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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Murray Stewart Petitioner [1898] ScotLR 36_623 (7 November 1898) URL: http://www.bailii.org/scot/cases/ScotCS/1898/36SLR0623.html Cite as: [1898] ScotLR 36_623, [1898] SLR 36_623 |
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Page: 623↓
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Under the provisions of section 8 of the Entail Amendment Act 1875, an heir of entail who has obtained authority to charge the estate is entitled to grant a bond of annualrent at a rate not exceeding £7, 2s. for every £100 of the amount authorised to be charged. Owing to the fall in the rate of interest since 1875 a bond calculated at this maximum rate would now produce a sum greater than the amount authorised. Held ( per Lord Pearson) that in an application for authority to charge, intimation will be made to the next heirs to give them an opportunity of moving that the interlocutor be varied by introducing a more limited maximum rate; that if they appear it is for the petitioner to show why the motion should not be granted, and that if they do not appear the Court will not ex proprio motu impose any limit other than that contained in the section.
Observations ( per Lord Pearson) on the case of Cadell, Petitioner, May 25, 1897, 34 S.L.R. 640.
This was a petition by H. G. Murray Stewart, heir of entail in possession of the estate of Broughton, in the county of Wigton, for authority to charge that estate with a sum of £11,002 expended by him on improvements. Authority was craved to execute either “a bond of annualrent in ordinary form over the said lands of Broughton in respect of or corresponding to the said sum of £11,002, or otherwise to grant a bond and disposition in security for the fourth of the said sum.
The petition was remitted to Mr Montgomerie Bell, W.S., to report on the procedure. The terms of the report lodged by him, so far as material, are fully quoted in the Lord Ordinary's opinion.
By section 8 of the Entail Amendment (Scotland) Act 1875 it is provided as follows:—“It shall be lawful for an heir of entail in possession of an entailed estate in Scotland holden by virtue of any tailzie dated prior to 1st August 1848 (notwithstanding any provision to the contrary contained in the tailzie) who has obtained the authority of the Court to borrow money under this Act on the security of the estate, to charge the fee and rents of such estate, other than the mansion-house, offices, and policies thereof, or the fee and rents of any portion of such estate other than as aforesaid, with a bond of annualrent, binding himself and his heirs of tailzie to make payment of an annual rent for twenty-five years from and after the date of such authority of the Court,” by “such annualrent to be payable by equal moieties half-yearly, and to be at a rate not exceeding £7, 2s. per annum for every hundred pounds so authorised to be borrowed, and so on in proportion for any greater or less sum.”
The Lord Ordinary ordered intimation to be made to the three nearest heirs of the terms of Mr Bell's report, and no objection having been lodged on their behalf, granted decree in terms of the. prayer of the petition.
Opinion.—“In granting the prayer of this petition it is right I should add an explanation of the procedure.
It is a petition in ordinary form under the Entail Acts 1875 to 1882 to have improvement expenditure charged on an entailed estate in (the alternative modes sanctioned by statute—that is, by bond of annual-rent, or (to the extent of three-fourths) by bond and disposition in security.
The three next heirs are of full age and not subject to legal incapacity. They are resident in England, but are represented by an Edinburgh firm of law-agents of high standing.
Mr M. Montgomerie Bell, W.S., to whom the petition was remitted in ordinary course, raised three questions in his report.
The first question related to certain expenditure which was begun but not quite completed when the petition was presented. I have allowed the petitioner to amend his petition so as to include this in terms, and as the reporter, while reducing the sum originally claimed to £10,523, 3s., allows £497, 19s. 10d. additional under this head, amounting together to £11,021, 2s. 10d., I have allowed a charge to the full amount of £11,002, 6s. craved in the petition, this being less than the sum reported as duly expended.
The second question related to certain items of expenditure which the man of skill had refused, but as to which the solicitors for the three next heirs had stated certain objections. I allowed the parties an opportunity of insisting on these objections, but they have not availed themselves of it.
The third question touches a matter of considerable importance in entail practice, regarding the alternative of charging the expenditure by way of annual rent. The reporter points out that (as usual) the petitioner has not given any indication as to which alternative he is to adopt, but that if he elects to proceed by bond of annualrent he will be in a position to charge the estate with an annual rent at any rate not exceeding £7, 2s. for every £100 of the sum he is found to have expended on permanent improvements.
Mr Bell adds—‘The reporter understands that it is not an uncommon practice for heirs of entail in similar circumstances to charge their entailed estates at the maximum rate, and that thereby considerable profits are made by them on such transactions. An instance of this was disclosed in the petition— Cadell, May 25, 1897, 34 S.L.R. 640.
The reporter does not wish to suggest
Page: 624↓
It will be observed that this suggestion of the reporter, which seems to me altogether reasonable, is made ‘in the interests of the next heirs of entail.’ It raises no question of competency. Had it done so, I should have decided the question or reported the case to the Inner House, whether the next heirs appeared to defend their interests or not. But the question raised is one merely as to the amount with which the estate should be charged not being beyond the maximum allowed by the statute. I therefore appointed special intimation of Mr Bell's report to be made to the three next heirs or their known agents in order that they might appear for their interest if so advised. As they have not appeared I take it that they do not object to the maximum charge.
I am not, however, to be held as deciding that the petitioner, in an application to charge improvement expenditure, is entitled, as a matter of course, to obtain authority for a bond of annualrent at the rate of £7, 2s. per cent. That is the rate required to provide repayment of the capital in twenty-five years on a 5 per cent. basis. But if the lender is willing to improve his money at a less rate than 5 per cent., he will be willing to accept a bond of annualrent at a less rate than £7, 2s.; or conversely, if he is to get a bond calculated at £7, 2s. per cent., he will give a correspondingly larger sum for it.
Accordingly, if the petitioner is armed with authority to charge the estate with an annual rent calculated at the statutory maximum rate, he will be able to go into the market with his bond, and thus put into his pocket, at the cost of the estate, a substantially larger sum than the amount he is found to have expended on improvements.
That is what happened in the case of Cadell, referred to by the reporter. But I desire to point out that that was not a decision on the question. What happened was this. The petition was in ordinary form, save that it made no mention of the alternative of granting a bond and disposition in security. Answers were lodged for the two next heirs objecting to certain items of expenditure as being a business venture subject to depreciation—(it was a brickwork)—and asking for a special inquiry. The usual remit resulted in a report which satisfied the respondents on that head, and the man of business (Mr Rankine Simson, W.S.) reported that authority might be granted in the usual terms. Thereupon the parties came to an agreement, whereby on the petitioner restricting his claim as to the brickwork, and renouncing his statutory right to substitute a bond and disposition in security for a bond of annualrent, the respondents (including the curator ad litem to the third heir) assented to authority to charge being granted in terms of Mr Rankine Simson's report. This agreement was embodied in three minutes which were lodged in process. This resulted in an interlocutor granting warrant to the petitioner to execute a bond of annualrent over the estate in ordinary form, such annualrent not exceeding the sum of £7,2s. per cent. of the sum to be charged. Having thus obtained authority, the petitioner granted a bond of annualrent in favour of an insurance company at the rate of £7, 2s. per cent. on £3000, which he desired to charge, and for this bond he received from the Insurance Company £3436, 5s. 9d. This came out in a subsequent and final report by Mr Rankine Simson, and it was then, and not till then, that the question was raised. After careful consideration (for the pecuniary result was startling) I formed the opinion that the question was raised at too late a stage, the bond of annualrent of which I was then asked to approve being within the authority which I had previously granted in terms assented to by the three next heirs.
“The question therefore remains quite open. Moreover, it is not, so far as I know, concluded by practice. I found on inquiry that the case of Cadell was certainly not the first case in which a petitioner had obtained more for his bond than the amount of his improvement expenditure. And in the present case it was argued for the petitioner that the case of Leith, 1888 ( 15 R. 944), was an authority in favour of his view. That case itself does not seem to me to decide any such question; and the remarks of Lord Adam (p. 950) which were founded on seem to apply to the later stage which was reached in the case of Cadell, and not to affect Mr Montgomerie Bell's present suggestion that the Court should interfere at an earlier stage.
On the other hand, I have had occasion to know that within the Iast few years there had been instances of such annualrents being granted by heirs of entail at £6, 4s., £6, 10s. 8d., and £6, 14s. 1d. per cent. in place of £7, 2s. And only last week, in the case of W.
E. M'Adam (Nov. 5, 1898), the reporter, Mr J. P. Wright, W.S., reported in favour of a rate of £6, 0s. 9d. per cent., being on the basis of 3
I propose therefore in each case to allow the next heirs an opportunity of modifying the usual terms of the interlocutor giving
Page: 625↓
Counsel for the Petitioner— Blackburn. Agents— Russell & Dunlop, W.S.
