Scottish Court of Session Decisions

The late George Home of Wedderburn, Billie, and Paxton, executed an entail of part of his estates, and a deed of nomination of heirs, on July 16, 1816; and of the same date he also executed a trust-disposition, by which he conveyed the estate of Billie and others “to and in favours of David Renton, Esq. of Greystonelees, William Pringle, Esq. one of the depute-clerks of Session, and John Renton, Esq. of Chester-bank.” Only one of these trustees was to have the power of acting at a time; but, on failure of the first-named trustee, the second was to act, and on his failure the third. Thereafter, a plurality of trustees might be appointed, as specified in the deed. Powers were given to enter vassals. to output and input tenants, and grant tacks not exceeding 21 years; “as also to name and remove factors from time to time, with such powers, and liable to such diligences as the said trustee or trustees shall think proper, and to give such salaries to the factors, and gratifications to any other persons who shall be employed in relation to the premises, as the said trustee or trustees shall think expedient at the time, and to settle accounts annually with the said factors, and upon payment of what shall be found due, to exoner and discharge them of their intromissions and management; and within six months after each clearance with the factors, the said David Renton, William Pringle, and John Renton, or other trustee or trustees, acting in the order above mentioned, for the time, shall make up the accounts of his or their intromissions during the period of the factor's accounts, and get the same examined and approved of by an accountant of character in Edinburgh; and if the account is approven of by the said accountant, such approbation is hereby declared to operate as a full exoneration of the said trustee or trustees, for their whole management, during the currency of said account.” The trust-deed contained this clause of protection, for the safety of the trustees:—“It is provided and declared, that the said David Renton, William Pringle, and John Renton, or other trustee or trustees named, or to be named as aforesaid, shall noways be obliged to do diligence, other-ways than as he or they shall think fit, nor shall he or they be liable for omissions, but only each of them for himself, and his own actual and personal intromissions, nor shall they be farther liable for their factors, than that they shall be habit and repute responsible at the time of entering upon their office.” The trustees were declared “bound to apply the whole rents of the estates hereby conveyed, for the ends, uses, and purposes after mentioned, viz.” 1st, For payment of debts due on open or current accounts; 2d, For payment of all “the public burdens affecting the estates hereby conveyed, and the due and lawful interest of alt bonded debts, or other debts due by me; and of all necessary charges and expenses to be disbursed by the said trustees, or their factors, in executing this trust right; which charges and expenses are to be taken on the honest word of the acting trustee or trustees for the time, and not to be subject to challenge on any account or pretext whatever; and for payment of such salaries and gratifications as the said trustees shall give to factors, lawyers, arbiters, or others, who shall be employed with relation to the management of this present trust; and of the yearly sum of £100 sterling, as a gratification to the acting trustee or trustees, for their trouble in the management; it being hereby declared, that in case there be at any time more than one acting trustee, the said yearly sum of £100 sterling shall be equally divided among the said acting trustees;“3d, For payment of bequests; 4th, The trustees were directed, inter alia, to put the heir of entail, if major, in possession of the estate of Paxton; and lastly, the free residue of the rents of the trust-estates was to be applied in payment of the general debts of the truster. After their extinction, the trustees were to denude of the lands by conveying them to the heirs of entail specified in the relative deeds, and that in the form of a strict entail. The deed contained ample powers of revocation.

On 6th August, 1819, George Home executed a supplementary trust-disposition, referring to the previous trust-deed, and bearing that “I do hereby revoke, supersede, and set aside the nomination of the said David Renton, and John Renton, in the said trust-right, and alienate, dispone, and make over to and in favours of William Molle of Mains, the said William Pringle, one of the depute-clerks of Session, and James Hunter writer in Dunse, and to the survivor or survivors of them who shall accept, or to such other person or persons as may hereafter be named and appointed by me, my real and personal estates thereby conveyed, but in trust always, for the ends, uses, and purposes therein mentioned, and with and under the declarations, conditions, provisions, and reservations therein expressed, declaring that a majority of my said trustees accepting and surviving, shall at all times form a quorum, for executing the purposes of the said trust, ratifying and approving the said nomination, and declaring that the said William Molle, William Pringle, and James Hunter, as trustees foresaid, shall have the same powers, and be subject to the same declarations, conditions, provisions, and reservations, as if named and appointed as such in græmio of the foresaid trust-right, to which this supplementary trust-deed has an express relation, excepting in so far as altered by these presents.”

Of the parties thus named as trustees, William Pringle, depute-clerk of session, was the personal friend of the truster, and was his creditor, at the truster's death, to the amount of £9000. William Molle was a writer to the signet, of respectable professional standing; proprietor of large estates in Berwickshire, where he held the office of one of the deputy-lieutenants; and well known to the truster. James Hunter was writer at Dunse, in respectable practice; well known to the truster, and employed by him as his agent in country business.

The truster, George Home, died on the 20th February, 1820. At his death, his debts amounted to £77,636, of which there were due on bonds and bills £65,556. He left legacies to the amount of £8150. And there were life-annuitants drawing £1246. His personal funds were estimated at £19,520; and the gross rental of the trust-lands varied during the ten following years between £7234 and £8133. In this estimate the lands of Paxton were not included, as William Forman Home, the first heir of entail, was major, and was put in possession of Paxton by the trustees.

The trust-lands lay in seven different parishes in Berwickshire. Both, the tenants, and the feuars on the trust-estates, were a numerous body; the creditors also were numerous.

On March 17, 1820, a meeting of trustees was held, at which William Molle and William Pringle attended, and declared their acceptance of the trust. James Hunter was prevented from attending. William Forman Home attended the meeting, along with John Wauchope, W.S., as bis agent. The minutes of the meeting contained this entry:—“ The trustees hereby appoint Mr Pringle to be their cashier; Mr Molle to be factor; Messrs Molle, Turnbull, and Brown, writers to the signet, to be agents in Edinburgh; and Mr Hunter to be agent before the Sheriff, Commissary, and other courts of Berwickshire, and they direct a factory to be made out in favour of Mr Molle.” Molle was the leading partner in the firm of Molle, Turnbull, and Brown.

James Hunter afterwards declared his acceptance of the trust, and a commission of factory was granted by the three trustees, to Molle, on March 22, 1820. The deed narrated, “that it was necessary for the more proper and easy management of the estates and effects committed to our care, to appoint a proper person to act as our factor, with the powers after mentioned, and having full confidence in the integrity and ability of the said William Molle, for executing the said office,” &c., they therefore appointed him. The factor was empowered to uplift rents and duties; to uplift bank-dividends; and to pursue for all debts due to the truster, and to adopt all legal measures for carrying these objects into effect; “and generally, to do every thing lawful and necessary in the premises which we could do ourselves, or which to the office of factor in such cases is known to belong: Declaring always, as it is hereby expressly provided and declared, that the said William Molle shall be holden and obliged, as by acceptation hereof he binds and obliges himself, his heirs, executors, and successors, to hold just count and reckoning with us, for his whole intromissions in virtue hereof, at all times when required, and shall make payment to us, or our order, of whatever balance shall then appear to be owing by him to us; but declaring, that in his said accounts, the said William Molle shall have allowance of all necessary expenses, and of a reasonable gratification for his trouble as factor foresaid; also declaring that these presents shall subsist aye and until recalled by an express writing under the hands of us or our quorum, or under the hands of the survivors of us, or of our successors as trustees foresaid, or by any new factory being granted to another person.”

The chief management of the trust was taken by Molle and Pringle, both of whom lived in Edinburgh, and who formed a quorum. They did not encourage Hunter, who lived at Dunse, to take an active share with them, and even refused to allow him the expense of coming to Edinburgh to attend their meetings, except the annual meeting, which was generally held in February. Molle and Pringle soon felt themselves to be regarded with distrust by W. F. Home of Paxton, the heir of entail, and Hunter was thrown into much more confidential communication with Home than with his co-trustees.

James Brown, accountant in Edinburgh, was chosen to act as accountant under the trust. Ilis salary was fixed, according to the opinion of another respectable accountant in Edinburgh, at £73, 10s. The salary of Molle, as factor, was fixed at £180, and of Pringle, as cashier, at £50, with Brown's approbation. It was arranged that the annual accounting should be held by making up accounts to the 31st of December of each year, and transmitting them to the accountant to prepare his report. On the part of the factor the accounts rendered included his receipts no later than for the rents of the penult preceding crop. Thus the first accounts coming down to 31st December, 1820, included only the rents received or arrears due by tenants for crop 1819, though a full fourth part of the rents for the year 1820, was already due by some of the tenants; and in like manner as to the succeeding years. The reason alleged for this was, that the rents properly effeiring to crop 1820 were not due until after 31st December, 1820; and that even of that portion which became conventionally due at an earlier date, only a small part was received, so that the accounts were presented in a more distinct form, by keeping the receipts properly effeiring to each crop by itself.

The accounts of the trust which were sent in to Brown to be audited, besides the factorial intromissions and disbursements, embraced also the actings of Pringle, as cashier, receiving money from Molle and paying it away to the creditors on the estate, or to meet its expenses. They also included accounts for law-agency, done for the trust-estate in Edinburgh, by Molle, Turnbull, and Brown, W.S., and in the country by James Hunter. Several months always elapsed after the close of each year, and sometimes a longer period, before all these accounts were transmitted to the accountant; but in general the accounts of any one year were all in his hands by the month of July following. Even then, however, some delay frequently occurred before the accounts were audited by the accountant; and docketed as approved by him in terms of the trust, as he often required to apply to the respective parties for explanations as to their several accounts before finally docketing them. The accounts for the year ending 31st December, 1820, were docketed by the accountant in July, 1822; the accounts ending 31st December, 1821, were docketed in November, 1824; the accounts for 1822, in December, 1824; the accounts for 1823, in April, 1825; the accounts for 1824, in February, 1826; and the accounts for 1825, in January, 1827. The first report by the accountant showed a balance of £906 in favour of the factor; in reference to which the accountant added a note that the balance was merely apparent, as rents to the amount of £400, for crop 1820, were past due at Candlemas, 1820; and rents to the amount of £1800 for the same crop were past due at Martinmas, 1820; so that a considerable part of these rents was probably in the factor's hands, though no account of them would be stated before the audit for 31st December, 1821. The second report of the accountant showed an apparent balance of £247 in Molle's favour. The third report showed a balance of £983 against him. Each subsequent report showed a balance against him, which, by the docket in January, 1827, was as high as £2258.

Long before the date when the accountant's report was issued, the actual state of the factor's balance was totally different from what there appeared, as he continued in the mean-time to draw the rents of the estate, and, from time to time, to pay over to Pringle, as cashier, large sums to meet the debts and expenses of the trust, always exceeding £4000, and sometimes £6000 in a year. By these payments Pringle always received a larger sum from Molle, within a few months of the close of any given year, than sufficed to extinguish the balance which ultimately appeared against Molle on the accounts of that year when docketed by the accountant. But in the mean-time, Molle was going on, drawing new rents.

Besides the sums paid directly to Pringle, Molle was entitled to credit for various other annual payments, such as public burdens, &c. of fluctuating amount, but often considerable. They ranged from £500 or £600 to £1540 in the course of a year. The rents received by Molle, were liable to considerable variation from several causes. Among others there were some abatements of rents which were allowed by the trustees to tenants whose rents were considered excessive. And arrears of rent, which at length amounted in 1830 to £4034, were from time to time incurred by the tenants.

In these circumstances, Pringle never knew the actual balance standing against Molle on his factorial intromissions, as at the close of any given year, until after the accountant had made up his report. Pringle was aware that, long before that period, that balance no longer existed, and a new course of intromissions was going on, under which he (Pringle) was, from time to time, obtaining large receipts for the trust, while the actual gross receipts of Molle and his whole trust-disbursements were not known to Pringle, before the accountant's next audit, and could only have been learnt by him, by demanding an inspection of Molle's books. At the same time, as the yearly audits were communicated to Pringle, he must have seen, by the report in January, 1827, that the balance against Molle, on the accounts closing 31st December, 1825, was as high as £2258, and that a considerable balance had stood against Molle on each of the four preceding annual accounts.

The accounts ending 31st December, 1828, were in the hands of the auditor in July, 1827, but he did not complete his audit till March, 1828. Before that time Pringle had repeatedly applied to Molle to prevent any balance from standing against him on his factory accounts. On March 26, 1828, Brown, the accountant, wrote to Molle, “I have just had a call from Mr Pringle, who is equally anxious with myself that the matter of your balances in Billie trust should be arranged.” In April, 1828, Brown wrote to Molle that he had completed his audit of the Billie trust accounts for 1826, but “before closing them it will be necessary that some arrangement be come to, for the settlement of the balance on your accounts. It occurs to me that the best plan is for you now to pay up the balance with interest, which I can state in a note to my report.” This balance was £1970. On 11th June, 1828, Brown, in writing to Pringle for his fee as accountant, mentioned that his report for 1826 was ready to be docketed “whenever a settlement of the factory balance is provided for.” Pringle on the same day wrote to Molle, “I received a letter from Mr James Brown, the trust-accounts’ auditor, a copy of which I subjoin to this. You see the accounts for the year 1826 are ready to be docketed whenever the balance due by you upon these accounts is settled. This has been once and again urged upon you, and it is absolutely and indispensably necessary that it be done, and that within a short time. In the situation in which I stand, I cannot possibly agree to let the matter lie longer over unsettled; it is not consistent with my duty that I should. Not only must the balance above referred to be settled and paid up, but I must be furnished with a note from you of the precise sum in your hands, in the view that this also may forthwith be made a part of the tangible trust-funds, to be applied for the purposes of the trust; and I beg leave to repeat what I formerly stated, that neither you as factor, nor I as cashier, ought to retain any of the trust-money in our hands for any length of time. I must request your particular attention to what I have stated. I do so on your own account, as well as in reference to my official duty as a trustee.”

Molle did not pay up the balance, and the accounts of 1826 remained in the mean-time undocketed.

In July, 1828, Pringle lodged his accounts, as cashier, for 1827, in the hands of Brown to be audited. In September, 1828, Pringle, when writing to Molle, acknowledging receipt of £1000, pressed him earnestly for a farther payment before the expiration of the month, and intimated that when the case was laid before the trustees, he, for one, would consent to nothing else than the immediate paying up of all that was due to the trust. In December, 1828, Molle sent his accounts, to 31st December, 1827, to Brown to be audited. In March, 1829, the annual meeting of the trustees was attended by the three trustees. In reference to the trust- accounts it contained the following entry:—“ The agents reported that the factor and cashier's accounts, up to 31st December, 1827, had been laid before the accountant. The accounts for 1828 will also soon be made out, and laid before the accountant.” Another entry bore that the accountant had not yet completed his view showing what progress, “if any,“ had been made towards lessening the debts since the trust began; but that this was to be done speedily. No special notice was entered on the minutes as to the state of Molle's balances.

In March, 1829, Brown, when writing to Pringle to make an interim payment of L.50, to account of Hunter's agency-accounts for 1828, stated that he proposed “now to docket the report on the accounts, ending 31st December, 1826. The balance thereon of L.1971 will be introduced into the subsequent year's account, with interest; and a note will be inserted in the account 1826, stating that the balance was carried forward, and settled with interest in March, 1829, or something to this effect. I presume the fact warrants such a statement.”

It did not appear that Pringle returned a written answer to Brown, but the balance was not paid up by Molle, and the accounts of 1826 remained undocketed.

In June, 1829, Hunter repeatedly wrote to Brown desiring to see the report on the trust-accounts, and stating that he was anxious on the subject in consequence of the doubt stated at the last annual meeting whether any debt had yet been paid off. Brown mentioned that he required the accounts to be then in his hands for malting out the audit of 1827. In the autumn 1829, Hunter made repeated applications to Molle and Pringle to have these accounts sent to him, but they remained in the hands of Brown. In January, 1830, he wrote to Brown “demanding” the accounts, and Brown answered that he was then engaged, by desire of the trustees, in preparing a general view of the whole trust-management for the annual meeting in February; upon which Hunter answered that he would waive his request in the mean-time, rather than occasion inconvenience to the trust.

In March, 1830, Brown, while writing to Pringle for some further materials before closing his reports for 1827 and 1828, added, “I this day send to Mr Molle some notes on his factory-accounts for these years, in which notice is taken of the state of the balances.” In April, 1830, Pringle wrote Brown that his accounts for 1829 were ready to be submitted to him, and were only delayed for a few days at Molle's desire, who wished to lodge bis factory-accounts at the same time. Pringle added, “I should wish, however, that when his accounts appear, you would drop him a note, desiring him to hand you a precise state of the balance in his hands, brought up to the present time, so as you may have a complete view of matters at making out your report upon the trust-affairs. I have made out a note to that effect, regarding my own transactions, and put it up alongst with the accounts.” Molle's accounts for 1829 were sent, in the same month, to Brown.

In June, 1830, Brown wrote to Molle, requesting answers to his “notes” on the factory-accounts for 1826 and 1827, which could not be closed without them, stating that Pringle had made up a state of his intromissions to the day on which he had lodged his accounts for audit, and, that, at Pringle's suggestion, he (Brown) begged Molle now to do the same. Molle wrote answers to Brown's “notes,” and Brown brought down his report to 31st December, 1829, but without docketing the account. The balance against’Molle, as on 31st December, 1827, was stated at L.1851; on 31st December, 1828, at L.2172; and on 31st December, 1829, at L.1634. Brown also prepared a general view of the trust-affairs, from which it appeared that, on the assumption of Molle paying up the balance due by him, the debts of the trust were diminished, since its commencement, by a sum of L.8075.

On 30th August, 1830, Brown docketed the accounts ending 31st December, 1826, 31st December, 1827, 31st December, 1828, and 31st December, 1829, and approved of the intromissions of the trustees.

On 21st September, 1830, the three trustees held a meeting, their annual meeting having been delayed till then. The minutes bore that “Mr Molle reported that the factor and cashier's accounts, up to 31st December, 1829, had been audited by the accountant.” No notice was taken in the minutes of the state of Molle's balances, but it was the subject of oral discussion; and the necessity of the balance being paid up was urged on Molle by the two other trustees. The accountant's reports on the trust-accounts were then put into the hands of Hunter. On 24th September, Hunter wrote to Pringle expressing dissatisfaction at the state of the balance due by Molle; and on 27th September, Pringle wrote an answer, marked “private,” in which ho said,—“I yesterday had yours of the 24th. I can assure you that the circumstance of the balance due by Mr Molle, the factor on the Billie trust-estate, is fully as distressing a circumstance to me, as it can possibly be to you. Neither that balance, nor a former one, I mean as it stood some time ago, and which amounted to about L.2000, I think, escaped my observation, when directed to it. I urged Mr Molle again and again, and pressed it upon him, in the strongest manner, by letter, to have it paid up.” Pringle added that he had received from Molle, in 1829, L.6706; and in 1830, L.4339. He also stated that in March, 1829, he had received a payment of L.1500, which reduced Molle's balance then to only “some hundred pounds,” and that he (Pringle) “was a good deal pleased that this was done, from whatever quarter it (the L.1500) was procured.” Pringle added, that he had hoped the whole balance would have been wiped off, but, in place of that, he had been vexed by seeing it again increase, in spite of his frequent and urgent remonstrances, although Molle made many promises to reduce it. The letter also suggested to Hunter the propriety of writing a decided letter to Molle on the necessity of paying up his balance, with interest since December, 1829, and of promptly paying over to him (Pringle) the funds received in future. Hunter wrote to Molle in a less peremptory manner than Pringle had suggested, but stating the impropriety of his keeping the balance of December 1829 so long in his hands, and desiring it to be paid up. He at the same time wrote to Pringle, observing that if Molle did not, in ten or fourteen days, pay up his balance, “some other plan must be adopted; while I will, though very reluctantly, conclude that a certain unpleasant surmise is not altogether without the shadow of foundation. This solely for your own eye.” He also suggested that the factor ought to find security.

On 16th October, 1830, Pringle and Hunter had a meeting, at which they addressed a joint letter to Molle, requiring him immediately to pay up the balance of £1634, which remained due at 31st December, 1829; to make out a state of his subsequent intromissions, and pay over the balance in his hands; and, besides other arrangements, to find security for his future intromissions. Again, on 28th October, they addressed a joint letter to Molle in still more peremptory terms. On 29th October, 1830, Pringle wrote to Hunter, advising that the factory should be instantly recalled, and an action of count and reckoning raised against Molle, unless some speedy satisfaction were obtained as to his accounts. He and Pringle also, on the same day, executed a revocation of Molle's factory, and next day Molle resigned it. Molle at the same time intimated that he was to execute a trust-deed for behoof of his creditors. Molle's sequestration followed soon afterwards. Molle had continued to enjoy the highest general credit for solvency and responsibility until within a day or two of his declared bankruptcy. He had discounted bills of considerable amount, at the Edinburgh banks, in October 1830, on some of which his own name was the chief guarantee looked to by the banks. He subsequently denuded himself of the trust. Hunter then threatened an action and framed a summons against Pringle, charging him with the grossest misconduct as a trustee, and concluding against him as personally liable to a large amount. Pringle resolved to denude of the trust, and, on his doing so, the action was given up. In adopting these proceedings, Hunter was unconsciously a mere instrument in the hands of W. F. Home, who soon after quarrelled with him for rejecting Home's proposed interference in the trust affairs. Hunter died in 1833, after having made an abortive attempt to assume new trustees. David Milne, advocate, son-in-law of W. F. Home, was then appointed judicial factor on the trust estate.

The final balance due by Molle, 31st December, 1830, according to the report of Brown, made up in January 1832, was £3775. But Hunter, while acting as sole trustee, had made a claim in Molle's sequestration for a sum of £5729, as due to the trust.

At the date when Pringle resigned, the debt of £9000 originally due to him by the trust-estate had considerably increased. He had always accounted regularly for his intromissions as cashier, and a small balance remained due to him in respect of these.

After the death of Hunter, who was predeceased by Pringle, an action was raised by W. F. Home, in 1833, against William Molle and the trustee on his sequestrated estate; against the representatives of Pringle; and against the representatives of Hunter; setting forth the tenor of the trust, and supplementary trust, and the conduct and proceedings of the trustees, and alleging that the trustees “had conferred upon themselves, with large salaries, the whole subordinate offices of the trust, in wilful, corrupt, and fraudulent violation of the clear intentions and directions of the truster:”—and that they had “been guilty of the most gross and culpable negligence, and of wilful and corrupt violation of their duties as trustees.” It concluded against the defenders for payment of £5729, alleged to be due by Molle, and for a count and reckoning. It contained other conclusions, as for liability for £10,000, for alleged malversations, &c, and in particular for a declarator, “that the said trustees were not in any view entitled to make any charge for trouble, as cashier, factors, or agents, or to draw any salary, or other payments, or remuneration from the trust-estate, beyond the sum of £100 per annum, expressly provided for them by the said trust-deed, and that they have forfeited all right to the said annual allowance of £100, in consequence of their gross negligence, and wilful and corrupt violation of their duties as trustees.”

Defences were lodged by all the parties. Molle's trustee stated a defence, that, in point of form, the pursuer should have claimed under the sequestration, and should not have called the trustee into Court in this action. The Lord Ordinary repelled this defence, and, as the subsequent discussion was chiefly as to the liability for the balance due by Molle on his intromissions, the other defenders alone made up a record. Nothing was stated on the record to warrant the charges of malversation. During the progress of making up the record, the judicial factor was sisted as a co-pursuer with Home.

Pleaded for the pursuers;—

1. The truster had specially enjoined the mode in which the accounts of the trust were to be adjusted. The trustees were “to settle accounts annually with the factors, and upon payment of what shall be found due, to exoner and discharge them:”and, “within six months after each clearance with the factors,” the trustees were to have their own accounts audited by an accountant in Edinburgh. This clearly contemplated an annual clearance with the factor, which was only to be given, on his paying up the balance due by him. And considering the amount of the sums to be intromitted with, and that the trustees were neither responsible for the factor (if they did their own duty), nor bound to take security from him, and were even privileged to prescribe the degree of diligence in which he should be liable, it was plain that the truster had relied on an annual clearance between the trustees and the factor, on his paying up the balance in his hands. The trustees had violated these plain injunctions of the truster, and had adjusted the trust accounts on a totally different footing, leaving a balance lying over in the factor's hands, which was not warranted by the trust, and therefore was not covered by the clause of protection in it. The trustees thus rendered themselves personally responsible for all loss arising from the factor's intromissions.

2. It was not competent for a body of trustees to appoint one or more of their own number to be factor, cashier, or agent for the trust, especially where a salary was annexed to the office, unless express power to that effect was given in the trust-deed; by so doing, they acted ultra vires, and they were therefore deprived of the benefit of the clause of protection, and were liable for the whole actings of persons so appointed, as if no clause of protection had existed.

3. In the special circumstances of this case, such appointment was incompetent. The original trust-deed, containing the whole trust-powers, contemplated, at least for a considerable period, the acting of only one single trustee at a time. That trustee was allowed a gratuity of £100 per annum, as trustee. Power was given “to name and remove factors from time to time, with such powers, and liable to such diligences as the said trustee, or trustees, shall think proper, and to give such salaries as the said trustee, or trustees, shall think expedient.” And farther, it was required that the factor should be habite and repute solvent at the date of his appointment; and that the trustee, or trustees, should settle accounts annually with the factors, and discharge them, on payment of what should be found due. It was clear, therefore, that if one trustee alone were acting, the power of naming himself factor, fixing his own salary, prescribing the degree of diligence to which as factor he should be liable, and annually auditing and discharging his own accounts, was altogether incongruous; and the existence of such power amounted to actual proof that the truster only gave a power to name a factor, who was not trustee. But when the supplementary trust-deed was granted, which was merely relative to the original trust-deed, it gave no new trust-powers whatever to the trustees. It expressly gave “the same powers,” and no other; and therefore the very important alteration could not be presumed to have been either made or intended, of empowering the trustees to name themselves to offices, with salaries, under the trust. These offices implied responsibilities, in regard to accounts and otherwise, and the first and primary check upon these officers was placed by the truster in the trustees. It was incompatible with the maintenance of an efficient check, that the trustees should hold any of the offices requiring to be controlled. This was the more evident, because the trust accrued to survivors; and thus it might have happened, under the natural operation of the trust, that, if the appointment of Molle, as factor, was competent, he might have come to be both sole trustee and factor at the same time: for, in such a situation, he could have no less trust-power than the three trustees possessed; and if his appointment by them was good, it would be good supposing him to have survived as sole trustee.

4. Independently of other circumstances, as the trustees did, simul et semel, appoint each of their number to an office implying emolument and responsibility, this was, in substance, as objectionable as if a sole trustee had appointed himself to one such office. The check which was to be exercised by the trustees over their officers, might be as effectually destroyed in the one way as in the other. And if such a proceeding did not imply a total forfeiture of the benefit of the clause of protection, it at least should do so, as to all loss accruing from the conduct of any of the officers so appointed.

5. Molle was liable for his own arrears. And the conduct of both Pringle and Hunter, though corruption could not be proved against them, still amounted to culpa lata, and, therefore, was not covered by the clause of protection. Pringle knew, both as trustee and as cashier, that Molle was, for a long series of years, in a heavy arrear to the trust. He knew that this continued notwithstanding the repeated remonstrances of the accountant, who, at length, refrained for several years from docketing the accounts, after auditing them, because of the state of Molle's balances. In these circumstances he acted in wilful and gross violation of his plain duty as trustee, otherwise he would either have obtained Hunter's concurrence (or at least would have applied for it), at an early stage, in demanding payment, or security, from Molle, and, on his failure, revoking his factory. In place of this, no such step was taken until after the whole loss to the trust had been irremediably incurred. As this loss was caused by Molle's holding the power of factor, conferred on him, and maintained in him, by the act of the co-trustees, while they, and especially Pringle, knew Molle to be persevering in the grossest abuse of his duty and power as factor, this amounted to misconduct and violation of their duty qua trustees, such as to render them liable for Molle's arrears, notwithstanding the terms of the clause of protection. ¹ That clause was never meant to cover culpa lata, or wilful violation of duty and trust; and it would be contra bonos mores, if it had.

6. Though Hunter, from living in the country, and other causes, was less prominently subject to these animadversions than Pringle, yet his neglect of duty had amounted to culpa lata, and he was therefore liable.

7. On the separate ground that Pringle held the office of cashier, with a salary, he must at all events be liable, for his failure to perform the duties of that office. The clause of protection in the trust-deed had no

_________________ Footnote _________________

¹ Moffat, Jan. 31, 1834 (ante, XII. 369); Sym, May 13, 1830 (ante, VIII. 741).

application to him qua cashier; he was liable in exact diligence as to the

duties of that office. As cashier he had the special means of superintending and controlling the actings and the accounts of Molle as factor, and he culpably failed to employ them. He ought therefore to be held liable for the loss accruing from Molle's failure.

8. In any event the defenders should not be allowed credit either for the salaries paid to Molle and Pringle, or for the gratuity of £100 a-year, in respect of the loss which had accrued to the trust-estate through the misconduct of the trustees. And generally the whole trust accounts should be opened up.

Pleaded by Pringle's representatives—

1. The mode of accounting which the trustees adopted, in sending the whole accounts, both of themselves as trustees, and of the factor, &c. to be audited by the accountant, was full compliance with the directions of the truster as to the accounts. And the trustees had never discharged the factor of any balance which remained due by him.

2. It was the universal practice, where there was a body of trustees, to select from among their own number, any one to be factor, cashier, or agent whom they considered competent, in point of skill, to perform these offices, unless the trust-deed forbade such choice to be made. This practice was so notorious, that where men of business were named among the trustees, it might fairly be presumed to be the wish and expectation of the truster that they should be appointed to these offices. And, by a decision in which the whole Court were consulted, the legality of the practice of such appointments was expressly established. ¹

3. There were no special circumstances to prevent this general rule from applying to the Billie trust. Considering the nature and extent of the trust-estates, the sum of £100 per annum, divisible among three trustees, was not a payment for trouble or responsibility, but was merely meant to be a complimentary gratuity, in a friendly trust. Powers were expressly given to the trustees to name factors; and the nature of the estate was such that the nomination of one or more factors, with an adequate salary, must have been contemplated as necessary. The appointment of the factor, cashier, and agents, was therefore legally and effectually made. It was required that the factor should be habite and repute responsible at the time; and that condition had been duly attended to. The trustecs had allowed the salaries of factor and cashier to be fixed, not by themselves, but by the accountant who was perfectly competent and disinterested; and these salaries were moderate in the extreme. There was nothing, therefore, in the appointment to these offices which was irregular or ultra vires on the part of the trustees.

_________________ Footnote _________________

¹ Lady Montgomerie, June 4, 1822 (ante, I. 453; or new ed. 421). See also F.C

4. If each appointment of factor, cashier, and law-agent, would have been valid and legal, if singly made, the whole were equally valid and legal though made unico contextu, unless corrupt motives had influenced the appointments. Accordingly the pursuers had hazarded the allegation of corruption; but had totally failed to prove it. And if the appointment of factor, &c., from among the trustees themselves, was valid and legal, it could not have the effect of forfeiting the clause of protection, to any extent whatever.

5. It was necessary to separate entirely the liability attaching to the office of Pringle as trustee, from that attaching to his office as cashier. In regard to the first, the whole force of the clause of protection applied. He was therefore “no ways obliged to do diligence otherways than as he should think fit,” nor “liable for omissions,” but only for “his own actual and personal intromissions;” and in particular, his sole liability in reference to the factor expressly was that “the factors shall be habite and repute responsible at the time of entering upon their office.” Pringle had taken care that a factor was selected who was habite and repute responsible; and, qua trustee, he was no farther liable for that factor. But, besides this, he had honestly and conscientiously done his duty as trustee. There was always a very considerable lapse of time after the close of any given year, before he saw the accountant's report and knew the exact state of Molle's balance at that date. Before he knew it, the balance was changed by subsequent intromissions and payments, both of them considerable, which had been made by Molle in the interval. And although a succession of balances came at last to appear against Molle, yet he was enjoying the highest credit for solvency, engaged in extensive professional business, and possessing every outward appearance of wealth, so that Prirtgle's suspicion of his solvency was not soon awakened. Nevertheless he repeatedly and strongly urged on Molle, the necessity of paying off the balance due by him; and so soon as his distrust of Molle's solvency was at all excited, which occurred before Molle's general habite and repute for solvency had been affected, he concurred with Hunter in adopting the most energetic measures for putting an end to Molle's factory and intromissions because he did not immediately find security. Pringle, therefore, could not be subjected qua trustee. ¹

6. In regard to the liability, qua cashier, the precise extent of it should be considered, and kept wholly distinct from either privilege or responsibility, qua trustee. To do this justly, the case should be taken as if any third party had been appointed cashier, with the same moderate salary. Such person could have no benefit from the clause of protection; but he could be no farther liable than for his own intromissions. In particular, he had no power to compel the trust-factor to pay even the balances remaining

_________________ Footnote _________________

¹ Ainslie and Others, Feb. 6, 1835 (ante, XIII. 417).

in his hands. He had no power even to raise an action for them. He

had no power to rccal the factory. He could only apply to the factor for the monies in his hands, which Pringle had frequently done, to the effect of drawing very large annual sums from Molle, and apply these monies to pay the interest of debts, and expenses of trust-management, &c. Pringle had done all this, and qua cashier, he was no farther liable.

7. The salaries to the factor and cashier were moderate, and must have been paid, whoever did the duty of factor or cashier. Whatever liability might attach to the performance of these offices, the salary must at least be paid. And there was as little ground for challenging the gratuity of £100 per annum. The whole accounts had been audited in terms of the trust, by an accountant of character, and no new accounting could be demanded.

Pleaded by Hunter's representatives—

In addition to the pleas arising out of the clause of protection, these defenders pleaded that Hunter, who lived in the country, had been very much kept ignorant of the trust affairs by Molle and Pringle; that his share in the management was there by rendered comparatively small; that he had used every exertion to save the trust-estate, as soon as he suspected the solvency of Molle; and, in general, that as he could not be subjected, except as trustee, no ground existed for subjecting him in that character.

The Lord Ordinary pronounced this interlocutor:—“Finds, that by the settlements of the late George Home of Wedderburn and Paxton, William Molle, writer to the signet, the late William Pringle, and the late James Hunter, were appointed trustees for carrying those settlements into effect: Finds, that on the 17th of March, 1820, being the first meeting of the said trustees after the truster's death, William Molle was appointed factor, and the said William Pringle cashier, each with a salary, in addition to the sum allowed to them by the trust-deed for ‘their trouble in the management:’ Finds, that in virtue of this appointment, Mr Molle had large intromissions with the rents of the trust-estate: Finds, that from December, 1822, large annual balances were due by the factor on his intromissions, and were never fully paid up: Finds, that the management, in terms of the above-mentioned appointments, continued until the 29th of October, 1830, when the said factory was recalled by the co-trustees, the late William Pringle and the late James Hunter: Finds, that on the following day the bankruptcy of the said William Molle was declared, and that a large balance was then due by the said William Molle, as factor to the trust-estate, amounting, according to the pursuer's statement, to the sum of £5729 sterling: Finds, that the object of the first conclusion of the present summons is to fix upon the defenders, the representatives of the said William Pringle and of the said James Hunter, a liability for the said balance: Finds, that the said late William Pringle being not only a trustee, but having been appointed cashier, with an additional salary, undertook in that double character the special duty, and had the special means of superintending and controlling the actings and the accounts of the factor and co-trustee, Mr Molle: Finds it established by the documents in process, that the late William Pringle was apprised of the factor's irregularity in failing to pay up and account for the annual balances of his intromissions: Finds, that the said “William Pringle, though thus aware of the factor Mr Molle's violation of his duty, took no steps, either by requiring caution, or insisting for payment, or recalling the factory, for securing the trust-estate against the consequences of the irregularities of the factor, of which he was so cognisant: Finds, that in these circumstances, the late William Pringle did incur a liability for the loss ultimately occasioned to the trust-estate by the failure of the said factor, William Molle: Therefore, finds the defenders, the representatives of the said William Pringle, liable for the balance due by the said William Molle as factor, and appoints the case to be called, that this balance may be precisely ascertained, but assoilzies the said representatives from the other conclusions of the libel, and decerns; and in regard to the defenders, the representatives of the late James Hunter, assoilzies them from the whole conclusions of the libel, and decerns, and finds them entitled to their expenses.” ^*

_________________ Footnote _________________

^* “ Note.—There are various conclusions in this summons which present no difficulty, and which, indeed, were hardly touched on in the argument before the Lord Ordinary.

“ 1st, Considering the large discretionary powers conferred by the trust-deed on the trustees, in regard to the expenses of management, the Lord Ordinary sees no ground for questioning the amount of the salaries allowed to the cashier, factors or agents; upon which it may also be remarked, that comparing the present system of management followed by the pursuers themselves with that under the trust, the former is considerably the more expensive of the two.

“As to the appointment to those offices, of persons holding the situation of trustees, the Lord Ordinary has to observe, that the impropriety, inexpediency, and hazard of such a course, is well exemplified in the present case. Considering the evident consequences of such nominations, by which the interest of the same individual as an officer under the trust may, and in many cases must be, placed in opposition to his duty as trustee, much might be said against their legality. But, taking into view the notoriety of the practice, and the extent to which it has been carried in this country, without any attempt at challenge, the Lord Ordinary does not consider himself warranted in sustaining this circumstance as a substantive objection to the trust-management.

“ 2dly, In regard to the conclusion for ‘malversations’ committed by the trustees, it must be at once dismissed, as the record contains no specific statements of any malversations requiring further enquiry.

“ 3dly, The same remark applies to the general conclusion for accounting. The whole accounts, audited by an accountant of character, are now, and have been from the beginning, in process, and in so far as the Lord Ordinary is aware, there is no objection to any of the articles of them, except those connected with the balance due by the factor, Mr Molle.

“Indeed, from what took place at the debate, that appears to the Lord Ordinary to form substantially the only ground of dispute between the parties; and in regard to it, he has found it necessary to make a material distinction between the case of the late Mr Hunter and that of Mr Pringle. Against the former and his representatives, the claim seems to be groundless. Mr Hunter, though a trustee, took, or rather was allowed, little or no share of the management. He was resident in Berwickshire, and acted as the country agent of the trust. Mr Pringle and Mr Molle, the other two trustees, resided in Edinburgh; being a quorum, they had the means of carrying on the management without requiring the presence of Mr Hunter at their meetings, and the inference fairly to be drawn from the correspondence is, that they were not disposed to admit him into the management, farther than was absolutely necessary. Accordingly, the Lord Ordinary is satisfied, on a perusal of the documents, that the late Mr Hunter was, from the year 1822, entirely in the dark as to the true state of the factor's accounts, and the continued balances allowed to remain in his hands. It also appears, that from the 5th of February, 1829, he made constant attempts, though unsuccessfully, to get access to those accounts, and it was not until the end of September, 1830, that they were put into his hands. From that time he did every thing in his power to obtain payment from Mr Molle; and, indeed, it is to his exertions that the ultimate recal of the factory may be ascribed.

“In these circumstances, considering the exuberant confidence reposed in the trustees by the trust-deed, the reliance Mr Hunter was fairly entitled to place in the acting quorum of the trustees, Mr Pringle and Mr Molle, two professional persona of the first respectability, the backwardness of those gentlemen to communicate with Mr Hunter, his ignorance of the factor's balances, and his anxiety and activity from the moment his suspicions were roused, and his attention called to the matter, the Lord Ordinary must bold, that Mr Hunter and his representatives are fully entitled to the benefit, of the protecting clauses of the trust-deed; and he may further observe, that the charge made in this clamorous summons against the late Mr Hunter, of entering into a corrupt compact with the late Mr Pringle, by which he, Hunter, abandoned the action he had raised against Mr Pringle, in consideration of Pringle resigning the trust in his favour, seems most absurd and unwarrantable, now that it is established by the documents in process, that Mr Hunter truly acted in those matters as the instrument of the pursuer, the heir of entail, and an instrument which, considering the somewhat extraordinary and unscrupulous proposals made to him in the course of those proceedings, the pursuer evidently viewed as completely under his power. Upon all these grounds, the Lord Ordinary has thought himself bound to award expenses to the representatives of Mr Hunter.

“The case of Mr Pringle is very different, though, in one particular, viz., the fairness and good faith of his actings, his character stands perfectly unimpeached. The whole charges made against him in the summons, of wilful violation of his duty, and corrupt connivance at the dilapidation of the trust-funds, appear to be utterly without foundation, and might have been spared. At the same time, the Lord Ordinary is compelled to hold, that there was such a constructive violation or neglect of his duty, as to render him liable for the consequences. It is true, that by the trust-deed, the trustees are protected from any further liability for their factor, than that he shall ‘be habit and repute responsible at the time of entering upon office and it also appears, that Mr Molle was habite and repute responsible, not only at the time of entering upon his office, but until a very short time indeed, before the public declaration of his bankruptcy. But the present case, like every other of the kind, must depend upon its special circumstances. Now here, Mr Pringle was not merely a trustee receiving the allowance granted by the truster—he was the cashier, appointed by himself and his co-trustees, with an additional salary. It was his duty, and he had the power, to ascertain the state of the factor's accounts, and to restrict his balances within a reasonable amount, whatever delay might occur in the formal auditing of those accounts by the accountant—a delay which, in this case, occasionally extended to years after the accounts were given in—the cashier, whose province it was to collect and apply the trust-funds to the proper purposes of the trust, was bound to enquire, and to know how the factor's accounts stood. It is proved by the documents in process, that he did know, and that the irregularity of the large balances retained by the factor, was repeatedly noticed by the accountant. Mr Pringle's case then is not merely that of a trustee relying on the circumstance of a factor being habit and repute responsible, for Mr Pringle, as trustee and cashier, had the means of knowing, and knew that whatever might be Mr Molle's general character for solvency, he was in the habitual violation of his duty as factor, and was either unable or unwilling to account properly for the trust-funds. Having this information, Mr Pringle neither required caution, nor communicated the matter specially to his co-trustee Mr Hunter, for the purpose of recalling the factory; hut knowing, as he did, at the end of the year 1839, the large balance in the account of that year due by the factor, he allowed him to go on collecting the rents fur the year 1830, thus increasing the balance to a great amount, if not to the sum actually concluded for. It is quite possible, and indeed there is no reason to doubt that this conduct on the part of Mr Pringle proceeded from an ill-founded reliance on Mr Molle's solvency, and from a reluctance to take strong measures against a person with whom ho was on a footing of intimacy and confidence. But it appears to the Lord Ordinary, that the consequences of this mistaken confidence must be borne by him, and not by the trust-estate, of which he was the guardian.

“Before concluding, the Lord Ordinary feels himself called upon to notice the enormous accumulation of documentary evidence with which this process has been encumbered. That of the pursuer extends to 300 pages of print, while on the part of the defenders there are about 200 more. It is true that this case turning much upon written evidence, required the printing of documents to a certain extent. But he must say, that this mass of pretended evidence, whether the indiscriminate admission or confused arrangement of its contents be considered, has had the effect of obscuring, rather than of elucidating the points in dispute, and may form a fit subject of consideration in discussing the point of expenses.”

Reclaiming notes were lodged by the pursuers, and by Pringle's representatives.

The Court ordered cases, on advising which the following Opinions were delivered;—