Scottish Court of Session Decisions

 

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 53

 

A1767/03

OPINION OF LORD BURNS

In the cause

THE JUDICIAL FACTOR FOR THE JAMES CLARK EXECUTRY ESTATE MRS JOAN PENTLAND CLARK

Pursuer;

against

(THIRD) MR PATRICK COLLINGE GRAVATT WILSON as executor of the late James Clark and as an individual;  (FOURTH) MR CHARLES WILLIAM PAGAN as a partner in the firm messrs Pagan Osborne Solicitors with a place of business at 12 Catherine Street, Cupar, Fife and as executor of the late James Clark and as an individual.

Defenders:

 

MRS JOANNA HELEN MAY CLARK, MR JAMES CLARK and MRS CAROLYN ELIZABETH CLARK

 

Third party respondents;

Pursuer:  Party

Defenders:  Clark QC, Barne;  Maclay Murray & Spens

 

5 May 2015

Introduction
[1]        The pursuer, who represented herself in this proof, is the judicial factor on the executry estate of the late James Clark (the deceased) who died on 5 December 1985.  He owned a number of farms including Upper and Nether Pitlochie and Leckiebank.  The pursuer and the deceased had been married but were divorced in October 1977.  They have three surviving children who are designed in the instance of the record as “the respondents and ¾ beneficiaries”.  The pursuer was appointed by interlocutor of 13 March 2007 to replace the late John Hamilton Macfie who had been appointed judicial factor ad interim on the same estate in 1999 and permanently on 8 November 2000.  Mr Macfie died in 2006.  Under the deceased’s will, he appointed his widow, Mrs Ann Clark (the widow) and his solicitor, Mr Jack Wilson of J&G Wilson as executors. 

[2]        The third defender, Patrick Collinge Gravatt Wilson, was a close friend of the deceased who was assumed as an executor to the deceased’s estate on 13 December 1985.  He was removed from office as executor by interlocutors dated 23 March and 27 May 1999 upon Mr Macfie being appointed judicial factor ad interim.  The fourth defender, Charles William Pagan W.S., a partner in the firm of Pagan Osborne, Solicitors, Cupar was assumed as an executor by deed of assumption at the instance of the third defender in June 1991.  He was also removed from the office of the executor by the interlocutor of March 1999 upon the appointment of the judicial factor.

[3]        The defenders were represented by Mr Clark QC and Mr Barne, advocate.  Mr James Clark, the son of the pursuer and the deceased, appeared on behalf of the children and cross-examined some of the witnesses but made no closing submission. 

[4]        This action was raised in December 2003 by Mr Macfie in his capacity as judicial factor of the estate.  It has had a long and tortuous history and has undergone significant changes in the course of the last 12 years.  It is one of a series of litigations concerning this contentious and troubled estate that stretch back almost two decades.  Mr Macfie as judicial factor had produced a report to the court dated 11 October 2000 in which he made a number of criticisms of the actions of the third and fourth defenders when executors of the estate.  As originally raised, the third and fourth defenders faced conclusions of declarator and payment of £175,000 on the basis that payments made by them and by their predecessors had disabled the estate from meeting its obligations to the pursuer, who was a creditor of the estate by virtue of the deceased entering into a minute of agreement with her shortly before they divorced.  That agreement provided for the payment by the deceased and his executors of maintenance until the remarriage or death of the pursuer of a sum of £2,400 per annum to be increased in line with inflation as measured by the retail price index. 

[5]        The action was sisted and Mr Macfie indicated in March 2004 that he did not intend to proceed with it due to lack of funding.  Having been appointed as judicial factor in place of Mr Macfie, the pursuer decided to continue these proceedings and to introduce additional defenders including, as a first defender, the widow who married the deceased in November 1982.  In addition, the pursuer added a number of conclusions for reduction of the leases granted by the deceased of various agricultural properties to a farming partnership created by the deceased and the widow created shortly before his death.  She also sought reduction of a “letter of waygoing” dated 12 September 1989 to which reference will be made.  In addition she concluded for reduction of a minute of agreement and discharge dated October 1997 between the third and fourth defenders, the deceased’s children and the widow following a settlement reached at mediation. 

[6]        In the course of this litigation as a result of interlocutors in the Outer House following procedural debate and reclaiming motions against those interlocutors, the pleadings have undergone very substantial excision by order of the court and amendment by the parties.  In addition the three children have been allowed to enter the process by means of answers by interlocutor dated 29 June 2010 even though, as Lord Carloway pointed out in the opinion of the court dated 27 March 2012 they do not appear to resist the pursuer’s conclusions.  As Lord Carloway also pointed out, exactly what their status may be is entirely unclear as is that of their pleadings.  However, the pursuer adopts to some extent the averments made by these third party respondents/defenders to whom I shall refer as “the children” in the course of this opinion. 

[7]        A procedural debate took place before a temporary judge in November 2009.  Her decision of 18 February 2010 involved very substantial excision of the pleadings as set out in her interlocutor of that date.  As a result, the widow, who had been first defender, was taken out of these proceedings.  A proof before answer was allowed on restricted averments against the third and fourth defenders.  After a reclaiming motion against the temporary judge’s interlocutor, the action returned to the Outer House where the pursuer amended once more and further debate was heard before Lord McEwan.  He issued an opinion on the relevancy of the new pleadings dated 4 August 2011 against which the pursuer reclaimed.  That reclaiming motion was refused by opinion of Lord Carloway referred to above dated 27 March 2012.  A proof was then fixed to take place in December 2014 which called before me. 

[8]        Prior to the proof, a By Order hearing took place on 21 January 2014.  The Minutes of Proceedings record the position of the pursuer at that time as follows: 

“The pursuer advised the court that she is no longer insisting upon the reduction conclusion, and is only insisting upon the esto case (the single issue case of the 3^rd and 4^th defenders’ personal liability in respect of a creditor remaining unpaid despite payments being made to beneficiaries, and said defenders having agreed that no sums were due to the estate from the beneficiaries for any reason whatever)”.

 

[9]        It was necessary to record the position of the pursuer since the pleadings in this case have not focused the issues in any easily comprehensible way.  As Lord Carloway pointed out in the opinion referred to, the pleadings at that time for the pursuer were “both prolix and repetitive, often did not aver fact, indiscriminately incorporate documents and averment of both law and sources of evidence and there is no coherent structure”.  Regrettably, the position has not improved since then. 

[10]      However it is important to note that the closed record, which underwent amendment both in November 2014 and immediately prior to the proof, contains only one conclusion for payment of £1,014,000 which is said to be: 

“The sum estimated to be absent from the said executry estate from the said date (December 1989) by reason of the joint several and or several breaches of trust, improper motivation, wrongful gratuitous and involuntary acts in breach of trust whereby (the defenders) alienated part of the executry estate to a person not in right to receive it and failed to account for the true extent of the estate”

 

[11]      The person “not in right to receive it” was and is the widow.  In November 2014 the pursuer deleted conclusion seven which was for production and reduction of the minute of agreement and discharge dated October 1997 between the defenders, the children and the widow which was the subject of extensive dispute in the proof. 

 

The closed record
[12]      It is difficult to identify within the articles of condescendence where the pursuer’s claims which make up the sum sued for are articulated.  In condescendence 2.1(a)(ii) the pursuer avers on page 18 that the minute of agreement of October 1997 included the agreement that no funds were due to or by the widow and was “illegally granted by the third and fourth defenders in breach of their trust duties”.  In particular, that agreement is said to incorporate, first, a gratuitous discharge of a debt of some £100,000 in rent for certain of the farms due to the estate and, second, an “illegally preferential payment” of some £100,000 paid to the widow in November 1997 by the third and fourth defenders in the absence of any onerous obligation and for no value in return to the estate which is said to have prejudiced the estate’s lawful creditors’ “prior legal rights”.

[13]      So far as the first element of that claim is concerned, the periods during which the widow is said to have occupied after the deceased’s death the farms of Leckiebank and Pitlochie are set out in condescendence 11.  She is said to have occupied Leckiebank from 29 May 1986 until 4 December 1989 when that farm was sold.  She is said to have occupied Pitlochie between 29 November 1986 and 27 February 1987 when it was sold.  It is averred that the rent was £55,000 per annum which was not paid and that the defenders omitted to recover rent due over those periods. 

[14]      Accordingly it is being contended that the defenders not only failed to recover rents from the widow due to the estate but, in breach of trust, granted her a discharge from any liability to pay for those rents in the minute of agreement of 1997.  

[15]      Further, the payment to the widow of £100,000 by the defenders in November 1997 in furtherance of the minute of agreement is said in condescendence 4 page 39 of the record to be “the causa sine qua non of the bankruptcy of the estate” and the inability of the estate to account to the pursuer as an individual for the maintenance payments which the deceased provided for her.  That act is averred on page 44 to have been designed to benefit the widow knowing that the interests of a creditor (presumably the pursuer) would be defeated.  This agreement to pay the £100,000 to the widow cannot, it is averred, be construed as a payment of a prestable debt since it was knowingly gratuitous and was “an illegally preferential payment” in the knowledge that it would defeat the interests of other creditors. 

[16]      On page 45 reference is made to production number 130, a letter from Mr T Findlay Marshall, an actuary, which is said to calculate that the pursuer as a creditor of the estate should be paid as £446,200.  This is explained at page 46 to be a lump sum sufficient to obtain a discharge in respect of the future obligation to pay the pursuer the monthly allowance and is “the least inefficient means of concluding the matter”.  It is said in condescendence 4 that there have been no monthly payments to her since October 2005. 

[17]      At page 47 a sum of £405,515.40 is claimed being the expenses of Mr Macfie the judicial factor and those of his firm and the expenses of the pursuer as judicial factor in her duties including maintaining an office, her own time and effort and expense.

[18]      Together those claims amount to £851,715.40.  It is unclear where the balance of the sum sued for is derived from.

[19]      Accordingly the closed record advances a claim against the third and fourth defenders in respect of failing to ingather the sum of £100,000 from the widow in rents and a wrongful payment to her of £100,000 as a result of the minute of agreement of October 1997.  It also advances a claim for a capitalised sum in respect of the future obligation of the estate to pay to the pursuer as an individual the maintenance provided for her by the deceased until her death or remarriage.  Further the record contains various claims for expenses on the estate incurred by Mr Macfie and latterly by the pursuer in her capacity as judicial factor. 

[20]      In presenting written submissions at the end of the proof the pursuer advanced her claim in a different form.  She maintained first that she should be awarded £377,401.84 in respect of excessive legal fees charged by the fourth defenders firm Pagan and Osborne. 

[21]      Secondly, she claimed a sum of £1,635,326.82 in respect of the partnership assets which the executors had failed to ingather.  That related to the sum of £185,529 which was said to be owed to the estate by the widow in 1986.  The basis of this part of the claim appears to be that because in 1997 the widow, by payment to the children of £145,000, acknowledged and accepted that she had been overpaid by the executors for her claims as a partner of the farming business and as tenant of the farms as set out in the letter of waygoing.  Accordingly, the executors should not have paid her £100,000 in November 1997 but should have ingathered the sum that she should have paid namely £185,529 which, if 12% compound interest is added to these sums from November 1986, amounts to the £1.6 million claim. 

[22]      Thirdly, the pursuer claims £370,001.81 which represents the wrongful payment to the widow of £100,000.00 in November 1997 with interest applied thereto from November 1997 to November 2014. 

[23]      Lastly she claims the sum of £392,201.91 in respect of the “fruits of occupation” from the period when she occupied the farms without paying rent.  It will be noticed that the original claim for rent upon the farms appears to have been abandoned and the claim for the “fruits of occupation” is substituted.   This claim is one for the sum of £106,000 in “rent/fruits” which ought to have been recovered from the widow apparently in November 1997 with interest applied to it from that date. 

[24]      In closing submissions for which the pursuer and defenders helpfully provided written documents, the pursuer advances various arguments based upon errors and breaches of trust by the defenders which mainly relate to a payment by them to the widow of £100,000 in November 1997 and by allowing the widow to pay to the children a sum of £145,000 also in November 1997 in furtherance of the minute of agreement.  In addition, she argued that a debt of £106,000 was “discharged” by the defenders in October 1997 which constituted an “error/breach of trust” for which they were personally liable.  A further claim in respect of “excessive legal fees” charged by the third defender and his firm Pagan Osborne, was advanced.

[25]      On the final day of submissions a further document was produced by the pursuer entitled “form of motion” in which she moved the court to sustain her pleas in law and to ordain the defenders to pay to her as executor the sum of £2,774,932.38.  This document was provided by the pursuer in the guise of a motion but was in fact further submissions produced at the last moment in spite of the fact that I had requested parties to exchange written submissions.  It contains 6 pages of narrative which ought to have been included in the written submissions and which have no place in a motion form. 

[26]      Although the record contains averments to the effect that the defenders are liable to repay to the estate sums paid to the children of £68,000 each, the pursuer made it clear in submission that she was no longer advancing this part of her claim (page 7 of the “form of motion”).

 

History of the estate and the litigations

[27]      At that time of his death, the deceased owned a group of farms at Nether Pitlochie, Upper Pitlochie and at Leckiebank.  That farmland extended to some 1,100 acres.  He had executed a will dated 20 November 1985 in which he left his whole estate in four equal parts to the widow and the children.  The widow and his solicitor Jack Wilson of J&G Wilson, Kinross, were nominated executors under that will. 

[28]      On the day before he died the deceased entered into a contract of copartnery with the widow in relation to the farms.  That agreement provided inter alia for the subscription of capital to the partnership firm as shown in a balance sheet of 29 November 1985.  In addition, on the same date, the deceased granted a lease in favour of himself and the widow as partners in the firm of James Clark as constituted in terms of the contract of copartnery and to the survivors or survivor of them of the farms of Upper Pitlochie, Nether Pitlochie and Leckiebank. 

[29]      Accordingly, on the execution of those documents, the deceased became the landlord of a partnership tenanting the farmland under what was to be regarded as a valid agricultural lease the rights to which, on death, came to vest in the widow alone.

[30]      On 11 March 1986 Jack Wilson signed a deposition in respect of the extent of the deceased’s estate for the purposes of confirmation.  The value of the estate was stated at £443,119.11. Among the heritable estate were the farms belonging to the deceased, which, in each case, were given a value subject to the tenancy which the deceased had created in favour of the partnership.  The inventory of the estate appears at volume 1 of the productions at page 54 to 72.  (The productions in this case had been placed in four lever arch files and paginated.  I will refer to them by the volume in which they appear and the page number.)  Under the moveable estate as listed at page 58, there appears the “interest in James Clark (an agricultural firm) amounting to £100,000”.  On page 62 in the section of the inventory entitled “Estate other than that in the inventory in part two” there is included under the heading “Gifts made within seven years of deceased’s death” the following: 

“Transfer of half share of the partnership assets to Mrs Anne M A Clark on 29 November 1985 conform to contract of co-partnery dated 4 December 1985 and recorded in the Books of Council and Session 12 December 1985”

 

The value thereof is given at £100,000.  This appears to be the other one half share of the partnership assets which were listed within the moveable estate in Scotland of the deceased at the same value.  The confirmation was granted at Cupar on 1 April 1986. 

[31]      In March 1986 the farm at Leckiebank was advertised for sale and shortly afterwards an offer was received from a Mr and Mrs Miller at the price of £350,000.  The date of entry was fixed at 30 May 1986.  However, because it was considered that the widow held the agricultural tenancy of that farm and others by virtue of her being the surviving partner of the partnership to which the farms had been leased by the deceased, it was necessary to obtain her consent for the sale of Leckiebank.  Accordingly, after negotiations, she gave her consent to the sale with vacant possession upon the basis that she should be compensated by a payment of 40% of the net proceeds of sale.  The position of the executors at that time was guided by the advice of counsel that the widow had a right as tenant in the farms of Nether and Upper Pitlochie and Leckiebank.  Accordingly, the executors instructed Bell Ingram, chartered surveyors to give an opinion on the value of the tenant of her leases to allow the properties to be sold.  The opinion dated 19 August 1986 (1/77 to 78) was to the effect that: 

“A fair and reasonable inducement would be to offer to pay to the tenant (the widow) about one third or say 33% of vacant possession value of the farms.  But if this was not sufficient again the agreement of the tenant, we do not see any objection to the executors increasing their offer to any figure up to your proposed figure of 40%”. 

 

[32]      The contract entered into with Mr and Mrs Miller for the purchase of Leckiebank fell through and missives were then entered into between the widow and the executors for the purchase of that farm.   

[33]      In September 1986 instructions were given for Pitlochie to be sold, again with vacant possession.  The children sought and obtained interim interdict to prevent the advertising of Pitlochie.  That interim interdict was subsequently recalled.  In November 1986 the children raised a further action for reduction of the missives between the executors and the widow in respect of Leckiebank.  That action was successful and decree was pronounced in January 1989 reducing the assignation of the missives to her. 

[34]      In December 1986 missives were concluded for the sale of Pitlochie at a price of £885,000.  Entry was to be 27 February 1987.  On that date, a sum of more than £563,000 was paid to the Clydesdale Bank in respect of an overdraft which the deceased had maintained and which at the date of death stood at around that sum. 

[35]      Dispute in respect of the valuation of the widow’s rights in the agricultural tenancies continued but in September 1989 a letter of waygoing was entered into between the widow and the executors.  This document records that upon the death of the deceased she became entitled to the tenancies of the farms of Upper and Nether Pitlochie and Leckiebank and had consented to give up the tenancies of those farms in consideration of the payment of £140,000 and £336,300 in respect of those farms.  She was, however, still in occupation of Leckiebank as at September 1989.  In order to allow the executors to sell Leckiebank with vacant possession she agreed to vacate that farm upon a condition that she would be paid the above sum of the £140,000 to remove from Leckiebank and the above sum of £336,300 in respect of her removal from Pitlochie.  However, she agreed to repay to the executors a sum of £185,529 in terms of the contract of co-partnery between herself and the deceased together with a sum of £67,750 in respect of the proceeds of certain assets from another limited company.  The letter of waygoing is at 1/79 – 80. 

[36]      As part of the negotiations leading to that agreement, it appears that certain calculations were made as to the sums due to or by the widow in respect of the executry.  This was committed to a draft which is dated 11 July 1989.  It appears at page 1/81.  The sums due by the widow include the above sum of £185,529 and the calculation refers, not only to the partnership agreement of December 1985, but also to the balance sheet dated 29 November 1985.  That was because, in terms of the contract of co-partnery clause ninth,  in the event of the death of a partner the share or interest of that partner was to vest in the surviving partner and the deceased’s estate would only be entitled to receive such sum as stood as shown in the balance sheet immediately preceding the death.  In the event, only the balance sheet showing the original capital of the firm had been prepared by the time of the deceased’s death.  That balance sheet was used in the calculations of sums due to or by the widow for the purposes of the letter of waygoing.  The balance sheet referred to appears at page 1/285.  It shows the capital account attributed to the deceased at the figure of £185,529. 

[37]      Sums due by the widow included rent due by her of the farms of Leckiebank from 16 May 1986 to 28 May 1986 and Pitlochie from 16 May 1986 to 11 November 1986. 

[38]      Sums due to the widow included the payments to secure vacant possession of Pitlochie and Leckiebank amounting in total to £476,300.  A total sum due to the widow as a result of the calculations set out there is shown at £338,664.21.  There is also reference to a deduction that fell to be made in respect of the fruits of occupation for both Pitlochie and Leckiebank for various periods but no figures are attributed to those items. 

[39]      Leckiebank was sold in October 1989 for the sum of £500,000.  In November 1989 Jack Wilson suggested to solicitors acting for the pursuer that they purchase an annuity in order to meet the obligations which she was owed by the estate in respect of the agreement to pay her maintenance (2/453).  However, by letter dated 15 November 1989 her solicitors refused that proposal as wholly unacceptable to her.  It was also thought that it would not obtain the approval of her children as residuary beneficiaries (2/459). 

[40]      Also in November 1989 an action was raised by the children which sought reduction of the letter of waygoing.  The action sought to interdict the executors from settling with the widow in respect of the sale of Leckiebank.  The matter called before the Lord Ordinary in respect of a motion for interim interdict when it is recorded at 2/462 in a letter by Jack Wilson to the third defender that the Lord Ordinary had suggested some settlement should be negotiated.  

[41]      As a result thereof, and after negotiations had taken place, various “Heads of Agreement” were entered into.  These are at pages 2/465 to 468 and are dated 24 November 1989.  In this agreement the executors agreed to pay to the widow £318,000 “to account of such rights, if any, as she has in terms of the agreement dated 5 September 1989” which is a reference to the letter of waygoing.  They also agreed to pay the three children £68,000 to account of their entitlement as beneficiaries.  Those payments were said to be without prejudice to any claims which the executors, the widow or the children have or may have against one another. 

[42]      Shortly thereafter the third defender wrote to Jack Wilson by letter dated 26 November 1989 in which he intimated that he did not give his consent to any money being paid out to any of the beneficiaries.  That was on the basis of the advice that the Dean of Faculty Mr A C M Johnson QC (as he then was) had given to the executors and because there were at that time six Court of Session actions unresolved in connection with the executry. 

[43]      In response Jack Wilson wrote on 27 November 1989 (2/472) that the heads of agreement had been entered into after careful negotiation at which representatives for the widow and the children had been present and had been signed by senior counsel for the parties and it was “accordingly effectively an order by the court to the executors to make payment in terms of that agreement”. 

[44]      In about December 1989 the children duly received the sum of £68,000 each and the widow received the sum of £318,000 but that sum was secured with a standard security over a farm which she had subsequently purchased.  It appears it was being treated as a loan on the basis that it might have to be repaid.  In May 1990 the widow received a further £68,000 pursuant to the heads of agreement.  According to the evidence of Mr Pagan that was not as a beneficiary but as a creditor of the estate. 

[45]      In May 1991 Jack Wilson died and was replaced by the fourth defender, Mr Pagan, on 25 June 1991.

[46]      In August of 1994 the children brought a further action against the widow and the current third and fourth defenders seeking inter alia declarator that the widow had entered into the letter of waygoing acting as auctor in rem suam.  It also concluded for declarator that the total of the principal sums of money narrated in the letter of waygoing, namely those sums payable to the widow as compensation for renouncing the tenancies of the farms, were truly assets of the estate of the deceased to be distributed to the beneficiaries.  It had a further conclusion for decree for payment of £276,000 to the executors in respect of monies already paid to the widow by the executors.  

[47]      This action was settled by mediation in October 1997 and by the entering into of two minutes of agreement and a discharge with which I deal later in this opinion. 

[48]      In April 1996, the executors raised an action of accounting against the widow which was then dealt with at the arbitration mentioned below. 

 

The arbitration
[49]      An arbitration between the widow and the third and fourth defenders in May 1997 was arranged (3/809).  The executors were represented by James McNeil QC and Eric Robertson, advocate.  The widow was represented by Christopher Adam QC and James Young.  Both the executors and the widow were advancing claims.  The minute of submission submitted a number of questions to the arbiters including, as the fourth question, whether the widow should have been credited with one half of the original capital of the firm as referred to in clause third of the contract of co-partnery by reason of a gift in her favour.  That was a reference in the letter of waygoing to the sums calculated as being due by the widow to the estate in the calculations dated 11 July 1989 referred to above in which the widow had agreed to repay to the executors the figure of £185,529.  It was contended by the widow that the deceased had made a gift of one half of the capital of the farming partnership to her at the commencement of that partnership and that was recognised by the terms of clause third of the contact of co-partnery and was recorded as such in the capital transfer tax inventory referred to above.  Mr McNeil QC had advised the executors by note dated 14 February 1997 (3/880 - 881) that a concession should be made by the executors of this point and such a concession was duly made at the arbitration.  His advice was repeated in a note of 31 October 1997 (3/904 – 907).  Mr Pagan gave evidence to the effect that a gift of one half of the partnership assets to an incoming partner, especially in a partnership between husband and wife, was not at all unusual. 

[50]      The executors claimed that the value of the leases of the farms credited to the widow (£140,000 re Leckiebank and £336,300 re Pitlochie) ought to have been shown in the partnership accounts as assets of the partnership.  If so, the executry would have benefitted to the extent of one half of those figures to maximise the estate for the benefit of the beneficiaries and creditors.  The arbiters, however, disagreed.  They also considered other matters which are not relevant to the present dispute. 

[51]      The children were informed of this decision but did not want the matter to be taken any further and therefore the executors did not appeal this decision (3/844). 

 

The mediation
[52]      In an attempt to negotiate a settlement of the action raised by the children against the widow and the executors in August 1994, mediation was suggested by the fourth defender between the widow and the children.  A proof in that action of 10 days duration had been set down for 28 October 1997.  Accordingly, the fourth defender wrote to the solicitors acting for the widow (McGrigor Donald) and the children (Brodies) on 11 September 1997 (3/847‑849).  He pointed out that the executors had been advised that their own expenses for the proof were likely to exceed £50,000 and accordingly the value of the estate would be depleted by the executors costs and on any view the ultimate executry distributions would be reduced substantially in the event of a proof.  He offered to “attempt to provide figures summarising the different possible outcomes” of the action with the proviso that parties would understand the difficulty of working from totally disparate assumptions.  In relation to the winding up of the estate, he pointed out that it was a long way from completion mainly to the potential claim in respect of Lloyds (see paragraph 66 below) and the pursuer.  He also stated that “the executors can make no distributions”.

[53]      In a letter to his fellow executor, the third defender, dated 2 October 1997 the fourth defender advanced figures upon the basis of various assumptions in relation to the outcome of the pending action.  If the children lost the action, the widow might owe the executors £250,000 but that depended on the amount of rent or fruits of occupation that she might be due to pay and whether she was only liable for payment of half the £185,529 in respect of the partnership assets.  However, as a minimum it was estimated that she would pay into the estate £100,000. 

[54]      If, on the other hand, the children won the action the widow might have to pay into the executry over £600,000 which might reduce to £450,000.  On any view, she would be entitled to one quarter of a net residue of the estate being a quarter beneficiary under the will. 

[55]      In order to assist the participants in the mediation, the fourth defender prepared a “balance sheet” as at 30 September 1997, also designed to show possible outcomes (3/853).  Mr Pagan stressed in his evidence that this was not a proper accounting exercise but designed to show parties what assets the executry might have depending on the possible outcomes of the action.   It appears to show that if the children were successful in their action, the estate would have net assets of £818,900 or £665,150.  If the children were unsuccessful in their action, the net assets of the estate would be either £452,600 or £298,850.  It also shows the widow paying in sums of between £776,500 and £622,750 and receiving certain sums ranging from £200,000 and £74,500, again depending on whether or not the children were successful in the action.  Thus, at best, she might have to pay in £466,500 and, at worst, £71,950.  The interpretation to be placed upon this document, which was apparently sent to at least one of the children, namely Joanna Clark who also gave evidence, was a matter of dispute in this action.  In any event, it appears to have given rise to a considerable element of misunderstanding at least on Joanna Clark’s part and to a conviction that the payments made after the mediation were contrary to what she and her siblings thought had resulted therefrom. 

[56]      According to Mr Pagan, the mediation was meant to settle all disputes over the letter of waygoing and the various payments made to or by the widow and those made to the children.  It was an attempt at a global settlement to resolve all issues between them. 

[57]      A first mediation meeting was held on 9 October 1997 at which the widow was present together with her solicitor, a representative of Pagan Osborne on behalf of the executors and one of the children, Joanna Clark with her solicitor Calum Wilson from Brodies.  A note of that meeting apparently drafted by Calum Wilson is at 3/875 – 879.  It sets out the issues identified by the mediator as being whether the widow was acting as auctor in rem suam in relation to the letter of waygoing and resolution of payments due to or by each party.  The figures on the balance sheet mentioned above were referred to and it was explained that the parties could use it as a framework into which they could insert figures if they felt that would be helpful.  I will set out Joanna Clark’s position on this meeting when I examine the evidence below.

[58]      A further mediation meeting took place on 21 October 1997 and a sharp factual dispute between Mr Pagan and Joanna Clark as to what occurred at that meeting and what was agreed by the parties arose in the course of the evidence.  However, for present purposes, it is sufficient to record that a handwritten minute of agreement purporting to set out the agreement reached at the mediation appears at 3/1002 – 1009 and is signed by the parties including Joanna Clark.  (1/152 is a further copy of that agreement.)  In addition, a “draft discharge” also in handwriting appears to have been signed by the parties, including Joanna Clark (1/158).  During the course of that second day of mediation, Joanna Clark was represented by her solicitor David Williamson of Brodies (now deceased).  There was a dispute as to whether he also acted for the other children.

[59]      Mr Pagan, who was at the second day of mediation, gave evidence to the effect that agreement was reached between the widow and Joanna Clark, who represented her siblings and that agreement was committed to a handwritten document.  He stated that the mediator had gone from party to party seeking agreement and had then committed that agreement to writing having satisfied himself that it did indeed reflect the agreement. 

[60]      The handwritten document appears at 3/1002 to 1004 and bears to be an agreement among the widow, the executors (the third and fourth defenders) and the children.  A further agreement between only the widow and the children appears at pages 3/1005 to 1007.  Finally a document entitled “Draft Discharge” is at 3/1008.  Mr Pagan stated that the draft discharge was written out by Mr Braid of Morton Fraser & Milligan, solicitors, who acted as Edinburgh correspondents for the executors.

[61]      The first agreement among the widow, executors and children, states inter alia that the executors would pay to the widow the sum of £100,000 after delivery to the executors of a signed discharge.  The court action at the instance of the children against the widow and executors would be disposed of on the basis of absolvitor with no expenses due to or by any party.  The action of accounting at the instance of the executors against the widow would also be disposed of in that fashion.  The executors agreed to grant a discharge of the inhibition against the widow on the dependence of that action of accounting.  It was further acknowledged that:  

“no further sums are due to the executry estate by any beneficiary for any reason whatever including any sum due by Anne in respect of rent for or the fruits of occupation of the farms at Pitlochie and Leckiebank”. 

 

[62]      The agreement between the widow and the children provided for the payment by the widow to the children of £145,000.  In addition, each discharged the other absolutely from any claim of any nature whatsoever available to them as at 31 October 1997 in relation to the administration of the estate, in relation to any payments made to any party arising out of the administration of the estate or any agreement made in connection with the winding up of the estate. 

[63]      The draft discharge narrates that the widow and the children had entered into a minute of agreement amongst themselves and with the executors and: 

“so hereby ratify, approve and confirm the whole accounts, actings, transactions, intromissions and management of the executors and their predecessors and of their legal advisers to the date hereof”.

They acknowledged that the duties of the executors, their predecessors and legal advisers to the date thereof would be totally fulfilled by the implementation of the agreement and by the payment of £100,000 and they “hereby exoner, acquit and discharge the executors of their whole actings, transactions and management done under the Will of the deceased”.  It goes on: 

“and we bind ourselves and our executors and representatives whomsoever to free and relieve the executors and their foresaids and their legal advisers from and against all claims and demands which may be made against them or any of them in connection with our respective shares of the executry estate”. 

 

[64]      On each of the minutes of agreement and the discharge various signatures can be seen, although in the copies available to the court and parties the bottom of the pages has to some extent been cut away.  However, the signature of Joanna Clark appears on the last page of the first minute of agreement, and on the last page of the second minute of agreement.  It also can be seen on both the first and second page of the draft discharge.

[65]      Mr Pagan’s evidence was that parties had signed those documents at the end of the mediation process thereby confirming their agreement thereto. 

[66]      Mr Pagan explained the payment of £100,000 by the executors to the widow as being necessary since it represented a debt owed by the executry to her in respect of monies withheld from her in respect of the partnership assets of £185,529 referred to above.  In effect, it was a payment of £92,750 with an additional element for interest which was, in the circumstances, very modest and could have been much more.  That payment was necessary also so that the widow could make the payment of £145,000 to the children.  The agreement extinguished all claims that the widow might have against the estate or the children and claims that the children might have against the estate or against the widow and was designed to achieve a global settlement as indicated above.  However, the estate still faced the claim by the pursuer as an individual creditor in respect of the monthly payment to her and there was an additional and potential liability to Lloyds since the deceased had been a Lloyds name and the estate was potentially facing a large claim at the time in respect of that liability.  That liability did not actually arise. 

[67]      As a result of the agreement, it was then necessary to obtain the signatures of all the children on the typed versions of the document which were prepared.  James Clark was at that time in Hong Kong and Carolyn Clark or Sarris was living in Greece.  This resulted in a course of correspondence between solicitors which was lodged by the defenders as 7/34 of process.  The individual letters are not numbered and I refer to them by date and author.  The first is a fax from Mr Williamson of Brodies who was said to act for the children.  It is dated 28 October 1997 and states as follows: 

“In the interests of expedition last week I had everyone sign the ‘draft’ discharge which I had typed from the manuscript actually signed at the mediation meeting.  If I am right in my assumption that the official discharge is now to be signed as well then I am seeing James Clark and Joanna Clark tomorrow and I will get that done by them then”.

 

There was reference then to Carolyn Sarris and the possibility of faxing her a copy of the discharge so that they could be signed by her and posted back.  It is also stated: 

“I hope that the executors will be prepared to pay over the money to Anne Clark upon the basis of what you already have (which is clearly indicative of an intention by the children to be bound) and what I hope you will very shortly get”.

 

There was then some difficulty in obtaining a signed copy of the discharge from Carolyn Sarris but that was eventually obtained and sent to the executors by letter of 3 November 1997.  As a result of receipt of all these discharges duly signed, the £100,000 was paid to the widow by the executors in terms of the minute of agreement. 

[68]      This was the last act in the history of the estate which was of relevance to the mediation. 

The pursuer’s claims

[69]      As stated above, the claims advanced by the pursuer on record are difficult to identify and categorise or to link up with the conclusions.  Her claims underwent change and re-definition at the stage of both of the two written submission which she tendered and which, for completeness, I append to this opinion. 

[70]      However, I consider that the pursuer’s claims relating to the wrongful administration of the estate can be summarised as follows: 

 

1.         That the payment to the widow by the executors of £100,000 in November 1997, as a result of the mediation, was in breach of duty owed to the estate by them.  Atpage 18 of the closed record it is stated to be: 

“A gratuitous alienation and illegally preferential payment… in the absence of any onerous obligation and for no value in return to the estate, all to the prejudice of the estate’s lawful creditors’ prior legal rights”

 

 While it had ostensibly been paid as a debt in respect of half of £185,529 which was deducted from payments to her in respect of the compensation payments for vacating the farm tenancies, the deceased had not in fact made a gift to her of the assets of the partnership.  There was a presumption against donation which had not been rebutted and the executors were wrong to view the deceased as having gifted to the widow any share of the partnership assets.  Instead of paying money to her, the executors should have ingathered the whole of £185,529 from her as a debt owed to the estate as shown in the opening balance sheet of the partnership contract.  The concession made at arbitration had been wrongly made and the advice given by Mr McNeil Q.C. was flawed being given in the absence of full and proper information.

2.         The executors acted in breach of their duty towards the estate and the beneficiaries by paying the sum of £100,000 to the widow since the mediation had not resulted in any agreement from the children that any such sum should be paid.  Neither was the discharge apparently signed by the children binding.  Joanna Clark’s signature on the documents was appended on the understanding that they were preliminary only and not binding and that the executors would make no payment to the widow.  In any event, it was her understanding from Mr Pagan that the estate had sufficient funds to meet all future liabilities to creditors and the pursuer in particular.  That was not the case. 

3.         The defenders breached their duties as executors by failing to ingather the sum of £193,333.  That was because the payment of £145,000 was an acknowledgement by the widow that the sums paid or credited to her in terms of the letter of waygoing, of which £318,000 was actually paid, was an overpayment.  Having regard to the fact that £145,000 payment was made to three of the four beneficiaries (of which the widow was one) the total value of the overpayment was in fact £193,333 and, accordingly, rather than agreeing that the widow should pay £145,000 to the children, they ought to have ingathered £193,333 into the estate.   The Minute of Agreement is also averred to be a fraudulent preference at page 39 of the closed record. 

4.         The defenders failed to ingather money in respect of unpaid rent or fruits of the widow’s occupation of the farms after she gave up the tenancies thereof.  That is described in condescendence 2.1(a)(ii) at page 18 of the closed record as a gratuitous discharge of a debt due to the estate for her occupation of the farms. 

5.         By paying out the £100,000 to the widow and by failing to ingather the other sums mentioned above, the estate was unable to fulfil its obligations to the pursuer as creditor in respect of her monthly allowance.  They ought therefore to be held liable to pay a sum which is sufficient to discharge the claim of “an unpaid index linked life creditor” (see page 45 of the record). 

6.         The claims for expenses to the estate, the pursuer’s own expenses and reimbursement of “the excessive legal fees” charged by Pagan Osborne. 

 

[71]      Before turning to address these issues I should set out the competing arguments on

the nature of the duty of the defenders as executors.  The pursuer argued that the defenders had committed breaches of trust and errors in making the payment to the widow and failing to ingather other sums from her.  She cited the case of Town and Country Bank Ltd v Walker and anr 1904 SLT 411 and Millar’s Trustees v Polson 1897 24R 1038 for the proposition that where an act or default of a trustee amounts to an irregularity or error of judgement which creates a personal liability, the trustee will be liable to make good to the trust estate the loss he caused.  In cases of culpa lata or gross negligence, a trustee would be liable to repay to the estate money which was lost as a result of his negligence. 

[72]      Mr Clark QC submitted that an executor was not a trustee of the deceased’s creditors but was eadem persona cum defuncto and had limited liability according to the amount of the deceased’s estate (Stewart Trs v Stewart’s Executry 1896 23R 739 at 743).  Payment to beneficiaries before creditors made without ascertaining with certainty that the estate is solvent will expose them to liability to replace what they paid away (Lamond’s Trs v Croom 1871 9M 662).  Cases of culpa lata will attract personal liability (Wilson and Duncan on Trusts Trustees and Executors 2^nd Edition paragraph 28-05).  In some cases, reliance on legal advice will negate any suggestion of negligence (Eaton v Buchanan 1911 SC (HL) 40).  He referred me to section 32(1) of the Trusts (Scotland) Act 1921 which provides power to the court to relieve a trustee from personal liability for breach of trust if it appears to it that the trustee has acted honestly and reasonably and ought fairly to be excused. 

[73]      It is clear that if executors make payments to beneficiaries before satisfying creditors of the estate and without ensuring that there are sufficient funds to do so, they will incur personal liability.  Cases of gross negligence will also expose executors to personal liability as will resistance to the execution of their duty.  In certain circumstances, an act or default by an executor amounting to error of judgement or irregularity may incur personal liability.  If, therefore, I concluded that the defenders made payments to beneficiaries to the prejudice of creditors, had committed some error of judgement which exposed them to personal liability or were guilty of gross negligence or wilful failure to perform their duties, they could be liable therefor.  While Mr Clark QC argued that since the defenders had sought and obtained legal advice throughout, that in itself would negate any suggestion of negligence, I would not be prepared to go that far as far as Mr Pagan was concerned.  He is a lawyer and highly experienced in this field and I would not excuse him from negligence on his part simply on the basis that he sought and followed advice from eminent members of the senior bar. 

[74]      In relation to the first matter, it is necessary to examine whether or not the executors were well founded in considering in 1997 that they owed the widow one half of the sum of £185,525 withheld from her in respect of the partnership assets in terms of the letter of waygoing.  This matter can be decided principally upon the basis of the documents referred to in the course of the evidence led before me.  The pursuer and Mr Pat Wilson and Mr Pagan, who were led in evidence by the pursuer, and Mr McNeil QC who was led by the defenders, were all taken through a great number of documents to establish their content and to inform the court as to the history of the estate which I have summarised above.  In the case of Mr Pat Wilson, it was clear that, while he had received some of these documents in this capacity as executor and had himself written a small number, he was unable, due to his age, the passage of time and intervening medical problems, to recall much of the circumstances surrounding the correspondence to which he was referred.  In addition, it was clear from his evidence and from the terms of correspondence written by Jack Wilson, that the latter took most of the decisions as executor sometimes contrary to the express instructions of Pat Wilson (see above). 

[75]      However, at the end of the day there was little dispute as to the content of or the interpretation to be put upon the documents referred to.  One exception to that was the advice given to the executors by Mr McNeil about “the gift” to the widow of one half of the partnership assets which I deal with in the context of the first issue and another was the minutes of agreement and discharge which resulted from the mediation which I will address in the context of the second and third issues. 

 

The first issue:  the payment of £100,000

[76]      In the preamble to the contract of co-partnery between the deceased and the widow (1/45 to 48) it is stated that the deceased and widow had “for some time been carrying on business as farmers at those farms”.  Clause third provides that: 

“The original capital of the firm will be subscribed by the first and second parties (that is the deceased and the widow) and will be the sum to be shown in the balance sheet to be prepared as at the 29^th day of November 1985 for the business of farmers formerly carried on by the first party at Nether Pitlochie, Upper Pitlochie and Leckiebank aforesaid except that the heritable property belonging to the first party is not to be included in the partnership capital”.

 

It further provides for a profit and loss account for the firm to be made up as at 28 November 1986 and annually thereafter.  In terms of clause ninth, in the event of the death of a partner, the share in the business of that partner would vest in the surviving partner and the deceased partner would have no interest or right to the partnership or property but

“shall only be entitled to receive such sum as stands at the credit of the retiring or deceased partner as shown by the balance sheet for the balancing date immediately preceding the date of death”.  

 

Because of the death of the deceased so soon after this agreement was entered into, the only balance sheet that was prepared was that of 29 November 1985 which showed the original capital subscribed to the partnership.  Those accounts appear at 1/285 and are headed “Messrs James Clark, Farmers, Gateside, Fife” and show a capital account under the name James Clark of £185,529.  The terms of clause third make it clear, however, that that capital originally subscribed was subscribed “by the first and second parties” and seem to me to indicate that the deceased had gifted one half of that capital to the widow. 

[77]      The letter of waygoing of 5 September 1989 obliged the widow to repay the whole of that sum to the estate by clause two at page 1/80 and the calculations of sums due to or by the widow at page 1/181 accordingly show a sum due by her of £185,589 in terms of the balance sheet dated 29 November 1985. 

[78]      The opinion of James McNeil, QC, who gave evidence before me called by the

defenders, had been obtained on this particular matter (Note dated 31 October 1997 confirming that advice at 3/904).  He had concluded that the one half share of the partnership assets had indeed been gifted by the deceased to the widow.  He therefore advised that the concession to that effect at the arbitration of May 1997 should be made.  The widow had contended that the deceased had made a gift to her of one half of the partnership assets and pointed to the capital transfer tax inventory as supporting that contention.  In a note by Mr McNeil, which is dated 14 February 1997 but which must in fact be 1998, since it refers to a letter of instruction dated 13 October 1997, he explains the thinking behind his view.  He refers to the Capital Transfer Office (CTO) inventory at page 9 where Jack Wilson had deponed to a transfer of one half of the partnership assets to the widow.  He also refers to the waygoing valuation. It is clear from that that Mr McNeil had been provided with papers other than simply the CTO inventory.  The pursuer argued that the advice of Mr McNeil proceeded upon inadequate information given to him by the fourth defender.  James Clark had raised this matter in cross-examination of Mr McNeil.  He stated in evidence that there was no-one in 1997 who could give any information as to whether the deceased had gifted these assets to the widow but the CTO return showed it as a gift and there was no contrary evidence.  He clearly relied upon the sworn deposition of Jack Wilson in the inventory to the effect that half of the partnership assets had been gifted to the widow.  That particular matter appears in the inventory at page 1/62.  In cross-examination by James Clark, Mr McNeil was taken to certain documents written by Jack Wilson.  In a letter dated 7 August 1986 from Jack Wilson to WA Finlayson & Co CA (1/353), there is reference to a draft balance sheet and “the capital account contributed entirely by the deceased to the sum of £185,529”.  Mr McNeil had no recollection of this letter.  He said, however, that he had seen the letter of waygoing.  In her written submissions the pursuer contends that Mr McNeil’s evidence that there was nothing which contradicted a gift to the widow of half of the partnership assets was incorrect and refers to a letter from Jack Wilson to the then solicitors of the widow dated 1 October 1986 (1/380), in which he stated: 

“Having regard to the foregoing circumstances and the fact that there is no evidence that your client made any contribution whatever to the partnership assets but that she still derives out of the partnership agreement the whole benefit of these partnership assets (including tax relief for losses carried forward) we calculate that the draft balance sheet as at 29 November 1985 should be amended in terms of the statement enclosed and that the claim of the executors against your client will thus fall to be stated at £185,529 as detailed in this statement.”

 

There then follows the draft balance sheet of the partnership which shows the capital account in the name of the deceased only at the above figure.  I have no note of this letter being put to Mr McNeil in cross-examination.  The pursuer’s written submissions at page 7 also refers to a letter from the CTO to Jack Wilson dated 5 November 1987 (1/425) in which the author asked for Mr Wilson’s agreement that “the deceased must be regarded as having held all of the partnership capital as at the date of death”.  This letter was not the subject of questions to Mr McNeil and I am unable to come to any view on the contents thereof.  There was no evidence before me that the agreement sought was obtained or what the eventual position of the estate was in this regard.  However, it appears this assertion proceeded on the basis that “the original capital (of the partnership) had not been quantified at the date of the deceased’s death” rather than any question of a gift by the deceased. 

[79]      Jack Wilson had made a formal deposition that the inventory was a complete record of the moveable estate of the deceased (1/67) and the inventory shows only half the moveable capital in the farming business within the estate and the other half as a gift to the widow (1/62 and 1/58).  While there may subsequently have been doubt about that and Jack Wilson may have been intent on arguing later with the widow’s solicitors that she should account for all of those assets to the estate, those matters do not throw light on the deceased’s intentions and are hardly conclusive.  In the letter of 1 October 1986 all that is said is that the widow made no contribution to the partnership assets and begs the question of gift.  As far as the CTO letter is concerned, I do not know whether the contract of co‑partnery was shown to that office nor, as I have said, what the eventual position was found to be.  

[80]      Although Mr Clark QC did not advance any submissions on the matter of a presumption against donation, looking to the whole circumstances as advanced in evidence, they seem to me to be sufficient to overcome any such presumption and make it clear that the intention of the deceased was indeed to give one half of the partnership assets to the widow.  As was stated in the contract of co‑partnery, the deceased and widow had been farming the farms for “some time” before they entered into the contract of co-partnery and it seems to me quite logical that they would share those assets upon the partnership being formed.  Clause third states in terms that “the original capital of the firm will be subscribed by the first and second parties” and specifically excludes from the partnership capital the heritable property belonging to the deceased.  The CTO deposition by Jack Wilson declared that such a gift had been made and that is consistent with what the parties agreed in terms of the contract of co-partnery.  Mr Pagan’s evidence was that a gift of a half share in the partnership assets was not uncommon in family farming partnerships.  I accept that evidence.  In my view, the proper course was to make the concession which was made at the arbitration and to accept that the widow had been entitled to a one half share of the partnership assets.  I consider that the subsequent payment of £100,000 was a legitimate one as a payment to a creditor of the estate and that the executors were correct to make it.  Whether or not Mr McNeil had all the papers before him, his view was a sound one.  In any event, I am unable to conclude that, by taking the view that they did, the defenders were in breach of duty towards the estate, acted in a negligent manner or created a fraudulent preference of any kind. 

[81]      The actual sum that was retained from the widow from about 1986 was £92,764 being one half of the figure attributed to the partnership assets.  Mr Pagan said that the figure of £100,000 represented that figure plus some interest.  Standing that this matter had been outstanding for so long, the addition of such a small element of interest was very modest and could well have been much greater. 

 

The second and third issues:  The mediation of October 1997

 [82]     If the payment of £100,000 to the widow was the payment of a debt due to a creditor of the estate, as I have concluded it was, then it required to be paid, with or without the consent of the beneficiaries.  However, because the pursuer and her family have contended for so long that this payment was made against the wishes of the beneficiaries, without their agreement and, indeed, after they had been misled by the fourth defender among others about whether it would be paid and the consequences of it being paid, I propose to examine the evidence about the mediation in order to address issues 2 and 3 of the pursuer’s claims set out above. 

[83]      Joanna Clark gave evidence to the effect that she attended both mediation meetings on her own account and did not represent her siblings.  In answering questions from the pursuer in chief she said that she understood this process as being “non-binding” in an attempt to settle the action against the widow and that the executors would make no distribution.  She was not aware that, as a result of the mediation, the widow would be paid any money.  She understood from the balance sheet referred to above (3/853) that, at a minimum, the widow would pay money into the estate in the region of £100,000 even if the children lost the action. 

[84]      At the first meeting the mediator came and spoke to her.  She asked him if he had read her submissions and when he said he had not she refused to continue.  She then called David Williamson who attended and she discussed the position with him.  The meeting ended at about 5.30pm agreeing that she and Mr Williamson would attend the next meeting on 21 October. 

[85]      On that date she attended with Mr Williamson.  He met the mediator and eventually told her that a deal was to be proposed.  Mr Pagan came in and “began to suggest” that the executors would pay money to the widow.  Before he had finished, she stopped him and said that if any money was to be paid to the widow, the mediation would stop and “we would see him in court”.  Later Mr Pagan again appeared and asked her what she would accept and he suggested £145,000 to be paid to the children by the widow not the estate.  Her response was that she could not speak for her siblings but agreed the figure of £145,000.  It acknowledged that the widow had been wrongly paid and she and her siblings could drop the court case.  Mr Pagan returned and offered her the £145,000.  She discussed it with Mr Williamson and whether the estate would have sufficient funds to pay its liabilities to her mother and Lloyds.  Mr Pagan had assured her that there would be. 

[86]      She was asked to sign three bits of paper one of which she described as the £145,000 payment in return for stopping the action.  The other two were in handwriting which Mr Pagan described to her as “paper exercises” and a draft note of what he needed to do to wind up the estate.  She “naively” signed them.  She told Mr Williamson that the mediation would stop if the estate was going to pay the widow any money.  She never intended to give anyone a discharge for any sum of money. 

[87]      In cross-examination by her brother, James Clark, she confirmed that she had a mobile phone at that time and did not need to leave the room to make any calls.  Mr Pagan had asked her to sign the documents on behalf of her siblings but she said that she had no authority to do so.  She spoke to her sister Carolyn that evening about the proposals and to James who was in Hong Kong.  He said he wanted time to think about it. 

[88]      In cross-examination by Mr Clark QC, she denied ever signing a formal witnessed document in respect of the mediation.  The averment in the pleadings at page 23 to the effect that she and her siblings “did not sign and return the formal discharge document prepared and sent out by the fourth defender” was correct.  She said that some months after the mediation, she got a call from Pagan Osborne asking her to sign documents which were to be sent to her.  She did not sign them. 

[89]      She was referred to the bundle of documents 7/34 of process.  In relation to the letter from Mr Williamson to Morton Fraser dated 28 October 1997, she accepted that Mr Williamson “appeared” to be acting for all the children.  She acknowledged that he makes specific reference to the payment of money by the executors to the widow.  She claimed that she misunderstood the deal and only discovered that any money would be paid to the widow months later when she refused to sign the documents sent to her.  On being shown the handwritten documents which bore her signature she said that she believed that what she had signed was “provisional in terms of the settlement”.  She also said that she had no discussions with Mr Pagan or Mr Williamson about the payment of £100,000 to the widow and claimed that Brodies were not aware of that payment.  Mr Williamson had never mentioned it to her.  Her eventual position was that “I never signed a deed with £100,000 in it, not in my mind”.  When shown the handwritten minute of agreement (1/152) she accepted that her signature appeared on it but that she felt she was not committed because it was in handwriting and that “I agreed to it in principle according to my understanding”.  She also accepted that she signed the draft discharge (1/158) but because it contained blanks she did not see it as binding or final.  It can be seen that the addresses of her siblings are omitted and a day of the month is left blank.  Mr Williamson did not assist her about what the agreements related to.  The documents did not contain what she agreed to or what she passed on to her siblings.  When she spoke to her brother, she passed on information about the payment of £145,000 and the stopping of their action.  She was shown the typed version of the minute of agreement (3/936) which shows the payment of £100,000 to the widow signed by her brother and the course of correspondence at 7/34 and asked whether she must have known that the payment would only be made by the fourth defender on receipt of all the signed discharges from the siblings.  She claimed that that was “not my interpretation”.  She maintained that the typed and signed documents were only drafts and that she refused to sign the “formal discharge” which was sent to her several months later.  When shown the discharge she signed in front of Calum Wilson of Brodies on 30 October 1997 (7/34 of process) she had to accept that she had signed a formal witnessed document but that it was not her understanding that it was binding. 

[90]      Mr Pagan’s evidence was very different.  He clearly understood that Joanna Clark was representing her siblings as was Mr Williamson.  Joanna Clark was well aware of the proposed payment to the widow and agreed to it on behalf of her siblings.  As stated above, the mediator went to all parties explaining the agreement he had written down.  She signed the handwritten documents in full knowledge that the money would be paid.  He did not recall Mr Williamson being present at the second mediation but accepted he could have been.  He was not going to pay any money over, however, until he got all the children to sign the draft discharge because of the past history of this estate.  This is what happened.

[91]      He did not give her any assurances about the level of funds in the estate.  If he said anything about the maintenance claim, he told her that it was not part of the mediation, she would be paid monthly and there could be no guarantee of a lump sum payment.  His office would never communicate directly with the children since they were represented by Brodies.  That would be unprofessional and improper.  In any event there was no need to do so since the necessary documents had been signed soon after the mediation after which the money was paid to the widow and she paid the £145,000 to the children.

[92]      I am unable to accept Joanna Clark’s evidence in many respects.  Her evidence was highly unsatisfactory.  She contradicted herself of a number of occasions when documents were put in front of her.  She produced implausible or incredible explanations for her alleged lack of understanding of what transpired at the meeting and thereafter and her evidence that she was sent some “final” version of the agreements and discharge by Pagan Osborne was powerfully contradicted by Mr Pagan.  It is clear beyond question that she represented her siblings at the mediation.  Mr Williamson was there to represent them all as is apparent from the terms of his later correspondence in 7/34, the fax dated 28 October 1997.  She signed a statement dated 4 June 2006 in relation to the meeting of 21 October 1997 in which she stated “I, Joanna Clark, attended the above meeting(s) as representative of the three surviving children”.  I find that Mr Williamson and she were there on behalf of all the children. 

[93]      She plainly knew about the £100,000 payment to the widow at that meeting.  She signed the handwritten documents at that time and the minute of agreement provides for that payment in paragraph 1 (1/152).  Mr Williamson stated in his fax of 28 October 1997 that “I had everyone sign the draft discharge which I had typed from the manuscript actually signed at the mediation meeting”.  Her signature also appears on the handwritten draft discharge (1/158 and 159).  Mr Williamson knew that the payment would be made as is clear from the terms of the last sentence of the fax mentioned above:  

“I hope that the executors will be prepared to pay over the money to Ann Clark upon the basis of what you already have”.

 

[94]      Her evidence that Mr Williamson did not discuss the minute of agreement with her and did not advise her about it is incredible.  He was there to represent her interests and those of her siblings.  It is inconceivable that he would get her to sign these documents at the meeting and not explain them to her, even assuming she had not already understood their import.  She started by denying she had signed any formal witnessed documents.  She had to accept that to be untrue when such a document was put in front of her.  I conclude that her evidence that her understanding was to the effect that these documents were non‑binding or in some way provisional, that she was not aware of the agreement that the widow would be paid £100,000 by the executors and that her own solicitor failed to explain all that to her is simply untrue.  I consider that she has persuaded herself that she did not know of and did not agree to the payment to the widow which she now regrets but the contemporaneous evidence is that she did know and did agree to it.  Whatever she may have understood from the balance sheet given to her by Mr Pagan before the mediation as to the contribution to the estate which the widow might make, that understanding must have been dispelled by the information she received at the mediation. 

[95]      Wisely, James Clark did not follow his sister into the witness box in order to support her version of these events, insofar as he might have been able to do so. 

[96]      Some attempt was made by Joanna Clark to suggest that, if she did agree, it was only because of some assurance given to her by Mr Pagan that there would be sufficient money left in the estate to pay all obligations.  Leaving aside for the moment the question of the financial state of the executry at this time and the evidence of that matter before me, it is difficult for her to say, on the one hand, she had no idea that the payment would be made and on the other to say that she would never have agreed to the minute of agreement had the assurance not been made.  That seems to be the position being advanced on page 23 of the closed record.  It is stated there that a representation was made by the executors throughout the mediation that there were sufficient funds to meet all outstanding creditors and that Joanna Clark got an assurance that her mother’s claim would be “settled forthwith”.  This representation by the fourth defender: 

“induced in the minds of the respondents the misunderstanding that their mother’s claim would be paid and was by reason of that representation an essential understanding which was a precondition to the respondents consenting to the minute of agreement of October 1997”.  

 

[97]      In any event, as Mr Clark QC pointed out when he objected to questions about this assurance (which I upheld), it was an attempt to elicit evidence in support of a conclusion for reduction of the minute of agreement which the pursuer had deleted and went beyond the scope of the proof as defined in the minute of proceedings.  I do not therefore need to come to a concluded view on this matter but, had it been pursued, I would have been unwilling to accept the evidence of Joanna Clark that any such assurance had been made and would have accepted the evidence of Mr Pagan on this matter. 

 

The failure to ingather £145,000 or £193,000
[98]      The widow was paid £318,000 in 1990 in return for giving up possession of the farms.  According to the letter of waygoing, she was due £476,300 therefore.  She thus did not receive her whole entitlement in that regard.  Although this part of the pursuer’s claim is framed in highly convoluted fashion at page 4 at the fourth bullet point of the written submission on behalf of the pursuer and repeated at page 10 and 11, paragraph 4, it appears that her assertion is that the widow’s payment of £145,000 to the children was an acknowledgement that she had been overpaid in respect of the sums credited to her as compensation for giving vacant possession of the farms.  Thus, instead of allowing her to pay any money to the children, they ought to have demanded that it be paid to the estate in order to make provision for the beneficiaries, including her. 

[99]      Firstly, I do not consider that there is any evidence to suggest that the sums paid to her as compensation for giving vacant possession were in any way excessive.  The evidence of the chartered surveyor at the time was to the effect that the tenant would be entitled to up to 40% of the sale price of the farms.  The figures actually paid to her were achieved as a result of due negotiation between the widow and her advisers and the executors.  It was urgently necessary in any event to obtain agreement from her to vacate these farms so that they could be sold and the overdraft, which amounted at the time to approximately £500,000, could be paid off. 

[100]    Secondly the challenge to the payment of £100,000 to the widow and the payment of £145,000 by her to the children is simply an attempt by another route to reduce the mediation agreement of October 1997 and the minute of agreement and discharge flowing therefrom which the pursuer specifically deleted from the pleadings shortly before the proof.

[101]    Thirdly the payment of £145,000 by the widow was not simply an acknowledgement that she had been overcompensated for vacating those farms or in any other way.  It was paid as part of a global settlement to avoid the costs of the pending litigation and to settle all claims made by and against the children.  I accept Mr Pagan’s evidence on that point.  Some indication of the rationale behind it was set out by Mr McNeil in his Note of 31 October 1997 (3/906).  He described it thus:  

“As is well known, the dispute which was the subject of mediation concerned, essentially, a claim by the children in litigation to be entitled to reopen a waygoing agreement between the executors and Mrs Ann Clark with a view to reducing the amount payable to Mrs Ann Clark of renunciation of leases.  That dispute, with ancillary matters, has been the subject of numerous litigations but was settled with the compromise that Mrs Ann Clark pay £145,000 to the children.  Thus the parties resolved that dispute without any sums being paid into the executry estate;  nor was there any reason why such a sum should have been so paid”.

 

[102]    Mr Williamson wrote to Mr Macfie on 7 March 2000 (3/1101) and observed that it was difficult to be definite about what the payment represented being one “struck at after a lengthy and detailed negotiation/mediation which was fraught with difficulty”.  He also made the point that the money was not paid into the estate because that would have attracted a capital tax charge, a point made also by Mr Pagan.  Mr Williamson described it as a figure which broadly represented what the children might receive if they won, so: 

“the children got what they wanted but it would not cost Ann Clark nearly as much as it would if she lost the action”. 

 

[103]    From Mr Williamson’s detached view some distance in time from the mediation itself, a picture thus emerges of a compromised settlement taking account of a number of different claims and interests which, at least to him, represented a sensible resolution of the many differences between the warring factions.  It also appears to be his view that the children did not do badly out of it. 

[104]    In any event, in the opinion of the court delivered by Lord Carloway in Joan Pentland Clark v Anne Clark and Others dated 27 March 2012  it was found that the payment to the widow of 40% of the total gross land value, in order to secure vacant possession of the property, was entirely proper and indeed necessary (see paragraph 45-46 of that opinion).

[105]    Accordingly I conclude that the sum of money actually paid to the widow in the year to April 1990 of £318,000 was paid under deduction of the £185,529 said to be due to her in terms of the letter of waygoing.  The balance due to her in respect of the giving of vacant possession amounting to £336,300 in respect of Pitlochie and £140,000 in respect of Leckiebank was a reasonable and legitimate sum to pay to her.  The sum of £318,000 actually paid therefore represents a legitimate and reasonable payment to her as a creditor of the estate and was paid on account of any further payments.  That is shown in the document entitled “Payments to Mrs Anne Clark in the year to 8 April 1990” at page 1/265. 

[106]    I find that the defenders were not in breach of any duty to the estate in paying the £100,000 to the widow and that the children agreed to that payment being made as a result of the terms of the minute of agreement which they all eventually signed as a precondition of the payment being made.  I also find that the defenders were under no duty to ingather the sum of £193,333 or £145,000 from the widow.  The Minutes of Agreement did not constitute fraudulent preferences. 

 

Issue 4:  unpaid rent or fruits of occupation. 

[107]    On page 4 paragraph (iii) of the pursuer’s written submission it is contended that a debt of £106,000 owed to the estate by the widow was “discharged” by the defenders as a result of the mediation where it was agreed that: 

“no further sums are due to the executry estate by any beneficiary for any reason whatever (including without prejudice to the foregoing generality:  (any sums due by Anne in respect of rent for or the profits of occupation of, the farms of Pitlochie and Lechiebank.)”

 

The pursuer maintains that this “discharge” was in breach of the defenders’ duty to the estate and that that sum ought to have been ingathered.  In condescendence 4 page 41 of the record, it is averred that the defenders:  

“knew or ought to have known that insolvency would be the result of their agreement to discharge the £100,000 rent debt owed by the first defender” (the widow). 

 

At pages 13 and 14 of the written submission compound interest on the figure of £106,000 from November 1997 is added bringing this item of claim to £392,201.91.  The pursuer drew attention to the note of the mediation meeting of 9 October 1997 (3/875) and to pages 878 and 879 where Mr CM Clark of Pagan Osborne stated that he was to check the payment of rent and that rent owed by the widow would have to be reduced to £100,000.  Mr Macfie at pages 8 and 9 of his report stated that the widow had occupied Leckiebank from 29 May 1986 to 4 December 1989 and that, in principle, it was conceded by the executors that she was liable to pay the executors for the fruits of occupation but that this claim was disposed of without payment as part of the mediation agreement.  In relation to Pitlochie, the widow had occupied it from 29 November 1986 to 27 February 1987 and was dealt with in the mediation in the same manner as that in respect of Leckiebank. 

[108]    Mr Clark QC argued that the agreements reached at mediation ought to be viewed in the round and that this item was disposed of a part of an overall settlement between the parties in order to avoid a potentially expensive litigation.  In respect of any claim for unpaid rent, no such claim could be pursued because, as Mr Pagan had said, if such rent had been paid, the widow could have claimed that fresh agricultural tenancies had been created. 

[109]    In relation to an alternative figure for fruits of occupation, he submitted that there had been no proof of the value of any claim which the estate may have had against the widow in this regard.  The fact that the deceased had been heavily in debt at the time of his death indicated that the farms were not necessarily profitable.  A file note of 24 June 1991 by Mr Pagan (2/520) when reviewing the executry,  highlights that Mr Jack Wilson had noted that in the last year of his life the deceased incurred trading losses of £129,775.  Pat Wilson had given evidence to the effect that the widow had employed a farm manager who would presumably have drawn a wage. 

[110]    In any event, the claims which the widow had given up against the estate had to be considered.  She had been due £338,664 from the estate on waygoing but that was based on the incorrect assumption that the whole of the assets of the partnership belonged to the estate.  She had actually received £318,000.  She was thus due £20,664 together with interest.  She was also due interest on one half of the £185,529.  She had a claim for reimbursement under clause three of the letter of waygoing and a claim for crops, seeds and manure under clause four. 

[111]    It could not be said that in acting as they did, the defenders had acted negligently or had incurred personal liability.  In any event, an executor was not liable to account to a creditor for the fruits of a deceased’s estate (Currie on confirmation paragraph 1-21 and Stewart’s Trustee v Stewart’s Executry 1896 23R 739). 

[112]    The pursuer’s claim in this matter is sometimes described as a breach of duty in wrongfully discharging a debt to the estate in the form of unpaid rent and sometimes as a wrongful discharge of a claim for fruits of occupation.  That may be because the minute of agreement between the widow, the defenders and the children at paragraph 6 encompassed both elements (3/101).  I agree with Mr Clark QC that it is necessary to look at the mediation agreements in the round when considering whether any particular element could be described as a breach of duty on the part of the defenders.  It is apparent that the widow did occupy both Leckiebank and Pitlochie for the periods set out above (see the calculations of sums due to or by Mrs Ann Clark 1/81 in which the sums due by her include the fruits of occupation for those periods).  At that time no value was placed on these items and no evidence was led before me as to why that was the case.  But the period concerned was at a time when she had given up her right to occupy the farms as tenant. 

[113]    As to the discharge of a liability for rents for the relevant period, the original executors did not formulate the widow’s liability in this way and that may well have been because of the risk that, in accepting rent, new tenancies might have been created or at least the widow might have been able to argue that such had been created causing further dispute.  In any event, since she had given up her right to occupy as tenant, payment of rent would not have been appropriate.  Accordingly, I do not consider that in discharging the widow from liability for arrears of rent in the mediation agreements in 1997, it can be said that the defenders were in breach of any duty to the estate.  As to the discharge of liability for fruits, Mr Clark QC was correct to point out that no evidence was led as to what value ought to have been placed on this element.  As stated above, no value was placed on the fruits in 1989 and no attempt was made to place a value on them at the proof.  The sum of £106,000 may be derived from the rent payable for each of the farms for the relevant periods but such a calculation does not reflect the value of the fruits.  Thus, even if I was of the view that there had been some breach of duty incurring personal liability upon the executors, I would have been unable to quantify the extent of that liability. 

[114]    I am not able, however, to conclude that there was any breach of duty in this respect.  There is no evidence that the executors in 1997 were able to quantify a claim for the fruits of occupation.  No such quantification was done in 1989 and none was attempted at this proof.  There is force in Mr Clark’s point that it is unclear in any event whether the widow could be said to have obtained any profit from farming the lands during the relevant periods standing the apparent lack of profitability in the last year of the deceased’s life and the extent of his borrowings.  In addition to that, it is necessary to look at what the widow gave up at the mediation.  Looking at all these features, it cannot be said that the executors were in breach of their duties towards the estate in giving up this potential claim.  It appears to me that there would have been very considerable difficulties in pursuing it and that looked at in the whole context of the settlement reached at mediation, it was a reasonable and proper compromise. 

 

Issue 5:  the pursuer’s claim in respect of her maintenance. 

[115]    The pursuer argued that it was because the executors had paid out money from the estate to the widow and, separately, had failed to ingather sums from her, that the estate was ultimately unable to meet its obligations to her as a creditor.  She led the evidence of Mr Finlay Marshall, Actuary of ARH Collins & Co. who spoke to the calculations contained in his report production 130.  This was designed to show that the value of the pursuer’s claim for arrears of maintenance was in the region of £231,625.  The actuarial value of an annuity from 2 October 2014 for the life of the pursuer amounted to £214,575.  It was argued that the pursuer had received no monthly payment from the estate since October 2005.  At page 14-15 of her written submission she advances a claim for £240,000 in respect of arrears.  On page 45 of the record, it is averred that the estate should be paid £446,200 in order that “the estate is restored to solvency sufficient to enable the estate to obtain a discharge of the claim of the unpaid index-linked life creditor”.  This includes an element for the “future element of an extant obligation to a creditor”.  It appears therefore that the pursuer claims both arrears of maintenance with interest thereon and a capital sum representing the purchase of an annuity to provide for payments into the future for the life of the pursuer. 

[116]    The defenders led the evidence of Sandra Terrace of Carlisle & Collins Actuaries who carried out a rival exercise to that of Mr Marshall in respect of the arrears of monthly payments.  She applied interest at 8% per annum to those arrears and brought out a total net value of £157,240.98 to December 2014 (7/34 of process).  She did not make any calculations in respect of future payments. 

[117]    I have concluded that the defenders were not in breach of any duty towards the estate such that they should be found personally liable to the pursuer as judicial factor.  It follows that the inability of the estate, subsequent to their removal from office, to pay maintenance to her is not a matter for which the defenders are liable.  Nor are they liable to pay a sum representing the value of an annuity in order that the estate can pay the monthly sum to the pursuer until her death. 

[118]    As Mr Clarke QC argued, even if the defenders had been in breach of their duties in the ways which the pursuer contended, they would not be liable to return the estate to solvency since that would in effect impose on them as executors a liability akin to insurers.

[119]    I am not able to come to a concluded view on the evidence presented to me as to why in 2005 the estate became unable to pay the monthly allowance to the pursuer.  However, I am able to conclude that the payment of £100,000 to the widow did not render the estate insolvent.  That was the advice given by Mr McNeil at the time and spoken to by him in evidence (see the note from the consultation of 4 November 1997 at 3/915) and was the evidence of Mr Pagan, which I accept. 

[120]    Nor do I consider that the subsequent inability to pay the maintenance was caused by any fault or breach of trust on the part of the defenders as argued by the pursuer.  The estate continued to fulfil its obligations to the pursuer as creditor for some five years after the defenders were removed from office.  The pursuer argued that the court appointed a judicial factor in place of the defenders in 1999 in a petition for sequestration of the estate and that was a judicial determination of the estate’s insolvency.  However, as Mr Clark QC argued, the use of the term “sequestration” does not necessarily mean that the estate was insolvent.  There was the difficulty in valuing the extent of the pursuer’s claim (see Mathew v Mathew’s Trs 1907 15 SLT 326) and the amount which would be needed to make provision for it.  In addition, the children remained liable to repay the £68,000 paid to them as beneficiaries and, if demanded, those sums would have been available to the estate.

[123]    Mr Clark QC submitted that the nature of the obligation to the pursuer under the 1977 agreement was limited to paying her a monthly allowance.  As far as any liability to make payment to the estate of a lump sum representing a capitalised sum for the future is concerned he argued that this claim could not be capitalised since it was contingent on the pursuer remaining unmarried and surviving.  A contingent liability to the pursuer would not prevent the executors from making payments to creditors of the estate (see Mackenzie Stuart Law of Trusts page 207).  Thus the executors were entitled, and indeed bound, to make the payment of £100,000 to the widow in 1997 as a creditor of the estate in spite of the existence of that contingent liability.  In any event, as Mr Clark QC argued, there was no evidence that the estate had settled a claim on the basis of a capital sum with the pursuer qua creditor.  Were the defenders required to pay a capital sum there would be no guarantee that the estate would not raise further proceedings. 

[124]    Had I found that the defenders were in breach of trust or were at fault in some respect and were liable to the estate in respect of arrears of maintenance, I would have found that the sum due to the pursuer for arrears of maintenance bore interest as calculated by Ms Terrace rather that the interest calculated by Mr Marshall.  He applied compound interest at 10% per annum on the basis that this would have been the cost to the pursuer had she taken out a loan for home improvements.  There is no proper basis for such a calculation of interest. 

[125]    I consider that the pursuer’s claim for payment of maintenance in the future is a debt contingent upon her surviving and not remarrying.  The estate was therefore obliged to pay her a monthly sum as per the agreement.  It did so during the whole period of the tenure of the defenders as executors and beyond.  Had I found for the pursuer, I would have concluded that there was no obligation on the estate to provide an annuity in respect of future payments.  While such an arrangement could perhaps have been entered into with the agreement of the beneficiaries, when it was actually offered it was rejected both by the pursuer herself and by the children.  The problem with such an arrangement is that had an annuity been purchased, the payments would have stopped upon the remarriage or death of the pursuer and the capital used to purchase the annuity would not have been recoverable.  It is perhaps understandable that the children were not prepared to agree to such a step. 

Issue 6 legal fees etc. 

[126]    In the form of motion, the pursuer claims £377,401.84 in respect of excessive legal fees charged to the estate by Pagan Osborne.  Mr Macfie reported that those fees amounted to £306,738 at the time of his report and had not been taxed.  The pursuer contended at page 10 of  her written submission that those fees had not been properly incurred and calculated that she should be awarded the sum of £377,401.84 which appeared to represent the repayment of one third of those fees to the estate together with interest since November 1998.  There was no evidence in relation to the fees charged by Pagan Osborne and no specific claim appears to be advanced on record in respect of these fees.  In any event, there was no evidence that any work carried out by Pagan and Osborne was carried out improperly.  At page 14 of her written submissions, she appears to claim £150,000 as relief from costs awarded against the judicial factor.  Again, there is no claim on record for this matter and no evidence about it.  It seems to be an attempt to recoup some of the expenses awarded against her in the past and I am unable to grant such relief. 

[127]    Mr Clark QC advanced arguments which would come into play were I to find that the defenders were liable to the pursuer as judicial factor and it is appropriate that I deal albeit briefly with those arguments. 

The right of relief
[128]    It was argued that, even if the defenders were liable to the pursuer, they should be granted relief available to them in terms of section 32 of the Trusts (Scotland) Act 1921. This provides as follows: 

“32       Court may relieve trustee from personal liability.

(1) 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.”

 

[129]    Mr Clark QC argued that this was a highly complex and problematic executry from the outset.  Each of those who had an interest in the estate was represented by leading firms of solicitors and by eminent counsel and the context was one of bitterness and deep seated mistrust.  In addition to that, the nature of the estates liability to the pursuer in terms of the minute of agreement to pay a monthly allowance was, according to Mr McNeil QC, unique.  It could not be varied by court order in terms of the Family Law (Scotland) Act 1985.  The executors had attempted to agree a lump sum payment to the pursuer but that was unacceptable both to her and to the children.  Mr ACM Johnston QC had advised that the purchase of annuity would be a practical solution but an offer to that effect had been refused (see 2/453 and 2/459). 

[130]    The attitude of the children was summarised by Mr Williamson in a letter dated 6 March 1996 (2/675) in which he said: 

“Put shortly, our clients position is that they are essentially prepared to invest such residue of the estate as will undoubtedly come to them in the end of the day, in prosecuting their position.  That may or may not turn out to be a wise decision:  but it is the decision which has been communicated to us after detailed consideration and we are instructed to proceed in accordance with it.”

 

The pursuer herself in evidence stated in the context of litigation draining the estate of resources said “better that way than the estate going to the wrong person”.  In relation to the payments made to the children of £68,000 each, not only had the executors raised an action against Jack Wilson and J and G Wilson challenging those payments (to which Mr Pat Wilson had refused to consent) but they had also expressly reserved their right to recover those payments from the children and had obtained an indemnity from them in that respect contained in the minute of agreement.  The estate, it was argued, still retained a right to recover those payments.  The judicial factor (Mr Macfie) had abandoned the executor’s action against Jack Wilson and J and G Wilson. 

[131]    So far as the payment of £100,000 to the widow and the giving up of any claim in respect of fruits of occupation, the executors have acted on the advice of senior counsel, the figure of £100,000 represented a significant discount on what could have been due had full interest been applied.  The widow had given up a number of claims in the mediation.  That mediation had avoided the estate funds being further reduced by the impending litigation.  Any claim for fruits of occupation was a speculative one standing the evidence of the profitability of the farms prior to the death of the deceased and thereafter. 

[132]    Had I been satisfied that the defenders were personally liable for breach of trust towards the estate, I would have granted the relief in terms of section 32(1) of the 1921 Act.  That relief would have been a complete relief from any personal liability.  From the whole evidence advanced towards me during the proof, I consider that the defenders acted both honestly and reasonably in their administration of this estate.  I appreciate that that finding runs contrary to the comments made by Mr Macfie in his report to the court dated 11 October 2000 at page 11 and 12 where he summarises six points all of which relate to the acting’s of the executors up to September 1989.  I am concerned with payments made by the defenders after that.  The executors were dealing with a highly complex estate where every step was to the subject of potential and actual dispute by the beneficiaries.  As Mr Macfie pointed out it had suffered from the outset by the fact that the widow was an executor on the estate despite the obvious conflict of interest she had in respect of her being a tenant under the lease and a former partner of the partnership.  In addition, it was clear from the evidence that Mr Jack Wilson took a somewhat high handed approach and acted not only without fully consulting Mr Pat Wilson but also on occasion in conflict with Mr Pat Wilson’s instructions.  Accordingly, Mr Pagan upon appointment, stepped into a highly charged situation which, I consider, he managed with commendable skill.  He also was careful to take the advice at all critical stages from members of the Bar.  Short of giving in to all the demands of the children, nothing the executors could have done would have satisfied them.  In that event, the widow would, no doubt, have taken steps to challenge decisions benefiting the children.  The outcome of the mediation appears to have been agreed to by the children at the time and, as stated above, from Mr Williamson’s detached perspective some years later, it appeared to him that the children had not done badly out of that settlement.  For the reasons given by Mr Clark QC I would have granted the relief sought under section 32 of the 1921 Act. 

[133]    Reliance was also placed by Mr Clark on the “indemnity” which the children had given contained in the Discharge (3/938).  However, he recognised that the indemnity was in respect of all claims and demands which might be made against the defenders in connection with the shares of the executry estate of the children.   The pursuer had specifically departed from her claim that funds paid to the children of £68,000 each should be recovered from the defenders.  In those circumstances, I do not consider that I should express a view about the effect of that indemnity. 

 

Prescription
[134]    Mr Clark QC also advanced submissions to the effect that some of the pursuer’s claims had, in any event, long since prescribed.  He accepted that the claim for fruits of occupation had not done so since that matter was the subject of a claim in the original summons raised by Mr Macfie in December 2003.  He submitted that in 2007 the pursuer expanded this action to include the present defenders but it can be seen from the original summons (3/1141) that both the defenders were included.  However, that summons did not include averments about the payment of £100,000 to the widow in 1997.  It was directed towards the actings of Jack Wilson and Pat Wilson in paying sums to the children and widow between April 1987 and April 1990.  It also contained averments in condescendence 12 about the failure to the present defenders to ingather the £145,000 paid by the widow to the children on the basis that £45,000 represented the fruits of occupation and the balance was “an over-payment by the estate to Mrs Ann Clark for vacant possession” of the farms.  It was argued that the pursuer’s claims were subject to the five year prescriptive period in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973.  They were obligations on the defenders as executors to make reparation to the estate for breach of trust (see Schedule 1 paragraph 1(d) and (f)).  They were not imprescriptible in terms of schedule 3 since no claim was made to produce accounts or to make reparation for fraudulent breach of trust.

[135]    Had I found in favour of the pursuer, I would have concluded that the claims in respect of the fruits of occupation and the claim in respect of failure to ingather the sums paid by the widow to the children in 1997 had not prescribed since they were both contained in this action as originally raised.  However, the claim in respect of the payment of £100,000 by the defenders to the widow was not included and I would have found that it had prescribed. 

Disposal

[136]    In the circumstances, I will repel the pursuer’s pleas in law and sustain the defenders’ first, second and third pleas in law.  I will dismiss the action.  I will reserve meantime all questions of expenses.