United Collieries v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 30 June 1950 |
| Date | 30 June 1950 |
| Docket Number | No. 49. |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
Lord Mackintosh.
BankCompanyCrownInterestPrescriptionRight in SecurityTrustConsignation in bank by company of fund representing sums payable to holders of debenturesFailure of holders to claim payment within period of negative prescriptionWhether rights of holders beneficial or in securityDisposal of fund.
A company made a large issue of debentures, maturing in 1936, all of which had by 1923 been drawn for repayment although in some cases repayment had not actually been made owing to the company's inability to trace the holders. In 1923 the company, which was then on the point of applying to the Court for sanction of a scheme of reconstruction, deposited in bank, in the joint names of the company and the trustee for the debenture holders, sums representing the amount of the unpaid debentures and the amount of the interest due thereon to their respective dates of payment. During the next ten years a few of the missing holders were traced and received payment of their appropriate proportions of the deposited money, which in 1924 had been withdrawn from the bank and invested. These holders received no interest for the period from 1923 until payment. In 1949 questions arose as to the disposal of the balance of the deposited money and of the interest which had accrued thereon. The principal question was whether (as the company contended) the fund had been provided as a security for the unpaid holders which, now that the rights of these holders had been cut off by the negative prescription, should be repaid to the company, or whether (as the Crown contended) the unpaid holders had alone had the whole beneficial interest in the fund, which, to the extent that holders had not appeared to claim their rights, should now pass to the Crown as bona vacantia. A subsidiary question as to interest was raised by the representatives of a holder who had received repayment in 1933.
Held (1) that after making the deposit in 1923 the company had no beneficial interest in the sums deposited, (2) that from that moment the deposited funds and all accruing interest were held in trust for the unpaid debenture holders alone, (3) that accordingly the rights of these holders to claim payment out of the trust fund so constituted had not been cut off by the negative prescription, and (4) that the representatives of the holder who had been repaid in 1933 were entitled to interest for the period from 1923 to 1933 and also to interest on that interest from 1933 until payment.
Held further (rev. judgment of Lord Mackintosh) that, although any further claims against the fund by unpaid holders were unlikely, the fund should not be paid over to the Crown as bona vacantia but should be consigned in the hands of the Accountant of Court and dealt with in accordance with the Court of Session Consignations (Scotland) Act, 1895.
The United Collieries, Limited, and the Collieries Trustee Company, Limited, brought an action of multiplepoinding and exoneration for distribution of a fund held by them in respect of unclaimed First Debentures of the first-named company.
The pursuers' averments, shortly stated, were as follows:The first-named pursuers had in 1902 issued 10,000 First Debentures of 100 each, secured by a deed of declaration of trust under which the second-named pursuers were now the sole trustee. The trust deed had been modified by agreement in 1911, when each debenture had been divided into an A debenture of 50 and a B debenture of 50. The original debentures fell to be redeemed at 110 per cent at 31st December 1917. The substituted debentures fell to be redeemed at 115 per cent at 31st March 1936, but provision was made for a sinking fund and for redemption by drawings prior to maturity. It was specifically provided that the principal moneys secured by the debentures should become payable with the premium at or before the expiration of fourteen days after the debenture was drawn for redemption, and that interest should cease to run after the day fixed for payment of the debenture. By 31st May 1923 all the debentures had been redeemed with the exception of 44 A debentures and 58 B debentures, all payable to bearer. Of these, 43 of each class were still represented by 43 original debentures which had not been exchanged in 1911. All the unredeemed debentures had at sundry dates earlier than 1923 been drawn for redemption but the holders could not be traced. Their redemption value at 115 per cent was 5865, and the interest due on them to their respective dates of payment amounted to 2885, 12s. 8d. These two amounts, totalling 8750, 12s. 8d., were deposited in bank on 5th June 1923 in the names of "United Collieries, Limited, and Collieries Trustee Company, Limited, First Debenture Redemption Account."1 During the next ten years one A debenture and 15 B debentures were repaid. No record existed of the persons receiving repayment except that five of the B debentures were held by Sir John Reid. In all these cases repayment was made only of the principal sum due, together with the premium of 15 per cent and interest to the respective dates when they were drawn for redemption. Forty-three A debentures and 43 B debentures (viz., those represented by the original debentures which had not been exchanged in 1911) remained unpaid. By agreement between the pursuers the deposited money had been uplifted from the bank in 1924 and had been invested, certain of the accruing interest had been paid to the first-named pursuers, and the fund now held by the pursuers amounted to 11,358, 18s. 7d., and constituted the fund in medio.
Claims were lodged as follows:
I. By the United Collieries, Limited, for their individual interest. These claimants averred that the deposit on joint account was not in terms a trust, or intended to be such. The purpose and effect of the separate account was to substitute the deposited funds as security for any obligation of theirs in respect of unpaid debentures, and so to release heritable and other property then held in security by the trustee. The funds in the account remained their property. The deposit did not relieve them of their obligation to the unpaid debenture holders, whose claimprimo loco was against them alonethis liability being carried down annually in their balance-sheet. The long negative prescription had now cut off the right to repayment of those holders who had not yet been repaid. Moreover, in terms of the relevant documents (including the debentures themselves), neither those holders nor holders who had been repaid after 5th June 1923 were entitled to any interest after their debentures were drawn for redemption. Security, accordingly, was no longer required, and the deposited funds should be restored to these claimants. Alternatively, if the deposit on joint account created a trust, this was an administrative trust for payment of debts, and these claimants retained a radical right in the funds. Alternatively, if an ordinary trust had been created, its purposes had failed and there was a resulting trust for these claimants. These claimants therefore claimed the whole fund in medio. [They also stated various alternative claims to part of the fund.]
II. By the Collieries Trustee Company, Limited. These claimants reserved their right to object to the amount of the fundin medio...
To continue reading
Request your trial
-
Hastie's Judicial Factor v Morham's Executors
...S. L. R. 571; Kinloch v. RocheidUNKENRUNK, (1800) M. App. Prescrip. Nos. 4 and 7, 5 Pat. App. 35; United Collieries v. Lord AdvocateSC, 1950 S. C. 458; Bertram, Gardner & Co.'s Trustee v. King's and Lord Treasurer's Remembrancer, 1920 S. C. 555, Lord Skerrington at p. 563; Cooper Scott v. G......