenses. I think the litigation has proceeded on wrong lines from the first; and I also think that the pursuer, if he had exercised reasonable caution and had taken reasonable means of informing himself of the facts of the case, would have been less ready to launch into a litigation which has so far proved so unfortunate, the more especially as it involved the making of serious charges against respectable people—charges which I think ought not to have been made on slender grounds. Therefore I have no difficulty about the pursuer's liability for the expenses of the trustees. The trustees, so far as I can see, do not appear to have been at all in default. Two of their number, the widow (the pursuer's author) and her son Daniel, the individual defender, had (barring certain legacies which were well secured) the whole interest under the trust. The one was liferentrix, the other was residuary legatee, and the two lived together, and during the whole period of the trust the arrangement on which they and the trustees acted was that Daniel, who was at his mother's instance appointed factor to the trust, should manage everything and account to her direct. I cannot think that this was an unusual or unreasonable arrangement, and I think the pursuer, whether or not he had at first evidence that such an arrangement had been in fact made, had at least the statement to that effect of the trustees' agents Messrs Graham, and ought at least to have considered whether the usage and practice of the trust, acquiesced in by his author, the liferentrix, during so long a period, admitted of any other interpretation. But the factor does not seem to have so thought. He seems to have considered that the trustees were nevertheless bound to produce accounts of charge and discharge formally vouched—such accounts as they would have had to produce at the call of a beneficiary who had left the whole administration in their hands, and to whom they had never accounted from first to last. That position was, in my judgment, entirely untenable, and the factor, in bringing this action against the trustees, did so at his own risk, and must take the consequences.

The question whether there should be expenses awarded to Daniel Paterson is not quite in the same position. Daniel, as factor for the trust, was probably bound to render accounts to his mother, if his mother required them, or if the manner in which the trust was administered between him and his mother required accounts. But it did not follow that he was bound to preserve vouchers for all these years for every item of expenditure—he and his mother having, as I have said, the whole interest between them, and the mother being satisfied for all these years that all was in order. Daniel's position therefore was a position I should imagine, common enough in such circumstances, and at all events, a position which should have suggested caution on the pursuer's part before assuming that he was entitled, even from Daniel, to an account of charge and discharge with every item formally vouched. At the same time the case must, I suppose, be taken on the footing that Daniel was bound to keep and produce accounts of the trust, and it is quite certain that until the action was raised, Daniel had not, although called upon to do so at the instance of the pursuer, produced to the trustees any account at all. A list of the investments

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of the estate seems to have been furnished. But that was all, and it may be that, all things considered, he (Daniel) was somewhat dilatory in making up such accounts as he ultimately made up, and which accounts I have held sufficient. On the other hand the action having been brought, there is no doubt that as soon as it was brought there was lodged with Daniel's defences or with the trustees' defences—it does not matter which—an account showing the income of the trust-estate and its disposal during the period of the liferent; and there were also produced along with that account certain pass-books, &c., which I have held to vouch sufficiently all Daniel's payments to his mother in so far as he was bound to vouch them. There may have been one or two further vouchers which were not produced at first, but practically Daniel's answer to the action was production of an account with sufficient vouchers.

But then it is said that there was not produced along with the account any explanation by him or by the trustees as to the coupons of the trust investment having been from the first entrusted to the old lady, and as to her having cashed these coupons for herself. That is quite true. It was not until objections and answers were ordered that that fact came out. But still it was a fact which the factor might have ascertained on making inquiry, and which I daresay the Messrs Graham would have told him if he had asked them. At all events, that explanation was tabled before the second discussion in the Procedure Roll, or before the incurring of any serious expense. And that being so, the only question is, what amount of modification I am to make upon the award of expenses against the pursuer. I think, as I have said, that Daniel was a little slack in not at once realising his position, and in not at once tabling his accounts with the necessary explanation; but I hold that at all events before the second discussion in the Procedure Roll Daniel had made, or the trustees for him had made, all the explanations which were necessary, and had also tabled all the necessary documents: and therefore what I propose to do is to allow Daniel's expenses, subject to modification, which will probably extend to the expenses up to the lodging of the third account—30th November—when all the necessary explanations were before the parties. I shall know when the account comes to be taxed what Daniel's expenses are up to that period. I shall also have in view in fixing the modification the fact that Daniel's has to account for a sum of £144 brought out in the final account which he produced.

As to the pursuer's responsibility, I see no ground for departing from the rule that a judicial-factor—like a trustee in bankruptcy—litigating, does so at his own risk. I do not consider the case here one specially favourable. I think the pursuer, to say the least, was unduly credulous. He accepted without due inquiry the statements of the parties whom he ought as a man of the world to have distrusted. At all events he ought to have more fully informed himself of the facts of the case, and ought to have hesitated before making the charges against the defenders which he did make. On the whole, I see no reason for holding the pursuer otherwise than personally liable—that is to say, unless the funds in his hands are sufficient, as I hope they are, for his relief.”

The pursuer reclaimed, and argued—(1) On the question of expenses. ( a) As regards Paterson's Trustees. The judicial factor when he entered upon office was bound to raise an action against them. He saw what their attitude had been when called upon to account by Mrs Paterson herself. The appointment of Daniel Paterson as factor in no way discharged the trustees—M'Laren on Wills, 1228; Edmond v. Blaikie & Anderson, June 29, 1866, 4 Macph. 1011; Carruthers v. Carruthers, July 13, 1896, 23 R. (H.L.) 55. The trustees should have been found liable in expenses to the pursuer, because it was owing to them that the action and proof had become necessary, or at least neither party should be found entitled to expenses. In any event, the pursuer should not be found personally liable in expenses, but only “as judicial factor”— Craig v. Hogg, October 17, 1896, 24 R. 6, 34 S.L.R. 22, referred to. ( b) As regards Daniel Paterson individually, if the pursuer was right in his contention as to expenses in a question with the trustees, a fortiori he was right as to the Lord Ordinary's finding with reference to expenses in a question with Daniel Paterson. (2) On the question of the Clyde Trust bond the Lord Ordinary was wrong. The defender Daniel Paterson had failed to prove that he was authorised to take the bond in these terms. But in any event the destination had not the effect of a testamentary conveyance to Daniel Paterson. That was well established in the case of deposit-receipts, and the cases with regard to other securities could be distinguished or ought to be reconsidered— Walker's Executor v. Walker, June 19, 1878, 5 R. 965; Connell's Trustees v. Connell's Trustees, July 16, 1886, 13 R. 1175, referred to. In any event, the revocation executed by Mrs Paterson revoked the destination— Campbell v. Campbell, July 8, 1880, 7 R. (H.L.) 100.

The argument for the defenders is sufficiently indicated in the opinions of the Lord Ordinary and Lord M'Laren.