Scottish Court of Session Decisions

In 1893 Charles Barrington Balfour of Balgonie let the farm of Lochty for a period of thirty years at a rent of £108 per annum to Thomas Buttercase and James Geddie “jointly, and their respective heirs, but expressly excluding sub-tenants and assignees, legal or conventional,” without the landlord's permission in writing. The lease contained a clause providing and declaring that “if at any time during the currency hereof the tenants or either of them shall have become notour bankrupt, or should their estate and effects, or any portions thereof, have become sequestrated or conveyed in trust for behoof of their creditors or attached by their legal diligence, then this lease shall, in the option of the landlord, become ipso facto null and void, and the landlord shall be entitled to apply to the Sheriff of the county, or any competent authority, for a warrant of summary ejection.”

On 1st April 1895 Buttercase and Geddie executed a trust-deed for behoof of their creditors in favour of John Scott Tait, C.A., Edinburgh. By the terms of the said trust-deed the trustee was empowered to “compound, transact and agree” any question or differences that might arise between him and any other person or persons, touching the execution of the trust-deed.

Mr Tait accepted office, intimated to the landlord that he did not propose to take up the lease, and realised the estates conveyed to him by the trust-deed. After paying all debts, including arrears of rent, there remained a surplus of about £800.

On 5th July 1895 Mr Buttercase's estates were sequestrated, and Mr Tait was appointed trustee thereon.

On 2nd July 1895, Mr Balfour, the landlord, lodged a claim with Mr Tait for £1001 as damages for breach of contract on the part of the tenants, representing the capitalised value of future rents. On 22nd August 1895 Mr Tait issued a deliverance sustaining the landlord's claim to the extent of £384, 15s. 5d., and on the 23rd August he paid the landlord's agents that sum.

In these circumstances an action of multiplepoinding was raised by Mr Geddie, which Mr Tait, pursuer and nominal raiser, pleaded was incompetent, there being no double distress. The Court repelled that plea, but found no expenses due to or by either party.

In the condescendence of the fund in medio lodged by him, Mr Tait took credit for the above-mentioned sum of £384 odds, and Mr Geddie objected to the condescendence in so far as Mr Tait took credit for that amount, and in so far as he deducted from Geddie's share of the fund in medio any portion of the expenses incurred in maintaining his unsuccessful plea to the competency of the multiplepoinding.

The objector pleaded—“(1) The trustee is not entitled to credit for the said payment of £384, 15s. 5d., in respect that (first) the claim at the instance of the landlord was wholly unfounded, the objector being able and willing to perform the tenant's part of the contract of lease; (second) the said payment was wrongfully made by the trustee in breach of the agreement between him and the objector's agent; and (third) the said payment was wrongfully made by the trustee in breach of his duty as trustee. (2) The trustee is not entitled, as in a question with the objector, to take credit for any portion of the expenses incurred by him in unsuccessfully resisting the action of multiplepoinding.”

Mr Tait lodged answers to these objections and pleaded—“(2) The objection to the payment of the sum of £384, 15s. 5d. to Mr Balfour should be repelled, in respect that (first) the claim at Mr Balfour's instance was well founded to the extent to which it was sustained by the trustee; and (second) the said claim was paid by the trustee in bona fide on the advice of counsel and in exercise of the power conferred upon the trustee by the trust-deed to compound, transact, and agree or submit and refer questions or differences. (3) The expenses incurred by the trustee in the action of multiplepoinding having been so incurred in consequence of irrelevant averments made by the real raiser, reflecting on the conduct of the trustee, the objection to such expenses forming a charge on the fund in the hands of the trustee should be repelled.”

A proof before answer having been allowed, it appeared that sundry negotiations took place with regard to the lease in July and August between the trustee, the agent for Mr Geddie, and the agents for the landlord. Immediately prior to the lodging of the landlord's claim with Mr Tait, counsel's opinion was taken thereon, to the effect that the trustee was bound to recognise and rank the landlord's claim for damages. Counsel added—“I have not had submitted to me any statement of the actings of the landlord and the trustee with respect to the lease, but I assume that the landlord did not exercise the power of annulling the lease given in the contract in the event of the execution of a trust-deed by the tenant.” On 31st July Mr Tait intimated to Messrs Strathern & Blair, W.S., the landlord's agents, that Mr Geddie was prepared to carry out the lease of Lochty farm, and he added, “unless the landlord objects to his doing so, it seems to me the only way out of the difficulty.” To this letter Messrs Strathern & Blair made no reply. On 21st August Mr Tait had an interview with Mr Thomas White, S.S.C., agent for Mr Geddie, the particulars as to which were thus stated by Mr Tait in his evidence—“With regard to the letter of 21st August 1895, which Mr White afterwards sent to the landlord, he expressed the view that it was desirable to try the

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landlord's agent again, and I said, ‘By all means try him.’ Then Mr White said, ‘What will we say to him?’ I said he could easily put it in shape, and he began to draft the letter. He hadn't gone very far when he said he had a difficulty about the thing, or something to that effect. I then said, ‘I don't think there is much difficulty; it is a very simple matter. I will dictate it;’ and I proceeded to do so. He cut in twice before I got the sentence finished. (Q) The first portion of the letter is to the following effect—‘As agent of Mr Geddie, I hereby intimate that he is prepared to adopt the lease of Lochty farm, granted by Mr Charles B. Balfour of Balgonie in favour of Mr Buttercase and him as individuals, and I shall be obliged by your letting me know before Friday at noon whether your client is prepared to. accept Mr Geddie's obligation in full of the whole obligations in the lease;’ does that fairly represent the words that you dictated?—(A) That is just what I had in my mind. I called a halt there. Anything put in the letter about a multiplepoinding was added by Mr White afterwards. When I got a copy of the letter subsequently, I saw that that was not what I had agreed to. After I had finished dictating, Mr White brought up the question of the multiplepoinding. I told him I had nothing to do with his multiplepoinding. I said the proper thing was to have an interdict interpelling me from dealing with the landlord's claim. I told him that I would proceed to issue a deliverance on the landlord's claim. I cannot say whether I did so before or after the first paragraph of the letter was drafted. I told him emphatically that I intended to deal with the landlord's claim—I mean by issuing my deliverance in the ordinary way. I did not know whether Mr White intended to add any sentence to the letter when I left the meeting. I received a copy of the letter from him. (Q) Did you receive it the same day or next day?—(A) I am under the impression that I got it next morning, but I may be wrong. I am now shown the letter to me by Mr White, dated 21st August 1895. It was received in the afternoon of that day, and I dealt with it the following day by letter dated 22nd August. I had not undertaken to reject the landlord's claim. I had already paid the first and second dividends on the other creditors’ claims, but I still kept the landlord off for Mr Geddie's benefit. I had no other claims to dispose of at that time except the landlord's and a small claim of a party named Nimmo. After replying to Mr White I had a call on the following day, the 22nd, from Mr Murray, of Messrs Strathern & Blair. I think Mr Murray is the head clerk in their office. I had seen him previously in connection with the matter. He called upon me specially with regard to the landlord's claim. He told me that they had received a letter from Mr White, of date 21st August, and he was mentioning the purport of it to me but I told him I was aware of it. (Q) Did you ask Mr Murray whether the landlord had replied to it?—(A)I think he volunteered the statement that they did not intend to reply to it; I don't think I asked. He made it very plain that the landlord did not intend replying to the letter. I asked him whether the landlord intended to accept Mr Geddie, and he said, ‘Certainly not.’ He had told me before that the landlord was not prepared to accept Mr Geddie's obligation in full of the obligations under the lease. He was very emphatic in saying that the landlord would not accept him. Mr Murray asked me on the same occasion what I meant by all the delay in not issuing the deliverance. I was quite clear, by the call of Mr Murray, that the landlord's agents would not accept Mr Geddie. I certainly did not in any way regard myself as tied down not to dispose of the landlord's claim. Having learned that that was to be the attitude of the landlord and his agents, I sat down at once to prepare the deliverance. I saw that there was no hope of the landlord taking Geddie, and that I must send out my deliverance.”

Mr Robert Strathern, W.S., deponed—“I was perfectly satisfied that Mr Geddie hadn't the means, even if he had the capacity, to carry on the farm … I did not make any answer to the letter of 21st August 1895, because I had advised Mr White before that I could not advise the landlord to accept Mr Geddie, and I did not think it necessary to repeat what I had already said. Cross-examined.—I repudiated all idea of accepting Mr Geddie in any form whatever.”

Alfred Alexander Murray, managing clerk to Messrs Strathern & Blair, deponed—“I told Mr Tait that Mr Balfour was not prepared to accept Mr Geddie's obligation…. It was made perfectly clear by me to Mr Tait that the landlord would have nothing to do with Mr Geddie, and I insisted on having the landlord's claim disposed of.”

On 16th February 1897 the Lord Ordinary ( Stormonth Darling) sustained objection No. 1, repelled objection No. 2, appointed the pursuer and nominal raiser to correct the condescendence of the fund in medio in accordance with the interlocutor, found the pursuer and nominal raiser liable to the objector in the expenses connected with the said objections to the extent of five-sixths of the taxed amount thereof, and granted leave to reclaim.

Opinion.—… “My opinion is that the claim of damages was bad in law. Such a claim can only be made in respect of abandonment of the lease by the tenant. If a landlord either exercises his option to bring the lease to an end or accepts a renunciation by the tenant without reserving his right to damages, his claim is barred— Walker's Trustees v. Manson, 13 R. 1198. The claim only holds where the abandonment is the voluntary act of the tenant, as in Bidoulac v. Sinclair's Trustees, 17 R. 144.

Now, where was the abandonment in this case? The mere execution of the trust-deed in April 1895 did not constitute abandonment. The lease was not thereby

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assigned, because it was not assignable without the landlord's consent, and the landlord never consented. Neither did the sequestration of Buttercase constitute abandonment, for according to the well-known dictum of Mr Bell (Com. i, 76:—“Bankruptcy does not of itself annul a lease. The tenant, though bankrupt, may still continue in the possession, provided he pay the rent regularly and perform the other stipulations of the contract. All that the landlord is entitled to do in case of his tenant's failure to pay the rent is to have recourse to the hypothec and the proceedings prescribed in the Act of Sederunt 1756.‘ If, therefore, both Buttercase and Geddie had desired to carry on the farm, the landlord could not have prevented them except by exercising his option under the lease. But even if the action of the trustee is to be taken as a practical abandonment on the part of Buttercase, it does not follow that Geddie, the solvent joint tenant, was thereby ousted from possession. That is, so far as I can judge, precisely the point that was decided in the case of Young v. Gerard, 6 D. 347. The lease there was in favour of two joint tenants and their respective heirs and successors, with an exclusion of assignees and sub-tenants, and an option to the landlord to bring the lease to an end in case of bankruptcy just as here. One of the tenants died, the other became bankrupt and executed a renunciation of the lease. The representatives of the deceased tenant claimed to remain in possession of the subjects, and the landlord attempted to remove them, pleading, inter alia, that the lease being a joint lease in which he was entitled to have two solvent tenants, it came to an end by the bankruptcy of either tenant. But the Inner House, affirming Lord Wood, rejected that plea, and held that the right of the solvent tenant was not irritated by the bankruptcy and renunciation of the other. The only difference between the two cases is that the option here being a stronger one, the landlord, if he had chosen, could undoubtedly have brought the lease to an end because of the execution of the trust-deed though both Geddie and the firm were solvent, while the landlord in Gerard's case could only do so in case of bankruptcy. But the decision is directly in point as regards the effect of Buttercase's bankruptcy on the rights of Geddie. The higher option of the landlord in this case is of no moment, because the validity of his claim of damages rests on the theory that he did not exercise his option.

There is one other argument which I ought to notice. It was said that the lease, though taken in favour of two persons jointly without mention of any partnership, was truly a partnership asset. In point of fact it had been so treated, and rights may thereby have arisen as between the tenants themselves. If Geddie had been allowed to carry on, Buttercase's creditors might perhaps have had a claim to share in the profits, if any, unless Geddie had made some arrangement with them. But I am at a loss to see how that could enlarge or affect rights of the landlord. His rights were defined by the written contract. If the lease had been taken to the firm, or to the partners as trustees for the firm, the dissolution of the firm by the bankruptcy of one of the partners would have brought the lease to an end without any action on the part of the landlord, though it by no means follows that in such a case the landlord would be entitled to claim damages for abandonment. But that is on the principle that when the firm is dissolved there is no longer a tenant. When the tenants are individuals they remain tenants notwithstanding the dissolution of the firm. I was referred to two cases ( Aitken's Trustees v. Waddell, 8 S. 753; and M'Whannell v. Dobie, 8 S. 914), where leases for the purposes of a partnership had been taken to individuals without mention of the firm, and yet it was held that the leases must be exposed to sale on the dissolution (or non-formation) of the partnership. But these were cases inter socios in which the landlord was not called, and indeed had no interest, because in one of them the lease was taken expressly to assignees, and in the other the subject was urban. Accordingly these cases can have no possible bearing on the right of a landlord to claim damages for abandonment.

I look in vain for any evidence of abandonment by Geddie, who must, I think, be held to have been turned out by the landlord. If so no damages were due, and objection I must be sustained.

Objection 2 stands, I think, in a different position. It claims that the trustee shall pay, either out of Buttercase's share of the surplus assets of the firm, or out of his own pocket, the expenses which he incurred in unsuccessfully pleading that the present action of multiplepoinding was incompetent, because there was no double distress. It is significant that their Lordships of the First Division, in repelling that plea, withheld expenses from the successful party, on the ground, as I am informed, that the record contained charges of bad faith against the nominal raiser, which for his own vindication he was entitled to answer. Even if that were not so, I should say that a trustee, whom the makers of a trust have themselves selected, has a very considerable latitude in stating untenable pleas at the expense of the trust. I therefore repel objection 2.

I need hardly add that although I have felt bound to sustain objection 1, I have done so without the remotest idea of impugning the good faith of the trustee. I think he acted rather precipitately, and on a mistaken view of the law, but I do not question his good faith for a moment, and the charges to that effect in my judgment ought never to have been made.”

The pursuer and nominal raiser reclaimed, and argued—(1) The landlord's claim was good. The lease was a firm lease, though it was taken in the name of the individual partners. The obligation under the lease was an obligation of the firm, and the surplus in Mr Tait's hands was a surplus belonging to the firm. That surplus, before being divided between the partners, must first be applied to meeting the claim of

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damages that arose to the landlord in consequence of the failure of the firm to implement the contract of lease. Young v. Gerard, Dec. 23, 1843, 6 D. 347, raised a pure question between landlord and tenant. The present case depended not so much on the landlord's rights as on the relations of the estates of the individual partners and of the firm inter se. (2) Even assuming that the landlord's claim was bad, the trustee was entitled to take credit for the sum paid. Under the trust-deed he had full power to compromise and transact, and he had the same power at common law. He had effected a compromise, thereby reducing the landlord's claim by a very large amount. A trustee was the judge of the validity of claims, and it was his duty to adjudicate himself, and not to engage in litigation, whenever a beneficiary objected to his satisfying any claim against the estate— Mackenzie's Trustees v. Sutherland, Jan. 10, 1895, 22 R. 233, per Lord M'Laren at p. 236; Forshaw v. Higginson, 8 Mac. and G. 827. The Lord Ordinary had completely exonerated the trustee from any imputation of mala fides. (3) The Lord Ordinary was right as regards the expenses of the preliminary stages of the action.

Argued for the objector—(1) The landlord's claim was bad. The lease was a lease to individuals, not to a firm. Geddie had therefore a right to continue in the tenancy of the farm though Buttercase renounced the lease, unless the landlord exercised his option under the contract— Young v. Gerard, ut sup. He had exercised his option, and therefore he was not entitled to damages— Walker's Trustees v. Manson, July 17, 1886, 13 R. 1198; Bidoulac v. Sinclair's Trustee, Nov. 29, 1889, 17 R. 144. (2) If the landlord's claim was bad, Mr Tait must be held personally liable. He knew that Geddie strongly objected to that claim being satisfied. He had dictated a letter on 21st August, intimating to the landlord's agents that Geddie proposed to continue the lease; yet on the 22nd he had issued his deliverance, and on the 23rd he had actually paid the money. He gave Mr Geddie no opportunity of preventing such a payment being made. His proper course would have been to let the question be determined by the court of law between the landlord and Geddie, and to adopt a neutral attitude. (3) Geddie had been completely justified in raising the action of multiplepoinding, and therefore no part of the trustee's expenses should come out of his share of the surplus.

At advising—