and personal estate to his trustees, upon trust to convert the same (with power to postpone the conversion), and out of the proceeds to pay his debts and legacies, and to invest the residue and pay the income to his wife, Marion F. Ogilvie, during her widowhood, the income being payable only in part if she married again; and, subject to the widow's interest, upon trust to hold the residuary estate for his daughter in the event of her attaining twenty-one or marrying again. The trust premises were not to vest in the daughter absolutely, but she was to have the income for life, and after her death the trust premises were, subject to her power of appointment, to be divided amongst her children and certain issue, in default of whom the trust premises were to be held in trust for certain other persons who were infants. Alexander Ogilvie alone proved the will. At the time of his death the testator was the registered holder of 33,635 ordinary shares of 1l. each in the Powell Duffryn Steam Coal Company, Limited, and just before the company increased its capital, as below mentioned, its ordinary shares were worth between 31. and 31. 10s. each. The company's articles of association, before they were altered, were in fairly ordinary form, two of them being, so far as material, as follows: "106. The board may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserve fund or funds to meet depreciation contingencies, or for equalising dividends, or for repairing or maintaining any property of the company, or for any other purposes of the company, and the same may be applied accordingly from time to time in such manner as the board shall determine. 107. The company in general meeting may declare a dividend to be paid to the members according to their rights and interests in the profits, but no larger dividend shall be declared than is recommended by the board." In 1913 the following new articles were added by special resolution: "108A. The company may in general meeting capitalise any part of the undivided profits of the company standing to the credit of the company's reserve fund, and distribute the same as a bonus amongst the holders of the ordinary shares in the company in proportion to the ordinary shares held by them and the amounts paid up thereon respectively. 108B. Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus, wholly or in part, by the distribution of specific assets, and in partieular of paid-up shares, debentures, or debenture stock of the company, or paid-up shares, debentures, or debenture stock of any other company, or in any one or more of such ways; and the directors shall give effect to such resolution; and, where any difficulty arises in regard to the distribution, they may settle the same as they think expedient, and in particular may issue fractional certificates, and may fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made to any members upon the footing of the value so fixed, in order to adjust the rights of all parties, and may vest any such specific assets in trustees upon such trusts for the persons entitled to the dividend or bonus as may seem expedient to the directors. Where requisite, a proper contract shall be filed in accordance with s. 88 of the Companies (Consolidation) Act, 1908, and the directors may appoint

any person to sign such contract on behalf of the persons entitled to the dividend or bonus, and such appointment shall be effective." In March, 1913, the directors gave notice of an extraordinary general meeting to pass the following resolutions: "1. That the directors be, and they are hereby authorised pursuant to Article 35 of the company's articles of association, to increase the capital of the company from 1,835,7821. to 2,394,3761. by the creation of 558,594 ordinary shares of 11. each. 2. For the purpose of capitalising the sum of 558,5947., being part of the undivided profits of the company standing to the credit of general reserve account, and upon which income-tax has been paid by the company, a dividend of 6s. 8d. per share on each of the ordinary shares be, and the same is hereby declared out of such account, and that the directors be, and they are hereby further authorised pursuant to Article 108в. of the articles of association of the company, to satisfy such dividend by allotting to the members one 11. ordinary share credited as fully paid up in respect of every three ordinary shares held by them respectively on this the 26th day of March, 1918. Such new ordinary shares to rank for dividend as and from the 1st day of January, 1918, and to rank in all other respects pari passu with and carrying the same rights as the existing ordinary shares." The notice was accompanied by the following circular: "Dear Sir or Madam,-In accordance with the announcement made at the annual general meeting, held on the 5th inst., I am instructed by the directors to say that they propose to capitalise the sum of 558,5941. which has been expended on capital account and forms part of the undivided profits of the company standing to the credit of general reserve account, and upon the whole of which income-tax has been paid by the company. They consequently recommend the shareholders to declare out of such account a dividend of 6s. 8d. upon each of the existing ordinary shares to those members who appear on the share registers on the 26th March, 1918. This dividend the directors propose to satisfy by the allotment of ordinary shares of 11. each credited as fully paid up-i.e., one new ordinary share for every three ordinary shares held on the aforesaid date, and for this purpose they recommend that the share capital of the company be increased by the creation of 558,594 ordinary shares of 17. each, which will rank for dividend as and from the 1st day of January, 1918, and in all other respects rank pari passu with and carry the same rights as the existing ordinary shares. The shares to be issued in respect of the capitalised profits will, we are advised, as between tenants for life and remaindermen, constitute an accretion to capital and not income, and they will not be required to be brought into account by the allottees as income for the purpose of either income-tax or super-tax returns. The outcome of the scheme will be to increase the number of shares held by each ordinary shareholder, but in so far as the company is under Government control, the amount of profits available for dividend purposes will remain about the same as hitherto." The resolutions were duly passed, and 11,211 of the new ordinary shares were allotted to Alexander Ogilvie in respect of the testator's holding of shares in the company, and he took out an originating summons against the testator's widow and daughter, to which an infa

remainderman was added, by amendment, as a defendant, raising the question whether the 11,211 shares received by him as the testator's executor and trustee ought to be retained by him as part of the capital residuary estate subject to the trusts of the will, or ought to be transferred by him as income to the testator's widow, the present tenant for life under the trusts of the will.

Warwick Draper for the plaintiff.

Alexander Grant K.C. and Cecil W. Turner for the first tenant for life contended that the 11,211 shares belonged to the tenant for life as income, inasmuch as they were distributed as dividend out of a reserve fund consisting of profits. The company, on its original articles, could not distribute a dividend on shares forming part of the testator's estate except out of cash, and it had altered its articles so as to be able to declare a dividend in fully-paid shares. Distribution in such shares did not make what was given less a dividend out of profits, and consequently the shares were income and not capital. They referred to Bouch v. Sproule, 12 App. Cas. 385; Wood v. Odessa Waterworks Company, 42 Ch. D. 636; In re Armitage, [1893] 3 Ch. 337; In re Malam, [1894] 3 Ch. 578; In re Thomas, [1916] 2 Ch. 331; In re Hatton, [1917] 1 Ch. 357; In re Palmer, 56 S. J. 363; In re Evans, [1913] 1 Ch. 23; and Swan Brewery Company v. Rex, [1914] A. C. 231.

F. Whinney for the other defendants argued that the shares were capital of the estate and not income. The case was a stronger one than Bouch v. Sproule, for there an option was given to the shareholders to take the dividend either in cash or in shares, yet on the option's being exercised in favour of shares the shares were held to be capital, whereas in the present case the capitalisation was determined by the company itself without the shareholders being given any voice in the matter.

SARGANT J. said that in coming to his decision he was not influenced by the sentence in the circular as to the shares not being income. Ever since Bouch v. Sproule the law had been quite settled as to the general principles on which such a case as this was to be decided. At p. 397 of the report of the case Lord Herschell said: "I quite agree with the Court below that, apart from the authorities to which I have alluded, the general principle for the determination of such a question as that before us, and in my opinion the only sound principle, is that which is well expressed in the judgment of Fry L.J.: 'When a testator or settlor directs or permits the subject of his disposition to remain as stocks or shares in a company which has the power either of distributing its profits as dividend or of converting them into capital, and the company validly exercises this power, such exercise of its power is binding on all persons interested under the testator or settlor in the shares, and consequently what is paid by the company as dividend goes to the tenant for life, and what is paid by the company to the shareholder as capital, or appropriated as an increase of the capital stock in the concern, enures to the benefit of all who are interested in the capital." From what was said in that case in the House of Lords, and by Stirling J. n In re Malam, it was clear that the Court had to look

as much at the substance as at the form of the transaction. The same principle had been acted on in In re Armitage, and had been unquestioned ever since. Mr. Grant had had to admit that if there had been an option to take either in cash or shares, and the option had been exercised in favour of shares, Bouch v. Sproule would have exactly applied, and the shares would have been capitalised. The fact that the company had given no option to the shareholder, but had taken advantage of its new articles to distribute in the form of share capital, was an argument in favour of, and not against, its intention to have a capital distribution. The shares taken by the plaintiff must be held by him as capital of the estate, and not transferred to the tenant for life as income.

Solicitors for all parties: Davidson & Morriss.

K. B. D.

KING'S BENCH DIVISION.

F. E.

Jan. 15.

* BRIDGES V. CHAMBERS. War-Restrictions--Landlord and tenant-Increase of rent since the war- -Notice-Increase of Rent and Mortgage Interest (War Restrictions) Act, 1915 (5 & 6 Geo. 5, c. 97), s. 1, sub-s. 1 (iv.) and (vi.).

Appeal from the Barnsley County Court.

By s. 1, sub-s. 1, of Increase of Rent and Mortgage Interest (War Restrictions) Act, 1915: "When the rent of a dwelling-house to which this Act applies ... has been, since the commencement of the present war, or is hereafter during the continuance of this Act, increased above the standard rent

as hereinafter defined, the amount by which the rent payable exceeds the amount which would have been payable had the increase not been made shall, notwithstanding any agreement to the contrary, be rrecoverable: provided that this sub-section shall not apply to any rent which accrued due before November 25, 1915; and

"(iv.) Where the landlord pays the rates chargeable on, or which but for the enactments relating to compounding would be chargeable on, the occupier of any dwelling-house, an increase of the rent of the dwelling-house shall not be deemed to be an increase for the purpose of this Act if the amount of the increase does not exceed any increase in the amount for the time being payable by the landlord in respect of such rates over the corresponding amount paid in respect of the yearly, half-yearly or other period which included the third day of August, nineteen hundred and fourteen, and for the purposes of this proviso the expression rates' includes water rents and charges; and

“(vi.) Wherever an increase of rent is by this Act permitted, no such increase shall be due or recoverable until the expiry of four clear weeks after the landlord has served upon the tenant a notice in writing of his intention to increase the rent, accompanied . .

(b) where the increase of

The defendant occupied a cottage as the tenant of the plaintiff, the rent of which on August 4, 1914, was 6s. a week. On July 24, 1915, the plaintiff, on the ground of an ncrease in the rates, increased the rent to 6s. 3d. a week. The defendant paid the rent of 6s. 3d. without question until December, 1917, when he claimed from the plaintiff the repayment of the excess of 3d. a week over 6s., which was the "standard" rent, from November 25, 1915. The plaintiff having refused to make any repayment, the defendant paid no rent for five weeks, in order to reimburse himself for the excess: see s. 5 of the Courts (Emergency Powers) Act, 1917. The plaintiff claimed in this action to recover the five weeks' rent which the defendant had failed to pay. The plaintiff had not given any notice under the Act of 1915 of his intention to increase the rent.

The county court judge held that as the increase had been made before the Act of 1915 came into force, it was not Recessary to give notice of the increase, and he gave judgment for the plaintiff.

The defendant appealed.

H. C. Davenport for the defendant.
Ellis Hill for the plaintiff.

THE COURT (Horridge and Salter JJ.) allowed the appeal. HORRIDGE J. said that the question was whether the Act 1915 applied to an increase in rent made before the Act came into force. The language of the Act was quite clear. Sect. 1, sub-s. 1, provided in express terms that if an increase in rent above the standard rent, i.e., the rent payable on August 4, 1914, had been made since the commencement of the war, it should be irrecoverable, except as to rent ch accrued due before November 25, 1915. Then foljosed certain provisos, one of which (iv.) authorised an rease of rent to meet an increase in the rates, but by the *rth proviso this right was confined to cases where the trescribed notice had been given by the landlord to the Therefore, although the increase in rent in the present case was lawful at the time it was made, it ceased be recoverable when the Act came into force on December 23, 1915, unless and until the landlord gave the quisite notice. Wortley v. Mann, [1916] W. N. 390, was rectly in point, and supported that view.

Lant.

SALTER J. delivered judgment to the same effect.

Appeal allowed; leave to appeal.

Solicitors for defendant: Corbin, Greener & Cook, for oley & Sons, Barnsley.

Vendor and purchaser-Sale by mortgagee-"Realise any security"-Omission by mortgagee to apply for leave of Court-Damages-Courts (Emergency Powers) Act, 1914 (4 & 5 Geo. 5, c. 78), s. 1.

Appeal from Spalding County Court.

The plaintiff claimed specific performance of a contract for the sale of certain land, and, alternatively, the return of the deposit of 101. and 501. as damages for breach of contract.

The defendant was the mortgagee of the land in question, but he was not in possession, and, apart from the provisions of the Courts (Emergency Powers) Act, 1914, he had a right to sell the land. On August 3, 1917, the land was put up by him for sale by auction, and the plaintiff agreed to buy a lot immediately adjoining his business premises, which he was desirous of extending. The completion was to take place on October 11. Shortly after the auction it was brought to the notice of the defendant by the mortgagor that, not having obtained the leave of the Court under the above-mentioned Act, he had no right to sell the land. Correspondence passed between the parties, but no application was ever made to the Court by the defendant, who, on August 24, 1917, purported to annul the sale on the On ground of the irregularity under the Act of 1914. October 30, or some days later, his mortgage was paid off, and thereafter this action was brought.

The county court judge found that the defendant's laches had caused serious loss to the plaintiff, and, relying on Day v. Singleton, [1899] 2 Ch. 320, he awarded damages and return of deposit, in all 501., but refused specific performance.

The defendant appealed.

Courts (Emergency Powers) Act, 1914, s. 1, sub-s. 1: "From and after the passing of this Act no person shall . . (b) . . . realise any security (except by way of sale by a mortgagee in possession) . . . . except after such application to such Court and such notice as may be provided for by any rules or directions under this Act.

Dyer and Sandlands for the defendant.

J. F. Carr for the plaintiff.

F. O. R.

any expenses the purchaser may have incurred in investigating the title. For the plaintiff it was said that that rule did not apply, and that the case fell within Day v. Singleton (supra), where the Court of Appeal decided that the purchaser was entitled to damages for the loss of his bargain if the vendor failed to do everything in his power to complete the sale. In In re Daniel, [1917] 2 Ch. 405, Sargant J.