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Cite as: 2018 GWD 27-339, 2018 SLT 877, 2019 SCLR 599, [2018] CSOH 88, [2018] ScotCS CSOH_88

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OUTER HOUSE, COURT OF SESSION

[2018] CSOH 88

PD150/16

OPINION OF LORD CLARK

In the cause

MARY FORBES AND OTHERS

against

ENOS McLEAN

Pursuers

Defender

Pursuer: D I McKay QC, McNaughten; Digby Brown LLP

Defender: N McKenzie; Clyde & Co (Scotland) LLP

24 August 2018

Introduction

[1] In this action, the widow, four children and three grandchildren of Mr Frederick

Forbes seek damages under section 4(3)(b) of the Damages (Scotland) Act 2011. There are

also claims for loss of support and loss of personal services. Mr Forbes died on 24 December

2014, as a result, the pursuers aver, of his exposure to asbestos dust and fibres and his

consequent development of mesothelioma.

[2] The pursuers sue the defender is his capacity as the executor on the estate of his late

father, Enos McLean (Senior),who was a partner in a now dissolved partnership (“the firm”)

which carried on business as painters and decorators. The pursuers aver that Mr Forbes

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worked for the firm from about 1957 to about 1964 and that he was exposed to asbestos

during the course of his employment with the firm.

[3] The pursuers’ averments go on to state:

“The defender is sued as executor of the estate of the late Enos McLean (Senior). On

2 September 1994 the defender was confirmed in the Court Books of the

Commissariot of Tayside, Central and Fife at Dundee as Executor of the late Enos

McLean (Senior). The pursuers sue the defender for the purposes of constituting a

claim against the estate of the deceased Enos McLean (Senior).”

[4] The defender’s averments in answer include the following:

“Any liability that the defender may have had as Executor did not extend beyond the

estate committed to his charge. As Executor, the defender was eadem persona cum

defuncto. In any event, an Executor’s office is terminated once the whole estate has

been administered without the need for discharge. Explained and averred that the

entire estate was distributed and the administration of the estate completed in or

around March 1995. At the same time, the defender’s office as executor to the estate

of the late Mr McLean (Senior) terminated. The defender is no longer executor to the

estate of Mr McLean (Senior) and his estate is no longer extant. The pursuers are

called upon to aver the basis upon which they assert that the defender continues to

be Enos McLean Senior’s [sic] Executor. Their failure to do so will be founded upon.”

[5] The defender sought dismissal of the action on the grounds that the pursuers’

averments were irrelevant et separatim lacking in specification. The case called before me on

the procedure roll, for debate. The central issue raised at the debate was whether a relevant

claim was made against the defender in his capacity as executor, if the estate had been

ingathered and distributed and he had been discharged as executor.

Submissions for the defender

[6] The submissions advanced for the defender can be summarised as follows. The

pursuers’ case was irrelevant and lacking in specification and should be dismissed. Any

liability on the part of the late father of the defender had ended when the estate was

distributed to beneficiaries under his will. This occurred long before the present action was

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raised. The pursuers’ claim was bound to fail. As executor, and being eadem persona cum

defuncto, the defender merely stood in the shoes of his late father. What happened after

confirmation was granted on 2 September 1994 “was lost” to the defender. It could however

be presumed, given the passage of time, that debts were paid and the remainder of the estate

was distributed. On that assumption, the estate was gone and nothing remained. The claim

being made by the pursuers was an illiquid claim against the defender as executor. But his

office had come to an end on distribution of the estate, in accordance with the usual practice.

Reference was made to Johnston’s Executor v Dobie 1907 SC 31. A formal discharge by the

beneficiaries was not necessary for the office to come to an end.

[7] The question of the liability of discharged testamentary trustees had been raised in

several cases arising from the failure of the City of Glasgow Bank in 1878. One such case was

Assets Co Ltd v Falla’s Trustee (1894) 22 R 178, in which Lord Kyllachy had held that it was not

incompetent to sue even a discharged trustee for the purposes of constituting a claim against

the estate. On appeal, this view had been endorsed by the Inner House. However, in Assets

Co Ltd v Bain’s Trustees (1904) 6 F 692, after proof, Lord Kyllachy had analysed the matter in

more detail and concluded that he had expressed the wrong view in Assets Co Ltd v Falla’s

Trustee, which view had gone uncorrected by the Division. Lord Kyllachy had explained that

discharged trustees were functi officiis and that a decree cognitionis causa tantum could be

brought against an heir but not against a former trustee. Any decree against the trustees was

not enforceable against them, nor would it assist in a claim against the beneficiaries, who

could be sued directly. The decree sought was held by Lord Kyllachy to be both unnecessary

and futile. The reclaiming motion was heard by a court of seven judges and, while it was

correct that the majority concluded (by four to three) that the trustees in that case could be

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sued for the purpose of constituting a claim against the estate, it had to be recognised that only

the Lord President had expressed the view that this could occur even where all of the assets of

the deceased had been ingathered and distributed. Lord Trayner, with whom two of the other

judges in the majority agreed, had explained that the pursuers claimed that some of the assets

of the estate remained extant and were still to be ingathered and distributed. The trust had

therefore not come to an end. The trustees remained vested in that part of the estate. This

should be viewed as part of the ratio decidendi of the decision of the majority. On appeal to the

House of Lords, it was correct that the focus was on other aspects of the claim, in particular

the contention that assets had been fraudulently concealed by the now deceased person. The

question of whether any part of the estate remained extant was not discussed nor was the

issue of whether discharged trustees could properly be sued. However, there were

expressions of view by the judges in the House of Lords to the broad effect that the judgment

of the Lord Ordinary was sound, as was that of the dissenting judges in the Inner House. It

could therefore be concluded that the views reached by the Inner House in Assets Co Ltd v

Falla’s Trustee and in Assets Co Ltd v Bain’s Trustees were unsound.

[8] The defender here was not raising an issue of competency. It was a question of

relevancy. Lord Kyllachy’s views in Assets Co Ltd v Bain’s Trustees after proof, expressed on

reflection, were correct. The conclusions in the present case were in the ordinary form,

seeking payment from the defender as executor. But no such decree could be enforced

against him. The defender is a man in his eighties. If he were to die, it could not be correct

that his executor would be open to an action by the pursuers on the same basis as currently

claimed against him. As was made clear in Ainslie v Ainslie 1886 14 R 209, the liability of an

executor is limited to the amount of the estate and otherwise he is simply a debtor. The

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decision of the majority in the court of seven judges in the Inner House in Assets Co Ltd v

Bain’s Trustees, if taken to apply to discharged trustees, was inconsistent with the underlying

principle that following discharge, trustees have no continuing liability or duty. But the

views of the majority were in any event restricted to circumstances in which the estate had

not been fully ingathered and distributed.

[9] The pursuers made no averments about the existence or otherwise of a discharge of

the defender as executor. They did not suggest that he was being sued cognitionis causa

tantum. The conclusions were not restricted to him in his capacity as executor. Any decree

pronounced against the defender would therefore be unrestricted, whether as to his capacity

as executor, or by being a decree cognitionis causa tantum or by limiting decree to the extent

of the deceased’s estate. On the assumption that the estate had been distributed, these

conclusions were all futile.

[10] The defender’s liability as a former executor had come to an end. If the pursuers

were correct, it existed in perpetuity. In any event, the facts of the present case differed from

the facts in the authorities founded upon by the pursuers, which primarily concerned

questions of fraud.

Submissions for the pursuers

[11] The submissions on behalf of the pursuers can be summarised as follows. The

pursuers offered a proof before answer on the whole averments on record. The pleadings

made clear that the purpose of the action was to constitute a claim against the estate of the

deceased, who was a former partner in the firm. The defender had averred that the entirety

of the estate had been distributed, although in oral submissions it was said that what had

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happened to the estate had been “lost to us”, that is, that it was not known what had

occurred. In essence, an assumption of ingathering and distribution of the estate was being

relied upon, but the court could not make that assumption. The pursuers did not admit that

the estate had been ingathered and distributed and that issue, and the concomitant question

of implied discharge, was therefore a matter for proof. In Assets Co Ltd v Falla’s Trustee Lord

Kyllachy had allowed a proof about the effects of the alleged express discharge. In the

present case the pursuers were on stronger ground: no express discharge was founded upon.

For that reason alone, a proof before answer had to be allowed.

[12] In the case of Assets Co Ltd v Bain’s Trustees, there was again an express discharge.

The House of Lords had restricted its analysis to the issue of whether there was fraudulent

concealment of assets. The issue of the competency and relevancy of a claim against

discharged trustees was simply not discussed. The speeches in the House of Lords did not

disagree with or disapprove of the views expressed by the majority in the court of seven

judges in the Inner House. As to the judgement of Lord Kyllachy, the pursuers in the

present case were still entitled to a proof on the question of discharge. That was the case

even if for some reason the House of Lords was taken to have overruled the majority view.

But it had not done so. The ratio decidendi of the decision in the Inner House was binding,

whether or not the executor had been discharged.

[13] The facts of the present case differed from those in the cases of Assets Co Ltd v Falla’s

Trustee and Assets Co Ltd v Bain’s Trustees. The present claim was based upon events in 2014.

It was surprising to hear the pursuers’ claim described as futile. An employer required to

have employers’ liability insurance. There was such cover in respect of the firm, which had

employed the deceased and in which the defender’s father had been a partner. Decree of the

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type sought would not by any manner of means be futile. It was in fact necessary in order to

invoke a claim against the insurers.

[14] The decisions of the Inner House in Assets Co Ltd v Falla’s Trustee and Assets Co Ltd v

Bain’s Trustees, to the effect that even a discharged trustee could be sued for the purposes of

constituting a claim, were binding upon this court. That this was the law was confirmed by the

references to these cases in leading texts, which supporting the proposition that an executor,

even if discharged, can be sued. Reference was made to the section in the Stair Memorial

Encyclopaedia of Scots Law (re-issue) on Trusts, Trustees and Judicial Factors (para 216) and to

Wilson and Duncan, Trusts, Trustees and Executors (at 449), which stated, in reliance upon Assets

Co Ltd v Falla’s Trustee, that a pursuer can sue in order to constitute a claim against the estate

even where the trustee has been discharged.

[15] If the action in the present case was successful, the insurers would pay out. The

situation was not unlike that of restoring a dissolved company to the Register of Companies

in order to bring proceedings such as the present. In effect, that was what was sought:

restoring the executry. The purpose was not to claim against the beneficiaries, but rather to

constitute a claim against the estate so that the insurers would require to meet it. It may be

correct that in a question with the beneficiaries a discharged trustee is functus, but that was

not the point of the present action. Cases such as Johnston’s Executor v Dobie and Ainslie v

Ainslie were not in point. The pursuers in the present case could not possibly have made a

claim at the time of the executry being in process.

Reply for the defender

[16] It was the winding up of the estate, by distributing the assets, that was important.

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There was a presumption of regularity and hence that this had occurred. The question of

insurance was res inter alios acta. What was sought here was an open decree. The position of

a dissolved company differed from that of an executor. Where the employer of a deceased

person who had been exposed to asbestos had been a partner in a firm or a sole trader, there

was no remedy equivalent to that of restoring a dissolved company to the register of

companies. This was an accident of the rules on limitation of actions. The sole purpose of

an executor was to distribute the estate and his liability was limited to the value of the

estate. These were important factors.

Decision and Reasons

The central issue

[17] The present case focuses on the discrete legal point as to the relevancy of the claim

made against an executor, who avers that he has been discharged, for the purposes of

constituting a claim against the estate of the deceased. That is the point of law in issue.

There is, however, a wider practical and policy question, which was adverted to briefly in

submissions, the answer to which flows from the decision on the legal point in dispute. It is

this: where an employee claims to have suffered personal injury at the time of his

employment and the employer was either a partner in a partnership or was a sole trader,

who has died, can the former employee (or his family members if he is also now deceased)

sue the executor of the former partner or sole trader, perhaps long after the executor has

ingathered and distributed the estate, as a means of seeking to cause the insurers under the

employers’ liability insurance policy to meet the claim?

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[18] If the injured person was employed by a company which was later dissolved, the

company can of course be restored to the Register of Companies for the purposes of

proceedings being raised. It was implicit in the pursuers’ position that, where the employer

was a partnership or a sole trader, the law should allow proceedings to be taken against the

former executor of a deceased partner in the partnership or of the deceased sole trader, because

otherwise there would be a potentially significant lacuna in the provision of means of redress

under Scots law. That point is, however, of no direct relevance to the legal analysis. The central

issue before me is simply whether or not Scots law recognises a remedy against an executor in

circumstances such as the present, albeit solely to constitute a claim against the estate.

Should the central issue be decided only after proof?

[19] The pursuers also contend that this case must in any event be appointed to a proof

before answer because the pursuers do not admit (indeed they deny) the defender’s averments

that the estate has been distributed and that the defender had impliedly been discharged as

executor some years ago. The question therefore arises as to whether, if I accept this contention

of the pursuers, I should simply fix a proof before answer and express no view on the central

issue argued before me, leaving that matter to the judge hearing the proof. I have concluded

that this is not the course I should take. It is true that there is a factual dispute as to whether or

not the executry is at an end, but there is an overarching argument to the effect that the result of

the factual dispute does not matter. It seems to me that it is only if the overarching dispute is

resolved in favour of the defender that the secondary issue arises as to whether proof on the fact

of discharge should be fixed. I say more later about this secondary issue, but I will deal firstly

with the central issue.

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The authorities

[20] There are certain key cases which assist in dealing with the central issue. Assets Co

Ltd v Falla’s Trustee (on occasion referred to in the plural, as Falla’s Trustees) is the first of

these cases. In terms of the City of Glasgow Bank (Liquidation) Act 1882 all assets belonging

to or vested in the bank or its liquidators were transferred to and vested in Assets Co Ltd.

The company raised an action against the sole surviving trustee of the deceased, Robert

Falla, seeking reduction of an agreement and discharge executed by Mr Falla and the

liquidators of the City of Glasgow Bank in 1879 and for count, reckoning and payment. The

basis upon which these remedies were sought was that the discharge of Mr Falla had been

granted in reliance upon and on condition of the truth of certain statements made by him as

to the extent of his means and estate and that it had subsequently become clear that he had

fraudulently concealed several important assets. The defender averred that the estate had

been distributed, conform to discharges of the trustee, which were produced. Thereafter,

the pursuer raised a further action for reduction of the agreement and discharge granted by

Mr Falla against the beneficiaries on the estate of Mr Falla. The two actions were conjoined.

In his opinion, the Lord Ordinary made the following observations (at 179):

“Now, I am not sure that, upon the materials before me, I could without inquiry

affirm the fact on which the defence rests. But I do not find it necessary to consider

that question, because I am of the opinion that, even if the fact be as the trustee

states, the action is not incompetent, at all events as an action for constitution. The

trustee may of course defend upon the merits, or abstain from defending as he

chooses; but I am not prepared to say that it is incompetent to sue even a discharged

trustee for the purpose of constituting a claim against the trust-estate.”

The defenders reclaimed and argued inter alia that the action against the trustee was

incompetent. They argued that the trust estate had been distributed and the trustee discharged.

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The defender was sued as trustee but no longer held that office. Constitution of the debt against

the trust-estate was not necessary. The beneficiaries into whose hands the estate had passed

could be sued directly. The Inner House refused the reclaiming motion. The Lord President

(with whom the three other judges concurred) agreed with the Lord Ordinary and stated

(at 181):

“…I think the reclaimers exaggerate the importance of the conclusion against the

trustee, for he is brought into the action only as a trustee to see something being done

with the trust-estate. It is for him, as the Lord Ordinary says, to consider whether he

will appear to defend or not, but to say that it was in any way incompetent for the

pursuers to call him appears to me to be out of the question.”

This case therefore provides authority, albeit without very detailed reasoning, for the

proposition that the present claim is competent.

[21] In Assets Co Ltd v Bain’s Trustees (1904) 6 F 676 and 692, and Assets Co Ltd v Phillips’

Trustees (1904) 6 F 754, the pursuer again sued testamentary trustees seeking reduction of

discharges granted by the liquidators to contributories, who, it was averred, had failed to

disclose the existence of certain properties in the statements of assets they had provided prior

to the discharges being granted by the liquidators. The two cases gave rise to three reported

decisions of relevance for present purposes. The first of the three reported decisions, reported

at (1904) 6 F 676, was issued following an appeal to the Inner House after a debate. The

Lord Ordinary (Lord Kyllachy) had, following the debate, sustained the first and second

pleas-in-law for the defenders in Assets Co Ltd v Bain’s Trustees and granted absolvitor. The

first plea was to the relevancy of the action and second was that the pursuer was barred as a

result of mora and taciturnity. The Lord Ordinary had reached his conclusion principally on

the ground that a pursuer in a case such as that before him, which involved allegations of

fraud, must bring his case within a reasonable time. In his opinion, the Lord Ordinary did not

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consider the further plea by the defender that, having bona fide distributed the estate and

having been duly discharged as trustees, they should be assoilzied from the pecuniary

conclusions of the summons. The pursuers reclaimed.

[22] Assets Co Ltd v Phillips’ Trustees raised issues of a similar kind, except that the defenders

in that case had never been discharged or divested of their character as trustees. In that action,

the Lord Ordinary (again Lord Kyllachy) allowed a proof before answer. The defenders

reclaimed.

[23] The reclaiming motions in the two cases were heard and advised together by the

Second Division, which allowed a proof before answer in both cases. The Lord Justice Clerk

stated (at 686):

“…the case of Falla’s Trustees seems also to be conclusive upon the question whether

trustees who have been discharged can be called in such an action.”

To that extent, this decision of the Second Division supports the decision reached in Assets Co

Ltd v Falla’s Trustee. However, this issue was not referred to by the Lord Ordinary and similarly

was not touched upon in the opinions of the other judges in the Inner House (Lord Young,

Lord Trayner and Lord Moncreiff). The two actions then proceeded to proof.

[24] The cases were then heard together in conjoined proofs on the merits by the

Lord Ordinary (Lord Kyllachy) and then advised separately. In both cases, the Lord Ordinary

assoilzied the defenders and the pursuer then reclaimed. In Assets Co Ltd v Bain’s Trustees the

decision of the court of seven judges who heard the reclaiming motion is reported at (1904) 6 F

692 (the opinion of the Lord Ordinary being set forth at page 694 et seq). By a majority of four to

three, the court held (per the Lord President, the Lord Justice-Clerk, Lord Adam, and

Lord Trayner) that the reclaiming motion should be allowed and that (reversing the judgment

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of Lord Kyllachy) the action was competent in order to constitute a claim against the trust-

estate. Lord Young, Lord Kinnear, and Lord Moncreiff dissented.

[25] The reasoning of the Lord Ordinary can be summarised as follows. The trustees had

established that they had long since ceased to have any connection with the trust-estate, which

had been administered and distributed. An extrajudicial discharge had been granted by the

whole of the beneficiaries. The former trustees were functi officiis and the remedy of a creditor

was to proceed directly against the beneficiaries. The pursuer did not dispute these points

and disavowed any intention to establish any personal liability against the trustees. The

decree would not be enforceable. A decree of constitution cognitionis causa tantum was only

appropriate in different circumstances. The pursuers were not entitled to decree. The decree

sought would be unnecessary and indeed futile. Turning to the views he had expressed in

Assets Co Ltd v Falla’s Trustee, he said (at 696-697):

“And, indeed, I doubt whether the contrary would have been seriously maintained

were it not for a supposed decision of the point in the case of the Assets Co. v. Falla's

Trustees 22 R. 178, or perhaps rather for a gratuitous and, I am afraid, not well-

considered observation in my own judgment in that case—an observation not

essential to the judgment, but which somehow escaped correction in the Inner-

House…

But as regards the substance of the defence founded on the discharge, what

happened was this: I held that the admission of the discharge was insufficient, and

accordingly allowed a general proof, and to this the Inner-House adhered. But I

appear to have added that, even if the discharge was admitted, the decree asked

against the trustees might still be granted as a decree of constitution. And this, as I

think unfortunate observation, although not adopted, was not corrected in the Inner-

House. That is really the whole foundation for the pursuers' contention that the point

now in question was decided in the case of Falla.”

In short, the Lord Ordinary recanted on the views he had expressed in Assets Co Ltd v Falla’s

Trustee and now took the view that where trustees had been discharged they could no longer

be sued, even for the purposes of constituting a debt against the estate.

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[26] The Lord President did not agree with the Lord Ordinary’s reasoning, and said

(at 704):

“… it is to be observed that the pursuers do not ask any decree for payment against

the testamentary trustees of Mr Bain personally, but merely desire to have the sum

sued for constituted as a valid debt against his testamentary trust-estate. Where the

representatives of a deceased person have taken no steps to have themselves

confirmed, or where they have renounced the succession, the pursuer of an action

against them may restrict his claim to a decree cognitionis causa tantum, which gives

him a right to attach the estate of the deceased person, but imposes no personal

obligation or liability upon the defenders— vide Forrest v. Forrest 1 Macph. 806. In that

case the pursuer restricted his demand to a decree cognitionis causa tantum, and

obtained decree in terms of the conclusions of the summons as so restricted. I think it

may be correctly stated as a general proposition that a person is entitled to bring an

action of constitution against the representatives of his debtor, for the purpose of

establishing the liability of his (the debtor's) executry estate for a money claim, even if

he, (the pursuer), may be unable to obtain a decree for payment against these

representatives. The fact of a testamentary trustee having resigned, or executed the

trust, does not, in my judgment, deprive a creditor of this right, although other

remedies, such as confirmation as executor creditor, may possibly be open to him. It

is to be kept in view that both the defenders, the testamentary trustees of Mr Bain,

and Mr William Bain junior, as an individual, appeared and lodged defences in the

present action, but neither the trustees nor Mr William Bain junior pleaded that the

action is incompetent as directed against them respectively.

The defenders suggest that the proper course for the pursuers was to sue the

beneficiaries of Mr Bain directly, and it may be that they could follow the funds, (if

they are extant), into the hands of any gratuitous taker, but these beneficiaries would,

doubtless, have pleaded that they knew nothing as to the facts alleged by the pursuers,

and that, having received the funds in bona fide from the persons authorised to

administer them, they were not liable in accounting and payment. The most obvious

and natural course seems to me to be the one which has been followed, of proceeding

against the testamentary representatives of Mr Bain, into whose hands the funds, ex

hypothesi, came, and who are the proper persons to account for their disposal. In this

connection I may refer to the case of the present pursuers v. Falla's Trustees 22 R. 178 in

which it was held, (affirming the judgment of Lord Kyllachy), that it is competent to

sue a trustee who has distributed the whole trust-estate, and been discharged by the

beneficiaries, for the purpose of constituting a claim against the trust-estate. The

beneficiaries can effectually discharge, or affect, their own rights, which have come to

them by the bounty of the testator, but they cannot, in my judgment, discharge or

affect the rights of creditors of the testator who claim not under, but against, his trust.”

[27] The Lord Justice-Clerk agreed with the Lord President stating that the opinion he had

formed was to the same effect, adding “and for the grounds of it I would refer to the opinion to

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be delivered by Lord Trayner”. Lord Adam also agreed with the reasoning of Lord Trayner,

who said:

“But that an action is competent against trustees who have been discharged, where

its purpose is to constitute a claim against the estate of the truster, has been in

terms decided in the case of Assets Company v. Falla's Trustees 22 R. 178. We were

asked (being a Court of seven Judges) to reconsider that decision. I have done so,

and see no reason to doubt its soundness. But it is unnecessary to discuss here

whether trustees who have been discharged on the fulfilment and termination of

the trust, can competently thereafter be called as defenders in an action based upon

the debt or obligation of the truster. The trust here has not come to an end.”

Thus, Lord Trayner expressed agreement with the decision in Assets Co Ltd v Falla’s Trustee

but also concluded that it was not necessary to deal with the point decided in that previous

case, as the trust in the case now being decided had not come to an end.

[28] As noted above, Lord Young, Lord Kinnear and Lord Moncreiff dissented. As

Lord Young put it (at 713), the pursuer’s claim was in effect:

“that by such intimation and this action following upon it, the trust, which for

thirteen years had been dead, as I think, or slumbering, as they might prefer to call

it, was revived, or awakened, and the defenders restored to sleepless life as

trustees destitute of estate, but with anxious and costly duties to be performed by

them at their personal and individual expense for behoof of the pursuers…”

The existence of a claim against trustees in the present context therefore meant that trustees

would be exposed to liability for a lengthy period. The dissenting judges were of the view

that the Lord Ordinary was correct to find that the defenders were under no liability as

trustees, because they had been discharged of all their trust obligations. That such a discharge

put an end to the trust was beyond question. There could be no liability to the residuary

legatees, because their own discharge was a conclusive answer to any demand at their

instance. There could be no liability to the truster's creditors, because the trustees had

divested themselves of the trust-estate. It would make no difference that there was a part of

the estate still outstanding.

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[29] In both Assets Co Ltd v Bain’s Trustees and Assets Co Ltd v Phillips’ Trustees the views of

the majority of the court of seven judges in the Inner House resulted in the grant of the

pursuer’s reclaiming motion and the allowance of a proof on the issue of undue concealment

of funds. Accordingly, the Lord Ordinary’s conclusion, after proof, in Assets Co Ltd v Bain’s

Trustees that the discharged trustees could not be held liable was overturned. In both cases,

the pursuers then appealed to the House of Lords. The decision of the House of Lords is

reported as Watt and others v Assets Co Ltd and Bain and others v Assets Co Ltd [1905] AC 317.

The author of the case report states that the only point of difference between the two cases was

that in the Bain appeal “the appellants’ trustees had long since paid over the whole estate in

their hands to the beneficiaries and been discharged from their office.” The case report goes

on to narrate that counsel for the appellants made this point in argument. However, this issue

is not referred to at all in the speech of the Lord Chancellor, with which the other four judges

concurred. The speech deals with the question of mora. While three of the concurring judges

endorsed the judgment of Lord Kyllachy, no reference is made to the issue of competency of

the claim against the trustees. The House of Lords allowed the appeals and restored the

interlocutor of the Lord Ordinary.

[30] The textbooks to which I was referred treat the central issue in the present case as

having been determined by the decisions in Assets Co Limited v Falla’s Trustee and the first of

the Assets Co Limited v Bain’s Trustees cases ((1904) 6F 676). In the Stair Memorial Encyclopaedia

of Scots Law (re-issue), on Trusts, Trustees and Judicial Factors, at paragraph 216, it is stated:

“Where a trustee has distributed the whole trust estate and been discharged by the

beneficiaries, it is competent for a creditor to sue him for the purpose of constituting

a claim against the trust estate.”

In Wilson and Duncan, Trusts, Trustees and Executors, at 449, Assets Co Limited v Falla’s Trustee

Page 17 ⇓

is founded upon to support the proposition that:

“A trustee who has been discharged by the beneficiaries can be sued in order to

constitute a claim against the trust-estate”.

[31] I am in no doubt that these propositions are supported by the cases founded upon. The

second of the decisions of the Inner House in Assets Co Limited v Bain’s Trustees (that is, the

decision of the court of seven judges which followed upon the proof) is not referred to in

support of the propositions in the textbooks. I assume the reason to be that, as is explained

above, it proceeded, so far as three members of the majority of the court were concerned, on

the basis that the pursuer offered to prove that the estate had not all been ingathered.

However, as I have noted, Lord Trayner expressed what might properly be regarded as the

obiter view that Assets Co Ltd v Falla’s Trustee had been correctly decided, with which two of

the other judges agreed and which accorded with the views expressed by the Lord President.

In view of the fact that this issue is not mentioned at all in the speeches in the House of Lords

on appeal, I cannot regard the broad endorsements by the judges in the House of Lords, of the

Lord Ordinary’s views, as including any specific endorsement of his departure from his earlier

view on the question of competency of the claim against discharged trustees. If the judgment

of the House of Lords was intended to overrule the decisions of the Inner House in Assets Co

Ltd v Falla’s Trustee and the point made by the Lord Justice-Clerk in the first of the Assets Co

Ltd v Bain’s Trustees appeals, that would have been made clear. It can therefore be said that

the second of the decisions of the Inner House in Assets Co Limited v Bain’s Trustees is not

directly authoritative on the issue in the present case. However, the other two decisions of the

Inner House (in Assets Co Ltd v Falla’s Trustee and the first of the Assets Co Ltd v Bain’s Trustees

appeals) are in my view conclusive and, moreover, are binding on me.

[32] That being so, there is no real point in analysing in any detail the views put forward

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by the Lord Ordinary and the three dissenting judges in the second of the Assets Co Limited v

Bain’s Trustees reported decisions. The decision was not directly relied upon by the pursuers

in the present action, other than in support of the proposition (the views on which, as I have

said, may properly be regarded as obiter) that a trustee could be sued even if discharged. In

particular, it was not averred or suggested that the claim on the employers’ liability

insurance policy in the present case represented an asset of the estate of the defender’s late

father which was yet to be ingathered. I was not addressed on the question of how, when,

and in respect of a claim by whom, the insurance claim or its proceeds was or might become

an asset of the estate. For example, I was given no information on whether the employer’s

liability insurance policy, as a contingent policy at the time of the death of the defender’s

father, had been confirmed by the defender as executor. I therefore make no observations

on any of these matters.

[33] In light of these points, questions remain, if the pursuers succeed, about the usefulness

and effect of any decision against the defender in the present action. In particular, such a

decision cannot be res judicata in a claim against the beneficiaries (the making of such a claim

being in any event, I note, disavowed by the pursuers). Whether it can assist in relation to a

claim against the insurers may depend on the points identified in the preceding paragraph.

Whether any issue arises as to the insolvency of the estate and thus about the availability of any

right under the legislation dealing with third party rights against insurers also remains to be

seen. I offer no view on these issues, not having been addressed on them in any detail. As

presently advised, however, I do not consider that I can conclude that the pursuers’ case is

either unnecessary or futile. Of course, if executors or trustees can be sued in that capacity

many years after their roles have, as they see it, terminated, that may be viewed as an

Page 19 ⇓

unfortunate burden facing such persons (although perhaps not quite as onerous as the

comments of Lord Young, noted above, suggest). However, all that the authorities founded

upon by the pursuers concern is the question of suing for the purposes of constituting a claim

against the estate and it may be that a person sued in that context would not see any need to

defend the claim. In a case such as the present, there is no question raised of any personal

liability on the part of the defender. Although this was not the subject of submissions, the short

point of principle might simply be that where the right to claim on an insurance policy formed

part of the estate when the executor was appointed, and a subsequent claim by a creditor of the

estate would allow such an insurance claim to be made, the estate has not been the subject of a

final distribution and a case such as the present can be brought to seek to assist in accessing the

rights under the policy.

[34] While the case law deals with testamentary trustees, I do not see any material

distinction between trustees and executors for the purposes of the issues raised in the present

case. Also, I am not persuaded (and indeed little was said on the point in submissions) that

the absence of any restriction in the instance to the claim, or the conclusions, as being directed

against the defender solely in his capacity as executor is of importance. No authority was

referred to in support of the point. In any event, the averments made by the pursuers make

the position clear. It is true that the principal authorities founded upon by the pursuers

apparently proceeded on the basis that the case made was not incompetent. However, I

consider that the observations in Coutts v Coutts 1866 4 M 802, at 803, apply also in a case such

as the present:

“Whether the action is irrelevant in one sense of the word, or in a strict view

incompetent, is a very nice question, because they run very much into one another.”

In my view, no sound reasons exist for concluding that the claim in the present case, which,

Page 20 ⇓

based on the authorities, is competent, can be said to be nonetheless irrelevant. I conclude

that the pursuers’ case is competent and relevant.

[35] I turn now to consider the pursuers’ contention on the secondary issue, that is, the

need for proof on the question of whether the defender has been discharged as executor. The

averments on this matter are set out above (paras [3] and [4]). As I have also noted above, the

defender’s position was qualified in oral submission to the effect that the discharge of the

defender as executor was implicit or to be presumed, given the passage of time, the details of

the executry being “lost”. The defender’s averments on these matters are met with a general

denial. While the pursuers have no specific averments to the effect that the executry is

continuing or that the estate has not been fully ingathered, it is (as the defender recognises in

his averments) the pursuers’ position that the defender is the executor. A discharge is

something expressly or impliedly granted by the beneficiaries and its effect in circumstances

such as the present is not something dealt with in the authorities to which I was referred. In

my view, if I was not with the pursuers on the central issue, it would be necessary for the

circumstances giving rise to the implicit or presumed discharge to be dealt with in evidence.

Once that evidence has been led, it would be necessary to hear submissions on whether the

executor has been discharged and the legal effect of such a discharge, where the issue at large

is a claim by a person who claims to have become a creditor of the estate and in respect of

whose claim the proceeds of an insurance policy may become available to the estate.

Accordingly, had I not been of the view that the pursuers’ claim against the executor, even if

discharged, is competent and relevant, I would have accepted the pursuers’ submission that

whether there has been a discharge and its legal effect in circumstances such as the present are

matters to be dealt with after proof.

Page 21 ⇓

Conclusion

[36] For these reasons, I shall refuse the defender’s motion to dismiss the action and I

shall appoint the cause to a proof before answer. In the meantime, I reserve all questions of

expenses.