Scottish Court of Session Decisions

The pursuer in this action is the permanent trustee on the sequestrated estate of Thomas Fleming ("the debtor") conform to act and warrant granted on 16 October 1990, the date of sequestration being 11 July 1990. The debtor died on 9 January 1995 and the defender is the debtor's widow. At the date of sequestration the debtor and the defender lived in the matrimonial home at 24 Dochart Drive, Coatbridge. The title to that property was in the names of the debtor and the defender equally between them and the survivor of them. The pursuer seeks declarator that he remains vested in the debtor's one half pro indiviso share of the property and that he is entitled to insist on an action of division and sale of the property. Alternatively, he seeks declarator that esto the defender is infeft in that share as heir of provision by virtue of a special destination, she is personally liable to the creditors of the debtor to the extent of the value of that share. After debate the sheriff held that on the death of the debtor the special destination took effect and the defender became infeft in the property. He also held that as heir of provision the defender was liable for the debtor's debts up to the value of his pro indiviso share. The defender appeals to this court against the sheriff's decision to find her liable for the debtor's debts as heir of provision, while the pursuer cross-appeals against the sheriff's decision that the property became vested in the defender by virtue of the special destination. One matter which was not before the sheriff was that the debtor was discharged under section 54 of the Bankruptcy (Scotland) Act 1985 ("the Act") on 11 July 1993.

Certain matters were agreed by the parties before this court. It was accepted that as the law stands a survival special destination could be evacuated inter vivos by either party to the deed, and could be evacuated mortis causa unless the deed was as a result of a contractual agreement, such as where both parties contributed to the purchase price, or the party purporting to evacuate was a donee. It was accepted that in the present case the debtor could not validly have evacuated mortis causa. It was accepted that under section 31(1)(b) of the Act the act and warrant had the same effect as if a decree of adjudication had been pronounced, that this only conferred a personal right on the pursuer, unless the act and warrant was registered, and that he had not registered his act and warrant. It followed that if the special destination was not evacuated, the defender would by operation of law become vested in the debtor's share immediately on his death. It was accepted by the defender that creditors individually could sue an heir of provision for the debts of the deceased due to them. It follows from this that it was accepted that the decision of Lord Stott in Barclays Bank Ltd. v. McGreish 1983 S.L.T. 344 was wrongly decided. I should say that I agree with this concession. Lord Stott did not have before him or consider the special position of an heir of provision. In relation to liability for the debts of the institute the situation is clearly set out in McLaren on Wills and Succession 3rd edition page 1284 "Heirs of provision succeeding under a deed of simple destination incur a passive liability, but only to the extent of the value of the succession". Had this matter been before him no doubt his decision would have been different, but as it is this decision must be overruled. Finally, it was agreed that in so far as the sheriff relied on section 31(7) of the Act he was in error as that subsection is only concerned with sequestration of the estate of a deceased debtor and is not concerned with the situation of the sequestration of a living debtor who dies subsequent to the sequestration.

The logical starting point is to consider the cross-appeal, as if the special destination was evacuated the other questions do not arise. The argument on behalf of the pursuer started from the proposition which could not be disputed that a special destination may be revoked inter vivos and also revoked mortis causa unless one of the exceptions applies. That being so, the destination could be revoked in certain circumstances by an unrecorded deed, namely a will. That shows that registration is not essential to revoke a destination. It follows that an unrecorded conveyance would have the same effect. A disponer has done all in his power to part with the property by signing and delivering a disposition and by so doing has revoked the special destination, and the effect of the revocation cannot depend on the accident of whether or not the disponee records the disposition, a matter which is outwith the control of the disponer. Section 31(1)(b) of the Act provides that an act and warrant has the same effect as if a decree of adjudication had been pronounced in favour of the trustee. An unrecorded decree of adjudication is in the same position as an unrecorded conveyance and according has the effect of revoking the special destination. It was submitted that the sheriff was in error in treating the case as a competition between the personal right of the trustee under the unrecorded act and warrant and the real right of the defender under the special destination because the true issue is whether the special destination every took effect.

In reply counsel for the defender submitted that while a special destination could not properly be described as testamentary, it was of testamentary effect. In Brown's Trustee v. Brown 1943 S.C. 488 Lord Justice Clerk Cooper said that a special destination will, unless it has been evacuated, carry the property on the death of the institute to the substitute named as next heir of provision "and in this sense such a destination may be regarded as testamentary in effect". As far as conveyancing law is concerned a substitute under a special destination becomes infeft immediately on the death of the institute and in order to defeat that right something has to happen, effective in conveyancing terms, to stop it happening. A will can defeat a special destination, but there is a special reason for that. Both a will and the effect of a special destination speak at the moment of death. In order to defeat a special destination a will must expressly or by necessary implication revoke that destination and, accordingly, ex hypothesi, must be later in date than the destination. The clear rule in relation to testamentary writings is that the later in date must rule. Accordingly, the will supersedes the special destination and prevents it from coming into effect. A will by its very nature cannot be recorded before death, but anyone dealing on the faith of the register and who sees that property is held by virtue of a special destination will be aware that it may be defeasible by will and will wish to see the will before being satisfied as to title. The position is different, however, in the case of an unrecorded disposition. Its existence would be unknown to anyone dealing on the faith of the register. Furthermore, as infeftment under a special destination takes place immediately on death, such infeftment would win the race to the register as against an unrecorded disposition, although it would not be eligible to take part in the race to the register if there is a will speaking at the same moment which revokes it. It follows that whatever is contained in an unrecorded document, other than a will, cannot prevail against the automatic infeftment available to the substitute under the special destination. It is clear from Goudy on Bankruptcy 4th edition page 256 that the effect of vesting of the bankrupt's estate in the trustee is that he gets a personal right only, and if there is a prior disponee of heritable property a race to the register will result. See also McBryde on Bankruptcy 2nd edition paragraph 9-17. If the pursuer's argument is correct the act and warrant would confer a right on the trustee which he would not have against the holder of a prior unrecorded disposition. There is no reason why a trustee should be in a unique position in feudal law just because this is a special destination. The warning of Lord President Cooper in Hay's Trustee v. Hay's Trustees 1951 SC 329 that in relation to special destinations the courts are stage by stage drifting further and further away from the feudal principles on which the whole doctrine should rest should be heeded.

In my opinion the logical progression of the pursuer's argument contains one jump too many. I accept that a testamentary deed may revoke a special destination and also that such a deed will be unrecorded. In my view, however, it does not in the least follow that any unrecorded deed may have the same effect. Because of the special and privileged nature of special destinations in feudal law it is, in my opinion, to feudal law that one must look to see whether such a destination has been revoked. We are not here concerned with the question as to who has the beneficial ownership of the property, the sort of problem which arose in Sharp v. Thomson 1995 S.C. 455, 1997 SC (HL) 66. Ex facie of the register the substitute has an automatic right to become infeft in the property on the death of the institute unless some step has been taken by the institute to revoke that destination, and in my opinion any such revocation in order to be effective should be on the register. The position of the unrecorded will is, in my view, a special one and arises only because a special destination is testamentary in effect and therefore faces competition from a true testamentary deed. In relation to that competition the later will must supplant the earlier special destination. Looking to proper feudal principles, however, I am of the view that in the absence of competent mortis causa revocation the special destination must take effect unless there is some properly recorded inter vivos revocation. As counsel for the defender pointed out there is no reason in principle why a trustee should be in a better position relying on his act and warrant than would be the holder of an unrecorded disposition. There is no inequity in this result as, if a trustee wishes to protect his position against the possibility of the death of the debtor giving rise to the automatic infeftment in the substitute, all the trustee has to do is to register his act and warrant in the appropriate register and this will give him a real right which will defeat the right of the substitute. In my opinion if he omits to do so he must take the consequences. I should add that one curious side effect of the pursuer's contention would be that if the special destination is automatically revoked by the unregistered act and warrant, in the event of the property not being needed to meet the debts and being reinvested in the debtor, that reinvestment would appear to be without the benefit of the special destination and this could lead to considerable prejudice to the substitute. For these reasons I am satisfied that the pursuer's contentions cannot succeed and the cross-appeal will accordingly be refused.

I now turn to the defender's grounds of appeal. Counsel submitted that the powers of a trustee in bankruptcy are granted to him by statute. Under section 3 of the Act it is provided that his general functions shall be to recover, manage and realise the debtor's estate and distribute the estate among the creditors accordingly to their respective entitlements. Under section 31 he is vested in the whole estate of the debtor and that is defined in subsection (8) as meaning the whole estate at the date of sequestration, including the capacity to exercise and take proceedings for exercising all such powers in, over or in respect of any property as may have been exercised by the debtor for his own benefit. Accordingly, in terms of the statutory scheme any action which the trustee is entitled to raise is raised in place of the debtor and not in place of the creditors. He is not vested in any rights which creditors may have to make claims themselves. It is accepted that creditors may claim against an heir of provision in respect of debts owed to them by the institute, but that is a claim which is personal to the creditors. It is not, accordingly, a claim which can be pursued by the trustee acting under his statutory powers. For that reason the trustee has no title to sue. The position is further complicated by the fact that the debtor was discharged before his death and before the special destination took effect. Under section 55 the effect is that the debtor is discharged of all debts and obligations contracted by him or for which he was liable at the date of sequestration. Any claim by a creditor against an heir of provision is not the same as a claim which he has made in the sequestration. It is a separate claim which is based on the original debt, but after the discharge of the debtor that debt has been discharged and cannot be sued upon. Accordingly, even if the trustee had power to sue an heir of provision on behalf of creditors he would be suing in respect of a debt which has been discharged, and for that reason the action is irrelevant.

In reply the solicitor advocate for the pursuer submitted that the trustee is vested with a right, acting on behalf of the creditors, to sue for the purposes of recovering and managing the trust estate. The pro indiviso share of the property was vested in him as part of the trust estate and he is entitled to act on the creditors' behalf as far as that share of the property is concerned. In Goudy, at page 336, it is said that the trustee is at the same time both a representative agent and a judge, an agent in so far as the creditors as a body is concerned acting for them in their transactions with third parties enforcing their legal claims and fulfilling their legal obligations. Accordingly, it was submitted, where all creditors would be entitled as a body as a whole to pursue an heir of provision the trustee can act on their behalf. A trustee at common law has power to raise actions without needing statutory powers. He may now reduce gratuitous alienations as part of his statutory powers, but this was first introduced in the Bankruptcy (Scotland) Act of 1856. Prior to that it had been recognised that at common law he had similar powers. This is exemplified in Edmond v. Grant 15 D. 703 and Hay v. Mair 27 January 1809 F.C. In Mann v. Sinclair 6 R. 1078 a latent partner in a business retired but gave no notice of the dissolution of the partnership. The remaining partner continued the business and subsequently issued a circular stating that he had taken another person into partnership and that the firm would be carried on by these two partners. An action was raised by the trustee on the firm's sequestrated estate against the former partner for payment of the balance of the debts of the firm not covered by the assets of the firm, on the ground that the retired partner had given no notice of his retirement from the business. It was held that in fact the circular was sufficient intimation that the retired partner was no longer a partner and that, accordingly, he was not liable. Furthermore the opinion was expressed that only those creditors who could show that they had been misled by the retired partner into the belief that he was still a partner would have a title to sue. Accordingly, as this represented a class of creditors and not the body of creditors as a whole, the trustee would have no title to sue as representing them. Lord President Inglis said that the trustee could not represent a class of creditors. His proper character was as a representative of the entire creditors. He said that if all creditors were entitled to sue "there would be no difficulty about allowing the trustee to sue". The clear implication from this dictum accordingly is that, provided the trustee is representing the whole body of creditors in raising the action which he does on their behalf, he has a title to sue on their behalf. In relation to the discharge of the debtor it was submitted that section 55 only has the effect of relieving the debtor from any claims being made against him personally by creditors. The discharge of the debtor does not in any way affect the ongoing sequestration or the validated claims made by the creditors against the debtor's estate, which still remains vested in the trustee despite the discharge of the debtor.

In reply senior counsel for the defender submitted that the broader proposition taken from Goudy was not vouched by authority. A trustee may be a representative for creditors for the purpose of in-gathering the estate, but that does not make him a representative for making claims against third parties on behalf of the creditors, which claims would not form part of the debtor's estate. In Mann it is far from clear what was the basis of the trustee's claim and, in any event, the observations of the Lord President do not go so far as to assert that the trustee was vested in rights of creditors. In any event the trustee in a case such as the present may not be acting on behalf of the whole body of creditors. Under section 22(8) of the Act the submission of a claim by a creditor bars the effect of any rule of law relating to limitation of actions. The right of creditors against an heir of provision is a right to sue for pre-sequestration debts. The right against the heir of provision has to be constituted by an action and, accordingly, the normal rules of limitation would apply. If the debts owed to the creditors have prescribed there would be no right of action against the heir of provision because any such claim has to be constituted by action by the creditors. Accordingly, some of the creditors may have debts which have not prescribed while others may have debts which have prescribed. It is only those who have debts which have not prescribed who can sue the heir of provision and they constitute a class of creditors rather than the body of creditors as a whole, Accordingly, even if there is substance in the defender's contention that the trustee may sue on behalf of the body of creditors as a whole, that is not necessarily the position in the present case. In any event he submitted that as what the creditors could sue the heir of provision for was the debts of the debtor as at the date of sequestration, if the debtor has been discharged then there are no debts outstanding as at the date of the sequestration. It follows that any action by the creditors against the heir of provision would be proceeding on a false assumption.

In my opinion the sheriff reached the right conclusion and the appeal falls to be dismissed. The share passing under the special destination can only be taken with such qualifications as could be pleaded against the institute. The substitute takes no greater right than that possessed by the institute. The institute's share was vested in the trustee and was liable for the debtor's debts which had been constituted against the estate by valid claims. On the death of the debtor his share passed under the special destination with the same qualifications. Let us assume that the debtor's liabilities exceeded his assets, a not uncommon situation. The share of the property would appear in the accounts as an asset but its actual value to the debtor, and accordingly to his heir of provision, would be nil because of the excess of liabilities. I would be extremely reluctant to hold that the device of a special destination which was introduced for a purpose long since unnecessary can suddenly restore the share to its full value to the detriment of creditors who have a perfectly valid claim against it while it remained in the hands of the trustee. The creditors have already made their claims against the debtor's estate and have left it to the trustee to in-gather that estate and to meet their claims in whole or in part, as the case may be. Accordingly, in my opinion on any view the trustee, even if he is acting on behalf of the creditors in raising this action, is doing so on behalf of the whole body of creditors for the purpose of preserving the asset value of the estate. The present case is therefore a fortiori of the situation in Mann. It is to be noted that in Mann the claim that was being made was not for the purpose of in-gathering estate of the sequestrated firm, whereas in the present case the claim that is being made is in respect of property which does form part of the debtor's estate and had already vested in the trustee. I am not impressed by the argument that a claim by a creditor against the heir of provision might have prescribed and therefore there may be two classes of creditors. The creditors have already made their claims based on the debts owed to them as at the date of sequestration. At that time the defender had no right to the debtor's half share of the property but merely had a spes. She did not acquire any right in the property until the death of the debtor. There could therefore be no right of action against her until that date. I find it difficult to see how any claims against her could have prescribed before any action could be taken against her. However, in my view this problem does not arise because I am not satisfied that the trustee in this case is really making a claim on behalf of creditors. What he is doing is raising the action to enforce the rule that a substitute cannot taken any greater right than was possessed by the institute and is doing so as part of his obligation and right to manage the estate. At the time when the property passed to the defender it was of little or no value because it was burdened by the debts of the debtor. She could only take the property subject to that qualification. Because of the peculiar provisions relating to special destinations the property ceased to be vested in the trustee and became vested in the defender on the death of the debtor. The trustee is, however, in my opinion entitled to ensure that all that passes under the special destination is the feudal right to title to the property but no more. He is, accordingly, in my opinion perfectly entitled in his own right to raise an action against the heir of provision for the purpose of restoring to the trust estate the value of the property which is equivalent to the value of the debts by which it was burdened. I am therefore satisfied that the pursuer is entitled to the declarator which he seeks in terms of the fourth crave of the initial writ.

For these reasons I move your Lordships to refuse both the appeal and the cross-appeal and remit the matter back to the sheriff to proceed as accords.

I cannot leave this case without repeating the words of Lord Cooper in Hay's Trustee where he says:

The present case is yet another example of the inconvenience of this unnecessary quirk of feudal conveyancing.

Your Lordship in the chair has fully set out the background to the appeal and the submissions respectively made by the appellant and respondent. There are essentially two issues focused for our consideration. The permanent trustee in the sequestration of the late Mr Thomas Fleming (who is the pursuer in the case and the respondent in the appeal) seeks to establish in a question with Mr Fleming's widow a right to recover, (or at least recover the value of), the deceased's half share of the house at 24 Dochart Avenue, Coatbridge. This house, which was the home of Mr and Mrs Fleming, was owned jointly by them with survivorship rights in favour of each created by special destinations in the disposition which constituted their title. This disposition had been registered in the Land Register of Scotland on 20 July 1987. The permanent trustee's main claim is that right to the deceased's half share of the house vested in him by virtue of the act and warrant pronounced in his favour following upon the sequestration of Mr. Fleming on 11 July 1990. Mr. Fleming died in January 1995. Moreover by operation of section 54 of the Bankruptcy (Scotland) Act 1985 the debtor was discharged from the sequestration on 11 July 1993.

In answer to the pursuer's claim the defender's counsel had contended that since the defender had a registered title she had acquired a real right to the disputed half-share on the date when the deceased had died. It was accepted that Mr and Mrs Fleming had bound themselves not to defeat each other's right under the special destination by way of mortis causa deed but it was also accepted that each institute had the right to evacuate the special destination by inter vivos deed. However, it was contended that since the special destination in the defender's favour had been converted into an effectual registered right by the death of Mr Fleming, the deceased could only have prevented the passage of full title to Mrs Fleming if he had before his death granted a disposition which had been registered prior to the completion of the defender's infeftment. On this point the Sheriff had sustained the defender's case.

The pursuer had an alternative case. It was submitted that through his act and warrant the pursuer had acquired a personal right to the relevant half share of the house and in terms of section 31(1)(b) of the 1985 Act this had the force of a decree of adjudication in his favour. It was maintained on behalf of the permanent trustee that under common law an heir of provision could only inherit if he or she assumed liability for the debts of the deceased up to the value of the heritable property which was inherited. The permanent trustee ingathered the sequestrated estate for the benefit of the claimant creditors and he could follow such estate of the debtor as had originally passed to him by virtue of the sequestration. Thus, it was said, that without evacuating the special destination, the permanent trustee could proceed against the substitute to the extent that she had passively assumed liability for the debts of the deceased to the extent of the value of the real estate she had taken by way of provision. The Sheriff had sustained this alternative case.

Before us, the defender and appellant appealed against the Sheriff's finding that the defender had to pay the debts of the deceased to the extent of her inheritance as heir of provision. Moreover, at the commencement of the appeal, the defender amended to introduce a new defence against the alternative claim being advanced on behalf of the permanent trustee. This amendment was to the effect that since the debtor had been discharged from the sequestration prior to his death, the defender when she had taken under the destination, could not be responsible for the debts of the deceased. This was because the particular debts which were at the root of the permanent trustee's claim had earlier been discharged by virtue of the debtor's discharge from the sequestration. Although these arguments had not been advanced to the Sheriff, we decided that as they simply gave rise to a legal question, it would be practical to allow them to be advanced in the appeal.

By way of cross-appeal the pursuer and respondent appealed against the rejection by the Sheriff of his case that the deceased had evacuated the special destination. The two issues that seem critical to the appeal were firstly the circumstances under which a special destination constituted by a registered disposition could be held to be evacuated at the point of time when the institute dies. The second issue is the extent of the right of the permanent trustee after the discharge of the debtor to follow the estate taken by the substitute and to recover from the substitute outstanding debts on which creditors' claims in the sequestration are based. Although the defender's appeal was heard first the relevance of this depends on the outcome of the pursuer's principal case so I shall deal with that first.

As I have already indicated, in resisting the cross-appeal, the respondent did not dispute that Perrett's Trustees v Perrett 1909 S.C. 522, and Brown's Trustee v Brown 1943 S.C. 488 had imposed limitations on the power of a institute to evacuate a special destination by mortis causa deed when each of the institutes had contributed to the purchase of the heritage. In that situation the arrangement between the parties is contractual to the effect that the property cannot be carried by any testamentary deed. However, the appellant did not dispute the authority of Steele v Caldwell 1979 S.L.T. 228, and Smith v MacKintosh 1989 S.L.T. 148, which are to the effect that a special destination such as is the subject of this case can be evacuated by inter vivos deed. Indeed, the original disponees retain full enjoyment of their portion of the estate, and for example, the creditors of each can adjudicate in respect of each portion to secure payment of their debts. I find nothing curious about the fact that joint owners may want to regulate testamentary succession without intending to curtail freedom to alienate the property inter vivos. Special destinations of the kind we are considering are commonly found in family situations. A spouse may separate and want to sell his or her share; but if the parties retain the property until death, which would normally happen if they were cohabiting in the property then each, if surviving, will have the right to inherit. The general incidents of this kind of arrangement are well recognised. What is not specifically established, perhaps somewhat surprisingly, is what degree of inter vivos alienation is required before a special destination contained in a deed upon which infeftment has been taken can be said to be evacuated.

The respondent claims that upon sequestration the heritage passes to the permanent trustee so that the special destination is evacuated. However, it is difficult to see why this should be so in confrontation with a registered special destination. A special destination in a disposition is a somewhat curious hybrid device. It is not contained in a testament. Indeed, the device was developed to circumvent the former rule that heritage could not be disposed of by way of testamentary deed. In a case such as the present, where evacuation cannot take place by way of testamentary deed, the special destination is effectively a disposition of the associate's half share to the substitute, with conditions precedent, that it will only become effective on the survivorship of the substitute. Thus although the special destination is not a testamentary deed it will only become operative on the death of the institute. It is perhaps no wonder that the device has been labelled as clumsy by judges and academics: but it remains popular with practical conveyancers nevertheless. In Sharp v Thomson 1995 S.C. 455 (in the Inner House) the Lord President gave an exhaustive and learned analysis of the distinction between real and personal property. A real right is a right which attaches to the property and is apt to be valid against the whole world. On the other hand a personal right is an aspect of the law of inter-personal obligations and its effect does not extend beyond the persons affected by it. These rights cannot be fragmented. There is no intermediate right between a real right and a personal right. In the House of Lords (1997 S.C.(H.L.) 66) the Inner House was overturned on a speciality relating to the legislation governing floating charges but the Lord President's analysis of the general rights affecting property was not attacked. The effect of Sharp was to reinforce the traditional approach of Scots Law that registration in the public records is the key to the creation and ranking of real rights in Scotland.

When a special destination, such as we have here, is found in a registered disposition and creates a conditional institution in the substitute dependent only on estate remaining with the original institute and on survivorship, then immediately that survivorship results, in the absence of prior evacuation of the estate, the survivor without taking any further step becomes fully infeft in the share of the deceased (McDonald Conveyancing Manual 6^th Edition, para 31.17). At first sight it would seem odd if the survivor's apparent right to infeftment might be defeated by an unregistered disposition which happened to be floating about perhaps unknown to the survivor. The logical rule, consistent with conveyancing practice, is that the survivor's title could only be defeated by a competing title registered prior in date. Such a rule preserves the efficacy of the public records. It is agreed by parties that the institute has a right to evacuate the special destination inter vivos. Now if as it has sometimes been put, the institute can "do what he likes" with his own share then, if the matter can be as widely put as that, it would be possible for him to remove the special destination by a simple written declaration of his intention to deprive the substitute. However, it has never been suggested in the authorities that a special destination could be evacuated in this way. What has often been judicially declared is that the institute is free to make use of his share by disposing of it or disponing it inter vivos. The concept therefore is that the institute can defeat the special destination by getting rid of the property to his advantage or even gratuitously. This would be consistent with the expression used in relation to the matter which is "evacuation". The primary meaning of this term is "to empty of contents". An institute evacuates the special destination by releasing it from his estate but this can only be done effectively if the disponee completes his claim to it. It would be inconsistent with principle if the disponee from the institute could defeat the substitute survivor's right to infeftment by producing an unregistered deed when faced by a competing infeftment. The authorities are peppered with references to the institute "evacuating" the special destination. This might suggest that some act on the part of the institute alone completes the evacuation of the special destination. However, I think the language is used in a broad sense. The institute can do no more than grant a disposition. The act of registering the disponee's title lies with the disponee, but, of course, the process of alienation is initiated by the disposition of the institute. Once the institute has done all he requires to do it is for the disponee to protect his own title. In the situation we are considering the institute is dead so it is not unrealistic to look at the competition as being between the substitute and the institute's disponee. It is for the latter to convert his right into a full right to protect it.

In terms of section 31(1)(b) of the 1985 Act the permanent trustee by virtue of his act and warrant acquires the right of an adjudger holding a decree of adjudication. The effect of such an adjudication is of course to confer a personal right upon which infeftment may proceed. As to ranking among adjudicators there are special rules but an unregistered decree of adjudication against the debtor can be defeated by a bona fide disposition for value from the debtor which is registered before the adjudication is registered. In this respect the decree of adjudication is no different to any other disposal by the debtor.

The Solicitor Advocate for the pursuer and respondent emphasised that certain special destinations can be defeated by testamentary deed. This, it was contended, indicates that in general special destinations can be defeated by something less than a registered deed. However, the fact is that special destinations are sometimes of a category that can be defeated by a testamentary deed of the institute. The capacity of the institute to evacuate the destination by such a deed is particular to destinations with no contrary contractual restriction on mortis causa evacuation. Where the destination intrinsically permits the institute to evacuate by mortis causa deed then clearly it is the incidents of such a deed which determines if the destination has been evacuated. The efficacy of a mortis causa deed, where there is competition between such deeds, does not depend on the date of registration but rather the date of execution and it not the earlier deed but the later deed which prevails. Where evacuation by mortis causa deed is inapplicable, it is the competition between disponees which prevails, and in that situation the date of registration of a disposition is the critical factor.

In relation to the alternative case of the respondent, namely the case based on the appellant's character as an heir of provision, I find that the position in relation to such an heir is correctly analysed by Professor Gretton in his article "Death and Debt" 1984 S.L.T. 299. It is of course trite law that the debts of a deceased are a prior charge on the estate of a deceased before the estate passes to successors or beneficiaries be they legatees or heirs. The position in relation to an heir of provision is merely an extension of this rule. The respondent founds strongly on the fact that the debtor in this case had been discharged before he died and thus completed the substitute's right to take unconditionally as a survivor.

Under the 1985 Act the overall scheme is clear enough. The creditors no longer sue the debtor directly for their debts or exact diligence against him. Instead they claim in the sequestration and exercise their statutory right to rank in the sequestration proceeds. The permanent trustee for his part ingathers, takes over, and if necessary realises, the debtor's estate and this estate is applied towards satisfaction of the creditors' claims. Section 54(1) of the Act provides for the discharge of the debtor three years after the sequestration and section 55(1) provides that the debtor shall thereupon be discharged from the debts for which he is liable at the date of sequestration. However, it must be noted that the last mentioned section provides that the sequestrated person be released from liability for debts. It does not restore him to the rights which may have passed to the permanent trustee following upon the sequestration. Thus the trustee retains the rights to ingather and administer what was formerly the debtor's property. Moreover, the creditors, although they have lost the right to sue the debtor directly, retain their right to rank in the distribution by the permanent trustee. The purpose of sections 54 and 55 is not to deprive creditors of their rights but rather to release the debtor from the burden of his earlier debts and to restore him to the right to pursue normal business activities. This is done on the basis that effectively he has handed over all his assets at the time of sequestration to the permanent trustee to distribute, according to the rules of ranking, to the creditors. The appellant does not dispute that creditors can look to the heir of provision to meet unsatisfied claims against the debtor. However, it was submitted, that the permanent trustee has no right to make a claim against the heir, such right being reserved to the creditors. It is certainly true that the right which the permanent trustee has is to "recover, manage and realise" the debtor's estate (section 3(1)). However, the whole estate vests in the permanent trustee at the date of sequestration for the benefit of the creditors (section 31(1)). The rule that a creditor may proceed against an heir of provision for the value of the provision is long established but scrutinising authoritative descriptions of that right it is necessary not to lose sight of the fact that the underlying equitable principle is that in succession payment of debts is to be ranked before rights of heirs and legatees. With the development of rules governing conveyancing and succession the precise mechanism for carrying the rule into effect may vary.

The permanent trustee by way of his act and warrant acquired the debtor's full rights in his instituted share of the destination. This included all of the personal rights of the debtor in relation to that share, including the right to realise the property, and the right to convert the personal right into a real right. When the debtor was discharged the permanent trustee continued in these rights and notwithstanding the discharge, the permanent trustee remained free to realise the debtor's half share for the benefit of the creditors. When the debtor died the permanent trustee lost the real right in the institute's share. However this happened subject to his retention of certain personal rights in the property. The creditors' claim to have the value of the property available to meet their debts is a personal right. The passive liability of the heir of provision is a personal obligation. After sequestration the permanent trustee had a vested right to the whole of the right which the instituted debtor had in the property. However, even after the debtor died, the permanent trustee in a question with the heir of provision retained a right to the value of the property insofar as required for creditors' claims. In the present action he is merely enforcing that right. He does that as the party charged with ingathering the estate which the debtor had available to satisfy his creditors. The creditors of course retain a claim against such funds as the heir of provision may contribute but in the circumstances of sequestration the claim is given effect to through their claim in the sequestration itself. I am confirmed in my analysis by the fact that the approach I have adopted alone makes sense. For the creditors still to be required to claim directly from the heir of provision could lead to an unwelcome scramble and would remove the very benefits which the sequestration procedures were designed to achieve. Reference to the creditors proceeding against the heir of provision, were not intended to relate to the situation where the debtor has been sequestrated, creditors' diligences equalised, and a separate procedure for ingathering estate has been imposed by legislation.

For the reasons I have outlined I agree with the views reached by the Sheriff after his comprehensive and informative analysis. I therefore agree that the proof should be disposed of as proposed by your Lordship in the Chair.

I have read the Opinion of your Lordship in the chair and, for the reasons given therein, agree that both the appeal and the cross-appeal should be refused and the case be remitted back to the sheriff to proceed as accords.