Scottish Court of Session Decisions

The Clydesdale Bank Limited raised an action against William Anderson M'lntyre, sometime millspinner and manufacturer at Erichtside, Rattray, and against Douglas William M'lntyre and Angus David M'lntyre for any interest they might have, in which they sought to have it declared “that the defender William Anderson M'lntyre is bound to accept and record in the Division of the General Register of Sasines applicable to the County of Perth a disposition and reconveyance by the pursuers in his favour, with entry as at the term of Martinmas 1908, of the following subjects, videlicet:—All and whole the several subjects and others described in the title-deeds thereof, as follows, viz.—( First) All and whole the lands and others called the Blairgowrie Spinning Mill, and lands connected therewith, situated in the parish of Blairgowrie and County of Perth,… and ( Second) All and whole that piece of ground upon which the Waulk Mill of Blairgowrie is built, with the said Waulk Mill and houses erected thereon and ground adjoining thereto, and the privilege and use of the water in the Corn Mill lade for driving the machinery of the said Waulk Mill, bounded as follows, videlicet:—… and the whole engines, shafting, gearing,

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and machinery of every kind and description, both heritable and moveable, within or upon or connected with the said Waulk Mill and others, so far as held by the pursuers under the disposition” dated 16th and recorded 30th December 1897, granted to the pursuers by William Panton, solicitor and banker, Blairgowrie, with consent of the defender William Anderson M'Intyre, “and still remaining”; and “that the defender William Anderson M'Intyre is bound to pay to the pursuers the whole costs and expenses of and connected with the preparation, execution, and recording of the said disposition and reconveyance: And thereafter, in the event of the defender William Anderson M'Intyre failing to accept and record the said disposition and reconveyance within two months after the date of the decree to be pronounced herein ordaining the said defender to accept and record the same, warrant should be granted in favour of the pursuers authorising them to put a warrant of registration on the said disposition and reconveyance, and to record the same on behalf of the said defender in the appropriate Register of Sasines, the whole costs and expenses of the said registration being payable by the said defender.”

The pursuers pleaded, inter alia—“(2) The pursuers being only security holders over the said subjects, and being no longer desirous to hold same, are entitled to a decree ordaining the defender William Anderson M'Intyre to accept and record in the appropriate Register of Sasines a disposition and reconveyance thereof. (3) In the event of the defender William Anderson M'Intyre failing to accept and record a disposition and reconveyance of the said subjects within the period specified in the summons, the pursuers are entitled to decree authorising them to record the same on his behalf.”

The defenders pleaded, inter alia—“(3) The pursuers having taken over the said subjects as their own property, this defender is not bound to accept a reconveyance thereof. (4) The pursuers having discharged the defenders of all obligations incumbent upon them under and in virtue of the said deed of declaration and of the whole debt due by them to the pursuers, the defender is entitled to absolvitor. (5) It being a condition-precedent of any right of reconveyance on the part of the pursuers that they should account to the defender for their intromissions with the said subjects, and not having done so, the action should be dismissed; et separatim, the action is premature. (6) In any event the pursuers are barred by their actings from seeking the remedy they now crave.”

The facts appear sufficiently from the opinions of the Lord Ordinary ( Skerrington) and of Lord Kinnear.

On 25th May 1909 the Lord Ordinary pronounced this interlocutor:—“Repels the pleas-in-law stated for the defender William Anderson M'lntyre so far as directed against the declaratory conclusions of the summons: Finds and declares that the said defender is bound to accept and record in the Division of the General Register of Sasines applicable to the County of Perth a disposition and reconveyance by the pursuers in his favour, with entry as at the term of Martinmas 1908 of the subjects and others specified and described in the summons, which specification and description are here referred to and held as repeated brevitatis causa, and the whole engines, shafting, gearing, and machinery of every kind and description, both heritable and moveable, within or upon or connected with the Waulk Mill and others mentioned in the summons, so far as held by the pursuers under the disposition specified in article 1 of the condescendence, and still remaining, and decerns; and finds and declares that the said defender is bound to pay to the pursuers the whole costs and expenses of and connected with the preparation, execution, and recording of the said disposition and reconveyance, and decerns: Quoad ultra continues the cause: On the motion of counsel for defender William Anderson M'lntyre, grants leave to reclaim.”

Opinion.—“The pursuers, the Clydesdale Bank Limited, ask for declarator that the defender William Anderson M'lntyre is bound to accept and record in the Division of the General Register of Sasines applicable to the County of Perth a disposition and reconveyance by the pursuers in his favour, with entry as at the term of Martinmas 1908, of the heritable subjects described in the summons. These subjects were acquired by the pursuers conform to disposition dated 16th and recorded in the appropriate Register of Sasines 30th, both days of December 1897, granted in their favour by John Panton, solicitor and banker in Blairgowrie, with consent of the defender William Anderson M'lntyre. This disposition was ex facie absolute, but by deed of declaration, dated 17th and 22nd December 1897, and recorded in the Register of Sasines on 28th May 1908, the pursuers, with the special consent and concurrence of the defender, acknowledged, confessed, and declared that the said subjects were vested in the pursuers for the purposes and objects therein particularly mentioned, which were to secure the payment of certain advances made and to be made by the pursuers. The defender was never feudally vested in the subjects, and accordingly it would not be correct to say that he had the radical right thereto—( Ritchie v. Scott, 1899, 1 F. 728)—but he himself alleges that Mr Panton simply held the subjects for his behoof for a few weeks until certain documents should be prepared. It follows that the defender was the beneficial owner of the subjects although the feudal title was in name of Mr Panton, and in my opinion he continued to be such beneficial owner notwithstanding the disposition granted by Mr Panton in favour of the pursuers.

The pursuers having a proprietary title to the subjects have had to pay feu-duties to the superiors amounting in cumulo to the annual sum of £151, 17s. 8d. As they have been unable to sell the subjects, and

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no longer desire to hold them, they have called upon the defender to accept and record a disposition and reconveyance thereof, but he has declined to do so.

It was not seriously disputed by the defender's counsel that, as matters stood under the disposition and deed of declaration of 1897, his client was under an implied obligation to accept a conveyance of the subjects from the pursuers when called upon to do so. I need hardly say that no such obligation is expressed in either of the deeds, but I think that it is clearly implied. In support of this view the pursuers' counsel referred to the opinion of Lord Justice-Clerk Hope in Gardyne v. Royal Bank of Scotland, 1851, 13 D. 912 (p. 922), the soundness of which does not seem to be affected by the fact that the decision of the Court of Session was reversed by the House of Lords—1 M'Q. p. 350. The pursuers' counsel also referred to the case of Marshall's Trustee v. Macneill & Company, 1888, 15 R. 762. The real defence upon which the defender's counsel relied was that stated in his third plea-in-law, to the effect that by a certain transaction which took place in 1902–1903 the pursuers took over the subjects as their own property. What happened was this—On 6th June 1902 the defender and his firm granted a trust deed for behoof of their creditors. The pursuers do not seem to have executed any formal deed of accession, but their representatives attended meetings of creditors and took part in the proceedings. It appears from the minute of meeting of the creditors held on 7th October 1902 that the debtors offered a ‘composition of 6s. 8d. per £, payable one half in cash on the trustee receiving acceptances of the offer from all the creditors, and the other half in three mouths thereafter, the bank to hold the value of their security as £10,000 and to rank for dividend on the balance, and the estate to remain under the charge of the trustee for realisation in order to provide the second instalment of the dividend.’ The meeting, at which the pursuers were represented, unanimously accepted this offer. The pursuers subsequently received payment of the composition of 6s. 8d. per £ in full of their claim of £3640, 1s. 5d., and by the terms of the receipt they discharged the debtors and the trustee of said claim.

“The claim of £3640, 1s. 5d. which the pursuers thus expressly discharged was of course only the balance of what was due to them by the debtors after deducting the £10,000 which the pursuers agreed to hold as the value of their security. It is unnecessary to consider whether this transaction further operated as an implied discharge by the pursuers of the whole debt, including the £10,000. If it did not so operate, then it could not be maintained that the pursuers' position as mere security holders was in any way affected or altered. On the other hand, if the whole debt, including the £10,000, must be held to have been discharged, the present case would in that respect be similar to that of Kinmond, Luke & Company v. James Finlay & Company, 1904, 6 F. 564, decided by the Second

Division, affirming the judgment of Lord Low. It was there decided, in circumstances not unlike the present, that a security which had been valued and deducted, and which afterwards proved to be of much greater value than had been anticipated, had not become the property of the creditor, but remained a mere security, although the debt which it secured had been discharged. The defender's counsel cited an earlier decision, viz., Craig v. Somerville, 1894, 2 S.L.T. 139, to the opposite effect. The opinion of Lord Kyllachy (Ordinary) indicates that this case must have been argued upon the assumption that if a creditor in a sequestration values and deducts his security, and the debtor be afterwards discharged—on payment of a composition, the creditor must be held to have made the security subjects his own—an assumption which, if sound, would go far to justify the decision. I was told that it appeared from the minute book that Lord Kyllachy's judgment was affirmed by the Second Division, but it does not appear upon what grounds their Lordships proceeded, or whether the judgment was pronounced of consent. The case of Kinmond, Luke & Company is, in my opinion, precisely in point, and is a conclusive authority so far as I am concerned for the proposition that the pursuers by the transaction in question did not take over the security subjects as their own property. If, then, the defender is still beneficial owner, I think it follows that he is bound to accept a conveyance from the pursuers. In the meanwhile I shall repel defender's pleas so far as directed against the pursuers' declaratory conclusions, and shall pronounce a decree in terms of that conclusion, and quoad ultra continue the cause. It is unnecessary for me to say more about the defender's fourth and fifth pleas-in-law than that they seem to me to be untenable.”

The defender reclaimed, and argued—The trust deed provided that the rights and preferences of creditors should be determined as if in a process of sequestration, and that the discharge granted to the debtors should be valid and effectual as if it had been obtained under a sequestration under the Bankruptcy Acts. Accordingly, while they did not dispute that as matters stood under the disposition of 1897 the defender (in accordance with Gardyne v. Royal Bank of Scotland, March 8, 1851, 13 D. 912, Lord Justice-Clerk Hope at p. 922) was under an implied obligation to accept a reconveyance of the subjects, there was no such obligation after the trust-deed and the acceptance of the composition offer. The debtor transacted with is creditors on the footing that he was to get the benefit of the Bankruptcy Act, namely, a complete discharge from all liabilities in return for stripping himself of his property, but the argument on the other side would have the effect of re-creating bankruptcy. Everything, including rights in security, went to the trustee to be administered by him— The Cleland Trustees v. Dalrymple's Trustees, December 18, 1903, 6 F. 262, 41 S.L.R. 159;

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Goudy on Bankruptcy, 449—but by agreeing to value their security, and to rank for dividend on the remainder, the bank transformed their right of security into a right of property— Craig v. Somerville, July 6, 1894, 2 S.L.T. 134, affirmed in Inner House, October 25, 1894, 2 S.L.T. 243. Kinmond, Luke & Company v. James Finlay & Company, March 8, 1904, 6 F. 564, 41 S.L.R. 378, was admittedly to the contrary effect, the distinction being that there the bankrupt was seeking to recover a surplus after full satisfaction, while here the attempt was to impose a continuing obligation on the debtor. Craig v. Somerville should be followed, and the defender assoilzied. Speedy's Trustees v. Commercial Bank ( cit. inf.) had no direct application to the present case. (2) In any case, if, as they averred, the bank had acted as full owners and had stripped the property of its machinery and other valuable adjuncts, it was barred now from saying that it was a mere security holder. A proof of these averments should be allowed.

Argued for the pursuers and respondents—The case was ruled by Kinmond, Luke, & Company ( cit. sup.). The report in Craig v. Somerville ( cit. sup.) was unsatisfactory in that it did not show on what grounds Lord Kyllachy's decision had been affirmed. In any case, so far as appeared, the 65th section of the Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. cap. 79) had not been cited to Lord Kyllachy, who seemed to have assumed that the secured creditor became under the 65th section the proprietor, whereas, on the contrary, the words “reserve to such creditor the full benefit of such security” implied the contrary. There was no question of re-creating bankruptcy; the debts now due were not due before the date of the trust deed. A secured creditor, even after valuing and deducting the value of his security and ranking for the balance, could revalue the security subjects— Commercial Bank of Scotland Limited v. Speedie's Trustee, November 27, 1885, 13 R. 257, 23 S.L.R. 167; it followed that valuing and ranking did not convert the security right into a right of property. (2) A secured creditor was entitled to sell as much as he could of the security subjects.

At advising—