Scottish Court of Session Decisions

By bond and disposition and assignation in security, dated 20th and recorded 24th March 1891, Erskine Wemyss of Wemyss and Torrie, in the county of Fife, bound himself to pay to Edmund Escombe, at Whitsun

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day 1891, the sum of £20,000, which he had borrowed from him, with interest at the rate of 10 per cent. during the not-payment thereof. In security of payment Mr Wemyss disponed the estates of Wemyss and Torrie, and assigned five policies of insurance.

Of the same date Wemyss executed a separate agreement with Escombe, and a trust-disposition and conveyance. By the agreement Wemyss became bound in further security of the loan to pay annual instalments of £2000 at the term of Whitsunday in each year, from 1892 to 1901, into the hands of Edmund Escombe, and Joseph Guedalla, solicitor in London, it being declared that said instalments should be held by them “in trust for the ultimate liquidation of the debt on 15th May 1901, or on such prior date as the loan shall be called in” by Escombe. This agreement was not recorded.

By the trust-disposition and conveyance Wemyss conveyed to Escombe, Ferdinand Faithfull Begg. and himself, as trustees, his estates of Wemyss and Torrie, and the whole moveable property upon or in any way connected therewith, and certain policies of assurance in trust for the purposes afterwritten. In the 8th place he directed the trustees to apply the yearly income of the estate ( secundo) in paying the principal sum of £20,000 due to Escombe, and the principal sum of £20,000 due under bond and disposition and assignation in security to Mrs Jane Spark; and ( tertio) in paying debts due by the truster, but not secured over the trust-estate, and which were specified in the third schedule annexed to the deed. In the tenth place it was provided that as soon as the trustees should have made payment of the two sums of £20,000 due to Escombe and Mrs Spark, and have paid the unsecured debts, and all sums borrowed by themselves, and have been relieved by all obligations incurred by them, and reimbursed for all advances which they had made, they should denude of and reconvey the trust-estate to the truster.

After the execution of the trust-disposition the trustees entered into possession of the trust-estate, and proceeded to administer the trust.

A new agreement was subsequently entered into on 18th July and 23d September 1891 for the purpose of modifying the previous agreement between Wemyss and Escombe, dated 20th March. The parties to the new agreement were (1) Escombe as an individual, (2) Escombe, Begg, and Wemyss, as trustees under the trust-disposition of 20th March, (3) Wemyss as an individual, and (4) his wife, Lady Lilian Wemyss. It was agreed, inter alia, that the instalments of £2000 due under Escombe's bond and disposition and assignation in security should be payable at Martinmas in each year; that the instalments should be paid direct to Escombe, and applied by him in extinction of his debt; and that he should not “require or be bound to accept payment of the princi pal sum, or any part thereof, before the terms above fixed for payment of the instalments.” This agreement was not recorded.

After the execution of this agreement Mr Wemyss entered into a new arrangement for settlement of his affairs. He borrowed the sum of £140,000 from Lord Ashburton upon the security of the estates of Wemyss and Torrie, and of certain policies of assurance, conform to bond and disposition and assignation in Lord Ashburton's favour, dated 27th October and recorded 5th November 1891. Wemyss also, in consideration of the loan he was receiving from Lord Ashburton, granted a trust-disposition and conveyance, dated 27th October and recorded 6th November, wherein he disponed to himself, George Levinge Whately, and William Nocton, as trustees, heritable estate belonging to him, and in particular the estates of Wemyss and Torrie, and the whole moveable property upon or in any way connected with the same, and certain policies of assurance, and further bound himself to make over to the said trustees the sum of £140,000 as soon as he received it. The trustees were directed in the second place to hold and apply the trust-estate, and the loan of £140,000 in payment of the two sums of £20,000 due to Mr Escombe and Mrs Spark, and of the sums due to the unsecured creditors, specified in the third schedule annexed to the trust-disposition and conveyance dated 20th March 1891, in order to obtain their consent to the termination of the trust thereby created, and generally to apply the trust-estate in order to secure the discharge of said trust. The trustees were further directed to repay the loan of £140,000.

On 3rd March 1892 Erskine Wemyss, George Levinge Whately, and William Nocton, the trustees acting under the trust-disposition and conveyance of 27th October 1891, and Lord Ashburton, raised the present action against Edmund Escombe, as an individual, and also against the said Edmund Escombe, Ferdinand Faithful Begg, and Erskine Wemyss, the trustees acting under the trust-disposition and conveyance dated 20th March 1891, as trustees and as individuals. The pursuers, in the first place, sought to have it declared that the defender Escombe was bound to accept repayment from the pursuers, the trustees under the second trust-disposition and conveyance, of the sum of £20,000 due to him under the bond and disposition and assignation in security granted by Wemyss in his favour, and to have Escombe ordained on payment or consignation of said sum to execute a discharge of said bond and disposition and assignation and security; and failing his granting such discharge, that it should be declared that the lands and policies of assurance were redeemed and disburdened of the foresaid bond and disposition and assignation in security. The pursuers further sought to have the defenders, as trustees, decerned and ordained to denude of and discharge the trust in their favour, and to discharge and disburden the lands and policies of assurance conveyed to them upon payment of said

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sum of £20,000 to Escombe, or upon consignation of the same, and upon evidence being produced of the payment of the debts specified in the trust-disposition and conveyance of 20th March 1891 as being due to Mrs Spark, and the creditors specified in the third schedule annexed to said trust-disposition, and upon the defenders as trustees being relieved of all obligations undertaken by them, and repaid all advances and granted a full discharge of their intromissions as trustees; failing the defenders so doing the pursuers asked declarator that said lands and policies of assurance were redeemed and disburdened of the trust-disposition and conveyance; and that they belonged to the pursuers Erskine Wemyss, George Levinge Whately, and William Nocton, as trustees foresaid.

The pursuers averred, inter alia, that the said Erskine Wemyss, George Levinge Whately, and William Nocton, as trustees foresaid, had paid Mrs Spark the sum of £20,000 due to her, and had also paid the whole debts specified in the third schedule annexed to the trust-disposition and conveyance of 20th March 1891; that they had offered to pay Escombe the £20,000 due to him, and upon his refusing to accept payment had, after serving a notice of premonition upon him that the sum due under his bond would be paid at Whitsunday 1892, consigned said sum in bank in his name, and that the defenders, as trustees, had received rents and profits far more than sufficient to reimburse them for any outlays they had incurred in the execution of the trust created in their favour.

Defences were lodged by the defenders Escombe and Begg. The former averred, inter alia, that he was a domiciled Englishman, and had no residence or heritable property in Scotland.

The pursuers pleaded, inter alia—“(3) The alleged agreement of 18th July and 23rd September 1891 is not binding on the pursuers, in respect … ( b) it has not been registered in the register of sasines, and cannot therefore restrict or modify the rights of Lord Ashburton under his bond and disposition in security, … and ( e) even if otherwise valid (which is denied), it is ultra vires, and not binding on others than the trustees acting under the trust-disposition and conveyance of 20th March 1891.”

The defender Escombe pleaded, inter alia—“(1) No jurisdiction. (3) No title to sue. (6) On a sound construction of the said bond and disposition and assignation in security, and of the said agreements, and particularly of the said agreement dated 18th July and 23rd September 1891, the pursuers are not entitled to insist in repaying the said loan, nor is this defender bound to accept repayment thereof, nor to grant a discharge, in the manner concluded for in the summons.”

On 24th June 1892 the Lord Ordinary ( Stormonth Darling) repelled the preliminary pleas for the defender Escombe.

“ Opinion.—… The questions which I have to deal with now are (1) whether there is jurisdiction against Escombe, … and (3) whether the pursuers have a title to sue. My opinion on all of these is in favour of the pursuers.

It is said that the real question in the case is with Escombe as an individual, and that he being a domiciled Englishman is not subject to the jurisdiction of this Court. It is true that the pecuniary question is, whether he is to receive an income of £2000 a-year for nine years longer on his loan of £20,000, but that involves not merely the question whether a landed estate in Scotland is to be disburdened of his security, but also the question which of two sets of persons are to be henceforward the proprietors and administrators of that estate in trust. I do not know what Court can determine these latter questions except the Supreme Court of Scotland, and yet they are so closely connected with the pecuniary question that it would be in the highest degree inconvenient to separate them. I am aware that convenience alone will not create jurisdiction, but I think there is one ground certainly, and probably there are others, on which Escombe is liable to the jurisdiction of this Court.

In the first place, he is infeft as proprietor of land in Scotland. No doubt the title is a trust title, but one of the leading purposes of the trust is for payment of the principal and interest on his loan. He is therefore not merely a trustee, but a beneficiary of the trust. It can hardly be disputed that as trustee he is liable to jurisdiction in Scotland in all questions connected with the trust, including its interpretation, management, and endurance—See Robertson's Trustees v. Nicholson, 15 R. 914, expressly adopting Lord M'Laren's opinion in Kennedy v. Kennedy, 12 R. 275. But Mr Escombe's possession is not merely fiduciary; it is to a certain and very considerable extent beneficial, and therefore I think he comes within the rule stated by the late Lord President in the case of Fraser v Fraser & Hibbert, 8 Macph. 404, that ‘the beneficial possession, whether natural or civil, of immoveable estate within the realm, whether permanent or temporarily, upon a good title of possession, is sufficient to found jurisdiction.’ If so, the defender is amenable not merely in actions relating to the trust, but in personal actions as well, at all events, in those relating to his personal interest in the estate.

If it were necessary I should be prepared to hold that he is liable also in his capacity as a bondholder infeft in Scottish heritage. He is not as such in possession of the land, but he is in possession of heritable estate in Scotland, and heritable estate of a kind satisfying two of the tests which have always been regarded as most material, for his interest is attachable by the diligence appropriate to heritage, and if he required to make his security effectual by maills and duties or poinding of the ground he would have to resort to the Scottish Courts. But I regard the first ground which I have stated as enough for the decision of the question….

The third question is raised by the

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defender's plea of no title to sue. It is said that the only person having a title is Mr Wemyss himself, but I cannot adopt that view. The trustees under the deed of October 1891 were appointed for the express purpose of paying off this among other debts. Their title seems to me therefore clear, and it is obviously the interest of Lord Ashburton, as a beneficiary under that trust and a postponed bondholder, to have the estate cleared of a debt bearing such heavy interest as that of Mr Escombe.

I shall therefore repel the first … and third pleas for the defender.”

On 20th July 1892 the Lord Ordinary pronounced this interlocutor:—‘Finds that the defender Edmund Escombe was bound to accept repayment from the pursuers the said Randolph Gordon Erskine Wemyss, George Levinge Whately, and William Nocton, as trustees foresaid, at the term of Whitsunday 1892, of the principal sum of £20,000 sterling, with interest thereon and penalties if incurred at said term, being the sums contained in and due under the bond mentioned in the summons; and in respect that the said sum of £20,000 and interest has been consigned in the name of the said Edmund Escombe by the said pursuers, decerns and ordains him to execute and deliver to the said pursuers, as trustees foresaid, a valid discharge of the foresaid bond and disposition and assignation in security, and lands and others therein conveyed in security, and to assign the policies of assurance, all in terms of the second conclusion of the summons: Further, in respect of the said consignation, and of the evidence produced in process of the payment of the debts and sums of money specified in the trust-disposition and conveyance dated 20th March 1891 as due to Mrs Spark, and the creditors specified in the third schedule annexed thereto, Finds and declares that the defenders the said Edmund Escombe, Ferdinand Faithful Begg, and Randolph Gordon Erskine Wemyss, as trustees foresaid, are bound to denude of and discharge the trust in their favour created by the said trust-disposition and conveyance above mentioned on being relieved by the pursuers, as trustees foresaid, of all obligations and liabilities undertaken or incurred by them, and reimbursed and repaid any expenses or advances disbursed by them in the execution of the trust, and on their obtaining from the said pursuers and the said Randolph Gordon Erskine Wemyss, as an individual, a full discharge and exoneration of their whole actings, intromissions, and management; and grants leave to reclaim, and quoad ultra continues the cause.

Opinion.—On the main question in the case, viz., whether the defender Escombe is bound to accept immediate payment from the pursuers of a sum of £20,000 which he lent to Mr Wemyss in March 1891, or is entitled to refuse payment till 1901 in order that he may draw interest at 10 per cent. in the meantime, I am in favour of the pursuers.

The bond in favour of the defender which is the only recorded deed prior to the bond in favour of Lord Ashburton leaves the debtor perfectly free to repay the principal at any term subsequent to Whitsunday 1891, for he binds himself to pay interest after that term only ‘during the not-payment of the said principal sum,’ and although there are provisions for a sinking fund at the rate of £2000 a-year down to 1901, that is merely an additional security for repayment of the principal in favour of the lender, and not a prohibition against repayment by the borrower at an earlier date.

The defender appeals to an agreement between him and Wemyss of even date with the bond, but that seems to me to add nothing as regards this question to the terms of the bond. Both deeds make it quite clear that the defender was free to call in the loan at any time, and it would take very express and unequivocal words to debar the debtor from paying when he chose what the creditor could demand when he chose. It is enough, however, in my view, that this agreement was not recorded, and could not therefore affect the rights of a subsequent bondholder, relying, as he was bound to do, on the state of the records.

The same answer holds good as regards the agreement of 18th July and 23rd September 1891, and therefore it is unnecessary to discuss whether it was duly executed.” …

The defender Escombe reclaimed, and argued— No jurisdiction—The first and main conclusion of the action was a personal one, directed against the reclaimer as an individual, and was not concerned with real estate at all. Upon this conclusion all the subsequent conclusions depended. But the creditor in a bond and disposition in security, who was not otherwise subject to the jurisdiction of the Scots Courts, was not rendered liable to their jurisdiction in personal actions by the mere fact that heritable estate in Scotland was disponed to him in security of his debt. The contract under the bond was primarily a personal one founded on the debtor's personal obligation, and it did not make the creditor a proprietor, or even give him a title of possession such as a lessee had. It was not registered in the Books of Council and Session, and such registration alone could be said to be an appeal to the aid of the Scots Courts. Perhaps the reclaimer might be called upon as a trustee, and quoad the heritage covered by the trust conveyance, to answer in the Scots Courts, but that question only arose under the second and following conclusions of the summons, which could not be given effect to until effect was given to the first. No title to sue—The title to sue was in Mr Wemyss, and not in Lord Ashburton or the trustees, who were not the debtors in the bond. On the merits—The bond granted by Wemyss in the reclaimer's favour must be read along with the agreement of September 1891, which gave the reclaimer an undoubted right to refuse payment of the £20,000 except by the stipulated instalments. That agreement was not open to challenge. It

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was not a good objection to it that the reclaimer, who was a trustee, took a benefit under it to himself, for the agreement was a mere readjustment of the respective rights and interests of the reclaimer and Wemyss, and in no way prejudiced the interests of those for whom the reclaimer was bound to act. At anyrate every person whose interests could be said in any sense to have been prejudiced had been paid or satisfied, and there was now no one at whose instance the agreement was open to challenge. It could not be challenged by Wemyss, for he had not been induced to enter into it by unfair means, but it was for his benefit at the time when it was entered into. His trustees could have no higher rights that he had, and Lord Ashburton, the postponed bondholder, who had only a jus crediti under the second trust, could not compel the trustees to do anything which their author could not require them to do. Nor could Lord Ashburton directly insist on the reclaimer taking repayment of the £20,000, for there was no contractual relation between them of any kind. A debtor, if not otherwise barred, might come forward and pay up the debt, but he might also fetter himself as to the time or mode of repayment, and a postponed creditor had no right to interfere with a personal contract of that kind. He was entitled to rely on the records for the protection of his security, but that was not affected by the argument, and it must receive effect, although not appearing on the face of the records.

Argued for the pursuers— Jurisdiction—The defender was infeft under his bond and disposition in security in Scots heritable estate. His interest was attachable by the diligence appropriate to heritable estate in Scotland. Such infeftment was sufficient to found jurisdiction, if not in personal actions generally, at anyrate in all actions relative to the lands held in security by him. By registering his bond the creditor had invoked the aid of the Scots Courts, and they alone could aid him in making his right effectual. Apart, however, from his bond, the defenders, having accepted a disposition in trust for the administration of heritable estate in Scotland, were clearly subject to the jurisdiction of the Scots Courts in all questions relating to the trust. The trust was eminently a Scots trust as it was granted by a domiciled Scotsman, and the trust-estate was entirely situated in Scotland. The Scots Courts must therefore have jurisdiction to determine questions relating to the trust— Kennedy v. Kennedy, December 9, 1884, 12 R. 275; Robertson's Trustee v. Nicholson, July 13, 1888, 15 R. 914. Title to sue—Lord Ashburton had a most material interest in the subject-matter of the action, and the trustees under the second trust simply came in the place of Wemyss, whose title was undoubted. On the merits—The agreement of September was ultra vires of the trustees who were parties to it, as it conferred on a particular debtor a preference to a large sum of money, and Lord Ashburton, as coming in the place of the creditors whose debts had been paid out of the loan made by him, had a right to object to this burden being placed on the trust-estate. The agreement was also invalid because it conferred a benefit on one of the trustees, who thus became auctor in rem suam— Penton, &c., v. Penton's Trustees, January 9, 1863, 1 Macph. 245. Even if binding on Wemyss the agreement was not binding upon the trustees under the later trust-deed, nor upon Lord Ashburton, as it had not been recorded. The trustees held a proprietary right under the disposition in their favour, which was in form an absolute disposition, and were entitled to rely upon the records. This contract with the truster was of a highly onerous character, and placed them in an analogous position to singular successors buying on the faith of the records, and their rights could not be affected by a continuing burden of which they had no notice. Even if the reclaimer had right to refuse immediate payment of the debt due to him, that was not a reason for the defenders refusing to denude of the trust created in their favour, for his right would be equally good against the trustees under the second trust-deed.

At advising—