Scottish Court of Session Decisions

The Trusts (Scotland) Act 1867 (30 and 31 Vict. cap. 97) enacts—Section 3—“It shall be competent to the Court of Session on the petition of the trustees under any trust deed to grant authority to the trustees to do any of the following acts on being satisfied that the same is expedient for the execution of the trust and not inconsistent with the intention thereof; … 3. To borrow money on the security of the trust estate or any part of it. …” Section 16—“Applications to the Court under the authority of this Act shall be by petition addressed to the Court, and shall be brought in the first instance before one of the Lords Ordinary officiating in the Outer House. …”

Alexander Brodie Davidson and others, the testamentary trustees of Thomas Alexander Anderson, farmer, Nonikiln, Alness, who died on 28th November 1914, presented a petition in which they craved the Court “( first) To grant warrant to, authorise, and empower the petitioners to purchase from Charles William Dyson Perrins or his successors, at the price of £5640, with entry at Whitsunday 1921, the farm and lands of Nonikiln as at present possessed by the petitioners lying in the parish of Rosskeen and county of Ross and Cromarty; ( second) for that purpose to grant warrant to, authorise, and empower the petitioners to borrow money upon the security of the said subjects, or on such part thereof as to the petitioners shall seem expedient and necessary to an amount not exceeding £2000, and to execute all such bonds and dispositions in security or other deeds affecting the said subjects as may be necessary for that purpose; ( third) alternatively to the prayer under head (second) hereof, to remit to a Lord Ordinary to dispose of the application for power to borrow as aforesaid; and ( fourth) to find that the expenses of the present application are chargeable against the said trust estate.”

No answers were lodged.

The circumstances in which the petition was presented sufficiently appear from the report ( infra) by Mr W. M. Whitelaw, S.S.C., to whom on 4th December 1920 the Court remitted the application.

In his report Mr Whitelaw, inter alia, stated—“Under the fifth purpose of the said trust disposition and settlement the testator appointed his nephew Thomas Alexander Anderson Rae to be his residuary legatee, and expressed the wish and desire that he should succeed the testator in the farm of Nonikiln after the testator's death and carry on the said farm in the same manner as it was carried on by him. The testator further expressed the wish and desire that his said nephew should carry on the herd of shorthorns founded by him ‘if at the time my nephew shows a decided interest in and knowledge of shorthorns and my said trustees consider it judicious and advisable for him to do so.’ The testator further directed his trustees to convey and make over to his said nephew as his own absolute property the whole residue and remainder of the testator's estate on his said nephew attaining the age of twenty-one years, and in particular the testator directed his trustees to convey and make over to his said nephew the lease of the said farm of Nonikiln or his right of tenancy thereof, with the whole stock, crop, and plenishing thereon and everything on or about the said farm belonging to and used by the testator in connection therewith, with the right to his said nephew to reside in the dwelling-house along with the testator's widow. The testator further provided

Page: 246↓

that in the event of his widow and his said nephew not residing together amicably the right of his widow to reside in the farm house at Nonikiln, together with her right to the whole household furniture and effects therein (under certain exceptions), should cease and determine, as it was necessary for the proper management of the farm that his said nephew should reside in the house.…

The testator conferred upon his trustees all requisite powers for the carrying out of the trust and of any codicil he might make, and particularly empowered his trustees as soon as possible after his death to displenish his farm of Achindunie and any other farm he might occupy at the time of his death with the exception of Nonikiln, which had to be retained in accordance with the provision before mentioned.

The testator was survived by his widow and his nephew the said Thomas Alexander Anderson Rae.

As stated in the petition, payment of the specific pecuniary legacies bequeathed under the testator's trust disposition and settlement and codicil has been made and the testator's widow has received one-half of his moveable estate, including the furniture and effects in Nonikiln farmhouse. A receipt by the testator's widow therefor is produced.

It is further stated in the petition that by arrangement with the petitioners the testator's widow removed from the farmhouse at Nonikiln at Whitsunday 1916, and that the residue of the testator's estate in the petitioners' hands at 31st May last amounted to £9457, 19s. 3d., as specified in the petition.

Nonikiln farm as stated in the petition extends to about 250 acres, of which 239 or thereby are arable. For several years prior to Whitsunday 1888 the farm was possessed by Mrs Anne Robertson or Anderson, the testator's mother, and by the testator as joint tenants. By lease dated 7th and 21st September 1891 Sir Kenneth James Matheson of Lochalsh, Bart., the then proprietor of Nonikiln, let the farm to the said Mrs Anne Anderson and the testator jointly and to the survivor of them for nineteen years from Whitsunday 1888 at the yearly rental of £235 under the conditions mentioned in the lease. Since the expiry of this lease until the present time the tenancy of the farm has been continued by tacit relocation.

The said Mrs Anne Anderson died in or about the month of August 1910, and from that date until his death the testator was sole tenant of the farm.

Since the testator's death the petitioners have carried on the farm. The yearly rent thereof is still £235. The petitioners have kept up the herd of shorthorns at the farm.

The petition further states that the present proprietor of the farm of Nonikiln, Mr C. W. Dyson Perrins, has decided to sell, inter alia, the said farm in terms of the general conditions of sale by him wherein it is stipulated that entry shall be at Whitsunday 1921, when the price shall be payable.

Certain letters have passed between the agents for the proprietor and the agents for the petitioners, from which it appears that the petitioners have accepted the option given them of purchasing the farm at the price of £5640, subject to their obtaining from your Lordships authority to enable them to carry through the transaction, it being stipulated that if the authority required is not obtained by the 15th of January 1921 the petitioners must vacate the farm at Whitsunday 1921.

The testator's nephew the said Thomas Alexander Anderson Rae is as stated in the petition seventeen years of age. He is a student of Agriculture at the University of Edinburgh, and it is stated that it is his desire to occupy the farm and keep up the herd of shorthorns when he attains majority. Apart from the value of his interest in the testator's estate, it is further stated in the petition that he has no means wherewith he could purchase the farm. A letter from him dated 27th November 1920, in which he states that the present application is in accordance with his wishes, has been lodged in process.

The petitioners are desirous of continuing in occupation of the farm to enable them to make over the tenancy and the herd of shorthorns to the testator's nephew in terms of the testator's trust disposition and settlement. They have, however, been served with a notice to quit at Whitsunday 1921, and it is stated that they can only retain possession of the farm by purchasing same.

The petitioners further state that if the farm has to be vacated at Whitsunday 1921 the herd of shorthorns which is associated with the name of Nonikiln will require to be sold and that the testator's expressed wishes that his nephew should carry on the farm and the herd of shorthorns will be defeated.

No power to purchase or to borrow upon the security of heritage was conferred upon the petitioners under the testator's trust disposition and settlement and codicil and the present application is accordingly made.

It is stated in the petition that £4000 of the trust funds (the right to which has as already mentioned vested in the testator's nephew) could be made available towards the purchase price of the farm at Whitsunday next.

Mrs Anne Janet Anderson or Rae, now residing at 16 Greenbank Terrace, Edinburgh, and William Rae, one of the petitioners, are curators of the said Thomas Alexander Anderson Rae, appointed under trust disposition and settlement by William Rae (father of the said Thomas Alexander Anderson Rae), a copy of which is lodged in process. The said curators have intimated their approval of this application by letters lodged in process.

In the present application, which your Lordships will observe is not presented under the Trusts Acts, the petitioners crave your Lordships ( First) to grant warrant to purchase the farm of Nonikiln at the price of £5640 with entry at Whitsunday 1921; ( Second) for that purpose to grant warrant

Page: 247↓

to the petitioners to borrow money upon the security of the said farm or part thereof to an amount not exceeding £2000 and to execute the necessary bonds and dispositions in security and other deeds; ( Third) Alternatively to the prayer under head second, to remit to a Lord Ordinary to dispose of the application for power to borrow as foresaid; and ( Fourth) to find the expenses of the application chargeable against the trust estate.

With regard to the power applied for under head First, namely, to purchase the farm of Nonikiln, the reporter would direct your Lordships' attention to a consideration of the question of whether the present application is necessary. It is suggested by the petitioner that for the preservation of a certain portion of the trust estate, namely, the herd of shorthorns referred to in the petition, and for the effectual carrying out of the testator's intentions as to this nephew carrying on the farm of Nonikiln, the purchase of the subjects is essential. If this is so it may be argued that the petitioners are at their own hand entitled to purchase the farm. In support of this view the reporter refers your Lordships to the decision in the case of Armstrong v. Wilson's Trustees, 7 F. 353, in which it was held that trustees who had expended trust funds in building and repairing heritable subjects belonging to the trust estate which ultimately realised less than the sum expended upon them had not acted imprudently or negligently and that loss had not been caused by their fault.

The petitioners, however, think that as the purchase of heritable property is a nontrust investment they may be charged with having acted ultra vires if they carry through the purchase of the farm without judicial sanction, and they have accordingly applied to your Lordships to grant the necessary sanction in the exercise of the nobile officium of the Court in order that they may, although by a method not contemplated by the truster, give effect to his desire that his nephew may carry on the farm.

In these circumstances the reporter humbly begs to suggest to your Lordships that the competency of the present application is doubtful. He knows of no authority in which the nobile officium of the Court has been exercised in circumstances closely resembling those in the present application.

The reporter, however, would refer your Lordships to the following cases In the case of Kinloch, 1859, 22 D. 174, trustees appealed to the Court in exercise of its nobile officium to grant them power to borrow money on the security of the trust estate, but it was held that where a trust deed does not empower the trustees to borrow money on the security of the trust estate it is not competent for the Court in the exercise of its nobile officium to confer such power upon the trustees.

In a later case, Berwick and Others (Walker's Trustees), 1874, 2 R. 90, the petitioners craved authority to accept the renunciation of a lease of a farm of which they were the proprietors, but the application was refused, it being held that the petition was incompetent. The reporter would refer your Lordships particularly to the opinion of the Lord President (Inglis) in which he said—‘The powers of trustees are defined by he trust deed and the Court will give not higher power. The trustees are not entitled to come to the Court for advice. If they have no power given them by the deed it is incompetent for us to grant it them. I think therefore that the petition should be dismissed as incompetent.’ The other judges concurred, and Lord Deas in his opinion said—‘I see no reason whatever to doubt that the petitioners take a judicious view of what is for the interests of the trust estate. But it is for them to exercise their own discretion in that matter. If they do so rightly they will be safe. But it is a pure question of management in which we cannot aid them, and I think we must refuse the petition as incompetent.’

In the still later case of Noble and Others (Robert Noble's Testmentary Trustees), 1912 S.C. 1230, the trustees presented a petition relying upon the nobile officium of the Court for authority to expend a portion of the capital of the trust estate in rebuilding and repairing a tenement included in the estate, and for power thereafter to lease the tenement for twenty-one years, which in their opinion would be to the advantage of all the beneficiaries in the estate. The Court dismissed the petition, holding (1) that if the trustees did not already possess the desired powers under the terms of the deed it was incompetent for the Court to grant them in exercise of its nobile officium, and (2) that if the trustees did possess the powers the exercise thereof was a matter of administration for their own determination with regard to which the Court could give no advice. Lord Kinnear in his opinion said—‘I am unable to see that the Court can authorise these things to be done by virtue of its nobile officium. The questions are purely questions of administration.’ Lord Mackenzie, one of the other judges who concurred in his opinion, said—‘The matters that are dealt with in this petition are matters of trust administration, and as such cannot be dealt with by the Court in an appeal to the nobile officium of the Court. It is for the trustees to administer in the manner which they think best in the circumstances.’

The reporter thinks it right, on the other hand, to draw your Lordships' attention to certain cases in which the Court in exercise of its nobile officium has granted the powers craved.

In the case of Sir William Erskine's Trustees v. Wemyss, 7 S. 594, where the trustees were instructed to entail a portion of the truster's heritable estate and no power of sale in relation thereto was given in the deed, on the rest of the truster's estate being proved insufficient to pay his debts the Court authorised the trustees to sell that part ordered to be entailed in so far as necessary for payment of the debts and provisions. Lord Craigie, however, expressed considerable doubts, and thought that the trustees could only sell by authority of Act of Parliament.

Page: 248↓

In the later case of Henderson and Others (Somerville's Trustees) v. Somerville, 3 D. 1049), where the trust deed provided for payment of debts and provisions, and empowered the trustees to sell certain portions of the truster's heritable estate, and to apply the same together with the personal funds in payment of the debts and provisions, the Court held that although no special power of sale as to the remaining heritable property was expressed in the deed there was by a fair construction thereof necessarily an implied power of sale, and consequently the trustees were entitled to sell the said property in the same manner and as freely as if the truster had given them special power to that effect.

In the case of Stenhouse and Others (Wardlaw's Trustees), 1902, 10 S.L.T. No. 229, p. 349, the Court authorised the trustees, acting under a trust deed in which no power was given to invest the trust estate in the purchase of heritable property, to purchase the heritable property desired. Although there is no reference in the report of this case that it was presented as an appeal to the nobile officium it must have been so presented, as it was not, and in the Reporter's view could not have been, presented under the Trusts Acts. The petition was remitted on 19th July 1902 by the Second Division to the Lord Ordinary on the Bills ‘to dispose of the petition.’ It appears to the Reporter that the petition was so remitted in order that it might be disposed of in the then ensuing vacation. It was not, however, disposed of by the Lord Ordinary until 2nd November 1902. The Reporter accordingly very respectfully suggests to your Lordships the doubt which he has felt as to whether the Lord Ordinary was right in granting the power asked for. The Lord Ordinary may have taken the view that as the trust estate consisted to a large extent of heritage, and as there was a power given to the trustees to excamb, that that implied a power to acquire heritage by purchase where the purchase was essential to the development of the heritage held by the trustees. If that be the explanation of the position, then the petition appears to the Reporter to have been unnecessary, but if it is not, then in the Reporter's opinion the power was wrongly granted, because ( a) the Lord Ordinary was not entitled to exercise the nobile officium of the Court when the power was granted, and ( b) the decision is inconsistent with the earlier cases of Kinloch and Berwick above referred to. This was evidently the view of the Court in the case of Noble's Trustees, where this case was commented upon, but the case of Berwick was followed. The Reporter begs to refer your Lordships in particular to Lord Kinnear's criticism of Wardlaw's case.

In the case of Coats' Trustees, 1914 S.C. 723, where owing to a claim of legitim the trustees experienced difficulty in exercising a power conferred on them by the truster to make over valuable pictures belonging to him to his children, including one of the trustees, at valuation, the Court empowered them to expose these pictures to sale at prices not less than those specified in the valuation, and under the express condition that one of the trustees who was a child of the truster should be entitled to bid at the sale.

From the decisions in the cases above referred to it appears to the Reporter that an appeal by trustees to the nobile officium of the Court for special powers is competent only when under special or unforeseen circumstances the powers craved are required to enable the trustees to carry out the general purposes and intentions of the truster not strictly in accordance with his directions but in the manner best calculated to give effect to his intentions, and that an appeal to the nobile officium of the Court is not competent where the powers sought relate to a simple act of management which is either a matter for the trustees' discretion or outwith their powers.

At the date when the testator made his settlement he was occupying the farm of Nonikiln under a yearly tenancy. The farm might therefore have been let to another tenant or sold to a third party. On the other hand, the testator's relations with the proprietor might have been of such a friendly nature that the testator never contemplated the possibility of his nephew not being able to succeed him in the tenancy of the farm should he wish to do so. It is impossible, therefore, to predicate what instructions or powers the testator would have given to the trustees to meet the situation which has now arisen, viz., the investments of the trust funds in a non-trust investment.

If your Lordships are of opinion that the application is competent, it appears to the Reporter that it is expedient for the execution of the trust, and not inconsistent with the intentions thereof, if the power craved to purchase the farm of Nonikiln is granted. From the report of Mr Gill, which has been obtained by the petitioners' agents on the suggestion of your Reporter, it will be seen that Mr Gill considers the price at which the farm of Nonikiln has been offered to the petitioners to be fair and reasonable.

With regard to the power applied for under head second of the prayer of the petition to borrow money upon the security of the said farm of Nonikiln after purchase, and under head third alternatively to remit to a Lord Ordinary to dispose of the application for power to borrow, it appears to your Reporter that this part of the application is not one which falls to be made to your Lordships in the exercise of the nobile officium of the Court. Under sections 3 and 16 of the Trusts (Scotland) Act 1867 it appears to your Reporter that an application by trustees for authority to borrow money on the security of the trust estate or any part thereof should be presented to a Lord Ordinary, and that the application should state that it is made under the Trusts Acts, and in particular the Trust Act of 1867, sections 3 and 16.

Your Lordships may accordingly, in the event of your granting authority to purchase the farm of Nonikiln as craved, think it expedient to remit the petition to a Lord

Page: 249↓

Ordinary to be disposed of by him under the Trusts Acts. It has been held, however, that where a petition combines an appeal to the nobile officium with a prayer under section 3 of the Trusts Act 1867 the Division can competently grant the whole prayer— Trustees of the Prime Gilt Box, 1920, 2 S.L.T. 2.”

At the hearing of the case in the Summar Roll the petitioners argued—(1) The Court should empower the petitioners to purchase the farm. The will showed that the testator anxiously desired that the stock should be kept together, but a casus improvisus had prevented this being done. Accordingly the present case was one which was appropriate for the exercise of the nobile officium of the Court— Wardlaw's Trustees, 1902, 10 S.L.T. 349; Coats' Trustees, 1914 S.C. 723, 51 S.L.R. 642; Erskine's Trustees v. Wemyss, 1829, 7 S. 594. Weir's Trustees, 1877, 4 R. 876, 14 S.L.R. 564, showed how far the Court would go in order to carry out a testator's intentions. Kinloch, 1859, 22 D. 174, was distinguishable from the present case where power was sought to carry out a special desire of the testator. In that case, as in Berwick, 1874, 2 R. 90, 12 S.L.R. 58, and Noble's Trustees, 1912 S.C. 1230, 49 S.L.R. 888, the power sought was a power to perform what was a mere act of administration. Hall's Trustees v. M'Arthur, 1918 S.C. 646, 55 S.L.R. 609, was also distinguishable, for there the power sought received no support from the will—see Lord Johnston's opinion at 1918 S.C. 650, 55 S.L.R. 611, and Lord Skerrington's opinion at 1918 S.C. 653, 55 S.L.R. 613. (2) The Court should empower the petitioners to borrow money upon the security of the farm. Although the granting of power to borrow did not involve the exercise of the nobile officium of the Court in as much as power to borrow was conferred by the Trusts (Scotland) Act 1867 (30 and 31 Vict. ch. 97), secs. 3 and 16, under which the application fell to be made to the Lord Ordinary, the power to borrow sought for in this case was merely incidental to the power to purchase, which the Court in virtue of its nobile officium, was now asked to grant. In these circumstances the Court could competently grant both the powers craved— Trustees of the Prime Gilt Box, 1920, 57 S.L.R. 463.

At advising—