1867, do not render such a sequestration incompetent, for unless the petitioners can make out that it is incompetent, I do not know of any ground on which it can be recalled, and if it is not to be recalled, then the company's assets must be distributed under the sequestration. This question, whether it is competent to sequestrate a company formed and registered under the Companies Act 1862, is a very serious and important one, and must depend for its solution on the terms of the Act of 1862.

The Act of 1862, as I read it, is intended to provide a complete code of law applicable to the case of those companies to which it applies, and this is made very clear at the outset by the fifth section, which describes the different divisions or parts of the Act, and which relate to the following subject-matters, viz., the first part, to the constitution and incorporation of companies and associations under the Act; the second part, to the distribution of the capital and liability of members of companies and associations under the Act; the third part, to the management and administration of companies and associations under the Act; the fourth part, to the windingup of companies and associations under the Act; the fifth part, to the registration office; the sixth part, to the application of the Act to companies registered under the Joint-Stock Companies Acts; the seventh part, to companies authorised to register under the Act; and the eighth part to the application of the Act to unregistered companies. Now, it appears to me that this indicates very clearly the intention of the Legislature not only to make provisions applicable to these companies but to provide a complete set of rules, so that the whole law with regard to the companies embraced by the Act should be found within the Act itself. In the next place, it is to be observed that the liability of the parties is not the same as in a common law partnership, the reason being that all companies to which the statute applies are made incorporations, and the rule of corporation law therefore applies, which is, that individual members are not liable for debts due by the corporation, nor can they sue for debts due to the corporation. Their only liability is to pay what they have undertaken to pay by the terms of the contract.

This rule of corporation law is assumed to apply to every company under the statute, under the exceptions provided by the sections after mentioned. What at present I want to make clear is that the effect of the incorporation of the company by the statute, except for the clauses I am about to mention, is that no action or diligence would lie against the individual members of a company formed and registered under the Act, whereas at common law an action would lie against every individual member of a company for a company debt. The section I refer to is the 18th, which provides"Upon the registration of the memorandum of association, and of the articles of association, in cases where articles of association are required by this Act or by the desire of the parties to be registered, the registrar shall certify under his hand that the company is incorporated, and in the case of a limited company that the company is limited. The subscribers of the memorandum of association, together with such other persons as may from time to time become members of

the company, shall thereupon be a body corporate by the name contained in the memorandum of association, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, with power to hold lands." Now, if the 18th section had stopped there the company would have been a proper corporation without any exception, and the corporators or members of the corporation would not have been liable for the corporation debts; but then the section proceeds, "but with such liability on the part of the members to contribute to the assets of the company in the event of the same being wound up as is hereinafter mentioned." The liability therefore of the corporators, which would not have existed if it were a corporation without qualification, is made to depend on what is "hereinafter mentioned," and that we find in section 38.

Section 38 provides :-"In the event of a company formed under this Act being wound up, every present and past member of such company shall be liable to contribute to the assets of the company to an amount sufficient for payment of the debts and liabilities of the company, and the costs, charges, and expenses of the winding-up, and for the payment of such sums as may be required for the adjustment of the rights of the contributories amongst themselves" under certain qualifications. The liability, then, of the members is only to come into operation in the event of the company being wound up, and the amount of the liability is the amount sufficient for payment of the debts, costs, charges, and expenses of the winding-up, and for payment of such sums as may be required for the adjustment of the rights of the contributories "amongst themselves." Thus the adjustment amongst themselves, after the debts and liabilities of the company have been satisfied, can take place only under the statute. It cannot take place under the Bankrupt Act, for the duty of the trustee in a sequestration is only to realise the assets and pay the creditors; if there is any surplus, then his duty ends by paying it over to the bankrupt in accordance with the express provisions of the Act of 1856. So that under a sequestration there can be no such adjustment of the rights of contributories amongst themselves. Therefore, it is plain to me that when section 38 speaks of the liabilities of a company under a winding-up, it must mean a winding-up under the Act, for it extends expressly to the adjustment of the rights of contributories. The qualifications adjected to section 38 I do not think very material, except that as regards past members, that is to say, those who have been, but have ceased to be members, rules are introduced (sub-secs. 1, 2, and 3) which are not the rules of the common law; and so the liability under section 38, which is the sole liability of the members of the corporation, is not a liability conform to the common law, but is defined and limited by the statute. The only other section which is important in the construction of the words "winding-up," which is to be the occasion of bringing the liability of the members into operation-is the 195th. It is in that part of the statute which is applicable to companies registered though not formed under the Act. A company formed under a deed, Act of Parliament, or charter, when registered, comes under its provisions, and among

other incidents is this, that it shall be wound up under the statute; and we know, as matter of practice, that when a company not constituted under the Act comes to be registered under it, it is for the purpose of taking the benefit of the winding-up clauses. The 195th section, in speaking of actions in dependence before registration, says:-"All such actions, suits, and other legal proceedings as may at the time of the registration of any company registered in pursuance of this part of this Act have been commenced by or against such company, or the public officer or any member thereof, may be continued in the same manner as if such registration had not taken place; nevertheless execution shall not issue against the effects of any individual member of such company upon any judgment, decree, or order obtained in any action, suit, or proceeding so commenced as aforesaid; but in the event of the property and effects of the company being insufficient to satisfy such judgment, decree, or order, an order may be obtained for winding-up the company." It is to be observed that under this section, where the company of which it speaks is registered but not constituted under the Act, there is the same limit of liability as was previously provided with regard to the shareholders of a company constituted under the Act. No diligence is competent against the shareholders; no such remedy is competent to any creditor, and the only remedy is to apply for a winding-up order.

There cannot, I apprehend, be two meanings of this section, for winding-up cannot mean by way of sequestration or a private trust-deed; it must mean winding-up under the statute. The obtaining of a winding-up order is entirely a statutory process.

If, then, the only remedy competent to creditors of a company not formed but only registered under the Act is to obtain a winding-up order, much more must it be the only remedy competent when the company is also formed and constituted under the Act. The Act cannot mean in such a case as that anything else than is meant in sec. 195.

In these circumstances, whether it is expedient that there should be sequestration or not, I am of opinion that the statute clearly excludes such a process, and therefore we must hold that on the insolvency or bankruptcy of a company registered under the Act, its winding-up must be subject to the provisions of the Act.

I am therefore for recalling the sequestration.

LORD MURE-I entirely concur with your Lordship, and on the same broad ground, viz., that as the Companies Act of 1862 introduced rules which were not those of the common law, and some of which cannot be found in the Bankruptcy Act, and some of which are inconsistent with and at variance with its provisions, it must be held that companies registered under the Act cannot be sequestrated.

LORD SHAND-It is explained in the answers to the petition for recal of this sequestration that the object which the respondents have in view in wishing this sequestration to be continued is to prevent preferences being secured over the great bulk of the company's property. It is stated that on 29th May 1884, being five days before the first deliver

ance on the petition for sequestration, the present petitioners raised an action for poinding the ground, and the object of the respondents in keeping up the sequestration is not because sequestration is a preferable method of procedure, or because it can be as easily managed, but in order to cut down the diligence. With that object I entirely sympathise, but the question to be determined cannot be influenced by the consideration that under a sequestration preferences would be cut down which under a liquidation would stand.

This case is just one of several which show that the Acts regulating joint-stock companies are defective in two particulars, because, in the first place, the equitable rules of ranking have no place in a liquidation, and in the second place, because those statutes do not provide for the cutting down of diligences used before the company went into liquidation as is the case with regard to sequestration.

In England, so far as regards the first point, there is a provision in the Judicature Act of 1875 (38 and 39 Vict. cap. 77), the 10th section of which is to this effect-"In the winding-up of any company under the Companies Acts 1862 and 1867, whose assets may prove to be insufficient for the payment of its debts and liabilities and the costs of winding-up, the same rules shall prevail and be observed as to the respective rights of secured and unsecured creditors, and as to debts and liabilities provable, and as to the valuation of annuities, and future and contingent liabilities respectively, as may be in force for the time being under the law of bankruptcy with respect to the estates of persons adjudged bankrupt." Whether there is a further power of cutting down diligences commenced on the eve of declared insolvency I do not know, but I hope that one result of this case will be that the Legislature will consider this question.

On the merits of the question we have to deal with I entirely agree with your Lordships. In the English Bankrupt Acts there are express provisions that they shall have no application to the case of companies registered under the Act of 1862. In Scotland there is no similar provision, but though there is no express provision in the Bankruptcy Act or in the Joint-Stock Companies Acts, I am yet of opinion that the language of the Joint-Stock Companies Acts by the clearest implication excludes the provisions of the Bankruptcy Act. We must take the provisions of the Act of 1862 and subsequent Acts as a whole, and I agree in thinking that as the statutes have provided an express mode of creating incorporations by means of registration, so they have provided the only means for bringing them to an end when the time for their dissolution arises. In addition to the provisions of the statute of 1862 it is worthy of notice that in the Act 42 and 43 Vict. cap. 76 [Companies Act 1879], which deals with jointstock banking companies, there are provisions for enabling such companies to hold a certain amount of uncalled capital, and that there is a proviso that this capital is not to be capable of being called up except in the event of the company being "wound up.'

"

It appears to me that the term "winding-up," as used in these Acts, relates entirely to the mode of winding-up which the statutes created. In the case of a sequestration the machinery is en

Prop. Invest

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tirely different; the functions of the trustee in a sequestration are quite different from those of a liquidator; the property is transferred to him, and throughout the procedure is semi-judicial; the process is more limited than is the case with a liquidation. In a sequestration the property is divided among the creditors, but if there is any surplus the trustee has no power to settle the rights of the partners inter se. The only provision in the Bankruptcy Act in regard to that matter is section 155, which provides-"Any surplus of the bankrupt's estate and effects that may remain after payment of his debts, with interest, and the charges of recovering and distributing the estate, shall be paid to the bankrupt or to his successors or assignees."

The statute, however, with which we are dealing provides that in the case of a winding-up a great deal more can be done than that, for the rights of the contributories can be adjusted amongst themselves, and that either voluntarily or with the aid of the Court. Again, it is a question how far the general provisions of the Act of 1862 are to be applied in the case of a sequestration. An argument was maintained to the effect that the term "winding-up" might include sequestration-which I am satisfied was not intended,but then I ask, Would the provisions in the winding-up clauses be applicable to the case of a sequestration? I think if that were so it would be impossible to see where the confusion would end.

I hold that by clear implication the general terms of the Joint-Stock Companies Acts refer exclusively to the mode of winding-up under those Acts, and that therefore the sequestration of joint-stock companies is entirely incompetent. The Court pronounced these interlocutors :(1) In the petition for recal of the

sequestration.

"Having considered the cause and heard counsel for the parties on the reclaiming note for the Standard Property Investment Company (Limited) against the interlocutor of Lord Fraser (Lord Ordinary on the Bills) of 12th August last, recal the said interlocutor, and in terms of the prayer of the petition recal as incompetent the sequestration of the estates of the Dunblane Hydropathic Company (Limited), awarded by the Sheriff of Perthshire on 11th July last (1884), and appoint this judgment of recal to be entered in the Register of Sequestrations and on the margin of the Register of Inhibitions, all in terms of the 31st section of the Bankruptcy Act 1856: Find the petitioners entitled to expenses, &c."

(2) In the petition for judicial winding-up.

"Remit the petition to the Second Division of the Court ob contingentiam of a petition at the instance of Patrick Stirling, Esquire, of Kippendavie, of date 9th June 1884, for the judicial winding-up of the Dunblane Hydropathic Company (Limited)."

Counsel for the Standard Property Investment Company-Mackintosh-Low. Agents-Duncan Smith & Maclaren, S.S.C.

Counsel for Thomas Whitson-Sol.-Gen. Asher, Q.C.-Lorimer. Agents-Dundas & Wilson, C.S.

Friday, December 12.

FIRST DIVISION.

[Court of Exchequer.

LOTHIAN (SURVEYOR OF TAXES) v.

Revenue

MACRAE.

Income-Tax-Clergyman - Deduction from Assessable Income of Expenses necessarily incurred in Discharge of Public Duty--Income-Tax Act 1854 (16 and 17 Vict. c. 34), secs. 51 and 52. Held that the minister of a parish, who from age and infirmity had been provided with an assistant to whose salary he made a considerable contribution, was not entitled to deduction from the amount of his income to be assessed under the Income-Tax Acts of the amount of such contribution, because in order to obtain the benefit of the deduction allowed by the Income-Tax Act 1854, sec. 52, the expenses in respect of which deduction is claimed must have been necessarily incurred in the personal discharge of duty. The Income-Tax 1854 (16 and 17 Vict. c. 34), sec. 51, provides - "In assessing the duty chargeable under Schedule (E) of this Act, in respect of any public office or employment, when the person exercising the same is necessarily obliged to incur and defray out of the salary, fees, or emoluments of such office or employment the expenses of. travelling in the performance of the duties thereof, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to lay out and expend money wholly, exclusively, and necessarily in the performance of the duties of his office or employment, it shall be lawful to deduct from the amount of the said salary, fees, and emoluments to be assessed under this Act the amount of all such expenses necessarily incurred and defrayed in manner aforesaid."

Sec. 52 provides "In assessing the duty chargeable under any schedule of this Act upon any clergyman. . . in respect of any . . . emolument of his profession, it shall be lawful

to deduct . . . from such emoluments any sum or sums of money paid, or expenses incurred by him, wholly, exclusively, and necessarily in the performance of his duty or function as such clergyman.. and if such sum or sums or expenses shall not have been deducted as aforesaid, then a proportionate part of the duty charged and paid by such clergyman . . shall, on due proof to the Commissioners of such sum or sums having been expended as aforesaid, be repaid to such clergyman."

Dr John Macrae, minister of the parish of Hawick, being seventy years of age, and in the forty-first year of his ministry, an assistant was appointed by the congregation at a salary of £120, which was subscribed by Dr Macrae and the members of the congregation. During the three years prior to the raising of the present question the average sum contributed by Dr Macrae had been £45.

At a meeting of the Commissioners for general purposes of the Income-Tax Acts for the county of Roxburgh, held at Jedburgh upon 3d June 1884, Dr Macrae claimed repayment of incometax for the three years ended 5th April 1883, in respect of the £45 per annum contributed by him

during each of the three preceding years towards the payment of his assistant's salary.

In support of his claim Dr Macrae cited 16 and 17 Vict. cap. 34, sec. 52, above quoted, and contended that he was entitled to the abatement, as the expense was wholly, exclusively, and necessarily incurred in the performance of his duty or function.

The surveyor of taxes objected to the allowance of the claim, in respect that there was no obligation upon Dr Macrae to expend this sum or to enter upon this engagement. The payment was a voluntary one, and was not "necessarily incurred' in the performance of his duty or function; and further, the exemption only applied to expenses incurred by the clergyman in doing the duties himself, and not to payment of an assistant acting on his behalf.

The Commissioners, looking to Dr Macrae's age and the extent of the parish, held that the services of an assistant was necessary, though Dr Macrae could not have been obliged to provide them, and allowed the claim.

The surveyor took a Case.

Argued for the surveyor of taxes-The £45 given by Dr Macrae was a voluntary subscription upon his part; he gave as one of the congregation. The expense was not one incurred by him in the discharge of his duty as minister, but through his failure to discharge that duty. What the Act contemplated was expense incurred by a minister in the personal discharge of his duty, and as that was not the case here income-tax was exigible.

Argued for Dr Macrae-Although the appointment was made by the congregation, it was with Dr Macrae's approval. Upon him lay the burden of making up any deficit through the failure of the congregation to provide the salary agreed upon, and against him and not against the congregation would any action for the recovery of that salary be laid. This expense was necessarily incurred, as without it Dr Macrae would be unable fully to discharge the duties of his office-Taxes Management Act 1882 (43 and 44 Vict. cap. 19), sec. 9; Income- Tax Act 1842 (5) and 6 Vict. c. 35), sec. 146.

At advising

The

LORD MURE-In this case of the appeal of Mr A. J. Lothian, surveyor of taxes, against the decision of the Commissioners for the County of Roxburgh, the facts which we are called to deal with are shortly these :-Dr Macrae, the minister of Hawick, contributes a very considerable sum towards the salary of a gentleman who is engaged as his assistant, by an arrangement gone into between him and the congregation of the church to which he ministers. assistant is appointed by the congregation, with a salary of £120 a-year, and of that salary Dr Macrae, by voluntary arrangement, contributes £45 a-year. His assistant appears to have been appointed (from the statement in the Case) in consequence of Dr Macrae's age, and his not being as efficient now as he was in former years, and not able to overtake the duties of the parish, in which he has been minister for a great many years; but it is done by voluntary arrangement, and the claim made by him is to be relieved from the payment of income-tax upon that portion of his stipend, amounting to £45, which he contributes towards the salary of his assistant. The Commissioners have found

that he is entitled to exemption, and your Lordships are now called upon to state what you conceive to be the proper rule of law applicable to this matter. Now, the claim is rested upon a clause specially inserted in the Income Tax Act of 1854 relative to clergymen, and which deals with the abatement of duty to be made in the case of clergymen for expenses incurred in the performance of their duties; and it provides that in assessing the duty chargeable on ministers of any religious denomination in respect of profits, fees, and emoluments, "it shall be lawful to deduct from such profits, fees, or emoluments any sum or sums of money paid, or expenses incurred by him necessarily in the performance of his duty or function as such clergyman or minister;" and the question is, whether a sum of money so paid by voluntary arrangement between a clergyman and his congregation to an assistant comes within those words? Now, I have carefully considered the expressions used, and the conclusion I have come to is, that I do not think this arrangement can be held to bring Dr Macrae within the exemption. The words are peculiar, and they are substantially similar to those used in the 51st section applicable to officials Government officials who are not clergymen. The words are-to deduct from such profits or fees any sum or sums of money paid or expenses incurred by him "necessarily in the performance of his duty or function." Now, is an expense incurred in getting another person to perform duties which in consequence of his own age or infirmity he cannot overtake, an expense incurred necessarily in the performance of his duty as clergyman?" I do not see how these words, "necessarily incurred by him in the performance of his duty or function," can be held to cover any payment made to another party for the performance of that duty. We were referred to the 51st section as showing the use of the words, and what the words used in the 52d section covered, but I confess I see no great difference between the substantial meaning of the words used, though the phraseology of the 51st section is a little different. The phraseology is that in assessing the duty chargeable in respect of any public office, where the person exercising the same is necessarily obliged to incur and defray out of the salary, fees, or emoluments of his office the expenses of travelling in the performance of his duties, or of keeping or maintaining a horse to enable him to perform the same, he shall be entitled to deduct the sums so expended. Therefore the person who is exempted is exempted from certain expenses which while he himself is performing the duties of his office he is put to by the distance he has to go; but still the expenses in that case are clearly expenses incurred by himself in the act of performing his duty in travelling about the country. And so here the word expenses relates to similar expenses, whatever they may be, necessarily incurred by the clergyman while he himself is performing his duty; and I cannot construe these words as implying that they can be held to apply to a subscription or contribution made by him along with his parishioners for payment of the salary of an assistant who is discharging the duties of the office. I have considered the case with every disposition to give effect to the exemption of a gentleman who has made so generous a contri

v. Macrae

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bution to this assistant's salary; but it is a voluntary act on his part-a very praiseworthy one in itself-and I cannot find any ground for holding it comes under the expression "incurred by him necessarily in the performance of his duty or function.' On these grounds I think the decision of the Commissioners in this case a mistaken one, and that the surveyor is entitled to have his view given effect to. I am reminded by Lord Shand that we were referred to the 8th rule of sec. 146 of the Income Tax Act of 1842 (5 & 6 Vict. cap. 35), which provides for the case of a principal paying his deputy a salary; but that is a different thing altogether. There is no exemption there from income-tax-it is only regulating how the whole salary is to be paid. In that case the Government get the whole duty on the whole salary, whatever it may be, whereas what is done here is to exempt a certain portion of the salary from any duty whatever, and therefore I do not think that that section is applicable to the present case.

LORD SHAND-I have come to be of the same opinion that your Lordship has just expressed. The words that are to be construed are--it shall be lawful to deduct from such profits, fees, or emoluments any sum or sums paid or expenses incurred by him necessarily in the performance of his duties or function as such clergyman or minister. It appears to me that the true reading of these words is, necessarily in the personal performance of his duty as clergyman, and that they will not cover the case of an arrangement made by which the personal performance of the duty is to some extent to be devolved upon others. This view of the statute receives, I think, very clear support from the preceding section, to which your Lordship has referred. That section has obviously the same object in view as section 52, but the language of it is more ample, and it fixes, I think, by way of illustration, the class of expenses which are contemplated by the statute, where it provides that a person upon a salary shall be entitled to deduct sums which he is necessarily obliged to incur and defray out of the salary, fees, or emoluments of his office, as the expenses of travelling in the performance of his duties, or of keeping or maintaining a horse to enable him to perform the same, &c. The class of expenses there defined by the statute are expenses necessarily incurred in the personal performance of his duty, and I do not think we can carry the meaning of section 52 into a wider class of expenses. That view is, I think, considerably strengthened by the fact that by rule 8 of section 146 of the Act 5 and 6 Vict. cap. 35, there is a direct provision made for the case of public officers who appoint a deputy, and it is there directly provided that the Crown shall have income-tax upon the total salary, leaving it to the person who draws that salary, and makes an arrangement for another to perform the duties, to deduct the income-tax off that share. If we were to sustain the contention of Dr Macrae in the present case it appears to me we would be practically, in a great many cases at least, repeating the rule of the Act 5 and 6 Vict. c. 35, to which I have referred, and I do not think we can by implication, and by implication only, under this later Act of Victoria, repeal the earlier provision to which I have referred. So, taking all these considera

tions together, I have come to the conclusion that the expense of providing an assistant, in order to save to some extent the incumbent of the parish from personally performing his duties, is not an expense which can be said to be necessarily in the performance of that duty, for I think the statute refers to personal performance of that duty.

LORD ADAM-I think that the exemption in the Act applies to expenses incurred by a clergyman necessarily in the performance of his dutiesthat is, of his duties by himself personally. In this case it appears to me that the expenses are incurred, not to enable him to perform his duty, but to enable another person to perform part of his duty for him. It appears to me that that is not an exemption within this clause of the Act, and I agree with your Lordship that the 51st section, and also the 8th rule, section 146, of the Act 5 and 6 Vict., go strongly to corroborate the opinion that that is the right view of the case. I therefore concur.

The LORD PRESIDENT and LORD DEAS were absent.

The Court sustained the appeal.

Counsel for Surveyor of Taxes-Lord Adv. Balfour, Q. C.-Lorimer. Agent-David Crole, Solicitor of Inland Revenue.

Counsel for Macrae-M'Kechnie. Agent-H. W. Cornillon, S.S.C.

Friday, December 12.

FIRST DIVISION.

HOME'S TRUSTEES V. RAMSAY AND OTHERS. Succession-Fee and Liferent-Lapsed ShareEffect of Liferent to Parents on Distribution among Children-Division per stirpes.

A truster directed the residue of his general estate, and also the sum contained in a bond of provision over his entailed estates, to be held by his trustees for behoof of three younger daughters (who were all married), for the liferent use allenarly of them and their respective husbands; after the death of each of them and her husband, her share to be divided equally among her lawful issue. In the event of any of them dying without lawful issue, her share was to be held, after the death of her and her husband, "for the liferent use and behoof allenarly of her surviving sisters, and failing them or either of them, then the said third part or share shall be divided equally amongst their lawful children, share and share alike, on their respectively attaining majority." One daughter died without issue, another had three children, and another had six. Held that the share of the childless daughter being destined to the other daughters in liferent before their children were to take the fee, the division of it among their children ought to be per stirpes and not per capita.

...

William Foreman Home, Esquire, of Billie, Paxton, and Wedderburn, died on 28th April 1852, survived by four daughters, viz.-(1) Mrs Jean Home or Milne, spouse of David Milne of