Scottish Court of Session Decisions

Sir A. D. Stewart was heir of entail in possession of the entailed estates of Grantully and others. In 1885 he brought the present petition for authority to substitute a bond and disposition in security, or bonds and dispositions in security, for a sum representing the amount of the unexpired portion of a rent-charge which had been created over the said estates by his predecessor Sir W. D. Stewart in 1870. This rent-charge had been created by an absolute order by the Inclosure Commissioners for England and Wales, charging the fee of the estate with a fixed yearly sum payable for twenty-five years from 1870. The petitioner had paid off upwards of one-fourth of the said rent-charge.

The petition was based on the 9th section of the Entail Amendment (Scotland) Act 1875 (38 and 39 Vict. c. 61), which proceeds on the narrative that “it is expedient that where an estate in Scotland, holden by virtue of any tailzie dated prior to the 1st day of August 1848, has before the passing of this Act been duly charged with the cost of improvements executed thereon, and shall continue charged therewith after the passing of this Act, the heir of entail in possession thereof at or after the passing of this Act should be entitled to relief in the matter, but subject to the conditions hereinafter provided: Be it therefore enacted as follows—(1) It shall be lawful for such heir of entail, with the consent of the nearest heir for the time entitled to succeed to the said estate, in case he or any of his predecessors in possession of the estate shall have granted a bond or bonds of annual rent over the estate or any portion thereof, or otherwise imposed or created a rent-charge or rent-charges

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thereon, in respect of improvements executed under the Act of the 10th year of the reign of His Majesty King George the Third, chapter 61, or under the Act of the 11th and 12th years of the reign of Her present Majesty, chapter 36, or any Act amending either of these Acts, or under the Improvement of Land Act 1864, or any Act amending the same, or any other Act authorising the loan of money for the improvement of land, and in case such bond or bonds of annual rent or rent-charge or rent-charges continues or continue to affect the estate at the time, to agree with the creditor in any such bond of annual rent or rent-charge for the substitution therefor of a bond and disposition in security over the estate or any portion thereof, other than as in the preceding section mentioned, for the portion then remaining unpaid of the sum on which the amount of such bond of annual rent or of such rent-charge was calculated, or otherwise to obtain from any person willing to advance the same money on loan to pay to the creditor the portion of such sum then unpaid as aforesaid, under such bond of annual rent or rent-charge if the creditor will consent to receive the same, and having obtained the sanction of the Court to such agreement to grant bond and disposition in security in terms thereof, in favour of such creditor or other person, and such bond and disposition in security if in favour of the creditor shall operate as an absolute discharge by him of such bond of annual rent or rent-charge. (2) Bonds and dispositions in security granted in terms of this section shall set forth the rate of interest stipulated to be paid from the date of the advance until repayment, with corresponding penalties, and may be in the form, and shall have the effect and operation and be subject to the conditions and provisions as to keeping down interest which are mentioned in the preceding section.”

The Entail Amendment (Scotland) Act 1882 (45 and 46 Vict. c. 53), sec. 6, sub-sec. 4, was also set forth, which provides—“When at least one-fourth part of a capital sum borrowed for improvements on an entailed estate upon the security of a terminable rent-charge, in manner provided by the Entail Acts, shall have been defrayed by the heir in possession, it shall be lawful for such heir, without the consent of the nearest heir being required, and whether the cost of such improvements shall have been charged prior or subsequent to the passing of the Entail Amendment Act 1875, to avail himself of the provisions of the said Act for the substitution of a bond or disposition in security over the estate for the remainder of such capital sum.”

The prayer of the petition craved, inter alia, that “such sum as your Lordships may find to be the actual or estimated cost of this application and the proceedings therein, and of obtaining the loan, and granting security therefor,” should be included in the sum for which the proposed bond and disposition in security was to be granted.

The Lord Ordinary (Trayner) remitted to Mr H. B. Dewar, S.S.C., to examine the procedure and to report.

Mr Dewar in his report submitted to the Lord Ordinary the question, inter alia, whether the above-mentioned expenses could be properly charged on the fee of the estate.

The question depended on the terms of the Entail Act of 1875, already cited, the 7th section of which provides, inter alia, that “from and after the passing of this Act it shall be lawful for the Court, on the application of the heir of entail in possession of an entailed estate in Scotland, holden by virtue” of an “old” entail [the benefit is extended to “new” entails also by the Act 41 and 42 Vict. c. 28, sec. 3], “to grant authority to such heir of entail to borrow money to defray the cost of improvements on such estate, whether the same have been already executed by him or are in the course of execution, or are merely contemplated at the date of the application, and whether the same, if executed prior to the date of the application, were executed before or after the passing of this Act, and to grant security therefor to the lender in the manner hereinafter provided, such heir of entail having paid the cost of such improvements as may have been executed prior to the date of the application, or being liable for the same so far as unpaid: Provided as follows:…..(6) In every case the Court shall, in fixing the amount to be borrowed under their authority, add to the actual or estimated amount of the cost of the improvements the actual or estimated amount of the cost of the application and the proceedings therein, and of obtaining the loan or granting security therefor.” ….

The Lord Ordinary pronounced the following interlocutor:—“Finds that the procedure has been regular and proper, and in conformity with the provisions of the statutes and relative Acts of Sederunt: Interpones authority, sanctions the agreement for the substitution of a bond and disposition in security, or bonds and dispositions in security, for the amount due under the rent-charge mentioned in the petition as at 11th November 1885, being £1093, 19s. 2d.: Authorises and empowers the petitioner to execute in favour of any person or persons who may advance the said sum of £1093, 19s. 2d. a bond and disposition in security in ordinary form over the fee of the entailed estates of Grantully, Murthly, Strath-braan, and others other than the mansion-house, offices, and policies thereof, or over such portions thereof as are contained in the said rent-charge for the said cumulo sum of £1093, 19s. 2d., with interest thereon at the rate of £5 per centum per annum from the date of the said bond and disposition in security, or bonds and dispositions in security, binding the petitioner, and his heirs of entail in their order successively, to repay the principal sum therein, with interest and penalties as aforesaid, and containing a power of sale in ordinary form, and all clauses usual in bonds and dispositions in security over estates in Scotland held in fee-simple, but always subject to the like conditions and provisions as to keeping down interest as are made and provided by the Act 11 and 12 Vict. cap. 36, and any Acts amending the same in regard to bonds and dispositions in security in respect of provisions to younger children: Quoad ultra refuses the prayer of the petition, and decerns: Remits to Mr Dewar to see such a bond and disposition in security prepared and executed, and to report.

“ Opinion.—1 have refused the prayer of the petition in so far as it craves authority to burden the entailed estates with the expenses of this application and the proceedings therein, and also

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with the expenses attending the substitution of a bond and disposition in security for the existing rent-charge. The petitioner bases this part of the prayer of the petition on section 7 (sub-section 6) of the Entail Amendment Act of 1875. I am of opinion that that section of the Act does not apply to the case before me. It will be observed that by section 7 of the Act of 1875 the Court is empowered to authorise an heir of entail to borrow money to defray the cost of improvements, but this is limited to the cost of improvements made by the heir who seeks power to borrow. The words of the section are, ‘that it shall be lawful for the Court, on the application of the heir of entail in possession, … to grant authority to such heir of entail to borrow money to defray the cost of improvements on such estate, whether the same have been already executed by him, or are in the course of execution, or are merely contemplated at the date of the application.’ The improvements in question in respect of which the rent-charge was created (now sought to be replaced by a bond and disposition in security) were not executed by the petitioner, but by a previous heir of entail, and therefore it appears to me that the section quoted does not apply to the present case. Sub-section 6 is a provision qualifying the leading clause, and will not come into effect if the leading clause is not applicable. Even if clause 7 of the Act did apply I have great doubt whether sub-section 6 would avail the petitioner. It refers to the expense attending the borrowing of money. I am not asked to authorise the petitioner to borrow money in the strict sense to defray the expense of improvements made, making, or to be made by him. If I were, I should have to inquire into the character of the alleged improvements in order to see whether they were such that their cost could be charged on the entailed estates. I should also require to be satisfied of the amount of such cost. But none of these things are before me. There is an existing rent-charge for the cost of improvements executed before 1870, and 1 am asked to authorise the substitution therefor of another form of security without any inquiry into the circumstances under which the rent-charge was created. The petitioner says that he is in effect asking power to borrow money to pay off the rent-charge. If he is (although that is not the form of the petition), that is not asking power to borrow money to pay for the cost of improvements made by him.

I admit that my construction of the statute is a strict one, but if sound it must be applied. The next heir of entail (through the reporter) has asked that this shall be done.”

The petitioner reclaimed, and argued—The sections which gave authority to substitute a more advantageous form of security for an existing rent-charge were silent as to expenses. The Court must therefore look to section 7 of the Act of 1875, subsec. 6. This application was in substance, though not in form, one for the purpose of borrowing money (for the petitioner was to borrow from his new creditor under the bond) “to defray the cost of improvements on the estate” (for the rent charge in question was created in respect of money which was advanced by the commissioners for the express purpose of executing improvements, and was so expended). The section was therefore directly applicable. The improvements need not have been executed by the petitioner himself, nor, as here, the rent-charge created by him. The Lord Ordinary's view of these words was too strict— Maxwell, July 17, 1877, 4 R. 1112. The estate in this case had not had to bear a previous set of expenses, for the debt was originally created in 1870, i.e., prior to the Act of 1875. It was equitable that it should now bear the cost of this procedure. Section 12, subsec. 6, of the Act of 1875 was also referred to, but was not strongly relied on, looking to the decision in Maclaine v. Ranken, July 12, 1878, 5 R. 1053.