Scottish Court of Session Decisions

Mr Alexander MacGregor, solicitor, Inverness, acted for some years as law-agent to Mr Murdo Mackenzie, the testamentary trustee of the deceased Duncan MacLennan, farmer, Muir of Ord, Ross-shire, and was employed by him to do work in connection with the management of the trust-estate. In respect of this work Mr MacGregor had accounts for the sums of £93 and £45, and in May 1894 he obtained of consent in the Sheriff Court of Inverness a decree against Mr Mackenzie, as trustee aforesaid, for the first of these sums.

About that date the whole estate was handed over by Mr Mackenzie, with the knowledge and consent of Mr MacGregor, to Mr Robert Munro, accountant, Alness, on behalf of the beneficiaries under Mr Mac Lennan's settlement.

Two years later the estate was sequestrated and Mr John Sandison was appointed trustee in the sequestration.

An affidavit and claim was lodged by Mr MacGregor, in which he stated that the trust-estate was at the date of the sequestration indebted to him in the two sums mentioned above, “being the amount of accounts for professional business and cash disbursements incurred to him on the employment of Murdo Mackenzie … as trustee and executor acting under the trust-disposition and settlement of Duncan MacLennan … in connection with the administration of the said trust.” In the affidavit as originally lodged he asked merely for an ordinary ranking, but being allowed to amend he claimed to be ranked preferably for the two sums.

The trustee pronounced the following deliverance—“The trustee rejects the claim

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of £93, 6s. and of £45, 6s. 7d. to a preferable ranking, but admits them to an ordinary ranking, subject, however, to taxation of the accounts claimed by the Auditor of Court, and that on the grounds specified in the subjoined note.”

Note.—“The claimant acted as agent to Mr Murdo Mackenzie, sometime residing at Ensign Cottage, Fairfield Road, Inverness, now at Hawthorn Lodge, there, who was sole accepting and surviving testamentary trustee of the deceased Duncan Mac Lennan, farmer, Achederson, in the county of Ross and Cromarty, whose estates form the subject of this sequestration, and the claimant's account has been incurred for work done for the said trustee, in connection with the said estate prior to the sequestration. It must, however, be kept in view that the whole estate was handed over by the said Murdo Mackenzie, with the consent, knowledge, and approval of the claimant to Mr Robert Munro, accountant, Alness, on behalf of the beneficiaries under the deceased's settlement, in or about May 1894, at least two years before the date of the sequestration, and which virtually necessitated sequestration. At the time the estate was so handed over the trustee divested himself of all interest he had as trustee, or as an individual in the estate, and accordingly then lost any lien, if any, he might ever have had over the said estate.

In the claimant's affidavit there is no reason specified why his accounts should be preferably ranked; if any such reason exists it should have been specified in the affidavit, for all that appears the accounts are claims which the claimant alleges he had against the estate at the date of the sequestration, and being such the trustee can only give them an ordinary ranking.

Further, it is doubtful indeed if the claimant is justified in doing this, as the present claim should have been made by the said Murdo Mackenzie, who is the party who incurred the expense, and the party against whom alone the claimant has any claim; as it is, however, alleged that the work was done prior to the sequestration, and that the claimant took a decree against the said Murdo Mackenzie, the trustee is willing to give an ordinary ranking. This ranking must, however, be subject to taxation by the Auditor of Court. It is a well-known principle that a trustee on a sequestrated estate can pay no law-agent's accounts until they have been taxed. It may be said that in this case the claimant holds a decree against the said Murdo Mackenzie for part of the amount claimed, but this decree was obtained of consent of the said Murdo Mackenzie, and without the amount being taxed. This consent is not binding on the trustee, and it is consequently submitted that the production of the decree in this process does not dispense with the necessity of taxation of the claimant's account against the estate of the bankrupt.”

The claimant appealed to the Sheriff-Substitute ( Scott Moncrieff) who on 29th November pronounced the following interlocutor—“The Sheriff-Substitute having made avizandum, refuses the appeal except to the extent of finding that the trustee is bound to admit the claim of the appellant of £93, 6s. to an ordinary ranking, without subjecting it to taxation; quoad ultra affirms the deliverance of the trustee appealed against, and decerns: Finds no expenses due to or by either party.”

Note.—“The sequestration in this ease is that of the estate of a deceased debtor. This estate was for some time prior to the date of sequestration under the charge of a testamentary trustee and executor who employed the appellant, a solicitor in Inverness, to act as agent in the management of the executry. Two accounts were incurred by the executor in that capacity to the appellant—one of these amounted to £93, 6s., the other to £45, 6s. 7d. For the former sum decree was obtained against the executor. The respondent admits that the appellant's accounts were incurred for work done in connection with the estate now sequestrated, and he is willing to admit them, subject to taxation, to an ordinary ranking. The appellant, however, claims a preferable ranking, and hence the present appeal. This claim appears to be based upon a dictum of Mr Erskine, iii., 9, 46, to the effect ‘that the expense of confirmation and the other charges necessary for the common management come off the whole head of the executry funds, and are therefore, like the debts properly called privileged, preferable to every other creditor.’ This opinion is, of course, entitled to very great weight, although apparently not supported by any judicial authority. It is also true that although it was expressed prior to the passing of any of the modern Bankruptcy Statutes, there appears to be nothing in them to deprive a debt of any privilege which it might have at common law. But I can find nothing in the authorities upon bankruptcy which would warrant me in holding that the present claim is entitled to a preferable ranking. The claims which are fall under well recognised heads, and certainly the presumption is against any addition being made to them unless there is clear authority for doing so. The executor does not make the claim. It is his law-agent, and I fail to see why the law-agent of the executor of a deceased debtor should be in a better position than the law-agent of the debtor himself. Whether or not the appellant can go against the executor is another matter, and not before me. I consider, however, that in so far as the appellant holds a decree for his account, this claim should be ranked without recourse to taxation. It is not a case for expenses. The trustee omitted at first to state his grounds for rejection as required by statute, and the appellant upon one small point has been successful.”

The claimant appealed, and argued— This being a charge in connection with the management of the estate was entitled to preference— Ersk. iii. 9, 46; M'Laren's Wills and Succession, sec. 2296. Accordingly, the question of the trustee's lien did

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not really arise here, since apart from it he had the equitable right to be reimbursed for any expenses incurred in the administration of the estate, and the appellant's account remained as a first charge on it— Dall v. Drummond, July 15, 1850, 8 Macph. 1006; Thomson v. Tough's Trustee, June 26, 1880, 7 R. 1035; Drummond v. Carse's Executor, January 27, 1881, 8 R. 449.

Argued for the respondent—The appellant had no direct claim against the trustee in sequestration. He should have made a claim against his employer, the testamentary trustee, who again would have had a right to reimburse himself by retaining the trust-estate. As, however, the testamentary trustee had parted with possession of the estate to the beneficiaries, he had lost his right of lien, which was only operative at the instance of the person in whose hands the property was. Accordingly, the appellant's employer was the only person against whom he had any claims—Bell's Com. ii. 392; Gibson v. Macdonald, December 7, 1824, 3 S. 374; Anderson v. M'Dowal, March 21, 1865, 3 Macph. 727.

At advising—