Marshall Castings Ltd and Cindal Aluminium Ltd v Inland Revenue Commissioners

[1946] 2 All ER 16

Categories:        COMPANY; Shares: TAXATION; Tax Avoidance        

Court:        KING’S BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        4, 5, 12 APRIL 1946        

Revenue – Excess profits tax – Transfer or acquisition of shares in company – Main purpose of transaction – Avoidance or reduction of liability to tax – Main benefit accruing – Benefits weighed against avoidance – Whether confined to benefits to company – Transferees of shares rendered working proprietors – Standard profits raised – Finance Act, 1941 (c 30), s 35 – Finance Act, 1944 (c 23), s 33.

The first appellant company was a company with issued capital of £8,352 out of a nominal capital of 10,000 shares of £1 each. In January 1941, it increased its capital by the issue of 2,100 preference shares of £1 each, which were allotted to T, who sold 525 of these shares to each of four employees of the company (subsequently appointed directors and thereby rendered working proprietors of the company) at half their par value, to be satisfied out of directors’ fees subsequently to be received. The second appellant company was a wholly owned subsidiary company of the first appellant company, who held all except 2 shares of the total issued capital of £252, the remaining shares being held by the two directors of the company as qualifying shares. In November 1940, the first appellant company transferred its shares in the second appellant company in equal parts to the two directors, and the second appellant company then became an independent director-controlled company entitled to its own minimum standard profit, viz, £1,000. In January 1941, the second appellant company increased its capital by the creation of £1 preference shares and 525 of these shares were allotted to T, who sold them to an employee (subsequently appointed a director) at half their par value, to be satisfied out of directors’ fees subsequently to be received. In April 1941, two other employees were allotted 50 preference shares each paid for at par, and became directors on the same date. In an appeal against directions made by the Commissioners of Inland Revenue under the Finance Act, 1941, s 35, as amended by the Finance Act, 1944, s 33, the Special Commissioners, weighing, against evidence of tax, benefits that accrued to the company only, held that the tax benefit from the transactions far outweighed the other benefits accruing to the company, and directed that the second appellant company should continue to be treated as a subsidiary company of the first appellant company and that the three of the four new directors should not be regarded as working proprietors of the company:—

Held – (i) Viewing the general structure and scope of the relevant legislation, the Special Commissioners were right in confining their attention to benefits accruing to the company and in excluding benefits to individuals, except in so far as they were reflected in benefits to the company.

(ii) on a true construction of the words “transaction … which involves … a transfer or acquisition of shares” in the Finance Act, 1944, s 33(3), since the section applied to two or three related transactions, only one of which involved a transfer or acquisition, there was no reason why it should not apply to one transaction only, part of which consisted of a transfer or acquisition.

Notes

The tax avoidance which the Commissioners have to counteract by adjustment under the Finance Act, 1941, s 35, as amended by the Finance Act, 1944. s 33, is tax avoidance by the company. It is held, therefore, that the benefits to be considered are benefits accruing to the company, including in that term benefits to individuals so far as they are beneficial to the company.

For the Finance Act, 1941, s 35, see Halsbury’s Statutes, Vol 34, p 131; and for the Finance Act, 1944, s 33, see ibid, Vol 37, p 329.

Case Stated

Case Stated under the Finance (No 2) Act, 1939, s 21(2), the Finance Act, 1937, Sched V, Pt II, and the Income Tax Act, 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King’s Bench Division of the High Court. On appeals by the appellants against directions made by the Commissioners of Inland Revenue under the Finance Act, 1941, as amended by the Finance Act, 1944, the following facts were found by the Commissioners:

Page 17 of [1946] 2 All ER 16

‘Both the appellant companies carried on the business of castings in aluminium and other metals. The Marshall company was incorporated in 1925, with a nominal capital of £10,000 in ordinary shares of £1 each. In Oct., 1939, its issued capital was £8,352, and was held by Noakes and Oakley, the only directors, and two others. On Jan. 1, 1941, its issued capital was increased by the issue on Jan. 1, 1941, of 2,100 6 per cent. preference shares of £1 each. These 2,100 shares were first allotted to T. for cash at par, and T. then sold them as to 525 shares each to Cadam, Jones, Deeley and Aspin, employees of the company for 10s. per share to be satisfied out of directors fees subsequently to be received. In order to qualify as a working proprietor the holding of shares in excess of 522 was necessary. Cadam, Jones, Deeley and Aspin were elected directors on Jan. 1, 1941. No share qualification was necessary for a director. Each share carried one vote.

The Cindal company was incorporated in 1938, with a nominal capital of £5,000 in ordinary shares of £1 each. In Oct 1939, its issued capital was £252 and was held as follows: the Marshall company, 250 shares; Noakes, 1 share; Oakley, 1 share. Noakes and Oakley were the only directors. The qualification of a director was the holding of one share. For the purposes of excess profits tax it was a wholly owned subsidiary of the Marshall company at this time. On Nov. 29, 1940, Noakes and Oakley each purchased 125 shares previously held by the Marshall company at 30s per share. They thus owned the whole of the issued capital. The Cindal company therefore ceased to be a wholly owned subsidiary of the Marshall company and became a director-controlled company for the purposes of excess profits tax. In Jan 1941, the capital was increased by the creation of preference shares and 525 preference shares of £1 each were allotted to T., who in turn sold them to Watkins, an employee, who was appointed a director. The consideration payable by Watkins to T for these shares was 10s per share to be met from directors’ fees as received in the future. On Apr. 8, 1941, 50 preference shares were allotted to two employees, Freeman and Lisle, respectively, which they paid for at par. Both became directors on the same date. The issued capital at this date was 625 preference shares of £1 each, and 252 ordinary shares of £1 each.

Each share carried one vote. In order to qualify as a working proprietor the holding of shares in excess of 43 was necessary.

By reason of the shareholdings prior to Nov. 1940, the Cindal company was a wholly owned subsidiary of the Marshall company and the standard for both companies was £1,500, viz, one working proprietor. The excess profits tax benefit which might be expected, as the result of the transfers of 125 shares in the Cindal company to Noakes and Oakley respectively, causing the Cindal company to cease to be wholly owned subsidiary of the Marshall company, was £1,000 to the Cindal company as a standard. The benefit to the Marshall company, which might be expected as a result of the transfers of the 525 preference shares in Jan 1941, to Cadam, Jones, Deeley and Aspin, was £4,500 (less the total remuneration paid to the four persons concerned which would otherwise be an allowable deduction to be added to the standard in respect of three additional working proprietors). Oakley was already a working proprietor, and four constituted the maximum allowable. The benefit to the Cindal company, which might be expected in respect of the transfer to Watkins of 525 preference shares in Jan 1941, and the transfer to Lisle and Freeman of 50 preference shares in Apr 1941, was an addition of £500 and £3,000 (less the total remuneration payable to the three persons concerned in a full year which would otherwise be an allowable deduction) to the standard of that company respectively.’

The evidence of Oakley which was accepted by the Special Commissioners was as follows:

‘In the autumn of 1940 he pointed out to Noakes that it was time to implement promises given to Cadem, Watkins, Deeley, Jones and Aspin. The appointments to directorships and the transfers of shares to them were effected. Aspin and Jones had not been promised directorships. He desired all the persons, to whom shares were transferred, to have a stake in the company concerned. The benefit to the Marshall company of the transfers was that the transferees would be better servants with a stake in the company, and that he would be able to leave some of the responsibility of managing the business to them. The same applied to the Cindal company. Excess profits tax was not in his mind at the time the transfers were made.’

The evidence of Noakes which was accepted by the Special Commissioners was as follows:

‘The transfer of the shares in the Cindal company from the Marshall company to himself and Oakley was of no benefit, other than that of excess profits tax, to the Marshall company. He, in fact, did not have excess profits tax in mind when the transactions were agreed or effected.’

The decision of the Special Commissioners was in the following terms:

‘… We consider it desirable to set out the manner in which we construe the Finance Act, 1944, s. 33(3) … On an appeal to us, when subsect. (3) is in question, we … take up our

Page 18 of [1946] 2 All ER 16

stand at the time when the transaction or transactions were effected, and, having regard to the law relating to the tax in force at the time, ascertain whether the main benefit, expected to accrue during the currency of the tax to the business, is an excess profits tax benefit, or a benefit or benefits to the business other than excess profits tax. In contrasting these benefits, we are clearly of the opinion that, like the excess profits tax benefit, the benefit or benefits, other than excess profits tax, must be to the business and not to an individual or individuals. It is the business which is assessed to and bears the tax: Finance (No. 2) Act, 1939, s. 12(1)(2) … Applying this construction of the subsection to the present case, we have no hesitation in finding, on the evidence as a whole, that the excess profits tax benefit to the appellant companies, in respect of all the transactions, far outweighed the other benefit or benefits to be expected to accrue to those companies and is, therefore, the main benefit. Some benefit, other than excess profits tax, no doubt might be expected to accrue to the appellant companies as a result of the transactions challenged; benefits also accrued to the various persons to whom the shares were issued or transferred. It is, however, to be noted that the appointments to directorship are not challenged, the number of shares issued and transferred in each case forms the subject of the directions. To qualify as a director of the Marshall company it was unnecessary to hold any shares. To qualify as a director of the Cindal company it was necessary to hold one share.

We hold that the benefits, which might be expected to accrue to the appellant companies as a result of the appointments of the various persons to directorships, were not benefits accruing from the issue or transfer of the shares in question.

The result of the conclusions we have reached on the evidence is as follows: (1) The Cindal company shall continue to be treated as a subsidiary of the Marshall company; the position of Watkins and Lisle and Freeman does not, therefore, arise. (2) Jones, Deeley and Aspin shall not be regarded as working proprietors of the Marshall company.’

With regard to Cadam, who had been with the Marshall company since the age of 15, and, after a short absence, had been persuaded to return to the company’s service on the promise that he would be made secretary of the company and director as soon as financially possible, the Commissioners, in the exercise of their discretion, discharged the direction in respect of his not being treated as a working proprietor of the company; otherwise the directions stood confirmed.

J Millard Tucker KC and John Clements for the appellants.

The Solicitor General (Sir Frank Soskice KC) and Reginald P Hills for the respondents.

Cur adv vult

12 April 1946. The following judgment was delivered.

WROTTESLEY J. The first question in this case is one which it is easier to ask than to answer. The Finance Act, 1944, s 33(3), omitting parts immaterial to this case, is as follows:

‘If it appears in the case of any transaction or transactions, being a transaction which involves, or transactions one or more of which involve: (a) the transfer or acquisition of shares in a company … that, having regard to the provisions of the law relating to excess profits tax, other than the said section thirty-five [of the Finance Act, 1941], and this section, which were in force at the time when the transaction or transactions was or were effected, the main benefit which might have been expected to accrue from the transaction or transactions during the currency of excess profits tax was avoidance or reduction of liability to the tax, the avoidance or reduction of liability to excess profits tax shall be deemed for the purposes of the said section thirty-five to have been the main purpose or one of the main purposes of the transaction or transactions.’

On the Special Commissioners, therefore, in the event of an appeal under the Finance Act, 1941, s 35, the above-mentioned sect 33 casts the burden of saying with regard to any particular transaction whether the main benefit which might have been expected to accrue from it was the avoidance of liability to excess profits tax. (Throughout this judgment a reference to avoidance of tax must be taken to include reduction of liability). In investigating any such transaction they will, therefore, almost certainly have to weigh other benefits which might accrue.

The Special Commissioners have held that the only benefits which they ought to weigh against avoidance of tax are benefits accruing to the company. The appellant says that this is too narrow a view of the meaning of the section and that there should be weighed any benefit which might accrue from the transaction to any person interested or concerned in it.

The second question is whether the phrase “transaction which involves … the transfer or acquisition of shares in a company” has the meaning “transaction which consists of the transfer or acquisition of shares” or has a wider

Page 19 of [1946] 2 All ER 16

connotation so as to cover a transaction part of which was the transfer or acquisition of shares.

As to the first question the Act does not say in terms that the main benefit which might have been expected to accrue from the transaction is a benefit to the company, still less that any benefit from tax avoidance is to be weighed by considering only other possible benefits to the company. The case can, therefore, only be answered by threading one’s way through the legislation on the subject and looking at the history, object and scope of it.

The whole matter begins in 1939 in the Finance (No 2) Act of that year, passed on 12 October about a month after the outbreak of war. Sect 12(1) and (2) and sect 13(1) and (2) are as follows:

‘12. (1) Where the profits arising in any chargeable accounting period from any trade or business to which this section applies exceed the standard profits, there shall, subject to the provisions of this Part of this Act, be charged on the excess a tax (to be called the excess profits tax) equal to three-fifths of the excess. (2) Subject as hereafter provided, the trades and businesses to which this section applies are all trades or businesses of any description carried on in the United Kingdom, or carried on, whether personally or through an agent, by persons ordinarily resident in the United Kingdom. 13. (1) For the purposes of this part of this Act, the standard profits of a trade or business shall, in relation to any chargeable accounting period, be taken, if the person carrying on the trade or business so elects, to be the minimum amount specified in subsect. (2) of this section, and, in the absence of such an election, to be the amount of the standard profits for a full year computed in accordance with the provisions of subsects. (3) to (9) of this section: Provided that in relation to a chargeable accounting period which is less then twelve months, the standard profits shall be taken to be the amount in question proportionately reduced so as to correspond with the length of the period. (2) The minimum amount referred to in subsect. (1) of this section is one thousand pounds, or, in the case of a trade or business carried on by a partnership or by a company the directors whereof have a controlling interest therein, such greater sum, not exceeding three thousand pounds, as is arrived at by allowing seven hundred and fifty pounds for each working proprietor in the trade or business. In this subsection—(a) the expression “working proprietor” means a proprietor who has, during more than one-half of the chargeable accounting period in question, worked full time in the actual management or conduct of the trade or business; (b) the expression “proprietor” means, in the case of a trade or business carried on by a partnership, a partner therein, and, in the case of a company, any director thereof owning not less than one-fifth of the share capital of the company.’

At this stage, therefore, the profits of persons or companies carrying on trade or business in this country might not exceed those of the standard period by more than two-fifths, and any profit greater than that was excess profit and passed in the form of tax to the state.

By 27 June 1940, even this increase of profit was prevented by the Finance Act of that year, which by sect 26 substituted for the words “equal to three-fifths of the excess” the words “equal to the excess.” Generally speaking, therefore, after this, at any rate, those who carried on a trade or business in this country must either so arrange their expenditure and prices as not to make any excess profit, or if, by accident or design they made any excess profit, it was taken from them. That, at any rate, was the general design of the legislation, although of course it had to contain numerous exceptions in order to deal with cases where the result of the pre-war trading had been a loss or where fresh capital had had to be issued which must be rewarded, or in the case of a new company or a new business, or where for any reason the standard of pre-war years could not or ought not in fairness to be adopted. This aspect of this legislation is, I think, important as a good deal of use was made in the course of the argument of the word “penal” in order to describe some of the legislation under consideration. What Parliament enacted was, it is true, in form a tax, but it was not taxation in the ordinary sense so much as the machinery employed by the Legislature in a crisis in the nation’s affairs, in order to prevent persons from making a greater profit during the war than they had made before; and looked at from this point of view it was no more penal than was the legislation which compelled persons of all ages to give their services to the country, either in the fighting forces or in some other capacity.

Among the numerous exceptional cases for which provision had to be made were those where the standard profits were so small as to be negligible or non-existent, and these cases were dealt with by granting as standard profit to the

Page 20 of [1946] 2 All ER 16

person concerned the minimum amounts set out in sect 13(2) of the Act of 1939. The Finance Act, 1940, by sect 31, substituted for that subsection the following:

‘(2) The minimum amount referred to in subsect. (1) of this section is one thousand pounds, or, in the case of a trade or business carried on by a single individual, or by a partnership, or by a company the directors whereof have a controlling interest therein, such greater sum, not exceeding six thousands pounds, as is arrived at by allowing one thousand five hundred pounds for each working proprietor in the trade or business.’

I need not read the proviso: it deals with a possible increase in a special case where the nature or size of the business justified it. Sect 31 of the 1940 Act went on:

‘In this subsection—(a) the expression “working proprietor” means a proprietor who has, during more than one-half of the chargeable accounting period in question, worked full time in the actual management or conduct of the trade or business; (b) the expression “proprietor” means, in the case of a trade or business carried on by a partnership, a partner therein, and, in the case of a company, any director thereof owning more than one-twentieth of the share capital of the company.’

As a result of this subsection the profit which a trader would be allowed to keep would be increased in the case of a company, the directors of which had a controlling interest, up to £1,500 yearly for each working proprietor up to four. Thus, in the case of the Marshall company the increase of capital in 1941, the issue of that capital in blocks of 525 six per cent preference £1 shares each to Cadam, Jones, Deeley and Aspin and their appointment as directors rendered them working proprietors and raised the standard profits to the highest figure at which it could ordinarily stand, namely, £6,000. The number of shares necessary to qualify the entry as a working proprietor was 522 shares, so each of them got three more shares than the necessary number.

The Cindal company was a wholly owned subsidiary company of the Marshall company, which held 250 shares out of the total issued capital of £252. The directors in the case of this company must each hold one share in order to qualify. As a result, the standard profit of the Marshall company included that of the Cindal company and no separate standard profit could be claimed for the latter company: sect 17(3) of the Act of 1939. In November 1940, the Marshall company transferred half of its shares to one of the directors and the other half to the other director of the Cindal company. Up to then each of these directors had only held one share. The Cindal company thus became an independent director controlled company and entitled to its own minimum standard profit, namely, £1,000. Then in January 1941, 525 preference shares were created and issued to Watkin, who was appointed a director. In April 1941, Freeman and Lisle were each allotted 50 preference shares, 7 shares more than were necessary to qualify them as working proprietors. There were now three working proprietors, and the minimum standard profit of this company had gone, as a result of these steps, from nothing to £4,500.

As counsel for the appellants pointed out, once all profits above standard profit became excess there was, in many cases, no longer any inducement to economy, and it was for this reason that by the Finance Act, 1940, s 32, the Commissioners were given power to disallow expenses which were not reasonable and necessary. In addition, as he pointed out, there was every inducement to those who controlled a business to take advantage of the provisions permitting minimum standard profits in order to increase the standard profit of a company, the standard profit of which, apart from these provisions, would be less than the minimum: for instance, a father would be found taking his son into partnership, or making his son and daughter directors so as to make them working proprietors, for by this means the company would be enabled to make and keep increased profits which were not treated as excess profits. Hence Parliament found it necessary to enact, first of all, the Finance Act, 1941, s 35, and finally the Finance Act, 1944, s 33, the section set out at the outset of this judgment, which amended and strengthened it. The Finance Act, 1941, s 35, reads:

‘(1) Where the Commissioners are of opinion that the main purpose for which any transaction or transactions was or were effected (whether before or after the passing of this Act) was the avoidance or reduction of liability to excess profits tax, they may, if they think fit, direct that such adjustments shall be made as respects liability to excess profits tax as they consider appropriate so as to counteract the avoidance or reduction of liability to excess profits tax which would otherwise be effected by the transaction or transactions. (2) Without prejudice to the generality of the powers

Page 21 of [1946] 2 All ER 16

conferred by subsection (1) of this section, the powers conferred thereby extend—(a) to the charging with excess profits tax of persons who, but for the adjustments, would not be chargeable with any tax, or would not be chargeable to the same extent; (b) to the charging of a greater amount of tax than would be chargeable but for the adjustments. (3) Any person aggrieved by a direction of the Commissioners under this section may appeal to the Special Commissioners, whether on the ground that the main purpose of the transaction or transactions was not the avoidance or reduction of liability to tax or on the ground that no direction ought to have been given or that the adjustments directed to be made are inappropriate.’

I have already read the Finance Act, 1944, s 33(3), at the outset of this judgment. Moreover, in its amended form this section was by the Finance Act, 1944, s 33(1), to be deemed always to have had effect.

The general effect of this legislation is pretty clear. Those who enter into such transactions having as one of the main purposes the avoidance of tax fall within the jurisdiction of the Commissioners who are empowered to take the steps described in the original section in order to counteract the avoidance. Before, however, the Commissioners could make use of these very stringent powers, they had to be satisfied that one of the main purposes was avoidance, and in neither of the cases with which we are concerned were the Commissioners satisfied of this. Here the Finance Act, 1944, s 33(3), comes in and makes it unnecessary for the Commissioners to be satisfied or to satisfy the Special Commissioners that the main object was avoidance. In the first place it is to be noted that the transactions to which this section applies are limited. If a single transaction it must involve, and if more than a single transaction one at least must involve, the transfer or acquisition of shares in a company. This language supplies the answer to the point taken by counsel for the Commissioners as to the meaning of the words “transaction involving a transfer or acquisition of shares.” Since the section applies to two or three related transactions, only one of which involves a transfer or acquisition, there is no reason why it should not apply to one transaction, one part of which consists of a transfer or acquisition. This interpretation has this additional advantage, that it gives to the word “involve” its ordinary grammatical and literal meaning.

In the course of the argument counsel for the appellants point out that these powers were far-reaching and came perilously near exposing the subject to such taxation as the Commissioners of Inland Revenue might choose to impose. Regarding the tax as a tax, the powers granted to the Commissioners are an apparent delegation of a discretion ordinarily reserved by Parliament to itself; for they enable the Commissioners by adjustment to charge with tax persons who otherwise would not be chargeable and to charge a greater amount of tax than would be chargeable but for the adjustments. On the other hand, these powers are confined to what is necessary in order to counteract the avoidance or reduction of liability to tax which would otherwise be effected by the transaction.

From the foregoing provisions it would appear to be reasonably clear that the real object to be attained by the Commissioners under the Finance Act, 1941, s 35, as amended and added to in 1944, was to neutralise the effect ot two different classes of transaction: firstly, transactions a main purpose of which was demonstrably to avoid liability to tax. That is not this case. But in its amended form the legislation went far beyond this: the Finance Act, 1944, s 33(3), dealt, secondly, with transactions where the main purpose could not be proved to be avoidance of tax. To such transactions a new test was to be applied: Was the main benefit which might have been expected to accrue during the currency of the tax avoidance of liability to the tax? If it was, then the Commissioners must treat it as a transaction a main purpose of which was avoidance of tax and make the appropriate adjustments to counteract this avoidance. It is no longer incumbent on the Commissioners of Inland Revenue to satisfy themselves or to prove to the Special Commissioners on appeal that tax avoidance was in fact a main purpose of the transaction. It is sufficient that a reasonable man with knowledge of the circumstances and the law should expect it to follow; moreover, the Commissioners are to confine their outlook to what may be expected during the currency of the tax.

Turning back now to the facts of these cases, the Special Commissioners, in weighing the various benefits other than tax avoidance which might have

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been expected to accrue from, the above transactions, thought themselves not at liberty to weigh any benefits other than those which accrued to the company. Thus in one case there were, as the Speical Commissioners point out, benefits which accrued to the various persons to whom the shares were transferred at half issue price. These the Commissioners excluded from their consideration. In addition there were, at the same time as the share transactions, appointments of persons as directors. These appointments either entailed no share transactions or else the issue or transfer of a single share. Accordingly the Special Commissioners held that any benefits which might accrue to the company from these appointments were not benefits accruing from the issue or transfer of the shares with which they had to deal.

With reference to the first question, I have come to the conclusion, viewing the general structure and scope and object of this legislation, that the Special Commissioners were right to exclude from their consideration benefits accruing not to the company but to the individuals concerned. The tax avoidance which the Commissioners of Inland Revenue have to counteract by adjustment is clearly tax avoidance by the company. For in the case of a company, the tax if not avoided would be assessed on and raised from the company. On this side of the scales, therefore, is to be placed the benefit which might be expected by a reasonable man to accrue to the company in the form of tax avoidance flowing from the transaction. Then in order to see whether this benefit was the main benefit to the company, it seems to me that the Commissioners must next look at the other benefits which might be expected, by a reasonable man, to accrue to the company during the currency of the tax from the transaction: for instance, greater zeal in production, a greater incentive to care and economy in the use of the company’s plant on the part of the employees, the retention or enlistment of a particularly skilful man who is not willing to remain a wage or salary earner merely. These are the kind of benefits to which the Commissioners are intended to have regard, in my opinion, although it is true that none of them is mentioned except by implication in the Finance Act, 1940, s 32, dealing with unreasonably high expenses. From this point of view benefits to individuals may be taken into account, but only in so far as they are likely to advantage the company. I note in passing that it was from this point of view that benefits to individuals were mentioned in the appellant’s contentions. If benefits to the individuals concerned in the share transactions are to be taken into account as such, then I see no reason why benefits to individuals which were at the expense of the company’s efficiency should not be taken into account; and this would cut clean across the whole object of the legislation.

As to the directorship, in so far as they formed an integral part of any transaction investigated, the Special Commissioners are not precluded from considering them merely because they did not entail any acquisition or transfer of shares or else so small a transfer as to be negligible. On the other hand, it is for the Commissioners to say what are the transactions which they challenge, providing they do not split up artificially what is really one integral transaction, and it appears from the case that they have not challenged these appointments. There seems to be reason in the argument used, which is that in this case the appointment of the directors was not dependent on the share transactions; so that the company could have got that benefit, if it be one, without issuing the shares which they issued to the persons concerned.

In the result, the Special Commissioners have not misdirected themselves in the construction they place upon the subsection. In particular, they are right in confining their attention to benefits accruing to the company and in excluding benefits to individuals, except in so far as they are reflected in benefits to the company. As to the appointments of persons as directors, in the circumstances of this case and seeing that the Commissioners had not purported to interfere with these appointments the Special Commissioners were at liberty to find what was a fact, that any benefits flowing from these appointments were not benefits accruing from the share transactions and could not have been expected to accrue.

In the result, therefore, the appeal must be dismissed.

Appeal dismissed with costs.

Solicitors: Ward, Bowie & Co (for the appellants); Solicitor of Inland Revenue (for the respondents).

W J Alderman Esq   Barrister.

Delaney v T P Smith Ltd

[1946] 2 All ER 23

Categories:        LANDLORD AND TENANT; Tenancies: TORTS; Trespass        

Court:        COURT OF APPEAL        

Lord(s):        TUCKER AND COHEN LJJ AND WYNN-PARRY J        

Hearing Date(s):        14, 29 MARCH 1946        

Trespass – Verbal tenancy agreement subsequently cancelled – Occupation of premises without consent of owner – Forcible ejectment by owner – Pleading – Liberum tenementum – Law of Property Act, 1925 (c 20), s 40.

The appellants were the owners of a damaged dwelling-house which was being repaired. In April, 1944, an oral agreement was entered into between the respondent and the appellant’s agent, whereby the respondent was to become tenant of the house, when ready for occupation, at a weekly rental, two instalments of which were payable in advance. The repairs were effected and the house was ready for occupation by the second week in December 1944. Meanwhile, however, the appellants had decided to sell the estate on which the house was situated and so informed the respondent by letter, dated 4 December 1944. The respondent obtained a key of the house, and, on 11 December 1944, entered into possession of the premises. On 20 December 1944, the appellants forcibly ejected the respondent and his effects. In an action for damages for trespass the respondent alleged that he was tenant of the house and as such protected by the Rent Restrictions Acts. The appellants pleaded, inter alia, that there was no note or memorandum in reference to the alleged tenancy as required by the Law of Property Act, 1925, s 40. The county court judge, notwithstanding the absence of any memorandum in writing to satisfy the section and the inapplicability of the doctrine of part performance found in favour of the respondent. The grounds upon which the judge so found were that the appellants had to justify the eviction of the respondent; that in their attempt at justification, they were frustrated by proof of the agreement; and that the respondent, being in possession, relied on the agreement not as a cause of action, but to defeat the plea that the trespass was justified:—

Held – Although the respondent’s possession was sufficient to support an action against a wrongdoer, it was not sufficient as against the lawful owner; the respondent was bound to rely on the agreement for a teancy, not merely to defeat the plea that the trespass was justified, but as an essential part of his cause of action; and, there being no sufficient memorandum in writing, the Law of Property Act, 1925, s 40, was an answer to his claim.

Notes

Where a plaintiff in trespass admits the title of the defendant but pleads a lease from him, it must be strictly proved and there must be compliance with the Law of Property Act, 1925, s 40, because, owing to the course of the pleadings, he is, in effect, bringing an action on a contract relating to land. This is equally the case if the plaintiff traverses the defendant’s title and pleads a demise in the alternative; the demise or agreement is an essential part of his case, and sect 40, which requires a written contract, or memorandum or note thereof, must be complied with.

As to a Claim of Right as a Defence to an Action of Trespass, see Halsbury, Hailsham Edn, Vol 33, p 18, para 29; and for Cases, see Digest, Vol 43, pp 405–407, Nos 281–299.

Cases referred to in judgments

Ryan v Clark (1849), 14 QB 65, 43 Digest 407, 299, 18 LJQB 267, 13 LTOS 300.

Wilkins v Boutcher (1842), 3 Man & G 807, 30 Digest 361, 241, 4 Scott, NR 425, 11 LJCP 104.

Browne v Dawson (1840), 12 Ad & El 624, 43 Digest 384, 100, 4 Per & Dav 355, Arn & H 114, 10 LJQB 7.

Roberts v Taylor (1845), 1 CB 171, 43 Digest 407, 294, 3 Dow & L 1, 14 LJCP 87, 4 LTOS 314.

Appeal

Appeal by the defendants from a decision of His Honour Judge Forbes given at Coventry County Court on 4 December 1945. The facts are fully set out in the judgment of Tucker LJ.

A P Iliffe for the appellants.

W L James for the respondent.

Cur adv vult

Page 24 of [1946] 2 All ER 23

29 March 1946. The following judgments were delivered.

TUCKER LJ. Cohen LJ desires me to say that he has read the judgments which are about to be delivered and concurs in them.

This is an appeal by the defendants from a decision of His Honour Judge Forbes, sitting at Coventry, given on 4 December 1945, whereby he gave judgment for the plaintiff for £70 damages and costs in an action for trespass.

The defendants were the owners of a dwelling-house—No 102, Allesley Old Road, Coventry. It had been damaged by enemy action and was being repaired in the year 1944. The plaintiff was anxious to obtain the tenancy thereof when repaired. The county court judge has found as a fact that in April 1944, an oral agreement was made between the plaintiff and one Kelly, acting on behalf of the defendants, that he should become tenant of this house at a rent of 24s 6d a week, the first two weeks to be paid in advance, and that he could go into occupation as soon as the house was ready. The repairs were thereafter effected and the judge has found that the house was ready for occupation by the second week in December 1944. Before this, however, the defendants had changed their minds and decided to sell all the houses on the estate on which 102 Allesley Old Road was situate and they so informed the plaintiff by letter dated 4 December 1944. The plaintiff subsequently had an interview with one of the directors of the defendant company at which he was informed that they adhered to their decision and could not let him a house. Thereafter the plaintiff managed to obtain a key of the premises from somewhere and took possession of the premises on 11 December. On 20 December the defendants forcibly ejected him and his effects, this being the trespass complained of. By his particulars of claim the plaintiff alleged that he was tenant of the dwelling-house in question and as such was protected in his occupation under the Rent and Mortgage Interest Restrictions Acts, 1920–1939, and claimed damages for trespass. In response to a request for further particulars he stated that he was unable to give the exact date on which the agreement to let was made but it was in the latter part of April 1944. The defendants by their defence pleased inter alia that there was no note or memorandum in reference to the alleged tenancy as required by the Law of Property Act, 1925, s 40.

The county court judge in a careful reserved judgment, having held that there was no memorandum signed by the defendants’ lawfully authorised agent sufficient to satisfy the statute and that there had been no act of part performance, dealt with the defendants, plea as follows:

‘The question then arises whether the plaintiff brings this action upon the contract so that the action is within the ambit of the statutory provision. He alleges a tenancy, which is not quite the same thing as the agreement for the tenancy, but which arose out of it, and therefore I think that upon this part of his claim he seeks to charge the defendants upon the agreement. But he also alleges that the defendants unlawfully entered the house and ejected him from it; and I think he is entitled to treat this as a separate and independent claim. At the time that T. P. Smith (who, I need hardly say, was acting as the agent of the defendants) entered the house, the plaintiff was in possession of it. Possession is prima facie lawful, and in this case it seems to me that the plaintiff’s possession was taken in pursuance of an agreement by which the defendants were bound, not the less because Smith had repudiated it. The plaintiff does not need to enforce the agreement by action; he had already enforced it by entry into possession; and, the agreement being proved, in the course of the trial of the plaintiff’s claim for trespass, it is the defendants who say that they were entitled to eject the plaintiff because the agreement was not in writing. If the defendants had brought an action against the plaintiff for possession, they would have been met, and defeated, by the plea that they had made an agreement with the present plaintiff for a tenancy. In such an action, it would have been no answer for them to say that the agreement was not in writing or evidenced by writing, because the agreement would not be set up as a cause of action. I think that the true position is this: the plaintiff, being in possession of this house, is evicted by the defendants. He brings his action in trespass. The defendants admit the eviction. They have to justify it, by showing that he was a trespasser. In their attempt at justification, they are frustrated by proof of the agreement. The plaintiff relies on the agreement, not as a cause of action—his cause of action in trespass prima facie is complete without it,—but to defeat the plea that the trespass was justified.’

I think the judge came to an erroneous decision. It is clear that the plaintiff was in fact founding his claim on the tenancy agreement pleaded by him. It is no doubt true that a plaintiff in an action of trespass to land need only in the first instance allege possession. This is sufficient to support his action against

Page 25 of [1946] 2 All ER 23

a wrongdoer, but is not sufficient as against the lawful owner, and in an action against the freeholder the plaintiff must at some stage of the pleadings set up a title derived from the defendant. The true position is illustrated in the old forms of pleadings: see Bullen & Leake’s Precedents of Pleading, 3rd Edn, pp 802, 803, and the cases there referred to dealing with the plea of liberum tenementum. It is sufficient, I think, to refer to the judgment of Patteson J in Ryan v Clark, where he explained the nature of this plea as follows (14 QB 65, at p 71):

‘… it admits such a possession as would maintain the action against a wrongdoer, but asserts a freehold in the defendant with a right to the immediate possession.’

Sutton, in Personal Actions At Common Law, I think, correctly states the position at p 185, where he explains that the plea of liberum tenementum might be thought to infringe the rule that a plea in confession and avoidance must either expressly or by necessary implication confess the plaintiff’s claim and says:

‘… but it was construed as admitting that the plaintiff had possession of the close in question, which was sufficient to support his action of trespass against a wrongdoer, but was not sufficient to support it against the lawful owner of the property.’

This being the nature of the plea where the plaintiff relied on a demise from the defendant he had to plead it in his replication and any defence thereto had to be set up by way of rejoinder: see Wilkins v Boutcher.

Considerable latitude is no doubt allowed with regard to pleadings in the county court and it may appear at first sight that the technicalities of pleadings prior to the Common Law Procedure Act can have little bearing upon an appeal from a county court in the year 1946. None the less, the Law of Property Act, 1925, s 40, deals with procedure. It must be pleaded and has been pleaded in the present case, and one way in which its efficacy can be tested is by examining precisely what has to be proved by a plaintiff in an action for trespass against the freeholder. I think the plaintiff was at some stage bound to rely on the oral agreement of tenancy. He has elected to do so in his particulars of claim and in my view the Law of Property Act, 1925, s 40, as pleaded, is an answer to this claim. For these reasons I am of opinion that this appeal succeeds.

WYNN-PARRY J. I need not re-state the facts. They are stated at length in the judgment of the county court judge, and have been summarised by Tucker LJ.

The county court judge found that there was no sufficient memorandum of the agreement on which the plaintiff relied to satisfy the Law of Property Act, 1925, s 40, and that there was no evidence of any act of part performance such as would have taken the case out of sect 40 of the above Act; indeed it was not argued before us with any force that the doctrine of part performance applied in this case. Notwithstanding, however, the absence of any memorandum in writing sufficient to satisfy the section, and the inapplicability of the doctrine of part performance, the judge has found in favour of the plaintiff. The material part of his judgment, which was a reserved judgment, has already been quoted by Tucker LJ and I need not repeat it. I am unable to agree with the reasoning of the judge. In my view the plaintiff must rely on the agreement for the tenancy not merely “to defeat the plea that the trespass was justified,” but as an essential part of his cause of action.

The reasoning of the judge raises a question of principle and, for the purpose of testing the matter, it is desirable to disregard any criticisms which might be levelled against the form of the particulars of claim.

The alternative cause of action on which the judge held that the plaintiff was entitled to succeed was a claim in trespass to land. In Bullen & Leake’s Precedents of Pleading, 3rd Edn, at p 417, the note, citing, among other cases, Browne v Dawson reads as follows:

‘In order to maintain an action for this wrong the plaintiff must have a present possessory title … Actual possession as owner is presumptive proof of property, and is sufficient against a mere wrongdoer who cannot show any better title or authority.’

Under the old form of pleading the count, in such an action as this, would have taken some such form as: “That the defendant broke and entered certain land of the plaintiff. … ”: see Bullen & Leake’s Precedents of Pleading, 3rd

Page 26 of [1946] 2 All ER 23

Edn, p 415, and compare the count in Browne v Dawson which was “trespass for breaking and entering a certain room or apartment of the plaintiff, called the school-room.” To the above count the plea of the defendant would have been a plea of liberum tenementum, “That at the time of the alleged trespass the said land was the freehold of the defendant”: see Bullen & Leake’s Precedents of Pleading, 3rd Edn, p 802. The plea of liberum tenementum was construed as admitting the actual possession of the plaintiff, but as containing by implication an assertion of a right of possession in the defendant as owner of the freehold. By way of replication to a plea of liberum tenementum, the plaintiff might plead a demise from the defendant to the plaintiff: see Bullen & Leake’s Precedents of Pleading, 3rd Edn, p 803. Under the modern from of pleading a plaintiff, met with the defence that the land in question was the freehold of the defendant, can raise a corresponding plea of demise from the defendant by way of reply.

It is clear upon the facts in this case, as found by the judge, that if the pleadings had proceeded strictly (a hypothesis which must be assumed for the purpose of testing the matter) the plaintiff would have been compelled to plead the oral agreement for a tenancy by the appropriate proceeding analogous to a reply in the High Court, because he was not in a position to deny the defendant company’s freehold title.

Now it is to be observed that the plea of liberum tenementum, and the corresponding modern defence that the land was the freehold of the defendant involve a confession and avoidance. The plea admits the possession of the plaintiff, but asserts a title to the freehold. If issue were joined at that stage of the pleadings, the defendant would have to assume the onus of proving his title. In Roberts v Tayler, Cresswell J said (1 CB 117, at p 126):

‘In trespass quare clausum fregit the possession of the plaintiff is the foundation of the action; and the defendant is considered sufficiently to deny the plaintiff’s right of possession by pleading liberum tenementum in himself or a third person; in the latter case justifying as the servant and acting by the command of such third person: and by this anomalous plea the plaintiff is put to show how he has a possession in himself consistent with the freehold being in another, unless he chooses to traverse the title set up by the plea.’

So where a plaintiff by his reply admits the title of the defendant, but pleads a demise from him, there is a true confession and avoidance. The plaintiff is concluded by his confession and must fail in his action unless he proves the case set up by his reply, namely, a demise from the defendant. The onus is thrown upon him to prove the matter set up by way of avoidance, and it has become an essential part of his case to do so. Where, therefore, in such circumstances he relies on a demise or a tenancy, he must prove it, and in order to do so he must comply with the Law of Property Act, 1925, s 40, because as a result of the position into which he has been forced by the course which the pleadings have taken, he is, in my judgment, bringing an action upon a contract for the disposition of an interest in land. It is as if he had amended his statement of claim: because, where the allegation in question goes to the root of the matter, he cannot by introducing the allegation into his reply place himself in a better position than he would have been in had he pleaded it in his statement of claim.

The question then arises: Does a different result flow if, instead of admitting the defendant’s title, the plaintiff by his reply denies the defendant’s title, but as an alternative pleads a demise from him? In my judgment the result is the same. In such an event the plaintiff sets up an alternative case: in the event of his failing successfully to traverse the title of the defendant at the trial he is, to quote again the words of Cresswell J in Roberts v Tayler (1 CB 117, at p 126):

‘… put to show how he has a possession in himself consistent with the freehold being in another.’

Thus the proof of the demise or agreement for tenancy becomes, equally in such a case, an essential part of the plaintiff’s case, without which he could not succeed. Assuming that I am right in my conclusion that the plaintiff must satisfy sect 40 of the above Act in a case where he admits the defendant’s title, it would be strange if he could avoid that obligation by merely traversing the defendant’s title in his reply. In my judgment the true view is that the pleadings must be looked at as a whole; and if it appears that, in order to succeed upon a sole or

Page 27 of [1946] 2 All ER 23

alternative cause of action, he must prove a demise or an agreement for a tenancy, then he must satisfy sect 40 of the above Act, or prove such part performance as will take the case out of the section. If this were not so, then it would follow that a person in the plaintiff’s position, who has nothing more than an oral agreement to grant a tenancy, upon which, therefore, he cannot bring an action either for specific performance or damages, may, if he is able to effect a clandestine entry, upon eviction successfully bring trespass; provided he takes the precaution of not relying upon the unenforceable agreement in his statement of claim, but relies upon the allegation that the defendant “broke and entered premises of the plaintiff,” an allegation which he must know to be unsupportable in law; confident that by so framing his pleadings he will be enabled to do by his reply that which he could not hope to do by his statement of claim, namely, to obtain relief against the defendant upon the footing that a binding agreement of tenancy existed between them. So to hold would be in my view to defeat the section.

For these reasons I would allow the appeal.

Appeal allowed with costs.

Solicitors: Griffith & Son agents for John Varley, Coventry (for the appellants); Julius White & Bywaters agents for Penman, Johnson & Ewins, Coventry (for the respondent).

C StJ Nicholson Esq   Barrister.

Leopold Hirsch and Olgar Hirsch v Rt Hon Sir Donald Somervell, Rt Hon Herbert Morrison and Rt Hon James Chuter Ede

[1946] 2 All ER 27

Categories:        CIVIL PROCEDURE        

Court:        CHANCERY DIVISION        

Lord(s):        ROXBURGH J        

Hearing Date(s):        16, 30 APRIL 1946        

Aliens – Enemy aliens – Action by German national against officers of the Crown alleging wrongful arrest, detentional threatened deportation – State of war with Germany still continuing – No right of action – Striking out statement of claim.

Practice – Pleading – Striking out statement of claim – Inherent jurisdiction of the court – Action by enemy aliens against officers of the Crown alleging wrongful arrest, detention and threatened deportation – No cause of action.

On 2 July 1945, the plaintiffs L H and O H issued a writ in an action complaining of their arrest, detention and threatened deportation, and claiming relief in respect of these matters against the defendants who were, at the material dates, officers of the Crown. In earlier proceedings, which took place in July, 1944, the court had held that L H and O H were German nationals and therefore could not challenge their arrest and detention. The statement of claim in the present action did not admit that L H and O H were German nationals at the date of the earlier decision and then make allegations showing that they had ceased to be German nationals. It merely stated: “Until the entry of the Germans into Austria the plaintiffs were Austrian nationals. Since then their nationality has been undertermined save that they now claim to be Austrian nationals as formerly.” The defendants aplied to have the statement of claim struck out by the court in the exercise of its inherent jurisdiction:—

Held – (i) The plaintiffs having been held to be German nationals in July, 1944, they were still German nationals at the time the writ was issued, on 2 July 1945, because the war with Germany was still continuing.

R v Bottrill, Ex parte Kuechenmeister followed.

(ii) as the plaintiffs were alien enemies, they could not challenge the legality of their arrest, detention or threatened deportation.

R v Home Secretary, Ex parte L  R v Bottrill Ex parte Kuechenmeister and Netz v Chuter Ede followed.

(iii) since the cause of action was obviously and incontestably bad, the statement of claim must be struck out.

Netz v Chuter Ede followed.

Page 28 of [1946] 2 All ER 27

Notes

This is another attempt by German nationals to challenge the validity of internment and deportation. In Netz v Ede Wynn Parry J, struck out the statement of claim, by virtue of RSC, Ord 25, r 4. Roxburgh J, makes a similar order in this case, acting under the inherent jurisdiction of the court.

As to Position of Enemy Aliens, see Halsbury, Hailsham Edn, Vol 1, pp 455–457, paras 771–774, and pp 461, 462, para 780; and for Cases, see Digest, Vol 2, p 147, Nos 200–202, pp 154–158, Nos 25–280, and pp 193–198, Nos 540–563, and Supplement.

As to Inherent Jurisdiction of Court to Strike out Pleadings, see Halsbury, Hailsham Edn, Vol 25, p 256, para 420; and for Cases, see Digest, Pleading and Practice, pp 82–84, Nos 691–703.

Cases referred to in judgment

Dyson v A-G [1911] 1 KB 410, Digest Pleading 75, 645, 81 LJKB 217, 105 LT 753.

R v Home Secretary, Ex parte L [1945] KB 7, 114 LJKB 229.

R v Bottrill, Ex parte Kuechenmeister [1946] 1 All ER 635.

Netz v Chuter Ede [1946] 1 All ER 628.

Procedure Summons

Procedure Summons by the defendants asking the court, in the exercise of its inherent jurisdiction, to strike out the plaintiffs’ statement of claim and dismiss the action. In the action the plaintiffs complained of their arrest, detention and threatened deportation by the defendants who were, at the material dates, officers of the Crow. The facts are fully set out in the judgment.

H O Danckwerts for the applicants (defendants).

Harold Brown for the respondents (plaintiffs).

30 April 1946. The following judgment was delivered.

ROXBURGH J. This is an action by Leopold Hirsch and Olgar Hirsch, his wife, against the Rt Hon Sir Donald Somervell, the Rt Hon Herbert Morrison and the Rt Hon James Chuter Ede. In this action the plaintiffs complain of three separate things: (i) their arrest; (ii) their detention; (iii) their threatened deportation; and founded upon these complaints they claim relief against these three defendants who, at the material dates, were servants of the Crown.

These defendants have applied to me to strike out the statement of claim and to dismiss the action in the exercise of the inherent jurisdiction of the court. This is a jurisdiction which must be most sparingly exercised and I have in my mind at this moment the words of Fletcher Moulton LJ in Dyson v A-G He said ([1911]1 KB 410, at pp 418, 419):

‘Now it is unquestionable that, both under the inherent power of the court and also under a specific rule to that effect made under the Judicature Act, the court has a right to stop an action at this stage if it is wantonly brought without the shadow of an excuse so that to permit the action to go through its ordinary stages up to trial would be to allow the defendant to be vexed upon the form of legal process when there could not at any stage be any doubt that the action was baseless … To my mind it is evident that our judicial system could never permit a plaintiff to be “driven from the judgment seat” in this way without any court having considered his right to be heard, excepting in cases where the cause of action was obviously and almost incontestably bad.’

Therefore, the question which I have to consider is whether in this case “the cause of action is obviously and almost incontestably bad.”

It has been admitted during the course of the argument that the plaintiffs, Leopold Hirsch and his wife, are the persons who were the applicants for a writ of habeas corpus in the proceedings reported under the name of R v Home Secretary, Ex parte L. It has, therefore, been decided against them that they were German nationals at the date of that judgment. The original detention of the plaintiffs took place at Port-of-Spain in Trinidad under an order of detention, the lawfulness of which was disputed by the plaintiffs in the former proceedings. They were then brought to the United Kingdom where they have since been interned. They failed in their application for a writ of habeas corpus on the ground stated by Viscount Caldecote LCJ in these words ([1945] KB 7, at p 10):

‘That being so [i.e., they having the status of German nationals] it is not necessary to go into the circumstances which have been detailed to use as to the detention of the applicants at the Port-of-Spain in Trinidad. Whatever may be the rights or the wrongs of the question that has been raised, there is an impediment at the very outset of the applicants’ motion, namely, that they being enemy aliens, and retaining their status of enemy aliens notwithstanding the German decree [which is referred to in that case] are not in a position to apply for a writ.’

Page 29 of [1946] 2 All ER 27

So far, therefore, as the original arrest and detention of the plaintiffs at Port-of-Spain is concerned, it has been decided that they could not challenge it at the date of that judgment because they were German nationals.

The war with Germany was still continuing at least up to 2 April 1946, as has been decided in the proceedings in R v Bottrill, Ex parte Kuechenmeister. Therefore, as the war was still continuing at least up to 2 April 1946, the plaintiffs were certainly German nationals on 2 July 1945, when the writ in this action was issued. It is to be noted that the statement of claim does not admit that they were German nationals at the date of the former decision and then make allegations designed to show that they have ceased to be German nationals. It says:

‘Until the entry of the Germans into Austria the plaintiffs were Austrian nationals. Since then their nationality has been undetermined save that they now claim to be Austrian nationals as formerly.’

It seems to me that that pleading cannot possibly stand with the decision in R v Home Secretary, Ex parte L. If they were German nationals at that date, I cannot think that they have ceased to be so by this date, but if there be any circumstances which have brought about that change, nothing in this judgment will preclude those circumstances from being properly pleaded and, if they can be, proved.

Upon the footing that the plaintiffs still are German nationals, it seems to me that it has been so plainly determined by a long line of authorities that they cannot, while a state of war continues, challenge the legality of their arrest, detention or threatened deportation that I am bound to say that their form of action is “obviously and almost incontestably bad.” As regards deportation, Wynn-Parry J recently had to consider, in Netz v Ede, almost the precise question which I have to consider. The only different is that he was being asked to strike out the statement of claim and to dismiss the action, not under the inherent jurisdiction of the court, but under RSC Ord 25, r 4. Having considered the authorities most exhaustively and having travelled to the question of deportation through the cases dealing with detention, Wynn-Parry J said ([1946] 1 All ER at p 634):

‘In my judgment, holding the view that I do that on the statement of claim as it stands the plaintiff must be regarded as an alien enemy, I have no alternative but to take the view that there cannot be at any stage any doubt that this action cannot possibly succeed.’

He struck out the statement of claim subject to the possibility of it being amended. If I may say so, I entirely agree with Wynn-Parry J. The matter appears to me to be settled beyond any possible doubt.

As regards the arrest and detention of the plaintiffs, R v Bottrill is the latest of a long line of authorities. That was an application for a writ of habeas corpus before Lord Goddard LCJ, Croom-Johnson and Lynskey JJ, and judgment was delivered on 3 April 1946. On that appellant, which was for a writ of habeas corpus on the ground of detention, it was held that the war with Germany was then still continuing and it was admitted that the applicant was a German national. The authorities were then investigated with great thoroughness and Lord Goddard LCJ, concluded his judgment with these words (at p 637, ante):

‘His Majesty can always allow any alien, the subject of any state with which he is at war, to remain in this country, carry on his business and live as an ordinary citizen. One knows during the Napoleonic Wars and other wars in which this country has been engaged very frequently it was done. French subjects lived in this country and were allowed to live in this country, carry on their business and reside as ordinary citizens. So long as they are doing that it is presumed they are doing so by the licence of the Crown, but the Crown can withdraw that licence at any time. When the Crown thinks it necessary, in the interests of the safety of this country, to deprive an alien enemy of that right, the Crown withdraws the licence to live in the way he has been living and, by imprisoning him, the Crown considers, in the interests of the State, the alien enemy should no longer be allowed to remain here in the position he has been in and restores him (if one may so put it) to the status of an alien enemy and a person who should be put under restraint for the safety of the State. In those circumstances it seems to me the decisions which are binding on this court—and, as it seems to me, also on the Court of Appeal—show perfectly clearly that once the Crown has taken that step with regard to an alien

Page 30 of [1946] 2 All ER 27

enemy the alien enemy is debarred from applying for a writ of habeas corpus and this court has no power to grant a writ.’

It has been submitted to me that, even although the Crown may lawfully imprison a German national while a state of war is in existence between this country and Germany, the servants of the Crown may, nevertheless, be liable in civil courts for carrying out the lawful orders of the Crown. Of that argument I feel bound to say that it is “obviously and … incontestably bad.”

Therefore, in my judgment, I must strike out the statement of claim in this action, but that is subject to this, that I will always be willing to grant leave to amend if an application for that purpose is made and the amendment is one which is not “obviously and almost incontestably bad.”

Statement of claim struck out and the proceedings stayed. Leave to appeal granted.

Solicitors: Treasury Solicitor (for the applicants, the defendants in the action); Waller, Neale & Houlston agents for Marsh & Ferriman, Worthin (for the respondents, the plaintiffs in the action).

B Ashkenazi Esq   Barrister.

Re Greycaine Ltd

[1946] 2 All ER 30

Categories:        COMPANY; Insolvency        

Court:        COURT OF APPEAL        

Lord(s):        MORTON, BUCKNILL AND COHEN LJJ        

Hearing Date(s):        15, 16 APRIL 1946        

Companies – Receivers – Remuneration – Receiver appointed at agreed remuneration by trustees of trust deeds securing debentures – Compulsory winding up – Application by liquidator for remuneration to be fixed by the court – From what date court can fix remuneration Law of Property Act, 1925 (c 20), ss 101(1) (iii), 109(6) – Companies Act, 1929 (c 23), s 309.

Under a trust deed securing debentures issued by a company, the trustee was empowered in certain events to appoint a receiver at a remuneration payable out of the mortgaged premises “at such rate not exceeding that provided in the Law of Property Act, 1925, s 109,” as the trustee might determine. The deed further provided that the receiver, out of the moneys received by him, was to pay all costs and expenses incurred in carrying on the business of the company, retain his remuneration and pay over the balance to the trustee. The Law of Property Act, 1925, s 109(6) provides: “The receiver shall be entitled to retain out of any money received by him, for his remuneration, and in satisfaction of all costs, charges, and expenses incurred by him as receiver, a commission at such rate, not exceeding 5 per centum on the gross amount of all money received, as is specified in his appointment, and if no rate is so specified, then at the rate of 5 per centum on that gross amount.” In 1936, a receiver was appointed by the trustee and was authorised to retain, out of the mortgaged premises and moneys to be received: (a) for remuneration, a commission at the rate of £5 per cent of the gross amount of all moneys received by him, and (b) all costs and expenses. In 1937, an additional receiver was appointed and it was provided that the remuneration payable to the first receiver was to be divided between the two receivers. In 1938, an order was made for the compulsory winding up of the company. The receivers carried on the business of the company until September 1940, when the company’s works were destroyed by enemy action. There had been heavy claims for war damage. The receivership was still on foot, and the receivers had already received nearly a million pounds. On 25 May 1945, the liquidator applied to the court, under the Companies Act, 1929, s 309, to fix the remuneration of the receivers. On a motion by the receivers to discharge the order of the registrar, the judge held (a) that the court had jurisdiction under sect 309 to fix the remuneration of a receiver even when he had been appointed at an agreed remuneration; (b) that the jurisdiction could be exercised only as respects the future and that the date of the liquidator’s application was the date from which the court could fix the remuneration. On appeal by the liquidator to the Court of Appeal, the questions to be determined were (i) whether the remuneration of the receivers was validly fixed by the trust deed and the deeds of appointment; (ii) assuming that the court had

Page 31 of [1946] 2 All ER 30

jurisdiction to fix the remuneration where it had already been fixed by contract, as from what date the court could fix it:

Held – (i) Upon the true construction of the trust deed, the remuneration of the receivers was not in excess of that authorised thereunder. The provisions of the trust deed differed from those of the Law of Property Act, 1925, s 109(6) in that, under the trust deed, the receiver was entitled to pay the costs and expenses incurred by him before retaining his remuneration. Sect 109 was only referred to in the trust deed, for the purpose of specifying the “rate” at which the trustee should be remunerated, and the reference was, therefore, only to the latter half of sect 109(6), ie, “a commission at such rate, not exceeding 5 per centum on the gross amount of all money received, as is specified in his appointment.” The receivers’ remuneration had, therefore, been validly fixed by the trust deed and the deeds of appointment.’

(ii) upon the true construction of the Companies Act, 1929, s 309, the court could only fix remuneration as from the date of its order.

Order of Lord Uthwatt, sitting as an additional judge of the Chancery Division ([1946] 1 All ER 329) varied.

Notes

The Court of Appeal affirm Lord Uthwatt in the court below in holding that sect 309 of the Companies Act, 1929 enables the court on the application of a liquidator to fix remuneration for a receiver notwithstanding any agreement for remuneration made at the time of appointment. Lord Uwatt held that this power was exercisable from the date of the application of the receiver, but the Court of Appeal take the view that if the words “to be paid” in the section refer to the future, the logical conclusion is that the court can fix remuneration only as from the date of the order of the court. The order of Lord Uthwatt is accordingly varied to this extent.

For Application of Liquidator to Fix Remuneration of Receiver; see Halsbury, Hailsham Edn, Vol 5, p 516, para 837.

Cases referred to in judgments

River Wear Comrs v Adamson (1877), 2 App Cas 743, 36 Digest 105, 705, 47 LJQB 193, 37 LT 543.

Heydon’s Case (1584), 3 Co Rep 7a, 42 Digest 614, 143.

Interlocutory Appeal

Interlocutory Appeal by the liquidator from an order of Lord Uthwatt, sitting as an additional judge of the Chancery Division, dated 30 January 1946, and reported ([1946] 1 All ER 329). The facts are fully set out in the judgment of Morton LJ.

Andrew Clark KB and V R Aronson for the liquidator.

Gerald Upjohn KC and J W Brungate for the receiver.

C W Turner for the personal representatives of the joint receiver.

16 April 1946. The following judgments were delivered.

MORTON LJ. This is an appeal by the liquidator of a company now called Greycaine Ltd from a decision of Lord Uthwatt, who was Uthwatt J when he heard the case, but Lord Uthwatt when he gave his judgment. The respondents are Brigham, who is the present receiver appointed under a power in a debenture trust deed, and the legal personal representatives of Wilcock, the deceased receiver. The appeal raises certain important questions as to the construction of the Companies Act, 1929, s 309, and the matter has been very fully and well argued before this court. I think it really comes down in the end to a short, though by no means easy question of construction. The section itself is in the following terms:

‘The court may, on an application made to the court by the liquidator of a company, by order fix the amount to be paid by way of remuneration to any person who, under the powers contained in any instrument, has been appointed as receiver or manager of the property of the company, and may from time to time, on an application made either by the liquidator or by the receiver or manager, vary or amend any order so made.’

The first question raised by the appellant, thought is seems doubtful whether this point was argued in the court below, was whether the remuneration of the receivers was validly fixed by the trust deeds (to which I must refer shortly) and the deeds of appointment of receivers. I think Lord Uthwatt assumed that the remuneration was validly so fixed, but we have given leave to the appellant to raise that argument in this court, it being an argument based on the construction of documents, and counsel for the receiver raised no objection to that question of construction being argued.

Page 32 of [1946] 2 All ER 30

That being the first question, the second is whether, if the remuneration has been so fixed, the court has jurisdiction to re-open the matter at all under sect 309, and to re-fix, so to speak, the remuneration. The judge held that the court had that power, and there is no cross-appeal by the respondents from that decision. That is a matter which has been discussed in certain text books. We were referred to Buckley On The Companies Act, 11th Edn, p 200, and Halsbury’s Laws of England, Hailsham Edn, vol 5, p 516, note (e). We have not heard an argument on that point, and I do not proposed to express any view upon it. The judge has held that the court has that jurisdiction, and there is no appeal from his decision. I propose to leave the matter there in the absence of any argument, or any appeal, and to assume in favour of the appellant that the court has power to fix the remuneration under sect 309, notwithstanding that the remuneration was duly fixed on the receiver’s appointment.

The third question is, assuming that the court has jurisdiction to fix the remuneration where it has already been fixed by contract, as from what date can the court fix it. There are four possible dates suggested. The first (and this is the primary contention of the appellant) is that the court can fix the remuneration as from the appointment of the receiver. The second and alternative contention which he puts forward is that the court can fix the remuneration to be paid as from the commencement of the winding up. The third possible date is as from the date of the application made by the liquidator under sect 309. That is the date which the judge thought was the right date. The last possible date is that the court can only fix the remuneration as from the date of the court’s order. There was no argument before the judge as to which one of the two last mentioned dates is right, assuming that one of them is the right date, because it would appear that there was no change of circumstances between those two dates in the present case. I think it is necessary, in arriving at a conclusion as to what the section means, to choose between those two dates, assuming that the court cannot accept either the date of the appointment of the receiver or the date of the commencement of the winding up.

Before considering the questions before us, it is necessary for me to state the facts of the case. The company was incorporated under the name of F Gruneisen and Co Ltd on 25 October 1912. The capital was originally £55,000, but was subsequently increased to £75,000, and the company carried on business as book binders, stationers and publishers. The name was subsequently changed to Greycaine Book Manufacturing Co Ltd and later to Greycaine Ltd. In July, 1929, the company issued a series of first mortgage debentures. There were 100 of them at £1,000 each. On 8 July 1929, a trust deed was executed to secure that series of debentures. The trust deed was made between the company (under its then name) of the one part, and Century Insurance Co Ltd as trustee of the other part, and we were told that Century Insurance Co Ltd and a subsidiary of that company held all the debentures secured by that trust deed. Cl 6 of the trust deed contains a charge of all the assets with the payment to the trustee of all moneys owing under the debentures in a not unusual form. The clause which deals with the appointment of a receiver and the remuneration of a receiver is cl 17 which is as follows:

‘The trustee at any time after this security becomes enforceable may by writing appoint a receiver of the mortgaged premises or any part thereof … (3) Unless otherwise directed by the trustee such receiver may exercise all the powers and authorities vested in the trustee by cl. 11 and 12 hereof.’

I pause there to say that cl 11 contains a power for the trustee to enter upon and take possession of the mortgaged premises and to sell them, and other powers relating to the same matter, whereas cl 12 contains, amongst other things, a power to the trustee at any time after the security has become enforceable to carry on, or concur in carrying on, the business of the company. Cl 17(5) is as follows:

‘The remuneration of such receiver shall be payable out of the mortgaged premises and shall be at such rate not exceeding that provided in the Law of Property Act, 1925, s. 109, as the trustee may from time to time determine.’

The mortgaged premises, of course, in this case are not merely income but capital. With cl 17(5) I think one should read cl 17, which is as follows:

‘The receiver shall out of the moneys received by him pay all costs and expenses

Page 33 of [1946] 2 All ER 30

incurred by him in carrying on the business of the company or otherwise in exercise of his powers and his remuneration and shall pay over the balance to the trustee to be applied by it as hereinbefore provided.’

It seems to me that those two sub-clauses contemplate that the receiver shall do two things out of the moneys received by him, whether by way of capital or income. He is to pay all costs and expenses incurred by him in carrying on the business of the company or otherwise in exercise of his powers, and he is to retain his remuneration. Then he is to pay over the balance to the trustee. Going back to cl 17(5), we find that the remuneration, which, as I read the clause, is a separate thing from the costs and expenses:

‘… shall be payable out of the morgaged premises and shall be at such rate not exceeding that provided in the Law of Property Act, 1925, s. 109, as the trustee may from time to time determine.’

I shall return to the Law of Property Act, 1923, s 109, when I have finished stating the facts.

In November 1934, five second debentures of £1,000 each were issued. Again they were all taken up by Century Co and its subsidiary, and a trust deed was executed on 16 November 1934, to which I need only refer quite briefly. Cl 7 of that trust deed provides:

‘All the covenants and provisions of the first debenture trust deed in relation to the first debentures … shall extend and apply to the security hereby constituted for the second debentures and to such second debentures in like manner as if the same were herein set out and specifically made applicable thereto with such modifications as the differences in the amounts and series of the first debentures and second debentures may require.’

Again Century Insurance Co was the trustee of that deed.

On 20 November 1936, Century Co as trustee, appointed Brigham, one of the present respondents, to be receiver under both deeds, and I must now refer to two clauses in that appointment. Curiously enough, although it is only an appointment of Brigham, he is defined as “herein called ‘the receivers’”. Cl 2 provides:

‘The receivers and each of them shall have and may exercise all the powers and authorities vested in the trustee by cl. 11 and 12 of the trust deed first mentioned in the schedule hereto.’

That was the first debenture trust deed. Cl 5(2) provides as follows:

‘The trustee authorises the receivers to retain out of the mortgaged premises and/or the moneys to be received by the receivers hereunder: (a) for their remuneration a commission at the rate of £5 per cent. of the gross amount of all moneys received by them: (b) all costs charges and expenses reasonably and properly incurred by them in the exercise of their powers as receivers.’

As regards the insertion of the word “charges” in that clause, it is admitted by counsel for the receiver that that goes beyond what is authorised by the terms of the debenture trust deeds. I understand that at one time a claim was made by the receivers to retain something in respect of the remuneration of their staff, but that claim has now been dropped. I think that for all practical purposes I can treat this appointment as if it referred in cl 5(2)(b) only to costs and expenses. Counsel for the liquidator has very fairly said that he makes no point of the insertion of the word “charges” now that the receivers have dropped their claim to charges in respect of their staff; he concedes that the insertion of that word makes no difference, as it should merely be treated as surplusage.

On 8 April 1937, the trustee appointed Brigham and Wilcock joint receivers, and cl 2 of that deed provides as follows:

‘All the provisions powers and discretions contained in or conferred by Mr. Brigham’s appointment shall extend and apply to the appointment hereby made and all the powers and discretions of the receivers under Mr. Brigham’s appointment and this deed shall be exerciseable either by the receivers jointly or by either of them severally.’

Cl 3 is:

‘The remuneraton provided in Mr. Brigham’s appointment shall be divided between the receivers in such proportions as they shall agree.’

Page 34 of [1946] 2 All ER 30

No question turns upon cl 3.

On 18 August 1937, a winding-up petition was presented, and on 8 March 1938, an order was made for the compulsory winding up of the company. On 22 April 1938, the appellants, White and Robins, were appointed joint liquidators. On 27 July 1944, Robins died, and White is now the sole liquidator. On 30 October 1944, Wilcock, the joint receiver, died, and the respondents, John and Margery Wilcock, are his legal personal representatives. The receivers carried on the business of the company until 27 September 1940, when the company’s works were destroyed by enemy action, and there have been certain heavy claims for war damage. The receivers have received up to date close on a million pounds, so that, if their remuneration is to be allowed at the rate specified in the trust deeds and the appointments, it will be a very substantial sum indeed.

On 29 May 1945, the liquidator took out a summons under the Companies Act, 1929, s 309, asking that the court should direct what amount of remuneration by way of commission, percentage, or otherwise, should be paid to Brigham and Wilcock as joint receivers, and to Brigham as the surviving receiver, and on what proportion such remuneration should be distributed between them. Then it was asked that certain accounts and inquiries be taken and made and vouched. On 23 October 1945, that summons came before Sir Arthur Stiebel, and he made this order:

‘It is ordered that the remuneration of the said Bernard Harry Brigham and Frederick Wilcock deceased as such receivers as aforesaid be and the same is hereby allowed at the sum of £15,000.’

It is to be observed that that order does not state the period in respect of which the registrar allowed this sum of £15,000, but I think probably his intention was that that remuneration should cover everything done by the receivers from the date of their appointment down to the end of the receivership. The registrar has stated that he made a slip in the calculation of the amount, and it is common ground that that order must be discharged, although there are certain other matters which are hotly in dispute.

On 6 November 1945, the respondents launched a notice of motion to discharge the order of the registrar. They asked for a declaration that the receivers were, and are, entitled to keep the remuneration already paid to, or retained by, them pursuant to the trust deeds and appointments. That motion came before Uthwatt J and on 30 January he made the order from which the liquidator now appeals. It is in the following terms, so far as material:

‘This court doth order that the said order dated Oct. 23, 1945, be discharged [ie, the order of SIR ARTHUR STIEBEL] and this court doth order that the matter be remitted to the registrar but any order made by him is not to relate to remuneration which pursuant to the terms of the trust deed and the instruments appointing the receivers has prior to the date of the liquidator’s application accrued payable to the receivers.’

I think it is clear that the words “accrued payable” would apply to any sums which the receivers had acquired a right to retain prior to the date of the liquidator’s publication. For instance, if they had received certain proceeds of sale, then the agreed percentage on those proceeds of sale would have “accrued payable” to the receivers.

I shall turn back now to the first question argued by counsel for the liquidator: was the receiver’s remuneration validly fixed by the trust deeds and the appointments? In my view it was, and I cannot find any conflict between the provisions of the trust deeds and the appointments. Counsel for the liquidator has pointed out that the statutory power under the Law of Property Act, 1925, sect 101(1)(iii) refers to the appointment of a receiver:

‘… . of the income of the mortgaged property, or any part thereof; or, if the mortgaged property consists of an interest in income, or of a rentcharge or an annual or other periodical sum, a receiver of that property or any part thereof; … ’

Then sect 109(3) provides:

‘The receiver shall have power to demand and recover all the income of which he is appointed receiver … ’

Certain means are specified by which he may do that. Sect 109(6) (which is the most relevant subsection) is as follows:

‘The receiver shall be entitled to retain out of any money received by him for his

Page 35 of [1946] 2 All ER 30

remuneration, and in satisfaction of all costs, charges, and expenses incurred by him as receiver, a commission at such rate, not exceeding five per centum on the gross amount of all money received, as is specified in his appointment, and if no rate is so specified, than at the rate of five per centum on that gross amount, or at such other rate as the court thinks fit to allow, on application made by him for that purpose.’

Reading the first trust deed in conjunction with the Law of Property Act, 1925, sect 109(6) I think the effect is as follows: first, the receiver was to be entitled to pay the costs and expenses incurred by him. That is expressly provided for by the first trust deed, and in that respect the provisions of the first trust deed differ from the provisions of sect 109(6) where the “commission” is to cover the costs, charges and expenses of the receiver. Then, in addition to paying those costs and expenses, the receiver is to have remuneration at such a “rate” not exceeding that provided in the Law of Property Act, 1925, s 109, as the trustee may from time to time determine. In my view, the reference to a “rate” refers to the latter part of sect 109(6) which begins with the words:

‘… a commission at such rate, not exceeding five per centum on the gross amount of all money received, as is specified in his appointment … ’

I do not think one brings in at that point the first part of subsect (6). Subsect (6) is only referred to for the purpose of specifying the rate. Then when one comes to the actual appointment, we find that it specifies that the receivers are to receive:

‘… for their remuneraton a commission at the rate of £5 per cent. on the gross amount of all moneys received by them.’

In addition they are to have:

‘… all costs [I omit the word “charges” for the reason already specified] and expenses reasonably and properly incurred by them … ’

In my view, the remuneration so fixed is not in excess of that authorised by the trust deed, on its true construction, and the remuneration of these receivers has been validly fixed by the trust deed and the appointments.

It being common ground that the order of the registrar must be discharged, and that the matter must be remitted to him, I now come to the question: what is the direction which should be given to the registrar? Counsel for the liquidator has contended that the direction should be that he is to fix the remuneration of the receivers from the date of their appointment, or, alternatively, that the direction should be that the receivers are entitled to remuneration from the date of their appointment, to the commencement of the winding up in accordance with the scale of remuneration fixed by their appointment, and as from the commencement of the winding up the remuneration is to be fixed by the court.

The construction of this section, short though it is, is not free from difficulty, but after carefully listening to the arguments addressed to us, I have come to the conclusion that I agree with Lord Uthwatt in thinking that the court cannot go back further than the date of the liquidator’s application. I base that conclusion, as Lord Uthwatt did, primarily on the words “to be paid.” Lord Uthwatt said (at p 332, ante):

‘… these words point to regulating the course of events in the future, not to the possibility of reviewing the past.’

With that observation I entirely agree. It is, however, a matter which has caused me some difficulty to understand why Lord Uthwatt, taking that view, should have taken the date of the application by the liquidator as the date from which the court can fix the amount of the receiver’s remuneration. It seems to me that, if the words “to be paid” are words referring to the future, the logical conclusion is that the court can only fix the remuneration of receivers as from the date of its order. I do not propose to go further into that matter because the respondents have not argued against that part of the order which allows the registrar to go back to the date of the application by the liquidator. That part of the order, I understand, will make no practical difference to them. All that was said by Lord Uthwatt on that subject (ibid, at p 333) is:

‘Nor again are they [the parties] concerned with the question whether what I have called the future means the date of the application or the date of the order, but it is, in my view, clear that the date of the application is the material date.’

The judge did not, however, give any reasons for that conclusion.

Turning again to the Companies Act, 1929, s 309, I think one must bear in mind that there has ex hypothesi been an appointment of a receiver before the

Page 36 of [1946] 2 All ER 30

court exercises its power. The section refers only to any person who has been appointed as receiver under the powers contained in an instrument, so that the section is dealing with a case in which there has been a bargain between the company and the trustee for the debenture holders, and between the trustee and the receiver. I think it is not unfair to describe it, as counsel for the receiver did, as a penal section, if the effect of it is that the court can take away from the receivers remuneration which they have already earned in pursuance of their bargain. Ordinarily, a receiver takes his remuneration out of the moneys which he has received. He may work hard and try to sell a property and fail, in which case, on a percentage remuneration, he gets nothing. On the other hand, if he does sell, directly he has received the proceeds of sale he has a right to his percentage. There is no difficulty at all in treating the section as referring only to the future. You merely find out what moneys the receiver has received up to the date of the order, and what remuneration he is entitled to retain under his bargain, and the court then says what is “to be paid” in the future. To my mind, the very fact that there is no date mentioned in the section as the date from which the court may fix the amount of the receiver’s remuneration is a strong indication that the court is not to go back to any earlier date than the order itself. The order is to deal with the future and only with the future. The intention is, I think, to leave undisturbed that percentage which has already accrued to the receiver on the moneys collected by him.

Counsel for the receiver relied upon other portions of the section in respect of his argument, but, for my part, I think that the vital words are “to be paid,” and it is on those words I found the view at which I have arrived. There are certain other matters which were referred to in argument which I think are of considerable importance. To my mind, if the legislature had intended to empower the court to take away remuneration already earned by a receiver, it would have made provision for that remarkable power in plain terms by words which plainly conferred that power. Counsel for the liquidator agrees that his argument must imply that the receiver may be called upon to pay back moneys already received, and rightfully received, by him. It is, of course, possible that the legislature intended to give such a power, and the power is a discretionary one, but for my part I should not feel inclined to construe the section so, unless the words were reasonably plain, and to my mind they are reasonably plain the other way. One can easily think of circumstances where it would be a very great hardship on a receiver to have the whole matter suddenly re-opened. For example, a receiver might have been carrying out his duties in accordance with his bargain for ten years. He might have expended a large part of his remuneration in paying sur-tax and income tax thereout, and in paying his staff and other expenses of every kind. He might then be faced with a demand for the repayment of the sums so received by him. Again, supposing a receiver had died, his executors would always have hanging over them this possible claim as a result of the exercise of its powers by the court under sect 309. Furthermore, if the section has the construction for which counsel for the liquidator contends, it is a striking fact that persons who were engaged in receiverships before the passing of the 1929 Act would suddenly find that remuneration which they had contracted to receive, had retained and had possibly spent, could be taken away from them by the court. All these consequences would not deter me from giving that construction to the section if I thought it was the construction which the words most naturally bear, but I do not take that view.

Counsel for the receiver referred us to the manner in which the legislature has made provision for the cases where persons are to be called upon to repay moneys already received by them. He referred in particular to the misfeasance section, sect 276. There a very careful provision indeed is made in regard to the repayment of moneys by officers of the company under certain circumstances which I need not describe. The only provision in the Act which was suggested as having any application to the case of repayment of moneys received by a receiver was sect 311(1)(b), but that is a section which deals with a case where a default has arisen on the part of the receiver in failing to render proper accounts of his receipts and payment. I doubt very much whether that subsection could be invoked for the suggested purpose, but however that may be, I cannot believe that the legislature would have given a power to recall moneys from the receivers

Page 37 of [1946] 2 All ER 30

without making some clear provision as to how these moneys were to be recalled.

To my mind, the construction which best fits the words of the section is that the court can only fix remuneration as from the date of its order. The other possible alternative which may be the right one, but which does not commend itself so much to my mind, is that the court can fix the remuneration as from the date of the application by the liquidator. To my mind the court is not empowered by the words of this section to go any further back. The construction I have put on the section, as it seems to me, follows exactly the wording of the section; there is no need to imply anything, and no difficulty arises as to the date to which the court can go back. The section is dealing, and dealing only, with the future.

BUCKNILL LJ. I agree that this appeal should be dismissed for the reasons given by Morton LJ in his judgment, and I have nothing to add.

COHEN LJ. I agree, and I only desire to add a word on one point. Counsel for the liquidator bases his argument in substance on a passage from the speech of Lord Blackburn in River Wear Comrs v Adamson where Lord Blackburn said (2 App Cas 743, at p 764):

‘As long ago as Heydon’s case LORD COKE says that it was resolved “that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered; 1st. What was the common law before the Act? 2nd. What was the mischief and effect for which the common law did not provide? 3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth? And 4th. The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief and advance the remedy.’

He says that the mischief with which Parliament was trying to deal arises from events which happened before a winding up supervened, and that when a winding up supervened the interests of the unsecured creditors who had been unable to protect themselves became paramount. He adds that this mischief could not be wholly removed unless we accept his construction and construe the section as enabling the court to review the remuneration of the receiver as from the date of the first appointment of a receiver. This may be true. But I think there are a number of other considerations which may have weighed with Parliament. I will not go through them in detail. They have been mentioned by Morton LJ. It is enough to say that, amongst the considerations that Parliament may have taken into account, was the undesirability in principle of disturbing bargains possibly acted on for many years before the commencement of the winding up. I cannot help feeling that, if we were to put that forced construction—and I think it would be a forced construction—on the language of this section in order to remove completely the mischief defined by counsel for the liquidator, we should be neglecting that part of the speech of Lord Blackburn which immediately follows the passage which I have read. Lord Blackburn went on to say (ibid, at p 764):

‘But it is to be borne in mind that the office of the judges is not to legislate, but to declare the expressed intention of the legislature, even if that intention appears to the court injudicious … ’

I am not saying that in this instance that criticism would be justified; I do say that I think the only construction to be placed on this section is that which has been indicated by my Lord, and I cannot find anything in the circumstances justifying us in making that departure which the argument of counsel for the liquidator required from the natural meaning of the words.

For these reasons, I agree that, subject to the question of the form of the order, the appeal should be dismissed.

Appeal dismissed. Order of Lord Uthwatt, sitting as an additional judge of the Chancery Division, varied by the substitution of the words “prior to the date of the order” for the words “prior to the date of the liquidator’s application.” Leave to appeal to the House of Lords granted.

Solicitors: Cosmo Cran & Co (for the liquidator); F C Hampshire, Harpenden (for the receiver); Roney & Co (for the personal representatives of the joint receiver).

F Guttman Esq   Barrister.

Yoxford and Darsham Farmers’ Association Ltd v Llewellin

[1946] 2 All ER 38

Categories:        AGRICULTURE: CONSTITUTIONAL; Other Constitutional        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT AND TUCKER LJJ        

Hearing Date(s):        22, 25 MARCH, 10 APRIL 1946        

Emergency Legislation – Egg marketing – Voluntary compensation fund – Failure of packer to contribute – Direction transferring producers to other packers – Validity – Bill of Rights, 1688 (sess 2, c 2) – Defence (General) Regulations, 1939 (SR & O, 1939, No 927) regs 54c, 55 – Eggs (Control and Prices) (Great Britain) Order, 1944 (SR & O, 1944, No 502) arts 3, 14.

Under an egg-marketing scheme brought into operation by the Minister of Agriculture and Fisheries in 1941, the appellants, who for a number of years had carried on the business of marketing eggs within a wide area, became licensed packers for an area restricted to within a few miles of their packing station, the producers in that area being compelled to sell their eggs to the appellants. At the invitation of the Minister a voluntary compensation fund was set up within the industry to which the surviving packers, who had made a proportionate gain in business, could make contributions, and out of which these packers who had been put out of business or had suffered a proportionate loss of business could be compensated. The trade association which administered the fund called upon the appellants, who had made a proportionate gain out of the scheme, to contribute to the fund. The appellants did at first contribute but after a time refused to make any further contributions. After due warning, the Minister directed a re-transfer from the appellants to other packers of sufficient producers to bring the appellants to the point at which no net contributions would be due from them into the compensation fund:—

Held – (i) The direction was a proper exercise by the Minister of the discretionary powers conferred upon him by the Defence (General) Regulations, 1939, regs 55 and 54c.

(ii) there had been no levying of money for or to the use of the Crown and the Bill of Rights, 1688, therefore, had no application.

Notes

In A-G v Wilts United Dairies a charge was made by the Minister for granting a licence, which was held to be a levying of money for the use of the Crown, but in this case the direction by the Minister did not contain any demand for payment of money to the Crown.

For the bill of Rights, 1688, see Halsbury’s Statutes, Vol 3, p 149; and For the Defence (General) Regulations, 1939, regs 54c, 55, see ibid, Vol 37, pp 739, 741.

Cases referred to in judgment

R v Comptroller-General of Patents, Ex p Bayer Products Ltd [1941] 2 All ER 677, [1941] 2 KB 306, 165 LT 278.

Point of Ayr Collieries Ltd v Lloyd-George [1943] 2 All ER 546.

Carltona Ltd v Works Comrs [1943] 2 All ER 560.

A-G v Wilts United Dairies (1922), 91 LJKB 897, 25 Digest 132, 519, 127 LT 822.

Aitken Watson for the appellants.

The Attorney General (Sir Hartley Shawcross KC) and Patrick Devlin for the respondent.

Cur adv vult

10 April 1946. The following judgments were delivered.

SCOTT LJ. This is an appeal by the plaintiffs from a judgment of Croom-Johnson J in favour of the defendant sued as Minister of Food. The plaintiffs sought a declaration and injunction: (1) A declaration that the direction dated 15 March 1945, or the direction of or about 3 April to 6, 1945, or any of them issued on behalf of the defendant to the plaintiffs whereby the defendant as Minister of Food purported to exercise his powers in that behalf under the Defence (General) Regulations, 1939, reg 55 and the Eggs (Control and Prices) (Great Britain) Order, 1944, para 3 is not a bona fide exercise by the defendant of such powers and is not binding on the plaintiffs; and (2) An injunction restraining the defendant and all persons acting under his authority from acting on the said directions or from requiring the plaintiffs or their present customers to act in accordance therewith.

On 3 May 1945, the action was disposed of upon a trial before Croom-Johnson J of the two following issues: (1) Whether the issue of the direction by the defendant of 15 March 1945, or the directions of or about 3 to 6 April

Page 39 of [1946] 2 All ER 38

1945, or either of them is a proper exercise by the Minister of his powers having regard to the letters of 14 February 1945, and 15 March 1945, exhibited to the affidavit of Sir Herbert Guy Musgrave Hambling, Bart, sworn herein of 7 April 1945; (2) Whether the said directions by reason of such letters contravene the provisions of the Bill of Rights, 1688.

Judgment was given for the defendant with costs. In a considered judgment, the judge held (1) that what the defendant had done was properly done by him within the discretionary powers conferred upon him by the Defence Regulations, regs 55 and 54c; and (2) that there had been no levying of money for or to the use of the Crown and that the Bill of Rights upon which the plaintiffs relied had no application. With both decisions we agree.

In June, 1941, the Minister of Food considered it necessary to regulate the whole trade of the country in home-produced fresh eggs. This under Defence Regulation 55 he had, as “the competent authority,” power to do.

The material provisions of that regulation are as follows:

‘(1) A competent authority, so far as appears to that authority to be necessary … for maintaining supplies and services essential to the life of the community may be order provide—(a) for regulating … the keeping, storage, movement, transport, distribution, disposal … of articles of any description … (b) for regulating the carrying on of any undertaking … and also make such provision … as the competent authority thinks necessary or expedient for facilitating the introduction or operation of a scheme of control … under this regulation; and an order … may prohibit the doing of anything regulated by the order except under the authority of a licence granted by such authority … (2A) A competent authority may, if it appears to that authority to be necessary … for maintaining supplies and services essential to the life of the community, make or give as respects any undertaking all or any orders or directions which might have been made or given under sub-para. (a) of para. (1) of Reg. 54C by an authority which is a competent authority for the purposes of that Regulation, if the undertaking had been a war production undertaking and had been declared … to be a controlled undertaking, … ’

The relevant words of reg 54C(1) are:

‘… the undertakers shall carry on the undertaking in accordance with orders made or directions given by a competent authority, and such orders or directions may, in particular … ’

The last mentioned power to give directions is thus both general and particular, and on the true interpretation of the provision the particular power does not, pin our opinion, cut down the general power. Orders were made and from time to time amended from June, 1941, onwards, the relevant order at the time in question being No 502, entitled “The Eggs (Control and Prices) (Great Britain) Order, 1944.” Under it every producer keeping over 25 head of poultry was prohibited from selling except through the licensed packer with whom he was registered.

The appellants were licensed packers—art 3(1), (2), and (3); and by art 3(7) were prohibited from disposing of eggs except to the Minister. Art 14 was as follows:

‘(1) The provisions of this Order are subject to any directions which may at any time be given by or on behalf of the Minister, and to any licences or authorisations which may be granted by or on behalf of the Minister under this Order. (2) Every person holding a licence or authorisation granted under or continuing in force by virtue of this order, shall comply with every condition imposed by such licence or authorisation.’

The appellants had for 20 years carried on the business of marketing eggs, collected within a wide area around Yoxford in Suffolk, and sold by them largely in London. When the Eggs Order came into force in 1941 they became licensed packers for the area lying within 10 miles of their packing station at Darsham, pursuant to a scheme brought into operation by the Minister. No fees or charges were payable under the licence. As a result of the scheme, some perhaps were put out of business, some licensed packers lost business and others gained. After the scheme had been running some time, the Minister invited all packers to set up a voluntary compensation fund within the industry to which surviving packers who had made a proportionate gain in business could make contributions, and out of which those packers who had been put out of business, or had suffered a proportionate loss of business, could be compensated. This fund was established and was run by a trade association, the National Egg Packers Association Ltd. Those administering the compensation fund took the view that the appellants had made a proportionate gain out of the scheme, and called on them to contribute

Page 40 of [1946] 2 All ER 38

to the compensation fund. For a time the appellants did so, but after a time they refused to make any further contributions. On 14 February 1945, the directors of egg supplies, on behalf of the Minister, wrote to the appellants’ chairman, pointing out that he had been asked many times to come and talk over the position, and that, as he would not come, and would not pay, the Minister would, under his powers, have to “re-transfer from you to other packers sufficient producers to bring you to the point at which no net contributions would be due from you into the compensation scheme,” a re-transfer which as the letter said, would involve “a reduction of (the appellants’) output to something less than half its present size.”

After further correspondence, in which the appellants refused to budge from their position, the Minister on 15 March wrote, saying that as from 22 March all collections by the appellants from producers south of a named geographical line would be transferred to another licensed packer. Between 3 and 6 April the Minister issued directions to 199 different producers accordingly, the appellants receiving one in their capacity of a producer within the area. Each direction purported to be given under the powers of reg 55, which, as stated, incorporated the directive powers of reg 54C, and not under any powers conferred by Order No 502.

The judge was plainly right on both issues. On the first he was right for these reasons: (1) The Emergency Powers (Defence) Act, 1939, s 1, gave powers to His Majesty in Council to make regulations. Subsect (1) is expressed in the widest terms possible and subsect 2(), which confers particular powers, begins “without prejudice to the generality of” subsect (1). (2) Reg 55 incorporating 54C confers both legislative power to make orders and executive power to give directions. The principle of interpretation of the regulations in regard to powers of both types is plain and has been affirmed time after time in this court and also in the House of Lords in appeals relating to orders under reg 18B. It is unnecessary to repeat what was said by this court in R v Comptroller of Patents, Ex p Bayer Products Ltd. Clauson and Goddard LJJ agreed with me. The same principle was enunciated by Lord Greene MR in Point of Ayr Collieries Ltd v Lloyd-George, and in Carltona, Ltd v Commissioners of Works and Others.

On the second issue it is enough to point out that no payment was demanded on behalf of the Crown or made to the Crown. It was contended for the appellants that the decision of the House of Lords in Attorney General v Wilts United Dairies, affirming the Court of Appeal, supported their contention before us that the Minister, by asking the licensed packers to help him to even out the losses and gain of the packers party to his scheme by joining in the voluntary compensation fund, had acted in a way expressly forbidden by the Bill of Rights. We do not agree. In that case the Food Controller, purporting to act under the powers conferred upon him by the Defence of the Realm Regulations during the first German War, had required dairy farmers in certain districts to make a payment direct to him of 2d per gallon in respect of milk supplied by them. As he had been given no such authority either by Parliamentary or by delegated legislation, the charge was held to be invalid; see per Lord Buckmaster, (91 LJKB 897, at p 900):

‘The powers so given are no doubt very extensive and very drastic, but they do not include the power of levying upon any man payment of money which the Food Controller must receive as part of a national fund and can only apply under proper sanction for national purposes.’

That decision has no relevance to the facts of the present case.

It is perhaps right to add that in the present case we have no ground whatever for thinking that there was any want of bona fides in the action taken by the Minister.

The appeal must be dismissed with costs.

TUCKER LJ agreed.

Appeal dismissed with costs.

Leave to appeal to the House of Lords refused.

Solicitors: Durrant, Cooper & Hambling (for the appellants); Treasury Solicitor (for the respondent).

C StJ Nicholson Esq   Barrister.

Barclay Davit Co Ltd v Samuel Taylor and Sons (Brierley Hill) Ltd

[1946] 2 All ER 41

Categories:        CIVIL PROCEDURE        

Court:        CHANCERY DIVISION        

Lord(s):        ROMER J        

Hearing Date(s):        2, 3, 8 APRIL 1946        

Practice – Discontinuance of action by plaintiff – Written statement delivered by plaintiff after delivery of defence – Statement delivered pursuant to an order made on an interlocutory application by plaintiff – Delivery of statement a “proceeding in the action” – Subsequent notice of discontinuance invalid – RSC, Ord 26, r 1 – RSC, Ord 53A, r 21A.

In an action by the plaintiffs alleging the infringement of their letters patent, the defence was delivered on 30 May 1945. On an interlocutory application by the plaintiffs under RSC, Ord 53A, r 21A, an order was made by the master on 6 November 1945, and, pursuant to that order, on 4 February 1946, the plaintiffs delivered a written statement signed by counsel. On 12 February 1946, the plaintiffs served notice of discontinuance. Under RSC Ord 26, r 1, a notice of discontinuance delivered by the plaintiff after receipt of the defendant’s defence is valid only if delivered before the plaintiff has taken “any other proceeding in the action (save any interlocutory application). It was contended by the defendants that the service of the written statement was a “proceeding in the action” within the meaning of RSC, Ord 26, r 1, and that the notice of discontinuance was, therefore, invalid. On behalf of the plaintiffs, it was contended that compliance with an order was not in itself a separate proceeding in the action and that, although the delivery of the written statement together with the order under which it was delivered constituted a “proceeding,” such proceeding was protected from the operation and scope of RSC, Ord 26, r 1, because it was made on an interlocutory application:—

Held – (i) An act which had some degree of formality and significance and which was done by the plaintiff in furtherance of the action was a “proceeding” within the meaning of RSC, Ord 26, r 1. The fact that the act was done in pursuance of an order made on an interlocutory application was immaterial where the order was made on the application of the plaintiff and there was no penalty for failure to comply with its provisions; the exemption from the operation of RSC, Ord 26, r 1, given to interlocutory applications and orders made under them did not include everything done as a result of such an order.

(ii) the delivery of the written statement by the plaintiffs, was a “proceeding in the action” within the meaning of RSC, Ord 26, r 1. The subsequent notice of discontinuance was, therefore, invalid.

Notes

Notice of discontinuance cannot be given after taking a “proceeding” other than an interlocutory application. This appears to mean a proceeding which is intended to be in furtherance of the action, but it is argued that where the proceeding in question is taken in consequence of an interlocutory order, such as an order made under RSC Ord 53A, r 21A, inpatent proceedings, notice of discontinuance can still be given. this view is rejected.

As to Discontinuance of Action, see Halsbury, Hailsham Edn, Vol 26, pp 76, 77, para 129; and for Cases, see Digest, Pleading and practice, pp 499–503, NOs 1736–1779, and Supplement.

For RSC Ord 26, r 1, see Yearly Practice of the Supreme Court, 1940, p 412.

Cases referred to in judgment

Munday v Butterley Co Ltd [1932] 2 Ch 227, Digest Supp, 102 LJCh 23, 148 LT 132.

Spincer v Watts (1889) 23 QBD 350, Digest Practice 499, 1737, 58 LJQB 383, 61 LT 711.

Vickers, Sons & Maxim Ltd v Coventry Ordnance Works Ltd [1908] WN 12, Digest Practice 499, 1738, 25 RPC 207.

Procedure Summons

Procedure Summons by the defendants, in a patent action, asking that the action stand dismissed for want of prosecution on terms that the plaintiffs should be precluded from bringing any further action in respect of infringements up to the date of the writ in this action. The facts are fully set out in the judgment.

P J Stuart Bevan for the applicants (the defendants).

James Mould for the respondents (the plaintiffs).

Page 42 of [1946] 2 All ER 41

8 April 1946. The following judgment was delivered.

ROMER J. This is a summons taken out by the defendants in the action of Barclay Davit Co Ltd against Samuel Taylor & Sons (Brierley Hill), Ltd. The summons asks that the action stand dismissed for want of prosecution on certain terms which are then set out in the summons.

The action is a patent action and pleadings were delivered. The writ was issued on 26 February 1945; the statement of claim was delivered on 5 April 1945, and the defence was delivered on 30 May 1945. On 12 February 1946, the plaintiffs served notice of discontinuance, and the date of that notice is, as will be seen, some months after the date of the delivery of the defence. The validity of that notice is challenged by the defendants, and I am invited to say that, having regard to the circumstances of the case, it was not open to the plaintiffs on 12 February 1946, to serve a notice of discontinuance and that the notice which, in fact, they did serve was a nullity and may be ignored.

The matter depends substantially on the language of RSC, Ord 26, r 1, the relevant part of which is as follows:

‘The plaintiff may, at any time before receipt of the defendant’s defence, or after the receipt thereof before taking any other proceeding in the action (save any interlocutory application), by notice in writing, wholly discontinue his action against all or any of the defendants or withdraw any part or parts of his alleged cause of complaint, and thereupon he shall pay such defendant’s costs of the action, or, if the action be not wholly discontinued, the costs occasioned by the matter so withdrawn … Save as in this Rule otherwise provided, it shall not be competent for the plaintiff [to discontinue his action].’

The defendants rely on two matters, each of which, they say, constitutes the taking of a proceeding in the action by the plaintiffs after 30 May 1945, upon which date the defence in the action was delivered. First, they say that on 14 August 1945, the plaintiffs swore an affidavit of documents and filed that affidavit, and that the filing of that affidavit constituted the taking of a proceeding. The affidavit was filed pursuant to an order made on a summons for directions taken out by the plaintiffs on 31 July 1945. The second matter which they say constitutes the taking of a proceeding by the plaintiffs was the delivery on 4 February 1946, of a written statement which was delivered by the plaintiffs pursuant to an order made on their application on 6 November 1945.

The application was made under RSC Ord 53A, r 21A, which provides:

‘(1) In any action for infringement of a patent or petition (otherwise than by way of appeal from the Comptroller) for the revocation of a patent, the plaintiff or petitioner shall, as soon as he becomes entitled to give notice of trial, apply as to the mode of trial, and if he fails to apply within 14 days of becoming so entitled, the defendant or respondent, as the case may be, may make such application. Any such application may be dealt with in chambers or in court, as the judge shall think fit. (2) Upon any such application the court or judge may give such directions:—(a) for the delivery of further pleadings or particulars; (b) for the delivery of statements signed by counsel setting out all the contentions whether of fact or law (including contentions as to the construction of the specification or other documents) upon which the parties respectively intend to rely; (c) for the taking by affidavit of evidence relating to matters requiring expert knowledge, and for the filing of such affidavits and the delivery of copies thereof to the other parties; (d) for the making of experiments, tests, inspections or reports; (e) for the hearing, as a preliminary question, of any question that may arise (including any question as to the construction of the specification or other documents), and otherwise as the court or judge may think necessary or expedient for the purpose of defining and limiting the issues to be tried [and other matters which are there mentioned].’

The order which was made under RSC, Ord 53A, r 21A, was an order made in chambers. So far as it is an order upon the plaintiffs, it directs [by para 2] that they:

‘… do on or before Dec. 4, 1945, make and file a statement stating (a) Whether they admit that the documents mentioned in para. 1 of the said particulars of objections were published in this realm before the date of the letters patent in suit. (b) Whether the plaintiffs will accept the King’s printers’ copies of the specification referred to in the pleadings or photostat copies thereof as evidence of the matters contained therein. (3) That within 4 weeks of the receipt of the statements in paras. 1 and 2 hereof referred to the plaintiffs and the defendants do respectively supply to the defendants and to the plaintiffs copies of any drawing model sample photograph blue print or other particular upon which the plaintiffs and the defendants respectively desire to rely at the trial.’

Page 43 of [1946] 2 All ER 41

Then there is a limitation as to the putting in of evidence at the trial by drawings, and so on, and other provisions, through which I do not propose to go, dealing in considerable detail with many matters which it was necessary or desirable should be dealt with and finalised with a view to getting ready for trial, and the conduct of the action at the trial. It was in pursuance of that order that the statement upon which the defendants rely, the written statement of the plaintiffs signed by their counsel, was put in and it contains certain admissions.

The defendants are plainly precluded from relying, as being proceedings in the action within the meaning of RSC, Ord 26, r 1, upon the applications which the plaintiffs made and which resulted, first, in the order for the filing of the affidavit of documents, and, secondly, in the order made by the master on 6 November 1945, because both those applications were interlocutory applications and interlocutory applications are expressly taken out of the scope of RSC, Ord 26, r 1. But the defendants say, as I have already indicated, that the filing of the affidavit and the service of the written statement constitute the taking of a proceeding by the plaintiffs within the meaning of RSC, Ord 26, r 1.

I confess that it is a matter of considerable difficulty to arrive—at all events, unaided—at any satisfactory conclusion as to what precisely the draftsman of RSC, Ord 26, r 1, had in mind when he used the language which appears in that part of the rule which I have read. The object, as I conceive it, of RSC, Ord 26, r 1, is to save expense and trouble to those concerned in the defence of an action in the event of the plaintiff making up his mind that he wants to discontinue the proceedings which he has set upon foot, and that, if he desires so to discontinue, then he must do so before his opponent has been put to any substantial degree of expense. That being, (as I believe it to be), the underlying principle of RSC, Ord 26, r 1, does not in any marked degree facilitate the problem which is set before me of saying what precisely, in detail, is meant. What is said, in effect, is that a plaintiff may discontinue so long as he has not taken any proceedings in the action other than interlocutory applications. Aye or no, is the statement which was a signed written statement delivered by the plaintiffs a proceeding in the action, and if it was not, then was the affidavit of documents which they filed a proceeding in the action other than an interlocutory application?

I will deal first, with the signed statement which was put in in response to the order of 6 November 1945, and see whether that is a proceeding within the meaning of RSC, Ord 26, r1. Both counsel who argued the case seem to be satisfied that the only authority which is of any assistance on this matter is Mundy v Butterley Co Ltd, where Maugham J had to consider whether a particular document, viz, a formal notice to deliver an affidavit of documents, which was given by the plaintiffs’ solicitors after the receipt of the defence, was or was not “any other proceedings in the action” within the meaning of RSC, Ord 26, r 1. He came to the conclusion that it was not.

In his judgment, after referring to certain considerations (which are relevant only in this sense, that they show how clearly convenient the course is which the defendants have adopted on the present occasion in coming to the court with a view to getting the matter decided here and now rather than waiting until the trial), Maugham J turned to the substantial point, which he said was not free from difficulty and continued as follows ([1932] 2 Ch 227, at pp 230–232):

‘The authorities which have been cited begin with Spincer v. Watts, where there is a judgment by LINDLEY, L.J., which has often been referred to. Unfortunately, I think, the ground on which the Court of Appeal decided that case is one which is not open to me here. It was an action by the holder against the acceptor and the drawer of a bill of exchange. The acceptor paid money into court in satisfaction of the claim, while the drawer delivered a defence denying liability, and set up a counterclaim. The plaintiff, after receipt of the defence, took the following step—a word I use without prejudice to what follows:—he paid into court the amount of the counterclaim and took out of court the amount paid in by the acceptor, and having done that, he gave the drawer notice of discontinuance. Then the question was whether that notice was good or bad, and that came before the court on a direction to tax. In the Court of Appeal, LINDLEY, L.J., after referring to Order 26, r. 1, and the facts in the case said this [23 Q.B.D. 350, at pp. 352, 353]: “It is said that it was then too late for the plaintiff to give a notice of discontinuance, because he had, after receipt of the defence, taken a ‘proceeding’ in the action, not being an interlocutory application. I think that the exception throws some light upon the meaning of the words ‘before taking any other

Page 44 of [1946] 2 All ER 41

proceeding in the action.' and, having regard to it and the object of the rule, I think what is meant is, ‘taking any proceeding with the view of continuing the litigation with the person against whom the proceeding is taken.' In the present case no proceeding was taken by the plaintiff with that view after the delivery of the defence. I think therefore, that the plaintiff’s technical objection fails, and it follows that he must pay the defendant Watts’ costs of the action up to the date of the notice of discontinuance.” LOPES, L.J., who was putting exactly the same point said this [23 Q.B.D. 350, at p. 353]: “I do not think that either of those steps is the kind of ‘proceeding’ which was contemplated by r. 1 of Order 26. I think the rule intended a proceeding which has the effect of continuing the action—not a proceeding which has the effect of putting an end to the action. Therefore, I think the plaintiff was entitled to give the notice of discontinuance.” That case does not seem to me to afford me very great assistance here, because the formal letter requiring a delivery of the defendants’ affidavit of documents was not a letter intended to put an end to the proceeding in any way whatever; it was a letter written in the ordinary course by the plaintiffs’ solicitors on the footing that the action was going to proceed and without evincing any intention whatever of shortening or putting an end to the proceedings or any part of them.

“The next case cited is Vickers, Sons & Maxim Ltd v. Coventry Ordnance Works Ltd. There it is to be observed that after the notice of discontinuance, the defendants set the case down for trial, and when it came on for trial counsel for the plaintiffs submitted that the action had come to an end on the previous Oct. 1, the date of the notice to discontinue, and that point the learned judge had, therefore, to determine. He infact determined that the notice to discontinue was bad, and accordingly the action had to be dealt with and was dismissed with costs, the plaintiffs not supporting the action. This instance, therefore, is one of very inconvenient procedure being adopted for the purpose of getting the point determined whether a notice of discontinuance is or is not good. What was decided to be the objection to the notice of discontinuance was the fact that after the delivery by the defendants of their defence and particulars of objection, the plaintiffs amended their statement of claim by adding parties and amended the averment of title, and delivered their amended statement of claim on July. 29, and then on Oct. 1, they gave notice to discontinue. WARRINGTON J said: “That was not a mere formal proceeding on their part but was done in order to enable them to prosecute successfully the action which without such amendment they could not have done.” Then the report continues: “The delivery of that amended statement of claim was in his Lordships’s judgment a proceeding other than an interlocutory application within Ord.26, r.1. The present case was not at all like Spincer v Watts as far as the facts were concerned, but the dicta of FINDLAY L.J. applied.’

It is quite plain, I think, with regard to the Vickers case that it was not there merely a question of amending the statement of claim but of amending the writ as well. There was an amendment of the whole of the proceedings by bringing in additional parties, and then there was a further amendment, with regard to the statement of claim, relating to the averment of title.

Maugham J then proceeded ([1932] 2 Ch 227, at pp 232, 233:

‘As I have said, he accordingly dismissed the action with costs. So far, therefore, I have only reached this stage in attempting to construe Ord. 26, r. 1: that a step taken with a view to putting an end to the action is not a proceeding in the action, and that an amended pleading delivered after the delivery of the defendant’s defence is prima facie another proceeding in the action and is clearly not an interlocutory application, which means an application to the court. It seems to me then I have to decide, without very much assistance from those authorities, whether such a letter, which clearly is not an interlocutory application, is a proceeding in the action, the word “proceeding” being one which certainly does suggest something in the nature of a formal step, either an application to the court which for the purposes of this rule would not be an interlocutory application, or at least a step taken by a litigant in prosecution of the action being a step which is required by the rules. In saying that, I am not attempting a complete definition, but merely a kind of approximation to the sort of proceeding which is probably pointed to by the terms of the rule. I do not think on the whole that a letter written by a solicitor stating that he intends to set the action down for trial at a future date would be a proceeding in the action; I do not think a mere appointment to examine documents which had been offered for inspection would be a proceeding; I do not think that conferences between solicitors or either informal or quasi informal letters or conversations could be regarded as a proceeding. I should add that I am not even sure that a formal application under the summons for directions for delivery of an affidavit of documents or for leave to administer interrogatories would be regarded as “proceedings in the action other than of an interlocutory nature,” and, without deciding that, I may add it would be very strange if a mere letter saying the previous order must be complied with is a proceeding within the meaning of this rule, although an application for the order, or for similar relief, would not bar the right of the plaintiff to discontinue the action because of the exception in the rule “save any interlocutory application.’

Page 45 of [1946] 2 All ER 41

The judge then referred to a case which was decided under the Arbitration Act, 1889, and, though it was of obvious relevance to the case which was before him, I do not think I get very much assistance out of it myself in arriving at a conclusion upon the present case.

The guidance which is to be found in Mundy v Butterley Co Ltd is largely of a negative character, but, at all events, one does find this much, that a proceeding may take the form of a document and is not limited to a proceeding before the court (being a proceeding other than an interlocutory application). But there is further guidance. I think, in forming a view (at which I have to arrive before I can proceed further in the matter) as to whether this written statement is a proceeding notwithstanding that it was made under an order. Counsel for the defendants suggested that a proceeding or step must be (i) for the purpose of continuing litigation and not putting an end to it; (ii) something in the nature of a formal step; (iii) not an interlocutory application. Those, he said, are the three tests to apply to any matter which is being relied upon under RSC, Ord 26, r 1. On the other hand, counsel for the plaintiffs says that compliance with an order already made was not in itself a separate proceeding in the action, but was all part of obtaining and perfecting the order: if it were so, the drawing up of the order would be a separate proceeding. He said that one has to ask oneself whether the plaintiffs, after the receipt of the defence, had taken some fresh step, with a view to furthering the litigation, contrasted with merely carrying out the provisions of some antecedent order. In the present case he said the order an everything done under it were steps which together constitute a proceeding, but that such proceeding is protected from the operation and scope of RSC, Ord 26, r 1, by reason of the fact that it was made on an interlocutory application.

It seems to me that the principal assistance I get from Mundy v Butterley Co Ltd are the two passages from Spincer v Watts where Lindley and Lopes LJJ expressly gave their views as to what RSC, Ord 26, r 1, meant. Lindley LJ after referring to the exception of interlocutory applications, said (23 QBD, 350, at p 353):

‘I think that the exception throws some light upon the meaning of the words “before taking any other proceeding in the action,” and, having regard to it and to the object of the rule, I think what is meant is, “taking any proceeding with the view of continuing the litigation with the person against whom the proceeding is taken.’

Lopes LJ said (ibid):

‘I think the rule intended a proceeding which is to have the effect of continuing the action—not a proceeding which has the effect of putting an end to the action.’

The views which I think that Lindley and Lopes LJJ were indicating were to some extent in this sense: that, provided that you find that some act has been done by the plaintiff in the furtherance of the action towards its ultimate end, namely, trial, and that that act is not merely an informal one but is one which sustains some degree of formality and significance, that act is a proceeding within the meaning of RSC, Ord 26, r 1. I think that that view of the matter is very much the one which Maugham J himself was expressing in the Mundy case when he pointed out that there must be, at all events, a real formality, and that the word “proceeding” certainly does suggest something in the nature of a formal step taken with a view to furthering the litigation. It is plain that informal discussions and informal documents, directed though they may be, and probably would be, to the advancement of the action towards trial, are not necessarily proceedings within the meaning of RSC, Ord 26, r 1. If, however, one finds something which has both formality and significance, and which is either taken or launched by the plaintiff with a view to bringing the action nearer to trial, it seems to me that that is a “proceeding” within the meaning of RSC, Ord 26, r 1; and I think that one would be cutting down the scope and intention of the rule if one were to accept the more limited interpretation which counsel for the plaintiffs seeks to put upon it in cases where what is done is done by virtue of the provisions of an order. It seems to me that the position in the present case was this. The plaintiffs applied for an order, and an order was made which dealt thoroughly and completely, both in matters of detail and procedure with this action down to and including the trial. The fact that the plaintiff got this order made on an interlocutory application and that the application itself, and the order made upon the application, are excepted from the

Page 46 of [1946] 2 All ER 41

operation of RSC, Ord 26, r 1, does not mean that the exemption which flows from RSC, Ord 26, r 1 in favour of an interlocutory application, results also in exemption of everything that follows as the result of the order on the interlocutory application being made.

As I have already said, the order was one of considerable importance and dealt with a variety of topics. Para 2 of the order, which was the one upon which the plaintiffs acted, directed the filing of the statement which I am now considering. Para 3 prescribed:

‘That, within 4 weeks of the receipt of the statements in paras. 1 and 2 … the plaintiffs and the defendants do respectively supply to the defendants and to the plaintiffs copies of any drawing model sample photograph blue print.’

The order then dealt with the calling of expert witnesses at the trial, that being merely a matter of procedure, and then gave either party liberty to set down the action for trial at the expiration of the time therein indicated, and also went on to deal with discovery. It seems to me that action under para 3 could not fairly be regarded as anything other than a proceeding within the meaning of the rule. Action under para 7 (which is the setting down for trial) obviously would be a proceeding within the meaning of the rule, and, in my view, action under para 2 is equally an independent proceeding under the rule and it would be giving an unduly narrow interpretation to the word “proceeding” to regard the filing of a statement under para 2 (which was, in fact, filed) as merely a step in carrying out the order as distinct from a proceeding in the action.

Logically, it seems to me that the plaintiffs’ argument goes to this, that they could have carried out the order in its entirety, except para 7, and yet not have taken a proceeding in the action within the meaning of that word as used in RSC, Ord 26, r 1. It seems to me that the filing of this statement wholly differs from the informal kind of matter to which Maugham J referred towards the end of his judgment in Mundy v Butterley Co Ltd, and does in fact possess the degree of formality and significance which would justify one in describing it as a proceeding other than an interlocutory application in the action.

The only other point upon which I might say a word is the question whether, assuming that, as I find it to be, the filing of the plaintiffs’ statement is a proceeding, the fact that it was filed in pursuance of an order makes any difference. It occurred to me at one stage of the discussion that a possible view might be that RSC, Ord 26, r 1, was only directed to proceedings of a purely and wholly voluntary character, such as, eg (although it is expressly exempted from the rule), the launching of an interlocutory application. But RSC, Ord 26, r 1, does not say so; it is quite unqualified in its terms and uses the expression “any other proceeding.” Whether, in certain special circumstances, one might be justified in qualifying those words in some way, I do not think that I am justified in doing so in this case by saying that a proceeding made in pursuance of this particular order is outside the scope of RSC, Ord 26, r 1, because it is to be observed that not only was the order made on the application of the plaintiffs themselves, but it carries with it nothing in the nature of a sanction or penalty for failure to observe or comply with its provisions. The plaintiffs might perfectly well have disregarding the order, without any pains or penalties being inflicted upon them, by serving notice of discontinuance the moment the order had been made.

I am satisfied that, although there might be some ground in some cases for thinking that some act is of such an involuntary character as to be outside the scope of RSC, Ord 26, r 1, the filing of this statement by the plaintiffs in the manner contemplated by the order does not cease to be a proceeding, or is not prevented from being regarded as a proceeding, merely because it was done in pursuance of the order which the master made. Therefore, in my judgment, the filing of this statement is in fact a proceeding within the meaning of RSC, Ord 26, r 1, and I so decide.

On that view, it does not become necessary for me to deal with the further ground upon which the defendants submitted that the plaintiffs had taken a step in the action, namely, the filing by them of an affidavit of documents, and I express no view as to whether that contention is or is not sound.

Consent order that the action be discontinued. Costs of the action down to and including the application (such costs to be taxed if not agreed) to be paid by the plaintiffs to the defendants. Plaintiffs to be precluded from bringing any further

Page 47 of [1946] 2 All ER 41

action in respect of the infringement of which specific particulars were given in this action.

Solicitors: Peacock & Goddard agents for Shakespeare & Vernon, Birmingham (for the applicants, the defendants in the action); Blundell, Baker & Co (for the respondents, the plaintiffs in the action).

B Ashenazi Esq   Barrister.

Rees v Hughes

[1946] 2 All ER 47

Categories:        SUCCESSION; Administration of Estates        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MORTON AND TUCKER LJJ        

Hearing Date(s):        10, 11 APRIL, 10 MAY 1946        

Husband and Wife – Death of wife owning separate estate – Funeral expenses – Medical and nursing fees – Liability of executors – Common law liability of husband – Effect of married women’s property legislation – Married Women’s Property Act, 1882 (c 75), s 1(1) – Administration of Estates Act, 1925 (c 23), ss 32(1), 33(1), (2) and (7), 34(1) and (3), 45(1) and (2), 46(1), Sched I, Pt I – Law Reform (Married Women and Tortfeasors) Act, 1935 (c 30), ss 1, 2.

Burials – Expenses – Deceased wife – Common law liability of husband – Effect of married women’s property legislation.

The appellant’s wife, who owned separate property, died at the home of the respondents, with whom she had been living for some months prior to her death, leaving a will of which the respondents were executors. The questions involved were whether the respondents could recover from the appellant (i) a sum which they, in their capacity as executors, paid in respect of medical attendance and nursing fees, without any request, express or implied, from the appellant and without legal compulsion so to do, and (ii) a sum paid in respect of funeral expenses, the will having contained no direction with regard thereto:—

Held – (i) If the medical and nursing fees were the liability of the appellant’s wife, they were properly discharged out of the estate and there was no liability on the appellant; if they were the liability of the appellant, they should not have been paid by the respondents, and as the respondents had paid them without any request from the appellant and without legal compulsion so to do, they could not recover the money so paid from the appellant.

(ii) the effect of the Married Women’s Property Act, 1882, the Administration of Estates Act, 1925, and the Law Reform (Married Women and Tortfeasors’ Protection) Act, 1935, was that there was now, as regards property of any kind, no difference between a married woman and a feme sole; the foundation for the old common law rule putting on the husband the public duty of burying his deceased wife had disappeared, and the wife’s estate was liable for that which had previously been an obligation imposed on the husband, who had, by the marriage, acquired his wife’s personalty; the respondents could not, therefore, recover from the appellant the sum paid by them, in their capacity as executors, in respect of funeral expenses.

Notes

This case is an application of the maxim cessante ratione legis, cessat ipsa lex. The common law liability of a husband to pay his wife’s funeral expenses arose from the fact that her personality passed to her husband on marriage, she was unable to make a will of realty or personality, and had no separate existence apart from her husband. When she had separate estate this might, indeed, be liable in equity for payment of funeral expenses, but this did not affect the common law position. Successive legislation, however, has now placed a married woman in every respect on the same footing as a feme sole, and the liability of the husband, therefore, no longer exists. The court refuses to express any opinion on the position arising if the wife left no estate.

As to The Duties of Executors and Others as to Burial, see Halsbury, Hailsham Edn, Vol 3, pp 456–460, paras 856–865; and for Cases, see Digest, Vol 7, pp 520–526, Nos 1–62.

Cases referred to in judgments

Willock v Noble (1875), LR 7 HL 580, 37 Digest 424, 326, 44 LJCh 345, 32 LT 410, affg SC sub nom Noble v Willock (1873), 8 Ch App 778.

Page 48 of [1946] 2 All ER 47

Bertie v Chesterfield (Lord) (1723), 9 Mod Rep 31, 27 Digest 83, 650.

Gregory v Lockyer (1821), 6 Madd 90, 27 Digest 83, 651.

Willeter v Dobie (1856), 2 K & J 647, 7 Digest 523, 23.

Re M’Myn, Lightbown v M’Myn (1886), 33 Ch D 575, 7 Digest 523, 24, 55 LJCh 845, 55 LT 834.

Edwards v Edwards (1834), 2 Cr & M 612, 7 Digest 525, 53, 4 Tyr 438, 3 LJEx 204.

Tugwell v Heyman (1812), 3 Camp 298, 7 Digest 523, 28.

Sharp v Lush (1879), 10 ChD 468, 7 Digest 522, 16, 48 LJCh 231.

Green v Salmon (1838), 8 Ad & El 348, 7 Digest 523, 21, 3 Ner & PKB 388, 1 Will Woll & H 460, 7 LJQB 236.

Williams v Williams (1882), 20 ChD 659, 7 Digest 521, 8, 51 LJCh 385, 46 LT 275.

Ashby v White (1703), 1 Bro Parl Cas 62, 1 Digest 23, 187, Holt KB 524, 2 Ld Raym 938, 6 Mod Rep 45, 1 Salk 19, 3 Salk, 17, 14 State Tr 695, 1 Smith LC, 12th Edn 266.

Jenkins v Tucker (1788), 1 Hy Bl 90, 7 Digest 524, 39.

Ambrose v Kerrison (1851), 10 CB 776, 7 Digest 524, 38, 20 LJCP 135, 17 LTOS 41.

Bradshaw v Beard (1862), 12 CBNS 344, 7 Digest 524, 41, 31 LJCP 273, 6 LT 458.

Rogers v Price (1829), 3 Y & J 28, 7 Digest 522, 15.

Appeal

Appeal by the defendant from an order of His Honour Judge Evans KC made at Conway County Court, and dated 17 January 1946. The facts are fully set out in the judgment of Scott LJ.

Ralph Sutton KC and Carey Evans for the appellant.

Gerald Gardiner for the respondents.

Cur adv vult

10 May 1946. The following judgments were delivered.

SCOTT LJ. In this case the defendant appeals from the judgment of His Honour Judge Evans, finding him liable to repay to the executors of his wife’s will certain payments made by them in that capacity, amounting in all to £51 15s 0d, of which £32 17s 6d represented the cost of her funeral and burial and the balance, £18 7s 6d, was for medical and nursing services in the lady’s last illness. The defence was a denial of liability and a plea that “the payments were not made for or on the defendant’s behalf.” The wife had property of her own, shown in the account for estate duty at £1,063 8s 3d (gross) of personalty, and £1,200 (gross) of realty, with total debts (including the above items) of only £170 4s 0d  For the last three months of her life the deceased had been living in the house of her brother-in-law and sister, the executor and executrix named in the will and plaintiffs in the action, her husband visiting her there regularly. The appellant and the deceased had been married in 1937. There was no evidence below of any request having been made to the respondents by the appellant to pay either of the debts. The solicitor for the defendant below there submitted that the deceased was, as a result of modern legislation about married women, in exactly the same position as a feme sole or a man in regard to property rights and duties, and that therefore the claim by her personal representatives against the husband for burial and funeral expenses was bad in law. The cost of medical and nursing expenses was, he contended, either a debt of the deceased and not of the husband, or, alternatively, if it was the husband’s debt, there was no request by him to them to pay it, and no payment by the executors in mistake of fact. It was, therefore, a voluntary payment irrecoverable from him. The judge, however, seems to have held that the medical and nursing services were “necessaries,” and that the fact of itself entitled the executors to recover from the husband—on what ground I do not understand. In regard to the funeral expenses, he relied on “a presumption of law in the absence of special circumstances” that the husband was liable, that there were no special circumstances, and that, therefore, the husband must pay. In my opinion, he was wrong on both issues. I will take the funeral expenses first.

On this topic counsel for the husband, in an illuminating exposition of the position of married women, traced the early case history both at common law and in equity down to 1883, and thereafter the statutory history beginning with the Married Women’s Property Act, 1882. His argument is, in my view, unanswerable.

Page 49 of [1946] 2 All ER 47

There is an obligation at common law, in the nature of a public duty, which rests on certain persons, in whose possession a dead body may be—a husband being one—to bury it. And at common law, before modern legislation about married women, if a woman died covert, her husband was bound to discharge that duty, at his own expense, up to a reasonable amount, no doubt varying with his position in the world. So fundamental was his obligation that even a stranger, who as a volunteer carried out the funeral and burial of the dead wife at his own expense, was entitled to recover the amount (up to that reasonable limit) from the husband. It was this ancient duty of the husband, at common law, which the judge doubtless had in mind when he decided against the appellant. But, as the appellant’s solicitor rightly submitted to the judge, that position has been completely changed by legislation. The very foundation of the duty, the foundation which gave rise to the common law doctrine, has completely gone, and has taken with it the superstructure which the common law had erected on it.

In order to demonstrate the change in the position, counsel for the appellant took the court through the relevant decisions, in logical sequence, beginning with Willock v Noble, from which he cited Lord Cairns LC (LR 7 HL 580 at pp 589–591), Lord Chelmsford (ibid, at p 596), and Lord Hatherley (ibid, at p 603). The wife being by marriage completely identified with her husband and having at law no property of her own, and no separate power of disposition, the duty of burying her body inevitably fell at common law on her surviving husband. Bertie v Lord Chesterfield was an early recognition of the husband’s duty at law, in which it was held that a power in equity of disposition over settled personalty could not extend to her own funeral expenses since that would mean that “she had given away more than she had to dispose.” It not being proved in that case that the late Earl had requested the plaintiff, as executor of the countess’s equitable estate, to pay the funeral expenses, his bill against the late Earl’s estate was dismissed with costs. The executor of the Countess was not liable because he was not executor of property on which the liability for funeral expenses would or could legally fall.

No authority for the proposition, that, even in the pre-1883 period, the executor of a married woman, disposing by will of her equitable settled estate, had any liability at common law to pay for her funeral expenses, was called to our attention by counsel for the respondents, and counsel for the appellant submitted that there is none. That equity would give effect to a direction in the will of a married woman that her funeral expenses should be paid out of her settled estate does not touch the common law rule of the husband’s obligation. In this context counsel for the appellant cited Gregory v Lockyer; Willeter v Dobie; Lightbound v M’myn.

Where a man dies possessed of personal property, the duty of burying his body falls primarily on his personal representatives: see Blackstone’s Commentaries, Vol 2, ch 32, p 508; and this duty entitles the personal representative to absolute priority of reimbursement out of the estate: see Edwards v Edwards (2 Cr & M 612)—a case of an insolvent estate. By an extreme application of the husband’s liability the common law allowed even a stranger to recover from the estate his voluntary expenditure on funeral expenses: see Tugwell v Heyman, and particularly the note to that case to the effect that a stranger who uses assets of the estate for that purpose does not thereby make himself an executor de son tort.

That funeral expenses fall within executorship expenses hardly seems to call for authority, but counsel for the appellant cited to us three plain cases: Sharp v Lush, Green v Salmon, and Williams v Williams. Indeed, the executor is not only so entitled, but is bound thereto, because apart altogether from the will the law imposes that duty. There would thus in the old law seem to be a possible case of two persons falling under the duty of burying a deceased wife—first, the husband at common law and, secondly, the executors of the will of the wife disposing of her settled estate, containing a direction to her executors and trustees to pay for her funeral. But no case was brought to our attention in which the executors of the wife had ever attempted to recover from the husband their own expenditure on the funeral.

The modern statutory alteration of the married woman’s position began on 1 January 1883, when the Married Women’s Property Act, 1882, came into force.

Page 50 of [1946] 2 All ER 47

Sect 1(1) says:

‘A married woman shall, in accordance with the provisions of this Act, be capable of acquiring, holding and disposing by will, or otherwise, of any real or personal property as her separate property, in the same manner as if she were a feme sole, without the intervention of any trustee.’

The next stage in the journey of the married woman to independence was brought about by the Administration of Estates Act, 1925. Sect 32(1) says:

‘The real and personal estate, whether legal or equitable, of a deceased person, to the extent of his beneficial interest therein, and the real and personal estate of which a deceased person in pursuance of any general power … disposes by his will, are assets for payment of his debts … and liabilities … ’

Of course, in this subsection the masculine includes the feminine. Subsects (1) and (2) of sect 33, read together, provide that out of the real and personal estate of an intestate:

‘… the personal representative shall pay all such funeral, testamentary and administrative expenses, debts and other liabilities as are properly payable thereout having regard to the rules of administration contained in this Part of this Act … ’

Subsect (7) makes the provisions of the section subject to the provisions of a will. Sect 34(1) provides that:

‘Where the estate of a deceased person is insolvent, his real and personal estate shall be administered in accordance with the rules set out in Part I of the First Schedule to this Act.’

And Sched I, Pt I, r 1, says:

‘The funeral, testamentary and administration expenses have priority.’

Sect 34(3) is as follows:

‘Where the estate of a deceased person is solvent his real and personal estate shall, subject to rules of court and the provisions hereinafter contained as to charges on property of the deceased, and to the provisions, if any, contained in his will, be applicable towards the discharge of the funeral, testamentary and administration expenses, debts and liabilities payable thereout in the order mentioned in Part II of the First Schedule to this Act.’

The “order” there mentioned does not affect the present question. Sect 45(1) in effect abolishes all rules of distribution other than those contained in the Act, excepting only entailed interests (subsect (2)). Sect 46(1) provides in detail for the distribution of the residuary of an intestate, and subsect (1)(ii) says:

‘If the intestate leaves issue but no husband or wife, the residuary estate of the intestate shall be held on the statutory trusts for the issue of the intestate.’

As the result of the above provisions read with the 1882 Act, counsel for the appellant submitted that husband and wife became entirely separate persons in law and were treated as being each in precisely the same position as the other for practically all purposes connected with the rights and obligations in connection with property. Whatever gaps were still left were filled in by the Law Reform (Married Women and Tortfeasors) Act, 1935. Sect 1 provides that, subject to certain provisions not presently relevant:

‘… a married woman shall (a) be capable of acquiring, holding, and disposing of, and property … in all respects as if she were a feme sole.’

And sect 2(1) provides that (similarly subject):

‘… all property which … (b) belongs at the time of her marriage to a woman married after the passing of this Act; or (c) after the passing of this Act is acquired by or devolves upon a married woman, shall belong to her in all respects as if she were a feme sole and may be disposed of accordingly.’

The amendments to previous Acts contained in the second column of Sched. I and the repeals contained in the second column of Sched II, are consequential on the main provisions of the Act, and fill in the interstices in order to perfect the reform intended by Parliament—so that, for all questions of rights or liabilities relating to property of any kind, there should in future be no difference whatever between the position of a married woman and a feme sole—or, for that matter, of a man.

Page 51 of [1946] 2 All ER 47

This being the effect of the express language of the three statutes, all the original reasons, which made the common law put on the husband the public duty of burying his deceased wife, have wholly ceased to operate. The contention of the appellant is that, if the wife is to be treated as a feme sole during her life, she also dies as a feme sole; the duty of burying her in that capacity necessarily falls on her personal representatives, to exactly the same extent and for the same reasons as on the death of her husband it is the duty of his personal representatives to bury him. That contention is in my opinion well-founded, as resting on an express provision of statute law. But if there be any doubt as to the meaning of the express provisions, I regard it as a case where the maxim cessante ratione legis, cessat ipsa lex applies directly and obviously. Broom, in his Legal Maxims, 9th Edn, p 107 begins with the positive and complementary maxim ubi eadem ratio, ibi idem jus, which he paraphrases as:

‘The law consists, “not in particular instances and precedents, but on the reason of the law“… ’

quoting Lord Holt CJ in Ashby v White. The negative maxim, which is the more relevant in the instant case, he paraphrases at p 110 as follows:

‘Reason is the soul of the law, and when the reason of any particular law ceases’ so does the law itself.’

The legislation about married women has thus caused the law, requiring the husband to bury his dead wife, to cease—at any rate, where she leaves assets, as in the present case.

As regards the other heads of claim, for doctor’s fees and nursing charges, there obviously can be no liability on the husband. The fact that both types of service might or would come within the description of “necessaries,” if they had been rendered on the credit of the husband, is irrelevant. As the wife was ill as a feme sole the prima facie presumption of law is that credit was given to her and not to her husband; and, there being no fact in evidence to support a finding that either doctor or nurse relied on the husband’s credit, there was no possible foundation in law for the judge’s conclusion. But in any case, if the wife’s executors who paid did so because they thought the husband was liable—a most unlikely supposition—they were mere volunteers, paying under a mistake not of fact but of law, and “money paid at request” does not lie in such a case.

Since writing this judgment I have read the judgments of my brethren and agree with them.

The appeal must be allowed with costs here and below—there on Scale C.

MORTON LJ [read by Tucker LJ]. I have had the advantage of reading the judgment which is about to be delivered by Tucker LJ. I agree with that judgment, and I only desire to make a few brief observations.

In the present case the wife’s estate was sufficient for payment of her funeral expenses. I am satisfied that in such a case the husband is now under no liability to pay these expenses. The question whether a husband still remains liable to pay his wife’s funeral expenses if the wife leaves no estate, or if the wife’s estate is insufficient to make this payment, does not arise in the present case, and I do not think that Scott LJ, has expressed, or that Tucker LJ intends to express, any opinion upon it. In these circumstances I propose to follow their example. This question may never come before the court for decision.

TUCKER LJ. There are two quite distinct questions involved in this appeal. The first is whether the executors of the deceased can recover from her husband the sum of £18 17s 6d, being the sum which they in their capacity of executors have paid in respect of medical attendance and nursing fees incurred during the last illness of the deceased lady. The second is whether they can recover the sum of £32 17s 6d which they have paid in respect of the funeral expenses, the will having contained no direction with regard thereto. The county court judge has decided both questions in favour of the executors and given them judgment for £51 15s 0d

The first question can, in my opinion, be very shortly disposed of. The medical and nursing fees must have been a liability either of the husband or the wife. If they were the wife’s liability they have been properly discharged out of the

Page 52 of [1946] 2 All ER 47

estate and there is no liability on the husband. On the other hand, if they were the liability of the husband, they should not have been paid by the executors, and if the executors have paid them without any request from the husband and without legal compulsion so to do, they cannot recover the money so paid from the husband. There was no suggestion that there had been any such request, express or implied, or any compulsion in law and, consequently, this part of their claim should have been dismissed.

The funeral expenses raise very different considerations. It is common ground that at common law, before modern legislation altering the status of married women, the husband was liable for his wife’s funeral expenses; and in the interests of public decency the law allowed a stranger who had voluntarily incurred and paid such expenses, without any request from the husband so to do, to recover them from him: see Jenkins v Tucker, Ambrose v Kerrison, and Bradshaw v Beard. In such cases the law will imply a request on the part of the husband to do that which it is his legal and moral obligation to perform.

But counsel for the appellant contends that the effect of the Married Women’s Property Act, 1882, the Administration of Estates Act, 1925, and the Law Reform (Married Women and Tortfeasors) Act, 1935, has been to put married women as regards their property and contracts in the same position as femes sole, that is, on the same footing as men. Before considering the provisions of those statutes as affecting married women it may be convenient to state the position with regard to the burial expenses of a man. It has long been well settled that where a man dies possessed of property his funeral expenses must come out of that property. In Blackstone’s Commentaries, Vol 2, ch 32, p 508, dealing with the powers and duties of an executor, it is said:

‘He must bury the deceased in a manner suitable to the estate which he leaves behind him. Necessary funeral expenses are allowed, previous to all other debts and charges … ’

See also Edwards v Edwards where Parke, B (2 Cr & M 612, at p 616) said:

‘I take the rule to be, that the executor is entitled to be allowed reasonable expenses, and if he exceeds those he is to take the chance of the estate turning out insolvent.’

In Tugwell v Heyman, and Rogers v Price, it was held that executors with assets in their hands were liable for payment of funeral expenses even where they had not ordered the funeral; and this was stated to be the law by Jessel MR in Sharp v Lush (10 Ch D 468, at p 472).

It is contended by the appellant that the law as there stated is now equally applicable to the executors of a deceased married woman. The Married Women’s Property Act, 1882, s 1, provided that a married woman should be capable of acquiring, holding and disposing of any real or personal property as her separate property as if she were a feme sole. Then, in 1935, the Law Reform (Married Women and Tortfeasors) Act, 1935, s 1, provided so far as material as follows:

‘Subject to the provisions of this Part of this Act … a married woman shall—(a) be capable of acquiring, holding and disposing of any property; and (b) be capable of rendering herself, and being rendered, liable in respect of any tort, contract, debt, or obligation; and (c) be capable of suing, and being sued, either in tort or in contract or otherwise; and (d) be subject to the law relating to bankruptcy and to the enforcement of judgments and orders, in all respects as if she were a feme sole.’

Sect 2 provides:

‘Subject to the provisions of this Part of this Act all property which (a) immediately before the passing of this Act was the separate property of a married woman or held for her separate use in equity; or (b) belongs at the time of her marriage to a woman married after the passing of this Act; or (c) after the passing of this Act is acquired by or devolves upon a married woman, shall belong to her in all respects as if she were a feme sole and may be disposed of accordingly … ’

A married woman having thus been put in these respects on the same footing as a feme sole, which is equivalent for these purposes to that of a man, the result is that the provisions of the Administration of Estates Act, 1925, are equally applicable to the estate of a married woman as to the estate of her husband. It is, I think, sufficient to refer to sect 34, and to Sched I. Sect 34(3) is as follows:

Page 53 of [1946] 2 All ER 47

‘Where the estate of a deceased person is solvent his real and personal estate shall, subject to rules of court and the provisions hereinafter contained as to charges on property of the deceased, and to the provisions, if any, contained in his will, be applicable towards the discharge of the funeral, testamentary and administration expenses debts and liabilities payable thereout in the order mentioned in Part II of the First Schedule to this Act.’

Sched I, Pt I, deals with the order of payment of debts where the estate is insolvent and provides that the funeral, testamentary and administration expenses have priority. It seems clear, therefore—and I do not understand this to be disputed—that the executors of a deceased married woman are now liable to pay her funeral expenses. But it is contended for the executors that the husband still remains liable as he was at common law and that his liability is the “primary” liability so that the executors can recover from him any sum which they have been called upon to pay as a result of their “secondary” liability. No authority for this proposition was cited and for my part I do not understand in this connection the notion of a “primary” and “secondary” liability. The executors, it is to be noted, are not claiming contribution. They are asking to be indemnified.

The true view is that contended for by counsel for the appellant, namely, that the basis of the husband’s liability at common law was the status of a married woman and her limited power to make a will as described by Lord Cairns LC in Willock v Noble, where he says (LR 7 HL 580, at p 589):

‘Before the Wills Act a married woman was, as a general rule, incapable of making a will. Her will of land was declared void by statute. Her will of personalty was equally invalid, not merely because marriage was a gift of her personalty to her husband, but because in the eye of the law the wife had no existence separate from her husband, and no separate disposing or contracting power.’

He then goes on to refer to certain modifications which were engrafted on this general rule and points out that the Wills Act left her capacity to make a will exactly as it stood before the Act.

Counsel for the executors, relied upon certain cases where courts of equity have been called upon to decide whether the wife’s separate estate or the husband should bear the funeral expenses. In Gregory v Lockyer where a decree had directed the funeral expenses to be paid out of the separate estate of a feme covert, Sir John Leach, V-C, ordered the cost thereof to be repaid by the executor to the husband who had actually paid the bill, but expressed a doubt whether generally the husband has a right to throw the funeral expenses on the wife’s separate estate. In Willeter v Dobie the wife, in exercise of certain powers of appointment given to her notwithstanding coverture in relation to her separate estate, appointed the residue among her nieces “after payment of her just debts, funeral and testamentary expenses.” It was held that this was a good charge upon the residue. Sir W Page Wood, V-C, said that the rule that a husband is liable to pay the funeral expenses equally with the debts of his deceased wife was not disputed but added (2 K & J 647, at p 649):

‘… the point is, whether, by this clause in her will, the wife has not relieved her husband out of her separate estate—whether she has not made him a present, in effect, of what her funeral expenses would have cost him.’

In Lightbown v M’myn (33 ChD 575, at p 576) Chitty J said:

‘In Willeter v. Dobie it is true that there was a charge by the wife of her funeral expenses. It is also true that the law casts upon a husband the duty of burying his wife, but the law does not on that account cast upon the husband the burden of burying his wife at his own cost always. In most cases the husband takes all his wife’s personal property by reducing it into possession during his lifetime. To call upon him to bury her out of his own moneys in a case like the present, where the wife exercised her power of appointment, and made the fund general assets for her creditors but has omitted to mention her funeral expenses, would be too hard. I think, therefore, that the husband is entitled to retain the sums expended on her funeral.’

In Bertie v Chesterfield the executor under the will of a married woman, made in pursuance of a power to dispose of property the subject of separate maintenance, who had paid the funeral expenses of the married woman was allowed to be reimbursed out of assets of her deceased husband which he had devised to a third party subject to the payment of his debts.

Page 54 of [1946] 2 All ER 47

These cases, in my view, merely indicate that the court in the exercise of its equitable jurisdiction was always careful to see that the separate estate of a married woman should not without sufficient reason be made to bear an obligation which was the husband’s at common law. Now that the separate estate of a married woman has ceased to exist and she has in this respect the status of her husband, the very foundation for the old common law rule has disappeared and the wife’s estate is, in my view, liable for that which had previously been an obligation imposed on the husband who had by the marriage acquired his wife’s personalty.

For these reasons, I think the executors’ claim against the husband was not maintainable and that this appeal succeeds.

Appeal allowed with costs.

Solicitors: Rhys Roberts & Co agents for William George & Son, Portmadoc (for the appellant); Sharpe, Pritchard & Co agents for Porter & Co Conway (for the respondents).

C StJ Nicholson Esq   Barrister.

Shayler v Woolf

[1946] 2 All ER 54

Categories:        LAND; Sale of Land, Other Land: CONTRACT        

Court:        COURT OF APPEAL        

Lord(s):        LORD GREENE MR, MORTON AND SOMERVELL LJJ        

Hearing Date(s):        9, 13 MAY 1946        

Waters and Watercourses – Sale of land – Contemporaneous agreement for supply of water – Vendor owner of adjacent land – Covenants by vendor to supply water from pump on vendor’s land for use of purchaser in connection with house on conveyed land and to keep pump in repair – Whether benefit of agreement assignable to subsequent purchaser – Effect of arbitration clause – Arbitration Act, 1889 (c 49), s 4.

Contract – Agreement for supply of water – Arbitration clause – Whether contract assignable – Arbitration Act, 1889 (c 49), s 4.

On 30 July 1938, Mrs W conveyed a piece of land adjoining her own premises to Mrs P, who convenanted to build thereon a bungalow for which she required a water supply. On the same day, an agreement was entered into between Mrs W and Mrs P, whereby Mrs W agreed to supply from a pump on her premises water for the use of Mrs P in connection with the bungalow to be erected on Mrs P’s premises. Cl 1 of this agreement provided: “[Mrs. W.] will henceforth supply to [Mrs. P.] from the aforesaid pump situate on the premises of [Mrs. W.] and so long as such pump shall continue to produce the same a regular and continuous supply of water for use in respect of all domestic purposes in connection with the said bungalow.” By cl 2, Mrs P was to pay 10s a year to Mrs W for the water supply. Cl 4 provided: “[Mrs. W.] hereby covenants with [Mrs. P.] for and with intent to bind so far as may be herself and her successors in title that she and they will henceforth maintain and keep the said pump and the pipes taps and apparatus thereto in good and proper working order and repair and so long as such pump shall continue to produce the same do all such things as may be necessary to insure a constant supply of water.” The agreement was determinable at the option of either party after the expiration of 10 years from the date thereof and it contained an arbitration clause. When the agreement was made in 1938, the pump was producing water but was not in a good state of repair. Later, apparently owing to the accumulation of earth and debris in the well which surrounded the pipe, the pump ceased to deliver water. Since the necessary repairs would have been expensive at the time, it was considered more economical to construct a new pump. The old pump was, therefore, dismantled, a new bore-hole was sunk and a new pumping apparatus was installed. There would have been no difficulty in connecting the bungalow to the new installation, but this was not done. On 17 August 1944, Mrs P conveyed the property and the bungalow, together with the benefit so far as assignable of the water supply agreement, to S S requested Mrs W to continue the supply of water to the bungalow, but she refused to do so. S thereupon brought an action for specific performance of the agreement. On

Page 55 of [1946] 2 All ER 54

behalf of Mrs W it was contended that there had been no breach of covenant because the proper repair of the well would have involved installing entirely new apparatus which could not be said to come within the covenant. It was further contended that the benefit of the contract was not assignable (a) because it was not the intention of the parties that it should be assignable; (b) because it contained an arbitration clause and such a clause was in its nature not assignable:—

Held – (i) There had been a breach of covenant on the part of Mrs W by reason of her failure to keep the pump in repair. The covenant did not relate to the well, but to the pump and, on the facts of the case, the proper repair of the pumping apparatus would not have involved installing an entirely new piece of apparatus. Although the obligation to supply water was limited to the time when the pump “shall continue to produce” water, that phrase referred to a failure of the water supply owing to something other than a breach of covenant.

(ii) on the true construction of the contract, it was the intention of the parties that it should be assignable. Moreover, since the contract did not relate to personal services and there would be no increase in the burden of the contract if it were assigned, no objections to assignability arose.

(iii) if a contract were otherwise assignable, an arbitration clause did not prevent it from being assignable; the clause followed the assignment of the subject matter of the contract. It was clear from the Arbitration Act, 1889, s 4, that an arbitration clause was in its nature assignable.

Cottage Club Estates v Woodside Estates Co (Amersham) Ltd distinguished.

(iv) since the contract was assignable by Mrs P and had been assigned by her in her conveyance to S, the benefit of the contract vested in S.

Decision of Roxburgh J ([1946] 1 All ER 464) affirmed.

Notes

The Court of Appeal affirm the court below, holding that the covenant had been expressly assigned. They do not, therefore, deal with the point considered by Roxburgh J, as to whether the covenant in question ran with the land.

On the question of the assignability of a contract containing an arbitration clause both Morton LJ and Somervell LJ, agree that an arbitration clause is not a personal covenant in the sense that it cannot be assigned, and that no such proposition is to be deduced from the words of Wright J, in Club Estates Ltd v Woodside Estates Co (Amersham) Ltd.

As to Assignments of Contract Containing Arbitration Clause, see Halsbury, Hailsham Edn, Vol 1, pp 626, 627, para 1074, and p 639, para 1086; and for Cases, see Digest, Vol 2, p 365, Nos 334–336, and Supplement.

Cases referred to in judgments

Aspell v Seymour [1929] WN 152, Digest Supp.

Cottage Club Estates v Woodside Estates Co (Amersham) Ltd [1928] 2 KB 463, Digest Supp, 97 LJKB 72, 139 LT 353.

Appeal

Appeal by the defendant from an order of Roxburgh J dated 6 February 1946, and reported ([1946] 1 All ER 464). The facts are fully set out in the judgment of Lord Greene MR

M G Hewins for the appellant.

C L Fawell for the respondent.

13 May 1946. The following judgments were delivered.

LORD GREENE MR. In spite of a gallant attempt by counsel for the defendant to get his case upon its legs, in my opinion this is a perfectly plain case and the judge was manifestly right.

The plaintiff, Shayler, is the owner of a bungalow, known as Pear Tree Cottage, which he acquired from a Mrs Lawton, who, before her marriage to her present husband, was Mrs Iris Ethel Peacock. The conveyance was dated 17 August 1944. Pear Tree Cottage had, in fact, been built by Mrs Peacock, as she then was. She had acquired the land and a building previously erected thereon which she was under contract to pull down and replace with the bungalow, Pear Tree Cottage. She had purchased from the defendant, Mrs Dorothy Gladys Irene Woolf. That transaction took place on 30 July 1938.

At that time Mrs Woolf owned not merely the land on which Pear Tree Cottage was subsequently built, but adjoining land, known as Shottenden Lodge, at Herne Bay. She had upon that land an installation for procuring

Page 56 of [1946] 2 All ER 54

a water supply. It consisted of a pump, contained in a rising main and worked by a rod which, in its turn, was set in motion by a windmill. The pump had at an earlier date, apparently, for some reason failed to deliver water. In order to get at the supply again, a bore had been sunk into the lower ground and that was connected by a suction pipe to the installation which contained the pump. The result was that one unit was made, consisting of the overground works, the windmill and so forth, the rising main, containing the pump, and the bore below it with the suction pipe. By that means the flow of water was procured.

By 30 July 1938, which was the date on which Mrs Peacock purchased the land, the position of the pump was as follows. It had originally been placed in what had previously been a well. That well had suffered various misfortunes in the course of its history, and the state of affairs on 30 July 1938, was that, the walls of the well having broken down, the well was entirely filled up to within a few feet of the surface with bricks and earth. That by itself did not affect the operation of the pump. So long as the pump and the rising main and the other underground apparatus was in working order, the mere presence of this debris surrounding it was unimportant. On the other hand, the presence of that debris was unquestionably a source of danger, although at the time possibly nobody realised it. The origin of the present dispute arose when the pump was found not to be delivering water; and that was caused, apparently, by the debris to which I have referred. I shall return to that in a moment.

On the occasion of the purchase by Mrs Peacock and on the same day as the conveyance of 30 July 1938, an agreement was entered into between the present defendant, Mrs Woolf, and Mrs Peacock. It was an agreement for the supply of water from the pump to the new bungalow, Pear Tree Cottage, when it should be built. In cl 1 Mrs Woolf agreed that she:

‘… will henceforth supply to [Mrs. Peacock] from the aforesaid pump situate on the premises of [Mrs. Woolf] and so long as the pump shall continue to produce the same a regular and continuous supply of water [for all domestic purposes in connection with the bungalow then in course of erection].’

Under cl 2 Mrs Peacock was to pay 10s a year for the water supply. Under cl 3 Mrs Peacock was given the right to lay mains and pipes for the purpose of getting the water supply from the pump connected with her bungalow.

Under cl 4 Mrs Woolf covenanted with Mrs Peacock:

‘… and with intent to bind so far as may be herself and her successors in title that she and they will henceforth maintain and keep the said pump and the pipes taps and apparatus thereto (but except the mains pipes or apparatus laid or fixed [by Mrs. Peacock under the power conferred by cl. 3]) in good and proper working order and repair and so long as such pump shall continue to produce the same do all things as may be necessary to insure a constant supply of water of a quantity and quality hereinbefore mentioned … ’

Under cl 5 there was a power of determination at the option of either party (i), in the event of a main supply being brought within reasonable nearness to Mrs Peacock’s bungalow, or (ii), at the expiration of a period of 10 years from the date of the contract. Under cl 6, on determination of the agreement Mrs Peacock, if required, was to remove the mains and pipes, etc, which she might have put in and to make good any damage. Cl 7 provided for the submission to arbitration of disputes arising under or out of the agreement.

When, on 17 August 1944, the present plaintiff took the conveyance from Mrs Lawton (previously Mrs Peacock), Mrs Lawton assigned by the conveyance, so far as assignable, the benefit of the agreement of 30 July 1938. Consequently, if the benefit of that agreement was assignable, it was duly assigned to the present plaintiff.

As I have said, the pump ceased to deliver water. When the expert contractor desired to investigate the state of affairs and see whether repairs could be effected, he found that it was impossible to withdraw the rod which worked the pump from the rising main. It was clear, therefore, that there was something wrong below and out of sight. That, in his opinion—whatever it was—had been caused by the presence of all this earth and debris in the well which surrounded the pipe and, although he could not possibly know what was the extent of the trouble, he, at any rate, thought that it was extensive or might well be extensive. On the other hand, it might (as I understand it) have meant nothing more than that the rising main was fractured and that that had the effect of making it impossible to withdraw the rod and the pump apparatus which it worked.

Page 57 of [1946] 2 All ER 54

However that may be, it was perfectly clear that it would be impossible without digging down to the level of the trouble, whatever it should turn out to be, to repair the apparatus or, indeed, to find out precisely what damage had been caused; but the view which he took was that, whatever the damage was, it was due to the settling down and pressure of this mass of debris in the well. He pointed out that you ought not to have a pump in soil or ground of this description unless you have surrounding it some sort of protecting tube or something which will prevent the soil, or whatever it may be, from pressing on the pipe. Such a provision would also make it easier to effect repairs and withdraw broken parts. So long as the well was empty and in good condition, the liming of the well had that effect in relation to the pump, because, so long as the well was empty, the surrounding earth was kept away from the pump and there was no question of the pump being damaged by pressure of the earth; but directly the well was filled in there was the risk of that pressure affecting the pump and damaging it.

The cost of digging out the debris from the well and repairing the broken parts, whatever they might prove to be, would have been very heavy and the contractor advised—and, undoubtedly, soundly advised—that a new bore should be sunk in another place and the overground apparatus, which was in perfectly good condition, should be used; so that, in effect, there would be another pump. It is not said in this action that the obligation of the defendant, whatever it may be, applies to that new pump, which was, we are told, installed, some thirty yards away. A perfectly good supply was obtained from it and, incidentally, when it was sunk, the proper practice—of surrounding it with a tube to protect it—was followed. The defendant could, of course, had she chosen, have allowed the plaintiff to have a supply from that pump. For reasons which appeared to her to be good, she declined to do so. Had she done so, although the plaintiff, if he is right in this action, would have had a technical claim against her for breach of her covenants in respect of the original pump, the damages that he could have recovered would have been purely nominal, so long as she gave him an alternative supply from her new pump. She had it, therefore, in her power to mitigate damage. However, she did not do so and eventually this action was begun.

Two main questions are raised. The first one is that, on the true construction of this agreement, there has been no breach of covenant on the part of the defendant. It is said that the injury could only be made good by installing, in effect, an entirely new apparatus; and various cases were cited us relating to the principle applicable to landlord and tenant, under which, under a repairing clause, the tenant is not bound to present the landlord with a new house. Those cases, with respect, do not appear to me to assist us in any way. It is a perfectly clear covenant to maintain and keep the pump and the pipes, taps and apparatus thereto in good and proper working order and repair. It is quite impossible on the evidence to say that the proper reparation of this apparatus would involve the installing of an entirely new piece of apparatus. Various parts would no doubt have to be renewed. If the damage was caused by a break in the rising main, of course a new rising main would have had to be inserted; but there can be no question on the evidence in this case of treating the repairs which fell to be made to maintain and keep this pump in working order as being such as would have involved the substitution of an entirely new pumping apparatus. It seems to me to be beyond question that, on the facts, the covenant to maintain and keep the pump and pipes in proper order would cover what has happened.

The case of counsel for the defendant really was, I think, that the operation of clearing the well and putting in what he said would have been necessary to have put in, viz, a new tube to cover the apparatus and protect it from pressure of earth, would have been substantially a novel type of apparatus, which could not be said to come within the covenant. But in point of fact the covenant has nothing to do with the well. Nor does the covenant require Mrs Woolf to instal any kind of protection to the pipe. If she chooses not to do so, she runs the risk of having the pipe injured. If she did not make a proper repair and give proper protection, she would run the risk of being held liable in the event of a later breakdown. It seems to me that the language of this covenant is far too clear to admit of the argument which has been submitted to us.

Page 58 of [1946] 2 All ER 54

I might add that the obligation to supply the water is, of course, limited to the time when the pump “shall continue to produce” water; but that phrase must, in my opinion, mean the pump as repaired and maintained in accordance with the covenants contained in the agreement; in other words, Mrs Woolf would not be entitled to say: “The pump does not produce water; I am, therefore, not bound to supply you,” when the failure to produce water was due to a breach of her own covenant. The phrase refers clearly to some failure in the water supply which might occur owing to something other than a breach of the covenant.

The next point that was argued was as to the assignability of this covenant. It was pointed out, quite properly, that the agreement is not in terms expressed to extend to bind assigns and it was also pointed out that there is a reference to the successors in title of Mrs Woolf in cl 4 and an express intention to bind them in regard to her repairing covenants. Those points are, of course, legitimate points to put forward; but the question that we have to decide is, first, on the true construction of this contract, when interpreted in relation to the surrounding circumstances and its own subject-matter, was it the intention of the parties that the contract should be assignable?

In my opinion, there can be only one answer to that question. There is nothing in the nature of personal services concerned in this agreement. Subject to one point which was argued on the arbitration clause which I shall mention later, there can be no possible suggestion that, in the case of an assignee of Pear Tree Cottage, the burden on Mrs Woolf would have been any greater than it would have been in the case of Mrs Peacock herself. None of those objections to assignability therefore arise. When one looks at the subject-matter of the agreement—a purchaser of land from Mrs Woolf, erecting thereon a bungalow which has no water supply, and desiring to have a water supply—if the water supply is personal to the purchaser herself, what is to happen when she dies? What is to happen if she wants to sell? Obviously, the value of the newly erected bungalow would be very much lower unless she could pass to the purchaser the benefit of this agreement, because the bungalow would not have a water supply. Looking at the whole nature of the subject-matter, it seems to me impossible that any sensible persons could have intended in the circumstances that the right to this supply should be personal to Mrs Peacock herself. I come to that conclusion quite clearly, notwithstanding the fact that in cl 4 there is an express reference, for the purpose of the repairing covenant, to the assigns of Mrs Woolf.

That only leaves one point and that is the arbitration clause. It is said that the contract cannot be assignable because of the existence of the arbitration clause, inasmuch as such a clause is in its nature not assignable or is only assignable (it is said) where the assigns are expressly mentioned in the clause itself or the contract which contains the arbitration clause is itself expressly declared to be assignable. In my opinion, those propositions are incapable of support in the wide way in which they are stated; nor does any of the authorities quoted to us in support of them really touch the point.

The question whether an arbitration clause prevents a contract from being assignable must depend on the intention of the parties, and the nature of the contract will, of course, be very important. Quite apart from an arbitration clause, if the nature of the contract is one which makes it incapable of assignment, owing to its personal nature, there is no question, of course, of the assignability of the arbitration clause; but that an arbitration clause is assignable in its nature seems to me to be quite clearly contemplated by the Arbitration Act, 1889, s 4, and it has been recognised in this court in one of the authorities referred to, namely, Aspell v Seymour.

As I have said, apart from this arbitration clause, the agreement in this case is, in my opinion, quite clearly assignable. That is because, on its true construction, it is an assignable contract, that being the intention of the parties gathered from the document when read in the light of its subject matter and the surrounding circumstances. It seems to me that the result of that must necessarily be that the arbitration clause also follows the assignment of the subject-matter of the contract. There is nothing, I conceive, in principle or authority which would prevent that from taking place.

The consequence is that, in my opinion, this was a contract assignable by

Page 59 of [1946] 2 All ER 54

Mrs Peacock and, as it was assigned by her in her conveyance to the present plaintiff, the benefit of the contract is now vested in him and he is entitled to sue upon it.

The judge, in my opinion, was perfectly right and this appeal must be dismissed with costs.

MORTON LJ. I entirely agree with the judgment which has been delivered and I only wish to add a few words upon one submission made by counsel for the defendant. He submitted boldly as a general proposition that the benefit of an arbitration clause could never be assigned; and this view appears to be put forward in Russell On Arbitration And Award, 13th Edn, p 46, where the authors say:

‘A submission is defined as “a written agreement to submit present or future differences to arbitration“… It is a personal covenant and cannot be assigned … ’

They then go on to deal with a more limited matter.

That general statement appears to be based upon an observation of Wright J in Cottage Club Estates Ltd v Woodside Estates Co (Amersham) Ltd, where he said ([1928] 2 KB 463, at p 466):

‘The arbitration clause is a personal covenant, and cannot be transferred; nor indeed was it transferred in any sense in this case.’

In my view, in that sentence Wright J was dealing with the facts in the case before him and did not intend to lay down any such general proposition as is contended for by counsel for the defendant, and set out in Russell On Arbitration And Award, 13th Edn. As my Lord has said, any such general proposition would appear to be contrary to the provisions of the Arbitration Act, 1889, s 4, and, in my view, it cannot be sustained.

I agree that the appeal should be dismissed.

SOMERVELL LJ. I agree with the reasons which have been given by the Master of the Rolls for dismissing this appeal and I should also like to state expressly my agreement with what has just fallen from Morton LJ with regard to the nature of an arbitration clause. It seems to me that, on any ordinary principle, it certainly is not a personal covenant in the sense in which the adjective “personal” is ordinarily used in this context.

Appeal dismissed with costs.

Solicitors: Kingsford, Dorman & Co agents for Girling, Wilson & Bailey, Herne Bay (for the appellant); Bentley, Taylor & Co (for the respondent).

F Guttman Esq   Barrister.

R v Turvey

[1946] 2 All ER 60

Categories:        CRIMINAL; Criminal Law, Criminal Procedure        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND LYNSKEY JJ        

Hearing Date(s):        13 MAY 1946        

Criminal Law – Larceny – Conspiracy to steal disclosed to owner – Property handed over on instructions from owner for purpose of apprehension – Absence of asportation.

The appellant, who was in charge of a Ministry of Works depot, approached W, who was in charge of another depot, and suggested a plan, whereby W was to steal some goods from his depot, hand them to the appellant, who, in turn, would hand them to a receiver. W informed his superiors of the plan, and, with a view to entrapping the appellant, it was arranged that W should hand over the goods to the appellant, and W did in fact do so. The appellant was charged with and convinced to stealing:—

Held – The charge was wrong; there was no evidence of asportation; the appellant did not carry away the goods against the will of the owner, who was willing that the should have them, and handed them to him; in the circumstances the conviction must be quashed.

R v Eggington distinguished.

Notes

Absence of consent by the owner of goods to the taking of them is an essential element in a charge of larceny. Cases of the type of R v Egginton do not affect this rule, since facilities given to the thief to carry out his offence still leave the element of true asportation. It was held as far back as 1850, in R v Lawrence (14 JP 561), that there was no larceny where the goods were put into the hands of the thief by a servant, by directions of the master, and the case now reported is similarly decided.

As to Taking Property by Consent of Owner, see Halsbury, Hailsham Edn, Vol 9, p 506, para 866; and for Cases, see Digest, Vol 15, pp 833, 834, Nos 9693–9701.

Case referred to in judgment

R v Egginton (1801), 2 Bos & P 508, 15 Digest 883, 9693.

Appeal

Appeal against a conviction for larceny at the Devon County Sessions, on 1 March 1946. The facts are fully set out in the judgment.

W Scott Henderson KC and Malcolm Wright for the appellant.

H E Park for the Crown.

13 May 1946. The following judgment was delivered.

LORD GODDARD LCJ [delivering the judgment of the court]. In this case the court is of the opinion that the conviction must be quashed. The appellant appeals against his conviction on count 1 of the indictment only.

The circumstances were these: The appellant was charged that on 12 December 1945, being a servant of His Majesty’s Minister of Works, he stole from the Minister a considerable number of table knives, spoons, and so forth. He had got into touch with some foreigner living at Newton Abbot, and found that he would be a ready receiver of goods which could be stolen from the Ministry of Works. Then, being in charge at that time of a depot of the Ministry of Works at Torquay, he approached one Ward, who was in charge of a depot at Exeter. Ward was tempted to steal the property of the Ministry of Works and hand it to the appellant, who would in turn hand it to the man at Newton Abbot. Ward at once communicated with his superiors at Bristol, the people who were really in control of the property, and told them of this plan which had been suggested to him. The officials of the Ministry of Works said it would be a good thing to let this plan go on and catch them at a suitable time, which would enable them to prosecute this appellant for stealing. What they did was this: They told Ward to hand over the property to the appellant, and Ward handed over the property to the appellant. He intended to hand it to the appellant and did hand it to the appellant.

That being so, the question arose whether or not the appellant could be charged with stealing. He could have been charged with conspiracy that he was inciting to commit a felony and other charges, there is no doubt, but could he be charged with the felony of stealing? In this case it is perfectly clear that if he stole the goods, he stole them at Exeter, but he did not take them there against the will of the owner because the owner handed them to him and meant to hand them to him. The chairman in his ruling, when counsel submitted no

Page 61 of [1946] 2 All ER 60

case, set out his findings, and it appears that he decided principally on the authority of R v Eggington, an old case, but perfectly good law, and also because he took a certain view with regard to the control the owner was exercising over the goods.

R v Egginton was a case in which a servant told his master that someone was going to rob the premises. “Very well,” said the master, “let them rob the premises and we will catch them”; in other words, to put a homely illustration, a man, knowing that somebody is going to break into his house, leaves the bolts drawn and so makes it easy for the man to come into the house, and when he comes in he catches him and a crime has been committed; he commits the crime none the less that the servant has been told to make things easy. In this case, if Ward had been told by the person who really had control of these matters, “Let the appellant come in and take the goods,” that would have been one thing, but he told him to take the goods and hand them to the appellant, and that makes all the difference.

One matter to which the chairman seems to have attached considerable importance was this, that Ward said to the appellant at the time when he was handing over the goods: “You must give me a receipt, I must have a receipt for these goods,” and the appellant said he quite understood that and he would give a receipt for the goods. Thereupon, a perfectly fictitious document is made out, which both parties knew and intended to be fictitious, under which it is made to look as though the goods were handed over to the appellant to take to the Palace Hotel at Torquay, but, of course, that was not an authority by Ward to the appellant to take the goods to Torquay because everybody knew that the appellant was meaning to steal these goods and they were to go to the receiver at Newton Abbot. No one intended that they were to go to Torquay, and this document was simply manufactured as a blind, or whatever word you like to use; it is not a genuine document, and therefore it is as if it did not exist.

The other point on which the chairman in his direction to the jury, as we think, went wrong was that he told the jury that these goods always remained under the control of the Ministry, because apparently the police had been warned, and the police were to follow the prisoner once he had stolen them, either to follow him or go immediately to Newton Abbot and find them in the possession of the receiver. But that will not do. Once the goods were handed over to the appellant the goods were under his control and nobody else’s. What was to happen supposing, while he was driving along being followed by the police, the police car broke down? Of course, he would cheerfully drive away with these goods. Of course the goods were under the appellant’s control as soon as he went away with the goods.

The charge that was put against the appellant was the wrong charge, a charge of which he could not have been convicted because there was no evidence here of what, to use a technical expression, is termed asportation. He did not carry away the goods against the will of the owner but because the owner was willing that he should have the goods and gave them to him. In those circumstances, the conviction will be quashed, so far as this charge is concerned, and the appeal allowed on count 1.

Appeal allowed.

Solicitors: Crawley & de Reya agents for J C M Dyke & Toyne, Exeter (for the appellant); Treasury Solicitor (for the Crown).

R Hendry White Esq   Barrister.

Alston v Alston

[1946] 2 All ER 62

Categories:        FAMILY; Divorce        

Court:        PROBATE, DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        WILLMER J        

Hearing Date(s):        27 MAY 1946        

Divorce – Petition – Date of presentation – Matrimonial Causes Act, 1937 (c 57), s 2 – Matrimonial Causes Rules, 1944, r 3.

The date of the “presentation” of a petition for dissolution of marriage under the Matrimonial Causes Act, 1937, s 2, is the date on which the petition is filed.

Notes

By the Matrimonial Causes Rules a matrimonial cause is commenced by filing a petition, therefore the date of filing is held to be the date of presentation for the purpose of calculating the period of three years’ desertion preceding the presentation of the petition.

As to The Matrimonial Causes Act, 1937, s 2, see Halsbury’s Statutes, Vol 30, p 336.

Petition

Petition by the husband for divorce on the ground of his wife’s desertion. The report is confined to the question of the date of the presentation of a petition. The relevant facts are set out in the judgment.

V G Hines for the petitioner.

27 May 1946. The following judgment was delivered.

WILLMER J. This case, I believe, raises a novel point. The petition was signed by the petitioner on 10 October 1945, who on the same day swore the affidavit verifying it. It was not, however, filed with the court until 31 October 1945. The petitioner’s case is that he was deserted by his wife from a date which he fixed as 17 October 1942. According to the Matrimonial Causes Act, 1937, s 2, the petitioner, if he is to succeed, must establish a period of at least three years immediately preceding the presentation of the petition. It therefore becomes obvious that it is vital to decide at what stage a petition is presented. If the presentation of the petition refers to the date when the petitioner signs it and swears his affidavit, in this case the three years had not elapsed. If, on the other hand, the presentation of a petition refers to the date when it is filed in the court, then the three years have elapsed, and the case having otherwise been completely proved, the petitioner is entitled to his decree. There appears strangely enough to be no authority which counsel has been able to find as to what presentation of the petition means. I have been referred to the Matrimonial Causes Rules, 1944, r 3, which does specify that every matrimonial cause shall be commenced by filing a petition addressed to the High Court. It has been argued that a petition can only be said to be presented when it actually reaches the court. That must be and can only be on the day when the petition is filed. The point is purely a technical one. If I decided that this petition was presented on 10 October 1945, it would have the effect of causing this petition to be dismissed, and would involve instituting new proceedings on what could only be a technical point. I think both on the merits of the case and also on the technical ground, I must decide that a petition is presented when it is filed in the court, that is to say, in this case on 31 October 1945. That being so, on the date when this petition was presented, in accordance with the meaning I attach to the word, the three years had already run and I, therefore, hold that the petitioner is entitled to succeed. There will, therefore, be a decree nisi.

Decree nisi.

Solicitors: Church, Rendell (for the petitioner).

R Hendry White Esq   Barrister.

Bluff v Bluff (otherwise Kelly)

[1946] 2 All ER 63

Categories:        FAMILY; Divorce        

Court:        PROBATE, DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        WILLMER J        

Hearing Date(s):        26, 27, 28 MARCH 1946        

Divorce – Onus of proof – Intervention by King’s Proctor – Undefended petition for nullity – Wilful refusal to consummate marriage – Decree nisi granted – King’s Proctor alleging marriage consummated – Whether affirmative proof necessary.

The petitioner was granted a decree nisi on the ground that the marriage had not been consummated owing to the wilful refusal of the respondent. The suit was not defended. The King’s Proctor subsequently intervened and alleged that the marriage had been consummated. It was contended on behalf of the petitioner that the King’s Proctor, intervening to show cause, must prove the truth of his plea and that, consequently, if the court at the end of the hearing were left in doubt, the petitioner was left in possession of his decree. On behalf of the King’s Proctor it was contended that in these circumstances the petition failed:—

Held – The intervention of the King’s Proctor alleging that the assertion, which was the foundation of the decree obtained by the petitioner, was false, went to the same subject as that which formed the basis of the petitioner’s prayer for a decree; in such a case the King’s Proctor was not bound to prove affirmatively that the marriage had been consummated; the whole matter was re-opened, and, if the petitioner failed to satisfy the court that the marriage had not been consummated because of the wilful refusal of the respondent, the petition should be dismissed.

Semble: aliter when the King’s Proctor intervenes to show cause, in an undefended case, by alleging that the petitioner has been guilty of adultery which had not been disclosed to the court. In such a case the onus would be on the King’s Proctor to establish affirmatively that such adultery had taken place, and if the King’s Proctor failed in that respect the petitioner would be left in possession of a decree which he had already obtained.

Notes

There does not appear to be any previous decision upon the onus of proof when the King’s Proctor intervenes to show cause against a decree of dissolution on the ground of wilful refusal to consummate the marriage. It is held that it is still for the petitioner to satisfy the court of the truth of the grounds alleged. Willmer J, suggests that the position is otherwise when the King’s Proctor is alleging adultery by the petitioner, and this view is supported by Hulse v Tavernor (1871) LR 2 P & D 357, where it was held that identity need not be so strictly proved by the King’s Proctor as upon the trial of such an issue between husband and wife.

As to Intervention by the King’s Proctor Showing Cause against a Decree, see Halsbury, Hailsham Edn, Vol 10, pp 771–774, paras 1261–1223; and for Cases, see Digest, Vol 27, pp 480–487, Nos 5085–5193.

Intervention

Intervention by the King’s Proctor showing cause why a decree nisi granted in favour of the petitioner should not be made absolute, on the ground that the marriage, alleged by the petitioner not to have been consummated owing to the wilful refusal of the respondent, had, in fact, been consummated. The extract from the judgment of Willmer J which contains all relevant facts, is confined to the question of onus of proof.

C A Marshall-Reynolds for the King’s Proctor.

J G St George Syms for the petitioner.

28 March 1946. The following judgment was delivered.

WILLMER J. There has been some discussion with regard to the onus of proof in a case such as this. Counsel for the petitioner contended that he was in possession of the decree of the court, and that the King’s Proctor, intervening to show cause, must prove the truth of his plea; and that consequently, if the court at the end of the hearing were left in doubt, he (counsel) was left in possession of his decree.

On the other side, counsel for the King’s Proctor, when I posed the same question to him—namely, What is the position if, after hearing all the evidence, the court is left in a complete state of doubt as to what really did happen?—submitted that in that state of affairs the petition failed.

Page 64 of [1946] 2 All ER 63

The odd thing is that there appears to be no direct authority for this comparatively simple point. It is important to bear in mind that the decree so far has been obtained by hearing one side only; so that it is not a case of a re-trial or a re-hearing such as that of a defended case in the Court of Appeal. In such a case it may well be said that the onus is always on the appellant to satisfy the appellate tribunal that the court below has made a mistake and gone wrong. But it seems to me that no such consideration arises in a case like this, where the previous proceedings have been undefended and the court has only heard the one side.

It may very well be that there is a difference between different types of case. If the King’s Proctor intervenes, as he commonly does, to show cause in an undefended case by alleging that the petitioner himself or herself has been guilty of adultery which has not been disclosed to the court, it may very well be that, in such a case, the onus would be upon the King’s Proctor to establish affirmatively that such adultery had taken place; and if the King’s Proctor’s proof failed in that respect, then it would be fair to say the petitioner was left in possession of his decree which he had already obtained. I doubt, however, whether the same considerations apply in a case like this, where the intervention of the King’s Proctor goes to the same subject as forms the basis of the petitioner’s prayer for a decree, ie, the question whether or not the marriage has been consummated. Initially the petitioner starts out to prove that the marriage has not been consummated, and has not been consummated because of the wilful refusal of the respondent; and all that the King’s Proctor does by his plea is to allege that that assertion, which is the foundation of the decree obtained by the petitioner, is false. A case such as that reopens the whole matter. It is not a case where the King’s Proctor has to prove affirmatively that the marriage has been consummated or one in which, in default of such proof—ie, if the court is left in doubt—the petitioner remains in possession of his decree. The whole matter is re-opened before me and, as counsel for the King’s Proctor put it, I am put in the same position as the previous judge would have been in had the whole of the evidence been before him; and if at the end of the whole case I am left in doubt as to which side has told me the truth (if either), then the effect is that the petition fails because it has not been proved.

I propose to act on that principle in this case. I have been through the evidence at length and I do not place very much reliance on either side, although, as I have stated, I have a preference for the case of the respondent. This petition fails because so much of it is left in doubt. I think the marriage has been consummated. I would not like to say that the respondent has proved it to me. My opinion is that it was consummated; but, in any case, the petition fails because the petitioner has not satisfied me that it was not consummated.

Petition dismissed.

Solicitors: Henry Mossop & Syms (for the petitioner); King’s Proctor.

R Hendry White Esq   Barrister.

Evans v Rogers

[1946] 2 All ER 64

Categories:        AGRICULTURE        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND SINGLETGON JJ        

Hearing Date(s):        8 MAY 1946        

Food and Drugs – Milk – Standard agreement with Milk Marketing Board – Surplus to requirements – Delivery taken at farm collecting point – Sample taken later at diversion point – Whether in accordance with Act – Food and Drugs Act, 1938 (c 56), ss 24(1), 68(4).

The respondent entered into a standard agreement with the Milk Marketing Board to sell all his milk to the Board. The milk was, and had been for many years past, under the direction of the Board, supplied to one G, who was a bulk purchaser of milk from the Board and also a haulage contractor conveying milk on behalf of the Board. Under a diversion order from the Board milk surplus to the requirements of G was to be re-directed by him to a specified creamery. On the occasion in question some churns of the respondent’s milk were collected by G at the respondent’s farm, the contents treated by G as surplus milk and conveyed by a circuitous route to the specified creamery. The milk was sampled at this creamery

Page 65 of [1946] 2 All ER 64

and it was found that a quantity of water had been added. The respondent was charged, under the Food and Drugs Act, 1938, s 24(1), with unlawfully selling for human consumption to the Board milk to which an addition of water had been made. The justices dismissed the information. The question for the determination of the court was whether the sample was taken in accordance with the Act, sect 68(4) of which provides that samples may be taken at any dairy, or at any time while the milk is in transit, or at the place of delivery to the purchaser, consignee or consumer. It was agreed that the sample was not taken at the respondent’s dairy:—

Held – The place of delivery for the purpose of sect 68(4), and under the contract, was the place where the delivery to the purchaser took place under the direction of the Board, in this case the farm collecting point where G took delivery; G having taken delivery, it could not be said that the milk was any longer in transit; and as the sample was not taken at the place of delivery, it was not taken in accordance with sect 68(4); accordingly, the justices were right in the conclusion to which they came in dismissing the information.

Notes

This is another case upon the construction of the very unsatisfactory form of contract prescribed by the Milk Marketing Board. In Watson v Coupland the court expressly left open the question as to where the place of delivery might be for the purpose of taking a sample as laid down by the food & Drugs Act, 1938, s 68. It is held that the place of delivery is the place where a bulk purchaser takes delivery, and that, therefore, a sample taken on premises to which the bulk purchaser subsequently re-directs surplus milk in accordance with a direction of the Board is not properly taken for the purpose of the Food & Drugs Act, 1938.

As to where Samples of Food May be Taken, see Halsbury, Hailsham Edn, Vol 15, pp 144, para 230; and for Cases, see Digest, Vol 25, pp 71, 72, Nos 14–22.]

Case referred to in judgments

Watson v Coupland [1945] 1 All ER 217.

Special Case

Special Case stated for the opinion of the King’s Bench Division of the High Court by the Justices of the County of Montgomery on an information preferred by an inspector of weights and measures under the Food and Drugs Act, 1938, s 24(1). The facts are fully set out in the judgment of Lord Goddard LCJ.

Vernon Gattie for the appellant.

8 May 1946. The following judgments were delivered.

LORD GODDARD LCJ. This is a special case stated by the justices of the county of Montgomery on an information preferred by an inspector of weights and measures, who had prosecuted the respondent for unlawfully selling for human consumption to the Milk Marketing Board milk to which an addition of water had been made, contrary to the Food and Drugs Act, 1938, s 24(1).

The case raises a question of some difficulty by reason of the form of contract which every milk producer is now obliged to make with the Milk Marketing Board. As has been pointed out before in this court, it is one which may inflict considerable hardship on the farmer because he is bound to sell to the Milk Marketing Board and to nobody else. He has no voice in the form of contract; it is one which the Milk Marketing Board prescribe, and they are the only possible purchasers. It is a case in which if something took place which it is shown the farmer could not control in any way, the court should not find him guilty of any offence unless the statute forces us to do so.

The point which is raised in this case differs from the point which was raised in Watson v Coupland, because the point in that case was as to where the sale took place, and the court expressly left open the question which is raised in this case as to where the place of delivery might be for the purpose of the Food and Drugs Act, 1938, s 68. The question which is now raised is not where the sale took place, but whether or not the sample was taken at the place of delivery. The prosecution relied upon the sample which was taken and the analysis of the sample which had been taken, and it is, therefore, necessary for the prosecution to show that the sample was taken in accordance with the terms of the Act. Sect 68(4) provides:

‘A sampling officer, or an inspector of the Minister, may take samples of milk at any dairy, or at any time while it is in transit, or at the place of delivery to the purchaser, consignee or consumer … ’

Page 66 of [1946] 2 All ER 64

Sect 100 defines transit as including all stages of transit from the dairy, the place of manufacture or other source of origin to the consumer.

It is agreed here that there is no question of the sample being taken at the dairy. Therefore, in order that the sample should have been regularly taken in this case, it must have been taken either while the milk was in transit or at the place of delivery. Before I refer to the facts I ought to refer to the contract under which the milk was sold by the respondent to the Milk Marketing Board. He sells all his milk to the Milk Marketing Board, and by cl 3 of the contract it is provided:

‘The producer shall deliver the milk daily to such places and consignees as the Board directs.’

It is quite obvious that under that clause the Milk Marketing Board can give such directions as it pleases as to the places and consignees, but if they only direct the farmer to deliver to a particular consignee without stating the place where it is to be delivered, the farmer will fulfil his contract if he delivers to the consignee who chooses to fetch the milk. It is then provided:

‘The producer shall permit the Board to arrange and pay for transport of the milk from the farm collecting point to the place of delivery.’

Then there are some provisions with regard to the farmer having the milk ready at the farm collecting point, and the farm collecting point is defined.

In cl 5 it is provided:

‘Subject to the provisions of cl. 9 hereof, the property and risk in the milk will pass to the Board at the place of delivery when the milk is unloaded from the vehicle by which it is transported, or in the case of rail-borne milk at the time when it is made available by the railway company for collection by the consignee.’

Watson v Coupland really depended upon that clause, and the court held in that case that the sale took place and was complete when the milk arrived at the place of delivery where it was unloaded from the vehicle by which it was transported.

Now in this case the material facts found by the justices are, first of all, that the sample was taken at a place called the Four Crosses Creamery in the county of Montgomery, but it is also found that one Griffiths was a bulk purchaser of milk from the Milk Marketing Board and under a diversion order from the Milk Marketing Board milk surplus to the requirements of Griffiths was re-directed to Four Crosses Creamery. It seems to follow from that that it was to be re-directed by Griffiths. It is also found that the respondent’s milk was and had been for many years past, under the direction of the Milk Marketing Board, supplied to Griffiths; that Griffiths was also a haulage contractor conveying milk on behalf of the Board; that on the day in question the seven churns of milk were collected by Griffiths’ lorry driver at the farm, and on that day the contents were treated as surplus milk by Griffiths and conveyed by a circuitous route to the Four Crosses Creamery.

It seems to me, in the first place, that the place of delivery need not necessarily be the place where the property passes. Where the property passes under this contract was decided in Watson v Coupland. Humphreys J said in that case ([1945] 1 All ER 217, at p 220):

‘I do not say that the question where the delivery took place is immaterial. It may be from certain points of view material, but for the purposes of this case it is absolutely immaterial because what has to be considered is not where the milk was delivered from A to B, but where the sale took place.’

Croom-Johnson J said much the same thing in his judgment. In that case, therefore, the court left open the question as to where the place of delivery was.

In my opinion, the place of delivery for the purpose of sect 68(4), and indeed under this contract, is the place where the delivery to the purchaser takes place under the direction of the Milk Marketing Board. The farmer is to deliver to the person to whom he is told to deliver, and at the place he is told, if he is told the place. There is no suggestion in the case that he was told to deliver at any particular place. It appears that he was told to deliver to Griffiths, and Griffiths took delivery of the milk at the farm collecting point. It may be—I am not deciding it one way or the other—that it could be argued that delivery in fact took place at Griffiths’ place of business. Griffiths may be in a dual capacity as a haulage contractor to the Milk Marketing Board and also

Page 67 of [1946] 2 All ER 64

a person entitled to delivery of milk from the farmer. but it is unnecessary to consider that because the sample of milk was not taken at Griffiths’ place of business; it was taken at the place to which Griffiths delivered the milk under some order which the Milk Marketing Board had apparently served upon him, because the direction of the Milk Marketing Board to him was that he was to re-direct milk which was surplus to his requirements to the creamery where the sample was in fact taken.

It seems to me that in these circumstances the place of delivery of the milk was the farm collecting point where Griffiths took delivery. We are relieved from having to consider the question as to whether this sample was taken in course of transit because once the milk was delivered to Griffiths and Griffiths took delivery of it, the question as to whether the milk was in transit does not arise for the purpose of this case, because it cannot be said that the purchaser having taken delivery, the milk was any longer in transit once Griffiths had got the milk. In these circumstances it seems to me that before the sample can be used in evidence against the respondent, it must be shown that it was taken at the place of delivery, which was the farm collecting point for this purpose. We are not considering the question as to whether the property passed. The place of delivery for this purpose was the place where it was collected by Griffiths. As the sample was not taken there, it follows it was not taken in accordance with the section, and, accordingly, the justices were right in the conclusion to which they came in dismissing the appeal.

HUMPHREYS J. I agree with the judgment of my Lord. All I desire to say is that it seems to me that probably the point which has been raised in this case might have been raised upon the facts in Watson v Coupland, but it was not in fact raised. No question was raised or argued as to where the delivery took place in that case, and, as my Lord has said, that question was expressly left open by the members of the court. On the peculiar facts of this case, I agree with the result proposed.

SINGLETON J. I am of the same opinion. I wish to add that it is greatly to be regretted that the Milk Marketing Board cannot adopt a form of contract which will work more satisfactorily. Everyone is anxious that adulteration of milk by farmers or by others should be dealt with, and severely dealt with, when it is detected. But this contract, which has been in operation for some years now, is so difficult that a farmer’s life is far from easy.

As to the facts of the case I would add this. Griffiths was a bulk purchaser of milk from the Milk Marketing Board. The respondent’s milk was, and had been for many years past, under the direction of the Board, supplied to Griffiths. The farmer under the contract had to deliver the milk daily to such places and consigness as the Board directed. When there was surplus milk, that was dealt with by a diversion order, and on the day in question the contents of the churns were treated as surplus milk and conveyed by a circuitous route to the Four Crosses Creamery. There is nothing to show that the farmer, the respondent, knew anything whatever of that diversion order or that the milk was in fact going to the Four Crosses Creamery. The submission on behalf of the appellant was that having regard to the existence of the diversion order, the point of delivery of the milk was the Four Crosses Creamery. The justices rejected that submission, and there is no ground upon which we can say that they were wrong in law in so doing.

I agree that the appeal must be dismissed.

Appeal dismissed.

Solicitors: Sharpe, Pritchard & Co agents for P E White, Welshpool (for the appellant).

C StJ Nicholson Esq   Barrister.

Re An Arbitration Between Montague Wickham and The Mayor, Aldermen and Burgesses of The Metropolitan Borough of Paddington

[1946] 2 All ER 68

Categories:        LOCAL GOVERNMENT        

Court:        KING’S BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        21, 29 MARCH 1946        

Local Government – Superannuation of officers – Assessment of superannuation allowance – Remuneration of borough treasurer acting as local fuel overseer – Superannuation rights regulated by local Act – Local Government Superannuation Act, 1937, s 40(3) not applicable to employees of local Act authorities – Employment not to be treated as two separate employments – “Officer” – “Emoluments” – Paddington Borough Council (Superannuation and Pensions) Act, 1911 (c ci), ss 3, 4, 5, 13 – London County Council (General Powers) Act, 1928 (c lxxvii), Pt VII – Local Government Superannuation Act, 1937 (c 68), ss 1, 3, 8, 26, 40(3) – Local Government Superannuation (Administration) Regulations, 1938 (SR & O, 1938, No 574), art 4 – Fuel and Lighting Order, 1939 (SR & O, 1939, No 1028), art 16(1) – Paddington Borough Council Superannuation Scheme, 1938, arts 4, 13(2), 15.

In 1903 at the age of 22, W became an officer of the Paddington borough council. In 1923, he was appointed borough treasurer and had held that office continuously, as an officer in an established capacity and duly placed on the permanent staff, until 1945, when he reached the age of 65, which was the age of compulsory retirement under the Paddington Borough Council (Superannuation and Pensions) Act, 1911. By sect 5 of that Act, after 10 years’ service an officer was entitled to a certain proportion (varying with the length of his service) “of the average amount of his salary or wages and emoluments during the 5 years ending on the quarter day which immediately precedes the day on which he ceases to hold his office.” The Act further provided that an officer had to contribute 2 1/2 per cent of “his salary, wages and emoluments” to the superannuation fund, and by the London County Council (General Powers) Act, 1928, this amount was raised to 3 per cent, and to 5 per cent for officers appointed after 1928. “Officer” was defined in the Acts as “every officer in the service of the council in an established capacity and duly placed on the permanent staff,” and “emoluments” as including “all fees, poundage and other payments made to any officer or servant as such” but not including “casual payments or gratuities or payments in respect of over-time.” The “local Act scheme” under which W was serving differed in material respects from the scheme prescribed by the Local Government Superannuation Act, 1938. Pursuant to this latter Act, the Paddington Council made an amending schme in 1938, but under this scheme a person who had attained the age of 55 (and could not therefore complete 10 years’ service before attaining the age of compulsory retirement) was not entitled to participate in the benefits of the superannuation fund. In September 1939, an emergency committee of the council appointed W local fuel overseer under the Fuel and Lighting Order, 1939, but nothing was said about remuneration. On 12 February 1940, the committee resolved to grant an honorarium of £50 for the 4 months ending 31 December 1939, “to the borough treasurer for services rendered under the Fuel and Lighting Order, 1939.” On 16 December 1940, the committee “considered the question of fixing the remuneration of the borough treasurer in his capacity of local fuel overseer” and resolved that W’s remuneration as local fuel overseer be fixed at £150 per annum as from 1 January 1940. From this £150 a year, W had deducted 3 per cent as contribution to the superannuation fund. The question to be determined was whether the superannuation allowance payable to W was to be based merely upon what he had earned as borough treasurer or whether what he had received for his duties as local fuel overseer should also be brought into consideration. Under the Local Government Superannuation Act, 1937, s 40(3): “Where an employee holds under a local authority two or more separate employments of such a nature that he can cease to hold one without ceasing to hold the other or others, the provisions of this Act shall, unless the context otherwise requires, apply as respects him in relation to each of those separate employments as if the other or

Page 69 of [1946] 2 All ER 68

others were an employment or employments held by him under another authority.” It was contended by the council that this section applied to W in relation to his employment as borough treasurer and local fuel overseer: his employment in these two capacities must be treated as separate employments and, therefore, the remuneration received by W as local fuel overseer could not be included in his superannuation allowance because he was over 55 when appointed to that post. The council further contended that the rate of contribution payable by W to the superannuation fund in respect of the remuneration received by him as local fuel overseer was 5 per cent, and not 3 per cent  On behalf of W, it was contended that, for the purposes of the Superannuation Acts, his employment should be treated as that of an officer and not as two separate employments, and that his superannuation allowance should be calculated on the average of all that he had received in the 5 years previous to his compulsory retirement (as provided by sect 5 of the 1911 Act):—

Held – (i) Upon the true construction of the Local Government Superannuation Act, 1937, sect 40(3) thereof did not apply to W in relation to his employment as borough treasurer and local fuel overseer, because W’s superannuation rights were regulated by the provisions of Paddington Borough Council (Superannuation and Pensions) Acts, 1911–1938 (local Acts), and not by the Local Government Superannuation Act, 1937. Sect 40(3) of the 1937 Act merely provided that, where the provisions of that Act applied, they should apply in a particular way.

(ii) for the purposes of the Superannuation Acts, W was to be regarded as an officer, and his employment should not be treated as two separate employments. Superannuation rights were paid not in respect of an office, but were earned by an officer for services rendered. On the facts of the case, the £150 per annum paid to W for his services as local fuel overseer was an emolument paid to him as borough treasurer for extra services rendered by him as borough treasurer. He was, therefore, entitled to have it brought into account in the calculation of his superannuation allowance, which was to be assessed on all his receipts for the 5 years previous to his retirement.

R v Lyon applied.

(iii) the rate of contribution payable by W to the superannuation fund in respect of the remuneration received by him as local fuel overseer was 3 per cent.

Notes

The question in this case is the proper treatment of a local government officer entitles to superannuation is respect of his services in one office, that of borough treasurer, who has been called upon to render services in another capacity, that of fuel overseer, which services did not entitle him to any separate superannuation rights. It is held that the payments in respect of his service as fuel overseer are “emoluments” which are to be taken into consideration in calculating his superannuation allowance.

As to Superannuation of officers, see Halsbury, Hailsham Edn, Vol 21, pp 71–88, paras 123–154; and for Cases, see Digest, Vol 33, Nos 1687, 1688, Vol 37, Nos 100–105, and Supplement, Metropolis, 20a-c.

For the Local Government Superannuation Act, 1937, see Halsbury’s Statutes, Vol 30, p 385.

Cases referred to in judgment

R v Lyon, Ex p Harrison [1921] 1 KB 203, 33 Digest 248, 1688, 90 LJKB 278, 124 LT 243.

Stoke Newington Borough Council v Richards [1930] 1 KB 222, Digest Supp, 99 LJKB 1, 142 LT 257.

Special Case

Special Case stated for the opinion of the King’s Bench Division of the High Court of Justice by an arbitrator. The facts are fully set out in the judgment.

H B Williams for the applicant.

Harold I Willis for the respondent council.

Cur adv vult

29 March 1946. The following judgment was delivered.

ATKINSON J. This is a special case asking several questions bearing upon the superannuation right of one Wickham, the late borough treasurer of the respondent council, the Metropolitan Borough Council of Paddington. Since September 1939, he was called upon to perform and has performed, the duties

Page 70 of [1946] 2 All ER 68

of local fuel overseer, and he received certain remuneration for that work. The real issue between the parties is as to whether his superannuation allowance is to be based merely upon what he had earned as borough treasurer or whether what he received for those extra duties must be also brought into consideration

To understand the question and how it arises it is necessary to go in some detail into the relevant legislative provisions. I begin with a private Act, the Paddington Borough Council (Superannuation and Pensions) Act, 1911. Sect 4 provides:

‘(1) Subject to the provisions of this Act every officer who (a) shall have completed 10 years’ service … shall be entitled on [retiring] to receive … a superannuation allowance according to the scale … provided.’

The original definition of an officer [in sect 3] has been slightly varied by the London County Council (General Powers) Act, 1928, s 42, so that the present definition is (and has been since 1928):

‘“Officer” means every officer in the service of the council in an established capacity and duly placed on the permanent staff.’

Sect 13 of the 1911 Act provides:

‘Subject to the provisions of this Act every officer in the service or employment of the council shall contribute to the superannuation fund a percentage amount of his salary or wages and emoluments according to the scale provided by this Act such amount to be deducted by the council from the salary or wages and emoluments payable to him and to be carried to the credit of and form part of the superannuation fund.’

Emoluments are defined in this way [in sect 3]:

‘“Emoluments” includes all fees poundage and other payments made to any officer or servant as such … but does not include casual payments or gratuities or payments in respect of overtime.’

Sect 5 says:

‘The scale of superannuation allowances to be made to an officer under this Act shall be as follows (that is to say): After 10 years’ service or aggregated service ten-sixtieths of the average amount of his salary or wages and emoluments during the 5 years ending on the quarter day which immediately precedes the day on which he ceases to hold his office or employment; after 11 years … eleven-sixtieths … And so on up to a maximum after 40 or more years’ service or aggregated service of forty-sixtieths of such average amount.’

Going back to sect 4, subsect (3) thereof says:

‘Where an officer has attained the age of 65 years he shall cease to hold his office or employment and shall thereafter receive the superannuation allowance to which he may be entitled under this Act.’

That is the scheme under which Wickham was employed.

The next Act to which I must refer is the Local Government Superannuation Act, 1937, because the first question which is asked by the arbitrator has reference to whether a particular provision of this Act applies to Wickham’s position. This Act was a general Act, which imposed upon all councils the obligation of providing and maintaining superannuation schemes; but that obligation did not apply to councils which already had a superannuation scheme in existence. The heading to Pt I is this:

‘Superannuation of employees of local authorities not being local Act authorities.’

It is made quite clear in Pt I that a local Act authority is an authority which has already got a superannuation scheme by virtue of a special Act. Sect 1 provides:

‘(1) As from the appointed day, a superannuation fund shall, subject to the provisions of this section, be maintained for the purposes of this Part of this Act by each of the following bodies, that is to say: (a) the council of every county, county borough and metropolitan borough … (2) The preceding subsection shall not apply to any local authority specified therein who (a) not having adopted the Act of 1922, maintain a superannuation fund under a local Act [which takes Paddington out of this Part of the Act] … (3) (a): a local authority who are for the time being required to maintain a superannuation fund under this Part of this Act are referred to as an “administering authority.’

Then sect 3 provides for contributions:

‘… all such persons as are mentioned in the next succeeding subsection shall, subject

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to the provisions of this section and to the provisions of Pt. III of this Act relating to officers appointed in a temporary capacity, be entitled to participate in the benefits of the appropriate superannuation fund maintained under this Part of this Act, and persons [and this is rather important] so entitled shall, unless they are such persons as are mentioned in the proviso to sect. 6(1) of this Act, contribute to that fund in accordance with the provisions of that section, [i.e., only people who are going to benefit are to contribute]. In this Act, the expression “contributory employee” means a person who is for the time being entitled to participate in the benefits of such a superannuation fund, notwithstanding that he may be such a person as is mentioned in the said proviso. (2) The persons referred to … are (a) every whole-time officer of a local authority specified in Sched. I Pt. I, to this Act who are not a local Act authority … (c) every officer or servant of a local authority, not being either a local authority specified in Sched. I, Pt. I, or a local Act authority … ’

Therefore, any one who is within a scheme run by a local Act authority, is excepted out of these provisions of this Act. Sect 3(4) provides:

‘The following persons shall not become contributory employees by virtue of the foregoing provisions of this section, that is to say, a person who … (c) has attained the age of 55 years and has not completed, and cannot before attaining the age of compulsory retirement applicable in his case complete, 10 years of service.’

So that a person who did not become a whole-time officer or a contributory officer within the provisions of this Act before he was 55 was outside it altogether—no contributions, no benefits. Then sect 8(5) deals with the superannuation allowance:

‘For the purposes of this section, the average remuneration of a contributory employee means the annual average of the remuneration received by him in respect of service rendered during the 5 years immediately preceding the day on which he ceases to hold his employment or the day on which he attains the age of 65 years, whichever is the earlier.’

There is a distinction there between the measure of the 5 years and the 5 years under a local Act. Under a local Act the 5 years ends for the purpose of ascertaining the average with the quarter day previous to retirement. The 5 years under this provision ends on the day immediately preceding the day on which the officer ceases to hold his employment. The definition of “remuneration” [in sect 40 of the 1937 Act] is again different from the definition of “emoluments” in a local Act:

‘“Remuneration” means all salary, wages, fees, poundage and other payments paid or made to an employee as such for his own use … ’

It does not include payments for overtime or allowances paid to cover cost of office accommodation or clerks’ assistance, and so on, but there are no words excluding, as there are in the other case, casual payments or gratuities. So that it is quite plain that, in material respects, the scheme which this Act ordained differs from the local Act scheme under which Wickham was serving.

Pt II of the 1937 Act does, however, apply to local Act authorities. Sect 26 provides:

‘(1) A local Act authority shall, not later than 12 months before the appointed day, make a scheme for modyifing their local Act scheme so as to secure that on and after the appointed day (a) the following persons shall [subject to certain exceptions] be entitled to participate in the benefits of their superannuation fund, that is to say (i) every whole-time officer of the authority … (b) … the benefits of their superannuation fund shall be so adapted … to such persons as are mentioned … that they shall enjoy rights not substantially less favourable … (2) The following persons shall not be entitled to the benefit of the preceding subsection, that is to say, a person who … (c) has attained such an age that he cannot under the provisions (if any) of the local Act scheme or the practice of the authority, relating to qualifying periods of service and the age of compulsory retirement, become entitled to a superannuation allowance.’

As a result of that section, the Paddington Council made a scheme, as they were ordered to do, for modifying their local Act [Paddington Borough Council Superannuation Scheme, 1938]: Art 4 was this:

‘Subject to the provisions of this scheme and to the provisions of Pt. III of the Act of 1937 relating to officers appointed in a temporary capacity, the following persons shall be entitled to participate in the benefits of the superannuation fund, that is to say (a) every whole-time officer of the council.’

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Then the scheme proceeds to do exactly what Pt II of the Act said it ought to do. I then come to art 13(2):

‘Any person who, having been in the employment of the council immediately before the appointed day, becomes subject to the local Act scheme on the appointed day by virtue of art. 4 (a), not being a person to whom para. (1) of this article applies or such a person as is mentioned in art. 4 (b) or (c) [i.e., a whole-time employee] shall be deemed for the purposes of the local Act scheme to be in the service of the council in an established capacity and duly placed on the permanent staff of the council on the appointed day and the provisions of that scheme relating to the reckoning of further service and to service under other authorities shall apply accordingly.’

That makes this clear: every whole-time officer who was brought into the superannuation scheme by this amending scheme became an officer within the definition contained in the 1911 private Act. But it is equally clear that every whole-time officer who came into the scheme at a later date (i.e., at a date later than the appointed day), did not automatically become an officer within the meaning of the Act of 1911. Then art 15:

‘Notwithstanding anything contained in the foregoing provisions of this scheme a person who has attained the age of 55 years and has not completed, and cannot before attaining the age of compulsory retirement applicable in his case complete, 10 years of service, shall not be entitled to participate in the benefits of the superannuation fund.’

That completes the legislative provisions with which I need deal at the moment.

Wickham was born on 16 September 1880, so that he attained the age of 65 on 16 September 1945. In fact, he was compulsorily retired. He entered the service of the council so long ago as March 1903. On 26 February 1924, he was appointed borough treasurer to the council and since that date he has continuously held that office as an officer in the service of the council in an established capacity and duly placed on the permanent staff. On 7 September 1939, he was appointed by the emergency committee acting on behalf of the council to be local fuel overseer under and by virtue of the Fuel and Lighting Order, 1939, but no remuneration was fixed at the time of appointment. What in fact happened was this. On 7 September a resolution was passed by an emergency committee stating that the borough treasurer consulted the committee generally upon the matter of fuel controlling. He undertook to submit certain names for the advisory committee which the Order required and undertook to report at a subsequent meeting. Then came this resolution:

‘Resolved that Mr. Montague Wickham be appointed local fuel overseer for the Metropolitan Borough of Paddington.’

The Fuel and Lighting Order, 1939, art 16(1) provided:

‘Each local authority shall within 7 days after the date on which this order comes into force appoint for their district an officer to be called “the local fuel overseer,” who shall hold office, subject to any directions of the divisional coal officer, at the pleasure of the local authority.’

The council had to have a local fuel overseer. Apparently Wickham was asked if he would take on this work and agreed to do it, and so he was appointed; but nothing was said about remuneration. On 12 February 1940, there was another meeting of this emergency committee and the town clerk submitted a memorandum from the Mines Department regarding the repayment of the reasonable expenses incurred by local authorities in the administration of the above-mentioned order and stated that it was not the intention of the Department to lay down a scale of remuneration for local fuel overseers. The committee then passed the following resolution:

‘Resolved that for the 4 months ended Dec. 31, 1939, honoraria of £50 and £25 be granted to the borough treasurer [that is, I think, very significant], and Mr. J. M. Shoubridge respectively, for services rendered under the Fuel and Lighting Order, 1939.’

It is significant that the honorarium was not granted to the local fuel overseer but to “the borough treasurer” “for services rendered under the Fuel and Lighting Order, 1939.” So it went on for that year, but on 16 December 1940:

‘The chairman submitted to the committee details of remuneration paid to local fuel overseers in certain boroughs in the metropolis, and the committee having considered the question of fixing the remuneration of the borough treasurer in his capacity of local fuel overseer, it was—Resolved that the remuneration of Mr. Montague Wickham as local fuel overseer, be fixed at £150 per annum, with effect from Jan. 1, 1940.’

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There was no further change in the following years.

Now this problem presented itself to Wickham as borough treasurer: what contribution ought to be deducted from his salary? Under the original scheme an officer had to contribute 2 1/2 per cent of his salary every year. This was increased by the London County Council (General Powers) Act, 1928, Pt VII, of which applied to the Paddington Borough Council. That, in effect, raised the contribution to 3 per cent, and for officers appointed after 1928 to 5 per cent. There is one other matter which must be pointed out here. The Local Government Superannuation (Administration) Regulations, 1938 [made under the Local Government Superannuation Act, 1937] imposed the following duty on local authorities by art 4:

‘Every local authority specified in Sched. I, Pt. I, to the Act shall (a) upon a person entering their employment on or after the appointed day; (b) if during the continuance of the employment by them of an employee on or after the appointed day, any change occurs in the circumstances of his employment, being a change which is (either in their opinion or in the opinion of the employee notified by him to them in writing within 6 months after the change) material for the purposes of the Act, as soon as may be after the change or after receipt by them of such notification as aforesaid, as the case may be; and (c) if during the continuance of the employment by them of an employee on or after the appointed day, the authority pass a statutory resolution for the purpose of sect. 3(2)(b) of the Act, being a resolution which is (either in their opinion or in the opinion of the employee notified by him to them in writing within 6 months after the resolution is passed) material in relation to that employee, as soon as may be after the resolution is passed or after receipt by the authority of such notification as aforesaid, as the case may be; take into consideration the question whether that employee was or was not a contributory employee or local Act contributor immediately after he entered their employment, immediately after the change in the circumstances of his employment, or immediately after the passing of the resolution, as the case may be.’

In other words, if there is a change made, it is the duty of the council at once to determine what effect it has, if any, upon the superannuation rights of the employee with whom they are dealing so that he may know where he is. It never occurred to the Council that there was any change in the position of the borough treasurer, and in fact nothing was done under that provision.

Wickham took the view that this salary of £150 and the £50 were both emoluments within the scheme and, therefore, that he had to deduct 3 per cent, and he did deduct 3 per cent every time from the payment to himself, which I suppose he authorised. That 3 per cent, of course, could only be the right contribution if this was an emolument due to him in his capacity of borough treasurer. As everybody knows, the accounts of these local authorities are audited, and if an auditor took the view that insufficient contribution was being paid it would be his duty to raise it. In a case to which I shall refer later, where insufficient had been deducted, the auditor changed the council with having paid too big a salary without the proper deduction, and they were surcharged. So that if, during these years, 5 per cent ought to have been deducted, as is contended now by the council, and not 3 per cent, as Wickham says, at any time during those years the council could have been surcharged with this extra payment. Up to this point in the history, the auditor, Wickham and the council apparently all took the view that that which was being done was being properly done.

On 14 June 1944, the assistant district auditor wrote to the council calling their attention to the fact that they had not complied with the provision of the 1938 Act, that, if during the continuance of an employee any change occurred they should consider the matter and determine as to whether or not he was liable to contribute to the superannuation fund. Thereupon the council did give their mind to it and sent Wickham notice, dated 11 August 1944:

‘You were appointed by the council … during the continuance of such employment … a change occurred in the circumstances of your employment by virtue of your appointment by the council as local fuel overseer and such change is in the opinion of the council material for the purposes of the said Act. And whereas the council in pursuance of art. 4 of the above mentioned Regulations have taken into consideration the question whether you were or were not a local Act contributor immediately after the change in the circumstances of your employment as aforesaid. Now in pursuance of art. 5 of the said Regulations and of all other powers in that behalf them thereunto enabling the council hereby notify you of their decision which is as follows: (i) The council have decided that as local fuel overseer you are a local Act contributor [that

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is worth remembering when we come to their contentions on another question], and that you became such a contributor at the date of your appointment to such office. (ii) The council have further determined that the statement required to be furnished to you in accordance with the provisions of art. 5(2) of the said Regulations shall be as follows: (a) as local fuel overseer you are an officer of the council within the meaning of the said Act. [There, again, it seems clear that on that date Wickham became an officer within the meaning of the Act.] (b) your description as such officer is that of local fuel overseer; (c) the rate of contribution you are liable to pay to the superannuation fund maintained by the council under their local Act scheme is 5 per cent; (d) the remuneration upon which contributions are payable by you is £150 per annum as from the date of commencement of such remuneration namely Jan. 1, 1940; (e) the previous service which you are entitled to reckon in connection with the said office is nil.’

Wickham gave notice of objection and that led to this arbitration. Before we leave that notice, let me emphasise again that they decided that he was a local Act contributor, that he was an officer within the meaning of their local Act and that as such officer the rate of contribution was 5 per cent.

Then came the arbitration, and the first question asked in the award has reference to the applicability of the Local Government Superannuation Act, 1937, s 40(3). Before I come to that section, let me clarify the issue between the two parties. Wickham says: “I am an officer and I have been since 1924. As such officer I am entitled to a superannuation allowance which shall be twenty-one-sixtieths of my average salary and emoluments of the last 5 years. Part of those emoluments is the £150 which I received per year, payment to me for extra services which I rendered.” The council, on the other hand, say: “No, these are two separate offices. As borough treasurer you are entitled to your superannuation allowance based upon your average salary for the last 5 years.” I do not know what they would say that his rights as local fuel overseer would be; but they say that is a separate office and that the £150 a year is not to come into the emoluments which are to be brought into the calculation. If that is right, it is perfectly plain that, as local fuel overseer, Wickham never was in any of these schemes because he did not become local fuel overseer until he was 59 years of age, when he could not be entitled to any superannuation benefit and, therefore, could not be liable to contribute. I quite agree that in the Act of 1911 there are no express words saying that he shall not be liable to contribute, but it is clearly implicit when it says: “You are not entitled to any superannuation allowance unless you have put in 10 years’ service, and you have got to retire at 65.” Therefore, it is perfectly plain that he never could come within the benefits of the scheme, and I cannot imagine that anyone would contend that he was, therefore, liable to contribute to the scheme. Then there was the further scheme bringing in whole-time employment. When he was appointed local fuel overseer he came within it, if at all, by virtue of that scheme as a whole-time officer, because he was not an officer within the original scheme, and that scheme expressly expects servants or employees who cannot put in 10 years before their compulsory retirement. The Act, in so far as schemes are concerned which are made under the Act, again says in plain terms that he is not a contributor and not within the scheme. Therefore, as local fuel overseer, he could not be liable to contribute and he could not be entitled to any benefit. That would be the position if the two offices are kept separate and if he is deemed to be two separate individuals. That is the issue.

Pt III of the Act of 1937 is headed “Miscellaneous and General Provisions.” Sect 40(3) says this:

‘Where an employee holds under a local authority two or more separate employments of such a nature that he can cease to hold one without ceasing to hold the other or others, the provisions of this Act shall, unless the context otherwise requires, apply as respects him in relation to each of those separate employments as if the other or others were an employment or employments held by him under another authority.’

The first question that I am asked is this:

‘Whether the Local Government Superannuation Act, 1937, s. 40(3) applies as respects Mr. Wickham in relation to his employment as borough treasurer and local fuel overseer.’

It seems to that the subsection assumes that the provisions of the Act apply to the offices with which it is dealing and that it is simply ordering how those provisions shall apply. In my view, it means that, where the provisions of this

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Act apply, they shall apply in a particular way, ie, where an employee is an employee to whom these provisions apply, these provisions shall apply in a certain way. It is interesting to see what the section does not say. It does not say: “The provisions of this Act and also the provisions of any local Act shall apply,” as if the employee had different employers—in other words, separating the two offices completely. It does not say: “Neither the provisions of this Act nor the provisions of the local Act.” It is interesting to observe that the framers of this section thought that, with reference to a scheme even under the Act, it was necessary, if you wanted to achieve that result, to have a special section providing for it.

Let me go further. I ask myself the question what provisions of this Act can apply to an employee of a local Act authority; because it is not only some provisions, it is “the provisions of this Act” which are to apply. Can it really mean that an officer, being plainly and admittedly within the local scheme, if he accepts a second post passes out of the scheme he has contributed to for years, under which he is entitled to a superannuation allowance—that he passes into some other scheme, some hypothetical scheme which does not even exist (because this Act does not make a scheme for any authority, it only orders authorities which have not got a scheme to provide one)? Paddington had no other scheme but the one contained in their local Act. Can it really mean that this officer holding two offices has to pass out of his own scheme into some nebulous hypothetical scheme which does not even exist and which has got no funds? It cannot possibly mean that. I have tried very hard to find any argument in favour of the contention that this section governs employees whose rights are regulated solely by the local Act, even apart from the words “unless the context otherwise requires,” and there are very many such contexts in Pt I. It is only Pt I which lays down the superannuation clauses and it is only superannuation clauses which are relevant for this purpose. Pt I, in terms, is not to apply to a local Act. I am quite satisfied that sect 40(3) of the 1937 Act means simply that where an officer is subject to a scheme made under the provisions of this Act (ie, a scheme which is not a local Act scheme) those provisions shall apply in a certain way. That cannot apply to an officer whose rights are regulated by a local Act scheme. It would be fantastic in one way. Let me take sect 3(4) of the 1937 Act. Here is a plain provision that a person shall not become a contributory employee if he has attained the age of 55, and cannot before attaining the age of compulsory retirement complete 10 years’ service. By that provision as local fuel overseer he is outside the whole thing; he is not a contributor. Yet the council say, wholly inconsistently with their argument here, “As such overseer you are liable to contribute 5 per cent” I cannot reconcile the two contentions. Rightly or wrongly, I cannot see how sect 40(3) has any bearing at all, but I do think Wickham can get two points out of the existence of that section. I have referred to them and I repeat them again. First, the person who drew the section obviously thought, and, therefore, I am entitled to say that Parliament obviously thought, that without that provision there would be no separation of the two offices. Also, they merely say: “The provisions of this Act” when they might also have said, if they had meant it, “and also the provisions of any local Act.” Therefore, I answer the first question in the negative.

Question (ii) is:

‘Whether Mr. Wickham’s employment as borough treasurer and local fuel overseer should be treated as two separate employments for the purposes of the Paddington Borough Council (Superannuation and Pensions) Act, 1911–1938, the Local Government Superannuation Act, 1937 (so far as that Act applies) and the Paddington Borough Council (Superannuation) Scheme, 1938, or as the employment of an officer.’

If the first question had been answered “Yes,” I suppose one would say that that would answer the succeed question, but the mere fact that question (i) is answered in the negative does not necessarily settle question (ii). Question (ii) has to be determine by the proper interpretation and construction of the Paddington local Act, and it raises two contentions. The contention for Wickham, urged very strongly here, was simply this: “This is a case of the employment of an officer, Wickham. All you have got to get at when he is compulsorily retired is what has he made in the last 5 years, what benefits he received, and average those.” The contention still remains the same by the council: “No,

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you are to separate the two, they are to be treated as two separate employments.” If they are right about that, as I have pointed out, as fuel overseer he is out of everything. He has paid contributions when he ought not to have paid them and cannot possibly be entitled to anything because he has not put in 10 years’ service. So their contention comes to this: in finding out what the borough treasurer is entitled to, you are to ignore entirely the £150 a year; he gets nothing in respect of that.

I think it important to appreciate that this is not a question as to the proper treatment of an officer holding two offices each of which carries superannuation rights, for no office carries such right. It is not the office which entitles him to a superannuation allowance; it is the length of service by somebody who is an officer which earns a pension or superannuation rights. It is not a question as to the proper treatment of an officer entitled to superannuation rights in respect of service in each of two offices, because one office is out of it. The question is the proper treatment of an officer entitled to superannuation in respect of his services in one office who has been called upon to render services in another capacity (or in another office), which services could not entitle him to any separate superannuation rights. That is the matter to be considered. Wickham has all along taken the view that the extra salary was an emolument paid to him for extra services rendered and, therefore, subject to a 3 per cent deduction; and that 3 per cent, as I have said, has been deducted. The council, strangely enough, take the view that Wickham, qua local fuel overseer, is not within the scheme as contained in the 1911 Act, not being an officer as there defined and not becoming such until he was 59, and that he is not within the scheme of 1938 in that he was over 55 when appointed. Yet they claim that his salary was subject to a 5 per cent deduction as an officer appointed under the original Act, which, of course, he is not. I have already referred to that inconsistency. As local fuel overseer, he was not (at any rate, until 1944), an officer within the original scheme; he did not come within the definition of it. In that capacity he had never been put on the permanent staff. I asked what made a man an “officer on the permanent staff” and I was told it needed a resolution to put him on the permanent staff and bring him within that definition. There never was such a resolution and the nearest you get to it is August 1944, when Wickham was told that the council had determined that he was such an officer. In my view, it is plain that the salary paid for services rendered under the Fuel and Lighting Order, 1939, was not subject, and could not be subject, to any deduction except on the basis that it was an emolument to Wickham for extra services rendered. I think that must be clear. If you are going to consider it as a separate office, I cannot see on what possible ground it can be said that the salary was subject to any deduction. It did not begin until he was 59. Whether you regard him as a whole-time employee or as an officer does not seem to me to matter. He never could come as such within this superannuation scheme and, therefore, could not be called upon to contribute to it. Therefore, if there was a deduction to be made, it could be only a deduction of 3 per cent, regarding it as an emolument to Wickham in his capacity as borough treasurer; and such, in fact, it was.

I am entitled, in dealing with a special case, to draw all necessary inferences of fact. I doubt whether the facts do not speak for themselves without the drawing of inferences. Let me repeat them again. On 7 September 1939, Wickham was appointed local fuel overseer, nothing being said about remuneration. On 12 February 1939, there is this resolution (which seems to me to crystallise the position) that for the 4 months ended 31 December 1939, the honorarium of £50 be granted to “the borough treasurer“—not to “the local fuel overseer,” not to Wickham as local fuel overseer, but simply to the borough treasurer. For what?—for services rendered under the Fuel and Lighting Order, 1939. They are saying: “We are giving you, the borough treasurer, £50 more than your salary because of the services you, the borough treasurer, have rendered under this order.” Eighteen months go by without any change. To get at the real relationship and the real contention between the parties, you have to go back to the commencement of it and see how it started and find out how the thing began—services rendered by Wickham as borough treasurer—outside the particular scope of his office, but still services rendered to the council. Then on 16 December 1940, there comes this:

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‘Resolved that the remuneration of Mr. Montague Wickham as local fuel overseer be fixed at £150 per annum.’

Surely it cannot be suggested that you can read into that resolution: “Understand that from now onwards there is a complete change in your position and that so far from this service being rendered by you as borough treasurer or being added to your services as borough treasurer, this resolution means that you pass out of the scheme qua local fuel overseer and cease to be entitled to any superannuation rights in respect of what you will be paid.” I cannot read that into that resolution. It seems to me you could look at it in this way: the job was either to carry extra remuneration or it was not. If it was, the £50 for services rendered was for services which were to be paid for, and the £50 would not be properly a gratuity but would be the payment of a reasonable sum for services rendered which had to be paid for—and the payment of a sum paid for services rendered (as the resolution says) by the borough treasurer. If the services were not to be paid for, it is a little difficult to regard that appointment as an appointment to a separate office, a voluntary office which was not to be paid for. It seems to me that the only inference which can be properly drawn from the facts here is that this case is precisely like R v Lyon.

Therefore, I think that there is no answer to the argument for Wickham on the second question that he is to be regarded as an officer, and that the average is to be calculated on all that he received during the past 5 years. There is no suggestion that the £150 was not, at least, an emolument. The £50, it is said, was a gratuity. It does not matter for the purpose of this case what it was because it was outside the 5 years. The 5 years begins in June, 1940, and ends in June, 1945, and, therefore, I am not going to determine the rather difficult question as to whether the £50 was a mere gratuity or was a payment for services rendered which it had been always contemplated should be paid for. That is wholly immaterial and too trifling a matter to worry about. My answer to question (ii) is that his employment is to be treated as the employment of an officer, that is, superannuation rights are not paid in respect of an office, they are earned by an officer for services rendered.

Question (iii) is:

‘Whether contributions should be paid to the superannuation fund by Wickham in respect of the remuneration paid to him in his capacity of local fuel overseer at the rate of 3 per cent., being the percentage applicable to his remuneration as borough treasurer as in the case of an officer appointed by the council on or before Sept. 29, 1928, or at the rate of 5 per cent. being the percentage applicable in the case of officers appointed after that date.’

The answer to that depends on the answer to question (ii), that, if it is deemed to be merely an emolument payable to Wickham as borough treasurer, he only pays 3 per cent. If that is wrong, then it is not liable to anything. It is not liable to 5 per cent, because, as local fuel overseer, he never came into the scheme at all and no contribution could be called for from him. All that happened to him was that he was appointed. If he had been younger, he would have come into the scheme as a whole-time officer under the 1938 alteration of the original Act, but even that scheme, in plain terms, says he shall not be liable to contribute if he is of such an age that he cannot put in 10 years’ service before compulsory retirement. Therefore, it is plain that it is either 3 per cent, or nothing, and, as 3 per cent has been deducted, my answer to that is: The rate of 3 per cent is the true rate and not 5 per cent.

Question (iv) is:

‘Whether the payment of £50 under the resolution of the emergency committee of Feb. 12, 1940, was rightly or wrongly taken into account by Wickham as being salary or emoluments from which deductions ought to be made on behalf of the council for the purposes of the Acts and Scheme referred to in question (ii).’

Really, that is trifling. I think myself a good deal could have been said by Wickham in support of a right not to make any contribution in respect of that sum, but he is content to have made the contribution and he is not asking for it back. Therefore, I answer that by saying it was rightly deducted. The fact that 30s was deducted makes no difference at all because it does not enter into the matter.

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There are two cases which I want to refer to, because I think they support the view I take. In Stoke Newington Borough Council v Richards the point was this:

‘Where the town clerk of a metropolitan borough is by virtue of the Representation of the People Act, 1918, the registration officer of a magistration area which is coterminous with the borough, the fees which he receives as registration officer are “emoluments” of his office as town clerk within the meaning of the Superannuation (Metropolis) Act, 1866, s. 4, and ought, therefore, to be taken into account along with his salary and other emoluments in calculating the superannuation allowance to be granted to him under the last-mentioned Act on his retirement from the office of town clerk.’

The Superannuation (Metropolis) Act, 1866, s 4, under which the question arose, was:

‘Subject to the provisions herein contained, the allowance to be granted [after the commencement of this Act] to persons who shall have served in an established capacity as officers as aforesaid, whether their remuneration be computed by weekly wages, poundage or percentage on collection of rates, or annual salary, shall be as follows; (that is to say) To any person who shall have served 10 years and upwards, and under 11 years, an annual allowance of ten-sixtieths of the salary and emoluments of his office … ’

Those words “of his office” are not in the Act with which we have to deal. I have to deal with emoluments to an officer “as such.” There is no reference to a particular office but simply emoluments of an officer “as such,” whereas Stoke Newington Borough Council v Richards had to deal with the words “emoluments of his office.” The decision was that even there the fees paid to the registration officer were emoluments of his office of town clerk because the law required the town clerk to be appointed registration officer. The main interest to me of the case is the argument of counsel for the officer, and the cases which he collected and referred to, where additional work had been put upon an officer in respect of which he had received remuneration. They were mostly cases for compensation for loss of office but where the compensation had to be with reference to emoluments and earnings from office. In all those cases the officer had always had the benefit of the view that these extra payments to him in respect of extra work put upon him were rightly taken into consideration in assessing the compensation payable.

I wish to refer to R v Lyon, because it seems to me so like this case. This is the headnote:

‘The London County Council, as the authority under the Lundacy Acts for the county of London, maintains a number of asylums. During the war many of the officers employed in those asylums undertook military service, and the asylums had to be carried on with depleted staffs. The council called upon the remaining officers to undertake special duties or extra work outside the terms of their contracts, and, in consideration of the special services rendered, approved of special duty grants to those officers. Upon payment of the grants no deductions were made in respect of the superannuation fund under the Asylums Officers’ Superannuation Act, 1909, s. 8, as the council considered that the payments did not come within the words “salary or wages and emoluments” in that section, but were mere gratuities. Out of the sum paid for special duty grants, the district auditor disallowed a sum of £36 1s., and surcharged it upon the council.’

His contention was: “These sums will come into the calculation of superannuation rights and, therefore, there ought to have been a contribution in respect of those payment. You have overpaid this man, you have not made the deductions.” Therefore, he surcharged them. The court held:

‘… that the special duty grants were “emoluments” within the meaning of sect. 8 of the Act and were subject to deductions in respect of the superannuation fund, and that the disallowance and surcharge by the auditor were, therefore, properly made.’

The Earl of Reading LJC, giving the first judgment, quoted sect 16 of the Act ([1921] KB 203, at pp 207, 208):

‘“The salary or wages and emoluments of an established

Page 79 of [1946] 2 All ER 68

officer or servant shall, for the purpose of computing the amount of a superannuation allowance or gratuity, be calculated according to the average amount of his salary or wages and emoluments during the 10 years ending on the quarter day which immediately precedes the day on which he ceases to hold his office or employment.” Then it goes on: “and the expression ‘emolument’ includes all fees, poundage and other payments made to any established officer or servant as such [so that there is the same language as I have got here] for his own use.” If I stop at those words, I can see no reason why the words “other payments made to any established officer or servant as such for his own use” would not include extra payments for extra services and extra responsibilities undertaken … [they] can be brought within the words “extra work and responsibility”; and it is to be observed that this is extra work and responsibility in the employment which the established officer or servant is actually engaged for.’

It was work outside what he was actually engaged for. Then the Earl of Reading LCJ, said ibid, p 209):

‘… but in any event it all comes back to this, that the work which the officer or servant was doing was work for the same employer in the same institution, in respect of the same class of work … ’

Darling J put it somewhat differently. He said (ibid, pp 209, 210):

‘I am of the same opinion. It is said that there is a difficulty about this case in many respects, but particularly because what was paid here to one officer who was an established officer for doing more work than that which he at first contracted to do was not paid to him as “an established officer or servant as such for his own use.” Now it was paid to him for his own use. If he had not been an established officer this case could not have arisen; it was paid to him for doing the work which another established officer did before the war, and, therefore, it appears to me that what he received in each of these instances was a payment made to an established officer as such for his own use. Now another difficulty is raised upon sect. 8 of the Act. It is pointed out that the words are “subject to the provisions of this Act, every established officer and servant employed in an asylum shall contribute annually“—it is said how can he “contribute annually”? The war is over. He cannot contribute next year, because there will be no difficulty in employing the ordinary number of servants, and, therefore, next year he will not get the money. I do not see any difficulty about that. He will contribute annually in the years in which he does get the money, and the result will be that when it comes to calculating his pension, for some years it will be put down to his benefit that he received more than the ordinary salary attaching to his particular office, and that will give him an increase of pension.’

Avory J took the same view.

To my mind R v Lyon is very helpful in this case and seems to me to support the view I have formed quite independently of it that Wickham’s rights are to a pension which is to be assessed on all his receipts for the past 5 years and that this £150 was paid to him for extra work which was imposed upon him, with his consent, which began on a voluntary basis and which after 18 months was put on a basis of remuneration. It is perfectly plain that the council would never have got a whole-time officer to do the local fuel overseer’s work for £150 a year. If they had tried to get somebody outside to hold such an office it would have cost them far more. Because the borough treasurer was getting a salary and was ready to do these extra duties, he did them. To my mind, it is quite plain that the £150 was an emolument which he was entitled to have brought into account. Therefore, I answer all four questions in that way.

Order accordingly.

Solicitors: W H Thompson (for the applicant); W H Bentley, Town Clerk Paddington for the respondent council).

P J Johnson Esq   Barrister.

Bomford v South Worcestershire Area Assessment Committee and Preshore Rural District Rating Authority

[1946] 2 All ER 80

Categories:        LOCAL GOVERNMENT        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND SINGLETON JJ        

Hearing Date(s):        2 MAY 1946        

Rates and Rating – Valuation of agricultural dwelling-houses – Deduction from minimum wage in respect of dwelling-houses – Whether gross value limited by value for payment of wages in lieu of cash – Agricultural Wages (Regulation) Acts, 1924–1940 – Local Government Act, 1929 (c 17), s 72.

Two cottages on the appellant’s farm were occupied respectively by a foreman, who received his wages free from any deduction in respect of the cottage, and a tractor driver, from whose wages a sum was deducted in respect of the cottage. The deduction was made pursuant to an order made by the local agricultural committee under the Agricultural Wages (Regulation) Acts, 1924–1940, which fixed a minimum wage and enabled part of that wage to be paid otherwise than in cash:—

Held – (i) The Local Government Act, 1929, s 72, required that where agricultural cottages were used as dwelling-houses for agricultural labourers, the cottages, for the purposes of rating, were to be dealt with as though they were let to the farmer, subject to a restrictive covenant that he could use them only for the purpose of housing his labourers.

(ii) the gross value of the cottages, ascertained in accordance with that section, was not limited by the value at which they were to be reckoned as payment of wages in lieu of payment in cash under the Agricultural Wages (Regulation) Acts, 1924–1940, and the order then in force.

(iii) the true effect of the section was that the gross value of the cottages was to be fixed by reference to the rent at which the cottages would be expected to let with a restrictive covenant upon them; and account must be taken both of the greater benefit which the farmer might be receiving through having cottages into which he could put his labourers, and of the diminution, by the restriction as to their user, of the gross value they would otherwise bear.

Notes

This appears to be the first reported decision upon the valuation of agricultural dwelling-houses under the Local Government Act, 1929, s 72. In such cases the true position would seem to be that the agricultural workers are mere licensees, while the farmer is the tenant subject to a restrictive covenant by virtue of which he is bound to use the dwellings for farm workers. It was pointed out in Baker v Wood (1919) 89 LJKB 344, that the deduction from the minimum wage in respect of a dwelling-house occupied by an agricultural worker was not rent and did not indicate a contract of tenancy. The value for rating purposes is not, therefore, limited to the sum which the Agricultural Committee can fix as the proportion of the worker’s wage applicable to his occupation of the dwelling. This sum is merely one of the factors to be borne in mind when fixing the gross value. Another factor is the restrictive covenant.

For Agricultural Workers’ Wages, see Halsbury, Hailsham Edn, Vol 1, pp 389–395, paras 652–660.

For the Valuation of Agricultural Dwelling-Houses, see Halsbury, Hailsham Edn, Vol 27, p 434, para 870.

Case referred to in judgments

Williams v Smith [1934] 2 KB 158, Digest Supp, 103 LJKB 421, 151 LT 112.

Special Case

Special Case stated for the opinion of the King’s Bench Division of the High Court, under the Quarter Sessions Act, 1849, s 11. The facts are fully set out in the judgment of Lord Goddard LCJ.

H B Williams for the appellant.

G D Squibb for the respondents.

2 May 1946. The following judgments were delivered.

LORD GODDARD LC. This is a case stated for the opinion of the court under the provisions of the Quarter Sessions Act, 1849, s 11, and it raises a question of considerable importance to farmers and assessment committees in agricultural areas. It involves the construction of the Local Government Act, 1929, s 72, which deals with the rating of cottages used in connection

Page 81 of [1946] 2 All ER 80

with a farm for the housing of agricultural labourers. The section is in these words:

‘As from the first day of April, nineteen hundred and thirty, the gross value for rating purposes of a house occupied in connection with agricultural land and used as the dwelling-house of a person who—(a) is primarily engaged in carrying on or directing agricultural operations on that land; or (b) is employed in agricultural operations on that land in the service of the occupier thereof and is entitled, whether as tenant or otherwise, so to use the house only while so employed, shall, so long as the house is so occupied and used, be estimated by reference to the rent at which the house might reasonably be expected to let from year to year if it could not be occupied and used otherwise than as aforesaid.’

The two cottages in this case are cottages one of which is actually occupied by a foreman on the appellant’s farm (the appellant being the farmer) who receives £4 a week without any deduction in respect of the cottage; the other cottage is the dwelling of a tractor driver on the farm, who receives an average of £3 15s 0d a week from which 3s 3d a week is deducted in respect of the cottage. The 3s 0d is deducted pursuant to the provisions of an order made by the Worcestershire Agricultural Committee under the provisions of the Agricultural Wages (Regulation) Acts, 1924–1940, which fixes a minimum wage and enables part of that wage to be paid otherwise than in cash; that is to say, if the farmer provides a cottage for his worker the cottage is to be taken as representing 3s 0d part of the minimum wage. If he pays the man £3 15s 0d a week and provides him with a cottage he is entitled to deduct 3s 0d a week and to pay him only £3 12s 0d a week. The contention of the appellant in this case (which is supported by counsel’s argument) was that in those circumstances the gross value of the cottage could not be fixed at a higher sum than £6, because the effect of the section, so he said, was to make the 3s 0 a week the criterion of the value. I think that is a fair way of putting his argument, and I am bound to say that at first his argument very much impressed me and I thought he was right; but when I turn to the case, as counsel for the respondents invited us to do, the first fact that is stated in the case is this:

‘The appellant is a farmer and occupies the two cottages for the accommodation of agricultural workers employed by him on his land. The cottages are not let to the agricultural workers, who reside therein by virtue of their employment … ’

They are, therefore, what are commonly called service tenants, but, in fact, must be regarded as in the position of licencees, because if they leave the farmer’s employment they have to leave the cottages and can be ejected from the cottages; therefore, the person to whom these cottages are let, or who must be regarded as the person to whom the cottages are let, is the farmer.

Therefore, counsel for the respondents has argued, and his argument has convinced me he is right, that what this section requires is that where you have these agricultural cottages which are used as dwelling-houses for agricultural labourers you are, for the purposes of rating, to deal with the cottages as though they were let to the farmer subject to a restrictive covenant, the restrictive covenant being that he can only use the cottages for the housing of his workers on the farm. When one gets that firmly into one’s mind one sees that the value for rating purposes is not necessarily to be limited to this 3s 0d, which is the sum that the agricultural committee can by statute fix, and have in this case fixed, as representing the part of the wage which can be deducted in respect of the occupation of the cottage. Whether it is deducted or not does not matter. The benefit which may be given to the agricultural worker, in lieu of cash, is the benefit of having him the cottage which is assessed at 3s 0d a week.

It is quite obvious that the person to whom the cottages are let, or who must be regarded as the person to whom the cottages are let, is the farmer for rating purposes; and a farmer might be ready and willing to pay a higher rent than 3s 0d a week for the cottage, although that would mean the utmost benefit he could receive from his servant once he put the servant into the cottage to live there. The reason (as Singleton J pointed out during the argument) is this: It may pay a farmer very well to get a foreman, who will only come to him at a particular wage, if he can have a cottage; and to enable a farmer to get a labourer on his farm he would be very anxious to have cottages so that he may induce workers to come; what he would pay to get a cottage into which he may put a labourer might be more than he would be able to deduct from the

Page 82 of [1946] 2 All ER 80

labourer’s wage, because he would have the advantage of having the labourer on the farm, or whatever class of servant it might be; and, therefore, I think the construction which counsel for the respondents placed on the section is right, and that the true effect of the section is that the gross value of the cottage is to be fixed by reference to the rent at which the cottage would be expected to let with a restrictive covenant upon it; and although the restrictive covenant upon it is that it must only be let to a worker on the farm, and although if it is let to a worker on the farm, 3s 0d is the gross value in cash which the farmer can get from it, it is quite obvious that the letting to the farmer may be of a greater value than the 3s 0d. That is a matter which the assessment committee have to take into account, and, therefore, when we are asked the question, as the court is in this case, whether on the facts stated the gross value of the two cottages ascertained in accordance with the Local Government Act, 1929, s 72, is limited by the value at which they are to be reckoned as payment of wages in lieu of payment in cash under the Agricultural Wages (Regulation) Acts, and the order in force, the answer is in the negative; they are not limited by that 3s 0d a week; they can take into account the greater benefit which the farmer may be receiving through having cottages into which he can put his labourers or his workers. The gross values are agreed in this case to be £12 and £10.

The real object, as it seems to me, of the section is this, that the farmer, having got a cottage of this sort, in which he actually houses his workers, is not to have the cottages assessed as though they were in the open market, in which case they might be taken as week-end cottages by someone who might be willing to pay a very large rent, comparatively speaking, of £50 or £60 a year. So long as the cottage is kept for an agricultural worker that point is to be taken into account, and the restriction is to be taken into account as diminishing the gross value which the cottage would otherwise bear.

The actual sum here is not for us to determine; it has been agreed between the parties. As I have said, the question is answered in the negative, and the gross values of £12 and £10 and the rateable values of £7 and £6 will accordingly stand.

HUMPHREYS J. I am of the same opinion. My Lord has covered the whole ground, and if I were to say anything it would be merely vain repetition. I, therefore, say nothing except that I agree.

SINGLETON J. I regard this as a difficult case. It comes from South Worcestershire, and the Worcestershire Agricultural Wages Committee in performing their duty under the Agricultural Wages (Regulation) Acts, 1924 to 1940, decided that the benefits or advantages which may be reckoned as payment of wages in lieu of payment in cash for the purpose of the application of any minimum wages should be, in the case of a cottage, including any garden provided with the cottage, 3s 0d per week, less any rent or rates which may be paid by the occupier. The case deals with two cottages, both of which fall under the Local Government Act, 1929, s 72. One of those cottages is occupied by a foreman employed by the appellant, and no deduction is made in respect of it. The other cottage is occupied by another man who is employed as a tractor driver on the appellant’s farm, and a deduction of 3s 0d a week is made in respect of that cottage.

My Lord has pointed out that, for the purposes of this case, we have to regard the farmer himself, the appellant, as the occupier of the cottages. Para 1, ie, of the case, so states. It says the appellant is a farmer and occupies the two cottages for the accommodation of agricultural workers employed by him on his land. The cottages are not let to the agricultural workers. The appellant is the occupier for the purposes of rating.

The Local Government Act, 1929, s 72, provides:

‘As from the first day of April, nineteen hundred and thirty, the gross value for rating purposes of a house occupied in connection with agricultural land and used as the dwelling-house of a person who—(a) is primarily engaged in carrying on or directing agricultural operations on that land; or (b) is employed in agricultural operations on that land in the service of the occupier thereof, and is entitled, whether as tenant or otherwise, so to use the house only while so employed, shall, so long as the house is so occupied and used, be estimated by reference to the rent at which the house might

Page 83 of [1946] 2 All ER 80

reasonably be expected to let from year to year if it could not be occupied and used otherwise than as aforesaid.’

I am not sure when orders of the nature of those made by the Worcestershire Agricultural Wages Committee first came into operation, but I gather at least from the heading of this order that they existed so far back as 1924.

It is important to notice that the Local Government Act, 1929, s 72, does not say that the rateable value or the gross value of any hereditament so used and occupied shall be assessed according to the figure of deduction allowable by the County Agricultural Wages Committee. Nothing of that sort is said, but the gross value for rating purposes shall, so long as the house is so occupied and used, be estimated by reference to the rent at which the house might reasonably be expected to let from year to year if it could not be occupied and used otherwise than as aforesaid.

The appellant, the occupier for this purpose, can only make a deduction such as that allowed under the order of the agricultural wages committee. In the one case he does not make any deduction; in the other he makes a deduction of 3s Od a week. Those are matters to be borne in mind; and, indeed, both counsel told us that under the decision in Williams v Smith, the appellant could not charge more rent than the 3s Od a week; so that it seems to me the appellant, being the occupier, the gross value for rating purposes has to be assessed on the basis that he is occupier and that the cottages are occupied and used within the meaning of the Local Government Act, 1929, s 72 (b), and that those who have to fix the gross value for rating purposes must bear in mind that the appellant, the farmer, is the occupier, and that the value to him is limited by the fact that so long as the cottage is used in that particular way he, the owner, can only deduct 3s Od a week. Consequently the cottage is of much less value than it otherwise would be. Those who fix the gross value for rating purposes are not bound to fix it upon the actual sum of 3s 0d a week, but that fact is one of the essential features they should bear in mind.

I agree that this appeal must be dismissed.

Appeal dismissed with costs.

Solicitors: Ellis & Fairbairn (for the appellant); Vizard, Oldham, Crowder & Cash agents for Smith & Roberts, Evesham (for the respondents).

C StJ Nicholson Esq   Barrister.

Killner v France

[1946] 2 All ER 83

Categories:        LAND; Sale of Land        

Court:        KING’S BENCH DIVISION        

Lord(s):        STABLE J        

Hearing Date(s):        8 APRIL 1946        

Sale of Land – Completion date, 27 November 1944 – Purchaser entitled to rescind contract if property destroyed by enemy action “prior to the date fixed for completion” – Purchase money paid to vendor and purchaser let into possession of part of property on 23 November 1944 – Property destroyed by enemy action on 25 November 1944 – “Completion” – Purchaser entitled to rescind contract.

By a contract dated 22 November 1944, the owner of a lease of certain property agreed to sell the residue of the term to a purchaser for the sum of £1,500. Completion was to take place on or before 27 November 1944, and the purchaser was to have vacant possession on completion. By cl 11, the contract provided: “If the property is destroyed or rendered uninhabitable by enemy action prior to the date fixed for completion the purchaser shall have the right to rescind this contract and have the deposit returned to him.” Owing to some difficulty in obtaining the original lease, it was found that it might not be possible to complete the legal formalities until after 27 November; but, since the purchaser was anxious to take possession on that date, it was agreed that the purchase money should be paid and vacant possession should be given on that date, that apportionment should be as from that date and that a transfer of the leasehold should be executed in due course. On 23 November the balance of the purchase money and authority for releasing the deposit were sent to the vendor’s solicitors. On the same day, the purchaser was allowed by the vendor to move some of his furniture into the premises. On 25 November the property was rendered uninhabitable

Page 84 of [1946] 2 All ER 83

by enemy action. The question to be determined was whether the purchaser was entitled to rescind the contract or whether the vendor was entitled to retain the purchase money and transfer the residue of the term to the purchaser. It was contended by the vendor that the date of completion was the date of the payment of the purchase money:—

Held – (i) The word “completion” in the contract had its usual meaning, ie, “the complete conveyance of the estate and final settlement of the business.”

(ii) upon the true construction of the contract, 27 November 1944, was the date fixed for completion, and was, therefore, the date referred to in cl 11 of the contract. Since the property had been destroyed before the matter was completed and before the date fixed for completion, the purchaser was entitled to rescind the contract under cl 11, although he had paid the whole of the purchase money and had been let into possession of part of the property.

Notes

The word “completion” is generally construed to mean the complete conveyance of an estate and the final settlement of the business. In this case the purchaser had paid the purchase money and had been let into possession of part of the property, but the date of completion in the contract was subsequent to the destruction of the property by enemy action. Certain legal formalities, however, could not be completed before the date fixed, and adopting the construction of “completion” above referred to, it is held that the purchaser is still entitles to exercise his right of rescission, which by the contract depended upon enemy action prior to the “date of completion.”

As to Date for Completion, see Halsbury, Hailsham Edn, Vol 29, pp 340, 341, para 458; and for Cases, see Digest, Vol 40, pp 110–116, Nos 877–927.

Cases referred to in judgment

Lewis v South Wales Ry Co (1852), 10 Hare, 113, 11 Digest 232, 1212, 7 Ry & Can Cas 923, 22 LJCh 209, 21 LTOS 3.

Lord Advocate v Caledonian Ry Co [1908] SC 566.

Action

Action by a purchaser of the residue of a lease of certain property for the rescission of the contract and the return of the purchase money. The facts are fully set out in the judgment.

Harold Brown for the plaintiff.

G H Crispin and J W Wellwood for the defendant.

8 April 1946. The following judgment was delivered.

STABLE J. This case raises a short point and one which (as far as I know) is not directly covered by authority. The plaintiff, John Killner, is suing to recover £1,150 from the defendant, in these circumstances. The defendant, Mrs France, was the owner of the residue of a term of 99 years in a leasehold property at 65, King Henry’s Road, Hampstead. She was anxious to sell the residue of the lease, and she put the matter into the hands of some estate agents, Match & Co. Killner was, apparently, anxious to buy the property, and after some correspondence the matter passed into the hands of their respective solicitors.

On 7 November Messrs Anning, the solicitors who were acting for the vendor, after referring to some little difficulty in getting hold of the original lease, said this:

‘We understand your client is very anxious to obtain possession within a fortnight and provided the original lease is recovered or we can get the copy of the counterpart without delay there seems no reason why completion should not take place very quickly, otherwise we understand your client is willing to pay the purchase money to us, and take possession. We will send you a draft contract on these lines and if it is approved you can have the abstract immediately.’

I understand this to mean that it is anticipated that there may be early completion, but, if it turns out to be otherwise (ie, if there is any hitch or delay), the vendor’s solicitors are saying: We understand Mr Killner is ready to pay the purchase money to us and go into possession, notwithstanding that the property has not been legally conveyed to him.

On 8 November a draft contract was sent for approval, and on 17 November Mr Piper, the purchaser’s solicitor, wrote a letter in these terms:

‘Will you please state if your client is proposing to vacate the part of the premises occupied by her on Nov. 27, the date arranged for completion. If not, I take it she will be willing to pay rent as a tenant for such period as she remains there. It seems unlikely that we shall be able to complete the purchase by Nov. 27, but I understand

Page 85 of [1946] 2 All ER 83

you will be willing to permit my client to take possession upon payment to you of the balance of the purchase money, and doubtless you will be good enough to let me have a completion statement made up to Nov. 27, and also give an undertaking on your client’s behalf to execute the necessary transfer if the matter is not completed by that date.’

It appears that Killner, who owned some property (an inn) in some other part of the world, had disposed of that property and his purchaser, or tenant, was coming in on 27 November bringing his own furniture with him, and Killner wanted to get his furniture out of the inn before the new man brought his. Killner saw Mrs France, the vendor, and asked if she would be kind enough to let his furniture go in a few days before the date of completion. She was a little dubious at first, but he assured her the money was forthcoming, and she said that he could put his furniture in before the matter was completed. Acting on that, Killner brought some furniture into the premises on 23 November. The position at that time was this: the basement and the ground floor were still in the possession of Mrs France; there was a tenant on the top floor, and Killner’s furniture went into the first floor.

On 20 November the vendor’s solicitors wrote saying:

‘Our client informs us she will have vacated the premises in her occupation by Dec. 1.’

On 22 November Mr Piper, who as acting for Killner, sent a formal contract, approved and signed by his client, and he said:

‘I shall be sending you a banker’s draft tomorrow for the balance of the purchase money and a release of the deposit, so that my client may take possession on Monday next, as I do not think we shall be able to complete by that time.’

In other words, he was saying that, as it was probable the legal formalities would not be carried out by 27 November and as his client was anxious to take possession on that date, he was sending a banker’s draft and the deposit. Mr Piper does not appear to have known of the arrangement by which Killner was bringing some of his furniture on to the place on 23 November.

On 22 November Messrs Anning wrote to say:

‘We are in position to exchange contracts.’

On 23 November Mr Piper wrote, saying:

‘As stated in my letter to you yesterday I now enclose a banker’s draft for £1,035 being the balance of the purchase money, together with an authority to the agents to account for the deposit. This is sent so that my client will be able to move into possession of the empty flat. I take it that I have your undertaking to send me your client’s part of the contract and to execute a transfer of the leasehold in due course. Will you please take this letter as my undertaking to pay you any apportionments which may be due from my client up to Monday next.’

It is important to remember the “Monday next” was 27 November; and that Killer’s solicitor was releasing the whole of the purchase money, notwithstanding the fact that he had not actually got a contract with the vendor, much less a transfer; but he was relying on the common-sense and professional integrity of the person with whom he was dealing. Simultaneously he inclosed with this letter to Messrs Anning, a letter addressed to Match & Co saying:

‘This matter is now completed. I hereby authorise you to account to the vendor’s solicitors, Messrs. Anning & Co., of 8, Queen’s Street, Cheapside, for the deposit in your hands.’

On 24 November Messrs Anning wrote to Mr Piper acknowledging his letter and the banker’s draft and authority for releasing the deposit, and said:

‘We sent you the contract signed by the vendor yesterday and will let you have completion statement in due course, and in the meantime shall be glad to receive the draft transfer.’

The relevant words of the contract, which is dated 22 November 1944, are in cll 2 and 11:

‘2. The purchase shall be completed in London on or before Nov. 27, 1944. All current ground rent, taxes, water rates and local rates payable in respect of the property sold shall be paid, or allowed by the respective parties, up to the said date, or earlier day of completion and apportioned if necessary … On actual completion (but not before) the purchaser shall be let into vacant possession of the property sold, except of the top flat [which was let to somebody else] … 11. If the property is destroyed or

Page 86 of [1946] 2 All ER 83

rendered uninhbitable by enemy action prior to the date fixed for completion the purchaser shall have the right to rescind this contract and have the deposit returned to him.’

Unhappily, on 25 November the property was destroyed or rendered quite uninhabitable, by enemy action. Mrs France, who was living on the ground floor, was seriously injured. The question is whether or not the provisions of cl 11 entitles Killner, the purchaser, to rescind the contract, or whether Mrs France is entitled to retain the purchase money and to transfer in due legal form the outstanding term of the lease to Killner, for what it is worth.

I have been referred to two authorities: Lewis v South Wales Ry Co, which was a decision of Turner, V-C, and Lord Advocate v Caledonian Ry Co, a Scottish case turning on the construction of the Finance Act. It seems to me neither of these cases throw any real light on the matter which I have to decide. Turner, V-C, in Lewis v South Wales Ry Co, said (10 Hare, 113, at p 119):

‘The question is, what is the meaning of the words “until the completion of the purchase.” Those words may, no doubt, import and generally perhaps would be construed to refer to, the complete conveyance of the estate and final settlement of the business; but I do not think this is the only or necessary meaning of the words.’

Although he has decided that, in that case, the words bore a different meaning he is saying that the usual construction to place upon those words is a complete conveyance of the estate and the final settlement of the business.

In my opinion, cl 11 deals with a date—the date fixed for completion. Now, what is meant by “completion” in this clause”? I adopt the words of Turner, V C, and, in my judgment, in this contract the words “completion of the contract” mean “the complete conveyance of the estate and final settlement of the business.” Having regard to the terms of the contract, it seems to me that what the parties intended, and what they have expressly agreed to, is that the date referred to in cl 11 is 27 November. Up to that date, had the contract been completed? In my judgment, it had not. It is true the purchaser had paid the whole of the purchase money and had been let into possession of a part of the property that he was buying, but by no means all of it. It is apparent from the correspondence that the apportionment and the like were to be as from 27 November.

The result is that, inasmuch as the subject-matter of the contract was destroyed before the matter was completed and before the date fixed by the contract as the date of the completion of the matter, cl 11 comes into operation and the plaintiff is entitled to succeed in the action. What the position would be if there had been a completion in the strict sense of the word for example on 23 November that is to say four days before 27 November and two days before 25 November when the bomb fell, is an interesting problem, but one which does not fall to be determined in this case.

As a result, I have come to the conclusion that this contract can properly be rescinded and under the terms of the contract Killner can recover his money, and, therefore, I give him judgment for £1,150 with costs.

Judgment for the plaintiff with costs.

Solicitors: J Tickle & Co agents for A R Piper, Hurstpierpoint, Sussex (for the plaintiff); B R Everett (for the defendant).

P J Johnson Esq   Barrister.

Wallace v Major

[1946] 2 All ER 87

Categories:        CRIMINAL; Road Traffic        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND SINGLETON JJ        

Hearing Date(s):        1 MAY 1946        

Street and Aerial Traffic – Motor vehicle – “Driver” – Steersman of towed broken-down vehicle – Road Traffic Act, 1930 (c 43), ss 1, 4(1), 11(1), 121 – Road Traffic (Driving Licences) Act, 1936 (c 23), s 1(1) – Motor Vehicles (Construction and Use) Regulations, 1941 (SR & O, 1941, No 398), reg 82(2).

The steersman of a towed vehicle is not the driver of the vehicle within the meaning of the Road Traffic Act, 1930.

The respondent, who was steering a broken-down motor vehicle which was being towed by another motor vehicle, was charged, under the Road Traffic Act, 1930, s 11, with driving a motor vehicle in a manner which was dangerous to the public. The magistrates came to the conclusion that the respondent was not the driver of a mechanically-propelled vehicle within the meaning of the Act, and dismissed the information. It was contended on behalf of the appellant that the respondent was a driver within the meaning of the Act by virtue of sect 121 of the Act, which provides that “driver,” where a separate person acts as steersman on a motor vehicle, includes that person as well as any other person engaged in the driving of the vehicle, and that the expression “drive” shall be construed accordingly:—

Held – Sect 121 of the Act did not apply because the provision in that seciton contemplated two persons being in charge of the same vehicle, eg, a steam wagon, and the magistrates were right in finding that the respondent was not acting as a driver within the meaning of the Act and in dismissing the information.

Notes

It is held in this case that the steersman of a vehicle on tow is not a “driver” for the purpose of a prosecution for dangerous driving. Such a person is not a driver in the popular sense of the term, for he has nothing to do with making the car go, nor can he ever have the proper control contemplated by reg 82(2) of the Motor Vehicles (Construction & Use) regulations, 1941.

For the Road Traffic Act, 1930, ss 11, 121, see Halsbury’s Statutes, Vol 23, pp 620, 686.

Special Case

Special Case stated for the opinion of the King’s Bench Division of the High Court by the magistrates for the West Riding of Yorkshire, sitting at Snaith, who dismissed an information, under the Road Traffic Act, 1930, s 11(1), for driving a motor vehicle in a manner which was dangerous to the public. The facts are fully set out in the judgment of Lord Goddard LCJ.

Hon J R Cumming-Bruce for the appellant.

J G Foster for the respondent.

1 May 1946. The following judgments were delivered.

LORD GODDARD LC. I have clearly come to the conclusion in this case that the justices were right.

The matter arises in this way: The charge against the appellant was that “he unlawfully did drive a motor vehicle, to writ, a motor lorry on a road called Pontefract Road in a manner which was dangerous to the public, having regard to all the circumstances of the case … contrary to sect. 11 of the Road Traffic Act, 1930.” The charge is the offence of what is commonly called dangerous driving.

The Road Traffic Act, 1930, s 11(1), is in these terms:

‘If any person drives a motor vehicle on a road recklessly, or at a speed or in a manner which is dangerous to the public, having regard to all the circumstances of the case … ’

he shall be guilty of an offence.

Certain facts were admitted before the justices, and the point was taken on the admissions that were made that the respondent could not be in any case convicted because he was not the driver of the motor car, and the justices, without going into the merits so far as concern the dangerous driving or otherwise, upheld that contention and dismissed the information; and the question we have to decide in whether or not they were right in holding that the man was not the driver on the admitted facts of the case.

The facts in the case are that a motor vehicle was proceeding along the road

Page 88 of [1946] 2 All ER 87

towing another vehicle, which had broken down, or was incapable of being driven, by reason of some mechanical defect, and the respondent was the man who was steering the towed vehicle.

The magistrates came to the conclusion that the respondent was not the driver of a mechanically-propelled vehicle within the Road Traffic Act, and, therefore, they dismissed the information. It is, therefore, necessary to consider some of the relevant sections of the Act. Sect 1 provides:

‘This Part of this Act [which includes sect. 11] shall apply to all mechanically propelled vehicles intended or adapted for use on roads (in this Act referred to as “motor vehicles”) and to vehicles (in this Act referred to as “trailers”) drawn by motor vehicles … ’

It seems quite clear that what I have compendiously called a motor vehicle can be not only a motor vehicle but can be also a trailer; but that really is not the main point in this case, because whether it is a trailer or whether it is to be regarded as a mechanically-propelled vehicle, the point which is taken by counsel for the respondent in support of the justices’ decision is that this man in any case was not driving a motor vehicle; he was simply steering a broken-down motor vehicle which was in tow; and, ordinarily speaking, giving the ordinary meaning to words in the English language, it is difficult to see how a person who is merely at the steering wheel of a car and having nothing to do with the propulsion of the car, having nothing to do with making the car go, is driving the vehicle. The vehicle, in fact, was not being driven; it was being drawn. That is one way of putting it; but the main answer that was made to that point was that by sect 121:

‘“Driver,” where a separate person acts as steersman of a motor vehicle, includes that person as well as any other person engaged in the driving of the vehicle, and the expression “drive” shall be construed accordingly.’

So it is said when sect 11 says if any person drives a motor car that is to include the person who steers a motor car.

The reason why I think that argument must be rejected is that the passage in sect 121 which I have just read obviously contemplates two persons being in charge (I think I may use that expression) of the same vehicle, and it is, I think, probably designed especially to meet the case of a steam wagon in which one man is making the wagon go, by working the regulator and seeing that the pressure of steam is kept up in exactly the same way as an engine driver on a railway does, and another person is directing the braking of the vehicle and steering it, and it is desired that he should be liable for negligent driving or dangerous driving just as much as the person who otherwise might be called the driver. Of course, it might be, in such a case, that both would be liable. If the driver who is responsible for the safety of the vehicle was driving it at an excessive speed he might be properly prosecuted for proceeding at an excessive speed; if, on the other hand, the negligent driving was caused by the negligent steering of the vehicle, then it is thought right that the steersman should be a person to be regarded equally as a driver; but that paragraph of sect 121 cannot, in my opinion, have any bearing on the present case, because the present case is not a case where there were two people in charge of the same vehicle but only one, and the man who was acting as steersman of the vehicle was not, in my opinion, acting as the driver. After all, we have to remember that this is a penal Act and we are bound to construe the Act strictly and ought not to stretch the language in any way; and, in my judgment, it is impossible to say that a person who is merely steering a vehicle which is being drawn by another vehicle is driving that vehicle. No doubt he is controlling it to some extent; no doubt he is doing many things which a driver would have to do; but before he can be convicted, it seems to me, of being a person driving a motor car in a dangerous manner, it must be shown he is at least driving it; that is to say, making the vehicle go.

My attention has been drawn by counsel for the respondent to the Motor Vehicles (Construction and Use) Regulations, 1941, reg 82(2), which provide that:

‘… no person while actually driving a motor vehicle shall be in such a position that he cannot have proper control over the vehicle or that he cannot retain a full view of the road and traffic ahead.’

Page 89 of [1946] 2 All ER 87

It is quite obvious that a person who is merely steering a towed vehicle cannot have proper control; he certainly cannot have full control; and though he might have as much control as could fairly be attributed to a person on a towed vehicle, it is obvious he cannot retain a full view of the road and traffic ahead. Therefore is would follow that every person who is steering a broken-down car which is being towed by another car would be committing an offence every time he did it.

There seems to be no previous authority on this point except this, that it has got into the text-books (see eg, Mahaffy And Dodson’s Road Traffic Acts And Orders, 2nd Edn, p 12, n), and has been noted in the Justice of The Peace (Vol 106, p 227, Vol 109, p 263), that Charles J at Warwick Assizes held that a steersman of a towed vehicle was not obliged to have a licence; and if he had been a driver of a motor car he obviously would have had to possess a licence under sect 4(1) of the Act which provides that:

‘A person shall not drive a motor vehicle on a road unless he is the holder of a licence … ’

In my opinion, Charles J was right, and his decision is in accordance with the decision of this court that the person who is steering the towed vehicle is not the driver of the vehicle.

Our attention has also been called to the Road Traffic (Driving Licences) Act, 1936, s 1(1), which provides that:

‘Notwithstanding the provisions of subsection (1) of section four of the Road Traffic Act, 1930, a person who is not the holder of a licence to driver a motor vehicle issued under Part I of that Act may act as steersman of a motor vehicle (being a vehicle on which a speed limit of five miles per hour or less is imposed by or under section 10 of that Act) … ’

Such a vehicle is a locomotive under the other provisions of the Road Traffic Act, 1930; but that section is obviously designed to cover the very point that is in the Act of 1930 in making a steersman of a motor vehicle which has also someone else upon it, a driver. In those particular circumstances where there are two people engaged, as I have already said, in the control or management of some of these vehicles the steersman is to be deemed to be the driver. I think the word “steersman” only occurs in the Act of 1930 in that particular (I call it a definition) clause, but it is not strictly; it is a clause which makes the word “driver” include someone who would not ordinarily be regarded as a driver; and, obviously, therefore, when you find the word “steersman” again used in the Act of 1936 it is dealing with the provision in the Act of 1930 which, as I have already said, does not apply to this case.

For these reasons I am of the opinion that the magistrates came to a right decision in this case, and the appeal must be dismissed with costs.

HUMPHREYS J. I am of the same opinion. My Lord has covered all the ground in this case, and I only want to say just a word or two as to the way in which the matter strikes me. I was very much impressed, in the first instance by the argument of counsel for the appellant, that, while sect 11 of the Road Traffic Act, 1930, read, as it has to be, with sect 1 would probably not cover the case of a person who was steersman of a trailer and would not include him in the word “driver,” there was apparently a special provision in that Act stating that for the purpose of the Act, and for all purposes of the Act, the steersman of such a vehicle was to be deemed a driver, ad that was a reference by counsel to sect 121; and until one gives the matter further consideration and gets the assistance which we had from counsel for the respondent, it is a very reasonable construction. What it says is:

‘“Driver”, where a separate person acts as steersman of a motor vehicle, includes that person as well as any other person engaged in the driving of the vehicle, and the expression “drive” shall be construed accordingly.’

Why, then, should it not be said that the person who is steering the towed vehicle is a driver for the purposes of the Act? I think the answer comes when one looks a little more carefully at the exact words in that definition, if that be the right word to use. The words are:

‘… where a separate person acts as steersman of a motor vehicle [that is one motor vehicle and one man] includes that person as well as any other person engaged in the driving of the vehicle … ’

Page 90 of [1946] 2 All ER 87

It seems to me there is one vehicle and two persons who may be deemed, and we now declare are to be deemed, both of them as the driver. Those words do not fit the facts in this case, because here there were two separate vehicles and there is no one person who can be said to be the driver of one of those vehicles, because he was the steersman, while there is another person who can be said to be the driver, because he was engaged in the driving of that vehicle. The facts do not come within the definition at all.

I think my Lord’s view must be the right one, that the statement or inclusion of the word “steersman” and the word “driver” must relate to some such matter as my Lord has referred to; that is to say, probably a steam wagon where you have two men, and are required to have two men, by the Act, one of whom is the steersman and the other is for all practical purposes the driver. That man does the stocking and the manipulating and so forth, that is, everything except the steering.

When once that goes, it seems to me that the whole of the argument of counsel for the appellant goes, because you are left in this position: Charge, sect 11: this man drove a motor vehicle on a road contrary to the terms of sect 11, assuming that the thing he was driving was a motor vehicle. The thing that he was concerned with was a motor vehicle. I think it comes precisely within the language of sect 1 which says that:

‘This Part of this Act shall apply to all mechanically propelled vehicles intended or adapted for use on roads … ’

In my opinion, it applies equally to one which has temporarily broken down as it does to one which is, in fact, in working order and going along the road.

Then one says that this Act shall also apply to vehicles in this Act referred to as trailers, which are not driven by anyone at all but drawn by motor vehicles. I have no doubt that this trailer was being drawn by a motor vehicle, and that it was a trailer, but what about the driver? It seems to me to be a contradiction in terms really to say that this person was driving at all, that he was a driver in the ordinary sense of the word, and, according to the admission of the counsel for the appellant, unless you can bring in sect. 121, in the ordinary acceptation of the term the person who was driving that contraption is the man in charge of the towing vehicle, and I think that is the common sense of the matter.

Sect 1 of the 1936 Act shows that if you take a man in the position of the person who was charged here, if he was the driver, then he required a licence. That is quite clear, because the case taken in sect 1(1) of that Act is that a person who is not the holder of a licence to drive a motor vehicle may act as steersman on a motor vehicle in one instance, and one instance only, and that is if it is one of those which is not allowed to go more than 5 miles an hour, involving the proposition that if it is an ordinary motor car he must have a licence if he is the driver, the only answer to which must be, it seems to me, he is not the driver.

Again, the Motor Vehicles (Construction and Use) Regulations, 1941, reg 82, provides that:

‘… no person while actually driving a motor vehicle shall be in such a position that he cannot have a proper control over the vehicle … ’

No one could ever act with safety as the driver of a towed vehicle, because he never can have a proper vision and proper control over the vehicle. Then it goes on:

‘… or that he cannot retain a full view of the road and traffic ahead.’

It states the reason; no person in such a position could ever do it.

Those are the sort of reasons which satisfy me that my Lord must be right in holding as he has (and I agree with him) that sect 121 has no relation to the facts in this case at all; that this man was rightly dealt with by the justices as a person who was not the driver of the motor vehicle in question.

SINGLETON J. I agree, and I would add only this. A new Road Traffic Act appears every few years; no doubt there will be another before very long, and I hope when that comes about that consideration will be given to the question as to whether or not the position of those who may be in the position of the respondent in this case will be regarded. It may be that in such event an alteration will be made in the law so that a person who is sitting at the wheel of a towed car and who may actually be the driver, or be held to be the driver,

Page 91 of [1946] 2 All ER 87

in a penal statute, may at least be placed in the same position as the driver of another vehicle, and I see no reason why he should not be. If that happens, then, indeed, the argument of counsel for the appellant will not have been in vain.

Appeal dismissed with costs.

Solicitors: Cummings, Marchant & Ashton (for the appellant); Treasury Solicitor (for the respondent).

C StJ Nicholson Esq   Barrister.

Crossland v Crossland

[1946] 2 All ER 91

Categories:        FAMILY; Divorce        

Court:        PROBATE, DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        WALLINGTON J        

Hearing Date(s):        22 MAY 1946        

Divorce – Decree absolute – Pronouncement in court – Intervention prior to filing of document recording decree – Finality of pronouncement.

Judgments – Order – Decree absolute – Pronouncement in court – Whether final.

The filing, in the Divorce Registry, of the document recording a decree absolute is not essential to the validity of the pronouncement of the decree. When the judge in court has, with his lips, pronounced a decree absolute, the steps which are taken subsequently to that pronouncement are merely ministerial acts which have no relation to the validity of the decree or its immediate effectiveness at the time of its pronouncement.

Notes

As a general rule the court has power to reconsider its own judgment or order before it is entered or drawn up. In Geering v Geering and Mockford (1921) 38 TLR 109), it was held that the court had power to set aside an order dismissing a co-respondent from the suit since, no order had been drawn up and the judgment had not been sealed. A decree absolute, however, is a decision in rem affecting the status of the parties, and Wallington J decides in the case now reported that the judicial pronouncement in court is final and absolute.

As to Effect of Entry or Drawing up of Judgments or Orders, see Halsbury, Hailsham Edn, Vol 19, p 260, para 560; and for Cases, see Digest, Practice, pp 815–817, Nos 3759–3777.

Intervention

Intervention by a member of the public to set aside a decree absolute which had been pronounced in court but not filed. The facts are fully set out in the judgment.

F S Laskey and Roger Ormrod for the petitioner.

R Bush James KC and Hon Victor Russell for the respondent.

Neville Faulks and Anthony Gordon for the intervener.

Colin Duncan for the King’s Proctor.

22 May 1946. The following judgment was delivered.

WALLINGTON J. The question before me is whether the decree absolute in this case, which I pronounced by my lips on 11 February last, is a final and effective decree, or whether any further steps were necessary in order to give it permanent and effective validity.

The point raised by the intervener is that, in view of the circumstances disclosed in his affidavit, and admitted in the affidavit filed on behalf of the petitioner, the petitioner was not entitled in law to that decree absolute because he had, during the period of six months after the decree nisi, been guilty of adultery with the wife of the intervener; and on behalf of the intervener it has been argued that although I had with my lips pronounced a decree absolute, it was not binding and effective or completely valid until the registrar had signed the document recording the decree and that document had been filed in the Divorce Registry; and it is said that, before that was done—at all events before the filing was done—the intervener in person had attended before me and asked that the decree should not be made absolute. There is some discrepancy in the testimony and in the views of those representing the parties as to the exact time at which the intervener appeared; but on the information that has come to me it is agreed, or not disagreed, by counsel representing the various parties, that infact this decree, or rather, the document recording the decree, was signed by the registrar at a time which, in all probability, was earlier than the time at which the intervener attended to object; and I feel no doubt that that was the case. Counsel for the intervener has argued that that decree still remained ineffective because it had not been filed.

Page 92 of [1946] 2 All ER 91

A great many authorities have been cited to me and have proved very useful. They relate to a number of cases in which there were questions as to the effectiveness of judgments in the Probate Division, the King’s Bench Division, the Chancery Division, the Bankruptcy Court, the Companies Court, and so on, until certain things may have happened to them subsequently to the actual pronouncement of the order by the lips of the judge in court. I have given full attention to all those authorities, and the result is that, in my opinion, they do not affect the question before me, which resolves itself ultimately into one point, namely, whether the filing of the document recording the decree is essential to the validity of the pronouncement of the decree.

I am quite satisfied, on the authorities, that when the judge in court has with his lips pronounced a decree absolute, there is an end of the matter, and that the steps which are taken subsequently to that pronouncement are merely ministerial acts which have no relation to the validity of the decree, or to its immediate effectiveness at the time of its pronouncement.

I therefore, must dismiss this intervention.

Intervention dismissed.

Solicitors: Aukin, Courts & Co (for the petitioner); Tarlo, Lyons & Co (for the respondent); Lawrence Dennis & Co (for the intervener); King’s Proctor.

R Hendry White Esq   Barrister.

Nicholls v F Austin (Leyton) Ltd

[1946] 2 All ER 92

Categories:        TORTS; Tortious Liability: HEALTH; Health and safety at work        

Court:        HOUSE OF LORDS        

Lord(s):        LORD THANKERTON, LORD MACMILLAN, LORD WRIGHT, LORD SIMONDS AND LORD UTHWATT        

Hearing Date(s):        12, 14 MARCH, 12 APRIL 1946        

Factories – Dangerous machinery – Absolute duty – Circular saw – Guard complying with Woodworking Machinery Regulations, 1922, reg 10 – Whether duty to guard against dangerous material ejected from machine – Factories Act, 1937 (c 67), s 14 – Woodworking Machinery Regulations, 1922 (SR & O, 1922, No 1196), reg 10.

The appellant, while employed in the respondents’ factory at a woodworking machine known as a straight line edger, was injured by a piece or sliver of wood which flew out of the machine and struck her left hand. The machine consisted of a circular saw, fitted on a table and driven by an electric motor. The front edge of the saw was about 2ft from the front of the table at which the operator stood. The wood to be worked was conveyed from the front of the table, which was 3ft 2ins from the floor level, towards the cutting edge of the saw, by a mechanical conveyor, driven by a separate gearing, and by rollers which assisted the conveyor. There was a metal hood over the whole of the rollers, conveyors and circular saw. In front of the machine there was a self-adjusting guard in the form of a row of metal fingers, which rested on the top of the ingoing wood. There was a space of about 4ins between the bottom edge of the wood and the surface of the table, which might be reduced by the depth of the ingoing slab. At the time of the accident the appellant was engaged in feeding wooden slabs about 12 to 15ins long, about 9ins in width and 2ins in depth, which were being cut into strips. The appellant’s hand was struck by an off-cut from the left hand side of the slab which flew out, probably through the space at the left hand side of the machine between the bottom of the hood and the surface of the table. In an action for damages in respect of personal injuries the main case of the appellant rested on an alleged breach by the respondents of a statutory duty imposed on them by the Factories Act, 1937, s 14, in that they failed to fence the saw so as to prevent the danger of material which was being operated on being ejected by the machine and causing injury. Alternatively the appellant sought to impose liability on the respondents, at common law, in respect of their negligence in supplying improper plant, by supplying a machine which was dangerous and unsafe. The Secretary of State had made no regulations under the last paragraph of sect 14 requiring the fencing of materials or articles which were dangerous while in motion in the machine: —

Page 93 of [1946] 2 All ER 92

Held – (i) The obligation imposed by the Factories Act, 1937, s 14, to fence securely every dangerous part of any machinery was an obligation so to screen or shield the dangerous part as to prevent the body of the operator from coming into contact with it, an obligation which in this case had been amply fulfilled; the obligation did not also extend to fencing the dangerous part so as to prevent any part of the material on which the machine was working from flying off and striking the operator, that matter depending solely on the making of regulations by the Secretary of State under the last paragraph of the section.

(ii) there was no evidence of breach by the respondents of their common law duty to the appellant.

Decision of the Court of Appeal ([1944] 2 All ER 485) affirmed on other grounds.

Notes

The decision of the Court of Appeal turned upon the question whether there remains any residual duty under the Factories Act, 1937, s 14, notwithstanding compliance with the Woodworking Machinery Regulations. The House of Lords affirm this decision upon the ground that sect 14 does not impose an obligation to provide protection against the ejection of dangerous materials while the machine is in motion, unless regulations dealing with such materials are made by the Secretary of State. No such regulations applied in the present case.

As to Absolute Duty to Fence Dangerous Machinery, see Halsbury, Hailsham Edn, Vol 14, p 594, para 1130; and for Cases, see Digest, Vol 24, pp 908–910, Nos 65–76.

Case referred to in judgment

Miller v William Boothman & Sons Ltd [1944] 1 All ER 333, [1944] 1 KB 337, 113 LJKB 206, 170 LT 187.

Appeal

Appeal by the factory worker from a decision of the Court of Appeal (Mackinnon and Lawrence LJJ and Cassels J), dated 23 October 1944, and reported ([1944] 2 All ER 485). The facts are fully set out in the opinion of Lord Thankerton.

Sir Charles Doughty KC and S R Edgedale for the appellant.

F W Beney KC and R Marven Everett for the respondents.

Their Lordships took time for consideration

12 April 1946. The following opinions were delivered.

LORD THANKERTON. My Lords, the appellant claims damages against the respondents in respect of personal injuries sustained by her while employed as a factory hand at their factory. On 29 May 1943, while employed at a woodworking machine known as a straight line edger, the appellant’s ring and middle fingers of her left hand were injured, the middle finger being severely injured.

The machine in question consisted of a circular saw fitted on a table, and driven by an electric motor. The front edge of the saw is about 2ft from the front of the table, at which the operator stands. The wood to be worked is conveyed from the front of the table, which is 38 ins from the floor level, towards the cutting edge of the saw by a mechanical conveyor, driven by a separate gearing, and by rollers which assist the conveyors. There is a metal hood over the whole of the rollers, conveyors and circular saw. In the front of the machine there is a self-adjusting guard in the form of a row of metal fingers, which rests on the top of the ingoing wood. There is a space of about 4ins between the bottom edge of the hood and the surface of the table. The 4in gap might be reduced by the depth of the ingoing slab. At the time of the accident, it appears that the appellant was engaged in feeding wooden slabs about 12 to 15ins long, about 9ins in width and 2ins in depth, which were being cut into strips for chair bearings. There does not seem to be much doubt that appellant’s hand was struck by an off-cut from the left-hand edge of the slab, which flew out—probably through the space at the left-hand side of the machine between the bottom of the hood and the surface of the table. In the course that the case has taken, that would appear to be a sufficient statement of the circumstances at the time of the accident, since, although the appellant originally maintained that the fencing of the circular saw did not comply with the Woodworking Regulations, 1922, reg 10, and that the respondents were therefore in breach of their statutory duty thereunder, this contention was negatived by Stable J who tried the case, and was not maintained in the Court of Appeal or before this House.

Page 94 of [1946] 2 All ER 92

The main case of the appellant rests on an alleged breach by the respondents of a statutory duty imposed on them by the Factories Act, 1937, s 14, in that they failed to fence the saw so as to prevent the danger of material which is being operated on being ejected by the machine and causing injury. Alternatively, the appellant seeks to impose liability on the respondents at common law, in respect of their negligence in supplying improper plant, by supplying a machine which was dangerous and unsafe.

The Factories Act, 1937, s 14, provides as follows:

‘(1) Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position or of such construction as to be as safe to every person employed or working on the premises as it would be if securely fenced: Provided that, in so far as the safety of a dangerous part of any machinery cannot by reason of the nature of the operation be secured by means of a fixed guard, the requirements of this subsection shall be deemed to have been complied with if a device is provided which automatically prevents the operator from coming into contact with that part.

(2) Where the Secretary of State is satisfied that there is available and suitable for use in connection with machinery of any class any type or description of safety device which—(a) prevents the exposure of a dangerous part of machinery whilst in motion; or (b) stops a machine forthwith in case of danger, he may make regulations directing that the type or description of device shall be provided for use in connection with such class of machinery as may be specified in the regulations: Provided that, in any proceedings in respect of a contravention of this subsection, it shall be a sufficient defence to prove that a device at least equally effective was being used in connection with the machinery in respect of which the contravention occurred.

(3) Any part of a stock-bar which projects beyond the head-stock of a lathe shall be securely fenced unless it is in such a position as to as safe to every person employed or working on the premises as it would be if securely fenced. The Secretary of State may, as requests any machine or any process in which a machine is used, make regulations requiring the fencing of materials or articles which are dangerous while in motion in the machine.’

The Woodworking Regulations, 1922, were made under the Factory and Workshop Act, 1901, s 79, which Act was repealed by the Factories Act, 1937, but by sect 159(1) of the Act of 1937, it was provided that any regulation made:

‘… under any enactment repealed by this Act which is in force at the commencement of this Act shall continue in force and shall have effect as though it had been made … under this Act, and, in so far as it could have been made … under a particular provision of this Act, shall be deemed to have been made … under that provision … ’

Sect 60 of the Act of 1937 gives a general power to the Secretary of State to make special regulations for safety or health, and under subsect (2)(c) it is provided that such regulations may:

‘modify or extend with respect to any class or description of factory any provisions of Part I, Part II or this Part of this Act, being provisions imposing requirements as to health or safety;’

which include sect 14 of the Act.

At the trial, the first point argued before the judge was whether the obligation to fence imposed by subsect (1) of sect 14 is an obligation not only to protect against direct injury by contact with the machine, but also against indirect injury from something that flies off from the machine. The judge accepted the wider construction. The second point was whether the result of the provisions of sect 60(2)(c) as to modification of the provisions of the Act was that the Woodworking Regulations, 1922, in effect, became substituted for sect 14, so that compliance with the regulations operated as discharged of the obligations imposed by sect 14. The respondents maintained that the regulations did so operate, and that it had been so decided by the Court of Appeal in Miller v William Boothman & Sons. In that case a workman had had his thumb taken off by the cutting edge of a circular saw; the saw was fitted with a guard of the best standard pattern in existence which complied with the Woodworking Regulations, 1922, reg 10, but, of necessity, part of the cutting edge of the saw was exposed when in use. It was admitted that reg 10 had been complied with, and the Court of Appeal held that reg 10 modified the provisions of subsect (1) of sect 14, and that the defendants had not committed a breach of a statutory obligation. The judge distinguished the case of Miller from the present case, on the ground that in Miller’s case they were dealing with the direct

Page 95 of [1946] 2 All ER 92

danger from the cutting edge of the saw, against which the regulation had specifically prescribed the dimensions and nature of the guard to be provided, whereas, in the present case, the regulations were silent about the indirect danger of bits of wood thrown out at the side of the machine. The judge, accordingly, held that the respondents were under the obligation to fence securely imposed by subsect (1) of sect 14; that there would be no practical difficult in providing a perfectly satisfactory guard to prevent the pieces of wood from flying out; and that they were in breach of their statutory obligation. He awarded the appellant £350 in name of damages.

The Court of Appeal reversed this decision, holding that the decision in Miller’s case was not distinguishable. Mackinnon LJ says ([1944] 2 All ER 485, at p 488):

‘It seems to me clear, so far as the statement of claim in this case alleges breaches of the statutory duty imposed by the 1937 Act, it being admitted that the defendants fully complied with the requirements of the regulations of 1922, any attempt to say that there was any surviving or additional duty upon them by sect. 14 is erroneous and is not justified having regard to that decision of this court.’

Lawrence LJ and Cassels J agreed. The judges of the Court of Appeal appear to have assumed that subsect (1) of sect 14 included protection against danger from portions of wood ejected from the machine.

My Lords, on consideration of the terms of sect 14, I am of opinion that there is a simpler answer to the contention of the appellant, namely, that the obligation to fence imposed by subsect (1) is an obligation to provide a guard against contact with any dangerous part of a machine, and that it does not impose any obligation to guard against dangerous materials or articles ejected from the machine in motion, that matter depending solely on the making of regulations by the Secretary of State under the discretionary power conferred on him by the last paragraph of the section. This view appears to be amply confirmed by the language used. In the first place, subsect (1) is dealing with fencing of dangerous parts of any machine, and not with dangerous machines, whereas the dangerous materials or articles do not necessarily emanate from a dangerous part of a machine; further, the reference to the exception where the position or construction is such that it is as safe to every person employed or working on the premises as it would be if securely fenced suggests safety from contact with the dangerous part, and this is stated in terms at the end of the proviso to subsect (1). Secondly, subsect (2)(a) continues the same idea of guarding against contact by referring to prevention of the exposure of a dangerous part. Thirdly, the last paragraph of the section appears finally to put the proper construction of the section beyond doubt, in that it does not refer to parts of machinery which are dangerous because they eject materials or articles in such a manner that they are liable to cause injury but it is the materials that are characterised as dangerous. I will only add that if subsect (1) was intended to include fencing against the ejection of materials or articles, I would not expect to have two separate provisions for the making of regulations, or to have the second one in a separate general paragraph at the end of the section, instead of in a subsection of its own, for the last paragraph of the section is clearly not part of subsect (3).

It being admitted that no regulations have been made under the last paragraph of sect 14, I am of opinion that there is no obligation imposed by sect 14 upon the respondents as regards these flying bits of wood, and, therefore, they are not in breach of any statutory obligation, and the appellant’s main contention fails. I should add that this conclusion renders it unnecessary to deal with the decision in Miller’s case, and I express no view on its correctness.

On the appellant’s alternative claim at common law, I am of opinion that no case has been made out. The judge made no finding that there was common law negligence, and I agree with with the comments of Mackinnon LJ and Lawrence LJ as to the absence of any adequate evidence on this aspect of the case.

In my opinion, the appeal fails and should be dismissed with costs, and the order of the Court of Appeal should be affirmed.

LORD MACMILLAN. My Lords, the appellant while operating a circular saw was struck by a fragment which flew off from a block of wood which she was

Page 96 of [1946] 2 All ER 92

engaged in cutting into strips and thereby suffered injury to her hand. She sues her employers, the respondents, for damages on the ground that, in breach of their statutory duty under the Factories Act, 1937, s 14, they failed so to fence the circular saw as to prevent fragments of wood flying off and striking the operator. It is not quite clear how the fragment of wood which struck the appellant flew out but it was probably thrown off through a space between the hood covering the saw and the table.

The question of importance in the case is whether the statutory duty imposed by sect 14 of the Act of 1937 to fence securely every dangerous part of any machinery is fulfilled when the dangerous part is so fenced as to prevent the operator from coming into contact with it; or whether the duty also extends to fencing the dangerous part so as to prevent any part of the material on which the machine is working from flying off and striking the operator.

The circular saw was admittedly a dangerous part of the woodworking machine which the appellant was operating. It was therefore the duty of the respondents securely to fence it. They observed and indeed more than observed all the requirements of the Woodworking Machinery Regulations under the Act for the fencing of circular saws. But the fencing did not prevent a fragment of wood flying off while the saw was working. Was it the statutory duty of the respondents so to fence the saw as to prevent this possibility?

In my opinion, the statute imposes no such duty. The obligation under sect 14 to fence the dangerous part of a machine, as I read it, is an obligation so to screen or shield the dangerous part as to prevent the body of the operator from coming into contact with it, and this obligation was in the present instance amply fulfilled. That this is the correct reading of the statute is made plain by the proviso to sect 14(1) which enacts that:

‘… in so far as the safety of a dangerous part of any machinery cannot by reason of the nature of the operation be secured by means of a fixed guard, the requirements of this subsection shall be deemed to have been complied with if a device is provided which automatically prevents the operator from coming into contact with that part.’

Moreover the statute clearly recognises the distinction between danger arising from the operation of the machine itself and danger arising from the material on which the machine is operating, for in subsect (3) of sect 14 it empowers the Secretary of State:

‘… as respects any machine or any process in which a machine is used [to] make regulations requiring the fencing of materials or articles which are dangerous while in motion in the machine.’

No such regulations have been made and in the absence of any such regulations there is no statutory duty to fence materials or articles which are dangerous while in motion in a machine. The accident suffered by the appellant was accordingly in my opinion not due to any breach by the respondents of any statutory duty incumbent upon them.

On my reading of the statute it becomes unnecessary to consider the question whether the observance by the respondents of all the requirements of the Woodworking Machinery Regulations under the statute exhausted their duty to fence under sect 14(1), as was held by the Court of Appeal in the present case, following Miller v William Boothman & Sons Ltd, and I, therefore, express no opinion on this topic.

The appellant also pleaded that the respondents had been guilty of negligence at common law. I agree with the Court of Appeal that the evidence entirely fails to support may such case.

The appeal should be dismissed.

LORD WRIGHT [read by Lord Simonds]: My Lords, I agree that the appeal should be dismissed. I shall merely add a few observations on my own part to explain why I do so.

The appellant, the plaintiff in the action, is a young woman who was employed by the respondents as a factory hand. At the time of her injuries she was working at a machine, known as a straight line edger and was operating a circular saw. She suffered injuries to the ring and middle fingers of her left hand, for which Stable J who tried the case, awarded her £350 as damages. Her left hand had been struck by some small object, presumably a small piece of wood, causing a laceration which later became septic. No one could speak as to the exact

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nature or size or shape of the object but it has been taken that it was a piece of wood. No witness saw it or from whence it came. The appellant seems to have been standing at the time feeding pieces of wood into the machine to be dealt with by the saw. There was evidence that very small pieces of wood called slivers do fly out of the machine in front, but no evidence that they had caused injury to anyone. In the front of the machine there was a line of small objects called fingers, a little above the level of the table; the appellant said the little piece of wood may have come through them, or perhaps may have come from under the metal hood at the side. The saw itself was completely covered and the requirements of the Factories Act as to safety were fully satisfied. The appellant did not put her hand anywhere near the saw, nor had she any need to do so. The wood was pushed on to the conveyor which carried it to the saw. There was no suggestion of contributory negligence against the appellant. It was not clear how so small an abrasion could have resulted in the actual injury.

The appellant based her claim on sect 14 of the Factories Act of which she said there was a breach and also on the Woodworking Machinery Regulations, reg 10; she further said there was a breach of the common law duty. In my opinion she has failed on each head.

The Factories Act, 1937, s 14, requires that every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced. The full terms of the section are before your Lordships and I need not repeat them. But it is essential to note that the governing words are “every dangerous part of any machinery.” The appellant has been unable to point to any part of the machine that could satisfy the description of a dangerous part, that is, excluding such parts as were securely fenced. Thus it is clear that the requirements of the Woodworking Machinery Regulations, 1922, were satisfied. Those regulations were issued under the Factory and Workshop Act, 1901, which preceded the Act of 1937, but were made applicable to the later Act by sect 159. These regulations deal in particular with circular saws and the like.

Sect. 14 of the Act of 1937 does however contain an additional paragraph at the end of the section which is in the following terms:

‘The Secretary of State may, as respects any machine or any process in which a machine is used, make regulations requiring the fencing of materials or articles which are dangerous while in motion in the machine.’

But no regulations have been made under this clause, which is left in the air. It might indeed have been made use of to prevent the small slivers thrown off by the back of the saw, being at large within the metal case in which the machine works, and coming out and striking the operator. It is not clear why no regulations have been made with this object. Perhaps it has not in experience been found of sufficient importance. But the fact remains that no regulations have been made to give effect to the additional clause appended to subsect (3). Hence that clause has remained of no effect in itself at least up to the present. Similarly the wide powers of modifying or extending provisions imposing requirements as to health and safety remains unemployed so far as might affect the particular claim in his case. Sect 60(1)(b) does indeed also give power to make regulations to limit or control the use of any material or process. I am not clear how far the power to make regulations under this would extend, but no regulations material to this case have been referred to.

But the additional clause to sect 3(3) does point the contrast between the fencing of dangerous parts of the machine and the fencing of materials and articles which are dangerous while in motion in the machine and are to that extent adverse to the appellant’s claim and confirms the construction which the respondents put on the section. This, I think, is fatal to her claim.

In this view of the position, it is not necessary to express any opinion on the soundness of the decision of the Court of Appeal in Miller v Boothman.

I agree with the reasoning of the Court of Appeal which led them to hold that there was no evidence of breach by the respondents of their common law duty to the appellant. That the common law duty exists in proper cases is unquestionable. But it is limited to reasonable exercise of care and skill to guard against danger which as reasonable people, the employers ought to have anticipated. The injury suffered by the appellant was, it seems, outside normal experience, and such as could not reasonably have been anticipated. That,

Page 98 of [1946] 2 All ER 92

I think, justifies a conclusion that there was no negligence at common law.

I should dismiss the appeal.

LORD SIMONDS. My Lords, this appeal raises in the first place a short question of construction of the Factories Act, 1937, s 14. If that question is decided in favour of the respondents, it becomes unnecessary to consider the further question what is the effect upon that section of certain regulations for the use of woodworking machinery made under an earlier Factories Act, but continued under the Act of 1937.

The appellant, who was at the material times employed by the respondents as a factory hand working on a machine known as a straight line edger, the main feature of which is a circular saw, was on 29 May 1943, while so employed, injured by a piece or sliver of wood which flew out of the machine and struck her left hand. The damage was more serious than might have been expected and she brought her action against the respondents, alleging that they had committed a breach of their statutory duty under sect 14 of the Act or under the said regulations, and alternatively that they had been guilty of negligence at common law.

The first question is, I think, correctly stated in the appellant’s case in these words: Whether the words “every dangerous part” referred to in the Factories Act, 1937, s 14, refer only to parts which are directly dangerous by reason that the part itself is liable to cause injury so that such parts only are required to be fenced by the said section, or whether the said words “every dangerous part” includes parts which are indirectly dangerous in that they are liable to throw out material with such force that the material is liable to cause injury to the worker so that such parts also are required to be fenced by the said section.

My Lords, I have no doubt that this question should be answered by saying that the words “every dangerous part” in their context refer only to parts which are directly dangerous by reason that the part itself is liable to cause injury.

Sect 14 follows sects 12 and 13, the former of which deals with “prime movers” and the latter with “transmission machinery,” and itself, by subsect (1), provides that:

‘Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position or of such construction as to be as safe to every person employed or working on the premises as it would be if securely fenced.’

There follows a proviso which is of great importance, but, apart from the proviso it seems to me clear that the subsection is dealing with a physical part of a machine, not with its function. Machinery, particularly in motion, is a constant source of danger to the workman, as the horrid story of factory accidents proclaims. “Prime movers” “transmission machines” “every dangerous part of any machinery,” these in turn are things from which the worker is to be guarded by a secure fence. I find nothing in this language to suggest that the section aims at protecting the worker from any indirect danger arising out of the functional operation of the machine. If there was any ambiguity, it would be set at rest by the proviso, which provides that:

‘… in so far as the safety of a dangerous part cannot by reason of the nature of the operation be secured by means of a fixed guard, the requirements of this subsection shall be deemed to have been complied with if a device is provided which automatically prevents the operator from coming into contact with that part.’

These last six words make it clear that the security at which the substantive part of the subsection aims is security from unintentional, or, I suppose, even intentional, contact with a dangerous part. The fence is intended to keep the worker out, not to keep the machine or its product in. To the same conclusion I am led by subsect (2), which contemplates the use of a safety device which:

‘… (a) prevents the exposure of a dangerous part of machinery whilst in motion or (b) stops a machine forthwith in case of danger … ’

These again are expressions which show that the danger to be guarded against is in the contact of worker with machine.

Finally, the concluding words of sect 14, which might well be in a separate section, confirm this view. For the Secretary of State is thereby authorised

Page 99 of [1946] 2 All ER 92

“as respects any machine or any process in which a machine is used” to make regulations requiring the fencing of materials or articles which are dangerous while in motion in the machine. Here a clear distinction is drawn between dangerous parts of the machine and materials or articles. The authority would be superfluous if the danger apprehended by subsect (1) included danger not only from contact with a dangerous part but also from the materials which it might discharge.

Since the respondents have not in my opinion committed any breach of their statutory duty under sect 14, I find it unnecessary to say anything about the decision of the Court of Appeal in Miller v William Boothman & Sons Ltd.

I will only add that I see no possible ground for holding that the respondents were guilty of negligence at common law. The judge who heard the case did not so decide, and having read the evidence that he had before him I am satisfied that he could not properly have come to such a conclusion. I concur in the motion that this appeal should be dismissed.

LORD UTHWATT. My Lords, the appellant, while operating a machine known as a straight line edger, was injured as a result of the ejection by the machine of some of the wood upon which the machine was working. In respect of this injury she claims damages, alleging that the injury was due to a breach by the respondents of a statutory duty arising under the Factories Act, 1937, or alternatively to a breach by the respondents of their common law duty to take proper care to provide a safe system of working.

With respect to the first claim, it is argued that there was a breach by the respondents of the Factories Act, 1937, s 14(1): that Miller v Boothman was wrongly decided: and that accordingly the circumstance that the Woodworking Machinery Regulations, 1922, were duly complied with is no bar to the success of a claim based on subsect (1) of sect 14.

The first matter to be considered, therefore, is the effect of subsect (1) of sect 14. That subsection runs as follows:

‘Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position or of such construction as to be as safe to every person employed or working or the premises as it would be if securely fenced:

Provided that, in so far as the safety of a dangerous part of any machinery cannot by reason of the nature of the operation be secured by means of a fixed guard, the requirements of this subsection shall be deemed to have been complied with if a device is provided which automatically prevents the operator from coming into contact with that part.’

It is not disputed that, apart from the absence of fencing precluding the ejection of material which was being worked upon by the machinery, all dangerous parts of the machinery were duly fenced as required by the subsection. The contention of the appellants is that the phrase “every dangerous part” in respect of which the obligation to fence is imposed by subsect (1) of sect 14 includes parts which are indirectly dangerous in that they are liable to throw out material with such force as to be liable to cause injury to the worker. Acceptance of this contention involves the view—indeed it is in the substance of the contention—that the obligation imposed by the subsection is to fence the machine, viewed as a single operating unit, so as to avoid the possibility of danger arising to the worker from its operation.

My Lords, in my opinion the subsection, whether it be read alone or be read in connection with the other provisions of the Act relating to machinery, negatives the contention. The lines on which the Act—so far as relevant here—proceeds is not to take into account any machinery as a whole, but to require the several parts of the machinery to be considered separately in light of their construction, position or dangerous nature. Under sect 12 there are to be securely fenced flywheels and (subject to certain exceptions) every moving part of any prime mover, and under sect 13 every part of the transmission machinery, unless it is safe by reason of its position or construction. Sect 14(1) applies to “every dangerous part of any machinery other than prime movers and transmission machinery.” That dangerous part is to be securely fenced unless it—ie, the dangerous part—is in such a position or of such construction as to be safe. The proviso to the subsection is of assistance. Where a fixed guard is not practicable as respects a dangerous part, the provision of a

Page 100 of [1946] 2 All ER 92

device which prevents contact between the operator and that part is to satisfy the obligation obtained in the leading provision of the subsection. The prevention of contact between the worker and the dangerous part is to be sufficient.

The matter is, I think, put beyond doubt by the circumstance that, under the concluding part of sub-sect (3) of sect 14, power is given to the Secretary of State to make, as respects any machine or process in which a machine is used, regulations requiring the fencing of materials, or articles which are dangerous while the machine is in motion. The machine is there treated as a single unit, and materials upon which the machine is operating are included in the subject matter in respect of which regulations may be made. The language of the subsection giving this power precludes one from reading it as enabling the Secretary of State to make regulations directed to working out an obligation arising under subsect (1). The presence of the power renders it illegitimate to put the strained construction upon subsect (1) for which the appellants contend.

In my opinion, therefore, the claim under the Act fails, and in the circumstances it is not necessary to express any opinion as to the correctness of the decision in Miller v Boothman.

As regards the alternative claim, the trial judge, who found in favour of the appellants on their claim under the Factories Act, 1937, expressed no view as to the effect of the evidence. In my opinion—I do not propose to review the evidence—the appellants failed to show that the respondent was guilty of negligence.

I would dismiss the appeal.

Appeal dismissed with costs.

Solicitors: Shaen, Roscoe & Co (for the appellant); Barlow, Lyde & Gilbert (for the respondents).

C StJ Nicholson Esq   Barrister.

Wardale v Binns

[1946] 2 All ER 100

Categories:        SALE OF GOODS        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND SINGLETON JJ        

Hearing Date(s):        7 MAY 1946        

Factories and Shops – Shop – Hours of closing – Sunday trading – Restriction – Sale of bread on Sunday – “Meals or refreshments” – Shops (Sunday Trading Restriction) Act, 1936 (c 53), ss 1, 2, Scheds I, para 1 (b), II.

A shopkeeper was convicted of an offence against the Shops (Sunday Trading Restriction) Act, 1936, in that he had not closed his shop for the sale of bread on a certain Sunday, but had sold a loaf to a customer. By sect 1 of the Act, every shop is required to be closed on a Sunday, except for the transactions mentioned in Sched I to the Act, which include the sale of “meals or refreshments whether or not for consumption at the shop at which they are sold.” By sect 2, a local authority can make “partial exemption orders” and by Sched II such partial exemption orders may be made in respect of the sale of bread “in so far as such sales are not included amongst the transactions mentioned in Sched I to this Act.” No such order had been made in this case. On an appeal by the shopkeeper against his conviction, the recorder was of opinion that the loaf of bread was a meal or refreshment within Sched I, para 1(b), to the Act and held that no offence had been committed. On appeal to the High Court, it was contended by the prosecution that, since no order had been made under sect 2 and Sched II of the Act, the sale was an offence against the Act:—

Held – (i) The sale of bread on a Sunday for the purpose of a meal or refreshment was not an offence because the sale of meals or refreshments was permitted under Sched I to the Act Sched II merely provided that a partial exemption order might be made in respect of the sale of bread in so far as such sale was “not included amongst the transactions mentioned in Sched I.”

(ii) on the facts of the case, the court was not prepared to say that the recorder’s decision was wrong. Where the provisions of an Act were

Page 101 of [1946] 2 All ER 100

obscure, the benefit of that obscurity should be given to the accused.

London County Council v Lees followed:

Notes

The history of the legislation relating to Sunday trading is an unhappy one. It is highly controversial subject, and the present Act, after much amendment, reached the Statute Book in a form which elicited from Lord Hewart LCJ in LCC v Lees, the comment: “Not often in the course of half a century of experience of the law have I had the opportunity of endeavouring to come to close quarters with such a piece of legislation.” The provisions as to the sale of bread in Scheds I and II, are well-nigh irreconcilable, and in the present case the court uphold the decision of the recorder quashing the conviction because, as Humphreys J expresses it “If an Act of Parliament is so drawn as to make it really difficult to say what was intended and what facts come within it, the benefit of that obscurity should be given to the accused person.”

As to Sunday Trading, see Halsbury, Hailsham Edn, Vol 32, pp 129–136, paras 189–198, and Supplement; and for Cases, see Digest, Vol 42, pp 936–939, Nos 84–116, and Supplement.

Cases referred to in judgments

London County Council v Lees, London County Council v Iafrate [1939] 1 All ER 191, Digest Supp, 160 LT 281.

London County Council v Davis [1938] 2 All ER 764, Digest Supp, 1 59 LT44.

Appeal

Appeal by way of case stated from a decision of the recorder of the city of Liverpool quashing a conviction by the stipendiary of Liverpool for an offence against the Shops (Sunday Trading Restriction) Act, 1936. The facts are fully set out in the judgment of Lord Goddard LCJ.

E E Youds for the appellant.

G B H Currie for the respondent.

7 May 1946. The following judgments were delivered.

LORD GODDARD LCJ. This is a case stated by the recorder of the city of Liverpool, who quashed a conviction of the appellant by the stipendiary of Liverpool for an offence against the Shops (Sunday Trading Restriction) Act, 1936. The offence that was alleged against him was that on Sunday, 24 June 1945, he did not close his shop, 27, Hall Lane, Liverpool, for the sale of bread, but sold a 21b loaf of bread to a customer.

The facts, and the only facts, which are found in the case are these:

‘On Sunday, June 24, 1945, the respondent sold to a small boy a 2lb. loaf of bread which bread was sold for human consumption off the premises. Shortly subsequent to the said sale, the respondent was interviewed by a Shops Acts inspector, one Tighe, and was asked why the shop was not closed on that day, Sunday, for the sale of bread. He was cautioned and said: “I will tell you the truth. I had some bread left on my hands and decided to sell it, because we cannot sell it on a Monday, as it is stale.’

At the same time, there was a notice in the shop to the effect that the shop was open for the sale of sweets, minerals, tobacco and confectionery. On that it is said that the shop was not closed for the serving of customers with bread on a Sunday, and that, therefore, a breach of the Act had been committed.

The recorder was of opinion that the loaf of bread was a meal or refreshment within Sched I, para 1(b), to the Act and held no offence had been committed. This, I think it is fair to say, is a conclusion he has come to as a matter of law on the construction of the Act, and is not in itself a finding of fact.

First, it is necessary to look at the Act. By sect 1 of the Act it is provided:

‘Every shop shall, save as otherwise provided by this Act, be closed for the serving of customers on Sunday: Provided that a shop may be open for the serving of customers on Sunday (a) for the purposes of any transaction mentioned in Sched. I to this Act.’

Before I go on, I will refer to Sched I, which is headed:

‘Transactions for the purposes of which a shop may be open for the serving of customers on Sunday.’

They include:

‘1. The sale of … (b) meals or refreshments whether or not for consumption at the shop at which they are sold … ’

So to sell a meal or refreshment, whether for consumption on or off the premises, is not prohibited by the Act; and I do not think it could be contended that the meal or refreshment must be for the person who actually buys. It is quite clear, it seems to me, that a person can send his servant to buy a meal or refreshment for him

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and bring it back to the house where the employer lives and will consume the food. In the same way, if two or three people are going out for a ramble on a Sunday and one goes into a shop to buy refreshments for that ramble, obviously the consumption by all three or more of the people would be also permitted by the Act.

Sect 2 of the Act deals with “partial exemption orders” and provides:

‘1. The local authority may by order (in this Act referred to as a “partial exemption order”) made in accordance with the provisions of this Act provide that after the expiration of 9 months from the commencement of this Act shops situated in their area or in such part thereof as is specified in the order may for the purposes of such of the transactions mentioned in Sched. II to this Act as may be so specified be open for the serving the customers on Sunday subject to the limitations hereinafter provided.’

No such order has been made in this case.

It is under Sched II to this Act that the difficulty arises, because Sched II, which sets out the “transactions in respect of which a partial exemption order may be made,” is in these terms:

‘The sale of (a) bread and flour confectionery, including rolls and fancy bread; (b) fish (including shell-fish); (c) groceries and other provisions commonly sold in grocers shops; in so far as such sales are not included amongst the transactions mentioned in Sched. I to this Act.’

It is said that if a shopkeeper sells a loaf of bread he is committing an offence because the sale of bread is one of those matters which may be permitted by a special order, and, as Parliament has so provided, it follows from that that, unless an order is made under sect 2 permitting the sale of bread, an offence is committed if you do sell bread: the Act, therefore, must be read as though it said that the keeping open of a shop on a Sunday and selling bread in that shop is in itself an offence. I think there would be a great deal of force in that argument if it were not for the words “in so far as such sales are not included amongst the transactions mentioned in Sched. I to this Act“—from which it follows that the sale of bread or flour confectionery, if sold for the purpose of a meal or refreshment, is not an offence: it is permitted by the Act because Sched II only prohibits the sale in so far as the sale is not included amongst the transactions mentioned in Sched I.

This Act came under the consideration of this court in 1939 in two cases which were heard together: London County Council v Lees and London County Council v Iafrate. In those cases the respondents kept shops at which such things as cream buns, chocolate eclairs, veal and ham pies, Swiss rolls, and so forth, were sold. It was admitted that those articles were flour confectionery—at any rate, some of them were. I should think it is doubtful whether a veal and ham pie is flour confectionery, but, at any rate, the buns and the eclairs and the Swiss rolls would be flour confectionery. The court in that case pointed out (and, indeed, very eminent counsel who argued the case for the London County Council in that case agreed) that, taking the provisions of those two Schedules together and comparing and contrasting them with each other, they were unintelligible—and for this reason, that, although the sale of flour confectionery is dealt with expressly in Sched II, as Sched II says that those sales are not to be affected by Sched II if they are included amongst the transactions included in Sched I, and as these things were sold as refreshments and the sale was permitted, it could not be said that it was permitted under Sched I to the Act and prohibited under Sched II; that makes nonsense. Therefore, said the court (as I understand the decision): “We are not going to hold that a man is to be convicted of an offence under this Act when in one Schedule it says that he may do a thing, whereas, on the particular construction you ask us to put upon the other Schedule, he is not entitled to do such a thing.”

In spite of the very excellent argument to which we have listened on behalf of the appellant in this case, although it would be straining language to say that a loaf of bread necessarily constitutes a meal (in certain circumstances it obviously may) I cannot understand how it can be said that a loaf of bread, sold for human consumption, is not a loaf of bread sold for refreshment. The word “refreshments” is not a term of art. When one talks about a person taking “refreshments,” one means taking some article of food generally different from what I may call a full meal—something light—a refresher. Bread is a refreshment just as much as a bun is refreshment, just as much as a ham sandwich

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is a refreshment. It may not be such an attractive refreshment, but it is a refreshment and part of a meal. That, I think, must be conceded. Therefore, the position is that under Sched I to this Act bread can be sold as a refreshment. Therefore, to say that, unless there is a partial exemption order, bread cannot be sold because of the provisions of sect 1 creates in my mind a very formidable difficulty. With the greatest respect, I think one may say that it is possible that Parliament did not appreciate that by inserting the concluding words to Sched II (the words “in so far as such sales are not included amongst the transactions mentioned in Sched I to this Act”) they were very largely stultifying, if not entirely stultifying, the provisions of the Act with regard to the matters which they mention in Sched I. One of the provisions most commonly sold in grocers’ shops is cooked meat. I cannot appreciate how anyone can argue that the sale of cooked meat is not the sale of a refreshment. I should think, indeed, that in very many cases it is the sale of a meal. Many people are content with a meal of cold meat. If, therefore, cold meat, or cooked bacon, can be sold in a shop on a Sunday—and it clearly can be, under the provisions of Sched I—it seems to me that the provisions of Sched II do not make the sale an offence. So, too, I think, with the case of bread. No doubt, in the ordinary way, a person does not buy dry bread as a refreshment; but at the present time I can understand that there may be many occasions on which a person would be only too thankful, on a railway journey, for instance, to buy a roll, which, perhaps, with a glass of water, may be the only sustenance he or she can get upon a long journey. But in any circumstances bread must be, it seems to me, a refreshment, and if Parliament meant to say “you may sell bread by the slice but not sell it by the loaf,” they would have said so.

I think exactly the same difficulty arises in this case as arose in the Lees case. I am certainly not prepared to say that the recorder was wrong: in fact, I think, in the circumstances I should have held in the same way myself. My difficulty, as I say, is created by that part of the enactment to which I have referred more than once, the concluding words of Sched II. If difficulties are created in this way and if decisions of this court are not in accordance with what Parliament intended, Parliament can put it right, and Parliament, no doubt will put it right.

For the reasons I have endeavoured to give, in my opinion this appeal fails and must be dismissed.

HUMPHREYS J. I am of the same opinion, and I desire to associate myself heartily with some observations which fell from my Lord in the course of the argument when he observed that he was very much averse to the notion that any person should be convicted in this country upon the terms of an Act of Parliament which was obscure and which lawyers could not construe clearly. If an Act of Parliament is so drawn as to make it really difficult to say what was intended and what facts come within it, the benefit of that obscurity should be given to the accused person.

The next thing I want to say is this. I have tried to see what it was that Parliament was really intending and desiring to do in the passing of this Act, which was by no means the first Act, by a great many, which had been passed with a view to restricting Sunday trading. I find that Parliament starts by declaring:

‘1. Every shop shall … be closed for the serving of customers on Sunday.’

Then it was thought necessary to make exceptions to that. What are the exceptions and why are they made? I have found it quite impossible to arrive at any conclusion as to what was in the mind of those who put in this list of exceptions, unless it amounts to this (I am not saying I think it does, but it may possibly) that wherever you can think of anything which people are likely to want on Sunday, then a shop may be kept open for that purpose. So you find things which are not in the least necessary, which can never be necessary, but which are the sort of things which the ordinary person may desire to purchase on Sunday, although he could purchase them all perfectly easily on any other day. They are such things as “sweets, chocolates, ice-cream.” (I will leave out intoxicating liquors; there may be a special reason there; Sunday trading is dealt with in the Licensing Acts.) Why should people be

Page 104 of [1946] 2 All ER 100

particularly allowed to buy sweets and ice-cream on Sundays, if all shops are to be closed on Sunday? I do not know. What is the necessity for a flower shop to be open on Sunday? It is very pleasant for some people to be able to buy flowers on Sundays, but nobody can say it is necessary. “Fruit and vegetables” are things which you eat, and one can understand it in that case. Then you get “aircraft, motor, or cycle supplies or accessories.” I can only imagine that that is to help the broken-down motorist or even the person who is travelling by air; but it is a little unlikely that a person who is travelling by air, and has found it necessary to make a forced landing, would go to the sort of shop which would be open on Sunday in order to get what was necessary to make his aircraft airworthy. Then, “tobacco and smokers’ requisites.” No doubt, it is a convenience for a great many people to be able to buy tobacco on Sunday. Then:

‘… newspapers … books and stationery … guide books, postcards, photographs, reproductions, photographic films and plates and souvenirs … ’

For some reason or other, people may open their shops on Sunday in order to sell all these things.

We are dealing here with bread. Is bread forbidden? Certainly not. Not only is the sale of bread not forbidden on Sunday, but it is expressly allowed, because one of the things which is specifically allowed is any meal; and, therefore, if a person goes into a shop and says, “I want some beef and vegetables and bread and butter and cheese,” if the shopkeeper has those things with which to supply him there is no question at all that bread may be sold, because it is part of a meal; it is not the whole meal, but part of it, and one is entitled to buy a meal, including bread.

The next word is “refreshments.” I respectfully agree with my Lord: I think the word “refreshments” is really equivalent in this statute, as I think it is in ordinary parlance, to a light meal, something less than a solid meal. What article of food is there which is more appropriately described as “refreshment” than something made of flour, something in the nature of bread? It seems to me quite impossible to say that bread does not come within the ordinary term “refreshments,” which are specifically allowed to be sold on Sunday—and not merely if they are to be consumed on the premises; they may be taken off the premises. If, therefore, the hypothetical person is one who does not want to eat his meal at the shop, he may buy his meal at the shop and take it home; and, in order that he may eat that meal at home, one of the things he most assuredly may buy is his bread, whether or not he buys something else.

If that be so, the difficulty here is created, it seems to me, by the last words in Sched II to the Act, because that Schedule, which deals with the making of a partial exemption order, says that it may be made in respect of bread. If the matter rested there, I agree that a strong argument might be put up to the effect that the sale of bread on Sunday must be illegal (unless as a meal or refreshment) prima facie because a partial exemption order may be made in order to enable the sale of bread on Sunday. But then there are these words:

‘… in so far as such sales are not included among the transactions mentioned in Sched. I to this Act.’

(I do not want to spend time in further considering these words because my Lord has dealt with the matter fully and I agree with every word he has said.) The sale of bread, therefore, is apparently forbidden because it is only allowed under a partial exemption order if made. But look at Sched I. If bread is part of a meal or refreshment, then it is permitted. It is those words, as I understand it, which caused eminent counsel in the Lees case to say—and almost caused Lord Hewart LCJ, to say—that the two Schedules are contradictory. The view taken by the court in that case was one which I myself had taken earlier—not on quite the same words, but dealing with the Shops (Hours of Closing) Act, 1928, which contained somewhat similar words—in London County Council v Davis. In that case Branson and Du Parcq JJ had come to the conclusion that newly baked bread came within the words “newly cooked provisions” in the Act of 1928. I myself had very great difficulty in arriving at that conclusion for the reason which I then gave (and I see no reason to withdraw it) that I did not think any ordinary person would ever talk about “newly cooked bread,” and in all the Acts of Parliament that I was at that time able to find the expression was never used. Nobody talks

Page 105 of [1946] 2 All ER 100

about “cooking” bread; it is always “baked“—“newly baked bread.” I said then, and I say now, that, where the matter is as doubtful as that, and certainly where other members of the court take a different view, I am not prepared to say in a criminal case that the magistrate who has acquitted the particular person charged before him is wrong.

That was the view taken by this court in London County Council v Lees, where Lord Hewart LCJ (whose decision was agreed with by Charles and Singleton JJ), said he was not prepared to differ from the view of the magistrate who had held that no offence was committed. I take the same view in this case. I do not put my judgment higher than this: it seems to me quite obvious that bread may be sold on Sunday in a shop in certain circumstances which are, I think, indistinguishable from the circumstances in this case. What Parliament meant exactly, if it meant anything, by those concluding words of Sched II, I do not profess to know or to understand. But the tribunal which has stated this case for our consideration has come to the conclusion that the most reasonable view to take of the matter is that the person who sold bread on a Sunday to a boy for human consumption had sold it either as a meal or refreshment.

I come to the conclusion that the recorder was quite justified in taking that view, and, this being a criminal case, I decline to say I differ from him.

SINGLETON J. While appreciating the arguments which have been addressed to the court, I am bound to say that I regard this as a case which it is very much easier to argue than one in which to give judgment. That often occurs. There are many difficulties in the Act which give scope to the argument of counsel but which present difficulty in giving a judgment.

The respondent, a shopkeeper, has a shop in which various articles of food are sold, and, on Sunday, 24 June 1945, he sold to a small boy a 21b loaf of bread, which bread, one must assume, was sold for human consumption off the premises. When the respondent was seen by an inspector, he said, after caution:

‘I will tell you the truth. I had some bread left on my hands and decided to sell it, because we cannot sell it on a Monday as it is stale.’

He was served with an information under the Shops (Sunday Trading Restriction) Act, 1936, s 1, which provides:

‘‘Every shop shall, save as otherwise provided by this Act, be closed for the serving of customers on Sunday: Provided that a shop may be open for the serving of customers on Sunday (a) for the purposes of any transaction mentioned in Sched I to this Act.’’

Sect 2 of the Act deals with “partial exemption orders” and brings into play Sched IIi to the Act. I do not propose to refer to it because no partial exemption order has been made by the local authority, although it is to be observed that the words of Sched II, and in particular, the concluding words, provide an argument that has succeeded before now in cases under this Act. When the information was heard, the magistrate found the charge proved. There was an appeal to quarter sessions and the recorder of the city, having presented the facts which I have already stated, found in para 12:

‘I, being of opinion that the loaf of bread sold was a meal or refreshment within Sched I, para. 1(b) to the Act, held that no offence had been committed.’

That may be a statement of opinion; it may be, to some extent, fact. Indeed, in London County Council v Lees, to which reference has been made by my Lord, Lord Hewart LCJ, speaking of the facts in that case said ([1939] 1 All ER 191, at p 196):

‘I will only add that among the many doubts which this case and this legislation present to my mind is the doubt whether we are really dealing here with a question of law at all, or whether, upon the true construction—if there is a true construction—of this statute, that with which the magistrate was coming to terms was a pure question of fact.’

I confess I have some doubt in my mind as to what the facts found by the recorder were. He did not hear any evidence on behalf of the respondent; he did hear the evidence of the inspector.

Speaking for myself, and assuming I had not any authority before me, if I was faced with those facts alone I should be very much inclined to come to

Page 106 of [1946] 2 All ER 100

the conclusion that on that Sunday morning the respondent’s shop was not closed for the serving of customers. But there are certain difficulties. The case of Lees was before this court in Jan 1939. The facts were different, and, again speaking for myself, I can see that there may well be a difference between the sale of two eclairs or a Swiss roll and the sale of a loaf of bread. It may be (to a certain extent, at least) that the Lees case covers this case. But, on the whole, I am not satisfied that it does. I should have felt very considerable difficulty on this matter apart from that case and apart from the view which has been expressed by my Lord and by Humphreys J; but I take cover, if I may use such an expression in this matter, in that which was said in the Lees’ case by Lord Hewart LCJ ([1939] 1 All ER 191 at p 196):

‘Not often in the course of half a century of experience of the law have I had the opportunity of endeavouring to come to close quarters with such a piece of legislation. Sir William Jowitt, appearing on one side in this case, frankly admitted that the provisions of these two schedules, taken together, and compared and contrasted with each other, were, to his mind, unintelligible.’

I confess I do not find them easy to interpret. This court expressed an opinion about them several years ago, and the fact that all the members of this court have again expressed an opinion upon them may lead Parliament to think that it is quite time that legislation of this kind was made a little clearer. I agree that the appeal fails.

Appeal dismissed with costs.

Solicitors: Cree & Son agents for W H Baines, Town Clerk, Liverpool (for the appellant); Lester Davidson, Liverpool (for the respondent).

C StJ Nicholson Esq   Barrister.

Re Fry, Chase National Executors and Trustees Corporation Ltd v Fry and Others

[1946] 2 All ER 106

Categories:        SUCCESSION; Gifts        

Court:        CHANCERY DIVISION        

Lord(s):        ROMER J        

Hearing Date(s):        16, 17 APRIL, 15 MAY 1946        

Gifts – Incomplete gift – Transfer of shares – Intending transferor resident outside sterling area – Regulation prohibiting transfer without consent of Treasury – Transfer executed, but death of intending transferor before licence from Treasury obtained – Intended transferee not entitled to shares – Defence (Finance) Regulations, 1939, reg 3A(1), (4) (as amended by SR & O, 1940, No 1254).

F, who was resident in the United States of America, desired in 1940 to make a gift to his son of certain shares which he held in an English company. A transfer was executed and sent to the company for registration. Under the Defence (Finance) Regulations, 1939, reg 3A (as amended) the transfer of any securities or any interest in securities in which a person resident outside the sterling area had, immediately before the transfer, any interest, was prohibited unless permission from the Treasury had been obtained; and registration of any such transfer was prohibited without permission from the Treasury. The company, therefore, replied to F, that certain forms would have to be completed by the transferor and transferee and that a licence from the Treasury would have to be obtained for the transfer. The necessary forms well filled up by F, and the son, but F died before the licence from the Treasury could be obtained. The question to be determined was whether the son was entitled to require F’s personal representatives to obtain for him legal and beneficial possession of the shares:—

Held – (i) Since the requisite consent of the Treasury had not been obtained, and the company was, therefore, prohibited from registering the transfer, the son had not acquired the right to be clothed with a legal title to the shares in question.

(ii) there had not been a complete gift to the son of the equitable interest in the shares, because F had not obtained the consent of the Treasury and, therefore, he had not done all that was necessary to divest himself of his equitable interest in favour of his son.

Holt v Heatherfield Trust Ltd distinguished.

Page 107 of [1946] 2 All ER 106

(iii) inasmuch as a transferee of such shares was prohibited under the Finance (Defence) Regulations, 1939, reg 3A, from acquiring any interest therein without licence from the Treasury, the court could not recognise a claim to such an interest where the consent of the Treasury had not been given.

(iv) since F’s intention to transfer the shares to his son had not been fully and completely implemented before his death, the son was not entitled to call upon F’s personal representatives to obtain for him legal and beneficial possession of the shares.

Milroy v Lord applied.

Notes

This is an interesting point, upon which there is no previous authority, on the effect of an attempted transfer of shares by a non-resident without the consent of the Treasury as required by the Defence (Finance) Regulations. It is held that in such circumstances the transferor has not done everything required of him in order to divest himself of the legal and equitable title to the securities and that the attempted gift to the transferees accordingly fails. An argument based upon the fact that the British Treasury regulations would have no operation by the law of the transferor’s domicil or the lex loci actus is also rejected, since there was an intention to create an immediate interest which was in violation of the regulations.

As to Incomplete Gifts, see Halsbury, Hailsham Edn, Vol 15, pp 738–740, paras 1278, 1279; and for Cases, see Digest, Vol 25, pp 529–531, Nos 195–209.

For The Defence (Finance) Regulations, 1939, reg 3A, see Halsbury’s Statutes, Vol 33, pp 707, 708.

Cases referred to in judgment

Milroy v Lord (1862), 4 De G F & J 264, 25 Digest 530, 206, 31 LJCh 798, 7 LT 178.

Roots v Williamson (1888), 38 ChD 485, 43 Digest 715, 1531, 57 LJCh 995, 58 LT 802.

Re Williams, Williams v Ball [1917] 1 Ch 1, 25 Digest 532, 221, 86 LJCh 36, 115 LT 689.

Ellison v Ellison (1802), 6 Ves 656, 25 Digest 533, 233.

Donaldson v Donaldson (1854), Kay 711, 43 Digest 627, 666, 23 LJCh 788, 23 LTOS 306.

Holt v Heatherfield Trust Ltd, and Bridgewater Ltd [1942] 1 All ER 404, [1942] 2 KB 1, 111 LJKB 465, 166 LT 251.

Adjourned Summons

Adjourned Summons to determine whether the plaintiffs, Chase National Executors and Trustees Corporation Ltd, as personal representatives of the testator, ought to execute any such confirmatory transfer or other instrument as might be requisite to enable the defendant Sydney Fry to be registered as the holder of 2,000 ordinary shares of £1 each, and the defendants Cavendish Investment Trust Co (Liverpool), as the holders of 280 ordinary shares of £1 each, in Liverpool Borax Ltd (of which shares the testator had executed transfers in his lifetime) and to account to such defendants respectively for the dividends on such shares declared since the execution of the said transfers or since any and what date, on the basis that the testator had made valid gifts of the said shares to such defendants respectively in his lifetime; or whether the said shares formed part of the testator’s estate. The facts are fully set out in the judgment.

J W Brunyate for the plaintiffs.

Humphrey H King for the testator’s son.

A H Droop, E M Winterbotham and M O’C Stranders for the other defendants.

Cur adv vult

15 May 1946. The following judgment was delivered.

ROMER J. The facts relevant to the case are somewhat complicated. The testator died on 22 October 1941, in the State of New Jersey, in the United States of America. He was at his death domiciled in the State of Florida. The defendant Sydney Fry is a son of the testator and he deposes that in 1936 his father invested £400 of his (Sydney Fry’s) money in the purchase of certain shares in a concern which turned out to be a complete failure, and that, when he was visiting the testator in America, the testator told him that, as a recompence for the loss, he would transfer to the deponent 2,000 shares in Liverpool Borax Ltd. Sydney Fry exhibited a letter to him from the testator, written on 22 November 1940, from New York, in which the testator told him he had sent a signed transfer of those shares in favour of Sydney Fry to one Toon, who was

Page 108 of [1946] 2 All ER 106

at that time the branch manager of the Putney branch of Barclay’s Bank Ltd. To a later affidavit Sydney Fry exhibited this transfer. It purports to be in consideration of £4,000 paid by the transferee and is signed by the testator in the presence of a witness. It was subsequently dated 1 March 1941. Cecil I Robertson swore an affidavit to which he exhibited a letter from the testator to Toon which accompanied the share transfer and in which the testator stated that he was inclosing also a cheque for £120 in respect of stamp duty. In addition to this transfer of shares to Sydney Fry, the testator was also minded, at the same time, to transfer other shares in Liverpool Borax Ltd, to the Cavendish Investment Trust, which was a private company, all the shares in which were held by the testator and various members of his family. Accordingly he sent to R Duncan French & Co of Liverpool, who acted as accountants and auditors to the Cavendish Trust, a share transfer of 1,058 ordinary and 280 preference shares of £1 each in Liverpool Borax Ltd. This share transfer, which was in favour of the Cavendish Trust, was received by R Duncan French & Co, on 14 December 1940. The transfer was executed by the testator in the presence of a witness, and purported to be in consideration of the sum of 10s paid by the transferee. The seal of the Cavendish Trust was duly affixed to the said transfer, and, following such sealing, the transfer was dated 24 December 1940. The 3,058 ordinary and the 280 preference shares in Liverpool Borax, Ltd hereinbefore mentioned comprised the testator’s entire holding in that company and he had deposited the certificates for those shares with the Putney branch of Barclay’s Bank Ltd.

At the time when the share transfers to which I have referred arrived in this country, and at all material times subsequent thereto, the relevant war-time restrictions upon the transfer of securities were those introduced into the Defence (Finance) Regulations, 1939, by SR & O, 1940, No 1254, and the regulation material to this case was reg 3A, para (1) of which was in the following terms:

‘‘Subject to any exemptions which may be granted by order of the Treasury, no person shall, either on his own behalf or on behalf of any other person, agree to transfer or acquire, or transfer, or acquire otherwise than by operation of law or by inheritance, any securities or any interest in securities, unless the Treasury or persons authorised by or on behalf of the Treasury are satisfied that no person resident outside the sterling area has, immediately before the transfer, acquisition, or agreement, any interest in the securities: Provided that nothing in this paragraph shall prohibit any agreement, transfer, or acquisition which is effected with permission granted by the Treasury or by a person authorised by them or on their behalf.’’

Para (4) of reg 3A was as follows:

‘Subject to any exemptions which may be granted by order of the Treasury, no person shall, except with permission granted by the Treasury or by a person authorised by them or on their behalf, enter any transfer of securities in any register or book in which those securities are registered or inscribed unless there has been produced to him such evidence that the transfer does not involve a contravention of this Regulation as may be prescribed by instructions issued by or on behalf of the Treasury.’

Inasmuch as the testator was resident in America, it follows that the transfers of shares which he desired to effect were prohibited by this regulation unless permission from the Treasury was obtained pursuant to the proviso to para (1). The application to the Treasury by a non-resident for permission to sell or transfer a security had to be made on a form which was called form L,  Further, on any transfer of a security the transferee had to sign a form (called form D) stating whether or not any person acquiring an interest under the transfer was “resident” for the purposes of the Defence (Finance) Regulations, 1939. This form had also to be signed by the transferor.

R Duncan French (of R Duncan French & Co) communicated with Toon with reference to the testator’s intended transfer of 1,058 ordinary and 280 preference shares of Liverpool Borax Ltd to the Cavendish Trust, and Toon sent to French the certificate for the 280 preference shares, and informed him that the Putney branch would also send the certificate for the ordinary shares as soon as possible as a prior transfer was in course of registration—by which Toon was intending to refer to the transfer of the 2,000 ordinary shares to Sydney Fry. In the meantime French, acting on the instructions of the directors of the Cavendish Trust, had the transfer to that company stamped £24, being £1 per cent on the aggregate value of £2,396, treating the ordinary shares as

Page 109 of [1946] 2 All ER 106

of the value of £2 per share and the preference shares as worth par. The testator had stated that that was the value of the shares respectively in the letter which he had sent to R Duncan French & Co, accompanying the transfer to the Cavendish Trust. French deferred forwarding the stamped transfer to Liverpool Borax Ltd for registration because of the communication from Toon concerning the certificate for the ordinary shares to which I have just referred. On 24 February 1941, he did send the said stamped transfer to Liverpool Borax Ltd together with the certificate for the preference shares on hearing from the Putney branch that they had sent the share certificate for 3,058 ordinary shares to Liverpool Borax Ltd. On 25 February 1941, the secretary of Liverpool Borax Ltd wrote to French acknowledging receipt of the said transfer to the Cavendish Trust and stating that it would be placed before the directors at their next meeting. On 12 March 1941, the secretary of Liverpool Borax Ltd wrote again to French saying that it would be necessary for form D to be completed by the transferor and transferee under the Defence (Finance) Regulations, 1939, and that, as the testator was a non-resident, it would also be necessary to obtain a licence from the Treasury for the transfer of the shares. French immediately communicated with the Liverpool branch of Barclay’s Bank Ltd which he knew had acted for the testator, and on behalf of the Cavendish Trust requested them to complete form D both on behalf of the Cavendish Trust and on behalf of the testator. The Liverpool branch accordingly did so on 24 March 1941. The form, as completed by them, stated that the persons who directly or indirectly had any interest in the 1,058 ordinary shares and 280 preference shares in question were not all residents for the purposes of the said regulations, but that the persons who would have an interest in the said shares by virtue of the transfer thereof were all residents for such purposes. About the same time, the Liverpool branch of the said bank completed on behalf of the testator a form L with respect to the said 1,058 ordinary shares and 280 preference shares, the transaction being therein stated to be a gift. This form included both the said ordinary shares and the preference shares in the application for permission to sell. French sent this form and the said form D to the Putney branch with instructions to send them to the Securities Control Department of the Bank of England. Accordingly, a representative of the stock exchange branch of the said bank attended at the Securities Control Department and was told that the said form L could not be accepted as it dealt with both preference and ordinary shares and that a separate form for each class of share was required. Subsequently, the said form L was altered so as to relate to preference shares only and a form L relating to the 2,000 ordinary shares to be transferred to Sydney Fry was altered so as to cover all the 3,058 ordinary shares. This last mentioned form L (which is exhibit “R. D. F.4”), as hereinafter appears, was sent out to the testator in America and he signed it himself. The consideration for the sale of the ordinary shares was originally expressed to be £4,000, but this was altered to “nominal.”

Robertson, in his affidavit, states that it is not possible after this lapse of time to state definitely whether or not exhibit “R D F.4” was re-exhibited to the Bank of England, but he assumes that it was because, immediately following the communication to the Bank of England of the testator’s replies to the questionnaire next mentioned, statutory declarations concerning the circumstances of all the transfers were called for. The representative of the said stock exchange branch had already been informed by the said department that certain information regarding the proposed transfers to the Cavendish Trust and to the defendant Sydney Fry was required, and, as this information could only be furnished by the testator, the Putney branch sent to him a memorandum asking certain questions, which memorandum was received back by the Putney branch with the testator’s replies on 23 September 1941. The testator had written upon this memorandum certain comments in which he made it clear that the proposed transfers both to Sydney Fry and to the Cavendish Trust were intended by him to be gifts. He returned the memorandum to the Putney branch together with a letter dated 8 September 1941, and written from Florida. In his letter the testator said:

‘I have given these shares to Sydney Fry and Cavendish Investment Trust many months and months ago so please get transfers completed, or, failing that, hand them the signed transfers with the scrip, and they can hold them.’

Page 110 of [1946] 2 All ER 106

The memorandum and the testator’s replies were submitted by the stock exchange branch to the said department, which then required a statutory declaration to be made on behalf of the Cavendish Trust, and, on 7 October 1941, the Putney branch wrote to the Cavendish Trust so informing them and inclosing the necessary form of declaration. By a resolution of the directors of the Cavendish Trust passed on 10 October 1941, the defendant, Mrs Gee, was appointed to make this statutory declaration on their behalf and she did so on 12 October 1941. This declaration was to the effect that 1,058 ordinary and 280 preference shares of Liverpool Borax Ltd, had been offered to the Cavendish Trust and that, if they were accepted, the Cavendish Trust should thereby become the sole and absolute owner of the shares and no other person would have any interest therein and that the said shares would not have been acquired by the company by virtue of any contract or option or arrangement of any kind under which the company should have agreed or might be required to sell back or re-transfer the said shares or similar securities or make any payment or give any other consideration for the said shares. The said resolution and declaration were sent to the Putney branch who did not, however, receive the same until after the testator’s death, which occurred on 22 October 1941. Consequently, no further steps were taken by the bank to obtain a licence for the said transfer in favour of the Cavendish Trust.

Certain further facts require to be stated with regard to the 2,000 ordinary shares intended to be transferred to the defendant Sydney Fry. On 17 December 1940, the Putney branch sent the said transfer (which had been executed by Sydney Fry) to the registrar of Liverpool Borax Ltd for registration. They also sent to Liverpool Borax Ltd at a later date, the certificate for the 3,058 ordinary shares. On 20 December 1940, Liverpool Borax Ltd returned the transfer to the Putney branch stating that it would be necessary to obtain the consent of the Bank of England thereto and that form D would be required to be completed both by the transferor and transferee. On 2 January 1941, a form D and a form L were sent by the Putney branch to the testator in America for signature and were subsequently returned signed by him. This form D and a declaration were signed by the defendant Sydney Fry and on 20 March 1941, the said transfer (with forms D and L and the said declaration) was returned to Liverpool Borax Ltd for registration. The said form L was returned to the Putney branch by Liverpool Borax Ltd in order that application might be made to the Bank of England. On 26 September 1941, the said stock exchange branch sent a form of statutory declaration to the Putney branch which the said department of the Bank of England required in connection with the 2,000 shares and the Putney branch sent this to the defendant Sydney Fry on 27 September 1941. This statutory declaration, duly made on 12 October 1941, but unstamped, was returned to the stock exchange branch by the Putney branch on 24 October 1941. This was after the death of the testator and consequently the Putney branch took no further steps to obtain a licence for the said transfer to the defendant Sydney Fry.

The question which I have to determine, upon the facts as above related, is whether the defendants Sydney Fry and the Cavendish Trust are entitled to call upon the plaintiffs to co-operate with them in obtaining legal and beneficial possession of the shares which the testator was minded to transfer to them. In considering this question, it was conceded on their behalf that they are to be regarded as volunteers, for no consideration passed, or was ever intended to pass, from them to the testator. The case is accordingly one where a person, having formed the intention to make a gift, dies before that intention has been fully and completely implemented. The law generally applicable to such a position was stated by Turner LJ in Milroy v Lord as follows (4 De G F & J 264, at p 274):

‘I take the law of this court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course, do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I

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understand the law of this court, be resorted to, for there is no equity in this court to perfect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the court will not hold the intnded transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.’

As the testator intended the gifts now in question “to take effect by transfer,” it follows from these observations of Turner LJ that no question as to the creation of a trust in favour of the donees can arise, and, indeed, no argument so based was advanced on their behalf.

Sydney Fry and the Cavendish Trust clearly had not acquired, at the date of the testator’s death, the legal title to the shares which they now claim, because the transfers had not been registered by Liverpool Borax Ltd. Had they, however, arrived at the position which entitled them, as against that company, to be put on the register of members? Had everything been done which was necessary to put the transferees into the position of the transferor? If these questions, which are suggested by Roots v Williamson could be answered affirmatively, the transferees would have had more than an inchoate title; they would have had it in their own hands to require registration of the transfers. Having regard, however, to the Defence (Finance) Regulations, 1939, it is impossible, in my judgment, to answer the questions other than in the negative. The requisite consent of the Treasury to the transactions had not been obtained, and, in the absence of it, the company was prohibited from registering the transfers. In my opinion, accordingly, it is not possible to hold that, at the date of the testator’s death, the transferees had either acquired a legal title to the shares in question, or the right, as against all other persons (including Liverpool Borax Ltd) to be clothed with such legal title.

As no question of trust arises, I must next consider whether there had been a complete gift of an equitable interest in the shares. As to this, the argument for the transferees was put on more than one ground. It was said that the testator executed documents which were appropriate to the subject-matter of the gifts, viz, share transfers; that these documents, being under seal, were irrevocable; that he did everything he could, and that was necessary for him to do, to divest himself of his legal and equitable interest in the shares in favour of the transferees; and that, even if he failed to succeed in his purpose so far as the legal title was concerned, he must be regarded as having passed to them his equitable interest in the shares. In Re Williams Warrington LJ (adopting the language of Turner LJ in Milroy v Lord), said ([1917] 1 Ch 1, at p 8):

‘Claiming as she does as a volunteer and alleging that the assignor made this gift to her, she can only succeed if she can show that the assignor did everything which according to the nature of the property comprised in the assignment was necessary to be done in order to transfer the property and render the assignment binding upon him.’

This, say the transferees, they have succeeded in showing in the present case.

In illustration of the principle, they refer to such cases as Ellison v Ellison and Donaldson v Donaldson as establishing that, in an assignment of an equitable interest in property, the validity and effect of the assignment as between assignor and assignee is not affected by the absence of notice to the trustees in whom the property is vested. In further illustration, I was referred to Holt v Heatherfield Trust Ltd, in which it was recognised that where there is an absolute assignment of a debt, the absence of notice to the debtor does not affect the efficacy of the transaction as between the assignor and assignee. Atkinson J said ([1942] 1 All ER 404, at p 407):

‘Until notice be given the assignment is an equitable assignment, but it is an assignment which requires nothing more from the assignor to become a legal assignment … it seems beyond argument that the absence of notice does not affect the efficacy of the transaction as between assignor and assignee.’

So here, it is contended, the absence of registration of the share transfers does not affect the efficacy of the transaction as between assignor and assignee, and the transactions must be treated as complete assignments of the testator’s equitable interest in the shares. Now, I should have thought it was difficult to say that the testator had done everything that was required to be done by

Page 112 of [1946] 2 All ER 106

him at the time of his death, for it was necessary for him to obtain permission from the Treasury for the assignment and he had not obtained it. Moreover, the Treasury might in any case have required further information of the kind referred to in the questionnaire which was submitted to him, or answers supplemental to those which he had given in reply to it; and, if so approached, he might have refused to concern himself with the matter further, in which case I do not know how anyone could have compelled him to do so. Apart, however, from considerations of this kind, it appears to me that the Defence (Finance) Regulations, 1939, reg 3A, prevents me from giving effect to the argument, however formulated, that at the time of the testator’s death a complete equitable assignment had been effected. The interest in the shares so acquired by the assignees would indubitably be an “interest in securities,” within the meaning of reg 3A; and, inasmuch as they are prohibited from acquiring such an interest except with permission granted by the Treasury, this court cannot recognise a claim to such an interest where the consent of the Treasury was never given to its acquisition. The assignment and acceptance of the interest would both be equally incapable of recognition in the absence of Treasury sanction, and that sanction was never in fact obtained; it might indeed (although the probabilities are certainly otherwise) never have been forthcoming at all.

An argument—designed to avoiding the consequences of reg 3A—was then urged by Mr Droop, on behalf of one of the claimants. This argument was, as I understood it, as follows. The testator was at all material times domiciled in the State of Florida. Neither the law of that State nor the law of New Jersey (where he executed the share transfers) prohibited the assignment by the testator of his full equitable interest in the shares in question. Such an assignment might be prevented from receiving any effect in this country by reason of the Defence (Finance) Regulations, 1939, but those regulations had no operation either on the conscience or on the proceedings of any person domiciled in Florida or taking action in New Jersey. It was accordingly open for any person so domiciled or taking action to assign his equitable interest in the shares subject to a condition, viz, that the assignee should obtain permission from the Treasury to acquire that interest. This, says Mr Droop, is how the acts of the testator should be regarded, viz, as assignments, effective and valid by the law of the domicil and of the lex loci actus, of his equitable interest but conditional upon the assignees obtaining the requisite permission to enjoy the fruits of the assignments; and, if such permission were refused, then the assignments must be regarded as nugatory ab initio and for all purposes. As an essential part of the argument, it is said that no effective equitable interest became vested in the assignees at all until the Treasury permission was obtained.

Counsel for the plaintiffs was prepared to agree, for the purposes of the argument, that the law of the States of Florida and New Jersey was as suggested by Mr Droop. Even so, however, it is not, I think, possible for this argument, notwithstanding its ingenuity, to succeed. Assuming that, had the testator been so minded, he could by appropriate means have created the somewhat nebulous interests and highly artificial position involved in the argument of Mr Droop, and conferred on his son and the Cavendish Trust equitable interests in the shares which had no effective existence in this country until Treasury sanction was obtained, I am bound, nevertheless, to look to what he did in fact and to the legal results which flowed therefrom. And what he did in fact cannot, in my judgment, be regarded as having the effect which Mr Droop invites me to attribute to his actions. What the testator did was to sign two documents of the kind appropriate to the intention to pass, and to pass immediately, his entire legal and beneficial interest in the shares in question. In other words, he executed two share transfers in the ordinary form. He, or his agents, also performed certain other acts, referred to in the evidence, with a view to obtaining registration of the transfers. It seems to me that I must regard these share transfers and other acts as either passing an interest in the shares to the transferees or not. If they did not, then there was not a complete gift of any interest in the shares at the testator’s death. If, on the other hand, they did pass an interest, then such interest had no element of contingency or futurity about it, but was a present and effectual equitable interest and the acquisition thereof by the assignees was in violation of reg 3A; and a claim to it cannot, as I have already said, be entertained by this court. The argument, accordingly,

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in my judgment, cannot, on any view, sustain the claims which it is sought to base upon it and it is not open to me to accept it.

In the result, I have arrived at the conclusion (with regret, as I frankly confess) that there is no principle which enables me to hold that Sydney Fry and the Cavendish Trust are entitled to the shares which the testator undoubtedly desired them to have.

Declaration accordingly.

Solicitors: Linklaters & Paines (for the plaintiffs); Ellis, Bickersteth, Aglionby & Hazel (for the testator’s son and another defendant); Hancock & Scott (for the other defendants).

B Ashkenazi Esq   Barrister.

Bowmaker Ltd v Wycombe Motors Ltd

[1946] 2 All ER 113

Categories:        CONSUMER; Consumer credit        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND SINGLETON JJ        

Hearing Date(s):        30 MAY 1946        

Lien – Particular – Motor repairer – Motor car let on hire-purchase agreement – Repairs at request of hirer after determination of agreement – No lien against owner.

Hire-purchase – Motor car – Repairs at request of hirer after determination of agreement – No lien against owner.

By a hire-purchase agreement, dated 1 August 1945, the respondents let a motor car to one P, on the terms, inter alia, that P was to keep the vehicle in good order, repair and condition at his own expense, and was not to be deemed to have any authority to pledge the owner’s credit for repair of the vehicle or to create a lien thereon in respect of such repairs. On 12 December 1945, P being then in arrear, the respondents, in accordance with the agreement, terminated the agreement by letter, and on 19 December 1945, issued a writ against P for the arrears and claiming the return of the vehicle. On 27 December 1945, P, who had disregarded the notice, met with an accident and left the car on that date at the appellants’ garage for repairs. On 30 January 1946, judgment was obtained against P by the respondents, who obtained leave to proceed, and on 1 March 1946, the sheriff levied execution at the appellants’ garage in respect of that judgment. The appellants claimed an artificer’s lien for the amount of the repairs, and an interpleader by the sheriff was filed and the hearing of the issue took place. The master decided that the lien could not prevail:—

Held – The authority to the hirer, P, had been duly determined under the terms of the agreement, and at the time when he took the car to the appellant’s garage, he had no more right to the car than a thief would have; in those circumstances the appellants could not establish a lien on the car against the owners, who were no parties to placing it with them for repairs.

Per Lord Goddard LCJ: An arrangement between the owner and the hirer that the hirer shall not be entitled to create a lien does not affect the repairer. A repairer has a lien although the owner has purported to limit the hirer’s authority to create a lien in that way. Once an artificer exercises his art upon a chattel, the law gives him a lien upon that chattel, which he can exercise, against the owner of the chattel, if the owner of the chattel is the person who has placed the chattel with him or has authorised another person to place the chattel with him.

Notes

This case is of importance to garage proprietors and to those letting out cars on hire-purchase terms. It is clear on authority that the common law lien arising on execution of repairs to a car is only enforceable against the owner if the hire purchaser had authority to send the car for repair, and that such authority is normally implied while the hirer is in lawful possession of the car. When the hire purchase agreement has terminated, however, the possession is against the will of the owner and it is held that a repairer cannot exercise a lien for repairs which the hirer has no longer any authority to have executed.

For Particular Lien for Work Done, see Halsbury, Hailsham Edn, Vol 20, pp 563–566, para 711–713; and for Cases, see Digest, Vol 32, pp 247–252, Nos 311–381.

Page 114 of [1946] 2 All ER 113

Cases referred to in judgments

Buxton v Baughan (1834), 6 C & P 674, 32 Digest 220, 48.

Singer Manufacturing Co v London & South Western Ry Co [1894] 1 QB 833, 8 Digest 220, 1398, 63 LJQB 411, 70 LT 172.

Green v All Motors Ltd [1917] 1 KB 625, 3 Digest 95, 255, 86 LJKB 590, 116 LT 189.

Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307, Digest Supp, 97 LJKB 25, 138 LT 102.

Keene v Thomas [1905] 1 KB 136, 3 Digest 95, 254, 74 LJKB 21, 92 LT 19.

Appeal

Appeal by the claimant from an order of a master on an interpleader issue which raised the question as to whether a repairer had an artificer’s lien for the price of repairs on a motor car, let under a hire-purchase agreement which, on default by the hirer, had been duly determined. The facts are fully set out in the judgment of Lord Goddard LCJ.

Stephen Chapman for the appellants.

A C Longland KC and B B Stenham for the respondents.

30 May 1946. The following judgments were delivered.

LORD GODDARD LCJ. This is an appeal from a decision of a master given on an interpleader issue which arises in this way: On 1 August 1945, the plaintiffs in the issue, Bowmakers, who are people who finance hire purchase agreements, and who for this purpose it is agreed were the owners of a particular motor car, entered into a hire purchase agreement with a man called Payne, under which they let to him on hire with a view to his ultimate purchase a certain motor car upon the terms of an agreement, one of which was that the hirer was:

‘‘To keep the vehicle in good order, repair and condition, and to be responsible for all risks of whatsoever kind, fire included. If and whenever any repairs are required they shall be carried out at the expense of the hirer provided that the hirer shall not have or be deemed to have any authority to pledge the owner’s credit for the repair of the vehicle or to create a lien thereon in respect of such repairs or for any other purpose or thing whatsoever.’’

It was also provided that if the hirer made any default the owners could forthwith retake possession of the vehicle and terminate the agreement. Then there was a further provision:

‘‘A demand by the owners for the return of the vehicle given orally or by their duly appointed representative or in writing left at or sent by prepaid post addressed to the hirer at his last known address or the address set out in the preamble to this agreement shall be sufficient notice of termination of this agreement by the owners.’’

On 1 December 1945, £43, part of the hire, was in arrear, and on 12 December 1945, the plaintiffs terminated the agreement by letter of that date, and on 19 December they issued a writ against Payne for the arrears, claiming the return of the vehicle. On 27 December Payne, who had disregarded the notice that was given to him and was wrongly at that date in possession of the vehicle, had met with an accident and left the car on this date at the defendants’ garage for repairs, and the repairs amounted to £115 15s Od. On 30 January 1946, judgment was obtained against Payne by the plaintiffs in the action, who obtained leave to proceed, and on 1 March the sheriff of Buckingham levied execution at the defendants’ garage in respect of that judgment. They claimed to hold the car on an artificer’s lien for the amount of the repairs, and an interpleader by the sheriff was filed, and the hearing of the issue took place. The master decided that the lien could not prevail, and in my opinion he was clearly right.

The position was that at the date when this car was left at the garage, Payne had no right or title to the car whatsoever; he was holding the car against the will of the true owners. First of all, let us see what the position is with regard to liens generally created on the property of what I may call third persons. The first case to which I may refer is the well-known decision in Buxton v Baughan, in which the facts were these:

‘‘A. put a phaeton into the possession of M. for him to paint it and paid M. beforehand for the painting. M. never painted it, but placed it on the premises of B., where it stood three months:—Held: B. had no lien on the phaeton for his charge for the standing of it, unless the jury were satisfied that M. placed it there by the authority of A.’’

Alderson, B summing up to the jury, stated the law in this way, (6 C & P 674 at p 675):

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‘The defendant cannot set up a bargain made by Mackenzie, unless Mackenzie had authority from the plaintiff to make such a bargain. If you trust your goods into a man’s possession, and he makes a bargain about them without your authority, you are not bound by that bargain, and may reclaim the goods. The fact that the plaintiff’s servant was three months before he could find out where the phaeton was does not look much like the plaintiff having authorised a bargain to be made for the defendant to keep it at hire. A man has no right to keep my property, and charge for the standing of it, unless there was a previous bargain between him and me, or between him and some agent authorised by me.’

So the lien in that case failed.

With regard to hire purchase agreements, the law has been extended, as I understand it, to this extent, that if the owner of a chattel lets it to another on a hire purchase agreement, he puts the hirer into possession of the vehicle with authority to use it as though it were his own during the time that the hiring exists, and to use it in all manners necessary for his enjoyment. Accordingly, he may deal with it in such ways as are necessary for its use and enjoyment.

In Singer Manufacturing Co v London & South Western Ry Co, a man who was in possession under a hire purchase agreement of a Singer sewing machine placed it in a railway cloak room during the time that the hiring was in existence and, the hiring having come to an end, the owners of the machine claimed it from the railway company, who set up a warehousemen’s lien, and Collins J in giving his judgment in that case put it in this way ([1894] 1 QB 833 at p 837):

‘I think in this case the lien may also be rested on another ground; and that is, that the person who deposited this machine was, as between himself and the owner of it, entitled to the possession of it at the time he deposited it. He was entitled to it under a contract of hire, which gave him the right to use it, I presume, for all reasonable purposes incident to such a contract, and among them, I take it, he acquired the right to take the machine with him if he travelled, and to deposit it in a cloakroom if he required to do so. In the course of that reasonable user of the machine, and before the contract of bailment was determined, he gave rights to the railway company in respect of the custody of it. I think those rights must be good against the owners of the machine, who had not determined the hire purchase agreement at the time that those rights were acquired by the railway company.’

So, too, it has been held in the cases to which our attention has been called, more especially Green v All Motors Ltd and Albemarle Supply Co Ltd v Hind & Co, that where it is necessary that a motor car should be kept in running condition and repair during the time a hire purchase agreement is current and valid, the hirer has a right to take it and get it repaired and, if he takes it and gets it repaired, the repairer can exercise an artificer’s lien upon it because at the time when the motor car was left with him, he, the hirer, had got the right, whether you call it by implied authority or by legitimate authority, to use that car in all reasonable ways, and among those ways is a right to get the car repaired and kept in running order. Therefore he is placing it with the repairer with the consent of the owner and the artificer’s lien on that account will prevail against the owner.

But these cases have also held, and quite understandably, that an arrangement between the owner and the hirer that the hirer shall not be entitled to create a lien, does not affect the repairer. A repairer has a lien although the owner has purported to limit the hirer’s authority to create a lien in that way. That seems to me to depend upon this: Once an artificer exercises his art upon a chattel, the law gives the artificer a lien upon that chattel, which he can exercise, against the owner of the chattel, if the owner of the chattel is the person who has placed the goods with him or has authorised another person to place the goods with him. If I send my servant with my chattel to get it repaired, the artificer will get the lien which the law gives him on that chattel although I may have told my servant that he is not to create a lien. The fact is that the lien arises by operation of law because the work has been done upon it.

In this case, the authority to the hirer had been duly determined under the terms of the agreement, and at the time when the hirer took the car to Wycombe Motors Ltd he had no more right to the car than a thief would have. He had been placed in possession of the car. The consent of the owner of the car to the bailment had ceased, and if the hirer converted it to his own use by selling it, it seems to me that he would have been guilty of larceny, though, as has been

Page 116 of [1946] 2 All ER 113

pointed out during the course of the argument, every time he drove the car he was driving it without the consent of the owner and was committing an offence under the Road Traffic Act.

In these circumstances, it seems to me impossible to say that Wycombe Motors Ltd can establish and insist on a lien against the owner of the car, who was no party to placing it with them, and indeed it was placed with them against their rights. The case is no doubt of some importance to people who finance hire purchase transactions or let out cars on hire purchase terms, and it is also of importance to garage proprietors who do repairs. It is well-known that a very large number of cars are on hire purchase at the present time. It is also very well-known, unfortunately, that a great many cars are stolen at the present time; and it is one of the risks which a garage proprietor who does repairs—one of the risks of his trade—that he may find either because a hire purchase agreement has been terminated or for some other reason, whether by reason of a theft or not, the person who brings the car has no right to deposit the car for repairs; and he may find he has no lien and cannot enforce his rights against the car or recover the money from the thief or person in illegal possession of the car.

It seems to me impossible to hold that the common law lien can have prevailed against the owner of the car when the person who placed the car for repairs had no right to do so. In my opinion, the Master’s decision was right, and this appeal fails.

HUMPHREYS J. I agree, and it is only because the case has been said to be of some importance that I add that in my opinion the proposition contended for by counsel for the appellants has been decided in each of several authorities all of which are binding upon us. I turn particularly to the judgment of Bankes LJ in Green v All Motors Ltd, in which he observed as follows ([1917] 1 KB 625, at p 632):

‘In Keene v. Thomas the point, as stated by LORD ALVERSTONE, C.J., was “whether the man who made the bargain with the repairer had authority from the plaintiff to make such a bargain.” That is the first point to be decided. The question, therefore, is whether on Oct. 31, when Price [for whose name Payne may be substituted] made the bargain with the defendants for the repair of the motor car, he had authority from the plaintiff to do so. In my opinion, he clearly had authority unless the plaintiff had determined the hire purchase agreement before that date.’

“Agreeing with that view, Scrutton LJ observed (ibid, at p 633):

‘Accordingly the hirer had by contract a duty as well as a right, until the hire was terminated, to have the car repaired, with the ordinary consequences of giving the repairer a lien on the car for the proper cost of the repairs.’

He then posed the question for decision in that case as being:

‘Had the bailment been determined when the order to do the repairs was given by the hirer?’

On the facts of this case it seems to me to be unarguable that at the time when the order to do the repairs was given, there was no authority in Payne to give any such order.

SINGLETON J. I am of the same opinion. Under the hire purchase agreement the owners had power in certain events to terminate the hiring immediately. They did that on 12 December by notice in writing. From that time the hirer had no right to use the car, still less had he a right to pledge anyone else’s credit for the incurring of expense upon the car.

The authorities cited to us by counsel for the appellants show that all of them really are decided upon the question as to whether or not the hirer had authority. In Keene v Thomas it was shown that in the circumstances of that case the hirer had authority to send the car to be repaired and, therefore, the plaintiff’s lien was good not only against the hirer but also against the plaintiff. In the circumstances of this case, the hirer had no authority to send the motor car to be repaired, and the claim to a lien accordingly fails.

I would only add this, that the argument for the appellants seems to me to be an effort to extend the right to a lien beyond anything which has ever been contemplated. That is shown, as I think, by the two passages just referred to

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by Humphreys J in the judgments of Bankes LJ and Scrutton LJ in Green v All Motors Ltd.

Appeal dismissed with costs.

Solicitors: L Bingham & Co (for the appellants); Peacock & Goddard agents for W Parkinson Curtis, Bournemouth (for the respondents).

C StJ Nicholson Esq   Barrister.

Hemsworth v Hemsworth

[1946] 2 All ER 117

Categories:        TAXATION; Income Tax        

Court:        KING’S BENCH DIVISION        

Lord(s):        DENNING J        

Hearing Date(s):        23, 24, 25 JANUARY 1946        

Income Tax – Deduction of tax – Annual payments – Allowance to wife under separation deed – Necessity for calculation and notification of deduction – Income Tax Act, 1918 (c 40), All Schedules Rules, r 19(1).

Husband and Wife – Separation agreement – Payments without deduction of income tax – Arrears – Payments discharged only in respect of amount actually paid – Tax deductible on balance only – Income Tax Act, 1918 (c 40), All Schedules Rules, r 19(1).

In order to exercise his right of deduction under the Income Tax Act, 1918, All Schedules Rules, r 19(1), the person making any payment or part payment in pursuance of his obligation must make a calculation in order to ascertain the amount of the deduction and of the residue, and must then notify the other person of the deduction andy pay him the residue.

Notes

This case decides that before making a deduction in respect of income tax from payments under a separation deed it is necessary to notify the wife of the amount of the deduction upon the basis of the decision in Taylor v Taylor. Reference may be made to Johnson v Johnson ([1946] 1 All ER 573), in which Lord Merriman P discusses the scope of Taylor v Taylor, and finds that it does not justify a husband in making deductions of tax which will result in the wife being completely without maintenance.

As to Deduction of Tax, see Halsbury, Hailsham Edn, Vol 17, p 237, para 477; and for Cases, see Digest, Vol 28, pp 72, 73, Nos 381–391.

Case referred to in judgment

Taylor v Taylor [1937] 3 All ER 571, [1938] 1 KB 320, Digest Supp, 107 LJKB 340.

Action

Action by a wife against her husband for arrears of instalments alleged to be due under a separation deed dated 16 April 1938, by which the husband agreed to pay to the wife £365 a year, subject to a proportionate reduction in the event of a reduction in his income, and the wife undertook as a condition precedent to the husband’s obligation to pay, that she would not annoy him. The husband paid the full amount, without deduction of income tax, until June, 1940. On that date the husband’s solicitors wrote saying that, owing to a diminution in the husband’s income, the amount payable to the wife was £22 a month, which in January, 1941, was reduced to £11 a month, and in July, 1941, to £2 10s a month. In fact the husband’s gross income was not reduced. After a temporary increase, in June, 1942, to £5 a month, the husband, in Nov 1942, stopped the allowance altogether and made no further payments. The husband’s defence was that the condition precedent not to annoy him had been broken by the wife. Denning J found that the wife had continued to perform and observe the stipulations on her part to be observed in the deed and that the sums were payable subject to arriving at a calculation.

The extract from the judgment deals solely with the question of quantum and income tax.

G R Mitchison for the plaintiff.

Hon T G Roche for the defendant.

25 January 1946. The following judgment was delivered.

DENNING J. … Some of the observations in Taylor v Taylor are not easy to reconcile with the actual decision in the case, but upon the true construction of the Income Tax Act, 1918, All Schedules Rules, r 19(1), coupled with the decision in Taylor v Taylor, I am of opinion that in order to exercise his right of deduction the person making any payment or part payment in pursuance of his obligation must make a calculation in order to ascertain the amount of the deduction and of the residue, and must then notify the other

Page 118 of [1946] 2 All ER 117

person of the deduction and pay him the residue. Unless such notification is made, the person to whom the payment is made has no information on which to allow such deduction and cannot be called on to allow it, and unless the person paying has made such a calculation he is not acquitted and discharged of so much money as is represented by the deduction, nor has he paid the residue. If the person pays without any such notification it must be taken to be a payment made without deduction and to be a discharge only in respect of the amount actually paid; and when the creditor sues for the balance which remains due over and above the sums actually paid, the debtor, when he comes to pay that balance, is entitled to deduct tax on that balance and pay the residue. That right only arises on payment, but Taylor v Taylor shows that judgment should be entered only for the residue. In this particular case the debtor made payments without making any deduction and without making any notification to the creditor on the matter. The payment which he made I find only discharged the debt in respect of the amounts actually paid. In regard to the judgment in the case, tax can be deducted on the balance which is sued for and only on that balance. In the result, I hold that the calculation submitted by the plaintiff is correct and judgment should be entered for the sum of £474 19s 8d, with costs.

Judgment for the plaintiff with costs.

Solicitors: Freke Palmer, Romain & Romain (for the plaintiff); Andrew, Purves, Sutton & Creery (for the defendant).

P J Johnson Esq   Barrister.

Re Horn, deceased

Westminster Bank Ltd v Horn

[1946] 2 All ER 118

Categories:        SUCCESSION; Wills        

Court:        COURT OF APPEAL        

Lord(s):        LORD GREENE MR, MORTON AND SOMERVELL, L JJ        

Hearing Date(s):        1, 2 MAY 1946        

Wills – Hotchpot clauses – Advances – Money lent “to be taken in or towards satisfaction” and “brought into hotchpot” – Estate insufficient to provide for all legacies – Whether clause operating as discharge of debt.

The testator, during his lifetime, lent to his son, the appellant, a considerable sum of money. His will contained a clause which provided that all money lent to any child should be taken in or towards satisfaction of the share of such child or his or her issue taking by substitution in his residuary estate and should be brought into hotchpot and accounted for accordingly. The estate was insufficient to provide for all the legacies, the appellant disputed his liability to discharge his debt to the estate and relied on the above-mentioned clause, which, he said, on its true construction, operated as a discharge of the debt:—

Held – (i) There being no residue, there was no room for the operation of the clause, because it was a clause which was to come into operation only on the occasion stated and for the purpose stated, viz., when residue was being distributed and for the purpose of equalising the distribution.

(ii) the words “taken in or towards satisfaction” meant the same thing as “brought into hotchpot” and were not words of discharge but words of charge.

(iii) the clause was an ordinary hotchpot clause and there could not be extracted from it any words sufficient to release or forgive the debt, and, in the events which had happened, the appellant was bound to make good to the estate the sum in question.

Notes

This case deals with the construction of a hotchpot clause which had been adopted to meet the case of outstanding loans instead of, as in Re Cosier, gifts for advancement. There was no residue upon which the hotchpot clause could not operate, and it is argued that the terms of clause amount to a discharge of the debt to the estate. This argument the court rejects.

As to Hotchpot Clause in Wills, see Halsbury, Hailsham Edn, Vol 34, p 424, para 470; and for Cases, see Digest, Vol 44, pp 1238–1250, Nos 10697–10776.

Page 119 of [1946] 2 All ER 118

Cases referred to in judgment

Re Cosier, Humphreys v Gadsden [1897] 1 Ch 325, 66 LJCh 236, 76 LT 31, affd, sub nom Wheeler v Humphreys [1898] AC 506, 44 Digest 1241, 10719.

Re Trollope, Game v Trollope [1915] 1 Ch 853, 44 Digest 1242, 10722, 84 LJCh 553, 113 LT 153.

Limpus v Arnold (1884), 15 QBD 300, 44 Digest 531, 3479, 54 LJQB 85.

Re Schweder, Oppenheim v Schweder (1893), 37 Sol Jo 249, 23 Digest 431, 5021.

Appeal

Appeal by the defendant from an order of Cohen J dated 17 April 1946. The facts are fully set out in the judgment of Lord Greene MR.

J N Gray KC and E G Eardley-Wilmot for the appellant.

Andrew Clark KC and Gwyn Rees for the respondents.

J V Nesbitt for the trustees.

2 May 1946. The following judgment was delivered.

LORD GREENE MR. If it had not been for certain observations in previous cases, I myself should not have thought that the present question was really open to argument. The testator left surviving him four children, two sons and two daughters. The benefits that he conferred upon his children by the will were of this nature: First of all, by cl 4 he gave certain legacies of large amounts, two of them settled on the daughters and their issue, and two settled on the sons and their issue. There was also another small legacy for the benefit of the children of one of the daughters. The son’s legacies were £45,000 each and those were settled. Then, in cl 5, he provided that if his estate should not be sufficient to provide in full for all the legacies, the legacies bequeathed by cl 3—with which we are not concerned—and the daughters’ settled legacies were all to rank pari passu and in priority to the settled legacies of the two sons, which were to abate accordingly. By cl 12 of the will, he bequeathed the remainder of his property on trust to sell, call in and convert in the usual way and to pay the funeral and testamentary expenses and pay or provide for the legacies. As to the residue, under cl 14 he bequeathed it in equal shares to those of his four children who survived him and the issue per stirpes of any who predeceased him. In point of fact, all the four children did survive him. Then in cl 15 there is this provision, which I will read in full:

‘‘All money which I have lent or covenanted or agreed to lend or which I may hereafter lend or covenant or agree to lend to any child of mine on his or her marriage or otherwise for his or her advancement or establishment in life and the interest on all such money shall in default of any direction to the contrary in writing under my hand be taken in or towards satisfaction of the share of such child or his or her issue taking by substitution as aforesaid in my residuary estate and shall be brought into hotchpot and accounted for accordingly.’’

The facts are quite short. The estate was insufficient to provide for all the legacies. In his lifetime, the testator had lent to his son Geoffrey, the present appellant, a sum of £13,700, carrying interest at 5 per cent. It has been assumed for the purpose of the discussion that this was a loan of the nature specified in cl 15 of the will, namely, a loan on marriage or for advancement or establishment in life. Some question was raised as to whether, on the facts, that was so, but having regard to the view that we take of the construction of the will, we need not go into that. Now, the only amount available for the two £45,000 legacies to the two sons, was the sum of £43,000; that is to say, there was enough in the estate to provide roughly for a half of each of those legacies. Accordingly, if, as Cohen J has held, Geoffrey remains liable to pay into the estate the amount of his loan, the whole of what he pays in will go towards filling up the deficiency in these settled legacies; there was not, and in no event can there ever be, any residue left for division under cll 14 and 15 of the will.

In those circumstances the son, Geoffrey, disputes his liability to discharge his debt to the estate and relies on cl 15 of the will, which he says, on its true construction, operated as a discharge of the debt. The words on which he relies are the words which say that the money lent should be “taken in or towards satisfaction of the share of such child or his or her issue taking by substitution in my residuary estate.” Those words, he says, on their true construction, are words which give the debt to the debtor and, therefore, operate as a release of the debt notwithstanding that there is no residue at all.

I have said that, apart from observations in previous cases, I should have thought the answer to this question was clear. Of course, there is no set formula required for the release or forgiveness of a debt in a will; all that is

Page 120 of [1946] 2 All ER 118

required is that the testator shall have made his intention clear. But one thing that is quite certain in this case, is that the testator has not in terms forgiven or released a debt. The release must be spelt in some way out of the direction in cl 15, that the money lent is to be taken in or towards satisfaction of the share in the residue. It is, in my opinion—and I am speaking now without reference to the authorities—reasonably clear that you cannot concentrate on the word “taken” and say that that is a word of gift: you must read it in its context and it is quite untrue to say that the testator has said that his son shall “take” anything at all simpliciter. He has said “taken in or towards satisfaction of the share in the residue.” That is not a direction for absolute taking, but a direction for taking in certain conditions and for certain purposes and for no other purposes at all, as it seems to me.

In the present case there is no question, of course, of any share of residue on the facts, and it is argued by the respondents that there is no room for the operation of this clause, having regard to the position, because it is a clause which is only to come into operation on the occasion stated and for the purpose stated, namely, the occasion when residue is being distributed and for the purpose of equalising the distribution. That, in my opinion, is the correct view, but the matter must also be looked at from a rather broader angle and in relation to what has been said with regard to the meaning of those words “be taken in or towards satisfaction.” Therefore, I do not rest my judgment entirely on the view that this clause cannot operate unless there is a residue. If there was even a small residue, that argument would, or might, fail to have effect and it appears to me that even if that argument be disregarded or be thought to be wrong, cl 15 by itself does not produce the result of extinguishing the debt in any circumstances save where there is sufficient residue to enable the directions to be carried out, namely, that the amount of the money owing is to be taken “in or towards satisfaction” of the share. In other words, this must not be construed as forgiveness either in whole or in part of the loan.

Now cl 15, as it appears to me—again without reference to authority—is nothing more nor less than an ordinary hotchpot clause. It is a hotchpot clause which has been adapted to meet the case not of gifts for advancement, but of outstanding loans. It was suggested that to construe this as a mere hotchpot clause, in the case of a loan, would be really to give it no operative effect, because, in the case of a loan, the debtor would be bound in any event to bring into account, before he could take any share, the amount outstanding of his debt. As was pointed out by Morton LJ in the course of the argument, that cannot possibly be right in the case of the substitutional gift to issue because, apart from some such clause as this, the outstanding debt owed by a father who had predeceased the testator could not be brought into account as against the share given to his issue by substitution and, therefore, it is manifest that cl 15 on any view was a necessary clause.

The argument of counsel for the appellant involved giving two totally different meanings to the two limbs of the clause, namely, the limb which says that the money owing is to be taken in or towards satisfaction, and the limb which says “shall be brought into hotchpot and accounted for accordingly.” He agrees that the latter is, what I may call, an ordinary hotchpot clause, but he says that the former limb is something more and is a gift or release. In my opinion, this is merely a verbose way of expressing the ordinary hotchpot provisions and both limbs mean really the same thing. That is confirmed by the use of the word “accordingly.” He is really putting it in two forms of language, one the popular language understandable by the layman, “taken in or towards satisfaction of the share,” and the other the technical language understandable by a lawyer, “shall be brought into hotchpot”; and really the two expressions mean the same thing. The words “shall be taken in or towards satisfaction” are not, in my view, words of discharge. To use the language of Sargant J they are words of charge. They are not saying “The debt is extinguished” at all, but they are saying how the debt is to be dealt with in the distribution of the estate. It seems to me that to read out of the word “taken” a gift or release or forgiveness of a debt would be to interpret in a forced and unusual sense words inserted alio intuitu.

One cannot shut one’s eyes to the fact that the courts are sometimes disposed, very naturally disposed, to view favourably a rather strained interpretation,

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if that is considered necessary to achieve the overriding purpose of the will or to avoid some blatant inequality or unfairness; but it is to be observed that to construe those words in the way suggested in the present case, so far from avoiding unfairness or inequality, would in fact create, it, because the result would be that the son Geoffrey would obtain in the result a far higher benefit from his father than his brother: he would get a share, for instance, in the settled legacy, or, rather, he and his family would have a settled legacy equal to that taken by his brother and his family and, in addition to that, he would be discharged from his existing liability. That seems to me to be entirely contrary to the general scope and intention of this will and I am certainly not prepared to put what I consider would be a forced construction on the words relied upon in cl 15 when it is going to produce such a result.

Now, having said that and having approached the matter entirely without reference to previous cases, I must now say a word about the cases on which reliance is particularly placed. The appellant’s sheet anchor is the case of Re Cosier, in this court. That was a case where there was a clause which, save in one respect, was practically, with immaterial differences, identical with cl 15 in the present case. There was the same provision about certain sums being taken in or towards satisfaction of children’s shares, and the direction that they should be brought into hotchpot and accounted for accordingly. As a matter of fact, that is a common form which appears frequently, and the difference between that form and that in the present case consists entirely of the fact that, instead of the sums dealt with being sums which had been given or covenanted to be given to the child, as in Re Cosier they were here sums which were lent to the child; so that what has happened is that that particular form has been taken and used with the substitution of a reference to loan for the reference to advancements. It was a curious case. The question related to a sum of £10,000 in which, in the events which had happened, the father had a reversionary interest. He had covenanted on the marriage of his son to settle that sum and he retained a reversionary interest in it. The question was whether that sum was to be treated as part of his estate and, therefore, divisible equally between the son and the daughter under the will or whether the son was to take it as part of his share and as against a similar sum given to the daughter out of the general estate. The latter result would have produced equality between the two children; the former result would have benefited the daughter at the expense of the son. Chitty J had held that the £10,000 was divisible equally between the son and the daughter. The matter came before this court and the decision of Chitty J was reversed, and it was held that the £10,000 went to the son and the daughter, of course, would get the corresponding £10,000 out of the estate.

The grounds upon which this court appear to have based their judgment were that the hotchpot clause covered the whole of the £10,000, notwithstanding the fact that the son had only received a life interest in it; then, secondly, they held that upon the true construction of the hotchpot clause, the word “taken” amounted to a word of gift. There is no question, of course, in that case of release, because the matter was not a debt but was an asset of the testator, and they construed the word “taken” as being a word of gift. The word, the meaning of which we have to decide, did not arise nor anything like it, but there are certain dicta which have a bearing on our present question. Lindley LJ said this ([1897] 1 Ch 325, at p 331):

‘It was contended that this is to render a hotchpot clause operative as a gift, which is not its function. But that is only a half truth, and is very misleading. A hotchpot clause in a will has always to be construed together with some other clause which is a clause of gift, and the question always is, What is the true effect of the clause of gift and of the hotchpot clause which has to be construed with it? The combined effect of the two clauses is always, so far as I know, to pass to the legatee of what is given, the testator’s interest, if any, in that which is to be brought into hotchpot.’

There he is referring to the combined effect of the hotchpot clause and of the gift in the will under which the residue was given equally between the son and the daughter. Then he says this:

‘Take the very common case put by my brother RIGBY in the course of the argument. Suppose a father lends his son £1,000, and then bequeaths to him a share of his residuary estate, and directs that the £1,000 shall be brought into hotchpot. What is this but a gift to the son of the £1,000 as part of the share given to him?’

Page 122 of [1946] 2 All ER 118

One thing is quite clear there, to my mind, that Lindley LJ is considering, and considering only, the possible case where there is sufficient residue to enable the estate to be divided without cancelling any part of the debt, because he says:

‘What is this but a gift to the son of the £1,000 as part of the share given to him?’

He treats, as I say, the combined effect of the gift and the hotchpot clause as a gift. I should have thought myself, with respect, that where a testator directs that a debtor’s son shall take the debt as part of his share of residue, the release of the debt takes place not by virtue of the word “take” or of any particular word, but by virtue of the very nature of the transaction which takes place when the accounts of the residue are settled up. The debt obviously could not survive the final distribution of the estate on the basis indicated.

Rigby LJ carries the matter a little further. He says (ibid, at p 333):

‘Suppose, however, that the testator has lent a child money, say £10,000 instead of giving it, and has, to make the transaction clear, taken from the child a bond for repayment. Or, suppose again, that he has lent the money to a stranger on mortgage. If the testator says, “I declare that the money spent by me on my son’s education shall be taken in or towards satisfaction of his share,” it is plain that, as to that particular subject-matter, there can be no gift. In each of the other cases the £10,000 is an existing asset of the testator, available for the payment of creditors, but, subject to their claims, entirely at the testator’s disposal. If then he says, “I declare that the £10,000 owing to me on bond by my son, or the £10,000 lent by me on mortgage to A, shall be taken in or towards satisfaction of my son’s share under my will,” it would, in my judgment, be repugnant to common sense to say that the son was not released from the debt in the first case, and made the owner of the mortgage debt in the second. This, however, is the same thing as saying that the words operate as words of gift.’

There, again, I should have thought myself that the release of the debt takes place by virtue not of the words but of the very nature of the transaction. It is said in argument that those observations of Rigby, LJ, are intended to apply not merely to the case where the residue is ample but to the case where the suggested release of the debt will involve an additional benefit to the son. I very much doubt whether the Lord Justice was thinking of that case at all. It seems to me much more probable that he was merely elaborating the point that he had put in argument, as referred to by Lindley, LJ. One thing I think, is clear, that he was construing the language of the hotchpot clause as equivalent to language of gift.

Those observations, whatever their extent may be, are, of course, only dicta, and, with great respect, I am unable to follow the reasoning on which they are based, which would appear to have the effect of giving a forced construction to a word inserted alio intuitu for the purpose of avoiding what in that case would have been a gross inequality between two children. That was the only way which this court saw of escaping from that inequality.

The case went to the House of Lords and the House of Lords succeeded in escaping from the inequality by a totally different construction of the will. I need not go into the details of it, but the construction that they put on the will involved no reliance on any part of the words in the hotchpot clause as amounting to words of gift. Lord MacNaghten, who delivered the leading opinion, said that the hotchpot clause was in the common form; it was a clause which is textually the same as this with the exception that one related to gifts and one related to loans. He treats it as an ordinary common form of hotchpot clause, but he says more than that. He refers to the judgment of this court and he says ([1898] AC 506, at p 510):

‘The Court of Appeal are more fortunate in finding a way of escape. By inverting the hotchpot clause they arrive at a correct result. The whole fund, they say, must be brought into hotchpot by the son. It has, therefore, to be taken towards satisfaction of his share; the direction that it is to be so taken implies a gift, and, therefore, whatever interest the father retained in the fund is given to the son by the hotchpot clause, as RIGBY, L.J., thinks, or, as the other members of the court held, by the conjoint operation of that clause, and the gift in the earlier part of the will.’

That is his summary of the reasoning of this court and he then proceeds as follows (ibid):

‘Now I must say I cannot follow this reasoning. It seems to me plain that the testator’s reversionary interest in the fund cannot come under the operation of the hotchpot clause. Nothing was to be brought into hotchpot but what the testator had covenanted or agreed to give. The hotchpot clause is in the common form. The clause must have its ordinary effect.’

Page 123 of [1946] 2 All ER 118

Then he says (ibid, at p 512):

‘… I desire to rest my judgment on the plain language of the will without putting any strained construction on any words in the hotchpot clause or giving it a peculiar or unusual effect.’

Now those words of criticism, it is said, must be taken as having been directed solely to that effect given by this court to the hotchpot clause when they construed it as covering the father’s reversionary interest in the £10,000. I do not agree that those criticisms are limited to that. I read them as extending to the whole of the reasoning of the Court of Appeal and it is to be observed that Lord Macnaghten set out the whole of the reasoning, including the interpretation this court had put on the word “take” or “taken,” and says: “I cannot follow this reasoning.” That, I should have thought, meant the whole of the reasoning that he had summarised in his proceeding paragraph. I am all the more disposed to think I am right in construing the observation of Lord Macnaghten in that way because, if I may say so, it seems to me that it is the result which one would have come to without any authority at all. As I have said, this appears to me to be an ordinary hotchpot clause of a rather verbose form and the words “taken in or towards satisfaction” were inserted as indicating the working and machinery of such a clause and not for the purpose of producing a result by way of gift or by way of forgiveness of an existing loan.

As I have said, Re Cosier is the sheet anchor and I do not think that I need refer at any length to any other cases except the case before Astbury J on which reliance was placed, Re Trollope. That is a case in which it appeared very likely that the estate would be deficient and would not cover the whole indebtedness of a debtor son. The will was not precisely in this form, but it did contain a provision that the advances to the son should be taken in full or in part satisfaction of the benefits given to him under the will. That the judge construed as amounting to a release of the debt. I am bound to say, with the utmost respect, that I do not think that that case has any real bearing on the question we have to decide. The judge’s reasoning does not induce me to think that the views that I have expressed on this subject are in any way wrong. He bases himself almost entirely on the observations of the Court of Appeal in Re Cosier, to which I have referred, and he treats the criticisms of those observations in the House of Lords as not really affecting the view of the Court of Appeal or their persuasiveness in the case he had to deal with. In my opinion, the judge misconstrued the effect of the criticisms of the House of Lords, which, as I read them, entirely take away from the observations in Re Cosier any persuasive effect which those dicta might otherwise have had. He also, I think, placed too much weight on the earlier case of Limpus v Arnold and he disregards a decision in Re Schweder. He says of that case ([1915] 1 Ch 853, at p 862):

‘… it certainly does look as if CHITTY, J., formed a definite opinion that a proviso that a debt owing by a legatee should be taken in full or part satisfaction of his or her legacy did not amount to a release of that debt if, and to the extent that, the debt exceeded the amount of the benefit.’

He had that authority before him. True it is not a very full report, but that is his interpretation of it, and he declines in effect to be guided by it, because he thought that Re Cosier was too strong. That case of Chitty J as understood by Astbury J was, in my view, decided correctly and Astbury J ought not to have disregarded it. In so far as he is bound to take into account decisions on other wills, he should not have disregarded it on the ground that Re Cosier lays down some other principle or method of construction.

I do not think that I need refer to any of the other cases which have been cited to us. In my opinion, putting it quite shortly, this is an ordinary hotchpot clause and there cannot be extracted from it any words sufficient to release or forgive the debt and in the events which have happened the son, the appellant, is bound to make good to the estate the sum in question. What has happened, I think, must be what so frequently happens, that a rather unintelligent copying and adaptation of a common form has been made without really considering whether the words are suitable or convenient or not. If the testator desired to forgive a debt, he could quite easily have said so. It is not, in my opinion, legitimate to extract such an intention out of these words and particularly

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so where the result of so doing would be not to avoid but to create a gross inequality and injustice. The judge’s judgment, which unfortunately we have not before us because no note was taken of it, was perfectly right in his conclusion and this appeal must be dismissed.

Morton and Somervell LJJ agreed.

Appeal dismissed. Costs of all parties between solicitor and client.

Solicitors: Marshall & Hicks Beach (for the appellant); Wrentmore & Son (for the respondents); Murray, Hutchins & Co (for the trustees).

F Guttman Esq   Barrister.

Holmes v Director of Public Prosecutions

[1946] 2 All ER 124

Categories:        CRIMINAL; Criminal Law        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT SIMON, LORD MACMILLAN, LORD PORTER, LORD SIMONDS AND LORD DU PARCQ        

Hearing Date(s):        6, 7, 8, 9, 10 MAY, 4 JULY 1946        

Criminal Law – Murder – Provocation – Wife’s confession of adultery – Whether sufficient provocation to reduce murder to manslaughter – Functions of judge and jury.

(1) In dealing with provocation as justifying the view that the crime may be manslaughter and not murder, a distinction must be made between what the judge lays down as a matter of law, and what the jury decides as a matter of fact. If there is no sufficient material, even on a view of the evidence most favourable to the accused, for a jury (which means a reasonable jury) to form the view that a reasonable person so provoked could be driven, through transport of passion and loss of self-control, to the degree and method and continuance of violence which produces the death, it is the duty of the judge as a matter of law to direct the jury that the evidence does not support a verdict of manslaughter. If, on the other hand, the case is one in which the view might fairly be taken (a) that a reasonable person, in consequence of the provocation received, might be so rendered subject to passion or loss of control as to be led to use the violence with fatal results, and (b) that the accused was in fact acting under the stress of such provocation, then it is for the jury to determine whether on its view of the facts manslaughter or murder is the appropriate verdict. It is important to consider, where the homicide does not follow immediately upon the provocation, whether the accused, if acting as a reasonable man, had “time to cool.”

(2) The whole doctrine relating to provocation depends on the fact that it causes, or may cause, a sudden and temporary loss of self-control whereby malice, which is the formation of an intention to kill or to inflict grievous bodily harm, is negatived. Consequently, where the provocation inspires an actual intention to kill or to inflict grievous bodily harm, the doctrine that provocation may reduce murder to manslaughter seldom applies. Only one very special exception has been recognised, viz, the actual finding of a spouse in the act of adultery. This has always been treated as an exception to the general rule; but it has been rightly laid down that the exception cannot be extended.

(3) A sudden confession of adultery by either spouse without more can never constitute provocation of a sort which might reduce murder to manslaughter.

(4) The duty of the judge at the trial, in relevant cases, is to tell the jury that a confession of adultery without more is never sufficient to reduce an offence which would otherwise be murder to manslaughter and that in no case could words alone, save in circumstances of a most extreme and exceptional character, so reduce the crime. When words alone are relied upon in extenuation the duty rests on the judge to consider whether they are of this violently provocative character, and if he is satisfied that they cannot reasonably be so regarded, to direct the jury accordingly.

Decision of the Court of Criminal Appeal ([1946] 1 All ER 524), affirmed.

Page 125 of [1946] 2 All ER 124

Notes

The House of Lords uphold the Court of Criminal Appeal, holding that a sudden confession of adultery without more can never constitute sufficient provocation to reduce murder to manslaughter, and the dictum of Blackburn J in R v Rothwell implying the contrary, is no longer good law. Lord Simon reviews the respective duties of judge and jury in regard to provocation in case of felonious homicide, and, finally, points out that the sentence for murder being fixed, provocation alters the nature of the offence in a way which is unnecessary in lesser offences where it can be allowed for in the sentence.

As to Provocation, see Halsbury, Hailsham Edn, Vol 9, p 434, para 745; and for Cases, see Digest, Vol 15, pp 776–782, Nos 8305–8384.

Cases referred to in opinion

Woolmington v Director of Public Prosecutions [1935] AC 462, Digest Supp, 104 LJKB 433, 153 LT 232, 25 Cr App Rep 72.

Mancini v Director of Public Prosecutions [1941] 3 All ER 272, [1942] AC 1, 111 LJKB 84, 165 LT 353, 28 Cr App Rep 65.

R v Maddy (1671), 2 Keb 829, 15 Digest 781, 8376, 1 Vent 158, sub nom R v Manning, T Raym 212.

R v Pearson (1835), 2 Lew CC 216, 15 Digest 781, 8378.

R v Morley (Lord) (1666), 6 State Tr 770, 15 Digest 779, 8340, 1 Sid 277.

R v Mawgridge (1706), Kel 119, 15 Digest 777, 8306, 17 State Tr 57, Fost 274, 296, 1 East, PC 276, 278, sub nom Mawgridge’s Case, Holt KB 484.

R v Rothwell (1871), 12 Cox CC 145, 15 Digest 780, 8350.

R v Jones (1908), 72 JP 215, 15 Digest 780, 8352.

R v Palmer [1913] 2 KB 29, 15 Digest 780, 8354, 82 LJKB 531, 108 LT 814, 8 Cr App Rep 191.

Appeal

Appeal from a decision of the Court of Criminal Appeal, dated 5 April 1946, and reported ([1946] 1 All ER, 524), dismissing an appeal against a conviction of murder at a trial before Charles J at Nottingham Assizes, on 28 February 1946. The facts are fully set out in the opinion of Viscount Simon.

P E Sandlands KC and Elizabeth K Lane for the appellant.

The Solicitor General (Sir Frank Soskice KC), Anthony Hawke and Rodger Winn for the Crown.

Their Lordships took time for consideration

4 July 1946. The following opinions were delivered.

VISCOUNT SIMON. My Lords, the appellant was charged with murdering his wife and was convicted of this crime at Nottingham Assizes, at a trial before Charles J and a jury, on 28 February last. On his applying to the Court of Criminal Appeal for leave to appeal against this conviction, that court (Lord Goddard LCJ, Wrottesley and Croom-Johnson JJ) treated his application as the actual appeal and dismissed it for the reasons given in a judgment read by Wrottesley J on 5 April. On 12 April the appellant obtained from the Solicitor-General (who was acting in place of the Attorney-General under the Law Officers Act, 1944) a certificate that the decision of the Court of Criminal Appeal involved a point of law of exceptional public importance, and that it was desirable that a further appeal should be brought to this House. The point of law is whether Charles J was right in telling the jury that, upon the evidence at the trial, and having regard to the law, it was not open to the jury to find a verdict of manslaughter, and that the statement by the accused’s wife to him that she had been unfaithful to him was not such provocation as could justify a verdict of manslaughter instead of murder. More generally, the question we have to consider is what are the respective functions of judge and jury in such cases, and how the law draws the line between instances of provocation which would, and those which cannot, make it proper for the jury to be left to decide on the facts on the appropriate verdict.

The appellant killed his wife, according to his own evidence, on the night of Sunday or in the early hours of Monday, 18 or 19 November of last year, in the kitchen of the house where they lived. On the previous Saturday he had telegraphed to a Mrs X, who lived in a different part of the country and with whom he admitted that he had previously had sexual relations, that she might expect him on the Sunday or Monday; he travelled on the Monday to Mrs X and told her that his wife had left him. In fact, his wife’s dead body was discovered next day in the room where he had killed her. She had received a severe wound on the head caused by the hammer-head for breaking coal which was close to his hand, and she had many bruises on her body, but the final cause of death was manual strangulation. The appellant’s story was that there was a

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quarrel between them on the Saturday night, originating from some persons winking in the direction of his wife in a public house that evening; he said that he had entertained suspicions of his wife’s conduct with regard to other men in the village, and that there had been some suggestion made to him with regard to her and his own younger brother. The quarrel, he said, culminated in his wife saying, “Well, if it will ease your mind, I have been untrue to you,” and she went on, “I know I have done wrong, but I have no proof that you haven’t—at Mrs X.’s” “With this,” the appellant’s statement continued, “I lost my temper and picked up the hammer-head and struck her with the same on the side of the head. She fell on her knees and then rolled over on her back, her last words being, ‘It’s too late now, but look after the children.' She struggled just for a few moments and I could see she was too far gone to do anything. I did not like to see her lay there and suffer, so I just put both hands round her neck until she stopped breathing, which was only a few seconds.” In the witness-box, the appellant was asked in cross-examination, “When you put your hands round that woman’s neck and gave pressure through your fingers, you intended to take you wife’s life, did you not?” and he answered, “Yes.”

There was no corroboration at the trial to support the accused’s statement that his wife admitted her unfaithfulness, but for the purpose of deciding whether Charles J’s direction to the jury was correct, it must be assumed that she did, and that either her confession or her pertinent inquiry about his own misconduct provoked him to lose his temper. The House was unanimous in holding that the direction given by the judge was correct; there were no circumstances of special aggravation, and confession of adultery, grievous as it is, cannot in itself justify the view that a reasonable man (or woman) would be so provoked as to do what this man did. The House accordingly dismissed the appeal, while taking further time to pronounce upon the more general questions of law and principle discussed in the course of the argument.

In dealing with provocation as justifying the view that the crime may be manslaughter and not murder, a distinction must be made between what the judge lays down as matter of law, and what the jury decides as matter of fact. If there is no sufficient material, even on a view of the evidence most favourable to the accused, for a jury (which means a reasonable jury) to form the view that a reasonable person so provoked could be driven, through transport of passion and loss of self-control, to the degree and method and continuance of violence which produces the death, it is the duty of the judge as matter of law to direct the jury that the evidence does not support a verdict of manslaughter. If, on the other hand, the case is one in which the view might fairly be taken (a) that a reasonable person, in consequence of the provocation received, might be so rendered subject to passion or loss of control as to be led to use the violence with fatal results, and (b) that the accused was in fact acting under the stress of such provocation, then it is for the jury to determine whether on its view of the facts manslaughter or murder is the appropriate verdict. It is hardly necessary to lay emphasis on the importance of considering, where the homicide does not follow immediately upon the provocation, whether the accused, if acting as a reasonable man, had “time to cool.”

The distinction, therefore, is between asking “Could the evidence support the view that the provocation was sufficient to lead a reasonable person to do what the accused did?” (which is for the judge to rule), and, assuming that the judge’s ruling is in the affirmative, asking the jury: “Do you consider that, on the facts as you find them from the evidence, the provocation was in fact enough to lead a reasonable person to do what the accused did?” and, if so, “Did the accused act under the stress of such provocation?”

Woolmington’s case shows that if the jury, after a proper summing up, entertains a reasonable doubt as to the answers to these questions, it ought to give the accused the benefit of the doubt. Mancini’s case points out the importance of considering the nature of the weapon used in retort—in that instance, Macnaghten J was held to be justified in excluding the possibility of mere manslaughter when a dagger was employed in resentment to a blow aimed at the accused with a fist, for “the mode of resentment must bear a reasonable relationship to the provocation if the offence is to be reduced to manslaughter”: [1941] 3 All ER 272, at p 277.

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The whole doctrine relating to provocation depends on the fact that it causes, or may cause, a sudden and temporary loss of self-control whereby malice, which is the formation of an intention to kill or to inflict grievous bodily harm, is negatived. Consequently, where the provocation inspires an actual intention to kill (such as Holmes admitted in the present case), or to inflict grievous bodily harm, the doctrine that provocation may reduce murder to manslaughter seldom applies. Only one very special exception has been recognised, viz, the actual finding of a spouse in the act of adultery. This has always been treated as an exception to the general rule: Manning’s case . Blackstone’s Commentaries, Bk IV, p 192, justifies the exception on the ground that “there could not be a greater provocation.” But it has been rightly laid down that the exception cannot be extended, eg, by Parke B, in Pearson’s case, where he insisted on the condition of ocular observation. Even if Iago’s insinuations against Desdemona’s virtue had been true, Othello’s crime was murder and nothing else.

Necessary self-defence, or action taken in the necessary defence, for example, of wife or child from outrage or maltreatment, stand apart, as in such cases there is no crime at all committed.

This brings me to the question which, as I understand, was the actual reason why the law officer’s certificate was given in this case: viz, whether “mere words” can ever be regarded as so provocative to a reasonable man as to reduce to manslaughter felonious homicide committed upon the speaker in consequence of such verbal provocation. There is nothing in the decision of this House in Mancini’s case which was intended to prejudge this question, nor does the decision in fact do so.

It is first to be observed that provocation by “mere words” may have more than one meaning. It may mean provocation by insulting or abusive language, calculated to rouse the hearer’s resentment. The contrast with provocation by physical attack is obvious. A blow may in some circumstances rouse a man of ordinary reason and control to a sudden retort in kind, but the proverb reminds us that hard words break no bones, and the law expects a reasonable man to endure abuse without resorting to fatal violence. It is in this sense that the constantly repeated statement in the old books that “mere words” (not being menace of immediate bodily harm) do not reduce murder to manslaughter is to be understood: see Hale’s Pleas of The Crown, Emlyn Edn, Vol I, p 456, citing the resolution of all the judges in 1666, in Lord Morley’s case (6 State Tr 770, at p 771); Mawgridge’s case (17 State Tr 57, at p 66), Hawkin’s Pleas of The Crown, Bk I, ch 13, sect 33: East’s Pleas of The Crown, Vol I, p 233.

There is, however, a different sense which may sometimes attach to the meaning of “mere words,” for they may be used, not as an expression of abuse, but as a means of conveying information of a fact, or of what is alleged to be a fact. This must be the sense in which Blackburn J spoke in R v Rothwell, when in the course of summing up to a jury in the case of a man charged with murdering his wife, he went so far as to say (12 Cox C C 145, at p 147):

‘As a general rule of law no provocation of words will reduce the crime of murder to that of manslaughter, but under special circumstances there may be such a provocation of words as will have that effect, for instance, if a husband suddenly hearing from his wife that she had committed adultery and he having no idea of such a thing before, were thereupon to kill his wife, it might be manslaughter.’

It is to be noted that Blackburn J said “might,” and not “would,” and the illustration had no resemblance to the facts of the case he was trying.

Blackburn J’s dictum was applied in the accused’s favour in R v Jones, and was not dissented from in R v Palmer, when, however, the Court of Criminal Appeal refused to extend the suggested exception to cover the case of a man engaged to be married to a young woman whom he killed when she confessed to illicit intercourse with someone else. Channell J in delivering the judgment of the court, said that the reason for the exception suggested by Blackburn J was that a sudden confession is treated as equivalent to a discovery of the act itself.

In my view, however, a sudden confession of adultery without more can never constitute provocation of a sort which might reduce murder to manslaughter. The dictum attributed to Blackburn J and any cases which seem to accept

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or apply it, can no longer be regarded as good law. The rule, whatever it is, must apply to either spouse alike, for we have left behind us the age when the wife’s subjection to her husband was regarded by the law as the basis of the marital relation, when, as Bracton said (see Pollock And Maitland’s History of English Law, 2nd Edn, Vol II, p 406), she was sub virga viri sui and when the remedies of the Divorce Court did not exist. Parliament has now conferred on the aggrieved wife the same right to divorce her husband for unfaithfulness alone as he holds against her, and neither, on hearing an admission of adultery from the other, can use physical violence against the other which results in death and then urge that the provocation received reduces the crime to mere manslaughter.

It is not necessary in this appeal to decide whether there are any conceivable circumstances accompanying the use of words without actual violence, which would justify the leaving to a jury of the issue of manslaughter as against murder. It is enough to say that the duty of the judge at the trial, in relevant cases, is to tell the jury that a confession of adultery without more is never sufficient to reduce an offence which would otherwise be murder to manslaughter and that in no case could words alone, save in circumstances of a most extreme and exceptional character, so reduce the crime. When words alone are relied upon in extenuation, the duty rests on the judge to consider whether they are of this violent provocative character, and if he is satisfied that they cannot reasonably be so regarded, to direct the jury accordingly.

There are two observations which I desire to make in conclusion. The first is that the application of common law principles in matters such as this must to some extent be controlled by the evolution of society. For example, the instance given by Blackstone’s Commentaries, Bk IV, p 191, citing an illustration in Kel 135, that if a man’s nose was pulled and he thereupon struck his aggressor so as to kill him, this was only manslaughter, may very well represent the natural feelings of a past time, but I should doubt very much whether such a view should necessarily be taken nowadays. The injury done to a man’s sense of honour by minor physical assaults may well be differently estimated in differing ages. And, in the same way, one can imagine in these days at any rate, words of a vile character which might be calculated to deprive a reasonable man of his customary self-control even more than would an act of physical violence. But on the other hand, as society advances, it ought to call for a hither measure of self-control in all cases.

The remaining reflection is as follows: the reason why the problem of drawing the line between murder and manslaughter, where there has been provocation, is so difficult and so important, is because the sentence for murder if fixed and automatic. In the case of lesser crimes, provocation does not alter the nature of the offence at all: but it is allowed for in the sentence. In the case of felonious homicide, the law has to reconcile respect for the sanctity of human life with recognition of the effect of provocation upon human frailty.

LORD MACMILLAN, LORD PORTER, LORD SIMONDS and LORD DU PARCQ concurred.

Appeal dismissed.

Solicitors: Ludlow & Co (for the appellant); Director of Public Prosecutions (for the Crown).

C StJ Nicholson Esq   Barrister.

Edwards v Jackson and Dingle

[1946] 2 All ER 129

Categories:        CONSTITUTIONAL; Elections        

Court:        MANCHESTER SPRING ASSIZES        

Lord(s):        MORRIS J        

Hearing Date(s):        7 MAY 1946        

Elections – Parliamentary – Nomination – Sufficiency of description of candidate – Opinion of returning officer – Removal of surplusage – Ballot Act, 1872 (c 33), Sched I, Pt I, rr 6, 9, 22.

The plaintiff was a candidate at a Parliamentary election. The defendants were the returning officer—the Lord Mayor—and the Town Clerk. The plaintiff’s nomination paper described him as “Honorary Secretary, Moss Side Tenants’ Protection Society,” which was not a society in the ordinary accepted sense of the term. On the public notice and on the ballot paper the plaintiff was described as “Secretary.” The plaintiff, on the ground that the notice and the ballot paper did not accord with the nomination paper, as required by the Ballot Act, 1872, Sched I, Pt I, rr 9 and 22, claimed, against the defendants, the penalty provided by sect 11 of the Act for wilful misfeasance or wilful act or omission in contravention of the Act, and for damages:—

Held – (i) Under Sched I, Pt I, r 6, of the Act, the opinion in regard to sufficiency of description and of identification of the candidate was the opinion of the returning officer, who having honestly formed the opinion that the original words of the nomination paper were excessive, and that the word “secretary” was a description, which, in his opinion, was calculated sufficiently to identify the candidate, could not be said to have been guilty of a wilful misfeasance or wilful act or omission in contravention of the Act.

(ii) the notice and the voting paper did in fact accord with the nomination paper as altered by the returning officer to make it valid.

Notes

There are a number of decisions on the sufficiency of nomination of candidates in municipal elections, but little authority on Parliamentary elections. This case decides that for the purpose of the rule 6 of the Ballot Act 1872, Sched I, no proceedings can be maintained against a returning officer for insufficiency of description if he has honestly formed the opinion that the description given is sufficient to identify the candidate.

As to Nomination of Candidate for Parliamentary Election, see Halsbury, Hailsham Edn, Vol 12, pp 249–255, paras 504–513; and for Cases, see Digest, Vol 20, p 68, Nos 479, 480.

Case referred to in judgment

Thompson v Gibson (1841), 8 M & W 281, 42 Digest 954, 268, 9 Dowl 717, 10 LJEx 241.

Action

Action by a candidate at a Parliamentary election against the returning officer for a penalty under the Ballot Act, 1872, s 11, and for damages. The facts are fully set out in the judgment.

The plaintiff appeared in person.

A D Gerrard KC and A E Jalland for the defendants.

7 May 1946. The following judgment was delivered.

MORRIS J. The plaintiff in this action is a member of the Manchester City Council and at the Parliamentary election last year he was a candidate for the Moss Side Division. The first defendant was the returning officer and was the Lord Mayor of the city of Manchester at the time of the election, and the second defendant was the acting returning officer and was and is the town clerk of the city of Manchester.

The nomination paper which was handed in nominating the plaintiff as candidate for Parliament described him in the column under the heading “rank, profession or occupation” as the “Honorary Secretary, Moss Side Tenants’ Protection Society.” On the ballot paper he was ultimately described as “Edwards, Albert Richard, 36, Lincroft Street, Moss Side, Manchester, secretary.” He had also so been described on the notice issued on 25 June 1945, by the acting returning officer. The plaintiff complains that the description which appeared both on the notice or poster of 25 June 1945, and also on the ballot paper was incorrect and inadequate and was a description which was unauthorised having regard to the fact that the nomination paper when handed in bore the description “Honorary Secretary, Moss Side Tenants’ Protection Society.” He claims that the nomination paper was accepted with the description that it bore at the moment that it was handed in. By his statement of

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claim, para 5, he alleges that contrary to the Ballot Act, 1872, Sched I, Pt I, r 9, the acting returning officer—that is the second defendant—issued posters describing him not as “Honorary Secretary, Moss Side Tenants’ Protection Society,” but as “Secretary,” which was not the description shown in the nomination papers as required by r 9. He further complains in his statement of claim, para 6, that contrary to the Ballot Act, 1872, Sched I, Pt I, r 22, ballot papers were provided for the election which described him as “Albert Richard Edwards, 36, Lincroft Street, Moss Side, Secretary,” and not as “Albert Richard Edwards, 36, Lincroft Street, Moss Side, Honorary Secretary, Moss Side Tennats’ Protection Society” as shown in the nomination papers and as required by r 22. He states his case in paras 9, 10, and 11 of his statement of claim in the following way. He says that the description of him which the defendants caused to appear on the posters and ballot papers was calculated to prevent him from being recognised as the person who was the Honorary Secretary of the Moss Side Tenants’ Protection Society. He claims under sect 11 of the Ballot Act, 1872, from both defendants the penalty provided by sect 11 for what he alleges to be the wilful misfeasance, in contravention of the Ballot Act, 1872, in the manner alleged by him in paras 5 and 6 to which I have referred. He further complains that having been prejudiced in the conduct of his election campaign by the acts of the defendants and having forfeited his deposit of £150 under the Representation of the People Act, 1918, s 27, he is entitled to recover as special damage from the defendants the sum of £150, being the amount handed to the acting returning officer on 25 June in the presence of the returning officer, the first defendant. He alleges that at that time the returning officer informed him that his nomination papers were quite in order. He, therefore, brings this action, claiming under the Ballot Act, 1872, s 11, a penalty of £100 and claiming damages.

The plaintiff before approximately the year 1920 carried on the profession of accountancy, though the evidence does not show that he was a chartered accountant. Since that time he has done but little accountancy work, but has from time to time held himself out to do some. For some years before the year 1940 his business was that of the distribution of circulars. He had an organisation which was called the Parents’ Protection Society, which continued down to approximately the year 1934. The Parents’ Protection Society was really a name by which he conducted certain public activities. He later changed the name to that of the Moss Side Tenants’ Protection Society: he changed it after the Rent Act of 1933 was passed. His activities were thereafter directed to the assistance of tenants who applied to him for help or advice in connection with their problems. When from time to time he stood as a candidate at the municipal elections he was on many occasions described on the ballot paper by reference to the Parents’ Protection Society. When he stood from time to time after 1934 for the municipal elections he was from time to time described by reference to his position as Honorary Secretary of the Moss Side Tenants’ Protection Society. There is no society which by the ordinary acceptation of that term could be regarded as a society, but the name Moss Side Tenants’ Protection Society is one which the plaintiff and his wife use when they carry out the work that they do for the assistance and advice of tenants. If cases require the services of a solicitor, then as the plaintiff is not a solicitor he passes on the cases to an honorary solicitor. One of the honorary solicitors suggested that forms should be made available so that those who desired could apply to join the society, and a form for membership was printed and has been put in evidence. Those who desire to join the society have to declare they are not members of any political party and do not intend to become members of any political party. The society is a very loose organisation; it does not have any rules or constitution save to the extent that any rules can be found in the words set out in the form of membership document. There are no minutes kept, and there are, as far as I know, no other officers of the society than the plaintiff and his wife, who acts in the capacity of assistant honorary secretary, and the honorary solicitor.

It is clear, therefore, that the word “society” is somewhat loosely employed and that in reality the Moss Side Tenants’ Protection Society consists of the plaintiff and his wife and one or two others who together do their best to assist by counsel or in some practical form where tenants have grievances or problems

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which call for their assistance. At the present time the plaintiff has no profession or occupation as such but he has continued his work in the name and in the capacity of honorary secretary of the Moss Side Tenants’ Protection Society.

Before considering the issues raised by the plaintiff in his statement of claim and the law applicable to those issues it is necessary that I should state the principal facts which have led to this litigation and to state the conclusions at which I have arrived. The plaintiff was minded to stand as a candidate for the Moss Side Division, and he had a form of nomination appropriate for a Parliamentary election. He caused that paper to be filled in at the top and he filled in the columns headed “Surname,” “Other names,” “Abode,” “Rank, Profession or Occupation.” He was then proposed and seconded by two registered electors of the constituency and he obtained the signatures of those who assented to his nomination. He then took the nomination paper on the Friday before 25 June to the Town Hall. 25 June was the day appointed for the election. A notice dated 16 June being a notice required by the Ballot Act Rules, stated that the returning officer for the Parliamentary Borough of Manchester would on Monday, 25 June between the hours of 10 o’clock in the forenoon and 12 o’clock proceed to the nomination and, if there was no opposition, to the election of a member for the Parliamentary Borough of Moss Side. The notice stated that every nomination paper must be signed by two registered electors as proposer and seconder respectively, and by eight other registered electors as assenting to the nomination. It further stated that every nomination paper had to be delivered to the acting returning officer by the candidate proposed or by his proposer and seconder between the said hours of 10 and 12 o’clock on 25 June at the Town Hall. The notice further stated who were entitled to be admitted to the room. The plaintiff took the nomination paper to the Town Hall and showed it to one Foley. Foley looked at and checked the names and put pencil ticks opposite to those names. It is clear that the procedure that was then followed was a procedure that is customary and that is in every way convenient; it is convenient for a candidate to know in advance whether those who have proposed and seconded him and have assented to his nomination are registered electors. The ticks appear opposite to the names, but do not appear opposite to the top part of the form, and in particular do not appear opposite the column headed “Rank, Profession or Occupation.”

I am satisfied on the evidence that Foley did not give and did not purport to give any ruling on that occasion which had any or purported to have any binding effect. I am satisfied that Foley did not deal with the question of the description of the plaintiff in his conversation with the plaintiff, but that all that Foley was doing was to follow the convenient course of checking the names. The course was convenient from the point of view of those who would assist the returning officer and the acting returning officer because it would have the result that the possibly laborious work of checking the names could be done in advance and would not be left to be done during the period appointed on 25 June. But it was no part of Foley’s province at that time to deal with the question of the description of the plaintiff in any way.

On the Saturday before the Monday, Foley had a conversation with the town clerk, and it was deemed prudent to make preliminary arrangements with the printers who would be required eventually to print the ballot papers. Some time on the Saturday the town clerk told Foley that he considered that the advice he would tender to the returning officer would be that the description “Honorary Secretary, Moss Side Tenants’ Protection Society” would not be appropriate and that the apposite description would be the word “Secretary.” The town clerk, therefore, arranged with Foley that the draft to be sent to the printers of the ballot paper would be a draft containing the description in the one word “Secretary.” At some time, I think on the Monday morning the printers were asked to set up the ballot paper in type. It seems to me that what took place between Foley and the town clerk and what took place with the printers was only something that was convenient and was not anything that had any conceivable legal effect. It must be difficult to arrange the printing of a ballot paper if no preliminary steps are taken before the time when nominations close, to get type set up and to have arrangements made with the printers; it is an eminently reasonable course to follow that some preliminary arrangements

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with the printers should be made; nothing binding is done and it might be that if the course of the nomination day does not follow what was expected, some loss or expense might result to the printers or to someone else, but I do not think there was anything sinister or unfortunate in the fact that Foley, after his discussion with the town clerk and after ascertaining what was the provisional view formed by the town clerk as to the advice that he would tender to the returning officer, sent the papers to the printers in the manner and at the time when they were sent.

I come now to the events of Monday, 25 June which was the day appointed for the election, or, as it is commonly called, nomination day. It is not easy to be precise in regard to times, but I think that the plaintiff arrived in the Lord Mayor’s parlour, which was the room appointed for the election, a minute or two after 11 o’clock. There was a representative of the city treasurer’s department present and seated near to the Lord Mayor, the returning officer. The plaintiff brought with him his nomination papers consisting of the top paper which had been seen and ticked by Foley at the end of the previous week, and a number of other papers nominating him as candidate. He was accompanied by his proposer, Pheasey, and he brought with him a certified cheque for the amount of £150.

A discussion of some kind took place. The town clerk had announced that he would not receive cheques, but would receive either cash, legal tender, or a banker’s draft. The town clerk considered that it might be unfortunate to depart from the ruling or announcement that had been made and to accept a cheque from one candidate if cheques were not to be accepted from others, and I am satisfied that any conversation or discussion that took place—though it may not have been a conversation audible to the plaintiff—was directed to that matter. No sort of suggestion was made or has been made that the plaintiff’s cheque was not a good and valid cheque or that it was not one that would be met. In fact, the cheque was accepted, and at some stage I consider that the Lord Mayor did use the words, “It is quite all right.” I accept what the first defendant says, that when he used those words he was referring to the cheque. At some stage also inquiry was made as to whether the nomination was in order, and I think that inquiry was directed as to whether the names of the proposer and seconder and those who assented had been verified and checked, and an answer was made that the names had been checked. The nomination paper having been handed in and the cheque having been accepted, the plaintiff then handed in a letter by which he appointed himself his own election agent, left the part of the room where the Lord Mayor was, and had a conversation with his wife and with a councillor. The plaintiff and his wife then went out of the Lord Mayor’s parlour, looked at the new council chamber and at other parts of the building in the vicinity, and then went home, arriving at approximately 12 noon. After the plaintiff had left the Lord Mayor’s room a question was raised as to the description of the plaintiff on the nomination paper. The point was mentioned to the town clerk, who mentioned it to the returning officer, and after discussion the returning officer formed the provisional or tentative view that the description was excessive and that the word “Secretary” might replace the words on the nomination form. When that situation arose a messenger was sent without success, to try to find the plaintiff. When the message came that the plaintiff could not be found, the returning officer, the first defendant, came to the conclusion that the description as it was in the nomination paper of the plaintiff was a description that he did not think ought to stand, and the nomination paper was altered by crossing through all the words with the exception of the word “Secretary.” The first defendent accepts full responsibility for the alteration that was made, though it was physically made by the second defendant and was not actually seen to be made or seen after having been made by the first defendant. The alteration I consider on the evidence in this case was made some time approximately 10 minutes after the time when the plaintiff had first presented the nomination paper to the returning officer. I think that the objection that was raised to the form of description was an objection that was made at or immediately after the time of the delivery of the nomination paper within the Ballot Act, 1872, Sched I, Pt I, r 6: on this point see Thompson v Gibson.

After the nominations had all been received posters were published and were

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dated 25 June by which the acting returning officer gave notice that each of the candidates set out in the notice had been duly nominated as a proper person to serve in Parliament as a member for the Moss Side Division, and the names of four candidates were set out. The plaintiff was described as follows: “Candidate’s surname—Edwards. Other names—Albert Richard. Abode—36, Lincroft Street, Manchester. Rank, Profession or Occupation—Secretary.” Then came the names of his proposer, seconder, and those who assented to the nomination. Notice was given that the names of the candidates would be printed in the ballot paper in the order stated.

On 28 June the town clerk wrote a letter to the plaintiff, the first paragraph of which was in these terms:

‘‘Dear Councillor Edwards,—After the Lord Mayor as returning officer had received the nomination paper relating to yourself and after the notice that you had been nominated had been posted up outside the Town Hall my attention was drawn to the way you were described in the nomination paper in the column that is headed “Rank, Profession or Occupation.” You were described as “Honorary Secretary, Moss Side Tenants’ Protection Society.” [The letter then goes on:] I thought I ought to let you know that it has been decided that although your nomination was valid, the description of your occupation set out above contains several words which can only be regarded as surplusage. [Then after examples were given:] In the circumstances it has been decided that your occupation should appear on the ballot papers as “Secretary.” I am also informing Councillor Pheasey and Mr. J. E. Frost, who nominated you. I hope this will be satisfactory and agreeable to you.’’

Letters in similar terms were sent to Pheasey and Frost. The plaintiff received this letter some time on the Friday afternoon, that is, the Friday afternoon following the Monday of nomination day.

The plaintiff did not in fact issue any election addresses, and he states that after he received that letter and was informed of the description that would appear on the ballot paper he felt as though his enthusiasm had been dissipated, and it seems clear that thereafter he took few of the normal steps and conducted few of the normal activities that would be conducted by other candidates. When the figures of the election were counted it appeared that the plaintiff received 446 votes. That compared with 10,201 votes for the candidate who was successful, 7,423 for the next candidate, and 2,525 for the other candidate. The plaintiff forfeited the deposit of £150 which he had been required pursuant to statute to give.

The questions which arise on those facts are whether the defendants, or either of them, have done anything which was contrary to law and anything that gives rise to a cause of action in the plaintiff, and if so, what damages have been proved or ought to be awarded; further, if so, what penalty ought to be awarded.

It is necessary to consider the terms of the Ballot Act, 1872, and in particular Sched I, Pt I, r 6, is of great consequence in this case. Sect. 1 of the Ballot Act, 1872, provides:

‘‘A candidate for election to serve in Parliament for a county or borough shall be nominated in writing. The writing shall be subscribed by two registered electors of such county or borough as proposer and seconder, and by eight other registered electors of the same county or borough as assenting to the nomination, and shall be delivered during the time appointed for the election to the returning officer by the candidate himself, or his proposer or seconder.

If at the expiration of one hour after the time appointed for the election no more candidates stand nominated than there are vacancies to be filled up, the returning officer shall forthwith declare the candidates who may stand nominated to be elected, and return their names to the clerk of the Crown in Chancery; but if at the expiration of such hour more candidates stand nominated than there are vacancies to be filled up, the returning officer shall adjourn the election and shall take a poll in manner in this Act mentioned. A candidate may, during the time appointed for the election, but not afterwards, withdraw from his candidature by giving a notice to that effect, signed by him, to the returning officer: Provided, that the proposer of a candidate nominated in his absence out of the United Kingdom may withdraw such candidate by a written notice signed by him and delivered to the returning officer, together with a written declaration of such absence of the candidate … ’’

Sched I, Pt I, r 6 is in these terms:

‘‘Each candidate shall be described in the nomination paper in such manner as in the opinion of the returning officer is calculated to sufficiently identify such candidate;

Page 134 of [1946] 2 All ER 129

the description shall include his names, his abode, and his rank, profession or calling, and his surname shall come first in the list of his names. No objection to a nomination paper on the ground of the description of the candidate therein being insufficient, or not being in compliance with this rule shall be allowed or deemed valid, unless such objection is made by the returning officer, or by some other person, at or immediately after the time of the delivery of the nomination paper.’’

R 8 provides as to who may be present, and provides that the candidate and his proposer and seconder and one other person selected by him shall be entitled to attend. R 9 makes provision for the giving of public notice, and I have referred to the notice dated 25 June which was issued. R 11 provides:

‘‘The returning officer shall, on the nomination paper being delivered to him, forthwith publish notice of the name of the person nominated as a candidate, and of the names of his proposer and seconder, by placarding or causing to be placarded the names of the candidate and his proposer and seconder in a conspicuous position outside the building in which the room is situate appointed for the election.’’

That was done by Foley, who wrote out the names from time to time and they were published outside. It is to be noted that the statutory requirement does not compel the description of the candidate to be added. In r 12 it is provided as follows:

‘‘A person shall not be entitled to have his name inserted in any ballot paper as a candidate unless he has been nominated in manner provided by this Act, and every person whose nomination paper has been delivered to the returning officer during the time appointed for the election shall be deemed to have been nominated in manner provided by this Act, unless objection be made to his nomination paper by the returning officer or some other person before the expiration of the time appointed for the election or within one hour afterwards.’’

R 13 says:

‘‘The returning officer shall decide on the validity of every objection made to a nomination paper, and his decision, if disallowing the objection, shall be final; but if allowing the same, shall be subject to reversal on petition questioning the election or return.’’

It is provided by r 22:

‘‘Every ballot paper shall contain a list of the candidates described as in their respective nomination papers, and arranged alphabetically in the order of their surnames, and (if there are two or more candidates with the same surname) of their other name: it shall be in the form set forth in the Second Schedule to this Act or as near thereto as circumstances admit, and shall be capable of being folded up.’’

It is further necessary to refer to sect 11 of the Act, which provides:

‘‘Every returning officer, presiding officer, and clerk who is guilty of any wilful misfeasance or any wilful act or omission in contravention of this Act shall, in addition to any other penalty or liability to which he may be subject, forfeit to any person aggrieved by such misfeasance, act, or omission a penal sum not exceeding one hundred pounds.’’

It is clear from a consideration of the Act and the rules, and of the forms, that it is undesirable to have some kind of advertisement that parades under the guise of description. It would seem from a consideration of the rules and of the forms that it would be undesirable that political labels should be attached to a ballot paper.

‘The plaintiff, by para 8 of his statement of claim says this:

‘The plaintiff paid his deposit of £150 on being informed that the nomination papers were quite in order and in the belief that his description in the nomination papers would be so shown on the official posters and the ballot papers and therefore get full publicity for the fact that he was the tenants’ candidate.’’

It seems to me that the scheme of the rules and the forms does not indicate that publicity to particular views or publicity to any attachment to a particular party is to be given by the nomination form or by the ballot paper. I think further that a consideration of Sched I, Pt I, r 6, makes it clear that the opinion in regard to sufficiency of description and of identification of a candidate is to be the opinion of the returning officer, and it is no part of my duty in this case, as I conceive it, to express any opinion as to whether I do or do not think that the opinion formed by the returning officer was a correct one. I could quite conceive that if a returning officer found on a nomination paper some phrase such as “The People’s Friend” under the column “Rank, Profession or

Page 135 of [1946] 2 All ER 129

Occupation,” or some such words as “Free Trade Candidate,” or “Cheap Food Advocate,” the returning officer might think and might honestly form the opinion that such words were not correct words of description so as sufficiently to identify a candidate.

The rule provides that the candidate shall be described in the nomination paper in such manner as in the opinion of the returning officer is calculated “to sufficiently identify” such candidate. The first defendant by his evidence states that he formed the opinion that the original words of the nomination paper were excessive words and that the description “Secretary” was a description which, in his opinion, was calculated sufficiently to identify the candidate. It is not for me to substitute my opinion. I conceive that on this part of the case I have to decide whether the returning officer did form that opinion and whether he honestly formed that opinion. I am satisfied that the returning officer did honestly form that opinion.

It is clear further from a consideration of r 6 that it cannot be determined in advance whether a particular description will or will not be in the opinion of the returning officer calculated sufficiently to describe a candidate. A nomination paper may come in which is wholly unexpected. The mere fact that it is very frequently known in advance which candidates are to be nominated is only something that happens in practice, but a nomination paper may be presented of which a returning officer has no conceivable kind of previous knowledge; he cannot have any opportunity in advance to form an opinion, and those who present the nomination paper cannot know in advance what will be the opinion of the returning officer. It can only be known either at or immediately after the time of the delivery of the nomination paper what is the opinion of the returning officer. In this case the paper was presented by the candidate, the plaintiff, and by his proposer. It may be that a candidate and his proposer and seconder will be present, but it is not obligatory for them to be present, and sect 1 of the Act to which I have referred shows that the nomination paper may be delivered either by the candidate or by his proposer or seconder. They therefore need not all be there, and it is apparent, therefore, that there would not be or might not be opportunity for the three of them to be consulted by a returning officer on any question of description.

Many points have arisen for consideration during the course of the argument of this case. It was considered whether the rule means that on an objection being taken which is upheld the returning officer must reject the nomination paper and reject, therefore, the nomination. If that were the position the result might be that because of some error of description in a particular case there would be the necessity to reject the nomination. It might be much too late to get another nomination paper signed within the time appointed for the election. Another question which has been debated is the question whether, if objection is raised to a description (and an objection, therefore, on which the returning officer has to decide) it is essential that the candidate should be given an opportunity to be heard. But, as I have pointed out, a candidate might not be present. The rules show that there are certain time limits imposed upon the returning officer. It might be, therefore, that a candidate would not be present and that within the time available there would be no opportunity to secure his presence. I think that r 6 must be construed reasonably, and as it is the opinion of the returning officer which is decisive, the view that I have formed (which is a view that relates solely to the facts of this particular case) is that if a returning officer takes objection or if his attention is directed to a description of a candidate, and if he thinks that the description contains surplus matter, there is no obligation on him to reject the nomination altogether if by the mere omission of the purely surplus words the nomination can be regarded by him as valid.

It is to be seen that r 6 provides that the objection must be made by the returning officer or some other person at or immediately after the time of the delivery of the nomination paper. The candidate and his proposer and seconder might not be available at the moment that the objection is taken; they might not be available at any time up to the expiration of the hour after the time appointed for the election, which is the time set out in these rules. If a description is too elaborate, and if, therefore, it does not comply with the rule as being one which in the opinion of the returning officer is calculated sufficiently to

Page 136 of [1946] 2 All ER 129

identify the candidate, I see no reason why the returning officer should reject that nomination altogether. If a candidate has been proposed—and a candidate presumably wishes to stand—he can only stand if his nomination paper complies with the rules. If the returning officer thinks it does not do so because it contains some surplus words, but thinks it can be made to comply by striking out some words which are mere surplusage, I can see no reason why in such a case the returning officer should not make the amendment and so ensure the regularity of the nomination.

In this case I am satisfied that the returning officer formed the opinion that he states, and that he formed it honestly. His act in striking out or in causing the striking out of some words was an act merely to give effect to his opinion. In my view r 6 makes it obligatory on the returning officer to give consideration to the question as to whether the description is or is not sufficient. I think that must also mean that he must give consideration to the question as to whether the description is more than sufficient. He must, in my view, raise an objection to any piece of blatant surplusage. If, by striking out some words of excess, he can make the nomination paper comply with the rules, this cannot in my view be a wilful act on his part which is in contravention of the Ballot Act. This is a decision which I limit, as I said before, to the facts of this particular case.

The plaintiff takes the point that he could have withdrawn his candidature if he had known that the description on his nomination paper was not to be accepted. But it is to be pointed out that the withdrawal of a candidate can only take place during the time appointed for the election. It might well be that a candidate would be nominated a minute or two before the time appointed for the election expired and that the objection to his description could validly be taken in accordance with the Act at a moment after it was too late for him to withdraw his candidature. But the candidate can only stand if his nomination paper is regular and in order, and it is only in order if the description is what is in the opinion of the returning officer sufficient.

The plaintiff must be taken to know that his nomination paper must pass the scrutiny of the returning officer. His complaint, in my opinion, lacks substance and merit when it is seen that his nomination paper has been preserved and made valid by the action of the returning officer. When the paper was handed in it was not known whether it complied with r 6 or not in fact. When the point was raised it was found that it did not. When it was altered it did. The compelling statutory provision ordaining that each candidate shall be described in the nomination paper in such manner as in the opinion of the returning officer is calculated to sufficiently identify such candidate was then obeyed, and the returning officer cannot, in my view, be said to be acting in contravention of the Act if all he does is to strike out surplus words from the nomination paper so as to make it valid according to the Act.

It is clear that it is most desirable whenever possible that a candidate should be informed of any objection to the description that may be taken. It is most important that a candidate should be given an opportunity to be heard, and in ordinary circumstances a rule providing that the returning officer shall decide something must I think involve that he should hear all points of view before deciding. In this case the plaintiff went away not unnaturally thinking that all was in order. But having considered these rules, I cannot find that it is essential to hear a candidate in these circumstances. It might well be that a candidate would not be available or could not be found and that a decision on an objection taken would have to be made within the timetable laid down by these rules.

For the reasons that I have given, I do not think that the returning officer did anything wrong on the facts of this case in permitting the alteration to be made of striking out words of surplusage. The defence as pleaded in para 3 of the defence is in substance established. I think, therefore, that there was no wilful misfeasance and no wilful act or omission in contravention of the Act. This view that I have formed makes it unnecessary for me to deal with many other points raised by counsel for the defendants in the course of his argument. For example, he submitted that if a returning officer was exercising a judicial function cast upon him by the Act of Parliament he would not be liable to be sued if he acted in good faith.

The actual complaint in this case, as I have indicated by reference to the statement of claim, is that the posters and the ballot paper did not accord

Page 137 of [1946] 2 All ER 129

with the nomination paper. Actually they did accord with the nomination paper as altered, because as altered (and as altered, in my view, so as to make it valid) the nomination paper contained the description “Secretary.” The posters and the ballot paper did, therefore, accord with the nomination paper. But I have not decided the case on any technical point because I have given full consideration in the part of the judgment I have just concluded to the question as to whether the alteration made in the limited circumstances of this case was or was not irregular. The defendants did comply with the rules for the reason that the nomination paper was altered so as to keep it alive and valid and subsisting, following upon the opinion formed by the returning officer who was obliged to arrive at an opinion upon the matter.

That really concludes the determination of the matters that I have to decide in this case. I think it is only fair that I should add that after hearing this case I have not the smallest reason to think that either of the defendants was ill-disposed towards the plaintiff. It is unfortunate, particularly as the attention of the town clerk and Foley had been directed to this matter of the description on the Saturday, that the plaintiff was not told of this point when he presented his nomination paper. It is unfortunate that after the decision which was arrived at by the returning officer the plaintiff was not sooner informed; he might have been informed by telephone. He is on the telephone and is a city councillor and is well known. It is unfortunate that the letter informing him of what had happened did not reach him until the Friday afternoon, and the letter itself is not as fully informative as perhaps it might have been. None of these considerations, however, in my view, affects the decision in this case.

I think it also right to add that even if the plaintiff had established to my satisfaction that there was any irregular act upon the part of the defendants, I should be very, very far from satisfied that the plaintiff had in fact proved any real damage. The plaintiff states that he was deprived of support. I thought that one witness expressed the matter very moderately and reasonably when he said “There is every likelihood that you lost some support by not being advertised in that way. As to the degree of it, that is a matter of opinion.” Some support may have been lost, but it would be quite impossible for any judge to form an opinion as to the measure of the support that was lost. The average elector would, I am sure, have decided before he entered the ballot booth as to the candidate for whom he purposed to vote. I think it is a wild assumption to suggest that votes are influenced by the particular words of description to be found on the actual ballot paper; I am sure that votes are influenced by meetings, by canvassing, by literature, and by all the other methods normally used by candidates to ensure adherence to their cause. There was only one Edwards standing, and his address was given. He had been at various times well known to the public. To say that he was robbed of his identity because he was not more fully described on the ballot paper is, in my view, to employ the language of rhetoric and fancy and not of sober reality. The posters which were issued dated 25 June to which I have referred, were posters that gave the full name and address of the plaintiff and described him as “Secretary.” I cannot conceive that by such posters are votes swayed, and to speak about being stabbed in the back is on the facts of this case to allow metaphor to run riot and to cast all reasonable sense of proportion aside. I find that this claim fails on the facts and on the law.

There must be judgment for the defendants with costs.

Solicitors: P B Dingle, Manchester, (for the defendants).

M D Chorlton   Barrister.

Re A Question Between Grace Marjorie Sims and John Sims

[1946] 2 All ER 138

Categories:        FAMILY; Ancillary Finance and Property        

Court:        CHANCERY DIVISION        

Lord(s):        WYNN-PARRY J        

Hearing Date(s):        2, 3, 6 MAY 1946        

Husband and Wife – Army separation allowance – Purpose of allowance – Whether wife’s absolute property – Allowance used by wife to pay instalments of building society mortgage on house purchased by husband as matrimonial home – Whether wife has lien on proceeds of sale of house.

After his marriage a husband purchased a house as a matrimonial home. He paid a deposit on the purchase and the balance of the purchase money was secured by a building society mortgage. He also purchased some furniture under a hire-purchase agreement. Until Sept 1939, when he was recalled to the army being on the reserve list), he paid all the instalments due under the mortgage and the hire-purchase agreement. On his return to the army, he gave his wife the remainder of his savings, which was about £60, and he asked her to do what she could in the way of paying the instalments while he was away. While the husband was in the army, the wife received the army separation allowance which amounted, for the greater part of the time, to 32s a week. Of this sum, 7s represented the compulsory basic allotment made by the husband, 18s represented the state’s contribution and the remaining 7s represented an entirely voluntary allowance made by the husband. This army allowance was more than sufficient to cover payments in respect of the building society mortgage and the furniture. During the husband’s absence, the wife paid all the instalments that were due. These payments were made by her out of a mixed fund consisting of her own earnings, possibly the remainder of savings she had made before her marriage, the £60 given her by the husband and the army allowance. The husband returned from the army in 1943. Later, differences arose between the husband and the wife, they parted and the house was sold. The wife claimed a lien on the proceeds of sale of the house and the furniture which was subject to the hire-purchase agreement, on the ground that the instalments paid by her while her husband was away had been paid out of her own money. It was contended on her behalf that the army allowance (except for the amount representing the husband’s voluntary contribution) was her own property for all purposes:—

Held – (i) Army separation allowance was paid to the wife not simply to spend on herself but for the purpose of helping her to maintain herself and to keep the home going during the husband’s absence. The object of the allowance was to compensate not merely the wife but both parties, and particularly the husband for the change in his financial circumstances. The payments made to the building society and under the hire-purchase agreement were, on the facts of the case, proper payments for the wife to make, as part of her maintenance, out of the allowance.

(ii) the wife could only succeed in establishing her claim to a lien on the proceeds of sale of the house and furniture if she demonstrated that she must have used her own, or part of her own, moneys because she had been supplied with insufficient moneys by her husband. This she had failed to do. She had, therefore, no lien on the proceeds of sale of the house or the furniture.

Notes

This case considers the nature and purpose of an army separation allowance. Such an allowance consists, of a compulsory basic allotment payable by the soldier, and a contribution by the State, together with such other sum as the soldier may voluntarily decide to pay. The whole amount is payable to the wife for the maintenance of herself and the marital home during the period of service, and she is not entitled to a change on any real or personal estate which has been purchased with it unless she can prove that her own money has been expended by reason of the insufficiency of the allowance. The interesting question of the ownership of accumulations out of the allowance does not fall to be decided in this case.

As to Dealings by Husband and Wife with Each Other’s Property, see Halsbury, Hailsham Edn, Vol 16, pp 673–675, paras 1073–1079; and for Cases see Digest, Vol 27, pp 146–149, Nos 1185–1206.

Cases referred to in judgment

Pitt v Pitt (1823), Turn & R 180, 27 Digest 148, 1197.

Outram v Hyde (1875), 24 WR 268, 27 Digest 148, 1195.

Page 139 of [1946] 2 All ER 138

Adjourned Summons

Adjourned Summons by the wife under the Married Women’s Property Act, 1882, for the determination of the extent of her interest in a freehold house and in certain furniture. The husband and wife were married on 3 April 1938, the husband being at the time a private in the regular army. In June, 1939, after his discharge from the army, the husband purchased the house as a matrimonial home. A deposit was paid on the purchase and the balance of the purchase money was secured by a building society mortgage under which the husband was the mortgagor and the money secured was repayable by monthly instalments. In July, 1939, the husband purchased the furniture under a hire-purchase agreement. He made the initial payment out of his savings, but, since he was on the reserve list, the furniture company would not enter into a hire-purchase agreement with him and the agreement was, therefore, made out in the wife’s name. The husband also purchased a gas-stove on hire-purchase terms. Until he was recalled to the army in September 1939, the husband paid all the instalments due under the building society mortgage and the hire-purchase agreements. On his return to the army, the husband gave his wife about £60 (the remainder of his savings) and asked her to do what she could in the way of paying the instalments while he was away. While the husband was away, the wife paid all the instalments that were due. The husband came back from the army in 1943. By Aug 1945, differences between the husband and wife had developed, with the result that they partied, and the house was sold.

A J Belsham for the applicant.

Hon Charles Russell for the respondent.

6 May 1946. The following judgment was delivered.

WYNN-PARRY J. This is an originating summons dated 12 September 1945, taken out by the applicant, Grace Marjorie Sims, to whom I shall refer as the wife, against the respondent, who is her husband, and to whom I will refer as the husband. The relief originally claimed was the determination of the question: What is the extent of the interest of the wife in the freehold property known as 11, Braycourt Avenue, Walton-on-Thames, in the county of Surrey, which was the marital home? At the husband’s request, the summons was amended so as to raise the question regarding the ownership of certain furniture, household effects and other articles which were, or had been, at the premises but which had been removed by the wife later.

The wife’s case as regards the house, the furniture subject to the hire-purchase and the gas-stove is that all the payments which were made in respect of those matters while the husband was away were made by her out of her own money. It is not disputed that the payments were made by her in the sense that she sent, or paid over, the money that was actually paid. She does not attempt to prove that any particular payment was made out of a particular fund. Her case, as I understand it, rests upon this. All she had from her husband while he was away was the army separation allowance, which amounted for a time to 31s a week, for most of the time to 32s a week, and for a period a further 12s a week was paid. That was for a period of 6 months. It is agreed that the 32s a week was more than sufficient to cover the payments in question in respect of the building society mortgage, the furniture subject to the hire-purchase agreement and the instalments in respect of the gas-stove.

The case of counsel for the wife involves analysing the build-up of the 32s a week separation allowance. 7s represents the compulsory basic allotment which has to be made by the soldier in order to obtain the state’s contribution, 18s represents the state’s contribution, and the remaining 7s represents a further but entirely voluntary payment made by the husband. Counsel for the wife says that the 18s contributed by the state is clearly entirely the wife’s property for all purposes; further, that the 7s a week basic compulsory allotment should be regarded as the wife’s, and only the final 7s voluntary allotment can be regarded as an allowance out of the husband’s moneys for which she can be asked to account, on the analogy of savings made by a wife out of house-keeping money provided by her husband for which she is accountable to her husband. But it must be remembered, in my view, that, in claiming the lien which the wife claims upon the proceeds of sale of the house, which has now been sold, upon the furniture subject to the hire-purchase agreement and upon the gas-stove, the wife is seeking equitable relief. She is not in a position to prove, as clearly emerged from the cases which were cited to me, particular payments

Page 140 of [1946] 2 All ER 138

out of a particular fund which could be traced. The payments which she made were payments out of a mixed fund consisting of her earnings, the remainder, if any, of her savings, the £60 which I find the husband gave her and the army allowance. The actual source of any payment cannot be traced.

The wife can only succeed if she demonstrates that she must have used her own, or part of her own, moneys and that she did that because she was supplied with insufficient moneys by her husband. I do not feel called upon to decide in this case, as a matter of law, what part of the 32s a week, if any, passed to the wife absolutely free from any obligation whatsoever towards the husband. That question may have to be decided if a husband, returning from the army, claims from his wife savings which can be shown to have accumulated out of, and only out of, the army allowance; but that question must be left until it is directly raised. In this case the onus is upon the wife, and I do not think that she discharges it by the case which she puts forward, and so entitles herself to equitable relief.

In my view, the true answer to her claim is that which was put forward by counsel for the husband in the second branch of his argument. The object of an army allowance, to which the state contributes, is, as I apprehend, a matter of compensating not merely the wife, but both parties, and in particular the husband, for the change in circumstances caused by his having to cease to be a wage-earner and to serve in the army, or whatever service is involved, at what is, admittedly, a comparatively low rate of remuneration. The provision for the payment of the allowance direct to the wife is, quite frankly, to ensure that it gets to the proper destination, but it is a payment which is made to the wife in respect of her husband. What, then, is her obligation in the eye of equity when she gets it? In my view it is not paid to her simply for the purpose of enabling the wife to spend it on herself; it is for the purpose of helping to maintain the wife, and to help the wife to keep herself and the home going during the absence of the husband. I do not go so far as to say that she is bound to apply the allowance in any particular order of priority. What I say is that the payments to the building society, to the furniture company under the hire-purchase agreement and to the gas company under the gas company’s hire-purchase agreement, are payments proper to be made under the general heading of maintenance. But once this point is reached, then it necessarily follows that the wife in this case has not discharged that burden of proof in demonstrating that she made the payments out of her own moneys, as that phrase is understood in such cases as those cited to me, namely, Pitt v Pitt and Outram v Hyde. I am not saying that the decision might not be otherwise in a case where the court has acceptable evidence that a wife in similar circumstances, well aware of the legal implications, so arranges her financial affairs that she shows beyond a peradventure out of what source each payment was made. On a claim made in such circumstances, different considerations would arise; but this is not that case. I found my decision simply on this, that it would have been proper for the wife to make the payments out of the allowance as part of her maintenance, particularly in view of the arrangement she made with her husband that she would pay what she could; and she has not demonstrated by her evidence that she did not do so.

I, therefore, reject her claim to a lien on the proceeds of sale of the house, the furniture which was subject to the hire-purchase agreement and the gas-stove.

Declaration accordingly. No order as to costs.

Solicitors: Stileman, Neate & Topping agents for Smart & Bowerman, Walton-on-Thames (for the applicant); Cree & Son agents for T K Dobson Walton-on-Thames (for the respondent).

B Ashkenazi Esq   Barrister.

Rushden Heel Co Ltd v Keene (Inspector of Taxes)

Rushden Heel Co Ltd v Inland Revenue Commissioners

[1946] 2 All ER 141

Categories:        TAXATION; Income Tax        

Court:        KING’S BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        20, 21, 22 MAY, 6 JUNE 1946        

Income Tax – Deductions against profits – Cost of litigation – Expenses of ascertaining profits – Whether outlay in order to earn profits or disbursement of profits earned – Income Tax Act, 1918 (c 40), Sched D Cases I and II, r 3 (a).

Income Tax – Appeals – Case stated – Procedure – One appeal only in each case.

Revenue – Excess profits tax – Deductions against profits – Costs of litigation – Expenses of ascertaining profits – Whether outlay in order to earn profits or disbursements of profits earned – Income Tax Act, 1918 (c 40), Sched D, Cases I and II, r 3 (a) – Finance (No 2) Act, 1939 (c 109), s 14.

In computing their profits for both income tax and excess profits tax purposes the appellants sought to charge, as a deduction from such profits, the costs and expenses of an appeal to the Special Commissioners in respect of the incidence of excess profits tax. Those costs and expenses included solicitors’ costs, fees of consulting accountants, fees of accountants acting generally for the company for professional services specially connected with the appeal and travelling expenses of witnesses. Accepting the statement of Lord MacMillan, in L C Ltd v G B Ollivant Ltd—that is was a commonplace in tax law that, in ascertaining what deductions were permissible in computing the amount of the taxpayer’s profits or gains, the question was whether the deduction claimed represented an outlay in order to earn profits or was a disbursement of profits earned—the question for determination was whether the expense of ascertaining the profits was an expense which was an outlay in order to earn profits or a disbursement of profits earned:—

Held – (i) An expense properly and reasonably incurred in the final ascertainment of profits might properly be considered as an outlay in order to earn profits and not an outlay of profits, certainly not of ascertained profits, as the profits were at all times subject to that outstanding expense.

(ii) in this case none of the profits, whether profits divisible among the shareholders, profits subject to excess profits tax or profits available for income tax, was ascertainable for a certainty until the appeal had been heard and the final decision given.

(iii) all the expense in dispute was incurred before the final determination of what the profits, in any of those senses, amounted to; consequently the expense was allowable as a deduction for income tax and for excess profits tax purposes.

Allen v Farquharson Bros & Co doubted and distinguished.

Semble: It is contrary to the usual procedure in tax appeals by way of case stated to include more than one appeal in one case; there ought to be a case for each appeal.

Notes

The successive steps in the reasoning upon which this decision is based are as follows: (1) an admissible deduction must represent an outlay in order to earn profits, as distinct from a disbursement of profits earned; (2) an expense incurred in ascertaining the profits may be said to be an outlay in order to earn profits; (3) in the circumstances under consideration the profits were not ascertained until the appeal to the Special Commissioners had been heard and finally decided; (4) the legal and accountancy expenses of the appeal were, therefore, deductible for both taxes.

For Expenses Wholly or Exclusively Expended for Purpose of Trade, see Halsbury, Hailsham Edn, Vol 17, p 152, para 312; and for Cases, see Digest, Vol 28, pp 42–44, Nos 215–226.

Cases referred to in judgment

Strong & Co Ltd v Woodifield [1906] AC 448, 28 Digest 57, 290, 75 LJKB 864, 95 LT 241, 5 Tax Cas 215.

LC Ltd v G B Ollivant Ltd [1944] 1 All ER 510.

Inland Revenue Comrs v Desoutter Bros Ltd [1946] 1 All ER 58, 174 LT 162.

Vulcan Motor & Engineering Co (1906) Ltd v Hampson [1921] 3 KB 597, 9 Digest 545, 3595, 90 LJKB 1366, 125 LT 717.

Page 142 of [1946] 2 All ER 141

Gresham Life Assurance Society v Styles [1892] AC 309, 28 Digest 59, 302, 62 LJQB 41, 67 LT 479, 3 Tax Cas 185.

Worsley Brewery Co Ltd v Inland Revenue Comrs (1932), 17 Tax Cas 349.

Inland Revenue Comrs v von Glehn [1920] 2 KB 553, 28 Digest 46, 236, 89 LJKB 590, 123 LT 338, 12 Tax Cas 232.

Income Tax Comrs, Bihar and Orissa v Maharajadhiraj Sir Rameshwar Singh of Darbhanga [1942] 1 All ER 362.

Anglo-Persian Oil Co Ltd v Dale [1942] 1 KB 124, Digest Supp, 100 LJKB 504, 145 LT 529, 16 Tax Cas 253.

Allen v Farquharson Bros & Co (1932), 17 Tax Cas 59, Digest Supp.

Case Stated

Case Stated under the Income Tax Act, 1918, s 149, by the Commissioners for the General Purposes of the Income Tax, for the opinion of the King’s Bench Division of the High Court of Justice. The facts are fully set out in the judgment.

J Millard Tucker KC and J W P Clements for the appellants.

The Solicitor-General (Sir Frank Soskice KC) and Reginald P Hills for the respondents.

Cur adv vult

6 June 1946. The following judgment was delivered.

ATKINSON J. In this case stated there are three appeals dealt with in one case. I am asked to draw attention to the fact that this is contrary to the usual procedure. There ought to be a case for each appeal. The taxing authorities for excess profits tax and income tax appeals are different. The taxes are levied under different statutes and this may lead to inconvenience. Three orders would have to be drawn up in this case apparently. I am saying this without any knowledge of my own, but, as far as the King’s Remembrancer and the office are concerned, they think this is not the better practice, but that there ought to be one case for each appeal.

These appeals arise in the following way. The Rushden Heel Co Ltd carries on a business, among other things, of manufacturing heels for boots and shoes. Its capital consists of 2,000 £1 shares. Before 20 January 1941, William Childs, Senior, held 1,971 shares, William Childs, Junior, 6 shares and Eric Childs another 6. There were three other children who held 6 or 5 shares apiece. In January 1941, William Childs, Senior, transferred 100 shares to each of his six children so that each of them had 106 shares, leaving 1,364 in his own hands. On 24 February 1942, the company claimed that William Childs, Senior, and William Childs, Junior, and Eric Childs were working partners within the Finance (No 2) Act, 1939, s 13(2). Sect 13, which deals with the computation of standard profits, says, in subsect (1):

‘‘For the purposes of this Part of this Act, the standard profits of a trade or business shall, in relation to any chargeable accounting period, be taken, if the person carrying on the trade or business so elects, to be the minimum amount specified in subsection (2) of this section … ’’

Then subsect (2) provides:

‘‘The minimum amount referred to in subsection (1) of this section is one thousand pounds, or, in the case of a trade or business carried on by a partnership or by a company the directors whereof have a controlling interest therein, such greater sum, not exceeding three thousand pounds, as is arrived at by allowing seven hundred and fifty pounds for each working proprietor in the trade or business.’’

The Finance Act, 1940, s 31(1) amended that subsection and provided:

‘‘For subsection (2) of section 13 of the Finance (No. 2) Act, 1939, there shall be substituted the following subsection: “(2) The minimum amount referred to in subsection (1) of this section is one thousand pounds, or, in the case of a trade or business carried on by a single individual, or by a partnership, or by a company the directors whereof have a controlling interest therein, such greater sum, not exceeding six thousand pounds, as is arrived at by allowing one thousand five hundred pounds for each working proprietor in the trade or business.’’

Therefore, if the company’s claim was well-founded, their standard would be at least £4,500, because there was no question, if the transaction were bona fide, about these three men being controlling directors and working directors.

But, on 26 March 1943, the assessing Commissioners took the view that the main purpose of the transfer was to avoid excess profits tax; they refused to accept the assurance of William Childs, Senior, that it was not, and directed that the liability for that tax for the chargeable accounting period ending

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21 September 1941, should be computed on the basis that the two sons were not working proprietors, but that their remuneration be allowed as an expense, and they gave a similar direction for all future accounting periods. In other words, the assessing Commissioners made a charge of bad faith against these gentlemen, which reduced their standard profits to £1,500.

On 31 August 1943, the company appealed to the Special Commissioners and the appeal was allowed, the direction of the assessing Commissioners being discharged.

It is quite plain, therefore, that the company benefited to the extent of £3,000, less what salaries they would have been allowed as an expense, and the fund available for and subject to income tax was similarly increased.

The appeal cost the company in legal and accounting expenses £141 19s 0d  In the accounts for the year ending September 1943, £93 19s 0d was charged against the receipts of the company, and in the following year the balance of £48 was so charged and was, in fact, paid. The £48 might have been included in the earlier year as a debt, but nothing turns upon that. Of this sum of £141, the solicitors’ costs amounted to £47 odd, the expenses of one set of accountants were £31 10s 0d, travelling expenses were £14 odd. The £48 was in respect of the accountants acting generally on behalf of the company.

In assessing the appellants for excess profits tax for the year, these payments on account of costs were disallowed as deductible expenses. In the following income tax assessment, although the profits assessable to income tax had been increased by a substantial sum, the expenses of obtaining that increase were again disallowed.

The first and main appeal is in respect of the income tax assessment for the year 1944–45, which, of course, was based on the previous year’s accounts. In this year, 1943–44, the company had successfully resisted a claim for excess profits tax, reducing the amount claimed by a very substantial sum, thereby increasing the divisible profits of the company and the profits assessable to income tax to an equivalent amount. It is said that the expenses of securing that increase are to be disallowed. It is not claimed that the disallowance was fair or in accordance with commonsense or ordinary business methods, because plainly it was not, but it is said it is the result of certain decisions by which I am bound.

The only statutory direction is the Income Tax Act, 1918, Sched D, Cases I and II, r 3:

‘‘In computing the amount of the profits or gains to be charged, no sum shall be deducted in respect of—(a) any disbursements or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade, profession, employment or vocation … ’’

the material words here being “for the purposes of the trade,”

An explanatory dictum very much relied upon by the respondents was the statement by Lord Davey in Strony & Co Ltd v Woodifield, where Lord Davey said that the expenditure must be made for the purposes of earning the profits. It might be just as well to read a little more of what he said ([1906] AC 448, at p 453):

‘I think that the payment of these damages was not money expended “for the purpose of the trade.” These words are used in other rules, and appear to me to mean for the purpose of enabling a person to carry on and earn profits in the trade, etc. I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arises out of, or is connected with, the trade, or is made out of the profits of the trade. It must be made for the purpose of earning the profits.’

It is as well to remember that only a few lines before he had expressed himself a little more fully in the words:

‘… appear to me to mean for the purpose of enabling a person to carry on and earn profits in the trade … ’

It is not unimportant to realise what the question in that case was. A brewery company, which owned licensed houses in which they carried on the business of inn-keepers, incurred damages and costs to the amount of nearly £1,500 on account of injuries caused to a visitor staying at one of their houses by the falling of a chimney. It was held that the damages and costs were not allowable

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as a deduction in computing the company’s profits. Lord Loreburn LC in dealing with the matter, said this (ibid, at p 452):

‘In my opinion, however, it does not follow that if a loss is in any sense connected with the trade, it must always be allowed as a deduction; for it may be only remotely connected with the trade, or it may be connected with something else quite as much as or even more than with the trade. I think only such losses can be deducted as are connected with, in the sense that they are really incidental to, the trade itself. They cannot be deducted if they are mainly incidental to some other vocation or fall on the trader in some character other than that of trader. The nature of the trade is to be considered. To give an illustration, losses sustained by a railway company in compensating passengers for accident in travelling might be deducted.’

It is very difficult to say that expenditure of that kind is incurred for the purpose of earning profits, but the statement of Lord Davey has been so often referred to and accepted that Lord Macmillan, in Ollivant’s case could say ([1944] 1 All ER 510 at p 517):

‘It is indeed a commonplace in tax law that in ascertaining what deductions are permissible in computing the amount of the taxpayer’s profits or gains the question is whether the deduction claimed represents an outlay in order to earn profits or is a disbursement of profits earned.’

I must say that I could not help sympathising with and appreciating more and more as the case went on what Lord Greene MR said in Commissioners of Inland Revenue v Desoutter Brothers ([1946] 1 All ER, 58, at p 60):

‘Speaking for myself, I am always disinclined to accept any general definition or test for the purpose of solving this type of question. The question whether or not a particular piece of income is income received from an investment must, in my view, be decided on the facts of the case. The facts must be ascertained and then the question has to be answered. For the Court to find itself fettered by some apparently comprehensive attempt at a definition directed to the solution of the problem in relation to one type of property, I cannot help thinking is unfortunate.’

I cannot help thinking the same thing here.

If one were permitted to interpret unaided the words in r 3, there would be no great difficulty about the case. But, accepting as I must what Lord Macmillan said, the problem I have to solve, as far as I can see, is this: Is the expense of ascertaining the profits an expense which is an outlay in order to earn profits, or is it a disbursement of profits earned? That seems to me to be the problem.

It is very difficult to know exactly what is meant by an outlay in order to earn profits. Are the costs of an appeal against an assessment of business premises for rating purposes directed to the earning of profits? Is the expense of the charwoman who cleans the floors directed to such an end? Is the expense incurred in resisting an unjust claim so directed?

The statutory rule is comparatively simple of application. Was the expense a purely business expense, an expense purely for the purpose of the trade, not of “trade,” but of “the trade”? Clearly it is a necessary operation for every trader to ascertain the sum due from him to the Crown for taxes. It is a part of the trade. It is a legal burden imposed upon him. Yet it is directed to the earning of profits only in the sense that it is made for reducing the claims of the Crown and thereby increasing the divisible profits. Profits, as it seems to me, must not be confused with receipts. Profits consist of a sum arrived at by adding up the receipts of a business and by deducting all the expenses and losses, including depreciation and the like, incurred in carrying on the business.

In Vulcan Motor and Engineering Company (1906) Limited v Hampson, the Court of Appeal held that the words “profit earned by a company” meant “profits divisible among the shareholders, in other words ‘net profits.’”

Expenses necessarily and properly incurred in carrying on a business, in my judgment, are directed to the earning of profits. Profits are increased or earned by reducing expenses, just as much as by increasing receipts. Therefore, an expenditure directed to reducing expenses is just as much directed to earning profits as is an expenditure directed to increasing receipts. In both cases the expenditure must be of a revenue character.

In taxation matters there are three different ascertainments of profits. First you have the commercial ascertainment, usually carried out—and indeed in the case of companies it must be so carried out—by qualified accountants.

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It cannot be suggested that the expenditure in question could be treated by the company as anything but revenue expenditure, reducing the profits available for dividends. There is no auditor in the world who would pass such a payment as a capital payment in the computation for business accounts. It is clear that it would inevitably be treated as an expenditure reducing the divisible profits. The ascertainment of these profits cannot be reached finally until after the second computation, that is to say, until the computation for the purpose of arriving at the excess profits tax has been completed, because excess profits tax is an expense and a debt to the Crown. Until that amount is ascertained, even the first ascertainment of profits cannot be more than provisionally arrived at.

The next ascertainment, that is, the one for the purpose of arriving at the amount of excess profits tax, is quite a different computation. It is under the Finance (No 2) Act, 1939, s 14:

‘‘For the purposes of this part of this Act, the profits arising from the trade or business in the standard period or in any chargeable accounting period should be separately computed, and shall be so computed on income tax principles as adapted in accordance with the provisions of Part I of the Seventh Schedule to this Act … ’’

In ascertaining profits for the purposes of excess profits tax, there are all sorts of different rules to bear in mind. Salaries can be revised, many transactions can be disregarded, any expense can be revised. It is really a different computation—it is enough to say that. The first or provisional ascertainment has to be corrected in accordance with those principles and with the schedules.

Following on the ascertainment of the amount of excess profits tax, you can then proceed to your computation for income tax purposes. There again that is a different computation, because many of the rules, which are applicable when computing the profits for the purposes of excess profits tax, do not apply to the computation for the purpose of arriving at the profits for the purposes of income tax.

There are two quotations one might profitably remember with regard to the broad view which has to be taken in making these assessments. In the Gresham Life Assurance case, Lord Halsbury LC said ([1892] AC 309, at p 315):

‘The word “profits“… is to be understood in its natural and proper sense—in a sense which no commercial man would misunderstand.’

In Worsley Brewery Co Ltd v Inland Revenue Comrs Lord Hanworth MR said, (17 Tax Cas 349, at p 356):

‘Now, it is quite true that the assessment of profits and gains for income tax is an assessment which has to be corrected in accordance with the directions laid down by the statute. That is clear and is stated in the judgment of WARRINGTON, L.J., in the case of the Inland Revenue Comrs v. von Glehn, but, subject to those corrections, the proper way of ascertaining the profits and gains is by the ordinary business methods whereby those profits and gains would be ordinarily determined by business men.’

Would any business man, anywhere, treat this expenditure as anything but a business expense reducing the profits of the year? I suppose, notwithstanding this broad principle, it is clear, that not every expense which a prudent trader would treat as a revenue expenditure can be deducted in computation of profits for tax purposes.

In the course of the second computation in this case the question arose as to the proper standard with regard to the excess profits tax. There was no finality with regard to this question until it had been settled by the Special Commissioners. Before that finality had been reached, this expense had been incurred.

Then came the third computation necessary for the assessment of income tax. That assessment could not be made until the amount payable for excess profits tax had been finally ascertained.

The point I want to emphasise here is this. All this expense which is in question was incurred before there was any ascertainment of profits, whether profits in the first sense, divisible among the shareholders, whether profits subject to excess profits tax, or whether profits available for income tax. The expense was incurred before the ascertainment of profits in any one of those three senses.

By sect 18 of the 1939 Act, the payment of excess profits tax is to be deemed

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an expense. Three points can be noted in connection with this expense when considering the assessment for income tax purposes. The expense in dispute increased the profits available for income tax by a substantial sum. The expense incurred increased the profits available for income tax for all future years so long as excess profits taxation should exist. The expense incurred was incurred before the profits for income tax purposes or any other purpose were ascertained. Can it be said that this expenditure was not incurred solely for the purposes of the trade? Can it be said that it was not directed to earning profits? Lord Wright, in Ollivant’s case ([1944] 1 All ER 510, at pp 519, 520), pointed out that the amount payable for excess profits tax never comes into the divisible profits but is bodily taken out of the profits which must be reduced accordingly. I know that Lord Simon and Lord Macmillan took a different view, but the majority of the Law Lords took Lord Wright’s view. The payment of excess profits tax is not, therefore, to be deemed to be a payment of a part of the profits. It is an expense taken out of the volume of receipts. If there had been no appeal, £4,500 would have been bodily taken out of the receipts of the company. As a result of the appeal two-thirds of that was brought back.

What guidance can be obtained from the decided cases as to the meaning of this expression “directed to the earning of profits?” Expenditure to get rid of a troublesome director has been allowed. The expenditure of maintaining the assets of the business, where costs were incurred in upholding the trader’s title to property, was allowed. Costs incurred in recovering a trade debt, costs incurred in resisting a claim for damages arising out of a business transaction, costs incurred in resisting a claim for conspiracy and fraud have all been allowed.

There is a sentence in the authority for the last example, Income Tax Commissioner of Bihar and Orissa v Singh, which is worth noting. The Privy Council was dealing with the appeal, and Lord Thankerton was expressing the opinion of the Board. The question was whether expenses incurred by the Maharajah in defending a claim for damages for fraud could be allowed as a deduction. The Maharajah had won his case. Lord Thankerton quoting Meredith J said ([1942] 1 All ER 362, at p 365):

‘Defence of such suits must be regarded in my view as a necessary though unpleasant part of the business of moneylending. [The Maharajah might have been sued in his personal capacity but he was sued in respect of transactions which had some connection with a moneylending business.] I am satisfied that the suit was primarily against the Maharajah in his capacity as a moneylender, and not merely as a rich nobleman, and it was based primarily upon breach of contract by the moneylender … In the opinion of their Lordships, the only right view as to the nature of the Agra suit, is that expressed by those judges.’

In other words, if it was a necessary though unpleasant part of the business, the expense incurred was to be allowed.

I should imagine that the duty of the ascertainment of indebtedness to the Crown was a necessary, though unpleasant, part of the business of any trader.

Expenditure in order to reduce expenses is an example of another kind of allowable deduction: see the Anglo-Persian Oil case. Expenditure to get rid of an annual expense chargeable against revenue is allowable. The expense of keeping an accountant or an accountancy department is a proper deduction to be made. The expense of ascertaining profits by accountants, not merely for the purpose of the Companies Acts, but for the purpose of ascertaining profits for income tax, and excess profits tax purposes, is an expense which is also to be allowed. Indeed, the expenditure of accountants discussing and arguing the question with the inspector of taxes is properly to be deducted: Allen v Farquharson Bros. If the expense of computing profits for excess profits tax or income tax is allowable and the expense of arguing matters arising with the inspector of taxes is an expense incurred for the purposes of earning profits, why is not the expense of arguing the same matters before the Special Commissioners on appeal also an expense for the purpose of earning profits? The expense of arguing the matter in one room is allowed. The expense of arguing before the Special Commissioners in another room and saving between £2,000 and £3,000 for the business, it is said, must be disallowed. There is no difference in object or purpose between the first set of expenses and the latter expenses. The amount of the tax, as I have said, is to be treated as an expense. The expense

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in question reduces a larger business expense. It seems to me plain that the expense in dispute ought to be allowed and unless I am precluded by authority from so doing, I shall proceed so to hold. May I? That is the real question in these appeals.

The case which is said to have settled the question adversely to the appellants is Allen v Farquharson Bros & Co. That was a decision of Finlay J,  Farquharson Brothers had appealed against an adjustment in an assessment, which had the effect of reducing the sum to be assessed from £10,000 to £2,570, less a deduction of £413 for war and tear, which had been agreed. But the respondents claimed a further deduction of £100, which would leave the assessment in the sum of £2,470, less £413 for were and tear. The sum of £100 so charged in the accounts consisted of the legal costs incurred by the respondents in the appeal to the Special Commissioners, and the question to be decided was whether that sum of £100 was an admissible deduction. The subject-matter of the appeal had been whether the respondents had succeeded to a business formerly carried on by somebody else, and the appeal was decided after two hearings. At the first hearing the Special Commissioners gave their decision in principle in favour of the respondents, that the respondents had succeeded to the business, and left the figures to be agreed between the parties. At the second hearing, a subsidiary point arose out of the terms of the previous decision and was decided in favour of the Crown. In the result, a very considerable reduction in the amount of profits assessed and income tax payable by the respondents for those four years was obtained by them. There were the usual contentions, the respondents saying that it was money wholly and exclusively and necessarily expended for the purposes of the trade, and the inspector contending that it was not. The Commissioners, who were business people, took the natural view, saying:

‘We … determined that the sum of £100, having been expended to ascertain the true profits of the business, distributable amongst the partners and assessable on the firm for income tax, was money necessarily wholly and exclusively laid out for the purposes of the business … and was also a monetary loss connected with the trade … ’

There was an appeal and Finlay J allowed it. It is important to observe that the appeal had nothing to do with the question of excess profits duty; it was merely concerned with computation for income tax. Finlay J clearly shows the distinction between the question that would have arisen if it had been an excess profits duty appeal, and the question arising in relation to income tax. He says (17 Tax Cas 59, at p 63):

‘The distinction, of course, is perfectly familiar and, in a general way, is recollected by anybody who has ever had anything to do with these things. Income tax is not a deduction before you arrive at the profits; it is a part of the profits. It is, as has been expressed by some well-known person—I cannot remember who, but it does not matter—the Crown’s share of the profits. Excess profits duty was quite a different sort of thing. That was a deduction, the sum to be deducted before you arrived at the profits for the purpose of computation, with the result that you deducted the excess profits duty in arriving at the computation and then if, as sometimes happened, later on, some excess profits duty was got back, that excess profits duty had to be brought in. Nothing of that sort, of course, is true of the income tax.’

It seems to me the judge is saying that expenses incurred before arriving at the profits, as is the case in an excess profits tax appeal, would be in a different position from the expenses which he was considering. That seems to me the distinction that he is drawing there. If that is so, then the case does not at all decide the point with which I have to deal.

But I have felt considerable difficulty in following the argument of the judge. He says (17 Tax Cas 59, at p 65):

‘I do not doubt that there are expenditures connected, for example, with the accounts, which are habitually allowed and rightly allowed; I do not doubt that the expenditure of keeping an accountant or, it may be, in the case of some of the very great businesses with which we are familiar, keeping a whose accountants’ department, is a proper deduction to be made. I do not doubt, further, that the accountants’ department will deal with the matters of income tax in the sense that they will prepare the accounts for income tax, and, as I suppose, sometimes discuss questions with the inspector of taxes or representatives from Somerset House which arise, and I do not suppose it would be sought to say that, by reason of that, the expenses of the accountants’ department were not proper to be allowed. I have got to decide the case, in spite of

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the invitation which has to some extent been given to me from both sides of the Bar, on the facts as they are found in the case, and in this case it seems to me that it is impossible to say that this was an expenditure for the purpose of earning the profits. The answer seems to me to be simple, that it was not an expenditure for the purpose of earning the profits and could not be.’

May I stop there for a moment? I ask, in all humility, why the accountant’s charges should be allowed as an expense for the purpose of earning profits, and the costs of defeating the Crown’s claim not be allowed as an expense for the same purpose? The judge goes on:

‘I cannot see that the profits were in the slightest degree altered, either decreased or diminished, as the result of this expenditure.’

I do not know what that means in view of the finding that, in the result, a very considerable reduction in the amount of profits assessed for these four years was obtained. I do not follow that. The judge goes on:

‘I feel compelled, on these facts as they are set out in this case, to hold that this was an application—I should think, as far as I can judge, an exceedingly proper application—of profits after they have been earned and was not an expenditure necessary to earn the profits.’

That is the ground of the decision—an application of profits after they have been earned.

But, if that is the right view, logically, every accountancy expense incurred after the close of the chargeable accounting period should be disallowed. Ascertaining the true figures is something which is necessarily done after the profits have been earned. But the ascertainment of profits is a business duty cast upon the company. At the close of the accounting period it is a liability still to be discharged. A necessary preliminary step to the performance of the statutory duty of paying excess profits tax is the ascertainment of profits computed in accordance with the Finance Acts. A necessary preliminary duty to the payment of income tax is the ascertainment of the expense of excess profits tax and of the profits as computed for that purpose. If the correct ascertainment involves bringing the figures before the Special Commissioners on appeal, I cannot myself see any ground upon which the costs of so doing can be held to be money not wholly and exclusively expended for the purposes of the trade. It seems to me there are two reasons why I am free to give effect to my own view. First, this case does not touch the question with which I have got to deal. It does not touch the costs of an excess profits tax appeal. But the other reason, and perhaps the more important one, is this. In my view, that judgment is inconsistent with the later case, in the Court of Appeal, of Worsley Brewery Co Ltd v Commissioners of Inland Revenue. I think the judgment in that case confirms the view I have formed. The Worsley Brewery Company had their accounts made up for seven years, ending with 1920. The accounts had been agreed. The amount due had been paid. Then, five years afterwards, for some reason which is not stated, they had reason to suppose that the accounts had been made out on a wrong basis; or, at any rate, if the profits had been properly computed, they would not have had to pay so much. New accountants were engaged to go into the whole question of the seven years’ accounts. They did, and they found out that a sum of £6,491 had been overpaid. A claim for repayment was made, the facts were put before the Commissioners, and repayments were made. £3,000 was repaid in the accounting year 1928, and the balance in the year 1930. The expenses incurred in securing the return of those sums amounted to £973.

There was no question, as far as I can see, but that those expenses would be properly allowable in the two years in which the repayments were received. But that would not have helped the company as much as if they could get the expenses thrown back to the earlier years, because excess profits duty had ceased to be payable. Therefore their claim was that the expenses should be thrown back and divided up over the seven years in respect of which the accounts had been re-opened, so that they could recover still further money which had been paid in excess profits duty. It would have been a very simple answer to say “But this is an expenditure of profits after they have been earned. The account is closed. The profits were earned years ago.” It would have been the simplest thing in the world to say “There is really nothing to discuss.” Yet it was conceded, as far as I can see, at any rate it was held, that it would

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be a proper allowance in the years in which the two sums were received, but that they could not be thrown back to the years in question.

Rowlatt J dealt with it in this way, (17 Tax Cas 349, at p 353):

‘It seems to me that the accountants’ charges which are allowed are not allowed as cleaving to any item [That had been argued—that they ought to be deemed to be cleaving to the item that was dealt with in the earlier years] … they are charged as a current item of the expenses in the current year and no more. It is a little bit metaphysical, but, if that is right, this charge is simply a current item of the expenses of the company. It is incurred in the later year; it may have become necessary in the later year because of some fumbling which was made in the preceding year.’

Lord Hanworth MR in the Court of Appeal, said (ibid  at p 355):

‘It would appear from the facts that it is the custom, and it is right, to allow accountancy charges in the computation of the profits for the purpose of excess profits duty. I do not desire to say more; I accept that proposition as one which is not contested in the present case. Secondly, it may be that it is right to employ not one but two sets of accountants. Again I make no comment upon that; I am going to assume that it was a legitimate expense for the company to undertake, but it is to be remembered that the expense was incurred by reason of the retainer given in the year 1925, and not before.’

Then he proceeded to deal with the question whether this expense could be thrown back a number of years.

Now I come to a very important judgment of Romer LJ which, in my humble opinion, entirely confirms the view I have formed. He says, (ibid, at pp 359, 360):

‘I am prepared to assent to the view that, when ascertaining profits of a trading concern, whether for the purposes of income tax or excess profits duty, the expense of having the accounts investigated by an accountant usually employed, or by any accountant and the preparation of the profit and loss account and of the balance sheet, is an expense which the trading concern is entitled to deduct from its receipts for the purposes of ascertaining its profits. [Now, why?] That appears to be, or, at any rate, may be taken, I think, to be an expense incurred wholly and exclusively for the purposes of the trade, which means, in view of the statement made by LORD DAVEY, in Strong v. Woodifield an expense made for the purpose of earning profits.’

That is saying, in very plain language, all these accountancy charges to which he had been referring are expenses incurred for the purpose of ascertaining the profits and if so incurred, they are expenses incurred for the purpose of earning the profits. Then he says:

‘I am not prepared to hold that, when all that has been done and the profits have been ascertained after the employment of the accountants in the normal way and a question arises at some subsequent period between the trading concern and some third party, which involves a consideration of the question whether the profits so ascertained were correctly ascertained, the expense of further investigating the accounts in an expense incurred for the purpose of earning the profits.’

Where does Romer LJ draw the line? It seems to me he draws the line in this way: All expenses incurred for the purpose of ascertaining the profits are allowable, but, when the profits have been ascertained, any further expenditure is not allowable. When were the profits ascertained? If one looks up the word “ascertain” in a dictionary one finds this: “to render certain: to fix: to determine: to find out for a certainty.” I think this is the dividing line. Any expense incurred in ascertaining the profits in that sense, in ascertaining them for a certainty, in finally determining what they amount to, comes within the first part of Lord Macmillan’s statement; in other words, as Romer LJ said, expenses incurred for the purposes of ascertaining the profits may be said to be an expense for the purpose of earning profits. The profits were not ascertained when the Commissioners or the inspector of taxes made a charge of bad faith against the appellants and directed that the transaction in question should be disregarded. They were not ascertained until the appeal had been heard and a final decision given. None of the profits in any of the three senses to which I have referred was ascertainable until after that decision had been given. Then, and not until then, did the company know what the divisible profits were. Then and not until then, did they know what the expense in connection with excess profits tax was going to be; then, and not until then, could one determine what were the profits assessable to income tax.

Page 150 of [1946] 2 All ER 141

In my judgment, the true principle, if I may repeat it once more, is that an expense properly and reasonably incurred in the final ascertainment of profits may properly be considered an outlay in order to earn profits. It is not an outlay of profits, certainly not of ascertained profits, as the profits were at all times subject to that outstanding expense.

Two further remarks may be made. It was a payment which reduced expenses not merely for the years in question but for future years and it was a payment which added a substantial sum to the profits subject to income tax.

I think that the income tax appeal must be allowed and the two appeals as to excess profits tax follow suit, because the same reasoning applies to those as to the income tax appeal. The appeals will be allowed with costs.

Appeals allowed with costs.

Solicitors: Scott & Son (for the appellants); Solicitor of Inland Revenue (for the respondents).

W J Alderman Esq   Barrister.

Re Henry Hornby (deceased)

[1946] 2 All ER 150

Categories:        SUCCESSION; Wills        

Court:        PROBATE, DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        WALLINGTON J        

Hearing Date(s):        27 MARCH 1946        

Will – Execution – Place of testator’s signature – “Foot or end” of will – Intention of testator – Wills Act, 1837 (c 26), s 9 – Wills Act Amendment Act, 1852 (c 24), s 1.

A document, purporting to be a last will and testament, was written, in green ink, in the testator’s handwriting, on one side of a sheet of paper. On the right hand side, about a third of the way down, lines had been drawn forming an oblong space, in which there appeared the word “Signed” in the testator’s handwriting in the same green ink, and, in a different coloured ink, the testator’s signature. The signatures of the attesting witnesses, also in this different coloured ink, appeared at the foot of the sheet. Beyond the document itself there was no evidence of the circumstances in which it had been prepared and signed. On a motion to admit the document to probate the question for determination was whether the document was properly executed having regard to the position of the testator’s signature:—

Held – The combined effect of the Wills Act, 1837, s 9, as amended by the Wills Act Amendment Act, 1852, s 1, was that it was for the court to decide in any particular case what was the end of a will and whether the document, with the signature where it was, made it apparent on the face of it that the testator intended to give effect by his signature to the writing signed as his will; there was no doubt, in this case, that the testator intended his signature sufficiently to authenticate the whole of the document written on that side of the sheet of paper; and consequently the document should be admitted to probate.

Notes

The will in this case is held to be properly executed, since it is clear that the place prepared by the testator for his signature was where he expected the will to end, and he, therefore, signed it with the intention of giving testamentary effect to the writing. As Wallington J, points out, there are many varieties of signatures which are capable of being brought within the Wills Act Amendment Act, 1852, and each must be dependent on its own facts.

As to Place of Testator’s Signature, see Halsbury, Hailsham Edn, Vol 34, pp 58–60, paras 71–74; and for Cases, see Digest, Vol 44, pp 251–258, Nos 783–849.

Cases referred to in judgment

In the Estate of Roberts [1934] P 102, Digest Supp, 103 LJP 61, 151 LT 79.

Margary v Robinson (1886), 12 PD 8, 44 Digest 253, 800, 56 LJP 42, 57 LT 281.

Sweetland v Sweetland (1865), 4 Sw & Tr 6, 44 Digest 254, 809, 34 LJPM & A 42, 11 LT 749.

Re Stalman, Stalman v Jones (1931), 145 LT 339, Digest Supp.

In the Goods of Coombs (1866), LR 1 P & D 302, 44 Digest 256, 820, 36 LJP & M 25, 15 LT 363.

Page 151 of [1946] 2 All ER 150

Motion

Motion for the admission to probate of a testamentary document, the signature of the testator appearing in an oblong space about a third way down and at the side of the document. The facts are fully set out in the judgment.

Victor Williams for the applicants, the executors.

William Latey for the testator’s brother.

27 March 1946. The following judgment was delivered.

WALLINGTON J. This is a motion asking that a document signed by Henry Hornby on 16 September 1919, be admitted to probate. The estate is a considerable one; it is said to amount to some £24,000. The attesting witnesses are dead, and there is no means of obtaining any evidence or assistance as to how this document came to be signed, as to why it was signed, where, and in the manner in which it was signed, nor as to any other circumstance that would assist the court in coming to a conclusion as to the facts of the case, beyond the document itself.

Before a document can be admitted to probate it has to be a testamentary document, complying with the requirements of the statutes relating to the bringing into existence of such documents. On behalf of deceased’s brother, Francis Hornby (who, under the document submitted to the court, is interested to the extent of a £1,000 legacy and in part of the residue, and who would be interested to a much larger extent if there were an intestacy, which, of course, there would be if this document could not be admitted to probate) counsel submits that this document is not entitled to probate because it is not signed at the foot or end thereof, as is required by the Wills Act, 1837, amended as it is by the Wills Act Amendment Act, 1852, s 1.

On the other hand, counsel for the executors submits that when the enlarging section of the Wills Act Amendment Act, 1852, and sect 1 of that Act are studied, it becomes plain that this document is properly executed because it complies with the conditions of that section, and, therefore, he moves that it be admitted to probate, and he relies for some assistance, though not, perhaps complete assistance, on a judgment of Sir Boyd Merriman, P, in Roberts’ case.

Counsel for the brother suggests, in effect, that I ought not to pay too much attention, though he does not go so far as to say that I ought to pay no attention, to any cases where there was no opposition, in other words, where there was a consent to the admission of the document to probate. I agree with him, but only to this extent: it is manifestly useful to have the assistance of counsel in dealing with both facts and law in any matter, particularly one that is so technical as the one before me. The assistance of counsel in such cases is not essential, by the means, nor is the court, owing to the absence of opposition, excused from the duty of going carefully into the whole of the circumstances as well as the law, and satisfying itself, before making an order admitting a document to probate or refusing probate, that the law has or has not been complied with.

In Roberts’ case it is plain that Sir Boyd Merriman P, considered the matter as fully as if there had been a strenuous and reasoned opposition to the admission to probate of the document then submitted to him. Similarly, in this case, and with the assistance of counsel for the brother, as well as of counsel for the executors, I must satisfy myself, before admitting this document to probate, that it is one that is entitled to be admitted because it does, in fact and in law, comply with the requirements of the statutes.

I am absolved from any inquiry as to the omission of the full testimonium, because counsel for the brother has said that he does not raise any question on the form of the testimonium or the place where the witnesses’ signatures appear. Their signatures appear at the foot of the sheet, nearer to the right-hand side of it, one under the other, and the first signatory as a witness has added “National Provincial Bank, Stafford.” Having written down to about one-third the length of the sheet from the top of it, the signatory, Henry Hornby, at some time or other (there is no evidence to show when) drew a horizontal line, a perpendicular line and then lower down the sheet another horizontal line, and within the oblong space so formed he has written the word “Signed,” and a little lower down, still in the oblong space, his own name “Henry Hornby.” That is the signature, and the only signature that can be relied upon by counsel for the executors as complying with the statutes as to the place of the signature, and if that is not within the statutes then this is not a document that can be admitted to probate as a whole, though it

Page 152 of [1946] 2 All ER 150

might be (and counsel for the brother concedes this) that that part of it above the signature, that is to say, higher up the sheet of paper than the point at which the signature appears, might be admitted to probate, the remainder of the document being non-testamentary and not provable as a will.

The question, therefore, is, does this signature comply, in this position, with the provisions of the Wills Act, 1837, s 9, and the Wills Act Amendment Act, 1852, s 1? If it does it must be admitted to probate; otherwise, only part of it can be so admitted. The earlier statute enacts in sect 9:

‘‘No will shall be valid unless it shall be in writing, and executed in manner hereinafter mentioned; (that is to say), it shall be signed at the foot or end thereof by the testator, or by some other person in his presence and by his direction; and such signature shall be made or acknowledged by the testator in the presence of two or more witnesses present at the same time, and such witnesses shall attest and shall subscribe the will in the presence of the testator, but no form of attestation shall be necessary.’’

It is the latter words of that section that actuated counsel for the brother in saying he was not pressing any invalidity in the attestation, but the material words for the purposes of this motion are “it shall be signed at the foot or end thereof by the testator.” That section has been modified or explained or to some extent mitigated in its requirements by the provisions of sect 1 of the amending Act of 1852. That is in these terms:

‘‘… every will shall, so far only as regards the position of the signature of the testator … be deemed to be valid within the said enactment [the Wills Act, 1837] as explained by this Act, if the signature shall be so placed at or after, or following, or under, or beside, or opposite to the end of the will, that it shall be apparent on the face of the will that the testator intended to give effect by such his signature to the writing signed as his will … ’’

First of all, what is the meaning of the words “if the signature shall be so placed beside or opposite to the end of the will that it shall be apparent on the face of the will that the testator intended to give effect by such his signature to the writing signed as his will”? It seems to me that that does not mean that it does not matter in the least where the signature appears, but it does mean that the court has to decide two things: (1) what, in the particular case, is the end of the will, and (2) whether the document, with the signature where it is, makes it “apparent on the face of the will that the testator intended to give effect by such his signature to the writing signed as his will.” In one sense the end of the will might be said to be the word “nineteen” in the words “As witness my hand this sixteenth day of September nineteen-hundred and nineteen,” but that raises the question what was the object of the testator—I call him testator by way of identification only—in apparently reserving the oblong space to which I have referred on the right-hand side of the sheet and higher up on the sheet than some of the words of the will itself, if it be a will? As has been said in argument, it is possible to enter into a bewildering variety of speculations as to how this came about, and I do not think it would serve any useful purpose to enter upon any of those speculations. The outstanding facts are that the testator has written the whole of the words of the will in his own handwriting, quite plainly, and in green ink, and inside the space to which I have referred he has written in the same ink and apparently at the same time the word “signed.” It is plain that he must have had some serious motive in making the oblong space. The words of the document that are written on the left-hand side of it are not a series of sentences ending at the point of the space on that side; they are words running straight on, as if they were prepared at the same time, written at the same time and intended to be signed at the same time. It cannot have been, therefore, because the testator thought after writing out the whole document that that would be a convenient spot and a prominent place at which to append his signature; it looks to me as if it must have been thought of by him before he had finished the writing of the words that appear on the sheet from the top to the bottom, and that he intended to sign the document as his will in that space which he had prepared beforehand.

The next facts of importance are: In a different ink, either at a different time or in a different room the testator has written his name as his signature in that space that I have alluded to, and the two witnesses, in the same ink at the foot of the sheet of paper, have written their names as witnesses, and one of them has added the branch of the bank in which, I suppose, he was engaged.

If intention to sign the will in that place has any significance within the

Page 153 of [1946] 2 All ER 150

meaning of the words from the amending Act that I have just read, I find that there is no doubt that Henry Hornby intended that signature sufficiently to authenticate the whole of the document written on that side of the sheet of paper.

Sect 1 of the Act of 1852 continues as follows:

‘‘… no such will shall be affected by the circumstance that the signature shall not follow or be immediately after the foot or end of the will … ’’

It is quite possible to put a meaning on those words that might be inimical to some extent to the claim of the applicant here to probate of this document; but, giving to the words their plain meaning, it seems to me that this signature does not follow, nor is it immediately after the foot or end of the will. That sentence, in its literal meaning, would seem to me to indicate that the document is not invalidated because the signature is not at the foot or end; nor is it to be affected—going on with the section:

‘‘… by the circumstance that a blank space shall intervene between the concluding word of the will and the signature, or by the circumstance that the signature shall be placed among the words of the testimonium clause or of the clause of attestation, or shall follow or be after or under the clause of attestation, either with or without a blank space intervening … and the enumeration of the above circumstances shall not restrict the generality of the above enactment … ’’

Some effect must be given to these words. The meaning of them quite plainly must be that although the section enters into some specification or particularisation of certain possible facts, that is not to alter this outstanding fact, that the court must look at the document and see whether the signature, wherever it is, is so placed that it shall be apparent on the face of the will that the testator intended to give effect by such his signature to the writing signed as his will.

There is only one other part of the section to which I need refer. It goes on to enact:

‘‘… no signature under the said Act or this Act shall be operative to give effect to any disposition or direction which is underneath or which follows it … ’’

Those words are relevant only to the question whether, in case I should have to hold that this signature is ineffective as to what is written below it, it is effective as to what is written above it. Now the authorities on which counsel for the brother has relied are authorities which are, in my judgment, materially different from the facts in this case. They were Margary v Ribinson, Sweetland v Sweetland, and Re Stalman. Each of those cases is interesting on its own facts, but, in my view, none assists the decision of this matter. Roberts’ case is one which is the nearest to the present case on the facts, though they are so fundamentally different, that it cannot be relied on as in any way decisive of the present question. Sir Boyd Merriman P, in his judgment ([1934] P 102, at p 106), does lay stress upon the first sentence of sect 1 of the Wills Act Amendment Act, 1852, to which I have referred. The sheet of paper upon which the will there was written was full before any signature or attestation clause could be appended, and, either there was not room enough at the end of the sheet to provide for signature and attestation, or it was thought more convenient that the signature and attestation should be in the margin. The signature of the testator was placed in the same position in relation to the attesting witnesses’ signatures as it would have been if it had been at the end of the will, that is to say, written on the left-hand margin of the sheet of paper, at right-angles to the text parallel with the edge and was on the right while the signatures of the witnesses were to the left, as there would have been if all the signatures had been at the end. The question there was, as it is in this case: Was the signature at the foot or end of the will? It is quite plain that in that case, if these words be interpreted without reference to sect 1 of the amending Act no one could say that the signature was at the foot or end; it was not at the foot, because it was at the top of the sheet of paper, or nearer to the top than the bottom, and it was not at the end because it was at the beginning, or, at any rate, certainly much nearer to the beginning than to the end. But Sir Boyd Merriman P, found that that document complied with the provisions of these statutes, and, in dealing with In the Goods of Coombs having set out sufficient of the facts, he says this ([1934] P 102, at p 106):

Page 154 of [1946] 2 All ER 150

‘Lord Penzance gave effect to the signature, and I cannot see any difference in principle here. So far as the position of the attestation clause is concerned it could not have been at any point which was more nearly opposite or beside the end of the will, [and this is the part that is important] and having regard to the fact that the whole writing is at right angles to the operative part of the will I think that I am justified in holding that the signature was so placed beside or opposite to the end of the will, that it is apparent on the face of the will that the testator intended to give effect by such signature to the writing signed as his will.’

If I were to apply those words literally to the present case the executors’ case would fail, because it cannot be said in strictness that this signature of the testator is so placed beside or opposite the end of the will, and so on. The category of cases to which sect 1 of the Act of 1852 can be applied has certainly not been so far exhausted. There must always be varieties of signatures that will have to be, and will be capable of being, brought within the ambit of the statute because of the many varieties of testator and the many varieties of conduct in relation to their testamentary documents that will arise from time to time for consideration, as they have arisen in the past.

It is for these reasons that I must regard this signature as being, in the intention of the testator, at the end of the will, and he so signed it with the intention of making it apparent on the face of the will that he intended to give effect by that signature to the writing signed as his will. For these reasons I come to the conclusion that the whole of this document is a valid and properly executed testamentary document, and I admit it to probate.

Document admitted to probate. Costs of all parties out of the estate.

Solicitors: Gregory, Rowcliffe & Co agents for Pickering & Pickering, Stafford (for the applicants, the executors); Gibson & Weldon agents for Lloyd & Leake, Shifnal (for the testator’s brother).

R Hendry White Esq   Barrister.

Countess of Berkeley v R G W Berkeley and Others

[1946] 2 All ER 154

Categories:        SUCCESSION; Wills: TAXATION; Income Tax        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT SIMON, LORD THANKERTON, LORD PORTER, LORD SIMONDS AND LORD UTHWATT        

Hearing Date(s):        2, 4, 8, 9 APRIL, 21 JUNE 1946        

Rentcharges and Annuities – Annuity given free of income tax – Statutory variation of tax burden – Will and codicils – Annuity given by codicil dated 3 December 1938 – Will and earlier codicils confirmed by codicil made in 1940 – Death of testator in January 1942 – When provision made – Finance Act, 1941 (c 30), s 25(1).

The testator made his will on 10 November 1936, and appointed thereby an annuity to his wife, Lady B. By the second codicil, made on 3 December 1938, he gave Lady B an annuity of such amount as might in any year be required to make up to the total sum of £5,000, clear of all duties and income tax, the annual net income to be received by her under his will and his marriage settlement. He further provided that this annuity should itself be free of income tax (including sur-tax). By the fourth (and last) codicil, made on 14 September 1940, the testator gave absolute priority to Lady B’s annuities and charged them on specified property. In all other respects he confirmed the will and earlier codicils. The testator died on 15 January 1942. The Finance Act, 1941, s 25(1) provides that, in the case of “any provision, however worded, for the payment … of a stated amount free of income tax … being a provision which (a) is contained in … a will or codicil … and (b) was made before 3 September 1939; and (c) has not been varied on or after that date,” the beneficiary shall bear a certain proportion of the income tax. The question to be determined was whether sect 25(1) applied to the annuity given to Lady B under the codicil of 3 December 1938. It was contended on her behalf (a) that, since the testator died after 3 September 1939, the section did not apply, because a “provision” contained in a will or codicil was not “made,” within the meaning of sect 25(1), until the moment of the testator’s death; (b) alternatively, that the last confirmation of the provision by the fourth codicil postponed the date at which

Page 155 of [1946] 2 All ER 154

it was originally made until the date of such confirmation which was after 3 September 1939:—

Held – (i) [Lord Porter dissenting] upon the true construction of the Finance Act, 1941, s 25(1), the words “any provision, however worded” referred to the benefit conferred and not to the words conferring it, and therefore “provision” was not “made” by a will within the meaning of the subsection until the testator was dead. Since the testator survived 3 September, 1939, sect 25(1) did not apply to his will or to any codicils, whatever their date, because a will or codicil came into operation only on the testator’s death and until then it was revocable so long as he had any testamentary capacity.

Re Waring overruled.

(ii) [per Lord Porter] since the codicil of 3 December 1938, had been confirmed by the codicil of 14 September 1940, sect 25(1) of the 1941 Act did not apply to the provision for Lady B’s annuity contained in the codicil of 3 December 1938, because, on the true construction of the will, the general rule applied that a will or earlier codicil was made at the date when it was confirmed by a codicil of later date.

Decision of the Court of Appeal, sub nom Re Berkeley, Borrer v Berkeley ([1945] 1 All ER 83) reversed.

Notes

The House of Lords reverse the Court of Appeal by a majority of four to one, deciding the case solely upon the construction of the words “any provision, however worded,” in the Finance Act, 1941, s 25. This expression may mean the words which define a benefit, or the benefit itself, and the House decides that the latter meaning is the one intended by the legislature. The testator did not die until after the passing of the Finance Act, 1941, and, therefore, the provisions of the Act have no application, since a will speaks from death. This has the further advantage, as pointed out by Lord Thankerton, of complying with the presumption that in the case of taxing Acts the legislature intends the incidence of taxation to be the same in Scotland and England.

As to Tax-Free Payments, see Halsbury, Hailsham Edn, Vol 28, pp 214–217, paras 386–391; and for Cases, see Digest, Vol 39, pp 166–168, Nos 572–593.

For the Finance Act, 1941, s 25(1), see Halsbury’s Statutes, Vol 34, p 119.]

Cases referred to in opinions

Re Waring, Westminster Bank Ltd v Awdry [1942] 2 All ER 250, [1942] Ch 426, 111 LJCh 284, 167 LT 145, revsg [1942] 1 All ER 556, [1942] Ch 309.

Re Tredgold, Midland Bank Executor and Trustee Co Ltd v Tredgold and Royal Society of Musicians of Great Britain (Incorporated) [1943] 1 All ER 120, [1943] Ch 69, 112 LJCh 68, 168 LT 135.

Re Sebag-Montefiore, Sebag-Montefiore v Alliance Assurance Co Ltd [1944] 1 All ER 672, [1944] Ch 331, 113 LJCh 280, 170 LT 395.

Income Tax Special Purposes Comrs v Pemsel [1891] AC 531, 42 Digest 649, 563, 61 LJQB 265, 65 LT 621.

Saltoun (Lord) v Advocate General (1860), 3 Macq 659, 42 Digest 675, 868, 3 LT 40.

Lord Advocate v Moray (Countess) [1905] AC 531, 21 Digest 42, 266, 74 LJPC 122, 93 LT 569.

Hyslop v Maxwell’s Trustees (1834), 12 Sh (Ct of Sess) 413, 44 Digest 519, d, 9 Fac Coll 246.

Nimmo v Murray’s Trustees (1864), 2 Macph (Ct of Sess) 1144.

Holmpatrick v Ainsworth [1943] SC 75.

Grealey v Sampson [1917] 1 IR 286, 44 Digest 375, 2091i.

Goonewardene (M) v Goonewardene (E M) [1931] AC 647, Digest Supp, 100 LJPC 145, 145 LT 7.

Re Fraser, Lowther v Fraser [1904] 1 Ch 726, 44 Digest 376, 2102, 73 LJCh 481, 91 LT 48.

Appeal

Appeal and cross-appeal from a decision of the Court of Appeal, (Lord Greene, MR Finlay and Morton LJJ), dated 13 December 1944, and reported sub nom Re Berkeley, Borrer v Berkeley ([1945] 1 All ER 83). The facts are fully set in the opinions of Viscount Simon, Lord Thankerton and Lord Porter.

J Neville Gray KC and Wilfrid Hunt for the appeallant, Countess of Berkeley.

Page 156 of [1946] 2 All ER 154

David Jenkins KC and J H Stamp for the respondents R G W Berkeley and R J G Berkeley (the appellants on the cross-appeal).

M G Hewins for the respondent Sybil Deane Jackson.

Their Lordships took time for consideration

21 June 1946. The following opinions were delivered.

VISCOUNT SIMON. My Lords, this is an appeal and cross-appeal from a unanimous decision of the Court of Appeal composed of Lord Greene, MR Finlay and Morton LJJ. The question to be decided was raised by originating summons and concerns the applicability to the Finance Act, 1941, s 25, to the first clause of the second codicil to the will of the late Earl of Berkeley.

The Finance Act, 1941, s 25(1), is as follows:

‘‘Subject to the provisions of this section, any provision, however worded, for the payment, whether periodically or otherwise, of a stated amount free of income tax, or free of income tax other than surtax, being a provision which (a) is contained in any deed or other instrument, in any will or codicil, in any order of any court, in any local or personal Act, or in any contract, whether oral or in writing; and (b) was made before Sept. 3, 1939; and (c) has not been varied on or after that date, shall, as respects payments falling to be made during any year of assessment, the standard rate of income tax for which is 10sin the £, have effect as if for the stated amount there were substituted an amount equal to twenty twenty-ninths thereof.’’

The effect of substituting twenty twenty-ninths for the whole of the stated amount is the same as if the stated amount were paid free of income tax at 5s 6d in the £ and no more, while the balance is left to be borne by the recipient.

The Earl of Berkeley died on 15 January 1942. His last will was made on 10 November 1936, and to this will four codicils were subsequently made dated respectively 14 September 1938, 3 December 1938, 9 March 1940, and 14 September 1940. The relevant portions of these testamentary dispositions are as follows. The will of 10 November 1936, contained in cl 2 an appointment to the testator’s wife, if she should be living at his death, of an annual sum of £1,200 for the then residue of her life, and in cl 24 a further annuity commencing at the expiration of 3 months from the testator’s death, of £200 free of income tax if and so long as she accepted (as she did) the office of executor and trustee of the will. In cl 23 the testator gave to his stepdaughter, Miss Jackson, an annuity of £1,500 free of income tax at the standard rate. The will also contained gifts of annuities to other persons. Cl 1 of the second codicil, dated 3 December 1938, is as follows:

‘‘I give to my wife Mary Emlen Countess of Berkeley during her life an annuity of such amount as may in any or every year after my death be required to make up to the total sum of £5,000 clear of all death duties and income tax the annual net income to be received by her in that year under my said will (including the appointment made by cl. 2 thereof) and under my marriage settlement (which I hereby confirm) dated Nov. 6, 1924 … ’’

Cl 4 of the fourth codicil dated 14 September 1940, was as follows:

‘I declare that every annuity by my said will or any codicil thereto bequeathed to my wife … shall be payable in priority to all other annuities or pecuniary legacies by my said will or by any codicil thereto bequeathed and that the annuity by my said will bequeathed to my stepdaughter Sybil Deane Jackson shall be payable in priority to all such other annuities or pecuniary legacies as last aforesaid except the annuity or annuities bequeathed to my said wife (which shall have absolute priority). And I charge first the settled estates and secondly the heirlooms (and in that order) with the payments of the annuities hereby or by any codicil hereto bequeathed and the duty on such of them as are bequeathed free of duty so far as my residuary estate shall be insufficient for the purpose.’’

The third and fourth codicils confirmed in all other respects the will and former codicils thereto.

In support of the contention that sect 25 has no application to this case, counsel on behalf of the appellant, the Countess of Berkeley, the testator’s widow, advances four propositions. (a) He first contends that a “provision” contained in a will or codicil, within the meaning of sect 25, is not “made” until the moment of the testator’s death. (b) If this contention fails, he contends as an alternative that the “provision” made in the second codicil must be treated as made at the date of the fourth and last codicil because this last named codicil confirms the previous testamentary disposition including the second codicil. If either of these contentions prevails, the “provisions” for the payment to be made annually to the Countess free of income tax would be made after 3 September 1939 and would therefore be untouched by sect 25. (c) He contends

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that in any case the “provision” is not for the payment of a “stated amount” free of income tax. (d) Lastly, he contends that in any case the “provision” has been “varied” by the fourth codicil and therefore is excluded from the operation of sect 25 by failing to fulfil para (c) of sect 25(1).

The Court of Appeal reached a conclusion adverse to each of these four contentions. I should agree with that Court, for the reasons they state, as regards (b), (c) and (d), but while I am fully alive to the force of the argument which prevailed with the Court of Appeal, as regards (a), I have after much consideration come to the conclusion that the first proposition is correct. The crucial question is what is the meaning of the phrase “any provision, however worded.” It may mean, as the Court of Appeal thought, the words which define a benefit and which are contained in the document or oral contract referred to in sect 25(1). Or it may mean the benefit conferred by such a document or oral contract. If it bears the first of these meanings, it is to be found in the language of the document or oral contract and is necessarily of the same date, being in effect equivalent to a clause. If it means the second, its date will be the date when the benefit is conferred.

Either meaning is possible in construing para (a) and para (c) of sect. 25(1), but I am forced to the conclusion that only the second meaning is possible when construing para (b); and if this is so in construing para (b), the same meaning must be given to the words when applying para (a) and para (c). Thus, “any provision, however worded” must be understood in all cases to refer to a benefit conferred and not to the words conferring it.

My reasons for thinking that this is the correct construction are as follows. There is a clear distinction drawn in the section between a provision “contained” in a document irrespective of date and a provision “made” before 3 September 1939. Language is very ineptly used if one speaks of “making” a clause. It is not the instrument, but the provision, for which a latest date is prescribed. Moreover, all the other documents mentioned, except a will or codicil, are such as would confer a vested right to the payment of the annuity free of tax—a benefit created at a time when income tax at 10s in the £ was in no one’s thoughts. It was the existence of this vested right which involved a hardship when income tax was greatly raised, for it used up far larger resources in meeting the tax-free annuity than anyone had contemplated. This hardship was one which only an Act of Parliament could relieve, in the absence of agreement between the beneficiary and the sufferer of the hardship. It is the making of such an agreement after the war broke out which is referred to, I think, in para (c) of sect 25(1).

The will of a living testator, on the other hand, confers no right on anyone to any benefit therein mentioned. Even if it existed side by side with a covenant not to revoke, the covenantee has no rights under the will until the testator is dead. There is therefore no call for statutory intervention in this case. It is true enough that a testator, using popular language, may say “I have made provision by my will for so-and-so,” but this consideration does not help in construing an Act of Parliament which, as I read it, authorises variation of vested rights only if they arose before the outbreak of the late war. I do not think that it would be a legitimate construction of sect 25(1) to run paras (a) and (b) together and read them as though the crucial date was contained in para (a).

I had at first been much impressed by the argument that, if on the true construction of the section the testator must be dead before the late war broke out, his will could not be varied after that date. But the answer is that which I have indicated above, viz, that what is contemplated is not the variation of a will, but the variation of a provision made by the will which conferred upon the annuitant a vested right from the moment of the testator’s death. There may well have been many cases between 3 September 1939 and the announcement of the proposal which became sect 25 of the Finance Act, 1941, when the parties concerned, feeling the inequity involved if strict effect was given to the provisions of the will, had by agreement varied the operation of the provision (in the sense of the benefit) which the testator had made. Where this had happened, as, eg, between a tax-free annuitant and the party entitled to the residue, there would be no call for statutory intervention and the agreement to vary would stand.

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On the view which I have been led to form, and the reasons for which I have above stated, no other question arises for decision in this appeal and the appeal must be allowed. The result is that Farwell J was right in Re Waring and cases like that discussed in Re Tredgold, should be decided on the ground that the testator died after the outbreak of the war.

By the cross-appeal it was contended that “the stated amount” was £5,000 and not the sum needed to make up that total free of tax after taking into account what is received from the other sources named, and I agree with the Court of Appeal, for the reasons it gives, that the cross-appeal fails.

I move that the appeal be allowed and that the cross-appeal be dismissed.

LORD THANKERTON. My Lords, this appeal and the cross-appeal raise questions as to the proper construction of the Finance Act, 1941, s 25. They arise out of the testamentary writings of the late Earl of Berkeley, who died on 15 January 1942. He had no issue, but his second wife, the present appellant, survived him. The subject-matter of the appeal and cross-appeal are the annuities given to the appellant under the will and codicils of the testator.

In the view that I take of the matter, the only relevant portion of the Finance Act, 1941, s 25, is subsect (1), which is as follows:

‘‘Subject to the provisions of this section, any provision, however worded, for the payment, whether periodically or otherwise, of a stated amount free of income tax, or free of income tax other than sur-tax, being a provision which (a) is contained in any deed or other instrument, in any will or codicil, in any order of any court, in any local or personal Act, or in any contract, whether oral or in writing; and (b) was made before Sept. 3, 1939; and (c) has not been varied on or after that date, shall, as respects payments falling to be made during any year of assessment, the standard rate of income tax for which is 10s.in the £, have effect as if for the stated amount there were substituted an amount equal to twenty twenty-ninths thereof.’’

Before referring to the testamentary writings, it should be explained that, under a settlement dated 8 June 1888, the testator had—in the events which happened—a power to appoint by will an annual sum not exceeding £1,200 to or for the benefit of any wife who should survive him, out of the income of the trust fund, of which the testator had a life interest. Further, under the settlement dated 6 November 1924, made on the marriage of the testator and the appellant, the appellant, after the death of the testator, is entitled during her life to the income of the fund therein defined as the settled fund, and an annuity of £2,000 payable by the testator’s personal representatives.

By his will, dated 10 November 1936, the testator appointed the appellant as one of the executors and trustees of his will; by cl 2, in exercise of the power conferred on him by the 1888 settlement, he appointed to the appellant an annuity of £1,200; by cl 23(B) he gave to his step-daughter, the respondent Sybil Deane Jackson, free of all duties during her life an annuity of £1,500 free of income tax at the standard rate; and by cl 24(A) he gave to each of his executors and trustees, while acting as such, an annuity of £200 free of all duties and income tax. The testator also left four codicils, the first of which, dated 14 September 1938, is not material.

By his second codicil, dated 3 December 1938, the testator gave to the appellant during her life:

‘… an annuity of such amount as may in any or every year after my death be required to make up to the total sum of £5,000 clear of all death duties and income tax the annual net income to be received by her in that year under my said will (including the appointment made by cl. 2 thereof) and under my marriage settlement [dated Nov. 6, 1924] … ’

He provided that in calculating the said annuity the annual sum of £200 given by cl 24 of his will should be taken into account, and that the said annuity should itself be free of all death duties and income tax, which he defined as including sur-tax or any other tax from time to time imposed on income.

The third and fourth codicils were made after 3 September 1939, to which I will refer as the war date. The third codicil, dated 9 March 1940, is not material. The fourth codicil was dated 14 September 1940; the testator, inter alia, declared that every annuity bequeathed to the appellant by his will or any codicil should be payable in priority to all other annuities or pecuniary legacies, and that the annuity bequeathed to the respondent Sybil Deane Jackson should have similar priority, except over the appellant’s annuities, which should have absolute

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priority, and he further charged first the settled estates and secondly the heirlooms (and in that order) with the payment of the annuities bequeathed by his will or any codicil thereto and the duty on such of them as were bequeathed free of duty so far as his residuary estate should be insufficient for the purpose. As in previous codicils, the testator added:

‘… in all other respects I confirm my said will as altered by the said former codicils thereto.’

On behalf of the appellant four contentions were submitted: (a) that the provision for payment of the appellant’s annuity, which is contained in the second codicil, was not “made” within the meaning of sect 25(1) until the death of the testator, which was after the war date, and therefore the Act did not apply; (b) alternatively, that the last confirmation of the provision by the fourth codicil postponed the date at which it was originally made until the date of such confirmation, which, again, was after the war date; (c) the provisions of the fourth codicil in relation to the appellant’s annuity constituted a variation after the war date, within the meaning of para (c) of the subsection, and therefore, the statute did not apply; and (d) that the provision made was not “of a stated amount” within the meaning of the subsection, and, accordingly, the state did not apply.

A fifth question arose on the cross-appeal, namely, whether “the stated amount” in this case is £5,000 or only the sum required, under the provisions of the second codicil, to make up the appellant’s net income to £5,000. The Court of Appeal had taken the latter view.

The Court of Appeal was bound by its previous decisions, Re Waring, and Re Sebag-Montefiore. In Re Waring it was held that the provision for two annuities by a will, signed and attested before the war date, was not made as at the death of the testator, which occurred after the war date, but was made at the date of the will, and that a codicil made after the war date, which contained no reference to the annuities and no express confirmation of the will, did not cause of the provision to be treated as made at the date of the codicil. In Re Sebag-Montefiore the will bequeathing the annuities was made before the war date, and a codicil made after the war date which expressly confirmed the will was held not to have the effect of causing the provision to be treated as made at the date of the codicil.

My Lords, it is clear that an acceptance of the appellant’s first contention, that the provision is not made until the death of the testator, would involve that sect 25 does not apply to the present case, and the remaining questions in the case disappear. The appellant’s fourth contention might arise in another case, and so might the question raised by the cross-appeal.

In Waring’s case the Court of Appeal reversed the decision of Farwell J whose opinion I venture to quote ([1942] Ch 309, at p 310):

‘The question for my determination is whether or not the Finance Act, 1941, s. 25 applies to a will made before Sept. 3, 1939, by a testator who died after that date. It is not until the death of a testator that provisions contained in the will take effect, and, therefore, in my judgment, the provision with which I am concerned here was not “made” until after Sept. 3, 1939. Until the death of the testator the will was a document bearing date before Sept. 3, 1939, but it had no effect. The Finance Act, 1941, s. 25, therefore does not apply.’

Lord Greene MR found no distinction between the date of making a will and the date of making a provision contained in a will, and he sought confirmation of his view in para (c) of sect 25(1): “has not been varied on or after that date.” He added ([1942] 2 All ER 250, at p 254):

‘If the argument of counsel for the respondent is correct and the judgment of the judge is correct, that paragraph can have no application whatsoever to a provision by will, because, if the provision can only be deemed to be made when the testator dies, it is quite obvious that it never can be varied after his death.’

MacKinnon LJ who agreed with Lord Greene MR does not consider the important question whether there was any distinction intended between the date of making the will and the date of making the provision which is contained in the will. Luxmoore LJ concurred.

My Lords, I regret that I am unable to agree with the reasoning or the conclusion of Lord Greene MR. To me, the draftsman has been careful to draw a distinction between the date of the will and the date when the provision

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was made, and the reason is that, as Lord Greene MR said ([1942] 2 All ER 250, at p 253), the legislature was intervening to adjust “the burden between the classes of persons benefiting under the wills.” He might have added that at the same time it was adjusting the obligations as between payer and payee under the deeds, orders of court, local or personal Acts or contracts, and in each of these cases there must be an existing right or obligation, and any variation must be a variation of an existing right or obligation. I have difficulty in thinking that variation as regards a provision contained in a will was intended to be different in character, so as to cover an alteration by the testator, which created no immediate right, and when there was no payer, no payee and no payment to adjust. The word “provision” may ordinarily be used in either of two senses, viz, (i) as the clause in the will directing the tax-free annuity—ie, the benefit—to be paid, or (ii) as the benefit provided for the annuitant. In my opinion, it is clearly used in the subsection in the latter sense. If the former meaning was intended, paras (a) and (b) would naturally and easily be combined by substituting “made by” for “contained in,” by deletion of the word “and” at the end of para (a) and adding “made before 3 September 1939.” In short the legislature was dealing with rights known to the law, and was adjusting such rights. I come to that conclusion independently of, but in agreement with, the presumption to which I will now refer, and which I could wish had been under consideration by the Court of Appeal.

In the case of taxing statutes, which apply to both England and Scotland, and where, as here, there is no suggestion that any of the language used has a technical legal meaning in either country, it is to be presumed that the legislature intended that the incidence of taxation should be the same in both countries. In Comrs for Special Purposes of Income Tax v Pemsel, Lord Watson said ([1891] AC 531, at p 557):

‘The only principle derivable from Lord Saltoun v. Lord Advocate which can aid in the decision of this case, appears to me to be this—That the Act of 1842 must, if possible, be so interpreted as to make the incidence of its taxation the same in both countries.’

In Lord Advocate v Countess of Moray, Lord Macnaghten said ([1905] AC 531, at p 538):

‘It must be borne in mind that the Act which your Lordships are now called upon to construe in its application to Scotland applies equally to the whole of the United Kingdom. It is a taxing Act. It must be presumed to have been the intention of Parliament to make the incidence of the taxation the same in Scotland as in England and Ireland, and to extend the same measure of relief … ’

I understand that some of your Lordships are of opinion that the section is reasonably capable of another construction. In that view, it would follow, in my opinion, that, if the section under consideration is thus reasonably capable of two constructions, one is bound to adopt the construction which is in harmony with the presumption, even if, otherwise, one would prefer the other one. The construction which I prefer is in harmony with the presumption; the other is not.

There can be no dubiety as to the law of Scotland in this matter. In Bell’s Principles of The Law of Scotland, s 3, 1864, it is stated:

‘‘A will may be made (and is presumed in law to be made) in the last moment of life, and so it is at all times during life revocable.’’

These are Professor Bell’s own words; he died in 1843. In Hyslop v Maxwell’s Trustees Lord Corehouse said (12 Sh (Ct of Sess) 413, at p 416 (n)), in reference to Miss Hyslop’s power of disposal under her uncle’s will:

‘A circumstance much founded on by the defendants, viz, that her settlement was executed before she knew of her uncle’s legacy, is quite immaterial. It is settled, that testamentary and revocable deed is to be held as the ultima voluntas testatoris, that is, as approved of, and confirmed down to the last hour that he is of a disposing mind.’

Lord Balgray said (ibid, at p 417):

‘It is clear that the settlement, though originally executed many years before Miss Hyslop’s death, did, so long as it existed unrevoked, manifest a continuous act of the will on her part, giving it the same force as if executed in the last moment of her retaining a disposing mind. It must therefore carry everything which it would have carried, if originally executed the day before her death.’

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In Nimmo v Murray’s Trustees, the trust disposition and settlement, under which the residue was left to “my own nearest heirs and successors,” was executed prior to the passing of the Intestate Moveable Succession Act, 1855, by which representation was introduced into intestate moveable succession. The testator died after the Act had come into operation. After quoting the words of Lord Corehouse, in Hyslop’s case, Lord Cowan said (2 Macph (Ct of Sess) 1144, at p 1148):

‘When, therefore, this testator, died, leaving to his “nearest heirs and successors” the residue of his estate, the same construction must be applied to the bequest as if the deed had been written out and executed by him at the last moment of his being of a disposing mind … ’

Lord Justice-Clerk Inglis expressed the same view as Lord Cowan. See also McLaren On Wills And Succession, 3rd Edn, Vol II, pp 778 and 808.

In the present case, the testator remained of a sound disposing mind at least until after the execution of his last codicil, if not until his death, and, if this had been a Scottish succession, the result in Scotland of the construction adopted by the Court of Appeal in Re Waring would be that the provision was made at a date at least subsequent to the date of the last codicil, and, therefore, after the war date. This would make a marked difference in the incidence of taxation in the two countries respectively.

I am accordingly of opinion that the decision of the Court of Appeal in Re Warning was wrong, and that all these somewhat artificial questions as to republication or confirmation or variation need never have arisen to complicate the matter. As I have said, this supersedes consideration of any of the other contentions in the appeal and cross-appeal, but I desire to add that, while I have formed no definite view, I am inclined to agree with the opinion of Lord Greene MR as to the decision in the Scottish case of Holmpatrick v Ainsworth.

I am, therefore, of opinion that the appeal should be allowed and that the cross-appeal should be dismissed.

LORD PORTER. My Lords, the facts in this case have already been stated, but in order to make my opinion plain, the more essential matters should be set out in proper sequence.

(i) By a settlement dated 8 June 1888, Lord Berkeley was given power to appoint by will that an annual sum not exceeding £1,200 should be paid to any wife who might survive him during the residue of her life out of the income of a certain trust fund. (ii) By a marriage settlement executed on 6 November 1924, a fund thereby constituted was settled upon trust to pay the income thereof to Lord Berkeley during his life and after his death to pay the same income to Lady Berkeley during her life. By the same settlement Lord Berkeley covenanted that his legal personal representatives would from and after his death pay an additional annuity of £2,000 to the trustees of the marriage settlement during the remainder of Lady Berkeley’s life. (iii) By his will, dated 10 November 1936, Lord Berkeley appointed the annual sum of £1,200 mentioned above to Lady Berkeley, made her an executrix and trustee, and disposed of his free estate in the manner therein appearing. Certain additional annuities were provided for, including one of £1,500 a year free of tax to Miss S D Jackson.

(iv) There were four codicils to this will, of which it is only necessary to mention two, viz, the second and fourth. (a) By the former, Lord Berkeley gave to Lady Berkeley during her life an annuity of such amount as may in any or every year after his death be required to make up to the total sum of £5,000, clear of all death duties and income tax, the annual net income to be received by her under his will (including the appointment of the £1,200) and under his marriage settlement. In calculating the amounts an annual sum of £200 given by the will was to be taken into account. The annuity was itself to be free of all death duties and income tax and payable quarterly, and income tax was to include sur-tax. The codicil confirmed the will and a former codicil in all other respects. This codicil is dated 3 December 1938, and is, therefore, executed before 3 September 1939. (b) The fourth codicil is dated 14 September 1940, and the chief material changes made by it are concerned with the priority of payment of the benefactions given by the will in previous codicils and the property upon which they are to be charged. By cl 4 every annuity by the will or any codicil bequeathed to Lady Berkeley was to be payable in priority to

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all other annuities or pecuniary legacies and the annuity to Miss Jackson was to have priority next after the annuities to Lady Berkeley. Moreover, the settled estates and heirlooms mentioned in the will were charged with the payment of the annuities. Cl 5 authorised the trustees of the will, inter alia, to provide for the annuities bequeathed by the will and codicil by purchasing an annuity.

The question for your Lordships’ determination is the effect of the Finance Act, 1941, s 25, upon this series of testamentary dispositions. Sects. 25 and 27 of that Act are as follows:

‘

Tax-free Payments, etc.

25(1) Subject to the provisions of this section, any provision, however worded, for the payment, whether periodically or otherwise of a stated amount free of income tax, or free of income tax other than surtax, being a provision which (a) is contained in any deed or other instrument, in any will or codicil, in any order of any court, in any local or personal Act, or in any contract, whether oral or in writing; and (b) was made before Sept 3, 1939; and (c) has not been varied on or after that date, shall, as respects payments falling to be made during any year of assessment, the standard rate of income tax for which is 10s in the £, have effect as if for the stated amount there were substituted an amount equal to twenty twenty-ninths thereof.

(2) Where any such provision as is mentioned in subsect. (1) of this section is a provision for a payment free of income tax (and not merely a provision for a payment free of income tax other than surtax) the sum, if any, to be paid under that provision to make good the requirement that the payment shall be free of surtax shall, in the case of surtax for the year preceding any such year of assessment as is mentioned in the said subsect. (1), be reduced to twenty twenty-ninths of the sum which would have been sufficient for that purpose if the rates of surtax in force for the year 1937–38 had applied to the year for which the surtax is payable.

(3) A person who is entitled under any such provision as is mentioned in subsect. (1) of this section to a payment free of income tax, or free of income tax other than surtax, shall be entitled to the following adjustment of his surtax for the year 1940–41, that is to say, his total income for that year, so far as it is ascribable to his rights under that provision, shall be reduced to what it would have been if in his case (a) the rates of surtax in force for the year 1937–38 had applied also to the years 1938–39, 1939–40 and 1940–41; and (b) the 1938–39 rates of income tax, other than surtax, had applied also to the years 1939–40 and 1940–41; and (c) the rights and liabilities of the persons concerned had been modified accordingly.

(4) If, in the case of a payment to which subsect. (1) of this section applies, the relations of the payee and payor are such that the payee is accountable to the payor for so much of any relief from income tax which he receives as is ascribable to the payment (a) the liability of the payee to account to the payor shall be limited to twenty twenty-ninths of the sum for which he would have been accountable if the 1938–39 rates of income tax, other than surtax, had applied to the year of assessment in which the payment falls to be made, and the foregoing provisions of this section had not passed; and (b) the relief to be given shall be calculated as if (i) the gross sum represented by the payment were what it would have been if the 1938–39 rates of income tax, other than surtax, had applied to the year of assessment in which the payment falls to be made, and the foregoing provisions of this section had not passed; and (ii) that gross sum had borne income tax at 10s in the £.

(5) This section shall not (a) affect any provision falling within r. 23 of the General Rules (which renders invalid agreements not to deduct tax); (b) affect any provision if, by virtue of any provision in the same or any other deed, instrument, will, codicil, order, local or personal Act or contract, which contemplates rises in the rates of income tax, the payments thereunder have ceased, or, in the event of further rises in the rates of income tax, may cease, to be wholly free of income tax, or, as the case may be, wholly free of income tax other than surtax; (c) apply to any emoluments of any office, employment, annuity, pension or stipend taxed under Sched E; or (d) apply to any dividends or shares of profits.

27(1) For the purposes of the provisions of this Act relating to tax-free payments (a) a provision, however worded, for the payment of such sum as will after deduction of income tax be equal o a stated amount, shall be treated as a provision for the payment of the said stated amount free of income tax, other than surtax; and (b) the expression “a stated amount” includes a stated fraction of the gross amount of any specified income (that is to say, of the amount of that income before income tax has been charged thereon, whether by deduction or otherwise), but does not include a stated fraction of the net amount of any specified income (that is to say, of the amount of that income after it has been charged to income tax, whether by deduction or otherwise); (c) the expression “if the 1938–39 rates of income tax, other than surtax, had applied” means, in relation to a year of assessment, if the standard rate of tax for the year had been 5s 6d in the £ and the provisions of the Income Tax Acts relating to relief from tax had not been amended in any respect by any Act passed since Sept. 3, 1939.

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(2) The Treasury may by regulations provide for adjustments between parties where payments to which the said provisions of this Act apply have been made before the passing of this Act otherwise than in accordance with those provisions.’

Having regard to the terms of these sections, your Lordships have to determine whether sect 25 applies to the sum secured to Lady Berkeley by the fourth codicil so as to reduce it, or part of it, by nine twenty-ninths.

On the respondent’s part it was said that the provision for payment free of income tax was of a “stated amount” (viz, £5,000), was contained in the second codicil and was, therefore, made before 3 September 1939, and had not been varied since that date. All these contentions were controverted by the appellants, who maintained: (i) that provision made by will or codicil is not made until the testator’s death; (ii) that even if it be made at the date of execution of the document, the material date is that of the fourth codicil, which confirmed the will; (iii) that the fourth codicil is a variation of the provision; and (iv) that in any case there is no “stated amount.”

My Lords, it is common ground that a will or codicil comes into operation on the death of a testator. Until then, so long at any rate as he has testamentary capacity, it is revocable, or to use the common phrase, ambulatory. Indeed as my noble and learned friend Lord Thankerton has pointed out, by the law of Scotland it is correctly described as made at the last moment at which it is revocable. If I thought the wording of the section ambiguous, I should, in an Act applicable to both England and Scotland, give such an interpretation as would best accord with the meaning which it would plainly bear under one of the two systems of law, though it might be doubtful under the other. But, speaking for myself, I do not consider the meaning doubtful. It is true that the word “provision” has more than one meaning. It may be used to indicate the thing provided or the words by which provision is made, and it was urged that in this section it bore the first meaning. It was, it was said, “made” when it came into operation; until then it was but inchoate. No doubt it was “contained” in the second codicil, but it was not “made” until the testator’s death. The argument is attractive, but takes, I think, too technical a view. “Provision” in the section appears to be used in the second sense mentioned above. The expressions “however worded,” “stated amount,” “contained in” all seem to point to the language rather than what the language brings about. The Court of Appeal so thought in Re Waring, and I agree with their view.

The second question is what is the codicil in which the provision is contained. Originally, no doubt, it is to be found in the second, but that codicil is confirmed by the fourth, and in the end it has to be determined which of the two ultimately “makes” it. The inquiry goes back behind the Wills Act, 1837, to the history of the publication and republication of wills, an expression now meaningless, but still unhappily in use. I do not, however, think it necessary to explore its origin; it is enough to say that there is a series of cases since the Wills Act, 1837, was passed insisting that, just as republication of the will substituted the date of the republication for that of the will before the Wills Act was passed, so afterwards the will spoke from the date of confirmation rather than from that of its original execution, and this result occurred even when there was no express confirmation contained in the codicil, provided the will was referred to and it appeared that the codicil intended to confirm it. To this result, it is true, there were some exceptions made with the object of preserving the intention of the testator where a strict fulfilment of the general rule would defeat it, eg, in cases where an exact compliance with the rules would result in the giving of double portions, or would defeat a gift to charity which the testator obviously intended to be effective. It may be enough to quote Grealey v Sampson and Goonewardene v Goonewardene (as exemplifying the rule, and Re Fraser, as exemplifying the exception. In the present case, however, there are no facts rendering either of these two exceptions applicable and the general rule that a will or earlier codicil is made at the date when it is confirmed by a codicil of later date must, in my opinion, prevail.

If this view be the true one it disposes of the case, but as the further points were fully argued, I think I ought to express my present opinion on them.

I think the amount was a “stated amount.” True, it may vary from year to year, but it is calculable once the net sum derived from the previous gifts

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is known and the tax and sur-tax for the relevant periods are ascertained. What, then, is the stated sum? It is, in my opinion, and as the Court of Appeal thought, the amount which the estate has to pay in cash in order to make up the income to £5,000 net. I can, perhaps, best express my view by saying that where there is a direction in a will to make up £x to £y the stated amount, for payment of which provision is made, is not £y but £y—£x.

Finally, it was contended that the codicil was a variation of the provision in the will for payment of a stated amount free of income tax. The Court of Appeal thought not; indeed they thought that an increase or decrease in the amount would not be a variation. In their view, it is the direction to pay free of tax which must be varied in whole or in part. I cannot take that view, but I find the giving of priority over other legacies and of a larger property from which the annuity may be received more difficult to pronounce upon, and until it is necessary to decide the matter I should prefer to withhold my decision.

LORD SIMONDS. My Lords, this appeal and cross-appeal raise a number of questions, of which many involve the consideration of facts and documents of some complexity. But the initial and fundamental question is one which can be simply stated and does not admit of much elaboration in answer. All that is involved is the construction of a few words in the Finance Act, 1941, s 25.

That section has already been cited to your Lordships but I will venture for the sake of clarity to repeat it. The material words are:

‘‘(1) Subject to the provisions of this section, any provision, however worded, for the payment, whether periodically or otherwise, of a stated amount free of income tax, or free of income tax other than surtax, being a provision which (a) is contained in any deed or other instrument, in any will or codicil, in any order of any court, in any local or personal Act, or in any contract, whether oral or in writing; and (b) was made before Sept. 3, 1939; and (c) has not been varied on or after that date, shall, as respects payments falling to be made during any year of assessment, the standard rate of income tax for which is 10sin the £, have effect as if for the stated amount there were substituted an amount equal to twenty twenty-ninths thereof.’’

The initial question is whether this section has any relevance in the circumstances which I will now baldly state.

The late Earl of Berkeley, whom I will call the testator, made his will on 10 November 1936, and thereby made certain dispositions in favour of his wife, the appellant, Countess of Berkeley, and bequeathed an annuity of £1,500 free of income tax at the standard rate to the respondent, Sybil Deane Jackson. He made a first codicil on 14 September 1938, to which I need not refer and on 3 December 1938, made a second codicil whereby he bequeathed to the appellant an annuity which I will assume for the purpose of this question to be of a “stated amount free of income tax” within the meaning of the section. After 3 September 1939, which I refer to as the “war date,” the testator made two further codicils. By a third codicil dated 9 March 1940, he made certain bequests in favour of the appellant and in all other respects confirmed his will and the former codicils thereto and by a fourth codicil dated 14 September 1940, he made a number of dispositions affecting (inter alia) the annuities given to the appellant and the respondent, Miss Jackson, and again in all other respects confirmed his will as altered by the codicils thereto.

The testator died on 15 January 1942, without having revoked or further altered his will. In the meantime the Finance Act, 1941, was passed, receiving the Royal Assent on 22 July 1941.

Sect 25(1) of the Act operates to reduce the annuities bequeathed to the appellant and the respondent, Miss Jackson (assuming them to be of “a stated amount”), if these conditions are satisfied: (a) that the provision was contained (inter alia) in a will or codicil; (b) that it was made before the war date; and (c) that it was not varied on or after that date. The first condition was clearly satisfied: upon the third I will not at present dwell, though it may have an incidental importance: it is to the second condition that I direct myself, asking the simple question, “Was any provision made for the appellant before the war date?” For the purpose of answering this question, I at this stage ignore the fact that the testator by codicils made after the war date confirmed his will and earlier codicils.

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For Cohen J who first heard this case, and for the Court of Appeal this question was decided by Re Waring. In that case Farwell J decided in a few words that provision is not, within the meaning of the section, made by a will until the testator is dead; but the Court of Appeal, reversing him, held that provision is made at the date of the testamentary instrument containing the bequest and that it is immaterial when the testator dies. And it is this decision which your Lordships are, in the first place, called upon to review.

My Lords, I am of opinion that the decision of the Court of Appeal in Re Waring was wrong and that this appeal should therefore be allowed. In that view the other questions, some of them, as it appears to me, not easy of solution, do not arise.

I was much impressed by the point taken by my noble and learned friend Lord Thankerton in the course of the argument and further developed by him in his speech to the House. It is a rule not to be disregarded that a statute applying both to England and Scotland should bear the same meaning in both countries if its language is fairly susceptible of that result. And since it appears to be clear how the law of Scotland would regard a bequest contained in a will dated before the war date by a testator who died after it, I should be disposed to give the same effect in English law to the section if such a result did no violence either to the language of the section or to any principle of law. But, my Lords, I by no means think it necessary to call this rule in aid. For, if I had to interpret this section upon the footing that English and no other law had to be considered, I should, with no more doubt or hesitation than I must feel when I differ from the Court of Appeal or any of your Lordships, conclude that it can have no application to the case of a testator who survives the war date, whatever may be the date of any will or codicil that he leaves behind him.

Ultimately, no doubt, the question whether provision has, within the meaning of sect 25, been made before or after a certain date can only be answered by a consideration of the section. It is a matter of construction and nothing else. But I cannot wholly ignore the clear purpose of the section and the circumstances under which the Act was passed. A practice had long grown up by which an annual sum free of income tax, including or excluding sur-tax, was provided for an annuitant. Unless the provision was made by will, it could only be made somewhat tortuously as, eg, by the provision of such a sum as after deduction of income tax would leave the required amount; and my own experience, though I would not be dogmatic about it, has been that by far the commonest source of tax-free provision is to be found in wills. The advantage of such a provision is that the recipient obtains a definite annual sum whatever the rate of tax may be: the disadvantage, that an indefinite burden is placed upon the payer or upon the fund out of which the payment must be made. Some increase or reduction of the burden must before the war date have been in the contemplation of any man who bargained to pay, or by his will bequeathed, an annuity free of tax: for changes in the rate of tax were a matter of common experience. But the war brought such changes as it was fair to assume had not been contemplated, the rate of tax rising, immediately on the outbreak, to a height hitherto unprecedented and continuing to rise. It was under these circumstances that the legislature in 1941 thought fit to make an adjustment of the burden between the payer and payee and did so in the manner provided by the Finance Act, 1941, s 25. But, my Lord, nearly two years had elapsed between the war date and the passing of the Finance Act, 1941, and what had happened in the meantime? There must have been many testators who made their wills before the war date (and thereby gave annuities free of tax) who survived the war date and knew of the great increase in the rate of tax (for who is so insensible as to be unaware of it?) and yet left their wills unaltered and so died. Why should their wishes be overridden? If a man’s wish is that his widow should have a clear annual sum for her support whatever the burden of taxation may be, there is no reason for the legislature to intervene to defeat it. Intervention where a guess may be hazarded as to what a testator’s intention might have been had he foreseen events is one thing, but intervention where those events were before his eyes and he has not changed his purpose in another, and I should not willingly attribute to sect 25 a meaning that had such a result.

In the present case the testator survived the passing of the Finance Act, 1941,

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but, to put it at the lowest, did nothing to suggest that, recognising the burden of increased tax, he wanted some adjustment made. Indeed, everything he did pointed in a contrary direction, but that is another part of the case. It was urged by counsel for the respondents that in such a case a testator must be presumed to know the section (and I suppose any section of any Act that may supersede it) and to be content to leave his will unaltered in the faith that the statute would make the adjustment that he desired of his testamentary disposition. My Lords, is it not the more probable view that he leaves his will unaltered because he does not want to alter it and remains as ignorant of the Finance Act, 1941, s 25, as I was until I read the report of Re Waring or, likely enough, until Re Tredgold came before me for decision? If so, what ground again is there for Parliamentary intervention? Here, surely, is a sphere of conduct in which a man may do what he will with his own.

But, my Lods, the question is, as I have said, a question of construction and I will not rely more than is proper upon the background that I have sketched. The question is whether, for the purpose of sect 25, provision is made by will for an annual payment when the will is duly signed, or when, by the death of the testator, the will becomes operative. The question here is not when the will was made but when provision was made, a distinction which escaped the notice of Mackinnon LJ and, as I think, led him into error in Re Waring.

I have pointed out that there are three conditions of sect 25 applying, and I think that is significant. The first condition refers to the document or other source of payment, in which the provision is contained: the second, to the date when the provision is made. It would have been easy for the draftsman to refer the date to the document and combine the first and second conditions. He did not do so and I think that one good reason for not doing so was that, if he had, the section might have had just the meaning for which the respondents contend. But there would have been this odd result that, whereas in every other case than a provision by will the section would have dealt with rights known to the law which had accrued at the war date, in the excepted case of a provision by will it would have purported to operate on an ambulatory document which had no force or validity whatever at the war date and could have none until the testator died. By introducing the date in a separate condition and providing that the provision in question must be made before a certain date he postulates of every provision, however made, a common content, viz, that it has a legal effect before that date.

That the section is not very artistically drawn I would be prepared to agree. In particular, little skill is shown in the use of the word “provision.” That is a word of diverse meanings which slide easily into each other. It has come sometimes to mean a clause or proviso, a defined part of a written instrument. Or it may mean the result ensuing from, that which is provided by, a written instrument or part of it. Sect 25(1) opens with the words “Subject to the provisions of this section,” and in this phrase either or both of the meanings I have given may be intended. Then comes the phrase “provision however worded,” where the first meaning would seem more apt, though the second is well enough. Thirdly, the word is used in the context of (a) “contained,” (b) “made,” and (c) “varied,” and here, though either meaning is appropriate to (a) or (c), it is the second meaning only which is appropriate to (b). I have said enough to show that it is not safe to build upon the fine shades of meaning of the word “provision,” but the balance is, I think, in favour of giving to the expression, “being a provision which was made before,” the second meaning that I have indicated. For one does not speak of “making” a provision, if by provision one means a clause or section.

So, my Lords, I come back to the simple question, whether provision is made by a testator for his beneficiary until he is dead. I do not doubt that, if asked, he might say he had made provision by his will, eg, for his wife. It is possible that she, if she knew the contents of his will, might say that he had made provision for her. But this is surely a loose and somewhat elliptical way of saying that, if he died without altering his will, there would be found to be provision made for her. I fail to see how provision can be made, how something can be provided, until there is vested in somebody some right known to the law. Until a testator is dead, the beneficiaries under his will have no better provision than have the next of kin from their intestate ancestor. In my view, sect 25 must be

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read as dealing not with a spes successionis, nor with an expectation which rests upon a document liable at any moment to be torn up and having no force in the law, but with rights known to the law and enforceable by one man against another.

My Lords, I have said that the third condition, viz, that the provision should not have been varied after the war date, had some significance. The importance of it, I think, is this, that it points to some act by the parties liable to pay and entitled to be paid the annual sum: it assumes rights in existence at the war date and afterwards varied, as eg, where an annuitant under a will and the residuary legatees agree that in view of the increased rate of tax some adjustment shall be made. I can see no sense or reason in it, if it is applied to the unilateral act of a testator. He is at all times master of the situation: why should application of the section depend on whether he does or does not vary his disposition? I think that the Court of Appeal did not sufficiently notice this aspect of the case. Lord Greene MR was, logically enough, driven to the view that the section applies, even though the testator has after the war date confirmed his will, for, as he justly says, if he has confirmed it he has not varied it. With all respect, I think that so strange a result might have led him to the view that the section has no relevance except where the variation is of rights accrued by virtue of a provision already made.

Coming to the conclusion that Re Waring was wrongly decided and that in this case sect 25 does not apply because the testator survived the war date, I do not think it necessary to say much about the other questions. I would, however, take this opportunity of correcting what I conceive to be an error in my judgment in Re Tredgold. The Court of Appeal had in Re Waring expressly left open the question whether their decision in that case would be applicable in a case in which the testator had by a codicil made after the war date expressly confirmed his will made before that date. In Re Tredgold I decided that it did not. But I do not think that I was justified in so deciding; for in Re Waring there had been a republication of the will by a codicil, though it contained no express confirmation of it, and upon further consideration I do not think that there is any valid distinction for this purpose between republication with and without confirmation. I ought therefore to have followed the decision in Re Waring, in which case Re Tredgold might itself have reached your Lordships’ House and the decision in Re Waring have been corrected at an earlier date. I would, however, add that, if it were necessary for me in this House to reconsider the effect of a republication of the will after the war date, I should adopt the view taken upon this point by my noble and learned friend Lord Porter, whose opinion I have had the privilege of reading.

I will not detain your Lordships by a consideration of the question whether the further dispositions made in regard to the appellant’s annuity by the fourth codicil amounted to a variation, so that the operation of the section would in any event be excluded. For, as I have already indicated, the question is for me an unreal one.

Upon the final questions raised by the appeal and cross-appeal, whether the provision in the testator’s will and codicils was for a “stated amount” and which was the “stated amount” I respectfully adopt the reasoning and conclusions of Lord Greene MR and cannot usefully add anything.

I would allow the appeal and dismiss the cross-appeal.

LORD UTHWATT. My Lords, by the Finance Act, 1941, passed on 23 July 1941, income tax for the year 1941–42 was directed to be charged at the standard rate of 10s in the £ for the year 1941–42. By sect 25 of the Act certain annuities expressed to be given tax free were dealt with. It is necessary to quote only sect 25(1) which runs as follows:

‘‘Subject to the provisions of this section, any provision, however worded, for the payment, whether periodically or otherwise, of a stated amount free of income tax, or free of income tax other than surtax, being a provision which (a) is contained in any deed or other instrument, in any will or codicil, in any order of any court, in any local or personal Act, or in any contract, whether oral or in writing; and (b) was made before Sept. 3, 1939; and (c) has not been varied on or after that date, shall, as respects payments falling to be made during any year of assessment, the standard rate of income tax for which is 10sin the £, have effect as if for the stated amount there were substituted an amount equal to twenty twenty-ninths thereof.’’

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The arithmetical result is that the gross amount of the sum payable in any year where the standard rate is 10s is computed as if the standard rate were 5s 6d—the rate which obtained in the year 1938–1939.’

The testator in this case died on 15 January 1942, having by his will dated 10 November 1936, and a codicil dated 3 December 1938, given certain tax-free annuities, and having by codicils dated 9 March and 14 December 1940, confirmed his will and former codicils.

The first question which arises for decision is whether sect 25(1) applies to a provision made by a testamentary disposition—assumed for this purpose to be made only by a will dated before 3 September 1939—of a testator who died on or after 3 September 1939. The provision is contained in a will. Was the provision so contained made before that date?

Sect 25(1), to my mind, admits of more than one construction and with Lord Greene MR in Re Waring I think it permissible to consider the nature of the problem with which the legislature chose to deal. Lord Greene MR made the following observations ([1942] 2 All ER 250, at p 253):

‘… it is to be observed that when a testator executes his will he is putting down his intention—his language expresses his intention, just as the parties to a deed express their intention, and it is a document which he knows perfectly well will have the effect which he intends it to have if he dies the next moment, or if he dies in … 10 years’ time … Testators making their wills before Sept. 3, 1939, would, ex hypothesi, have been making their wills in reference to a state of facts quite different from that for which sect. 25 was drafted. If the argument for the respondents were correct, it would mean that those testators who died in the interval between Sept. 3, 1939, and the date when the 10s income tax was imposed, which was in the Finance Act, 1941, would, at their peril, have had to make new wills or codicils in contemplation of this exceptional rise in income tax. It seems to me that the legislature cannot have imputed it to testators’ prevision of subsequent legislation at the time when they made their wills. What has happened is that testators having made their wills, the legislature intervened and adjusted the burden between the classes of persons benefiting under the wills. I see no reason whatever why the legislature should have dealt with the case in the way in which the respondents claim here; but I can see many excellent reasons why they should not. That makes it easier for me to accept what, in my view, is the clear prima facie meaning of this language.’

I find myself unable to agree with this method of approach in an effort to ascertain the general intention of the legislature, or with the conclusion at which Lord Greene MR arrived. The position dealt with by sect 25 was the existence of instruments providing for tax-free annuities. The standard rate of income tax might at the beginning of the war be expected to rise during its continuance. The section proceeds on the footing that prior to 3 September 1939, parties would not envisage the possibility of the standard rate of income tax rising to 10s in the £. Their assumed intentions on that basis were not to be disappointed. But on and after 3 September 1939, so far as income tax was concerned, parties ordered their affairs at their own risk. The obligor is held to a bargain made on or after that date. What, consistently with the rule laid down as respects obligors, is the treatment one might expect to be accorded to persons living on 3 September 1939, who have prior to that date made a will or codicil giving a tax-free annuity? Under the Act the question whether those persons did or did not survive its passing is immaterial. On one view, the testamentary instruments of all such persons are to be affected by the Act: on the other view, these testamentary instruments are to be left to mean what they say. Which of those views might one naturally expect the legislature to intend and express? The latter is, I think, the natural alternative to adopt. The testator who is alive at the war date has the right freely to alter his testamentary dispositions. The result of the Act in the cases to which it applies is to alter the operative effect of freely expressed intentions on a matter not contrary to the public interest. To my mind it would be wrong in these circumstances to impute to the legislature any intention to go beyond the necessities of the case. If the language of the section so admits, the section should, therefore, in my opinion, be construed as dealing only with an untoward situation which the interested parties could not be expected to consider and deal with. And the line was drawn at 3 September 1939. Why, as regards a person living on that date, able freely to deal with the matter as he thought fit, and having the same prescience as to the future course of events as a contracting party,

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should it be imputed to the legislature that its intention was to disturb an arrangement he had chosen to maintain, and force upon him an artificial scheme? He does not need help. Why thrust it upon him? He, if so minded—a common form is ready to hand in the books of precedents—could completely cover the ground by providing for any and every change in the rate of tax.

Nor does a consideration of the subject-matter dealt with suggest any special need for intrusion by the legislature in the case of a testator living on the war date. The contrary, indeed, appears to be the case. The object of giving an annuity free of tax is to allow the annuitant so much spending money. Solicitude for the welfare of the annuitant and personal interest in him appear from the nature of the gift. Tax-free annuities given by a testamentary disposition may be fairly assumed to be at all times well to the forefront of the testator’s mind.

I am unable, therefore, to see any good reason why the legislature should regard as needing alteration the testamentary arrangements of testators living at 3 September 1939, in respect of tax-free annuities, if no transaction made on or after that date is regarded as demanding interference. It is for these reasons that I differ from Lord Greene MR in the passage I have quoted. I venture the comment that, in reaching his conclusion, Lord Greene MR took into account only testamentary dispositions, and that a conclusion embracing cases where the testator survives the date of the passing of the Act is reached by considering only the case of a testator who did not so survive. To this it might be added—not by way of comment—that if Re Tredgold were rightly decided, the conclusion of Lord Greene MR as to the intention of the legislature includes the case where a testator has at any time after 2 September 1939, chosen in express terms to confirm his will. Whatever view the law may take of the operative effect of such a confirmation, that confirmation at least means to a testator, “I now mean what I then said.”

One further general observation may be made. Testamentary instruments appear in sect 25(1) of the Act in the middle of a list of other instruments all of which were in effective operation on 3 September 1939, and the section applies in the same way as respects the effect of the provision whatever be the character of the instrument in which the “provision” is contained. The general lay out of the section, as well as the substance of the matter, suggests that the legislature was dealing with a closed series of transactions involving, therefore, only the testamentary dispositions of testators who died before the war date. My Lords, in my view, the word “provision” is an ambiguous word. It may mean the clause in the instrument; the word “provision” in the phrase “subject to the provisions of this section” appearing in the forefront of the section may have that meaning. But the word may also mean the subject-matter resulting from the legal operation of a clause and, when it is used in that sense, the phrase commonly adopted in describing the act done is “provision has been made.” The ambiguity in the word “provision” arises from the fact that, when it is sought to describe generally provisions in the latter sense, resort must be made to the source from which they spring, viz, provisions in the former sense. In my opinion, the word “provision” in sect 25(1) is used in the latter sense. Read in that sense throughout the section, I find no difficulty in giving a sensible meaning to all parts of the section without putting any gloss on any other words appearing in it. One qualification only needs to be made to this statement, viz, that the word “provision” where secondly used in subsect (5)(b) is used in the former sense. But this, though relevant, is by no means decisive. Against this exceptional use there may be set the fact that the use of the phrase in subsect (5): “This section shall not … (c) apply to the emoluments of any office … or (d) … dividends or shares of profits“—the section, be it remembered, applies to a provision—goes on the footing that “provision” means the thing provided, not the source from which the thing is provided.

In support of my view some other matters may be referred to. There is first the outstanding fact that the critical date is attached to the provision made—not to the document in which it is contained. That I do not take to be a draftsman’s slip. Secondly, I attach importance to para (c) of sect 25(1)—the provision is to be one “which has not been varied on or after that date.” Generally speaking, variations are made in the effect of a clause, not

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its terms, and, leaving aside the disputed case of testamentary instruments, it would be only the effect—not the language—of a clause that would excite the attention of interested parties. Again, para (c) must receive the same construction, whatever be the instrument in which the provision is found. Among the instruments mentioned is an Act of Parliament. A provision in the former sense contained in an Act of Parliament can be varied only by another Act of Parliament (I leave out of consideration the exceptional case where the Act provides some other means of variation). An agreement between the parties interested would however be effective to vary a “provision” contained in an Act of Parliament in the latter sense. I do not conceive it to be possible that the section in such a case was intended to apply, whatever the parties interested agreed, unless there had been another Act of Parliament. Why should they not be free to make their own bargain? Provision in the latter sense must, therefore, have been intended.

If this be the meaning of the word “provision,” it follows that there is no provision made by testator until he dies and his will becomes an instrument having an operative effect in law. The Act accordingly does not, in my opinion, apply to the testamentary dispositions made by Lord Berkeley. I would add that I am in complete agreement with the view expressed by my noble and learned friend Lord Thankerton that the presumed intention of the legislature in a taxing Act is that the incidence of taxation should be the same in England and in Scotland, with the consequence that, if a taxing Act is reasonably capable of two constructions, one leading to equality of incidence in the two countries and the other to inequality, the former construction should be adopted.

My conclusion renders it unnecessary to express any opinion upon the other points which were argued. I content myself with saying that I agree with the views expressed by Lord Greene MR in reference to “stated amount” and that, if the view which I take as to the meaning of “provision” is correct, the observations made by Lord Greene MR on the question of “variation” need reconsideration

I would allow the appeal and dismiss the cross-appeal.

Appeal allowed. Cross-appeal dismissed.

Solicitors: Field, Roscoe & Co (for the appellant); Garrard, Wolfe & Co (for the respondents R G W Berkeley and R J G Berkeley); Culross & Co (for the respondent Sybil Deane Jackson).

C StJ Nicholson Esq   Barrister.

Congreve and Congreve v Inland Revenue Commissioners

[1946] 2 All ER 170

Categories:        TAXATION; Income Tax, Tax Avoidance, Surtax        

Court:        KING’S BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        30 APRIL, 1, 2, 3, 16 MAY 1946        

Income Tax – Sur-tax – Avoidance of tax – Transfer of assets to company abroad – Transfer of assets to company in United Kingdom subsequently moved abroad – By whom transfer must be made – “Associated operation” – What income deemed income of transferor – Finance Act, 1936 (c 34), s 18, Sched II, para 6 – Finance Act, 1938, (c 46), s 28.

The appellants, who were husband and wife, were both ordinarily resident in the United Kingdom, but domiciled abroad. A series of complicated transactions, the great bulk of which were undoubtedly entered into in order that the appellant wife might escape the incidence of income tax and sur-tax, resulted in the transfer of income to persons abroad. On an appeal against assessments made under the Finance Act, 1936, s 18, and Sched II para 6, as amended by the Finance Act, 1938, s 28, the Commissioners for the Special Purposes of the Income Tax Acts found that the appellant wife was an individual who had, by means of a transfer in conjunction with associated operations, acquired rights by virtue of which she had, within the meaning of sect 18, power to enjoy the income covered by the assessments, which was income payable to persons resident or

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domiciled out of the United Kingdom. The main questions for the decision of the court were: (i) Was it a condition precedent to the working of the section that the transfer must be made by the appellant wife? (ii) Whether the section applied to cases where the appellant wife transferred shares to a company in the United Kingdom, which, after the transfer, removed out of the United Kingdom? (iii) What income, found to be the income of a person out of the United Kingdom, which the appellant wife had power to enjoy, was to be deemed to be the income of the appellant wife or her husband?:—

Held – (i) It was a condition precedent to the working of the section that the transfer must be made by the person striving to avoid liability to tax; the section had no application to any transfer of assets unless it was a transfer made by an individual ordinarily resident in the United Kingdom and by virtue or in consequence of the transfer (either alone or in conjunction with associated operations) income became payable to persons resident or domiciled out of the United Kingdom.

(ii) the only effect of the transfer of shares to a company in the United Kingdom, which, after the transfer, removed out of the United Kingdom, was to make income payable to the transferee company, which was still resident and domiciled in the United Kingdom and the income only became payable to a person out of the United Kingdom by reason of the company moving out of the United Kingdom, not by the transfer; the exhaustive definition of “associated operations,” in subsect 2, was confined to operations in relation to any of the assets transferred or assets representing the assets transferred or income therefrom, and the removal of the company, in whom the assets were vested, out of the United Kingdom, could not be so described; consequently the section did not apply.

(iii) on a true view of the section it was only the benefit which might at any time accrue to the individual as a result of the transfer and any associated operation that the individual could be said to enjoy; consequently it was only income referable to assets which the appellant wife transferred herself or caused to be transferred that was to be deemed to be her income for the purposes of the Income Tax Acts and not the whole income of the company concerned.

Notes

It is clear from the preamble to sect 18 of the Finance Act, 1936, that the target aimed at by the legislature is the individual who is endeavouring to avoid the incidence of tax by transferring assets abroad. But when the transfer of assets is not carried out by the person ordinarily resident in the United Kingdom in consequence whereof income becomes payable to persons resident or domiciled out of the United Kingdom, it is held that the transaction is not affected by the section.

For the Finance Act, 1936, s 18, see Halsbury’s Statutes, Vol 29, p 230.

Cases referred to in judgment

MacDonald v Inland Revenue Comrs [1940] 1 KB 802, Digest Supp, 109 LJKB 609, 23 Tax Cas 449.

Howard de Walden (Lord) v Inland Revenue Comrs [1942] 1 All ER 287, [1942] 1 KB 389, 111 LJKB 273, 25 Tax Cas 121.

Corbett’s Executrices v Inland Revenue Comrs [1943] 2 All ER 218, 169 LT 166, 25 Tax Cas 305.

Case Stated

Case Stated under the Income Tax Act, 1918, s 149 and the Finance Act, 1927, s 42(7), by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King’s Bench Division of the High Court of Justice.

1. At meetings of the Commissioners for the Special Purposes of the Income Tax Acts held on 21 October 1942, 2, 3, 4 November 1942 and 27 September 1944, Mrs M G Glasgow Congreve and A C Congreve (hereinafter called “Mrs Congreve” and “Mr Congreve” respectively) appealed against the following assessments: Mrs Congreve against an assessment to sur-tax in the sum of £15,059 for the year ending 5 April 1936; Mr Congreve against assessments to sur-tax in the sums of £17,281, £26,314, £40,061, £70,066, £117,803 and £97,866 for the years ending 5 April 1936 to 5 April 1941 inclusive; and against assessments to income tax in the sums of £10,000, £20,000, £40,000, £60,000 and £60,000 for the years ending 5 April 1937 to 5 April 1941 inclusive.

2. All the above assessments are raised under the provisions of the Finance Act, 1936, s 18, and Sched II, para 6, and of the Finance Act, 1938, s 28. The appeals raise the question whether the said assessments were correctly made by reason of the matters hereinafter set out.

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The following table sets out the respective dates of registration, the full names and the short labels of the several English, Canadian and American companies hereinafter mentioned:

June 17, 1912        Humphreys & Glasgow Ltd., an English Company        an Hereinafter called        Humphreys & Glasgow (England)        

       English Company        ,,        Glasgow (England)        

Dec. 29, 1927        International Gas Processes Corporation, an American company        ,,        International Gas.        

Apr. 21, 1932        Humphreys & Glasgow (Canada) Ltd., a Canadian company        ,,        Humphreys & Glasgow (Canada)        

May 5, 1932        Rockbridge Ltd., A Canadian Company        ,,        Rockbridge        

Nov. 29, 1933        Humglas Ltd., A Canadian company        ,,        Humglas        

Nov. 18, 1936        Margreve, Ltd., an English company        ,,        Margreve        

Oct. 15, 1937        73 Investment Trust Ltd., an English company        ,,        Seventy Three        

Oct. 18, 1937        Marglas Ltd., an English company        ,,        Marglas        

Nov. 29, 1937        Glow Investment Trust Ltd., an English company.        ,,        Glow        

3. Mr Glasgow, the father of Mrs Congreve, was born about 79 years ago in the United States of America of American parents. He is and always has been an American citizen domiciled in one of the United States. In 1901 Mr Glasgow married an American lady. She is still living. Mr Glasgow came to England in 1892 and (except during the 1914–1918 war) resided in England from that time until September, 1939, when he gave up his residence in England and returned to America with Mrs Glasgow. They have not been back since. Shortly after coming to England in 1892, Mr Glasgow entered into a partnership with another American, Dr Humphreys. They carried on business in England under the firm name of Humphreys & Glasgow. Their business was the designing and supplying of plant for the production of carburetted water gas. Mr Glasgow became the sole owner of the business and in 1912 he sold it to Humphreys & Glasgow (England). Mr Glasgow became the owner of the bulk of the shares, and until December, 1927 owned a little over 93,000 shares out of 100,000 issued, the remainder being held by several employee directors of the company. Transactions thereafter relating to the said 93,000 shares are referred to in the following paragraphs …

4. Mrs Congreve was born in London, where she resided with her parents, accompanying them on their trips to the United States of America. From 1914 to 1919 she lived entirely in America. Upon reaching her majority Mrs Congreve took active steps to confirm her American citizenship and domicil and exercised her vote in New York City, although she continued to reside in the United Kingdom. On 30 July 1935, Mrs Congreve was married to Mr Congreve. Mr Congreve was ordinarily resident in the United Kingdom at all material times: as was later agreed (see para 21 of this case) he was at all material times domiciled in Eire. From time to time Mrs Congreve has received by way of gift from her father or her mother substantial American investments and she has also received substantial legacies from American relatives. Mrs Congreve has been a director of Humphreys & Glasgow (England) since September, 1939. The said assessment to sur-tax made upon her for the year ending 5 April 1936 is in respect of her income from 6 April 1935 to 30 July 1935, the date of her marriage to Mr Congreve.

5. Humphreys & Glasgow (England) was incorporated in England on 17 June 1912 with an authorised share capital of 100,000 shares of £1 each. It acquired from Mr Glasgow the business then owned by him of Humphreys & Glasgow. The shareholdings in Humphreys & Glasgow (England) were, in consequence of the matter hereinafter set out, held on the respective material dates as follows:

Name        January 1929        May, 1933        July 16, 1937        

Mr. Glasgow                28,083                28,083                —                

International Gas                60,000                —                —                

Humphreys & Glasgow (Canada)                —                65,000                —                

Mrs. Congreve                —                —                48,083                

Mr. Congreve                —                —                3,000                

Margreve                —                —                17,000                

Consolidated Nominees                —                —                28,000                

Other Shareholders                6,917                6,917                3,917                

       100,000                100,000                100,000                

The voting power of the shares was one vote per share. As appears from paras 6 and 7 hereof Mrs Congreve held from 16 April 1932, the whole of the issued capital of

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International Gas and in May, 1933 all the shares in Humphreys & Glasgow (Canada). As appears from para 10 hereof Mrs Congreve was on 16 July 1937, the owner of all the issued shares of Margreve save 50 ordinary which she purchased in October, 1937, the issued capital of Margreve being at that time £105,000 of which £100,000 was in preference shares and £5,000 in ordinary shares. The 28,000 shares held by consolidated nominees were so registered at that date. In fact they had been purchased by Margreve on 23 November 1936, from Humphreys & Glasgow (Canada): see para 10 hereof. It will be seen therefore that Mrs Congreve held at all material times directly or indirectly the controlling majority of the shares in Humphreys & Glasgow (England). In 1933 Humphreys & Glasgow (England) sold its foreign investments to Humglas (referred to later in para 9 hereof) receiving in exchange 995 out of 1,000 shares of no par value in Humglas Ltd and its class “A” debentures of the nominal value of $1,290,000. Mr Glasgow was the chairman and managing director of Humphreys & Glasgow (England) from the date of its incorporation until 30 September 1939, when he resigned his managing directorship, as from that date. He continued as chairman without remuneration. Mr and Mrs Congreve have respectively been directors of Humphreys & Glasgow (England) from 2 December 1936, and 11 September 1939. On 1 December 1937, Humphreys & Glasgow (England) sold the Humglas debentures to Glow (hereinafter referred to in para 13) for £257,500 payable in cash.

On 1 December 1937, Humphreys & Glasgow (England) acquired for £257,500, debentures issued by Glow of the nominal amount of £515,000. Humphreys & Glasgow (England) still holds these Glow debentures which are repayable at a premium of 20 per cent. At the date of the hearing before us Mrs Congreve owned 93,455 of the 100,000 issued shares of Humphreys & Glasgow (England).

6. International Gas was incorporated in the State of Delaware on 29 December 1927. By offer dated 9 December 1927, made by Mr Glasgow and accepted on 31 December 1927, by the board of International Gas, the latter acquired 60,000 shares of Humphreys & Glasgow (England) from Mr Glasgow in exchange for 11,116 shares of stock of International Gas of $100 each being the whole of its issued capital. On 16 April 1932, Mr Glasgow while in America made a gift to his daughter of these 11,116 shares. By offer dated 22 April 1932, made by Humphreys & Glasgow (Canada) and accepted by letter dated 25 April 1932, International Gas sold to Humphreys & Glasgow (Canada) Ltd its 60,000 shares of Humphreys & Glasgow (England) together with cash of approximately $3,400 (USA) which it then owned. The purchase moneys were satisfied by the issue of 995 shares of no par value of Humphreys & Glasgow (Canada) together with 424 series “A” redeemable sterling demand debentures of £500 each (total par value £212,000) part of a total authorised issue of £230,000 par value. The said debentures were non-interest bearing payable on demand at the Dominion Bank Ltd, King William Street, London, to which all the dividends of Humphreys & Glasgow (England) were directed to be paid. The said debentures bore interest at 6 per cent per annum from and after demand for repayment. The said purchase was completed on 19 April 1932. On or about 27 April 1932, International Gas went into liquidation, so that when the assets of International Gas were sold to Humphreys & Glasgow (Canada), Miss Glasgow (now Mrs Congreve) was the sole shareholder of International Gas, and by direction of that corporation the shares of Humphreys & Glasgow (Canada) were allotted direct to Miss Glasgow. The aforesaid debentures also became Miss Glasgow’s property. International Gas had received dividends annually on its 60,000 shares of Humphreys & Glasgow (England).

7. Humphreys & Glasgow (Canada) was incorporated by Dominion of Canada charter on 21 April 1932, with a share capital of 1,000 shares of no par value, and a Canadian directorate which received no directors’ fees. The income of Humphreys & Glasgow (Canada) came solely from the shares of Humphreys & Glasgow (England) immediately hereinafter referred to. No dividends were paid by Humphreys & Glasgow (Canada) the whole of its income being accumulated at the aforementioned branch of the Dominion Bank in London. At this bank the debentures issued to Mrs Congreve were repayable on demand. It acquired from International Gas the 60,000 shares in Humphreys & Glasgow (England) in consideration of the issue of the 995 shares and the £212,000 debentures referred to in para 6 hereof. On 1 May 1932, Miss Glasgow sold to Humphreys & Glasgow (Canada) 5,000 shares in Humphreys & Glasgow (England) which she previously held in her own right. They had been given to her by her father. The consideration for this sale was the issue to Miss Glasgow of further debentures in Humphreys & Glasgow (Canada) of £18,000 which made up the total authorised issue of £230,000. On 23 March 1936, Humphreys & Glasgow (Canada) agreed to buy from Mr Glasgow 28,000 shares of Humphreys & Glasgow (England) at a price to be fixed by valuation. This was subsequently fixed at £3 5s 0d per share ex dividend. These 28,000 shares were sub-sold by Humphreys & Glasgow (Canada) to Margreve as mentioned in para 10 hereof. On 16 July 1936, the Finance Act, 1936, s 18 became law. In Nov, 1936, Humphreys & Glasgow (Canada) applied for a surrender of its charter and the 65,000 shares, including the said 5,000 shares, of Humphreys & Glasgow (England) held by it, were transferred to Mrs Congreve on a

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distribution in specie of the assets in the winding up. These 5,000 shares have remained in her possession ever since. The date of the actual dissolution of Humphreys & Glasgow (Canada) was 13 October 1937.

8. Rockbridge was incorporated by Dominion of Canada charter on 5 May 1932, with a capital of 1,000 shares of no par value, 995 of which were issued (as hereinafter mentioned) to Miss Glasgow or her nominees. The remaining 5 shares went to Canadian directors who received no director’s fees. On 5 May 1932, Miss Glasgow sold to this company a number of her investments in American and/or Canadian undertakings. The consideration was the issue of the said 995 shares and series “A” debentures of the nominal value of £99,000 consisting of 165 at £500 each and 165 at £100 each. All these debentures like the Humphreys & Glasgow (Canada) debentures were non-interest bearing payable on demand at the Dominion Bank Ltd, King William Street, London, and bore interest at 6 per cent per annum from the date of the demand for repayment. No dividends were paid by Rockbridge—the whole of its income being accumulated—but in December, 1935, Rockbridge redeemed £22,000 of its debentures and in order to do this without selling securities it borrowed $47,000 (USA) from Mrs Congreve which was subsequently repaid to her on 15 January 1936. On 15 January 1936, Mrs Congreve sold to Rockbridge further foreign securities the purchase money being satisfied by the issue to her of £27,000 series “B” debentures of Rockbridge, which were in exactly the same form as the aforementioned existing series “A” debentures. On or about 20 June 1936, Rockbridge agreed to transfer all its assets, namely the American and/or Canadian investments to Mrs Congreve in satisfaction of the rights attaching to the debentures of Rockbridge held by her. Rockbridge also covenanted that on or after 20 June 1936, it would carry on no business save to wind-up and surrender its charter. On 27 November 1936, Mrs Congreve transferred the said investments to Margreve: see para 10 hereof.

9. Humglas was incorporated in Canada on 29 November 1933, with an authorised share capital of 1,000 shares of no par value. The whole of its share capital was taken up by Humphreys & Glasgow (England) except 5 qualification shares which were held by the directors in Canada. Humglas acquired from Humphreys & Glasgow (England) a number of foreign investments. The result of this transaction was that Humphreys & Glasgow (England) no longer remained liable to income tax on income arising from the said foreign investments nor did Humglas pay United Kingdom income tax on these investments as it was resident abroad. The purchase money was paid by the issue of $1,290,000 class “A” debentures. These debentures were non-interest bearing payable on demand but carried interest at 6 per cent per annum from the date of demand for repayment. On 1 December 1937, as appears in para 13 hereof, these debentures were sold by Humphreys & Glasgow (England) to Glow in consideration of an issue of £515,000 debentures at 50 per cent discount. Humglas is now and always has been controlled by its board in Canada. Its directors are all resident in Canada or USA. No dividends were ever paid by Humglas. Both at the time of the incorporation of Humglas and at the time of the sale of its debentures to Glow, Mrs Congreve held directly or indirectly a controlling interest in Humphreys & Glasgow (England): see shareholdings in para 5 hereof.

10. Margreve was registered in England on 18 November 1936. The original capital of £1,100 was divided into 1,000 3 per cent cumulative preference shares and 100 ordinary shares of £1 each. The preference shares took the whole of the surplus assets on a winding up. Margreve made the following purchases: (1) From Mrs Congreve on 23 November 1936, for £56,666 13s 4d payable in cash, 17,000 shares of £1 each in Humphreys & Glasgow (England). These 17,000 shares were part of the 65,000 shares which passed to Mrs Congreve on the winding up of Humphreys & Glasgow (Canada): (ii) From Humphreys & Glasgow (Canada) on 23 November 1936, for £93,333 6s 8d, (ie, at £3 6s 8d a share) payable in cash, 28,000 shares of £1 each in Humphreys & Glasgow (England). These 28,000 shares did not form part of the 65,000 shares acquired by Humphreys & Glasgow (Canada) as hereinbefore set out. They belonged to Mr A G Glasgow who on 23 March 1936, had agreed to sell them to Humphreys & Glasgow (Canada) at a price which was subsequently fixed at £3 5s 0d per share. Margreve took a transfer direct from Mr Glasgow, but the payment was made to Humphreys & Glasgow (Canada): (iii) From Mrs Congreve on 27 November 1936, a number of securities (the American and/or Canadian investments derived from Rockbridge and some other foreign investments) the price to be market value. These securities were ultimately valued at £232,283 2s 7d which price was paid in cash to Mrs Congreve by Margreve.

On 23 November 1936, the capital of Margreve was increased by the creation of a further 99,000 3 per cent cumulative preference shares. On 27 November 1936, Margreve allotted to Mrs Congreve 10,000 3 per cent cumulative preference shares at the price of £5 per share payable in cash, payable 10s per share down and £4 10s 0d per share before 31 December 1936. On the same date it was arranged that Mrs Congreve should take up a further 30,000 of the preference shares of Margreve at £5 per share payable as to £91,000 by USA dollars in New York at the current rate of exchange and as to the balance of £59,100 in sterling in London. On 3 December 1936, Mrs Congreve took up for

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cash at par 50 ordinary shares of Margreve, such shares being allotted to the trustees of a charitable trust entered into by Mrs Congreve. On 8 December 1936, the capital of Margreve was increased by the creation of 4,900 ordinary shares. This made the nominal capital of Margreve £105,000 of which £100,000 was in preference shares and £5,000 in ordinary shares. On 25 January 1937, Mrs Congreve took up a further 8,000 preference shares in Margreve at £5 per share payable in cash. On 16 March 1937, Mrs Congreve took up a further 40,000 3 per cent preference shares of Margreve at £5 per share payable in cash. On 14 April 1937, Mrs Congreve took up a further 11,998 3 per cent preference shares of Margreve at £5 per share payable in cash. This with the two signatory shares held for her made her the owner of all the 100,000 3 per cent preference shares of Margreve. On 30 July 1937, the Finance Act, 1937, became law. By sect 19 thereof a new tax called National Defence Contribution was levied on trades and businesses, including the holding of investments, carried on in the United Kingdom. In October, 1937, the 50 ordinary shares which had been allotted to the trustees of her charitable trust were purchased by Mrs Congreve for £500. This made Mrs Congreve the beneficial owner of all the issued preference and ordinary capital of Margreve. At an extraordinary general meeting of Margreve, held on 21 October 1937, resolutions were passed giving effect to the following: (i) The directors were authorised to create a series of 70 debentures of £5,000 each, as per their recommendation: (ii) The special rights and privileges attached to the 100,000 3 per cent cumulative preference shares (including any arrears of dividend accrued on those shares) were cancelled and extinguished and the said preference shares whether issued or not issued, were converted into and became ordinary shares ranking pari passu in all respects with the existing 5,000 ordinary shares of £1 each. At this meeting of Margreve it was also resolved to capitalise the sum of £350,000 being part of the sum standing to the credit of share premium reserve and that a bonus of £350,000 be declared and such bonus applied on behalf of the persons who, on 21 October 1937, were the holders of the ordinary shares in the capital of Margreve, in paying up in full £350,000 debentures of Margreve carrying interest as from the date of issue, at the rate of 6 per cent per annum, payable half yearly in advance. At a board meeting of Margreve held on 21 October 1937, after the extraordinary general meeting, the directors capitalised the sum of £350,000 aforesaid and distributed the same, as a special capital bonus, amongst the holders of the ordinary shares and applied the said £350,000 in paying up in full the amount payable on 70 debentures of £5,000 each, mentioned above. As at this time Mrs Congreve owned all the issued ordinary share capital of Margreve, the whole of the said capital bonus was payable to her and the whole of the said 70 debentures were issued to her, payment for the latter being satisfied by the said bonus monies. Up to this time Mrs Congreve had been a director of Margreve but on 25 October 1937, she resigned her directorship. At the board meeting of Margreve held on 25 October 1937, there was produced an allotment letter in respect of £215,000 out of the £350,000 debentures duly renounced in favour of Seventy Three (hereinafter referred to in para 11) which renunciation was accepted, and, in accordance therewith, the name of Seventy Three was entered on the register as the holder of such £215,000 nominal value debentures. The remaining £135,000 nominal value debentures were duly registered in the name of Mrs Congreve. At this board meeting it was also reported that Margreve had sold its 45,000 ordinary shares of £1 each in Humphreys & Glasgow (England) on which it had received the July 1937 dividend, to Marglas (hereinafter referred to in para 12); and Margreve was thus left holding assets solely in the form of foreign shares and securities. At this meeting of the board of Margreve on 25 October 1937, it was resolved that the payment of the first half year’s interest in advance on the £135,000 debentures, registered in the name of Mrs Congreve, be fixed for this date, viz, 25 October 1937, and the appropriate cheque for such interest, less tax, was drawn. The aforesaid interest of some £10,000 exhausted the income of Margreve received between April and Oct 1937. It was further resolved that the fixing of the date for the payment of the first half-year’s interest on the £215,000 debentures, registered in the name of Seventy Three be left over for the time being. At an extraordinary general meeting of Margreve held on 25 October 1937, a special resolution was passed whereby new articles of association were approved and adopted in substitution for and to the exclusion of existing articles and regulations. These new articles provided, inter alia: (i) That the number of directors should not be less than two nor more than five (the maximum number was subsequently increased to six on 5 April 1938, by ordinary resolution) and that not more than two of the directors, for the time being, should be resident in the United Kingdom. (ii) That no meeting of the directors be held in the United Kingdom: (iii) That general meetings held only outside the United Kingdom should be competent to pass any resolution binding upon or affecting the directors or any of them or the business or affairs of the company conducted by the directors, and that all general meetings should be held at such time and place outside the United Kingdom as might be determined by the directors. A meeting of the directors of Margreve, who at this time were Mr Mengel, Mr Crawley (both of London) and Mr Scarborough, of Jersey,

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was held in the Channel Islands on 26 October 1937. At that meeting Mr Richardson and Mr Gaudion (both resident in the Channel Islands) were appointed additional directors. At the same meeting of the board of Margreve it was resolved that the date for the payment of the first half year’s interest in advance on the £215,000 debentures, registered in the name of Seventy Three, be fixed for that day and an appropriate cheque for such interest in favour of Seventy Three was signed and paid; and it was also resolved to repay at par £135,000 debentures of this company held by Mrs Congreve, of which she had given notice of demand for payment. Subsequent to 26 October 1937, all directors’ meetings and general meetings were held in and the company’s business transacted wholly from the Channel Islands to the date upon which they were occupied by the enemy in June, 1940. This happening for the moment brought the company’s activities to a standstill inasmuch as the provisions of the articles prevented any meetings of the directors being held in Great Britain. On 1 August 1940, a board meeting was held in Douglas, Isle of Man, at which three persons resident in the Isle of Man were appointed directors in the place of the three previous persons who were resident, at the time of their appointment, in the Channel Islands. Office accommodation was secured at 50, Athol Street, Douglas, Isle of Man, at which address all the subsequent meetings of the board and the general meetings of the shareholders have been held and the whole of the company’s business conducted therefrom. The banking account of Margreve was transferred by the Westminster Bank Ltd from their Channel Islands Branch to their branch in Douglas, Isle of Man, at which Branch the account has been held since 1 August 1940. Margreve has never paid a dividend.

11. Seventy Three was incorporated in England on 15 October 1937, with a nominal capital of £1,000 divided into 1,000 shares of £1 each. Only 19 shares of Seventy Three have at any time been issued, one each of which is held by nineteen persons, employees of Humphreys & Glasgow (England), in their own right, each of whom paid for his own share out of his own moneys. At the first meeting of the directors of Seventy Three held in London, on 21 October 1937, it was resolved to create £430,000 worth of debentures namely a series of 86 of £5,000 each, repayable at a premium of 20 per cent. The debenture holders had options to require repayment on demand in various currencies at fixed rates. These debentures were applied for on that day at 50 per cent discount by Mrs Congreve, who paid a cheque for £215,000 being payment in full therefor. At that meeting of the board of Seventy Three there was purchased from Mrs Congreve £215,000 nominal 6 per cent debentures of Margreve, the same being paid for in cash at par. An extraordinary general meeting was held in London on 25 October 1937, at which all the shareholders were present, and new articles of association were approved and adopted. These new articles provided, inter alia: (i) that the number of directors should not be less than two nor more than five (the maximum number was subsequently increased to six on 5 April 1938, by ordinary resolution) and that not more than two of the directors, for the time being, should be resident in the United Kingdom: (ii) That no meeting of the directors be held in the United Kingdom: (iii) That general meetings held only outside the United Kingdom should be competent to pass any resolution binding upon or affecting the directors or any of them, or the business or affairs of the company conducted by the directors, and that all general meetings should be held at such time and place outside the United Kingdom as might be determined by the directors. At a board meeting held on 26 October 1937, in the Channel Islands, three directors resident in the Channel Islands, were appointed to the board which then consisted of Messrs Richardson and Cheetham, both of London, as additional directors, namely, Mr Scarborough, Mr Richardson and Mr Gaudion, all resident in the Channel Islands. Subsequent to 26 October 1937, all directors’ meetings and general meetings were held in and the business transacted wholly from the Channel Islands to the date upon which they were occupied by the enemy in June, 1940. This happening for the moment brought the activities to a standstill inasmuch as the provisions of the articles prevented any meetings of the directors being held in Great Britain. On 1 August 1940, a board meeting was held in Douglas, Isle of Man, at which three persons resident in the Isle of Man were appointed directors in the place of the three previous persons who were resident, at the time of their appointment, in the Channel Islands. Office accommodation was secured at 50, Athol Street, Douglas, Isle of Man, at which address all the subsequent meetings of the board and the general meetings of the shareholders have been held and the whole of the company’s business conducted therefrom. The banking account of Seventy Three was transferred by the Westminster Bank Ltd from their Channel Islands Branch to their branch in Douglas, Isle of Man, at which Branch the account has been held since 1 August 1940. Seventy Three has paid regular dividends which were substantial in percentage but did not involve much money, owing to the small share capital. They were as follows:—April, 1939, £1 7s 6d, April, 1940, £1 10s, April, 1941, £2 0s 0d, July, 1942, £2 0s 0d, gross per share. Save for these dividends no distribution of the income of Seventy Three was ever made. The income has been accumulated in banking accounts in the name of Mrs Congreve as custodian.

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12. On 18 October 1937, Marglas was formed in England with a nominal share capital of £400 divided into 400 shares of £1 each of which 50 were 5 per cent non-cumulative preference shares of £1 each and 350 ordinary shares of £1 each. The company did not issue a prospectus but a statement in lieu of prospectus was duly filed. Margreve applied for and took up 350 ordinary shares of Marglas at the price of £386 per share payable in full in cash on acceptance, ie, £135,100. Seven only of the preference shares were issued and these to employees of Humphreys & Glasgow (England). On 21 October 1937, Marglas agreed to purchase from Margreve the 45,000 fully paid shares in Humphreys & Glasgow (England) for £135,000 payable in cash (see para 10 hereof). The entire share capital of Marglas was afterwards acquired by Mrs Congreve. She paid Margreve £135,000 for the ordinary shares and bought the 7 issued preference shares for par or thereabouts. Marglas went into voluntary liquidation on or about 22 August 1940. The company has not yet been finally dissolved.

13. Glow was incorporated in England on 29 November 1937, with an authorised capital of £1,000 all in ordinary shares of £1 each. On 1 December 1937, Glow agreed to allot 19 of its shares to 19 persons, some of whom were employees of Humphreys & Glasgow (England). On 1 December 1937, Glow agreed to acquire for £257,500 the Humglas debentures owned by Humphreys & Glasgow (England) which had subscribed in cash for the debenture issued by Glow. On 1 December 1937, it was agreed to create and issue to Humphreys & Glasgow (England) at a discount of 50 per cent debentures of a nominal amount of £515,000. The company was not entitled to repay the principal moneys secured by the debentures prior to 21 October 1957, but the holders could at any time by not less than 10 days’ notice require the company to pay off the whole of the principal moneys thereby secured with a premium of 20 per cent. After failure to pay such principal the company was required to pay interest at 6 per cent on the principal moneys until the date of actual payment. The debentures contained options to the registered holders to require payment of the principal moneys and interest in certain foreign currencies at fixed rates of exchange. No interest on the Humglas debentures has ever been paid but, from and after the transfer of the Humglas debentures to Glow, compensation was paid for not demanding repayment of the debentures. Glow had no other source of income. On 3 December 1937, the company, as in the cases of Margreve and Seventy Three, adopted new articles vesting its control abroad, the control being moved first to the Channel Islands and then in Aug 1940, to the Isle of Man. Glow has paid dividends as follows: Apl, 1939, £1 7s 6d, Apr 1940, £1 10s, 0d. Apr 1941, £2 0s 0d, July, 1942, £2 0s 0d, gross per share. Save for these dividends no distribution of the income of Glow was ever made, the income has been accumulated in banking accounts abroad in the name of Humphreys & Glasgow (England) as custodian …

15. Mrs Congreve gave evidence at the hearing which we accepted as follows: She knew nothing about any of the said transactions, everything was done by her father, she merely signed documents when asked to do so.

16. Mr Richardson gave evidence at the hearing which we accepted as follows: He was a certified public accountant in the employment of Spain Bros & Co. He dealt with private accounts and taxation matters of Mr and Mrs Congreve. He had been a director of Margreve for two years and of Seventy Three and Glow shortly after their incorporation. His firm audited the accounts of Humphreys & Glasgow (England), Margreve, Seventy Three and Glow. All his firm’s correspondence with the Revenue concerning the taxation matters of the appellants and the aforesaid companies bore his initials. All dividends payable on the 65,000 shares of Humphreys & Glasgow (England) were paid direct to the credit of International Gas at the Dominion Bank, King William Street, London, and all debentures of Humphreys & Glasgow (Canada) were payable on demand at the same bank. For the purposes of the Finance Act, 1922, s 21, Spain Bros & Co had contended on behalf of Margreve that as from the date on which it became controlled from abroad the “total income” of Margreve consisted in its dividends from United Kingdom shares, and such part of its income from foreign shares as was remitted to the United Kingdom. This contention was accepted by the Special Commissioners. It had also been contended that Margreve was not liable to the National Defence Contribution from the time when it became controlled from abroad and with regard to its income from 6 April 1937, to 25 October 1937, it was claimed to off-set the payment of £10,000 debenture interest. An appeal was taken to the General Commissioners, the Crown contending that Margreve was only entitled to the rateable proportion for the six days from 21 October 1937, to 25 October 1937. 21 October was the date when the debentures were created and 25 October the date when control was transferred abroad. The decision was given in favour of the Crown. As director of Glow and Seventy Three he was aware that some of the 19 shareholders were employees of Humphreys & Glasgow (England), but could not say as to the rest. The £430,000 debentures created by Seventy Three were repayable at a premium of 20 per cent on demand. Mrs Congreve applied for the whole of this issue at 50 per cent discount and with the money Seventy Three purchased £215,000 debentures of Margreve from Mrs Congreve. Practically the only income of Seventy

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Three was the interest on the Margreve 6 per cent debentures, which was payable in advance.

17. It was admitted on behalf of the appellants that they did not claim the benefit of the proviso to subsect (1) of sect 18 of the Finance Act, 1936, either in its original or amended form in respect of any of the aforementioned transfers of shares or debentures made by or to any of the aforementioned companies in 1936 and 1937. It was further conceded on behalf of the appellants that if the whole of the transactions hereinbefore set out, going back to the transactions in 1932, were to be treated as one interconnected series, the said proviso could not be invoked in respect of the transfers to Humphreys & Glasgow (Canada) and Rockbridge. It was admitted on behalf of the appellants that the benefit of the proviso could not be invoked in respect of Humglas.

18. At the aforesaid meetings in October and November, 1942, (see paragraph 1 above) it was contended on behalf of the appellants:—(1) that the avoidance of liability to taxation was neither the purpose nor one of the purposes for which Mrs Congreve (then Miss Glasgow) effected either of the following transfers, that is to say, (i) the transfer on 1 May 1932, of 5,000 shares in Humphreys & Glasgow (England) to Humphreys & Glasgow (Canada), and (ii) the transfer on 5 May 1932, of various American and Canadian investments to Rockbridge; (2) that none of the transactions or operations subsequent to the said transfer of May 1932 were so related to the said transfers as to constitute such subsequent transactions or operations “associated operations” related to the said transfers of May, 1932, within the meaning of the Finance Act, 1932, s 18, or the Finance Act, 1938, s 28; (3) that the said transfers of May 1932 were not “associated operations” in relation to any subsequent transfers; (4) that as, at the time when Mrs Congreve made transfers of assets to Margreve and Seventy Three, neither of those companies was a person resident or domiciled out of the United Kingdom, such transfers of assets were not transfers to which the provisions of either the Finance Act, 1936, s 18, or the Finance Act, 1938, s 28, applied; (5) that the changes of residence of Margreve and Seventy Three resulting from the removal of the seat of control of these companies from the United Kingdom were not “associated operations” related to any transfers of assets; and (6) that in any event the liabilities of the appellants under the said sections were measurable by reference not to the whole of the respective incomes of the various companies to which transfers had been made, directly or indirectly, but only to such parts of the income of those companies as arose from the assets so transferred to them or from assets acquired by the companies as a result of associated operations related to such transferred assets.

19. It was contended on behalf of the respondents:—(1) that by reason of transfers and/or associated operations, Mrs Congreve had power to enjoy the income of the following Companies:—(a) Humphreys & Glasgow, (Canada); (b) Rockbridge; (c) Humglas; (d) Margreve; (e) Seventy Three; (f) Marglas and (g) Glow; (2) that all the transactions, whether transfers or associated operations, were so linked up as to form one series; it was admitted that, with regard to the companies (c) to (g) above, no claim was put forward to the benefit of the proviso, either under the Finance Act, 1936, or in its amended form in the Finance Act, 1938; accordingly the benefit of the proviso could not be claimed in respect of any of the transactions; (3) that with regard to the transfers to Humphreys & Glasgow, (Canada) and Rockbridge, there was no satisfactory evidence that the transfer and/or any associated operations were effected mainly for some purpose other than the purpose of avoiding liability to taxation and, with regard to the years covered by the Finance Act, 1938, there was no satisfactory evidence that the purpose of avoiding liability to taxation was not the purpose or one of the purposes for which the transfer or associated operations or any of them were effected; (4) that the change of the place of residence of Margreve, Seventy Three and Glow by the removal of control abroad was an associated operation within the meaning of the Finance Act, 1936, s 18; (5) that accordingly the whole of the income of the companies mentioned in para 19(1) above ought to be deemed to be Mrs Congreve’s income up to the time of her marriage and the income of her husband after they were married; (6) that the assessments were correct in principle and should be confirmed.

20. We, the Commissioners who heard the appeal, gave our decision as follows:—The first point we have to consider is whether the proviso to subsect (1), sect 18 of the Finance Act, 1936 can be invoked in favour of Mrs Congreve in respect of the transfers made by her in 1932 to Humphreys & Glasgow (Canada) and Rockbridge. We were asked to treat these transfers as separable and independent from later transfers in respect of which it was conceded that the proviso could not be prayed in aid; it was also conceded that, if the whole of the transfers and associated operations fell to be treated as one inter-connected series, the said proviso could not be invoked in favour of Mrs Congreve in respect of the transfers to Humphreys & Glasgow (Canada) and Rockbridge, irrespective of the purpose for which those transfers were effected. On the evidence as a whole and having regard to the language of sect 18 we are quite unable to divorce the transfers to Humphreys & Glasgow (Canada) and Rockbridge from the subsequent transactions. We hold that one interconnected series of transactions took place and it has not been shewn to our satisfaction that any of the transfers and

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associated operations, referred to in this case, were effected mainly for some purpose other than the purpose of avoiding liability to taxation or, as regards assessments for later years, that such purpose was not the purpose or one of the purposes. If this part of our decision be correct it covers all points raised in respect of the said proviso. As, however, we were strongly pressed, at the hearing of the appeal, to grant an adjournment to enable Mr Glasgow to give evidence before us, we consider it desirable to consider what would be the position on the assumption that the transfers to the two said companies could be segregated from the rest. In normal cases of this kind the attendance of the person primarily responsible for the various transactions is desirable if not essential to give evidence where any question arises under the said proviso. We have no doubt that Mr Glasgow was such a person. In this case we are in the fortunate position of being in possession of the expressed purposes for which the various transactions were effected. These are contained in the letter dated 9 August 1938, written by Messrs Spain Bros to the clerk to the Special Commissioners of Income Tax on the instructions of Mr Glasgow. We consider it unlikely that Mr Glasgow would, at the present stage, advance new and other purposes. We take these as the purposes put forward and it becomes our duty to test them, as it would be our duty to test any expressed purposes, in the light of all the circumstances of the case. It is clear to our minds that a most careful regard was paid throughout to the incidence of taxation and any changes brought about therein by the legislature. It is also clear that Mrs Congreve could obtain, in certain cases, the whole of the capital assets of some of the companies concerned by presenting debentures she held for repayment at a London bank without the consent or approval of anyone. We do not reject the expressed objects as having no place in the transactions, but this power of Mrs Congreve’s alone would appear to defeat them. We were informed that Mr Glasgow was 79 years of age. It is improbable that he would be able to journey from America, where he is residing at the present, in order to give evidence before us during the war. At the conclusion of hostilities transport facilities may well be difficult and Mr Glasgow might feel disinclined to make the journey. Any adjournment granted would, in all likelihood be for a considerable time. In our opinion the facts of the present case speak for themselves as to the main purpose and on these facts as a whole we came to the conclusion that no injustice would be done in refusing the application for an adjournment. The next point we have to deal with relates to Margreve and Seventy Three. Both these companies were resident in the United Kingdom when the transfers were made to them, and it was subsequently  that they became resident abroad. It was argued, under these circumstances, that sect 18 did not apply. We were unable to accept this contention. We hold that the language of the sect is wide enough to cover the case and that the change of residence by removal of control of two companies abroad is an associated operation within the meaning of subsect (2). In our opinion Mrs Congreve, who must be taken to have been a willing party to the transactions, was the only person entitled to benefit as the result of the whole of the transfers and associated operations, this being so, we do not consider it necessary that the transactions should all have been effected by her personally in order to fall within the mischief of the section. We hold that every transaction dating from the transfers made to Humphreys & Glasgow (Canada) and Rockbridge in 1932 was either a transfer or associated operation within the meaning of the section. The last point we have to consider relates to the question of the income of the foreign companies. It was argued that, if liability was held to exist under the section, such liability did not extend to the whole of such income, but only to that part which was referable to the assets which had been transferred either alone or in conjunction with associated operations. In our opinion Mrs Congreve had power to enjoy the income of all the foreign companies concerned within the meaning of the section, she alone could benefit as the result of the transactions. We hold that the whole of the income of these companies should be brought into assessment, and that the appeals fail on all the grounds before us.

21. A further hearing took place—as appears in para 1 of this case—on 27 September 1944. In the interim Mr Congreve (who had made his return of income for the years 1935/36 to 1940/41 on the basis of being domiciled in the United Kingdom) had been advised that he had at all material times been domiciled in Eire, and Mrs Congreve (who had throughout been regarded as not domiciled in the United Kingdom up to the date of her marriage) had been advised that from the date of her marriage her domicil was in Eire. Representations were accordingly made to the Commissioners of Inland Revenue on 25 March 1943, who, after consideration of the facts, signified their assent to the view that neither Mr nor Mrs Congreve was at any material time domiciled in the United Kingdom. The question for our determination on the further hearing, therefore, was the basis on which, in the light of the facts relating to the domicil of Mr and Mrs Congreve, the liability to income tax and sur-tax for the several years under the provisions of the Finance Act, 1936, s 18, and Sched II should be computed.

22. It was contended on behalf of the appellants:—(a) that, the Finance Act, 1936, s 18(1), although it defines the income to which the provisions of the section apply,

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does not prescribe the manner in which the amount of such income is to be computed for the purposes of assessment; (b) that the computation of the amount of an assessment upon income to which the provisions of the said sect 18 apply is governed by the Finance Act, 1936, Sched II, para 4; (c) that the effect of the conjoint operation of the said para 4, r 2 of Case IV of Sched D, and rr 2 and 3 of Case V of Sched D of the Income Tax Act, 1918, is that in the case of an individual not domiciled in the United Kingdom income arising abroad, although within the scope of the said sect 18, is to be computed by reference to the sums received in the United Kingdom; (d) that, in the case of an individual, the “tax chargeable” which under the Finance Act, 1936, Sched II, para 1 is to be charged under Case VI of Sched D, is the tax computed as aforesaid; (e) that in the light of the preamble to sect 18 of the Finance Act, 1936, and in the absence of express provisions to the contrary, the section must be construed to impose a charge of tax only to the extent to which tax would otherwise be avoided by means of transfers of assets, and not to impose a charge in excess of that which would have been made, had no such transfers taken place; (f) that the contentions under heads (a) to (d) above are consistent with such a construction of the section.

23. It was contended on behalf of the respondents:—(a) that the Finance Act, 1936, s 18, relates in terms to individuals ordinarily resident in the United Kingdom, without any distinction of domicil, and the absence of any such distinction in the case of such individuals concerned in the transfers of assets is enforced, and shown to be deliberate by the express reference to domicil in the case of the transferees; (b) that, as regards subsect (1) of the section, the criterion of liability is “power to enjoy income” as defined in subsect (3) of the section, irrespective of the actual receipt in the United Kingdom of any such income; (c) that the section is not limited to the charge of tax which would have been incurred under other provisions of the Income Tax Acts but for the transfers of assets, and that this is shown by, inter alia, the words in subsect (1) “whether it would or would not have been chargeable to income tax apart from the provisions of this section,” and also by the provisions of subsect (1a) which relate to the receipt, or title to receipt, of a capital sum, and clearly bring into charge amounts which would not have been chargeable, had no transfer of assets taken place; (d) that the provisions of the Finance Act, 1936, Sched II, para 1, are charging provisions, and direct that income of whatever nature falling within sect 18 of the Act is to be charged under Sched D, and not any other schedule, and under the rules as to computation in Case VI of Sched D, and not under the rules in any other case; (e) that paras 2 and 3 of Sched II are only consonant with para 1, if it be so read, and that para 4 merely applied general provisions of the Income Tax Acts, so far as applicable and subject to any necessary modifications.

24. We, the Commissioners, gave our decisions a follows:—The individuals with whose liability to tax the Finance Act, 1936, s 18, is concerned are “individuals ordinarily resident in the United Kingdom,” and, as to such individuals, no distinction is made by reference to domicil. We are unable to regard anything in the section as implying that the liability thereunder is to be limited, either generally to the amount of tax which would otherwise be avoided, or in the case of a person not domiciled in the United Kingdom, to tax on amounts received in the United Kingdom. The Finance Act, 1936, Sched II, para 1, which has effect under subsect (6) of sect 18, provides that “tax chargeable at the standard rate by virtue of that section shall be charged under Case VI of Sched D.” In our opinion this is a specific direction requiring the liability to be computed under Case VI: the measure of liability is found here, and not in para 4, which applies the general provisions of the Income Tax Acts relating to charge, assessment, collection and recovery, etc, “so far as they are applicable and subject to any necessary modifications.” The appeal fails on this point, and we determine the several income tax and sur-tax assessments in the following figures which have been agreed on the basis of our decision:—

               Sur-tax        Income Tax        

Mrs. Glasgow Congreve        1935/36        £11,220        —        

Mr. Congreve        1935/36        £13,265        —        

,,        ,,        1936/37        £24,406        £11,861        

,,        ,,        1937/38        £38,813        £22,084        

,,        ,,        1938/39        £36,977        £16,792        

,,        ,,        1939/40        £70,289        £27,901        

,,        ,,        1940/41        £48,058        £23,204        

The above figures of assessment are without prejudice to any such Dominion income tax relief as may be admissible.

J Millard Tucker KC and F Heyworth Talbot for the appellants.

D L Jenkins KC J H Stamp and Reginald P Hills for the respondents.

Cur adv vult

16 May 1946. The following judgment was delivered.

WROTTESLEY J. This case contains firstly the narrative of one Mr Glasgow’s life in this country. He was an American citizen, domiciled in the United States, who carried on a successful business in this country which he finally

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sold to Humphreys & Glasgow (England), an English limited company. I use throughout the same short labels as the Commissioners use in the case to describe the various companies concerned. Mr Glasgow had one child, now Mrs Congreve. She was born in London, spent a good deal of her childhood in America, and confirmed her American citizenship and domicil when she came of age. In 1935 she married Mr Congreve, who is domiciled in Southern Ireland or Eire.

The rest of the case sets out a large number of transactions of a complicated nature, the great bulk of which were without doubt transactions entered into in order that Mrs Congreve might escape the incidence of income tax and sur-tax, and the questions which arise are whether three assessments, namely, (1) against Mrs Congreve, before her marriage, for sur-tax in the sum of £15,059 for the year ending 5 April 1936; (2) against Mr Congreve for sur-tax in the sum of £17,281, £26,314, £40,061, £70,066, £117,803 and £97,866 for the years ending 5 April 1936 to 5 April 1941 inclusive; (3) against Mr Congreve for income tax in the sums of £10,000, £20,000, £40,000, £60,000 and £60,000 for the years ending 5 April 1937 to 5 April 1941, inclusive, are properly made. All these assessments are made under the provisions of the Finance Act, 1936, s 18, and Sched II, para 6, as amended by the Finance Act, 1938, s 28. All the transactions are set out sufficiently clearly in the case, and I shall not endeavour to paraphrase the account of them given by the Commissioners. In the result, the Commissioners found that Mrs Congreve was an individual who had, by means of a transfer in conjunction with associated operations, acquired rights by virtue of which she had, within the meaning of sect 18, power to enjoy the income covered by the assessments, which was income payable to persons resident or domiciled out of the United Kingdom.

The first point I will deal with is whether the Commissioners were right in not granting an adjournment to enable Mr Glasgow to give evidence before them. He was 79 years of age, and it was at the time of the hearing improbable that he would be able to make the journey to this country from America. Bearing in mind that counsel was not in a position, even at the hearing of the appeal, to undertake that Mr Glasgow would make the journey, and also that no application was made to take his evidence in America, and looking at the material which the Commissioners had before them, I find it quite impossible to say that the Commissioners wrongly exercised what was undoubtedly their discretion.

I pass now to the more important points in the case, namely, whether the complicated transactions or some of them fall within the Finance Act, 1936, s 18. Given the nature of the transactions, this must depend on the correct interpretation of the language of the section. As it happens, this section contains something in the nature of a preamble, for it opens with a statement as to the purpose of the section, and the court is therefore not left to ascertain the purpose of the section by a consideration of the language of the operative part merely. The court knows in advance what the purpose is. If, therefore, any question should arise as to whether the language of the section applies to any particular transaction, and if this question is not clearly answered in the operative part of the section, the court may properly resort to the express intention to see if this affords any help. It is, therefore, desirable to see how far the language of the preamble itself is clear; there is no preamble to the preamble, and the language of this introductory part of the section must, therefore, be construed according to its plain, ordinary meaning, if it has one. The words are:

‘‘For the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfers of assets by virtue or in consequence whereof, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled out of the United Kingdom, it is hereby enacted as follows … ’’

We have, therefore, to look for an individual who is ordinarily resident in the United Kingdom and avoiding liability to income tax. There cannot be two opinions as to what “avoiding” means. Where what is to be avoided is a liability, it must mean to evade or to keep out of the way of, whether it be as in Richard III, “The censures of the carping world,” or anything else unpleasant that might befall a man, such as a tax. At this stage, therefore, the legislature

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has clearly in mind an individual who is evading liability to income tax, and not a person who is, through no effort of his own, not in the road and so not likely to be affected by a tax. Nor is it all and every such evasion that is aimed at by the section. The individual must be evading it by a certain means, and that means is a transfer of assets of a particular kind; it must be a transfer by virtue or in consequence whereof income, either alone or in conjunction with associated operations, becomes payable to persons outside the United Kingdom. At any rate, there must be a transfer, and the first point which I have to decide is whether the target of the section includes a person who makes no transfer at all whether personally or through an agent. It seems to me that the language in which the purpose of the section is described is clear and unmistakable; it contemplates an individual bent on evading tax and doing so by transferring assets so as to bring it about that the income from them becomes payable to persons out of the United Kingdom. It may do this simply or it may do it only by being conjoined with associated operations, that is to say, operations of any kind effected by any person in relation to any of the assets transferred or representing the assets transferred or the income from them. The respondents, the Commissioners, contend that even the preamble of the section is not so limited and includes the case of a transfer which is made neither by nor on behalf of the individual; and it certainly is true that it is not stated in so many words that the individual avoiding the tax must make the transfer. But, looking at the words and reading them as a whole and in their ordinary and common-sense meaning, they appear to deal with the plain and straightforward case of an individual bent on avoiding tax and doing so by means of a transfer. The section does not deal with the case of an individual who escapes tax because of a transfer which some other person makes. The use of the words, “by means of,” fits this interpretation. These words mean, it was agreed in argument, a means to an end, and so import purpose: and that must mean purpose on the part of the person who is avoiding liability to income tax. This phrase is to be contrasted with such phrases as “by virtue of” and “in consequence whereof” both of which tend to negative or make unnecessary intention or purpose, and both of which are used in that sense in the very passage.

So much for the preamble, but it is truly said by the respondents that these introductory words are not to be used to restrict the plain wording of the operative or charging words to be found in subsect (1). The opening words of this subsection are:

‘‘Where such an individual has by means of any such transfer, either alone or in conjunction with associated operations, acquired any rights … ’’

Pausing there, it is seen that what I have called a preamble is more than a preamble; it is drawn in to the operative part of the section, so as to explain and so to limit or expand the kind of transaction which is to be dealt with. For instance, the individual must be ordinarily resident in the United Kingdom, and the transfer must also be such as has been referred to in the preamble. The respondents say that that only imports that it must be a transfer of assets by virtue or in consequence of which he has power to enjoy income of a person residing outside the United Kingdom, by whomsoever such a transfer is made. I do not think that this narrow meaning can be given to the use of the word “such,” but that the section is intended to deal with such transfers as are dealt with in the preamble. For the reasons that I have given, two characteristics attach to that kind of transfer. It must be made by a person avoiding liability to tax, and it must also bring it about that income becomes payable to persons outside the United Kingdom. This interpretation of the section is that which commended itself to Macnaghten J firstly in MacDonald v Inland Revenue Comrs (23 Tax Cas 449, at p 456), and secondly in Howard de Walden v Inland Revenue Comrs (25 Tax Cas 121, at p 128). It is true that in neither case was the contrary argued, and the judge therefore did not have to decide this point; nevertheless it shows the impact of these words on the mind of a judge who is not unfamiliar with the language of taxing statutes. In point of fact I find a similar assumption as to the meaning and by the same judge in Corbett’s Executrices v Inland Revenue Comrs (25 Tax Cas 305, at p 312), where he states the burden on the Crown as being:

‘… to establish that the individual, being a person ordinarily resident in the United

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Kingdom, has made a transfer of assets … ’

So far then the section deals with transfers made by the individual by means of which he or she has acquired any rights. I may say that I do not accept the argument of the appellants that the use of the word “acquired” strengthens the interpretation which I think is the right one, not that it indicates that the individual has done something to put himself in possession of the rights. As used by lawyers the word “acquired” has long covered transactions of a purely passive nature and means little more than receiving.

To pass on, the rights in question are rights by virtue of which an individual has, within the meaning of the section, power to enjoy any income of a person outside the United Kingdom. It is urged on behalf of the Crown that this is the test as to whether the section applies. In other words, all you have to do is to find a person ordinarily resident in the United Kingdom with power to enjoy income of a person outside the United Kingdom, then look and see if he got that power by a transfer. If he did, that is enough. The answer to this argument is that the section might well have been drawn in this way and so as to effect this. If so it would have been both simpler and more effective. But in that event the introductory words would have been unnecessary; and the courts are not here to make the efforts of the legislature to circumvent tax evasion more efficient than is provided by the language, particularly when that involves disregarding the ordinary plain language of the preamble, and the fact that that preamble is deliberately drawn into the fabric of the operative section. Here the legislature has been careful to hedge about the operative section with words which indicate that the target is an individual who is trying to avoid tax by means of a particular course of conduct. It is not for the courts to widen that target so as to include persons who have not evaded liability, at any rate by the means referred to.

That does not, however, conclude the matter. It is conceded by counsel for the appellants that a person who by an agent transfers his assets would not on that account escape the operation of the section. I think that a person who by owning all or practically all of the capital of an investment company is able to bring about such a transfer as is referred to in the section, is, for the purposes of such a section, a person who has avoided tax by means of a transfer. At this point, then, I can adopt precisely the language used by Macnaghten J in Macdonald v Inland Revenue Comrs (23 Tax Cas 449, at p 456), to which I have referred above. The words are:

‘It is to be observed that the section has no application to any transfer of assets unless (1) it is a transfer made by an individual ordinarily resident in the United Kingdom, and (2) by virtue or in consequence of the transfer (either alone or in conjunction with associated operations) income becomes payable to persons resident or domiciled out of the United Kingdom.’

Once this has been established, it becomes necessary to see whether it is a transfer by which Mrs Congreve has acquired any rights by virtue of which she has power to enjoy, whether forthwith or in the future, any income of a person resident or domiciled out of the United Kingdom which, if it were income of Mrs Congreve, received by her in the United Kingdom, would be chargeable to income tax by deduction or otherwise. The meaning of the words “power to enjoy” is dealt with in great detail in subsect (3), setting out five cases each of which amounts to “power to enjoy.” It is unnecessary at this moment to consider what they are.

So far I have not dealt with the case of transactions consisting of transfers which operate in conjunction with associated operations to bring it about that income is payable to persons resident or domiciled out of the United Kingdom. In that connection there arises another question, namely, whether the section applies to cases where Mrs Congreve transferred shares to a company in the United Kingdom which, after the transfer, removed out of the United Kingdom. There is no doubt that the result of the transfer coupled with the removal was that income became payable in the manner described by the section, but the appellants say that in these cases it cannot be said that the income became payable to the person out of the United Kingdom by virtue or in consequence of the transfer.

The contention of the Crown is that in such a case the income becomes payable to the company out of the United Kingdom by virtue or in consequence of the

Page 184 of [1946] 2 All ER 170

transfer, and that therefore the section applies. I confess I am quite unable to follow this argument. If language is to have any value at all, it seems to me clear that in such a case, whether the removal of the company took place eight months after the transfer or eight days, it is quite impossible to hold that by virtue of the transfer or in consequence of it, income became payable to the company which moved abroad. The only effect of the transfer was to make income payable to the transferee company which was still resident and domiciled in the United Kingdom; and the income only became payable to a person out of the United Kingdom when the company moved out of the United Kingdom. Indeed it was, I suppose, to deal with manoeuvres of this kind that the words “in conjunction with associated operations” were introduced into the section. Unfortunately, the definition of associated operations, which is exhaustive, is so drawn as not to include this particular manoeuvre. Wide though that definition is, it is confined to operations in relation to any of the assets transferred or assets representing the assets transferred or income therefrom; and I cannot see how the removal of the company, in whom the assets are vested, out of the United Kingdom can be so described.

That leaves another question, namely, the question of the income which is, when found to be the income of a person out of the United Kingdom which Mrs Congreve has power to enjoy, to be deemed to be the income of Mrs Congreve or her husband.

Now, in various instances related in the case before the court, Mrs Congreve either herself transferred or caused an investment company, in which she owned all or practically all the shares, to transfer shares so that she obtained, in respect of a company abroad, power to enjoy its income in the sense in which that phrase is used in the section.

It appears, for instance, in para 6 of the case that in April, 1932, Mr Glasgow gave his daughter all the capital in International Gas, an American company. As this company owned 60,000 shares in Humphreys & Glasgow (England), the trading company, in this way Mrs Congreve became indirectly the owner of the 60,000 shares. Intentional Gas sold these 60,000 shares to Humphreys & Glasgow (Canada), a Canadian company, for 995 shares and £212,000 worth of demand debentures which found their way into Mrs Congreve’s name, International Gas being wound up and disappearing. These debentures carried no interest until after demand for repayment. As a result Mrs Congreve could allow dividends on the 60,000 shares to accumulate tax free in the hands of Humphreys & Glasgow (Canada) and recoup herself in this country by calling in these debentures. This is, therefore, an instance of a transfer by a company wholly owned and controlled by Mrs Congreve, namely, International Gas, to a company resident abroad, by virtue of which income, namely, from the 60,000 shares, became payable to the Canadian company. It is also an instance of a transfer by means of which Mrs Congreve acquired rights in virtue whereof she had power to enjoy the income from those 60,000 shares. The case therefore falls within paras (a), (b), (c) and (e) of subsect (3), which are as follows:

‘‘(a) the income is in fact so dealt with by any person as to be calculated, at some point of time, and whether in the form of income or not, to inure for the benefit of the individual; or (b) the receipt or accrual of the income operates to increase the value to the individual of any assets held by him or for his benefit; or (c) the individual receives or is entitled to receive, at any time, any benefit provided or to be provided out of that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the associated operations on that income and on any assets which directly or indirectly represent that income; or … (e) the individual is able in any manner whatsoever, and whether directly or indirectly, to control the application of the income.’’

Within (a) because the income was accumulated so as to inure for her benefit; within (b) because if she allowed the income to accumulate, her debentures and her shares became more valuable; within (c) because she could demand repayment of the debentures; and within (e) because of her power to control Humphreys & Glasgow (Canada).

In addition, Mrs Congreve, then Miss Glasgow, sold 5,000 shares, which her father had given to her, to Humphreys & Glasgow (Canada) for further debentures of the same kind of the face value of £18,000; here then was another transfer by Mrs Congreve, and the section applies.

Different considerations apply to a transaction in 1936, when Mr Glasgow sold

Page 185 of [1946] 2 All ER 170

for value 28,000 shares in Humphreys & Glasgow (England) to Humphreys & Glasgow (Canada). These were sold on to Margreve, an English company.

I refer to the above facts only by way of illustration of the effect of the answers which I have given to the questions raised in argument. But the Crown lay claim to the right to tax the income, if any arose, from the 28,000 shares which Mrs Congreve’s father sold to Humplhreys & Glasgow (Canada), and say that that income is within the section. To test this we must look at the section again. It was clearly income of a company resident or domiciled out of the United Kingdom, Humphreys & Glasgow (Canada). To take the simplest case, in the transfer by Mrs Congreve of 5,000 shares to Humphreys and Glasgow (Canada) above referred to, the Crown claim that this transfer brings Mrs Congreve within the section. It clearly does, for she has by means of it acquired rights by virtue of which she has, within the meaning of the section, power to enjoy “any” income of a company resident out of the United Kingdom. I take the word “any” here to mean “any part,” but the Crown goes on to claim that all the income of the company therefore falls within the section, including that which arose from the 28,000 shares sold by her father to the company.

The point arose and was argued in the case of Lord Howard de Walden, where it was contended, for the taxpayer appellant, that the court should regard subsect (3) as merely expanding the meaning of the phrase “power to enjoy” so as to insure that individuals, who used circuitous complicated devices, should be no better off than the individual who contented himself with a transfer of assets to a person abroad coupled with an order to accumulate the dividends for him indefinitely; and that it was not intended to measure the quantum of the income to be treated as the individual’s income and so liable to tax. It was pointed out, anyhow, in the argument addressed to the Court of Appeal, that the wider interpretation contended for by the Crown would lead to results which were capricious and even fantastic. If the income dealt with by the section includes all the income which the person abroad has power to enjoy, the section certainly appears to work capriciously and to produce very different results according to whether the case falls under one or other of the paragraphs; thus para (a) deals with cases where “the income is in fact so dealt with by any person as to be calculated, at some point of time, and whether in the form of income or not, to inure for the benefit of the individual” and would only result in the individual being taxed on the income arising from the assets transferred. That is a case within the express object of the section and would prevent the avoidance referred to in the preamble. Case (b) would have the same effect if the company held only the transferred assets. But if the company were, for instance, an insurance company to which the individual had transferred his assets in return for promissory notes or non-interest-bearing debentures, a remarkable result would follow. The income of the company which operates, to use the words of the paragraph, “to increase the value to the individual of his assets,” is not confined to that part of it which flows from the transferred assets but is the whole of the company’s income. Case (c) is equally far-reaching, and goes far beyond the preamble to the section, because the whole income of the person abroad is to be attributed to the individual instead of the part which she is entitled to receive as a benefit. Case (d), on the other hand, only applies where the individual has power to obtain for himself the beneficial enjoyment of the income and would apply, therefore, only to the income of the transferred assets. Case (e) is probably also so confined, for it is only as much of the income of the person abroad as the individual can control that is attributed to him.

It will be seen, therefore, that the use of subsect (3) to measure the quantum of the income to be attributed and so the tax to be paid by an individual, who comes within the section, may produce results which are capricious in the sense that sometimes it affects only the income referable to the transferred assets, and sometimes it affects an income which bears no sort of relation to these assets, and might indeed be somebody else’s income from which the individual could never benefit. Some of these results may fairly be called fantastic. It is true that arguments of this kind were dealt with in the case of Lord Howard de Walden, to which I have referred, when Lord Greene MR ([1942] 1 All ER 287, at p 289), expressed the view that the courts would not shrink from such a result if necessary, as the whole section must be regarded as an attempt by Parliament to end, once for all, the battle of manoeuvre between

Page 186 of [1946] 2 All ER 170

the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that case the Court of Appeal had to deal with an English subject and a peer of Parliament who must have derived his wealth largely, if not entirely, from property in this country. Somewhat different considerations may be thought to apply to an American subject who remained such until she married a South Irishman domiciled in Eire, and who, for ought I know, in respect of a part of her income, pays tax in the United States. In such a case retroactive action of a penal kind may seem to go some way beyond the preamble to the section. In any event the decision of the Court of Appeal in that case left open, as it had to do, the question under debate, for the only income in question there was income from the transferred assets. It had not to deal with assets transferred by some other person.

Some guidance may be found in a matter of some difficulty in subsect (4). This subsection seems to return to the declared object of the section, and directs the Commissioners or the court to look at the substantial result and effect of the transfer and any associated operations, and all benefits which may at any time accrue to the individual as a result of the transfer and any operations are to be taken into account. Is this subsection only to be applied so as to make more tax exigible or is it also to be used so as to confine the section to the mischief aimed at in the preamble, namely, the prevention of the avoidance of tax by means of transfers? If subsect (4) is, as its language clearly suggests, to be regarded as an overriding subsection, it may be thought to afford the real clue which will prevent the extravagant results which would flow from a literal reading of subsect (3), and its introduction into subsect (2). In order to ascertain quantum the court is to look behind the literal interpretation and find the substantial result and effect of the transfer. On the other hand this subsection would also provide that an individual who, after making a transfer, employs colourable transactions to evade the operation of the section, would nevertheless be caught.

I have come to the conclusion that subsect (4) deliberately authorises the Commissioners, and so the court, to do this, whether the result is to prevent extravagant results in one direction or the other. On this view of the section it is only the benefit which may at any time accrue to the individual as a result of the transfer and any associated operations that the individual can be said to have power to enjoy. Consequently it is only income referable to assets which Mrs Congreve transferred herself or caused to be transferred, in the sense that I have referred to above, that is to be deemed to be her income for the purpose of the Income Tax Acts.

One more point raised by the appellant can be dealt with shortly. It was argued faintly that the whole object of sect 18 was to be curtailed owing to the provisions in Sched II, para 4, and that only income reaching this country was to be liable to tax. This would nullify the whole object of the section. I cannot accede to this argument.

Those are the answers that I have given to the questions, and I think I have answered all the questions which were argued before me. Obviously, the case will have to go back. There are three questions, as it appears to me. Firstly, is it a condition precedent to the working of the section that the transfer must be made by the lady? I have said “Yes,” that it must be made by the lady or by one of the companies which appear here. I except from that, of course, as I indicated, the trading company, because she did not own the whole of that. The second question was this: Is the particular manoeuvre of a transfer to the company and its subsequently moving abroad covered by the section? I think not, and I have said so. The third matter was: What are the assets? and for the reasons I have given, the assets are not the whole income of the foreign company, but that part which is referable to the transferred assets. Those are the three points. The two other points I have also answered against the appellants.

Appeal allowed with costs, and the case remitted to the Commissioners to adjust in accordance with the judgment.

Solicitors: Slaughter & May (for the appellants); Solicitor of Inland Revenue (for the respondents).

W J Alderman Esq   Barrister.

Cutler v Wandsworth Stadium Ltd

[1946] 2 All ER 187

Categories:        LEISURE AND LICENSING        

Court:        KING’S BENCH DIVISION        

Lord(s):        OLIVER J        

Hearing Date(s):        21, 22 MAY 1946        

Gaming and Wagering – Bookmakers – Provision of space for bookmaking – Dog-race track – Totalisator maintained – Whether action for damages lies against occupier – Betting and Lotteries Act, 1934 (c. 58), ss 11.30.

Action – Ubi jus, ibi remedium – Infringement of private right – Statutory remedy available – Whether action lies by private person – Bookmaker – Breach by occupier of dog-race track of obligation to provide space for bookmaking – Betting and Lotteries Act, 1934 (c. 58), ss 11, 30.

Although the Betting and Lotteries Act, 1934, s 30, provides severe penalties for breaches of the provisions of the Act, an action lies, at the suit of a bookmaker injured thereby, against the occupier of a dog-race track on which a totalisator is maintained, for breach of the occupier’s obligation, under sect 11(2)(b) of the Act, to secure that space is available, on the track, where bookmakers can conveniently carry on bookmaking in connection with the dog races run on that track on any particular day.

Notes

It is held in this case that bookmakers are a “specified class of the public” within the principle that where the legislature has provided protection for a specified class of the public, a member of the class, unless it is otherwise provided, has a right of action for breach of the protection provided, notwithstanding the provision of penalties.

As to Action for Damages by Private Person Irrespective of Breach of Statutory Provision where Penalties are Provided, see Halsbury, Hailsham Edn, Vol 1, pp 11, 12, paras 11, 12; and for Cases, see Digest, Vol 42, pp 758–760, Nos 1849–1858.

Preliminary Issue of Law

Preliminary Issue of Law in an action by a bookmaker against the occupier of a dog-race track on which a totalistor was maintained, for breach of the occupier’s duty, under the Betting and Lotteries Act, 1934, s 11(2)(b), to secure that there was available, on that track, space where the bookmaker could conveniently carry on bookmaking.

E G Hemmerde KC, J Platts Mills and Patrick O’connor for the plaintiff.

Eric Neve KC and R T Paget for the defendants.

22 May 1946. The following judgment was delivered.

OLIVER J. I have come to the conclusion on this rather difficult matter that this action does lie.

The section to be interpreted is the Betting and Lotteries Act, 1934, s 11, which provides as follows:

‘(1) Notwithstanding any enactment or rule of law to the contrary, it shall be lawful on any licensed track being a dog racecourse for the occupier of the track or any person authorised by him in writing—(a) to set up and keep a totalisator, whether in a building or not; and (b) on any appointed day, while the public are admitted to the track for the purpose of attending dog races and no other sporting events are taking place on the track, to operate a totalisator so set up, but only for effecting with persons resorting to the track betting transactions on dog races run on that track on that day; and for any person to effect betting transactions by means of a totalisator lawfully operated.’

That part of the section authorises, under certain conditions, the use of a totalisator on a dog racecourse.

Subsect (2) reads as follows:

‘The occupier of a licensed track—(a) shall not, so long as a totalisator is being lawfully operated on the track, exclude any person from the track by reason only that he proposes to carry on bookmaking on the track … ’

That seems to me to give a charter to bookmakers on dog-race tracks having a totalisator to go on to such tracks, provided, of course, that they are respectable people and that they behave themselves; that seems to me to be what is contemplated by the words of subsect (2)(a)—that he shall not be excluded from a track by reason only of the fact that he wants to make a book.

Subsect (2)(b) reads as follows:

‘The occupier of a licensed track (b) shall take such steps as are necessary to secure that, so long as a totalisator is being lawfully operated on the track there is available for bookmakers space on the track where they can conveniently carry on bookmaking in connection with dog races run on the track on that day … .’

Page 188 of [1946] 2 All ER 187

That seems to me to be putting upon the owner of the track the duty of seeing that bookmakers are given a fair chance of competing on level terms with the totalisator; I think that is what it means.

Subsect (2) of sect 11 of the Act continues as follows:

‘ … and every person who contravenes, or fails to comply with, any of the provisions of this subsection shall be guilty of an offence.’

and the offence is punishable under sect 30 of the same Act, which reads as follows:

‘(1) A person guilty of an offence under section … eleven [among others] or under any section contained in Part II, of this Act shall be liable—(a) on summary conviction, to a fine not exceeding one hundred pounds,and in the case of a second or any subsequent conviction for an offence under the same section, to imprisonment for a term not exceeding three months or to a fine not exceeding two hundred pounds or to both such imprisonment and such fine; or (b) on conviction on indictment, to [a much heavier fine and a heavier term of imprisonment.]’

It is quite true that those are very heavy penalties, even including a possibility of indictment, and the argument put forward for the defendants is that, looking at those penalties and the general scope of the Act, the legislature clearly intends that penal section to be the only remedy in respect of a breach of a provision of sect 11.

The question whether a breach of a statutory provision which entails penalties may also give rise to an action for damages at the suit of an injured party has been the subject of much judicial discussion. Some of the authorities are not easy to reconcile. But it seems to me that this principle does emerge: Where the legislature has provided for the protection of a specified class of the public, even though it has also provided penalties in respect of a breach of the enactment, members of that specified class who suffer injury from a breach of the provision, have a right of action. That seems to be a principle consonant with all the authorities.

The converse proposition is not, of course, true. It is not true to say, where there is no specified class, and only the public as a whole are intended to be protected, that injured members of the public can never have redress; in some cases it is held that they can. But I know of no authority—counsel on neither side has been able to give me one—which has decided that where a specified class is intended to be protected by the legislature and an enactment is broken, members of that specified class have no right of action.

I need not go through all the cases—they are too well known—but if that proposition is right, then I have only to look at this section and decide whether it was intended to protect a specified class of the community. Just as factory hands—an enormous class, running into millions—receive protection under the Factories Acts, and can sue in respect of certain breaches of the provisions of those Acts, so it is, it seems to me, with the bookmakers; they ply their trade on the dog-tracks and are a specified class of the public.

Looking at the preliminary section, it seems to me that this section was intended to protect their rights. They were members of a trade before the statute was passed; the statute in effect legalised a new form of betting by machine, and it was quite plain that what the legislature meant to say was this: We are, in permitting the use of this machine, obviously doing a considerable amount of damage to the bookmaking trade; we are authorising a new competitor, and a very formidable one; let us at any rate see that the members of that trade are given a fair chance to compete with the machine, and in order to do that we will say, not that every dog-track is to have a machine, but that if a track does have a machine, the owners of that track are to treat the bookmakers fairly. That, I think, is the object of the section.

I am not assuming that in this case the owners have treated the bookmakers unfairly at all—I have not heard the case yet—but for the purposes only of this preliminary point I have to assume that the bookmakers have been treated unfairly; if they have, they have a right of action, and this action will now proceed.

Preliminary objection overruled.

Solicitors: S Seifert & Co (for the plaintiff); Wilkinson, Howlett & Moorhouse (for the defendants).

P J Johnson Esq   Barrister.

R v Minister of Health, Ex parte Waterlow & Sons Ltd

[1946] 2 All ER 189

Categories:        HEALTH; Public health: HOUSING        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND SINGLETON JJ        

Hearing Date(s):        3 JUNE 1946        

Public Health – Housing – Compulsory purchase order – “Park, garden or pleasure ground” – “Required for the amenity or convenience of any house” – Land must be appurtenant to house – Housing Act, 1936 (c 51), ss 74, 75 – Housing (Temporary Accommodation) Act, 1944 (c 36), s 6.

Public Health – Housing – Authorisation by Minister of Health – Equivalent to compulsory purchase order – Housing Act, 1936 (c 51), s 74 – Housing (Temporary Accommodation) Act, 1944 (c 36), s 6.

Crown Practice – Certiorari – Prohibition – Substituted procedure under principal Act – Different machinery under subsequent Act – Whether writs lie – Housing Act, 1936 (c 51), s 74 – Housing (Temporary Accommodation) Act, 1944 (c 36), s 6.

The applicants owned certain land used as a sports ground and kept by them for the benefit of their employees. The Minister of Health, purporting to act under the Housing (Temporary Accommodation) Act, 1944, s 6, gave an authorisation to the local authority to enter and take possession of the land for the purposes of the Housing Act, 1936, Pt V. The applicants moved for an order of certiorari and an order of prohibition:—

Held – (i) The authorisation which was granted under the Housing (Temporary Accommodation) Act, 1944, s 6, was equivalent to a compulsory purchase order under the Housing Act, 1936, s 74.

(ii) the machinery under the 1936 and the 1944 Acts being different, the procedure prescribed, in Sched II, para 2, of the 1936 Act, for testing the validity of an order by an application to the High Court as distinct from certiorari was not applicable in this case; consequently an objection that certiorari and prohibition had been taken away and another procedure substituted was not well founded.

(iii) on a true construction of sect 75 of the 1936 Act, the “park, garden or pleasure ground” must form part of land which was appurtenant to a house, the amenities of which the sections intended to preserve; the sports ground in question was not land which a local authority was forbidden to acquire in part; therefore, the authorisation was good and the motions must be refused.

Notes

The object of the Housing (Temporary Accommodation) Act, 1944 was to facilitate the provision of a temporary houses of a bungalow type. Sect 6 simplified the procedure for the compulsory acquisition of sites, and it is decided in this case that the authorisation to be given by the Minister under that section is equivalent to a compulsory purchase order.

In Re Newhill Compulsory Purchase Order [1938] 2 All ER 163, Du Parcq J said ” I do not think that I need decide whether it would be enough to say that the land formed part of a park or a pleasure ground, without going on to say that, as such, it was required for the amenity or convenience of a house.” The Divisional Court in this case holds that “required for the amenity or convenience of a house” applies to the foregoing “park, garden or pleasure ground,” and that a sports ground is therefore not a pleasure ground so as to be protected by the section from compulsory acquisition.

As to Acquisition of Land for Provision of Housing Accommodation, see Halsbury, Hailsham Edn, Vol 26, p 562, para 1185; and for Cases, see Digest, Supp, Public Health.

Motions

Motions for an order of certiorari and an order of prohibition in respect of an authorisation given by the Minister of Health purporting to act under the Housing (Temporary Accommodation) Act, 1944, s 6. The relevant facts are set out in the judgment of Lord Goddard LCJ.

Gilbert Paull KC and TJ Sophian for Waterlow & Sons Ltd (the appellants).

The Attorney General (Sir Hartley Shawcross KC) and Hon H L Parker for the Minister of Health.

Erskine Simes KC and C E Scholefield for the Corporation of Walthamstow.

3 June 1946. The following judgments were delivered.

LORD GODDARD LCJ. Counsel for the applicants in this case has moved for an order of certiorari to bring up and quash an authorisation dated

Page 190 of [1946] 2 All ER 189

31 December 1945, given by the Minister of Health purporting to act under the provisions of the Housing (Temporary Accommodation) Act, 1944, s 6, authorising the Walthamstow Corporation “to enter and take possession for the purpose of Part V of the Housing Act, 1936,” of certain land which is a sports ground owned by Waterlow & Sons Ltd and kept by them for the benefit of their employees.

The matter arises in this way: Under the Housing (Temporary Accommodation) Act, 1944, which is to be read as one with the Housing Act, 1936, a local authority in the present circumstances have power to apply to the Minister for his authorisation to acquire certain land compulsorily and, for the purposes of expediting the proceedings in the present housing emergency, much of the machinery of the Housing Act, 1936, is altered. No public inquiry has to be held, and although the Minister must consider any representations made to him by the owners of the land if he gives an authorisation, the local authority can enter straight away, and have power thereby to acquire land in the same way as they are authorised by an order under the Housing Act, 1936, s 74, and thereupon they must buy the land and pay compensation.

It is said in this case that they have no power to acquire this land because the ground they are taking forms part of a pleasure ground, and that the acquisition of a pleasure ground or part of a pleasure ground is forbidden by the Housing Act, 1936, s 75.

On this motion three points have been argued. The first point which counsel for the Minister of Health has taken, and which I think conveniently may be dealt with first, is that certiorari does not lie, and that the only provision which gives a right of appeal to the Court is that of the Housing Act, 1936, Sched II, which provides for an application to the High Court; though perhaps it would be more logical in the first place to consider whether there is a compulsory order in this case, because Sched II deals with compulsory orders and provides for a hearing before the High Court, and also under sect 75 the words of the Act are “which at the date of the compulsory purchase order forms part of any park, garden or pleasure ground.”

In the opinion of the court, the authorisation which is granted under the Housing (Temporary Accommodation) Act, 1944, s 6, is the equivalent of a compulsory purchase order because under subsect (4) of sect 6 it is provided that:

‘Where a local authority have taken possession of land pursuant to an authorisation under this section, they shall by virtue of this section have power to acquire the land compulsorily as if they had been authorised so to do by an order under section seventy-four of the principal Act, made, submitted and confirmed in accordance with the provisions of the First Schedule thereto, incorporating the enactments required to be incorporated in such an order with the modifications and adaptations appropriate to such an order, and the authority shall as soon as may be after taking possession of the land serve notice under section eighteen of the Lands Clauses Consolidation Act, 1845, of their intention to take the land and shall in all respects be liable as if such notice had been given on the day of their entering on the land, except that the power conferred by subsection (2) of section five of the Acquisition of Land (Assessment of Compensation) Act, 1919, to withdraw such a notice shall not be exercisable.’

So it appears to me that the position is that as soon as the Minister has given his authorisation, the position is to be exactly the same as though a compulsory purchase order had been made, submitted and confirmed, and I think, therefore, that any provisions one finds in the Act dealing with a compulsory purchase order apply to the authorisation which has to be given under the Housing (Temporary Accommodation) Act, 1944. I think the Court must deal with it as if there had been a compulsory purchase order and regard the authorisation as a compulsory order.

Then comes the question in those circumstances whether or not certiorari lies. Under the Housing Act, 1936, Sched II para 1, it is provided:

‘So soon as may be after a compulsory purchase order or a clearance order has been confirmed by the Minister, the local authority shall publish in a newspaper circulating in their district a notice in the prescribed form stating that the order has been confirmed, and naming a place where a copy of the order as confirmed and of the map referred to therein may be seen at all reasonable hours, and shall serve a like notice on every person who, having given notice to the Minister of his objection to the order, appeared at the public local inquiry in support of his objection.’

Page 191 of [1946] 2 All ER 189

That provision of the schedule cannot apply to this case because it is not applicable under the Act of 1944. It is then provided:

‘2. If any person aggrieved by such an order as aforesaid, or by the Minister’s approval of a re-development plan or of a new plan, desires to question the validity thereof on the ground that it is not within the powers of this Act or that any requirement of this Act has not been complied with, he may, within six weeks after the publication of the notice of confirmation of the order, or of the approval of the plan, make an application for the purpose to the High Court … ’

and then it sets out what the High Court may do on such an application.

Then para 3 of Sched II provides:

‘Subject to the provisions of the last preceding paragraph, the order, or the approval of the plan, shall not be questioned by prohibition or certiorari or in any legal proceedings whatsoever, either before or after the order is confirmed or the approval is given, as the case may be, and shall become operative at the expiration of six weeks from the date on which notice of confirmation of the order, of the approval of the plan, is published in accordance with the provisions of this Act.’

It will be observed that under that paragraph the order does not become operative at once. It only becomes operative at the expiration of six weeks from the date on which the notice of confirmation is published. It also lays down a time limit within which the application is to be made to the court, that is, six weeks after the publication of notice of confirmation. Counsel for the applicant, in answer to the submission of counsel for the Minister of Health, takes the point that that procedure cannot be followed in this case because the machinery under the Housing (Temporary Accommodation) Act, 1944, is different from the machinery under the Housing Act, 1936, and as there is no publication in the newspaper provided for in the Housing (Temporary Accommodation) Act, as there is under the Housing Act, the procedure prescribed by para 2 of Sched II does not apply. In my opinion, that is a good answer to the case. I think one cannot say certiorari is taken away here because the substituted procedure which Sched II gives is not applicable to this case, and the court therefore is of opinion that it is no sound objection to say that certiorari has been taken away and another procedure substituted.

Counsel for the Minister of Health also wished to keep open, though he has not taken the point in this case, an objection that certiorari will not lie because this is a mere administrative order. We are not called upon to pronounce on that in this case, and I can, therefore now proceed to what I may call the real merits of the application. They depend on the true construction of sect 75 of the Act of 1936. That Act, as I have already said, is to be read together with the Act of 1944, and in the Act of 1944 is described as “the principal Act.” Sect 75 says this:

‘Nothing in this Act shall authorise the compulsory acquisition for the purposes of this Part of this Act of any land which … [leaving out immaterial words]—at the date of the compulsory purchase order forms part of any park, garden or pleasure ground, or is otherwise required for the amenity or convenience of any house.’

Counsel for the Minister of Health admits that this land may be described as a pleasure ground because it is a sports ground, but he contends that the true construction of the section is that it must form part of land which is appurtenant to a house, and that it is intended to preserve the amenities of a person’s house. It is admittedly, of course, a section against severance because it only deals with acquisition of part of a park, garden or pleasure ground, and in my opinion counsel for the Minister of Health is right in this respect. I think the matter would be clearer if put in this way: The whole thing turns on the word “otherwise,” and if one reads it in this way, “forms part of a park, garden or pleasure ground or for any other reason is required for the convenience or amenity of a house,” one sees that those words “required for the convenience or amenity of a house” apply to the words “park, garden or pleasure ground.” Not only that, but I think one must read the words “pleasure ground,” in this case applying the doctrine of ejusdem generis, as it is often called, which is a very sound rule of construction to apply to a section of this sort. It shows, I think, that the pleasure ground is something in the nature of a park or garden and is a matter which refers to the amenities or convenience of the house.

In my opinion, therefore, the main point that is taken and is of real importance in the case is that the sports ground in this case is not land which the local

Page 192 of [1946] 2 All ER 189

authority are forbidden to acquire in part, and, therefore, the order of authorisation is good and this motion and the motion for an order of prohibition must be refused with costs.

HUMPHREYS J. That, so far as I am concerned, is the judgment of the court.

SINGLETON J. I agree.

Motions refused with costs.

Solicitors: Coward, Chance & Co (for the applicants); Solicitor, Ministry of Health (for the Minister of Health); Sharpe, Pritchard & Co agents for C A Blakeley, Town Clerk, Walthamstow (for the Walthamstow Corporation).

C StJ Nicholson Esq   Barrister.

Alan Maberley v Henry W Peabody & Co of London Ltd

Rowland Smith Motors Ltd and Rowland Smith

[1946] 2 All ER 192

Categories:        TORTS; Nuisance: CIVIL PROCEDURE        

Court:        KING’S BENCH DIVISION        

Lord(s):        STABLE J        

Hearing Date(s):        3, 6, 7, 8 MAY 1946        

Nuisance – Adjoining premises – Damage to adjoining wall by large mound of earth piled against it – Damage to adjoining wall and land by percolation of injurious chemicals deposited on mound – Remedy – No substantial damage sustained up to date – Injunction appropriate remedy.

The defendants, who were the occupiers and owners of premises adjoining a garden belonging to M, had caused (or allowed) a substantial quantity of debris and earth to be piled up against M’s wall with the result that injury had been caused to it. Moreover, a chemical substance had been deposited on this mound and had percolated through the wall and was damaging the wall and the soil in the vicinity. It was contended by the defendants that a cause of action only arose when damage first appeared, and that M’s remedy was merely to bring an action for damages, or a series of actions, as and when the wall actually showed damage:—

Held – (i) The cause of action arose immediately the undue burden was placed on M’s wall, and from that moment the wall sustained damage which was harmful to it and which would ultimately result in its destruction.

Darley Main Colliery Co v Mitchell distinguished.

(ii) the injury to M’s right was not a small one; nor could it be adequately compensated by a money payment because, up to the present, he had not sustained any very substantial damage, but he would probably do so, in the course of time, if nothing were done to abate the damage. The assessment of damages should, therefore, stand over, and the appropriate remedy was an injunction.

Shelfer v City of London Electric Lighting Co applied.

Notes

In view of the present excavation and rebuilding of bombed sites this is an interesting decision on the rights of owners where damage, actual or potential, is caused to walls of adjoining property by deposits of debris. The principle laid down in Shelfer’s case are held to be applicable, namely, that a person by committing a wrongful act is not thereby entitled to ask the court to sanction his doing so by purchasing his neighbour’s rights, by assessing damages in that behalf: the rule is to grant an injunction.

As to Principles upon which an Injunction is Granted in Respect of Nuisance, see Halsbury, Hailsham Edn, Vol 24, pp 91–93, paras 161–167; and for Cases, see Digest, Vol 36, pp 223–228, Nos 648–690.

Cases referred to in judgment

Darley Main Colliery Co v Mitchell (1886), 11 App Cas 127, 1 Digest 15, 118, 55 LJQB 529, 54 LT 882.

Hurdman v North Eastern Ry Co (1878), 3 CPD 168, 36 Digest 191, 325, 47 LJQB 368, 38 LT 339.

Shelfer v City of London Electric Lighting Co, Meux’s Brewery Co v City of London Electric Lighting Co [1895] 1 Ch 287, 28 Digest 415, 408, 64 LJCh 216, 72 LT 34.

Action

Action for damages and an injunction in respect of a nuisance. The facts are fully set out in the judgment.

Page 193 of [1946] 2 All ER 192

F W Beney KC and J R Ogilvie Jones for the plaintiff.

J A Wolfe for the first defendants.

D A Scott Cairns for the second and third defendants.

8 May 1946. The following judgment was delivered.

STABLE J. This case, although it involves certain complications, is, in my view, both as regards the facts and the law, a reasonably simple one. The plaintiff, Dr Maberley, is, and was at all material times, the owner and the occupier of a garden situated in the Vale of Health in Hampstead. On the northern boundary of this garden is a wall which divides his garden from an open space at the back of a building, called the Athenaeum. The plaintiff complains of two separate and wholly distinct matters. First, he says that on the Athenaeum land a very substantial quantity of debris and earth has been piled up against the wall, and this has brought to bear on his side of the wall a condition of permanent stress or pressure which it is common ground the wall was never intended to sustain. The other matter is that on to this mound from time to time a chemical substance has been deposited, which has percolated through the wall and has set up a process of disintegration of the bricks and the lime mortar of which the wall is composed, and has adversely affected the fertility of the soil in the immediate vicinity of the wall on Dr Maberley’s side.

In this action, for those two independent wrongs, Dr Maberley is seeking redress from one or other or all three of the defendants concerned. Their position in the matter is this. Rowland Smith is the owner of the Athenaeum freehold, and, at all material times up to February 1941, a limited company, Rowland Smith Motors Ltd were the occupiers of the Athenaeum premises under an agreement with Rowland Smith. From Feb 1941, the premises have been occupied by Peabody & Co of London Ltd under a lease from Rowland Smith.

To recapitulate very shortly the history of the matter, as far back as 1937 Dr Maberley had occasion to complain to Rowland Smith Motors Ltd of the injury that they were doing to this dividing wall. It is agreed by everybody that the wall belongs to Dr Maberley on his side of the wall, up to the middle line, and that on the other side of the middle line the wall is part of the Athenaeum property. In 1937, Rowland Smith Motors Ltd erected a sort of concrete platform on the part of this land at the back of the Athenaeum, and in the course of that operation they undoubtedly applied stress to the wall, which pushed it over, as to a part of it. Dr Maberley complained, as he was entitled to do, and that matter was rectified; and as far as that part of the story is concerned, it is over.

Then, in 1939, Dr Maberley again complained and said that since the outbreak of the war a large quantity of soil and, apparently, household refuse, had been dumped on the eastern side of this concrete platform. There is no doubt that in 1939 Rowland Smith Motors Ltd who were excavating for some air raid shelters in some other part of Hampstead, took the soil that they excavated, brought it to this piece of land, and piled it up at the eastern extremity of this concrete platform, against this dividing wall. The reply to Dr Maberley’s complaint was that as soon as the thaw had set in steps would be taken to remove any danger to the wall; but it appears that nothing in fact was done. Dr Maberley ceased to take a very active interest in the matter, for the obvious reason that war service took him away from the neighbourhood. In 1942 Dr Maberley returned to Hampstead, and in 1944 (by which time the occupation of the Athenaeum had passed from Rowland Smith Motors Ltd to Henry Peabody & Co of London Ltd), he returned to the attack.

It was strenuously contended before me that this matter is really governed by a decision of the House of Lords in Darley Main Colliery Co v Mitchell. It was contended that the mere imposition of this burden on Dr Maberley’s wall was not in itself an infringement of his rights, but that the cause of action arose, and only arose, if and when some actual damage to the wall, resulting from the imposition of this burden, could be established. In my view that contention is wrong, and I further hold that it does not really matter whether it is right or wrong, for this reason: I had the advantage of the testimony of two very eminent architects, and each of them agreed that this wall was never designed or intended to sustain the sort of burden that has been imposed upon it. Mr Lovett, the plaintiff’s architect, detected certain cracks, fissures and bulges

Page 194 of [1946] 2 All ER 192

in the wall, which he attributed to the burden of the mound. Mr Biggs on the other hand, while he agreed the wall was not intended for the part allotted to it, attributed the cracks and displacement of the wall to what I may call natural causes. There was, in fact, very little difference between the views of the two architects, I have no doubt that the wall has suffered by the effluxion of time and that some but not all of the defects apparent on the wall today can be attributed to the mound. I am satisfied that nobody can dogmatically assert that this or that is attributable to the one cause or to the other.

I am satisfied, however, that demonstrable or apparent injury has been caused to the wall by the imposition of this mound. I do not accede to the submission of counsel for the defendants that under these circumstances the cause of action only arose when the first crack appeared, and that the plaintiff’s remedy is simply to bring an action for damages, or a whole series of actions for damages as and when the wall disintegrates brick by brick. It may well be that a fresh cause of action arises as each brick topples down, and that there is a continuing cause of action until the root of the trouble is eradicated; but, however that may be, I am satisfied that a cause of action arose immediately this undue burden was imposed on Dr Maberley’s wall, and that from that very moment the wall sustained damage, that is to say, it was subjected to a pressure or to a strain, an actual measurable physical impact, which was harmful to the wall and which must, in the course of time, ultimately result in its destruction.

I think that Darley Main Colliery Co v Mitchell is distinguishable, and I think the distinction was very clearly pointed out by Cotton LJ in Hurdman v North Eastern Ry Co, where he said (3 CPD 168, at p 174):

‘But excavating and raising the minerals is considered the natural use of mineral land, and these decisions are referable to this principle, that the owner of land holds his right to the enjoyment thereof, subject to such annoyance as is the consequence of what is called the natural user by his neighbour of his land, and that when an interference with this enjoyment by something in the nature of nuisance [then these are the important words] (as distinguished from an interruption or disturbance of an easement or right of property in ancient lights, or the support for the surface to which every owner of property is entitled), is the cause of complaint, no action can be maintained if this is the result of the natural user by a neighbour of his land.’

Cotton LJ was drawing a distinction between the action in nuisance and the action based on an interruption or disturbance, of an easement such as a right of support, or something of that kind.

As regards this mound, in my view there is no doubt that it was a nuisance in the legal sense of the term. It was a nuisance deliberately created by Rowland Smith Motors Ltd and for that the company is responsible to Dr Maberley. As regards the position of Rowland Smith in that matter, he was the owner of the freehold at the time when the nuisance was created. I am told that he substantially owns the company which created the nuisance, but, however that may be, Rowland Smith is a wholly distinct entity from the company, and as such I treat him. I think that he is responsible for the abatement of this nuisance, for two reasons: First, when the nuisance was created the land was occupied by Rowland Smith Motors Ltd; their agreement or their occupation came to an end, and the land was then leased to Peabody, with the result that for (it may be) a very short period of time, Rowland Smith was himself the owner and the occupier of the land on which the nuisance had been created. Whether he actually knew of his own knowledge of the existence of this nuisance, I do not know. There is no evidence that he did know, and I will assume that he did not know; but the secretary of Rowland Smith Motors, Ltd who was entrusted by Rowland Smith with the task of re-letting the property to Peabody, knew of the mound, because he was constantly on the property and saw it, and in my view this knowledge must be attributed to Rowland Smith. I think that there is another ground on which Rowland Smith is responsible, and that is this: If ever there was a nuisance that was apparent, it was this one, and although the owner of property who is not in occupation of it may be placed in a position of some difficulty if his tenant introduces a nuisance on the property which is latent and which will not readily be discernible even by the most careful property owner, anybody who took any interest in this property at all must have noticed that there was this vast amount of stuff which had been brought on to the land and piled up against the wall.

Page 195 of [1946] 2 All ER 192

The position of Peabody in relation to this nuisance is somewhat peculiar. I am satisfied that they did not create it or add to it in any shape or form, but the fact of its existence had been brought very pointedly to their notice. They are in occupation of the property; they have had ample time, if they were minded to put the matter right, so to do, and they have done nothing; and I think in law they are equally responsible with the owner of the freehold and with the actual tortfeasor for the adverse consequences that Dr Maberley has sustained.

As regards the other matter, what I may refer to as the chemical position, the facts are wholly different. Rowland Smith Motors Ltd have nothing to do with that at all. That nuisance never existed until a substantial time after they had ceased to have any interest in this property. As regards Rowland Smith, I am satisfied that he did not know of the nuisance, and I do not think that with any degree of care, however microscopically he had kept his property under inspection, he could be expected to have noticed it. The nuisance is latent, and it is brought about by the percolation of water charged with this deleterious chemical into and through the wall and on to the adjoining soil in Dr Maberley’s garden. For that matter it seems to me that the legal responsibility rests, and rests solely, on the shoulders of Peabody, the party who caused it.

I need not go into the facts at any length, and indeed there is little or no dispute about them. There is no doubt that Peabody deposited (in what may have been from the weight point of view, comparatively small quantities), a certain amount of this chemical on the land. The rain has washed it through the wall, and I have no doubt that it has disintegrated, and is disintegrating, the bricks and mortar of the wall, and that for a short distance on Dr Maberley’s side the wall is adversely affected.

The real problem, which is a practical problem rather than a legal problem, is this: Here we have two entirely separate and distinct wrongs, which have caused injury to the structure of Dr Maberley’s wall. The harm is derived from two separate and distinct sources, in one case the mound, and the other the chemicals; and the damage that these two causes have brought about, and are in process of bringing about, is complementary. The solution of the problem from the practical side is a composite operation, which will free the wall from the burden of the stress of the mound and protect it from any further percolation of this deleterious chemical.

The question is what is the appropriate form of relief. My attention was called to the judgment of A L Smith LJ in Shelfer v City of London Electric Lighting Co, where he said ([1895] 1 Ch 287, at pp 322, 323):

‘Many judges have stated, and I emphatically agree with them, that a person by committing a wrongful act (whether it be a public company for public purposes or a private individual) is not thereby entitled to ask the court to sanction his doing so by purchasing his neighbour’s rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be. In such cases the well-known rule is not to accede to the application, but to grant the injunction sought, for the plaintiff’s legal right has been invaded, and he is prima facie entitled to an injunction. There are, however, cases in which this rule may be relaxed, and in which damages may be awarded in substitution for an injunction as authorised by this section … In my opinion, it may be stated as a good working rule that (i) If the injury to the plaintiff’s legal rights is small, (ii) And is one which is capable of being estimated in money, (iii) And is one which can be adequately compensated by a small money payment, (iv) And the case is one in which it would be oppressive to the defendant to grant an injunction: Then damages in substitution for an injunction may be given.’

That short, clear and authoritative statement of the law I very respectfully adopt.

In my view none of the four conditions stated by A L Smith LJ in which it is proper for the court to award damages in substitution for the injunction is satisfied in the present case. I do not think the injury to the plaintiff’s legal rights is a small one. At this stage of the proceedings, in my view, it is quite incompetent for the court to estimate the quantum of that damage in money. If the source, or sources, of the trouble are removed, it may well be that, up to date, Dr Maberley has sustained very little damage. If, on the other hand, nothing is done about the matter, it may be that in course of time the damage

Page 196 of [1946] 2 All ER 192

which he will sustain as a result of the combination of these two wrongful acts, or one or the other of them, will be very substantial. As to the third condition it follows that, if this view of the matter is right, Dr Maberley cannot be adequately compensated at this stage of the proceedings by a small money payment. As to the fourth condition, that the case is one in which it would be oppressive to grant an injunction, it seems to me that that does not arise. Dr Maberley has been vigilant in defence of his rights; he has called the attention of the motor company to the mound at the earliest possible time, and, notwithstanding his protests, they piled up this great mound of earth, and have done nothing to prevent or reduce the harmful consequences which were foreseen and which, I venture to think, were perfectly apparent throughout.

As regards the introduction of the chemical, it seems to me to be an intolerable proposition that you can bring poisonous chemicals on to your land and allow them to percolate through your neighbour’s wall and kill his flowers on the other side, and then shrug your shoulders and say: “Oh, well, flowers do not much matter, and anyhow, it is a miserable old wall, and a modest sum of damages will put that matter right.” I think Dr Maberley is entitled to be protected from this invasion of his private rights.

I do not propose to assess the damages now, because it seems to me that the whole thing is so conjectural. Up to date, in the loss of amenities and otherwise, I do not think Dr Maberley has sustained any very substantial damage. At all events, the wall has not yet fallen down, and, if the cause of the trouble is removed, it may be that it never will fall down. I think the assessment of the damages is a matter that ought to stand over.

As regards the injunction, in my view, as I have already said, in relation to both the matters of claim this is essentially a case in which an injunction is the appropriate remedy, and I so decide. I do not think this is the moment to determine the exact form which the injunction should take, for various reasons. I think the most cogent reason is this, that we are faced with a somewhat intricate problem by reason of the fact that the source of the trouble is twofold, but as regards the chemical aspect of the matter the responsibility for that rests solely on Peabody, whereas, with regard to the other matter, the responsibility rests on all three of the defendants. The actual operation of putting these matters right is a matter which the defendants will probably be in a position to adjust as between themselves. Also, one cannot shut one’s eyes to the fact that at the present moment there are certain restrictions on every form of human activity in this island, and it may be that an order of the court, if made to-day, would be unenforceable by reason of those restrictions; but that the case is one in which the appropriate remedy is by way of injunction I entertain no doubt, and I so decide.

In my view, this matter should be rectified by the persons who are responsible for the prevailing state of affairs. In the circumstances, I think that, as against Peabody and Rowland Smith, there should be a declaration that they are not entitled to continue to maintain the deposits on these premises; I think the wording should be “any harmful substance which percolates into the plaintiff’s garden.” Nor are they entitled to maintain the accumulation of soil at or near the partition wall so as to damage it, or so as to be likely to damage it. As against all three defendants, the assessment of damages will stand over, and as regards the precise form of injunction there will be liberty to apply.

Judgment for the plaintiff with costs.

Solicitors: Cliftons (for the plaintiff); Norton, Rose, Greenwell & Co (for the first defendants); Fowler, Legg & Co (for the second and third defendants).

P J Johnson Esq   Barrister.

Re Welsh Brick Industries Ltd

[1946] 2 All ER 197

Categories:        COMPANY; Insolvency        

Court:        COURT OF APPEAL        

Lord(s):        LORD GREENE MR, MORTON AND TUCKER LJJ        

Hearing Date(s):        28, 29 MAY 1946        

Companies – Winding up – Petition by creditor – Writ already issued by creditor in King’s Bench Division for recovery of debt – Company granted unconditional leave to defend under RSC, Ord 14 – Winding-up court not precluded from considering evidence as to whether dispute bona fide – Discretion of judge to make winding-up order – Companies Act, 1929 (c 23), ss 168, 169 – RSC, Ord 14.

On 18 February 1946, the petitioner issued a writ in the King’s Bench Division for the recovery of certain sums advanced by him to the company, and on 9 April 1946, he presented, in the county court, a petition, based on that debt, for the compulsory winding up of the company on the ground that it was unable to pay its debts. On a summons for judgment under RSC, Ord 14, in the King’s Bench action, the registrar made an order on 26 April 1946, giving the company unconditional leave to defend. When the petition came on for hearing, the county court judge found on the evidence before him that the debt was owing and that the company could not pay its debts, and he made a winding-up order. The company appealed from the order. It was contended that the judge should have dismissed the petition because the order of the registrar giving the company unconditional leave to defend the action for repayment of the debt was in itself inclusive of the fact that there was a bona fide dispute, and winding-up proceedings were not the appropriate procedure for dealing with disputed debts:—

Held – In spite of the fact that unconditional leave to defend had been granted in the King’s Bench action, it was competent for the judge in the winding-up court to go into the evidence which was before him to consider whether or not there was a bona fide dispute. The registrar’s order was a matter which the winding-up court would take into consideration, but it did not preclude the judge from finding, as a fact, that there was no bona fide dispute as to the debt. The judge had, therefore, discretion to make a winding-up order under the Companies Act, 1929, s 168.

Notes

This case decided that the mere fact that unconditional leave to defend an action relating to a debt has been given, is not sufficient to make a winding-up petition one based upon a “disputed debt.” It is for the judge exercising the jurisdiction in winding up to consider all the facts and exercise his own discretion upon whether the debt is or is not disputed, the grant of leave to defend being merely one matter to be taken into consideration

As to Winding Up by the Court on Creditor’s Petition, see Halsbury, Hailsham Edn, Vol 5, pp 549–552, paras 887–890; and for Cases, see Digest, Vol 10, pp 832–834, Nos 5425–5454.

Appeal

Appeal by the company from an order of His Honour Judge Thomas, made at Cardiff County Court, and dated 7 May 1946, directing that the company be wound up compulsorily. The facts are fully set out in the judgment of Lord Greene MR.

Gerald Upjohn KC and R Gwyn Rees for the appellant company.

J B Lindon KC and Carey Evans for the respondents.

29 May 1946. The following judgments were delivered.

LORD GREENE MR. This is an appeal from an order of his Honour Judge L C Thomas, sitting in the Cardiff County Court, directing the appellant company, Welsh Brick Industries Ltd to be wound up compulsorily. The company appeals against that order and the appeal is put on two grounds. First, it was said that the petitioning creditor had no locus standi to present a petition because his alleged debt was the subject of a bona fide dispute and that in those circumstances the county court judge ought to have dismissed the petition on the ground that winding-up proceedings are not the appropriate procedure for dealing with disputed debts. The debt, I may say, was not one in respect of which a statutory demand had been made, and therefore the petitioner in order to succeed on his petition had to prove further to the satisfaction of the court that the company was unable to pay its debts [see Companies Act, 1929, s 169]. This is, of course, an appeal from a county court and our jurisdiction is confined to dealing with matters of law—and included in matters of law are questions as to whether or not, with regard to some particular issue of fact,

Page 198 of [1946] 2 All ER 197

there was evidence on which the county court judge could hold as he did. In the present case the debt on which the petition is based consisted of advances made to the company for something over £800 by the petitioner. On the evidence it is perfectly clear that he made those advances, but what is disputed is the liability of the company to repay them at the present time. It appears that the petitioner had issued a writ in the King’s Bench Division on 18 February 1946, for the purpose of recovering the amount of those advances and the petition was presented on 9 April 1946, some two months later. In the meanwhile, on a summons for judgment, an order was made (it was in fact made on 26 April 1946) by the registrar of the Cardiff District Registry giving the company unconditional leave to defend. In those circumstances the petition came on for hearing and affidavits were filed dealing with a number of matters, including the history of the relationship of the parties. So far as the debt in question is concerned, the case that was made before the county court judge was to the effect that, as the registrar in the King’s Bench action had granted unconditional leave to defend, that by itself was sufficient to establish the proposition that the debt was bona fide disputed and that therefore the judge ought not to make a winding-up order. Before us that point was taken too, but, in addition, a further point was taken, namely, that, quite apart from the order of the registrar giving unconditional leave to defend, on the evidence which was in fact before the county court judge he could not in law find that the debt was not a disputed debt. The law and practice on those matters is for present purposes stated with sufficient accuracy in Buckley On The Companies Acts, 11th Edn, pp 356, 357, as follows:

‘A winding-up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed and under circumstances may be stigmatised as a scandalous abuse of the process of the court. Some years ago petitions founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order.

I do not think that there is any difference between the words “bona fide disputed” and the words “disputed on some substantial ground.” I cannot accept the proposition that, merely because unconditional leave to defend is given, that of itself must be taken as establishing that there is a bona fide dispute or that there is some substantial ground of defence. The fact that such an order is made is no doubt a matter which the winding-up court will take into consideration and to which the winding-up court will in due course pay respect, but I cannot regard it as in any way precluding a winding-up judge from going into the matter himself on the evidence before him and considering whether or not the dispute is a bona fide dispute, or, putting it in another way, whether or not there is some substantial ground for defending the action. An order, of course, can be made under RSC, Ord 14, giving unconditional leave to defend on grounds which fall far short of the establishment of a substantial ground of defence to the satisfaction of the registrar or the master, as the case may be. He may find that there is a keen dispute between the parties and he may find that, on the facts before him, it would not be proper or just to treat that issue as one which he is capable of deciding—whether it is bona fide or not—and he may accordingly say: “The facts alleged are quite consistent with it being a bona fide dispute; I need not go so far as to find that it is a bona fide dispute, but I think that there ought to be leave to defend.” Accordingly, in the winding-up court it seems to me that it must be competent for the judge, in spite of the fact that unconditional leave to defend has been granted, to go into the evidence which is in fact before him. Of course, in an appeal from the winding-up court to this court, this court has a very much freer hand than it has in appeals from a county court, because it is not tied by the decisions of fact of the judge. But, looking at the evidence which was before him, I am bound to say that in the present case, so far from differing from the view which he quite clearly took that this debt was owing, I find it difficult to see on what ground he could have found the contrary; in other words, not merely am I unable to say that there was no evidence before him on which he could find as he did, but I

Page 199 of [1946] 2 All ER 197

find it difficult to see what evidence there was before him which would have justified him in finding the contrary. The affidavit, upon which unconditional leave to defend was obtained, was not put before him. The ground upon which the company defended the petitioner on this point was, as I have said, that the order of the registrar giving unconditional leave to defend was conclusive on that matter, so that the county court judge did not have before him any of the facts alleged in the affidavit on which the registrar made the order. We have, as a matter of fact, looked at that document, and I can find nothing in it which carries the matter any further. The question is: Was the petitioner entitled to claim repayment at this time or was the company entitled to refuse repayment until some future date? When the evidence filed on behalf of the company in support of that claim is looked at, it is found to be of the most flimsy and most vague character and it is all of this type. In his affidavit (sworn on 29 April 1946) Marshall, the secretary and a director of Welsh Brick Industries Ltd after referring to the promotion of the company, said:

‘The petitioner was one of such promoters, and it was arranged that he should finance the company until it took over the said property and became self-supporting.’

What that means I am quite unable to tell. With whom was it arranged; when was it arranged; up to what amount was he to advance money and on what terms? And does it mean that, if he did finance the company by way of an advance, the company’s obligation to repay was to be deferred to some future—and, if so, what future—time? The same matter is dealt with in other affidavits filed on behalf of the company. (In passing, I should say that the petitioner Mr Frederick Stanley Bates, denies in his affidavit that he arranged to finance the company—so that there is a complete denial of the company’s story. In the same affidavit, he again denies the allegation that he should provide the company with the sum of £5,000, the figure mentioned in the affidavit which was put before the registrar). Then, in a later affidavit (filed on 6 May 1946), Marshall says:

‘I insist that there is evidence in the documents in the Chancery action … to show that the petitioner was under an obligation to finance and to give effect to the said trusts in favour of the company.’

The Chancery action is an action in which the company is asserting against the petitioner that, in some way and to some extent, he is a trustee for the company of the brickworks in question. Therefore, what Marshall is saying here is this: “Proof of my statement that the petitioner undertook the financing of the company is to be found in documents in the Chancery action.” But he does not condescend to examine those documents and produce the proof. No extract from, or letter contained in, those documents, whatever they may be, has been put before the court. He had plenty of time to do it and if there was any substance in the argument that the company was entitled to some time or indulgence before it was to be called upon to pay, and there were documents to that effect, it would have been the easiest thing for him to produce them—but he chooses to deal with the matter in this way. Then, again, Marshall in his affidavit refers to what he calls “the documents in the Chancery action.” That is the company’s evidence—that these undoubted advances by the petitioner were not to be repaid for some substantial time; but it seems that that evidence is quite worthless; it establishes nothing of the kind, and I should have been very much surprised if the county court judge had taken the view that that evidence afforded a shadow of ground for thinking that there was a substantial defence to the action or a bona fide defence to the action. It was, in my opinion, competent to him to consider that issue and to examine the question of whether or not a debt was owing. He did examine the question whether a debt was owing, and in doing so he must have considered the question as to whether, on the evidence before him, there was any kind of substance in the defence put forward. He must have held that there was no substance in it—and I am not surprised that he did so.

In the result, therefore, the appeal on that ground fails. That, by itself, is sufficient to deal with the whole of this appeal. It was argued at one time by counsel for the company that the petitioner had failed to establish that the company was unable to pay its debts. The inability or ability to pay debts is a question of fact for the judge and there was ample evidence, in my opinion, on

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which he could find that the company was unable to pay its debts. Counsel for the company was impressed by the difficulties in which he found himself on that matter and he very properly conceded that the judge had found that the company was insolvent and that he (counsel) could not contend that there was no evidence upon which he could so find. That matter, therefore, disappears from the case.

In the result the appeal must fail and must be dismissed.

MORTON LJ. There were two issues of fact before the county court judge in this case. The first was: Is there a bona fide dispute as to the existence of the debt upon which the petitioner founded his petition? Secondly: Is the company unable to pay its debts? If both of these facts were found against the company, the county court judge would have discretion to make a windingup order under the Companies Act, 1929, s 168.

In my view it is right for us to proceed on the footing that the county court judge did arrive at a conclusion upon both of those issues of fact. As to the question whether the company was unable to pay its debts, he clearly did, as appears from the note of his judgment, and I do not desire to add anything to what has been said by the Master of the Rolls on this point.

As regards the other point, whether there was a bona fide dispute, it is quite true that, when the petitioner issued a writ in the King’s Bench Division claiming repayment of this debt, the company was given leave to defend. That is no doubt a matter for the county court judge to take into consideration, but it is not a matter which concludes the issue before him. I quote now from a note [to RSC, Ord 14] in The Annual Practice, 1945, p 201:

‘The power to give summary judgment under Ord. 14 is “intended only to apply to cases where there is no reasonable doubt that a plaintiff is entitled to judgment, and where therefore it is inexpedient to allow a defendant to defend for mere purposes of delay“… As a general principle, where a defendant shows that he has a fair case for defence, or reasonable grounds for setting up a defence, or even a fair probability that he has a bona fide defence, he ought to have leave to defend.’

Therefore, the decision of the registrar in giving leave to defend does not amount to more than this—that he thought, on the evidence before him, that there was at least a fair probability that the company had a bona fide defence. To my mind it is quite impossible to regard such a finding by the registrar as a bar in itself to a finding of fact by the county court judge that there was no bona fide dispute as to this debt at all.

I do not desire to go through again the evidence which has been referred to by the Master of the Rolls, but I would like to make one or two observations in deference to the admirable argument of counsel for the company. The debt is alleged in the petition as being: “the amount of money advanced by your petitioner to the company in Nov and Dec 1945.” Then there is a claim for interest with which I need not deal. That is verified by affidavit in the usual way. The affidavit in reply says this, after referring to the promotion of the company:

‘The petitioner was one of such promoters and it was arranged that he should finance the company until it took over the said property and became self-supporting.’

Criticisms of that statement have already been made. I entirely agree with them and I do not desire to repeat them. Counsel for the company suggested that it was inconceivable that this company should have embarked upon operations of brick-making unless it had had a firm agreement with the petitioner that he would not only advance moneys but leave those moneys on loan for a particular time and advance further sums as and when they were needed up to the alleged limit of £5,000. I agree it seems not unlikely that the company would require such a provision before it started business, but the difficulty is that the company’s own evidence does not state it. There is no statement to be found in the company’s evidence of an agreement not to call in the money before a particular date, or anything of that kind. If there was such an agreement it was for the company to set it up and prove it.

We were referred to the evidence which was filed in the King’s Bench action and on which leave to defend was given, but, assuming in favour of the company that we should refer to that evidence at all, as it was not before the county court judge, I think it carries the matter no further. All that Marshall says

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in his affidavit (sworn on 26 April 1946) in this regard is this:

‘The plaintiff was also to find a sum of £5,000 for financing the operations of the defendant company. [Para. 7].’

Again there is no description of the terms upon which the money was to be found or the dates upon which it was to be repaid. Then Marshall deals again with the matter in para 11 of that same affidavit:

‘The defendants admit that the plaintiff paid to the credit of the defendants’ said account the two sums of £159 10s. and £653 mentioned in the particulars of claim. Such amounts it is alleged [he is evidently not prepared to swear it] were provided by the plaintiff as part of the arrangement under which he was to finance the company to the extent of £5,000, and neither of them was a loan to the company, or not a loan at interest, or a loan repayable until and unless the plaintiff first satisfied his full obligation to finance the company’s operations to the extent of £5,000. Such is the defendants’ contention [he does not state it as a fact] and your deponent submits it is amply borne out by the facts set out above and the voluminous correspondence in the case.’

But he did not exhibit any document recording any such arrangement.

In my view there was ample evidence upon which the county court judge could come to the conclusion that there was no bona fide dispute as to the petitioner’s debt. I think he must have come to that conclusion as a matter of fact and, in my view, the appellant’s case fails under that head.

I agree that this appeal should be dismissed.

TUCKER LJ. I agree.

Appeal dismissed. Costs of the respondents to be paid out of the assets of the Company.

Solicitors: Fortescue, Adshead & Guest agents for Richards & Guest, Cardiff (for the appellant company); Ince & Co agents for Allen Pratt & Geldard, Cardiff (for the respondents).

F Guttman Esq   Barrister.

Simms Motor Units Ltd v Minister of Labour and National Service

[1946] 2 All ER 201

Categories:        CONSTITUTIONAL; Other Constitutional        

Court:        KING’S BENCH DIVISION        

Lord(s):        LORD GODDARD LCJ, HUMPHREYS AND LYNSKEY JJ        

Hearing Date(s):        15 MAY 1946        

Emergency Legislation – Essential work – Reinstatement – Dismissal of employee for alleged serious misconduct – Direction to reinstate – Instruction from Ministry ordering national service officer always to direct reinstatement in certain cases – No exercise of discretion by national service officer – Direction to reinstate invalid – Rules Publication Act, 1893 (c 66) – Emergency Powers (Defence) Act, 1939 (c. 62), s 1 – Defence (General) Regulations, 1939, reg 58A – Essential Work (General Provisions) (No 2) Order, 1942 (SR & O, 1942, No 1594, as amended by SR & O, 1943, No 1075, and SR & O, 1944, No 815).

On 23 February 1945, SMU Ltd a scheduled undertaking within the Essential Work (General Provisions) (No 2) Order, 1942, dismissed one of its workmen alleging serious misconduct. The workman complained to the national service officer and his complaint and appeal were referred to the local appeal board, who held that the dismissal was not justified on the ground of serious misconduct. The national service officer had received instructions from the Ministry that in all cases of dismissal for alleged serious misconduct he was always to direct re-instatement if (a) the recommendation of the appeal board that the dismissed workman’s appeal be allowed, was unanimous and (b) the dismissed workman desired to be reinstated. Acting on these instructions, the national service officer directed SMU Ltd to reinstate the workman. It was contended on behalf of SMU Ltd that the direction to reinstate was invalid because the national service officer had not exercised his discretion under the powers conferred on him by the Essential Work (General Provisions) No 2) Order, 1942 (as amended):—

Held – (i) The Minister could only confer power upon himself or his representatives under the Defence (General) Regulations, 1939, reg 58A, by

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Statutory Rules and Orders. He could not, by giving instructions which were not Orders, limit the duties or discretion conferred on the national service officer by the Essential Work (General Provisions) (No 2) Order, 1942.

(ii) the direction to reinstate was invalid because the national service officer had not exercised his discretion in the matter as required by the Order.

Notes

Where a minister is given power to make Orders he is not entitled to give further instructions affecting the working of the Orders except, it may be presumed, in matters of mere departmental routine. In the circumstances here reported a national service officer was given a discretion by Order, which was limited by subsequent instruction, and a notice of reinstatement given by such officer pursuant to and in accordance with those subsequent instructions is, therefore, held invalid.

As to Statutory Rules and Orders, see Halsbury, Hailsham Edn, Vol 31, pp 467–470, paras 573–580; and for Cases, see Digest, Vol 42, pp 782, 783, Nos 2114–2129.

For the Essential Work (General Provisions) (No 2) Order, 1942, see Butterworth’s Emergency Legislation, [14] 128.

Appeal

Appeal by way of case stated from a decision of the Appeals Committee of the Court of General Quarter Sessions for the county of Middlesex, given on 16 October 1945, allowing the appeal of Simms Motor Units Ltd from a decision of a court of summary jurisdiction for the petty sessional division of Highgate. An information was preferred against the company by a national service officer alleging failure to comply with a direction to reinstate in its employment a specified person within the meaning of the Essential Work (General Provisions) (No 2) Order, 1942. The workman had been dismissed by the company for alleged serious misconduct. It was found by the appeal committee that the national service officer had received instructions from he Ministry that in all cases of dismissal for alleged serious misconduct he was always to direct reinstatement if (a) the recommendation of the local appeal board, that the dismissed workman’s appeal be allowed, was unanimous and (b) the dismissed workman desired to be reinstated. The committee further found that the national service officer always acted on this instruction. The facts are fully set out in the judgment of the court delivered by Lynskey J.