Scottish Court of Session Decisions

A B, advocate, formed a connexion with Helen Stark, who bore two children to him. When bringing the connexion to a close, a bond was granted in January, 1809, by A B, to this effect:—“Considering that for certain good causes and considerations me hereunto moving, it is my will and intention to provide and secure Miss Helen Stark, late comb-maker in Edinburgh, in an annuity of £60 sterling, during all the days of her life, from and after the term of Whitsunday next: Therefore, know ye me to be bound and obliged, as I by these presents bind and oblige myself, my heirs, executors, and representatives whomsover, to provide and secure, on good heritable or personal security, at the sight, and to the satisfaction of my trustees after named, an annuity of £60 sterling, to continue and be payable during all the days of the life of the said Miss Helen Stark; and for this purpose, I hereby nominate and appoint James Moncreiff, Esq. advocate, and Samuel Williamson, Esq. late of Calcutta, in the East Indies, to be my trustees, with power to them to ask and demand from me such good and effectual security, for the said annuity of £60 sterling, to commence from the term of Whitsunday next to come, and so as it may remain and be completely secure to the said Miss Helen Stark, during all the days of her life; in trust always, for the purpose after mentioned, viz. that the said trustees shall become bound and obliged, as they bind and oblige themselves, by their acceptance hereof, to apply the proceeds of the said annuity, to be secured as aforesaid, in payment of the said sum of £60 sterling yearly, to the said Miss Helen Stark, and that by half-yearly payments, as long as she shall live, beginning the first payment at the term of Whitsunday next to come, and so forth at each term of Whitsunday and Martinmas yearly, with a fifth part more, in name of penalty, for non-performance, over and above payment, as aforesaid; and to enable my said trustees to make this my obligation effectual, I hereby consent to the registration hereof.” for preservation, and also that letters of horning might be raised thereon if necesary. A notarial copy of the bond was given to Helen Stark. Before this period, six half-yearly payments, each of £30, had been received by Helen Stark, through the hands of James Moncreiff, advocate, afterwards Sir James Wellwood Moncreiff, Bart. one of the Senators of the College of Justice, who had interposed in the matter as the personal friend of A B, and for the purpose of bringing to a close the connexion which had subsisted between A B and Helen Stark. The receipts were generally in these terms:—“Received of this date, the first half-year's payment of the annuity provided to me by A B, Esq. advocate, from James Moncreiff, Esq. advocate. (Signed) Helen Stark.” The receipts for payment of half-yearly annuities, subsequent to the bond, were in similar terms.

In April, 1809, A B married. In 1813, A B, on account of the embarrassed state of his affairs, executed a trust-deed for behoof of his creditors. At this period he enjoyed an allowance of £150 from his father, depending on his father's pleasure, out of which the annuity to Helen Stark continued to be paid. In 1814, his father intimated an intention of suspending the allowance, but, in consequence of a strong representation made by Sir James Moncreiff, the annuity to Helen Stark was still paid by the father of A B, and this continued till the death of that gentleman in 1817. Before his death he had executed a trust-conveyance of his estates, which were large, but which were liable to many claims. Under this trust, the acting trustee continued for several years to pay the annuity in question, as it was considered that the provisions in the settlement in favour of A B warranted this. The annuity was thus paid till 1822. Occasionally the payment was irregular, being delayed beyond the term, and Sir James Moncreiff repeatedly came under advance, in order to relieve the annuitant, by making the payment more regular than it would otherwise have been. It became apparent, in 1822, that A B's interest in the succession would not warrant farther payment of the annuity by his father's trustee, who accordingly refused to make it. A B was quite unable to pay it, and Sir James Moncreiff continued to pay the entire annuity from his own funds until March, 1830, as it seemed possible, till then, that A B might still retrieve his affairs and be able to perform his obligation towards the annuitant. But in 1829, A B found it necessary to execute a second trust-deed, in favour of a new set of creditors, subsequent to those in the trust 1813; and, on paying the annuity to Helen Stark in March 1830, it was intimated to her, that no farther payments could be made from Sir James Moncreiff's own funds, and that she must, in future, look to A B alone. In 1834, she raised an action against Sir James and the representative of Samuel Williamson, the other trustee now deceased, in which she libelled on the bond of annuity, and farther set forth that she had regularly received payment of the annuity from Sir James Moncreiff, from the date of the bond, till Whitsunday, 1830, inclusive, and that she “was frequently assured by him that her annuity was effectually secured;” that, at the above term, she was informed that no farther payment was to be made, as A B was insolvent, and no security for the annuity had been obtained; that in undertaking the office of trustees both Sir James Moncreiff and Samuel Williamson, “and more especially the former, became bound to the pursuer to require and enforce performance, by all legal and necessary measures, of the obligation under which the said A B laid himself to them, to provide and secure the foresaid annuity to the pursuer, on good heritable or personal security: That the said Sir James Moncreiff, and the said deceased Samuel Williamson, and particularly the former, entirely failed to discharge the duty undertaken by them, and more especially by the former, and never adopted any steps for enforcing the fulfilment of the said obligation, to the great loss and prejudice of the pursuer, although the said A B, at the date of the said bond, and long afterwards, was in circumstances which would have enabled him to furnish the requisite security; and the said trustees, and especially the said Sir James W. Moncreiff, had it in their power to make effectual the said obligation incumbent on the said A B: That the said trustees, and more especially the said Sir James Moncreiff, Bart. were and are bound and obliged to obtain and produce good and effectual security, real or personal, for the said annuity and arrears, and failing their doing so, or if by and through their failure, timeously to demand the same, and enforce the said obligation against the said A B, security for the said annuity and arrears cannot now be obtained from, or furnished by the said A B; the said trustees, and more particularly, the said Sir James W. Moncreiff, Bart. are and is” liable to pay up the arrears of the annuity, past due, and the future termly annuities as they should fall due. The action concluded for decree accordingly.

Defences were lodged only for Sir James Moncreiff, against whom alone the action was ultimately insisted in.

Parties were at issue whether the state of A B's affairs was so embarrassed from 1809, downwards, that no security could have been obtained for the annuity, even by doing ultimate diligence against him; and also whether the use of diligence against him would not only have been prejudicial to A B's chance of clearing himself of difficulties, by injuring him in his professional career, but would farther have been directly injurious to the pursuer, by causing the father of A B to withdraw the voluntary allowance out of which the annuity was paid. ^* Parties were farther at

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* Connected with this part of the case, there was a subordinate question raised, of a special nature, whether the defender had been negligent in not entering into a particular arrangement to which the father of A B was a party, along with some of the creditors of A B, and by which it eventually happened that part of these creditors received a considerable payment to account of their debts, after the death of A B's father.

issue whether the pursuer was actually aware all along that no security had been obtained, which she denied; and whether the defender had ever caused her to be assured that security was obtained, which she averred, but which was expressly denied, and wholly without proof.

Besides insisting that the course which had been followed, was truly the most beneficial for the pursuer, the defender pleaded that, from the terms and condition of the trust, there was necessarily implied, on the part of the trustee selected by A B, a discretionary power of deciding as to the most proper time and mode of enforcing the obligation to find security, which had been undertaken by A B; and that it was enough for the exoneration of the trustee, if he bona fide acted according to that discretion. The defender had not only done so, but had repeatedly made large advances from his own funds, to afford temporary relief to the pursuer, although he was under no species of obligation to do so at any time. It was necessary for the pursuer both to establish culpa lata against the defender, and also that she had suffered damage thereby. But she had proved neither of these points, and therefore the defender ought to be assoilzied. The defender also contended that A B, who was the only proper debtor in the annuity, and who had lately received an official appointment, by which his income was much improved, ought to be called.

The pursuer raised an action and recovered decree against A B, for the arrears of annuity. In the present action she pleaded that the onus lay on the defender to establish, that, from the date of the trust downwards, there never existed the means of obtaining security for the annuity. The object of the trust undertaken by him, was to get the annuity duly secured. If nothing but A. B.'s personal obligation had been looked for, the interposition of a trust had no object or meaning. And as the defender had never used any diligence, or threat of diligence against A B, or taken any step whatever for obtaining security, while he was certainly trustee for the pursuer as well as for A B, he could not now exoner himself for totally failing to perform that essential part of his trust-duty, except by adducing a clear proof that A B's embarrassments were such that no diligence against him would have been of any avail. And this the defender had failed to do. He ought, therefore, to be found liable in terms of the libel.

The Lord Ordinary pronounced this interlocutor:—“Finds, that by the bond libelled, dated 18th January, 1809, the granter, A B, bound himself ‘to provide and secure, on good heritable or personal security, to the satisfaction of the trustees after named,’ an annuity of £60 to the pursuer: Finds that the defender, then James Moncrieff, Esquire, advocate, and Samuel Williamson, Esquire, were named trustees, with power to ask and demand such heritable or personal security from the granter, A B, ‘so as the annuity might remain, and be completely secure to the said pursuer:' Finds, that by the said bond, the trustees were taken bound, ‘by their acceptation hereof, to apply the proceeds of the annuity to be secured as aforesaid, in payment of the said sum of £60 yearly,’ to the pursuer: Finds, that the defender accepted the trust, and received delivery of the bond, a notarial copy of it being sent to the pursuer: Finds, that from the date of the bond in 1809, till Whitsunday 1830, the termly annuities were paid by the defender to the pursuer: Finds, that from the last mentioned term, the payment of the annuities was discontinued, and intimation made by the defender to the pursuer, that they could no longer be paid in consequence of the inability of the defender, the trustee, to obtain payment from A B: Finds, that no security, either heritable or personal, had been obtained by the trustees, and finds it not proved that any steps ever were taken by them to obtain such security: Finds it not proved that the pursuer, while receiving payment as above mentioned, was informed either by the defender, or from any other quarter, that the security had not been granted: Finds, that the terms of the bond, combined with the successive payments of the annuity for twenty-two years, fairly raised the implication on which the pursuer was entitled to rely, that the primary obligation of the bond to grant security had been fulfilled: Finds, that the defender, by waiving all legal measures for the enforcement of the bond, without any communication to the pursuer, which would have enabled her to exercise her own discretion in that matter, must be held to have acted on his own responsibility, and did incur a liability to make good the annuity, unless it could be shown that such legal measures must have been, from the state of A B's affairs, from the date of the bond, absolutely unavailing: Finds this latter proposition not proved, and therefore repels the Defences, and decerns against the defender, in terms of the libel: And finds him liable in expenses.” ^*

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* “ Note.—This is certainly a case of great hardship on the part of the defender; but in this particular it only resembles many others, in which trustees, acting with the best intentions, have ultimately found themselves involved in the most serious responsibility, for the neglect of precautions, which their reliance on the purity of those intentions had led them to overlook.

“Since the question of responsibility has been raised here, the Lord Ordinary, after the fullest consideration, has formed the opinion that the legal grounds on which it rests must be sustained.

“In the first place, he must entirely discard that view of the transaction, which is pointed at in some parts of the Defences and the Record, and which was urged at the debate, viz., that it was the object and intention of the parties, to confer on the trustees a discretionary power of determining when and how far the bond could be enforced, consistently with the interest of A B, the granter. The bond is absolute and unconditional. It is clear that if the pursuer had called on the trustees to take steps against him, they could have had no discretion in the matter, but must, on pain of incurring a personal responsibility, have either followed her directions or renounced the trust, and delivered the bond to the pursuer.

“Secondly, The very special terms of the bond, when coupled with certain admitted facts, go far to determine the onus probandi, in regard to certain others oh which the parties are at variance.

“The bond does not merely convey the annuity in trust, and interpose the trustees between the granter and the annuitant, as the mere channel through which the termly payments are to pass. It binds the granter to provide and secure the annuity ‘on good heritable or personal security,’ at the sight of, and to the satisfaction of the trustees, with power to ‘them to ask and demand such effectual security,’ ‘so as it may remain and be completely secure to the said Miss Helen Stark,’ &c. ‘in trust, for the purpose that the trustees shall become bound and obliged, as they bind and oblige themselves, by the acceptance hereof, to apply the proceeds of the said annuity to be secured as aforesaid, in payment of the said sum of £60 yearly,’ &c. The leading obligation of the bond, then, was to grant security for the annuity, and it was only after the security had been granted in trust, that the obligation of the trustees to pay the proceeds properly commenced. Now, it is true, as was argued on the part of the defender, that no funds were provided for the adoption of legal measures against the granter, and the defender might perhaps have been perfectly safe, even if he had remained entirely inactive, and awaited the orders of the pursuer. But when he began to pay the annuity, still more when he continued to pay it for two-and-twenty years, the case was entirely altered; because then the fair presumption arose from the terms of the bond, and the acts of the defender himself, that legal measures were unnecessary, and that the leading and principal obligation of the bond, viz, to grant the security, had been performed; and this being a presumption on which the pursuer was entitled to rely, it would be necessary, in order to take off its effect, for the defender to prove that the pursuer knew the true state of the case. But this has not been done. The only proof offered consists of the receipts granted by the pursuer, and one or two letters, and these writings, so far from proving the knowledge of the pursuer, that the obligation of the bond had not been fulfilled, rather appear to the Lord Ordinary to lead to a contrary inference.

“But if the continuance of the payments must be held to have fairly raised the implication that the security was granted, and to have consequently prevented the pursuer from making any enquiry, or taking any measures regarding it, the consequence is obvious. The defender must be liable for the hazard which he has taken on himself; and it lies, not on the pursuer to show that legal measures for enforcing the bond against A B would have been successful, but on the defender to prove that such measures must have been unavailing. Now, even after giving all due weight to the statements of the defender respecting the embarrassments of A B, and to the evidence offered in support of them, it is impossible to hold that part of the defender's case to be proved.

“The only other difficulty is one which was pressed at the debate, and which arises from the terms of the Summons. No doubt the pursuer there avers, as part of her case, that ‘she was frequently assured by the defender that her annuity was secured,’ and ‘that A B was at the date of the bond, and long afterwards, in circumstances ‘which would have enabled him to furnish the requisite security;' and these averments are denied by the defender, who makes directly contrary averments. But, if the Lord Ordinary is right in the view which he has taken of the case, he thinks it would be unwarranted, even according to the most rigorous construction of the rules of form, to dismiss the action, because the pursuer has not positively proved certain facts averred in the Summons, but in regard to which it has been found that the burden of disproving them lies on the opposite party.”

The defender reclaimed.