Scottish Court of Session Decisions

Robert Brown of Shortroods, who died in 1895, left a trust-disposition and settlement, whereby he conveyed his whole estate to certain trustees, to be held by them for behoof of his family as therein directed. The estate consisted of heritable property of the value of about £33,000, and of moveable estate which consisted chiefly of a business carried on by the deceased in Paisley, for the manufacture of bricks and fireclay goods. By the fifth purpose of his settlement the testator authorised his trustees “to carry on my business of a manufacturer of bricks, tiles, and fireclay goods, and of plumbago crucibles and earthenware, as at present or as may hereafter be carried on by me in all their departments under the same firm, or in such other way or manner or under any other form as to them shall seem best.” Further, he empowered them “to appoint one of their own number or other fit person to be their factor or cashier, and to allow him a reasonable remuneration for his trouble.” By codicil dated 18th December 1891 he directed his trustees to divide the estate upon the expiration of ten years from his decease, unless they should find it

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expedient to realise at an earlier date, and also, in addition to the power to carry on the business, empowered his trustees to convert the same into a joint stock company. By codicil dated 6th December 1893 the testator nominated as one of his trustees “Robert Brown tertius, manager, residing at Millarstown House, Paisley, my grandson.” After the testator's death his trustees appointed Robert Brown tertius to be manager of the works at a salary of £700 a-year, together with a commission on the profits, and other perquisites. He accepted office as manager and continued to act in that capacity and to draw said salary and other emoluments as from April 1895 onwards. He also accepted office as a trustee and continued to act as such while acting as paid manager of the business.

On 2nd November 1899 William Mills, one of the trustees under the trust settlement, and certain of the beneficiaries thereunder raised the present action against the trustees and Robert Brown tertius as an individual, in which they concluded (1) for declarator that it was ultra vires of the trustees to pay salary or remuneration to the defender Robert Brown tertius for acting as manager of the business; (2) for interdict against their continuing to pay such salary or remuneration; and (3) for repayment by Robert Brown tertius of the sums received by him as such salary or remuneration.

Defences were lodged for the defender Robert Brown tertius as an individual and for the defenders the trustees.

The pursuers pleaded—(1) It being illegal and ultra, vires of the trustees of the said deceased Robert Brown to appoint one of their own number to be manager of the works and business carried on by them as aforesaid under the firm of Robert Brown & Son, and to allow him remuneration for his services as manager so long as he acts as and holds the office of a trustee, the pursuers are entitled to decree of declarator and interdict, in terms of the conclusions of the summons to that effect, with expenses.

The defenders averred that for some time prior to the testator's death the works were managed by the defender Robert Brown tertius.

The defenders the trustees, and the defender Robert Brown tertius as an individual, both pleaded, inter alia, that the trustees being entitled under the trust-disposition and settlement and relative codicils to appoint the defender Robert Brown tertius as factor or manager on that part of the trust estate consisting of the business and works, and to pay him a suitable remuneration therefor, they should be assoilzied, with expenses.

On 16th March 1900 the Lord Ordinary ( Low) pronounced an interlocutor in which he granted decree of declarator and interdict in terms of the first two conclusions of the summons; and before answer in reference to the petitory conclusions, appointed the defenders to lodge a statement of the sums paid to the defender Robert Brown by way of salary and commission on profits as manager of the said business.

Opinion.—“….The defenders' case upon the merits is that the appointment and remuneration of Robert Brown as manager of the business was authorised by the trust-deed. They do not dispute that if the trust-deed did not contain authority to that effect the payments which were made to Robert Brown cannot be justified.

In the trust-disposition and settlement the truster authorised his trustees ‘to carry on my business of a manufacturer of bricks, tiles, and fireclay goods, and of plumbago crucibles and earthenware as at present or as may hereafter be carried on by me in all their departments under the same firm, or in such other way or manner or under any other form as to them shall seem best.’

Robert Brown was not nominated a trustee in the trust-disposition and settlement which is dated in 1887, but in a codicil dated 6th December 1893. He is there designated ‘Robert Brown tertius manager, residing at Millarston House, Paisley, my grandson.’ It is stated in the defences (and I shall assume that it was the case) that at the date of the codicil Robert Brown had practically the whole control of the business as manager.

The defenders' argument was to the effect that the testator having in the first place authorised his trustees to carry on the business ‘as at present or as may hereafter be carried on by me,’ and having afterwards named as a trustee his grandson, whom he described as manager, and who was in fact manager of the business, the inference was that he intended the trustees to have power to continue his grandson as manager and to remunerate him.

I do not think that the argument is well founded. It seems to me that the object of the clause which I have quoted from the settlement was to give the trustees, in the event of their exercising the power of carrying on the business, full discretion as to the extent and form in which they should do so. I think that the idea is the same as that which appears in a codicil in which the truster empowered the trustees to convert the business into a limited liability company.

In regard to the designation of Robert Brown as ‘manager,’ that appears to me to be a mere description from which it is impossible to draw any such inference as is suggested by the defenders. Further, the truster in his settlement authorised his trustees to appoint one of their own number to be factor or cashier, and to give him reasonable remuneration, and there is a similar power in regard to the appointment of a law-agent. The truster therefore must be taken to have been aware that to entitle a trustee to remuneration for services rendered to the trust it was necessary that authority to that effect should be granted, and therefore the fact that he granted no authority in regard to a manager of the business rather indicates that his intention was that the trustees should not have such authority.

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The argument, however, upon which the defenders mainly relied was that the authority to appoint one of their number to be their ‘factor or cashier,’ and to allow him a reasonable remuneration, was sufficient authority to appoint and remunerate Robert Brown as manager of the business.

Now, it is to be observed that the power given to the trustees to appoint one of their number to be ‘factor or cashier’ does not bear to be given with reference to the business. It is just one of a number of powers which the truster conferred upon his trustees. He first gave them the power to carry on the business; then he authorised them (with certain limitations) ‘to sell and dispose of or feu out’ his heritable estate, and to realise his moveable estate; then he gave them certain powers of investment; and then followed the power to appoint as ‘factor or cashier’ and as law-agent one of their number ‘or other fit person.’

The defenders argued that the authority given was to appoint either a factor or cashier, and that the word ‘factor’ was wide enough to include manager of the business.

I am unable to take that view. I do not think that two appointments were contemplated, but only one—the appointment, namely, of a person who would perform the duties, such as collecting rents, falling to what in well-known phraseology is described as a factor or cashier, and as matter of fact the trustees appointed an accountant in Glasgow to perform duties of that description. It may not be possible to frame a definition which would exhaust all the duties which may fall within the province of a factor or a factor and cashier, because these must vary according to the character of the estate, but it seems to me to be clear that, according to the ordinary and understood meaning of the phrase (and the truster in this case seems to me to use it in the ordinary sense) a factor or cashier does not embrace the skilled manager of a manufactory.

I am therefore of opinion (there being, as I have said, no defence except that the appointment and remuneration of Robert Brown were sanctioned by the truster) that the pursuers are entitled to decree in terms of the declaratory conclusion and the conclusion for interdict.

In regard to the petitory conclusion, I propose to appoint the trustees to lodge a statement of the sums which have been paid to Robert Brown by way of salary and commission.”

The defender Robert Brown reclaimed, and argued— The general rule that a trustee is not entitled to make a profit out of his office was displaced in the present case by the expressed intention of the testator. The trustees were authorised to carry on the testator's business “as at present, or as may hereafter be carried on by me.” These words must be interpreted in the light of the circumstances which were present to the testator's mind, and the fact was that Robert Brown acted as manager of the business for some years before the testator's death. Further, in the codicil of 6th December 1893, in nominating Robert Brown as one of his trustees, he described him as “manager.” In any event, the power to appoint a “factor,” empowered the trustees to appoint Robert Brown as manager. The word “factor” was capable of construction, and its meaning must depend on what his duties were— Cameron's Trustees v. Cameron, December 8, 1864, 3 Macph. 200; Goodsir v. Carruthers, June 19, 1858, 20 D. 1141. Here the estate consisted of the fireclay works, and of lands suitable for feuing. The feuing of the estate would fall properly within the duties of a factor-why not the management of the other department, viz., the works?

Counsel for the pursuers was not called upon.