Scottish Court of Session Decisions

Mrs Scott was proprietrix of the lands of Summerhouse, in the county of Stirling. She died on 25th November 1874 without having made any settlement of her property, and was succeeded by her son William Scott, junior, born on 15th July 1870, as her heir-at-law. Her husband William Scott, who survived, had no right of courtesy, as Mrs Scott had never been infeft.

In 1879 William Scott borrowed £1500 from Matthew Cleland, and granted in his favour a bond and disposition in security dated 23d April 1879. By this bond and disposition in security, which proceeded on the narrative that the said William Scott had deemed it right to borrow the said sum with a view to the improvement of the lands of Summerhouse, and for the purpose of defraying the expense of erecting a suitable steading thereon, the said William Scott, therein described as “merchant in Strathaven, in the county of Lanark, tutor-at-law to my son, William Scott, junior,” inter alia, granted him as tutor-at-law foresaid, to have instantly borrowed and received from Matthew Cleland, merchant, Cambusnethan, in the county of Lanark, the sum of £1500 sterling, which sum he bound the said William Scott, junior, and himself, as tutor-at-law foresaid, and also himself as an individual, and their respective heirs, executors, and representatives whomsoever, without the necessity of discussing them in their order, to repay to the said Matthew Cleland and his heirs, executors, or assignees whomsoever; and in security of the personal obligation thereinbefore written, in the first place, he, as tutor-at-law foresaid, disponed to and in favour of the said Matthew Cleland and his foresaids, heritably but redeemably, as thereinafter mentioned, yet irredeemably in the event of a sale by virtue thereof, All and Whole the said lands of Summerhouse, therein particularly described; and, in the second place, he, for himself, disponed to and in favour of the said Matthew Cleland and his foresaids, heritably but redeemably, as thereinafter mentioned, yet irredeemably in the event of a sale by virtue thereof, All and Haill these six and eight penny lands of Graynes, in the parish of Avondale and county of Lanark, therein particularly described, belonging to the said William Scott himself; and whereas the said sum of money had been borrowed only for the purpose of making the said improvements on the said lands of Summerhouse, and was intended by him to form a charge thereupon, and upon his said son as proprietor thereof, and his personal obligation therefor had only been granted, and the said lands of Graynes had only been disponed as an additional security to the said Matthew Cleland, therefore the said William Scott did thereby declare that the said sum should be and was thereby constituted primarily a burden upon the said lands of Summerhouse, and proprietor thereof, and only secondarily a burden upon the said lands of Graynes, and proprietor thereof, and that in the event of himself or his successors in the said lands of Graynes paying the said sum, or interest thereon, they should be entitled to relief from the said lands of Summerhouse and proprietor thereof, and for the purpose of operating such relief they should, if they requested it, be entitled to an assignation of the said bond and disposition in security from the said Matthew Cleland.

The estates of William Scott were sequestrated in February 1885, and Mr Robert Wiseman, accountant, Strathaven, was appointed trustee. The trustee having an interest to prevent the lands of Graynes being made to bear the burden of the sum borrowed for the improvement of the lands of Summerhouse, at all events to the extent to which the defender William Scott, junior, was lucratus by the expenditure, raised an action of declarator against William Scott, junior, William Scott, as his administrator-in law, and Matthew Cleland, for his interest, in which he sought to have it found and declared that the bond formed a good and valid security over the lands of Summerhouse for repayment of the sum of £1500, or to the extent of £1152, 13s. 2d. He averred that the money had been entirely expended in the improvement of these lands,

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and that William Scott, junior, their proprietor, was lucratus to that amount, or at all events to the extent of £1152, 13s. 2d. Defences were lodged for William Scott, junior, in which he denied that he had been lucratus, and averred that William Soott was solvent for a considerable time after the execution of the bond, and that he had drawn the whole rents of the defender's lands since the succession opened in 1874, amounting to £750.

The pursuer pleaded—“(2) The money borrowed under the said bond and disposition in security having been expended on the lands of Summerhouse, belonging to the defender William Scott, junior, and the said expenditure having been necessary and reasonable, the pursuer is entitled to decree that the said bond forms a good and valid security over the said lands, at all events to the extent to which the said defender is lucratus thereby.”

The defender pleaded—“(3) The said bond and disposition in security not having been executed by this defender, or anyone authorised to borrow money on the security of his heritage, does not form a good and valid security over the lands of this defender, and he ought to be assoilzied with expenses. (4) The said transaction not having been reasonable and necessary in the administration of this defender's estate, this defender ought to be assoilzied, with expenses. (5) As the claim now made in respect of this defender having been lucratus by the expenditure libelled on has been extinguished, this defender ought to be assoilzied, or, at least, the pursuer is not entitled to have the said claim sustained except to the extent of the balance ascertained to be due by this defender to his father's estate.”

On the 4th November 1885 the Lord Ordinary appointed David Lister Shand curator ad litem, to William Scott, junior, and on 14th June 1886 he allowed a proof.

Thereafter the pursuer craved leave to amend the summons and record by adding an alternative conclusion that the bond should be found and declared a good and valid security for the sum of £1500, “or such other sum as shall be ascertained in this process was properly expended by the said William Scott in improving the said lands of Summerhouse belonging to the defender William Scott, junior; and that the said expenditure did to the extent of £1500, or such other sum aforesaid, permanently improve the said lands as at the date of said bond and disposition in security; and that the defender William Scott, junior, was thereby lucratus to the extent aforesaid; and that to the extent aforesaid the pursuer is entitled to require the defender Matthew Cleland, being the creditor in said bond and disposition in security, to proceed thereunder in the first place against the said William Scott, junior, and his estate, and that to the extent aforesaid the said William Scott, junior, is bound to free and relieve the pursuer, as trustee foresaid, and the said William Scott and his estate, of all obligations undertaken by the said William Scott in said bond and disposition in security, and of all sums paid by the said William Scott or the pursuer to the creditor in said bond and disposition in security,” and by adding this conclusion—“And the defender the said William Scott, junior, ought and should be decerned and ordained by decree foresaid to make payment to the pursuer of the said sum of £1500, or such part thereof as aforesaid, in so far as the same may have been already paid by the pursuer to the said Matthew Cleland, with the interest thereon at the rate of four per cent. per annum from day of till payment, but that only upon the pursuer executing and delivering to the defender the said William Scott, junior, and at that defender's expense, a valid and sufficient discharge of the said bond and disposition in security, so far as the same shall by decree foresaid be found to be a good security over the said lands of Summerhouse.” The pursuer further craved leave to amend his condescendence by adding this statement—“Since the date of closing this record the pursuer has paid the sum of £1500 contained in said bond and disposition in security to the said Matthew Cleland, and has obtained from him an assignation to said bond and disposition in security.”

The Lord Ordinary allowed these amendments, and thereafter a joint-minute for the pursuer and for the defender William Scott, junior, and his curator ad litem was lodged, in which they stated that they had agreed—“( First) that the expenditure … by this defender's father William Scott, senior, should be held as having improved this defender's lands of Summerhouse in value (both at the date of said expenditure and at the present time) to the extent of £600; ( second) that the said expenditure, but only to the extent of the said £500, and interest thereon at £4 per centum per annum from the 15th day of May 1879, forms a proper item of charge against the estate of this defender, in the accounting between this defender and the estate of his said father William Scott, senior; and ( third) that the balance due by this defender on an accounting between him and the pursuer, as trustee upon the sequestrated estate of the said William Scott, amounts to the sum of £190 sterling as at the date hereof, and they accordingly craved the Lord Ordinary to pronounce an interlocutor disposing of the cause, and to find neither party liable in expenses.”

On 26th February 1887 the Lord Ordinary ( M'Laren) pronounced this interlocutor—“The Lord Ordinary having considered the cause, Allows the amendments … to be made upon the closed record: Finds that Matthew Cleland, therein designed, advanced to the minor defender William Scott, junior, £1500 on the receipt and obligation of the minor's father, and that to the extent of £500 the estate of the minor is permanently improved and increased in value by the expenditure of a part of said advanced money upon it, and that to this extent the said William Scott, junior, is liable in repayment of said advance: Finds that the pursuer has acquired by assignation the right of the creditor in said advance, and that said right is not subject to compensation by any claim arising on the accounts between the said William Scott, junior, and his father, the bankrupt: Therefore decerns against the said William Scott, junior, for payment of the said sum of £500, with interest thereon at the rate of five per centum per annum, from the date of citation until payment, but that only upon the pursuer executing and delivering to the defender the said William Scott, junior, a valid and sufficient discharge of the said bond and disposition in security, in so

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far as the same binds, or purports to bind, the said William Scott, junior, and his said lands of Summerhouse: Finds no expenses due.

“ Opinion.—I think I am how fully in possession of the facts of the case, and the views that have been respectively maintained. The question here relates to the extent to which it is possible to render the estate of a minor liable for money expended in its improvement. In the circumstances set forth in the condescendence the pupil's father resolved to execute improvements on his son's estate, for which he borrowed in the son's name the sum of £1500 from Matthew Cleland. But in consequence of the difficulties which the law interposes towards transactions that may affect a minor's heritable estate Cleland took care to keep himself safe by getting a collateral security from William Scott, the father, over his lands of Graynes, a different estate of course from that of the pupil's estate—the pupil's estate being derived from his mother. It appears that the father's heritable estate affords a sufficient security for the borrowed money. But he has become bankrupt, and in the interests of creditors the trustee on the father's sequestrated estate contends that the debt contracted to Matthew Cleland should in the first instance be paid out of the son's estate, in so far as the money can be shown to have been beneficially employed in the improvement of that estate. He admits his liability, of course, for the balance that arises upon his collateral security—security given in express contemplation of such a result. Now, to obviate a proof the parties have agreed that it may be taken that the money was applied beneficially to the extent of £500. To that extent the son is lucratus, and I suppose it follows that if he pays the £500 he has suffered no lesion from the transaction which his father entered into on his behalf. But upon the account between father and son with reference to the rents of the son's estate there arises a balance against the father of £310, which, if it could be set against the £500 to which I have referred, would reduce the sum due to £190. It is contended on the son's behalf, first, that the son ought not to be called on to pay anything; and secondly, that at all events he is only to pay the £190, which is the nett benefit he has got out of the transaction, if you can identify the father with Cleland, the person who advanced the money at his request. On the first point, I am disposed to think it is not necessary for the purposes of this action to consider whether a bond granted by a tutor over the ward's heritable estate is a good security over the estate. That question could only arise here if the son's estate were insufficient to meet his obligations. But there is no question about the solvency of the son's estate, and therefore I do not need to consider the value of the bond as a security. But what I must consider is, in view of the fact that the son's estate has been benefited by the bona fide expenditure of money to the extent of £500, whether there is not an equitable obligation on the part of the son to repay the money so expended. I am clearly of opinion that the minor is liable to fulfil these equitable obligations founded on the law of recompense which would attach to any person sui juris in the same circumstances. The disability of the minor only arises in regard to matters in which it is necessary that he should form an independent opinion and act upon it, because he is not supposed to be capable of protecting his own interests. But there are other matters as to which there is no difference between the case of a minor and of a person sui juris. The claim of recompense is a claim that does not arise in consequence of anything that the party benefited has done, or is called upon to do, but in consequence of something that has been done for his benefit without his consent. I am therefore of opinion that Mr Cleland has a good claim against William Scott, junior, to the extent of £500; and I am further of opinion that the trustee of William Scott, senior, has the right to require Cleland to proceed against the son for that sum, because William Scott, senior, is only a cautioner, and it is the right of every cautioner at common law to call upon the creditor first to discuss the principal debtor. That is the benefit of discussion which is not said to have been excluded in this case, and about which no question has been raised.

“But now let me consider the second point, which is this, seeing that the trustee is the party who has raised the question, whether he ought to be affected by his constituent's obligation to account for the rents. Now, if William Scott, the father, before he became insolvent, had acquired right to the creditor's claim of recompense by making payment in terms of his collateral obligation, I am inclined to think that compensation would have taken effect ipso jure, and that William Scott, junior, would have been entitled to set-off his claim for the rents against the father's claim upon the bond. But the result is not necessarily the same when the trustee for creditors acquires the bond. I am not aware that he has acquired it. What he is here asking under the summons is, that Cleland should discuss the principal debtor, and if the principal debtor is discussed and payment obtained, there never could be compensation, because there never was the same creditor and same debtor in the two transactions. But supposing that the trustee has provisionally paid the debt, preserving his right of relief, then I am of opinion that in this case compensation does not take place. No doubt under the rule of the balancing of accounts in bankruptcy, the trustee cannot exact full payment from a debtor to the sequestrated estate, and at the same time require the other to take payment of a dividend upon a counter claim. But this doctrine only applies where the two claims have arisen before the bankruptcy. If the trustee for the convenience of the trust makes a payment whereby he acquires a right of credit against a third party, that is an asset which he holds for the benefit of creditors independently of the bankrupt, and which he is entitled to realise in full, the bankrupt's claim being only a claim in bankruptcy, and inferring a right to a dividend. And therefore upon both points which have been argued, my judgment is in favour of the pursuer.

“I think it will be necessary that the conclusions of the summons should be modified, or that I should only give decree in qualified terms. I cannot hold that the bond and disposition in security formed a good security over the lands, but I may hold that a debt to the extent of £500 was incurred by William Scott, junior, to Cleland.”

The defender reclaimed, and argued—That

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it was admitted that the father had expended £500 on the estate of the son, by which the latter was lucratus, and that he had drawn £310 in rents from the son's property. The one sum should be set off pro tanto against the other. Whatever was the position of the father before his bankruptcy was the position of his trustee now. Both claims had arisen prior to the sequestration. Throughout the whole transaction the debtor and creditor were the same, i.e., the father and son, and the father's trustee had incurred no fresh obligation, nor acquired any fresh right.

It was argued for the pursuer—That the case must be taken on the footing that it had been found that the ward's lands were benefited to the extent of £500 out of Cleland's money, and the question was whether the trustee had so acted as to put himself in Cleland's shoes. Both father and son were bound. The bond over the ward's estate was not necessarily bad; there were many cases which showed that the Court would grant authority to burden heritable estate ab ante— Armour v. Lands, 1671, M. 16, 284; Crawford, July 6, 1839, 1 D. 1183; M'Millan v. Armstrong, December 6, 1848, 11 D. 191; Bellamy, November 30, 1854, 17 D. 115; White, March 7, 1855, 17 D. 599. If the father could not pay then, the son was liable so far as he was lucratus—Paterson v. Greig, July 18, 1862, 24 D. 1370. Cleland could trace his money into the ward's hands; the narrative of the bond said that the money was borrowed to improve the ward's estate, and the circumstances were known—Fraser on Parent and Child, p. 256. If that were so, the pursuer was in Cleland's place in virtue of the assignation, and in that case no question of recompense could arise—Bell's Comm. ii. 123, 128; Bell's Prin. sec. 538; Stewart v. Stewart, November 8, 1878, 6 R. 145.

At advising—