United Kingdom House of Lords Decisions

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Cite as: [1797] UKHL 3_Paton_571

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SCOTTISH_HoL_JURY_COURT

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(1797) 3 Paton 571

CASES DECIDED IN THE HOUSE OF LORDS, UPON APPEAL FROM THE COURTS OF SCOTLAND.

No. 106

Peter Paterson, Esq. of Merryflats, and Archibald Campbell, Merchant in Greenock, surviving trustees, nominated and appointed by John Paterson of Castlehill, and John, Peter, James, and Agnes Patersons, children of the said John Paterson, Appellant

v.

John MacCaul, Merchant in Glasgow, Trustee upon the Sequestrated estate of the said John Paterson, and Wm. Craig and Others, Creditors of the said John Paterson, Respondents

House of Lords, 6th June 1797.

Subject_Trust Deed — Delivery — Simulate — Reduction of Deed in fraudem creditorum. —

Circumstances in which a trust deed, granted merely for the purpose of conveying his property to his children, and distributing it amongst them at the granter's death, upon which infeftment was immediately taken, was held to be reducible at the instance of subsequent creditors upon his bankruptcy, seven years thereafter, though not challenged under the statutes, but at common law.

April 24, 1786.

John Paterson of Castlehill, of this date, executed a trust deed in favour of the appellants, upon the narrative, “That the children of the marriage procreated, and existing between me and the deceased Mary Sommerville, my spouse, are still unprovided for by me, in a sufficient share of my estate, to which they have good right, from the subjects I have received belonging to their mother, and that it is my intention that those children should be suitably provided out of my estate.” Therefore he disponed to the appellants, as trustees and fiduciaries “for the use and behoof of John, William, Peter, James, and Agnes Patersons, ray children lawfully procreated between me and the deceased Mary Sommerville, all and hail that piece of land called Castlehill,” and certain other lands therein enumerated.

The reservations and purposes of the trust were thus declared:—

“Reserving always my liferent of the subjects above disponed. But these presents are granted for the
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ends and purposes after specified, namely, that the trustees shall, after my death, dispone and convey to my eldest son, his heirs and assignees whomsoever, and in case of his death without lawful issue, to my eldest son then existing, his heirs and assignees, the lands of Castle hill.”

He then directed his trustees to sell and dispose of “all his other heritable subjects above disponed by public or private sale, and to divide the proceeds of the same equally among my whole children, which shall be existing at the time of my death.”

The deed contained an obligation to infeft, and a procuratory of resignation and precept of sasine in common form, and the appellants were infeft upon it accordingly.

Dec. 17, 1793.

John Paterson of Castlehill, thereafter became bankrupt, and was sequestrated of this date, and the respondent MacCaul, was appointed trustee on his bankrupt estate.

The present action was a reduction brought by the respondents, to set aside and reduce the above deed, on the following grounds:—1st. That the conveyance was a simulate deed, not expressing the real views and intentions of the grantor, but intended merely as a pretence to enable him to settle upon more favourable terms with Agnes King, a woman who pretended to be his wife. 2d. That the trust conveyance for behoof of the children was never legally delivered, and the infeftments taken thereon were improperly and surreptitiously taken, without the authority or knowledge of the grantor. 3d. That the deed, supposing it to have been legally delivered, and seriously intended to convey what it expresses, was an alienation in fraudem creditorum.

Stair's Decisions, July 2, 1673; Reed v. Reed, Dec. 4, 1673.

In defence to this action, it was answered:—1st. That there was no legal evidence on the face of the deed itself, to show that it was a simulate deed, and merely to affect the claims of Agnes King upon him, 1st, because it did not convey the whole estate. It reserved it entire to himself in liferent; and, 2d, because if Agnes King made good her claim of being his wife, the infeftment taken would, in that case, not defeat her terce or dower, because she would be entitled to her terce upon all lands in which John Paterson was infeft, previous to granting that deed. 2d. In the next place, the deed was a properly delivered deed, given and left in the hands of John Maxwell, writer, Glasgow, who was agent as well of the grantor as of the grantees, and where the deed is in the hands of one who is the agent for

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both, it is presumed to have been delivered for behoof of the grantees. In the second place, it is impossible to say that a deed has not been delivered, on which sasine has been given, and the instrument of sasine duly recorded. Further, the consent of John Paterson was not necessary to this infeftment, as that was conclusive from his leaving it in the hands of the grantee's agent, with the usual clauses for infeftment. 3. The deed was not granted to the prejudice of prior creditors, for the grantor then owed no debts, or if he did, they have been all since paid, and the debts of the creditors who now reduce this deed, were contracted five or six years after its date; neither was it granted in contemplation of bankruptcy, for the deed is dated in 1786, and the bankruptcy took place in 1793. At the time the deed was granted, John Paterson was perfectly solvent. The case of Street v. Mason, founded on by the respondents, instead of being against, is in favour of the appellant, as showing that the deed is not impeachable as in fraudem creditorum.

Jan. 26, 1796.

Feb. 4, —

Feb. 26, —

Nov. 15, —

The Lord Ordinary, of this date, pronounced this interlocutor:—

“Reduce, decern, and declare, in terms of the libel.”

And, on representation, his Lordship adhered. And on petition to the whole Lords, the Court adhered to the interlocutor of the Lord Ordinary. ^*

Against these interlocutors the present appeal was brought to the House of Lords.

Pleaded for the Appellants.—1st. The deed was not simulate in any one degree, except as to Agnes King, and therefore must receive effect to every other purpose, and in particular, as regards the respondents, who challenge it. 2d. Because there is every legal presumption of the deed having been delivered, both from the general rule of law in regard to deeds executed according to the form of law of Scotland, which throws it upon the respondents to show that it was not delivered, but which they have not done; and also from the fact of its having been deposited with a person who was agent both for the grantor as well as the grantees; in which case, the presumption is, that it is delivered to him as agent for the grantees. And what makes

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* Opinions of Judges:—

Lord President Campbell.—“This was evidently a mortis causa deed, and cannot be sustained against creditors. Vide Dictionary, voce “Fraud,” case of Stewart v. Mason. Mr. Paterson showed his own sense

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this delivery more conclusive, is, that sasine was taken upon the conveyance, and the instrument duly recorded, which precludes the possibility of saying that the deed was not a delivered deed. Whether the infeftment was taken with or without the consent of the grantor, makes no difference, for he had bound himself in the deed to give sasine, by granting his authority to that effect. 3d. The deed, further, was not granted in defraud of prior creditors, nor granted in contemplation of bankruptcy, nor has any special act of fraud been stated or proved, to support such a ground; and yet, upon the authority of the cases upon which the respondents have relied, fraud must both be stated and proved.

Muirhead of Bradisholm and her Son v. Muirhead, Fountainhalls, Dec. 26, 1986. Ross v. Mackenzie, affirmed in the House of Lords, 29th April, 1776. App. to this vol.

Pleaded for the Respondents.—1st. The trust deed was a simulate deed, not expressing the real object and intention of the grantor, but intended merely as a pretence, to enable him to settle upon more favourable terms with Agnes King, or at least was not intended to be effectual, unless he prevailed on her claims. Had she prevailed in making good her claim, she would have been entitled to a share in his estate, and this deed was granted to disappoint that object. The deeds executed by persons about to engage in rebellion, conveying their estates to their next heirs, to save forfeitures, have always been reduced as simulate, or not meant to take effect, unless the forfeiture took place. Here the risk wished to be avoided never took place, because Agnes King's claim was finally settled and bought off, leaving rights to stand as before this deed was executed. 2d. The trust-deed was never legally delivered, and consequently cannot be effectual to the grantees or donees. 3d. The trust-deed was farther reducible, as being in fraudem

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of the matter, by cutting his name from the disposition. The deed, besides, was executed for a particular purpose, and not a fair one at the time. When that object ceased, the trustees wished to make another use of it, which was equally unfair. I am for refusing the prayer of the petition.”—“I adhere to the former interlocutor.”

Lord Justice Clerk.—“I am for adhering. This is an unilateral deed, and no other was meant to have a jus quesitum in it. It was put into the hands of his own doer, who had no authority to take infeftment for delivery, but only for making it a real right. The deed remained still in his own power.”

Lord Polkemmet.—“Of same opinion.”

Vide President Campbell's Session Papers, vol. lxxxiii.

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creditorum; and gratuitous alienations of this kind, it will not be disputed, may be set aside by creditors whose debts were contracted previous to such alienations, if they have been made with a fraudulent design. The design here was fraudulent, because, when the bankrupt executed this deed, he had no personal funds, and he could not be allowed to lock up his property, and at same time embark in trade, without making the design apparent. Mr. Paterson was trusted by his creditors, on the faith that his estate was still his, and not conveyed away to his children; and, therefore, although the conveyance may not be reducible upon any of the statutes, it is reducible at common law, which upon this point is founded on the most obvious principles of justice. Stair's Decisions, Street and Jackson v. Mason, 2d July 1763; Reed v. Reed, 4th December 1673.

After hearing counsel,

It was ordered and adjudged that the interlocutors complained of be affirmed.

Counsel: For Appellants, Sir J. Scott, M. Nolan.
For Respondents, Wm. Adam, John Clerk.

1797