Tr. v. Campbell

13,

"It is not without some misgiving that I have entertained this suggestion. But I have come to the conclusion that a definite and important question of law is distinctly raised on the defender's averment and the pleas, and that it ought to be decided against him, assuming the truth of all his averments, about which in fact there is not much if there is any dispute.

"I assume, therefore, that the transaction said to have taken place on the 12th of October was unchallengeable, and that Fraser's money came unobjectionably into the defender's hands. There is in this view no question as to the Act 1696, cap. 5.

"It is necessary to see clearly what the defender's averment as to the footing on which he received Fraser's money amounts to. For it is not an averment of a contract between them that the defender should conduct Fraser's defence and aliment him for the sum of £250, 5s. 2d., to be paid to the defender irrevocably. It is no more than an averment that Fraser employed the defender as his agent to conduct his defence, and put money in his hands to enable him to fulfil that employment. It is an averment of a mandate in the defender's favour essentially revocable. There was no proposal to amend the averment, and no suggestion that such an interpretation of it was not in accordance with the defender's understanding and intention. That could hardly have been suggested, looking to the correspondence between Fraser and the defender, and especially to Fraser's letter of 12th October. That is one specialty of this transaction, viz., that the money was placed in the defender's hands on a revocable mandate. The other specialty is that the money was appropriated in the defender's hands for the benefit of the bankrupt himself.

"The question then is, whether money put in the hands of a law-agent on the footing explained was taken out of the bankrupt's estate, or was so appropriated as to defeat the title of the trustee?

"The pursuer contended that on the defender's averments the money put into the defender's hands remained under Fraser's control, and might have been re-claimed, so far as unexpended, whenever Fraser chose to recal the defender's mandate. It was therefore, he contended, money belonging to the bankrupt, which necessarily passed to his trustee-there was no one else to whom it could be said to belong. Further, that it could not be held to be so appropriated as to exclude the trustee, unless a jus quæsitum in it were vested in some one other than the bankrupt. It was maintained that that could not be the case here, because under the contract of agency the defender had no right to insist against Fraser or any one in his right of retaining the funds put in his hands. The case it was said involved an attempt by the bankrupt to put his money beyond the reach of his creditors, while he retained his right to it and to the beneficial use of it, which was impossible in law-Learmonth v. Miller, May 3, 1875, 2 R. (H. of L.) 62.

VOL. XXXI.

The defender contended that the antecedent contract being ex hypothesi unchallengeable, the charges and payments as they fell due from day to day were merely the fulfilment of that antecedent contract, and were therefore not struck at by the sequestration, and further, that the money was so appropriated to a special purpose as to be protected from the effect of the sequestration-M'Kenzie v. Finlay, October 29, 1868, 7 Macph. 27; Bell's Comm. ii. 71.

"I am of opinion that this money was never taken out of the right of the bankrupt, and of necessity passed to the trustee; that the effect of the sequestration was to withdraw the defender's mandate so far as it authorised the defender to expend the funds he placed in his hands; and that in order to let in the principle that money in the hands of a bankrupt or of his agent may be protected against the sequestration by special appropriation, it is necessary that the right to the funds be taken out of the bankrupt and vested in some other person. But in this case there was no such right vested in anyone. I think that so long as funds belonging to a bankrupt remain under his control they cannot be withheld from his trustee.

"The point under consideration was somewhat strikingly brought out by two cases recently decided in England, in re Pollitt, L.R. 1893, 1 Q.B. 455, and in re Charlwood, L.R. 1894, 1 Q.B.D. 643.

"In the case of Pollitt money had been paid to a solicitor in order to defray the expenses of pending legal proceedings. On the bankruptcy of the client it was held that the solicitor was bound to pay to the trustee the amount due by him to the client at the date of the bankruptcy, and was not entitled to apply it in the conduct of the cause after the bankruptcy.

"The case of Charlwood is perhaps still more to the point. Charlwood was charged with murder, and on 3rd December he entered into an agreement with a solicitor (Cripps), whereby he agreed to pay Cripps £250, and Cripps agreed on his part to conduct the defence for that sum. The money was paid on the 10th December, and Charlwood became bankrupt on 20th December, and Cripps had notice of the bankruptcy on the 21st. The whole sum seems to have been required for the defence, but apart from that circumstance, it was held that Charlwood's trustee was not entitled to the amount or any part of it, and that Cripps was not bound to account for it. judgment, however, was expressly rested on the ground that by the agreement Cripps was entitled to the sum paid, and to no more, and that whereas in Pollitt's case the right to the money placed in the hands of the agent remained in the bankrupt, in the case of Charlwood the money had before bankruptcy ceased to belong to the bankrupt, and had become the property of the solicitor Cripps.

The

"That case expresses the distinction at least one of the distinctions-on which I consider that the question under consideration falls to be decided. If the effect of the contract averred by the defender had been

NO. XLIX.

to pass the right to the sum paid from the bankrupt to the defender, then the trustee could not have claimed it unless he could challenge the prior transaction; but if the money under the contract averred remained the property of the bankrupt, it of necessity passed to the trustee.

"There would have been, I think, no doubt on this point had the litigation in which the solicitor was employed been an ordinary action relating to the bankrupt's estate. But it is said that there was a difference in this case, because the defence of the bankrupt from a criminal charge was personal to himself, and was not a matter in which the trustee could interfere, and that the result of the pursuer's plea was that a bankrupt in such circumstances would not have been defended at all. I do not know whether the trustee might or might not have undertaken the defence. But if he did not, then Fraser would only have been in the position of a person charged with a crime who had no money to pay for his defence, which was in point of fact his predicament a very disadvantageous predicament, but only that in which all persons charged with crime and not possessed of funds necessarily are.

It is

"The sequestration here took place on 25th October, and the trustee was not confirmed until 13th November. In that interval a large part of the account now founded on by the defender was incurred. averred that the defender's instructions never were recalled, but it is not averred that the judicial factor or the trustee ever waived their right to claim the funds in the defender's hands, or acquiesced in his expenditure of them in the defence of the bankrupt. If there had been an averment to that effect I would have allowed a proof, but as I read the record, there is no such averment.

"On the whole, I consider the pursuer's contention well founded that the defender must account to him for the funds belongind to Fraser which were in his hands at the date of the sequestration.

"I do not decide whether the defender may have a claim against the trustee if he can show that he made any payments which the trustee would have been bound to make, nor is it necessary for me to say anything as to the defender's right to claim and rank on the bankrupt's estate.

"But the pursuer's claim goes somewhat beyond a claim for the money due by the defender to Fraser at the date of the sequestration, and extends to the sum in the defender's hands on 14th October when a creditor used arrestments. This claim is expressed in the first part of his fourth plea. It depends entirely on the 108th section of the Bankruptcy Act, 1856, which provides that no arrestments of the funds of a bankrupt executed on or after the sixtieth day prior to sequestration shall be effectual, and such funds or effects, or the proceeds of such effects if sold, shall be made forthcoming to the trustee.'

"The defender says that the effect of this clause and of the sequestration is that the arrestment was rendered invalid and wholly

ineffectual, and that was the only ground on which the defender supported his seventh plea in law, and the averment as to the invalidity of the arrestments at the commencement of his answer 3. No authority on this point was quoted, but it appears to me that the contention for the pursuer is in accordance with the true construction of the section, and that the effect ascribed to the section by the defender would reduce it to an absurdity. I am therefore prepared to sustain the pursuer's plea, and to repel the seventh plea for the defender.

"My judgment does not determine either what the amount belonging to Fraser was which was in the possession of the defender at the date of the sequestration, nor what the sum was which was validly arrested. It is possible that funds may have come into the hands of the defender after the arrestment which may not have been covered by the arrestment, but which may be covered by the sequestration." . . .

The defender reclaimed, and argued (1) He had been engaged to perform definite professional services for which he had been paid in advance, and which he was bound to carry out. It was immaterial whether Fraser could or could not recal his mandate; in fact he had not done so. The sequestration did not recal the mandate for it was not said that Fraser was insolvent when he entered into this arrangement with his agent. To affirm this interlocutor would be to place law-agents in a worse position than builders, artists, landlords, &c., who may all be paid in advance by a solvent man, without fear of having to account for the money received. The case was ruled by that of Charlwood, L.R., 1894, 1 Q.B.D. 643. The case of Sinclair, 1885, L.R., 15 Q.B.D. 616, was also in point. (2) In any case he was not bound to account for moneys expended before 25th October. The arrestment of 14th October was absolutely ineffectual, under the 108th section of the Bankruptcy Act, in consequence of the subsequent sequestration. Even if it were not, the agent had a preference for his expenses as against an arresting creditor - Wight's Trustees v. Allan, December 12, 1840, 3 D. 243.

Argued for respondent-The Lord Ordinary's judgment was well founded. This money did not become the agent's property, but remained under the control of Fraser and upon his sequestration passed to the creditors. The case was on all fours with that of Pollitt, L.R., 1893, 1 Q.B. 175 and 45, and was in marked contrast to that of Charlwood. Mr Justice Wright in Charlwood stated the distinction between these cases very clearly. Sinclair's case was special, and in subsequent cases the judges had expressed the opinion that the excep tion there allowed in favour of an agent should not be extended. (2) The plain mean ing of the 108th section of the Bankruptcy Act was to equalise all arrestments within sixty days of sequestration not to make arrestments absolutely invalid. That would be to create a preference in favour of the arrestee.

Tr. v. Campbell

13, 1894

At advising

LORD PRESIDENT-On 11th October 1893 Mr Thomas James Fraser was apprehended on certain charges of forgery to a large amount, and was taken to prison. He there bethought him as to the necessary steps to be taken for looking after his affairs, and he wrote to his law-agent, the defender Mr J. M. Campbell, writer, Glasgow, authorising him to take any steps necessary to preserve his estate, intimating that his clerk would afford him all information, and he further wrote as to the money which Campbell would get from his clerk. This Campbell was to take charge of and use for his defence in the criminal charge, &c. Now, acting under that authority, Campbell took possession of £285, and became the depositary of Mr Fraser his client. One of Fraser's letters to Campbell says that he is to pay any sums which he may direct him to pay. He was in fact "to hold the money for my order," and the other letters specifically direct the carrying out of this general order. Mr Campbell proceeded to carry out that mandate and he had Fraser defended, but Fraser pleaded guilty and received sentence of penal servitude.

Now, if Fraser had been solvent, what was done was precisely in accordance with instructions, but unfortunately on the 25th of October, about a fortnight after the apprehension, Fraser's estates were sequestrated. From the date of the sequestration the money in Mr Campbell's hands became the money of the creditors or of the trustee, and from that time Mr Campbell's duty was to look not to the bankrupt but to the organ of the creditors, viz., the trustee, for direction as to the disposal of this money. It is impossible to say that this is anything else than a revocable mandate, because Fraser could have changed the agency at any time. I cannot see that there is any good defence to this claim by Fraser's trustee-at least after the [date of the sequestration the mandate ceases and the money goes to the trustee.

To use the language of Mr Justice Wright in Charlwood's case-"In the case of Pollitt the money of the debtor was handed to the solicitor, who was to apply it to meet future costs. On the occurrence of the bankruptcy the authority ceased and the money went to the trustee." That is the case before us, and there is a clear distinction between it and the case of Charlwood, where when the bankruptcy took place the money no longer belonged to the client but to the agent.

I have hitherto discussed the case as if the sequestration was the date which we had to regard, but it turns out that an arrestment was used by a creditor of Fraser in Campbell's hands on 14th October 1893. It is said that the supervening sequestration rendered that arrestment invalid. I think, however, that the 108th section of the Bankruptcy Act only cuts down the right of the individual arrestment, and provides that the money arrested shall be handed over to the trustee. Ac

cordingly, the effect of the arrestments is that a nexus was laid upon the money in the hands of Campbell, preventing him from paying it away to anybody, and the sequestration gives a right to the trustee to get the money instead of the arresting creditor. It is therefore at the date of the arrestment by the individual creditor that Campbell became disabled from carrying out Fraser's instructions, and as from that date the trustee is entitled to the money in Campbell's hands.

LORD ADAM-I agree. The money put into Campbell's hands remained at the disposal of Fraser. It is impossible to spell out a contract under which, in return for the money handed over, Campbell was employed to carry out Fraser's defence. There was no obligation on Fraser to continue to employ Campbell or on Campbell to continue the employment. He was to expend such sums as Fraser might from time to time direct. The money remained at Fraser's absolute control, and if so in fact, in law the sequestration at once put an end to Campbell's power of disposal of what was Fraser's money. It may be a hard case, but not harder than that the creditors should pay for Fraser's defence.

We have been referred to two English cases, the one that of Pollitt and the other that of Charlwood, and I agree with your Lordship that the present case is ruled by the former and not by the latter. In Charlwood's case there was a distinct contract, and upon that ground the case was decided. The agent got a definite sum which he was to keep absolutely, but under the obligation of conducting his client's defence whatever it might cost. It was not so here. As in Pollitt's case the bankrupt employed an agent, but he remained free to change his agent at any moment.

I also agree as to the effect of the arrestment here used. The 108th section of the Bankruptcy Act says that no arrestment on or after the 60th day prior to the sequestration shall be effectual-that is effectual against the trustee, to whom all funds arrested are to be made forthcoming. It cannot mean that the arrestments are absolutely ineffectual. The sum arrested therefore ought to have remained in Campbell's hands, and been made forthcoming to the trustee.

I think the date from which the accounting is to be held must be the date of the arrestment.

LORD M'LAREN-In considering whether a client may make a bargain with an agent for professional services, entitling the agent to go on to the completion of the work even against the wishes of creditors, we must remember that an agent is not entitled to receive more than his legal charges without breaking through the rule that he must not enrich himself beyond the sum to which he has a legal right.

But there is no rule against a client even though insolvent entering into a contract with an agent to obtain his professional

services for a definite sum, and a typical instance is that of arranging for his defence against a criminal charge. If the money has not been paid, a trustee in bankruptcy can put an end to the contract even although he may have to pay damages for breach of the contract, but if the money has been paid it is impossible for him to intervene and stop the agent going on with the contract. The agent could then say, "I have been paid and I am willing to complete the work." The case of Charlwood was a case where the Court held that a trustee in bankruptcy was not entitled to repayment of money given to an agent for professional services. The present case is different. Here, with the prospect of requiring professional aid, Fraser put certain money into his agent's hands with authority to expend it as he might direct. That was nothing but a deposit, the agent being the depositary. Bankruptcy supervened, and the trustee, I think rightly, on the morning after his confirmation called for an accounting and for a determining of the contract of employment. The agent no doubt had a right to retain money in payment of his account up to that date but no further, and was bound to account for the surplus.

With regard to the question whether the right of retention was not terminated at an earlier date than that of the sequestration, the facts are as follows - Before sequestration an arrestment had been used in the agent's hands, and I see no reason why it should not receive full effect, so as to attach all funds belonging to Fraser in Campbell's hands so far as not required for repayment of outlays at that date. A nexus was thereby laid on preventing Campbell from paying any more money to himself between 14th and 25th October, when sequestration took place. While the Bankruptcy Act cuts down all preferences in the interest of creditors, it would be inconsistent with its policy and provisions to hold that it had the retrospective effect of making the arrestment absolutely ineffectual so as to enable the arrestee to make the funds arrested in his hands available for payment of his disbursements after the arrestment. The words of the 108th section are, I think, clear. They render arrestments within sixty days ineffectual as in competition with the trustee, to whom all sums arrested are to be made forthcoming.

The trustee for creditors is vested in the whole funds of the debtor, and the arrestee cannot have any preference over another arresting creditor.

LORD KINNEAR was absent.

The Court adhered.

Counsel for the Pursuer and the Respondent-Ure-M'Lennan. Agent-Robert D. Ker, W.S.

Counsel for the Defender and Reclaimer -Dundas-Guy. Agents-Wylie, Robertson, & Rankin, W.S.

Thursday, June 21.

SECOND DIVISION.

MILLAR (MORRISON'S EXECUTOR) AND OTHERS.

Will and Succession "Residue."

Construction —

A holograph settlement provided certain specific legacies amounting to £1000 free of legacy-duty, and proceeded-"The Thousand pounds so bequeathed is in the hands of my brother

also two hundred pounds, which latter if not expended by me before my decease & still in his hands will be-to be taken for all just and lawful debts, to give mournings to... my servant to the extent of Two pounds-also mournings to my niece to the extent of £5-Any residue to be given to J. M." A legacy had already been provided to J. M.

Held that the words "any residue" were not limited to the balance of the £200 after deduction of debts and mournings, but carried the free moveable estate of the deceased.

Miss Janet Scott Morrison died on 7th October 1893 leaving several mortis causa writings of a testamentary nature holograph of the deceased, the first being dated 31st August 1893, the second being undated, the third dated 31st August 1893, and the others being undated. These documents were all enclosed in an envelope, and on the envelope were these words "My will, Janet S. Morrison," in her own handwriting."

By the first of these testamentary writings Miss Morrison bequeathed certain pecuniary legacies to different persons, amounting in all to £1000, under the declaration that these legacies were to be paid free of legacy-duty. The document then proceeds as follows:- "The Thousand pounds so bequeathed is in the hands of my Brother William, Merchant, Leith; also Two hundred pounds, which latter if not expended by me before my decease & still in his hands will be-to be taken for all just and lawful debts to give mournings to Jessie my servant to the extent of Two pounds-also mournings to Nephew John Morrison's wife to the extent of Five Pounds-Any residue to be given to Janet Millar, residing at Castle-Douglas"-Signed "Janet S. Morrison; witness, Jessie Robertson." Miss Millar received a legacy of £100 under the former part of the settlement.. In the second testamentary writing, styled by the deceased "Codicil No. 1," Miss Morrison increased the sums for mournings, and nominated Mr William F. Millar, merchant, Leith, her sole executor, giving him £20 for his services. The other testamentary writings made specific bequests to different parties for certain articles of furniture, &c.

Mr Millar, as executor-nominate, was confirmed by the Sheriff of the Lothians

(Morrison's Exr

21, 1894

and Peebles. He found that the deceased's personal property amounted, without deduction of debts, to £1514, 19s. 6d., including the above-mentioned sums of £1000 and £200. The personal debts of the deceased were of very small amount.

A special case was presented by (1) the executor, (2) the residuary legatee, (3) Miss Morrison's next-of-kin, for the opinion of the Court upon the following questions of law:-"(1) Do the words 'Any residue to be given to Janet Millar,' occurring in the first holograph testamentary writing referred to, give right to the said Janet Millar only to any balance remaining of the £200 mentioned in the said writing after deduction of debts and the sums for mournings left by the testatrix; or, Are these words sufficient to carry any free moveable estate belonging to the deceased at the date of her death after providing for the specific legacies and bequests left by the testatrix, and the debts and expenses of the executry? (2) In the event of its being held that the words in question refer only to the balance of the said sum of £200, Do the funeral and executry expenses, including the inventory and legacy duties, or any of these items, fall to be charged against or deducted from said sum of £200 so far as that sum will meet them; or, Is it only debts due by the deceased before her death that are to be deducted therefrom, and the sums left for mournings?"

The residuary legatee argued-The presumption was for testacy. It was true that the testatrix had divided the great part of her estate into specific legacies, but it was plain that she considered there must be more estate than she was actually dealing with, because she directed the legacies to be paid free of legacy-duty. The deed was a settlement disposing of her whole estate and appointing an executor. There was therefore nothing in the context to show that the testatrix did not desire to leave the residue of her whole estate to the person named as residuary legatee-Jarman on Wills, i. 723; Williams on Executors, ii. 1317; Jull v. Jacobs, July 10, 1876, L.R., 3 C.D. 703.

The next-of-kin argued-The presumption against intestacy might be rebutted, and it was plain that in this case the testatrix was dealing solely with the specific legacies she had given, and meant that any small sum over after paying debts should go to Miss Millar, but she had not disposed of her whole estate by the legacies she left, and therefore the residue of the whole estate, excluding these sums of £1000 and £200, went to the next-of-kin-Hastings v. Hane, March 16, 1833, 6 Symon, 67; Ommaney v. Butcher, July 22, 1823, 1 Turner & Russell, 260; Jull (cited supra). At advising

LORD JUSTICE - CLERK-It is plain that the document the terms of which we are asked to construe in this case was left by this lady Miss Millar as a settlement of her whole affairs; indeed, the envelope in which the document is enclosed has written upon it, in her own handwriting, the words

"My will." In that document we find, in the place at which we would naturally expect to find them in a settlement disposing of the lady's whole estate, words which seem to be a direction as to what is to be done with the residue of her estate after giving effect to the particular directions settling what shall be done with the greater part of it.

The words are, "Any residue to be given to Janet Millar," &c., and I think we must read these words as meaning that she gives the residue of her whole estate, after providing for special legacies, to Janet Millar, unless the other parties to the case can show some circumstances weighty enough to lead us to say the contrary.

The only thing which is urged against that view is the mention by the testator of the special sum of £200 in the hands of her brother, and the way in which she has disposed of it, and it is contended by the testator's next-of-kin that looking at the position of the mention of this sum of £200, and the way in which the testator says it is to be applied, we must hold the statement as to residue as alluding merely to what may remain of the £200 after applying it as the testator has directed. I think there is no necessity for one reading these words as applying only to the residue of the £200, and as the words this lady has used in her settlement are sufficient to carry the residue of the whole estate to Janet Millar, and there is nothing to the contrary, there is a presumption that she intended to convey the residue of the whole estate to her. I think her words should receive their ordinary effect.

It is true, as was said by counsel for the next-of-kin, that in an earlier part of the settlement Miss Millar does receive a considerable sum of money as a legacy as well as being made residuary legatee, but I do not think that means any more than that the testatrix was not aware of the amount of estate she had to dispose of, and thought it less than it was, and directed that any small balance of residue should go to her friend. On the whole, I think we must read these words as giving to Janet Millar a right to the residue of the whole estate after paying the legacies provided for by Miss Morrison.

LORD RUTHERFURD CLARK—I think that the words we have to construe here must be read according to their ordinary meaning, unless there is anything in the context which would lead us to take a different view. I cannot see anything in the language of this will which leads me to think that the testatrix intended that the words should mean anything different from their ordinary signification.

LORD TRAYNER concurred.

LORD YOUNG was absent.

The Court answered the second alterna tive of the first question in the affirmative and found it unnecessary to answer the other question.