Scottish Court of Session Decisions

Alexander Hall, James Hall, and others, the sole surviving testamentary trustees of the late Adam Hall, woollen-carder, Newtown St Boswells, petitioners, brought a petition craving the Court to authorise the petitioners as trustees to sell (1) a villa at Newtown St Boswells to James Hall as an individual for £725, and (2) other subjects in Newtown St Boswells and Langlands Mill (excluding the machinery and plant therein) to James Hall and Alexander Hall as individuals for £5800, in terms of offers made by them, or to sell the villa and other subjects respectively to James Hall and James and Alexander Hall at such other price or prices and upon such other terms and conditions as the Court might direct, or alternatively to authorise the sale of the subjects by public roup with a right to bid thereat in James and Alexander Hall.

Answers were lodged by Mrs M'Arthur, a daughter of the testator, and her children, respondents.

The facts of the case appear from the following narrative, which is taken from the opinion of Lord Johnston—“The late Adam Hall died in 1908 possessed of estate to the value of about £8000, which consisted of his interest in the business of A. Hall & Sons, woollen-carders and spinners, Langlands Mill, Newtown St Boswells, including the machinery and plant therein, together with certain heritable properties. These latter were (1) tenements in Galashiels, (2) dwelling-house at Newtown St Boswells, (3) Langlands Mill, (4) certain tenements in Newtown St Boswells, mostly erected by Mr Hall, and many of them occupied by workers engaged in his mill. There was also a good deal of spare ground adjoining the mill available for extension thereof or for feuing or building. The various tenement properties were

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burdened with debt to the amount of about £4700. By his settlement Mr Hall nominated seven trustees, now reduced by death to five, of whom two were and are his sons Alexander and James Hall, and a third his unmarried daughter Miss Adelina Hall. At the date of his death the business of A. Hall & Sons was being carried on by Mr Hall in partnership with his two sons Alexander and James Hall under a deed of copartnery expiring at 1st July 1911. Mr Hall authorised his trustees to continue his business for such period and on such terms as they might think expedient, or to make such arrangements and settlements with his sons relating to his share and interest in the copartnery as they might think advisable. Shortly, the ultimate purpose of Mr Hall's settlement, after providing annuities for his widow and unmarried daughter, was equal division of his estate among his children, who were the two sons already mentioned and four daughters, three of whom were married and had issue, the sons taking their shares in fee and the daughters their shares in liferent and their issue in fee. Mr Hall's interest in his business was paid out by his sons at the conclusion of the partnership in 1911, and at the same time they acquired from the trustees the machinery and plant so far as belonging to their father. The sum payable by them was fixed at £4238, and this when paid up was applied by the trustees along with other moneys in their hands in freeing the heritable properties of debt. It resulted that at the date of the present application what remained of Mr Hall's estate was the heritage above enumerated. Mr Hall's settlement, which bears marks of care and discrimination in providing for eventualities, and more or less indicated incidentally the probable course of administration which his trustees would require to adopt, contained the following:—In the first place, though providing, consistently with their terms, that his children's provisions should vest at his death, Mr Hall expressly declared that his trustees should not be bound to make any payments to the beneficiaries until such time as they should see fit, “regard being had to the circumstances of my trust estate, it being my particular wish that my trustees shall not require to sell my heritable property under unfavourable circumstances, but that they shall be allowed to settle with the beneficiaries, interest as well as principal, at such times and in such way and manner as they may see proper.” But, in the next place, in the event of his sons or either of them continuing to carry on the business of A. Hall & Sons he provided that his trustees might, but only if they judged it to be fit and expedient, sell to them or him his factory of Langlands Mill and such of the machinery and plant there in as might belong to him at his death at such price as to his trustees might seem just and reasonable, or at a price to be fixed by arbiters in common form. And lastly, he empowered his trustees to feu his heritable property or any part thereof on such terms as they might think fit, and also to sell his heritable and moveable property, at any time they might think it expedient, by public roup or private sale, and to let his heritable property for such periods and on such terms as they might find necessary or expedient. It is therefore evident that Mr Hall's settlement contains all that is necessary to enable his estate to be administered and if deemed proper to be realised. It is also, I think, evident, having regard to the composition of Mr Hall's family and to the nature of the net estate which he left behind him, that while it is not impossible that division of the heritage should be made without realisation, realisation would be a natural and businesslike course for the trustees to adopt provided the times were favourable, and, should they do so, that nothing is wanting in the matter of powers conferred upon them. It is now proposed to sell to the two sons the whole of the Newtown St Boswells properties, and the trustees and the sons after taking what is said to be neutral advice by way of valuations have agreed on terms. But owing to the fact, as they say, that the fiars of a considerable part of the residue are in pupillarity or minority, and that they are therefore unable to carry out the transaction without special powers from the Court, the trustees have applied to the Court for authority to sell the property to Mr Hall's sons at the agreed-on price, or otherwise at such other price or prices as the Court may direct, or alternatively to authorise the whole of the properties at Newtown St Boswells to be exposed for sale by public roup under the express condition that the two sons as individuals or either of them should be entitled to bid at said sale for all or any part of them. The petitioners do not draw attention to the primary difficulty which meets them, viz., that the proposed purchasers of trust property are themselves two out of the five trustees, and that though this does not in point of principle alter the situation, from their position they presumably have a predominant voice in the trust management. The application is opposed by Mrs M'Arthur, one of the married daughters, and her husband as her curator-at-law, and on behalf of their minor and pupil children. They maintain shortly that so far as the petition relates to the mill subjects it is unnecessary, and that so far as it applies to the other heritable subjects it is irrelevant and incompetent.’

Argued for petitioners—In general there was no absolute rule that trustees could not buy the trust estate, a part of it, or be bidders when it was exposed to public roup. If the trustees secured the interposition of the authority of the Court, they or some of them might buy or bid at the public roup— Maxwell v. Drummond's Trustees, 1823, 2 S. 130 (N.E. 122); Taylor v. Watson, 1846, 8 D. 400, per Lord Mackenzie at p. 406, and Lord Fullerton at p. 407; Gillies v. Maclachlan's Representatives, 1846, 8 D. 487, per Lord Cunninghame at p. 493; Coats' Trustees, 1914 S.C. 723, 51 S.L.R. 642. [ Lord Skerrington referred to Fraser v. Hankey & Company, 1847, 9 D. 415.] If, however, the trustees did not obtain the authority of the Court, the transaction was open to challenge, but the sale was not

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absolutely null— Hankey's case ( cit.), per Lord Fullerton at p. 429. The English law was to the same effect— Campbell v. Walker, 1800, 5 Ves. Junr. 677, per Sir Richard Arden, M.R., at p. 681; Boswell v. Coaks, 1883, 23 ChD 302, per Fry, J., at p. 310, 1886, 11 A.C. 232, per Lord Selborne at p. 242. Further, the Court could adject conditions which would prevent the trustees using their special knowledge to secure an undue advantage. Further, in the present case the circumstances were special. An immediate division was necessary so far as the sons were concerned, and might in the daughters' case become necessary at any moment, and that could only be effected by realisation. Further, the heart of the trust property was the mill; the machinery and plant in it belonged to James and Alexander Hall; the shell of the mill was of little value; and the mill itself without the rest of the property was useless to James and Alexander Hall, who were tenants of the business in the mill under Adam Hall's settlement. It was unreasonable to sustain an objection when, as here, the course desired by the petitioners was the best in the interests of the trust. One or other of the alternatives of the prayer should be granted. The Heritable Securities Act 1894 (57 and 58 Vict. cap. 44), section 8, was referred to.

Argued for the respondents—The prayer of the petition was incompetent. If the rule was as stated by the petitioners, it was strange that there was no instance of its application until 1914. Even Coats' case ( cit.) was not an authority, for there there was no opposition to the petition; the part of the estate in question was very small in comparison with the rest; the trustees were competing amongst themselves for the subjects in question; and if the trustees had been excluded, the best bidders would have been excluded. Further, in that case the fact that the inclusion of trustees amongst possible bidders generally discouraged biding by third parties, was absent. The petitioners had not cited any decision in their favour. Further, the cases where creditors were allowed to buy the security subjects had no application for a creditor could not remove the obstacle as a trustee could by resignation. Tennant v. Trenchard, 1869, L.R., 4 Ch. 537, per Hatherly, L.C., at p. 544, was referred to. Further, even if the matter was in the discretion of the Court, the present case was not appropriate for the exercise of that discretion. The subjects proposed to be sold were about three-quarters of the whole estate. There was no explanation of why the trustees had not adopted the usual course of resigning. There was no need for division, and consequently a sale was not necessary. In any event the only sale that should be allowed should be by public roup.

At advising—