Scottish Court of Session Decisions

I therefore think that we must take the inventory as it stands, and the question comes to be, what amount of that £29,444 the executors have paid away in extinction pro tanto of the debts of the deceased? And the answer to that comes to be, not £29,444, but £19,650, plus so much more as may hereafter be realised and paid over to the liquidators.

It was said, no doubt, that this stock is to be handed over to the liquidators as an asset of the executry estate, or rather that there is to be an assignation by the executors to the liquidators of any value that may attach to this stock hereafter in respect of the surplus assets of the bank—any claim which the executry estate may have to surplus assets after the whole creditors have been paid—and that therefore this stock has really been paid away or handed over in payment to a certain extent of the deceased's debt. The question is, not what has been done with this presently worthless stock, but the question is, how much of the £5738, which was its value in March 1878, has been paid away in extinction of debt? and the answer must be—not one farthing. No part of that asset of the executry estate has been paid away in extinction of the deceased's debt.

The conclusion, therefore, to which I come is substantially that which has been arrived at by the Lord Ordinary—that while the pursuers are entitled to succeed in obtaining repayment of inventory-duty corresponding to the amount that they have actually paid away in extinction of the deceased's debt, they are not entitled to any more, and particularly they are not entitled per aversionem to claim the return of the whole inventory-duty paid upon a total of £29,444, because that is much in excess of what they have actually paid in extinction of debt. And yet the inventory-duty was quite accurately and correctly charged as at March 1878. The value of the estate was then £29,000, and consequently £400 was properly paid upon it, but the drawback must be, not the total amount of the lost executry estate, but the total amount of that portion of the estate which has been paid in extinction of the deceased's debts.

Lord Deas—I am very clearly of opinion that those calls were a debt due by the late Mr Galletly. That is clear, I think, both upon principle and in fact. That leads to this, that the executors are entitled to a return of the inventory-duty to the extent which has been stated by your Lordship. I am also of opinion, however, that they are not entitled to a return of the inventory-duty upon the amount which is stated in the inventory given up by them as the market value for the time being of that particular stock. We have no way of estimating it—no right to estimate it—except in the way in which it was estimated at the time, when it was quite rightly taken at the market value. I therefore entirely agree with your Lordship both as to this being a debt of the late Mr Galletly, and likewise as to the result to which that leads, upon the amount of the return to the executors.

Lord Shand—I am of the same opinion on both points. With regard to the large sum of £19,000 odds paid in respect of calls, it is to be observed that the payment made was in the ordinary course of executry administration by the executors. If the case had been one in which the executors had retained the stock over a period of years, and the result of their trading during those years had been that large liabilities had been incurred which were not liabilities existing when the testator died, I think a very different question would have been raised. It would then, I think, have been fairly represented that the calls were not in any true sense debts due and owing by the testator, but debts due and owing by the executors, which had been the result of their trading, and were properly their debts only. The bank failed within nine months after the testator's death. The calls were made in respect of trading that had occurred during his life. They were made upon shares which the executors were, we must presume, in the course of realising, and they were therefore not debts due and owing by the executors from any actings of their own, but due and owing by the deceased in respect of the stock left by him. I have therefore no doubt that the Lord Ordinary is right on that point.

On the second question, Whether the pursuers are entitled to receive back the inventory-duty paid upon the sum of £5738? there were two arguments urged. The first was that this stock, having been valued at £5738, had really been handed over to the liquidators of the bank in payment of debts due and owing by the testator to the bank—I mean towards the extinction of the calls that had accrued upon the shares. Now, in regard to that question, if it had appeared that at the time when the liquidators stipulated that this stock should be handed over to them the stock had acquired a value in the market, and had been valued accordingly as between the executors and the liquidators at a certain sum, and given over as at that value in extinction of calls, I should have found it difficult to distinguish between that sum and the large sums in dispute between the parties; for I think it might then have been very properly represented that this stock, taken as of the value of whatever the sum fixed might be, had been given to the liquidators as a payment towards debt due and owing by the deceased at the time of his death, that debt being the calls which had accrued upon the shares. But the fact is not so. These shares were not, at the time when the liquidators demanded the surrender of this estate, treated as an asset of known value. The liquidators simply asked—Take them at what they may be worth; they must be thrown in with the rest of the estate;—and in that state of matters it must be kept in view that the possessors of those shares might have been liable for future calls for aught that anybody knew at the time this surrender was demanded. I do not think the facts of this case as presented to the Court raise what is necessary to entitle the party to a return of the duty, viz., that the assets were of value, and were valued accordingly, and to the extent of that value the claim should be allowed. Accordingly that argument fails. Another point maintained by the pursuers was, that at all events they are entitled to correct what was an erroneous value put upon those shares. They were valued at £5000 odds, whereas it appears by the result that they were worthless. I agree with your Lordships in thinking that in questions of this kind, between executors and the Revenue, what must be looked at is the market value of shares of this description. The case is not like one in which a body of private trustees have to wind up a testator's business which he has been carrying on alone—where they put a high value upon it, and in the course of realisation it is found there is no such value, because it is swept away. That, I think, would present a very different question, because there you would have a valuation of a speculative character tested by the result, and the result would show that it had no such value. But here, and in reference to a joint-stock company, you have another criterion—the market value. The executors could have parted with this stock at the value they put upon it in the inventory, and it appears to me that we cannot go back upon that market value to correct it by the result, in the same way as you could do in the case of such a private estate and private business as I have referred to. Accordingly, I agree with your Lordship in thinking that the Lord Ordinary is right in reference to this branch of the case also.

Lord President—Lord Mure concurs in this judgment.