capital of the company, or (b) the capital assets actually in the hands of the company, or (c) the potential capital asset represented by uncalled capital; for the share continues to exist; nothing is paid out of the company's assets for the surrender; and the holder has not, by the surrender, escaped from any liability to the company. What has happened is that a fully paid share, previously forming part of the company's issued capital, and being so in a position in which the company had nothing more to get in respect of it-it was a liability only-has now passed into a position in which the company, relieved of its liability to the former holder, is able to issue the share to a new holder, and to receive from him a second time the amount thereof. It is, it is submitted, difficult to descry in a transaction having such results any reduction of the company's capital. The statute seems to confirm this view. For while the examples given in section 46 of the 1908 Act do not profess to be exhaustive of the ways in which a company may reduce its capital, it is, nevertheless, worthy of note that these examples involve either (a) diminution of nominal capital alone, or (b) diminution of both nominal capital and paid-up capital, or (c) diminution of actual paid-up capital alone. None of these results follows from the gratuitous surrender of a fully paid share which is not to be cancelled, and without one or other of them no reduction of capital seems possible.

L.J. astray. It seems, further, to be a mistake to regard the company as the holder of surrendered shares. It is no more the "holder of such shares than it is of the ordinary unissued shares of its capital.

So far this question of the gratuitous surrender of a fully paid share involving, per se, a reduction of capital has been dealt with as if there were no authority to set against that of CozensHardy L.J. and the text-writers who accept his dictum. But, fortunately for the writer, that is not so. Another judge, equally eminent, and specially versed in company law, had the point before his mind, and expressed his view upon it. In the case of In re Denver Hotel Co. Ltd. ([1893] 1 Ch. 495), in which certain fully paid shares were to be surrendered and cancelled, Lindley L.J. (as he then was) points out that a surrender of fully paid shares involves no release by the company of any of its rights against the surrenderor, but is "pure gain to the company, and goes on, in an opinion concurred in by the other members of the Court, to say (p. 505) : "We see no reason why the company should not accept the surrender. Under these circumstances the transaction is not really a purchase by the company of its own shares. The aid of the Court is not wanted to sanction the transaction except so far as the company desires to treat the shares when surrendered as permanently extinguished. Unless the capital is formally reduced the surrendered shares may be again issued."

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Lindley L.J. is, accordingly, just as clear that surrender by itself does not involve reduction of capital, as Cozens-Hardy L.J. was that it did, and the opinion of the former has not had its authority taken away by any subsequent adverse judicial comment. It is true that, in the case of British and American Trustee, etc. Corporation v. Couper ([1894] A.C. 399), Lord Watson, speaking of the surrender in the Denver case, while not challenging the decision,

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am by no means satisfied that the surrender in that case was one which the company could lawfully accept without the sanction of the Court."

His Lordship did not say in terms what were the grounds of his doubt; but it is probably to be inferred that it arose from a suspicion that the surrender in Denver formed part of the consideration for the transfer of assets in that case; for his Lordship's next sentence is :

"In Trevor v. Whitworth Lord Macnaghten said, 'I conceive that there can be no objection to a surrender of shares which are liable to forfeiture. A surrender of shares in return for money paid by the company is a sale and open to the same objections as a sale, whatever expression may be used to describe or disguise the transaction.' I concur in that opinion."

And that the objection was on the ground above suggested and not to surrender as such, seems to be made plain by what Lord Macnaghten himself said in the same case of Couper, for, referring to the Denver case, his Lordship said: "In both cases (i.e. in Denver and in Couper) as it seems to me you have a purchase by a limited company of its own shares; for I cannot agree that a transaction which involves a surrender of shares as part of the consideration is anything but a purchase of shares within the meaning of the opinion of this House in Trevor v. Whitworth."

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It is, at all events, clear that neither Lord Watson nor Lord Macnaghten held the view afterwards expressed by Cozens-Hardy L.J. that surrender per se involves reduction of capital. Had that been their view, Lord Watson could not have referred to "the surrender in that case as being one which required the sanction of the Court, nor could his Lordship and Lord Macnaghten have found it necessary to invoke the illegality of a company purchasing its own shares in order to condemn the unsanctioned surrenders. For, on the view of Cozens-Hardy L.J., all surrenders alike would require judicial sanction as involving reduction of capital. The criticisms of Lord Watson and Lord Macnaghten upon the surrender in the case of Denver accordingly appear not only not to impinge in any way upon, but rather to confirm, the general view regarding surrenders expressed by Lindley L.J. in that case.

That it is, as above suggested, the presence of the element of purchase or consideration by the company which makes a surrender objectionable is also borne out by the passages in the opinion of Jessel M.R. in the Dronfield Silkstone Co.'s case (already referred to), where he says:

"But I am by no means prepared to say that there is right under the term 'surrender' to buy up the shares..... That I think would be beyond the limit. I can well imagine that certain cases are clearly within the limit and ought not to be treated as diminutions of capital."

Lord Lindley's view receives yet further support from the reasoned opinion of Warrington J. (as he then was)-who, it may be noted, was of counsel in Bellerby in the case of Rowell v. John Rowell & Sons Ltd., referred to at the beginning of this article. In that case certain

fully paid shares were to be surrendered (on

condition that they were not to be cancelled but were to be available for re-issue) in exchange for certain other shares of the same company (to be deemed fully paid), of equal nominal value but carrying right to a lower rate of dividend. The matter was fully discussed before the learned judge, and he delivered an opinion dealing with the cases cited to him, which included most of those referred to in the present article. In the result Warrington J. reached the conclusion that the mere surrender of shares which remained uncancelled did not effect a reduction of capital, and that accord-' ingly the surrenders in the case before him were in order without the intervention of the Court. His Lordship pointed out that uncancelled surrendered shares continued to form part of the capital of the company, and could be reissued without the necessity of any resolution to increase capital, which would, obviously, have been necessary had there been, through the surrender taking place, a corresponding reduction of capital. Mr Stiebel suggests that the case of Rowell is not well decided, but this is apparently on the ground that the transaction in that case involved the giving of consideration by the company for the surrender. That does not, of course, affect the question presently under discussion.

It would appear, however, upon the foregoing survey of the authorities, that, of the judges who have considered the matter, Cozens-Hardy L.J. stands alone in taking the view that every surrender of fully paid shares effects a reduction of capital, and requires, in consequence, the sanction of the Court before it can become operative. It is not easy, therefore, to see why such able and careful writers as Mr Gore Browne and Mr Stiebel should accept his view as being the law, as against the view of Lindley L.J. and Warrington J., which latter is, as has been seen, in harmony with the views of Lord Watson, Lord Macnaghten, and other judges. Mr W. F. Hamilton, in his work, appears to accept the view of Lindley L.J. (Company Law, 2nd ed., pp. 230-5).

It seems, then, to the present writer that the view of Cozens-Hardy L.J. is not well founded in principle for the reasons indicated in the earlier part of this article, and that the view of Lindley L.J. is sound in principle and supported by authority. It is, accordingly, submitted that the true position is that a company limited by shares may, at its own hand, competently accept from any of its members the gratuitous surrender of fully paid shares held by him, where such shares are not, by the

1 Buckley on the Companies Acts (10th ed., p. 143)

couples Collins M.R. with Cozens-Hardy L.J. as also taking that view. This, with all respect, appears not to be warranted.

terms of the surrender, to be cancelled, but are to be retained by the company for re-issue.

As a practical matter, however, it may be that the cases in which a situation affecting a company's financial position can be completely dealt with by means of voluntary surrenders alone, will not be many. It will, probably, be more generally the case that, even where the method of surrender (which has several advantages over reduction of capital) is adopted for the purpose of rectifying the balance sheet, it will be found to be necessary to proceed by way of a scheme of arrangement under section 120 of the Act of 1908, in order to make surrender to the extent required compulsory. In this way surrenders for the purpose of readjusting a company's balance sheet may, in general, come before the Court. But the Court's intervention will be sought, not to validate the surrenders or to sanction the resulting consequences, but to make the scheme involving the surrenders binding upon all members affected; and what the Court will be concerned with will be only the question of the fairness of the scheme to such members. The proposition contained in the immediately preceding paragraph is accordingly not affected by such applications which, in various cases within the writer's knowledge, both in England and in Scotland, have recently been granted by the Court simpliciter without any suggestion that the steps appropriate to reduction of capital must first be taken. J. G. S.

NOTES FROM PARLIAMENT HOUSE.

Members of the Bar have returned from their spring vacation to find a session's work awaiting them which can be viewed even by the most optimistic with only "modified rapture." The total number of cases before the Court at the beginning of the session was 263, as compared with 245 in 1923, 306 in 1922, and 286 at the beginning of last winter session. Sixty-two cases are in the First Division Rolls, and 29 in those of the Second Division. In the Outer House Lord Blackburn has 15 cases, Lord Ashmore 65, Lord Morison 28, Lord Constable 32, and Lord Murray 32. The senior Lord Ordinary for the time being usually has the smallest number of cases in his Court; litigants do not call cases before a judge who may at any time be taken to the Inner House. Lord Ashmore's relatively large roll consists to a great extent of consistorial cases. The work would seem therefore to be fairly distributed among the Lords Ordinary.

of cases is 2254, which is 435 more than last year. The increase is almost entirely attributable to the King's Bench Division, where the number has risen from 563 to 992. Now this is interesting, for the Lord Chief Justice recently spoke with pardonable pride of the expedition with which that Division got through its work. Although a judge short last term, the Division disposed in the term of more than 500 cases out of the 700 down for trial in its rolls. There is undoubtedly a connection between the volume of litigation and the speed with which cases come before the Court for disposal. Those accustomed to the "law's delays must have read with admiration of the way in which an important case arising out of a shipping collision in the Thames was brought into Court and decided. The collision was in the middle of March; on 10th April "the President " issued his judgment. Can it be that our elaborate system of pleading, designed as it is to try a case with all the nicety of a goldsmith's balance, is a deterrent to litigation, and that the English method of a broad axe wisely encourages it ?

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Since these notes last appeared more than one advocate has publicly avowed his adherence to the Labour Party, so that no future Socialist Government, on assuming office, need find itself in the awkward dilemma of being entirely unrepresented in Parliament Hall. This is not the place for politics, but one interesting and entirely innocuous train of thought is started by the remarks of a recent legal convert to the left. Speaking on the desirability of "heightening the standards of municipalisation of all our concerns (whatever that may mean), he observed that we were passing from the stage of capitalism into the stage when the community was going to take charge of its own concerns." With the wicked capitalist abolished, the payment of lawyers will presumably be in kind. The successful jury senior will be observed driving two or three sheep and a swarm of miscellaneous poultry down the Mound, while the needy junior who has made the requisite number of motions will receive a ticket which entitles him to draw from the municipal bootmaker a pair of shoes in which he may resume his hopeful march upon the floor.

The English Courts shew

a

that when the Government came into office it had no supporters in the Faculty; it is by accidents like these that important constitutional innovations are made.

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Assembly week" has come and gone. The weather was none too favourable for the augmented stream of top-hats which is seen on the Mound at this season of the year, but all the functions passed off successfully. There was a large attendance of the Faculty at the Levée, which may or may not have been due to the personality of the present Lord High Commissioner. At least one of our evening papers remarked on the circumstance with cynical surprise, in view of what it was pleased to term the "ultra toniness" of the Bar. This provides yet another epithet to be added to those which have been lavished so freely on Scots lawyers in recent months. An unwonted element of gaiety was added to the Levée proceedings by one of the officials, who, evidently having failed to keep abreast of the latest developments in the feminist movement, got somewhat confused among the sexes in reading out the names of those presented to His Grace. It is believed that the members of the

This

judge, while repelling the objection, evidently felt that there was a good deal of weight in it. It must therefore have been with some relief that he found himself entitled, in his charge, to impress pretty strongly on the jury the possibility of a "Not Proven" verdict. was duly returned. But all concerned would undoubtedly have discharged their respective functions with an easier mind had there been a Court of Appeal in the background, to which the point could be referred.

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Lord Darling has since his retirement made several appearances in the House of Lords. He is always heard with respect, for he is eminent both as a judge and as a man, but his attempt to introduce a Criminal Responsibility (Trials) Bill was a complete failure. The Bill was designed to declare and amend the law relating to the criminal responsibility of accused persons," and it was intended to do this by carrying out the principal recommendations of Lord Justice Atkin's Lunacy Committee. The important clause, and the one which wrecked the Bill, proposed that a prisoner should not be held criminally responsible in the circumstances formulated in the

by their legal brethren in Edinburgh shortly after the close of the present session. About 1700 passages, including those for ladies, have been booked from the United States, and about 300 others from Canada. It is to be presumed, however, that not all of these will visit Scotland.

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A Bill has been introduced in the House of Commons for the purpose of establishing a Court of Criminal Appeal in Scotland. It is simply a duplicate, with the necessary modifications," of the English Criminal Appeal Acts of 1907 and 1908. It is not a Government measure, and its sponsors are evidently unaware of some rather elementary points. Thus, "the Lord President," not the Lord JusticeGeneral, is to preside over the suggested tribunal, while "the Court of Session" is made responsible for Acts of Adjournal. But these are small points; what the profession would do well to consider is whether, on the larger issue, the promoters of the Bill are not perfectly justified. There must be few, if any, English practitioners prepared to deny that the English Court has been beneficial, and is there any reason to suppose that a corresponding Court in Scotland would not be so equally? A case in point recently occurred on circuit, where an accused was on trial on a charge of culpable homicide. Counsel for the defence brought up for the judge's consideration what, as he contended, was an incurable defect in the indictment. The point was one eminently suitable

act was done or omission made he was suffering from such a state of mental disease as therefrom to be wholly incapable of resisting an impulse to do the act or make the omission." Lord Sumner opposed the Bill in an incisive speech, and pointed out that it is hard to see how one can be incapable of resisting an impulse to commit a crime if he is capable of appreciating its nature and character, and of appreciating that it is wrong. The Bill would confuse juries and lead to the acquittal of the undeserving. Lord Haldane and Lord Dunedin both spoke to the same effect. In view of the unanimous hostility of his noble and learned brethren, Lord Darling withdrew his Bill. The old controversy between doctor and lawyer thus remains pretty much where it did.

EXTRA CIRCUITS. JUNE-JULY, 1924.

WEST. The Hon. Lord Ormidale and The Hon. Lord Ashmore. Glasgow-Monday, 30th June 1924, at eleven o'clock. Pleading DietFriday, 20th June 1924. Service-Friday, 13th June 1924. Alexander Maitland, Esq., Advocate-Depute; Messrs Alexander Rae and V. S. M. Marshall, clerks.

NORTH.-The Hon. Lord Anderson and The Hon. Lord Sands. Dundee-Monday, 23rd June 1924, at eleven o'clock. Pleading DietFriday, 13th June 1924. Service-Friday, V. S. M. Marshall, clerks.

MR A. B. NOBLE, W.S., of Messrs Auld & Macdonald, W.S., Edinburgh, has been | appointed by the General Assembly Custodier of Titles to the United Free Church of Scotland in succession to the late Mr James Macdonald, W.S.

ASSOCIATION OF PROCURATORS-FISCAL. - The annual meeting on 24th May received with great regret intimation that Mr H. Hilton Brown, Edinburgh, felt it necessary to resign the office of president, and they resolved "to record in the minutes their cordial recognition and thanks for the valuable services which, as secretary and president, he had for so many years rendered to the Association; and to express the hope that he may soon be able to resume his official work, and before long see a satisfactory result of the efforts to obtain improved conditions of service for which he has so long and zealously contended."

The meeting unanimously appointed Mr J. Drummond Strathern, Glasgow, to fill the

MR ANDREW MURRAY, advocate, one of the older advocates of Aberdeen, has died at his

residence, 1 Marine Place, Aberdeen, in his seventy-sixth year. A native of the city, Mr Murray, after receiving his education at the Gymnasium, Old Aberdeen, under his uncle, the late Dr Anderson, entered the office of Messrs Davidson & Garden, advocates, and qualified after attending classes at Aberdeen University, subsequently entering his father's office, the firm then being Messrs Murray & M'Combie, and subsequently Messrs Murray, M'Combie & Bennett. He retired from practice in 1906. Mr Murray was for eighteen years Consular Agent at Aberdeen for the United States.

DECISIONS IN THE ENGLISH COURTS.

Inland Revenue Commissioners v. Burrell.

REVENUE-SUPER-TAX-COMPANY-DISTRIBU

TION OF UNDIVIDED PROFITS ON WINDING-UPPOSITION OF SHAREHOLDERS RECEIVING SUCH

PROFITS-FINANCE (1909–10) АСТ, 1910 (10 EDW. VII. CAP. 8), SECTION 66. - Certain steamship companies, each of which was formed to own a particular ship, had gone into liquidation in accordance with their respective articles of association when the ship which each owned had been sold or lost. On winding-up, the assets of each company, including undistributed profits, were divided among the shareholders. The Special Commissioners held that that portion of the assets which represented undivided profits did not form part of the respondents' income for super-tax purposes when distributed by the liquidator to the shareholders on the liquidation of the companies. This decision was affirmed on appeal by Rowlatt J. Held that distribution

a

on

liquidation reached the hands of the shareholders quite irrespectively of the sources from which the assets had accrued to the

company, and that, although the money in question had come into the hands of the company as profits, it now formed part of the general assets and had been divided as such; and that, therefore, the recipient shareholders were not chargeable to super-tax in respect of their share of such undivided profits. Decision of Rowlatt J. ([1923] 2 Κ.Β. 478; 1923, S.L.T. 128) affirmed. - Court of Appeal (Sir Ernest Pollock M.R., Atkin and Sargant L.JJ.).-4th April 1924.