Scottish Court of Session Decisions

Peter Macpherson Graham, gunner in the 15th Company of the Royal Artillery, son of the late Alexander Graham, wine and spirit merchant, Glasgow, brought this action in the Sheriff Court of Lanarkshire at Glasgow against Alexander Lang, distiller and wine merchant in Glasgow, and others, trustees of the said Alexander Graham, Terregles Avenue, Pollokshields praying the Court to ordain the defenders to produce full accounts of their intromissions as trustees aforesaid with the moveable estate of the said Alexander Graham and to pay to the pursuer £2000 with interest thereon from the date of the said Alexander Graham's death.

The pursuer was the eldest son of the late Alexander Graham. Alexander Graham died on April 27, 1900, leaving a trust-disposition and settlement and relative codicil, whereby he directed his trustees to pay the pursuer his legitim.

At the date of his death Alexander Graham carried on business in several licensed public-houses in Glasgow, held by him on lease, and the pursuer averred that the valuations placed on these public-houses by the defenders in the statement of legitim fund furnished to him by them were wholly inadequate, and that the defenders refused to allow him facilities for making up correct inventories for himself.

The pursuer pleaded, inter alia—that he being entitled to payment of his legitim, the defenders were bound to give an accounting and to make payment of his share of legitim.

The defenders pleaded, inter alia—“(1) The action is irrelevant. (2) The pursuer having no interest in the goodwills which follow the leases, and there being no estate otherwise available for legitim, the defenders should be assoilzied.”

On July 6, 1901, the Sheriff-Substitute ( Boyd) found that the goodwills of the premises could not be regarded as forming part of the moveable estate of the deceased,

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and therefore so far sustained the defences and assoilzied the defenders.

Quoad ultra he allowed a proof.

The pursuer appealed to the Court of Session.

On January 31, 1902, the First Division appointed the defenders (respondents) to lodge a full inventory of the estate of the deceased Alexander Graham, specifying what portions thereof they considered should be taken into account in ascertaining the legitim fund, and allowed the pursuer to lodge answers thereto.

In the inventory of the estate of the deceased Alexander Graham lodged by the defenders, it was stated that the deceased Alexander Graham was at the date of his death tenant of three licensed public-houses at (1) 259a Argyle Street, Glasgow, the goodwill of which was entered as nil, (2) 8 and 10 Cathedral Street, Glasgow, the goodwill of which was valued at £1200, (3) 188 Oxford Street, Glasgow, the goodwill of which was valued at £900, and that the defenders considered that the value of the goodwills of these public-houses should, before fixing the account of the legitim fund, be deducted, and, in a question with a child claiming legitim, be treated as heritable estate.

With regard to the licensed premises at 259a Argyle Street, Glasgow, the defenders stated that Alexander Graham, at the date of his death occupied the premises on a lease which was to terminate at Whitsunday 1900, and that the landlord of the premises had received notice from the Caledonian Railway Company that they were to acquire the property under compulsory powers. After Mr Graham's death, his trustees having obtained a transfer of the licence to one of their own number for behoof of the trust-estate, occupied the premises until the termination of the lease at Whitsunday 1900, and thereafter, under a special arrangement with the Caledonian Railway Company that they would remove upon three months' notice, and subsequently with the contractors, to whom the Railway Company let the contract for taking down the buildings, that they would remove at a week's notice, until Whitsunday 1901, when they were turned out of the premises without any compensation. In view of the notice which they had received to remove at that term, the defenders, thinking it a pity for the sake of the younger members of the deceased's family, who consist of two young girls, one of whom is likely to be a cripple for life, and although they were under no obligation to do so, set about endeavouring to find other premises in the same neighbourhood on the chance that the magistrates might be induced to grant a new licence. Early in April 1901, and before the April Licensing Court, they, upon their own responsibility, and at their own personal risk, after negotiation, entered into an agreement with the proprietors and the tenants of No. 271 Argyle Street, Glasgow, under which for an onerous consideration, and conditional upon their obtaining a licence for these new premises, the respondents were to become tenants, and the former tenants were to grant a renunciation of the unexpired portion of their tenure. A new licence was accordingly thereafter applied for and obtained by John Macaulay, one of their number, and it was duly confirmed by the Confirmation Court, and is now held by him for behoof of the trust estate. After obtaining this licence, the defenders, who had been taken bound, incurred the whole expense of altering, fitting up. and adapting the new premises for the purpose of carrying on the business of a wine and spirit menchant.

With regard to the licensed premises in 188 Oxford Street, Glasgow, the defenders stated—“The deceased Alexander Graham was tenant of these premises under a lease for five years from Whitsunday 1896, expiring at Whitsunday 1901. The rent was £65 per annum. These premises are no longer in the occupation of the defenders. After Mr Graham's death, viz., on or about 13th April 1901, they sold the goodwill and fittings attaching to said premises for the sum of £1500. Before making his offer the purchaser arranged with the landlord for a new lease.”

With regard to the licensed premises at 8 and 10 Cathedral Street, Glasgow, “the deceased Alexander Graham originally became tenant of these premises at Whitsunday 1885, he taking over a then current lease for the unexpired term thereof, which was five years. He continued tenant for a further period of seven years, under missives dated 1st November 1889, his date of entry being Whitsunday 1890, and the rent £120 per annum. The late Mr Graham continued to occupy the premises, and in March 1900 he again arranged to take them for a further period of seven years. These premises are still in the hands of the defenders, who are carrying on the business for behoof of the trust in terms of the authority to that effect contained in Mr Graham's trust-disposition and settlement—conform to excerpt therefrom appended hereto. No formal lease has yet been entered into, the defenders being in right of the deceased in possession under said missives.”

The pursuer lodged objections to the inventory of the defenders, in so far as it omitted from the legitim fund the value of the goodwills of the aforesaid licensed business carried on by the deceased Alexander Graham at the date of his death. He stated—“These goodwills were moveable, not heritable, estate. The businesses were carried on in crowded thoroughfares where there are a number of other licensed spirit shops within a very short radius. The value of the goodwills did not depend upon the custom of resorting to particular premises, but upon the reputation of the businesses which had been built up by the personal skill and industry of the deceased. It is the practice in Glasgow for the magistrates, when desired, to transfer the licence for such a business to other suitable premises in the locality, where there has been no misconduct on the part of the holder,

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and in no case would a landlord obtain a licence for premises in opposition to a former tenant's application for a transfer. It was in consequence of the goodwill so vested in the truster at the date of his death that his trustees were enabled to obtain the licence for No. 271 Argyle Street. The same conditions in regard to the character of the goodwill applied to the business carried on at Nos. 8 to 10 Cathedral Street. The goodwill attaching to the business carried on at No. 188 Oxford Street at the truster's death was also moveable estate, and the same considerations as those above stated apply to it also.”

On 4th June 1902 the First Division allowed the parties a proof of their respective averments on record and in the inventory and objections, and remitted to the Sheriff-Substitute to take the proof and to proceed as might be just.

The proof was concerned mainly with the question of the value of the goodwills of the several public-houses, which question is not pertinent to this report. It was clear on the accounts and proof that there was no legitim fund unless the goodwills of the licensed houses or part thereof was reckoned as moveable estate belonging to the deceased Alexander Graham.

On 9th November 1903 the Sheriff-Substitute ( Boyd), having considered the proof, found “in law that the value of the goodwill fell to be treated as heritable estate, and therefore must be deducted from the value of the estate before fixing the legitim fund, and that as such deduction resulted in a deficit of £1289, 3s. 1d. there was no fund available out of which legitim could be paid; therefore assoilzied the defenders from the conclusions of the action.”

Note.—“The first question is whether the goodwills of the businesses must be regarded as heritable or moveable. I think that in every case this must be a question of circumstances, but taking it as such I think I must regard them as heritable. The testator dismissed his son from the position of a beneficiary and relegated him to the position of a creditor. The testator was a tenant, he bequeathed his whole estate to his trustees, his leases excluded assignees except with the landlord's consent, but the landlord tacitly accepted the trustees in his place. I think that the goodwills enured to the premises to which the licences were given. I again refer to Bell's Trustees v. Bell, 12 R. 85, and Philp's Executor v. Philp's Executor, 21 R. 482. I have also had before me a case decided in this Court by Sheriff Guthrie and on appeal by Sheriff Berry— Foulis v. M'Gibbon, May 11, 1889 (not reported), and a judgment of Lord Low in Ross v. Ross's Trustees, July 20, 1901 (not reported), which support the view that the goodwills in this case are heritable.

If I am right in the opinion I have expressed it is unnecessary to consider the question of the value of the goodwills, but as I heard the proof and have since read the notes, I think I should state shortly what I think is the result of the evidence.”

[ The rest of the Sheriff-Substitute's note consisted of an analysis of the evidence as to the value of the goodwills.]

The pursuer appealed, and argued—The goodwill of the several public-houses here in question was moveable estate of the deceased Alexander Graham, now held by the defenders, his trustees. The goodwill of the businesses was certainly not wholly connected with the premises, but was to a large extent of a personal character, dependent upon the reputation of the businesses which had been built up by the personal skill and industry of the deceased. The question whether the goodwill of a public-house was heritable or moveable had been considered in a series of valuation cases, and had been determined to be in large part moveable— Macfarlane & Dailly v. Dundee Assessor, June 13, 1891, 18 R. 939, 28 S.L.R. 621: Hughes v. Assessor of Stirling, June 7, 1892, 19 R. 840, 29 S.L.R. 625; Stewart's Trustees v. Stewart's Executrix, May 21, 1896, 23 R. 739, 33 S.L.R. 570; Brown v. Robertson, July 29, 1896, 34 S.L.R. 570 (the sequel to Stewart's case); Murray's Trustees v. M'Intyre, March 12, 1904, 6 F. 588, 41 S.L.R. 398; Ross v. Ross’ Trustees, November 28, 1901, 9 S.L.T. No. 286. The same principles were applicable in determining whether the goodwill was heritable or moveable in a question as to the amount of legitim. The cases referred to by the Sheriff-Substitute did not apply. Bell's Trustees v. Bell, November 8, 1884, 12 R. 85, 22 S.L.R. 59, was the case of the sale of a pottery belonging to an intestate estate, and it was merely held that the goodwill was included in the enhanced price which the subjects brought from being sold as a going business. Similarly, the case of Philp's Executor v. Philp's Trustees, February 1, 1894, 21 R. 482, sub nom. Philp v. Martin, 31 S.L.R. 384, was very special. The real value to the estate of these licences lay in the probability of renewal, and this value was moveable in its character. In the case of the Argyle Street licences there was a “transfer” not a “new grant”—Licensing (Scotland) Act 1903, sec. 31, and Sched. 9—which clearly pointed to the personal character of the business. Accordingly the goodwill of an hotel was not merely an enhancement of the value of the leasehold premises, but was capable of being sold independently from the premises— West London Syndicate v. Commissioners of Inland Revenue [1898], 2 Q.B. 507; Inland Revenue Commissioners v. Muller & Company's Margerine, Limited [1901], A.C. 217. The cases in which the question was as to the estate of the owner of licensed premises were distinguishable from the present case, in which they were concerned solely with a tenant and a tenant's right.

Argued for the defenders and respondents—Legitim was a debt to be measured by the amount of the fund at the date of the father's death, and an increase in value taking place after his death did not affect legitim— M'Murray v. M'Murray's Trustees, July 17, 1852, 14 D. 1048; Gilchrist v. Gilchrist's Trustees, July 19, 1889, 16 R. 1118, 26 S.L.R. 639; Stewart's Executor v. Stewart's Trustees, May 21, 1896, 23 R. 739,

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sub nom. Brown v. Robertson, 33 S.L.R. 570. This principle excluded any claim in respect to the premises at Argyle Street, where the defenders took unlicensed premises and succeeded in getting a licence after the truster's death on their own responsibility. In a question of a tenant's estate the goodwill of a public-house was heritable. It accrued to the premises. The intending purchaser would go to the heir and not to the executor. In English law a leasehold was itself a moveable right, except where it extended for life or longer—Williams on Executors, i. 595; therefore English cases quoted did not apply. Similarly the valuation cases quoted were inapplicable, as in them a totally different set of considerations came into force. Yet even in valuation cases the goodwill of public-houses had frequently been regarded as heritable— Hughes v. Assessor of Stirling, June 7, 1892, 19 R. 840, 29 S.L.R. 625, per Lord Wellwood and Lord Kyllachy; Bell's Trustees v. Bell, November 8, 1884, 12 R. 85, 22 S.L.R. 59, which was a dispute on intestacy between heirs and executors, was valuable as showing that there was no separate pretium distinguishable as goodwill apart from the selling value of the subjects. Philp's Executor v. Philp's Trustees, supra, was a direct authority to the effect that the goodwill of a public-house attached to the premises, and was heritable. The same rule was illustrated in Ross v. Ross's Trustees, supra; ex parte Punnett, in re Kitchin, 1880, 16 Ch. Div. 226, per Sir Geo. Jessel, M.R., p. 233; Cooper v. Metropolitan Board of Works, 1883, 25 Ch. Div. 472, per Cotton, L.J., at p. 479; Chissum v. Dewes, 1828, 5 Russell's Reports, 29. The indorsation of a licence certificate by the person in whose name it had been issued, or by his executors, was of no value to a new tenant applying to the magistrates for a transfer of the licence— Hawick Heritable Investment Bank, Limited v. Huggan, November 6, 1902, 5 F. 75, 40 S.L.R. 33.

At advising—