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BARROWMAN, Re Petition for Directions [2003] ScotCS 40 (21 February 2003)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord MacLean Lord Hamilton Lord Reed	P19/00 OPINION OF THE COURT delivered by LORD HAMILTON in PETITION of GEORGE LANG BARROWMAN Petitioner; For DIRECTIONS _______

 

Act: Burland; Brodies, W.S. (for the Petitioner)

Alt: Wallace; Shepherd & Wedderburn, W.S. et Bartos (for the 1st Respondent)

H.B.M. Sayers, W.S. (for the 2^nd & 3^rd Respondents)

21 February 2003

1. y their Mutual Testamentary Settlement executed on 3 July 1975 ("the Will") Mr. George Shepherd and his first wife Mrs. Margaret Shepherd ("the testators"), who then both resided at Westbrook, Glasgow Road, Kilsyth, made provision for the disposal of their means and estate in the respective events of the death of the predeceasor and of the survivor of them. Mrs. Margaret Shepherd died later in 1975 survived by Mr. Shepherd. He remarried and himself died on 12 October 1997, survived by his second wife and by the three sons of his first marriage.
2. By the Will the testators provided that the estate of the predeceasor of them should pass to the survivor. By clause (Fourth) it was provided -

"The whole means and estate heritable and moveable, real and personal, of whatever nature and wherever situated passing to the survivor is left to the survivor on the following terms and conditions:-

(One) the survivor shall be bound by these presents, or by a separate

Testamentary Settlement in implement of the terms hereof, to leave the whole of the residue of the estate so far as still subsisting and traceable, and including specifically the said dwellinghouse, Westbrook, aforesaid and ground attached as hereinafter provided, to the children of the marriage between us, namely our sons, William Alan Hamilton Shepherd, Graham Andrew Shepherd and Ronald George Shepherd, declaring that nothing herein provided shall prevent us both by mutual consent varying these presents before the death of either of us including power to dispose of Westbrook and ground aforesaid; and also declaring that in the event of the survivor being unable to afford the upkeep of Westbrook etc, the survivor shall have powers to sell subject as hereinafter provided in the next clause, which failing in the usual way the net free proceeds of sale to form part of the residue of the estate of the survivor; (Two) in respect that it is our mutual wish that our family shall have the opportunity to continue to live in the family home at Westbrook, Glasgow Road, Kilsyth, we provide that on the death of the survivor our Trustees and Executors shall in turn offer to sell Westbrook and the ground attached to our eldest son at a price to be mutually agreed between our said children, or failing agreement at a valuation obtained from a suitably qualified valuer; and in the event of our eldest son not wishing to take up said offer within one month of said offer being submitted to him in writing the house and ground shall be offered to the next eldest son on a similar basis for a similar period; and in the event of his not wishing to take it up it shall be offered to our youngest son on a similar basis; Declaring that it is a condition of the sale of the subjects to any of our children that the son purchasing the subjects shall have such period as is mutually agreed between himself and his brothers or their representatives, or failing agreement in any event not less than five years, to pay up the balance of the price; Declaring also that the amount of said price shall form part of the residue of the estate of the survivor to be divided as hereinbefore specified; ..."

Provision was then made for the event of any of the three sons predeceasing the survivor of the testators, an event which did not occur.

3. On the death of Mr. Shepherd, Westbrook remained within the mutual estate. The present petitioner was and is the sole executor nominate and trustee acting under the Will. The eldest son, who is commonly known as "Alan Shepherd", is the first respondent. The other sons are the second and third respondents. By a codicil to the Will Mr. Shepherd purported to grant to his second wife in the event of her surviving him the liferent use and enjoyment of Westbrook; but, although the second Mrs. Shepherd did survive Mr. Shepherd, it is accepted by all concerned that that grant was, having regard to the terms of the Will, ineffectual. Certain issues have, however, arisen in relation to the disposal of Westbrook in respect of which the petitioner seeks directions from the Court.
4. Following Mr. Shepherd's death the three respondents ultimately reached agreement on the price for Westbrook. It was £130,000. No agreement, it seems, was however, reached on any other aspect of the disposal of Westbrook. Thereafter, on 30 December 1998, the petitioner wrote to the first respondent in the following terms -

"I, George Lang Barrowman, Solicitor, 7 Catherine Street, Kirkintilloch, Executor Nominate of the late George Shepherd, late of Westbrook, Glasgow Road, Kilsyth, conform to Confirmation by the Commissariot of South Strathclyde, Dumfries and Galloway in my favour dated 19 February 1998 do hereby in implement pro tanto of the Will of the said George Shepherd dated 3 July 1975 offer to sell to you at such date as may be mutually agreed but which shall be not later than 30 September 1999 the subjects now known as and forming Westbrook, Glasgow Road, Kilsyth and that at the price of ONE HUNDRED AND THIRTY THOUSAND POUNDS (£130,000) STERLING".

Although only a file copy was before us, that letter was, we were advised, duly subscribed by the petitioner. By letter dated 29 January 1999 solicitors acting on behalf of the first respondent replied in the following terms -

"On behalf of and as instructed by our client, William Alan Hamilton Shepherd, we hereby accept your offer dated 30 December 1998 to sell to Mr. Shepherd the dwellinghouse Westbrook, Glasgow Road, Kilsyth and that at a price of ONE HUNDRED AND THIRTY THOUSAND POUNDS (£130,000). In terms of the mutual Will of the said deceased George Shepherd and Mrs. Margaret Mitchell Leckie or Shepherd, our client offers to make payment of the price no later than 5 years from the date of conclusion of missives. For the avoidance of doubt, in the absence of any provision contained in said mutual Will, no interest shall run on the unpaid portion of the purchase price.".

That letter was both subscribed and witnessed. To that letter solicitors acting on behalf of the petitioner in turn replied by letter dated 8 February 1999 in the following terms -

"On behalf of the Executor Nominate of the late George Shepherd we hereby accept your formal letter dated 29 January 1999 to our offer of 30 December 1998 subject to the following qualification:-

1. The second and third sentences of your formal letter shall be held to be delete.

2. The said price of ONE HUNDRED AND THIRTY THOUSAND POUNDS (£130,000) STERLING shall be payable by 60 equal monthly instalments, the first such instalment being due as at the date of entry and at calendar monthly intervals thereafter.

3. The terms of this formal letter are only open for acceptance to reach us not later than 5.00 pm on Wednesday 17 February 1999 failing which our client proposes to offer the subjects for sale to Mr. Graham Shepherd.".

That letter was subscribed and witnessed. It was accompanied by a covering letter in which the petitioner's solicitors expressed the view that interest should be paid on the purchase price. By letter dated 10 February 1999 the solicitors for the first respondent replied in the following terms -

"On behalf of and as instructed by our client, William Alan Hamilton Shepherd, we hereby reject the terms of your letter of 8 February, 1999".

That letter was subscribed and witnessed. It was also accompanied by a covering letter in which the writers expressed the view that, having regard to the terms of the Will, interest was not payable nor was there any provision for the executor nominate to determine the level of instalments.

5. It was accepted before us that the formal letters of 30 December 1998, 29 January 1999 and 8 and 10 February 1999 all satisfied the requirements of sections 1(2)(a) and 2(1) of the Requirements of Writing (Scotland) Act 1995.
6. Before us no party contended that the opening provisions or the second declaration in clause (Fourth) (Two) was invalid. What was, in the first place, in dispute was the validity of the first declaration, namely -

"Declaring that it is a condition of the sale of the subjects to any of our children that the son purchasing the subjects shall have such period as is mutually agreed between himself and his brothers or their representatives, or failing agreement in any event not less than five years, to pay up the balance of the price".

7. Mr Bartos on behalf of the second and third respondents contended that, in respect individually and cumulatively of (1) the period for payment (in the event of there being no agreement in that respect) and (2) the reference to "to pay up the balance of the price", the declaration was void from uncertainty. The relevant test, he argued, was that identified by Lord Justice-Clerk Thomson in Hood v. Macdonald's Trustee 1949 S.C. 24 at page 28, namely, "whether a trustee, approaching the matter with proper care and properly advised, would be able to carry such an instruction out". The provision in the declaration that the period be "not less than five years" made it impossible for the trustee to know what length of time for payment he should specify in offering Westbrook to any of the sons. A trustee required to act with ordinary prudence (Menzies on Trustees (2nd edition.) para. 385; Binnie v. Binnie's Trustees (1889) 16 R.(H.L.) 23, per Lord Watson at pages 26-7). He could not, standing the declaration, frame an offer to sell Westbrook to a son which would, with respect to the time for payment, meet the requirements for certainty of a contract of sale. Reference was made to McBryde on Contract (2nd edition) paras. 5-19, 5-21 and 8-23, Trayner's Latin Maxims (4th edition.) at page 76, May and Butcher Limited v. The King [1934] 2 KB 17, Traill v. Dewar (1881) 8 R. 563, per Lord Justice-Clerk Moncrieff at page 586, Nicolene Limited v. Simmonds [1953] 1 Q.B. 543, per Singleton L.J. at page 549 and Denning L.J.at pages 551-2, Hick v. Raymond & Reid [1892] A.C. 22 and In re Viscount Exmouth [1883] 23 Ch. Div. 158, per Fry J. at page 163. Moreover, further uncertainty was introduced by the reference to "pay up the balance ... ", there being no reference to a deposit or to instalments or to any other payment earlier than payment of the full price. Reference was made to various dictionary definitions of "balance". It was impossible, it was argued, for a trustee fulfilling his duties under the Will to give effect to this declaration.
8. On this issue Mr. Wallace for the first respondent contended that the declaration was not void for uncertainty. The clearly expressed wish of the testators was that, if Westbrook remained in the estate at the time of the survivor's death, there should be an opportunity for their family to continue to live there. The mechanism for doing so was to offer it to their sons in turn at a price to be agreed among them or, failing agreement, to be determined by independent valuation. The provision for deferment of payment was designed to meet the difficulty that a purchasing son might have in raising the necessary funds. Although the period set for payment was one of at least five years and had no specified terminus thereafter, a limit could be set by the exercise by the trustee of an administrative discretion to fix a reasonable time thereafter. That might, in the circumstances, be a time shortly after the expiry of five years. Any unduly protracted period could be challenged by an interested party as being unreasonable. While the reason for the reference to "the balance" was not wholly clear (there being no provision for instalments or for payment otherwise than in a single sum), it might be that payments were made voluntarily to account of the price. Any difficulty with that expression was not sufficient to render the declaration as a whole void from uncertainty. The test was that identified by Lord Justice-Clerk Thomson in Hood v. Macdonald's Trustee at page 28. Applying that test the trustee would have no difficulty in carrying out the relevant instruction. That would include the sale being one in which a purchasing son was not obliged to pay the price or any part of it before the expiry of at least five years.
9. On this issue we are of opinion that the declaration, albeit giving rise to some difficulty of interpretation, is not void from uncertainty. It provides that the sale of the subjects to a purchasing son is to contain a condition in favour of the purchaser which allows him to defer payment for a period of time. It seems clear from the terms of the Will - and this is confirmed by the price later agreed among the brothers - that the subjects were a substantial property, the price of which might not readily be available to a son willing to purchase it. The testators, however, clearly wished the family (in one form or other) to have the opportunity to continue living in that property and, by providing for the deferment of payment, but not necessarily of entry, by a purchasing son, sought to facilitate that being realised. The trustee was directed that, in the event of the sons or their representatives not agreeing on the timing of payment, he should allow to a purchasing son a period of at least five years before the full purchase price need be paid. Although no particular time beyond five years was specified, that did not, in our view, render the implementation of this declaration impossible for the trustee. He was vested with power of sale and with such powers as were incidental to it, including, subject to any specific directions to the contrary and in so far as consistent with his duties to the beneficiaries as a whole, the power to fix when payment for trust assets acquired by a purchaser should be made. The exercise of that power would require to take into account the interests of the other beneficiaries, including the importance of realising and distributing the estate with due expedition. In the exercise of that power the trustee could insist, as a condition of the sale, on the purchase price being paid in full not later than the expiry of five years or within a reasonable period thereafter. In that way the possible uncertainty occasioned by the absence in the declaration of a final date for payment could be rendered certain. Nor do we consider that the reference to "pay up the balance of the price", either on its own or in combination with the matter of deferred time for payment, renders the declaration incapable of being given effect. It may be that the draftsman envisaged that the purchasing son might choose to make payments to account but, whatever he had in mind, the "balance of the price" is, where no earlier payments have been made, simply the full price. It is the outstanding sum, whatever that may be.
10. In the course of his presentation Mr Bartos submitted that any deferred time for payment had to be contained in the offer made by the trustee to that son as envisaged in the opening part of clause (Fourth) (Two). We shall return in another context to the mechanics by which the provision in the declaration might be given effect but for the present we should say that we do not accept that submission. The right to defer payment, in so far as it extends, is a condition conceived in favour of the purchasing son on which he may insist or not, within the parameters of that right, as he thinks fit. If and in so far as it is insisted on, it becomes a condition of the sale. It does not require to be contained in the opening offer. In so far as Mr Wallace submitted that an offer by the petitioner required to be capable of de plano acceptance we, for the same reason, reject that submission.
11. Much reliance was also placed by Mr Bartos on authorities concerned with commercial contracts of sale between otherwise unconnected parties. But the issue in this case is concerned with the efficacy of a testamentary provision designed to facilitate the perpetuation of a family arrangement. A court will be slow to hold that a testator's wishes, if expressed in terms reasonably capable of interpretation and application, should not be given effect.
12. The next issue is whether, if the declaration can be given effect, the purchasing son who takes advantage of the right to defer payment requires to pay interest on any outstanding sum. It is, of course, a general incident of a contract of sale of heritage that, in the absence of provision to the contrary, interest runs ex lege on the price from the term of entry until payment, the interest being "given in consideration of the fruits of that subject" (Erskine - Institute III.3.79). But the present issue must be considered in the particular context of a testamentary provision, due regard being had to the intention of the testators in so far as that may be discovered from the terms of the Will. In that connection decisions bearing on interest on advances under testamentary deeds are more in point. Reference was made in the course of the discussion to Baird's Trustees v. Duncanson (1892) 19 R. 1045 and to Matthew's Trustees v. Matthew (1905) 13 S.L.T. 470. In the former case Lord Adam, giving the leading opinion in which Lord President Inglis, Lord McLaren and Lord Kinnear concurred, held that, where the testamentary deed under discussion empowered the trustees to make advances of capital, directed that any such advances be deducted from the related beneficiary's share of the residue but made no provision for interest on such advances, the truster's intention to be inferred was that interest should not be charged. In Matthew's Trustees v. Matthew Lord Johnston, in the Outer House, distinguished Baird's Trustees v. Duncanson and held that, in the particular circumstances of the testamentary settlement under consideration, interest fell, as a matter of account in framing the scheme of division, to be charged on advances of capital which had been made.
13. In this field much turns on the features of the deed under consideration. We take the general rule to be that expressed by Lord Adam in Baird's Trustees v. Duncanson. Lord Johnston's view in Matthew's Trustees v. Matthew appears to have turned importantly on his consideration of the settlement before him and of the effect that failure to bring interest into account would have had on the equality which Lord Johnston construed to have been "the testator's primary idea".
14. In the present deed clause (Fourth) (One) provides for the division of the residue, including Westbrook, among the three sons. It is not expressly provided that such division is to be in equal shares, though in the absence of contrary indications in the Will such a division would be implied. Clause (Fourth) (Two), however, by providing for the sale of Westbrook to a son with deferment of payment, clearly envisages that, in so far as such an option is taken up, it may confer an advantage on the purchaser over other beneficiaries. The testators must be taken to have recognised that, if interest on the price were to be insisted in, this might discourage a son from taking up the option and thus defeat their wish that the family should have the opportunity to continue to live at Westbrook. In these circumstances, in the absence of express provision for interest, we hold that the testators' intention was that interest should not be payable. Confirmation of this view is found in the provision that the amount of "the price", without reference to any interest thereon, is to form part of the residue to be divided among the beneficiaries.
15. In these circumstances no question of any rate of interest arises for decision and we find it unnecessary to discuss that matter.
16. The remaining issue is the effect, in the context of the Will, of the correspondence which passed between the petitioner and the first respondent (or their respective agents) in December 1998 and early 1999. Mr. Wallace contended that, on the assumption that the declaration was valid, the effect of the correspondence was that the petitioner had, at no stage in the course of it, made to the first respondent an offer in terms of the Will; having failed to do so, the petitioner remained under an obligation to make a valid offer; the period of at least five years would run only from the making of such an offer. Mr. Bartos contended that, on the assumption that the declaration was void from uncertainty, a valid offer had been made by the letter of 30 December 1998; that offer fell to be construed as containing an implied term that payment of the price would be made within a reasonable time; the letter of 29 January 1999 fell to be construed as in effect a declinature of the petitioner's valid offer; it inserted an unwarranted condition that payment be made five years from the conclusion of missives; the formal letter of 8 February 1999, although in terms a qualified acceptance, was in effect a new offer (Wolf and Wolf v. Forfar Potato Co. 1984 S.L.T. 100); if it was open to the trustee in the exercise of ordinary prudence to make an offer to accept payments by instalments (as, it was submitted it was), that offer had also been declined by the first respondent. In these circumstances the respondent had passed from his option to purchase the subjects and the petitioner's obligation was now to offer them to the second respondent.
17. We reject both of these contentions. We notice first that it is far from clear that the "offer" which the trustee is to make to the eldest son requires to be an offer in formal terms. In the event of the eldest son "not wishing to take up said offer" within one month from its "being submitted to him in writing", an offer is to be made to the next eldest son on a similar basis for a similar period. At the time of the execution of the Will any valid offer of the sale of heritage would require to have been formally constituted in accordance with the law as it stood prior to the coming into force of the Requirements of Writing (Scotland) Act 1995. The reference merely to "in writing", while clearly excluding an oral offer, does not suggest a formal offer at that stage. Likewise, the expression "not wishing to take up said offer" may suggest a degree of informality. In these circumstances the initial communings envisaged by the opening part of clause (Fourth) (Two) may not have required formal writings - albeit in due course formal missives may have been appropriate.
18. In the event, however, both the letter of 30 December 1998 and that of 29 January 1999 were sufficient to meet the requirements for validity of a contract for the sale of heritage as those requirements stood at the respective dates of these letters. The first of these bears to be an offer made "in implement pro tanto of the Will" to sell Westbrook at a specified price. It must accordingly be construed under reference to the terms of the Will as properly construed. The Will, so construed, includes, we have held, a valid declaration entitling a son willing to purchase to defer the time for payment. There is nothing in the express terms of the letter which is inconsistent with the terms of the Will and, in particular, with the terms of the declaration. As a matter of objective construction, the offeror must be taken to have intended that his offer be in terms of the Will. In these circumstances there is no warrant for implying into this offer a term of payment within a reasonable time other than one which was reasonable having regard to the declaration. The response of 29 January 1999 bears in its first sentence to be an unqualified acceptance of the offer of 30 December 1998. It was made timeously. The second and third sentences are each expressed under reference to the terms of the Will. The second, while bearing that the first respondent "offers" to make payment of the price no later than five years from the date of conclusion of the missives, is not truly an offer open for acceptance or rejection but a vindication of the right conferred on the first respondent under the Will. It was not an offer which, on a sound construction and application of the Will, the petitioner could, in the circumstances, properly have refused, as it did not, on any view, claim a deferment beyond what was within the scope of the first respondent's right. The third sentence likewise merely clarifies the first respondent's position in respect of an existing right.
19. In these circumstances these two communings together constitute, in our view, a concluded contract of sale by the executor to the first respondent in furtherance of the terms of the Will. The bargain having been completed by them, the subsequent communings are irrelevant. The first respondent, far from rejecting the petitioner's offer, has in effect accepted it without qualification. In these circumstances the petitioner is neither entitled nor obliged to offer the subjects to the second respondent. Nor is the first respondent entitled to receive an offer from the petitioner such as would allow him a further period of at least five years to make full payment. He is committed to the existing bargain. Mr Wallace ultimately accepted that such a view of the effect of the correspondence was open.
20. We should record that Mr Borland for the petitioner advanced no substantive submissions in the course of the discussion.
21. The questions on which the petitioner seeks directions are as follows:

A. Upon a proper construction of the Will, and in particular having regard to the

term of the Will which provides for deferral of payment of the balance of the purchase price, may a son of the deceased who is desirous of purchasing the House defer payment of the whole of the agreed price for a period of at least five years notwithstanding that that son may have taken entry to the House?

B. If the answer to Question A is in the affirmative, having regard to the position

at common law that a purchaser of heritable property is bound to pay interest on an unpaid purchase price from the date of entry, is Alan bound to pay interest on the unpaid price for such time as it remains unpaid and, if so, at what rate?

C. If the answer to Question A is in the negative, upon what basis of deferred

payment can the Petitioner properly offer to sell the House to Alan Shepherd?

D. Upon a proper construction of the Will and the letters passing between the

Petitioner and Alan Shepherd's agents between 30 December 1998 and 10 February 1999, has Alan declined the offer to sell the House to him so that the Petitioner is bound to offer to sell it to the next eldest son of the deceased?

We shall, for the reasons given above, answer these questions as follows:

A. Yes.

B. Alan is not bound to pay interest on the unpaid price provided that payment in

full is made by 29 January 2004, being the fifth anniversary of the date on which missives were in the event concluded. No question arises as to the rate of interest.

C. Superseded.

D. No.