predecessor. In virtue of the provisions of the Finance Act of 1894 the respondent became liable on the death of Lady Stewart in estate duty in respect of the cesser of the right of Lady Stewart and the consequent release of the estate from this burden. An annuity, particularly when the annuitant, as was here the case, is an old lady, may be of small capital value in relation to its annual amount, and therefore, when regarded as a capitalised charge, be a comparatively small encroachment upon the capital value of the whole estate. But in calculating estate duty under the Act of 1894 no account is taken of this consideration. The annual burden is treated, not as a temporary one, which it is, but as if it were a permanent charge. This apparently harsh rule is in accordance with the policy of the Act, which is to levy a toll not upon succession, but upon every passing of property in respect of death. If the cesser of a life interest were not to be treated as the passing of the capital value of that life interest, it might not be difficult so to arrange the transmission and the burdening of family estates that the levy of the toll would take place at intervals much longer than each expiry of enjoyment according to the average chances of human life. Accordingly, in such a case as the present, it is necessary, in view of the provisions of the Act, to ascertain the capital value at the date of death equivalent to a perpetual annual payment of the amount of the annuity. This will depend upon two things—the value of money at the time of the annuitant's death, and the nature of the security afforded by the estate out of which the annuity is payable. An annual payment of £1000 a year chargeable upon the revenue of an estate in Consols will have a much larger capital value than an annual payment charged upon the revenue from a coal mine. The directions of the statute as to the calculations of the capital and the taxable value of the cesser of an interest are contained in section 7 (7) of the Act of 1894. Two cases are contemplated-(a) where "the interest extended to the whole income of the property," and (b) "where the interest extended to less than the whole income of the property." In case (a) the value of the benefit accruing from the cesser of the interest is to be the principal value of the property. This is readily intelligible. The fiar was getting no income; now he gets an interest which extends to the whole income of the estate. As regards duty, his liability is the same as if the person enjoying the life interest had been a fiar and he had succeeded to him. It was submitted, I think on both sides of the bar, that this provision is applicable only when the legal extent of the life interest

9

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1928.

is the whole income of the property, and is 18T Div. not applicable if this is not the legal nature of Inland that interest, even though de facto that interest Revenue v. exhausts the whole income of the property. I Fothringhave, I confess, great difficulty in accepting this view. Only two cases are contemplated, November 17, and case (b) is where "the interest extended to less than the whole income of the property." Now, if one figures the case of a widow who has been left, not the liferent of a property, but an annual sum payable out of the rents of a property, and this annuity proves to be greater in amount than the rents, so that she has to suffer an abatement, I have difficulty in understanding how this can be described as a case where the interest extended to less than the whole income of the property." Nor do I see how the rule of case (b) can reasonably be applied in such circumstances unless indeed it be applied in such a way as to bring about the same result as in case (a), viz. that the duty is chargeable on the whole value of the estate.

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It is unnecessary, however, for the purposes of this case to determine that question, for there is here no question of an interest which extended to the whole income of the property. In this event the benefit accruing is (section 7 (7) (b)) to “be the principal value of an addition to the property equal to the income to which the interest extended." This language is obscure and cannot be read literally so as to make sense. make sense. My primary impression of the construction coincided with what was suggested by Mr Robertson for the respondent, viz. that the language is elliptical and that the true reading is: "The principal value of an addition to the income of the property equal to the income to which the interest extended." This reading appears to me to yield a simple and intelligible result, and it also squares with the words "the principal value of " better than any other reading. "Principal value of " suggests something annual of which it is the principal or capital value. The other reading, for which perhaps there is a measure of obiter authority, is that the true reading is: The principal value of a hypothetical addition to the property yielding an income equal to the income to which the interest extended." This was interpreted, as I understood, as meaning "the hypothetical addition to the property of an extra piece of property yielding an income equal, etc.' It may be my lack of imagination, but this hypothetical extension of territory seems to me a confusing idea. In the case of a house it would necessitate a hypothetical extra storey or wing; in the case of an island property a hypothetical physical convulsion.

But either reading, I think, leads eventually to the same result. What is to be got at is the capital value of the annuity figured as payable

Inland

1928.

10

187 Drv. out of property identical in character with that out of which it is at present paid. In the Revenue v. case of The Lord Advocate v. Henderson's Trs. Fothring- (7 F. 963), Lord Stormonth-Darling expresses ham. it thus: "What you want to get at is the value November 17, of the benefit arising to the actual property by its being relieved of the actual burden. With that dictum I respectfully concur, although, as it appears to me through what I cannot but regard as a lapsus, Lord Stormonth-Darling failed to give effect to it in his judgment. I venture to think that the criticisms to which his Lordship's method of a sum in proportion were subjected in the Inner House were coloured by the fact that he made a mistake as to the factors, for the problem was eventually solved in the Inner House by what was really a sum in proportion. But is any sum in proportion necessary? I think not. It is a convenient way of arriving at a figure for the year's purchase to be applied in estimating the capital value of income which would be derived from land of the particular estate, but it is no more. It is not, in my view, strictly necessary to value the whole estate at all. If a valuator, mutually chosen, were, without valuing the whole estate, to return the opinion, "I think twenty years' purchase the proper figure for the estate," that would supply the necessary factor.

But of course, before he determined the factor, the valuator would have to be instructed—it is a question of law and not for him-what kind of rent he was to contemplate in fixing the years' purchase. Was it the gross rent, or the rent Ïess rates, etc., or the rent less rates, etc., and the burden of repairs? His determination as to years' purchase would vary according to the instructions given him. This consideration leads directly to the real question at issue in this case. Is the income which is to be capitalised the gross income or the net income? The middle view, that rates, etc., are to be deducted, but not repairs, seemed to be abandoned argumentatively by the respondent. According to the reclaimer the question to be answered is: What is the capital value of land, such as the estate of Murthly, yielding £4000 of net rental? According to the respondent it is: What is the capital value of land, such as the estate of Murthly, yielding £4000 gross rental? I have come to be of opinion that the former is the true question under the Finance Act

of 1894.

The thing which is charged under section 2 (b) is "property in which the deceased or any other person had an interest ceasing on the death of the deceased to the extent to which a benefit accrues or arises by the cesser of such interest." Now, as I have already indicated, under the scheme of the Act the temporary character of the interest that expires is an

irrelevant consideration. The interest to be valued is to be treated as if it were a permanent annual charge. The successor is to be treated as benefited by the capital amount of this annual interest regarded as a perpetuity. But the annual interest in the present case was £4000 net, and, in my view, that is the measure of the benefit. I am unable to regard the income referred to in section 7 (7) (b) as other than this annual interest. It has to be kept in view that though this happens to be the case of an estate in land the charge might be on moveable estate such as stocks or shares, and section 7 (7) (b) applies equally to such a case. In such a case there would in general be no difference between the gross and the net return. The successor would pay duty upon a sum calculated according to the amount of the benefit accruing to him by the enlargement of his income. It is no doubt within the competency of the Legislature to discriminate in favour of land and make the factor for calculation something less than the actual annual benefit. But this would, I think, require to be clearly and expressly provided in order to warrant any discrimination. The construction contended for by the respondent appears to me not to be consistent with the ruling provision that the measure of benefit accruing by the cesser of interest is the measure of liability.

The ambulatory amount of annual rates and the still more ambulatory amount of annual expenditure upon repairs does not appear to me to create serious difficulty. A certain amount of confusion has, I think, been caused by treating the proportional method as if it were a statutory rule and not merely a method of convenience. For the reasons I have stated I think income means beneficial income. Accordingly, what has to be ascertained is the capital value of a beneficial income from land. In my view, that is just the capital value of the land from which this benefit could be derived, and in ascertaining the capital value of land the burdens both of rates and of repairs must be taken into account, however the valuation is made.

Counsel for Pursuer, The Lord Advocate (Watson, K.C.), Skelton; Agent, Stair A. Gillon, Solicitor of Inland Revenue.-Counsel for Defender, Robertson, K.C., Keith; Agents, Lindsay Howe & Co., W.S.

M. D.

12

The Question of Law for the opinion of the Court was:

"Was there evidence on which I was entitled to find that the death of William Laurence did not result from personal injury by accident arising out of and in the course of his employment?"

The case was heard before the First Division on 7th December 1923.

Argued for the Appellants: The dictum of

to his award :

The facts in this case are not, I think, in dispute. The deceased lad met his death as the direct conse

quence of his disobedience to the instructions and

66

easy

warnings which he had received. These instructions were explicit and peremptory, and were to the effect that he must not go in front of the hutches when taking them down the incline. And he had been sharply rebuked on the very morning before the accident by the oversman, Dickson, who found him disobeying the rule. The question whether a work man, who had been injured by accident, has been injured while doing what he was employed to do, although doing it in a dangerous, and even forbidden way, or while doing something that was outwith the scope of his employment, is a question seldom of solution. The line separating the one class of case from the other seems to be, in spite of much exposition and illustration, somewhat elusive. But I venture to think that in the more recent decisions of authority the tendency of judicial opinion has been towards a strict view of explicit orders or prohibitions, in relation to the question under discussion. I take the following passage from the judgment of the Lord Chancellor (Lord Birkenhead) in Donnelly v. Moore (1921 S.C. (H.L.) at p. 46): Where a prohibition for which the employer is responsible, in matters comparable to those under discussion, is brought clearly to the notice of the workman, his breach of it takes him out of the sphere of his employment, so that the risk in which he involves himself has ceased to be reasonably incidental to that employment." This dictum was quoted and applied by Lord Sterndale M.R. in a case which, in the facts proved, bears a close resemblance to the present. In Cook v. L. & S.-W. Railway Co. ((1921) 14 B.W.C.C. 100) a railway shunter was injured while in the act of coupling up two corridor carriages. His duty was to couple the carriages, and to do so, he was obliged to stand between the lines on which they were. But he was expressly prohibited from going between the lines until the carriages were at rest. He disobeyed this order by going within the lines while the one carriage was being shunted against the other, and in consequence was fatally injured. It was held that the accident did not arise out of his employment, and that the company was not liable. The circumstances in the present case are even less favourable to the claim; for the deceased had no duty to per

which limit the sphere of employment, and prohibitions which only deal with conduct within the sphere of employment" (Plumb v. Cobden Flour Mills Co. Ltd., [1914] A.C. 62 at p. 67) still held good and had been recognised as authoritative in Estler Bros. v. Phillips ((1922) 91 L.J. (K.B.) 470; 127 L.T. 73; 15 Did the B.W.C.C. 291). The criterion was: prohibition refer to the way in which the workman should perform his work, or to an area into which he was forbidden to enter ? If he was doing a permitted thing in a forbidden way, as here, he was within the sphere of his employment (Mawdsley v. West Leigh Colliery Co. Ltd., (1911) 5 B.W.C.C. 80; Blair & Co. Ltd. v. Chilton, (1915) 8 B.W.C.C. 324; 53 S.L.R. 503; Herbert v. Samuel Fox & Co. Ltd., [1916] 1 A.C. 405; Bourton v. Beauchamp, [1920] A.C. 1001; Donnelly v. Moore, 1921 S.C. (H.L.) 41; M'Intosh v. Arden Coal Co., 1923 S.C. 830; Estler Bros. v. Phillips (cit.)). The decision in Cook v. London & South-Western Railway Co. ((1921) 14 B.W.C.C. 100) was inWest consistent with that in Mawdsley v. Leigh Colliery Co. Ltd. (cit.), and with that in Estler Bros. v. Phillips (cit.), and was unsound. The arbitrator had therefore reached a wrong conclusion.

Argued for the Respondents: The arbitrator was right. The workman had been given a direction as to the manner in which he should perform his work, coupled with a prohibition. The prohibition was comparable to a prohibition under the Coal Mines Act, 1911, which had been properly brought to the workman's notice, and fulfilled the requirements of the territorial test propounded by Lord Dunedin in Conway v. Pumpherston Oil Co. Ltd. (1911 S.C. 660) and in Plumb v. Cobden Flour Mills Co. Ltd. (cit.). Further illustrations of the kind of prohibition, disobedience to which would exclude a claim for compensation, could be obtained from Rodger v. Fife Coal Co., 1923 S.C. 280; Fairhurst v. Hollinwood Screw and Rivet Co., (1923) 16 B.W.C.C. 168; Hawkridge v. Howden

Clough Collieries Co. Ltd., (1923) 16 B.W.C.C. 55; Gaunt v. Babcock & Wilcox, 1918 S.C. 14. The question in all such cases was always one of degree. It was only possible to say that certain cases illustrated principles. The cases themselves could not be divided into compartments. Estler Bros. v. Phillips (cit.) decided no general principle. The decision there merely decided a particular case, and was of no value for general reference.

On 7th December 1923 the Court answered the question of law in the negative.

The Lord President (Clyde).-At the time of the accident the workman was engaged in taking certain hutches down a sloping road in Wellsgreen Colliery. This was part of his regular duties as a hanger-on. He had been verbally prohibited by his employers from guiding the hutches in their downward course otherwise than from the side, In violation of this express prohibition, of which he had been reminded so recently as the morning of the day of the accident, he attempted to guide a rake of hutches down the slope by getting in front of them. The result was that an accident happened which cost him his life. The question which is raised on the facts of the case as held proved is whether the workman's breach of the prohibition does or does not put him outside the scope of his employment. This is, of course, a question of law. The learned arbitrator has decided it on the principle thought to have been laid down by the Lord Chancellor in the group of cases reported under the name of Donnelly v. Moore (1921 S.C. (H.L.) 41; [1921] 1 A.C. 329), and in accordance with which the recent case of M‘Intosh v. Arden Coal Co. (1923 S.C. 830) was decided in this Court. Putting aside as irrelevant the statutory or non-statutory origin of a prohibition, my own opinion is that a prohibition, directed to a hanger-on, against placing himself between the rails in front of a moving rake of hutches, in order to control them, is in every way comparable as regards importance, object, and character-with a prohibition, directed to a shot-firer, against prematurely placing himself in proximity to the site of a miss-fire, in order to get on with his work. But, in deciding the question of law, the decisions of the House of Lords are binding on us, and Donnelly v. Moore has been succeeded by the later case of Estler Bros. v. Phillips (91 L.J. (K.B.) 470; 127 L.T. 73; 15 B.W.C.C. 291) decided in 1922. In that case there was the clearest prohibition directed to the workman against oiling machinery while in motion, and it was proved that the workman was fully aware of it. It is stated in the judgment, and appears from the report, that all the authorities dealing with the legal question

13

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1923.

we have to determine here were brought to 1st Div. the notice of the House, including, of course, Murray v. Donnelly v. Moore. The House decided that Fife Coal the workman's breach of the prohibition did Co. Ltd. not put him outwith the scope of his employ- December 7, ment. No reasons are given in the judgment as reported, but it is very evident that, after a full citation of the authorities, the House of Lords took the view that the prohibition did not belong to the class dealt with in Donnelly v. Moore. Now, I am not able to draw any material distinction between the character of the prohibition in Estler's case and the character of the prohibition in the present case. of them seem to me to be "prohibitions which only deal with conduct within the sphere of employment" (Plumb v. Cobden Flour Mills Co. Ltd., [1914] A.C. 62 at p. 67). The only thing that raises any doubt in my mind is that, if I were at liberty to exercise my own judgment, I should think exactly the same of the prohibition against a shot-firer prematurely visiting the locus of a miss-fire. But the opinion to that effect which I expressed in the Donnelly v. Moore group of cases was corrected in the House of Lords. There is, indeed, one feature in this case which does not find a counterpart in Estler; and that is that under section 74 of the Coal Mines Act, 1911 (1 & 2 Geo. V. cap. 50), disobedience to any order with regard to the working of the mine may be treated as an offence. But, if that specialty attaching to orders in coal mines had possessed any material importance, I have no doubt it would have been dealt with in the House of Lords judgments in the Donnelly v. Moore group. Since, then, I cannot distinguish the present case from Estler, my duty seems to me to follow it as the latest House of Lords decision on the subject. I am therefore for answering the question put to us in the negative.

Lord Cullen.-Apart from decisions, I should have come to the conclusion that the act of the workman was misconduct in the course of doing his work rather than one of going beyond the scope of his employment. While the authoritative decisions are varying, I agree with your Lordship that we may be guided by the recent decision in the case of Estler (91 L.J. (K.B.) 470; 15 B.W.C.C. 291), which I am not able to distinguish materially from this one as regards the degree or quality of the rule which was broken. I accordingly think with your Lordship that we should follow that authority and answer the question in the negative.

Lord Sands. In this case a workman, whose duty it was to bring trucks down an incline, disregarded a prohibition against getting in