Scottish Court of Session Decisions

By section 12 of the Entail (Scotland) Act 1882 (45 and 46 Vict. c. 53), it is enacted—“In any application under the Entail Acts to which the consent of any person is required, where such person is disabled under the provisions of the Entail Acts or otherwise from consenting by reason of being under age, or subject to other legal incapacity, the Court shall appoint his tutor curator, … or another person to be curator ad litem to the person under disability, and such curator ad litem may consent on his behalf, and no curator ad litem who may give any consent under this Act shall incur any responsibility on account of such consent in respect of any alleged error in judgment or inadequacy of consideration or want of consideration therefor, unless it shall be alleged and proved that he acted corruptly in the matter.”

In 1883 Captain John Maxwell Heron presented a petition to disentail the lands of Heron and Kirrouchtree, in the Stewartry of Kirkcudbright. Captain Maxwell Heron was born prior to 2nd June 1851, and his eldest son, Guy Maxwell Heron, being a minor, it was necessary that the value of his consent to the disentail should be ascertained. George Dunlop, W.S., Edinburgh, was appointed in the process curator ad litem to Guy Maxwell Heron. As such he gave his consent to the disentail, and on 18th February 1884, in respect of that consent, the Court approved of and interponed authority to the instrument of disentail.

The terms on which Mr Dunlop gave his consent appear from a minute of agreement between Captain Maxwell Heron

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and him as curator ad litem to Guy Maxwell Heron, dated 30th October and 1st November 1883, in the following terms:—“Whereas the said John Maxwell Heron, on or about ths sixth day of March Eighteen hundred and eighty-three, presented a petition to the Lords of Council and Session for authority to record an instrument of disentail of the said lands and estate, upon which petition the usual procedure followed, and, inter alia, the said George Dunlop was appointed curator ad litem to the said Guy Maxwell Heron: And whereas the said George Dunlop, as curator ad litem foresaid, has agreed to consent to the said disentail on the terms hereafter set forth: Therefore the parties have agreed, and do hereby agree, as follows, videlicet—First, It is hereby agreed between the parties that the value in money of the expectancy or interest in the said entailed estate of the said Guy Maxwell Heron is Sixteen thousand pounds, for which sum the said John Maxwell Heron hereby agrees and binds and obliges himself to grant to the said Guy Maxwell Heron a bond and disposition in security in ordinary form, and containing all usual and necessary clauses. Second, In exchange for the said bond and disposition in security, the said George Dunlop as curator ad litem hereby agrees to execute and deliver to the said John Maxwell Heron a deed of consent to the disentail of the said estate. Third, the said George Dunlop, as curator ad litem foresaid, further agrees to the said John Maxwell Heron borrowing a sum not exceeding ten thousand five hundred pounds upon the security of the said lands, to rank preferably thereon to the said sum of sixteen thousand pounds, the said sum of ten thousand five hundred pounds to be applied as follows, videlicet—(1) Three thousand pounds to be applied in the redemption of one-half of the annuity of seven hundred pounds presently payable out of the said lands and estate to Mrs Charlotte Burgoyne Maxwell Heron, mother of the said John Maxwell Heron; (2) two thousand five hundred pounds to be applied in repayment to the petitioner of sums expended by him on permanent improvements on the said estate, or to be hereafter so expended; (3) in payment of any sums presently borrowed by the said John Maxwell Heron on the security of his life-interest on the said estate and policies on his life, and the expenses hereinafter mentioned; (4) the balance to be paid to the said John Maxwell Heron at such times and in such amounts as shall be fixed by James Howden and James Alexander Molleson, both chartered accountants, Edinburgh, and by the said George Dunlop, or by a majority of them in the event of their differing in opinion. Fourth, The parties hereto agree that the said sum of ten thousand five hundred pounds, to be borrowed as aforesaid, and the sum of six thousand pounds, being the provision to younger children contained in the first party's antenuptial contract of marriage, shall rank on the said estate preferably to the foresaid sum of sixteen thousand pounds, and that the whole other existing debt amounts to the sum of thirty-seven thousand five hundred pounds, as will be shown by searches to be exhibited by the said first party to the said second party. Fifth, The whole expenses of the said application to the Court, the bond in favour of the said Guy Maxwell Heron, and of these presents, and incident thereon in any manner of way shall be paid by the said John Maxwell Heron.”

By agreement between parties the valuation of the entailed lands for the purpose of ascertaining the value of the consent was £93,000.

On 8th June 1892 Guy Maxwell Heron attained majority. Thereafter he raised an action against Mr Dunlop for the sum of £16,000, with interest thereon at 5 per cent. from 30th October 1883 till payment.

The pursuer averred—“(Cond. 5) It was the duty of the defender as curator ad litem, if he consented to take security over the lands before they were disentailed instead of insisting on consignation of the value of the pursuer's consent, to see that the security was proper and adequate. The defender agreed by the said minute of agreement of 1st November 1883 to accept security over the said lands instead of consignation, but he, in breach of his duty, failed to see that the security he obtained was proper and adequate. (Cond. 6) By the 4th clause of said minute of agreement Captain Heron undertook to show to the defender that the debts on the lands at that time amounted to £37,500. The defender took no steps to satisfy himself of the accuracy of Captain Heron's statement. On the contrary, he, in breach of his duty to the pursuer, failed to make any adequate inquiry as to the burdens on the lands, and their sufficiency to afford a security for the value of the pursuer's interest. If the defender had made adequate inquiry he would have found that besides the said sum of £37,500 the lands were burdened with two annuities and a jointure, the capitalised value of which amounted to £9686, 3s. 9d. (Cond. 7) Not only did the defender not inquire as to the real amount of the burdens on the lands, but by the minute of agreement he, while accepting a bond and disposition in security over the lands in return for the consent of the pursuer, agreed that Captain Heron should burden the lands by bonds taking priority to that in favour of the pursuer to the extent of £16,500 (Cond. 9) The result of the defender's action in accordance with the minute of agreement with Captain Heron and of the defender's omission to ascertain the burdens then existing on the lands was as follows—The said lands were burdened preferably to the bond in favour of the pursuer to the extent of £66,380, made up as follows:—(1) Burdens disclosed by Captain Heron, £37,500; (2) burdens not disclosed by Captain Heron (as set forth in condescendence), £10,200; (3) burdens which the defender consented should be ranked preferably to the pursuer, £16,500; (4) value of insurance premiums secured on the estates, £2180—£66,380. If to this amount the bond in favour of the pursuer be added,

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the said lands valued at £93,000 were to be burdened to the extent of £82,475. (Cond.10) Further, the defender, in breach of his duty foresaid, failed to make adequate inquiry as to the amount of the rent-roll of the said estates for the year 1882, being that immediately preceding the year in which the disentail petition was granted—the rents amounted to £3215, 13s. 8d. From that sum there fell to be deducted payments of interest on prior burdens and expenses necessarily incurred over the estates, and there was consequently left only £479, 7s. 4d. to pay the interest (£800) on the bond which the defender had accepted for the payment of the pursuer's interest in the said lands. (Cond. 11) On 11th July 1887 Captain Heron was sequestrated, and Mr J. A. Robertson, C.A., was appointed his trustee. The interest on the bond to the insurance company fell into arrear, and the premiums on the policies of assurance which the said company held were not paid. In these circumstances the said company forced the trustee to sell the lands, which he did by public roup at the price of £60,000. After paying prior burdens on the lands, only £488, 11s. 6d., subject to deduction of expenses, was left to meet the pursuer's bond for £16,000. … (Cond. 12) The pursuer has thus lost the whole of the sum payable to him for his consent to the said disentail. The defender is liable for said loss in respect that he failed to have the value of the pursuer's consent paid or properly secured, having accepted as a security for payment of the said sum of £16,000 what was manifestly an inadequate security. The defender failed to take care that the value of the pursuer's consent was properly secured on the estates. He could have insisted on consignation of the £16,000 instead of taking security for it. He allowed other bonds to be granted over the said estates in preference to the pursuer's bond. He failed to ascertain the amount of the burdens on the said estates, and he took as security on behalf of the pursuer a bond over the said estates which were already burdened to such an extent as to render these a totally inadequate security for payment of the pursuer's debt. In the circumstances condescended on said failure amounts to culpa lata.” The pursuer did not aver that the defender acted culpably in consenting to the disentail.

The pursuer pleaded—“(1) The defender having, in breach of his duty as curator and guardian of the pursuer during minority, failed to obtain proper security for the said sum of £16,000, and the pursuer having in consequence lost the same, decree should be granted in terms of the conclusions of the summons.”

The defender lodged defences, and, inter alia, “explained that the defender as curator ad litem to the pursuer under the Entail Acts, after due consideration of the whole circumstances, gave his consent to the disentail in consideration of the delivery of a bond and disposition in security by Captain Heron for £16,000 in favour of the pursuer, postponed to the burdens and provisions then affecting the estate, and to the further burden of £10,500 to be charged on the estate and applied in terms of said agreement. Explained further, that this was the best course open to the curator ad litem in the ward's interest in the circumstances of the case.”

The defender pleaded—“(1) The action is irrelevant and incompetent. (2) The action is barred by the Entail Acts, and in particular by section 31 of the Entail Amendment Act 1848 and section 12 of the Entail (Scotland) Act 1882. (3) The defender as curator ad litem in the petition for disentail was entitled to give his consent for such consideration as he thought proper, and the consideration in respect of which the consent was given having been fixed in bona fide by the defender as fair and reasonable under the whole circumstances, and having been duly obtained, the defender ought to be assoilzied.”

On 20th July 1893 the Lord Ordinary ( Kincairney) pronounced the following interlocutor:—“Finds that the averments of the pursuer are irrelevant, and insufficient to support the conclusions of the summons: Therefore assoilzies the defender from the said conclusions.

“ Note.—[After the circumstances had been stated]—The argument was confined to the effect and application of the 12th section of the statute pleaded by the defender. The pursuer maintained that it did not apply. He maintained that the consideration for the consent of the curator ad litem was £16,000. He did not dispute that his interest was fairly estimated at that sum, and that it was, if paid, an adequate consideration for the consent. His objection therefore, he maintained, was not to the inadequacy of the consideration, but to the inadequacy of the security for it, and he maintained that in complaining of the inadequacy of the security he was not charging the defender with mere error in judgment, but with such carelessness and fault as had in various cases been held sufficient to subject in liability trustees who had invested trust funds on security which was manifestly insufficient.

It was maintained for the defender that he was not in the position of a trustee who had invested trust funds, because, in the first place, the statute had conferred on him a much wider immunity than the law had accorded to trustees; and, in the second place, because he had never been in possession of any funds for investment; that the agreement must be read as a whole, and that, on a sound construction of it, it appeared that the consideration for the curator's consent was not the payment of £16,000, but the bond granted in terms of the agreement.

On this argument my opinion is in favour of the defender.

The main question is, what was the consideration obtained by the curator ad litem in respect of which he gave his consent? In considering that question it is important and instructive to distinguish between the duties imposed by the 13th section of the statute on the Court, in a case where

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consent is refused, and the provisions of the 12th section which apply when consent is given. In the former case the Court is required to ascertain ‘the value in money’ of the interest of the heir, and to direct that the sum ascertained shall be paid into bank in name of the heir, ‘or that proper security therefor shall be given over the estates.’ The case of Farquharson, 14 R. 231, quoted by the pursuer, was a case where consent had been refused.

But there are no such provisions in the 12th section relating to cases of consent. The curator ad litem is not required to ascertain the value in money of his ward's interest, or to see that the sum ascertained is consigned or invested. In such a case, as pointed out by the counsel for the defender, it may happen that no money consideration is involved as in the case—not at all unusual—where the object of a disentail is a re-settlement of the estates, and other less usual cases may be supposed where the consideration for a disentail might be something different from a payment of money; for example, an annuity or a disposition of a portion of the entailed estates, or again there might be reasons which might legitimately induce a curator ad litem to be moderate in his claims, as if (as is suggested in the present case) there was reason to doubt whether the entail was good against creditors. For such reasons a curator ad litem has a very wide discretion in regard to the grounds on which he shall consent to the disentail on behalf of his ward, and the Court is not concerned with these reason, except with the view of ascertaining whether the transaction has been honest and corrupt.

I am of opinion that on a sound construction of the agreement the consideration for the consent was not payment of £16,000, but a bond for that sum. That is expressed unequivocally in the second head of the agreement. Captain Maxwell Heron did not come under an obligation by the agreement to pay the £16,000 in money, and never did so, except indeed by the bond itself. It may be that the curator ad litem ought not to have accepted Captain Heron's bond, and ought to have refused his consent if he could not get the money, and so have thrown on the Court the duty and responsibility of ascertaining the sum and approving the security. But it is quite certain that he did not do so. He accepted a bond, and if it be said that that bond has proved an inadequate security, what is that but saying that the consideration was inadequate?

At first sight there is some difficulty in seeing how a security over an estate can be an inadequate security for a partial interest in it, and the 13th section of the statute seems to contemplate that the estate would be adequate security. But in this case the curator consented to new burdens being imposed on the estates, and it may be doubtful whether it was advisable to do that. Still I think it clear that the bond for which the curator stipulated was not a bond over the estate as it then stood, but a bond subject to the burdens mentioned in heads three and four of the agreement. But that again resolves into a question of the inadequacy of the consideration, and from any liability on that score the curator ad litem is protected by the statute.

I am of opinion therefore that the ground of liability here is really inadequacy of consideration, and that that ground of liability is excluded by the statute.

It may be noticed that here the father who granted the bond was his son's administrator-at-law, and it rather appears to me that if he had paid £16,000 to the curator ad litem, he could have demanded it back as his son's administrator-at-law, or could have uplifted it from the bank in that character if it had been consigned in bank. It is true that in that case he would have held the money in a fiduciary character, and it might, if capable of identification, be safe from his creditors, and it was perhaps a different thing to lend him the money on his bond, but the consideration suggests how limited the duty of a curator ad litem in such cases really is.

I decide this case on the footing that the whole question relates to the liability incurred by the defender in accepting the bond and disposition in security under the conditions specified in the agreement as a consideration for his consent to the disentail.”

The pursuer reclaimed, and argued—The defender was liable for the loss of the £16,000. (1) The duty of a curator ad litem under statute was to ascertain the value of the expectancy of his charge, and pay over the sum to the proper guardians for behoof of the minor. If the curator accepted a security in place of a sum of money to the value of the minor's expectancy, he did it at his peril, it being outwith his office. (2) Even if the curator ad litem was entitled to take a bond in lieu of money, the defender was liable because he took a bad security. He had failed to ascertain the burdens already existing on the entailed estate at the time of the agreement, and he had also failed to ascertain the state of the rental. Besides, he had allowed certain sums, some of which were not mentioned in the minute of agreement, to be charged on the estate as preferential debts to the bond in favour of his ward. The defender had therefore (1) taken a security, the commercial value of which was inadequate, and (2) allowed other debts to be made preferential to that of his ward. A curator ad litem, if he did not pay the money into bank, was bound to see that the security received was such as a prudent lender would accept— Farquharson v. Farquharson, December 15, 1886, 14 R. 231. Proof of the pursuer's averments should be allowed.

Argued for the defender—The judgment of the Lord Ordinary was right. A curator ad litem was entitled to take a security in return for his consent; he was not bound to take money. Here the averments of the pursuer amounted to this, that the defender had taken a second-class security, and had not made adequate inquiry. But a second

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class security was simply an inadequate security, and so long as the curator ad litem acted as such and not as an agent he was protected by the statute. And if the curator had not made adequate inquiry then he had committed an error in judgment in not thinking an inquiry necessary, and the statute again protected him. No corruption being averred the action was irrelevant.

At advising—