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2. A British subject who has ordinarily
JUDICIAL FACTORIES AND resided in this country goes abroad for an
SEQUESTRATIONS. indefinite period. In this case the Board give no real indication of what they are aiming at.
REPORT BY ACCOUNTANT OF COURT. They say nothing about duty or business, health or pleasure. It would rather appear that they In the report by Mr Jas. W. Inglis, the ought to have said “for an indefinite period accountant of Court, to the Judges of the Court or for a definite period of less than three years, of Session on the state of judicial factories and which is a very different matter. In any event sequestrations falling under his supervision the official view is that the presumption must from 31st December 1921 to 31st December be that the individual has gone abroad for 1922, it is stated that during the year there occasional residence only.
only. His claim
His claim for were lodged in his office 63 bank consignation immunity will not be admitted at first, and in receipts, for sums amounting in all to any case it will be admitted only by way of £84,908, 108.; 95 bonds under the Judicial repayment.
Factors Act, 1849; 9 bonds under the Bank3. A British subject who has ordinarily ruptcy (Scotland) Act, 1913 (section 163); resided in this country and now habitually 181 bonds under the Judicial Factors (Scotland) spends part of each year in this country and Act, 1880; 43 bonds under the Judicial Factors part of the same year abroad. This is the real (Scotland) Act, 1889; 16 other cautionary crux of the whole situation. It is exactly what bonds; 9 inventories of estates under the quite a number of people are doing. It is also Guardianship of Infants Act, 1886. There probably not uncharitable to assume that the were two applications by testamentary trustees main purpose, and a deliberate purpose, of their for supervision of their accounts under order scheme of life is the income tax benefit which of the Court. Of the 344 bonds lodged, 311 it is intended and hoped to involve. It is were by guarantee companies. quite reasonable to say this in view of the fact
During the year the accountant had before that in those cases the scheme of movement him, under remit from the Court, 225 applicais usually so engineered that the total residence tions for discharge of judicial factors, and he in this country within any one tax year shall reported on 16 applications for special powers, not amount to six months. The view of the and 165 applications for restriction of caution, Board is that this will not do, and apparently The number of factory accounts audited and it makes no difference that no home or residence reported on was 2126. The value of the is maintained in this country. In order to moveable property under the accountant's get at what is in the mind of the Board one has supervision amounts to £6,029,104; and the to go from the circular to the memorandum, heritage, at an average of say 221 years' purand there the view of the Board upon the six chase, £4,011,367; while 27 testamentary months' rule is stated thus :
estates have been supervised by the accountant,
the funds of which amounted to over £3,100,000; The Board do not consider that the case of the total, £13,140,471. British subject dealt with in the foregoing paragraphs
During the year £45,366, 5s. 3d. of consignafalls within this rule, which (that is the rule) is tions have been uplifted, and at 31st December primarily concerned with a different type of case, e.g. 1922 there were 257 consignation receipts in the case of the foreigner coming to this country on
the accountant's custody, amounting in all to
£97,039, 14s. 1d. In answer to this it is suggested that the Board In terms of the Court of Session Consignations are making quite too much of British allegiance. Act, 1895, there have, in addition, been handed That would be very quickly tested by what over to the King's and Lord Treasurer's Rememwould be the Board's own attitude to a case in brancer, during the year, consignation receipts which the individual lived, say, twenty years for sums amounting to £49, 1s., making the in this country, but is not a natural-born total amount paid to Exchequer (including the British subject and has never been naturalized. balance of funds in hand in 1889) £52,874, 10s. It is perfectly certain that, in the event of that There were 275 sequestrations awarded and gentleman suddenly becoming infected by the 3 re-opened during 1922, while 131 were wound modern spirit of pleasure-seeking and tax- up, and the number in dependenc avoiding (which in these cases closely approxi- December 1922 was 712 (after giving effect to mates to tax-evading) tours and intermittent the provisions of section 159 of the 1913 foreign residence, the Board would at once Bankruptcy Act). say that he remained for all purposes within In the sequestrations wound up during the the United Kingdom tax net, and that British year the gross receipts amounted to £88,820, allegiance or no British allegiance was neither and the debts to £204,897. The average here nor there.
dividend to the ordinary creditors was 3s. 5 d.,
average duration of the sequestrations V. CAP. 40), SECTION 209, SCHEDULE D, CASES 21 years, and the percentage of ordinary I. AND II., RULE 3.—Messrs Rowntree & Co. Ltd. expenses, 18 (including trustees' commission, set aside out of their profits for 1919 the sum 6%, and law expenses, 73).
of £50,000 which they invested in the name of The accountant concurred in 9 sales of herit- trustees to be held as an invalidity fund for the able property by private bargain, and made relief of distress among their employees. They 19 special reports on applications for discharge. claimed to deduct this sum from the profits of Discharges were granted to 117 trustees and the year in order to arrive at the statutory 42 bankrupts. There were 23 accounts of income for the purposes of income tax. The private trust deeds submitted for audit. The Special Commissioners decided adversely to this amount of consignations in bankruptcy cases in contention, and their decision was upheld by the accountant's custody at 31st December Rowlatt J. Held that the payment could not 1922 was £1670, 14s. 7d. There was consigned be said to have been made exclusively for the during the year £188, 78. 6d. ; uplifted purposes of the business carried on by the com£116, 19s. 4d. ; and handed over to the King's pany, and ought not, therefore, to be deducted and Lord Treasurer's Remembrancer £125, 3s.6d. in order to determine the annual profits on which (making the total amount paid to Exchequer, income tax was to be charged. Decision of £13,781, 17s. 10d.).
Rowlatt J. affirmed.-Court of Appeal (Sir
At a meeting of Queensferry Town Council
Martin v. Stanborough.
BRAKES OUT OF ORDER LEFT UNATTENDED IN A had filled the office of Depute Town-Clerk for
PUBLIC HIGHWAY.—The defendant
7th the past eleven years.
September 1923 left his chauffeur in charge of his car outside 134 Marine Parade, Brighton.
a fairly steep slope. The MESSRS. PATTEN & PRENTICE, solicitors, chauffeur went off to get his dinner, leaving 18 Kilblain Street, Greenock, intimate that the car unattended. Before going he applied they have assumed as a partner in their the hand-brake and placed a block of wood business Mr Robert Arkley Reid, solicitor, under the near front wheel. While he was Greenock. Mr Reid served his apprenticeship absent a boy of ten climbed into the car which with Messrs Fyfe & Murray, writers, Greenock, moved backwards and struck the wall below and Messrs Brownlie, Watson & Beckett, the entrance to 134 Marine Parade, breaking writers, Glasgow, and afterwards entered the down about 16 feet of the railings. The handCourt Department of Messrs M'Grigor, Donald brake of the car was proved to have been in a & Co. After a period of war service he defective condition. The County Court judge returned to the latter firm, and occupied a found the defendant liable on account of the responsible post in their Conveyancing Depart- negligence of his servant in leaving unattended ment, remaining there until the commence
a car whose brakes were not in proper working ment of last year when he became managing order. Held that on the facts proved there clerk in his present office.
was evidence to show that the defendant's The business will be carried on under the servant had been guilty of negligence.-K.B. firm name of Patten, Prentice & Reid.
Div. (Bailhache and Roche JJ.).-9th April 1924.
DECISIONS IN THE ENGLISH
CURRENT LAW LITERATURE.
A Selection of Legal Maxims, Classified and
Illustrated. By Herbert Broom, LL.D. The
Law. Sweet & Maxwell Lid. 328. 6d. net. REVENUE INCOME TAX SCHEDULE D DEDUCTIONS CLAIM TO DEDUCT FROM PROFITS Ringwood's Outlines of the Law of Torts. Fifth MONEY SET ASIDE AS A PROVISION FOR INVALID Edition. By C. H. Ziegler, LL.M., BarristerWORKERS-INCOME TAX ACT, 1918 (8 & 9 GEO. at-Law, Sweet & Maxwell Ltd.
SURRENDER OF FULLY PAID SHARES. are allowed by the Act . . . . because each case
as it arises must be decided on its own merits." The question of the right of a company The question of the extent to which the power limited by shares to accept at its own hand referred to exists is, however, one of importance, from a member the gratuitous surrender of for, plainly, if the gratuitous surrender of fully fully paid shares held by him has come up more paid shares may be accepted by a company at than once recently in the writer's practice, its own hand, such a surrender may serve to and seems worthy of some consideration. meet a number of cases which would otherwise
It is generally accepted—and is, indeed, call for more elaborate and expensive solutions. settled law-that, before it can receive from a As already indicated, the Companies Acts member such a surrender, the company must, contain no provision regarding surrender of at least, have taken power in its Articles of shares, but the absence of such provision does Association to do so ; for there is nothing in not appear to lead to any conclusion, favourable the Companies Acts expressly to authorise or adverse, as to a company's power to accept the acceptance of surrenders. The Articles surrenders. For a company may do many of Association of many—it may be, of most-things which have not been made the subjeot companies limited by shares, accordingly, of statutory provision; and, unless the acceptcontain some clause authorising this. Such ance of a surrender impinges upon some provisions vary from the cautious form exem- principle or rule expressed or implied in the plified in the case of Rowell v. John Rowell statutory provisions under which the company & Sons Ltd. ( 2 Ch. 114):
came into being, it would seem that such The Board may at any time (where the law acceptance, although not expressly authorised,
permits) accept the surrender of any may still well be an act within the company's shares from any holder thereof desirous powers. In its ultimate aspect the right of of surrendering the same, on such terms a shareholder is simply a right to participate as the Board shall in each case deter- in the company's assets. Fundamentally, then, mine, and the Board may extinguish or there would seem to be no more reason for cancel such shares, or may reissue the requiring statutory authority for the acceptance same either as fully or partly paid up or of a surrender of shares than for the acceptance on such terms (or may sell them) as of the surrender of a debenture, as to which they may think fit."
no one would suggest any difficulty. (which commits no one to anything) to more And, indeed, it is settled that express articulate forms such as :
statutory authority for surrender of shares is "The Directors may accept (a) the surrender not required. Lord Herschell's opinion in
of any share by way of compromise of Trevor v. Whitworth, already referred to, any question as to the holder being clearly recognises that surrender of shares is properly registered in respect thereof, or a competent proceeding. But, on the other of any share which the company is entitled hand, it is plain that questions of infringement to forfeit, or (b) the gratuitous surrender of, or incompatibility with, statutory principles of any fully paid share. Any share so or rules might arise and require consideration surrendered may be disposed of in the in the case of a share which could not emerge
same manner as a forfeited share. with regard to a debenture. For example, if which may, perhaps, be taken as expressing the terms upon which a share is to be surthe draftsman's view of what surrenders the rendered involve the release of the holder from law does permit a company to accept at its liability to the company for the unpaid portion own hand.
thereof, or the cancellation of the share when But, notwithstanding the existence of such surrendered, then, in either case, reduction of provisions, the extent of a company's power capital would be involved, and there would so to accept surrenders has not yet been clearly be a conflict between the de plano authoritatively settled. There is, indeed, not acceptance of the surrender by the company a little divergence of view, both judicial and and the statutory provisions prescribing the extra-judicial, as to the extent of such power. methods by which alone a company may And while the power has been recognised in reduce its capital. Accordingly, the company several cases—to be afterwards referred to- could not, at its own hand, accept such a the law, generally, would appear, so far as surrender as that above suggested. Or, again, authoritative decision goes, to be still pretty if a company proposed to give to the member a much where Lord Herschell left it when, in consideration for the surrender, e.g. by making Trevor v. Whitworth (12 App. Cas. 409) (quoting over to him cash or saleable assets, then Jessel M.R. in In re Dronfield Silkstone Coal Co. even though the share were fully paid, and were Ltd., 17 Ch. D. 85), he said: “It is not for me not to be cancelled-there would be a purchase to say what the limits of surrender are which by the company of its own shares, and a return
of capital to the member, so that, in this case in Articles of Association, with regard to also, the company could not accept the surrender surrendered shares generally, that they are to without taking the steps prescribed by statute be dealt with in the same manner as forfeited for reduction of capital.
shares, it does not seem easy to suggest real But it is, it is submitted, not the fact of difficulty in the way of dealing with any surrender by itself which prevents the company surrendered shares. Further, Lord Watson acting at its own hand in the cases above has expressly said that surrendered shares may suggested, but the fact that the terms of be reissued (Trevor v. Whitworth, supra). surrender in each involve reduction The appropriate category in which to include of capital, and would, therefore, if carried surrendered and uncancelled shares would, out de plano, infringe statutory regulations accordingly, appear to be among the unissued which must_in cases of reduction first be capital of the company. That is what, for observed.
For it is manifest that if the practical purposes, such shares are. They are member receives nothing in exchange—by under the control of the company, which has way of release from liability or otherwise no liability to anyone in respect of them, and the giving up by him of his right to claim a they may be issued by the company to any part of its assets must result in “pure gain' person.
The term unissued ” may in their to the company; and, if there be no cancella- case carry a different shade of meaning from tion of the share surrendered, then it is difficult, that which it bears in the case of shares which prima facie, to see why there should be anything have never at any time been issued. But just to prevent the company accepting with both as unmarried
may mean either hands the benefit offered.
having been married at present capable Nevertheless doubts as to the possibility or of being married " (cf. In re Jones,  1 Ch.
i propriety of the acceptance by a company of 246), so “unissued may,
it is submitted, such surrenders have been suggested from legitimately mean either never having been various points of view. It has been questioned, issued at present capable of being for example, on the ground of an alleged issued.” In practice, so far as there is a difficulty in defining the position of an un- practice, accountants do include surrendered cancelled surrendered share in the company's shares among the unissued capital of the capital. It has also been disapproved on the company. ground that the surrender would disturb the With regard to the other point, that surrender equilibrium of the balance sheet and render of shares is objectionable because it would possible the payment of dividends which could disturb the equilibrium of the balance sheet, not otherwise be lawfully paid.
it may, perhaps, in the first instance, be The first of these objections, though suggested observed that this seems rather an odd exby one for whose views the writer has the highest pression to apply to an operation designed, respect, does not appear to be very formidable, by getting rid of liability, to restore the real and seems, in any case, to come a little late. equilibrium of a balance sheet, which presents Surrender has already been recognised by the at the moment only the semblance of an Courts as a competent course in the case of equilibrium through the inclusion on the credit forfeitable shares, and in the case of shares as side of items—the debit balances on certain to the registration of which there is a dispute accounts—which represent no real assets at (Bath's case, 1878, 8 Ch. D. 334), in neither of all. But neither this criticism nor the more which
surrendered shares substantial one that, through the surrenders cancelled. And it seems obvious that, so far and the consequent readjustment of the balance as the objection under discussion is concerned, sheet, payment may become possible of divino distinction whatever can result from any dends which could not otherwise be lawfully paid difference in the occasion of the surrender. seems to have any validity as an objection to Once the transaction is accomplished all alike surrender as such. are surrendered shares, and if a place in the It is plain that the results objected to would company's capital can be found for one so also follow equally if a creditor surrendered a claim can it be found for the others.
against the company of sufficient amount, and It cannot be disputed that shares which have that no possible objection could, in that case, been in the possession of a member but which be taken either to the company's acceptance have come back into the control of the com- of the surrender, or to the consequent results. pany may continue to exist, and may be issued Further, both the results in question are just to a new holder; for that is clearly so in the what are aimed at in many, if not most, cases case of forfeited shares. It seems plain that it of reduction of capital, for which the statute must equally be so with regard to forfeitable provides. There can, therefore, be nothing in shares which have been surrendered in lieu of such results, or either of them, which is, sua forfeiture. And as it is a common provision natura, objectionable. And by the gratuitous
surrender of shares, just as much as by the also accepts the view of Cozens-Hardy L.J. surrender of a creditor's claim, or by a reduction without reserve (Company Law, 2nd ed., p. 93). of capital, the company is relieved of the excess Mr Gore Browne's adherence to the faith, of liabilities which previously hampered it. however, is not too robust, for on p. 430 (op.
Why then do these results become objection- cit.) he makes the modified statement: "A able when they flow from a surrender of shares ; surrender even of fully paid shares will not or how do they afford ground for maintaining generally be lawful without the sanction of that a surrender of shares which produces or the Court,” giving the reason (which has permits them is objectionable or incompetent ? already been alluded to that “this disturbs The suggestion appears to be that the results the equilibrium of the balance sheet and may in question, when flowing from a surrender of render the payment of a dividend possible shares, and the surrender itself as producing which otherwise would be unlawful ”-a quite or permitting them, are objectionable because different ground of objection from that based they have not received the sanction of the on the alleged inherent reduction of capital. Court, as in the case of a reduction of capital. But Mr Gore Browne seems to become altogether This suggestion seems to be unsound. For (a), unorthodox when he says (p. 429), “ The rule as already pointed out, the same results would is that, where the Articles do not authorise the follow and be unexceptionable without the surrender or. forfeiture of shares, neither the sanction of the Court in the case of a surrender Directors nor a majority of the shareholders by a creditor, and (b) in any case, even in a can, without the sanction of the Court, make a reduction of capital, the sanction of the Court surrender or forfeiture valid,” for this would is required not to, or because of, the particular seem to imply that in all cases where the results which may follow from the reduction, Articles do authorise surrender or forfeiture but, as provided by the statute, to the reduction these steps may be carried out without the of capital itself, whatever the circumstances sanction of the Court. Such a view would, may be. The sanction of the Court cannot, of course, be quite inconsistent with the view therefore, it is submitted, be necessary either of Cozens-Hardy L.J., and indeed goes far to the validity of the results or to the validity beyond the view suggested in the present of the surrender, except where the conditions article. Limited to forfeiture and surrender
. of surrender are such as to involve reduction in lieu of forfeiture, the passage last quoted of capital.
would consist with the view of Cozens-Hardy It has already been pointed out that under L.J., but there seems nothing in the passage certain conditions—which are not those attend- itself, or in its context, so to restrict it.' ing the gratuitous surrender of a fully paid But if both the learned authors are to be share-surrender would involve reduction of taken as accepting the view of Cozens-Ha capital, and so, admittedly, call for the sanction L.J., they, with the learned judge, make a of the Court. But it has been said by Cozens- combination sufficiently formidable. NevertheHardy L.J. (as he then was), in the case of less, the present writer ventures to think that Bellerby v. Rowland & Marwood's Steamship Co. the learned judge in making the observation Ltd. ( 2 Ch. 14), that:
in question—it was an obiter dictum and no Every surrender of shares, whether fully more, though Younger J. seems to have taken
paid up or not, involves a reduction of it for more (In re Guardian Assurance Co.,
cancellation, of a fully paid share involves a and this pronouncement has been accepted by reduction of capital. In the case of a forfeited certain learned text-writers as settling the law. share it may be that, as the learned Lord For example, Mr Gore Browne, in his “Hand- Justice says, there is a reduction of capital; book of Company Law" (35th ed., p. 429), says: though, since the share remains in existence " Forfeiting or accepting surrenders of shares and Articles of Association usually provide that are reductions of capital, which in a proper case the holder shall remain liable for the unpaid the Court will sanction”; and again, “A calls, it does not seem quite clear that, even in forfeiture or surrender of shares is in fact a that case, there is reduction of capital--at reduction of capital.” This is the view of least where the unpaid calls would make up Cozens-Hardy L.J. in its entirety. Mr Stiebel — the full amount of the share. But, however to whose work the present writer is indebted for that may be, it is plain that, by the mere much assistance in his daily work-apparently I gratuitous surrender of a fully paid share,