Scottish Court of Session Decisions

Charles Stewart, wine and spirit merchant, Glasgow, died in November 1898, survived by his wife and two pupil children, and leaving a trust-disposition and settlement by which he conveyed his whole estate to Thomas Y. Paterson, Andrew Martin, Lewis Cook, and Mrs Stewart as trustees for certain trust purposes. All accepted office, but Mr Cook resigned in 1898, and in October 1903 Mrs Stewart died and William Neilson, the present petitioner, was assumed as a trustee. The trustees, it was declared, were to have all the powers, privileges, and immunities conferred upon gratuitous trustees by the Trusts Acts 1861 to 1891, and, without prejudice thereto, power to enter into possession of and intromit generally with the trust-estate; power to appoint factors, of their own number or otherwise, and allow them suitable remuneration; certain powers to compromise and enter into arbitrations regarding claims and questions with third parties affecting the estate; and a power of sale of all or any parts of the estate, either by public roup or private bargain.

On October 15, 1904, William Neilson presented a petition to the Court of Session praying the Court, inter alia, “to sequestrate the said trust estate, and to remove the said Thomas Y. Paterson and Andrew Martin from the office of trustees,… and to allow the petitioner to resign the office of trustee, and to appoint Robert Reid C.A., or such other person or persons as their Lordships might think proper, to be the judicial factor on the said estate.”

The petitioner averred that there had been and still were at the date of the petition serious irregularities in the administration of the trust, and in particular, inter alia, that the trustees had continued and still continue to carry on the wine and spirit business which was being conducted by the testator at the time of his death, and had never made any attempt whatever to dispose thereof. The licence was first transferred to the name of the testator's widow, and upon the assumption of the petitioner as a trustee at her death it was transferred to his name. The petitioner had been advised that the said business was not a proper trust-investment. It was not authorised by the trust—deed, which, on the contrary, conferred the most ample powers of sale upon the trustees. Further, liquors for the said business had all along been supplied at a profit, at first by the firm of Oswald, Paterson, & Company, of which the said Thomas Y. Paterson was sole partner, and thereafter by T. Y. Paterson & Company, Limited, of which the said Thomas Y. Paterson was managing director and principal shareholder. The supply of the said liquor to the trust business at a profit by a trustee was also a breach of trust. Further, the trustees employed one of their own number, viz., the said Mrs Stewart, to manage the business, and paid her for doing so a salary of £2 a-week. There was so paid her in all upwards of £400. The payment of such a salary to a trustee for work done for the trust was also illegal. At any rate its legality was very doubtful.

In these circumstances the petitioner maintained that it was necessary for the protection of the trust estate that the existing trustees should be removed from office and a judicial factor appointed to administer the trust. The petitioner was desirous of resigning the office of trustee, but deemed it to be his duty, and to be necessary both for his own safety and for the security of the trust, to first place the whole matter before the Court.

The petition was opposed by Mr Paterson and Mr Martin.

Counsel were heard in the Summar Roll on 23rd November 1904, and thereafter a minute was lodged on behalf of the respondents,

Page: 435↓

in which they undertook to use all reasonable means to sell the business, and the petition was continued to give them an opportunity of so doing.

The business was sold, but on 8th March 1905 the case was again enrolled on the motion of the petitioner, who moved for the removal of the trustees on the remaining grounds stated in the petition. The respondents opposed the motion, but subsequently lodged a minute, by which they undertook to repay to the trust estate the amount paid to Mrs Stewart for her services as manager, and the profit made by Mr Paterson by the sale of liquors to the business, and further agreed to apply for an order placing the administration of the trust under the superintendence of the Accountant of Court in terms of section 18 of the Factors Act 1889.

In respect of this minute the Court ordered the administration of the trust to be placed under the superintendence of the Accountant of Court, and dismissed the petition.

The Court further found the petitioner entitled to his expenses out of the trust funds as between agent and client. The respondents moved for their expenses out of the trust funds, and the petitioner opposed the motion. The Court refused the motion.