Scottish Court of Session Decisions

On 10th January 1880 Francis Henry Pottinger Mackintosh succeeded as heir of entail in possession to the estate of Farr, Inverness-shire. The next heirs of entail were Major Rose of Kilravock, and his sons Hugh and John.

In July 1882 Mr Mackintosh communicated

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with the next heirs as to their consents to a disentail. They were willing to agree to this course on the value of their interests being provided for. In September 1882 he presented a petition for authority to record an instrument of disentail of the estates. In the proceedings a curator ad litem, was appointed to each of the second and third heirs, both of whom were in minority.

The parties to the petition agreed to get a valuation of the interests of the next heirs on a statement to be adjusted between them, it being also agreed that neither party should be committed to accept the valuation, and that it should be made on the assumption that the estate was worth £40,000, as Mr Mackintosh, estimated it to be, but that if it were sold for less the values put on the heirs' interests should be reduced in proportion to the price.

Mr Deuchar, actuary, was asked to make the valuation on this assumption. On 14th February 1883 he intimated that he estimated the interest of Mr Mackintosh at £10, 155, that of Major Rose at £820, that of Hugh Rose at £8425, that of John Rose at £2800. These sums amounted to £22, 200. The actuary intimated that these sums did not exhaust the value of the estate, which, deducting a debt upon it, he took to be £28,000. There was a difference, after making a certain allowance for an annuity on it, of £4500 falling to be distributed among the heirs of entail. The actuary intimated that he “considered it fair that the distribution of this sum should be made proportionately to the interests of the parties” as he valued them. His final adjustment was:—

	As valued.	Additional share of surplus.	Total.
Present heir's interests	£10,155	£2,056	£12,211
Major Rose's interests	820	169	989
Mr H. Rose's interests	8,425	1,707	10,132
Mr John Rose's interests	2,800	568	3,368
	£22,200	£4,500	£26,700

After certain negotiations, during which another actuary, Mr Wallace, was consulted, it was agreed that the interests of heirs should be taken as they had been first estimated in an original draft report by Mr Deuchar, viz., Major Rose £989, Hugh Rose £10,132, and John Rose £3368. The minute of agreement was signed by Mr Andrew Macdonald as agent for the heir in possession, and Mr David Flett as agent for the consenting heirs.

The estate was disentailed and sold for £32, 300 on 29th April 1884. Prior thereto the heir in possession had become bankrupt. His trustee employed Mr Deuchar to calculate the amount payable to heirs in proportion to the price, and on 26th September 1884 paid to the consenting heirs their amounts brought out as due to them, and which were, to Major Rose £707, Hugh Rose £7243, John Rose £2497.

In December 1887 Mr Mackintosh brought an action against Major Rose, Hugh Rose, and John Rose, claiming payment of £2310, in the proportion of £159, 10s. from Major Rose, £1613 from Hugh Rose, and £537, 15s. from John Rose. He stated that Mr Macdonald, his Inverness agent, had employed as agents in Edinburgh in the disentail proceedings the family agents of the defenders, and instructed them to act for him; that the report of the actuary was obtained by them; that the sum paid to the next heirs was grossly in excess of the true value of the defenders' expectancies in the said entailed estate; that he knew nothing of the arrangements, having handed over the whole matter to Mr Macdonald; and being himself unfit from mental weakness at the time to attend to business, that he never consented to the sums being fixed for the defenders' interests, and had been debarred by their agents from having skilled independent advice as to the correctness of the actuary's report; and that certain portions of land were included in the valuation which had not been part of the entailed estate.

He averred that the actuary's report proceeded on the footing that the surplus of the estate which remained after providing far the pursuer's and defenders' interests and other charges should be distributed proportionally among the pursuer and defenders. “The value of the estate was taken at £40,000, or less debts thereon at £28,000. The interests of the different heirs, together with other charges, amounted to £23,500, leaving a surplus of £4500, which was distributed in terms of the said report among the present and next heirs in proportion to their several interests as therein valued. Of said sum of £4500 the defenders were to receive in terms of said report £2444 subject to modification on the estate being afterwards sold, as the selling price was in that event to be taken as the basis of calculation. Out of the sum of £32,300, being the price which the estate actually realised, the defenders received a share of the said surplus amounting to £1768, 5s. in the following proportions:—Major Rose £122, 10s., Hugh Rose £1234, and John Rose £411, 15s. The defenders were not entitled to any part of the said surplus the whole of which legally belonged to the pursuer alone, and should have been allocated to him. He believes and avers, that had his interests been protected by a separate agent in said disentail proceedings, the surplus would have been so allocated according to law. The above sum of £1768, 5s. was thus overpaid to the defenders in essential error as to the pursuer's legal rights to said surplus, or at least under a mutual mistake as to the relative and respective rights of parties in said surplus.” The pursuer pleaded—“(1) The sum sued for having been paid to the defenders under essential error, in fact and in law as condescended on, the pursuer is entitled to repetition of the same. (3) The sum sued for to the extent of £1768, 5s. having been paid to the defenders in essential error as to pursuer's rights, or at least under a mutual mistake as to the respective rights of parties in said surplus, the pursuer is entitled to repetition of said sum.”

The defenders produced certain correspondence and documents in order to show that the pursuer's interests were fully attended to by his agent in the disentail proceedings. These writings are referred to infra in the opinion of the Lord Justice-Clerk.

They pleaded that the pursuer's averments were irrelevant.

The Lord Ordinary ( M'Laren), after hearing counsel on the relevancy of the action, found that the “defenders are not liable to repay so much of the sums received in payment of the value of their respective interests as represents their

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shares of the surplus or residual estate remaining after valuation of the four life interests recognised by the statutes, and for this reason, that the sums paid to the defenders were not ascertained on the footing of a remit from the Court, but were settled under an agreement in which the defenders made equivalent concessions to the pursuer.”

“ Opinion.—I have now to consider the relevancy of the pursuer's claim.

The action is instituted by Mr Mackintosh of Farr, a gentleman who was proprietor of an entailed estate in Inverness-shire, but who acquired the estate in fee-simple, and who afterwards sold it; and the object of the action is to recover from the three expectant heirs, whose interests were valued and paid for, a return of part of the money paid to them on the ground that there was error in essentialibus. …

The other ground of claim involves considerations of a different and more complex character. It is said that a mistake, in principle or in law, was made by the actuary. It is not suggested that the actuary in any way failed in the duty which he had to carry out—the duty of valuing the expectancies—but that he erred in the final result brought out by him, by having divided amongst the four persons concerned the residual sum which remained after their respective interests had been valued. Now, that was not an actuarial error, but an error in law, if it were done. It is quite settled by the case of De Virte, if indeed there ever was a doubt on the subject, that under the present law whereby the heir in possession can compel consent, or can pay out the expectant heir without consent, he, the heir in possession, takes the whole estate, under deduction of the ascertained value of the life interests of the three heirs, whose interests alone are recognised. There is of course always a residual sum after providing for these interests, because the interests of remoter heirs, however small these may be, must be worth something. But I believe it is not in that way that the residue generally arises. It arises in this way—that it is necessary after valuing the interest of the heir in possession, and before proceeding to estimate the interests of the heirs in what remains, to consider the value of the contingent interest that might accrue to the children of the heir in possession, supposing that he should marry and leave issue.

Now the value of that contingency may amount to a very considerable sum when the heir is a young man and likely to marry, and it is evidently a sum in diminution of the value of the expectancies of the three heirs actually next in succession. That surplus, whatever it may amount to, is a thing that inures to the heir under the statute. But in this case the surplus, which probably arises in the way I have described (but how it arises is immaterial in my view), was divided amongst the four persons concerned, and that is said to be a mistake which, when pointed out, entitles Mr Mackintosh to repayment. But before such a result is reached two elements have to be considered. In the first place, this was not a valuation by a court of law at all, but a valuation by agreement of parties, which was intended to supersede the necessity of a remit from the Court. And, in the second place, it is to be observed that the arrangement actually made between Mr Mackintosh and the expectant heirs contained a condition very much in his favour, viz., the condition that, while the valuation was to be made upon an assumed sale value of £40,000, yet when the estate came to be sold, if less was realised, the sums to be paid to the expectant heirs were to be reduced proportionally. As it turned out the estate only produced £32,000, and apparently the real difference is greater than these figures indicate, because after deducting heritable debt I rather think the net estimated value of the estate would be only £28,000, and the net proceeds of sale would be only £20,000, so that the reduction that would be made, and was actually made, in virtue of agreement upon the sums prospectively fixed by Mr Deuchar, the actuary, was a very material one, and I will even say that, as far as I can see without making a close calculation, that reduction must have amounted to a larger sum than the part of the surplus that was divided among the three expectant heirs.

Now, I have observed that this was not a valuation by order of the Court, but by agreement, and when this concession is made by the expectant heirs that they are willing to be dealt with on the footing of the sum that the estate may realise, it is not unlikely that in valuing the interests allowance may be made for this circumstance. If Mr Deuchar valued the estate on the footing that it was to be disentailed by consent, under an agreement which none of the parties was obliged to sign, I am by no means clear that the case of De Virte would apply, because I think that under Lord Rutherfurd's Act, when consents could not be compelled but were purchased, the practice of actuaries was to divide the whole estate amongst the four persons interested in the proportions of their interests, and that it appears to me would have been a sound practice as between parties any one of whom could place a veto upon the sale or disentail. But without inquiring too strictly into the principles which ought to regulate the valuation of life interests in cases where the matter is to be regulated by agreement, it is enough for this case to say that the matter was not dealt with on the same footing as if it had been done under a remit from the Court, and that there were variations on the strict rights of parties on both sides. I am not satisfied that the pursuer has suffered any injury from these variations, or that they were things done without his consent. It appears that he was first dissatisfied with Mr Deuchar's report, and then obtained a valuation from another actuary, Mr Wallace, which seems not to have been so favourable to him, and I think that when he eventually agreed to accept Mr Deuchar's report it must be taken that the parties had settled the compensation after due consideration, and notwithstanding the view originally entertained by the pursuer that Mr Deuchar had not given him as much as he had a right to expect. I think that no sufficient reasons have been shown for re-opening the matter with which I am now dealing. Of course I cannot altogether overlook the observations that have been made about the position of Mr Macdonald, the agent in Inverness, who authorised and carried through these proceedings. If there were any real and substantive statement of Mr Macdonald having exceeded his powers for the promotion of the interest of creditors or other persons, that is a

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thing that ought to be inquired into. But the pursuer says he left the management of this transaction entirely in Mr Macdonald's hands. Mr Macdonald had no interest except to promote the pursuer's pecuniary concerns to the best advantage, and I think that an agreement signed by an agent who has full powers cannot be set aside upon the mere allegation that the pursuer was not personally consulted, and that the agent acted for him as he could do himself.

In this connection it is instructive to observe that after Mr Macdonald had signed the agreement accepting the sum that Mr Deuchar had brought out in his report, security had to be given, and the deeds of security over the estate were of course signed by Mr Mackintosh himself. He had the opportunity of objecting to the transaction and stating that he never authorised it, and of taking exception to the deeds, but nothing of the kind was done. The deeds were signed and acted upon without the slightest objection.” …

The pursuer thereafter pressed before the Lord Ordinary only one of his contentions as to land having been included in the calculation which did not form part of the entailed estate.

On 15th November 1888 the Lord Ordinary ( Lord Kinnear for Lord M'Laren) found that the only remaining portion to which that objection applied had formed part of the entailed estate, and assoilzied the defenders.

The pursuer reclaimed. In the Inner House he did not insist in any of the objections that land had been valued which did not form part of the entailed estate.

Argued for the pursuer—Mr Deuchar in preparing his report had proceeded upon a wrong principle in allocating the surplus as he did. It was decided that all the next heirs of entail were entitled to was the value of their expectancies; whatever was the value of the estate over that went to the former heir in possession as the fee-simple proprietor of the disentailed estate— De Virte v. Wilson, December 19, 1877, 5 R. 328. In this case the actuary had given part of the surplus to the next heirs. He was led into that error by the statements made to him by the agents in the petition proceedings, who had led him to understand that the consents of the next heirs must be valued as if they could have refused to give them, but under the Entail Acts the petitioner could have dispensed with their consents. The agents acted for the petitioner and for the next heirs; they had favoured the latter at the expense of the former. The ground of the Lord Ordinary's judgment was the agreement said to have been signed on behalf of the parties; in the first place, nobody had acted upon it, and secondly, the pursuer was not bound by it as he had had no independent legal advice, and from his intemperate habits and state of health was not able to look after his own interests. If the pursuer signed the agreement, or consented to its being signed on his behalf under the erroneous idea that he was bound to give the defenders the extra payments stated in the actuary's report, he was entitled to get back the over-payments so made, because an error in law of this kind vitiated a deed. There was no case made by the pursuer that the defenders were aware they were receiving a larger sum than their due, but that was not necessary if it was shown there was mutual error— Baird's Trustees v. Baird & Company, July 10, 1877, 4 R. 1005; M'Laurin v. Stafford, December 17, 1875, 3 R. 265.

The defenders argued—Although the consents of the next heirs could have been valued by order of the Court, that was not done here, as the parties entered into an agreement as to the way in which they were to be valued. Mr Deuchar took the usual way of dealing with those matters. The way in which the actuary dealt with this surplus was the way approved of in De Virte's case, supra cit. (Lord Shand's opinion, 336). The word “surplus” was not the proper word to be used here; it was really the final calculation of the actuary as to the next heirs' expectancies. After the actuary had reported all the parties agreed to take his report as correct, and their actings showed that the heirs consented to forego payment in cash, and took a bond and disposition in security for the value of the shares. In the circumstances they actually lost money, because Mr Mackintosh became bankrupt, and the estate had to be sold at an unfavourable time, with the result that only £32,000 was obtained for it, and the heirs got actually less than Mr Deuchar's report gave them, leaving out of account the way in which the actuary had dealt with the surplus. The agents had no doubt acted for both parties in the proceedings for the disentail, but, as the correspondence showed, the petitioner had had independent advice. The whole matter had been arranged and finished, and could not now be gone back upon; there was no question raised of fraud on the part of the defenders.

At advising—