Scottish Court of Session Decisions

Lord Skerrington—This case raises a question of general importance to persons who lend or borrow money on the security of beneficial interests in trust estates, viz.—whether the assignee of a beneficiary, as distinguished from a person who is himself an actual or prospective beneficiary, is entitled as of right to see the accounts of the trust in the absence of some special reason to the contrary. It so happens in the present case that the interest in the trust which belongs to the pursuer's cedent is a contingent one, by which I mean that it has not vested even subject to defeasance. Nothing however turns upon this specialty. In the well known case of Raes v. Meek ( 15 R. 1033, 25 S.L.R. 737, rev. 16 R. (H.L.) 31, 27 S.L.R. 8), the title of a contingent beneficiary to appeal to the Court for the protection of his contingent right was affirmed by the House of Lords. It follows in my opinion that such a beneficiary is entitled to see the trust accounts in order to assure himself that the trust has been duly and legally administered. This point was conceded by the defenders' counsel, and decisions to the same effect were cited— Muirhead v. Muirhead's Trustees (14th July 1909, n. r.) decided by Lord Johnston in the Outer House; In re Tillott (1892 1 Ch 86).

The defenders' counsel argued that a person who holds an assignment of a beneficial interest in a trust estate is in an entirely different position from that occupied by his cedent so far as regards the right to see the trust accounts. The maxim assignatus utitur jure auctoris had no application unless the cedent transferred his whole right out and out to a single assignee whom he thus substituted for himself as the beneficiary. He argued that a trust beneficiary and an assignee of a part only of his share could not each simultaneously possess and exercise the same right of inspection. A right cannot be assigned and at the same timeretained. In the present case the assignation was on its face a security, and if the pursuer's contention was sound it followed that the assignation doubled the number of persons who had a right to see the accounts in respect of one particular share. The beneficiary might equally well execute a score or indeed any number of partial assignations either ex facie absolute or in security, and so multiply indefinitely the expense of managing the trust and the duties of the trustees. These arguments overlook the fact that a share, whether vested or unvested, in the capital of a trust estate is in law assignable either in whole or in part. I do not need to consider whether in Scotland a testator can effectually prohibit alienation by inserting a clause of defeasance and gift over, because nothing of that kind was attempted in the present case. A beneficiary's right to inspect the trust accounts does not in my view arise from any fiction or presumption as to what the truster intended. It arises as a natural incident to the particular kind of property which he has chosen to create. Again, I do not need to consider whether a testator could effectually by means of apt language or of a clause of forfeiture deprive a beneficiary of a right to see the trust accounts, not because in the special circumstances secrecy was desirable as it often is in the carrying on of a commercial business, but merely in order to secure that his trustees should be absolutely free from criticism and control. There is nothing in the trust deed or in the circumstances to exclude the right of inspection which a beneficiary ordinarily enjoys. The defenders' counsel expressly conceded that if the action had been at the instance of the pursuer's cedent there would have been no good defence to it. But the right to examine the accounts is just as valuable and indeed necessary to a partial assignee as it is to an original beneficiary, and if one denies it to the former one gratuitously deprives this species of property of one of its natural incidents, with the result that it becomes less marketable and consequently less valuable to the beneficiary. Does any valid reason exist why a partial assignee should not be entitled to take the best means of satisfying himself that the trust is being properly managed, and of ascertaining the value and nature of the trust estate? I am aware of none. If a number of such assignations are granted some extra trouble may fall upon the trustees, but trustees must not assume when they accept office that they will have to deal only with the beneficiaries named or pointed out in the will. They are, however, entitled to employ and pay solicitors for taking charge of the trust accounts and exhibiting them when necessary. A beneficiary cannot involve the trust—that is his fellow beneficiaries—in unusual and excessive expenses merely because he chooses to dispose of his contingent or deferred share in a particular manner. The hypothetical score of partial assignees must either appoint a single representative to inspect the accounts on their behalf or they must indemnify the trust by paying for the

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