Scottish Court of Session Decisions

Lord Blackburn's OPINION.—[His Lordship narrated the circumstances of the case in the terms quoted above, and, after reciting the terms of the testator's trust-disposition and settlement, and repelling an objection by the pursuers to the defenders' accounts relating to a payment of £6000 to the heirs in mobilibus of the testator's son Rupert Clarke, with which this report is not concerned, proceeded]—The second objection to the accounts depends upon the fact that, at the date of his death, the testator held 50 shares in the Bridge of Allan Tramways Company. The nominal value of these shares was £10 each, and at the commencement of the trust their actual value was about £7. The trustees continued to hold these shares until 1921, when the company went into liquidation. The pursuers in their objections claim repayment of £352, 10s. to the trust-estate, in respect that the trustees did not realise these shares at £7, 7s., at which price some shares changed hands in the year 1906, but at the bar it was intimated that they were willing to accept £250 in full payment for the 50 shares.

I think it would be appropriate that at this stage I should say a word about Mr Mackenzie, as, after seeing him in the witness-box, I came to the conclusion that his description as a bank agent might lead to erroneous ideas in judging of his business capacities. As already stated, he was appointed to manage the farm, and I have little doubt that it was for this purpose that he was nominated as a trustee by the testator. In this capacity he practically had the management of the whole trust-estate in his hands. Up to 1919 Mr George Clarke took an active interest in the trust management, but after that date Mr Mackenzie was really in complete control. He impressed me as being absolutely honest and conscientious, and it was not suggested that he acted otherwise. The success attending his management of the farm, which yielded substantial yearly profits in addition to the enhanced price which it ultimately realised, testifies to his shrewdness and ability in that line of business. But his experience in such business matters as the investment of money or the interpretation of legal documents was limited. His main interests were in agricultural affairs, and it would, in my opinion, be a mistake to credit him with any extensive knowledge of investments and of money matters such as one might associate with a bank agent in a more populous centre than Tain.

The Bridge of Allan Tramways Company was a private company which owned the tramway line between Stirling and Bridge of Allan. This was one of the earliest, if not the first, tramway line to be constructed in Scotland, and at the date of the testator's death the plant was antiquated and worn out. It appears from the correspondence that the trustees did consider the propriety of keeping these shares. It is also proved that negotiations for the acquisition of the company's rights by the Stirling Town Council for the purpose of working the tramway line by electricity commenced in 1904 and continued for some years after the testator's death. In 1906 and 1907 the company paid dividends of 4 per cent, but in 1908 the dividend fell to 1 per cent, although in that year, as averred by the pursuers, the shares changed hands at £8, 10s. This probably indicates that at that date some people still anticipated that the Town Council would acquire the company's rights. The negotiations eventually fell through, although there is no evidence as to the precise date when they terminated. They probably continued down to 1911, as there were transactions in that year round about £5 per share; but thereafter the prices at which shares changed hands were nominal. From 1908 down to the liquidation in 1921 the company only paid 512 per cent in all. Mr Mackenzie's evidence is that he discussed these shares with George Clarke on several occasions, and this evidence is corroborated to some extent by Mrs Clarke. It appears that George Clarke, who was an electrical engineer, thought that the company would be taken over by the Town Council and that the trust would benefit by the retention of the shares. There is no evidence as to what information he may have had, but he advised that the shares should be retained and this advice was followed. It cannot be suggested that an investment of this sort was a proper trust investment, but, having been made by the testator himself, the trustees had power to hold it, and the immunity clause with regard to investments made by the testator himself is very wide. Apart altogether from the effect of the provisions of the Trusts (Scotland) Act, 1921, to which I shall refer hereafter, I am of opinion that the trustees cannot be held to have been guilty of such negligence as amounts to culpa lata, and as would be sufficient to overcome the effect of the immunity clause. Accordingly, I do not think that they ought to be held liable for the loss occasioned by the investment; and I shall repel this objection also. In any event, I do not think they can be blamed for holding the shares so long as there was a prospect of the negotiations for the transfer of the company's rights being successful, and I see no justification whatever for the pursuers' claim to have the shares valued at £7, 7s.

By the third objection to the accounts the pursuers claim repayment of a sum of £1212, 13s., in respect that the sum of £16,500, retained out of the price of £45,549, 17s. 11d. received from the Board of Agriculture by November 1921, was placed on deposit-receipt instead of being immediately divided among the beneficiaries or invested in securities yielding a higher rate of interest. The sum claimed represents the difference between 5 per cent and deposit-receipt rates on that capital sum from August 1921 to March 1924. It was Mr Mackenzie alone who was responsible for placing the money on deposit-receipt, and I have no doubt he believed it was the safest way of preserving it. He stated in evidence that he believed that this method of dealing with trust funds was expressly authorised by the trust-disposition and settlement, and he referred to the passage in the trust-disposition and settlement where the trustees are authorised “to deposit the same” (i.e. the trust funds) “at interest with foreign Colonial or other banks carrying on business or receiving money on deposit in Great Britain or to retain the same in bank in Great Britain” as justifying his action. Counsel for the defenders pressed upon me that the words admit of the construction placed upon them by Mr Mackenzie, and that any ordinary man would so interpret them. The clause is not very happily framed, and it may be that anyone entirely unfamiliar with such investment clauses might be misled as to its meaning. My impression was that Mr Mackenzie had been bona fide under the mistaken belief that the clause referred to deposit-receipts with Scottish banks. If this belief were reasonable, it would alone be a sufficient defence to the objection—Warren's Judicial Factor, 5 F. 890. But trustees do not require special authority to place money on deposit-receipt, and, if they hold money for distribution and not for investment, that is probably the proper way to deal with it. A small part of the £16,500 ought to have been invested to secure the annuity of the widow, who is now 80 years of age, but it appears to me that Mr Mackenzie's real mistake was in not making a final distribution of the balance more promptly. That there was some delay in bringing matters to a conclusion is clear, but it is not so clear to my mind that this delay, together with the placing of the remaining funds on deposit-receipt, constituted a breach of trust for which the trustees should be held liable to account. Mr Mackenzie explains the delay by saying that he was very much overworked, having, in addition to his bank duties, two other farms and two small estates on his hands to manage. He also says that he was not very sure what developments might arise in paying over such large sums, and that he had money enough in hand to correct the payment to Rupert Clarke's heirs in mobilibus if that payment should turn out to have been made in error. The question of vesting arose at a very early stage, and later was followed by the other questions raised in the action of accounting. I think Mr Mackenzie was justified in retaining money in his hands until all the questions which might arise had been disposed of. He distributed £36,000 among the beneficiaries very shortly after the bulk of the money payable by the Board of Agriculture had been received by him, but he did not receive the final payment until December 1922, and it was shortly after that date that it became clear that an action was to be raised challenging among other matters the payment of £6000 to Rupert Clarke's heirs in mobilibus. It was stated at the bar that the cost of placing the money on a permanent investment would have been about £350, and counsel for the pursuers admitted that the claim fell to be reduced by this amount.

Under these circumstances it would, I think, be difficult to hold that the placing of the fund on deposit-receipt amounted to a breach of trust. So far as I am aware, there is only one reported case in which a trustee has been held liable for keeping money on deposit-receipt instead of investing it. In Melville v. Noble's Trustees, 24 R 243, the testator had directed his trustees to pay to his widow the interest of the whole residue of the estate. Without even considering the question of investments, the trustees kept the money on deposit-receipt for nineteen years from 1875 at an average yield of 238 per cent. The Court, dissenting Lord Young, held that the trustees were bound to debit themselves in their trust accounts with interest at 3 per cent, which was apparently taken as the average yield of trust investments over the whole period. The ground of judgment was that to put money on deposit-receipt was not a proper permanent investment of trust funds, and that therefore the action of the trustees was not a mere omission in management, but a total neglect of a duty incumbent on them. Lord Moncreiff adds that there may be circumstances which would warrant trustees leaving trust funds on deposit-receipt for a considerable period. I do not think this decision goes far to support the pursuers' objection. That the decision was not intended to lay down any general rule, but that it depended on the special circumstances of the case, was recognised in the subsequent case of Manners v. Strong's Judicial Factor, 4 F. 829, where the same Judges, with the exception of Lord Trayner, refused to follow it. In the latter case the judicial factor had kept large sums on deposit-receipt for nearly twenty years, and after his death an action was raised against his representatives to account for the difference between the interest earned and the ordinary rate of interest on trust investments. The action was dismissed on the ground that, even if the factor had committed an error in judgment in what he did, there was no sufficient ground for holding that he had committed a breach of trust duty. I do not think it was unreasonable for Mr Mackenzie to place this fund temporarily on deposit-receipt, and if it were unreasonable, his action, in my opinion, did not amount to more than an error in judgment. I have accordingly reached the conclusion that this objection must also be repelled. I ought to add that the pursuers in the course of the proof asked leave to amend by taking a similar objection to a sum of £420 which had been kept on deposit-receipt throughout the whole period of the trust. They had had the trust accounts which disclosed this investment in their hands for nearly a year before the proof, and the objection, if successful, would have involved a calculation of the deposit-receipt rates and the average yield of trust investments from 1904 down to the present date. The defenders stated that they were quite unprepared to deal with such a question, and I accordingly refused to allow the amendment. It is right to say that Mr Mackenzie stated that he kept this sum on deposit-receipt to meet emergencies which might arise in connexion with the sheep farm, which appears to me to have been a reasonable thing to have done.

In dealing with these objections I have made no reference to section 32 of the Trusts (Scotland) Act, 1921, upon which the defenders found. That section provides that, if it appears to the Court that a trustee is personally liable for a breach of trust, but that he “has acted honestly and reasonably and ought fairly to be excused for the breach of trust,” then the Court may relieve him wholly or partly from personal liability. These are very wide powers, the effect of which is to leave to the Court as a jury question the amount, if any, which a trustee who has acted honestly and reasonably should refund to the trust-estate for committing a breach of trust. There is no attack here on the honesty of the trustees, and I am not prepared to hold that they acted unreasonably. But had I thought that a technical breach of trust had been committed, I should not have hesitated to apply the powers of this section and to have excused the breach. I cannot conceive a more appropriate case for so doing than one where sixteen years' management by the trustees has resulted in increasing the value of the estate from £10,000 to £50,000, and in the payment of large profits to the beneficiaries annually throughout the whole period. I think that, under such circumstances, to have held the trustees liable for technical errors resulting in a comparatively trifling loss to the trust-estate would have been just such a hardship as section 32 of the Trusts Act is intended to prevent. The farm, which is situated 50 miles from Tain, was managed by Mr Mackenzie with only one shepherd, and the debt the beneficiaries owe to him for his labours on their behalf is so great that it is, as I have already said, surprising to me that the objections, other than that depending on the question of vesting, should ever have been brought into Court. I shall assoilzie the defenders in both actions.

Lord President (Clyde).—There are two reclaiming notes before us, both of which relate to the estate of a person deceased who left a trust-disposition and settlement. The leading action is one of count, reckoning, and payment brought by certain of the beneficiaries under the testator's settlement against his testamentary trustees. The other concerns a question of vesting dependent on the construction of that settlement, but with it we have nothing to do on the merits, the only question being one with regard to the expenses of process.

Dealing with the action of count, reckoning, and payment, it must be observed that it was brought in consequence of prolonged delay on the part of the trustees in making payment of, or in accounting for, the pursuers' shares of the estate. By the end of 1921 the estate (which turned out to be of the value of between £48,000 and £50,000) had been, for practical purposes, wholly realised. After making very considerable interim payments to the beneficiaries, a sum of about £16,500 still remained in the hands of the trustees. Repeated requests were made to the trustees for an accounting or for payment, or at any rate for information with regard to this balance; and those requests were not only not satisfactorily answered, but (when answered at all) were answered by letters which can only be described as “putting off” letters. Some of them were left unanswered altogether. It was in those circumstances that this action to compel accounting and payment was served on the trustees in the beginning of 1924—fully two years after the estate had been to all intents and purposes completely realised and reduced into cash. When the account was produced under the pressure of the proceedings the pursuers took three objections to it.

The first objection was that the annuity payable to the testator's widow had been paid free of income tax although the settlement did not authorise it to be so paid. That this objection was well founded was promptly admitted; and, as the matter has been put right, it will be unnecessary for me to say anything more about it.

The second objection was that the trustees had imprudently retained a holding of 50 shares of £10 each which had belonged to the deceased in the Stirling and Bridge of Allan Tramway Co., and that, owing to their inattention, the value of these shares had been lost to the trust.

The third objection was that a sum of £16,500 had been retained by the trustees for more than two years on bank deposit-receipt instead of being invested in trust securities, and that in this way the shares of residue belonging to the pursuers had suffered loss.

I shall deal with the tramway shares first. The facts as proved are that the shares were valued for inventory purposes in 1904 at £8, 10s. per share. The trustees did not carry out—with regard to these shares—the resolution come to at their first meeting to realise all the deceased's shares. There is a letter, dated 18th October 1904, written by George Granville Clarke to the law-agent of the trustees, in which he expresses the opinion that the investment is a “bad egg,” and that it would be wise to consult a broker with regard to the value and saleability of the shares, and adds the suggestion that, if the tramway should ever be electrified, something better might be made of it. It appears that this letter reached Mr Mackenzie, and that at any rate the subject-matter of it reached Mrs Clarke. They did not, however, consult a broker, nor did they make any inquiries about the position and prospects of the tramway company; but simply made up their minds to retain the holding. From that time—in or about 1904—until the present day there is not the smallest sign that the trustees ever recalled the investment or its circumstances to mind. The shares fell gradually in value for some years, during which, however, transactions took place in them. The dividends varied but fell in like manner. None of these circumstances appear to have suggested themselves to the minds of the trustees as being suitable matter for consideration in connexion with the policy of retaining the shares. The result is that there has been a loss of money to the trust-estate, and that loss is moderately put (by the pursuers' concession) at £250. It is impossible to regard such inattention—such entire disregard of the duty of care for, and protection of, the estate under their charge which trustees owe to the beneficiaries—as anything but a breach of trust. If it were not so regarded, amounts much larger than four or five hundred pounds' worth of stocks or shares might easily be lost to a trust-estate—without any responsibility on the part of the trustees—simply because the trustees, though aware that the investment was a doubtful one, once for all determined to hold it, and then turned their backs upon it, and never so much as considered whether its position, as time went on, was one of improvement or of progressive deterioration. Much weight was put by the defenders on the indemnity clause in the settlement. It is difficult to imagine that any clause of indemnity in a trust settlement could be capable of being construed to mean that the trustees might with impunity neglect to execute their duty as trustees, in other words, that they were licensed to perform their duty carelessly. There is at any rate no such clause in this settlement. But as I shall have to come back to this topic hereafter, I say no more about it for the moment.

The matter of the retention of the £16,500 on bank deposit-receipt raises a more difficult question. The pursuers' case is that this sum should have been invested, and that the trustees are liable to account to them for the difference between 5 per cent (which could easily have been got on a first-class Government security purchased at the end of 1921 or in the beginning of 1922) and about 212 per cent (the return actually received during the two or three years on bank deposit-receipt). As I have already indicated, the testator's widow was entitled to an annuity under the settlement; but, subject to proper provision being made for that annuity, the estate was immediately payable to the beneficiaries entitled thereto. In the course of the correspondence which preceded the raising of this action, one of the pursuers, who was anxious to obtain information regarding the position of the estate, asked the trustees whether any sum had been set aside to meet the widow's annuity, and the answer given was in the affirmative. I am not questioning the honesty of the trustees' intentions; but—having regard to the actual facts of the case—this reply, if it meant anything, meant that the whole balance of £16,500 had been retained for the widow's annuity. It is common ground between the parties that a sum of £5000 was ample to secure the annuity. The truth is that nothing had been set aside in the ordinary sense. The entire sum of £16,500 was simply allowed to remain on deposit-receipt with the British Linen Bank, of which Mr Mackenzie was the agent in Tain, until after the present action was raised. Without doubt the duty of trustees who have an annuity to provide for is to set aside and invest a sum of money which will fully secure the annuity, and thus set free the rest of the estate for disposal to the beneficiaries who are immediately entitled to it. The result of not following this course was that the cost of meeting the widow's annuity, instead of being wholly charged on the revenue of a sum of £5000 invested (say) in 5 per cent War Stock, was spread over the whole £16,500 retained on deposit-receipt at 212 per cent, thus making the beneficiaries (other than the annuitant) contribute to the widow's annuity out of the interest on their shares in the balance of £11,500, which shares were immediately payable. In other words, the trustees unwarrantably threw part of the burden of paying the widow's annuity on the other beneficiaries to whom the estate (remaining after proper provision for the annuity had been made) belonged. I am unable in these circumstances to regard the trustees' conduct in not setting aside and investing a sum of £5000 to meet the annuity as anything short of a breach of trust, and I think they are therefore liable to account to the pursuers for whatever part of the annuity was unjustly taken out of the revenue received on the balance of the £16,500—that is, on £11,500.

But this does not exhaust the matter, for, as I have explained, the pursuers want much more than this. They want the difference between 5 per cent on the whole £16,500 (as if it had been invested in 5 per cent War Stock) and 212 per cent on that sum (212 per cent being the rate actually received on the bank deposits during the two years). Generally speaking, if money has to lie in the hands of trustees for a short period pending distribution, it is a sufficient discharge of their duty to put the money on deposit-receipt. On the other hand, if the execution of the trust purposes requires that the money should remain under administration for a period more or less prolonged, they must invest it. Now, the £11,500 was undoubtedly money awaiting immediate distribution. There was no reason at all that is supported by the evidence for postponing its distribution, and the only thing that prevented immediate distribution was the trustees' failure to set aside and invest the £5000 required to secure the widow's annuity. It was not, in these circumstances, the trustees' duty to invest the £11,500 at all; and I rather think that the pursuers' true complaint (if they had stated it) is that the trustees ought not to have retained the £11,500 at all. If that is right, their claim should have been for the difference between whatever part of the bank deposit interest may be actually credited by the trustees to their shares and “legal” interest on those shares, as being past due. This claim might, as it happens, come to the same thing in money as the claim actually made; but its ratio would be entirely different. The pursuers' claim as made in objection 3 cannot be sustained; and, although amendment of the objection was suggested, the pursuers declined to take that course. I should perhaps add that nothing has been adduced to show that the delay of two years had any necessary cause behind it; it seems to have arisen purely out of dilatoriness on the part of the trustees in winding up and completing their accounts. This is no excuse; but, while failure in business promptitude may easily turn into breach of trust, it is not necessarily, and in all circumstances, such. As the pursuers' claim stands, it is happily unnecessary to make up one's mind whether the long delay which occurred in the present case in completing the accounts and paying over the £11,500 amounted to a breach of trust.

But, in the next place, the trustees plead in aid the Trusts Act of 1921, and particularly section 32, which is in these terms:—“If it appears to the Court that a trustee is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the passing of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust, then the Court may relieve the trustee either wholly or partly from personal liability for the same.” If I am right in the earlier part of this opinion, there was a breach of trust in two particulars. That being so, we are asked to use this statutory power of relieving the trustees either wholly or partly from the consequences. Did they act honestly and reasonably, and ought they fairly to be excused?

Happily nobody has a word to say against the honesty of the trustees. The trustees undoubtedly meant well, and certainly the pursuers have every reason to be grateful to them for a long course of successful—if somewhat bold—administration, but for which the estate would never have reached anything like its present dimensions.

It seems to me that it is on the reasonableness of the trustees' actings that the question of the propriety of giving relief in the present case turns. Take the tramway shares. Suppose they had belonged, not to trustees, but to an individual who had reason to think that the holding—regarded as an investment—might deserve the epithet of a “bad egg,” and was conscious that it would be wise in his own interests to inquire about its value and whether it could and should be got rid of; but, either out of pure indolence, or because he preferred to take the chance of a possible electrification scheme coming along, or a purchaser of the undertaking turning up, decided not to bother about it but just to hold; and—having reached that stage—locked the shares up in his safe and never gave them another thought, although in point of fact the “bad egg” after a year or two fell lower and lower in value, and yielded less and less dividend, until it finally became utterly worthless. Could such a line of conduct be described as “reasonable”? I think not. Yet that is substantially what the trustees did. So far, therefore, as the tramway shares are concerned, the case is not, in my opinion, one in which the trustees could be “fairly excused.” Then there is the failure to set aside and invest £5000 for the widow's annuity. I quite understand that a rustic trustee, who was entrusted with duties such as were incumbent on the trustees here, and was unfamiliar with them, might see nothing unreasonable in keeping the whole balance of the trust-estate on deposit-receipt with a highly respectable institution like a Scottish bank, without setting aside and investing a part of it to secure an annuity for the testator's widow. It is not so very long ago that there was difference of opinion on the bench of this Court as to whether a trustee was committing a breach of trust duty by allowing money to remain on deposit-receipt and not investing it. But could any intelligent man regard it as reasonable to take that course (to which he was in no way compelled) in circumstances in which it had the direct effect of taking away from the beneficiaries entitled to the capital remaining in the trust a part of the return which (even if they were not immediately paid out) they ought to be getting upon that capital meanwhile? I think I am bound to attribute to the supposed rustic trustee the quality of intelligence; for, if he is lacking in it, how could the reasonableness—or for that matter the honesty—of his acts be judged? In my opinion the actings of the trustees in this matter, even supposing they could be regarded as rustics—which I by no means intend to suggest—were not reasonable. If so, the case is not one for the application of the statutory relief.

Finally, the defenders founded on the indemnity clause in the settlement. They founded on it both independently and as assisting their appeal to the discretion given to the Court by the Trusts Act. With regard to the tramway shares the argument was that, the trustees being given a general power to retain securities which the deceased held at his death, the general immunity conferred upon them implied that, once they had considered such a security, and decided to retain it, they were immune from the consequences of retention thereafter, and were under no obligation to revise the list of securities so retained from time to time. They said that trustees might “reasonably” so interpret the clause, even though a Court of law would not so construe it. With regard to the failure to set aside and invest the £5000 for the widow's annuity, the defenders founded on the series of powers given to the trustees in the settlement, including power to “borrow,” to “lend,” to “invest,” and to “deposit and retain in bank”; and again they said that trustees might “reasonably” read these powers as including bank deposit-receipts among the authorised investments. It would, I think, be difficult to set bounds to the possibilities of mistake in the unaided interpretation of formal legal documents by trustees who had no familiarity with them. But, while I think it clear that the clauses founded on contain no warrant whatever for what the trustees actually did in this case, with reference either to the shares or to the provision of a fund for securing the widow's annuity, I wish to say that it is not, in my opinion, reasonable conduct for trustees who administer, under a settlement, an estate which was never less than £13,000 in value and grew to be nearly £50,000 in value, to decline to avail themselves of legal assistance, and peril their immunity from liability to the beneficiaries on their own impressions of the meaning of legal terms. The trustees did employ a solicitor at first, but it is evident from the proof that they sought his advice but rarely. If he had given them wrong advice, the case might possibly have been different. It is not suggested that he had anything to do with the line taken by the trustees, either with regard to the shares or with regard to the annuity.

It remains to point out that the decree in the action as regards the tramway shares will go out against Mr Mackenzie, Mrs Clarke, and also George Granville Clarke, who unfortunately is now of unsound mind but continued to take his part in the trust up to the year 1919—long after the tramway company was liquidated. The decree on this head will be in favour of John Clarke (and his mandatary), and Mrs Cooper's executor, only—not, of course, in favour of George Granville Clarke. With regard to the matter of the annuity, the decree will go out against Mr Mackenzie and Mrs Clarke only—not against George Clarke, who by the time the estate had been realised was insane. The decree on this head will be in favour of John Clarke (and his mandatary), Mrs Cooper's executor, and George Granville Clarke. Mr John Clarke from the beginning and throughout took no part in the trust, being resident and in business abroad.

Lord Cullen.—As regards the fifty shares of the Stirling and Bridge of Allan Tramway Co., it appears that these shares were valued in the inventory of personal estate of the deceased at £8, 10s., which seems to have been a fair valuation at the time. The trustees continued to hold them for about seventeen years until 1919 when the company went into liquidation. During this long interval the shares progressively declined in value; no dividends were paid after 1911; and when the company went into liquidation their value had sunk to zero. They were shares in a commercial enterprise enjoying no special assurance of stability, but rather the reverse, as the progressive decline in value shows. Now it is the plain and undoubted duty of trustees who continue to hold shares of such a nature, or other kinds of assets, to keep a prudent and businesslike eye upon them, and to revise the situation from time to time, instead of going to sleep upon the matter and continuing to hold either in blind confidence or without giving any such consideration to the matter as an ordinarily prudent man would give. In the present case I am afraid that the trustees failed to perform this plain duty. There is nothing in the records of the trust to show that the expediency of continuing to hold the shares was ever really considered after the year 1905. Any evidence offered as to the matter having been talked about is of a very flimsy character, and wholly fails to show either that the trustees held considered views in favour of retention which were commendable to a prudent mind, or that the retention was the subject of serious and businesslike consideration at all. There is evidence of shares in the company having been sold from time to time by other holders at prices which gradually shrank as the years went on. There was no public quotation or free market, and it may be that the trustees would have found some difficulty in disposing of the fifty shares held by them had they endeavoured to do so; but it seems to me that it does not lie in their mouth to advance such possible difficulty, for they never made any effort to sell whereby the matter would have been tested. They were content to do nothing. Probably the farm was the absorbing interest of the trust. It was by far the most important of its affairs. The farm enterprise was carried through successfully, and in the end led to a very large enhancement of the trust-estate, but however creditable this may have been to the trustees, or to Mr Mackenzie individually, it cannot serve to excuse the negligence of the trustees in the matter of the shares. As regards the immunity clause in the will, it appears to me to be clear that that clause did not give the trustees any charter to act in the negligent manner they did. Apart, then, from any exercise of the discretionary power conferred on the Court by section 32 of the Trusts (Scotland) Act, 1921, which may be permissible and which may be made, it appears to me that we have no alternative but to hold that the three trustees other than John Clarke are bound, in accounting with the pursuers other than George Granville Clarke, to debit themselves with the loss on the shares due to such negligence; and I agree with your Lordship as to the figure at which that loss should be assessed.

As regards the third objection, it appears to me to be clear that during the period to which it relates the trustees should have had the amount required to provide the widow's annuity set aside and properly invested. To keep it in bank on deposit at a comparatively low rate of interest was not to make such investment. The result of it having been so treated, in common with the distributable balance of the other trust moneys, was that a certain amount of the interest accruing on that balance had to be used to make up the annual amount of the annuity, a course which would not have been necessary if the capital sum required to provide the annuity had been duly invested. I am of opinion that that amount of interest falls to be debited to the two trustees who are involved under this branch of the pursuers' claim in accounting with the pursuers. The sum to be restored depends upon the amount of the sum which should have been invested in order to provide the annuity, and also on the rate of interest it would have earned. As to the capital sum, the parties are agreed that it may be stated at £5000; and as to the rate of interest to be applied to it I have no doubt they will be able to agree. As regards the balance of the trust money deposited in bank during the period in question, the pursuers' contention is that it ought to have been invested in what may be called permanent trust investments as distinguished from being deposited in bank. Now the position of this balance was that it consisted of moneys falling under no trust purpose other than that for immediate distribution among the residuary legatees. That being so, the duty of the trustees was not to invest this immediately distributable fund in permanent investments, but to distribute it. During any normal interval preceding actual distribution it was a right enough course to lodge the money in bank. What actually took place was that the making of the full distribution was unduly delayed, and the beneficiaries were kept out of their money. This delay in distributing was unjustifiable. No intelligible explanation of it is advanced in the evidence. Accordingly, if the pursuers' claim on this head of the case had been that, in respect of the trustees being in mora, they should be debited with some interest, the pursuers might have had a good deal to say for it. But no such claim is made, and, although the propriety of making a suitable amendment was canvassed during the hearing, no such amendment has been offered. The pursuers' claim, therefore, remains one based specifically upon a breach of duty on the part of the defenders in failing to place on permanent investments this immediately distributable fund. I am not able to affirm that there was such a duty incumbent on the trustees, and I accordingly think that this part of the pursuers' claim under the third objection fails.

As regards section 32 of the Trusts (Scotland) Act, 1921, the discretionary power conferred on the Court is conditioned on the conduct of the trustee or trustees concerned having been both honest and reasonable. As to the honesty of the trustees in the present case there is no question whatever; but I find myself unable to affirm that the trustees, in neglecting their plain duty of looking after the tramway shares, and in neglecting their plain duty to invest the capital amount required to provide the widow's annuity, acted reasonably. On this footing the statutory discretionary power does not apply. I agree with the observations which your Lordship has made upon the bearing which the terms of the trust-deed have on this matter.

Lord Sands.—I have had considerable difficulty in this case, and I am reluctant to disturb the Lord Ordinary's judgment, but I do not see my way to differ from the conclusions at which your Lordships have arrived.