. Baird's Trustees

5, 1895

not himself observed its stipulations Johnston v. Robertson, March 1, 1861, 23 D. 646; Turnbull v. Maclean & Company, March 5, 1874, 1 R. 730; Macbride v. Hamil ton & Company, June 11, 1875, 2 R. 775. Even a landlord could not recover his rent as a liquid debt unless he had observed his duties under the lease-Graham v. Gordon, June 16, 1843, 5 D. 1207. The doctrine of liquid and illiquid did not arise here. It applied where the attempt was made to set off against a debt due under a contract something outside the contract. But the claims and counter claims were all under the same contract and must be disposed of together. The defenders' claim, moreover, if not liquid, was at least capable of instant verification.

At advising

to

LORD ADAM-My opinion is that the Lord Ordinary's interlocutor ought to be adhered to. This is an action brought by a tenant of the defender in Aberdeenshire, holding under a nineteen years' lease, which came to an end, I think, in 1892. It is one of the numerous conditions of that lease that at its expiry the outgoing tenant should be paid, according to valuation by arbiters mutually chosen, for the value of all sown grass; for the dung made upon the farm subsequent the time of the turnip sowing in the previous year; for the value of labour done to the break for green crop or fallow land in that year. The lease having come to an end, the valuation of these matters took place in terms of the lease, with the result that the valuation brought out £670, 17s. as being due by the landlord to the tenant under that clause of the lease. That amount is not disputed, nor is liability for it disputed on the part of the defender; but then he pleads in defence to the claim certain other claims for certain sums from 1884-- sums for rent alleged to be unpaid, interest on improvement expenditure on buildings, and on the fencing and draining of the land, bringing out a balance of £1002 due to him after allowing deductions for all the rent paid to account, and thus leaving a larger sum than that alleged to be due by him. The question is, whether in this action the landlord is entitled to go into this proof, and to say that these sums are due to him. My opinion is that he is so entitled as the Lord Ordinary has found. The claims here on the one side and the other are mutual claims arising under the obligations of the lease. The landlord is bound to pay this sum which is sued for in this action, and so equally is the tenant bound to pay his rent and implement the other prestations according to the averments on record. I think the question is just whether, as the Solicitor-General puts it, one party to the contract is to be entitled to instant payment, while at the same time he is refusing to implement his own part of the contract. I think he is not.

LORD M'LAREN-The claims regarding which the Lord Ordinary has allowed a proof appear to be entirely claims which

VOL. XXXIII.

arise within the lease between the late Mr Baird and his tenant-that is to say, they are all provided for in the lease. The lease as usual stipulates for rent payable at two half-yearly terms, and then the tenant is under obligation to repay to the landlord the sum expended by him for insurance and public assessments, and to pay him interest on certain expenditure which the landlord undertakes to make for the benefit of the farm. That is classed under the head of draining, building, fencing, and land improvements. Then again, the landlord under one of the usual clauses binds himself to give certain compensation to the tenant for available improvements at the end of the lease. What has taken place is that each half-year the tenant appears to have punctually paid his rent, but apparently there had been no payments made under the other conditions of the lease, probably because the rent was the thing the amount of which the tenant knew in advance, but he could not pay the other claims under the lease although the account was rendered to him.

Now, supposing that the tenant's claims had not been constituted by arbitration, it seems plain enough that the one party could not have sued for fulfilment of the pecuniary obligations without exposing himself to be met by the counter claims, not upon the ground of compensation, but on the ground that all stipulations under the same contract resolved into an account in which naturally a balance is due by the one party or the other.

The question then is, does it make any difference that the tenant has obtained an award from valuators as prescribed by the lease. I think not, and for this reason, that the arbiter who was valuing the tenant's claims had no power to deal with the matter of the landlord's claims for these annual charges that he was to receive along with his rent. The landlord had no defence to the award, and he very properly allowed it to go on, and allowed the claims to be valued, and I think that that ought not to prejudice his right to set off his claims, which are just as clearly due, and which need no constitution except the production of the vouchers, against the sums due to the tenant, which require to be ascertained by the opinion of a skilled person.

The only other observation I wish to make is, that while perhaps in point of form this is a case where a proof should be allowed, I think if I had been dealing with it I should not have fixed a diet in the meantime, but should have called upon the defenders to put in process their vouchers, because if it appears that the proper receipts are produced for the sums charged, and these sums have never been paid by the tenant, there cannot be anything left that would be a proper subject of parole evidence. It may be, of course, that if certain items were objected to, parole evidence might be necessary in regard to these. But I have always rather demurred to the idea of sending what is properly a case of accounting to proof without in some way ascer

NO. XIV.

taining what are the points upon which the parties are at issue. However, the interlocutor has not been objected to on that ground, and I suppose if we adhere to it there is every probability that so far as these claims can be instructed by the production of vouchers parties will dispense with other evidence.

LORD KINNEAR I am of the same opinion. It appears to me that the tenant's claim for the sum fixed by valuation under this contract of lease is very much in the same position as the landlord's claim for the fixed rent under a contract of lease, and therefore that the question now in dispute between the parties must be determined by the principle laid down by Lord Fullarton in the case of Graham v. Gordon, June 16, 1843, 5 D. 1207, which has been followed over and over again since, where his Lordship said that a claim for rent is not liquid in the same sense as a sum in a bond, because it is a payment in consideration of something to be done under a contract, and therefore if the obligations in respect of which the payment is to be made have not been performed, the demand for payment cannot be said to constitute a liquid claim. I think the tenant's position in this case is exactly the same as the position of the landlord in the case figured. He is entitled to have payment of the value of the stock in question, but that is a payment in consideration of the performance of his own obligations under the contract. If either party to a contract of this kind, having against the other a claim for a definite sum of money fixed by the contract, has not performed the obligations incumbent upon him in consideration of which that payment is made, that is a very good answer to an action such as we are now considering.

I agree with your Lordships that there is a case here which must be made the subject of inquiry, and that no decree can be given against the landlord until the pecuniary claims against the defender hinc inde have been finally adjusted. I also agree with the hope expressed by Lord M'Laren, that parties may see their way to avoid unnecessary expense in a case of this kind. But that is not a question for us, and as there is no sufficient ground to entitle us to interfere with the discretion of the Lord Ordinary, his judgment must stand.

The LORD PRESIDENT was absent.

The Court adhered.

Counsel for the Pursuer-Dundas-Glegg. Agents-Macpherson & Mackay, S.S.C.

Counsel for the Defenders - Sol. - Gen. Shaw, Q.C.- Salvesen - Lyon Mackenzie. Agents-W. & F. Haldane, W.S.

[Sheriff of Aberdeenshire. SUTHERLAND v. URQUHART. Landlord and Tenant - Lease - Counter Claims-Separable Obligations-Liquid and Illiquid.

An outgoing tenant raised an action against his landlord for the value of crops taken over by the landlord at the expiry of the lease, the amount of which had been ascertained by arbitration under a minute of agreement entered into by the parties at the termination of the lease. The landlord pleaded in defence that he was entitled to set off against the sum sued for, which he admitted was due, counter claims for damages which he alleged were due to him by the tenant for failure to implement the conditions of the lease as to the upkeep of buildings and the cropping of the land.

Held that the defence was irrelevant, on the ground that the claim and alleged counter claim arose upon separate and independent obligations, and that the latter being illiquid, could not be set off against the tenant's liquid claim for the sum fixed by arbitration.

Lovie v. Baird's Trustees (ante, p. 208) distinguished.

Mr John Sutherland, farmer, late tenant of the farm of Upper Tillymauld, on the estate of Byth, Aberdeenshire, raised an action against Mr Beauchamp Urquhart, proprietor of the estate, for payment of the balance of a sum due to him as the price of the grain crop which the landlord took over on the tenant giving up the farm. The value of the crop had been ascertained in a reference to arbitration by the parties under a minute of agreement entered into at the termination of the lease, and in the action this minute of agreement was alone founded on. It appeared, however, that the General Articles, Conditions, and Regu lations established by the defender for the tenancy of all farms on his estates of Meldrum and Byth, which were incorporated in the lease, contained provisions for the valuation by arbitration of the crops and other farm produce left by the tenants at the expiry of their leases. The sum fixed by the arbiters appointed to conduct the valuation was £136, but the pursuer admitted that he was due to the defender, for rent and other claims, the sum of £68, and he accordingly restricted his claim to £68.

The defender averred that he had claims against the pursuer to the amount of £205 "for failure to implement the terms of the lease as to the up-keep of buildings and the cropping of the land," together with the liquidate penalty of £72 as stipulated in the lease, and that he had raised an action against him for the former amount. He

contended that he was entitled to set off this claim against that of the pursuers.

The Sheriff-Substitute (ROBERTSON) on 27th June 1895 repelled this plea as irrelevant and granted decree for the sum sued for.

The defender appealed to the Sheriff, who on 16th August affirmed the interlocutor appealed against.

The defender appealed, and argued- The landlord was entitled to retain the price of the crop till his larger claim was satisfied. The two claims practically arose out of the same contract, and both fell to be settled at its termination, the tenant's claim being under the valuation fixed in terms the lease, and the landlord's for breaches of other conditions of the lease. The case of Lovie v. Baird's Trustees, ante, p. 208, was exactly analogous to the present one.

Argued for respondent-This was not a case where mutual claims under the same contract fell to be set off one against another. The claim under the valuation was a special one, separate from claims under the lease. Accordingly the case of Lovie v. Baird's Trustees did not apply. But even assuming the claims to be on the same footing, there was no authority for saying that the liquid claim by the tenant for value received from him by the landlord could be compensated by the illiquid claim against him for alleged violations of the lease, extending over a number of years, which could not be ascertained without inquiry. The case was ruled by Macrae v. Gordon, June 1, 1842, 4 D. 1310; and M'Rae v. M'Pherson, December 19, 1843, 6 D. 302.

At advising

LORD KINNEAR-This is an appeal from a decision of the Sheriff of Aberdeen in an action at the instance of a tenant against his landlord, but the action is not founded on the contract of lease, but on a separate and distinct contract which, so far as the record goes, has no necessary connection with the lease. The allegation is that when the tenant removed from the farm the defender entered into a submission with him to fix the value of the grain crop upon the farm, that upon the value being ascertained the landlord took the grain crop over at the fixed sum of £136, 7s. 7d., and that at the date of the valuation the pursuer was due to the defender a balance of rent amounting to £62, 6s. 7d. Then the pursuer says that he is willing to admit his liability for the rent, but that the defender refuses to pay him the balance that still remains of the valued price of the grain crop. I agree with the Sheriff that the only defence to this action, which is that the tenant is liable in damages for miscropping and failure to upkeep buildings, is an attempt to set off an illiquid claim of damages against a liquid claim of debt. The case appears to me to afford a very simple instance of the rule that no such right of retention or claim to set off can be allowed. The landlord has bought and received the grain crop at a fixed price, and he then claims to set off, against the right

of the seller to obtain payment of the price, an illiquid counter-claim of damages. Such a defence cannot be sustained.

The Sheriff refers to a series of cases in which it was held that a claim for rent might be compensated by a counter-claim on the part of a tenant, though the amount of the rent due was fixed by the lease, and therefore was so far liquid. But these decisions have no application to the present case. They are all illustrations of the rule that one party to a mutual contract cannot enforce the obligations in his favour while at the same time he refuses to implement the counter obligations to the other party. It does not affect that rule that the landlord's claim for rent is ex facie of the lease a liquid claim, because the case against him in this class of cases is that the full amount so fixed is not due, the tenant not having received the full consideration, in respect that he has not been put in full possession of the subjects of the lease.

The case of Lovie v. Baird's Trustees, on which the appellant founded, appears to me simply another illustration of the same rule. But I think that there was in that case another ground very clearly distinguishing it from the present. In that case the tenant was in arrear of rent, and the landlord had claims for rent against him extending over a considerable period. The tenant met these by counter-claims which were illiquid in themselves, but before the controversy was at an end the termination of the lease arrived, and as a consequence the tenant was required to give over to the landlord (or to the incoming tenant) certain houses, grass, fallow land, and dung, upon condition that he should be paid, "according to the valuation of men mutually chosen as aforesaid, for the value of all sown grass, for the dung made upon the farm subsequent to the time of turnip sowing in the previous year, for the value of labour done to the break for green crop or fallow land in that year." Now, upon that supposition the value of these things was fixed, and the tenant then brought an action against the landlord for the amount of the valuation, irrespective altogether of the landlord's claims against him. It was held that the landlord was entitled to a proof of his claims and to retain the amount of the valuation. But then the landlord's claim was just as liquid as the tenant's, for his claim was for arrears of rent, which was a liquid sum; the tenant's was for the amount of the valuation. But both parties were claiming on counter obligations in a mutual contract. In this case the contract on which the tenant founds is separable, if not separate, from the lease. The landlord, according to his own statement, has received the entire consideration for the money which he is now asked to pay. Accordingly, this case does not fall under the rule of the cases to which I have adverted.

It appears to me, therefore, that the judgment of the Sheriff in the action at the instance of the tenant must be affirmed.

The LORD PRESIDENT, LORD ADAM, and LORD M'LAREN concurred.

The Court adhered.

Counsel for the Pursuer-W. Brown. Agents-Henry & Scott, W.S.

Counsel for the Defender-H. JohnstonCullen. Agents-Auld & Macdonald, W.S.

Friday, December 13.

SECOND

DIVISION.

KER'S TRUSTEES v. KER.

Trust Marriage - Contract Provisions Wife's Power (1) to Discharge Provisions stante matrimonio, (2) to Accept Purchased Annuity in Lieu of Provisions.

In an antenuptial contract of marriage entered into in 1866 the husband's father bound himself to pay to trustees £40,000, and the husband assigned to them certain estate and effects. These trust funds were to be held, inter alia, for payment to the wife in the event of her surviving her husband, and there being children of the marriage, or their issue, of a free yearly annuity of £800 during her lifetime.

The only issue of the marriage were two sons, born in 1867 and 1870. In 1887 the husband became bankrupt, and in 1894, his sons having paid his debts, his bankruptcy was annulled, and his whole estate was vested in his sons.

In 1895 the wife and her sons called on the trustees to denude of the trustestate in their favour as being the only parties interested in the trust estate.

Held that the annuity being a marriage-contract provision, the wife could neither alienate nor discharge it stante matrimonio.

Menzies v. Murray, March 5, 1875, 2 R, 507, followed.

Held further, that the trustees were not entitled to purchase with the trustfunds an annuity of £800 payable to the wife contingently on her surviving her husband, and thereafter to denude of the rest of the trust-estate, because (1) the security of the trust funds was greater than that afforded by a purchased annuity, and (2) a purchased annuity would not be protected by the trust and could be alienated by the wife. Lord Charles John Innes Ker, born in 1842, and Miss Blanche Mary Williams, born in 1814, were married on 15th January 1866. Under their marriage-contract, dated 12th and 13th January 1866, the late Duke of Roxburghe bound himself during his life to pay to Lord Charles during the latter's life. and after his death to the trustees appointed under the marriage-contract, an annual sum of £1200. The Duke further bound himself to pay to the marriage trustees a sum of £40,000 out of provision for his Grace's younger children, payable out of the rents of his entailed estates. Lord Charles assigned to the marriage trustees, inter alia, (1) the capital of the residue of the estate of

the deceased Lieutenant-General Sir James Charles Dalbiac, and (2) his right and interests in and to a sum of £9600 held by the trustees under an indenture dated 24th December 1836.

The purposes of the trust constituted by the marriage-contract so far as relevant to the present case were as follows-(1) the trustees were to pay the free interests and annual proceeds of the trust-estate to Lord Charles during the subsistence of the marriage; (2) to pay to Lady Charles Ker, in the event of her surviving her husband, and there being a child or children of the marriage or the issue of such, an annuity of £800, restricted in the event of her marrying again to £400; "and it is hereby further provided and declared that the said trustees or trustee shall hold and apply the balance of the free income or produce of the property hereby conveyed, after payment of the said annuity or restricted annuity, as herein provided, for behoof of the child or children of the marriage, or for behoof of the issue of any child who may have died, according to the proportions in which they shall be entitled to shares of the funds and property of this trust;" (3) After the death of Lady Charles Ker, if she should have survived Lord Charles Ker, the trustees were directed to hold the whole funds and property for behoof of the children of the marriage, and to pay over the same to them in such proportions, at such times, and under such conditions as Lord Charles might direct and appoint, and failing direction by Lord Charles, the trustees were directed, after the death of the survivor of the spouses, to make over the trust-estate to and among the children equally, the shares of sons being payable when they attained 21 years of age, the shares of daughters being payable when they attained that age or were married, whichever event first happened, it being declared that the shares of the children should become vested in them on Lord Charles' death, unless it should be otherwise declared or directed by him. The marriage-contract contained no provision that the liferents and annuities to Lord and Lady Charles Ker were to be alimentary. Special directions were made as to the disposal of the portion of the trust-estate derived from (1) the estate of Sir James Charles Dalbiac, and (2) the funds subject to the indenture dated 24th December 1836.

The only issue of the marriage were two sons, Charles James Innes Ker, born 19th January 1867, and Bertram Harry Innes Ker, born 5th April 1870.

By two deeds of appointment dated 24th February and 2nd March 1892 respectively, in favour of Charles James Innes Ker and Bertram Harry Innes Ker respectively, Lord Charles irrevocably appointed that one-half of the property subject to the trusts of the marriage-contract should after the death of Lady Charles, if she should survive him, be held in trust for each of his said sons absolutely, and likewise that after his death the moiety of the balance of the free income of the trust property, after payment of the annuity, or restricted an

nuity, to Lady Charles should be held in trust for and belong to each of his said sons absolutely, and declared the whole of the property and interest thereby appointed to his said sons to be indefeasibly vested in them as from the dates of the said deeds.

Lord Charles was adjudicated a bankrupt on 19th February 1887, and by an order of the High Court of Justice in bankruptcy, dated 1st February 1894, it was ordered that his bankruptcy should be annulled, and that his estate should vest in his two sons, Charles James Innes Ker and Bertram Harry Innes Ker, as joint tenants.

In these circumstances Lady Charles Innes Ker and her sons were desirous that the said marriage trust should be wound up, except as regards the portions of the trust-estate derived from (1) the estate of the said Sir James Charles Dalbiac, and (2) the funds subject to the said indenture, dated 24th December 1836. They called upon the marriage - contract trustees to denude in their favour, and to place at their disposal the entire trust-estate, with the exception of the portions thereof above mentioned. They maintained that, in virtue of the two deeds of appointment, and of the order in bankruptcy, Lord Charles was now divested of all interest in the trust-estate, and that one-half thereof, subject to the rights of Lady Charles, was vested in each son. Lady Charles agreed to discharge the trustees and the trustestate under their charge of her annuity and contingent liferent right.

Lady Charles and her sons were willing that the sum required to purchase from a well-established assurance company or from Government the annuity of £800 yearly (restrictable as aforesaid), to which Lady Charles would be entitled in the event of her surviving Lord Charles, should be retained by the trustees and applied in purchasing said annuity in name of the trustees for the benefit of Lady Charles.

The trustees did not feel in safety to consent to the demand by Lady Charles and her sons without the sanction of the Court.

For the settlement of the question a special case was presented by (1) the trustees, (2) Lady Charles Ker with consent of her husband, and (3) the two sons of the marriage.

The questions of law were-"1. Are the first parties bound or entitled, upon receiving discharges from Lady Charles and the third parties, to make over to Lady Charles and the third parties the whole trust-estate with the exception of the portions thereof derived from (1) the residue of the estate of Sir James Charles Dalbiac, and (2) the funds under the indenture of 24th December 1836? 2. Are the first parties bound or entitled, after purchasing an annuity of £800 yearly (restrictable as aforesaid) payable to Lady Charles contingently upon her surviving Lord Charles, and upon receiving discharges from Lady Charles and the third parties, to make over to the third parties the whole trust-estate, with the exception of the said annuity purchased as aforesaid, and also with the exception of the portions of the trust-estate excepted in the preceding query?"

a

Argued for second and third parties-All parties interested in the marriage-contract funds now came forward and demanded that the trust should be wound up. All were sui juris. It would be argued on the other side that the wife was not sui juris. This argument was founded on Menzies v. Murray, March 5, 1875, 2 R. 507, following upon Anderson v. Buchanan, June 2, 1837, 15 S. 1073; and Pringle v. Anderson, July 3, 1868, 6 Macph. 982. The principle in these cases was, that where under marriage-contract an annuity was put in trust in such a way as to protect the wife against the husband, the wife during the lifetime of her husband was not a free agent for the purpose of revoking the trust. In all these cases the money came from the wife or her family, and was tied up before the marriage so as to protect the wife from her husband's influence. Such a trust was irrevocable stante matrimonio. But in the present case the money came from the husband's family, and the principle of the husband's adverse influence could not apply, as he had no interest in the marriage-contract trust-estate. The annuity was not declared in the deed to be alimentary, and the question came to be-Could not a wife, in order to benefit herself and her family, her husband having no adverse interest to her own, set free a provision made in her favour out of her husband's estate?-Ramsay v. Ramsay's Trustees, November 24, 1871, 10 Macph. 120; Laidlaws v. Newlands, February 1, 1884, 11 R. 481. In any event, the second question should be answered in the affirmative. There was no practical difference between the security of an annuity by a wellestablished insurance company and the security of the trust-estate. The purposes of the trust would be kept intact by the trustees purchasing an annuity, and they could then pay over to the sons the residue of the trust funds.

Argued for the first parties-Both questions should be answered in the negative. The case was ruled by Menzies v. Murray. The wife was not sui juris, and had no power to renounce her right, and it was not material from whose means or estate the income or annuity flowed, provided it was a marriage-contract provision-per Lord Deas in Menzies, supra, 2 R. 512. If the station of the parties was considered, the fund must be considered alimentary. The cases

of Laidlaws and Ramsay differed materially from the present, as in both of these cases there were two separate funds, and there was no matrimonial purpose for which the funds required to be retained in trust. The trust must be kept up, at least so far as was required to provide the annuity to the wife after her husband's death. If an annuity was bought from an insurance company, there was a risk, however small, of the insurance company becoming insolvent. Such a risk the trustees were not entitled to incur.

At advising

LORD TRAYNER-The condition on which the first question in this case could alone be answered in the affirmative is that Lady