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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> M'Farlane v Donaldson [1835] CA 13_725 (12 May 1835) URL: http://www.bailii.org/scot/cases/ScotCS/1835/013SS0725.html Cite as: [1835] CA 13_725 |
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Page: 725↓
Subject_Warrandice—Discharge—Agent and Client—Partnership.—
1. Five parties who were each entitled to one share of a trust-fund, granted a discharge, with mutual consent, and as taking burden for each other, “for their respective rights and interests,” with absolute warrandice,—held, that each was not liable to warrant the validity of the discharge granted by the others. 2. Held that a company of law-agents, and the individual partners thereof, were liable for the intromissions of one of the company, in the character of factor loco tutoris for minors, in respect that the accounts of the factor were not kept separate from those of the company, and that there were circumstances of neglect or concealment on the part of the company as to the defective title of the factor, which had led parties to place the funds of the minors in his hands.
The late Charles Donaldson conveyed his estate to the late William Macfarlane, W.S., and T. and W. Kennedy, as trustees, directing them to apply so much of the income as seemed proper for the maintenance of his family until the youngest should reach majority, after which to make up an account of the free trust-funds, and divide them equally, share and share alike, amongst his children then in life; declaring (inter alia), that the lawful children of any of his children deceasing should draw a share equal to that which the parent would have drawn if in life. The trustees accepted, and Macfarlane acted as agent and cashier.
_________________ Footnote _________________
* Mr Cunninghame took his seat within the Bar, as Solicitor-General, in room of Mr M'Neill, resigned. Mr John A. Murray also replaced Sir William Rae, Bart as Lord Advocate.
The youngest child attained majority on 16th April, 1826, at which time the parties entitled to the trust-funds were, Henry Donaldson of Liverpool, and John H. Donaldson of Leith, both sons of the testator; and three families of grandchildren by two deceased daughters, and by one deceased son, named Hamilton Donaldson. William Stewart of Shambelly, and the Reverend Dr Sommers, were, respectively, the fathers and administrators-in-law of the children by the deceased daughters.
In order to have a person appointed to act for the children of Hamilton Donaldson, a letter was addressed on 12th December, 1825, by Henry Donaldson and John H. Donaldson, to Macfarlane, “suggesting Mr Henry Low, W.S., of Messrs Low and Rutherford of Edinburgh, in whom we can trust every confidence, from the length of time of acquaintance and knowledge which we have had of him, provided he will undertake this situation, subject to the approbation of the mother of the children, and provided you acquiesce in this proposal. We have to request that you will make the necessary proposition to Mr Low at your convenience.” Mrs Hamilton Donaldson also agreed, that whoever should be approved of by Henry and John H. Donaldson, along with Macfarlane, should be appointed. Henry Donaldson wrote to Low in January, 1826, requesting him, on account of old friendship, to undertake the office of factor to the children. Low agreed to take the office; and a petition was presented, under the agency of Low and Rutherford, to the Court, in name of Henry and John H. Donaldson, and of Mrs Hamilton Donaldson, to appoint Low factor loco tutoris and curator bonis to her children. After the usual intimation, the petition was granted on 28th February, 1826, “the said Henry Low always finding sufficient caution before extract.” The appointment was intimated in the minute book, of which Macfarlane was keeper. In order to obtain an extract of the appointment, Low tendered a bond of caution, but the cautioner was objected to by the clerk, and Low found no other caution, so that an extract of the appointment was never obtained. In reference to the law agency connected with this appointment, Low and Rutherford, under the head of “Donaldson's Executors,” entered the usual charges.
With a view to paying over the trust-funds, a discharge was prepared by Macfarlane on the part of the trustees, to be signed by the parties receiving their respective shares of the trust-estate. Low and Rutherford made a charge in their books, under the above head, for meeting with Macfarlane as to the division of the trust-funds,—having explanations as to his trust-accounts,—and revising a draft of the discharge.
On 10th May, 1826, a scheme of division, specifying the share of each party, being exhibited by Macfarlane, a docquet was added, “approving thereof, and desiring the same to be carried into effect.” Low signed this, along with the other parties interested. An account-current, also prepared by Macfarlane, and showing a balance of £75 against him, was similarly docqueted and approved of, the sum of £15, as
The share belonging to each party respectively, was paid by Macfarlane, in terms of the scheme of division; and, in particular, the share belonging to the children of Hamilton Donaldson (which exceeded the sum of £2000) was paid to Low as their factor loco tutoris. Entries were made, under the head of “Donaldson's Executors,” in the books of Low and Rutherford, debiting themselves with receipt of £15, as their share of the balance which was paid over by Macfarlane; also a dividend on Bank of England stock, £51; a sum deposited by Macfarlane with Ramsay, Bonars, and Company, £130; and £560, being the children's share of a debt due by the City of Edinburgh, and uplifted by Low; besides other cash intromissions. Entries were also made crediting the company with letters written for the children, relative to the transference of their share, &c.
In 1830, while Low's factory still subsisted, he became bankrupt, and left the country, without having accounted to the children for their share of the trust-funds. They raised an action against Macfarlane and the other trustees, and also against Low and Rutherford, and the individual partners, concluding to have them found personally liable for the deficiency arising from Low's bankruptcy. The Court found the trustees liable. 1
Macfarlane died during the dependence of the process, leaving a trust-deed; and, at its close, his trustees raised an action of relief, both against Dr Sommers and the other parties who granted the discharge, in favour of Donaldson's trustees, and also against Low and Rutherford, and the
_________________ Footnote _________________
1 18th June, 1833, ante, XI.
In support of their conclusions against Dr Sommers and others, Macfarlane's trustees pleaded, * 1st, That as, by the terms of the discharge, the whole trust-fund was paid over to the beneficiaries, the children, or families of deceased children, of the testator; and as those parties, “with mutual consent, and as taking burden on us for each other,” approved of Macfarlane's whole intromissions, and acquitted him and the other trustees of all omissions, and bound themselves, with mutual consent, and taking burden as aforesaid, to warrant the discharge to the trustees “as a sufficient exoneration of the premises at all hands and against all mortals,” they were liable to free Macfarlane's trustees from the claim. And 2. That as the whole beneficiaries under the trust held out Low as a person possessing a complete title as factor loco tutoris, and some of their number were the petitioners for his appointment, Macfarlane was entitled to rely on the validity of Low's title, and must now be relieved from all loss in having transacted with Low on the faith of it. This was especially true, because, if these parties had not requested an extrajudicial settlement, Macfarlane would have wound up the trust by a process of multiplepoinding and exoneration, in which Low could not have uplifted the children's money without producing a title.
Dr Sommers and others answered, 1st, That as the whole fund was not paid to them as a body, leaving them to divide it, at discretion, among themselves, but each of the five parties had right to one share of the fund, which he received, and no more, the warrandice could not be extended to more than this; and, in reality, the discharge and relative warrandice were granted only “for our respective rights and interests.” Indeed, as several of the parties, including Low, acted for minor children, they could not have granted warrandice for any sum beyond their proper share; and no such warrandice was contemplated by any party. The others, therefore, were not liable to warrant the discharge which was granted on the part of Hamilton Donaldson's children by Low as their factor Loco tutoris. 2. It was the business of Macfarlane (a Writer to the Signet, and keeper of the minute-book which notified Low's appointment) to see that Low had a good title to uplift the minor's money before paying it. If he chose to pay it without seeing the extract of Low's appointment, it was at his own risk to do so, and he must bear the consequences. And it was denied that the division took place extrajudicially, owing to any request by the defenders.
In the question with Low and Rutherford, Macfarlane's trustees pleaded, 1st, As the company were employed as agents to carry through the appointment of Low as factor loco tutoris, made the regular charges
_________________ Footnote _________________
* One of the defenders, Mr Stewart, was assoilzied, in consequence of a separate compromise.
Rutherford, as an individual, and for the company of Low and Rutherford, answered, that Low had the sole intromissions, and directed all the agency which had taken place, and that he was ignorant of Low's title being incomplete until after his bankruptcy, which was quite unexpected to Rutherford, and left Low indebted in £1500 to the company; that the company, though the law-agents of Low in procuring the appointment, were not bound to see that Low found caution and procured an extract; that if the trustees were willing to take the risk of paying Low, without seeing his title completed, the company, as Low's agents, were not bound to interpel or warn them from doing so; and, if any claim of reparation could arise against them, it must be at the instance of Low's constituents, the children, and not of any antagonist party contracting with Low. 1 Besides, the intromissions by Low were in consequence of a trust-office held by him personally and individually, for which he alone was responsible. And even such intromissions as Low had entered in the books of the company to their debit, fell far short of the extent to which relief was claimed in this action.
The Lord Ordinary pronounced this interlocutor:—“Finds that, by the trust-deed of the deceased Charles Donaldson, dated in July, 1806, the late William Macfarlane, and certain other persons, were appointed trustees, for the purpose, inter alia, of dividing the whole residue of his fortune, after payment of his debts, among his children, upon the youngest child attaining majority, it being also provided that the lawful children of any of those deceasing should draw the share of their deceased parent: Finds that, upon the death of Charles Donaldson, in 1807, William Macfarlane, and certain of the other trustees, accepted the trust, the said William Macfarlane acting as cashier and manager: Finds that, upon the 16th of April, 1826, John Hamilton Donaldson, the youngest child, attained majority: Finds that, at that time, the children of Hamilton Donaldson, another of the testator's sons, who had died some time before, were under age: Finds that, with a view to the division of the funds, it was arranged among the parties that a curator bonis and factor loco tutoris should be appointed to the said children of
_________________ Footnote _________________ * The pursuers averred, that the company had a share in the profits arising from Low's appointment as factor, besides the emoluments of the law-agency connected with it; and they founded a separate plea upon this. Rutherford expressly denied this averment.
1 Wilson, June 20, 1826 (ante, IV. 732).
_________________ Footnote _________________
* “ Note.—The discharge granted to Donaldson's trustees by the parties interested in the succession is in very general terms, and contains a clause of absolute warrandice. But the discharge was prepared by the trustees, or by Mr Macfarlane, their manager, and himself a professional man, and in that discharge he inserted the name of Mr H. M. Low, as factor and curator for the minor children of Hamilton Donaldson. In such a case, it appears to the Lord Ordinary that the clause of warrandice, though perfectly effectual to protect the trustees in all the matters of accounting, on the supposition of Mr Low truly possessing the character which Mr Macfarlane, in framing the discharge, chose to ascribe to him, cannot, in sound construction, be held as a warrandice by the other parties interested to the trustees that he truly held that character—a point which they, the trustees, were bound to verify before they dealt with him as a party, and made over to him the share belonging to the minors.
“The other branch of this cause, viz. the claim by the pursuers against the company of Low and Rutherford, involves a question of some difficulty. There seems no reason for holding that Low and Rutherford acted as agents for Donaldson's trustees, and, therefore, the usual ground of liability against agents for blunders or omissions does not here exist. They were the agents of the minor children, and of Low, assuming the character of curator bonis for them, that is of the parties with whom Donaldson's trusties were acting; and it is maintained by Low and Rutherford, upon the authority of the case of Wilson, &c. against Riddel, 20th June, 1826, that, whatever claim a party may have against his own agent for the consequences of his professional mistakes and omissions, he has none against the agent of the party with whom he transacts. The present, however, is a special case, and it appears to the Lord Ordinary to warrant the application of a different principle from that which seems, upon very reasonable grounds, to have been adopted in the decision referred to. Messrs Low and Rutherford were the agents in the application to the Court for the appointment of one of the firm, Mr Low, as factor loco tutoris and curator bonis. It was their duty to know, and they must be presumed to have ascertained, whether caution had been found, and the act extracted, before proceeding one step farther, as agents for Mr Low, in that character. Still more was it their duty to ascertain that fact before they, as agents, countenanced the payment to, and the appropriation by, Mr Low of large sums of money, which he was entitled to receive only in that character. Now, it follows, from the entries in their books, that the company must be held to have been cognisant, not only of Mr Low assuming that character in dealing with Mr Macfarlane and Donaldson's trustees, but of those trustees paying large sums of money, on the reliance of his title having been complete. Not only are the revisal of the discharge, the meeting with Mr Macfarlane for the purpose of signing the discharge, and the various letters addressed to Mr Macfarlane in relation to the transference of the shares of the minors, entered as articles of charge in the company's books, but various of the payments received by Mr Low, as curator, are entered in the company's books at the credit of the minors, under the designation of ‘Donaldson's executors.’ In short, it rather appears from the books that, although Mr Low was appointed the factor and curator, the business charges of his actings in that capacity truly formed part of the profits of the company. In these circumstances, the Lord Ordinary thinks the company, and the individual partners of the company of Low and Rutherford, must be held liable in relief to the trustees. The company were cognisant, not only of the defect in Mr Low's title, but of the trustees’ reliance on that defective title—a reliance which they were actively instrumental in producing, by acting as agents for the pretended curator bonis and were certainly instrumental in continuing, by their perfect silence on the defect of his title, during the whole course of the transaction. Whatever negligence there may be justly chargeable against the trustees and Mr Macfarlane, in a question with the minors, the Lord Ordinary has arrived at the conclusion that the trustees have, in the circumstances of the case, a good claim against Low and Rutherford.”
The pursuers reclaimed, in so far as judgment of absolvitor had been pronounced in favour of Dr Sommers and John H. Donaldson.
Rutherford, and the firm of Low and Rutherford, reclaimed also.
Rutherford, for Rutherford and Low, offered to instruct, that, if it was only for the intromissions, so far as entering the company books, that liability was to be attached to the company, that principle would exempt the company and Rutherford from liability for a large part of what they would be subjected to under the interlocutor as it now stood.
More, for the pursuers, was understood to answer, that there was a letter in process, instructing company intromissions to an extent exceeding that which appeared in the books, and supporting the Lord Ordinary's interlocutor.
The other Judges concurred, and accordingly
The Court, while they adhered, found no expenses due by Rutherford, or the company of Low and Rutherford.
Solicitors: J. Lawson, W. S.— Graham and Anderson, W. S.— G. Rutherford, —Agents.