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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Accountant of Court v. M'Kinnon (Grainger's Curator) [1876] ScotLR 13_308_1 (23 February 1876) URL: http://www.bailii.org/scot/cases/ScotCS/1876/13SLR0308_1.html Cite as: [1876] ScotLR 13_308_1, [1876] SLR 13_308_1 |
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Page: 308↓
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Held that a curator bonis may invest his ward's money in loans, for security and payment of which assessments are authorised to be levied by Act of Parliament.
Page: 309↓
M'Kinnon was curator bonis to Grainger, who suffered under mental disease. On the curator presenting his annual account for year 1874–1875, the Accountant of Court reported as follows:—
The Accountant has found it necessary to object to the following investments made by the curator bonis, viz., on mortgage by the commissioners under ‘The Aberdeen County and Municipal Buildings Act 1866,’ and ‘The Sheriff Court-Houses Act 1860,’ £4500
“On mortgage by the trustees acting under ‘The Aberdeenshire Roads Act 1865,’6500
These are objected to, in respect that the securities are not heritable, and are thus of a class not hitherto sanctioned by the Court. But they have been passed temporarily on the personal responsibility of the curator bonis, who has been required to realise the amount of the said mortgages before the period for closing his next and final account.”
Upon this the curator laid before the Accountant a detailed account of the nature and position of the investments objected to.
The £4500 was lent to the Aberdeen County and Municipal Buildings Commissioners as commissioners under “The Sheriff Court-Houses Act 1860.”
It appeared that the total cost to the county of that half of the Court-House was £15,852, 14s. 8d., which had been reduced at this date by £4179, 7s. 6d.
The security was the assessment imposed in terms of the Act. The rate was not limited by the Act, and was imposed at the rate of one-sixth of a penny per pound, which yielded £923 per annum. The commissioners had resolved that the cost should be defrayed in thirty years, and had fixed the rate accordingly.
The £6500 was invested in a loan to the Aberdeen Road Trustees on the security of the assessments under “The Aberdeenshire Roads Act 1865.” From the accounts of the Road Trustees, under their Act, for the year ended Whitsunday 1875, it appeared that the amount of money borrowed and then due for payment of the road debt was £28,600. This includes the loan of £6500 by the curator. The turnpike road debt amounted at the passing of the Act to £43,000, the whole of which sum was borrowed and the debt paid off. The borrowed money presently due amounted, as above stated, to £28,600, so that since 1866–67, the first year of the assessment under the new Act, the debt had been reduced by £14,400. By sections 46 and 83 of the Act the trustees were empowered to borrow money to pay off the debt specified in the schedules annexed to the Act, and to assign in security for payment of it the assessment authorised to be levied under the Act, and to grant mortgages for the sums borrowed. By section 47 the money so borrowed must be applied to the payment of the debt, and to no other purpose whatever. The annual assessment for payment of interest of the debt exceeded £3000 considerably. For the year ended Whitsunday 1875 it amounted to £3364, 15s. 4d. By section 82 the assessment was recoverable in the same way as the land tax and assessed taxes.
The Accountant accordingly reported to the Lord Ordinary as follows:—
At audit of the curator's accounts for the year ending 30th September 1875, the Accountant has seen cause to object to certain investments made by the curator bonis, and has required him to realise the same before his next annual account falls due. Copy of the Accountant's report to that effect is hereto annexed.
These investments are on mortgages granted by trustees under certain Acts of Parliament. The curator, in answer to the Accountant's report, submitted evidence which has satisfied him that the securities are in themselves unexceptionable; but as the Court has not hitherto sanctioned investments of funds under judicial management on securities of that class, the Accountant has felt it incumbent on him to object to them, and require them to be realised. By desire of the curator, the Accountant now reports the matter to the Lord Ordinary.
The investment of funds under judicial management is not regulated by statute, and no special authority as regards investments is conferred by the Pupils Protection Act other than that specified in the 12th section thereof, which is somewhat general in its terms. But by the decisions of the Court the general rule has been held to be, that judicial factors appointed under the Pupils Protection Act can only invest the money of their wards in—
“1. Consols or other national funds.
2. Heritable securities.
3. Deposits, or operating accounts, with one of the chartered banks in Scotland.
The Accountant would refer to Fraser's treatise, ‘Guardian and Ward’ (2d edition, p. 475), and the decisions in the cases there noted.
The Lord Ordinary will observe that, though it may be very desirable that greater latitude should be given for the investment of funds under judicial management, it is essential for the guidance of factors and of the Accountant of Court that the power of investment shall be regulated by fixed and clearly defined rules. The securities taken by the factor in this case are of a class that is now numerous in Scotland; and if they are sanctioned by the Court, the probable effect may be that a large amount of funds now and in past years invested in consols, on heritable securities, or in bank at a low rate of interest, will be transferred to such trust-mortgages as have been taken in this factory, as the greater facilities of investing, and the higher rate of interest that can be obtained on the latter, will always form strong inducements for such transfer.
The Accountant requests the instructions of the Lord Ordinary.”
The Lord Ordinary reported the case to the Inner House.
Counsel appeared for the curator, and argued—There is no statutory enactment defining what are the securities which may form the subject of investment in such cases. The present practice seems based on the case of Haldane, and another in 1848. In both these cases money had been invested on personal security, and the Court ordered the uplifting of the sums and their reinvestment in Government or heritable securities. But this was before the Pupils Protection Act, which placed curators bonis, &c., under the supervision of the Accountant of Court. Section 13 of the statute provides—“That the Accountant shall see that the factor's accounts of charge and
Page: 310↓
discharge, with the vouchers therof, are duly lodged, and shall thereafter examine the same without undue delay, and audit the account on the general principles of good ordinary management for the real benefit of the estate and of those interested therein, and shall consider the investment of the estate and the sufficiency thereof, &c. Here the Accountant quite approves of the investments submitted to him. A relaxation of the rigid rule has been made by all the recent legislation with regard to the administration of trust-funds, and a relaxation in this matter was recommended by the late law commission. There is an obvious distinction between those who are under the Accountant of Court and those who are not. Even heritable security, as in Forsyth's case, may prove insecure. Authorities— Haldane v. Lindsay, Dec. 23, 1848, 11 D. 286; Pupils Protection Act, 12 and 13 Vict, c. 51, sec. 13; A.B., June 29,1854, 16 D. 1004; Morrison, Dec. 5, 1856, 19 D. 132; Trust Acts, 22 and 23 Vict. c. 35, sec. 32; 30 and 31 Vict. c. 97, sec. 5; 30 and 31 Vict. c. 132, secs. 1 and 2; Edinburgh City Act, 1 and 2 Vict. c. 55, sec. 77.
At advising—
Now, what are the facts actually before us? In the first place, the curator bonis has invested the sum of £4500 on the security of certain assessments leviable by the Aberdeen County and Municipal Buildings Commissioners, as commissioners under the Sheriff Court-Houses Act of 1860. This, which I understand to be a public statute, empowers the commissioners to levy an assessment by means of which the whole of the money borrowed by them will ultimately be paid off. The money originally borrowed was £15,852, but upwards of £400 has already been paid off by means of the assessment. The assessment is a very light one, viz., at the low rate of one-sixth of a penny per pound; but it yields an annual sum more than sufficient to pay the interest of the debt still outstanding, and will at length pay off the whole debt. Now, I cannot say that that is not equal to the very best heritable security that can be had. It is perfectly clear that the commissioners will do their duty, and as public trustees they may be compelled to do it. It is, however, needless to speculate on the means of preventing a failure in duty, as that is obviously not within the scope of probability. As regards this loan of £4500, I may say, therefore, that it seems to be as well secured as money can be, while it yields a return of four per cent., quite as much as heritable securities.
As regards the other investment, viz., of £6500, on the security of the assessments under the Aberdeenshire Road Act of 1865, it stands in a somewhat different position, as that is not a public but a local Act. But that does not affect the nature of the security. A considerable part of the sum originally borrowed has been paid off, the trustees are empowered to levy rates, and these rates are assigned in security of the debt. This investment, therefore, seems to me to be in exactly the same position as the other one to which I have adverted.
I purposely confine myself to saying that these are exceptionally good securities, which the curator was justified in taking; for it is very difficult to lay down any general rule or principle applicable to all time to come. All, therefore, that I can say is, that where by virtue of Act of Parliament such securities as those now in question are obtainable, they are as eligible as heritable securities, and may safely be taken by a curator bonis.
Page: 311↓
As your Lordship has pointed out, investments in public funds are very inconvenient. They can only be held in an individual name, and they are thus open to be attacked by the bona fide creditors of the individual. Then, with reference to heritable security, it is well known that good heritable securities cannot be got. The great insurance companies almost monopolise them, and take all that come into the market, and would take more if there were any. Besides, heritable security is scarcely applicable to small sums. Moreover, there is always a risk of money invested on heritable securities being lost. There is a difficulty in ascertaining the validity of titles, and the value of property rises and falls, especially in the case of house property. The consequence is that a large amount of trust-funds and money held by judicial factors and curators is allowed to lie in the bank at 1 or 2 per cent., or sometimes at no interest at all.
I have therefore no difficulty in holding that there is no absolute rule restricting the investments to the three classes of security, and, without specifying what other securities may be in the same position, I am of opinion that the investments here are unobjectionable, and that there is no ground for ordaining the curator to call them up.
Counsel for Curator—Asher. Agents— Morton, Neilson, & Smart, W.S.
