was

which the respondent says he paid for these shares

case it appears that there would be double some months previously. For that proposition I

super-tax on the same £71. am unaware of any authority. To say that the

The English case of Burrell is interesting in respondent purchased the dividend upon the shares is, I think, inaccurate . He bought the shares with itself

, and it naturally forms the basis of their potentialities, whatever they were.

There was suggestive considerations with reference to the then no dividend in existence. He paid a certain adjustments between capital and income of and arbitrary price for these shares, and that is the settled funds, although again the case itself whole transaction,

had no direct application to matters of that

kind. There were no fewer than twenty-three Lord Anderson said :

single-ship companies, in all of which a firm of When a transaction of this nature is entered into Burrell & Son had a controlling interest, and during the currency of the financial year of an that interest was mainly beneficially vested in industrial concern it is obvious that what happens Mr and Mrs Burrell. The articles of association is this, that not only is a part of the assets purchased of each company prescribed that the company outright, but that a chance is bought as well—a should be wound up when the ship was lost chance of sharing in any profits which may be made during the currency of that financial year; and that method of finance adopted was (1) to make a

or sold, and that was regularly done. The is just what the respondent bought on this particular return of capital in each company while it occasion.

a going concern; (2) to accumulate It is quite true that this decision was given, profits undistributed to about an equal amount ; and those remarks were made, with reference and (3) to sell and wind up, and then the price to taxation liability, and that the case did not and accumulated profits became distributable in raise any question of accounting between liquidation. In those distributions Mr and Mrs liferenter and fiar, though it cannot be denied Burrell very largely shared, and of the sums that it did raise the issue of capital and income, drawn by them there was arithmetically at least in a special relation. It is understood attributable to undistributed profits no less that in England, in view of certain decisions, than £120,000. All this of course had borne apportionment is often, or even usually, not income tax through the companies, but what made on the sale or purchase of stocks, as by the Crown said was that it was super-taxable giving a life-tenant part of the price as repre- income of the individual receivers, Mr and Mrs senting accrued dividend when trustees sell, Burrell. Successive decisions have been given or by keeping from the life-tenant, and carrying against the Crown by the Special Commissioners, to capital account, part of the first dividend Mr Justice Rowlatt, and the Court of Appeal. received by the trustees as having been paid Mr Justice Rowlatt said that in a liquidation for out of capital, when trustees purchase. “there is no longer any distinction between But these adjustments are regularly made with the capital and income of the company, us in Scotland in trustees' accounts, and they and the surplus is simply assets." Using are generally supposed to be required by the word “dividend” in its ordinary adminisScots law, though indeed that is not quite trative sense and not in its bankruptcy and certain (Baird, 1907, 15 S.L.T. 25). Assuming liquidation sense, the Master of the Rolls said, that in this recent case of Forrest the sellers “ the sums were not distributed to the sharehad been trustees holding for a liferenter, the holders as dividends, as the liquidation had question arises whether they would, or would deprived the directors of the power of declaring not, have been bound to treat the £50 as income a dividend. Further, after the liquidator had and to pay it to the liferenter. We think assumed his duties it is a misapprehension

are correct in saying that according to to continue the distinction between profits practice that is how the £50 would have been and capital.” treated in a Scottish trust, and that that would This decision may require to be considered have been sanctioned, if not indeed required, by trustees who are shareholders of companies by any professional auditor, and also, we fancy, which are wound up, when the funds are even by the Accountant of Court notwith- sufficient to allow of any distribution beyond standing the case of Baird. It seems to arise creditors. If the sum received is less than the for consideration whether the de in capital amount, it is understood hat it is not Forrest's case does not throw doubt upon the customary in Scotland to recognise any right propriety, or even the legality, of this method on the part of a liferenter to an apportionment, of administration and accounting. If the notwithstanding that there may have been practice is correct, one curious result may be default in income on the part of the company noted: if the £50 had been paid by trustee- for some time prior to the date of liquidation. sellers to a super-taxable liferenter as income, But even in such a case as that, a question may he would surely be bound to include it (or arise if it be assumed that the trustees' holding rather the £71) in his super-tax return, in which debenture stock or preference shares

we

was

carrying fixed rates of income which are in FACULTY OF ADVOCATES.—Mr Kenneth arrear unpaid. Take, however, the exceptional Charles Corsar, Mr James Latham M‘Diarmid case where the return to the trustees from the Clyde, B.A.(Oxon.), LL.B., Edinburgh, Mr John liquidation is more than the capital, as happened Cameron, M.A., LL.B., Edinburgh, and Mr in this case of Burrell, and that the money comes Robert Henry Sherwood Calver, M.A., LL.B., largely from accumulated profits. What then Edinburgh, were admitted to the Faculty of is the position of the liferenter with reference Advocates on 6th June. to income on the investment for the interval between the date up to which income was last MR WM. C. DUDGEON, W.s., 17 Rutland paid and the date of liquidation, and thereafter Street, Edinburgh, and Mr W. S. Farmer, S.S.C., to the date of actual distribution ? On this 13 Melville Street, Edinburgh, intimate that question Sargant L.J. was quite express in they have entered into partnership. The Burrell's case, though, no doubt, his dictum combined practice will be carried on in future was obiter.

at 18 Melville Street, Edinburgh.

BILLS OF EXCHANGE

DE

ORDER

BY

THIRD PARTY-
DRAWER AS PAYEE

RIGHT

EX

ABOVE

DRAWER

Had the shares in this case been settled, it is clear that the whole of their proportion of those undistributed profits would have been applicable, not as DECISIONS IN THE ENGLISH income, but as capital (In re Armitage, [1893]

COURTS. 3 Ch. 337). Further, Burrell's case may be supposed to

Gerald, M'Donald & Co. v. Nash & Co. raise a difficulty even where the constitution of the company provides that preference issues

INDORSEMENT shall in the liquidation rank for principal and LIVERY TO DRAWER OF BILL PAYABLE TO HIS

INDORSED unpaid income up to the date of liquida

SUBSEtion or up to the date of distribution. Even QUENT INDORSEMENT BY

PREVIOUS INDORSEMENT then it is by no means clear that the life

OF renter is entitled to anything even in the

AGAINST INDORSER-BILLS OF most favourable case for him which can be CHANGE ACT, 1882 (45 & 46 VIOT. CAP. 61), figured, namely, that the claim for both SECTIONS 20, 29, and 56.—M'Donald & Co, principal and income is satisfied in full by bought from the Government Disposal Board the liquidator, and that the liquidation fund

a number of cases of Australian tinned soup: includes a sufficiency of undivided profits to On 18th May 1920 they sold 19,000 of these meet the distribution in respect of income.

cases to William Archer & Co. Ltd. Archer & Atkins L.J. recalled In re Bridgewater Naviga- Co. were unable to find the money required, tion Co. ([1891] 2 Ch. 317) for the proposition and asked Nash & Co. for assistance, who agreed that

to find 75 per cent. of the money. An

arrange

ment was thereafter come to between the three If the articles give any particular body of share- parties concer

erned, that Nash & Co. should holders the right to profits whether distributed or indorse a series of eight bills to be drawn by not, that must be recognised in distribution by the M‘Donald & Co. on Archer & Co. payable six liquidator.

months after date, to the order of M'Donald

& Co. In consideration of the indorsement by But that case had nothing to do with the Nash & Co., M‘Donald & Co. agreed to hand beneficial rights in settled shares, and in re Armitage shews that all “profit” received by the cases. M'Donald & Co., accordingly, drew

·

over to them delivery orders for the balance of trustees does not fall to be passed on to the the requisite number of bills expressed to be liferenter. Lindley L.J. said:

payable to their order on Archer & Co., who This £1, 59. 64d. per share is profit. But is it accepted them. Nash & Co., thereafter, indorsed income to which the tenant for life is entitled ? the bills, and handed them to M‘Donald & Co. That is a totally different matter, and I say that it Sufficient room had been left above the indorseclearly is not.

ment for the indorsement of the name of any

person to whom M‘Donald & Co. should direct Finally, if any money were passed to the payment. Delivery orders were handed over liferenter, it would appear a strange result that in exchange for the bills. On 18th August this decision of the English Court of Appeal- 1920 Nash & Co. paid and discharged one bill. that no part of the distribution can be charged The remaining bills were not discharged and as super-taxable income-should be in effect fell due on 21st February 1921. Shortly before upset by the apparently immaterial specialty that date M‘Donald & Co. indorsed their name that one of the beneficial receivers happened on these bills as payees above the signature of to be a limited owner.

Nash & Co. The bills were presented as they

was

fell due to Archer & Co., who dishonoured them. salary of £500 as accountant in the employ of M'Donald & Co. gave notice of dishonour and the New Zealand Shipping Co. Ltd. The claimed payment from Nash & Co. as indorsers. company had since 1912, though they had Rowlatt J. decided that Nash & Co. were liable made no agreement to that effect, paid the inas indorsers, but that decision was reversed by come tax of their employees. The amount the majority of the Court of Appeal (Bankes, paid on behalf of the appellant for the year in and Atkin L.JJ., Scrutton L.J. dissenting). question was £80, 5s. This amount, along with Held (1) that on the facts Nash & Co. must be the amounts paid on account of other emtaken to have intended to undertake liability ployees, had been included in the company's on the bills; and (2) that by section 20 of the accounts under the heading “Income Tax,

“ Bills of Exchange Act, 1882, M‘Donald & Co. Staff,” and had been allowed as a trade expense were entitled to insert their name as payees, and deducted in order to arrive at the profits and so make Nash & Co. liable as indorsers, as for the year. The assessment complained of the bills when received by them were wanting included this sum of £80, 5s. in addition to in a material particular. Decision of the Court the appellant's salary. Held that although the of Appeal reversed.--House of Lords (Viscount payment of the employee's income tax by the · Haldane, L.C., Lords Dunedin, Atkinson, company was a voluntary act, it was a payment Sumner, and Buckmaster).-21st March 1924. in respect of the employment, and that the

sum so paid fell to be considered as an emolu

ment given to the employee in his position as Compania Mercantil Argentina v. United an officer of the company, and, accordingly, was States Shipping Board.

subject to income tax.-K.B. Div. (Rowlatt J.).

-27th March 1924.
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OF

EM

a

a

a

ENTAILS.

were null ; and as every proprietor was entitled

to grant.such deeds, the absence of the irritant The purpose of this article is merely to clause was of itself sufficient ground on which introduce students to most interesting to protect onerous deeds from challenge though subject, and one which has played a very the prohibitions were contravened. important part in the history of land in At length the ingenuity of the feudal lawyers Scotland.

of the seventeenth century devised those clauses Entails are gradually receding into the realm called irritant and resolutive, whereby not only of history, for since the passing of the Entail were the debts and deeds of the heir in possession (Scotland) Act, 1914, it is not competent to rendered null and ineffectual, but his own right grant an entail of a landed estate in Scotland. was declared to be extinguished or, in law

The word entail is derived from the French language, resolved, by his contravening the word tailler to cut, and, when lands are provisions of the settlement. Credit for evolvspoken of as being entailed, it simply means that ing those clauses is apparently due to Sir Thomas the legal order of succession, or the course of Hope, the Lord Advocate of King Charles the succession to land or heritable property in First, who is said to have advised the first Scotland, which is established by law, has been strict entail. The effect of the clauses, however, cut off, and an arbitrary line of succession has was for a long time the subject of doubt and been established.

discussion, and in 1662 the point was brought Entails came into fashion because the landed before the Court of Session. By a narrow interest great and powerful feudal majority it was decided that the clauses were aristocracy-desired to perpetuate estates effectual. The power of the landed aristocracy in the same families and to preserve the fortune, prevented a renewal of the discussion by the name, and antiquity of their ancestry, and procuring the passing of the Statute of 1685, to transmit their estates to a long line of which has proved, in its practical operation, successors, unencumbered with the debts and one of the most stringent evei enacted by the obligations of the individual heirs into whose Scottish Parliament. The statute

was prepossession they should descend. As liferents pared by Sir George MacKenzie, and was conin perpetuity are unknown in the law of Scot- sidered by lawyers to be indispensable to give land, the end to be attained was an effectual efficacy to the strict entail. By the Act it mode of restraining the power of alienation or was made lawful to tailzie lands and estates, , disposal which every owner of property possesses and burden substitute heirs with such conas an inherent right. In order to achieve the ditions as the entailers should think fit, and object in view, landed proprietors, with the to affect the tailzies with irritant and resolutive help of their legal advisers, tried various clauses so as to restrain the heirs of tailzie from methods before the Act of 1685, to be after-selling, alienating, or disposing of the lands, wards adverted to, was passed. The earliest or contracting debt, or doing any other deed method was to convey their estates to an by which they might be apprised, adjudged, arbitrary line of heirs, but without imposing or evicted from the substitutes in the tailzie, any restraints on those heirs. Such con- or the succession frustrated or interrupted. veyances were effectual so long as the order All such deeds were declared null, and the next of heirs remained unchanged, but each heir heir of tailzie might, upon contravention, take in possession for the time was absolute pro- up the estate. The statute required that the prietor or fiar of the estate, and there being no irritant and resolutive clauses should be prohibitions or restraints in his title he was inserted in the procuratories of resignation, able to alter the order of succession and dispose charters, precepts, and instruments of sasine of his estate either for a price or without any relating to the tailzied lands; and a register price being paid, and also borrow money on was appointed to be kept, wherein should be the security thereof.

recorded the substantial parts of the deed of The next method in point of history was to tailzie. It was further declared that the grant conveyances of estates containing certain omission to repeat the provisions and irritant prohibitions which prevented the heir in clauses in the rights and conveyances of the possession from doing any act of a gratuitous lands should import a contravention against nature in contravention of the prohibitions the person guilty of the omission and his heirs, in the title, but as he was an absolute pro- but should not affect creditors, or other singular prietor he could, for à sufficient consideration, successors contracting in bona fide with the dispose of the lands and disregard the pro- person infeft in the lands. hibitions. Such deeds were thus effectual only The strict entail is thus a settlement of lands inter hæredes. They contained no irritancy on a particular series of heirs made permanent clause declaring that all acts done or deeds by statutory clauses, and not existing indegranted in contravention of the prohibitions pendent of the statute.

pendent of the statute. Entails have always

S

been regarded by philosophical writers with English law in that respect. If I here make disfavour, and in the courts they have been a tenant for life by a settlement, he is tied up, subjected to rules of severe criticism in order eo ipso, and he can do nothing that shall endure to preserve the freedom of property. The beyond his own life estate, unless in so far as Statute of 1685 was the source of much litiga- I add powers to his estate. But in Scotland tion in our law, and produced some glaring it is the very reverse.

The heir of entail is evils. It entitled proprietors, on certain con- the fiar—he is free. Here the tenant for life ditions, to legislate for succeeding generations. is fettered, except so far as he is freed by powers. It excluded land from commerce. Agriculture In Scotland, the heir of entail is free, except so deteriorated under the system, for long leases far as he is fettered by the provisions of the were prohibited and heirs of entail could not entail—he is the fiar-he is in possession of borrow money to improve the property. The the fee-simple of the estate in every particular, minor and female branches of families were except in so far as he is tied up by the entail. impoverished and neglected.

This is the governing principle, and it is upon. In order to relax the restraints imposed by this governing principle that all the decisions the Statute of 1685, the legislature has from have gone. time to time made enactments founded on Having in view the abolition of casualties expediency and obvious utility conferring by the Feudal Casualties (Scotland) Act, 1914, various powers on heirs of entail. These acts this introduction to the law of entail may be will be found epitomised in the conveyancing concluded by referring to the fact that heirs books and still require to be studied by those of provision under a deed, whether a strict whose business it is to advise proprietors of entail or not, containing a destination, are in estates held under the fetters of a strict entail. a privileged condition as regards the payment It would not be in place in an article of this of casualties. If an institute or substitute nature to do more than advert to the fact that under the destination paid to the superior a numerous relaxations were made, all tending casualty of composition and received a charter to greater freedom of action.

containing or, confirming the destination, the, It is interesting to note the view which the destination was held to be recognised or enlaw takes of the nature of the right of the heir franchised by the superior. Thereafter the of entail in possession of the estate for the time. heirs of provision under the destination, and Subject to the modifications introduced by not the vassal's heirs-at-law, are heirs in a; the Act of 1914 as regards obligations to take question with the superior, and entitled to be, over sheep stock, the right to let the mansion- entered on payment of an heir's casualty merely house, and to contract for the sale of timber, and not the casualty due on the entry of a the heir in possession is regarded as the fiar and singular successor.

W. Y. so far as unfettered he is an absolute fiar, but only for the limited period of his own life. His power to affect the fee is determined by his

NOTE ON death, and the new heir who becomes fiar in

LORD ADVOCATE V. MACALISTER. his turn is not bound by any contracts bearing to affect the lands which the previous heir may The decision of the House of Lords in this have executed except such leases as may be case, affirming the judgments of the Lord valid under statute or by the deed of entail. Ordinary and of the First Division against the The right which he acquires is, so far as it is Crown, was given on 10th April of this year, unfettered, a right of absolute property, and and is reported in 1924 S.L.T. 237, and 40 Times every act of his which is not in contravention L.R. 564. There is no intention here to discuss of the entail is as valid and effectual as if he it as a decision on death duties. It is merely held the estate in fee-simple. In the case of desired to venture a note of interrogation on Montgomerie v. Eglinton (18th August 1843, 2 what may be regarded as a side issue, or rather Bell's App. at p. 185), Lord Brougham, who as no issue at all in the case, for it was mado shed much light on the law of entail, defines the matter of admission in favour of the Crown. position of an heir of entail thus : “An heir The case proceeded on the footing that “the of entail, in Scotland, is never considered a gift by the testator of a liferent interest to his trustee for the subsequent heirs of entail. He mother was admittedly ineffective as to this is considered as a fiar in all respects whatever, property as she already held it for her life.” The except in so far as he is tied up, bound down, facts were simple and were as follows : Under and fettered; and I have often had occasion, the marriage contract of Mrs Eliza Wallnutt she; both at the bar in your Lordships' presence, had a liferent of the lands of X, and subject to: and since I have come upon the bench, to that liferent the fee was vested in her son,. explain the great difference, I may rather say Major Wallnutt. He predeceased his mother, the contrast, between the Scotch law and the leaving a holograph general. will, under which,