Scottish Court of Session Decisions

William Stewart, of 8 William Street, in the parish of St Marylebone and county of Middlesex, who died in the year 1810, left a last will and settlement in favour of the eight deacons of the incorporated trades of the city or burgh of Perth, in which, after providing for payment of debts and for one special legacy, he directed that the residue and remainder of his estate, consisting for the most part of Irish five per cent. stock, “shall be invested”—“And as to all the rest, residue, and remainder of my estate and effects, I direct that the same shall be invested, or shall remain invested, in the public funds till a proper purchase or purchases in lands can be found in the neighbourhood of Perth, and that when such proper purchase or purchases can be found, the

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same shall be laid out in such purchase or purchases, and the rights and title-deeds thereof shall be taken to the said deacons for the time being, as trustees under this my will, and I do direct that until such purchase or purchases be found the interest and profits of the said residue of my estate, and after such purchase or purchases is made the rents and profits thereof, be applied by my said trustees in payment of the expense of the education of such a number of boys of poor and honest parents, burgher tradesmen of Perth, as the said interest or rents and profits may suffice for.” The testator then directed that sons of burghers of Perth of the name of Stewart should, if born in Perth and if their parents were deserving, be preferred in the first place; that the age of admission should be not less than seven years; and that the boys educated at the expense of the trust should have their education conducted at a separate school belonging to the trust. The testator also appointed the deacons of the incorporated trades, or any two of them, to be his sole executors.. No power of sale of the lands to be purchased under the provisions of the settlement was contained therein. The deacons of the eight incorporations accepted the office of trustees. Before a suitable investment in lands in the neighbourhood of Perth had been found, the trustees thought it expedient, in consequence of its being announced by the Government that interest on Irish five per cent. Stock was to be reduced to four per cent., to sell these stocks. Thereafter the funds of the trust were invested partly in City of Perth bonds and partly on heritable security, one subject of security being the estate of Glenfoot, near Perth. In 1851 a prior bondholder brought this property to sale, and the trustees purchased it at £655. Previously to this purchase the trustees had at a cost of £180 purchased a site for a school in Mill Street, Perth, on which, partly with the trust funds, but chiefly with funds contributed by the incorporated trades of Perth, they had erected a school building. At the date when this petition was presented, the property in the hands of the trustees consisted of this school site, the Perth bonds, and Glenfoot. The total annual income was less than £70. In 1874 the deceased Alexander Young left to the same body of trustees a sum of which the annual income amounted to £73, 10s. derived from Perth bonds, to be added to the salary of the teacher of Stewart's free school. Mr Young having expressed by his settlement a desire that girls should be admitted to the benefits of the charity, the trustees erected a new classroom for girls, in order to pay for which they borrowed £300 on security of the estate of Glen-foot. Glenfoot was from 1851 to Martinmas 1880 let at a rent of £35 per annum. During the last five years of that period the trustees found it necessary to allow an annual abatement of £5. At Martinmas 1880 Glenfoot was advertised as to be let, but the trustees failed to get any offer for a rent over £25 per annum, and offers at that rent stipulated for repairs on the fences and steading, which would have cost at least £100. In these circumstances the trustees determined to offer the property for sale subject to the approval of the Court, and received an offer to purchase it at £700, with £300 of which sum they proposed to pay off the bond, and the remainder to be invested on heritable security. As a result of this sale they stated that the revenue, which was too small for the necessary expenditure, and had all along required to be supplemented by voluntary contributions from the incorporated trades, would be increased by at least £12 a-year. The trustees therefore presented this application for leave to sell the trust-estate, founding on sec. 3 of the Act 30 and 31 Vict. c. 97, Trusts (Scotland) Act 1867. That section provides that “it shall be competent to the Court of Session on the petition of the trustees under any trust-deed to grant authority to the trustees to do any of the following acts on being satisfied that the same is expedient for the execution of the trust, and not inconsistent with the intention thereof, … to sell the trust-estate or any part thereof.” The prayer of the petition, after craving authority to sell, was as follows:—“and to give such directions as may seem to your Lordships necessary with respect to the investment by the petitioners of the said sum of £700, or the balance thereof after payment of debt and expenses; or to do further or otherwise in the premises as to your Lordships shall seem proper.” To this petition answers were lodged for Colin Anderson Hunt and others, deacon and members of the Hammerman Incorporation, Anderson being as such deacon one of Stewart's trustees, and having dissented from the resolution to present this application to sell. These respondents maintained that Stewart's trustees had acted illegally and ultra vires in burdening Glen-foot with a sum borrowed, not for the benefit of Stewart's trust, which was for boys only, but of Young's, which was for girls. They also maintained that the sale of that property entered into provisionally was illegal. They therefore submitted that the property of Glenfoot should not be sold, or, at least, that the illegal loan of £300 should not be paid out of the price, but that the whole price should be re-invested without deductions.

The Lord Ordinary ( Fraser) remitted to Mr W. G. Roy, S.S.C., to inquire into the circumstances and report. Mr Roy reported in favour of the prayer of the petition being granted. Thereafter the Lord Ordinary, on 1st June 1881, pronounced an interlocutor finding “that the proposed sale is not expedient for the execution of the trust, and is inconsistent with the intention thereof; therefore refused the petition and decerns.”

He added this note:—“William Stewart by his trust-deed directed his trustees to invest the money he bequeathed ‘in the public funds till a proper purchase or purchases in lands can be found in the neighbourhood of Perth, and that when such proper purchase or purchases can be found, the same shall be laid out in such purchase or purchases, and the rights and title-deeds thereof shall be taken to the said deacons for the time being as trustees under this my will.’

“It is unnecessary to review the administration of the trustees (as described in the report by Mr Roy) since the trust came into operation. If they were guilty of doing acts which were ultra vires (which that report shows they were), the purchase of the lands at Glenfoot of Abernethy certainly was not an act of this character. It was, on the contrary, one which carried out the direct order of the truster to purchase lands in the neighbourhood of Perth. Having purchased these lands the trustees have no power to sell, and

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this application is made to the Court upon that footing under the Trusts Act, which requires that the sale shall be proved to the satisfaction of the Court to be ‘expedient for the execution of the trust, and not inconsistent with the intention thereof.’ The case of Downie (10th June 1879, 6 R. 1013) shows that the Court will, upon a case of expediency and when consistent with the main object of the trust, authorise a sale. That case had reference to a trust for the education of children similar to the present one. But the facts as to the expediency of the action and the consistency with the truster's will were very different from what they are in the present case.

The whole advantage which it is said the trust will obtain by selling the heritable subjects in question—property of the character which the truster directed his money to be invested in—is an increased revenue of £12 a-year. This is calculating too sanguinely in reference to any investment in heritage that could be procured by the price of the subjects when sold, and the acquisition of such a small sum as this does not bring the case within the class making it expedient to authorise a sale.

The respondents seem to have no objection to the sale provided that the whole £700 be applied for the purposes of the Stewart trust. But this consent on the part of the respondents, even though the condition should be assented to by the petitioners, does not remove from the Court the duty of considering the propriety of the transaction. If unconditional consent had been given by the respondents, the Lord Ordinary would still have been of opinion that the proposal was inexpedient and ought not to be granted. No doubt the land does not seem to be a very profitable source of revenue. But still it is the kind of investment which the truster appointed, and it is not shown that other land could be purchased that would make a better return. The funds of the Institution seem to be at a very low ebb. The land at Glenfoot requires to be fenced. The £300 borrowed over it must be paid for by some one or other, and funds must be raised for these purposes if the institution is to be kept up. The Incorporated Trades of Perth seem to be the natural parties to see that all this is done.

The respondents are entitled to their expenses; and the Lord Ordinary in finding the petitioners liable, means, not that they shall take the expenses out of the trust-funds, but that they are personally responsible for this proceeding. The presentation of the petition was not an act in the execution of the trust; and the small trust-fund ought not to be diminished by the cost of this abortive proceeding.”

The petitioners reclaimed, and argued—The proposed sale was expedient, for it would increase the revenue of the trust. It was not inconsistent with the intention of the trust, but would enable that intention to be better carried out.

At the bar the petitioners obtained leave to delete from the prayer of the petition the words—“and to give such directions as may seem to your Lordships necessary with respect to the investment by the petitioners of the said sum of £700 or the balance thereof after payment of debt and expenses.”

The respondents maintained that it was incompetent to pay off the £300 borrowed for the purposes of Young's trust with the price derived from the sale of Glenfoot, which belonged exclusively to the funds of Stewart's trust.