Scottish Court of Session Decisions

This was an appeal from the Sheriff-court of Lanarkshire in an action at the instance of Alexander Drew against Peter Drew and himself, as the trustees of his late father, William Drew, brought in the following circumstances. By trust-disposition, dated in 1836, William Drew disponed his whole property to his three sons, as trustees for certain purposes. The pursuer and defender were the sole surviving sons. By this deed it was provided that the trustees were to hold and retain “in their hands, for the sole use and benefit of Peter Drew, the subjects described in the 4th, 5th, and 6th places, and allow Peter Drew to uplift the free rents thereof, but under the special condition that part of these subjects should lie under the real burden of a sum of £250 in favour of Alexander Drew. The trustees were directed to pay half-yearly the interest of this sum to Alexander; and it was expressly declared that the said principal and interest should be purely alimentary, and that it should not be competent to Alexander Drew to burden or alienate the same. William Drew died in 1838, and the trustees accepted the trust. It was averred by the pursuer that no part of the principal sum or interest had been paid to him since 1838; and he claimed in this action £761, 1s. 6d., being the interest on £250, at 5 per cent., since 1838, together with £60 of liquidate penalty for nonpayment of the interest at the terms when it was due.

The defender explained that, in 1848, the pursuer and defender referred to Thomas Leburn, S.S.C., all claims and disputes between them, including this claim of interest since 1838; and that, in 1859, the arbiter pronounced a judgment which was final and binding on the parties.

The defender produced a decree of the Court of Session for £309 odd against the pursuer, dated in 1853, with a recorded charge thereon; and also an assignation to a debt of £1881, due by the pursuer to the liquidators of the Western Bank, and paid by the defender.

He further alleged—“The defender, on 5th July last, raised an action of furthcoming in this Court against the pursuer and the Sighthill Cemetery Company of Glasgow, founding on said several decrees and horning. The pursuer did not dispute the debts, but pled payment. In this process the present defender lodged a minute, giving credit for the sum of £179, 4s. 5d., being the amount of interest on the £250 mentioned in the summons, from Whitsunday 1848 to Martinmas 1866 inclusive, after deducting the sums mentioned in the defender's statements 4 and 5. On the 4th February last your Lordship, the Sheriff-Substitute, repelled the present pursuer's said defences, and restricted the sum in the diligence as reduced by said credit of £179, 4s. 5d.; and, on the 8th March last, the said interlocutor was adhered to on appeal.”

The Sheriff-Substitute ( Strathearn) on 17th May 1867 pronounced an interlocutor—“Finding, in point of law, (1) that the interest on the principal sum concluded for is due, not by Peter Drew as an individual, but by the said Peter Drew and Alexander Drew as trustees and executors of their father; and that Peter Drew is neither entitled to plead in compensation, nor to retain said interest for or in liquidation of the debts due to him as an individual by the pursuer: (2) Finds that, even if the pursuer, and Peter Drew as an individual, did stand in the relation of debtor and creditor, yet as the interest was declared to be alimentary and inalienable by the pursuer, and not affectable for his debts or deeds, nor by the diligence of his creditors, that the defender cannot lawfully retain it or compensate it by his said debts: Finds, however that all interest due at and prior to Whitsunday 1848 was finally adjudicated and determined by said award, which operated as res judicata: Therefore so far sustains the defence, and assoilzies the defender from the conclusions of the action quoad hoc: Finds, with respect to the interest since due on said principal sum, that the pursuer is not entitled to charge the same at the fixed rate of 5 per cent, per annum, but at such rate as was charged from time to time by and paid to the said Bank of Scotland, and other banks, on discounting bills: Therefore, before further answer, allows the pursuer

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a proof of said rate of discount as between Whitsunday 1848 and Whitsunday 1866.” He observed in his note—“The defender, both as a trustee and as an individual (for he defends in both characters), has maintained that he was entitled to withhold payment because the pursuer was indebted to him in sums to a far larger extent than all the interest claimed, and of that statement there can be no doubt whatever. But he, as an individual, even if he had right to touch the pursuer's interest, has no legal title to retain a provision due by the trust in extinction of a private debt due to himself. On the same principle, he has as little title to plead compensation of the one debt by the other; there is no concursus debiti et crediti between the parties in the representative relation of the defender as a trustee, in which he is debtor for the interest, and the pursuer, who is not indebted to the trust at all.—1 Bell's Com., 5th ed., p. 39; Ib. vol. 2, p. 131. Again, although there had been a proper concourse, the interest due the pursuer being alimentary and not affectable by his debts or deeds nor by the diligence of creditors, the defender can neither retain it nor attach it for his debt; the very settlement under which his own provisions are derived has declared any such attachment void and null. Their father had unlimited faculty so as to fence the pursuer's provision, and the defender is bound to respect its exercise; and if authority were required for supporting a proposition so just it will be found in Ersk. 3, 6, 7; 1 Bell's Com., p. 129; Moneypenny v. Earl of Buchan, Rose, Marshall, and Forbes, and Others, 11th July 1835, 13 Shaw, 1112; Harvey and Others v. Calder and Earl of Buchan, 13th June 1840, 2 Sess. Cases, 1095; Lewis v. Anstruther, 11th June 1852, 14 Sess. Cases, 857; Same, 17th December 1852, 15 Sess. Cases, 260: and Bell v. Innes, 29th May 1855,17 Sess. Cases, 778. The defender, as part of his defence, and justifying his right to retain the interest, has pleaded that, notwithstanding the terms of the settlement, arrears could not be considered alimentary to the exclusion of creditors; and that is sometimes true. Reference was made to Erskine's Institutes, 3, 6, 7, in support of this doctrine, and the text of that author will show the distinction between such a case and the present. It is there stated that ‘alimentary rights granted for the personal subsistence of the grantee are not arrestable; but the past interest due upon an alimentary debt may be arrested by him at whose expense the alimony was supplied—that is, that the debtor to whom alimentary interest was due was not entitled to prevent a creditor, who had already alimented him, to take payment out of the very fund which was destined to provide him with the means of subsisting. But this is not a case of that kind; not one of the defender's debts against the pursuer are of an alimentary nature. There is, however, another answer to this defence, and it is this—that the pursuer's interest can never be regarded as arrears which have been allowed to accumulate in the hands of the party bound to pay them, because not absolutely needed by the pursuer, and therefore not alimentary; the trustees were the parties bound to pay that interest, the defender was the party who de facto uplifted it, and withheld payment in the face of two previous but abortive actions which were instituted to compel him to pay; and to admit such an argument would be to countenance and give the defender benefit from his own perhaps wrongful act. With respect to the pursuer's demand for compound interest, it cannot be sustained—‘Interest does not in the general case, ipso jure, bear interest: Therefore, however long arrears of interest may have continued unpaid, they cannot, without some voluntary or judicial operation, be converted into a principal bearing interest.’ 1 Bell's Com. 5th ed. p. 651. The learned author in the same paragraph points out instances where compound interest does become exigible; as where the holder of a fund is under an obligation to lay out and accumulate the interests, and fails; and in cases where there has been fraud or a tortious conversion of the money on which interest is claimed; but in the Sheriff-Substitute's apprehension the defender cannot be so blamed.”

Thereafter, after various procedure, the Sheriff-Depute pronounced an interlocutor finding that the defender was liable in payment to the pursuer of the arrears of interest. He observed—“Finds that it has been fixed by final interlocutors in this cause—1 st,That the defender Peter Drew is liable, in respect of his own wrongous acts, in payment of the interest due to the pursuer, both as a trustee and individually; 2 d, That in as far as said defender's liability is qua trustee, he cannot retain the interest in liquidation of debt due to him as an individual by the pursuer, in respect that there is no concursus debiti et crediti between the parties in these different capacities; 3 d, That although there had been a proper concourse, the interest, being alimentary, and not affectable by the pursuer's debts or deeds, or by the diligence of his creditors, the defender cannot, either individually or as trustee, attach or retain it for his debt; and 4 th, That this inability is not altered by the fact that the interest now payable consists mainly or entirely of arrears; both because arrears of an alimentary fund are equally exempt from the diligence of ordinary creditors as the fund itself, except in the exceptionable case referred to by Erskine, b. 3, t. 6, sec. 7, and because, even if this were not so, the accumulation of a number of terms' interest, which has not arisen voluntarily and of consent, but in consequence of the interest payable at each term having been tortiously withheld, is not properly arrears; and, at all events, the wrongdoer cannot be put, as regards such accumulation, in a better position than he was before.”

The defender appealed.

Mackintosh for him.

Rhind in answer.

At advising—