m spfffwas GE ACC pa] Issue organ c Origina specim* of all : Compai interest to the I AGO Man> general of Ace summai At leas interest Societie petition interest Vols. I. AGC4 hea clas :s E.G. :ly news- ;n, 26s. recognised [t contains ping (with is Reports foint Stock lerships, of of Interest wspaper iced. The luirements A concise 1 number, matter of Students' jrial Com- of general 2/- for the 3 above )le for all . a,^ a uniform for which the 6d. per price ot 3s. 6d. net, with the exception of a few " Double Numbers,' price is 5s. To Subscribers these are published at the special rate of 25. volume (3s. ()d. per " Double " volume). Subscriptions can still be received at this reduced rate by those desirous of obtaining the whole Series, but the back volumes must be paid for en bloc. Subscribers who may not wish to acquire the whole of the back volumes may, however, commence their Subscription with Vol. XXI. A list of Volumes already published, and Subscription Order Form, will be supplied post free on application. AGGOUNTANT'S ASSISTANT, THE. i6o pages. Price 6s. net. By Thomas Beckett. This Work is an Index to the Accountancy Lectures and Leading Articles printed in The Accountant, The Accountants' Journal, The Transactions of the Various Students' Societies, and other Periodicals, during the last 30 years of the Nineteenth Century, to which is added a List of the principal Treatises now in use on each of the 117 Subjects affecting Accountancy. The Work will be in Daily Requisition in Accountants' Offices. AGGOUNTANTS* (GHARTERED) GHARGES. (Third Revised and Enlarged Edition.) Price los. 6d. net. By Fras. W. Pixley, F.C.A., Bar r i ster-at- La w . One of the great wants of Members of the Profession is a Standard work of the Charges of Chartered Accountants, to which they can refer their clients, when asked either to quote A fee for future services or to support an account of Charges already rendered. This work contains the Scale of Charges which prevails amongst the leading practising London Chartered Accountants for Auditing, making Investigations, &c. — The Charges of Liquidators.— 1\\Q Charges of Special Managers and Trustees in Bankruptcy, Receivers in Chancery, &c. — The Charges for Assisting Debtors and Directors of Companies in Liquidation in the preparation of the Statement of Affairs.— The Charges of A rbitrators. Witnesses, &c. CATALOGUE OF BOOKS FREE. acgoumtancy books. ACCOUNTANTS' DIARY (Yearly), ruled, &c. Prices from IS. 6d. to los. — Editions Nos. i, 2, 3 and 3A are specially Ruled and Headed accord- ing to the Pattern approved by most practising Accountants. All Editions except the IS. 6d. contain a Directory of Accountants and much useful information. ACCOUNTANT'S AND BOOKKEEPER'S YADE-MECUM. Price 7s. 6d. net. By G. E. Stuart Whatley, Accountant (Exam. Inst. C.A.). The Work consists of a Series of short and Concise Articles upon Capital and Revenue Expenditure, Revenue Accounts, Deficiency Accounts, Depreciation, Reserve and Sinking Funds, Adjustment of Partnership Accounts, Joint Stock Companies Accounts, Tabular Bookkeeping, Hotel and Theatre Accounts, smA other matters not generally dealt with in existing Works on Bookkeeping, together with useful Forms and Directions. ACCOUNTANTS' MANUAL, published biennially, with Index. Subscription 3s. 6d. per annum. Vols. I., II., III., IV., V., VI., VII., VIII., and IX., now ready, price 12s. 6d. each (except Vol. III., los. 6d.) or 90s. the set. Also issued in parts every June and December, price 2s. 6d. each. The only complete and full set of Answers to the Questions set at the Institute of Chartered Accountants' Examinations, dating from December 1884. These Answers are designed to give the fullest and most reliable information on each question asked, and are compiled with a view to lasting reference. ACCOUNTANT'S COMPENDIUM, THE. Second Edition. Price 21s. net. (Medium 8vo, 570 pages). Containing in the form of a Lexicon a digest of the subjects of Examination prescribed by the Institute of Chartered Accountants in England and Wales and many other matters. By Sidney Stanley Dawson, FC.A., F.C.I. S.. F.S.S. Scope of Work:— Accountancy (generally), Acturial Matters, Administration of Assets, Adminis- trators, Agency, Apportionment, Arbitrations and Awards, Arithmetical Questions, Arrangements with Creditors, Auditing, Banking, Bankruptcy, Bills of Exchange, Bills of Sale, Bookkeeping, Branch Accounts, Building Societies, Capital and Income Questions, Carriage, Cheques, Company Law and Practice (Formation, Management, and Winding-up), Contracts (generally). Contributory, Death Duties, Debentures, Deeds of Arrangement, Departmental Accounts, Depreciation, Directors, Economic Questions, Equation of Payments, Executorship Accounts, Executorship Law,Factors, Foreign Exchanges, Goodwill, Guarantee, Hire-Purchase Agreements, Income Tax, Infant, Insurance, Interest (Questions involving). Investigations, Lien, Limitation of Actions, Liquidators, Manufacturers' Accounts, Mercantile Law (Generally), Official Receivers, Partnership, Pledge, Profit, Profit and Loss Account, Profits Available for Dividend, Promissory Notes, Receivers, Reserves and Reserve Funds, Sale of Goods, Savings Banks, Secretarial Matters, Self- Balancing Ledgers, Shipping, Single and Double Account, Single and Double Entry, Sinking Funds, Slip BDokkeeping, Stock Exchange Terms, Stock-in-Trade (Questions affecting). Trustees, Trustees in Bankruptcy, Wills, &c., &c. ADVANCED ACCOUNTING. About 400 pages. Price 21s. net. By Lawrence R. Dicksee, M.Com., F.C.A., Professor of Accounting at the University of Birmingham (Author of " Auditing," " Bookkeeping for Accountant Students," &c.) This work will be found of the greatest value to Candidates for the Final Examin- ation of the Institute, and to all serious Students of Accounts. In addition to an exhaustive treatment of the subject from an Accountant's point of view, an Appendix is included, which has been written by J. E. G. de Montmorency, B.A., LL.B. (Cantib), of the Middle Temple, Barrister-at-Law, dealing with the law relating to accounts, and the requirements of the Courts and of lawyers in connecti on therewith. ANTE-AUDIT. Price, is. each, net ; c^s. 6d. J-do/.en copies ; JOS. I dozen copies. Being the Auditor's Instructions to his Client's Book- keeping Staff. Issued in connection with the series of Audit Note-Books. Nos. I, 2, and 3. It is intended that this book shall be given by the Auditor to the Bookkeeper in cases where it has not been customary for the Accounts to be audited (more especially, perhaps, in small businesses), and where, not infrequently, the Accounts are being kept in a way that does not permit of the Auditor's duties being performed without a needless drain upon his time and patience. SPECIAL TERMS FOR PUBLISHING AUTHORS' WORKS OIBSE & CO., PRINTERS AND PUBLISHERS, AUDIT NOTE-BOOK. Nos. I. & IL, Price 6d. (net) each, 5s. per dozen. 40/- per hundred. Issued in two Series, viz. : — No. I — Suitable for a Monthly Audit. No. 2 — Suitable for a Quarterly or Half-yearly Audit. Name and address printed on Covers free on orders of 100 or more copies. AUDIT NOTE-BOOK No. 3. New and Enlarged Edition. (For Important Audits.) loo pages, Foolscap 4to. Price 2s. per copy, 20s. per dozen, or 70s. for 50 copies, and £5 10s. for 100 copies. Name and address printed on cover if 50 or more copies are ordered. AUDITING. A Practical Manual for Auditors. Fifth Edition. About 800 pages. Price 21s. net. By Lawrence R. Dicksee, M.Com., F.C.A. This well-known Work has been thoroughly revised and partly re-written, and is now in every way up to date. The Legal Decisions referred to have been brought up to the beginning of the Long Vacation, 1902, and especial attention has been devoted to the consideration of the effect of the Companies Act, 1900. BANKRUPTCY. Second and enlarged Edition. Price ys. 6d, net. By T. M. Stevens, D.C.L., Barrister-at-Law. A demand has arisen for a short work on the above, which, whilst treating the subject from a legal point of view, will still be of use mainly to Chartered Accountants and others. The general outlines of the subject, i.e., the text of the Acts, as explained by leading cases, is what is wanted, and what this work has endeavoured to give. THE BANKRUPTCY TRUSTEE'S ESTATE BOOK. Second Edition. Price4s.net. Compiled by Lawrence R. Dicksee, M.Com., F.C.A. Author of " Auditing," &c. This Book contains the whole of the information likely to be required by Trustees in Bankruptcy in such a form that in conjunction witlj the " Record Book " it provides a complete statement of all the facts relating to any particular estate, entirely doing away with the necessity for memorandum and loose sheets, which are so frequently lost. BOOKKEEPING, ACCOUNTS, & CALCULATIONS relating to Hire-Purchase Wagon Trade and Colliery Royalties and Wayleaves. Price is.6d. net. By George Johnson, F.S.S., F.C.LS., Corporate Accountant. BOOKKEEPING FOR COMPANY SECRETARIES. Third Edition. Price 3s. 6d. net. By Lawrence R. Dicksee. M.Com., F.C.A. This Work (which is founded upon a course of lectures delivered under the auspices of the Council of the Institute of Secretaries) deals very fully with those questions in relation to Bookkeeping, a knowledge of which is essential upon the part of every Company Secretary. It will, therefore, be found of the greatest value to all who occupy — or expect to occupy — that position, and also to all Accountant Students. BOOKKEEPING FOR ACCOUNTANT STUDENTS. Fourth Edition. Complete, with Index, los. 6d. net. By Lawrence R. Dicksee, M.Com., F.C.A. (of the firm of Sellars, Dicksee & Co.) Contains a full and complete explanation of the Theory of Double Entry, and is supplemented by copious Exercises and Questions that combine to make it a work of the highest educational value. BOOKKEEPING EXERCISES for Accountant Students Demy 8vo., about 96 pages. Price 3s. 6d. By LAWRENCE R. DiCKSEE, M.Com., F.C.A., Author of " Auditing," " Bookkeeping for Accountant Students," " Bookkeeping for Company Secretaries," &c. COMPANY-SECRETARY, THE. Fourth Edition. Price 25s. net. (Foolscap folio.) By W. H. Fox, Chartered Accountant. Containing a P'uU Description of the Duties of the Company-Secretary, together with an APPENDIX of FORMS and PRECEDENTS. 34 MOOROATB STREET, LONDON B.C. THE ACCOUNTANT'S COMPENDIUM SIDNEY STANLEY DAWSON (Of the firm of Dau'son, Lan^ley & Chevalier) Liverpool. Fellow of the Institute of Chartered Accountants in England and Wales, (First in order of Merit, Intermediate Examination, December 1895) (First in order of Merit, Final Examination, December 1897) Fellow of the Chartered Institute of Secretaries. Fellow of the Royal Statistical Society. Author of a Lexicon for Trustees, Liquidators, and Receivers. Contributor to the Encyclopedia of Accounting. London : GEE & CO., Printers and Publishers, 34 Moorgate Street, E.C. 1904. ^^ii; 'BS PREFACE. 'T^HE publication of the second edition of this work is primarily attributable to the fact that the first edition of 2,000 copies is exhausted. During the past six years every endeavour has been made to keep the text up to date, while the kindly criticisms which were passed upon the first edition have been carefully considered. Recent statutes and rules, and legal decisions pertaining to the profession have been embodied, and with the exception of those articles which are largely matters of opinion, references and authority are quoted throughout the work. Except where the context otherwise provides, the subjects of this work are dealt with in so far as regards their application to England, and to the extent only that they directly or indirectly affect the practice of an Accountant ; so that, where necessary, the treatment has been limited accordingly. While accepting full responsibility for the whole of the work, I desire to express my indebtedness to Mr. H. R. Graves, A.C.A., and Mr. W. E. Burnley, B.A., A.C.A. (both of whom are associated with my firm), for the valuable services they have rendered in assisting me to pass this edition through the press. SIDNEY S. DAWSON. 51 North John Street, Liverpool. September, 1904. CORRIGENDA Page Column Title Line in Column Correction 84 2 Consolidation of Mortgages 15 for effects read affects 93 2 Contributory 24 for have read had 97 I Cost Book Mining Company 37 for is ym^ are 219 2 Income Tax 38 Section 9 of the Finance Act 1904 extends the relief granted in respect of life insurance premiums or contracts for deferred annuities to those paid to, or effected with, any insurance company legally established in any British possession. 253 I Journal 12 for Code Napoleon read Code de Commerce. THE ACCOUNTANT'S COMPENDIUM. Abandonment of Vessel or Cargo.— Where a vessel or cargo which has been insured is damaged beyond repair or recovery, but not actually or completely destroyed or lost, the assured may abandon the vessel or cargo to the underwriter and recover upon his policy as for a constructive total loss. Notice of abandonment must be given without delay by the real owner, and although such notice must be positive in effect, it need not be in writing. On the abandonment of the pro- perty by the assured it belongs to the under- writers, who may utilise the same to the best advantage, so as to recoup themselves, if possible, of a portion of their payments to the assured. A constructive total loss cannot be con- verted into a partial loss by the expen- diture of money by the underwriters after notice of abandonment. [Re Blamnore Co., House of Lords, 1898.) [See Total Lx)ss.) Abatement. — A deduction, an allowance ; commercially, a discount for prompt pay- ment. [See Discount, Income Tax, Legacy.) Abrogation. — The repeal or annulment of a law. Later laws abrogate contrary prior laws. Absconding Contributory. — The Court may at any time before or after an order for winding-up a company has been made, upon proof that there is cause for believing that any contributory is about to abscond or conceal his property so that he may evade payment of calls or avoid examination, cause such contributory to be arrested and his books and property to be seized, and him and them to be safely kept until such time as the Court may order. (1862 Act, section 118.) j Absconding Debtor. — If a person depart out of England, remain out of England, or otherwise absents himself, with the intention of defeating or delaying his creditors, he by so doing commits an act of bankruptcy. (1883 Act, section 4.) If a person depart out of England (or attempt to do so) within four months before the presentation of a petition, or after a receiving order has been made, taking or attempting to take with him property to the amount of ;^2o or upwards, which ought to be divided among his crediters, it is a felony punishable with imprisonment for a period not exceed- ing two years, unless the jury are satisfied that the debtor had no intent to defraud. (Debtors' Act 1869, section 12.) The Court may cause a debtor to be arrested if it appears that he has absconded, or is about to abscond in order to avoid or delay bankruptcy proceedings. (1883 Act, section 25.) It has been held by the Court of Appeal that the words " has absconded " are without limitation as to time, and include the case of a debtor who has absconded before notice of a bankruptcy petition having been presented against him. {Northallerton case, 1898.) Where a receiving order has been made against a debtor, and the Official Receiver satisfies the Court that he has absconded, the Court may, on the application of the Official Receiver or a creditor, forthwith adjudge the debtor bankrupt. (Rule 191.) Abstract of Title. — A summary of the evi- dence of ownership (generally of land) setting forth in chronological order (if possible) the dates, nature, and material parts of the deeds, wills, or other documents affecting the title, so that a purchaser or mortgagee may Abstract] [Acceptance more readily deduce the title to the property in question. Acceptance. — An agreement to proposed terms ; a bill of exchange after acceptance by the drawee. Acceptance and Receipt.— These require- ments with regard to a contract for the sale of goods of the value of £io or upwards must be distinguished. There may be acceptance of goods without receipt and vice versa, but the Sale of Goods Act 1893 (section 4) requires both ; for although receipt is often evidence of acceptance it is not the same thing. There is an acceptance within section 4 when the buyer does any act in relation to the goods which recognises a pre-existing contract of sale, whether there be an accept- ance in performance of the contract or not. Receipt may take the form of actual delivery to the buyer or to a carrier named by him ; so also, if the seller agrees to hold the goods for the buyer, or a third party notifies the buyer that he holds the goods on his behalf, there is receipt by the buyer. Acceptance for honour supra protest.— Where a bill of exchange has been protested for dishonour by reason of non-acceptance, any person, not being a party already liable thereon, may, with the consent of the holder, intervene and accept the bill supra protest for the honour of any party liable thereon, or for the honour of the party for whose account the bill is drawn. The bill must not be already overdue, and must have been pro- tested (or at least noted) even though an inland hill. The acceptance must state that it is for honour, and if it does not state for whose honour it is made, it is deemed an acceptance for the honour of the drawer. Such an acceptance may be for part only of the amount in the bill, and the acceptor for honour engages that he will, on due present- ment, pay the bill according to the tenor of his acceptance, if not paid by the drawee, provided the bill has been duly presented for payment and protested for non-payment, and that he receives notice of these facts. The acceptor for honour is liable to the holder and all parties subsequent to the one for whose honour he has accepted. (1882 Act, sections 65, 66, and 67.) Acceptance of a Bill.— The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer. The acceptance must be written on the bill and signed by the drawee, but his signature is sufficient without additional words. The acceptance is incomplete and revocable until delivery of the bill, or notification of the acceptance be given. The acceptance must not express that the drawee will perform his promise by any other means than the pay- ment of money. (Bills of Exchange Act, 1882, sections 17 and 21.) A bill may be accepted (i) before it is signed by the drawer, (2) while otherwise incomplete, (3) when overdue, or (4) after dishonour by previous refusal to accept, or by non-payment. (Section 18.) An acceptance may be general or qualified. A general acceptance assents without qualifi- cation to the order of the drawer. A qualified acceptance expressly varies the effect of the bill as drawn, such as : — (i) Acceptance subject to the fulfilment of a condition (conditional). (2) Acceptance to pay part only of the amount for which the bill is drawn (partial). (3) Acceptance to pay at a specified place and not elsewhere (local). (4) Acceptance to pay on a different date from that in the bill as drawn (temporal). (5) Acceptance by one or more of the drawees, but not all (ahquot). (Sec- tion 19.) The holder of a bill may refuse to take a qualified acceptance, and treat the bill as dishonoured, but where a qunlified acceptance is taken without the previous authority or subsequent assent of the drawer or an in- dorser, such drawer or indorser is discharged from his liability on the bill. (Section 44.) A forged or unauthorised signature pur- porting to accept a bill is wholly inoperative, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up the forgery or want of authority. An unauthorised signature not amounting to forgery may, however, be ratified. (Section 24.) Acceptance] [Accommodation The above section (24) is subject to the provisions of sections 80 and 82, which afford protection to bankers paying or re- ceiving payment of cheques in good faith and without negligence. The delivery by a person of his signature upon a blank stamped paper, so that it may be converted into a bill, is prima facie authority to fill same up as a complete bill for any amount the stamp will cover, using the signature for that of drawer, acceptor, or indorser. The bill must be filled up within a reasonable time, and strictly in accordance with instructions given, but if the bill after completion is negotiated to a holder in due course, he may enforce it as if it had been duly filled up as to time and instructions, and it will be valid and effectual for all purposes. (Section 20.) Acceptance of an Offer.— The acceptance of an offer completes a contract, provided the requirements of the law as to form of acceptance be complied with. An offer may be withdrawn at any time before acceptance, for until both parties are bound, neither is bound. So an offer may be withdrawn at any time, even though the party making the offer promised to keep the offer open for a certain time, unless the promise were by deed or for valuable consideration. Never- theless, the person who made the offer should notify the party that he has withdrawn the offer before entering into a contract with a third party in reference to the same subject- matter : this duty may be waived by the party to whom the offer is made, or expressly negatived by the party making same — e.g., an offer of certain goods may be made " subject to being unsold on receipt of your acceptance." It has been held that under ordinary circumstances a contract is complete so soon as acceptance is signified, therefore an acceptance by post-letter completes the contract when the letter is posted, so that a telegram (purporting to withdraw an offer) received after acceptance is posted is inopera- tive although despatched before receipt of the acceptance. A written offer may be accepted verbally, and vice versci. With regard to the requirements as to stamp duty a mere proposal in writing, if accepted by parol, is not liable to stamp duty as an agreement. But, as already stated, these rules are subject to the legal requirements attaching in special cases. (See Sale of Goods Act ; Statute of Frauds.) Acceptor. — A person who accepts a bill of exchange drawn upon him ; until he accepts he is called the drawee, and he is not liable as acceptor of the bill until he has signed it as such (1882 Act, section 23) and delivered it (section 21). On acceptance he is pri- marily liable to pay the amount of the bill according to the tenor of his acceptance, and is precluded from denying to a holder in due course {a) the existence of the drawer, the genuineness of his signature and his capacity and authority to draw the bill, [b) if the bill be payable to the drawer's order, the then capacity of the drawer to indorse, but not the genuineness or validity of his indorsement, and (c) if the bill be payable to the order of a third person, the existence of the payee and his then capacity to indorse, but not the genuineness or validity of his indorsement (section 54). A bill of exchange being a simple contract the acceptor is liable to the holder for six years from the maturity of the bill ; and as regards other parties, no action on a bill can be maintained against any party thereto after the expiration of six years from the time when a cause of ^.ciion first accrued to the then holder against such party. For capacity to accept a bill see title Infant (Bills of Exchange). Accident Insurance.— Although to some extent a contract of indemnity, this class of insurance is rather an undertaking to pay a certain specified sum in the event of death or injury from accident. This distinction is important, for the insurer on paying the sum in question is not subrogated to the rights of the assured, and if damages are recoverable in respect of the injury or death from those who were responsible for the accident, such damages may be recovered, regardless of the fact that the person injured had been insured. Accommodation Bill.— A bill to which the acceptor, drawer or indorser, as the case may be, has put his name, without consideration, for the purpose of accommodating some other party who is to provide for the bill when due, or, if the accommodation party be the acceptor, the bill is one whereof the prmcipal debtor (according to the terms of the instrument) D 2 Accommodation] [Account is in substance a mere surety for some other person, who may or may not be a party to the bill. An accommodation bill is discharged when it is paid by the person who is in substance, though not in form, the principal debtor. (1882 Act, section 59.) Where two parties exchange s/ffij^r accommodation acceptances, ; such acceptances are not without considera- tion, for the acceptance of the one party is : deemed to be consideration for the accept- ance by the other. {Rolfe v. Caslon, 1795) Accommodation Party.— A person who has signed a bill as drawer, acceptor or indorser, without receiving value therefor, and for the , purpose of lending his name to some other person. The accommcdation party is liable on the bill to a holder for value, and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party or not. (1882 Act, section 28,) The person accommodated engages (a) that he will provide funds for payment of the bill at maturity, and [b) that if (owing to his omission to do so) the accommodation party is compelled to pay the bill, he will indemnify such party. The contract of indemnity arising out of the transaction does not require to be in writing. In general the Statute of Limitations runs against the accommcdation party and in favour of the person accommodated from the time the former was compelled to pay. An accommodation party who is compelled to pay a bill has all the rights of an ordinary surety under such circumstances, so that {inter alia) he is entitled to any security which may be held by the creditor. Accord and Satisfaction. — Accord. An agreement between two persons, one of whom has a right of action against the other, that the latter shall do or give something in satisfaction of the right of action. When the agreement is executed and satis- faction has been made it is called accord and satisfaction. " Accord and satisfaction " bars the right of action, but accord without satisfaction does not. In the case of an ascertained debt, the acceptance of a smaller sum is no satisfac- tion, for it is simply a reduction of the debt f^ro tanto, and an agreement without con- sideration to waive the balance. If, how- ever, a negotiable instrument be given for the smaller amount there would be satis- faction, and an action for the balance would not be maintainable. Account.- A statement, narrative, record, or explanation of some particular matter in words or figures ; commercially, a statement in money, showing, with any necessary ex- planation, the result, effect, or position of a specific budness, transaction, or person, the precise form varying according to the circum- stances ot the case. Account Current.— A running account be- tween two or more persons or firms. The term is generally applied to a copy of a personal account in a Ledger, which is being sent to the person in question in order to show the state of the account between the parties. The interest, if chargeable, is stated on both sides of the account in detail. Account Day.— Sf^ Settling Days. Accounting Party. — A person liable to account ; particularly one who officially or otherwise acts and deals with property for the purported benefit of others, such as agents, executors, trustees, liquidators, and receivers. " It is the first duty of an accounting party to " be constantly ready with his accounts." Account Sales.— An account of goo^s sold on commission rendered to the principal by the agent to whom the goods were consigned The gross proceeds are set out, with all expenses in connection with the consignment [including the agent's commission] deducted therefrom, thus showing the net proceeds. i i Account stated. — An account between parties, showing a balance which has been agreed upon. It differs from an open account to the extent that the burden of proof is 1 thrown upon the party who seeks to impeach it. j The admission of a balance due upon an account imports a promise to pay such balance, and gives rise to an action ex contractu. ' All accounts stated with infants are declared absolutely void by the Infants' Relief Act 1874. Accretion] [Acknowledgment Accretion.— The act of growing to a thing. A specific bequest if vested carries all the income and profits which may accrue upon it after the testator's death. Accumulated Profits.— Profits of a concern undistributed among its proprietors. Such profits must not be subject to the replacement of any knoivn shrinkage of the assets of the concern, otherwise the accumulations are really diminished to the extent of that shrinkage. " Carrying profits to a Suspense or to a "Reserve Account does not necessarily " change their character, still less their " owilership ; they remain the undrawn " profits of those persons to whom they " belonged — dedicated, no doubt, to certain " purposes, but not otherwise altered in their " character or ownership. If the purpose for " which those profits are set apart fail, they " become divisible, not as capital, but as "undrawn profits" (Lindley, L.J., Re Bridg- water Co.). The Companies Act 1880, section 3, pro- vides for the distribution of accumulated profits amongst the shareholders, in reduction of the paid-up capital of the company, but it is difficult to see how the provisions of the section can be complied with. There are two funds to be dealt with — (i) the capital fund and (2) the accumulated profits, and a distri- bution of a certain amount amongst the shareholders cannot reduce both funds to the extent of the amount distributed. Either the accumulated profits fund must remain intact, or the capital paid up must exist as before. If the latter procedure be adopted, the section really allows of another method of increasing the capital, for it is provided that the unpaid capital is increased by the amount distributed. There is little to be gained, however, by a study of this point, for the section is to all intents a dead letter. If a law is bad or impossible, a strict con- struction of it operates as an effective repeal. In this case the section has been (i) construed as authorising the reduction of two funds by the same payment to the full extent of such payment, (2) declared an impossibility, and (3) disregarded. Accumulation of Income. — The prospective accumulation of income is restrained by 39 & 40 George III., c. 98. This statute is called Lord Loughborough's Act, or more commonly the Thellusson Act, from the case which caused its enactment. The Act declares that no person shall by deed, will, or otherwise dispose of any property, whether real or personal, in such a manner that the income thereof shall be accumulated for a longer period than (i) the life of the grantor, or (2) twenty-one years from the death of the grantor, or (3) during the minority of any person living, or en ventre sa mere at the death of the grantor, or (4) during the minority of any person who would, if of full age, be entitled to the income to be accumulated. The effect of the statute is to leave directions for accumulation valid so long as they are not contrary to the provisions of the Act. If the directions for accumulation aim at a duration beyond the statutory limits, they are valid until the date upon which (according to the circumstances) the statutory limit is reached, when such directions cease, and become of no effect. The Act does not extend to (i) any provision for the payment of debts, (2) any provision for raising portions for a child of the grantor, or a child of a person taking an interest under the grant, or (3) any direction with regard to timber upon any lands. Acknowledgment of Debt or Liability.— The admission by a person of a debt or liability after the expiration of the particular period prescribed by the Statutes of Limita- tion for bringing an action thereon, whereby he is deprived of the benefits of the statutes. The acknowledgment must be in writing, signed by the party to be charged (or his duly authorised agent), or by part payment of principal or interest. An acknowledgment as to simple contracts is said to create a new obligation, whilst an acknowledgment as to specialties revives the old one. If a written acknowledgment be relied upon, it must either express or imply a promise to pay. Part payment in respect of a simple con- tract will not revive the whole debt unless a promise to pay the balance can be fairly inferred from the part payment, but in the case of specialties, part payment, like a written acknowledgment, revives the old obligation, and the whole debt is revived irrespective of any promise to pay the balance. Acknowledgment] [Actio With regard to contracts in respect of which two or more persons are jointly liable, and one of them makes an acknowledgment suffi- cient to "take the case out of the statute," there is again a difference between simple and specialty contracts. As the acknowledgment of a simple contract creates a neiv obligation the party making the acknowledgment is alone liable thereon, but in the case of a specialty it revives the old obligation and sets the action free against all parties. The Mercantile Law Amendment Act 1856 provides, however, that part payment of a statute -barred debt by one or more co- contractors shall not affect the position of the others, whether the liability is under simple or specialty contract. A person is bound by an undertaking to pay a statute-barred debt, even though there be no fresh consideration for the promise to do so. The authority of executors (in respect of the administration of the estate) being a several one, one executor can revive the statutes without the others, but only as against the estate (/ e., a liability to pay de bofiis testator is), it having been held that "chargeable" in section i of 9 Geo. IV., chap. 14 (Tenterden's Act), means ^'■personally ''chargeable." Thus, an acknowledgment by one or more executors binds the estate, but does not bind the other executors personally. The acknowledgment of a debt contained in a debtor's statement of affairs (under Bank- ruptcy procedure) will not operate to revive such debt if statute-barred. {Everett v. Robin- son, 1858.) The acknowledgment of a statute-barred debt is also termed the " revival of the •' statutes." {See Limitation of Actions.) Acquittance. — A written discharge of a debt due or sum of money payable, whereby the party to whom the payment is due, on receipt thereof, admits that he has been paid, so thgt he cannot demand the sum again if the acquittance be produced. Actio personalis moritur cum persona. — A personal right of action dies with the person. This is the rule of common law, but it has been materially modified by statute as follows : — 4 Edward III., chap. 7. Executors have the same right of action for trespass done to the goods and chattels of the testator and may recover damages in like manner as the testator might have done had he lived. (Administrators are within the statute.) 3 and 4 William IV., chap. 42. Real Estate. — Executors (or adminis- trators) may maintain an action for trespass for any injury done to the real estate of the testator in his lifetime, provided the injury was done within six months prior to the death, and the action be brought within one year after the death of the testator. Real and Personal Estate. — Actions may be maintained against executors (or administrators) in respect of any wrong done by the testator in his lifetime, whereby injury was done to the real or personal estate of another, provided the injury was done within six months prior to the death and the action be brought within six months after the executors (or .administrators) have taken up the administration of the estate. Lord Campbell's Act, 9 S' 10 Vict., chap. 93. This Act, as amended by 27 & 28 Vict., c. 95, provides that the personal repre- sentatives of a deceased person can sue for damages for the benefit of his near relatives if his death was caused by circumstances of such a character that if the man had not died he would himself have been able to maintain an action for the injuries. The representatives must sue within twelve months of the death, but if they do not sue within six months of the death, the persons entitled to the damages may themselves sue. Employers' Liability Acts. A right of action is given to the repre- sentatives of a workman who is killed in the course of his employment. In addition to the Employers' Liability Acts the Workmen's Compensation Act of 1897 makes a still further encroachment upon the above common law rule. With regard to the provisions of 3 & 4 William IV. {supra) it has been recently held that the time prior to the death runs from the Actio] [Act date the injury is done, and not from the time the wrong is committed which caused it. Damages recovered by executors or adminis- trators are to be treated as personal estate, whilst damages payable by them are to be treated as simple contract debts. Except so far as the common law rule has been modified by statute it is still in force, no action being maintainable in respect of purely personal wrongs, either by or against the legal representatives. The general rule applies to a claim for damages in respect of fraudulent misrepre- sentation {Peck V. Gurney, L.R. 6 H.L. 377), but the , executors or administrators of a director or other person who made the mis- representation may be liable to the extent to which the estate of the deceased benefited by the misrepresentation. {Phillips v. Horn/ray, 24 CD. 439.) Active Debt.— A debt in respect of which part payment of principal or interest is from time to time being made. Active Trust.— A confidence in connection with which there are duties to be performed. Act of Bankruptcy. — An act the perform- ance of which by a debtor renders him liable to be adjudicated bankrupt. The various acts of bankruptcy fall into the following classes : — (i) Conveyance or assignment of property to a trustee for the benefit of creditors generally (even though unregistered). {See Deed of Arrangement.) (2) A fraudulent gift or conveyance of property or any part thereof. {See Fraudulent Conveyances, &c.) (3) Any conveyance of property, or creation of a charge thereon, which would, in the event of bankruptcy, be deemed a fraudulent preference. {See Fraudulent Preference.) (4) Departure or remaining out of England, or from dwelling-house, ^'C, with intent to defeat or delay creditors. {See Absconding Debtor, Keeping House.) (5) Levy of execution by seizure and sale of goods ; or seizure and retention by the sheriff for 21 days, provided that the time occupied by interpleader proceedings (if any) is not to be counted as part of the 21 days. {See Execution Creditor.) (6) Declaration of inability to pay debts or presentation of a petition by the debtor himself. {See Bankruptcy Petition.) (7) Non-compliance with the requirements of a bankruptcy notice. {See Bankruptcy Notice.) (8) Notification to creditors that payment of debts has been or is about to be suspended. {See Suspension of Pay- ment.) (1883 Act, section 4 ; 1890 Act, section i.) (g) The making of a receiving order by the Court in response to and in lieu of an application to commit the (judgment) debtor. This latter is deemed to be an act of bankruptcy. (Section 103.) {See Judgment Creditor.) An act of bankruptcy is only available for the presentation of a petition thereon for the three months next following such act (section 6), and the term *' available act ot bank- ruptcy " is defined as " any act of bankruptcy " available for a bankruptcy petition at the "date of the presentation of the petition on " which the receiving order is made." (Section 168.) The trustee's title relates back to the act of bankruptcy upon which the petition is grounded, or if there have been other acts of bankruptcy the trustee's title relates back to and the bankruptcy is deemed to commence at the time of the earliest act of bankruptcy proved to have been committed within three months next preceding the date of the presentation of the petition. (1883 Act, section 43.) Act of God. — A direct, violent, sudden and irresistible act of Nature, which could not by any human intervention, care, or reasonable precautions have been foreseen or prevented. Act of Parliament.— A law made by the Sovereign, with the advice and consent of the Lords spiritual and temporal, and the Commons, in Parliament assembled. Before an Act is passed it is termed a " Bill." The Acts are either (i) public ; (2) special ; or (3) private. Acts of Parliament are sometimes termed statutes. Where common law and statute law differ, the common law gives place to the statute— so an old statute gives place to a contrary new one. {See title Law.) Actuarial] [Adjourned Actuarial Report.— A report made by an actuary based upon calculations made by him. The Life Assurance Companies Act 1870 provides that every life assurance company shall, once in every five years, if established after the passing of the Act, and once in every ten years if established before that time, or at such shorter intervals as may be prescribed by the company's regulations, cause an inves- tigation to be made into its financial condi- tion by an actuary, and shall cause an abstract to be made of the report of such actuary in the form prescribed by the Act, A printed copy of such report must be deposited with the Board of Trade within nine months after the date to which it has been prepared, and a printed copy must also be forwarded to every shareholder and policy-holder of the com- pany, upon application being made. {See Life Assurance Companies.) Actuary. — A person skilled in the calculation of the value of life interests, annuities, and life assurance matters. The officer of a life assurance company whose duty it is to make the necessary com- putations in connection with the statistics and finances of life assurance, and who has to make the actuarial reports required by the Life Assurance Act 1870. An officer appointed to keep the accounts of a savmgs bank. Address Book. — Every company to which the Companies Clauses Consolidation Act 1845 applies {i.e., certain companies incorporated by special Act) is required by that Act to keep a Shareholders' Address Book contain- ing the full names of the shareholders in alphabetical order and their respective addresses and descriptions. Every life assurance company must also comply with the above provisions in pursu- ance of the Life Assurance Act 1870. {See Register of Members, Register of Directors and Managers.) Address Commission.— A commission pay- able by the owners of a vessel upon the amount of the freight if procured by a char- terer other than the consignee. Ademption.— The taking away of a legacy by the alienation or conversion of the subject- matter of the legacy by the testator during his lifetime. Specific legacies are subject to ademption, but demonstrative legacies, on the failure of the particular fund, rank as general legacies. Adhesive Stamp. — A stamp attached to a document by the party as distinct from an impressed stamp affixed by the Revenue authorities. Foreign bills and promissory notes, inland bills payable on demand, receipts for the payment of money, agreements under hand, and a protest of a bill of exchange are instances where an adhesive stamp is permitted. Section 8 of the Stamp Act 1891 pro- vides : — An instrument, the duty upon which is required or permitted by law to be denoted by an adhesive stamp, is not to be deemed duly stamped with an adhesive stamp unless the person required by law to cancel the adhesive stamp cancels the same by writing on or across the stamp his name or initials, or the name or initials of his firm, together with the true date of his so writing, or otherwise effectively cancels the stamp and renders the same incapable of being used for any other instrument, or for any postal purpose, or unless it is otherwise proved that the stamp appearing on the instrument was affixed thereto at the proper time. Where two or more adhesive stamps are used to denote the stamp duty upon an instrument {e.g., two halfpenny stamps in lieu of a penny one), each or every stamp is to be cancelled in the manner aforesaid. Every person who, being required by law to cancel an adhesive stamp, neglects or refuses duly and effectually to do so in the manner aforesaid shall incur a fine of ten pounds. {See Impressed Stamp.) Adjourned Meeting.— A continuation of an original meeting at another time, at the same or another place. In the absence of special provision to the contrary, there is no necessity to give notice of an adjourned meeting. But, as a rule, the regulations of a company pro- vide that no business shall be transacted at an adjourned meeting except such as was left unfinished at the original meeting. Adjournment] [Administration Adjournment. — Postponing to another time or place ; a continuation of a meeting from one day to another. _ The vacation of the chair by the chairman does not per se adjourn a meeting, for if those present consider the chairman has acted improperly, they can elect another chairman and proceed. Adjudication. — The act of the Court whereby a man is declared bankrupt and is divested of his property, which is to be applied in payment of his debts. Where a receiving order is made against a debtor the Court adjudge him bankrupt: — (i) If the creditors at the first meeting, or any adjournment thereof, by ordinary resolution so resolve. (1883 ^ct, section 20 ) (2) If the creditors pass no resolution there- on. (Ibid.) {3) If the creditors do not meet to consider the matter, or a quorum does not attend the meeting called by the Official Receiver, or one adjournment thereof. {Ibid., and Rule 191.) (4) If a composition or scheme is not accepted and approved within fourteen days after the public examination has been concluded, or such extended time as may be allowed by the Court. (Ibid.) (5) Where the Official Receiver satisfies the Court that the debtor has absconded. (Rule igi.) (6) Where the public examination of the debtor is adjourned sine die. (Rule 192A.) (7) Where the debtor does not intend to propose any scheme or composition, (f^ule 191.) (8) Where an estate is being wound up in a summary manner and the Court is satisfied, as a result of the public exami- nation, that a scheme or composition ought not to be sanctioned, by reason of the conduct of the debtor. (Rule 273.) (9) Where the debtor applies to the Court to be adjudged bankrupt. Such applica- tion may be made orally and without notice. (Rule 190.) (10) Where the debtor fails to submit his statement of affairs to the Official Receiver without reasonable excuse. (1883 Act, section 16.) An order of adjudication may be made although the debtor has died since the com- mencement of the bankruptcy proceedings. (1883 Act, section 108, and Re Walker 1886.) No order of adjudication will be made against a firm in the firm name, but it will be made against the partners individually. (Rule 264.) There are three cases in which the Court may annul the adjudication, viz. : — (i) Where a composition or scheme is accepted by the creditors and approved by the Court after adjudication. (1883 Act, section 23.) (2) Where, in the opinion of the Court, the debtor ought not to have been adjudged bankrupt. (Section 35 ) (3) Where it is proved to the satisfaction of the Court that the debts of the bank- rupt have been paid in full. {Ibid.) It does not necessarily follow that the Court will annul an adjudication on the payment of 20s. in the £ ; all the circumstances will be inquired into. {See Arrangements in Bankruptcy, Bankruptcy Petition, Infant, Lunatic, Married Woman, Receiving Order, &c.) Adjudication Stamp. — The stamp affixed to an instrument after the Commissioners of Inland Revenue have, on request, in cases of doubt, assessed the duty payable on the instrument. Administration, Letters of. — Where a per- son dies intestate, and under certain other circumstances {see titles Administrator, et seq.), letters of administration are granted by the Court to some proper person, called the administrator. Grants of administration are either {a) general or unlimited, or {b) special or limited. In the former case the whole of the estate is committed to the administrator's charge, and his powers and functions vary little from those of an executor, but a limited administration extends only to a part of the estate, or to a certain locality or for a specified time. Generally, the widow or widower (as the case may be) has the prior right to administer an intestate's estate, and then in the following order come the children, grand-children, great grand-children, father, mother, brothers Administration] 10 [Administration and sisters, &c., all being equally entitled as regards those of the same degree. Males are generally preferred to females, and those of whole blood to the half-blood, other things being equal. The Land Transfer Act 1897 provides that where the intestate dies possessed of land, the heir-at-law, if not one of the next-of-kin, shall be nevertheless equally entitled to the grant of administration. The Court will not make a grant pcrsaltumi but a person who is entitled to administration may renounce the right. The Court, how- ever, will not grant administration unless those having the prior right have either renounced or have been cited to appear before the Court to assent to the grant to another. Failing any other person entitled, the Court may grant administration to a creditor, but only where the creditor has no security for his debt, and undertakes to pay all debts pro rata. Every person (other than the Solicitors to the Treasury and Duchy of Lancaster) to whom letters of administration are granted must give security for the due performance of his duties in connection with the administra- tion of the estate, as he is not deenled to have had that personal confidence of the deceased which is presumed in favour of an executor. Although an executor who has proved a will cannot take steps to revoke the grant of probate, it is the duty of an administrator, should he discover a will of the testator, to inform the Court, and take such steps as may be necessary to revoke the grant of adminis- tration. Although an executor's right is derived from the will, and the law knows no interval between the death of the testator and the vesting of the right in the executor (the sub- sequent grant of probate being the mere evidence of the right), the title of an adminis- trator is derived solely from the letters of administration, and strictly the administrator has no authority or title before the grant has been made, and even then only in respect of the estate as it exists, or in respect of things afterwards coming into existence, This state of things, if strictly adhered to, would obviously result in loss to the estate pending the grant, because no one would have title or authority in the interval to protect the assets, &c. ; the Courts, however, in order to prevent such a state of things, have " adopted the convenient fiction that letters "of administration when obtained operate " retrospectively, having relation back to the " death of the deceased, so as to enable the " administrator to sue before the grant to him " of administration, or after administration " in respect of matters occurring previously " thereto ; but it would appear that he can " only sue when the act done is for the benefit " of the estate." In any case, as in the case of an executor, the administrator cannot proceed (before the grant of administration) beyond the point where proof of title becomes necessary by production of the letters of administration. The above are the more important dis- tinctions between the ofhce of an executor and an administrator, their rights, liabilities, and duties generally being somewhat similar in other respects. {See Administration of Assets. Executor.) Administration of Assets (of a deceased person). — In the administration of the estate of a deceased person the assets are to be applied in payment of the debts in the following order : — (i) The general personal estate, not be- queathed, or bequeathed only by way of residue. (2) Real estate devised in trust to pay debts. (3) Real estate descended to the heir and not charged with debts. (4) Real or personal estate, devised or bequeathed subject to the payment of debts. (5) General legacies and annuities. (6) Specific legacies. [Demonstrative legacies are treated as specific if the fund remains, if not, they are treated as general legacies.] (7) Real or personal estate subject to a general power of appointment which has been exercised in favour of volun- teers. Administraiion] II [Administratioti (8) Paraphernalia of the widow. The debts are payable out of the assets in the following order : — (i) Reasonable funeral and testamentary expenses. (2) Debts due to the Crown. (3) Debts to which particular statutes give priority, such as income tax, poor rates, debts owing to building or friendly societies ex officio, regimental debts, &c. (4) Registered judgments against the de- ceased (within five years prior to the death), and unregistered judgments if recovered against the personal repre- sentatives themselves. (5) Recognisances and statutes. (6) Specialty contracts (if for valuable consideration) and simple contracts, including unregistered judgments re- covered against the deceased in his lifetime. (7) Voluntary bonds or covenants. If, however, a voluntary bond be assigned for value in the lifetime of the deceased it will rank as though originally given for valuable consideration. Prior to Hinde Palmer's Act (32 & 33 Vict, c. 46) all specialty debts ranked equally with simple contract debts as against equitable assets, but in priority as against legal assets, but the above Act abolished the priority save as regards an executor's right of retainer. Section 10 of the Judicature Act 1875 provides that in the administration by the Court of the assets of any person dying after ist November 1875, and whose estate may prove insufficient to pay his debts in full, the same rules shall be observed as to the re- spective rights of secured and unsecured creditors, and as to the debts provable, &c., as may be in force for the time being under the law of bankruptcy. This section does not adopt the whole of the bankruptcy rules, the following having no application to the ad- ministration : — (i) Limitation of the landlord's right of distress. (2) The avoidance of voluntary settle- ments. (3) The avoidance of fraudulent prefer- ences. (4) The " order and disposition " doctrine, See Deceased Insolvent, Hinde Palmer's Act, Land Transfer Act 1897, Legal Assets, Preference, Retainer. Administration Order. — (i) Where a judgment has been obtained in a County Court and the debtor is unable to pay the amount forthwith, and alleges that his whole indebtedness amounts to a sum not exceeding fifty pounds, inclusive of the debt for which the judgment is obtained, the County Court may make an order providing for the administration of his estate, and for the payment of his debts by instalments or " otherwise, and either in full or to such extent as to the County Court under the circumstances of the case appears prac- ticable, and subject to any conditions as to his future earnings or income which the Court may think just. (2) The order shall not be invalid by reason only that the total amount of the debts is found at any time to exceed fifty pounds, but in such case the County Court may, if it thinks fit, set aside the order. (3) Where, in the opinion of the County Court in which the judgment is obtained, it would be inconvenient that that Court should administer the estate, it shall cause a certificate of the judgment to be forwarded to the County Court in the district of which the debtor or the majority of the creditors resides or reside, and thereupon the latter County Court shall have all the powers which it would have under this section had the judgment been obtained in it. (4) Where it appears to the Registrar of the County Court that the property of the debtor exceeds in value ten pounds, he shall, at the request of any creditor, and without fee, issue execution against the debtor's goods, but the household goods, wearing apparel, and bedding of the debtor or his family, and the tools and implements of his trade to the value in the aggregate of ;^2o, shall to that extent be protected form seizure. Administration] 12 [Administration (5) When the order is made no creditor shall have any remedy against the person or property of the debtor in respect of any debt which the debtor has notified to a County Court, except with the leave of that County Court, and on such terms as that Court may impose ; and any County Court or inferior Court in which proceedings are pending against the debtor in respect of any such debt shall, on receiving notice of the order, stay the proceedings, but may allow costs already incurred by the creditor, and such costs may, on appli- cation, be added to the debt notified. (6) If the debtor makes default in payment of any instalment payable in pursuance of any order under this section, he shall, unless the contrary is proved, be deemed to have had since the date of the order the means to pay the sum in respect of which he has made default, and to have refused or neglected to pay the same. (7) (8) Money paid into Court under the order shall be appropriated first in satisfaction of the costs of the plaintiff in the action, next in satisfaction of the costs of administration (which shall not ex- ceed two shillings in the pound on the total amount of the debts), and then in liquidation of debts in accordance with the order. (9) (10) Any creditor of the debtor, on proof of his debt before the Registrar, shall be entitled to be scheduled as a creditor of the debtor for the amount of his proof. (11) Any creditor may, in the prescribed manner, object to any debt scheduled, or to the manner in which payment is directed to be made by instalments. (12) Any person who after the date of the order becomes a creditor of the debtor shall, on proof of his debt before the Registrar, be scheduled as a creditor of the debtor tor the amount of his proof, but shall not be entitled to any dividend under the order until those creditors who are scheduled as having been creditors before the date of the order have been paid to the extent provided by the order. (13) When the amount received under the order is sufficient to pay each creditor scheduled to the extent thereby provided, and the costs of the plaintiff and of the administration, the order shall be super- seded, and the debtor shall be dis- charged from his debts to the scheduled creditors. (1883 Act, section 122.) Where an application to commit is made to a County Court, and it appears to the Court that the total liabilities of the judg- ment debtor do not exceed fifty pounds, the Court may, if it thinks that an order for committal ought not to be made, make an administration order under section 122 of the Act, in lieu of making a receiving order under section 103. (Rule 358 ) Where an administration order has at any time heretofore been or shall hereafter be made, such order may at any time be set aside or rescinded by the Judge in any of the following cases, namely : — (i) Where two or more of the instalments ordered to be paid are in arrear. (2) Where the debtor has wilfully inserted in the list attached to his request the wrong name or address of any of his creditors, or has wilfully omitted there- from the name of any creditor. (3) Where the debtor subsequent to the date of the order has obtained credit to the extent of £^ or upwards without informing the creditor that he has an administration order. (4) Where the order has been obtained by fraud or misrepresentation. (5) Where a receiving order has since the date of the administration order been made against the debtor. Where an order is set aside or rescinded under the last preceding rule, it shall be without prejudice to anything already done or suffered under the order. Any money paid into Court under the order may be dealt with as if the order had not been set aside or rescinded. Administration] 13 [Affinity Notice shall be sent by the Registrar to the debtor and to every creditor named in the schedule that the order has been set aside or rescinded. Where it appears that the debtor is unable to pay any instalment, by reason of illness or other unavoidable misfortune, the Registrar may from time to time suspend the operation of the order until the next sitting of the Court, and the Judge may from time to time suspend the operation of the order for such time as he shall direct, or make a new order for payment by instalments. (Rules 15, 16, and 17 as to Administration Orders.) Administrator ad litem. — A person appointed as administrator of a deceased person's estate for the purpose of litigation only. Administrator cum testamento annexo. — A person appointed to administer the estate of a deceased person who, having left a will, has either named no executor or has named one either unable or unwilling to act. Administrator de bonis non (adminis= tratis). — A person appointed to complete the administration of the estate of a deceased person, on the death of the executor or administrator before the estate has been fully administered. Administrator durante absentia. — A person appointed to administer the estate of a deceased person during the absence of another who is strictly entitled to the administration. Administrator durante minore aetate.— A person appointed to administer the estate of a deceased person during the minority of the executor or of one entitled to grant of administration. Administrator pendente lite.— A person appointed to administer the estate of a deceased person pending any suit respecting the validity of the will or any other matter in dispute. Ad valorem Duty. — Duties or customs levied upon goods according to their value. Stamp duties payable in respect of certain documents according to the value of the subject-matter involved. Advance Freight.— 5^^ Freight. Advance Note. — A note given to a seaman stating that a certain sum will be paid to the bearer thereof at a certain future date, on account of the seaman's wages, conditionally on the seaman going to sea in pursuance of his agreement. The sum payable must not exceed one month's wages payable under the agreement. Adventure. — See Consignment. Adverse Claim. —5^^ Interpleader. Adverse Possession. — Occupancy of realty, without molestation, by one other than he rightly entitled, which may ultimately give a good title. An action to recover possession of land must be brought within twelve years of the time when the right first accrued. Advice. — An opinion of counsel or others; a commercial report ; information by letter ; written instructions to bankers or merchants relative to bills of exchange; notification of arrival or despatch of goods. Advowson. — A right of presentation to an ecclesiastical benefice. There is a distinction between a right of presentation and a right of nomination, and they may be possessed by different persons in respect of the same benefice. Presentation is the offering of the person to the bishop ; nomination is the offering of the person to the one who has the right of presentation. A right of nomination only to a vacant benefice does not pass to the trustee in the event of the bankruptcy of the person possessing such right, but a right of presen- tation does. (1883 Act, section 44.) Affidavit. — A pledge of one's faith ; a written statement sworn before a person having authority to administer an oath (generally a Commissioner for Oaths). A trustee in bankruptcy and a liquidator of a company being wound-up by the Court may, for the purpose of their respective duties in relation to proofs of debt, administer oaths and take affidavits. Affinity. — Relationship by marriage between the husband and the blood relations of the wife, and between the wife and the blood relations of the husband. For legacy and Affinity] 14 [A8:ent succession duty purposes, the husband or wife of a blood relation of a deceased person is treated as being of the same blood relation- ship to the deceased as his or her spouse ; but relations of the husband or wife of the deceased are treated as strangers in blood unless they are themselves related in blood to the deceased. {See Consanguinity.) Affirmation. — A solemn declaration without an oath. {See Declaration, Oath.) Affreiglitment.— 5f^ Freight. After-acquired Property. charged Bankrupt. See Undis- After sight. — A bill of exchange expressed to be payable at a stated period after sight signifies such period after the bill has been accepted, or after the date it has been noted or protested for non-acceptance. (1882 Act, section 14 (3).) Where a bill is payable after sight, present- ment for acceptance is necessary in order to fix the maturity of the instrument. (1882 Act, section 39.) When a bill is payable at sight it is presented for acceptance and payment at the same time. Agenda. — Memoranda of the business to be transacted at a meeting. Agent. — A person appointed to transact the business of another, who is termed the principal. Agencies may be divided into three classes : — Special, General, and Universal. A Special agent is one authorised to perform a single act, or a series of acts relating to one subject-matter. A General agent is one authorised to transact all the business of the principal, or at least all the business of a particular class. A Universal agent is one appointed to do all the acts which the principal can personally do. This is a class of agency which rarely occurs, and is not referred to by some writers. There are various classes of agents, such as : — Auctioneers, Brokers, Factors, Masters of Ships, Partners {inter se), Solicitors, &c. These are specially dealt with in their respective places, An infant cannot act as principal but, save under certain circumstances (such as proxy in company liquidation and bankruptcy pro- cedure), an infant can act as an agent, for as agent he is not deemed to exercise his own powers, but those which have been trans- mitted to him by his principal. Appointment. An agency may be created either verbally, in writing, or from a course of dealing, but an agent who is required to execute and deliver a deed must be appointed by deed. A del credere agent maybe appointed verbally, notwithstanding the provisions of the Statute of Frauds, which require a guarantee to be in writing. There appear to be two grounds for this : — (i) li a. del credere agent be regarded as the guarantor of the customers of his principal, the main object of the con- tract of agency is none the less to appoint the agent, not to obtain the guarantee from him, the latter being merely a term of the agent's appoint- ment. (2) The appointment does not involve a guarantee of the solvency of the principal's customers, but an indemnity to the principal against any loss arising from the agent's personal inadvertence in entering into contracts on behalf of his principal with persons who fail to perform them. Authority. The nature and extent of an agent's authority will include all the necessary means of carrying out his instructions. But where an agent's authority is known to be of a par- ticular or limited character, those who deal with him should enquire whether the authority given justifies the act contemplated. Where, however, an agent exceeds his authority, the principal is not bound, unless he is estopped from denying the want of authority. The agent in such a case may nevertheless be liable to the party with whom he has dealt, on the ground that he has committed a breach of his warranty of authority. A general agent may be subject as between him- self and his principal to some particular restriction, but such restrictions do not relieve Agent] 15 LAgent the principal as against strangers who deal with the agent ivithout notice of such particular restriction, if the act done falls within the ordinary scope of the general agency. On the other hand, the power of a special agent is strictly bound by the express authority he has received, and a stranger dealing with such special agent has no right to assume the act will be binding on the principal. Where, however, any act is done by an agent which is in fact beyond his authority, such act may be subsequently ratified by the principal, and such ratification will be equivalent to a previous authority to perform such act, pro- vided that (i) the agent acted as agent for a principal who was in contemplation and in existence at the time, and (2) the act in . question was one the principal himself might have lawfully done. For instance, a corpora- tion on coming into existence cannot ratify acts purporting to have been done on its behalf prior to incorporation. Remuneration. In the absence of agreement or a trade usage to the contrary, the employment of an agent implies an undertaking by the principal to pay or reward the agent for his services. In general, the services originally stipulated for should be completed before an agent can claim his remuneration, but in cases where he is willing to complete his contract, but is prevented by the principal from so doing, he might be entitled to a proportion of his remuneration — that is, to a quantum meruit for the actual services rendered. An agent is, however, entitled to no further reward, profit, or advantage from any acts or dealings on behalf of his principal other than the reward which has been agreed upon by his principal. All other profits whatsoever belong to the principal, and he may recover any secret commissions, profits, or double commissions from the agent, or damages for loss sustained by such dealings from either the agent or the party dealing with him. No trade usage can be alleged to justify these secret commissions, for such a usage has been characterised as a usage of fraud and plunder. Liabilities of Agent. An agent is liable for any loss sustained by reason ot neglect of his duties without reasonable excuse. An agent is also liable (equally with the principal) for a tort, purporting to have been done under authority. Where an agent has not disclosed his principal to the party with whom he deals he may be held liable to such party. The chief exceptions to this rule are : — (i) Where a trade usage settles otherwise, and (2) Where it is expressly stated that the agent acts as such (although the prin- cipal is not disclosed). An agent may in some cases be liable in respect of his dealings, even where he dis- closes his principal, as, for instance : — (i) Where he agrees to be so. (2) Where he contracts by deed in his own name. (3) Where the custom of the trade makes him liable, and (4) (In some cases) where he acts for a foreign principal. Rights of Agent. He has a right to indemnity by his prin- cipal for all advances and disbursements made which may have be; n right and proper in connection with the duties of the agency, and in cases where he has an interest in the proceeds of a contract made by him for a disclosed principal he may sue thereon. An agent may also sue in respect of any contracts made by him for an undisclosed principal. In addition to the ordinary remedies by action against his principal an agent may deduct any moneys due to him from any moneys of his principal which may be in his hands, and in certain cases where custom has established the right, an agent has a lien upon the principal's goods for any moneys due. Liabilities of Principal. A principal may be sued upon all contracts validly entered into by his agent for him, and where he has been undisclosed he may be sued on discovery, " subject to the quali- "fication that the state of the account " between the principal and the agent is not " [subsequently] altered to the prejudice of " the principal." Rights of Principal. A principal may sue upon all contracts validly entered into by his agent for him, Agent] i6 [Alien whether he was disclosed or undisclosed, provided that where the agent has been allowed to appear as the real contracting party the principal must allow any set-off or other equity which the third party may have against the agent. As a general rule the principal is entitled to the benefit of the personal service of the agent, but the maxim "Delegatus non potest delegate " {q.v.), does not always apply. Termination of Agency. The relationship of principal and agent may be terminated by (i) Withdrawal of authority by the principal. (2) Retirement of the agent. (3) Expiration of a fixed period. (4) Completion of a specified act or series of acts. (5) Death or insanity of either party (sub- ject to sections 8 and 9 of the Convey- ancing Act 1882). (6) Bankruptcy of the principal (subject to Conveyancing Act 1882). Either the principal or agent may retire from the relationship at any time, but if (i) it will act prejudicially to the other party, or (2) the agency is a power coupled with an interest, or (3) the agency was created for a fixed period, which has not elapsed, or (4) it was expressly agreed that the authority should be irrevocable, the agency can only be terminated with the assent of both parties, otherwise a right of action for damages will lie. A gratuitous agent may renounce his office at any time, but even under these circumstances he should give reasonable notice of his intended with- drawal. A gratuitous agent is, however, not liable for non-feasance, there being no con- sideration for the contract, but having com- menced his duties he is liable for misfeasance ; the " confidence induced " on his commencing his duties being held sufficient consideration to bind him as an ordinary agent. Agents* Balances. — These may represent moneys due to or from the agents of a con- cern. When moneys are due from the agents, care should be taken when including such items as "assets" that they are stated separately from ordinary book debts and that the net amount only, after deducting com- missions and other charges, is brought into the Balance Sheet. Agents' Returns. — These are reports made by agents to their principals, which may be either statistical or financial ; the statistical reciting prices, market movements, enquiries, &c., while the financial will include cash transactions, deliveries and purchases of goods, &c., enabling the principal to prepare his accounts and show his position with the agent or with the parties with whom the agent has dealt on his account. Aggregate Corporation.— 5ff Corporation. Aggregation.— The act of collecting parts into a whole mass or sum. The Fmance Act of 1894 provides for the aggregation of all property pasing on the death of a person which may be liable to estate duty, so as to form one estate, and the rate of duty payable is the proper graduated rate in respect of the aggregate value thereof. Exceptions are made in respect of (i) small estates, and (2) property passing in which the deceased never had an interest. [See Estate Duty.) Agio. — The difference between the real and nominal value of the currency of a country. Agistment.— The taking of other men's cattle into pasture land. There is a restriction on the power of dis- traint upon agisted cattle for rent under the Agricultural Holdings Act 1883. Agreement. — The reconciliation of two or more minds as to anything done or to be done; the agreement of parties is the very essence of contract. {See Contract.) Alien. — Subject to certain conditions, aliens are not now under any disability as regards the taking, holding, or disposing of real and personal property in the United Kingdom. An alien is under no contractual disability, and may make a will or act as an execute r or administrator ; and, if he has ordinarily resided or had a place of business or been domiciled in England during the year pre- ceding the presentation of a petition, he is amenable to the bankruptcy laws of England. Alien] 17 [Allotment An alien may not, however, own or possess, any share or shares in a British ship, but he may hold shares in the capital of a registered company which owns one or more British ships. Alienation. — The transferring of property from one ownership to another. Alimony. — The allowance made to a wife out of her husband's estate for her support after or during a matrimonial suit. In the event of the husband's bankruptcy, future payments of alimony are not provable on the ground of being incapable of fair estimation {Linton v. Linton, 1885), nor can arrears of alimony be proved for whether accruing before or after the receiving order [Kerr v. Kerr, 1897). The husband is liable to continue the pay- ments notwithstanding his bankruptcy or discharge. "A" List.— S^^ Contributory. Allocatur. — (It is allowed.) The certificate of allowance of costs by the taxing master. In bankruptcy procedure no costs must be paid to any solicitor, accountant, auctioneer, or other agent for the trustee or liquidator, as the case may be, except upon production of an allocatur for the amount claimed, otherwise such payments will not be allowed to the trustee in the audit of his accounts. (Bankruptcy Act of 1883, section 73.) Before taxing the bill or charges of any solicitor, manager, accountant, auctioneer, broker, or other person employed by an Official Receiver or trustee, the taxing officer shall require a certificate in writing, signed by the Official Receiver or trustee, as the case may be, to be produced to him, setting forth whether any, and if so what, special terms of remuneration have been agreed to, and in the case of the bill of costs of a solicitor, a copy of the resolution or other authority sanctioning the employment. (Rule 117.) Where any bill of costs, charges, fees, or disbursements of any solicitor, manager, accountant, auctioneer, broker, or other person has been taxed by a Registrar of the County Court, the Board of Trade may require the taxation to be received by a bankruptcy taxing master of the High Court. (Rule 124.) The fees payable on taxation may be added to the amounts respectively allowed, and charged against the estate. In summary cases the costs of any person (other than a solicitor) may, under certain circumstances, be paid and allowed without taxation. (Rule 273.) The trustee's remuneration is not a tax- able charge. (1883 Act, section 73.) The foregoing provisions apply mutatis mutandis to the winding-up of a company by the Court. (Rules 166, 168, &c.) Allonge. — When there is no room on a bill for further indorsements, a slip of paper, called an allonge, may be attached thereto, and all indorsements upon the allonge are deemed to be written upon the bill itself. (1882 Act, section 32.) As a preventative against fraud the first signature requiring an allonge should com- mence on the bill and end on the allonge. Some foreign codes require this procedure. The allonge does not require a stamp. Allotment. — The appropriation or distribu- tion of stock, shares, debenture stock, or bonds in a joint stock company in response to applications therefor, or in pursuance of contracts already entered into. An application for stock or shares may be withdrawn at any time before allotment, but when notice of allotment is duly addressed and posted the applicant is bound, even though the notice may never reach him. A valid allotment may also be made verbally. Although usually allotment follows an application, yet it is equally effective if allot- ment first be made and is then followed by an acceptance. A contract to subscribe for debentures cannot be specifically enforced as regards any moneys unpaid under the contract, the company's remedy being to sue for the C Allotment] x8 [Allotment damage (if any) it may have sustained by the breach of contract. It is not necessary formally to allot the shares subscribed for by the signatories to the memorandum of association, but in practice it is generally done. If the shares are not taken up by the signatories they will be liable to pay for them in the event of the liquidation of the company, unless the whole of the authorised issue has been allotted to other persons. {Mackley's case, I Ch.D. 247.) No allotment shall be made of any share capital of a company offered to the public for subscription, unless the following conditions have been complied with, namely : — {a) The amount (if any) fixed by the memorandum or articles of association and named in the prospectus as the minimum subscription upon which the directors may proceed to allotment ; or {b) If no amount is so fixed and named, then the whole amount of the share capital so offered for subscription, has been subscribed, and the sum payable on application for the amount so fixed and named, or for the whole amount offered for subscription, has been paid to and received by the company. The amount so fixed and named, and the whole amount aforesaid, are to be reckoned exclusively of any amount payable otherwise than in cash, and the amount payable on application is not to be less than 5 per cent, of the nominal amount of the share. If the conditions aforesaid have not been complied with on the expiration of forty days after the first issue of the prospectus, all money received from applicants for shares is to be forthwith repaid without interest, and if. any such money is not so repaid within forty-eight days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay such money with interest at the rate of 5 per cent, per annum from the expiration of the forty-eight days ; provided that a director shall not be liable if he proves that the loss of the money was not due to any misconduct or negligence on his part. Any condition requiring an applicant for shares to waive compliance with any require- ment of this section shall be void. This section, with the exception of the provision as to the percentage payable on application, applies only to the first allot- ment of shares offered to the public for sub- scription. (Companies Act 1900, section 4.) Any allotment made in contravention of the provisions of section 4 shall be voidable at the instance of the applicant within one month after the holding of the statutory meeting of the company and not later, and shall be so voidable notwithstanding that the company is in course of being wound up. Any director knowingly a party to the contravention of the provisions of the Act with regard to allotment, shall be liable to compensate the company and the allottea respectively for any loss, damages, or costs which the company or the allottee may have sustained or incurred thereby ; provided that proceedings to recover such loss, damages, or costs, shall not be commenced after the expiration of two years from the date of the allotment. {Ibid^ section 5.) Whenever a company limited by shares makes any allotment of its shares, the com- pany shall within one month thereafter, file with the Registrar : — (a) A return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses, and descriptions of the allottees, and the amount (if any) paid or due and payable on each share ; and {b) In the case of shares allotted in whole or in part for a consideration other than cash, a contract in writing, constituting the title of the allottee to such allotment, together with any contract for sale, or for services or other consideration in respect of which such allotment was made, such contracts being duly stamped, and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the con- sideration for which they have been allotted. Allotment] 19 [Alteration Penalty for non-compliance — Every director, manager, secretary, or other officer knowingly a party to the default, is liable to a fine not exceeding fifty pounds for every day during which the default continues. {Ibid, section 7.) Allotment Letter. — A written or printed notice given to an applicant for shares or debentures in a joint stock company inform- ing him of the number which have been allotted to him. A letter of allotment requires id. impressed stamp where the nominal amount to which the letter of allotment relates is less than five pounds, and 6d. impressed stamp where the nominal amount is five pounds or over. A separate duty is chargeable in respect of letters of allotment and letters of renuncia- tion, even though they be contained in the same document. (Finance Act 1899, section 8.) Allotment Notes. — Notes issued for the pay- ment periodically to a savings bank or to a near relative of a seaman, of stated sums on account of his wages during his absence at sea. The total amount payable under such allotment notes is limited to one-half of the total wages payable. Allowance. — A deduction from either weight or price for certain reasons. The commercial allowances are various, the following being examples : — Trade Discount. — An allowance of a certain percentage from the price of goods irrespective of the date of payment. A trade discount will vary from 10 per cent, to as high as 80 per cent, according to the nature of the goods, or class of customer. Cash Discount. — An allowance usually at the rate of (or less than) 5 per cent, per annum in consideration of payment within a certain time. A cash discount is in addition to the trade discount (if any), but is computed on the balance remaining after deducting such trade discount. Draft is a deduction from the gross weight of goods, to ensure the buyer obtaining full weight. Tare is a deduction from the gross weight of packed goods, of the weight of the box, case, wrapper, or other package in which the goods have been weighed. This deduction may be either based upon actual, estimated, or customary weight as the case may be. The balance of weight after deduction of tare is called subtle weight. Tret is a deduction of four pounds for every 104 pounds of subtle weight as an allowance for sand, dust, &c., but this practice is be- coming obsolete, the practice now being to allow for same in the price. An auditor should require all unusual allowances of substantial amount (which have been passed to the credit of customers' accounts) to be vouched in some manner, either (i) by written acknowledgment of the particular customers, or (2) by the initials of the principal or some responsible official being affixed to the entries in the Allowance Book. Defalcations are sometimes success- fully effected by (i) the non-accounting for moneys actually paid by customers, and (2) the settlement of the accounts being obtained by the passing to the credit of the customers' accounts unauthorised "allowances " to the extent of the moneys not accounted for. Payments made by an accounting party are also called allowances. {See Discount.) Alteration. — Deed. — The alteration of a material part of a deed after execution vitiates the instrument* Will. — No alteration of a will shall have effect unless the meaning of the words prior to the alteration was not apparent, but an alteration duly initialled by the testator and the two witnesses is valid. Bill of Exchange. — A material alteration of a bill {e.g.t date, sum payable, time or place of payment) without the assent of all parties liable thereon avoids the bill, except as against a party who has himself made, authorised, or assented to the alteration, and subsequent indorsers, provided that if the (material) alteration is not apparent payment of the bill according to its original tenor may be enforced by a holder in due course as though the bill had not been altered, A bill may be altered at any time before issue, and it may be subsequently altered to make it accord with the intention of the parties at the time of issue, but otherwise a material alteration after issue may be held to create a new instrument and require a fresh stamp. C 2 Alteration] 20 [Analysis {See Articles of Association, Award, Memo- randum of Association.) Alternative Director. — See Substituted Director. . Alternative Drawee.— An order (purporting to be a bill of exchange) addressed to two drawees in the alternative or in succession is not a bill of exchange. (1882 Act, section 6.) A drawee in case of need is not an alterna- tive drawee. {See Drawee.) Alternative Payee.— A bill of exchange may be made payable to one of two payees. (1882 Act, section 7.) Amalgamation (of Joint = Stock Com- panies). — This procedure is resorted to in order to combine two or more businesses for the common advantage. It may be performed either (i) by the transfer of all or part of the assets and liabilities of one or more existing companies to another existing company ; or (2) by the transfer of all or part of the assets and liabilities of two or more existing com- panies to a Jiew company. Under both operations the members of the transferring companies may have a right of becoming members in the company to which the properties, &c., have been transferred. In the first case the company acquiring the properties, &c., of the other company or companies is not wound up, but the com- panies being trans/erred must be so dissolved. In the second case all the previously existing companies must be wound up. Amalgamations are generally effected (i) under section 161 of the Companies Act 1862, or (2) under a special power in the memorandum of the transferring company, to sell the whole undertaking for shares in another company, combined with a power in the articles to divide the assets in a winding- up in specie. The amalgamation of life assurance busi- nesses, or a transfer of one company's busi- ness to another company cannot be effected without the sanction of the Court. The Court will require inter alia notices of the intended amalgamation or transfer to be served upon shareholders and policy-holders, and will not sanction any amalgamation or transfer in any case where policy-holders representing one-tenth or more of the total amount assured in ativ company which it is proposed to amalgamate or transfer, dissent from such amalgamation or transfer. {See Life Assurance Companies Acts.) Where an existing company acquires the whole undertaking of another company, under a scheme of amalgamation, it may then, if thought fit, alter its name, by special resolution, to meet the changed circum- stances, but it is none the less the same company, not having been formally wound- up. {See Arrangements, Reconstruction.) Amortisation. — This term is used, in a legal sense, to express the alienation of lands in mortmain, but in an accountancy sense it is applied in connection with the redemption of a liability, or reduction of the book value of an asset (such as a lease), by means of a sinking fund or otherwise. Analysis. — An arrangement of matter, under appropriate heads, according to requirements or circumstances. In its application to accounts, the recapitulation of a statement which shows a certain result, but in such a form as to expose the constituent parts contributing to such result. Analysis of the Ledger.— This is accom- plished by means of analysis sheets, and is an expedient resorted to as a check arithmetically upon the postings to the Ledger where it would be impracticable to call over such postings in detail. The analysis sheets are ruled to allow of columns for the folio, name, commencing balance (debit or credit), the various sub- sidiary books (debit and credit), and the con- cluding balance (debit or credit), so that the entries in each account may be extracted under these heads. The analysis of each account should be self-balancing ; as also each schedule and the summary of the schedules. I The totals of the various columns (debit 1 and credit) representing the subsidiary books should agree with the totals of the entries in the subsidiary books themselves. Thus, if the books do not agree, the error or errors may be located. This expedient is also of value in cases of investigation where the period of access to the Ledger is limited, Analysis] 21 [Annuity provided, of course, the accountant is per- mitted to make and take away such extracts from the Ledger. {See Trial Balance.) Annual General Meeting.— (S^^ General Meeting.) Annual List and Summary, — Every com- pany registered under the Companies Act 1862, and having a capital divided into shares, must prepare a list of its members, giving their names, addresses and occupa- tions, and stating the number of shares held by each of them ; with full particulars of the persons who have ceased to be members since the date of the last list, and the number of shares held by each of such persons. Note. — The list must also give particulars of the shares transferred since the date of the last return, distinguishing between those transferred (i) by persons who are still members, and (2) by persons who have ceased to be members. A summary must be prepared accompany-' ing the list stating the amount of the capital, the number of shares taken (from the com- mencement) to the date of the summary, the calls' made, received and unpaid, and the shares forfeited. The summary must be so framed as to distinguish between the shares issued for cash and those issued wholly or partly for consideration other than cash, and must also specify : — {a) The total amount of debt due from the company in respect of all mortgages and charges which require registration under the Companies Act 1900, or which would have required such regis- tration had they been created after the commencement of that Act, and (b) The names and addresses of the directors at the date of the summary. The return is to be signed by the manager or by the secretary of the company. (Com- panies Act 1900, section 19.) Note. — The Registrar will not accept the signature of a director. This list and summary must be prepared at least once in every year, made up to the fourteenth day succeeding the first ordinary general meeting in each year, and entered in a separate part of the register ; and a copy must be filed with the Registrar within seven days after such fourteenth day. The com- pany and its officers incur penalties by non-compliance with these requirements. A registration fee of 5s. is payable on filing the list and summary and list of directors with the Registrar. (Companies Act 1862, sec- tion 26 ) {See Register of Members, Share Warrants.) Annual Rests.— 5^^ Rest. Annual Return.— The annual list and sum- mary {q.v.) which a company, having its capital divided into shares, is required to file is sometimes called the " annual return," but the term is obviously applicable to all accounts, or reports which have to be prepared and filed annually. Annual Value. — The amount assessed as issuing annually out of, or by virtue of, the subject-matter in question, whether lands, personal property, trade, profession, or other- wise. The term is chiefly used in connection with the assessment and collection of income tax and local rates. Although the basis of valuation is not the same as for the purpose of income tax. assessment, the annual value of lands is used for the valuation of such lands, so that the principal value may be stated as being at the rate of a certain number of years' purchase. Annuity. — An annual payment, usually deter- mined on the death of the annuitant ; it may, however, be granted for a fixed term, and may be transmitted by will. An annuity may also be created by will, when it will rank and abate as a general legacy. Legacy duty (if chargeable) is pay- able upon the value of the annuitant's interest, calculated according to tables pro- vided for the purpose. The duty is payable in four annual instalments, which are due and payable as and when the first four pay- ments of the annuity are made, the first instalment being due on completion of the payment of the first year's annuity. Simple interest at the rate of three per cent, per annum, without deduction of income tax, is payable on all unpaid instalments of duty. Annuities are subject to estate duty to the extent to which any beneficial interest accrues by survivorship on the death of a person, but a single survivorship annuity, if less than £25, is exempt. If there be more than one such Annuity] 22 [Anticipation annuity then only the first granted is entitled to exemption. The estate duty may be paid by four equal yearly instalments, the first of which is due at the end of twelve months from the date of the death, with interest at the rate of three per cent, per annum, with- out deduction of income tax, upon all unpaid instalments of duty which interest must be paid with each instalment after the first year. An annuity created by will runs from the death of the testator; the first payment is therefore due at the end of a year from the death, unless the annuity is directed to be paid monthly or quarterly, in which cases the instalments will be payable at the end of the first month or quarter. If an annuity is directed to be paid, say, in quar- terly instalments, and a day is appointed for the first payment, which is less than three months from the death, the first payment would be made on such appointed day, but the second would not be payable until six months from the death ; or if the annuity were appointed to be paid in, say, monthly instalments payable on the first of each month, then the first payment would be ap- portioned (if necessary) in respect of the period between the date of the death and the ist of the following month, the first payment being such apportioned part, and all subsequent payments being a full month's proportion. A bequest of an annuity "free from any deduction," although relieving the annuitant of legacy duty, will not relieve him of income tax. A testator may, however, expressly direct that the income tax upon an annuity shall be payable out of his estate. An annuitant may prove against the estate of a bankrupt, by whom the annuity is pay- able to the extent of the present value of such annuity, whether it be for life, for a term of years, or otherwise. For the rules as to the valuation of annuities in the winding-up of a Life Assur- ance Company see title *' Life Assurance Companies' Acts." Annuity certain. — One payable over a definite period, as distinct from an annuity dependent for its duration upon some con- tingency — e.g., the existence of a given life. Ordinarily, annuities are payable at the end of the periods to which they respectively have reference ; if an annuity be payable at the commencement of such periods it is called an anniiitv-due. A perpetual annuity is termed a perpetuity, whilst a deferred annuity is one which is not to be enjoyed until the expiration of a given number of years. A reversionary annuity is one which is to commence on the death of a given person. Ante^^date. — To date a document as though executed before the true date of execution. A bill of exchange is not invalid by reason only that it is ante-dated. (1882 Act, section 13.) Ante-nuptial Debts. — A woman, married after 1882, remains liable for her ante-nuptial debts, contracts, and torts to the extent of her separate property, and her husband will only be liable for them to the extent of any property he may have acquired through his wife. Anticipation. — The doing or acquiring of an act or thing before the appointed tinse. Married women may be restrained by the terms of a will or settlement from alienating, by way of anticipation, property settled to their separate use during coverture, but no restraint against alienation imposed by a woman upon herself ysiW be valid as against her ante-nuptial debts. The Court has now power, even where a woman is restrained from anticipation, to make a judgment or order binding her interest in her separate property, if the woman consents thereto, and the Court is satisfied that it will be to her benefit to do so. Anticipation of Profit. — This term is not used in the sense of " expectation of profit" (for such a prospect justifies the existence of every trader, as such), but rather in the sense of taking credit in the accounts for profits as though they were earned, when they are only partly so, or depend for finality upon some future performance or other contingency. Thus, to take credit for the profit on sales made for future delivery is an anticipation of such profit if (say) the particular goods in question have not been acquired by the vendor at the time of preparing the accounts and there is an uncertainty about his ability to effect delivery. The valuation of stock- Anticipation] 23 [Apportionment in-trade at selling prices, and in the majority of cases the practice of " wri ting-up " the assets, are other forms of anticipation of profit. {See Profit, Realised Profit.) Appearance. — When a person is served with a summoning process from a Court he generally comes into such Court to defend himself by "entering an appearance" with the proper officer. Appearance to an action in the High Court must be entered within eight days from service of the writ, and may be entered in person or by attorney. Apportionment. — Apportionment may be made in respect of time or in respect of estate. At common law there is no apportionment in respect of time of any periodical payments except interest on money lent. The reason for the exception with regard to interest is set out in a decision nearly two centuries old, thus : — " Interest being due de-die in diem " is not one entire thing, but is an aggregate " of many distinct things." Per contra the reason given for the non-apportionment of rent at common law was that until the rent day nothing was due or payable, and that the whole rent belonged to the person entitled on the day of payment, however recent his title. The common law rule was the cause of injustice and inconvenience, and was modi- fied by statute from time to time, and the last Act dealing with the subject is the Apportionment Act of 1870, which provides that all rents, annuities, dividends, and other periodical payments in the nature of income are, like interest on money lent, to be con- sidered as accruing from day to day, and to be apportioned in respect of time accordingly, the apportioned parts to be payable when the next entire portion shall have become due. This Act does not extend to life insurance premiums ; nor does it apply to the proceeds of investments sold cum dividend, when such investments have been bequeathed to one for life with remainder over, the whole of the proceeds being treated as capital, although a full period's dividend was about to be declared upon the investments in question. On the other hand, if an investment be made during the currency of a period when a dividend is accruing due, the tenant-for- life will be entitled to the whole of such dividend when declared. This was decided in the case of Mtittlebury v. Muttlehury in 1886. The purchase or sale must, however, be in the dne course of the administration, for some special circumstances may induce the Court to order an apportionment, as in the case of Biilkeley v. Stephens (1896). With regard to dividends and interest upon shares or debentures in public com- panies, they must be apportioned according to the time or period during which they are deemed to have been earned and declared in respect of, regardless of the actual date of receipt. Thus, if a person died on 20th October, and a dividend was declared in the following February upon one of his invest- ments in respect of the year ending the intervening 31st December, the proportion from I St January to 20th October would be treated as capital, and the balance {^^ of the whole dividend) would be treated as income. So, if a dividend be declared in respect of a half-year, such as on railway stock, the apportionment between capital and income would be based upon the number of days' dividend to which these accounts were respectively entitled out of the actual number of days in the particular half-year. If, however, an interim dividend be declared upon ordinary shares at the rate of 5 per cent, per annum, for the half-year ending 30th June, and is paid in August, and the following February a dividend is declared for the half-year ending 31st December, at the rate of 10 per cent, per annum, and expressed at the time of declaration to be supplementary to the interim dividend, making a total dividend for the year of 7J per cent., then if a person died (say) on the 5th September, holding some of these shares, it is submitted (there being no direct decision on the point) that the apportionment would be:— Capital. — The proportion of dividend at 7 J per cent, per annum, from ist January to 5th September, less the amount of the interim dividend paid in August. Income. — The balance of dividend re- ceived in February, after deducting the net amount apportioned to capital — that is, the proportion of dividend at 7J per cent, per annum from 5th September to 31st December. Apportionment] 24 [Apportionment The Apportionment Act, 1870, expressly states that the word "dividends" includes (besides dividends strictly so called) all payments made by the name of bonus or otherwise out of the revenue of trading or other public companies ; but where a public .company declares a dividend or bonus, without paying the same in the ordinary way, but with the intention of appropriating the amount so declared as an increase of the company's capital and with- out any option to the shareholders, such ""dividend" or its equivalent does not belong to the life-tenant, but must be treated as capital {Bouch v. Sproule (1887), 12 A.C. 385). The rents in respect of a specific devise of real property, and the dividends accrued on a specijfic bequest of personalty, are appor- tionable to the date of the testator's death as between capital and the respective devisees or legatees. The profits of a private partnership are not apportionable under the Act, although they may be declared at regular intervals ; for such profits are not " rents, annuities, or periodical payments," nor are private partner- ships "trading or other public companies " within the meaning of the Act of 1870 (re Griffith, 12 Ch.D.655), but the interest pay- able on a partner's capital is apportionable {Ibbotson V. Elam (1865), i Eq. 189). The articles of partnership generally pro- vide for the ascertainment of profits as at the date of dissolution, whether occasioned by death or otherwise, so that although the question of apportionment in such cases may not arise as between the partners, it may in exceptional cases as between the life-tenant and the remaindermen of a deceased partner's estate. The principles of apportionment between capital and income involved in the adminis- tration of a deceased person's estate (or in any other case where applicable) may be summarised as follows : — (i) Rents, annuities, dividends and interest on money lent are apportionable from day to day. But rent payable in advance by agreement is not apportionable. The whole sum is due on the first day of each period. {Ellis v. Rowbotham, App. Cas. 1900.) (2) The profits of a private partnership, the profits from a voyage of a ship owned in 64th shares, and life insur- ance premiums are not apportionable. (3) The proceeds of investments sold cum dividend are not apportionable, nor is the first dividend which is received upon an investment made during the currency of a period. (4) Dividends and the like are apportion- able according to the period during which they are deemed to have been earned, and are declared in respect of, regardless of the date of receipt. (5) Dividend or bonus declared with the intention of increasing the capital of a concern to the extent of the amount declared, and with no intention of pay- • ing same in the ordinary way, must be treated as capital. (6) The provisions of the Apportionment Act do not extend to any case in which it is expressly stipulated that no appor- tionment shall be made. Where the proceeds of realisation of a mortgage security are insufficient to discharge the amount due for principal and interest, the amount received is apportionable as between tenant-for-life and remaindermen as follows : — (i) Add to the amount recovered the interest (if any) actually received by the tenant- for-life. (2) Add to the amount originally advanced the interest for the whole period of advance (whether received or in arrear). (3) The amount due to the remaindermen is that proportion of the original advance which the augmented sum under para- graph (i) bears to the augmented sum under paragraph (2). (4) The amount due to the life-tenant is that proportion of the total interest (whether received or in arrear) which the augmen- ted sum under paragraph (i) bears to the augmented sum under paragraph (2), less the interest actually received by the life-tenant. Example : — Advanced 10 years ago £1,000 @ 4 %— Interest received £300, interest in arrear £100. Security realised £800. £800 + ^300^ /i, 000 + £400 ^* ^ , . , }i of £1,000 = £785^ capital }|of£40C .. = £314? Less .. . . 300 147 income £800 Apportionment] Sometimes property not producing income is given to trustees in trust to convert and re- invest and to pay the income thereon to a tenant-for-life with reversion to others, and the conversion of the property into an income- producing fund is deferred for the benefit of the estate. In such a case, the Court will order the apportionment between capital and income to be effected as follows : — Ascertain the amount which, if put out at (generally) 4 per cent, per annum on the day the property came into the trustees' hands {e.g., the day of the death of the testator), and accumulated at compound interest with yearly rests, less income tax, would produce an amount equal to the proceeds of the property upon the day such proceeds were actually received. The sum so ascertained is to be treated as capital, and the difference between that sum and the actual proceeds as income. Thus, if the life-tenant had been entitled to receive income from the investment of the proceeds of sale of certain property as from 3rd July 1891, but the property was not realised until the 31st July 1895, ^-i^d had not produced income meanwhile, the apportion- ment between capital and income would be ascertained thus : — £ s d Proceeds of sale of property, 31st July 1895 4,388 13 7 Present worth of £4,388 13s. yd. on 3rd July 1895 at 4 per cent., less tax at 8d. (=£3 17s. 4d. per cent.) is £4.375 13s. 8d,, obtained thus :— 28 days' interest on £1 at £'3"86 per cent, per annuni=£'oo2965. Present worth of £1 '002965 equals £1. Therefore, present worth of £4,388 13s. 7d. equals £4.375 13s. 8d., 28 days' interest upon which at 4 per cent, per annum = £13 8 9 Less tax at 8d, . . 8 10 12 19 II Amount as at 3rd July 1895 . . 4,375 13 8 Present worth of £1*0386 due one year hence at 4 per cent, per annum, less tax at 8d., equals £1 ; therefore present worth of £4,375 13s. 8d. equals £4,212 15s. lod. One year's interest at 4 per cent, upon which is £168 10 2 Less tax at 8d... 5 12 4 162 17 10 Amount as at 3rd July 1894 4,212 15 10 [Apportionment Presentworthof £1*03883 due one year £ s d hence at 4 per cent, per annum, less tax at 7d., is £1 ; therefore present worth of £4,212 15s. lod. equals £4,055 6s. 2d. One year's interest at 4 percent, upon which is £162 4 3 Less tax at 7d.. . 4 H 7 157 9 8 Amount as at 3rd July 1893 . . 4,055 6 2 Present worth of £i'039 due one year hence at 4 vet cent, per annum, less tax at 6d., is £1 ; therefore present worth of £4,055 6s. 2d. equals £3,903 IS. 8d. One year's interest at 4 per cent, upon which is £156 2 6 Less tax at 6d. ,. 3 18 o 152 4 6 Amount as at 3rd July 1892 . . 3.903 i 8 Present worth of £1 -03916 due one year hence at 4 per cent, per annum, less tax at (say) 5d., is £1 ; therefore present worth of £3,903 is. 8d. is £3.755 19s. 5d. One year's interest at 4 per cent, upon which is £150 4 10 Less tax at 5d.. . 327 147 2 3 Amount as at 3rd July 1891, which is treated as capital, and the £3,755 19 5 balance of the proceeds of sale — (£632 14s. 2d.) as income. Thus the life-tenant receives compound in- terest at 4 per cent., less the current income tax, upon the amount treated as capital, for if the above be reversed, commencing with £3^755 19s- 5d., and interest (less tax) be added and compounded in yearly rests, the accumulations will bring the amount appor- tioned as capital to the equivalent of the actual proceeds of sale at the date thereof. The complication between capital and income, arising from the postponement of sale of non-income-producing assets, is often avoided by the insertion of a clause in the will, allowing of postponement of sale, and providing that no allowance shall be made to the life-tenant in respect of any loss of income pending realisation. In Allhusen v. Whittell (1867) 4. Eq. 295, an important rule of apportionment (re-affirming earlier decisions) was clearly laid down to the following effect :— Inasmuch as that portion of the capital of a testator's estate which is required to pay the debts, legacies, funeral expenses, and such like is not part of the true residue of the estate, the life-tenant is not Apportionment] 26 [Apportionment entitled to the income upon that portion of the capital which is so required. In other words, the capital of the estate must not be charged with the gross amount of the debts, legacies, and expenses, but only such a sum as with the income thereon for one year from the death, will make up the amount necessary to pay such debts, &c. This rule was also followed in Lambert v. Lambert, 16 Eq. 320, the actual figures in that case being : Capital /io,209, first year's income /i,57i, debts, legacies, and expenses /4, 729. There- fore /4,o99 of the latter item was held chargeable to Capital Account, and £^Z^ (the balance) was treated as the income earned upon the ;^4,o99, leaving ;^94i for the life- tenant. The rule is seldom applied in practice — in fact it would raise considerable difficulties in many cases ; and in some instances a clause is inserted in the will excluding the operation of the rule, so that that portion of the capital of a testator's estate ultimately required for the payment of debts, legacies, &c., may be treated as "residue" until actually applied to such purposes. Bankruptcy and Company Liquidation. — When any rent or other payment falls due at stated periods, and the receiving order or the order or resolution to wind-up (as the case may be) is made at any time other than one of those periods, the person entitled to the rent or payment may prove for a proportionate part thereof up to the date of the receiving order or winding-up order or resolution as if the rent or payment accrued due from day to day. (Bankruptcy Act, 1883 ; 2nd Schedule, Rule 19, and Winding-up Rule 99.) Commercially, apportionments are made in respect of various matters not only upon a change of proprietorship, as in the case of the sale of a business or an incoming or outgoing partner, but also upon each date the position of a concern is ascertained. Such items as interest, rent, rates, and fire insurance premiums, which accrue from day to day, require adjusting in order to show the position with accuracy, for some may be paid in advance whilst others are accruing due. In the case of annual payments there does not appear to be much difficulty as to the proper apportionment of same as between two given periods, but where payments are made (say) quarterly in respect of an annual sum, there appears to be great difference of opinion. For instance, to take the familiar case of rent — a rental at the rate of ^92 los. per annum in respect of certain property is payable upon the usual " quarter days," that is to say, ^23 2s. 6d. each quarter. The property is sold on the 9th September, the vendor having already received the rent pay- able on the previous 24th June, and a recent inquiry as to the amount payable to the vendor in respect of the rent accrued during the 77 days from 24th June to 9th Sep- tember elicited four different solutions, viz. :. — Amount payable to vendor for accrued rent £ s d £ s d (i)3Bsot £92 10 o .. . .. 19 10 3 2) g? of £23 2 6 . . . . 1872 (There are 97 days be- tween 24th June and 29th September) (3) 3^& of £92 10 o . . . . 514 The purchaser is entitled ^^^^^^ to 20 days' rent out of the current quarter's rent, therefore the ven- dor takes . . . . 23 2 6 Less 514 18 I 2 (4) The vendor is entitled to the portion of rent which has accrued since the date in the year from which the premises were originally let. Thus, il the premises were let on 25th March in any year the vendor is entitled in this case to l%% of ^^92 10 o 42 II 7 Deduct Amount received on 24th June . . . . 23 2 6 19 9 I The above solutions are set out at length in order to show the various principles in- volved, but the true solution would in all cases appear to be inseparable from the precise terms of the tenancy. Thus, if the rent is an annual one, but payable quarterly or otherwise for convenience. Solution No. i (above) is correct ; whilst if the rent be a quarterly one, being referred to at its annual equivalent merely for comparative purposes. Solution No. 2 is correct. Solution No. 4 would not only depend upon the terms of the Apportionment] 27 [Arbitration agreement, but upon the terms of the receipt given for the rent received on 24th June. Where the sum to be apportioned is an annual one the apportionment may be effected readily by the use of an ordinary 5 per cent, interest table. Thus : — Ascertain the capital sum which if put out for one year at 5 per cent, per annum will produce the sum to be apportioned. Then find the interest at 5 per cent, per annum upon the capital sum so ascertained for the number of days in respect of which the apportionment is required. The amount of interest so ascertained is the apportioned part required. For example: — /755 15s. gd. per annum ; required the apportioned part for 97 days. The first part of the rule can speedily be carried out, for as £\ at 5 per cent, will pro- duce one shilling per annum, conversely, every shilling and fractional part of a shilling in the interest represents a corresponding number of pounds and fractions thereof as capital. The annual sum therefore only requires to be reduced to shillings, and then termed pounds, to arrive at the capital sum. Thus ;^755 15s. gd. interest is derived from ;^i5,ii5 15s. capital ; and 97 days' interest upon the latter sum at 5 per cent, per annum is ;^2oo i6s. lod., which is the required portion of ^755 15s- 9d- for 97 days. Interest tables may also be made use of for apportionment purposes in another way when numerous apportionments are required of the same sum. For instance, required the respective apportionments of the annual sum of ;^i7 I2S. for 87, 32, 27, and 219 days. As X days' interest on £b is equal to 6 days' interest on £x, it follows that if the annual sum is less than £\% 5s. the problem may be reversed, and in the example given, instead of apportioning in the ordinary way by multi- plication and division, all that is necessary is to find the interest at 5 per cent, on £%•], £^2, £2.'], and ;^2i9 for 352 days (the number of shillings in the sum to be apportioned) and the required apportionments are obtained, the total of which should equal the annual sum ; thus a check is obtained. As the whole of these results are upon one page in an ordinary interest table, it is obviously the more rapid method. , Appraisers. — Persons employed to value goods, &c. ; they are required to take out a licence, paying £2 per annum therefor. Appropriation of Payments.— If a debtor owes more than one debt to a person, and makes a payment insufficient to satisfy the whole, the money is appropriated as follows : — (i) To the debt the debtor desires, if he exercise the option at the time of pay- ment. The appropriation may be by word, in writing, or by conduct. (2) If the debtor does not make any election, then the creditor may place the money against any debt he pleases. This he may do at any time before action is brought, and having done so he may alter his appropriation, provided he has not notified the debtor, and so dis- closed the previous state of the account. Provided a debt really exists — that is to say, the contract upon which it is founded must not have been void — the creditor may place the money (if unappropriated by the debtor) against such debt, even though a right of action thereon may be barred by the Statute of Limitations. (3) If there be a general account between the parties, and no appropriation of payments by debtor or creditor, the presumption is that the payments have been appropriated to the items in order of date. '• The first item on the credit " side is to be placed against the first "item on the debit side." This pre- sumption may be rebutted by evidence. As against a cestui que trust a trustee who has mixed trust money with his own moneys in his banking account may not set up the rule in Clayton's case (No. 3 above), and it will be presumed that in drawing out of the bank he drew upon his own funds and not the trust money. The rule will, however, apply as between two cestuis que trustent under similar circumstances. Arbitration. — The determination of a matter or matters in dispute by the decision of one or more persons called arbitrators, who, in case they disagree, may call in an umpire to make a final decision. Arbitrations generally are governed by the Arbitration Act 1889, if the submission :s in writing, special classes having separate Acts Arbitration] 28 [Arrangements to regulate the procedure. Under the 1889 Act (i) the parties agree in writing to submit differences to arbitration ; (2) the arbitrator hears all the evidence ; (3) the award is drawn up ; and (4) the Court will enforce the award as if it were a judgment or order to the same effect. {See Arbitrator.) Arbitrator. — A person appointed to decide matters in dispute between two or more parties. When the reference to arbitration is made by the Court, the arbitrator is termed an official or special referee. Although in general the arbitrator should be an impartial person, yet, if the parties -with full knowledge of the facts select a man known to be biassed, there would be some difficulty in avoiding a trial before him. The duties of an arbitrator are to hear and determine all the questions at issue, and exercise such skill as he possesses in arriving at a decision. His authority depends largely upon the terms of the submission, but he cannot order anything to be done which would amount to an illegality, nor can he decree a divorce or deal with criminal cases. He can only deal with matters within the strict ambit of the submission. Recent decisions make it clear that an ordinary arbitration clause in a partnership agreement is sufficient to confer upon an arbitrator, appointed in pursuance of such clause, a power to award a dissolution and state the terms thereof. The arbitrator is not bound by any rules of procedure, although it is usual and proper to follow the proceedings of a trial at law. Notes of the evidence should be taken, and, on deciding to close the proceedings, prior to coming to his decision, the arbitrator should formally notify the parties thereof, after which it is improper for him to listen to either of the parties. The arbitrator cannot delegate his powers and duties to another; he must be present throughout thehearings, and, although he may call in legal or scientific experts and may delegate mere ministerial acts to his clerk, a solicitor, or an accountant, it is the decision of the arbitrator himself which must prevail, the award must be his, and he must not adopt the theories or opinions of any of the experts he consults, unless he is convinced of their truth. The admission or rejection of evidence is in the discretion of the arbitrator, but if he refuse to hear evidence which clearly bears upon matters within the submission the validity of the award may be imperilled. Witnesses may be compelled to attend, give evidence, and produce documents, but they cannot be compelled to produce documents which are not liable to be produced at a trial at law. Unless the submission shows a contrary intention, the witnesses may be examined on oath or affirmation, and for that purpose the arbitrator may administer oaths to, or take the affirmations of, the parties to the sub- mission, and the witnesses appearing before him. Persons wilfully giving false evidence are guilty of perjury, as if the evidence had been given in open Court. If a point of law arise the arbitrator may (i) deal with it, or {2) he may state a special case for the opinion of the Court, or (3) he may put his award in the form of a special case — that is to say, he may state the findings on the facts, and further state that if one view of the law be correct he finds for one party, or if another view of the law be correct he finds for the other party. Either party may ask the Court to compel the arbitrator to state a question of law for the opinion of the Court in the form of a special case. In the absence of anything to the contrary in a submission, it is implied that the reference is to a single arbitrator. {See Arbitration, Award, Special Referee,. Submission, Umpire.) Arrangements in Bankruptcy. — An arrangement may be entered into between a debtor and his creditors either before or after adjudication. The procedure is as follows : — The debtor must lodge his proposal for a scheme or composition in writing with the Official Receiver within four days after submitting the statement of affairs. The proposal must contain the terms of the composition or scheme, and state the particulars as to sureties or securities, 'ji any, Arrangements] 29 [Arrangements A meeting of the creditors will then be called to consider the proposal before the close of the public examination, and if a majority in number and three-fourths in value of all the creditors who have proved their debts resolve to accept the proposal, and the Court approve, the scheme is binding on all the creditors. An)' creditor who has proved his debt may assent to or dissent from the proposal by a letter addressed to the Official Receiver, and, if received a day prior to the meeting, the letter counts as if the creditor had attended the meeting and voted. Upon every application to the Court to approve a composition a fee is payable computed upon the gross amount of the composition, viz., £1 on every ;^ioo or fraction of ;^ioo up to ;^5,ooo, and los. on every ;^ioc or fraction of ;^ioo beyond ;^5,ooo. Upon every application to the Court to approve a scheme of ayrangement a fee is payable computed on the gross amount of the estimated assets (but not exceeding the gross amount of the unsecured liabilities), viz., £1 on every ;^ioo or fraction of ;^ioo ^P to ;^5>ooo, and los. on every ;^ioo or fraction of ;^ioo beyond ^5,000, provided that, where a fee has been taken upon a previous application to the Court to approve a composition or scheme, or where a fee has been paid upon the gross amount of the assets realised and brought to credit in the Cash Book when submitted for audit, seven- eighths of the amount thereof shall be deducted from the fee payable on applica- tion to approve a composition or scheme. Note, — The fee must be paid before the application can be heard. The Court cannot approve a scheme : — (i) Where the terms of the proposal are not reasonable ; or (2) Where the scheme is not calculated to benefit the general body of credi- tors ; or (3) In any case in which the Court is required, where the debtor is adjudged bankrupt, to refuse his discharge. Where any facts are proved which would necessitate a conditional discharge, or the refusal or suspension of same, in the event of bankruptcy, the Court cannot approve a scheme unless it provides reasonable security for payment of not less than 7s. 6d. in the £ to the unsecured debts provable at the date the scheme comes before the Court [re Ashmead Bartlett, 1901). Therefore creditors otherwise settled with can be excluded when providing the security, but the Court cannot sanction a scheme in which claims have been only conditionally withdrawn [re Pilling, 1903). The effect of the approval of a composition upon the various debts due from the debtor is much the same as in bankruptcy, had he been adjudged bankrupt— that is to say, the scheme is binding upon all creditors as regards debts provable in bankruptcy, but does not release the debtor from any liability under a judgment against him in an action for seduction, or under an affiliation order, or under a judgment against him as a co- respondent in a matrimonial cause except to such extent as the Court expressly orders. The acceptance by a creditor of a composi- tion or scheme does not release any partner of or joint-debtor with the debtor, or any person who was surety for him. No composition or scheme can be approved by the Court unless it provides for the payment in priority to other debts of all preferential payments in bankruptcy. The Court must also, before approving a compo- sition or scheme, be satisfied that provision is made for payment of all proper costs, charges, and expenses of, and incidental to, the proceedings, and all fees and percentages payable to the Official Receiver and the Board of Trade, under the scale in force for the time being. (Rule 205.) If default is made in payment of any instal- ment due in pursuance of any composition or scheme, or if it appears to the Court on satisfactory evidence that the composition or scheme cannot, in consequence of legal difficulties, or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, or that the ap- proval of the Court was obtained by fraud, the Court may, if it thinks fit, on application by the Official Receiver or the trustee or by any creditor, adjudge the debtor bankrupt and annul the composition or scheme, but without prejudice to the validity of any sale. Arrangements] 30 [Articled disposition, or payment duly made, or thing duly done, under or in pursuance of the composition or scheme. Where a debtor is adjudged bankrupt as aforesaid, any debt provable in other respects, which has been contracted before the adjudication will be prov- able in the bankruptcy. (1890 Act, section 3.) (An important article dealing with arrange- ments in bankruptcy appears in The Accoun- tant, 1902, p. 644.) Arrangements (Joint Stock Companies). — Any arrangement entered into between a company about to be wound up voluntarily, or in the course of being wound up volun- tarily, and its creditors shall be binding on the company if sanctioned by an extraordinary resolution, and on the creditors if acceded to by three-fourths in number and value of the creditors, subject to such right of appeal as is hereinafter mentioned. (1862 Act, section 136.) Any creditor or contributory of a company that has in manner aforesaid entered into any arrangement with its creditors may, within three weeks from the date of the completion of such arrangement, appeal to the Court against such arrangement, and the Court may thereupon, as it thinks just, amend, vary, or confirm the same. (Section 137.) The liquidators may, with the sanction of the Court, or of the committee of inspection, where the company is being wound up by the Court, or subject to the supervision of the Court, and with the sanction of an extra- ordinary resolution of the company, where the company is being wound up altogether voluntarily, pay any classes of creditors in full, or make such compromise or other arrangement as the liquidator may deem ex- pedient with creditors, or persons claiming to be creditors, or persons having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages against the com- pany, or whereby the company may be rendered liable. (1862 Act, section 159 ; 1890 Act, section 12.) The Joint Stock Companies Arrangement Act 1870 provides that, where any com- promise or arrangement is proposed between a company (which is being wound up by or under the supervision of the Court or volun- tarily) and its creditors, or a class of creditors and is accepted by the creditors or class of creditors by a majority in number representing three-fourths in value of those present at a meeting summoned for the purpose of con- sidering such compromise or arrangement, in person or by proxy, such arrangement shall, if sanctioned by the Court, be binding on all such creditors or class of creditors, and also on the liquidator and the contributories. [See 1900 Act below.) Note. — The procedure under the 1870 Act enables a liquidator to compel a minority of creditors to assent to the arrangement sanctioned by the majority as prescribed in the Act. Such arrangements usually provide (i) for the dissolution of the company on payment of a composition, or an allotment of shares or debentures to the creditors in a new company to be formed ; or (2) for the staying of the winding-up under an agreement for payment, or part payment, over a period of time, the company meanwhile continuing to carry on business. Section 24 of the Companies Act 1900 extends the operation of the 1870 Act to members of the company, but as there are no provisions in the 1870 Act for the protection of dissentient members (such as are contained in section 161 of the Act of 1862) Buckley, J., expressed a doubt in Re Patterson, Laing 6- Co. (1902), whether the Court would, in certain cases, sanction a scheme under the 1870 Act (where section 161 of the 1862 Act was applicable) unless the scheme contained clauses tor the protection of dissentient share- holders on the lines of those in section 161. {See Amalgamation and Reconstruction.) Articled Clerk. — Where, at the time of the ' presentation of a bankruptcy petition, any person is apprenticed or is an articled clerk to the bankrupt, the adjudication of bank- ruptcy operates as a complete discharge of the indenture or articles of agreement, if either the bankrupt or apprentice or clerk gives notice in writing to that eftect to the trustee, and if any money has been paid by, or on behalf of, the apprentice or clerk to the bankrupt as a fee, the trustee may, on the- application of the apprentice or clerk, or of some person on his behalf (but subject to an appeal to the Court), pay such sum as he Articled] 31 [Articles (the trustee) thinks reasonable out of the bankrupt's property, to or for the use of the apprentice or clerk — regard being had (i) to the amount which was paid to the bankrupt as a fee ; (2) the time served by the appren- tice or clerk prior to the bankruptcy ; and (3) any special circumstances. Where it appears expedient, the trustee may, upon application by the apprentice or clerk, instead of making a payment as com- pensation, transfer the indenture or articles of agreement to some other person. (1883 Act, section 41.) Being a personal contract, an apprentice- ship or articled clerkship ordinarily ter- minates on the death of either party, but if a master has covenanted to clothe and feed (as well as educate) the apprentice or clerk, the master's representatives, in the event of his death, will be required either to carry out the covenant to clothe and feed, or to com- pensate for the breach thereof, so far as they may have assets. Articles of Association (of a Company). — The internal regulations of a company, defining the mode and form in which the business of the company is to be carried on. A company limited by shares may adopt, in whole or part, the provisions contained in Table A. annexed to the Companies Act 1862, or may be registered with a specially drawn set of articles. If no articles of association are registered with the memorandum, Table A. is deemed to apply to the company ; but if special articles are desired they must be printed and bear a los. stamp, as if they were contained in a deed. The signatories to the memorandum must also sign the articles, such signatures being duly attested, but the number of shares the subscribers take must not be stated, as required in the case of the memorandum. (1862 Act, sections 14, 15, and 16.) The effect of such signatures is similar mutatis mutandis to the signing of the memo- randum. (See Memorandum of Association.) On registering the articles a fee of 5s. is payable. Since ist January 1901 an applicant for registration of the memorandum and articles of association of a company which invites the public to subscribe for its shares, must deliver to the Registrar a list of the persons who have consented in writing (as defined by section 2 of the Companies Act 1900) to act as directors. The memorandum of association of a com- pany limited by guarantee or unlimited must be accompanied with specially drawn regula- tions, there being no form of articles applic- able thereto, as in the case of Table A., to companies limited by shares. Although in substance Table A. meets the requirements of the present time, many com- panies find It necessary to add considerably thereto, and at the same time omit or modify some of its provisions. Briefly, the clauses of a company's articles deal with such matters as : — (i) Shares, as regards certificates, calls, forfeiture, lien, transfer, warrants to bearer, conversion, increase and reduc- tion of capital, rights attached to the shares, &c. (2) Borrowing powers, manner of raising loans; how power exercisable — i.e., whether by company or by directors ; limit (if any). (3) Meetings, proceedings, quorum, votes, minutes, &c. (4) Directors, proceedings, powers, remu- neration, retirement, &c. (5) Accounts, audit, dividends, reserve funds, &c. (6) Arbitration, and sundry other internal matters. The principal objections to Table A. are in respect of its provisions as to (i) voting powers (scale), (2) quorum (scale), (3) divi- dends (in proportion to shares— not amount paid up thereon), and (4) the fact that it does not provide for reduction of capital, such power not having been granted in 1862. The articles of association must keep within the ambit of the memorandum, for, as becomes a subsidiary document, they cannot in any way extend or amplify the memorandum. The articles of association cannot deprive the members of their statutory rights. For instance, a clause in the articles substituting certain rights in lieu of those contained in sections 161 and 162 of the Act of 1862, as regards dissentient members in a reconstruction arrangement, has been declared void by the Court of Appeal. {Re Gould, 1899.) So a clause Articles] 32 [Articles in the articles purporting to forbid, or attempting to qualify, a shareholder's right to present a petition for winding-up is inoperative. The articles of association (subject to the foregoing) may be altered at any time by special resolution, and the com- pany cannot be deprived or deprive itself of this power, for an article purporting to declare the regulations unalterable is void. Every special resolution altering the articles of association must be printed and annexed to the original articles, if any, and shall be deemed a part of such original articles. A copy of such special resolution must be filed (within 15 days of the passing of same) with the Registrar of Joint Stock Com.panies, and a fee of 5s. is payable thereon. If such a copy is not forwarded to the Registrar, the company and its officers incur a penalty not exceeding two pounds for every day during which the default continues. (1862 Act, section 53.) Hitherto it was a common practice for ^ Settling Days. Bad and Doubtful Debts.— Bad debts are such as are irrecoverable or only partly recoverable and ' ' bad " as to the balance. Doubtful debts are such as may or may not be recovered, some circumstance affecting the value of each of them. Bad debts should be written off as soon as they are con- sidered irrecoverable. Some concerns make a periodical charge against the profits as a provision against bad and doubtful debts, and where this is done, and such provision is adequate, the bad debts as ascertained and written off may safely be charged against the amount so provided. Where no such pro- vision is made, the Revenue Account should be charged with the bad debts immediately they become so. Other concerns continue to include bad debts among the debtors' balances, on the ground that sufficient pro- vision exists to cover them. This practice is not correct in principle. If a debt is bad — irrecoverable — the loss has taken place, and it is misleading to state that a provision against loss from had debts has been made when the loss has already been incurred and has ipso facto absorbed the provision in question. With doubtful debts, the question is some- what different. Here, it cannot be said that any particular debt will not be ultimately recovered. Some doubtful debts may, with due care and attention, be recovered in full, others may be realised in part, and the re- mainder prove worthless. In such a case it is clear that, pending developments, no specific debt can be written off, and yet the debts as a class cannot be taken to credit at any given date at their face value ; therefore, a provision based upon estimates must be made against possible loss. Thus, although it is customary to find in a Balance Sheet the phrase, "Provision against bad and doubtful debts," such pro- vision should strictly be based so as to provide only for I6ss arising from doubtful debts which may become wholly bad, the bad debts having been written off altogether. Bad] 40 [Balance It is not suggested that debts should prema- turely be written off, as bad, and so lost sight of, with the result that moneys which might have been ultimately recovered have been wholly lost, but rather, that when a debt has been adjudicated had (whatever may be the means of judging) the books of account should properly record the decision. For instance, if a. final dividend has been received in respect of an unsecured claim on a bank- rupt's estate, and the bankrupt has received an unconditional discharge, it is futile to carry the balance of the debt forward simply because an equivalent amount exists in " Provision for Bad and Doubtful Debts Account." It is customary to deduct the provision against loss on debts from the gross amount of the debts themselves when preparing the Balance Sheet instead of stating same upon the opposite side to the debts— in fact, the basis of the provision in some cases is in the nature of a fixed percentage of the total debts outstanding, ranging from 3 per cent, to 6 per cent., the necessary adjustment on account of the varying amount of the debts being charged or credited to revenue at the end of each period. Where such a practice is carried out the debts are stated thus : — Sundry Debtors . . . . ^^20,000 Less 4 per cent, for pro- vision against loss from doubtful debts 800 ^ig,2oo Some accountants prefer to set aside annually as a provision against bad debts a given percentage of the sales, such percentage being assessed as a result of the experience of previous years. {See Doubtful Debts Ledger.) Bailment. — " A delivery of a thing in trust " for some special object or purpose, and " upon a contract, express or implied, tocon- " form to the object or purpose of the trust." Bailments were divided by Lord Holt, in Coggs V. Bernard, 1704, as follows : — (i) Deposit of goods, &c., to be kept for the benefit of the bailor. (2) Deposit of goods, &c., that are useful, to be used by the bailee without charge (3) Deposit of goods, &c., to be used by the bailee upon payment of hire. (4) Pawn or pledge. (5) Deposit of goods, &c., to be carried or for something to be done to them for a reward payable to the bailee. (6) Deposit of goods to be carried or for something to be done to them without charge. Where the bailment is wholly for the bene- fit of the bailor or some third party (such as classes i and 6 above) the bailee is only liable for gross negligence. Where the bailment is wholly for the bene- fit of the bailee (such as class 2 above) he must use the strictest diligence. Where the bailment is for the benefit of both parties, or one of them and a third person (such as classes 3, 4 and 5 above), the bailee must exercise ordinary care. {See Carrier, Pawn.) Balance Account. — An account in the Ledger to which, as at the date of closing the books, all the balances of the other accounts are carried in a summarised form, so that the whole of the accounts may be closed or "balanced off." The modern practice, however, is to discard the Balance Account and "bring down" each balance in its ap- propriate place, so that the books are closed, as at the expiration of one period, and re- opened for the succeeding period simul- taneously. Balance Order. — The term applied to orders of the Court issued to enforce payment of calls or balances due from contributories. Balance 5crip. — When a transferor of stock or shares lodges scrip for a greater amount than he is about to transfer, such scrip is cancelled ; and after issuing to the trans- feree scrip for the stock or shares being trans- ferred, new scrip for the balance retained, called " balance scrip," is issued to the trans- feror. Balance Sheet. — Technically, a Balance Sheet is peculiar to the system of bookkeep- ing by double-entry in so far as it contains (generally) in a summarised form the whole of the Ledger balances after all the items rightly pertaining to the Revenue Account (or the Profit and Loss Account) have been transferred thereto. Balance] 41 Balance Thus, as all the then existing balances are embodied in the Balance Sheet, items which are not strictly assets (such as expenditure which is being spread over a period) and items which are not really liabilities (such as the so-called reserve funds) find a place in the statement. From the records of the transactions of a concern kept by single-entry a statement of assets and liabilities may be compiled, for such a statement may be prepared from any available data, but it does not operate as a Balance Sheet in so far as the records in such a case are not kept upon a system which admits of reconciliation. But if the records are kept by double-entry, the state- ment of affairs deducible therefrom will not only act as a statement of affairs, but will serve as a Balance Sheet as regards the equilibrium of the Ledger. Although a Balance Sheet presupposes a double-entry system of accounting as its base, the state- ments prepared from single-entry records are sometimes referred to as Balance Sheets also ; possibly because the popular conception of a Balance Sheet is that it is a statement of affairs, and has no other func- tion. To a very great extent this is so in practice, inasmuch as the equilibrium test is afforded by the Trial Balance, which, as its name implies, is a device whereby an accountant endeavours to balance his records before proceeding to prepare his Balance Sheet proper. For present purposes it will therefore be convenient to assume that the Trial Balance affords the necessary test as to the accuracy of the records, and that the Balance Sheet confines itself to an exposition of the financial position of the concern to which it appertains. This will enable refer- ence to be made to the functions of a Balance Sheet and a statement of affairs in synony- l mous terms as regards agoing concern, since, assuming accuracy, the mode of compilation ' is probably the only important difference between the two, for both are intended to afford, as on a specified date, a fair view of the financial position of the concerns to which they respectively refer. Upon which sides should the assets and liabilities respectively appear in the Balance Sheet ? The general practice in England at the present time is to place the assets upon the right-hand or credit side, with thecapital and liabilities upon the left-hand or debit side. It would appear, however, that this is not in accord with the practice in America and upon the Continent ; furthermore, the pre- sent practice in England has really grown up during comparatively recent years, and even yet admits of some difference of opinion in this country. Although an asset appears in a trader's Ledger as a debit item, that same item appears upon the credit side in a Balance Sheet drawn in the form to which we are now accustomed. This reversal of sides does not form part of the system propounded in any one of the nine leading bookkeeping works published between the years 1721 and 1858, the authors of same, without exception, showing the assets and liabilities on the same sides as they respec- tively appear upon in the Ledger, in the form of a Balance Account. These writers do not appear to have used the term "Balance Sheet " at all, but confined their systems to the Balance Account, viz., an account in the Ledger to which the balances of every other Ledger Account were trans- ferred each balancing date, so that, in effect, every Ledger Account was closed. Cory (a barrister, by the way) thus refers to it in his work published in 1839 :— " The Balance Account contains upon its " debit side the quantities and value of all *' the merchant's property, and of all the "debts due to him at the time the Rest is " made ; and upon its credit side it contains " all the debts or liabilities he owes. Deduct- " ing one from the other, the Balance "Account, therefore, contains upon its debit " side a balance showing the property of the " merchant when he closes business upon ** this occasion." A remark made by Inglis in 1858 to the effect that some systems adopted the reversed method while others did not, taken in con- junction with the fact that of the authors of the works published during the following two or three years one advocated one method while another supported the reverse, suggests that the statutory form of Balance Sheet annexed to Table A of the Com- panies Act of 1862, which came into prominence at a time when opinions evidently Balance] 42 [Balance differed, had much to do with the schism of English accountants, for the latter form of Balance Sheet, although optional, has certainly been substantially adopted by the trading community. If this should be so, it is incongruous that accountants should take their cue from statutory forms. Fortunately no difference of opinion exists as to the proper side upon which, say, the credit items of a Revenue Account should appear, yet the compulsory form prescribed for adoption by life insurance companies by the Act of 1870 places the income upon the left-hand side and the expenditure on the right-hand side. The distinction between truths and rules in bookkeeping is not overlooked. The truths are inviolate, but the rules may be varied at will ; there is no absolute necessity that credit items should appear upon the right-hand side, although it is in the interest of the uniformity of accounts that that side should contain the credit items. However, certain English writers have evidently con- sidered it necessary that the reversal of sides in a Balance Sheet should be justified, and they state that the firm or company (con- sidered for the purpose quite distinct from the individual proprietors or shareholders, as the case may be) prepares a Balance Sheet so as to render an account of its stewardship to the proprietors or share- holders in question. For this purpose the firm or company is entitled to take credit for assets possessed, and must be debited with the capital invested and any liabilities incurred . This is, however, characterised by some accountants as a convenient fiction. But it would appear that so long as one side of a Balance Sheet is headed Capital and liabilities, the ether Property and assets, and the items appearing thereunder are correctly stated, it is hardly a matter of very great importance apart from the question of uni- formity in accounts, upon which side they respectively appear. Apart from the question of reversed sides, a Balance Sheet may be prepared in either of two forms, viz., the double account form or the single account form. The double account Balance Sheet is adopted where the capital of a company is contributed by the shareholders for a specific purpose, such as the construction of a railway, or the acquisition of a gas under- taking, Sec, the amount actually paid for, or in respect of, same being shown as against the total capital raised, the balance only being brought into the general Balance Sheet ; in other words, the Balance Sheet is divided into two parts. {See Double Account System.) In the appended pro forma Balance Sheet it will be noted that the Legislature, in separating the Capital Account from the remaining items of the Balance Sheet, re- versed the sides, and dealt with the account in the form of receipts and expenditure. Extract from the Forms of Account pre- scribed by the Regulation of Railways Act 1868. Receipts and Expenditure on Capital Account. Amount Total Expendi- Amount Amount expended Amount received Total expended during last half- received during Receipts last half- to date to date to year year j £ s d £ s d £ s d £ s d 1 £ s d , £ s d To Expenditure — By Receipts — , Lines open for traflSc Shares and Stock . . 1 Lines in course of Loans construction 1 Debenture Stock Working Stock Other Receipts Subscriptions to other i > Railways . . 1 Docks, Steamboats, 1 and other items . . To Balance (if an ex- By Balance (if an ex- cess of receipts) cess of expenditure) . . 1 Balance] Dr. 43 General Balance Sheet. [Balance Cr. To Capital Account . . Balance (if an ex- cess of receipts). . „ Net Revenue Ac- count . . Balance at credit „ Debts due to other Railway Com- panies „ Amount due to Clearing House. . „ Sundry Liabilities. . £ s d ^T s d £ s d By Capital Account Balance (if an excess of expenditure) „ Cash in hand . . „ Cash at Bankers „ Investments . . „ General Stores on hand „ Sundry Debts due to the Company „ Amounts due from other Railway Com- panies „ Amount due from Clearing House . . „ Amount due from Post Office £ s d £ s d The above is not a literal extract, but one designed to show with prominence the dis- tinguishing principles involved. The double account system is compulsory in the case of certain railway and tramway companies, and all gas companies incor- porated by special Act of Parliament. The system is applicable, however, to many classes of companies which sink their capital in what are called "permanent assets." With regard to the single account system, it is only necessary to state that while the double account form resolves the Balance Sheet into two parts, in the single account Balance Sheet all the assets and liabilities (including capital) are classed together. As the cost of a railway or a canal once constructed may be easily earmarked in a Balance Sheet, the system required by law is peculiarly applicable to the various pre- scribed cases ; but to an industrial concern the double account form is not well fitted. Of course, an industrial concern may, and often does, acquire premises, or a goodwill, which represent a " standing " asset similarly to railways and canals ; but a large propor- tion of the capital of many industrial con- cerns consists of what is called working or circulating capital — cash in hand and at bank, stock-in-trade, and book debts — in the form of cash one day, stock-in-trade another, then a book debt which, when collected, becomes cash once more. And as the assets of a concern generally exceed its paid-up capital to the extent of its liabilities and undistributed profits, it cannot be stated precisely what particular assets represent the original capital, the undistributed profit, and the liabilities respectively. Thus, the double account system can only be adopted in a limited number of cases, and it is, therefore, the single account form with which accountants have generally to deal. The order in which the assets should successively appear upon a Balance Sheet is not of very great importance, so long as they are properly described and fairly grouped, but the question of grouping is a momentous one. As to order, the pro forma Balance Sheet annexed to Table A shows (i) immov- able property such as lands and buildings, (2) movable property such as stock-in-trade, (3) choses in action, ^.^., bills and book debts, (4) investments, and, lastly, (5) cash in hand and at bankers. This form commences with the more stable assets, and gradually arrives at the actually liquid asset of available cash, and this would appear to be the best form for an ordinary industrial concern. On the other hand, financial institutions desire rather to give prominence to their liquid assets, and, as a consequence, the order in which the assets appear in the Balance Sheet of a banking concern s almost the reverse of that stated above, the cash in hand, at Bank of England, at call and at short notice, and the easily realisable investments, being invariably set out at the head of the assets, while the real estate, if any, and such assets as bank premises, generally appear last. Balance] 44 [Balance Reverting now to the pro forma Balance Sheet annexed to Table A, the capital and liabilities are set out somewhat in the follow- ing order: — Capital, mortgages and deben- tures, bills payable, sundry liabilities, reserved profits to meet contingencies, and lastly, the balance at the credit of Profit and Loss Account available for dividend. This order is generally adopted by trading com- panies and, mutatis mutandis, by partnership concerns also. The object in placing the capital first was probably to give that item due prominence, but it might be urged that it would be more correct, at all events more consistent, to place the capital last. The order adopted would then more closely exhibit the varying rights of the parties con- cerned in and against the assets on the other side of the Balance Sheet, viz., creditors holding security first, unsecured creditors next, shareholders' claims last. Probably, as a relic of the old-fashioned Balance Accounts, the Balance Sheets of many partnership concerns do exhibit the capital last, but the more authoritative writers place the item at the head of the liabilities, and it would appear that while the business in question is a going concern the resultant prominence to the amount of capital is desirable. It is, perhaps, a con- venient expression to say that a Balance Sheet shows the assets of a concern upon one side and on the other side states to whom, and in what proportions, those assets equitably belong. So much to shareholders, or partners, for capital contributed ; so much to creditors for various goods supplied or services rendered ; so much to the share- holders (again) for reserved and undistributed profits. Thus, assuming solvency, every item included in the capital, liabilities, and undis- tributed profits is represented amongst the assets. Of course, under ordinary circum- stances, it is not possible to earmark the particular assets which represent the capital, nor in the absence of a specific mortgage can a liability be set against a particular asset, but assuming solvency, the various items of capital, liabilities, and undivided profits set out on one side of a Balance Sheet may be said to be an apportionment of the total assets appearing on the other side. Suppose the items in a Balance Sheet could be earmarked as under : — Sundry specified assets pur- chased with, or represent- ing the paid-up capital . . ;^io,ooo Sundry specified assets ac- quired on credit as yet unpaid for.. .. .. 3,200 Sundry specified assets re- presenting profits earned by the concern, and as yet undistributed . . 2,500 £^5.: In such a case there would be no necessity for a contra side to the Balance Sheet. But in practice this cannot be done, the circula- tion of the capital rendering it diflficult, if not impossible, to state specifically (in the absence of a mortgage or charge) which assets represent the capital, which assets represent the profits, and which assets are the proceeds of liabilities incurred. The question of ranking against assets in a winding-up is not being considered at present, but rather the earmarking of assets against the liabilities and capital in the Balance Sheet of a going concern ; and all that can be done in such a case, apart from the concerns to which the double account system is thoroughly applicable, and in the absence of a mortgage or charge, is to set the total assets against the total amount of capital, liabilities, and undivided profits. In other words, the assets cannot be allotted specifically to their equitable owners, whether creditors or capitalists, but they can be apportioned ; and a second schedule is therefore required setting forth the equit- able owners of the assets, and the amounts of their respective interests therein. Thus, taking the foregoing example, assuming the assets cannot be specifically allotted, a- schedule of the equitable owners will appear thus : — Capital paid up *.. .. ;^io,ooo Sundry Creditors .. .. 3,200 Surplus of Assets over Capital and Liabilities arising from Profits de- rived, but undistributed 2,500 /15.700 Balance] For convenience, so that the statement may be compact and comparative, the two schedules may be set against each other thus : — Capital Sundry Creditors Surplus £ 10,000 3,200 2,500 Sundry Assets £ • • 15.700 £15,700 This exhibits the framework of a Balance Sheet as at present prepared ; but it must be noted that, although practical difficulties prevent specific allotments of the assets so that a second side is necessary to show the financial position, the fact remains that the capital and surplus exist, if at all, among the assets. In other words, the assets are concrete, but the items capital and surplus on the left-hand side (above)* are mere abstract records. The liabilities are concrete, apart from the question of the existence of assets to meet them ; if there are no assets the creditors may not be paid, but the right to payment might remain. In the case of the capital and surplus this is not so. If there are assets to represent the abstract amounts of same, then the capital and surplus exist ; if there are sufficient assets to represent the amount of capital only and none to represent the alleged surplus, then the latter is non-existent ; if there are suffi- cient assets for the creditors only and none representing either the capital or surplus, there is no capital or surplus, nor has the owner of the capital and surplus (ordinarily) any rights remaining. Ballast. — Heavy material placed in the lowest part of a vessel to give her stability, which is required where there is a short cargo, or a full cargo but a light one. {See Kentledge.) Bank Book.— A book supplied by a banker to each of his customers, wherein the banker periodically enters in detail the deposits, withdrawals, and other transactions of the customer, so that the state of the account between them may be ascertained and agreed upon. It is also termed a Pass Book. The Bank Pass Book should be the banker's record of the transactions between the bank and the customer : the banker should not, therefore, permit thecustomer or his employee 45 [Bank to make any entry in the Pass Book. In the case of the Brighton Empire and Eden Syndicate V. The London and County Bank, decided in March 1904, the bank was held liable for the losses caused by the defalcations of the customers' manager, who had been permitted by the bank from time to time to make up the Bank Pass Book himself, several of the entries so made being false as to date or amount. The responsibility of the banker for the accuracy of the Bank Pass Book is further emphasised by the important case of Chatterton v. The London and County Bank, by which it was established that although a banker may make up a Pass Book and hand it to the customer, together with the paid cheques, the customer is under no obligation to examine the book, and the banker has no right to infer that it has been examined. The devices of dishonest employees in connection with Bank Pass Books are numerous, and are dependent upon the particular type of defalcation the manipula- tion of the Pass Book is intended to assist and conceal. The method generally employed is one or other of the following : — (a) Alteration of dates in the Pass Book where moneys have been lodged on dates later than those appearing in the Cash Book. (b) Alteration of amounts in the Pass Book where the moneys actually lodged are less than those entered in the Cash Book. (c) Making entries in the Pass Book which are inaccurate — such false entries not being detected by the Pass Book clerk at the bank. (d) Operating with a "duplicate" Pass Book . One book is sent regularly to the bank, but the duplicate is wholly written up by the dishonest employee to accord with his requirements. The banker's record is carefully withheld from the auditors, and the duplicate utilised for the purposes of audit. The balance shown by a Bank Book should be supported by a certificate from the banker before being accepted by an auditor as a voucher for the bank balance stated in the accounts. Generally, the balance shown in the Bank Book does not agree with that stated in the accounts, and this is accounted for by (i) Bank] 46 Bank unpresented cheques ; (2) cheques paid in but not cleared at the date in question ; (3) bills entered short, and other causes. A Recon- ciliation Account must then be prepared taking all these matters into consideration. An auditor should, however, satisfy himself that all items which are necessary to recon- cile the balances are botid fide, and as many of them at the date of actually completing the accounts will have already " come through" they can be readily tested. The mere agreement of the balance in the Banking Account of the customer with that certified by the banker (whether reconciliation be necessary or not) is not conclusive evidence that all is in order. The details, both as regards dates and amounts, should be com- pared with the customer's books, for deposits may have been made which are correct as regards amount but several days later than the date recorded in the customer's books, while a large amount may have been entered as a deposit in the customer's books, but in the Bank Pass Book two or more smaller items appear on different dates making up the large amount in question. Obviously these irregularities would not affect the ultimate balance, therefore details must be compared. The auditor of a banker's accounts should also examine the Bank Books of the cus- tomers, or as many as possible, and see that they agree with the respective customers' accounts in the bank's Ledger. Some trading concerns keep a single cash column book wherein they record by addition and subtraction the deposits and withdrawals day by day, thus enabling them to ascertain the available bank balance at any time with- out having to wait the banker's convenience in the matter of writing up the Bank Book. Bank Commission.— The amount payable to a banker for the services rendered as banker to the various customers. It is either a charge of a fixed sum per annum as agreed, or a certain rate per cent, upon the with- drawals ; or in some cases it is not charged on the understanding that a sum agreed upon is maintained as a minimum balance to the credit of the customer, no interest being allowed upon that balance. Bankers' Books Evidence Act 1879.— The object of this Act is to enable proof in Courts of justice of transactions recorded in the books of account of a banker without requiring the production of the books them- selves. A duly sworn copy of any entry or entries in the ordinary books of account of a banker are deemed frimd facie evidence of such entry or entries in all legal proceedings. Upon the application of any party to a legal proceeding the Court may order that such party may be at liberty to inspect and take copies of any entries in a banker's books for any of the purposes of the legal proceedings. The Court may make the order without summoning the banker, but in ordinary cases the order must be served upon the banker three clear days before it is to be obeyed. The order may be enforced against the banker as if he were a party to the proceeding, and the banker may be liable for costs and expenses caused through his default and delay in connection with the order. In Pollock V. Garle, 1897, the Court of Appeal held that this Act does not give rights to litigants to inspect a banking account which was not in fact or in sub- stance the account of one of the parties to the action, but of third persons who had nothing to do with the Htigation, although there might be exceptional cases, such as where there was an undisclosed principal, where an order would be made to inspect the account of a third person. Bank Note. — A Bank of England note, as distinct from the notes of other banks of issue, the latter being termed country notes. The Bank of England cannot refuse to pay a note presented for payment ; such notes cannot therefore be " stopped," but if the Bank officials are advised of the numbers of notes which have been lost or stolen it may facilitate the discovery of the holder. In England and Wales, Bank of England notes payable to bearer on demand are a legal tender for any sum of £5 or upwards (so long as the bank continues to pay its notes in legal coin), except at and by the bank itself or its branches. The bank in London is bound on presentation to pay the holder of any of its notes ; its branches are bound to pay only such notes as are made specially payable at the particular branch were the note is presented for payment. Bank] Certain banks established before 1844, not having since lost their privileges, have the right, subject to certain conditions, to issue notes payable to bearer ; but with these exceptions, the Bank of England has the exclusive privilege of issuing notes payable to bearer on demand. {See title Marked Cheque.) Bank of Issue. — A bank lawfully issuing its own notes. The Bank of England has the monopoly in London and within a radius of three miles ; beyond three miles and within 65 miles the monopoly is shared with banks of less than ten persons established before 1844 ; and beyond the 65 miles limit the monopoly is shared with all banks established before 1844 which have not since lost their privileges. No new banks of issue can now be formed, and as each existing bank of issue becomes extinct or loses its privilege, two- thirds of the amount of notes it was authorised to issue is added to the " authorised issue " of the Bank of England. The holders of shares in a bank of issue, notwithstanding registration under the Com- panies Acts with limited liability, are un- limitedly liable for the note issue, the Act of 1879 providing (i) for the payment of the notes outstanding and (2) for the indemnity of the general creditors to the extent of the general assets used in payment of the note- holders, whether in so doing the nominal amount of the liability of members is exceeded or not. Bank Post Bills.— Bills issued by the Bank of England generally payable at seven days' sight. They form a convenient means of remitting to any part of England. The lowest sum they are issued for is /lo, and no charge is made by the Bank for the accommodation. Bank Rate. — The rate per cent, at which the Bank of England is prepared to grant loans for limited periods and to discount approved bills. The rate is fixed every Thursday, and although considered the minimum rate, transactions are carried out in exceptional cases at a less rate. In times of emergency the rate has been changed during the currency of the week for which it had been fixed, but such occasions are rare. In fixing the rate the directors of the bank are influenced by the supply of and demand 47 [Bank for gold, and the general conditions of the money market. The rate is largely adopted as a standard lor the transactions of the other banks of the country, the interest chargeable upon loans being an agreed rate (say i per cent.) over the bank rate for the time being, and the interest allowed upon deposits an agreed rate under that ruling at the Bank of England. Bank Return. — The report issued by the Bank of England every Thursday afternoon showing the financial position of the Bank and setting forth (i) the amount of bank notes in circulation, (2) the stock of bullion and coin in reserve, and (3) details as to the banking department. The issue and banking departments must be stated separately. The following is a specimen of the return : — (coo's omitted.) Issue Department. Notes issued £ .. 49,403 (I) Government Debt .'. . . 11,015 (2 Other Securi- ties . . . . 6,760 (3) Gold Coin and Bullion .. 31,628 (4) £49,403 £49A03 Banking Department. Proprietors' Capital .. 14,553 (5) Rest . . . . 3,257 (6) Public Deposits 8,616 (7) Other Deposits 40,905 (8) Seven-day and other Bills . . 180 (9) £67,51 Government Securities . . 14,520 (10) Other Securi- ties .. .. 31.234 (11) Notes . . . . 20,053 (12) Gold and Silver Coin .. . . 1,704 (13) £67,511 The form of this return was prescribed by the Bank Charter Act 1844, prior to which date the Liabilities and Assets of both Departments were respectively con- solidated. The Government Debt (2) stood at £1,200,000 in 1694, and gradually grew to £11,015,100 in 1835, at which amount it has since remained. The item, Other Securities (3) is represented by investments of the highest class, and the three amounts (2) (3) and (4) together con- stitute the guarantee that the Bank Notes will be paid on presentation. In the above Specimen (ooo's omitted) {a) The Notes in actual circula- tion amount to . . . . £29,350 (being i— 12) (b) The Cash in hand amounts to £33,332 (being 4 + 13) (c) The Liabilities amount to. . £49,701 (bemg 7 + 8 + 9) id) The Reserve (i.e., against the Liabilities) amounts to £21,757 (being 12 -I- 13) (iVo/^.~The Rest, or withheld profits, is not deemed the Reserve.) (e) The Ratio of the Reserve to the Liabilities is 43I per cent. Bankrupt] 48 [Bankruptcy Bankrupt. — Colloquially, one who is unable to pay his debts in full, but legally one who has been formally adjudged bankrupt by the Court. (5f^ Adjudication.) Bankruptcy Notice. — If a creditor has obtained a final judgment against a debtor for any amount, and execution thereon has not been stayed, he may serve upon the debtor in England, or by leave of the Court elsewhere, a notice called a bankruptcy notice, requiring him to pay the judgment debt, or to secure or compound for it to the satisfaction of the creditor or the Court. A fee stamp of 5s. is payable upon every bankruptcy notice. If the debtor does not within seven days after service of the notice (or within the time fixed if served out of England) either (i) Comply with the requirements of the notice, or (2) Satisfy the Court that he has a counter-claim, set-off, or cross-demand which equals or exceeds the amount of the judgment debt, and which he could not set up in the action in which the judgment was obtained, he commits an act of bankruptcy upon which a petition may be presented. (1883 Act, section 4.) A jDankruptcy notice can only be presented in respect of a final judgment, and although formerly the assignee of a judgment debt and the trustee of a judgment creditor could not serve a bankruptcy notice, the Act of 1890 (section i) has amended this, providing that " a person who is for the time being *• entitled to enforce a final judgment shall be "deemed a creditor who has obtained a final " judgment." A garnishee order absolute is not a final judgment in this connection ; but an order for payment of money made by the Court under section 10 of the Companies (Winding- up) Act 1890 (the "misfeasance" section) is deemed a final judgment upon which a bank- ruptcy notice can be issued. (Companies (Winding-up) Act 1893.) A bankruptcy notice must be in the pre- scribed form and must state the consequences of non-compliance therewith. (1883 Act, section 4.) Although leave may be obtained to serve a notice out of England, no notice can be served upon a foreign debtor when resident out of the jurisdiction. {Ex parte Pearson, 1892.) It has also been decided that a bankruptcy notice cannot be issued upon a judgment against a married woman, although, if trading separately from her husband, she is otherwise subject to the bankruptcy laws as if she were 3. feme sole. (Re Lynes, 1893.) Where non-compliance with a bankruptcy notice is the act of bankruptcy relied upon in presenting a petition, the Court may, if it thinks fit, stay or dismiss the petition if an appeal from the judgment is pending (1883 Act, section 7). The issue of a bankruptcy notice is extensively resorted to by creditors, for although 15 per cent, only of the total notices issued result in receiving orders being made, this small proportio.i accounts for twice as many receiving orders as all the other acts of bankruptcy taken together. (Board of Trade Reports.) Bankruptcy Petition.— A petition presented to the Court either by a creditor or the debtor himself, that a receiving order be made against the debtor for the protection of his estate. Any creditor, whose debt is sufficient to entitle him to present a bankruptcy petition against all the partners of a firm, may pre- sent a petition against any one or more of the partners of the firm without including the others. A creditor may present a petition when : — (i) The debt owing, or if two or more creditors join in the petition the aggregate of the debts owing, amounts to /50 or upwards. Note. — If the petitioning creditor is a secured creditor he must, in his petition, either state that he is willing to give up his security for the benefit of the creditors in the event of the debtor being adjudged bankrupt, or he must give an estimate of the value of his security. In the latter case he may be admitted as a petitioning creditor to the extent of the balance of debt due to him (after deducting the Bankruptcy] 49 [Bankruptcy value so estimated) in the same manner as if he were an unsecured creditor. (2) The debt is a liquidated sum, payable either immediately or at some certain future time. (3) The petition is founded upon an act of bankruptcy which has occurred within three months next before the presen- tation of the petition ; and (4) The debtor is domiciled in England, or within a year before the date of the presentation of the petition has ordinarily resided or had a dwelling- house or place of business in England. Although not stated in the Act. it is necessary as a result of a common law rule in bankruptcy that the petitioning creditor's debt should have accrued due before the commission of the act of bankruptcy upon which it is intended to found the petition. And if the debt is on a bill of exchange the bill must have been issued before the act of bankruptcy, although it may not have vested in the petitioning creditor until after such act. The petition must be verified by an affidavit of either the creditor or someone acting for him having knowledge of the facts. A copy of the petition must be served on the debtor, and the petition will not be heard by the Court until the expiration of eight days from such service, unless it is shown to the satisfaction of the Court that the debtor has absconded, or unless the debtor has 61ed a declaration of his inability to pay his debts, in which cases the Court may hear the petition earlier. Where two or more bankruptcy petitions are presented against the same debtor, or against joint debtors, the Court may con- solidate the proceedings, or any of them, on such terms as the Court thinks fit. A stamp duty of £$ as a Court fee is pay- able on the petition, and a further sum of £^ must be deposited with the Official Receiver to cover any expenses which he may have to incur. Both these amounts are, however, repayable to the creditor out of the estate in the event of a sufficiency of assets ; and for better protection they rank in priority to the majority of the expenses of administer- ing the estate. In special cases the deposit for expenses may be a sum less than £s, and on a debtor's petition the fee of £^ is not pay- able where the Official Receiver certifies that there is reasonable ground for believing that the assets are sufficient to meet the expenses of administration. In such a case, however, the Court fee {i.e., £^) will be paj'- able upon the making of the receiving order. At the hearing of the petition the Court requires proof of (i) the creditor's debt, (2) service of the petition, and (3) the act of bankruptcy alleged, and if satisfied with such proof, the Court may make a receiving order, or if the Court is not satisfied there- with or considers no order should be made, the petition may be dismissed. Although formerly there was statutory remedy for persons aggrieved by the improper filing of a bankruptcy petition, under the present Acts there is apparently no remedy. But an action might be brought under the common law for maliciously pre- senting a petition and thus abusing legal process, the plaintiff being required to show malice and a want of "reasonable and probable " cause for presenting the petition. A debtor may petition for a receiving order against himself, filing a declaration of his inability to pay his debts beforehand, or merely stating that fact in the petition itself. Where a petition is filed by a debtor the Court will make a receiving order forthwith. The Court fee of £^, and deposit £5, are generally payable as in the case of a creditor's petition ; but, as already stated, the amount of the deposit may be reduced in a special case, and the fee may be dispensed with where there are sufficient assets, in which case the £s fee is charged upon the making of the receiving order. A creditor's or a debtor's petition may not, after presentation, be withdrawh without leave of the Court. The Court may stay any action, execution, or legal process against the property or person of the debtor at any time after the presentation of a petition, and any Court in which proceedings are pending against the debtor on proof of a bankruptcy petition having been presented, may either stay the proceedings or allow them to continue as it may think just. E Bankruptcy] 50 [Bin If a debtor by or against whom a bank- ruptcy petition has been presented dies, the proceedings in the matter shall, unless the Court otherwise orders, be continued as if he were alive. Where the debtor dies before service of the petition, the Court may order service on the personal representatives. Where the petitioning creditor does not proceed with due diligence on his petition, the ,Court may substitute as petitioner any other creditor to whom the debtor may be indebted in the amount required by the Act in the case of the petitioning creditor. {See Receiving Order.) (1883 Act, sections 6, 7, 8, 10, 106, 107, 108, no.) Bank Shares. — All contracts and agreements for the sale of shares or stock in any joint stock banking company in the United King- dom are null and void to all intents and purposes unless such contracts or agreements set forth the distinguishing numbers of the shares or stock, or where there are no such distinguishing numbers the person or persons in whose name or names the shares or stock are or is registered. (Leeman's Act.) Although treated upon the Stock Exchange as a dead letter, this Act has recently been declared as still of full legal force. {See Bank of Issue.) Barratry. — Fraudulent conduct of the master or crew, which tends to the shipowner's prejudice, either by injuring the ship and cargo or by exposing them to risk of injury, or forfeiture or seizure for breach of law. Barratry is a crime, and any act sought to be held as such must have been wilful and must have proceeded from criminal motives. Barter. — To exchange one commodity for another, as distinct from a sale which requires a money consideration. Bear. — See Bull and Bear. Bearer. — A bill is payable to bearer which is expressed to be so payable, or on which the only or last indorsement is an indorsement in blank (1882 Act, section 8) ; a bill payable to bearer is negotiated by delivery (section 31). {See Transfer of a bill by delivery.) Benefice. — See Advowson. Beneficial Interest. — A term sometimes applied to the interest of a cestui que trust in the property held by the trustee, but the term is possible of general application. Benefit Building Societies. — Associations established for the purpose of raising funds by small periodical subscriptions from their members for mutual assistance to purchase property. They are regulated by the Building Societies Acts. {See Building Societies.) Bequeath. — To leave personalty by will to another, whilst the word devise is used for the transmission of real property. Both words, however, may be used indiscriminately, with- out affecting the validity of the intended gift, Bequest. — A gift of personalty by will ; a legacy. {See Legacy.) Bid. — An offer of a price for an article on sale, generally at an auction. A person may withdraw a bid at any time before it has been accepted, which at an auction sale is evidenced by the fall of the hammer. {See Auction.) Bill in a Set.— Where a bill is drawn in a set it is commonly drawn in a set of three, one part orily being stamped, the remaining parts being exempt, unless issued or in somQ manner negotiated apart from the stamped part ; but presentment for acceptance is not a, negotiation, therefore the drawing of a bill in a set not only allows of transmission by different routes, and obviates the incon^ veniences arising from the miscarriage or loss of a bill, but affords an opportunity of negotiating the stamped part whilst the un-. stamped parts are in transit for acceptance, This is a great advantage in the case of bills drawn upon persons residing in foreign coun, tries. If the bill parts be numbered and each part refers to the other parts, then the whole of the parts are only one bill. If there be no reference to the other parts then each part becomes a separate bill in the hands ot a boiid fide holder. Where an indorser has nego- tiated two or more parts, or a drawee has accepted two or more parts, they are respectively liable as though each part was a separate bill, if they are negotiated into the hands of holders in due course. Subject to the foregoing, where any one part of a bill Bill] drawn in a set is discharged by payment or otherwise, the whole bill is discharged. (1882 Act, section 71.) The parts are called First of Exchange, Second of Exchange, and Third of Exchange respectively. {See Sola.) Bill of Entry. — An account of goods entered at the Custom House both inward and out- ward, stating the name of the merchant, the quantity and nature of the merchandise^ and the place to which same are going or from which they have been imported. When a merchant cannot state definitely the real quantities or qualities of imports he may make a bill of sight or priine entry, giving the best description possible. The goods may then be landed and examined in order that a perfect entry may be made. {See Post Entry.) The term bill of entry is also applied to the daily statement issued by the Custom House, giving detailed particulars of the exports and imports. Bill of Exchange.— Alt unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to bearer (1882 Act, section 3.) A bill payable on demand requires id. stamp, which may be either impressed or adhesive. A bill payable other- wise than on demand requires an ad valorem stamp by scale up to ;^ioo, the stamp for ;^ioo being one shilling, and for all greater amounts one shilling per ;^ioo, or fraction thereof. The ad valorem stamp on inland bills must be impressed, while in the case of foreign bills, adhesive stamps must be affixed of sufficient amount and duly cancelled before being presented for acceptance, indorsement, or payment, or being otherwise negotiated in this country. A bill is a chattel, and may be sold as such ; it is also a chose-in-action, and may be assigned as such. Bills are, however, ex- cluded from the term " Goods" in the Sale of Goods Act 1893. The various matters in connection with bills of exchange are dealt with in detail in their 51 [Bill appropriate places throughout this work, Acceptance of a bill. Acceptance for honour supra protest. Acceptor. Accommodation Bill. Accommodation Party. Advice. After sight. Allonge. Alteration. Alternative drawee. Alternative payee. Ante-date, At sight. Aval. Bank note. Bank post bills. Bearer. Bill in a set. Bills Payable. Bills Receivable. Blank acceptance. Blank cheque. Blank indorsement. Blank signature. Cheque. Conditional acceptance. Conditional indorsement. Consideration. Country notes. Cross bill. Crossed cheque. Date. Days of grace. Demand draft. Discharge of bill. Dishonoured bill. Dishonour, Notice of. Draft. Drawee. Drawer. Exchequer Bills. Extension of protest. Fictitious person. First of Exchange. Foreign Bill. Forged acceptance. Forged indorsemetit. General acceptance. Holder in due course. Honoured bill. Immediate parties. Inchoate instrument. Indorsee. Indorsement. Indorser. Inland Bill. Interest secured by Bill of Exchange, I O U, Issue. Lost bill. Marked cheque. Negotiable instruments. Negotiation back. Notary. Noting a bill of exchange. Not negotiable. Open cheque Order. Overdue bill. Partial acceptance. Partial indorsement. Payee, Payment for honour supra protest. Per procuration. Post-dated cheques. Presentment for accept- ance. Presentment for payment. Promissory note. Proof in respect of bills of exchange. Protest. Qualified acceptance. Qualified indorsement. Rate of exchange. Rebate on bills discounted. Re-draft. Re-exchange, Referee in case of need. Refer to drawer. Re-issue. Remote parties. Renewal of a bill. Restrictive indorsement. Retired bill. Sans recours. Second of Exchange. Securities deposited against bills. Short bills. Sight draft. Signature, Sola. Special indorsement. Stale cheque. Third of Exchange, Transfer by delivery. Treasury bills. Unauthorised signature, Unpresented cheques. Usance, Value in merchandise. Value received. Waring, Ex parte. Without grace. Bill of Lading. — A receipt for goods put on board a ship, signed by the shipowner or his agent (generally the captain), and stating the terms upon which the goods are delivered to, and received by, the ship. Bills of lading are usually made out in sets, three or more copies being prepared. The master retains one, and hands the consignor two or more, so that he may forward a copy to the consignee, A clause is generally inserted that, upon the accomplishment of one of the bills, the others are to be void. Every shipowner who carries goods for hire in his ship undertakes to carry them at his own absolute risk, the act of God and 01 E 2 BUI] 52 [Bill the King's enemies excepted, tmless by agreement between himself and a particular shipper, on a particular voyage, he limits his liability by further exceptions. The consequence of this rule of law is well described by Mellish, L.J. : — " Modern bills "of lading contain a long list of excepted " perils, exemptions from and qualifications " of liability, printed in type so minute ** though clear as not only to fail to attract " attention to any of the details, but to be " only readable by persons of good eye- " sight." The bill of lading is, however, not the con- tract with the shipper, but only evidence as to its terms. The effect of the indorsement and delivery of a bill of lading by the person entitled to hold it depends partly upon custom and partly upon statute : — (i) By Mercantile Cusiorn. — Indorsement | and delivery of the bill, after shipment of the goods, but before delivery to the person entitled to them under the bill, transfers such property as was intended by the indorsement. {2) By Bills of Lading Act 7855.— The in- dorsement of the bill transfers to the indorsee not only the property in the goods but all rights of suit and all liabilities in respect of the goods, as if the contract evidenced by the bill of lading had been made with himself. (3) By Admiralty Jurisdiction Act. — The indorsement of the bill of lading may give the indorsee rights of action in the Admiralty Court against the ship. Where goods are shipped in pursuance of a contract of sale the property in the goods passes to the buyer, unless the seller shows a contrary intention. He may show such intention by (i) taking a bill of lading in his own name, (2) making the goods deliverable to his order, or the order of his agent, and (3) instructing his agent not to deliver the bill except under certain conditions, such as payment of the price of the goods. Here the jus disponcndi is reserved by the seller, aud no property passes to the buyer by shipment. The seller may also draw upon the buyer for the price, and transmit the bill of lading and bill of exchange together. Here the property in the goods does not pass until the buyer has either accepted or paid the bill, as the case may be. A bill of lading is assignable v/ithout notice, but it cannot be termed negotiable in the widest sense, for its assignment cannot give a better title than the assignor possessed, with one exception, viz. : — An assignment (indorsement) bond fide and for value relieves an assignee, if he takes from an assignor with a good title at the time of indorsement, from liability to the vendor's right of stop- page in transitu which might have been exercised against the original consignee. A bill of lading requires a 6d. stamp, which must be affixed before execution of the bill. Bill of Parcels. — An account given by a seller of goods to the buyer, stating the quantities and prices of the goods bought. It is also called an invoice. Bill of Sale.— The following are not included in the term "bill of sale" within the meaning of the Billsof Sale Acts:— (i) Assignments for the benefit of creditors (2) Marriage settlements (3) Transfers or assignments of ships or shares therein (4) Transfers of goods in the ordinary course of business (5) Bills of lading (6) Documents used in the ordinary course of business as proof of possession or control of goods (7) Debentures of mortgage, loan, or other incorporated company (8) Letters of hypothecation of imported goods Hiring agreements are not within the Bills of Sale Acts, for no right of property passes under them to the hirer. A bill of sale may be absolute, the property in the chattels assigned passing upon the execution of the deed, or it may be conditional by way of mortgage to secure the payment of money on a future day. In the latter case the property in the goods passes to the grantee, but the right of possession remains in the grantor. On default the property in the goods vests in the grantee freed from the condition. Bill] 53 [Bills A bill of sale given by way of security for the payment of money is governed princi- pally by the amending Act- of 1882, which requires : — (i) The bill to be in the prescribed form. (2) The consideration to be set forth. (3) The consideration to be £^0 or up- wards. (4) The bill to contain or have annexed a schedule specifically describing the chattels comprised. (5) The bill to be attested by one or more credible witnesses who are non-parties. (6) The bill to be registered within seven clear days of execution, and registra- tion to be renewed at least once in every five years. The Register is open to public inspection. A bill of sale given by way of security does not of itself afford any protection against (i) Distress for rent, rates, or taxes. (2) The effect of the " reputed ownership" clause in the event of the grantor's bankruptcy. The chattels comprised in such a bill of sale can only be seized by the grantee under the following circumstances: — (i) Default in payment of sums secured or breach of covenant for maintenance of the security. (2) Bankruptcy of the grantor. (3) If distress be made for rent, rates, or taxes, or if execution be levied under any judgment. (4) Fraudulent removal of the goods. (5) Failure to produce last receipts for rent, rates, and taxes. But, as already stated, the right of seizure is subject to the right of distress for rent, rates, &c., and subject also to the effect of the reputed ownership rules of bankruptcy. Thus, if the grantor becomes bankrupt and the goods are not deemed within the grantor's order and disposition, they will pass to the grantee ; but if such goods are held to be in the order and disposition of the grantor in his trade or business under such circum- stances that he is the reputed owner thereof, the goods will pass to the trustee in bank- ruptcy. {See Debenture, Reputed Owner- ship.) Bill of Sale (Shipping).— The instrument of transfer of any British ship or any share therein. It must contain a sufficient descrip- tion of the ship to enable it to be identified, and be executed by the transferor in the presence of, and be attested by, a witness. When duly executed every bill of sale for the transfer of a ship or any share therein must be produced to the registrar of the port of registry of the ship, together with a "decla- ration of transfer," stating the transferee's qualifications to own a British ship, and the registrar shall thereupon register the bill and endorse the fact of such registration on the bill, stating the day and hour thereof. See Form A., Part I., first schedule. Merchant Shipping Act 1894. -^ bill of sale is not liable to stamp duty, but there is a small customs' fee payable on registration. A bill of sale will, however, only effect the transfer of shares (64ths) in ships. Shares in the capital of companies owning ships are transferable by ordinary transfer deed and are liable to the ad valorem duty of los. per cent. {See British Ship.) Bill of Sight.— S^^ Bill of Entry. Bills Discounted. — Bills of Exchange upon^ which the " present value " has been received- by the payee from a banker or other person, before the maturity of the bill. The banker charges a percentage called "discount" for the accommodation afforded, and hands the holder of the bill the net proceeds, recouping himself by collecting the face value of the bill on maturity. Until the bill is paid by the person primarily liable thereon (acceptor or otherwise), the party who has obtained such proceeds is, nevertheless (under ordin- ary circumstances), contingently liable upon the bill ; but a person who has negotiated a bill by mere delivery (see Transfer of a Bill by Delivery) will not be liable thereon. Where a banker closes his books at the end of his financial period he has invariably a number of unmatured " discounted bills " on hand. The whole of the interest (or discount) charged on the respective bills cannot properly be taken to credit in the Profit and Loss Account for the period under review, as provision should be made for interest on the bills until they respectively mature. This provision is termed " Rebate on bills discounted " {q.v.) Bills] 54 [Blank Bills Payable.— S^« Bills Receivable. | Bills Payable Account. — The account in the Ledger of a specified person wherein is recorded upon the credit side all bills in respect of which the person is primarily liable as acceptor or otherwise ; and upon the debit side, all payments against such bills. The credit side of the account may be com- piled (i) from the Journal in summary form, or (2) from the Bills Payable Book, either (a) in totals periodically, or {b) by recording each bill as accepted. The balance of the Bills Payable Account at any time should agree with an extracted list of outstanding bills, as shown by the Bills Payable Book. Bills Payable Book. — A chronological record of all bills accepted by a person, ruled in appropriate columns, to show : — Date of bill. Date accepted. Name of drawer. Amount of bill. Period. Date of maturity. Where payable. Ledger or Journal folio. Remarks. Some merchants use the Bill Book as a Ledger Account to represent the bills payable, posting the several items to the debit of the respective drawers. Others periodically journalise the contents of the Bill Book in a summarised form. Another method is to post the various amounts of the bills to the drawers' accounts, and periodically credit a Bills Payable Account in the Ledger with the total of the bills accepted during the par- ticular period, whilst yet another method is to deal with the bills in the Cash Book. Bills Receivable.— The term used to signify those bills the proceeds of which are receivable by a specified person, either as the drawer or as indorsee. It is a bookkeeping term dis- tinguishing the bills in question from bills payable, viz., those in respect of which a specified person is primarily liable, either as acceptor or otherwise. Bills Receivable Account. — This account operates conversely to a Bills Payable Account, so that the same remarks apply, mutatis mutandis, to both accounts. {See Bills Payable Account.) Bills Receivable Book.— This book deals with bills receivable in the same manner as a Bills Payable Book with bills payable, and the same remarks apply, mutatis mutandis, to both books. (5^^ Bills Payable Book.) Blank Acceptance. — See Acceptance. Blank Cheque.— A cheque form, containing the signature of the drawer, leaving the amount for which the cheque is to be drawn (and sometimes the name of the payee and the date) to be filled in by the holder. Where a person signs an ordinary bill of exchange before any amount is inserted therein the amount that may be subsequently inserted is limited by the value of the bill stamp (1882 Act, section 20) ; but in the case of a cheque requiring a penny stamp only, whatever the amount involved, the limit prima facie depends only on the amount to which the banker would honour the cheque. {See InchDate Instrument.) Blank Indorsement.— 5^^ Indorsement. Blank Signature. — See Acceptance. Blank Transfer.— A form of transfer of shares or other interest in a joint stock company executed only by the transferor, the transferee not being named. The intention of the transferor is that the person to whom the document is handed is thereby authorised to fill in the name of the transferee, whether a purchaser, mortgagee, or nominee. When the instrument of transfer is required by the regulations of the company to be in writing merely, a blank transfer may be filled in at any time and sent in for registration, and no objection can be raised by the com- pany as to its validity. Where, however, the transfer is required to be by deed, this practice is, strictly speaking, not available, for a deed executed in blank is inoperative, the delivery of a deed by the party in the form in which it is to operate being one of its essentials. [Powell v. London and Provincial Batik, 1893, 2 Ch. 555.) The practice is nevertheless carried out, even with deeds, in the expectation that the company, en registration, will not notice or take advantage of the irregularity. B.] 55 [Bookkeeping: B. List. — See Contributory. Blue Book.— A Governmental report or state- ment in book form, usually with a blue paper cover. Bond. — A promise under seal defeasible upon a condition subsequent — that is to say, it imposes a penalty for the non-performance of a condition which is avoided on the perform- ance of the condition, such performance being the real object of the bond. Notwith- standing the amount of the penalty, the rights of a promisee are limited to the actual loss sustained by breach of the condition. Bonded Stock. — The goods of a trader which are liable to customs or excise duties as the case may be, and which are left in duly certi- fied bond warehouses until required, the duties thereon not being paid until the goods are removed. On removal and payment of duty, the goods are termed " Duty paid Stock." Bonus. — A premium ; an extra dividend ; a distribution of profits amongst policy-holders of a life assurance company. Book Debts. — Debts due and accruing due to a person in the ordinary course of his trade or business, which are usually entered by a trader in his trade books. Book debts are not chattels within the meaning of the Bills of Sale Acts, but trade book debts are deemed within the order and disposition of the trader in the event of his bankruptcy, unless the debts have been assigned and notice of the assignment has been given to the various debtors prior to the commencement of the bankruptcy. An assignment of book debts carries the books in which they are recorded. The regulations of some companies prohibit the granting of loans or the extension of credit to its officers, but in any case book debts due to a company by any of its directors or other officers should be separately stated upon the face of the Balance Sheet. The pro forma Balance Sheet annexed to Table A of the Companies Act iv862 specially provides for this. In order to test the accuracy of the book debts the auditors of some concerns are per- mitted to communicate direct with the debtors by circular, stating the amount of in- debL3ia355 31 ) v.i b/ t'l ; ':> )3'i ; i > Ju3 by each respectively, and asking for a reply direct to the auditors in the event of any discrepancy. This, in most of the cases where the practice is adopted, is an effective check, while the moral effect upon the staff of the knowledge that the system is carried out must be great ; but if the directors of a particular company disapprove of the practice, the auditor can- not claim as of right to issue such circulars. Should the auditor consider, under the parti- cular circumstances, that the issue of circulars is essential, his remedy would be to certify that all his requirements had not been com plied with, leaving the shareholders to decide the question. {See Chose-in-action, Future Book Debts.) Book Entry.— The term given to the record of a transaction in the books, which really amounts to nothing further than an internal adjustment. For instance, if A. had two accounts with B., one in credit and the other in debit, and it was arranged to consolidate the two accounts, one of them (perhaps both) would be closed by the operation of the " book entry " which carried out the arrangement. Bookkeeping. — Bookkeeping is the art (based on certain scientific principles) of correctly recording transactions, generally mercantile, which involve the transfer of money or money's worth. The chief aims of bookkeeping are : — (i) To record the financial effect of any one transaction. (2) To record the combined effect of all the transactions within a given period so that the financial position of the transactor at the end of that period may be ascertained. There are two systems of bookkeeping in use, viz. : — Double Entry. — Bookkeeping by double entry was called in the earlier works the Italian method, from the fact that, although such a system is believed to have been in use in earlier times, it was left to Italy to revive the system by its adoption in the commercial cities of that country, whence it ultimately spread throughout Europe. As every transaction is a transfer of money or money's worth, involving a giver and a receiver, it follows that the effect of each Bookkeeping] [Bookkeeping transaction is that some person or account is benefited or increased to the same extent as another person or account suffers detriment or is decreased. Thus " every debit requires a corresponding credit," and in principle each transaction involves a "double entry." Upon this fundamental truth the whole super- structure of bookkeeping by double entry has been raised. In order to record the effect of each transfer and yet obviate the necessity of making the continuous addition and subtraction (and the consequent increase in clerical work) which the recording of numerous transactions would entail, (i) A Journal and separate books for various classes of transactions are utilised to collect and classify the various records of transactions before being carried to the Ledger, and (2) The Ledger Accounts are divided into two parts, giving a left-hand side, to which side all increases or debits are exclusively confined, and a right-hand side, to which all decreases or credits are placed. There are various devices, such as the Columnar system, to expedite the preparation of the records; Sectional Ledgers and De- partmental Accounts, to classify customers, districts, and departments ; subsidiary books to amplify the records, and self-balancing Ledgers to facilitate the balancing of the accounts. But these — few only among many — are the result of carefully adapting the double entry system to varying circumstances — the inevitable outcome of increasing com- merce, and the enhanced experience of ac- countants. Although, to the uninitiated, they are apparently complications tending to obscure the principle involved, they are in fact mere sub-divisions of one system based upon one simple truth. It has been said there is but one truth ; and, to make this a little clearer, it may be necessary to point out the distinction between this fundamental principle and bookkeeping rules which are based upon mere expediency. The /y»//i involved in the transfer is universal and inviolate ; the rule which places the debit items to the left-hand side of a Ledger Account, and the credit items to the right- hand side, is not necessarily universal, and the sides might be reversed without afifecting the principle involved. Furthermore, one side of the Ledger could be dispensed with, and both debits and credits placed in the remaining one, adding debits and deducting credits; in fact, it has been suggested upon good authority that a single column was the first method adopted. The cause and effect of recording trans- actions by double entry may be summarised thus : — (i) A transaction is a transfer of money or money's worth (2) Necessitating a giver and a receiver, (3) So that an account must be increased (or debited) and another account reduced (or credited) for an equivalent amount ; (4) An equilibrium in the Ledger is thus established, so that by means of the Trial Balance the clerical accuracy of the entries in the Ledger as regards amounts may be tested. (5) From the items in the Trial Balance we select the losses and gains, and they constitute the Profit and Loss Account ; while the remaining items, the assets and liabilities, form the basis of the Balance Sheet. (6) The difference between the assets and liabilities (including capital) should equal the balance of the Profit and Loss Account. (7) Thus, the Balance Sheet and Profit and Loss Account are confirmatory of each other, whilst details are afiforded as to how the resultant profit or loss has been derived or sustained. Single Entry. — This system is an incomplete record of the transactions with which it deals varying in extent according to circumstances, but generally recording only the personal obligations of or to the person in question, and omitting the complementary Revenue Accounts. What is termed single entry is in fact not a distinct system of bookkeeping, but rather the double entry system in an incomplete state. The procedure and effect of single entry may be summarised as follows : — (i) The cash transactions are recorded as in the case of double entry. (2) The sales and purchases are charged and credited to Personal Accounts. Bookkeeping] 57 [Borough (3) The cash received and paid in respect of sales and purchases is passed to the credit or debit of the accounts of those concerned. (4) But there is no detailed record of the gains or losses, nor is there any arith- metical check aftorded as in double entry. (5) The statement of the financial position is prepared from any available data. (6) The profit or loss is ascertained from a comparison of the past and present financial positions of the trader, after allowing for additions to or withdrawals from capital meantime. {See Journal, Journal Entry, Ledger, Trial Balance ) Books of Account.— The books forming part of the system of accounting in a specified concern, such as the Ledger, Journal, Cash Book, Purchase and Sales Books, and other connected subsidiary books. The precise extent of the term varies according to the system adopted, for in certain instances the Cost Books would be connected with the balancing of the books, whilst in others (the majority) the Cost Books would be treated as merely statistical records. Books of Original Entry.— Those in which the various transactions are recorded in the books of account for the first time— for instance, the Sales Day Book is ordinarily the book of original entry as regards the sales, although full particulars as to the goods delivered may have been previously recorded in a Warehouse Book, for the latter is not a book of account. Book Value. — The amount appearing from time to time in the books of a concern as the "value" of a particular asset or group of assets. It generally represents (i) the actual and direct cost, or (2) the cost (whether direct or indirect, original or additional), or (3) either of the foregoing less the amounts which have been written off by way of depreciation. The original cost of an asset may have been excessive ; additional and capitalised expenditure thereon may not have resulted in a corresponding increase in value, and the amount written off by way of depreciation may have been inadequate, so that the resultant book value would be in excess of the true value whether regarded from the point of view of a going concern or otherwise. On the other hand, deprecia- tion may have been provided for excessively, or unnecessarily because of appreciation in value from special causes. Sometimes the book value of an asset is a nominal amount which is obviously not the real value— f.^., the book value of the Bank of England (land and buildings) in the books of that institution. Borough Auditors. — The three auditors appointed under the Municipal Corporations Act 1882, two of whom are elected by the burgesses, and called elective auditors, the other being appointed by the mayor, and called mayor's auditor. An elective auditor must be qualified to be a councillor, but may not be a councillor, or the town clerk or the treasurer. The mayor's auditor must be a councillor. The term of office of each auditor is one year, and the election and appointment of the three auditors is to take place on the same day ; and although the method of appointment is dififerent, the distinction between elective and mayor's auditor would appear to end there, for generally their duties and responsibilities will be the same. The treasurer is required to make up the accounts of the borough half-yearly, at such dates as may be appointed, and within one month from the date to which the accounts are to be prepared he must submit them, with the necessary vouchers and papers, to the borough auditors, and they shall audit them. On the completion of the second half- year in each financial year, the accounts for the year are to be consolidated and issued in printed form. These provisions have been described as "exceedingly meagre and unsatisfactory" — in fact, although the Act of 1835 required the auditors to sign the accounts if they found them correct, the Act of 1882 contains no such provision. The duties of the auditors have consequently given rise to much difference of opinion, many officials whose accounts are subject to the audit attempting all means of limiting the scope of the auditors' functions. Many boroughs have, however, obtained private Acts of Parliament allowing them to Borough] 58 [Branch employ professional accountants, and thus replace the elective auditors entirely, or allow the duties of the latter to be merely nominal. Bottomry Bond.— A type of mortgage of a ship by which her keel (or bottom) is pledged for the repayment of a sum of money. The repayment depends upon the safe return of the ship. When the loan is secured upon the cargo the contract is known as respondentia. Bought Note. — A broker records his trans- actions in his Contract Book, and sends a transcript of the entry of each transaction to his respective principals. If it is a pur- chase he has made, the transcript is a bought note ; if a sale, it is a sold note. Bounty. — A premium paid to producers, or exporters of certain goods, with a view of en- couraging and developing an industry, when considered of importance to the country. Sometimes one country importing the "bounty fed" produce of another country levies import duties upon such produce in an attempt to counteract the effect of the bounty upon prices in the importing country. Such import duties are sometimes called "countervailing duties." Branch Banks. — Branch banks are regarded as mere agencies of a single bank, and not as distinct banks. Thus a bank, in the absence of special agreement, may consoli- date the accounts of a customer who has balances to his credit in certain branches and balances against him in others. The accounts so consolidated must, however, be in the same right, e.g.^ the banker cannot combine a Personal Account with one which he is aware is a Trust Account. The right of consolidation does not apply in favour of the customer without the bank's consent ; therefore, if a customer without consent draws upon a branch bank where he has no account, the bank is justified in dishonouring the cheque, although there are funds at another branch of the same bank. Branch banks are treated as separate banks for the purpose of calculating the time within which notice of dishonour of a bill of exchange must be given. The Companies Act 1879 provides that the auditor of every banking company,- registered after the passing of that Act, shall have delivered to him and he shall have access to all books and accounts of the company, so that he may examine them ; but with regard to banking com- panies having branches beyond the limits of Europe, it is to be deemed sufficient if the auditor is allowed access to such copies of, and extracts from, the books and accounts of such branches as may have been transmitted to the head office of the banking company in the United Kingdom. (Section 7.) Branch Establishments, Accounts of.— The main points to be kept in view when devising a system of accounts for branch establishments are those which will ensure : — Control and supervision by head office. Separate results of the trading of each branch. Facility of centralising and comparing such separate results. In order to keep each branch under the control of those in authority, a thorough system of statistical periodical report should be instituted, including such matters as the following (varying according to circumstances) : — [a] Orders received and having attention. {h) Orders on hand, but not commenced (in case more workmen are required). [c) Goods required from headquarters. [d) Special goods required by the branch, not stocked at headquarters. [e) Schedule of accounts due for payment. (/) Schedule of debts overdue. {g) Complaints from customers. {h) Rough idea of stocks on hand. With regard to the financial requirements, as distinct from the statistical, branch establishments may be divided into two classes : — Branch] 59 [Breach (i) Small establishments making only periodical returns to the head office, from which returns the books of account are compiled. These returns should include a Daily Statement of the gross cash taken, the expenses in detail, small purchases (if any), and the net cash, &c. The cash balances should be paid as often as possible either direct to head office or to the local banking account for transmission to head office. Book debts are ' " returned " at each stocktaking simi- larly to stock-in-trade. As to the check upon stocks, this may be effected either by a Stock Register (see that title) or by a com- parison of the respective percentages of gross profit (see Percentage) realised from time to time : — {a) With the past results of the par- ticular branch for the corre- sponding periods of previous years ; and, [d) With the past and present results of other but similar branches. (2) Important branches keeping an inde- pendent set of books, which are periodically balanced, and of which only the final results are transmitted to head office. These final results will be sent in the form oi a Trial Balance divided into two sections^ — viz., General section, consisting of Sundry Creditors and Debtors, appor- tionments of Rates and other period- ical payments, Cash and Bank Balances, &c., the balance of these items agreeing with the balance of the Private Ledger section, which will contain the balances of the Impersonal and Private Accounts, and of the accounts with other branches, from which particulars, together with the valuation of the Stock-on-hand, the head office accountant can prepare the Trading and Profit and Loss Accounts for the particular branches, and incorporate the results in the head office accounts. Each branch must keep a careful account of all goods supplied to and received from either head office or the other branches, and also of cash trans- actions therewith. At balancing time the total of the head office and various branch credits should equal the total of the head office and branch debits, and when the balances of all these cross accounts are trans- ferred at the end of the trading period tO' the head office books they can be entered in the form of a Reconciliation Account, both sides of which will agree, thus eliminating the balances after they have served their purpose — viz., the preparation of distinct Trading Accounts for each establish- ment. Head office expenses are sometimes appor- tioned over the various branches either in proportion to the trade done or on some other basis, according to the special circum- stances of the particular business. Breach of Trust. — A violation of duty by a trustee or other person in a fiduciary position. The act amounts to a misde- meanour, and may subject the defaulter to fine and imprisonment. Where a cestui que trust (not being under a disability) has con- curred in, or confirmed, any act amounting to a breach of trust, or has released the trustee from the consequences thereof, he may thereby have barred any remedy which might otherwise have been enforced against the trustee in respect of the breach, pro- vided the cestui que trust acts with full knowledge of all the facts of the case. The Trustee Act 1893 provides that where a breach of trust has been committed at the instigation or request (which need not be in writing), ox with the written consent of the beneficiary, the Court may, even in the case of a married woman restrained from alienation, impound the interest of such beneficiary by way of indemnity to the trustee. In ordinary circumstances, however, the remedies of a cestui que trust upon a breach of trust are : — Breach] 60 [British (i) A right of action against the trustee. The personal liability of trustees is joint and several, and the breach of trust constitutes a simple contract debt. The claim is provable in bank- ruptcy, but a bankrupt trustee is released from further liability for the breach on obtaining his discharge, unless the breach be of a fraudulent character. Where the trustee has not been guilty of fraud, the action must be brought within six years from the breach, for in such a case the trustee may claim the benefit of the Statutes of Limitation as though he had not been a trustee. (2) A right of following the trust estate into the hands of any alienee, except a bond fide purchaser for value having the legal estate before notice of the trust. Where a trustee has committed a breach of trust, and before his bank- ruptcy makes good the breach out of his own property, the trustee in the bankruptcy cannot recover the pro- perty under section 48 of the Bank- ruptcy Act of 1883, for it has been decided that such an act does not amount to a fraudulent preference, but an endeavour by the bankrupt to cover up his wrong and so prevent proceedings being taken against him. {New^s Trustee v. Hunting.) (3) A right of following the property into which the trust fund has been con- verted so long as it can be traced. Where the trustee mixes the trust funds with his own moneys, and the trust funds are still in his hands, the cestui que trust is entitled to all moneys in the trustee's possession which he cannot prove to be his own. The rule in Clayton'' s case as to appro- priation of payments (see that title) does not apply in this instance, the trustee being deemed to have drawn upon his own money.s first, irrespective of dates. (4) -^ right of impounding any beneficial equitable interest, to which the trustee committing the breach is entitled under the trust instrument. (5) A right to claim interest. The rate is usually 4 per cent., but it will be at a greater rate [a) where the trustee ought to have received more ; {b) where he has actually received more ; [c] where he is presumed to have received more [e.g., where the trustee has traded with the trust funds he will not only be liable for the funds, but also interest, or the actual trading profits at the option of the cestui que trust] ; [d] where the trustee has been guilty of direct breaches of trust or gross misconduct. (Snell's Equity.) Where a member of a partnership being a trustee makes improper use of trust moneys in the business, or on account of the partner- ship, no other partner is liable therefor to the persons beneficiall}' interested, pro- vided he was not aware of the breach of trust ; but the trust money can be recovered if still in the possession of the firm or under its control. The Judicial Trustees Act 1896 (see that title) provides that if it appears to the Court that a trustee, whether appointed under that Act or not, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the passing of that Act, but has acted honestly and reasonably and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed such breach,, then the Court may relieve the trustee either wholly or partly from personal liability for the same. Break-Up Value. — The ultimate selling value of a specified thing when worn out or super- seded ; for instance, the " scrap iron " value of an old machine. This is one of the factors in determining the rate of depre- ciation to be adopted in connection with a particular subject matter. [See Deprecia- tion.) British Ship. — One that has been registered as such, and is owned wholly by those British] 6i [Building entitled by law to hold a British ship, viz. : — (i) Natural born British subjects who have never taken an oath of allegiance to a foreign Government, or, having done so, have taken a subsequent oath to the British Sovereign, and whilst owners remain resi- dents in the King's dominions, or are partners of a firm carrying on business therein. (2) Naturalised persons, or denizens by letters of denization who have taken the oath subsequent to naturalisation, and are resident as above. (3) Bodies corporate established under, and subject to the laws of, and having their principal place of business in, the United Kingdom or a British possession. With certain excep- tions every British ship must be registered. The property in a British ship is divided into sixty-four shares, and no more than sixty- four persons m.ay be registered at the same time as owners of one ship, but any share may be held in joint ownership, and the joint owners not exceeding five in number may be registered and shall be considered as constituting one person, and any number of persons may have a beneficial title in a single share or number of shares, the registered holder representing such persons; a corporation or company may hold a share or the whole of the sixty-four shares [e.g., a single-ship company), the members of the corporation or company holding shares in the capital of the corpora- tion or company and not in the ship. No person may be registered as owner of a fractional part of a share. All the neces- sary particulars as to the ship and its owners must be given to the Registrar, who enters them in the " Register Book," and issues a "' Certificate of Registry " contain- ing the details entered in the Register Book. The Register may be inspected by any person upon payment of a fee not exceeding one shilling. {See Bill of Sale (Shipping), Co-owners, Mortgage of a Ship, Port of Registry.) Broker. — " An agent employed to make bar- " gains and contracts in matters of trade, " commerce or navigation between other "parties for a compensation commonly " called brokerage." Brokers are distinguishable from factors, in that factors have the possession of the subject matter of the contract, whilst brokers have not ; further, a broker cannot sue or act in his own name, whilst a factor can. Having no possession of the subject matter, a broker consequently has no right of lien, but there is an exception in the case of an insurance broker, who has a lien on the policy for his general balance. A broker is generally not liable on the contract if it be made known that he contracts as a broker. [See Agent, Factor, Jobbers.) Brokerage. — The remuneration of a broker for negotiating the purchase or sale of certain goods, stocks, shares, (Sec, generally by way of a commission or percentage of the price of the subject matter. Although section 8 of the Companies Act 1900 restricts the payment of commissions, and prohibits the application by a company of its shares by way of commissions for sub- scribing or agreeing to subscribe or pro- curing subscriptions for shares in such com- pany, the power to pay such brokerages as are lawful is expressly reserved to a com- pany by the section. Bucket Shop.— A slang term applied to the ofRces of outside brokers — that is, men who are not members of the Stock Exchange. Building Lease.— A lease of land for a long term of years at a ground rent, the lessee agreeing to erect and maintain during the term certain edifices which are to revert with the land to the lessor at the end of the term. m Building Societies.— The secretary or other officer of every building society und^r the Building Societies Acts (1874 to 1894) must, once in every year at least, prepare an account of all the receipts and expenditure of the society since the preceding statement, and a general statement of its funds and effects, liabilities and assets, showing the amounts due to the holders of the various classes of shares respectively, to depositors and creditors for loans, and also the balance due or outstanding on their mortgage se- curities (not including prospective interest), and the amount invested in the funds or Building] 62 [Calls other securities. Every such annual account and statement must be made up to the end of the official year to which it relates, and must be in the form prescribed for general use by the Chief Registrar of Friendly Societies. In particular the statement must give full information with regard to the mortgages to the society, distinguishing between : — (i) Mortgages upon each of which the debt does not exceed ;^5,ooo (not being mortgages included under (3) and {4) below). — Grouped in classes as regards amount. (2) Mortgages where the repayments are not upwards of 12 months in arrear, and the property has not been upwards of 12 months in possession of the society, and where the debt exceeds ;^5,ooo. — Set out in detail. (3) Mortgages of property of which the society has been upwards of 12 months in possession. — Set out in detail. (4) Mortgages where the repayments are upwards of 12 months in arrear, and the property has not been upwards of 12 months in possession of the society. — Set out in detail. The annual account and statement must be examined by auditors. Notwithstanding anything in the rules of any society, one at least of the auditors of the society shall be a person who publicly carries on the business of an accountant. The auditors in attesting the accounts are required either to certify that the *' account and statement " is correct, duly vouched, and in accordance with law, or to report to the society in what respect they find it incorrect, unvouched, or not in accordance with law. In addition, the mortgage deeds and other securities belonging to the society must be produced to the auditors, and they must certify, when certifying the accounts, that they have at that audit actually inspected such deeds and other securities, stating the number of properties the deeds with respect to which they have actually inspected. Every member, depositor and creditor for loans, is entitled to receive a copy of the annual account and statement from the society, and a copy must be sent to the Chief Registrar of Friendly Societies within fourteen days after the general meeting at which it is presented, or within three months after the expiration of the official year of the society, whichever period expires first. (Building Societies Acts 1874, section 40, and 1894, sections 2 and 3.) Bull and Bear. — A hull is a speculator who buys stock with a view of selling the same at some future date at a higher price, and thus profiting by the difference, whilst a hear is a speculator who hopes to benefit by the reverse operation, i.e., by selling stock of which he is not possessed, but which he expects to be able to buy at a loiver price at a future date. In view of the confusion often experienced in distinguishing between these two terms, one of the suggested origins of the terms may assist materially in this direction, viz. : — A " bull " is called so because he speculates for a rise, and a bull's natural method of attack is to toss up with its horns. A " bear ' ' is called so because he speculates for a fall, and a bear is inclined to press doivn its adversary with its paws. By-Products.— S^f Residual Products. c. Cable Transfers. fers. See Telegraphic Trans- Calendar Month.— In all Acts of Parliament since 1850 the term month means calendar month. If four bills of exchange were drawn at two months' date on the 28th, 29th, 30th, and 31st December 1897 respectively, they would all have become due and payable on the 3rd March 1898. So if a bill had been drawn on 28th February 1899 at 3 months' date, it would have become due and payable on the 31st May following, allowing the days of grace. Call Book.— A book recording all "calls" made at an establishment, stating the name j of caller, date and time, and person attending [ thereto. It is principally used in professional I offices. Calls. — Instalments of the share capital or debentures of a joint stock company which the members or holders are from time to time called upon to pay. Calls] 63 [Calls The procedure for making calls on shares is regulated by the articles of association, although, as regards the first issue the prospectus of a company often provides for the payment of the whole of the moneys due under the shares and specifies the due dates of payment. The Companies Act 1867, section 24, provides : — Nothing contained in the Companies Act 1862 shall be deemed to prevent any company under that Act, if authorised by its regulations as originally framed, or as altered by special resolution, from doing anyone or more of the following things, namely — (i) Making arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid, and in the time of payment of such calls. (2) Accepting from any member of the company who assents thereto the whole or a part of the amount remaining un- paid on any share or shares held by him either in discharge of the amount of a call payable in respect of any other share or shares held by him, or without any call having been made Every call made becomes a debt in the nature of a specialty (in England), for which the company can sue within 20 years. The regulations of the company usually provide for the payment of interest upon calls in arrear, or, in extreme cases, the forfeiture of the shares in default. The Companies Act 1862, section 75, provides : — *' The liability of any person to contribute •* to the assets of a company under this Act, '* in the event of the same being wound up, " shall be deemed to create a debt (in " England of the nature of a specialty) " accruing due from such person at the time " when his liability commenced, but payable •* at the time or respective times when calls " are made as hereinafter mentioned for •'enforcing such liability; and it shall be " lawful in the case of the bankruptcy of any •• contributory to prove against his estate the " estimated value of his liability to future *' calls as well as calls already made." Compulsory Liquidation. Where a company is being wound up by the Court the following regulaticns as to calls on contributories must be observed : — Where the liquidator desires to make any call on the contributories, or any of them, for any purpose authorised by the Acts, if there is a committee of inspection he may summon a meeting of such committee for the purpose of obtaining their sanction to the intended call. The notice of the meeting shall be sent to each member of the committee of inspectiou in sufficient time to reach him not less than seven days before the day appointed for holding the meeting, and shall contain a. statement of the proposed amount of the call and the purpose for which it is intended. Notice of the intended call and the intended meeting of the committee of inspection shaU also be advertised once at least in a London, newspaper, or, where the winding-up is uot in the High Court, in a newspaper circulat-- ing in the district of the Court in which tho^ proceedings are pending. The advertisement sh?^ll state th'e time apfid place of the intended meeting of the committee of inspection, and that each contributory may either attend the: said meeting and be heard, or make any- commurftication in writing to the liquidator or members of the committee of inspection ta be laid before the meeting in reference to the^ said intended call. At the meeting of the committee of inspec-. tion any statements or representations, made either to the meeting personally or addressed in writing to the liquidator or members of the committee by any contributory, shall be considered before the intended call is sanctioned. The sanction of the committee shall ha given by resolution, which shall be passed by a majority of the members present. Where there is no committee of inspection the liquidator shall not make a call without obtaining the leave of the Court . (Rule 86,) An application to the Court for leave to make any call on the contributories, or any of them, for any purpose authorised by the Acts, shall be made by summons stating the proposed amount of such call, and such summons shall be served four clear days at the least before the day appointed for making Calls] 64 [Cancellation the call on every contributory proposed to be included in such call ; or, if the Court so directs, notice of such intended call may be given by advertisement, without a separate notice to each contributory. (Rule 87.) When the liquidator is authorised by reso- lution or order to make a call on the con- tributories he must file with the Registrar a document in Form 58, with such variations as circumstances may require, making the call. (Rule 88.) When, in pursuance of a resolution of the committee of inspection, or an order of the Court, a call has been made by the liqui- dator, a copy of the resolution or order shall forthwith after the call has been made be served upon each of the contributories included in such call, together with a notice from the liquidator specifying the amount or balance due from such contributory in respect of such call, but such resolution or order need not be advertised unless, for any special reason, the Court so directs. (Rule 8g.) IThe payment of the amount due from each contributory on a call may be enforced by order of the Court to be made in chambers pn summons by the liquidator. (Rule 90.) A liquidator in compulsory winding-up may, with the sanction of the Court, compro- mise all calls and liability to calls. (1862 Act, section 160.) Voluntary Liquidation: Where "a- ddibpany is being wound up voluntarily and the list of contributories has been settled, the liquidator may from time to time n^'ake such calls • as he may deem necessary to satisfy the debts and liabilities i of the company, and the costs of winding- ! up the company, and for the adjustment of the rights of the contributories between themselves, and the liquidator may, in making a call, take into consideration the \ probability that some of the contributories ; upon whom the call is made may partly or ' wholly fail to pay their respective portions of the same. (1862 Act, section 133.) The liquidator should make a call by an | instrument in writing, but no special for- i malities are to be complied with. If a call be not duly paid in a voluntary i winding-up, payment may be enforced by I action brought by the liquidator in the name of the company against the defaulting con- tributories, or it may be enforced by pro- ceeding under section 138 of the 1862 Act, which gives power to (voluntary) liquidators to apply to the Court in respect to the enforcing of calls and other matters whereon the Court may exercise any powers which it might have done in case the company were being wound up by the Court. This latter procedure is considered the better to adopt. A voluntary liquidator may, with the sanction ol an extraordinary resolution of the company, compromise calls and liability to calls. (1862 Act, section 160.) Debentures.— A contract to subscribe for debentures cannot be specifically enforced as regards any moneys unpaid under the con- tract, the company's only remedy being to sue for the damage (if any) which it has sustained by the breach of contract. Cambist. — One skilled in the values of foreign coins, weights and measures, and the ex- changes in connection with same. A trader and dealer in promissory notes and bills of exchange. Cancellation of '* Scrip. "^- When a share certificate is lodged with an instrument of transfer in respect of the whole or part of the shares comprised in the certificate, it is necessary to cancel such certificate when issuing a new certificate to the transferee for his shares, and another to the transferor called the "balance scrip," for the shares (if any) retained by him. A company incurs a serious responsibility in issuing new certifi- cates, except in exchange for the old ones, which latter should be immediately can- celled. This is usuairy done by a cross-cut through the certificate, cancelling the seal and signatures of the directors. Sometimes a certificate is issued in pursu- ance of the regulations of the company, in place of one which has been lost or destroyed ; but under such circumstances a satisfactory indemnity should be required. Cancellation of Vouchers. — The marking or defacing of a voucher for payment, or any other matter, by the initia] of the person examining same, so that he may not only know Cancellation] 65 [Capital which vouchers he has examined, but also prevent the same from being fraudulently presented a second time. If due care is exer- cised in examining and comparing the dates of the various vouchers, the danger of a second presentation is further guarded against. Capacity. — "Capacity must be distinguished " from authority. Capacity means power ' ' to contract so as to bind oneself. Authority " means power to contract on behalf of " another, so as to bind him. Capacity to " contract is the creation of law. Authority • ' is derived from the act of the parties them- " selves. Want of capacity is incurable ; want " of authority may be cured by ratification. " Capacity or no capacity is a question of " law ; authority or no authority is usually a " question of fact." [Chalmers.] Capital.— A. Economic. That part of a person's possessions which he constitutes as his fund for the purpose of reproduction. The question whether a fund is or is not capital does not depend upon the class of commodities which constitute the fund, but solely upon the intention of the capitalist ; for, however ill-adapted the pro- perty in question may be for the particular object, it is none the less capital so soon as it is set apart for reproductive purposes. Economists divide capital into fixed and circulating, and also into positive and negative. Fixed Capital is wealth expended upon land, buildings, factories, canals, railways, docks, and such like things which are not intended to be sold, but to be retained to produce additional wealth. Although called fixed capital it is not absolutely so, but only as compared with circulating capital ; for " wear and tear " and depre- ciation are inevitable, necessitating ultimate replacement, notwithstanding constant repair during the " life " of the particular property. Circulating Capital is wealth used in the production of commodities, the efficacy of which is exhausted by a single use, such as {a) raw materials, and {d) cash for the payment of wages collectively used to I produce a manufactured article. The term \ " circulating " is derived from the circum- stance that this portion of capital requires to be constantly renewed by the sale of the finished articles and re-purchase of raw materials, &c. Positive Capital is represented by money, land, buildings, stock-in-trade, and all material objects, whilst Negative Capital is composed of credit, such as the right to demand payment of a debt. B. Commercial. It may be said that the whole of the pro- perty and assets of an undertaking consti- tute its capital irrespective of the existing liabilities ; for if it be absolutely necessary to possess the whole of such property and assets to allow of the business being carried on profitably, then it follows that if credit were not obtainable (to the extent of the liabilities referred to) the proprietor would need to increase his investment in the busi- ness to the extent of those liabilities. In. such a case, a statement showing the pro- prietor's financial position would be a mere ^schedule of property and assets, the total thereof being the proprietor's capital in the business. But the question as to what constitutes capital does not depend upon and vary with the extent of the credit obtainable by respective proprietors, hence : (i) The capital of a concern is the total amount of the property and assets employed therein, contributed partly by the proprietor and partly by those who have chosen to give him credit ; and (2) the capital of the pro- prietor in that concern is the surplus of the property and assets over the liabilities to third parties. C. Legal. (i) Administration. — Where property is given to one for life or other limited period, e.g., widowhood, and remainder to another, the " tenant-for-life " is entitled to the income from such property, and the remainderman to the corpus or capital. The capital may be either a specific sum of money, an investment, or (say) the residuary estate of the testator. In the administra- tion of the trust great care is necessary to distinguish between capital and income so that the original fund may be kept F Capital] 66 [Capital intact. The distinction depends largely upon the circumstances of each case, instances of which are dealt with under the titles "Apportionment" and "Executorship Accounts.' ' (2) Joint Stock Companies. {a) Authorised Capital^ Nominal Capital^ Registered Capital. — These are synony- mous terms, being the amount of capital which a company is authorised to issue, or with which it is registered, as the case may be. Companies registered under the Act of 1862 must pay a registration fee based by scale according to the amount of the capital (or number of members when the capital is not divided into shares), and in addition an ad valorem stamp duty of 5s. for every ;^ioo or fraction thereof of the registered capital. [V) Issued Capital, Subscribed Capital. — Capital which has been issued, sub- scribed for, and allotted to holders of shares or stock. , [c] Unissued Capital. — Authorised capital which has not been issued to the extent that it has not been subscribed or agreed to be subscribed for by any person. {d) F aid-up Capital. — That portion of the issued capital which has either been paid up in cash, or is considered to have been paid up. [See Registered Contract in respect of Shares.) [e) Uncalled Capital. — The unpaid por- tion of the subscribed capital which the holders have not been formally called upon to contribute, but in respect and to the extent of which they remain liable. A limited company may by special resolution declare that any portion of its capital which has not been already called up shall not be capable of being called up, except in the event of, and for the purposes of, the company being wound up, and thereupon such portion of capital shall not be capable of being called up, except in the event of, and for the purposes of, the com- pany being wound up. (Companies Act 1879, section 5.) A resolution in pursuance of the above amounts to an alteration of the memorandum of association, and it would appear that the alteration cannot be recalled by a subsequent special resolution. Where directors are em- powered either expressly or by necessary implication to borrow upon the security of the future calls (that is, the uncalled capital) they may do so, but in the absence of such power it would be iiltra vires to charge the uncalled capital. The articles of association sometimes give the directors power to authorise the mortgagee to make the calls upon the members so that he may be better secured. But where a company has passed a resolution in pursuance of section 5 of 1879 [supra) appropriating any portion of its uncalled capital for the purposes of winding-up, the portion so appropriated cannot be mortgaged. Bartlett v. May/air Co., 1898.) Legally, it is only the share capital which is considered as t/te capital of a company, and the holders of such shares (or stock) are members of the company. Although money raised by (i) mortgage, (2) debentures, or (3) other forms of loan, is capital from a commercial point of view, and is often referred to as Loan Capital, it must be care- fully distinguished from the share capital, as the mortgagees or lenders are obviously creditors and not members of the company. There are, however, differences of opinion among accountants (i) as to whether receipts in respect of debentures are receipts on Capital Account within the meaning of section 12, sub-sections 2 [c) and 3, of the Companies Act 1900, and as a consequence (2) as to whether such receipts must be included in the account which forms part of the report to be issued prior to the statutory meeting of a company. The capital of a registered company or of other corporations differs from that of the proprietor of an ordinary partnership con- cern, for whilst (say) the accumulating Capital] losses bf the latter will affect the amount of capital from time to time this is not the case with a corporation, the original capital being, by a legal fiction, deemed to exist until formally reduced by statutory methods. This question is referred to under title " Double Account System." That the capital of a corporation is in point of law something distinct from either the commercial or economic view of the term may be seen from the following extracts : — (i) The Companies Act 1877 was passed to explain the intention of the Act of 1867, and provides that a power to reduce capital shall include a power to cancel any lost capital, or any capital unrepresented by available assets, &c., &c. Here the Legislature recognises the existence of capital and confers power and provides formalities whereby a company may cancel such capital, although in so far as the same has already been lost, or is admittedly unrepresented by available assets, it is ipso facto non-existent. (2) It is quite obvious that with respect to such a property (a mine or mineral deposit) every ton of stuff got out of that which was bought with capital represented a portion of capital. It was said that the division of the profit arising from the sale of such was a returning of capital. If that was so, it was not at all events such a return ot capital as is prohibited by the Com- panies Acts. . . . The notion that the company is debtor to its capital may be convenient from an account- ant's point of view, but it has nothing to do with law. If a company is formed to acquire or work property of a wasting nature {e.g.^ a mine, quarry, or patent), the capital expended in acquiring the pro- perty may be regarded as sunk and gone, and if the company retains assets sufficient to pay its debts, any excess of money obtained by working the property over the cost of working 67 [Carriage I it may be divided among the share- holders, and this is true although some portion of the property itself is sold, and in one sense the capital is thereby diminished. (Lindley, L.J., Lee v. Neuchdtel Co.) For Increase and Reduction of Capital see " Memorandum of Association," " Registered Capital," and " Reserve Liability." Capital Expenditure. — An exchange of one property for another ; a payment of cash or the creation of a liability for an equiva- lent value of real estate, machinery, mer- chandise, &c. In its more restricted sense the term implies the expenditure of the capital receipts of a company or other body upon the construction of a particular work, e.g., a railway. Capital Receipts.— These are in the nature of contributions from shareholders and debenture-holders, &c., in the case of a joint stock company, although moneys raised on loan are not (legally) capital. The term is, however, of general applica- tion, distinguishing from receipts on account of income. Card Ledgers. — See SHp Bookkeeping. Carriage and Cartage. — Payments made by a trader for the transport of goods by rail and road respectively. Such expenditure may be divided into " Inward " and " Out- ward," the former being treated as part of the " purchase price " of the goods, whilst the latter forms part of the cost of dis- tribution. The reason for this distinction is based upon the assumption that if the goods were purchased " carriage paid " or " delivered " the price of same would be increased to the extent of the cost of trans- port. This argument would appear to apply equally to a sale, as more would be obtained for goods to be delivered by the seller than under an arrangement requiring the buyer to pay the cost of transit, but it is usual to charge " carriage inward " to the Trading Account, and treat " carriage out- ward " as an item of expense. In some trades it is customary for the seller to deliver all goods, for which he is entitled F 2 Carriage] 68 [Carrier to make a small charge. Such "recovered carriage " should he carefully distinguished in the Sales Book from the price of the goods themselves, so that the total amount recovered may be credited to the " Carriage and Cartage Account," to afford informa- tion as to whether the transport department " pays its way."' All payments to railway companies and others, stable expenses, wages of carters, porters, are types of expense of transport, and it is often im- portant to know to what extent the *' carriage recovered " reduces such expenditure. Carrier. — A common carrier is one who under- takes to carry for hire from place to place the goods of anyone who may employ him. A person who carries passengers only is not a common carrier. Duties. — He must carry all goods delivered to him, provided (i) They are of the class he usually carries. (2) The consignor is prepared to pay the charge or hire ; and, (3) There is room in the carriage. The goods should be carried by the ordi- nary route (not necessarily the shortest) without undue delay. Liabilities. — Prior to the passing of the Land Carriers Act 1830 common carriers were liable for every loss or injury to the goods they carried, however much such loss or injury might involve, and whether the carrier knew or not of the valuable character of the goods, unless the loss or injury arose by (1) The act of God, (2) The King's enemies, (3) The consignor's neglect (wholly), or (4) The inherent vice or defect of the subject-matter of carriage. The Act of 1830 provides that no common land carrier for hire is to be liable for loss of, or injury to, any article or articles or property of the descriptions following, viz. : — Gold, silver, precious stones, jewellery, watches, clocks, bills and other securities for money, maps, paintings, writings, title-deeds, glass, china, silks, and such like valuables, contained in a parcel and delivered to him to be carried for hire, or to accompany the person of any passenger, when the value of the property exceeds the sum of ;^io, unless at the time of the delivery thereof to the carrier the value and nature of the property be expressly declared by the consignor and an increased rate of charge be accepted by the carrier. The Act requires the carrier to exhibit a public notice in some conspicuous part of his office stating the increased rate of charge to be paid as a compensation for the greater risk and care to be taken of the goods. If the carrier does not exhibit such notice he is not entitled to the benefits of the Act. Prior to the Act carriers endeavoured to limit their liability by exhibiting a public notice to the effect that they would not be responsible beyond a stated sum, but sec- tion 4 provides that no land carrier shall limit his liability by public notices^ except to the extent provided by the Act in respect of valuables exceeding _;!<^io in value. Sec- tion 6, however, allows carriers to make a special contract (limiting their liability) with each person delivering goods. This latter privilege was largely availed of by means of printed conditions and limita- tions on the back of the receipt tickets, which were, in all probability, not noticed by the consignor ; and although all carriers other than railway companies and canal companies may still limit their liability in this way, the latter classes of carriers cannot avoid responsibility without complying with the Railway and Canal Traffic Act, 1854, which provides (i) that public notices limiting their responsibility are ineffectual, and (2) that special contracts may be made with a view of restricting liability, provided that [a) The contract be signed by the person delivering the goods, and [b) The contract contains conditions which are just and reasonable in the opinion of the Judge before whom any question relating thereto is tried. The various points in connection with sea-carriage are dealt with in their appro- priate places. Carry] 69 [Cash Carry =over.—S^^ Settling Days. Case of Need.— 5^^ Referee in case of need. Cash.— In its strict sense, the term cash is applied to coined money, but Bank of England notes are now treated as cash, being legal tender in. England and Wales for sums of ;^5 and over. In its widest sense, cash may be said to mean money, bank notes, cheques and bills payable on demand. Cash Account. — An account of the receipts and payments of the party rendering such account. An account in the Ledger showing the cash transactions (in aggregate) where the Cash Book totals are posted (but see title " Cash Book"). Cash Book.— The book wherein all receipts and payments of cash are recorded. Some advocate the entering of the bills (receivable and payable) through the Cash Book, whilst others consider these should be passed through the Journal or Bill Books. Cash Books are devised at the present time with a view of saving labour and facilitating the balancing of the books. In some cases the " Sectional Ledger " system necessitates columns in the Cash Book to correspond with the various Ledgers, whilst in many businesses the receipts or pay- ments, or both, are analysed by means of appropriate columns, the totals only being posted periodically to the Ledger. The majority of Cash Book " rulings," however, are still restricted to a separate record of cash, bank, and discount trans- actions. The audit of a Cash Book is considerably facilitated if each item in the Cash Account, particularly the payments, is given a con- secutive number in a special column, such number also being placed upon the voucher therefor. Vouchers are thereby more readily placed in order, and are then more easily compared with the respective entries. Apart from any question of analysis by means of columns, the Cash Book, in a system of bookkeeping by double entry, may be said to perform three distinct duties, viz. : — (i) A record of the cash transactions showing the balance of cash in hand from time to time. (2) The entries for a specified period con- stitute a Journal entry in a convenient form, the receipts being in the form of cash Dr. to the sundry persons or accounts from whom, or in respect of which, the cash has been received ; the payments being the reverse. (3) It is unusual to post the totals of the receipts and payments to a Cash Account in the Ledger, the Cash Book itself being generally treated as a Ledger Account, necessitating the inclusion of the Cash Book balance in the Trial Balance of the Ledger. Thus each and every entry in the Cash Book is (as it were) doubly posted by one entry in the Ledger. A receipt is posted to the credit of the payer, and by adopting the Cash Book as the Ledger Account, the " corresponding debit " is effected by the already existing entry in the Cash Book. Many students find the " cross post " from the Cash Book difficult to comprehend, but it may be explained as follows : — A Cash Book contains (say) one month's transactions, and it is required to post such transactions to the Ledger. The operator will say, ' ' I adopt the Cash Book en bloc as my Cash Account in the Ledger." The theoretical effect of this is that all the receipts (on the debit side of the Cash Book) have been bodily posted to the debit side of the Ledger, and all the payments to the credit side of the Ledger. The operator, then, using his pen for the first time, commences to make the "opposite entries" in detail, and, as he naturally obtains such details from the Cash Book, the actual postings he makes from that book are the cross postings only. Cash Creditor. — One whose claim has arisen out of cash transactions or loans, as distinct from a trade creditor, whose claim arises from trading transactions, such as the deli very of goods, &c. For bankruptcy purposes there is, under ordinary circumstances, no distinc- tion between these two classes, but see " Postponed Creditors." Cash Discount. — See Discount, Trade Dis- count. Cash] 70 [Certificate Cash Order. — An inland draft on demand drawn by one trader on another and (as a rule) passed through a bank for colkction. Many banks object to the prac- tice. Cash orders are generally subject to the law of bills of exchange. Cash Sales. — Sales made for cash payment at the time of sale or delivery. They are sometimes termed *' till-takings." Casting Vote. —A vote given by the chairman of an assembly or meeting when the votes of those present are equally for and against a given proposition, so that a decision may be arrived at. A chairman at common law has no casting vote, so that the privilege must be expressly conferred by ihe meeting or the regulations governing same. In some cases the chairman is not allowed to vote except to give a casting vote — that is, when the votes of the other persons present are equally for and against a given proposi- tion, but the articles of association of a company generally confer a casting vote in addition to any vote or votes to which the chairman may be entitled as a member, whether on a show of hands or at a poll. Catching Bargain.— One made for an in- adequate consideration, under such circum- stances that the aggrieved party was not in a position to negotiate upon equal terms ; such as a purchase from an expectant heir of his expectancy by one having a better knowledge of its real value. Caveat.— A warning. To "enter a caveat" is to endeavour by legal process to stay some projected act, e.g., to stay the probate of a will, the granting of letters of administration, the issuing of a lunacy commission, &c. Caveat emptor. — Let a purchaser beware. [See Warranty.) Certificate. — Share Certificate : A docu- ment which testifies to the ownership of stock or shares in a joint stock com- pany. Ordinarily it is issued under the common seal of the company, and signed by one or more directors, and generally countersigned by the secretary. Section 31 of the Companies Act 1862 provides that the certificate " is prima facie evidence of the " title of the member to the shares or stock " therein specified," but in order to complete the title of the member the purport of the certificate must be recorded in the register of members. This applies only to the member named in the certificate, or his legal represen- tative, for the title to the shares, &c., can only be transferred by the registration of an instrument of transfer, whereupon a n&w certificate is issued to the transferee. A share certificate must be distinguished from a share warrant in this connection. A com- pany may be estopped from denying the truth of what is stated in a share certificate issued by it. Thus, where shares were allotted for a consideration other than cash, and no contract had been filed under section 25 (now repealed) of the Companies Act 1867, the company having issued a cer- tificate stating that the shares were fully-paid was estopped from denying this to a third party who had taken the shares in good faith and for value, on the strength of the com- pany's certificate. [In re Ottos Kopje Diamond Mines, Lim., 1893, i Ch. 618.) In the event of a certificate being lost, a new one will be issued upon a proper indemnity being given by the member. Generally a small fee is charged for a " subsequent " certificate (whether the origi- nal be lost, worn out, or otherwise), but the Stock Exchange authorities object to a charge for the first certificate, and in practice such a charge is not made. [See Auditors' Cer- tificate and Report, Balance Scrip, Register of Transfers, Scrip, Share Warrants.) Certificate of Deduction. — A certificate given by the secretary of a company, a mort- gagor or a lessee, to the effect that in paying a dividend, mortgage interest, or ground rent respectively, he has deducted income tax therefrom, so that the amount so de- ducted may be recovered from the Inland Revenue by the shareholder, mortgagee, or lessor, as the case may be, provided he is not liable to pay the tax. Certificate of Incorporation.— A certificate issued by the Registrar of Joint Stock Com- panies to the effect that the company named therein has been duly registered. Such cer- tificate is conclusive evidence that all the requisitions of the Companies Acts in respect of registration, and of matters precedent and incidental thereto, have been complied with. Certificate] 71 [Charter- Party This applies to all certificates, whether issued before or after i January 1901. (1900 Act, section i.) A statutory declaration by a solicitor of the High Court engaged in the formation of the company, or by a person named in the articles of association as a director or secretary of the company, of compliance with the said requisitions, is to be produced to the Registrar, who may accept the declaration as evidence of such compliance. (Companies Act 1900, section i.) Companies which apply to the public for subscriptions for shares must now obtain a further certificate entitling them to commence business. {See Commencement of Business, restrictions on.) Certified Transfer. — An instrument of trans- fer, bearing a certificate, generally in the margin, to the effect that the " scrip " in respect of the stock or shares intended to be transferred has been lodged either with the secretary of the company in question or the secretary of the local Stock Exchange, as the case may be. The certificate affords satisfaction to the buyer, and enables the purchase money to be taken up on delivery of the instrument of transfer. Cestui que Trust. — A person having the enjoyment of the rents and profits of or other beneficial interest in property, the legal possession of which is vested in a trustee. {See Trust.) Cestui que vie. — The person for whose life an estate is held. C.F.I, (generally stated C.I.F.), Cost-freight- insurance. — When goods are sold and the price is quoted "c.i.f.," it includes the cost of the goods, the freight and the insurance. Under such a contract the vendor should hand over to the buyer a policy sufficient to cover the original cost of the goods (which should include the insurance premiums), but not necessarily sufficient to cover the amount of the sale in question. {See F.O.B.) Chairman. — The person who presides at a meeting of members, directors, a committee, creditors, or other persons. The chairman of a meeting may be elected by those present from one of their number unless otherwise provided by any regulations governing the particular meeting. For instance, the articles of association of a joint stock company generally provide that the chairman of direc- tors shall be chairman at any meeting of shareholders, whilst the Official Receiver, or his nominee, is ex officio chairman of the first meeting of creditors in bankruptcy and the first meetings of creditors and contributories in winding-up procedure. At common law the power to adjourn a meeting apparently rests with the chairman, but if he improperly vacate the chair the meeting may elect another chairman and proceed. {See Casting Vote.) Champerty. — A bargain between one of the parties to a suit and a third party (other- wise not interested) whereby in consideration of the financial support of the latter towards the costs of the action, the proceeds thereof (if they are successful) are to be divided ; such an arrangement is illegal. Charges Account. — The Ledger Account containing particulars of all expenses in- curred in connection with carrying on a business. The modern practice, however, is to subdivide the expenditure into convenient classes, so that comparisons of the expenses of different periods may be more readily instituted. Charges Recoverable.— Payments made by a merchant, agent, or other trader on account of clients or principals in connection with their particular merchandise, such expendi- ture being recoverable from the clients or principals, as the case may be. Pending recovery, such payments are treated as assets (book debts) in the books of the payer. Charging Order. — An order of the Court binding the stocks or funds of a judgment debtor with the judgment debt. {See Distringas.) Charterer. — A person who hires or charters a ship for a voyage or a period. Chartering Broker. — One who obtains charters for ships or finds ships for employ- ment for a commission. Charter^ Party. — An agreement in writing whereby a shipowner engages to provide a ship for a specified voyage or period for the carriage of goods for a sum of money called frciqht. Charter= Party] 72 [Cheque Amongst other things the agreement generally specifies or provides (i) The burthen of the ship, (2) Rate of freight, (3) That the ship is seaworthy and will be ready to take her cargo on a certain day, (4) Shall sail when loaded, and (5) Deliver her cargo at the port of desti- nation, (6) That the charterer shall load and unload the ship within a certain number of days called lay days {running days or work- ing days, as the case may be), (7) Or pay an extra sum per day beyond such days called demurrage, and also (8) Pay the agreed freight. Note. — The lay days may be fixed either running (/.f., consecutive) days, or only working days, but after the agreed number of days has expired (whether running or working) demur- rage is payable upon running days, A charter-party requires a 6d. stamp. Chattels. — Goods movable and immovable, except such as are in the nature of freehold or parcel of it. They are either Personal or Real. Chattels Personal are such as belong imme- diately to the person of the owner. Chattels Real are such as do not appertain immediately to the person of the owner, but depend upon some other thing, such as a leasehold of lands. Checkweigher. — A person appointed by the majority (by ballot) of the persons employed in a coal mine, where they are paid accord- ing to the weight of coal raised. His duties are to check the weights of the coal raised, j and to see that the miners are properly ' credited therewith. The miners have to maintain the checkweighman at their own t cost. I Cheque.— A bill of exchange drawn on a banker payable on demand. (Bills of | Exchange Act 1882, section 73.) A cheque should be presented to the banker for payment within a reasonable time. {See Unpresented Cheques.) A cheque may be revoked by (i) Countermand of payment. (2) Notice of the drawer's death. (Section 75.) (3) Notice of an available act of bankruptcy committed by the drawer. A cheque is not a good subject of donatio mortis causa, for the donee cannot sue the drawer's executors, not being a holder for value, whilst the banker's authority to pay is revoked by notice of the drawer's death. On payment of a cheque by the banker the cheque becomes the property of the drawer, but the banker may retain same as a voucher for the payment. London bankers generally return the paid cheques to the drawer, but in the provinces it is usually necessary to certify as to the accuracy of the Bank Account before taking up the paid cheques should they be required by the drawer as vouchers for his own account. Where the sum payable is expressed in words and also in figures, and there is a dis_ crepancy between the two, the sum denoted by the words is the amount payable. A cheque requires a penny stamp only, whatever the amount involved, and the stamp may be either impressed or adhesive. When a cheque is made payable to order it requires the indorsement of the payee, but such in- dorsement, in the event of the amount in the cheque being for £2 or over, is only evidence of payment and not a discharge for the amount paid. To operate as a discharge the indorsement in such a case would need to be over a penny stamp. Some estabhshments provide their own form of cheque, generally for advertising purposes, but such designs can only be adopted on receiving the assent of the banker. In the special form o^ "cheque" used by some firms a form of receipt is attached, which must be duly signed (and stamped if the amount is for £2 or over) before the banker will pay the "cheque." Such a document, however, is not a cheque within the meaning of the Bills of Exchange Act 1882 ; it is not an uncon- ditional, but a conditional, order for the pay- ment of money. At least one consequence of this is that bankers are deprived of the pro- tection afforded by section 82 of the Act. {Bavin 6^ Sims v. London and Soiith-W ester n Bank, 1899.) {See Crossed Cheque, Not negotiable.) Cheque] 1Z [Citation Cheque Book (Counterfoil).— The counter- foils of the cheques drawn upon a banker by any concern are utilised as a check upon the banking account, and in some instances are called over with the " bank entries " by the auditors. Some concerns take a "press copy" of every cheque they draw, and call the Bank Book over with same, whilst others obtain the " originals " from the bank at the end of each half-year. Yet another plan exists ; some Cheque Books are designed so that the cheques are upon alternate leaves, the inter- vening leaves consisting of plain paper, allowing of a copy of each cheque being taken by means of carbon paper. Chief Rents. — Annual payments arising out of a charge upon freehold lands. {Se& Ground Rent.) Chose in Action, Chose in Suspense, or thing in action. —Personal property of an incorporeal nature whereof a person has not the actual or constructive enjoyment, but merely a right to recover it by action at law, as in the case of a debt. Choses in action w^ere formerly not assign- able at common law, it being considered that such a course would tend to increase litiga- tion ; but assignments of equitable choses in action for valuable consideration have always been enforced in equity. The chief exceptions to the common law rule were : — (i) Negotiable instruments (formerly by the law merchant, but now by the Bills of Exchange Act, 1882). (2) Where the debtor assented to the transfer of the debt. (3) Bills ot lading. (4) Policies of life and marine insurance. But now the Judicature Act 1873 provides that any absolute assignment [a) in writing, under the hand of the assignor of atiy debt or other legal chose in action, of which (b) express notice has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to claim such debt, is effectual in law to pass the legal j right, and all remedies in respect of such j chose in action, but subject to all equities — e.g., set-off — that would have availed against the assignor. Notice of the assignment is necessary to prevent (i) the debtor paying the assignor, and (2) a subsequent assignee obtaining priority by notice. Notice further operates to take debts due to an assignor, in the course of his trade or business, out of his order and disposition, in the event of his bankruptcy, and, in the case of legal choses in action, enables the assignee to sue in his own name. A person may validly assign all or any of the book debts due and owing, or which during the currency of a given period may become due and owing to the assignor, provided that in order to give the assignee of a future chose in action a right to the same it must, upon coming into existence, answer the description in the assignment — that is to say, it must be capable of being identified as that which it was intended should be so assigned. {Tailby v. Official Receiver, 1888, 13 App. Cas. 523-) Chose in Possession. — That which a person not only has the right to enjoy, but of which he has also the actual enjoyment. C.I.F.— 5^^C.F.I. Circular Letter of Credit. — A letter addressed to several bankers or merchants residing in different places, for the accommo- dation of persons travelling. A person about to visit several distant places, and requiring a large sum at certain of the principal cities or towns, may purchase a letter of credit before departing. The issuer of the letter advises his various correspondents and supplies them with a specimen of the holder's signature. The holder may then present his letter at the various places and obtain such moneys as he may require, within the limits provided for. The advances are duly noted upon the letter of credit at each place, and on the holder's return he may recover such moneys from the issuer as may still be to his credit. This system relieves a traveller of the necessity of carrying large sums of money about with him. Citation. — A summons to appear ; where a party has a prior right to administration of a Citation] 74 [Commencement deceased person's estate, he must generally be cited or consent before the Court will grant administration to another. The Court may also cite before it all persons named or demonstrated as executors in a will, to the intent that they may either prove or refuse to prove such will. So where a person named executor has once elected to act or has acted as such, and afterwards attempts to renounce his office, the Court will cite him to take probate, and his disobedience will be a contempt. Clean Bill of Lading.— One stating that the goods therein referred to have been shipped in good order and condition, rendering the master liable to deliver in such condition. This liability is often avoided by inserting the words, *' weight, contents, and value un- known.'^ Clearance. — A certificate that a ship has been examined and cleared at the Custom House. Clear Days.— If a given number of days are required to be clear days they are to be reckoned exclusively of the preceding and succeeding days — that is to say, the day the notice is given, and the day of the event, should not be counted as part of the required notice. Clearing. — A method adopted by bankers, railway companies, and others, whereby they adjust their various cross-demands, and deal with differences only. Clearing a Vessel. — The entering of a vessel's name and an account of her cargo in the Custom House books on her entering or leaving the port, and the complying with all necessary formalities to enable the vessel to discharge or proceed. Closing Entries. — The term used to express the necessary adjustments to enable a set of books to be " closed " and the final accounts prepared. Generally, it may be said that the closing entries are those which transform the Trial Balance into the Balance Sheet. Code. — A collection or system of laws ; a col- lection of words, figures, or other signs, each with a respective meaning or conveying a particular phrase, thus enabling the pos- sessors to communicate by telegraph, cable, or otherwise, more economically and with greater secrecy Codicil. — A supplement to a will, to add to, explain, or revoke the contents or part con- tents of the will. It must be executed with all the formalities of a will. In the Wills Act 1837 the term " vvill " includes a codicil. Collateral Security. — One given as security for a debt in addition to the principal one already existing. [See Secured Creditor.) Colonial Register.— A joint stock company may keep a Colonial Register of such of its members as are resident in a colony where it transacts business. The Registrar of Joint Stock Companies in England must be notified thereof, and duplicate copies of the entries must be transmitted to the registered offices of the company as soon as possible. The entries must be entered in a duplicate register to be kept in England, which is deemed part of the register of the company. Transfers of shares registered in a Colonial Register are not liable for stamp duty in the United Kingdom if the transfers are not executed here. On the death of a member domiciled in the United Kingdom his shares registered in a Colonial Register are deemed to be property within the United Kingdom for the purpose of assessing the British death duties payable. Colonial Stock Act 1900. —S^^ Trust Investments. Columnar System.— A system of accounting by means of columns appropriately ruled in the books of account. It is particularly adapted to Departmental Accounts, analysis of sales, purchases, expenditure, &c., and reduces the volume of clerical work, the postings being effected in total sums instead of single items. The totals of the columns also serve as a check upon much of the work, varying according to the precise system adopted. Commencement of Business, Restric= tions on. — A company registered under the Companies Acts shall not commence any business or exercise any borrowing powers unless : — {a) Shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum sub- scription ; and {h) Every director of the company has paid to the company on each of the shares taken or contracted to be taken CommencementJ 75 [Committee by him, and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription ; and {c) There has been filed with the Registrar a statutory declaration by the secre- tary or one of the directors, in the prescribed form, that the aforesaid conditions have been complied with. The Registrar shall, on the filing of this statutory declaration, certify that the com- pany is entitled to commence business, and that certificate shall be conclusive evidence that the company is so entitled. Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding. Nothing shall prevent the simultaneous offer for subscription of any shares and debentures or the receipt of any application, but, pending the issue of the certificate required by this section, allotment of deben- tures would be provisional only. The penalty for contravention is that every person responsible therefor shall, without prejudice to any other liability, be liable to a fine not exceeding fifty pounds for every day during which the contravention con- tinues. These provisions do not apply to com- panies registered before the commencement of the Companies Act 1900, nor to com- panies where there is no invitation to the public to subscribe for shares. (1900 Act, section 6.) {See Profits prior to incorporation.) Commencement of the Bankruptcy. — See Act of Bankruptcy. Commencement of the Liquidation.— See Winding-up. Commission. — Commercially, the order under which one person negotiates business for another; the remuneration of a broker or other agent, generally by way of an agreed percentage upon the value of the subject-matter involved. Commission in Lunacy. — An inquiry whether a person alleged to be a lunatic is so or not. Commissioners for Oaths.— Solicitors and any other fit and proper persons whom the Lord Chancellor appoints to administer oaths and take affidavits. {See Oath.) Committee. — A body of persons elected to conduct some particular business. In special cases, however, a committee may consist of one person only. Committee of a Lunatic. — A committee (which may consist of one person only) to whose care and custody the person and property of a lunatic are entrusted by the Court. Committee of Inspection.— Bankruptcy. A committee consisting of not more than five nor less than three persons, appointed for the purpose of superintending the adminis- tration of a bankrupt's property by the trustee. The members of the committee are selected by the creditors by ordinary resolution, and any creditor or the holder of a general proxy or general power of attorney from a creditor may be appointed, provided that the creditor must prove his debt, and his proof must be admitted before he (or his proxy or attorney) acts upon the committee. The committee meet at such times as they shall from time to time appoint, and, failing such appointment, at least once a month ; and the trustee or any member of the committee may also call a meeting of the committee as and when he thinks necessary. They may act by a majority of their number present, provided a majority of the whole committee is present at the meeting. The continuing members of the committee may act, notwithstanding any vacancy in their body, provided there be not less than two such continuing members. No defect or irregularity in election of a member of a committee of inspection shall vitiate any act done by him in good faith. Where the number of members of the committee is, for the time being, less than five, the creditors may elect additional members, but the total number of members must not exceed five. Committee] 76 [Committee Any member of the committee may resign his office by notice in writing delivered to the trustee, and any member may be removed by an ordinary resolution at any meeting of creditors, of which notice has been given stating the object of the meeting. If a member of the committee becomes bankrupt, or compounds or arranges with his creditors, or is absent from five consecu- tive meetings of the committee, his office thereupon becomes vacant. (1883 Act, sec- tions 22 and 143 ; 1890 Act, section 5.) Any alteration in, or addition to, the com- mittee should be at once notified to the Inspector-General by the transmission of a certified copy of the resolution effecting such alteration or addition. (Board of Trade Regulations.) Powers. — The committee may be em- powered by the creditors to appoint a trustee and to fix his remuneration, and the trustee may consult the committee upon all important matters in connection with the administration of the estate. In particular, the trustee may not do the following things without the permission of the committee, viz. : — (i) Carry on the business of the bankrupt, so far as may be necessary for the beneficial winding-up of the same. 2v^o^^.— The business ought not to be carried on with the object of paying dividends out of profits, or of increas- ing the value of the goodwill. Such a practice necessarily involves risk of loss to which the creditors ought not to be exposed, and has, moreover, been held to be contrary to law. (Board of Trade Circular.) (2) Bring, institute, or defend any action or other legal proceeding relating to the property of the bankrupt. Note. — Where a trustee brings an action on behalf of the estate, although no personal benefit can accrue to him as a result of the litigation, he will be personally liable for the costs ; so that, if the estate of the bankrupt is insufii- cient for the payment of any of such costs, the trustee would have to pay them (or the balance of them) per- sonally. The proper course, there- fore (and the usual course), for the trustee is to obtain an indemnity against the costs from the committee of inspection or the creditors per- sonally before commencing litigation {Ex parte Angerstein). Where an action is brought against a trustee (or the Official Receiver) as representing the estate of the debtor, or where a trustee (or the Official Receiver) is made a party to a cause or matter on the application of any other party thereto, he shall not be per- sonally liable for costs unless the Court otherwise directs. (Rule 108. j (3) Employ a solicitor or other agent to take any proceedings or do any business which may be sanctioned by the committee of inspection. Note. — The sanction for the employ- ment must be obtained before the employment, except in cases of urgency , and in such cases it must be shown that no undue delay took place in obtaining the sanction. (1890 Act, section 15.) (4) Accept as the consideration for the sale of any property of the bankrupt a sum of money payable at a future time subject to such stipulations as to security or otherwise as the committee think fit. (5) Mortgage or pledge any part of the property of the bankrupt for the purpose of raising money for the pay- ment of his debts. (6) Refer any dispute to arbitration, com- promise all debts, claims, and liabilities whether present or future, certain or contingent, liquidated or unliquidated, subsisting or supposed to subsist between the bankrupt and any person who may have incurred any liability to the bankrupt, on the receipt of such sums, payable at such times, and generally on such terms as may be agreed upon. (7) Make such compromise or other arrangement as may be thought expedient with creditors, or persons claiming to be creditors, in respect of any debts provable under the bank- ruptcy. Committee] 11 [Committee (8) Make such compromise or other arrangement as may be thought expedient with respect to any claim arising out of or incidental to the property of the bankrupt, made, or capable of being made, on the trustee by any person, or by the trustee on any person. (9) Divide in its existing form amongst the creditors, according to its estimated value, any property v^hich from its peculiar nature or other special cir- cumstances cannot be readily or advantageously sold. (10) Appoint the bankrupt himself to super- intend the management of the property of the bankrupt, or of any part thereof, or to carry on the trade (if any) of the bankrupt for the benefit of his creditors or in any other respect to aid in administering the property in such manner and on such terms as may be directed. (11) Make such allowance as may be con- sidered just to the bankrupt out of his property for the support of the bank- rupt and his family, or in consideration of his services if he is engaged in wind- ing-up the estate. The amount of allowance may be reduced by the Court, and such allowance must be in money, unless the creditors by special resolution determine otherwise. The permission of the committee of inspec- tion, which is required in respect of the foregoing, must not be a general permission to do all or any of the above-mentioned things, but must only be a permission to do the particular thing or things for which per- mission is sought in the specified case or cases. (1883 Act, sections 57 and 64.) Any postponement with regard to the fivst dividend, or any postponement beyond the limit of two months of a declaration of divi- dend, notice of intention to declare which has been gazetted, must be sanctioned by the com- mittee of inspection. (1883 Act, section 58, and Rule 232.) Duties. — The committee must audit the trustee's Cash Book at least once every three months, and certify same. If the trustee carries on the business of the bankrupt, the " Trading Account " must be audited by the committee at least once every month. (Rules 288 and 308.) Generally, it is the duty of the committee to control the trustee in the administration of the estate — powers are conferred upon the committee, and it is their duty to exercise those powers. {See Powers, supra.) The trustee must have regard to any directions of the creditors or the committee, but in case of conflict the directions of the creditors in general meeting override any directions give by the committee. (1883 Act, sec- tion 89.) A member of the committee is debarred from purchasing any part of the bankrupt's estate without leave of the Court, either directly or indirectly, by himself or any partner, clerk, agent, or servant. Any such purchase may be set aside by the Court upon the application of the Board of Trade or any creditor. (Rule 316.) No member of a committee of inspection shall, except with sanction of the Court, directly or indirectly, by himself or any employer, partner, clerk, agent, or servant be entitled to derive any profit from any trans- action arising out of the bankruptcy, or to receive out of the estate any payment for services rendered by him in connection with the administration of the estate, or for any goods supplied by him to the trustee for or on account of the estate. If it appears to the Board of Trade that any such profit or payment has been made, they may disallow such payment or recover such profit, as the case may be, on the audit of the trustee's account. (Rule 317.) The cost of obtaining the sanction of the Court under Rules 316 and 317 must be borne by the person in whose interest such sanction is obtained (or applied for (?) ) and cannot be charged against the estate. (Rule 316.) The sanction of the Court to payment being made for services rendered to the estate by a member of a committee of inspection will only be given when the services performed are of a special nature. No payment will be allowed under any circumstances to a member of a committee of inspection for services rendered by him in the discharge of the duties attaching to his office as a member of such committee. (Rule 317A.) Committee] 78 [Committee The members of the committee may be paid their actual out-of-pocket expenses necessarily incurred, provided the approval of the Board of Trade be obtained. (Rule 125.) If there be no committee of inspection appointed by the creditors, any act or thing, or any direction or permission, which by the Bankruptcy Act 1883 is authorised or required to be done or given by the com- mittee, may be done or given by the Board of Trade on the application of the trustee, and any functions which devolve on the Board may (subject to any special directions) be exercised by the Official Receiver. (1883 Act, section 22, and Rule 337.) Upon every application by a trustee to an Official Receiver acting as the committee of inspection, a fee is payable as follows : — Where the assets are certified by the Official Receiver as not likely to realise more than ;^50o, 5s. Where the assets are likely to exceed ;^500, lOS. Deeds of Arrangement. Generally a committee of inspection is appointed, either by the deed or by the credi- tors, to supervise the trustee. There are no statutory provisions as to the duties of the committee, but bankruptcy procedure is followed to a great extent. Company Liquidation. Where the Court has made an order for winding-up a company, and as a result of the first (separate) meetings of the creditors and contributories a liquidator other than the Official Receiver has been appointed, a com- mittee of inspection may be simultaneously appointed to act with such liquidator, the- members of the committee having previously been nominated by the creditors and con- tributories. (1890 Act, section 6.) The members of the committee are selected from the creditors or contributories of the company, or persons holding their general powers of attorney, and the representatives of the creditors and contributories are to be in such proportions as may be agreed upon, or, in case of difference, as may be deter- mined by the Court. (Section 9.) The appointment of a committee of inspec- tion must be advertised by the liquidator in such manner as the Court directs imme- diately after the appointment. (Rule 58.) The general procedure is similar to that of a bankruptcy committee, as detailed above ; but a vacancy must be filed by the particular class (creditors or contributories) which the outgoing member represented. There is also a slight distinction from the bankruptcy rule as to the office becoming vacant by absence from five consecutive meetings ; the office does not become vacant in the winding-up procedure unless the member is absent from five consecutive meetings without the leave of those other members of the committee who, together with himself, represent the creditors or contributories, as the case may be. The duties of the committee are similar to those of a bankruptcy committee as to accounts and the general control over the liquidator. The following powers of the liquidator are exerciseable only with the sanction of the committee of inspection (or the Court), viz, : — The power to (i) Carry on the business of^ the company so far as may be necessary for its beneficial winding-up. (2) Bring or defend any legal proceedings in the name and on behalf of the company. (3) Employ a solicitor or any other agent to do any business which the liqui- dator is unable to do himself. The employment must be sanctioned before-hand, except in cases of urgency, and in such cases it must be shown that no undue delay took place in obtaining sanction. (4) Pay any class of creditors in full. (5) Make compromises with creditors, or persons claiming to be creditors, of the company. (6) Make compromises with contribu- tories or other persons apprehending any liability to the company. (7) Make calls upon the contributories. The bankruptcy provisions as to members of the committee (i) purchasing or dealing with the estate, or (2) making any profit thereout, or (3) receiving payment for services rendered, apply equally to winding- up procedure. If there be no committee of inspection, any act or thing or any direction or permis- sion authorised or required to be done or given by the committee may be done or Committee] 79 [Competent given by the Board of Trade, upon applica- tion of the liquidator, and any functions which so devolve upon the Board of Trade may (subject to special directions) be exercised by the Official Receiver. Upon every application by a liquidator to an Official Receiver acting as the committee of inspection, a fee of los. is payable. Common Seal. — The seal used by a corpora- tion as a symbol of its incorporation. {See Seal.) Commutation. — Conversion; the giving of one thing in satisfaction of another ; the pay- ment of a lump sum instead of annual or other payments, as in the case of tithes, land tax, and certain of the death duties. Companies Acts. — This term includes the whole of the Acts of Parliament which are to be construed as one with the principal Act of 18.62, viz. : — (i) Companies Act 1862 (2) Companies Act 1867 (3) Joint Stock Com- panies Arrangement Act 1870 (4) Companies Act 1877 (5) Companies Act 1879 (6) Companies Act 1880 (7) Companies Act 1883 (8) Companies Act 1890 (Memorandum) (9) Companies Act 1890 (Winding-up) (10) Directors' Liability Act 1890 (11) Companies Act 1893 (12) Companies Act 1898 (13) Companies Act 1900 The Principal Act. Unlimited Liability of Di- rectors. Reduction of Capital. Associations not for Profit. Subdivisions of Shares. Calls upon Shares. Share Warrants to Bearer. Contracts, &c., &c. Arrangements with Credi- tors. Interpretation of Act of 1867. Banking Companies, and other matters. Returning Accumulated Profits. Defunct Companies, &c. Colonial Registers. Power to alter the objects of the Company. Winding-up Procedure. Liability of Directors and others for statements in Prospectuses, &c. Amendment of Section 10 of the Winding-up Act 1890. Amendment of Section 25 of 1867 Act. Conclusiveness of Certifi- cate of Incorporation. Qualification of Directors. Restrictions on Allotment and Underwriting. Restrictions on commence- ment of business. Requirements as to filing and issue of Prospectus, Statutory Meeting, Registration of Mortgages and Charges. Audit and Auditors. &c,, &c. In addition to the above there are (i) Preferential Pay- ments in Bank- ruptcy Act 1888 (2) Preferential Pay- ments in Bank- ruptcy Act 1897 (3) Seals Act 1864 (4) Life Assurance Com- panies Acts 1870, 1871, and 1872 (5) Companies Clauses Consolidation Act 1845- Priority in Winding-up of certain Rates, Taxes, and Wages. Priority of the above to Debentures secured by a floating charge. Seals in Foreign Countries Life Assurance Companies Companies incorporated by Special Act. Company. — " A society of persons joined in a " common interest, generally for the purpose " of carrying on some commercial or indus- " trial undertaking." Companies may be incorporated or unin- corporated. An unincorporated company is really an ordinary partnership and has many disadvantages compared with a corporation. A company, association, or partnership formed after 1862, having for its object the acquisition of gain, and consisting of more than twenty persons (or ten in the case of a banking business), is illegal if unregistered. {See Corporation.) Comparative Statement. — A statement, generally in digest form, compiled from other records, and prepared in such a manner as to show comparatively the particular matters with which it deals, and in some cases stating also the percentages of the various items. Compensation. — Making amends ; that which is paid in satisfaction of an injury to property or person. Compensatory Errors are such as do not prevent the arithmetical balancing of a set of accounts, one error being neutralised by one or more other errors having a similar effect in the contrary direction. For instance, a short post of ;^io to the debit side of the Ledger would " compensate " for the errors of a short post of £6 and a " miss-post " of £4 to the credit side of the Ledger. Competent to dispose. — A person is deemed competent to dispose of property (within the meaning of the Finance Act 1894) if he has such an estate or interest therein or such general power as would, if he were sui Juris, enable him to dispose of the property. {See Estate Duty, Succession Duty.) Competitive] 80 [Compulsory Competitive Proof.— Where the joint estate of a firm or the separate estate of a partner is being administered, no partner in the firm may prove in competition with the creditors of the firm either against the joint estate of the firm or against the separate estate of any other partner until all the debts of the firm have been paid in full. Exceptions : — (i) Where distinct and separate businesses have been carried on and the indebted- ness has arisen in the ordinary way of business. (2) Where there has been fraudulent con- version of the property of the firm to the use of a partner or vice versa. (3) Where a partner, having been a bank- rupt, has been discharged and after- wards becomes a creditor of the firm or another partner, the discharge having released him from the firm's liabilities. A partner may also prove against the separate estate of another partner if the result of so doing is not to deprive the joint estate of a surplus or to be the means of reducing same — that is to say, proof may be made if the debtor-partner's estate is insolvent, even if the creditor-partner's claim be excluded. [Ex parte Topping, 1865.) It was doubted whether a creditor-partner could prove against a debtor-partner, even though within the last-mentioned rule, if such creditor-partner's estate showed a surplus without the aid of a dividend receivable from the estate of the debtor-partner, the sugges- tion being that as the surplus of the creditor- partner's estate would go to the joint estate, the admission of the proof against the debtor- partner's estate in effect enabled the joint creditors to prove against a separate estate, in so far as the dividend upon such proof increased the surplus to be transferred from the creditor-partner's estate to the joint estate. Such a proof would, however, be allowed, it having been held that, by the time the dividend in the form of an increased surplus has reached the joint estate, it has ceased to be part of the separate estate of the partner out of whose estate it was originally paid. {Re Head, 1894 •) Circumstances are conceiv- able, moreover, where the trustee of one partner might prove against the estate of another, and by so doing deprive the joint estate of a surplus or be the means of reduc- ing same to the apparent detriment of the joint creditors; and yet such proof would be the means of increasing the surplus of the creditor-partner's estate to a greater extent than that to which it has reduced the other partner's surplus. The joint creditors would thus eventually benefit by a proof which was primarily a competitive one. This result would happen where (i) the creditor-partner was solvent without the dividend the estate would so receive ; and (2) such dividend was greater than the surplus on the debtor- partner's estate, which would have existed but for the admission of the creditor-partner's proof. The executor of a deceased partner is in no better position than the deceased would have been. [Nanson v. Gordon, 1876.) Completed Audit.— One conducted after the accounts have been completed and submitted for examination, or at least after the com- pletion of the Trial Balance. {See Continuous Audit.) Composition. — An agreement between an in- solvent debtor and his creditors providing for payment of a portion only of the various debts in full satisfaction of the whole. The con- sideration for the unpaid portion of the debts, arises out of the mutual forbearance of the various creditors. {See Deed of Arrangement.) Compounding. — Making an arrangement with creditors for payment of a composition ; also, where a party is robbed and knows the thief, he compounds a felony if he agrees not to prosecute on surrender of his goods ; this is an offence punishable by fine and imprison- ment. Compound Interest.— 5^^' Interest. Compulsory Order (Winding=up), — An order made by the Court, as distinct from a voluntary winding-up which is the result of a resolution of the company. A winding-up under such an order is carried out by the Court (by means of the liquidator). The Court may make . an order upon the appli- cation of the company itself, but such an order, when made, can hardly be termed compulsory, although the subsequent pro- cedure is the same. {See Petition to wind-up, Winding-up.) Concurrent] Consideration Concurrent Consideration.— 5^e Considera- tion. Condition. — A stipulation; a restraint placed upon a thing. Where a contract for the sale of goods is subject to a condition, the buyer may, upon the breach of such condition by the seller, either : — (i) Repudiate the contract ; or (2) Waive the condition and adopt the contract ; or (3) Elect to treat the breach of condition as a breach of warranty, adopt the contract and claim for the consequent damage. Provided that, where the contract is not severable and the buyer has accepted the goods or part of them, or where the contract is for specijSc goods the property in which has passed to the buyer, a breach of con- dition by the seller can only be treated as a breach of warranty, unless there be a term in the contract, express or implied, to the contrary. In the absence of a contrary intention, there is an implied condition that the seller .has a right to sell the goods, or will have such right at the time the property is to pass. The remaining implied conditions in a contract for the sale of goods are dealt with (for convenience) under the head of Warranty. [See Defeasance.) Conditional Acceptance.— S^^ Acceptance. Conditional Indorsement. — See Indorse- ment. Conditional Legacy. — A contingent legacy. (5^^ Legacy.) Conditions of Sale.— The written conditions upon which property, goods, or any interest therein is to be sold. Conduct Money.— Money paid to a witness for his travelling expenses. Consanguinity. — The relation of persons descended from the same stock or common ancestor. It is either lineal or col- lateral. Lineals are descended in a direct line, such as grandfather, father and son, whilst collaterals do not descend directly, although they descend from a common ancestor [e.g., brothers and cousins). [See Affinity.) Consecutive Order.— Succeeding in regular order. Documents, book entries, &c., may be placed in consecutive order, either alpha- betically, chronologically, or numerically, according to circumstances. Consideration. — The price or subject matter which induces a contract. Consideration is one of the essentials of a simple contract, but with the exception of (i) those tending to the restraint of trade, and (2) those of which specific performance is required, contracts under seal (specialties) do not require con- sideration to make them binding, some writers stating that the solemnity of a deed " imports consideration," whilst others assert that the law presumes sufficient consideration, which the parties are estopped from denying. It would appear, however, that the more correct view is that given by Sir William Anson, to the effect that a deed owes its efficacy entirely to its form, which statement is historically supported, inasmuch as a contract under seal was in full efficacy before the doctrine of consideration had been developed. Where consideration is required to support a contract, it must be valuable, i.e., legal. The following are amongst the various classes of consideration : — Valuable consideration.-' ' Some right, interest, " profit or benefit accruing to the one party, " or some forbearance, detriment, loss or *' responsibility given, suffered, or undertaken " by the other." This is sufficient to support a contract, and provided the consideration is fairly within the definition, the Courts will not inquire into the sufficiency of it, provided it is not a mere pretence — it is for the parties them- selves to say what their terms shall be. Good consideration.— An equitable considera- tion based upon natural love, affection, and gratitude; it is insufficient of itself to support a contract. Moral consideration. — One based upon a moral obligation, which a person feels bound in honour and integrity to fulfil. This also is insufficient of itself to support a contract. Illegal consideration. — One which violates the principles of the statute law or the common law, including in the latter public policy and morality. Such considerations may be either wrong in themselves or wrong because they have been positively prohibited. Consideration] 82 [Consideration A contract based upon such a consideration cannot be enforced. Impossible consideration. — One the perform- ance of which is beyond the limit of human capacity. A contract to perform an act which is absolutely impossible will not be binding, but if such an act is possible at the time of entering into the contract, and subsequently becomes impossible, the person so contracting will be liable for the breach. Executed consideration. — (i) An act or forbearance given for a promise which simultaneously constitutes the proposal (or acceptance) and the consideration for the promise given in return for it, or (2) the offer of an act for a promise, or (3) the offer of a promise for an act. This must be distinguished from a past consideration. Past consideration. — Some act or forbearance in time past by which a person benefits without incurring any legal liability, but in respect of which he subsequently, from personal or other motives, makes a promise. Such a " consideration " has no legal effect, and cannot be enforced, being based upon motive, and not upon consideration. Three exceptions to this rule are said to exist : — (i) A past consideration will support a subsequent promise, if the consideration was given at the request of the promisor in contemplation of the subsequent promise. (2) Where a '* plaintiff voluntarily does that " whereunto the defendant was legally "compellable, and the defendant after- *• wards in consideration thereof ex- •* pressly promises, he will be bound by " such promise." Note. — It would appear that this exception is not ol general application, having arisen solely out of the liability of parish authorities inter se, respecting the expenses of paupers incurred in parishes other than their own. (3) A debt barred by the Statute of Limita- tions is sufficient consideration for a subsequent promise to pay it. {See also Consideration for a Bill of Exchange.) Executory consideration. — One to be per- formed subsequent to the promise, as in the case of mutual promises. This will support a contract if otherwise legal. Concurrent consideration. — One performed simultaneously with the making of the promise. [See Executed Consideration, supra.) Continuing consideration. — One executed or performed in part only, the remainder requir- ing to be performed subsequently. This will support a contract if otherwise legal. {See Executory Consideration, supra.) The consideration for a contract must move from the promisee, and a stranger to the consideration cannot maintain an action upon a contract, for the consideration " must " have passed from the person seeking to " enforce the promise which was made in " return for it." {Tweddle v. Atkinson, 1861.) But a third party may have rights under a contract as cestui que trust, if words amount- ing to a declaration of trust are used by one of the contracting parties. [Empress Engineering Co., 1880.) In a marriage settlement the children are "within the consideration," and as bene- ficiaries they can enforce the terms of the settlement. Even children by a former marriage are within this rule, but under a *' separation deed" the children are deemed strangers to the contract. A principal may enforce the terms of a contract made by an agent, but he can hardly be deemed a stranger to the consideration. Consideration for a Bill of Exchange.— Valuable consideration for a bill may be constituted by : — [a) Any consideration sufficient to support a simple contract ; or {b) An antecedent debt or liability. Such a debt or liability is deemed valuable consideration, whether the bill is pay- able on demand or at a future time. (1882 Act, section 27.) The consideration for a bill is presumed in favour of the holder, unless fraud or illegality be admitted or proved in connection with the acceptance, issue, or subsequent negotiation of the bill, in which case the holder must prove that subsequent to the alleged fraud or illegality value has in good faith been given for the bill. (Section 30.) Want of consideration is a matter of defence between immediate parties, but not against a remote party who is a holder in Consideration] 83 [Consignment due course ; thus the donee of a bill cannot sue the donor thereon, but if the donor were a holder in due course the donee can sue all parties prior to the donor whom the latter could have sued. Although it is usual to insert the statement as to value in the bill, such as "Value received," "Value in account," " Value in merchandise," &c., it is not essential (section 3) because of the legal presumption of consideration ; further- more, extrinsic evidence is admissible between immediate parties to impeach the consideration by showing its absence or illegality even where the bill expresses that value has been given therefor. {See Accom- modation Bill, Accommodation Party.) Consideration for Annuities Granted. — Money received by an insurance company in consideration of which it undertakes to provide an annuity for life or for a term of years (to be presently enjoyed or deferred) to the individual or individuals making the payment or on whose behalf such payment is made. The money so paid to the insurance company becomes its absolute property, and it takes the risk of finding so much per annum for the agreed number of years or for the life of the annuitant, as the case may be. The Government carry on the same kind of business in a small way, through the medium of the Post Office, the considera- tion for the annuities granted being used to cancel Consols. A company granting annuities upon human life is a company within the mean- ing of the Life Assurance Act 187&, and is subject to its provisions. Consideration for Stock, &c., trans= ferred.— The sum named in the instrument of transfer may not, and generally does not, agree with the amount receivable by the original seller (who signs the document as transferor) owing to a subsale by the original purchaser, and so on through other hands at different prices. The price paid by the lasi buyer is the one which fixes the ad valorem duty payable upon the transfer. When the transfer is not the outcome of a purchase and sale [e.g., a gift) a nominal consideration is inserted, and a ten-shilling stamp is required irrespective of the amount of stock being transferred. {See Nominal Consideration.) Consignment. — The sending or deHvering of goods to another person (generally in another town or country) for the purpose of sale. The person who sends the goods is called the consignor and the general pro- perty in the goods remains in him until they are sold by the agent. The person receiving the goods is called the consignee, agent, or factor, and occupies a position of trust as regards his dealings with the goods. He must lawfully account to the consignor for the proceeds. The goods themselves are also referred to as a consignment. {See Consignment Ledger.) Consignment Account.- Ledger. -See Consignment Consignment Ledger. — A Ledger used for separately recording the transactions in connection with the various consignments (for sale) of a trader, or agent. So far as regards the consignor, the consignment merely amounts to a transfer of a portion of his stock-in-trade from one place to another, and he must record the consignment at " stock " prices, adding any proper expenses incurred in connection with the transit. These amounts will be posted to the debit of the particular Con- signment Account, and any cash received on account credited to the consignee. On receipt of the account sales from the consignee showing the gross proceeds of the consignment and his expenses and commission, the Consignment Account may be adjusted and the amount due from the consignee brought to the debit of his personal account, whilst the profit or loss on the con- signment may be transferred to the General Profit and Loss Account of the trader, or to a Summary of Consignment Accounts as the case may be. Until the account sales is received from the consignee, enabling the Consignment Account to be finally adjusted, it is usual G 2 Consignment] 84 (at all events, more correct) to treat the balance of the Consignment Account merely as so much unsold stock in the hands of the consignee. Special circumstances, such as a " certain sale " or otherwise, may, how- ever, affect this general rule. With regard to the consignee, as he is really liable for the goods in specie, the pro- perty in the same remaining in the con- signor until the goods are sold, the Consignment Ledger kept by him should merely record the quantities and all neces- sary particulars to enable him to record the disposition of same. The entries in the books of account of the consignee should be in respect of the proceeds of the goods as and - when he receives same, his expenses (including commission) and the remittances to the consignor. Special circumstances may here also affect the general rules — for instance, where the consignee acts as a del credere agent, and he is required for the facility of settlement to treat the proceeds of the various sales as cash in his hands irrespective of the time of payment by the purchaser. In this case he would debit the purchaser and credit the consignor with the proceeds immediately. Sometimes an invoice at a suggested sell- ing price, or at the cost price, is forwarded to the consignee, but such prices must be regarded as mere guides to the agent, as he cannot be held responsible for the price of the goods if he has used all reasonable care and diligence, and has, nevertheless, failed to sell the goods or to realise the expected prices. Consolidation of Mortgages. — If a person has mortgaged lands to another, and subse- quently mortgages other lands to the same person for a further advance, the right to treat both advances as secured upon the whole of the lands is called a right of con- solidation. The right has been extended to the case of mortgages of different lands to different persons by the same mortgagor becoming vested by transfer in the same mortgagee. The right of consolidation has been con- siderably curtailed by the Conveyancing [Consul Act 1881, section 17 providing that, unless a contrary intention is expressed in the mortgage deeds, or one of them, a mortgagor seeking to redeem any one mortgage may do so without redeeming any other mortgage. The distinctions between consolidation and tacking are mainly : — (1) Consolidation is the righi to throw together upon one estate several advances made upon dijfermi estates, whilst tacking is the right to amalga- mate several advances made upon the same estate. (2) Consolidation prejudices the bor- rower, but tacking effects an inter- mediate incumbrancer. (3) Tacking depends entirely upon the protection afforded by the legal estate^ but consolidation does not. (4) Notice of the intermediate advance at the time of making a subsequent loan is fatal to a right of tacking. {See Tacking.) Consolidation of Shares.— 5^^ Memoran- dum of Association. Consols. — A contraction of the term " con- solidated funds " and " consolidated stock." All the various funds (income) of the Government have been consolidated, and all the various classes of the public debt have been similarly treated, so that the con- solidated funds are now pledged for the payment of the interest on the consolidated stock. {See Exchequer Bills, Exchequer Bonds, Treasury Bills.) Constructive Total Loss. —Sec Total Loss. Constructive Trust.— One "raised by con- • ' struction of equity in order to satisfy the " demands of justice without reference to any ** presumable intention of the parties, either '•express or implied," e.g., a vendor's lien upon land for the unpaid purchase-money in respect of same. Consul. — An officer appointed to represent his country in another country, in order to facih- tate commerce between the two. He has also to attend to the grievances of, and afford the necessary protection to, all persons belonging to the country appointing him, who may be resident in his official area. Contango] 85 [Continuous Contango. —5^^ Settling Days. Contingent Account. -An account to which a given sum is transferred by a charge to Revenue Account, as a provision against (i) unforeseen liabilities ; or (2) liabilities known to exist, but uncertain as to amount. Some businesses maintain a " Contingent Account " from pure conservative considera- tions as a matter of prudence. In such a case, the amount at the credit of Contingent Account, not being pledged to the redemp- tion of any contingency, is really a reserve or a surplus according to circumstances. Contingent Legacy. — See Legacy. Contingent Liability.— A liability which will only exist definitely upon the happen- ing of some event which may or may not happen. For instance, a party (other than the acceptor) to a bill of exchange which is in other hands is contingently liable thereon; the liability only attaching definitely on the default of all prior parties. Contingent Remainder. — A remainder limited so as to depend upon an event or condition which may never happen or be performed. [See Reversion.) Continuation. — See Settling Days. Continuing Consideration.— S^^ Considera- tion. Continuing Guarantee (or Guaranty). — An undertaking by one to answer for the continuing liabilities of or for the performance of a series of duties by another — a common instance of which is afforded by the guarantee of a current account. It is often difficult to decide whether a guarantee was intended to be a continuing one, or only for a single transaction or duty. It appears that no rule can be drawn from the cases, each having been decided upon the particular facts involved. The Partnership Act 1890 provides that : — *' A continuing guaranty .... given " either to a firm or to a third person in " respect of the transactions of a firm is, in " the absence of agreement to the contrary, " revoked as to future transactions by any " change in the constitution of the firm to " which, or of the firm in respect of the " transactions of which, the guaranty .... " was given." Although a contrary intention to the above cannot be inferred from the fact that the primary liability (that is, the liability of the principal debtor) is an indefinitely continuing one, such a contrary intention •' may appear " * by necessary implication from the nature of *• the firm ' where the members of the firm are " numerous and frequently changing, and " credit is not given to them individually, as " in the case of an unincorporated insurance " society." In the absence of special circumstances a continuing guarantee may be withdrawn at any time, as regards future transactions, and death (with notice thereof) relieves the estate of the guarantor from liability in respect of advances or transactions made subsequently, but where and whilst there is a continuing rela- tionship [e.g., a tenancy which has been created on the faith of the continuing guaran- tee) the guarantee cannot be withdrawn: at will, nor will death, in such a case, release the guarantor's estate from continuing liability. A surety on a joint and several continuing guarantee will be liable for advances made after the death of his co-surety (and notice thereof to the creditor), unless he gives notice to the creditor determining his liability. The particular instrument of guarantee may contain provisions expressly modifying the foregoing. [See Guarantee.) Continuous Audit.— One conducted by fre- quent visits during the course of the period under review — that is to say, weekly, monthly or otherwise ; sometimes pre-arranged and regular visits, in other cases, irregular and without notice. Some of the advantages of a continuous audit, over what is termed a completed audit, are : — (i) Earlier rectification of errors. (2) Errors more readily discovered. (3) Books of account necessarily kept up to date ; and (4) As a consequence, the accounts can be completed and a more exhaustive ex- amination made by an earlier date after the close of the financial period than would otherwise be the case. The most serious objection to this class of audit is the possibility of the figures and entries being tampered with after they have been passed by the auditor. [See Completed Audit, Investigation.) Contra] 86 [Contract Contra. — Against ; the opposite side. At the present time the term is restricted in book- keeping to the heading of the payment side of the Cash Book, but in the earHer works on bookkeeping {e.g., Cory, 1839) the Ledger Accounts are similarly treated, the title of the account appearing at the head on the debit side, and the word contra on the credit side. Contra accounts are those in respect of which parties give and take mutual credit. Where accounts are ' * set-off, ' ' the debtor on balance only paying over to the creditor the balance due, irregularities are apt to arise, to guard against which it is advisable that the cashier in all cases should give and take receipts for the full amount due to and from his principals respectively. The former sum may then be entered as a receipt and the latter as a payment in the Cash Book, the effect being to keep the sales to and purchases from each customer as distinct as transac- tions with different concerns, although they may be contained in the same Ledger Account. (See title "Mutual credits," &c.) This system also prevents confusion and unnecessary Journal transfers where " Sundry Debtors " and " Sundry Creditors" Accounts are kept. Contract. — An agreement enforceable at law, made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others (Anson), Contracts may be subdivided into : — Formal — (a) Contracts of record. (6) Contracts under seal. Simple — [a) Contracts required to be in some form other than under seal, (fc) Contracts for which no form is required, and which may be either express or implied. {See Chose in Action, Consideration, Deed, Express Contract, Implied Contract, Simple Contract.) Contract Book. — When a broker makes a contract the terms thereof are entered into his Contract Book and signed by him, a memorandum thereof being sent to each party — that is, a bought note to the buyer and a sold note to the seller. In the event of any difference between the terms in the bought and sold notes, the entry in the Contract Book provides the terms of the agreement. Lord Ellenborough having decided that the entry in the Contract Book was the binding contract. Where the notes differ, and no entry is made by the broker in his book, there is no contract. Contract Note. —A brief statement of the terms of a contract. The term is com- mercially applied to bought and sold notes issued by brokers in respect of produce, stock, or marketable securities. Notes relating to stock or marketable securities are liable to stamp duty as follows : — When the stock bought or sold is of the value of /5 or upwards, but not exceeding ;^ioo, the duty is one penny, which may be denoted by an adhesive stamp. When the stock bought or sold is of the value of ;^ioo or upwards the duty is is., which may be denoted by an adhesive stamp, specially appropriated to contract notes. In all cases the stamp must be cancelled by the person issuing the note. Where a note advises the purchase or sale of more than one description of stock or marketable security, the note is deemed, for the purposes of stamp duty, to be as many contract notes as there are descriptions of stock purchased or sold. When the stamp duty upon a note is one | shilling, the broker may add the amount of 1 duty to his charge for brokerage ; but any person who makes or executes a contract note which is chargeable with duty, not duly stamped, incurs a penalty of /20, and has no i legal claim for his brokerage in respect of the | contract. A broker is also subject to a penalty of ;^20 if he neglects to send a con- tract note to his principal when such contract note would, if sent, be chargeable with duty. For the purposes of the Stamp Act (1891) the terra " contract note " is defined as : — " The note sent by a broker or agent to his '* principal (except where such principal is *' acting as a broker or agent for a principal) " advising him of the sale or purchase of any " stock or marketable security." {See Contract Book.) Contract] 87 [Contributory Contract of Affreightment. — An agree- ment between a shipowner, or person acting through or for him, and another person, whereby the shipowner agrees to carry goods by water, or provide a ship for that purpose, in consideration of a sum of money to be paid to him called freight. When the agreement is to carry a complete cargo, or to furnish a ship for that purpose, the contract of affreightment is called a charter-party {q.v.), and when the agreement is to carry goods which form only part of the intended cargo of the ship, the contract of affreightment as to each parcel of goods shipped is evidenced by a bill oj lading [q.v.). Contribution. — The payment or performance of a share of the liability under a contract by each of two or more persons liable thereon. A right of contribution must be distin- guished from a right of recoupment. For instance, the remedy of co-surety against co- surety is for contribution, whilst the remedy of the sureties against the principal debtor is for recoupment. {See Contributory, Co- surety, Directors' Liability Act 1890, Partnership [distribution of assets] .) Contributory. — The term " contributory " means every person liable to contribute to the assets of a company registered under the Companies Acts, in the event of the same being wound up. It also includes, in all proceedings for determining the persons who are to be deemed contributories, and in all proceedings prior to the final determination of such persons, any person alleged to be a contributory. (1862 Act, section 74.) The holder of fully-paid shares is a con- tributory, and is entitled to the benefit of the provisions for the adjustment of the rights of the contributories amongst them- selves, and he, if otherwise qualified, may also present a petition for winding-up the com- pany. But a fully-paid shareholder is not liable to be placed upon the list of contribu- tories unless he so desires, for he is not liable to contribute anything to the assets of the company. Section 38 of the Companies Act 1862 provides that : — 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 com- pany to an amount sufficient for payment of the debts and liabilities of the company, and the costs, charges and expenses of the wind- ing-up, and for the payment of such sums as may be required for the adjustment of the rights of the contributories amongst them- selves, with the qualifications following (that is to say) : — ( i) No past member shall be liable to contribute to the assets of the com- pany if he has ceased to be a member for a period of one year or upwards prior to the commencement of the winding-up. (2) No past member shall be liable to contribute in respect of any debt or liability of the company contracted after the time at which he ceased to" be a member. (3) No past member shall be liable to contribute to the assets of the com- pany, unless it appears to the Court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this Act. (4) In the case of a company limited by shares no contribution shall be required froni any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member. (5) In the case of a company limited by guarantee no contribution shall be required from any member exceeding the amount of the undertaking entered into on his behalf by the memoran- dum of association. (6) Nothing in this Act contained shall invalidate any provision contained in any policy of insurance or other con- tract whereby the liability of indi- vidual members upon any such policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of such policy or contract. (7) No sum due to any member of a com- pany, in his character of a member, Contributory] 88 [Contributory by way of dividends, profits, or other- wise, shall be deemed to be a debt of the company payable to such member in a case of competition between him- self and any other creditor not being a member of the company ; but any such sum may be taken into account for the purposes of the final adjust- ment of the rights of the contribu- " tories amongst themselves. A winding-up order alters the position of shareholders or members and makes them contributories. Section 131 of the Companies Act 1862 pro- vides {inter alia) : — Whenever a company is wound up voluntarily .... all trans- fers of shares (after the commencement of the winding-up) except transfers made to or with the sanction of the liquidators, or alteration in the status of the members of the company, taking place after the commencement of such winding-up shall be void. A liquidator in voluntary winding-up has, therefore, the power to register a transfer after wdnding-up, and the transfer when registered will have full effect. [Re National Bank of Wales, 1897.) Section 153 (ibid) provides {inter alia) : — Where any company is being wound up by the Court, or subject to the supervision of the Court .... every transfer of shares or alteration in the status of the members of the company made between the commencement of the winding-up and the order for winding-up shall be void unless the Court otherwise orders. There may be one, or more than one, class of contributories according to the constitu- tion of the company, for the members may as between themselves be liable in a different degree, or in a different order, for the payment of the debts of the company. The section quoted above provides for two classes of con- tributories, viz., present members, i.e., those who are members of the company at the commencement of the winding-up, and past members, i.e., those who have ceased to be members within a year next before the com- mencement of the winding-up. The lists of contributories are settled as soon as may be after the commencement of the winding-up. The present members are recorded upon what is commonly called the "A" list, the past members being placed upon the " B " list. But the " B " list is in many cases not settled at all, and is never settled unless it appears to the Court that the contributories on the " A " list will be unable to satisfy the debts and liabilities of the company. For procedure as to settling the lists see infra. The liability of any person to contribute to the assets of a company registered under the Companies Act, in the event of the same being wound up, is deemed (in England) to create a debt of the nature of a specialty accruing due from such person at the time when his liability commenced, but payable at the time or respective times when calls are made for enforcing such liability. (1862 Act, section 75.) Section 7 of the Companies Act 1900 pro- vides that : — " Whenever a company limited by shares " makes any allotment of its shares the " company shall within one month thereafter " file with the Registrar : — {A) A return of the allotments with full particulars as to allottees &c., and (B) "In the case of shares allotted in " whole or in part for a consideration " other than cash, a contract in writing "constituting the title of the allottee " to such allotment, together with any " contract for sale, or for services or " other consideration in respect of " which such allotment was made, " such contracts being duly stamped, " and a return stating the number and " nominal amount of shares so allotted, " the extent to which they are to be " treated as paid-up, and the consider- " ation for which they have been "allotted." This section, which repeals section 25 of the Companies Act 1867, does not dispense with the necessity of a consideration for the shares, but provides that if the consideration is other than cash, it shall be expressed in a duly filed contract. Under, the older section it was held that if shares have been allotted under a con- tract which has not but ought to have been registered, the holder is liable to pay for Contributory] 89 [Contributory such shares in cash, for the unregistered contract would be no answer to an action for calls ; but a transfer of such shares without notice of the liability to a bond fide purchaser who acts on the faith of the transferor's certi- ficate, which states that the shares are paid up to a certain amount (fully-paid or other- wise), relieves such transferee from liability to pay the moneys so expressed to have been paid up, for the company is estopped trom denying the truth of the representation on the certificate. [Burkinshaw v. Nichols.) Bankruptcy.— In the event of the bank- ruptcy of a contributory the company, whether in liquidation or not, may prove for arrears of calls and the liability for future calls. (1862 Act, section 75, and Fuller v. McMaJion (1900), i Ch. 173.) {See Debts Provable in Bankruptcy.) Although a contributory who is also a creditor of a company is not allowed to set off moneys due to him as a creditor against moneys (calls) due from him as a contribu- tory, an exception is made when a contribu- tory becomes bankrupt after the commence- ment of the winding-up. In such a case the trustee in bankruptcy may set off against the calls any moneys due by the company to the bankrupt (except money due to the bank- rupt as a member), and a claim may be made for the balance (if any) either in the bank- ruptcy or the winding-up, as the case may be. If any moneys are due from a bankrupt contributory his trustee is placed upon the list of contributories, and is deemed to repre- sent the bankrupt for the purpose of the winding-up, unless he has disclaimed before a call has been made, for he may (notwith- standing section 153 of the Companies Act 1862) disclaim after a winding-up has com- menced. In the event of a disclaimer there is, of course, a right of proof against the contributory's estate for the resulting injury. Marriage. — If any female contributory marries, either before or after she has been placed on the list of contributories, her husband shall, during the continuance of the marriage, be liable to contribute to the assets of the company the same as she would have been liable to contribute if she had not married, and he shall be deemed to be a contributory accordingly. (1862 Act, section 78.) The right course, therefore, in such a case would be to settle both husband and wife upon the list of contributories, so that, if the wife survive, her liability may survive also. The provisions of the 1862 Act have, how- ever, been considerably affected by the Married Women's Property Act 1882, section 7 providing that shares in any company which after the commencement of that Act shall be allotted to, or placed, registered, or transferred in or into or made to stand in the sole name of any married woman shall be deemed, unless and until the contrary be shown, to be her separate property, and in respect of which, so far as any liability may be incident thereto, her separate estate shall alone be liable whether the same shall be so expressed in the document whereby her title to the shares is created or certified, or in the book or register wherein her title is entered or recorded, or not. . Section 13 further provides that a woman, after marriage, shall continue to be liable in respect and to the extent of her separate property for all con- tracts entered into before her marriage, including any sums for which she may be liable as a contributory, either before or after she has been placed upon the list of contributories, under and by virtue of the Acts relating to joint stock companies. Section 14 provides that a husband (married after 1882) shall be liable for his wife's ante- nuptial debts, contracts, and torts, including any liabilities as a contributory, but only to the extent of any property belonging to his wife which he acquired or became entitled to from or through his wife. The precise effect of the Act of 1882 upon section 78 of the Act of 1862 is a matter of some uncertainty. In view of the subsequent change in the law limiting a husband's liability for his wife's ante-nuptial debts, as above stated, the question is whether section 78 of the 1862 Act is still in force, imposing a special (statutory) liability upon the husband to contribute to the assets of a company in winding-up, although he would not have otherwise been so liable. The section, however, only applies (i) to a winding-up, so that a husband, is not thereby rendered liable to pay calls otherwise than in the winding-up of a company, and (2) to ante-nuptial debts — that is to say, to cases where the wife was Contributory] go [Contributory a shareholder before marriage, and not to cases where a married woman is placed upon the register. A much narrower interpretation of the section has been suggested, viz. : — " That, as a shareholder does not become ^' a contributory until winding-up commences, ** the words * if any iemale contribiitoyy ma.Tnes,' *' require that, in order to render the husband '* liable, the marriage must have taken place "after the commencement of the winding- -up." In Ex parte Hatcher (1879), Fry, J., stated, inter alia, that " The liability to contribute, "in the case of winding-up, is a statutory "liability having very peculiar incidents of "its own, and the objects and nature of it "are to be learnt from the Act of 1862 "itself. The husband's liability clearly "commenced when he married, and, there- " fore, he is to be deemed to owe a debt, the " accruing due of which commenced from the " time of his marriage. He is a contribictory "himself, and not merely the husband of a " contributory, and that liability to contribute, " which is made equal to a debt of his own, "cannot be affected by the Act of 1874, " which only deals with the husband's " liability in respect of his wife*s debts. There- "fore it does not touch the husband's own " hability to contribute." Whether the above would still be declared law, or whether the Act of 1882 is incon- sistent with the provisions of section 78 of the Act of 1862, is a matter of doubt. There has been no subsequent judicial decision, and the leading text-book writers unfortunately express no definite opinion on the point. Death. — If any contributory dies either before or after he has been placed on the list of contributories his personal representatives, heirs, and devisees shall be liable in a due course of administration to contribute to the assets of a company in discharge of the liability of such deceased contributory, and such personal representatives, heirs, and devisees shall be deemed to be contributories accordingly. (1862 Act, section 76.) "The liabiHty of a contributory is a " specialty debt, debitum in prasenti, solvendum ^'infuturo, and may be enforced, so long as " the shares are left standing in the deceased " member's name, or in that of his executors " as executors merely, both against his per- " sonal estate and against his real estate in " the hands of devisees. "If the personal representatives make "default in payment of calls made upon " them, the personal and real estates of the "deceased member may be administered. " The heirs and devisees need not necessarily " be placed on the list of contributories as " well as the personal representatives, but " may be added when the^ Court thinks fit. " Upon the death of a member, and until " his shares are personally accepted, trans- " ferred, or in some way disposed of by his "executors, the deceased member — that is, "his estate — remains a member, and his * ' representatives are on the one hand entitled " to the benefits accruing upon, and, on the " other, are in their representative capacity, "but not necessarily personally, liable for " calls in respect of his shares. " Whether, therefore, the shareholder die " after the commencement of the winding- " up, and either before or after he has been " placed on the list of contributories, or "whether he have died many years before "the winding-up, but his shares have not "been either personally accepted or other- " wise disposed of by his executors, the "liability of his estate is the same, and is " that which would have been the liability of ' ' the shareholder if living. " Executors, then, should be careful, before "proceeding to distribute their testator's "estate among the beneficiaries, to see that "they have provided for the contingent "liability in respect of such shares as they "have not disposed of, for otherwise they " may become personally liable." — Buckley. Executors, when placed upon the list of contributories in respect of their testator's shares, are liable only in their representative capacity and not personally, unless (i) they have personally accepted the shares, or (2) they have made themselves liable for a devastavit. The mere recording in the Share Register of the names of the representatives of a deceased member on production of pro- bate or letters of administration does not per se amount to an election on the part of the representatives to become registered as the holders of the shares of the deceased Contributory] 91 [Contributory member; there must be a "distinct and intelligent request " on the part of the repre- sentatives. (Cairns, "L.C, Re Buchan.) Trusts. — No notice of any trust, express, implied, or constructive, can be entered on the Share Register, the object being to free the company from the responsibility of enquiring after persons for whom shares are held in trust ; the trustee, therefore, cannot evade personal liability in respect of the shares standing in his name. If there are several trustees each is liable for the total amount due in respect of the shares of which he is one of the joint holders. As between the trustee and his cestui que trust, the latter is bound to indemnify the trustee against all liabilities attaching to the shares. Infancy. — The articles of association of a company sometimes prohibit the allotment or transfer of shares to an infant, but even apart from such a clause the company cannot be compelled to admit an infant as a member. If, however, shares be held by an infant transferee the company may, on ascertaining that fact, apply for a rectification of the register, so as to restore the name of the transferor. If a shareholder be an infant at the date of winding-up he cannot be placed upon the list of contributories, but if he originally held the shares as an infant, and is of full age at the date of winding-up, it is then a question whether or not he has elected to take the shares. If, on coming of age before the winding- up, he has elected to take the shares he will be liable as a contributory. Such election may be evidenced by (i) exercising any act of ownership over the shares, or (2) failure to repudiate the shares within a reasonable time after coming of age. The '* A " list of contributories will, there- fore, consist of the following : — (i) Every person who was a member at the commencement of the winding-up, who has not since died or become bank- rupt, and subject to the provisions as to infancy stated above. (2) The personal representatives (and, if thought necessary, the heirs and de- visees) of every member who has died since the commencement of th^ winding-up, or, having died previously, whose shares were not personally ac- cepted by his representatives. (3) The trustee in bankruptcy of any con- tributory, provided the shares have not been disclaimed before a call has been made. (4) The husband of a female shareholder (subject to the provisions of the Married Women's Property Act 1882, quoted above) . The " B " list of contributories will consist of all persons who have ceased to be mem- bers within a year next preceding the com- mencement of the winding-up, and, in the case of successive transfers of shares within the year, although as between themselves each transferor has a right to be indemnified by his transferee, yet, as regards the com- pany, all parties to such transfers are liable to be placed upon the "B" list, and the liquidator may apparently come upon any one of them for the calls, leaving them to settle their rights iiiter se. {See Measure of Liability, infra.) For the purpose of determining the year preceding the winding-up see Winding-up. Procedure. — In the winding-up of a com- pany by the Court the procedure in settling the list of contributories is as follows: — The liquidator shall, with all convenient speed after his appointment, settle a list of the contributories of the company, and shall appoint a time and place for that purpose. The list of contributories shall contain a statement of the address of, and the number of shares or extent of interest to be attributed to, each contributory, and shall distinguish the several classes of contributories ; and shall also distinguish between persons who are contributories in their own right, and persons who are contributories as being representatives of, or liable for, the debts of others. It shall not be necessary, where the personal representative of any deceased con- tributory is placed on the list, to add the heirs or devisees of such contributory ; nevertheless, such heirs or devisees may be added as and when the Court thinks fit. (Rule 80, and 1862 Act, section 99.) Contributory] 92 [Contributory The liquidator shall give notice in writing of the time and place appointed for the settle- ment of the list of contributories to every person whom he proposes to include in the list, and shall state in the notice to each person in what character, and for what number of shares or interest, he proposes to include such person in the list. (Rule 81.) On the day appointed for settlement of the list ot contributories, the liquidator shall hear any person who objects to being settled as a contributory, and after such hearing shall finally settle the list which, when so settled, shall be the list of contributories of the company. (Rule 82.) The liquidator shall forthwith give notice to every person whom he has finally placed on the list of contributories, stating in what character, and for what number of shares or interest he has been placed on the list, and in the notice inform such person that any application for the removal of his name from the list, or for a variation of the list, must be made to the Court by summons within twenty-one days from the date of the service on the contributory, or alleged contributory, of notice of the fact that his name is settled on the list of contributories. (Rule 83.) Subject to the power of the Court to extend the time or to allow an application to be made notwithstanding the expiration of the time limited for that purpose, no application to the Court by any person who objects to the list of contributories, as finally settled by the liquidator, shall be entertained after the expiration of twenty-one days Irom the date of the service on such person of notice of the settlement of the list. (Rule 84 (i) .) The liquidator may, from time to time, vary or add to the list of contributories, but any such variation or addition shall be made in the same manner in all respects as the settlement of the original list. (Rule 85.) Where a company is being wound up voluntarily, the liquidator settles the list, and, although it is advisable to follow the pro- cedure of a compulsory winding-up, it is not essential to do so. The list, however, in any case, when settled by a voluntary liquidator is only prima facie evidence of the liability of the persons named therein to be contribu- tories. (1862 Act, section 133.) Measure of Liability. The " A " list contributories are primarily liable to pay the debts of the company, and before the Court will sanction a call upon the **B" list contributories {i.e., the past members), proof must be given (i) that debts remain unsatisfied which were existent at the dates the respective contributories ceased to be members, and (2) that the assets of the company and the contributions recoverable from the whole of the contributories on the " A " list will be insufficient to satisfy all the debts. Even when the liability of a " B " list con- tributory has arisen, it is limited : — (i) In the case of a " limited company," to the amount left unpaid on the specific shares he formerly held, after allowing for the contributions (if any) received from the " A " contributory ; and (2) Whether a limited or unHmited com- pany, to the balance unpaid of such debts of the company as were existent at the date he ceased to be a member, after allowing for the amounts paid in respect of same out of the assets of the company, including the contributions which have exhausted the present members on the " A " list. Although the existence of the debts referred to above (No. 2) is the direct cause of liability attaching to " B." list contributories, their contributions, when received, are not distri- butable exclusively among such "old" credi- tors, but are treated as a common fund, i.e., as part of the general assets of the company, and applied for the benefit of all the creditors of the company. " You will apply all that you can get from " the existing members in payment of the " existing debts, no matter of what date. If, "after you have done that, there remain " debts unsatisfied, so that you have to resort " to members who have passed away from " the company within a year, then you will •• be compelled to classify the residimm of the " debts so remaining, and ascertain what part " of that residuum is to be attributed to past "debts — that is, to debts which pre-existed ' ' the transfers made by past members, and " what portion is to be attributed to the new "debts, which have arisen subsequently to " the date of the last transfer. When you Contributory] 93 [Contributory "have ascertained the proportion which is "attributable to debts which existed when *' the transfers were made, if there have been ' ' several transfers within the year, you will " be compelled of necessity to subdivide that " portion of the residuum into several por- " tions, according as you find that transfers '* have been made within the past year." (Lord Westbury in Webb v. Whiffin.) There is, however, no rule requiring the liquidator to exhaust the later members of the " B " list before calling on the earlier ones. All are simultaneously liable as regards debts incurred whilst they were respectively mem- bers. With regard to successive transferees of the same share during the year preceding the winding-up, all (being on the " B " list) are apparently liable for the sum due in respect of such share, subject to a right of indemnity by each transferor from his trans- feree. {Bretfs case and Morris's case.) The liability of a "B" list contributory with regard to the costs and expenses of winding-up is restricted to such costs and expenses as have been necessarily incurred in calling upon him for contributions in respect of debts. Adjustment of the Rights of the CoNTRiBUTORiES inter se. — When the creditors of a company which is being wound up have been paid in full, and a surplus remains, the Court (or, if in voluntary liquidation, the liquidator), after retaining sufficient to pay the costs of winding-up, must divide the surplus so remaining amongst the contributories, according to their respective rights and interests. This is termed ' ' adjusting therightsof the contributories amongst themselves.'' No contributory who is indebted to the com- pany for calls or otherwise can participate in the distribution, unless and until he pays the amount due from him. Before making a distribution amongst the general body of con- tributories, the claims of those who were debarred from a right of set-off in respect of dividends and other sums due to them qua members must be taken into account. Where a call has been made upon " B " list contributories, and it is afterwards ascertained that the contributions were sufficient to the extent that such "B" list contributions need not have been made, the "B" list contributories have a preferential right against the surplus for any sums they may have so paid. (Helbert v. Banner.) In the absence of special provisions the general distribution of assets must be made in such a manner as to allot the loss of capital to the members in proportion to the nominal amounts of capital respectively held by them. To give this result where all the shares were fully paid, or, being of the same nominal amount, had equal sums paid up thereon, the distribution would be pro rata ; but in some companies some of the shares are fully paid up and others only partly paid, so that in order to allot the loss of capital in proportion to the nominal amounts of capital held it would be necessary to (i) call up the difference between the "short paid" shares and the " fully paid " shares, and (2) dis- tribute the assets (augmented by the calls just made upon the " short paid " shares) amongst the contributories pro rata. Where certain shares have been issued at a discount the holder was held liable to pay up the amount of such discount in cash to the liquidator, even though the liabilities of the company had been paid, and the "call" had been made merely to adjust the rights of the contributories between themselves {Wei ton V. Saffery, 1897.) In Birch v. Cropper the House of Lords held that the surplus remaining after discharging the liabilities and repaying the capital was to be divided among all the shareholders in pro- portion to the nominal amount of the shares held by them, and not in proportion to the amounts respectively paid up thereon. Express provision is, however, generally made by the memorandum or articles of association for the distribution of the surplus assets afterpayment of debts, particularly pro- viding for the prior payment out of the assets of the preference share capital, for without some such provision preference shares do not confer a preferential right to return of capital in a winding-up ; but on the other hand, in the absence of any restricting clause, the preference shares would be entitled to par- ticipate rateably with the ordinary shares in respect of any surplus remaining after paying off the whole of the paid up capital. [Bridg- ivaier case.) {See Calls, Surplus Assets.) Controlling] 94 [Co-owners Controlling Accounts, — See Sectional Ledgers. Control over Debtor.— Every debtor against whom a receiving order is made shall, unless prevented by sickness or other sufficient cause, attend the first meeting of his creditors, and shall submit to such exam- ination and give such information as the meeting may require. He shall give such inventory of his property, such list of his creditors and debtors, and of the debts due to and from them respectively, submit to such exam- ination in respect of his property or his creditors, attend such other meetings of his creditors, wait at such times on the Official Receiver, special manager, or trustee, execute such powers of attorney, con- veyances, deeds, and instruments, and generally do all such acts and things in re- lation to his property and the distribution of the proceeds amongst his creditors as may be reasonably required by the Official Receiver, special manager, or trustee, or may be prescribed by general rules, or be directed by the Court by any special order or orders made in reference to any particular case, or made on the occasion of any special application by the Official Receiver, special manager, trustee, or any creditor or person interested. He shall, if adjudged bankrupt, aid, to the utmost of his power, in the realisation of his property and the distribution of the proceeds among his creditors. If a debtor wilfully fails to perform the duties imposed on him by this section, or to deliver up possession of any part of his property which is divisible amongst his creditors under this Act, and which is for the time being in his possession or under his control, to the Official Receiver or to the trustee, or to any person authorised by the Court to take possession of it, he shall, in addition to any other punishment to which he may be subject, be guilty of a contempt of Court, and may be punished accordingly. (1883 Act, section 24.) The debtor cannot, however, be compelled to submit himself to a medical examination, so that the trustee may be enabled to effect an insurance on his life. {Board of Trade v. ock, 1888.) {See Discovery, &c.. Public Examination, Re-direction of Letters.) Conversion of Shares into Stock. — See Memorandum of Association. Conversion of Stock. — The exchange of one class of stock (newly created) for another class (to be extinguished). The conversion is generally made to equalise the rate of interest payable upon the whole or the greater part of a certain class oi stock — for instance, suppose a stock be divided into 4 per cent, and 3 per cent, classes, the class bearing interest at 4 per cent, could be con- verted into 3 per cent, stock, the holders being allotted such a nominal amount of the 3 per cent, stock as would afford them the same income as previously, e.g., a holder of ;^30o of 4 per cent, stock would receive ;^40o of 3 per cent, stock on the conversion. Where such a conversion of stock causes an increase in the nominal capital, additional ad valorem stamp duty must be paid upon such increase of capital. {Midland Railway Co. V. Attorney -General, H.L. 1902.) Co-owners. — Co-owners are not necessarily partners, the distinctions between co-owner- ship and partnership being : — (i) Partnership is based upon agreement, but co-ownership is not necessarily the result of agreement. (2) Partners are, unless restricted, agents for each other, but co-owners are not so unless specially authorised. (3) Partners cannot dispose of their partnership shares without the con- sent of the other partners, but a co- owner has a right of free disposition over his property without the consent of his co-owners. (4) Partnership involves the idea of work- ing for a profit, but co-ownership does not necessarily imply this. Partnership may, and invariably does, include co-ownership, but it cannot be said that the reverse will apply . Although a partnership may not consist of more than 20 persons (save in the case of a banking firm, when the limit is 10 persons) there may be numerous co-owners — for instance, there may be 64 co-owners of a Co-owners] 95 [Copyright ship trading with their common property with a view of profit, but such co-ownership does not per se create a partnership. Co-partnership.— 5^^ Partnership. Copyhold. — A base tenure founded upon immemorial custom and usage The tenant's estate partakes of the nature of a freehold, but because it is held by a base instead of a free tenure it is called a copyhold. The evidence of the copyholder's title is the court-roll, which he can inspect, and, should he desire, he can make copies of entries thereon. As this class of tenure derives its whole force from immemorial custom, no copyhold estate can be created at the present day. A fine is payable to the lord of the manor on every grant or descent of the copy- hold. The manorial rights may, under certain circumstances, be commuted and the lands enfranchised, so that they become freeholds. {See Land Transfer Act.) With regard to a copyhold held by a bank- rupt, his trustee may either (i) disclaim same, or (2) deal with it as if it had been duly surrendered, or conveyed to such uses as he may appoint, and any appointee of the trustee is to be admitted or otherwise in- vested with the property accordingly. The trustee is not bound to be admitted to the land himself. Copyright. — The sole and exclusive privilege or liberty of printing or otherwise multiply- ing copies of any book, volume, pamphlet, sheet of letterpress, sheet of music, map, chart, or plan. The copyright of a book, &c., published in the lifetime of the author endures for his life- time and seven years after his death, or for 42 years after the date of first publication, whichever is the longer term. If the work is first published after the author's death the copyright exists for 42 years from the date of first publication, and belongs to the pro- prietor of the manuscript. Copyright is created by statute, and does not depend upon registration, which is per- missive only, and not compulsory. The copyright thus commences from the date of first publication, but no proprietor of copy- right in any book, &c., can take any pro- ceedings in respect of any infringement of his copyright unless before commencing his proceedings he has registered his book ; the infringement complained of may thus precede registration. A proprietor of copyright desiring to register at Stationers' Hall must lodge there a demand in the prescribed form, setting forth the particulars of the book, &c., for the purpose of registration. The demand must be signed by the proprietor and duly witnessed, and a fee of 5s. is payable on registration. A book cannot be registered before it is published. Copyright is an incorporeal right, is personal property, and may be bequeathed by will. In the case of the owner's bank- ruptcy it vests in his trustee as property available for the creditors. Copyright can be assigned (wholly or in part), but the assignment must be in writing, not necessarily under seal. If the original proprietor has been registered, the assign- ment must also be registered before the assignee can sue thereunder. If, however^ the copyright has not been registered prior to assignment, the latter document need riot be registered, as the assignee can be registered as though he were the original proprietor — but, in any case, registration must precede any action in respect of the copyright. The Act of 1842 provides a mode of assign- ment by entry of the assignee's name and address by the proprietor in the register at Stationers' Hall, on payment of a fee of 5s., and such assignment is as effective as an assignment by deed, and is not liable to any stamp duty. An amount representing copyright invari- ably appears in the accounts of publishers,, newspaper proprietors and others, being based upon (i) cost ; (2) accumulated expenditure (advertisements, losses in earlier years, &c.) ; (3) a stated number of past years' profits, or otherwise, according to circumstances. The treatment of copyright in the accounts involves to a great extent consider- ations similar to those affecting Goodwill {q.v.). The precise character of the work or works, the length of period unexpired, and the probability of the work retaining its commercial value during the period of copyright, must all be considered in deal- ing with the item. Copyright] Accumulated expenditure does not neces- sarily represent the value of a copyright, although it may be said that (indirectly) it represents the cost of acquisition^ and in assessing its value for Balance Sheet pur- poses this fact must be taken into account. Where the system of valuing upon a basis of a stated number of past years' profits (say four years) is adopted, the annual fluctuation, be it increase or decrease, is not a revenue item. The general tendency, how- ever (particularly in the case of joint stock companies, where the capital cannot be affected by adjustments), is either to leave the item undisturbed as regards amount, or interfere with it only with the idea of its ultimate elimination from the accounts by instalments out of profits. Corporation. — '* Corporations are artificial " persons created by law and endowed by it " with the capacity of perpetual succession. ^' They consist of collective bodies of men or "of single individuals; the first are called " corporations aggregate, the second corpora- " tions sole {t.g.^ a bishop). The existence of "corporations is constantly maintained by " the succession of new individuals in the '* place of those who die or are removed." Thus a corporation is considered as a dis- tinct individual from the persons composing it. The property of the corporation and not that of its members is liable for its debts, although the members may be liable to con- tribute to the assets of the corporation. The corporation may sue and be sued by its own members (but see Public Officer). Although a corporation ' ' has neither body " to be kicked, a soul to be saved, nor a ** mind to harbour ill-will," it apparently may be sued for wrongful acts. So, in the case of a company registered under the Companies Act 1862 et seq., an intent to prefer a creditor may be proved against the company in the event of winding-up (upon evidence of any act in relation to the com- pany's property, which, if done by an in- dividual trader, would have been deemed a fraudulent preference in the event of his bankruptcy), and the act rendered invalid accordingly. 96 [Cost The Interpretation Act 1889 provides that the expression "person" shall, unless the contrary intention appears, in every Act passed since 1889, include any body of persons, corporate or unincorporate. Corpus. — See Capital (Legal). Cost Accounts. — The term "Cost Accounts" in its widest sense implies a system of accounting for the materials and labour employed, and in some cases the working expenditure incurred, in the manufacture of a commodity or commodities, cr a class of commodities, so as to show : — (i) The prime cost or cost oT production (according to the system employed) of each particular work or commodity or class of same, so that the manu- facturer may know : — {a) What profit or loss he has made or sustained thereon — ^if sold. [b) What price he should charge therefor when completed — if not sold. {c) What price he should base his future estimates upon in respect of similar commodities. (2) The disposition of the materials con- sumed and labour employed, for if [a) The cost of materials consumed and labour employed be charged against the cost of the various productions ; and {i) Such costs of production are not excessive, but yield a satisfac- tory margin of profit ; and [c) The aggregate of such margins of profit (as ascertained from the costs of the various commodi- ties) agrees approximately with ihe corresponding balance shown by the financial books, ihen it follows that the expenditure in respect of materials and labour has been justified. The question as to whether it is practic- able or necessary (i) to ascertain the cost of each article produced, or (2) to ascer- tain the cost of each department only, oar Cost] 97 [Co=surety {3) to ascertain both individual and collective costs, must depend upon the par- ticular circumstances in each case. The method adopted will also depend to some extent upon circumstances, but generally a S3''stem of Cost Accounts must provide for: — {a) The distribution of the direct wages over the various " units," whether articles, departments, contracts, or jobs in hand. [b) The distribution over the various " units " oif the materials employed, whether issued from store or specific- ally obtained. [See Stores Account.) [c) The. apportionment of fixed or other charges — e.g., supervision and time- keeper's wages — incurred in connec- tion with the manufacture, produc- tion, or completion (as the case may be), which cannot be specifically allotted to any particular " unit," This apportionment may be based on (i) time occupied, or (2) turnover, or (3) value of materials used, or (4) amount of wages involved, or otherwise, according to requirements or circumstances. {See Cost of Production, Manufacturers' Accounts.) Cost Book Mining Company. — A company formed by a number of persons who have decided to contribute capital in certain pro- portions in order to search for ores, or work a mine. They appoint an agent called the purser, who conducts the affairs of the mine. The purser keeps a Cost Book wherein is entered the names of the share- holders and the number of shares respec- tively held by each. The minutes of all proceedings are also recorded in this book, and are required to be signed by all present at the various meetings. The purser enters all receipts and payments in respect of the mine in the Cost Book and prepares a statement periodically showing the financial position. This must be done once at least in every sixteen weeks, but it is generally done about once in every two months. A meeting of the shareholders is called to consider the purser's reports and accounts and, if a profit has been made, to declare a dividend. Subject to any special provision to the contrary a shareholder in a Cost Book partnership may relinquish or transfer his shares upon paying to the purser his share of the liabilities (if any) to date. Where the shares are relinquished notice must be given to the purser, and where they are transferred an entry of the transfer must be made by the purser in the Cost Book. Although a Cost Book mining company is practically a partnership, it does not con- stitute a partnership within the meaning of the Partnership Act, 1890. These companies appear to occupy an intermediate position between an ordinary joint stock company and an ordinary partnership. This class of company is peculiar to the Stannaries of Devon and Cornwall. Cost of Production. — The total expenditure incurred in the production of a commodity, as distinct from the prime cost, which is the original or direct cost of same. {See Manu- facturers' Accounts.) Co-surety. — One who is a surety in conjunc- tion with another ot others. One of several sureties on paying the debt has a right of contribution from his co- sureties (i) whether they are bound jointly or severally ; (2) in the same or in different instruments ; and (3) whether aware or ignorant of their mutual relationship, provided they are sureties for the same debtor and the same transaction. All must contribute equally if they are sureties for an equal amount, otherwise their contributions must be in the agreed proportions. No contribution can be recovered from a co-surety for any sum beyond the amount for which he has agreed to be bound, nor does the right to recover contribution arise until a surety has paid more than his just and proper proportion as agreed between him and his co-sureties, although he may have paid a considerable sum and his co- sureties have paid nothing. H Co-surety] 98 [Cover Where, however, a creditor has obtained a judgment against one or more of co-sureties for the whole of the debt, the surety may, without faying the deity bring an action against a co-surety for help to meet the amount of the judgment, for it is clear that if there are two or more sureties equally liable, the satisfaction of a judgment for the full amount of the debt by one surety will in- volve a payment by him in excess of his due proportion, and give rise to a right of contribution. But, as already stated, the surety is not in such a case called upon possibly " to ruin himself before seeking relief." Co-sureties are entitled to the benefit of all securities obtained by one of their number, whether they were aware of such securities or not. In addition to his right of contribution from co-sureties in respect of any payment in excess of his just proportion, a co-surety has his right of recoupment from the principal debtor for the whole amount he has paid to discharge his obligation, after deducting, of course, any sums received from co-sureties. In the event of the insolvency of one or more of a number of co-sureties, the due proportions for which the solvent sureties were liable are correspondingly increased. Thus, if there were originally five co- sureties and two became bankrupt (the estates providing no dividend) any surety paying the whole of the debt guaranteed would be entitled to recover contribution to the extent of one-third from each of the other solvent co-sureties, instead of the one-fifth for which they were originally liable. The liability of a bankrupt co-surety to contribution, although unascertained at the time of the bankruptcy proceedings, is a debt provable in the bankruptcy. The discharge of a bankrupt, or the acceptance by a creditor of a composition or scheme under the Bankruptcy Acts, does not release any person who was jointly bound or had made any joint contract with the bankrupt or debtor. The Statute of Limitations does not begin to run against a surety suing a co- surety for contribution until the liability of the surety is ascertained, i.e., until the claim of the principal creditor has been established against him; although at the time of the action for contribution the statute may have run as between the prin- cipal creditor and the co-surety. [See Guarantee.) Countersign. — The signature of a subordinate officer upon a document, to vouch for the authenticity of the signature or signatures of his superior officer or officers upon the same document. Country Notes.— The bank notes of all banks of issue, other than the Bank of England. They do not constitute legal tender. Coupon.— A piece cut off. The interest pay- able upon debenture bonds and the like is sometimes distributed by means of coupons. Upon or after the issue of the bond a sheet is issued, containing a certain number of " pay orders," representing the successive periods in which, interest will become payable. As each due date comes round the particular section of the' sheet must be detached, and payment will be made thereon, as and where indicated upon the coupon itself. A coupon for interest attached to or issued with any security, or with any agree- ment or memorandum for the renewal or extension of time for payment of a security, is exempt from duty (of id.) — Stamp Act 1 89 1 — and the exemption applies whether the coupons are issued with the security or issued subsequently in a sheet. (Finance Act 1894.) Covenant. — An agreement under seal between two or more parties, by which one (or more) of the parties pledges to the other, or others, either that some act has been done or will be done, or stipulates for the truth of certain facts. Cover. — Securities in the form of bonds, scrip, certificates, &c., deposited with a lender as security for a loan, generally with a margin in value, to cover the risk of loss in the event of the default of the borrower. Cover] 99 [Credit The term is also applied to the deposit sometimes required by stockbrokers before entering into speculative transactions on behalf of a client. Covering Debentures. — Those issued to the trustees (under a trust deed) "covering" the whole amount of the debentures issued by a company to the various holders. The trust deed (itself) is not a " debenture," and, as a consequence, chattels used to be excluded therefrom, to avoid the provisions of the Bills of Sale Acts, but by giving the trustees debentures for the whole issue they were thereby collaterally secured by a floating charge upon the chattels and other effects of the company without being called upon to register such charge as a bill of sale, the 17th section of the Bills of Sale Act of 1882 exempting certain debentures from the pro- visions of the Act. Since the ist January 1901 any resort to this procedure will be ineffectual, as section 14 of the Companies Act 1900 requires every mortgage or charge created by a company after the commence- ment of the Act and purporting {inter alia) to secure any issue of debentures to be registered within 21 days of its creation. [See Register of Mortgages.) The payment of interest to the individual holders operates in satisfaction pro tanto of the interest on the " covering debentures," for, although documents exist for double the amount of debentures issued, the actual indebtedness, as regards principal and interest, is unaffected. {See Debenture, Trust Deed.) Cover Note. — A note issued by an insurance company (generally fire, accident, or guarantee) setting forth the terms and subject matter upon which a proposal for insurance has been made, and declaring that subject to certain conditions the proposer shall be " covered " until a policy has been prepared and issued in conformity therewith, or until notice be given that the proposal has been declined. A cover note generally remains in force for 30 days only. Coverture. -The (legal) state of a woman dur- ing marriage. Formerly it gave rise to certain disabilities in respect of property, but since 1882 these have been almost entirely removed. Credit. — Trust or confidence ; commercially a person is said to give credit when he advances money upon loan, or transfers goods, or other property, to another, without stipulating for immediate payment. In economics credit is treated as negative capital, for it enables those who have an industry but no (positive) capital — or an insufficiency of it — to carry on such industry, credit being the capital of others which serves to supplement and render more complete the available resources of the trader. In bookkeeping, the term credit is applied to all entries corresponding with, or as opposed to, the debit entries. The placing of an amount to the credit of a personal account, either records a right of the par- ticular person to demand such amount, or else serves to record the satisfaction of an equivalent cross demand. The general YiiU in bookkeeping is to place all credit entries upon the right-hand side of the various books of account, the debit entries being placed upon the left-hand side. This is, however, a rule ensuring uniformity of practice rather than a book- keeping principle. {See Debit.) Defoe (writing in 1731) makes the follow- ing observations in his Complete English Tradesman :— " A tradesman ought to consider and " measure well the extent of his own strength ; ♦* his stock of money and credit is properly "his beginning; for credit is a stock as " well as money. He that takes too much " credit is really in as much danger as he '•that gives too much credit; and the ♦' danger lies particularly in this, if the "tradesman overbuys himself, that is, buys *' faster than he can sell, buying upon credit, ' ' the payments perhaps become due too '' soon for him ; the goods not being sold, "he must answer his bills upon the " strength of his proper stock — that is, paly " for them out of his own cash ; if that " should not hold out, he is obliged to put " off his bills after they are due, or suffer " the impertinence of being dunned by the " creditor This impairs his " credit j and if he comes to deal with the H 2 Credit] 100 [Crossed " same merchant or clothier, or other trades- "man again, he is treated like one that is "but an indifferent paymaster; and, "although they may give him credit as " before, yet, depending that if he- bargains " for six months, he will take eight or nine "in the payment, they consider it in the ^^ price and use him accordingly ; and this " impairs his gain, so that loss of credit is, "indeed, loss of money, and this weakens " him both ways. "A tradesman, therefore, especially at " the beginning, ought to be v.ery wary of " taking too much credit ; he had much " better slip the occasion of buying now and " then a bargain to his advantage, for that "is usually the temptation, than buying a " greater quantity of goods than he can pay " for, run into debt, and be insulted ; and, " at last, ruined. Merchants and wholesale "dealers, to put off their goods, are very " apt to promjpt young shopkeepers and " young tradesmen to buy large quantities of "goods and take large credits at first; but " if the young beginner does not find a vent " for the quantity, he is undone ; for, at " the time of payment, the merchant expects " his money, whether the goods are sold or " not ; and, if he cannot pay, he is gone at "once. The tradesman that buys warily, " always pays surely, and every young " beginner ought to buy cautiously ; if he "has money to pay, he need never fear " goods to be had ; the merchant's ware- " houses are always open, and he may " supply himself upon all occasions, as he " wants, and as his customers call. . . , " It is not possible in a country where " there is such an infinite extent of trade as "we see managed in this kingdom, that " either on one hand or another it can be " carried on without a reciprocal credit both " taken and given ; but it is so nice an " affair, that I am of opinion as many " tradesmen break with giving too much " credit as break with taking it. The danger, " indeed, is mutual and very great. What- " ever, then, the young tradesman omits, "let him guard against both giving arid " taking too much credit." {See Bookkeeping, Capital.) Credit Note.— An advice, acknowledgment, or admission of indebtedness sent or made in writing by a debtor to his creditor. The term is used commercially in connection with the note of allowance made by a vendor in respect of: — (i) Goods returned ; (2) Short weight ; (3) Abatement in price ; (4) Packages returned, &c. Creditor, — One who credits, believes, or trusts another ; commercially one to whom a sum of money is due. {See Secured Creditor.) Credit Sales. — Sales made, in respect of which payment is postponed, the price being recorded in the books of account of the vendor. The buyer becomes a debtor, and the price of the goods a book debt. Cross Bill.— 5^^ Re-draft. Crossed Cheque. — A cheque bearing across the face the addition of two parallel trans- verse lines, either with or without the words "and Company," or any abbreviation thereof, or with OY without the words " not negotiable." Thus :— (I) (2) (3) The above are instances of " general crossings." Crossed] lOI [Crown When a cheque bears across its face an addition of the name of a banker, either with or without the words "not negotiable," that addition constitutes a " special crossing" to that banker, thus : — (2) (3) \3v^ \o\^ \3.a' „V0*^"" &o^ The above are instances of ** special crossings." The Bills of Exchange Act 1882 does not recognise the words "account payee," or the name of the payee in full (written across the face of a cheque) as part of the crossing, and a banker would be justified in disregarding such additional words. The drawer may issue a cheque, crossed either generally or specially, or he may issue it uncrossed. Where uncrossed the holder may cross it generally or specially, or being crossed generally he may cross it specially, and whether crossed generally or specially he may add the words '^not negotiable. ' ' Where an uncrossed cheque, or a cheque crossed generally, is sent to a banker for collection, he may cross it specially to himself, and where a cheque is crossed specially to a banker, that banker may cross it again to another banker for collection. The crossing is a material part of the cheque, which cannot be lawfully obliterated or altered except as stated above. (1882 Act, sections 76, 77, 78.) A crossed cheque is only payable through a banker, that is to say, the holder cannot obtain a direct cash payment from the banker (as can be done in the case of an "open" cheque), but must pass the cheque through a banking account, either with the banker upon whom the cheque is drawn, or with some other banker. Where a banker pays a cheque crossed generally, otherwise than to a banker, or if crossed specially, otherwise than to the banker to whom it is crossed (or his agent for collection being a banker), he is liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid, provided that where a cheque is presented for payment which does not at the time of presentment appear (i) to be crossed, or (2) to have had a crossing which has been (a) obliterated, or [b) added to, or (c) altered otherwise than as authorised by the Bills of Exchange Act, the banker paying the cheque in good faith and without negligence shall not be responsible or incur any liability, nor shall the payment be questioned by reason of having been made (under such circumstances) otherwise than to a banker, or to the banker to whom the cheque is or was crossed, or his agent for i collection being a banker, as the case may be (Section 79.) Where a banker (in good faith and without negligence) pays a crossed cheque according to the terms of the crossing, he is protected to the extent that he is in the same position as if payment of the cheque had been made to the true owner thereof, (Section 80.) Cross Proof. — See Joint and Separate Estates, Crown Debts. — Debts due to the Crown. The Crown claims priority for its debts over all other creditors. In bankruptcy and winding-up procedure the Preferential Pay- ments Act 1888 {qrij.) provides for the prior payment of such taxes as may be due to the Crown, having become due and payable within a year previous to the commence- ment of bankruptcy or winding-up as the case may be ; whilst an order of discharge does not release the bankrupt from any debt with which he may be chargeable at the suit of the Crown, unless the Treasury certify in writing their consent to his being Crown] 102 [Date discharged therefrom. (1883 Act, section 30-) The Crown is bound by the provisions of the Bankruptcy Acts so far as regards (i) priorities of debts, (2) remedies against pro- perty, (3) the trustee's right of disclaimer, (4) the efect of a composition, and (5) the cfect of the debtor's discharge, but the Crown is not affected by the "relation back" of the trustee's title. (1883 Act, section 150, and Re Bonham, 10 Ch.D.) In the administration of the estates of deceased persons the debts due to the Crown after payment of reasonable funeral and testamentary expenses rank in priority to all other debts of the deceased. Cum Dividend.— With dividend. When a stock is sold it is presumed to carry with it any accruing dividend, unless there is an agreement to the contrary or the Stock Exchange Committee has declared the stock " ex dividend." If the transaction takes place after the Transfer Books have been closed (and it is a registered stock) the purchaser may either collect the dividend from the seller, or, if already declared and ascertained, he may deduct same from the purchase-money. If, however, the stock be sold " ex divi- dend " the seller has the right to retain or recover from the purchaser the dividend just paid or about to be paid. Cumulative Legacy.— 5^^ Legacy. Cumulative Preference Shares. — See Preference Shares and Stock. Current Account. — See Account Current. Custom. — Long usage. If a custom be universal it is common, but if it affect only certain districts or classes then it is par- ticular, and should present the following characteristics in order to be upheld and be judicially noted, viz. : — reasonable, cer- tain, compulsory, legally possible, and immemorial. Channell, J., has held that a custom judicially noted is not a rule of law, but a judicial recognition of a fact — the fact being that the practice so recognised as customary , generally prevailed. The recognition of such a custom would be withdrawn upon proof that as a matter of fact a new practice generally prevailed, in place of the former. Custom House. — The building where Govern- ment officials receive duties on imported goods, and where vessels are " entered " on arrival, and " cleared " when leaving port. Customs. — Duties charged upon commodities on their importation into, or exportation out of, a country. Customs of Merchants. — See Law Merchant. Cy-pres. — Near to it. " The principle of this " doctrine is that where a testator has two " objects which are incompatible and one is " primary or general and the other is secon- " dary or particular, the latter is sacrificed " so that the testator's intention may be " carried out as near as may be according " to law." Damage Survey. — An inspection held by surveyors, or other competent persons, to ascertain the nature and extent of the damage to a vessel or cargo. Data. — Grounds whereon to proceed ; facts from which to draw a conclusion. Date. — The time (generally the day) an event happened or something was done or is intended to be done. A deed (unless it be an escrow) takes effect from the date of its delivery, so that, pro- vided the date of delivery can be proved, a deed will be good even though it is not dated, or contains a false or impossible date {e.g., 31st February). A bill of exchange is not invalid by reason only that it is not dated, is ante -dated or post- dated, or bears the date of a Sunday. (1882 Act, sections 3 and 13). The date of an acceptance or indorsement is deemed to be the true date in the absence of evidence to the contrary (section 13), but the presumption may be rebutted, e.g., for the purpose of avoiding the effect of the Statute of Limitations. Where a bill is issued undated, and is pay- able at a fixed period after date or sight, any holder mav insert therein the true date of Date] 103 [Days issue, and the bill shall be payable accord- ingly, provided that where a wrong date has been inserted the bill shall nevertheless be deemed to be correctly dated as regards a holder in due course, and also as regards the party who inserted the date if he made the mistake ^o«a^^^. (Section 12.) Except where an indorsement bears a date after the maturity of a bill every negotiation IS prima facie deemed to have been effected before the bill was overdue (section 36), and in the absence of evidence to the contrary indorsements are deemed to have been made in the order in which they appear on the bill. (Section 32.) Where a bill is payable at a fixed period after date, after sight, or after the happening of a specified event, the time of payment is determined by excluding the day from which the time is to begin to run and by including the day of payment. The term " month " in a bill means calendar month. (Section 14.) A will is to be construed with reference to the real and personal estate comprised in it to speak and take effect as if it had been executed immediately before the death of the testator, unless a contrary intention appears in the will. Dating: Forward. — A practice adopted by some sellers of goods of dating an invoice some agreed period later than the time the goods in question are actually delivered. The object is to attract buyers by the long credit which such a system offers, but as the sellers must necessarily charge (by in- crease of price) for such accommodation and increased risk of making bad debts, it is not a system which can in any way be recom- mended. Apart from the principles involved, such a system of "dating forward " intensifies the difficulty of obtaining a correct account of the purchases of a concern in respect of a particular period, and the stock on hand at the end thereof, particularly so where the practice is carried on largely. [See Credit.) Day Book. — A book containing a chronological record ; commercially a record of transactions day by day. The term is usually applied in bookkeeping to the Sales (Day) Book, or the Purchase (Day) Book, wherein are recorded the sales and purchases respectively, although obviously the term is of wider application. Days of Grace. — The time of indulgence allowed to an acceptor for payment of a bill of exchange or promissory note. In the United Kingdom, 3 days called days of grace are added to the time of pay- ment of the bill or promissory note, and ordinarily the bill or note is due and payable on the last day of grace. There are no days of grace allowed on : — (i) Bills payable on demand ; and (2) Bills expressed to be payable " with- out grace." {A) When the last day of grace falls on a Sunday, Christmas Day, Good Friday, or a public fast or thanks- giving day, the bill is due and payable on the preceding business day (with the exception mentioned in C below). [B) When the last day of grace is a-Bank holiday (other than Christmas Day and Good Friday) or (C) When the last day of grace is a Sunday and the second day of grace is a Bank holiday, the bill is due and payable on the succeeding business day. (1882 Act, section 14.) Thus: — 00 ^0 Cases under A Cases under B Case under c I * 2 * Sunday Christ- mas Day Bank Holiday 3 Sunday, Christ- mas Day or Good Friday Christ; mas Day Bank Holiday Bank Holiday Sunday * Sunday * i 1 i (The asterisk shows the day upon which the bill is payable.) Where a bill is drawn in one country and is payable in another, the due date thereof is determined according to the law of the place where the bill is payable. That is to say, if an English bill were payable in a country which allowed no days of grace, the bill would Dayis] 104 [Debenture be payable on the date fixed by the instrument, i but a foreign bill payable in England would be entitled to 3 days' grace. Dead Charges. — The term applied to the expenses of a manufacturer which are not directly chargeable against the cost ' of any process or commodity. {See Cost Accounts, Establishment Expenses, Head Ofiice Charges, Manufacturers' Accounts.) Dead Freight. — That portion of the freight payable by a shipper who has agreed to supply, but has not supplied, a full cargo, at the agreed rate upon the quantity short shipped. Dead Rent. — See Royalty. Death Duties. — Duties levied upon the estates of deceased persons, or upon persons to whom any benefits accrue by the death of others. {See Estate Duty, Legacy Duty, Settlement Estate Duty, Succession Duty.) Death of Bankrupt or Debtor. — If a debtor by or against whom a bankruptcy petition has been presented dies, the proceed- ings in the matter shall, unless the Court otherwise orders, be continued as if he were alive. (1883 Act, section 108.) If a debtor against whom a bankruptcy petition has been filed dies before service thereof, the Court . may order service to be effected on the personal representatives of the debtor or on such other persons as the Court may think fit. (Rule 156a.) If a debtor dies after a receiving order has been made against him, an order of adjudica- tion may nevertheless be made {Re Walker, 1886), but after the death of a bankrupt the trustee cannot exercise a general power of appointment vested in the deceased. {Re Nicholls, 1885.) {See Deceased Insolvent.) Debenture. — An acknowledgment of a debt ; - '♦ securities given by companies." A deben- ture issued by a company takes the form of an instrument under the seal of the company, containing a covenant to repay the principal sum for which the company therein admits indebtedness, together with interest thereon at an agreed rate. The debenture usually contains a charge upon all or some of the company's property, and is issued subject to such conditions as may be agreed upon, which are generally endorsed upon the debenture. Where a debenture contains such a charge, or is issued with, and in pursuance of, a trust deed which contains such a charge, it is called a mortgage debenture. Where there is no charge incorporated in the debenture, it is called a simple debenture or naked debenture. Where the debentures are further secured by a trust deed, the freeholds and leaseholds of the company are usually conveyed to trustees for the debenture-holders, thus protecting the debenture-holders against the danger of having their claims postponed to those of subsequent mortgagees in respect of the property so conveyed, the other property of the company, stock-in-trade, book debts, &c., being subject to a charge contained in the debentures called a floating charge. {See Covering Debentures, Floating Charge.) Every mortgage or charge created by a company (since i Jan. 1901) for the purpose of securing any issue of debentures must be "registered" {see infra), but this must not be confused with what are termed " Regis- tered Debentures" as distinct from "De- bentures to Bearer," which form two of the classes into which debentures are commonly divided. Registered debentures are those which are expressed to be payable only to the registered holder. To effect a change of ownership they must, therefore, be transferred (as in the case of shares or stock) and the instrument of transfer duly registered with the company. The stamp duty upon registered debentures is per scale (based upon the rate ot 2s. 6d. per cent.), and the stamp duty upon the transfer thereof is at the rate of los. per cent. It has been held that where debentures are issued as redeemable at a premium at some future date the stamp duty payable on issue (2s. 6d. per cent.) must cover the amount of the premium as well as the * ' face value ' ' of the debenture. {Rowell's case (1897) 2 Q.B. 194.) But in Knight's Deep v. Commissioners (App. Cas. 1899) it was held that stamp duty was not payable on a premium payable only if redemption took place at the company's option at an earlier date than that originally fixed. {See Redeemable Debentures.) Of course, in the event of a transfer, the los. per cent, is payable upon the con- sideration for such transfer. Debenture] 105 [Debenture Dehentuns to hearer are those which are payable to the bearer thereof, and which pass by deHvery. The holder is not registered, nor is any written assignment necessary, the transfer stamp duty being thus avoided, but the stamp duty payable upon the debenture itself is los. per cent. Debentures to bearer are not issued so frequently as registered debentures. {See Negotiable Instruments.) A further distinction must be made between redeemable or terminable debentures and irredeemable or perpetual debentures. Redeemable debentures are those which provide for repayment of the principal sums (i) upon specified dates, (2) upon being " drawn " for redemption, or (3) after certain notice has been given of intention to repay. Irredeemable debentures are those which are issued upon condition that the principal sums secured are repayable only (i) on default of payment of interest, (2) on the winding-up of the company, or (3) on default as regards some special condition. Debentures issued by a company may, therefore, be classified as follows: — (i) Charge — (fl) Under trust deed, with a charge, either with or without covering debentures. [b) Without a trust deed, but debenture containing a charge. {c) Without any charge. (2) Holder — {a) Registered. {h) Bearer. (3) Repayment — {a) Redeemable or terminable. [b) Irredeemable or perpetual. There is no statutory limit imposed as to the amount a company can borrow upon debentures, but the articles of association sometimes impose such a limit. The com- pany must, however, have power to borrow, and this will depend upon its memorandum and articles of association. Generally, the memorandum expressly authorises the issue of debentures, but it appears that a company may borrow upon an implied power in the memorandum. Authority to borrow upon the security of the uncalled capital requires to be in more definite terms, but the power maybe contained in either the memorandum or the articles, a provision in the latter being suffi- cient if the memorandum is silent thereon ; but such a power in the articles will be of no avail if inconsistent with the memorandum. Where the memorandum and articles are silent upon the point, the articles may be altered by special resolution so as to enable the company to charge the uncalled capital. The rights of a debenture-holder having a charge upon the company's property are : — (i) To sue for repayment of principal, interest, and costs. (2) To present a petition to wind up the company. (3) To prove in the winding-up. (4) To appoint a receiver. The latter is the more usual course, but, as a general rule, these rights accrue only on the default of the company, in respect of all or any of the conditions under which the debenture was issued. Debentures may be issued at par, at a premium, or at a discount, but the actual liability of the company so issuing is measured by the nominal amount of the debentures in question; in the case of an issue of debentures redeemable at a premium, the contingent liability in respect of such premium must be recognised, and in many cases it is gradually provided for. (5^^ Execution Creditor, Preferential Payments, Trust Deed.) Registration.— Section 14 of the Companies Act igoo provides that every mortgage or charge created by a company after ist January 1901, being a mortgage or charge for the purpose of securing any issue of deben- tures, " shall, so far as any security on the " company's property or undertaking is "thereby conferred, be void against the "liquidator and any creditor of the com- •' pany, unless filed with the Registrar for "registration in manner required by this "Act within twenty-one days after the date of "its creation, but without prejudice to any " contract or obligation for repayment of the " money thereby secured" {i.e., the debt may be good, but the remedies available for enforcement of such debt will only be those open to an unsecured creditor). The " manner " of registration " required by the Act " is the entry by the Registrar on payment of the prescribed fee in a register Debenture] io6 [Debenture to be kept by him of (i) the date of creation of the charge, (2) the amount secured, (3) short particulars of the property charged, and (4) the names of the mortgagees or persons entitled to the charge. "With respect to a series of pari passu debentures, it is only necessary to record (t) the total amount secured, (2) the dates of the resolutions creating the series and of the covering deed (if any), (3) a general description of the pro- perty, and (4) the names of the trustees (if any) for the debenture-holders. Where [more than one issue is made of debentures in the same series, the company may require the Registrar to enter the date and amount of any particular issue, but an omission to do this shall not affect the validity of the debentures issued. The Registrar must give a certificate of such registration (which certificate is con- clusive evidence of compliance with the requirements), and the company must cause a copy of this certificate to be endorsed on every debenture or certificate of debenture stock issued by the company, the payment of which is secured by the mortgage or charge so registered. It is the duty of the company to supply the Registrar with the necessary particulars for registration, but the charge may be registered on the application of any person interested therein. The register is open to inspection by any person on payment of the prescribed fee, not exceeding is. A copy of every instrument creating a charge requiring registration as aforesaid is to be kept at the registered office of the com- pany, and to be open to inspection by the members and creditors of the company on pay- ment of the prescribed fee, not exceeding is. A copy of one debenture is sufficient in the case of a uniform series. In the event of omission to register or the misstatement of any particular, a Judge of the High Court is given discretionary power to order, on the application of the company or of any person interested, that the time for registration be extended, or that the omission or misstatement be rectified. (Section 15.) In Re Joplin's Brewery Company, Lim. (1901), Mr. Justice Buckley stated that in cases where the time for registration is extended under this section, the order (following the practice upon similar applica- tions under the Bills of Sale Act 1878 (sec- tion 14) ) ought to contain the words : " But *' this order is to be without prejudice to the " rights of parties acquired prior to the " time when such debentures shall be " actually registered." The Registrar may order a memorandum of satisfaction to be entered on the register on proof that a registered charge has been satisfied, and shall, if required, furnish the company with a copy thereof. (Section 16.) The company and its officers who wilfully make default in registration of any such mortgage or charge, and any persons who permit the delivery of a debenture without the endorsement thereon of the copy certi- ficate, are liable to penalties. In addition to the register kept by the Registrar, the company is required to keep one. (5^^ Register of Mortgages.) Aiidit. — It is important that an auditor should examine the conditions upon which debentures have been issued, for although it may not be incumbent upon him in all cases to inform the shareholders that a breach of such conditions has been committed, it is desirable that he should acquaint himself with the facts, so that he can exercise his judgment as to whether he should refer in his report to any such breach, for it is con- ceivable that under certain circumstances it may not be necessary to disclose the fact. An example of a breach of condition is the creation of specific mortgages on free- holds or leaseholds ranking in priority to existing debentures, notwithstanding an undertaking of the company not to do so. The term debenture is also a Custom House term used to signify the certificate given by the Customs authorities to an exporter of goods upon which drawback is allowed entitling him to receive the amount therein specified. {See Drawback.) Debenture-holders.— As applied to com- panies, the persons to whom the interest and principal moneys secured by debentures are payable, and who possess the rights and privileges conferred either by the debentures Debenture] 107 [Debtors themselves, or by the trust deed by which the debenture-holders are further secured. They are creditors of the company in ques- tion, and where the debenture (as is usual) confers a floating charge they rank before the unsecured creditors, ranking only after specific mortgages (if any), and the pre- ferential payments provided for by the Preferential Payments Acts of 1888 and 1897. {See Debenture, Execution Creditor, Floating Charge, Receiver.) Debenture Stock. — In reply to the self- imposed question, " What is the difference between debentures and debenture stock? " Mr. Palmer says : — '* Debenture is the name *' given to a contract usually under seal. " Debenture stock is the name given to a " debt of a special character. Hence they " differ as much inter se as a mortgage deed " and a mortgage debt." Ordinarily debenture bonds are only trans- ferable in their entirety, but debenture stock may be transferred in whole or part, provided that such part does not involve a fraction of a stated amount. Usually the stock is made transferable in multiples, say, of ;£"io, and in some cases each of the multiples has a dis- tinguishing number, similar to the method of identifying shares. Debit. — In bookkeeping the term "debit" is applied to all entries corresponding with or opposed to the credit entries. The placing of an amount to the debit of a Personal Ac- count either records a right to demand such amount from the particular person, or serves to record the satisfaction of an equivalent cross demand. The general rule in book- keeping is to place all debit items on the left- hand side of the various books of account, the credit entries being placed upon the right- hand side. With regard to items placed upon the debit side, such as will ultimately be received or continue to be enjoyed [e.g., book debts and lands purchased) are to be considered as assets, and those which will not be recovered {e.g., trade expenses) represent losses or charges against profits. Conversely, items placed upon the credit side which will ulti- mately have to be paid (by the person whose accounts are under review) must be treated as liabilities, whilst the credit items which do not involve a liability {e.g., commissions re- ceived) are to be treated as profits. {See Bookkeeping, Credit.) Debit Note.— An advice of indebtedness sent or made in writing by a creditor to his debtor ; a statement of goods sold or expenses in- curred. Debt. — A sum of money due from one person to another. {See Chose in Action.) Debtor. — A person who owes a sum of money to another. Debtors Act 1869. — Any person adjudged bankrupt .... shall in each of the cases following be deemed guilty of a mis- demeanour, and on conviction thereof shall be liable to be imprisoned for any time not exceeding two years, with or without hard labour : that is to say, (1) If he does not, to the best of his knowledge and belief, fully and truly discover to the trustee administering his estate for the benefit of his creditors all his property, real and personal, and how, and to whom, and for what consideration, and when he disposed of any part thereof, except such part as has been disposed of in the ordinary way of his trade (if any), or laid out in the ordinary expense of his family, unless the jury is satisfied that he had no intent to defraud : (2) If he does not deliver up to such trustee, or as he directs, all such part of his real and personal property as is in his custody or under his control, and which he is required by law to deliver up, unless the jury is satisfied that he had no intent to defraud : (3) If he does not deliver up to such trustee, or as he directs, all books, documents, papers, and writings in his custody or under his control relating to his property or affairs, unless the jury is satisfied that he had no intent to defraud : (4) If after the presentation of a bank- ruptcy petition against him .... or within four months next before such presentation .... he conceals any part of his property to the value of ten pounds or upwards, or conceals Debtors] io8 [Debtors any debt due to or from him, unless the jury is satisfied that he had no intent to defraud : (5) If after the presentation of a bank- ruptcy petition against him .... or within four months next before such presentation .... he fraudulently removes any part of his property of the value of ten pounds or upwards : (6) If he makes any material omission in any statement relating to his affairs, unless the jury is satisfied that he had no intent to defraud : (7) If knowing or believing that a false debt has been proved by any person under the bankruptcy .... he fail for the period of a month to inform such trustee as aforesaid thereof : (8) If after the presentation of a bank- ruptcy petition against him .... he prevents the production of any book, document, paper, or writing affecting or relating to his property or affairs, unless the jury is satisfied that he had no intent to conceal the state of his affairs, or to defeat the law : (9) If after the presentation of a bank- ruptcy petition against him .... or within four months next before such presentation . . . . he conceals, destroys, mutilates, or falsifies, or is privy to the concealment, destruction, mutilation, or falsification of any book or document affecting or relating to his property or affairs, unless the jury is satisfied that he had no intent to conceal the state of his affairs, or to defeat the law : (10) If after the presentation of a bank- ruptcy petition against him .... or within four months next before such presentation .... he makes or is privy to the making of any false entry in any book or document affecting or relating to his property or affairs, unless the jury is satisfied that he had no intent to conceal the state of his affairs, or to defeat the law : (11) If after the presentation of a bank- ruptcy petition against him .... or within four months next before such presentation .... he fraudulently parts with, alters, or makes any omission, cr is privy to the fraudu- lently parting with, altering, or making any omission in any document affecting or relating to his property or affairs : (12) If after the presentation of a bank- ruptcy petition against him .... or at any meeting of his creditors within four months next before such presentation .... he attempts to account for any part of his property by fictitious losses or expenses : (13) If within four months next before the presentation of a bankruptcy petition against him . . . . he by any false representation or other fraud has obtained any property on credit and has not paid for the same : (14) If within four months next before the presentation of a bankruptcy petition against him .... he, being a trader, obtains, under the false pre- tence of carrying on business and dealing in the ordinary way of his trade, any property on credit, and has not paid for the same, unless the jury is satisfied that he had no intent to defraud : (15) If within four months next before the presentation of a bankruptcy petition against him .... he, being a trader, pawns, pledges, or disposes of, otherwise than in the ordinary way of his trade, any property which he has obtained on credit and has not paid for, unless the jury is satisfied that he had no intent to defraud : (16) If he is guilty of any false representa- tion or other fraud for the purpose of obtaining the consent of his creditors or any of them to any agreement with reference to his affairs or his bank- ruptcy. (Section 11.) Section 11 of the Debtors Act 1869 shall have effect as if there were substituted therein for the words " if within four months " next before the presentation of a bank- " ruptcy petition against him," the words " if within four months next before the Debtors] 109 [Debts "presentation of a bankruptcy petition by " or against him, or in the case of a receiving " order made under section 103 of the Bank- " ruptcy Act 1883, before the date of the "order." (1890 Act, section 26.) If any person who is adjudged a bankrupt . . . . after the presentation of a bank- ruptcy petition against him .... or within four months before such presentation . . . . quits England and takes with him or attempts or makes preparation for quitting England and for taking with him any part of his property to the amount of twenty pounds or upwards, which ought by law to be divided amongst his creditors, he shall (unless the jury is satisfied that he had no intent to defraud) be guilty of felony, punish- able with imprisonment for a time not exceeding two years with or without hard labour. (Section 12.) Any person shall in each of the cases following be deemed guilty of a mis- demeanour, and on conviction thereof shall be liable to be imprisoned for any time not exceeding one year, with or without hard labour : that is to say, (i) If in incurring any debt or liability he has obtained credit under false pre- tences, or by means of any other fraud : (2) If he has, with intent to defraud his creditors, or any of them, made or caused to be made any gift, delivery, or transfer of or any charge on his property : {Semble under the Act of Elizabeth and/or the Bankruptcy Acts.) (3) If he has, with intent to defraud his creditors, concealed or removed any part of his property since or within two months before the date of any unsatisfied judgment or order for pay- ment of money obtained against him. (Section 13.) If any creditor in any bankruptcy . . . wilfully and with intent to defraud makes any false claim, or any proof, declaration, or statement of account which is untrue in any material particular, he shall be guilty of a misdemeanour punishable with imprisonment not exceeding one year, with or without hard labour. (Section 14.) Where a trustee in any bankruptcy (or the Official Receiver) reports to the Court •. . . that in his opinion a bankrupt has been guilty of any offence under this Act, or where the Court is satisfied upon the repre- sentation of any creditor or member of the committee of inspection that there is ground to believe that the bankrupt has been guilty of any offence under this Act, the Court shall, if it appears to the Court that there is a reasonable probability that the bankrupt may be convicted, order the trustee to prosecute the bankrupt for such offence. (Section 16.) Debts Provable in Bankruptcy. — All debts and liabilities, present or future, certain or contingent, to which the debtor is subject at the date of the receiving order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the receiving order y shall be deemed to be debts provable in bankruptcy, ivith the following exceptions : — {a) Unliquidated damages arising out of a tort, and (6) Debts which, in the opinion of the Court, are incapable of being fairly estimated. (1883 Act, section 37.) If judgment has been obtained in an action of tort, before the date of the receiving order, the claim becomes a judgment debt and is provable, but the consideration for a judgment debt may be inquired into. "If a "judgment were conclusive, a man might '* allow any number of judgments to be "obtained by default against him by his '* friends or relations without any debt being " due on them at all," (James, L.J.) With regard to a debt contracted by a. person with the debtor, after notice of an available act of bankruptcy having been committed by the debtor, it has been held that section 37 (2) ot the Bankruptcy Act 1883 does not provide that such a debt is "not provable" in the bankruptcy, but only that the creditor is under a personal disability in respect of proof. {Buck well v. horman, 1898.) If, therefore, the debt (but for the notice of the act of bankruptcy) would have been a provable debt, the creditor has no remedy — he cannot prove in the bankruptcy, being {personally debarred, nor can he sue the debtor after he has Debts] IIO Debts obtained his discharge, for the discharge releases him from all debts provable in the bankruptcy. Note. — This provision does not apply to a bill holder who, being himself liable on the bill, was compelled to take up the bill after notice of an act of bankruptcy. {McKinnon V. Armstrong, 1877.) Although ordinarily debts provable in bankruptcy are in respect of obligations incurred before the date of the receiving order, where a debtor is adjudged bankrupt upon the annulment of a composition or scheme which has been previously sanctioned by the Court (but lor some reason not carried out), in such cases any debt provable in other respects which has been contracted before the date of the adjudication will be provable in the bankruptcy. (1890 Act, section 3 (15).) The following are some special instances of debts which are, or are not, provable, as the case may be : — Life Annuities. — The value of these can be estimated and proved for. Alimony. — There can be no proof for arrears of alimony which have become due since the date of the receiving order. An order for the payment of alimony may be varied from time to time according to the means of the husband ; there is, therefore, no means of placing a value upon the future payments for the purpose of proof in bank- ruptcy. {Linton v. Linton, 1885.) The un- certainty as to the continuance of the obligation to make the payments exists not only as to future payments but also as to arrears, for the Divorce Court can and will wholly or partially relieve a husband from payment of arrears if it is just to do so, and it was decided in Kerr v. Kerr (1897) that arrears of alimony, even though due at the date of the receiving order, were not prov- able in the bankruptcy. Voluntary Bonds. — Proof will be admitted jn respect of these (ranking pari passu with the other creditors), provided they are not fraudulent as against creditors, and there are no special circumstances to justify rejection. Debts founded upon fraud or an illegal ■consideration, or statute-barred debts, are not provable. Calls on Shares.— A company, whether in liquidation or not, may prove for arrears of calls and the liability to future calls in the event of the bankruptcy of a contributory. (1862 Act, section 75, and Fuller v.McMahon (1900) I. Ch. 173.) But if the shares are marketable the claim for future calls can be avoided by a sale and transfer to some person acceptable to the company. The contingent liability to be placed upon the " B " list in the event of a winding-up order being made within 12 months of the transfer may, however, need to be considered in some cases. Arrears of salary and commission (apart from the Preferential Payments Act) may be proved for, but there is apparently no right of proof for future commissions. Where a manager or other servant is under an agree- ment for a period of years, he may prove for future salary for the unexpired portion of the term, less an allowance for the probability of his obtaining other employment {Yelland's case), and quare, less an allowance for the probability of his decease, if a long period. Section 37 (8) of the Bankruptcy Act 1883 provides: — ** Liability " shall for the purpose of this Act include any compensation for work or labour done, any obligation or possibility of an obligation to pay money or money's worth on the breach of any express or implied covenant, contract, agreement, or undertak- ing, whether the breach does or does not occur, or is or is not likely to occur or capable of occurring before the discharge of the debtor, and generally it shall include any express or implied engagement, agreement, or undertaking to pay, or capable of resulting in the payment of money or money's worth, whether the payment is, as respects amount, fixed or unliquidated ; as respects time, present or future, certain or dependent on any one contingency or on two or more contingencies ; as to mode of valuation, capable of being ascertained by fixed rules, or as matter of opinion. {See Competitive Proof, Differences, Dis- clairfier. Double Proof, Interest in respect of Proof of Debt, Joint and Separate Estates, Postponed Creditors, Proof in respect of Bills of Exchange, Proof of Debt, Secured Creditors.) Debts Provable in Winding-up.— Section 10 of the Judicature Act 1875 provides that Debts] III [Deceased the law of bankruptcy for the time being in force shall apply to insolvent companies being wound up as regards secured and unsecured creditors, the debts and liabilities provable, and the valuation of annuities and of future and contingent liabilities. With regard to solvent companies, section 158 of the Act of 1862 still applies, viz. : — •' In the event of any company being " wound up under this Act, all debts payable "on a contingency, and all claims against "the company, present or future, certain or " contingent, ascertained or sounding only in "damages, shall be admissible to proof •' against the company, a just estimate being '• made, so far as is possible, of the value of "all such debts or claims as may be subject "to any contingency or sound only in " damages, or for some other reason do not " bear a certain value." Thus, if a company is insolvent, a claim for unliquidated damages arising otherwise than by reason of a contract promise or breach of trust is not provable ; but such a claim would be provable against a solvent company. Where the articles of association of a com- pany provide for the payment out of the funds of the company of a stated annual sum by way of remuneration to the directors, such remuneration is not deemed as being due to them in their character of members of the company, but under a separate and dis- tinct contract, and the directors are, there- fore, entitled to prove and rank as ordinary creditors in the winding-up of the company for any unpaid fees. {New Britkh Iron Co., 1898.) {See Debts provable in Bankruptcy.) Deceased Insolvent. — Any creditor, whose debt would have been sufficient to support a bankruptcy petition had his debtor been alive, may, after the death of the latter, present a petition praying for an order for the administration of the debtor's estate, according to the law of bankruptcy. A fee stamp of £5 is payable upon every such petition. It is not necessary to prove that any act of bankruptcy was committed by the deceased in his lifetime. (1883 Act, section 125.) Such a petition may 'not be pre- sented after proceedings have been com- menced in any Court other than the Bank- ruptcy Court ; but upon proof of the insolvency of the estate, that other Court may transfer the proceedings to the Bankruptcy Court, whether any creditor makes applica- tion for such transfer or not. One advantage to creditors arising from the transfer from the Chancery Court to the Bankruptcy Court would be the limitation of the landlord's right of distress, which would not be imposed in the Chancery Court. {Fryman v. Fryman^ 1888.) On the making of an administration order the personal representative must lodge in duplicate with the Official Receiver an account of his dealings with, and administration of, the deceased's estate, a list of the creditors, a statement of the assets and liabiHties, and such other information as may be required by the Official Receiver. The account, list, and statement are to be made out and verified, as nearly as may be, in accordance with the practice, for the time being, of the Chancery Division of the High Court. The expense of preparing, making, verifying, and lodging these documents, after being taxed, and on production of the necessary allocatur, is allowed out of the deceased's estate. The creditors have the same powers as to the appointment of a trustee and committee of inspection, as they have in other bank- ruptcy cases, and the general provisions of the Bankruptcy Acts, mutatis mutandis, apply. The provisions of the Bankruptcy Acts as to the examination of witnesses, &c. (section 27 of the Act of 1883 and Rule 66), and as to the avoidance of voluntary settlements and fraudulent preferences (sections 47 and 48, ibid), were held, prior to 1890, not to apply to administration orders in respect of a deceased person's estate {Re Hewitt, 1885, and Re Gould, 1887), and the provisions of section 21 of the 1890 Act have apparently not affected these decisions. The Court held, in Re Gould {supra), that section 125 applied only to the mode of adminis- tration and not to the subject-matter which was to be administered ; also, that the effect of the section was not to enlarge the assets of the deceased insolvent (by avoiding settlements or preferences), but only to provide the mode of administration in respect of the existing assets. This principle was upheld by the Court of Appeal in Hasluck v. Clark (1899), when it was decided that section 45 of the Deceased] 112 [Deed Act of 1883, and sections 11 and 12 of the Act of 1890 (restricting tlie rights of execution creditors), were not applicable to administra- tions under segtion 125. The payment of proper funeral and testa- mentary expenses is to be made in full out of the deceased debtor's estate, in priority to all other debts ; this priority is specially reserved in the Preferential Payments in Bankruptcy Act 1888. The priority of debts prescribed by the latter Act applies in the case of a deceased person who dies insolvent, as if he were a bankrupt, and as if the date of his death were substituted for the date of the receiving order. Notice to the legal personal representative of a deceased debtor of the presentation by a creditor of a petition is deemed, in the event of an order for administration being made thereon, as an equivalent to notice of an act of bankruptcy, and after such notice no pay- ment or ti'ansfer of property made by the personal representative will operate as a dis- charge between himself and the Official Receiver or trustee (if appointed), provided that nothing shall invalidate any payment made or any act or thing done in good laitb, by the personal representative before the date of the order of administration . Where an administration order is made, such order is gazetted and advertised in the same manner in all respects as an order of adjudication is gazetted and advertised. Not only has an executor the right to retain his own debt prior to notice of the presentation of a petition, but the Court of Appeal (confirming the decision of the Court below) ruled, in Re Rhoades (1899), that an order for administration did not affect the right of retainer. The executrix in this case, in ignorance of her rights, had in fact actually paid over the whole of the funds in her hands to the Official Receiver and lodged a proof in respect of her debt. The funds were more than sufficient to pay the executrix in full, and after withdrawing her proof of debt she was held entitled to recover from the Official Receiver the full amount of her debt. Where any surplus remains in the hands of the Official Receiver or trustee, after pay- ment in full of all the debts due from the deceased debtor, together with costs of administration and interest, as provided by the Bankruptcy Acts, such surplus must be handed over to the personal representative of the deceased debtor. (1883 Act, section 125 ; 1890 Act, section 21 ; and Rules 275 and 278.) {See Death of Bankrupt or Debtor.) Decimal System.— A system of money, weights and/or measures , in which the standard unit in the ascending series is multiplied by ten, and in the descending series is divided by ten. Declaration. — The Statutory Declarations Act 1835 provides for the making of solemn declarations without oath, before a Justice of the Peace, notary public, commissioner for oaths, &c. The instrument of declaration requires a 2S. 6d. stamp, unless the declaration is within the exemptions in the Stamp Act, 1891. Declaration of Transfer. (shipping). -See Bill of Sale Declaratory Statutes. — Those which de- clare the law as it previously existed accord- ing to the common law. Deed. — An instrument in writing or printing on paper or parchment, sealed and delivered. In practice it is always signed. The parties to a deed are identified by their respective seals, whilst the deed is operative from the date of its delivery. With regard to the "sealing" of deeds by individuals the practice is to affix a wafer beforehand, and the party in executing the instrument merely touches the wafer and adopts it as his seal, and formally "delivers" the document as his deed. In the case of a company (corporation) the act of "sealing" imports delivery. Thus the attestation clausfe affixed to the deed of an individual usually reads : — Signed, sealed, and delivered in the presence of ; whereas in the case of a company or corporation the attestation clause merely recites that " the common " seal of the company (or corporation) was " affixed hereto in the presence of " {i.e., the director or directors and/or secretary of the company, or officers of Deed] UNi.4 A^n Y [Deed the corporation, as the case may be). When a deed is delivered subject to a condition it does not take effect unless and until such condition has been fulfilled, but on the performance of the condition the effect of the instrument is retrospective. Such a document is called an Escrow, an example of which is afforded in the execution of a conveyance of land by a vendor and delivery to his solicitor, on the condition that the deed is delivered only upon payment of the purchase money. A deed is also termed (a) a contract under seal, {b) a specialty contract, or [c) a formal contract. The characteristics of a deed are : — (i) Estoppel. (2) Merger. (3) Right of action thereunder generally is barred after 20 years from the time the right first accrued. (4) Its efficacy rests upon its form and not upon valuable consideration, therefore a gratuitous promise is binding if made under seal. There are, perhaps, two exceptions to this : [a] Contracts in restraint of trade must be reasonable, and consideration would form an ele- ment of reasonableness ; [b] specific per- formance cannot be obtained of a gratuitous promise even if made under seal. A deed requires a los. stamp. Deed of Arrangement.— A deed of arrange- ment, or private arrangement made between a debtor and his creditors, is one whereby those creditors who may assent to it, in con- sideration of each other's assent, accept either : — (i) An assignment of the debtor's property ; (2) A stated composition ; or (3) Payment in full by instalments in dis- charge of their respective debts, either absolutely or upon stated conditions. The Companies Act 1S62 (section 164) provides that " any conveyance or assign- '*ment made by any company formed under '♦this Act of all its estate and effects to " trustees for the benefit of all its creditors " shall be void to all intents." The Deeds of Arrangement Act 1887 defines a deed of arrangement for the purposes of that Act as including " any of " the following instruments, whethev under seal ** or not, made by, for, or in respect of the * ' affairs of a debtor for the benefit of his " creditors generally (otherwise than in pur- " suance of the law for the time being in " force relating to bankruptcy), that is to " say : — " [a) An assignment of property. " (i) A deed of or agreement for a com- '* position. " And in cases where creditors of a debtor "obtain any control over his property or " business : — " (^) A deed of inspectorship entered into " for the purpose of carrying on or " winding up a business. *' (^) A letter of licence, authorising the "debtor or any other person to " manage, carry on, realise, or dispose "of a business with a view to the "payment of debts. " [e] Any agreement or instrument entered " into tor the purpose of carrying on *' or winding up the debtor's business, "or authorising the debtor or any ♦'other person to manage, carry on, " realise or dispose of the debtor's "business, with a view to the pay- " ment of his debts." (Section 4.) Note. — The term " creditors gener- ally" includes all creditors who may assent to, or take the benefit of, a deed of arrangement. (Section 19.) Every such deed as defined above is void! unless registered with the Registrar of Bills; of Sale within seven clear days after the firsti execution thereof by the debtor or any creditor. A deed of assignment may be registered before being executed by the trustee, and where a deed was executed by the debtor, the trustee and one creditor only before registration, and was subsequently executed by other creditors, this fact was held not to be such an alteration of the deed as to vitiate its registration. [Ex parte Milne, re Batten (1889) 22 Q.B.D. 685.) The "deed" must be stamped with the proper inland revenue duty (los. if under seal), and in addition a stamp denoting a duty of one shilling per ;^ioo or fraction of /loo of the value of the property passing, or (where no I e8 ? II SI «5 5§ a^s < s Deed] 114 [Deed property passes under the deed) the amount of composition payable thereunder. The stamps must be affixed before production of the deed to the Registrar. There is also an ad valorem "filing duty" of £1 per /i.ooo or fraction thereof (with a maximum of £5 duty), pay- able upon the value of the property passing or the amount of composition payable under the deed, as the case may be. Where an ad valorem fee cannot be applied, a fixed fee of £2 is payable. The registration is effected as follows: — A true copy of the deed, and of every schedule or inventory thereto annexed cr therein referred to, must be presented to the Registrar and filed within seven clear days after execution, together with an affidavit by some person present thereat verifying the time of execution, and con- taining a description of the residence and occupation of the debtor, and the place or places where his business is carried on, and an affidavit by the debtor stating the total estimated amount of property and liabilities included under the deed, the total amount of composition (if any) payable thereunder, and the names and addresses of his creditors. Great care must be exercised with regard to the schedule of the creditors' names and addresses. This schedule must be signed by the debtor, and should there be any important omissions as regards names ot addresses, the registration of the deed may be declared invalid (as in the case of Aldous V. Foord (1899) 108 L.T. 278), and the deed itself void in consequence. The register is open to public inspection upon payment of the prescribed fee, viz. : For searching the register {i.e., for every name inspected) and on inspecting the filed copy of the deed, including the extracts allowed by the rules, the fee of 2s. 6d. Note. — The extracts are limited to the dates of execution and registration, the names, addresses, and descriptions of the parties to the deed, and a short statement of the nature and effect of the deed. A deed of arrangement, as already stated, is void if not registered in accordance with the Act of 1887, and section 17 provides that " nothing in this Act shall be construed to " repeal or shall affect any provision of the " law for the time being in force in relation " to bankruptcy, or shall give validity to "any deed or instrument which by law is " an act of bankruptcy or void or voidable." So that such a deed may be avoided not- withstanding registration — (i) If it contravenes the provisions of 13 Eliz. chap. 5, relating to frauds upon creditors, and (2) By a receiving order being made against the debtor upon a petition presented within three months aiter the date of the deed. Deed of Assignment. A deed by which a debtor assigns his pro- perty, real and personal, land, houses, furniture, stock-in-trade, book debts, &c., to a trustee, in trust to realise same, and after payment of the expenses and the preferential claims to distribute the balance pari passu amongst the assenting creditors, who in consideration of (i) the assignment and (2) the dividends received (if any) release the debtor (either absolutely or conditionally) from the debts respectively owing to them. In the absence of any provision in the deed as to any surplus remaining after paying the costs and all claims in full, the balance strictly belongs to the creditors, for there is no resulting trust implied in favour of the debtor. [Smith v. Cooke^ 1891, A.C. 297.) Although deeds are usually employed, it is not absolutely essential to the validity of an assignment of personal property that it be under seal. It is customary to exclude from the deed any leasehold property of the debtor, par- ticularly where it is subject to onerous covenants, the deed, however, generally expressing that " the debtor shall stand " possessed of all leasehold property to " which he is now entitled upon trust for " the trustee and the creditors," and further declaring that the debtor "shall " assign and dispose of the same and an)'- " income arising therefrom in such manner " as the trustee shall from time to time " direct," the net proceeds of every such Deed] 115 [Deed disposition being payable to the trustee, who must apply the same in accordance with the provisions of the deed. This is done because the trustee has no power of disclaimer (such as is possessed by a trustee in bankruptcy), and should the leaseholds vest in the trustee, he would be personally liable for the rent and covenants thereof whilst he continued to hold the property. Where, however, the deed comprises " lands, messuages, tenements, and heredi- " taments, corporeal or incorporeal, of any tenure "' it must not only be regis- tered under the Deeds of • Arrange- ment Act 1887, but also under the Land Charges Registration, &c., Act 1888, which provides that every deed of arrangement shall be void as against a purchaser for value of • any land comprised therein or affected thereby, unless and until such deed is registered at the Office of Land Registry and Deeds of Arrangement. The deed may be so registered upon the application of the trustee under the deed, or an assenting creditor. The effect of non-registration is that a purchaser of the land for value (with or without notice of the deed) would be entitled to the land as against the trustee and the creditors. The method of administering the estate, its realisation and distribution, is in- variably detailed in the deed itself, the bankruptcy procedure being as a rule adopted, and a Committee of Inspection appointed . Where the benefits under a life policy have been assigned as part of the debtor's estate, care should be taken to notify the insurance company, and, where necessary, to obtain the special form oi assignment required by the particular company. Where any of the property is subject to the risk of fire or burglary [e.g.^ a jeweller's stock-in-trade), steps should be taken to insure against same, or, if already insured against, to have the policies duly endorsed by the company in favour of the trustee. The trustee should also give express notice of the deed to all debtors in respect of any book debts assigned, because, of course, he cannot take legal proceedings to recover such debts until he has done so, and the mere fact that the trustee has made a previous written demand for the money due is not sufficient notice. The deed of assignment must be expressly referred to in some written communication, otherwise the trustee will fail to obtain judgment. A conveyance or assignment by a debtor of his property to a trustee for the benefit of his " creditors generally " constitutes an act of bankruptcy, and is available to creditors for the presentation of a petition within three months after the date of the deed ; and this is so even where the deed is not stamped or registered. [Ex parte Heapy^ 1889.) But a creditor who has assented to such an assignment cannot take advantage of it as an act of bankruptcy [Ex parte Stray, 1867), unless he has been induced to assent by misrepresentation, or some fraud has been practised upon him in con- nection therewith. Nor can a creditor, who has assented to the assignment, sue the debtor ; but a creditor who has not assented thereto can sue the debtor, but if the deed has become irrevocable he has no remedy against the property assigned, except by bankruptcy procedure. In order to render a deed of assignment irrevocable and a pro- tection against an execution creditor at least one other creditor should have assented (either in writing or verbally) to the deed. [Harland v. Binks (1851) 15 Q.B. 713.) While an assenting creditor has the ordi- nary rights of a cestui que trust, a non- assenting creditor has no remedy against the trustee for non-performance of his duties under the deed. [See Creditor's assent infra.) A trustee, under a deed of assignment, cannot safely deal with or distribute the estate of the debtor until after the expira- tion of three months from the date of the deed even though he is certain that all the creditors have assented to the deed, or at all events that the dissenters are insufficient in the aggregate to present a petition, for in practice no risks are taken, and the general rule is to postpone distribution for I 2 Deed] ii6 [Deed the full three months. For if a receiving order is made against the debtor upon a petition presented within three months of the date of the deed, the title of the trustee in bankruptcy will relate back to the earliest act of bankruptcy committed by the debtor within the three months next preceding the presentation of the petition. This neces- sarily will include the property comprised in the deed of assignment, and upon bank- ruptcy ensuing the position of the trustee under the deed will be : — (i) He may be treated as a trespasser and the trustee in bankruptcy can claim the property unconverted, and the value of such as may have been con- verted — not an account of moneys received in respect of dealings with the property : or (2) He may be treated as an agent, and the trustee in bankruptcy may call for an account as between principal and agent of the moneys received, or which ought to have been received, under the deed. {Ex parte Vaughan (1884) 14 Q.B.D. 25.) The trustee in bankruptcy must, however, make his election — he cannot treat the trustee under the deed as both a trespasser and an agent. In accounting for his dealings, the trustee under the deed is entitled to all " proper allowances," but with regard to his remuneration he is in an unenviable position. Under ordinary circumstances a trustee under a deed of arrangement which is avoided by subsequent bank- ruptcy proceedings cannot recover or retain (as the case may be) anything in respect of his remuneration for acting under the avoided deed, even though the latter document makes provision for same. Note. — Provision should be made in the deed for the remuneration of the trustee, otherwise some difficulty might arise in respect thereof, whether bankruptcy ensued or not. In exceptional cases, however, allowances are made by the Court out of the bankrupt's estate, for services rendered thereto by a trustee under an abortive deed, where the estate has clearly benefited by such services. The following decisions bear directly upon this point : — -Money paid bond fide by a debtor to defray counsel's fees and other legal expenses in opposing proceedings in bank- ruptcy that have been commenced against him cannot, should adjudication follow, be recovered from the solicitor by the trustee in bankruptcy, even though the Rolicitor knew of the acts of bankruptcy on which the proceedings were based. [In re Sinclair (1885) 15 Q.B.D. 616.) In Ex parte Ball (1894), Vaughan Williams, J., said: — " The next question is whether these " gentlemen (accountants and solicitors) " are entitled to retain these moneys on " account of their charges. I think they " are clearly not entitled to retain them. "What was decided in In re Sinclair " was, that when a man comes with ready " money in his hand and asks for legal " assistance with regard to his financial " affairs, or his financial position, " the lawyer, or it may be the account- " ant, is not bound to ask the person "coming with ready money where "it comes from. But there is nothing " in the decision in In re Sinclair " which enables a solicitor or an account- " ant to take from the debtor a charge " upon the debtor's property to secure " payment for the services to be rendered, " because in such a case the very fact "informs the solicitor, or accountant, as " the case may be, that the money which " he is looking to for paj^ment is the " money of the bankrupt, and, potentially, " the money of his creditors ; and it " seems to me that just the same con- " sideration arises with regard to moneys " which the accountant or solicitor may " be collecting for the debtors which " were due to them in the course of their "trade. " But I am asked to say whether the " trustee can properly make any allow- " ance to either the accountant or Deed] 117 [Deed " solicitor in respect of the work which " they did. What I understand to be the " rule as to that matter is this : If the " trustee in the exercise of his discretion " thinks that the creditors have derived "profit from the work which has been " done, at the direction of the debtor, the " trustee may adopt those services and " pay for them. But, although that is to " my mind the rule, I by no means think " that it is a rule which would justify " the trustees in at all liberally or freely " spending the money of the creditors in " paying the expenses of the meetings of " creditors which the debtor, or debtors, " may have thought fit to call before their " bankruptcy. On the contrary, I think " that the trustee ought to be very slow " indeed to adopt any such services. One " knows quite well that, in the hope of " avoiding bankruptcy, debtors in difhcul- " ties will catch at a straw and always " hope that something may avoid that dis- " agreeable result. They always will call " their creditors together, not from any " sense really that it is the best thing to " do for the creditors, but because they " hope somehow or another, if there is " a meeting of creditors, they may " avoid bankruptcy. That being so, I " should say that, generally speaking, a " trustee ought to decline to adopt the *' services of the solicitor or accountant " with regard tO' these meetings which " debtors, in the expectation of a pro- *' bable bankruptcy, call of their creditors. " But I am unwilling to say that there " may not be a case in which the trustee " may properly adopt a portion of the " services. It is said here that the " accountants prepared a statement of " affairs which was very useful to the "creditors at. the time of this meeting, *' and enabled them to determine with full " information what was the best course " for the creditors to adopt. That par- " ticular item of charge is a charge for a " service which I can quite understand *^ the trustee might say was a very useful ■" service, and he might pay for it. " The solicitor may, for aught I know, " necessarily have been employed to get " that statement prepared ; but I should " have said prima facie that the employ- " ment of a solicitor for that purpose was " quite unnecessary, and I should have " thought that the debtors might have " given their instructions directly to the " accountant. At the present moment, " not having the bill before me, I cannot " say whether there are any services of " the solicitor which the trustee may pro- " perly adopt and pay for as having been " useful to the creditors. He must exer- " cise his own discretion, and, when he " has done so, then, if anyone feels " aggrieved by the exercise of his discre- " tion, the matter may be brought before " the Court ; but the rule that I lay down, " and intend that the trustee should act " upon, is that he should be very strict " in this matter of adopting services of " this sort and paying for them, and he " must go through the items of the bill " of costs, and only pay for such items " as he is clearly satisfied have been in- " curred in such a way as that a benefit " to the extent of the charge has resulted, " to the creditors." The same learned Judge followed this ruler in Re Foster (1895, 72 L.T. 364) and allowed the trustee under an avoided deed to retain the sum of £^ for his trouble, although the Official Receiver in the exercise of his dis- cretion had refused to make an allowance. The trustee had claimed ;^io. An allowance was also made to the trustee under a deed in Re Apfleton in the Liverpool County Court (25 February 1898), although the Official Receiver (after consulting with the Board of Trade) had declined to allow any such remuneration. A trustee may, however, protect himself not only as regards his remuneration, but in respect of liability for (a) carrying on the business of the debtor, {b) realising the estate, and (^r) distributing same, by obtain- ing from the creditors or some of them, or a committee of inspection appointed by them or by the deed, an indemnity in respect of any such liabilities, responsibilities^ Deed] 11^ [Deed or losses to which he may consider him- self subjected by virtue of his office as trustee under the deed. The trustee has a right of indemnity out of the trust assets in respect of any personal liabilities properly incurred by him in con- nection with the administration of the trust, provided bankruptcy does not ensue, and the creditors to whom the trustee has made himself personally liable can (because of and through the trustee's right of indemnity) obtain payment of their debts out of the trust assets in priority to the claims of the creditors who have assented to the deed. In the event of an. assignment being set aside by bankruptcy proceedings, the Board of Trade have a right to object to the trustee under the assignment being appointed trustee in the bankruptcy, for the former becomes, as a general rule, an accounting party to the latter. {Re Martin, 1888, 21 Q.B.D. 29.) Deed of Composition. An agreement whereby creditors agree to discharge a debtor from the claims they have against him in consideration of receiving a certain composition thereon, payable at a stated time or in stated instal- ments, in money or bills, with or without a surety, the creditors further covenanting not to sue the debtor unless and until he makes default in the terms or one of the terms of the arrangement. Although the general rule is that a liquidated and undis- puted debt cannot, even with the consent of the creditor, be discharged by the pay- ment of a smaller sum by the debtor in the same way in which he was bound to pay the whole sum, unless, of course, the consent of the creditor be under seal, an arrangement for a composition made with more than one creditor is valid (apart from the provisions of the Act of 1887 as to registration), even though not under seal, for the composition payable is supple- mented by further consideration, viz., mutual forbearance, each creditor taking a composition in full discharge in considera- tion of the other creditors doing the same. The creditors of a person may, however, absolutely assign their respective debts to a nominee of the debtor in consideration of an agreed composition, thus conferring a right upon such nominee to sue the debtor for the " face value " of the claims. But the assignee may be a person selected solely on account of the debtor's confidence in his nominee's forbearance. Such right to sue being therefore nominal, the assignment has the effect oi giving the debtor a discharge from his creditors generally in considera- tion of a composition, without recourse to a document requiring registration under the Act of 1887. A deed of composition must be based upon good faith between the debtor and his creditors and also between the creditors themselves. In particular, any secret bargain to give any creditor or creditors an advantage over the others will avoid the whole arrangement. [Ex parte Milner, 1885.) Not will a person who has assented to a deed of composition be bound thereby if the assent was given on the faith that other creditors would also join, and the latter do not assent. [Reay v. Richardson^ 1835.) A composition arrangement is not of itself an act of bankruptcy, nor need the document necessarily contain such a notice of suspension of payment as would amount to an act of bankruptcy, but in practice it will be found difficult to avoid the formal announcement to the creditors, or one of them, that the debtor " has suspended, or " that he is about to suspend, payment of "his debts." Creditors generally agree to release their debtor upon payment of the stated composi- tion — that is, upon the performance of the covenant and not upon the debtor's promise, and in such cases upon the failure of the debtor to carry out the covenants, which were made a condition precedent to his obtaining his release, the unpaid portions of the original debts revive with their attendant rights and remedies. Where, however, an arrangement is made to accept the new agreement in discharge of the old debts, these debts would be released upon the promise of the debtor, and upon default in the performance the old DeedJ 119 Deed debts would not revive, and the creditors' only remedies would be fox and in respect of the new debts, viz., the amounts of com- position respectively payable and unpaid under the deed. This state of things, how- ever, is hardly ever allowed— certainly not with intention. "Where promissory notes are given for the amounts of composition payable, and the deed is properly drawn, the release by the creditor being made conditional upon the payment of the notes, as and when they mature, then if the debtor makes default in meeting the notes, the old debts revive with the original rights and remedies, the arrangement thereby falling through. Where, as is often, the case, the promissory notes fox the amount of the last instalment of a composition are signed by a surety, the position on default is this : The debtoT is liable for the whole amount of the original debts remaining unpaid, but the surety is not concerned therewith ; the latter is, however, still liable to the extent of the notes he has signed. The creditors, upon default, may therefore sue the debtor upon the respective balances of theix original debts, and sue the surety upon the notes for such portion only as they are unable to recover from the debtor, limited, of course, to the amount of the notes in each case. The reason for this was explained in Glegg V. Gilbey (2 C.P.D. 6, 209), viz. : — The surety must be taken to have contracted subject tO' the well-known rule of law by which, if the debtor fails to pay the com- position, the creditors are remitted to their old debts. The surety has thus contracted that, subject to that rule, if the debtox does not pay, he will do so (to the extent guaranteed), and his position is therefore in no way altered by allowing the creditors to sue the debtor first for the whole amount of their debts which remain unpaid. A Deed of Inspectorship is one used in conjunction with either a pxospective assignment ox a composition, where it is desirable to carry on the business of the debtor, and/or gradually wind up the same under the supervision of a committee of inspection selected from the creditors. A Letter of Licence is an instrument of arrangement whereby the creditors agree to give time to the debtor, and forbear to sue fox a stated period, in order that he may retrieve his position. Creditors, by assent- ing to such an arrangement as this, do not necessarily release any portion of their debts, nor does the entering into same necessarily constitute an act of bankruptcy on the part of the debtor. Creditor's Assent. — A private arrange- ment between a debtor and his creditors is only binding upon, and fox the advantage of, those creditors who assent thereto. The best possible evidence of assent is the creditox's signature to the deed itself, but it is not essential that the assent be proved in this way. Creditors may assent to a deed of arrangement in a separate writing, or even verbally or by conduct. It is not safe, however, to rely upon a verbal assent, because of the difficulty of proof ; the rule is in the case of "an arrangement" that where a creditor verbally agrees with other creditors to accept the composition he cannot afterwards refuse to do so, for having held himself out to other creditors as assenting, it would amount to a fraud upon the latter to allow him to withdraw, the consideration for the assent of the other creditors being " mutuality of assent." As already stated, a creditor cannot set up as an act of bankruptcy an assignment or other arrangement to which he has assented ox been pxivy, and a cxeditox who had pxesented a bankxuptcy petition on the gxounds of " notice of suspension of pay- ment " and the execution of a deed of assignment was (ultimately) unsuccessful, the Divisional Couxt, on appeal, deciding that as the petitioning cxeditox had attended a meeting of creditors which involved an act or acts of bankruptcy, and at which a proposal for an assignment was considered and agreed to, he must be deemed to have acquiesced in the deed, although he did not expressly assent, if, being present, he did not dissent at the time the proposal was put to the meeting. [Ex parte Croslandy Accountant Law Reports (1897) 125.) Deed] 120 [Deed A more recent case is that of Re Carr ; ex parte Jacobs (85 L.T. 552), where a creditor having notice of the deed, and not having expressed his dissent therefrom, and not having explained the delay, pre- sented a bankruptcy petition at the expira- tion of two months, but the petition was dismissed because the creditor was deemed to have assented to the deed. In practice, where the deed itself cannot be presented to the various creditors, an epitome of its contents is in some cases pre- pared, and printed copies thereof together with "forms of assent" issued to each of the creditors for their signatures. In the majority of cases, however, the usual contents of a deed of arrangement being well known, a "form of assent" only is issued to the creditors. A trustee should require proof of any creditor's claim which may be considered doubtful, before such creditor has been allowed to execute a deed of arrangement, for, apart from fraud, the trustee cannot afterwards exclude such creditor's claim. {Lancaster v. Else, 31 Beav. 325.) Creditors whose claims are guaranteed by a third party, i.e., a surety, should require a clause in the deed itself reserving their rights against the surety, or else obtain the permission of the surety before assenting to a deed of arrangement, for although in bankruptcy it is expressly pro- vided that sureties are not discharged — the payment of a dividend and the discharge of the debtor being a legal result — this does not apply in the case of a private arrange- ment which is an act of the parties them- selves. To assent to a private arrangement without such permission or reservation oi rights might operate as a release of the surety. Where a deed of arrangement is set aside by bankruptcy proceedings, the creditors are not bound by any release they may have given in the deed, but may prove in the bankruptcy for the whole of the unpaid balances of their respective debts. [Re Stephenson (1888) 20 Q.B.D. 540.) Accounts. — Every trustee under any deed of arrangement as defined by the Deeds of Arrangement Act .1887 must within 30 days of the first day of January in each year transmit to the Board of Trader an account of his receipts and payments ay such trustee. The term " trustee " here includes any person appointed to distribute a composi- tion or to act in any fiduciary capacity under any deed of arrangement. (Bank- ruptcy Act 1890, section 25.) The accounts should be made up to 31st December in each year, but if the trusts are completed during the month of January, the Board of Trade will accept a. completed account. The accounts must be in the prescribed form and verified by affidavit. Where the trustee carries on the business of the debtor^ a separate Trading Account must be kept and a copy thereof supplied to the Board of Trade as a distinct account, the totals only of the receipts and pa3''ments on Trading Account being incorporated in the yearly account. Where the deed has been made by debtors in partnership, distinct accounts must be kept (and transmitted) showing the receipts and payments of the joint estate and of each of the separate estates. (Rule 13.) In every account each receipt and payment must be entered in such a manner as will sufficiently explain its nature. (Rule 8.) Petty expenses must be entered in the accounts in sufficient detail to show that no estimated charges are made. (Rule id.) Where property has been realised the gross proceeds of sale must be entered under receipts in the account, and the necessary disbursements and charges incidental to sales must be entered as payments. (Rule II.) Where dividends or instalments of composition are distributed under the deed, the total amount of each dividend or instalment of composition must be entered in the trustee's account as one sum, and the trustee shall forward with his final account under the deed a statement in the prescribed form, showing the amount of the claim and the amount of dividend or composition pay- able to each creditor, distinguishing in such list the dividends or instalments of composition paid, and those remaining unclaimed. (Rule 12.) Deed] 121 [Defaulter The accounts must bear an ad valorem (bankruptcy) stamp based upon the gross amount of the assets realised and brought to credit, or the gross amount of the com- position distributed during the period com- prised in the account. For the purpose of assessing this duty, the payments made upon Trading Account and payments to secured creditors in respect of their securities may be deducted from the receipts. The stamp fees are: — Upon every ;/!^ioo or "fraction of ;{^ioo up to £s^o, 5s. Upon every ;^'ioo or fraction of ;^ioo above ^500, 2s. 6d, This scale is not cumulative ; that is to say, in assessing the stamp duty upon the second account filed, the amount upon which duty has already been paid in the first account must not be considered. Where a trustee has not since the date of his appointment or last account, as the case may be, received or paid any money as such trustee, he must forward an affidavit of " no receipts and payments." (Rule 15.) Where the trustee has either — (i) Realised all the property included in the deed of arrangement or sO' much as can probably be realised, and made a final distribution of dividend or composition, or (2) Fulfilled the trusts and obligations in any other way, he must transmit with his final account an affidavit to that effect, and no further accounts will be required from him, (Rule 16.) Where it appears to the Board of Trade that an account of receipts and payments in the prescribed form may for special reasons be dispensed with, the trustee may be per- mitted to transmit such a summary or modified statement of accounts as the Board of Trade may think sufficient. (Rule 17.) Where the Board of Trade consider the accounts incomplete, or that they require amending or explaining, they may make such requisitions upon the trustee there- upon as they may think necessary. (Rule 14.) The accounts transmitted to the Board of Trade may be inspected by any creditor upon payment of one shilling, and the Board of Trade will supply copies of same, or extracts therefrom, to any creditor upon payment of fourpence per folio of 72 words or figures. Unclaimed Dividends. — A trustee under a deed of arrangement is not required, like trustees in bankruptcy and liquidators of com- panies to pay over undistributed balances and unclaimed dividends to the Bank of England. INI any trustees, desiring to obtain a complete discharge from their trust, have voluntarily offered to pay over un- claimed dividends to the Bankruptcy Estates Account, but the Board of Trade have no power to accept them, and they accordingly remain in the hands or under the control of the trustees. A professional accountant who acts as trustee under private deeds in a consider- able number of cases can meet the difficulty by paying all unclaimed dividends into a special banking account in his own name (not that of his firm where he is in partner- ship), allowing the same to accumulate, and keeping a careful record of them as regards (i) the estate, (2) the creditor entitled, and (3) the amount. He would then be prepared in the event of any legislation in reference thereto which may be effected in the future on the lines of a well-known section of the Bank- ruptcy Act of 1883. Deed [Poll. — A single deed in the form of a declaration of the grantor's act or intention. So called because formerly deeds made by one party had a polled or smooth-cut edge, as distinct from an indenture. {See Indenture.) Defaulter. — When a member of the Stock Exchange is unable to carry out or satisfy his obligations to the market he is officially declared a defaulter. A notice to that effect is read to all the members after their attention has been called by three strokes with a wooden hammer upon the rostrum from Defaulter] 122 [Deficiency which the notice is read. The member is then said to have been "hammered." The Stock Exchange appoint hquidators called official assignees, who deal with all defaulting members' estates so far as regards Stock Exchange matters. All open transactions are closed at current prices immediately the default is announced, and all debts due to a defaulter by members of the Exchange are paid to the assignees, who distribute the proceeds of all assets which come to their hands pari passu among those members who are creditors. Thus, unless there be unsatisfied creditors outside the Stock Exchange, the defaulter does not require to go through the Bank- ruptcy Court, for the members who were creditors have to bear any loss there might be. The defaulter cannot transact any further business in the House after default, but if his estate pays los. in the £, and he has not been guilty of misconduct, he may be re- admitted to membership. In the event of the defaulter being declared bankrupt by the Court by reason of unsatisfied '* outside" creditors, the trustee has no claim upon the fund collected by the official assignee from the members [Ex parte Grant, 1880), but he is entitled to any private assets which the defaulter may have handed over to the official assignee. Defeasance.— Something which defeats the operation of a deed, but is contained in another docament. If it is contained in the same deed it is called a "condition." Deferred Creditor.— 5^^ Postponed Creditor. Deferred Life Annuities.— Annuities for the life of a purchaser, but deferred until a stated time, near or remote according to the sum paid for the annuities. If the annuitant die before the annuity commences, the purchase money is lost. Deferred Ordinary Shares, or Stock.— Shares or stock entitling the holders (generally) to the residue of the earnings after all prior stockholders (such as preference or ordinary) have been satisfied. The Regulations of Railways Act 1868 provides that any railway company which has for the year preceding paid a dividend upon its ordinary stock of not less than 3 per cent, may resolve to divide the (paid- up) ordinary stock into two classes, one to be called preferred ordinary and the other deferred ordinary. The div.ision must be in equal portions, and the preferred ordinary stock will bear a fixed maximum dividend of 6 per cent, per annum, and will rank for such dividend (only) in priority to any dividends payable on the deferred ordinary stock, and pari passu with any undivided ordinary stock created or to be created, but the maximum dividend of 6 per cent, will be dependent upon the profits of each particular year— /.5., it is non-cumulative. In each year after the 6 per cent, has been paid upon the preferred ordinary stock, the holders of deferred ordinary stock, in respect of all dividend exceeding the 6 per cent, already paid to the holders of ordinary stock, will raik pari passu with the latter. In other words, if there are undivided ordinary, preferred ordinary, and deferred ordinary stocks, in the first distribution the latter stand out, and when the two former have received 6 per cent, then the preferred ordinary stand out, and any further dividend available is dis- tributed pari passu between the undivided and deferred ordinary. Thus the undivided ordinary receive a 6 per cent, dividend and a supplementary dividend (as it- were), the preferred ordinary receive 6 per cent., and the deferred ordinary only receive the supplementary dividend. Deficiency Account. — The account to be prepared by a bankrupt, or the officers of a company being wound up by the Court, showing how the deficiency represented upon the respective statements of affairs has arisen. In the case of a bankrupt the account must commence from a date twelve months before the making of the receiving order, or such other period as the Official Receiver may fix. In the case of a company the account must commence from a date three years before the making of the winding-up order ; in the event of the winding-up order being made within three years from the formation of the company, the account must cover the whole period of the company's existence. [See title Statement of Affairs.) Deficiency] 123 [Demurrage Where a company has incurred losses in trading so that a debit balance exists in the Revenue Account, such balance, of course,\vill appear on the asset side of the Balance Sheet, but it should be so recorded that the item cannot be erroneously mistaken for an asset, for which purpose, instead of the narration " Revenue Account — balance, " it is preferable to state, " Revenue Account — deficiency." Defunct Companies.— 5V^ Registrar of Joint Stock Companies. Del Credere Agent. — See Agent. Delegatus non potest delegare (a dele- gate cannot delegate). — An agent cannot delegate his authority. " The maxim, when analysed, merely im- " ports that an agent cannot, without '* authority from his principal, devolve upon " another obligations to the principal which " he has himself undertaken to personally " fulfil ; and that, inasmuch as confidence in " the particular person employed is at the " root of the contract of agency, such an " authority cannot be implied as an ordinary " incident in the contract. But the exigen- " cies of busines's do from time to time " render necessary the carrying out of the " instructions of a principal by a person other " than the agent originally instructed for the " purpose, and where that is the case the *' reason of the thing requires that the rule " should be relaxed, so as, on the one hand, " to enable the agent to appoint what has " been termed a ' sub-agent ' . . . and, " on the other hand, to constitute in the " interest of and for the protection of the " principal, a direct privity of contract " between himself and such substitute. And " an authority to the effect referred to may " and should be implied where from the con- " duct of the parties to the original contract " of agency, the usage of trade, or the nature " of the particular business which is the sub- " ject of the agency, it may reasonably be " presumed that the parties to the contract " of agency originally intended that such " authority should exist, or where in the " course of the employment unforeseen emer- " gencies arise which impose upon the agent " the necessity of employing a substitute." [Thesiger, L.J.] Delivery Order. — A written or printed docu- ment, entitling any person named therein or the legal holder thereof to the delivery of any goods, wares, or merchandise lying in any dock, port, wharf, or warehouse. Where the goods are of the value of £2 or upwards the order must bear a penny stamp duly cancelled by the issuer. Delivery orders are often deposited with bankers and others as security for advances. Demand (Payable on).— A bill is payable on demand {a) which is expressed to be payable on demand, or at sight, or on presentation, or {b) in which no time for payment is expressed. Where a bill is accepted or indorsed when it is overdue, it shall, as regards the acceptor who so accepts or any indorser who so indorses it, be deemed a bill payable on demand. (1882 Act, section 10.) A cheque is a bill of exchange drawn on a banker payable on demand. (Section 73.) Where a bill is payable on demand present- ment for payment must be made within a reasonable time after its issue, in order to render the drawer liable, and within a reasonable time after its indorsement, in order to render the indorser liable. Where a promissory note payable on demand has been indorsed it must be presented for payment within a reasonable time of the indorsement. If it be not so presented the indorser is discharged. In determining what is a reasonable time, regard shall be had to the nature of the instrument, the usage of trade with regard to similar instruments, and the facts of the particular case. (Sections 45 and 86.) (As to a cheque, see title Un- presented Cheques.) A bill of exchange payable on demand requires a penny stamp irrespective of the amount stated in the bill, but a promissory note payable on demand is subject to ad valorem stamp duty. Demonstrative Legacy. — See Legacy. Demurrage. — An allowance made to the owners of a vessel by the freighter or charterer for detaining her for a longer period than agreed upon. The charterer is usually allowed a certain number of days, called lay days (which may be either running Demurrage] 124 [Depreciation or working days) for receiving and dis- charging the cargo, after the expiration of which he is Hable to pay an agreed sum per day so long as the ship is further detained. {See Charter-Party.) Denoting Stamp.— (1) A stamp placed upon a copy of a document stating or denoting that the original has been duly stamped. (2) Where the stamp duty with which an instrument is chargeable depends upon the duty paid upon another instrument, the payment of such last mentioned duty will, on production of both instruments duly executed, be denoted upon such first mentioned instrument. Departmental Accounts. — A system of accounting whereby the transactions of several departments of one business are separately recorded in the accounts. The stocks on hand are valued separately, and the sales and purchases, by means of columns in the re- spective books, are analysed and allotted to the various departments ; a record is also kept of all transfers from one department to another, the latter items being treated upon a strictly cost-price basis. With regard to working expenses, direct charges are placed against the respective departments, the remainder being apportioned either in respect of turnover or otherwise, according to circumstances. The apportion- ment of the working expenses amongst the various departments, however, is not a usual practice, the raison d'etre of Departmental Accounts not being to ascertain the final result of each department, but rather to determine the percentages of gross profit realised in each case, as the different percen- tages realisable on the various classes of goods are so irregular, and the fluctuations of turn- over, comparing one department with another, are in many instances so great as to render most misleading any attempt to average the results which a proprietor considers ought to be obtained. Deposit.— Bonds, shaie certificates, money or other property, as the case may be, placed in the hands of a person or company (i) for safety, (2) in order to obtain interest thereon, (3) as security for a debt or otherwise, or (4) as an earnest to secure the performance of a contract, particularly a contract of sale. Money lodged with a banker and, by arrangement with him, kept separate from the depositor's current account (if any), to be withdrawn only on notice being given, and upon special terms as to interest (if any), is termed " money on deposit," and the receipt given therefor by the banker is called the " deposit note." This note requires no- stamp. The depositor's right against the banker is merely that of a creditor. Bills deposited with a banker for collection or for any other special purpose do not pass to the trustee in the event of the banker's bankruptcy {see Short Bills), and this also applies to bonds and other valuables deposited for safe keeping. A deposit of the title-deeds of lands as security for the repayment of a loan con- stitutes an equitable mortgage, notwithstand- ing the provisions of section 4 of the Statute of Frauds, it having been held that the deposit itself, without even a verbal communication, will create a valid charge. (Frauds, Statute of.) The Court of Probate Act 1857 provides that any person may deposit his will for safe custody in the depository of the Court. Depositors' Ledger. — One recording the accounts of depositors, in the case of building societies, savings banks, and the like. A good form of ruling for such a Ledger is one which provides for the date being placed in the centre column, the deposits paid in and interest credited occupying columns to the right, the deposits withdrawn and interest debited being placed to the left. This allows of every transaction being recorded in strictly chronological order, and as each transaction, debit or credit, occupies the entire line from left to right, the balance day by day can be readily perceived, and this is an important matter in this class of accounts. The system adopted by the savings banks necessitates one column only, deposits being added and withdrawals deducted, so that the balance is always known for ready comparison with the depositor's Pass Book. Depreciation. — The term is used in account- ancy to represent the shrinkage in value of Depreciation] 125 [Depreciation any particular.property,buildings,machinery, I plant, &c., (i) as a consequence of being i employed in trading or for manufacturing I purposes, (2) by mere effluxion of time, (3) ! by becoming obsolete, or (4) from any other ! cause. The subject of depreciation is a very wide one, as almost every class of property is entitled to be considered upon its own peculiar merits in this respect. That the loss arising from the diminished value of an asset should be charged against the revenue derived from its use appears incontestable in principle, yet many difficul- ties are encountered in practice in assessing the amount so chargeable. The main factors in determining the amount of depreciation chargeable are : — (i) The original cost or value of the property. (2) The probable life thereof. (3) The repairs and renewals to be under- taken during such life. (4) The break-up or residual value. Referring to these points seriatim : — (i) The original cost is not necessarily synonymous with the original value, and the circumstances connected with - the purchase may need to be con- sidered. (2) The probable life may be ascertained from experience, although it may to a great extent be controlled by the circumstances of each case ; for instance, certain machinery will last longer if it is used at normal speed and is carefully tended than will be the case if subjected to undue pressure or if it is neglected by those in charge. On the other hand, although in an excellent state of preservation, the machinery may fall in value as a result of some new and improved means of pro- duction being devised. (3) With regard to repairs and reneivals : to repair is to make good for all practical purposes ; to renew is to make again absolutely. Despite repairs, machinery and plant will ultimately require to be renewed — that is to say, to be made again absolutely. Upon the basis of these propositions, an eminent accountant has stated that if revenue is charged with the cost of repairs, and proper provision is also made for renewals out of revenue, it follows that provision has thereby been made for depreciation also, even for that imper- ceptible depreciation which is taking place every day, and which can only be made good when the thing so depreciated is renewed or restored to its first or original state. Thus, theoretically at least, an adequate charge for repairs and renewals against revenue dispenses with the necessity for a further charge for depreciation ; but it is difficult to apply this principle in practice. It is conceivable that many objects cannot be tinkered with — they do not need repairing, while their efficiency is fully maintained for years. But in the course of time they collapse and require to be entirely replaced. This amounts to a renewal no doubt, necessary, say, after 10 years, but as the revenue of the 10 years in question should bear this expense, the annual provision out of revenue for future renewal is in effect a recognition of the gradual depreciation of the particular object. To charge revenue with repairs and renewals, only as and when such repairs and renewals are necessary and have been duly effected, is clearly tantamount to a postponement of proper provision, affecting the accuracy of the Balance Sheet during the life of the various objects ; for, notwithstand- ing the gradual approach of the renewing period, the machinery and plant would appear in the state- ment at cost, without any provision for the pending expenditure which the mere lapse of time will necessitate. Thus, if depreciation is not to be charged against revenue periodically, some periodic provision must be made for repairs and renewals whether actually expended during the particular period or not. So that so far as the Revenue Account is concerned, it is of little importance whether an annual charge be made in the name of Depreciation] 126 [Deviation depreciation or as a provision against future renewals so long as the charge is adequate. (4) The residual value is important. It may be large or small and so affect the amount of depreciation. Suppose a certain machine costs /loo ; that with proper repairs it will perform its work efficiently for ten years, and it is estimated that at the end of that time the residual value, say, as scrap iron, will be ;^2o. Here the depreciation is £80, so that, apart from interest questions, the annual charge to revenue would be £S for depreciation or future renewal, plus the cost of the necessary repairs meanwhile. With regard to machinery the conditions to which it will be subjected, and the possi- bility of it becoming obsolete before it would be worn out in the ordinary sense because of new and improved means of production being devised, must be considered in connection with the question of depreciation, for the possibility of obsolescence is an important factor in determining the "life" of a given machine. This risk of obsolescence is, how- ever, in the nature of a contingency which may or may not arise, rather than an inevitable shrinkage, and it is as a con- sequence a difficult matter to provide against satisfactorily. It is advisable to classify the different properties as much as possible, so that the various rates of deprecia- tion applicable to each class may be more easily adopted in the accounts. In determin- ing the rate of depreciation of property the question as to whether the rate will be based each year (or other period) upon the original valuation or upon the diminishing values brought about by the amount of depreciation periodically passed to credit must be con- sidered, for it is obvious that a much larger percentage of depreciation will be necessary in the latter case if the same ultimate result is required. The system of basing the depre- ciation upon the diminishing values has, however, the effect of relieving the later years of a proportion of the charge for depreciation at the expense of the earlier years, but when it is remembered that with certain classes of property repairs and maintenance are necessary, and that such charges generally fall heavier upon the later years, it is a question for consideration whether the "diminishing value" principle is not the better one, as it serves to equalise matters by charging the earlier years with little in the way of repairs and a larger proportion of depreciation, whilst the condition of things in the later years is reversed. The valuation of a lease or premium paid therefor may be written off" in fixed annual sums, or upon the annuity principle, employ- ing interest at an agreed rate in the accounts, such interest being passed to credit of Profit and Loss Account. As the premium paid for a lease is theoretically the present value of the excess of annual value of the premises over the actual rent paid, it follows that the amounts periodically charged to Profit and Loss Account in reduction of the " premium " are, in reality, so much more rent. {See Fixed Capital, Goodwill, Income Tax, Profits available for Dividend, Repairs and Renewals, Wear and Tear.) Devastavit. — He has wasted. The wasting of the estate of a deceased person by his executor or administrator arising through extrava- gance or a misapplication of the assets. The loss arising therefrom is chargeable against the person committing the waste, but in the case of two or more executors, one will not be protected, by mere passiveness, from liability in respect of a devastavit committed by one of his co-executors, for it is the duty of co-executors to watch over the conduct of each other. Deviation. — A voluntary departure by the master of a ship from the usual course of the voyage. In the absence of express stipula- tion the owner of a vessel impliedly under- takes to the shippers of cargo that he will proceed without unnecessary deviation, and it is an implied condition of the contracts of marine insurance concerning the ship and cargo that no deviation will be made. Devia- tion arising from the ignorance of the cap- tain appears to be within the definition, as also that made purposely to save property, but efforts to save life which involve deviation are allowed. If a master receives reliable information that if he continues in the usual course of his voyage he will expose his ship and cargo, or either of them, to perils, such as capture,. Deviation] 127 [Differences pirates, icebergs, or other dangers of naviga- tion, he will be justified in making a reason- able deviation to avoid them. Differences. — The amounts payable or receivable, as the case may be, by a speculator in stocks, shares, or produce in respect of the fluctuations in price of the subject-matter of speculation between given dates, i.e.^ settling days. The Gaming Act, 8 and 9 Vict. c. 109, provides that all contracts, whether by parol or in writing, by way of gaming or wagering are null and void, and no action can be brought or maintained for recovering any sums of money alleged to have been won upon any wager, or which shall have been deposited in the hands of a third person to abide the event on which any wager shall have been made. The contracts referred to, it must be noted, are not made illegal, but merely void and unenforceable at law. " It has been decided that agreements " between buyers and sellers of shares and " stocks to pay or receive the differences " between their prices upon one day and " their prices on another day, are gaming and " wagering transactions wdthin the meaning " of the (above) statute." (Lindley, J., Thacker v. Hardy, 1878.) But where the parties to the agreement are not the buyer and seller respectively, but a broker (as buyer or seller according to instructions) and his client, the nature of the transaction is altered. " The essence of gaming and wagering is " that one party is to win and the other to " lose upon a future event, which at the time ' ' of the contract is of an uncertain nature — " that is, if the event turns out one way A. " will lose, but if it turns out the other way " he will win. But that is not the state of ' ' facts (where a client instructs a broker to " buy or sell for him even with no intention of " taking or making delivery). The broker " was to derive no gain from the transaction ; " his gain consisted in the commission which ' ' he was to receive whatever might be the " result of the transaction to the client. " Therefore the whole element of gaming " and wagering was absent from the '• contract." (Cotton, L.J., ibid.) Where a client employs a broker to speculate for him the agreement between the parties renders it necessary that the broker should himself, as principal, enter into real contracts of purchase or sale with jobbers. If, in carrying out his agreement with the client, he enters into contracts and incurs obligations with the jobbers, for non- performance of which actions could be brought against him, then upon the general principles of agency he (the broker) is entitled to be indemnified by his principal (the client) against liabilities incurred in executing his orders. When a client so instructs his broker he does not authorise him to make a "time bargain " in the strict sense of the term. " A real time bargain is a very rare " occurrence. What are called time bargains " are, in fact, the result of two distinct and " perfectly legal bargains, namely, first, a " bargain to buy and sell, and secondly, a " subsequent bargain that the first bargain " shall not be carried out. It is only when " the first bargain is entered into upon the " understanding that it is not to be carried " out that a time bargain, in the sense of an " unenforceable bargain, is entered into.'" (Lindley, J., ibid.) Stated shortly, although a gaming contract is unenforceable, gambling of itself is not illegal, and an agent does nothing illegal in carrying out the instructions of his client ; he is therefore entitled to be indemnified against losses thereby sustained, and, in the event of the bankruptcy of his principal, he may prove for such losses. {Ex parte Rogers, 1880.) But where the parties act as principals to a contract to pay " differences " the case comes within the Gaming Act and is unen- forceable. Where there is a bargain for the payment of differences, with an option to the buyer, for some further consideration, to demand delivery of the stock or other subject- matter of the transaction, the option does not, of itself, take the transaction out of the operation of the Gaming Act, if but for such option the Act would render the contract unenforceable. The seller cannot compel the buyer to take delivery, for the latter may decline to exercise his option and pay the differences only. [Re Gieve, 1899.) [See title Jobbers.) Differences] 128 [Directors Differences in Exchange.— Sr^ Rate of | Exchange. j Dilapidation. — Decay. The term is used to ; signify the want of repair to property for which a tenant is held liable to a landlord when yielding up demised premises at the end of a term, when such premises were held under a lease requiring the premises to be delivered in good repair. Diminishing Balances.— The term used to signify the values at which a property stands in the books and accounts from time to time, such values (or balances) diminishing by and to the extent of the amounts periodically passed to credit of the account as and for deprecia- tion or otherwise. {See Depreciation.) Directors. — The officers who conduct the affairs of a joint stock company. They are the special, not general, agents of the com- pany, for they can only exercise such powers as are conferred upon them by the memo- randum and articles of association. As all persons dealing with a particular company are presumed to have knowledge of the con- tents of these documents, they are deemed to have notice of the extent of the directors' powers, and the nature of the special restric- tions (if any) placed upon them. The regulations as to appointment, qualifi- cation, remuneration, and retirement, are also contained in the articles. Appointment and Qualification. — Directors are generally appointed in one of the following ways : — la) By name mentioned in the articles of association. {h) By the signatories to the articles of association in accordance with express ■ power given thereunder. {c) By the shareholders in general meeting. {d) By the other directors in order to fill a vacancy. Sometimes — although rarely — they are appointed for purposes of formation only, and are either re-elected or replaced at the statutory meeting. Neither the Companies Acts nor Table A require directors to hold shares in the com- pany appointing them as a qualification for office, but the articles ot association of most companies provide for a share qualification — in fact, the London Stock Exchange require it before granting a quotation for the shares. There are, however, many companies having directors who do not possess any share or stock qualification, whilst, on the other hand, some companies are "governed " by directors, with a share qualification which has been bestowed upon them by some person under whose influence they act, quite apart from their own discretion. By section 2 of the Companies Act 1900 the under-mentioned restrictions are placed on the appointment of directors of companies which invite subscriptions for shares from the public : — A person is not capable of appointment by the articles unless, before the registration of the articles, he has either by himself or by his agent authorised in writing — {a) Signed and filed with the Registrar a consent in writing to act as such director ; and {b) Either signed the memorandum of association for a number of shares not less than his qualification (// any) or signed and filed with the Registrar a contract in writing to take from the company and pay for his qualification shares {if any). By section 3 of the 1900 Act it is made a statutory duty for directors of all com- panies to obtain their qualification {tf any) within two months after appointment, or such shorter time as may be fixed by the regulations of the company. In the event of non- compliance, or in the event of a director ceasing to hold his qualification, his office is to be vacated ; and if any unqualified person act as a director after the expiration of the time limit, he becomes liable to pay to the company the sum of five pounds for every day during which he so acts. Note. — The provisions of the above sections do not impose a qualification, they merely enforce the requirements (if any) of the com- pany's regulations in this respect. Remuneration. — The regulations of some companies provide for the remuneration of the directors out of the profits of the company, whilst others make the remuneration payable out of the com- pany's funds — an obvious distinction. Directors] 129 [Directors Where the articles of association provide for the payment out of the funds of the com- pany of a stated annual sum by way of remuneration to the directors, it has been held that even where directors must of necessity be members, such remuneration is not due to them in their character of members of the company, but under a separate and distinct contract, and directors are therefore entitled to prove and rank as ordinary creditors in the winding-up of the company for any unpaid fees in pursuance of the articles of association. {New British Iron Co. (1898) I Ch. 324.} On the other hand, if a director is entitled to a stated sum per annum by way of remuneration, he is not entitled, while the company is a going concern, to any part thereof unless he acts for the full year. {Inman v. Acvoyd &■ Best, Lim., App. Cas. 1901.) Responsibilities . — Directors are not only agents, but quasi- trustees for the company, as the funds of a company may be regarded as a trust-fund of which the directors have the administration. It is said that directors are also trustees '^ for the shareholders of the powers which have " been committed to them." A director stands in a fiduciary relation towards the company, and as a consequence he cannot contract with the company, unless the articles otherwise provide, but it is cus- tomary to allow directors to contract with the company, provided they do not vote when any question relating to their particular contracts is being considered by the directors as a body. Directors may be held personally responsible for acts ultra vires which are also ultra vires the company, or which, though intra vires the company, the members decline to ratify — unless such acts are the result of an honest mistake or an error of judgment, and they have otherwise acted bond fide. If the acts are ultra vires the directors but intra vires the company, they may be ratified by the members in general meeting, but if the acts are ultra vires the company they cannot be ratified. Ordinarily, the liability of a director, apart from fraud and acts ultra vires, is that of an ordinary member in respect of the shares he may hold, but the Companies Act 1867 provides that the liability of the directors of a limited company may be unlimited if so provided by the memorandum of association (as originally prepared or as altered by special resolution) . This provision is, however, not taken advantage of, and may be regarded as a " dead letter." The fact that some of the directors of a company have acted irregularly in transact- ing business on behalf of the company when a quorum was not present, will not be allowed to prejudice third parties who have acted with- out notice of the irregularity, for although all persons having dealings with a company are fixed with notice of its memorandum and articles as regard external affairs, they are not presumed to have knowledge of its " indoor management." In any case, anything alleged to have been done on behalf of a company at a meeting of directors, where a quorum was not present, may be subsequently ratified and confirmed at a duly constituted meeting of directors ; when so ratified, the act will be valid ab initio. A special liability attaches to directors in connection with the issue of a prospectus and also as to irregular allotments. [See Allot- ment, Directors' Liability Act 1890 Governing Director, Local Director, Managing Director, Prospectus, Substituted Director.) Directors' Liability Act 1890. — Directors, promoters, and others responsible for the issue of a prospectus inviting applications for shares or debentures in a company are liable to pay compensation to any persons (who have subscribed for shares or debentures on the faith of the prospectus) for any damages sus- tained by reason of any untrue statements therein, unless — (i) With respect to every untrue statement 7iot purporting to be made on the author- ity of an expert, or of a public document, the person liable (director, promoter, &c.)-had reasonable ground to believe, and did up to the time of allotment be- lieve, that the statement was true ; and (2) With respect to every untrue statement purporting to be a copy or extract from the report of an expert, the copy or extract fairly represented the report of the expert or was a correct copy thereof, K Directors] 1^0 ^Discharge and further, the persons liable must have had reasonable grounds for believ- ing the expert was competent to make the report ; and (3) With respect to every untrue statement purporting to be a statement made by an official person, or a copy of or extract from a public official document, it fairly represented such official state- ment, or was a correct copy of or extract from such document. By section 2 of the Companies Act igoo a person is not to be named as a director in any prospectus issued by or on behalf of a company prior to the expiration of one year from the date at which the company is en- titled to commence business unless prior to the publication of the prospectus he has, by himself, or his agent authorised in writing, signed and filed with the Registrar, a consent in writing to act as such director. It is sub- mitted that such consent will be sufficient to bind a director as regards knowledge of, although it may not be conclusive as to his responsibility for, the contents of the prospectus. Subject to the disabilities which such consent in writing may impose, where a person has ' ' consented " to become a director, but withdraws his consent before the issue of the prospectus, which is, nevertheless, issued without his authority or consent, and he forthwith gives reasonable public notice of such facts, or where, after the issue of the prospectus, he becomes aware of any untrue statement therein, and withdraws his consent, giving reasonable public notice of such with- drawal, with the reason therefor, he will not be held liable to pay compensation. Section 10, sub-sec. 7, of the Companies Act 1900 protects a director or other person responsible for the issue of a prospectus from liability for non-compliance with the re- quirements of the section, if he proves — {a) As regards any matter not disclosed— want of knowledge ; {h) Any honest mistake of fact on his part ; and also from liability for non-compliance with the requirements as to disclosure of directors' interest in the promotion, unless it he proved that he had knowledge of the matters not disclosed. Those responsible for the issue of a pro- spectus are liable to indemnify all persons who have been improperly stated to be directors against all damages and costs incurred by reason of their names having been improperly inserted in such prospectus. Directors (but semhle not promoters) who have become liable under the Act of 1890 are entitled to recover contribution from others who, if sued separately, would have been liable to make the same payment. The granting of this right of contribution effected an important alteration in the law. Discharge of a Bankrupt.— A bankrupt may, at any time after being adjudged bank- rupt, apply to the Court for an order of discharge, and the Court will appoint a day for hearing the application, but such applica- tion will not be heard until the public examination of the bankrupt has been con- cluded. A bankrupt intending to apply for his discharge must produce to the Registrar a certificate from the Official Receiver specifying the number of his creditors of whom the Official Receiver has notice (whether they have proved or not). The Registrar shall not less than 28 days before the day appointed for hearing the application give notice of the time and place of the hearing of the application to the Official Receiver and trustee, and the Official Receiver shall forthwith send notice thereof to the Board of Trade for insertion in the Gazette. The Official Receiver must also send to each creditor a notice of the day appointed for the hearing of the debtor's application for discharge, not less than 14 days before the day so appointed. But it is not necessary in summary cases to send notices to creditors for less than £2. The application must be heard in open Court. The Official Receiver must make a report upon the bankrupt's conduct and affairs, and the Court takes the report into consideration upon the hearing of the application, and may either (i) grant or (2) refuse an absolute order of discharge, or (3) suspend the opera- tion of the order for a specified time, or (4) grant an order of discharge subject to con- ditions as to future earnings or after-acquired property, provided that the Court shall refuse the discharge in all cases where the bankrupt Discharge] 131 [Discharge has committed any misdemeanour under the Debtors Act 1869 (q.v.) or the Bankruptcy Act 1883, or any other misdemeanour, or any felony in connection with the bankruptcy, unless the Court for special reasons shall otherwise determine. The Court shall also, upon proof of any of the facts hereinafter mentioned, either : — (i) Refuse the discharge, or (2) Suspend the discharge for a period 'of not less than two years, or .(3) Suspend the discharge until a dividend of not less than ten shillings in the pound has been paid to the creditors, or ((4) Grant an order of discharge condition- ally upon the bankrupt assenting to judgment being entered against him by the Official Receiver or trustee for the unsatisfied portion of the debts provable in the bankruptcy, such amount to be payable out of future earnings or after- acquired property, but execution there- on not to be levied without leave of the •Court. Such an order may be modified by the Court if after the expiration of two years the bankrupt satisfies the Court that there is no reasonable pro- bability of his being in a position to comply with the terms of the order. The facts hereinbefore referred to are : — A. That the bankrupt's assets are not of a value equal to ten shillings in the pound on the amount of his unsecured liabilities, unless he satisfies the Court that the fact that the assets are not of a value equal to ten shillings in the pound on the amount of his unsecured liabili- ties has arisen from circumstances for which he cannot justly be held responsible. B. That the bankrupt has omitted to keep such books of account as are usual and proper in the business carried on by him and as sufficiently disclose his business transactions and financial position within the three years imme- diately preceding his bankruptcy. ' • The omission to keep proper books ' ' is not a slight but a serious offence -*' against trading morality. It is not '' enough that there should be books " with entries in them which would " require a prolonged examination by " a skilled accountant in order to ascer- " tain the result of them. That is not " keeping proper books. The books •* should be properly kept and balanced ** from time to time, so that at any '* moment the real state of the trader's * • affairs may appear at once. Those *' are the books which traders ought to " keep." (Lord Esher.) C. That the bankrupt has continued to trade after knowing himself to be insolvent. " When a man is insolvent he has no " right to take upon himself to decide " whether his business is or is not to be " sold, or whether his business is or is " not to be carried on. When he is ** insolvent he really is carrying on his '* business at the risk and expense of **his creditors. Sometimes he may, *' by great good fortune, succeed in " pulling through, if he is not too deeply " involved, but, as a general rule, one " knows from experience that is not so, ** and that going on with trading under ^* those circumstances leads to bank- " ruptcy in the end and to a greater " deficiency than there would be if the '* debtor were to pull up as soon as he *' found he was insolvent. A man, *' therefore, is not justified in going on ''or in selling, or, in fact, taking any *' step at a time when he is insolvent " without the concurrence of the "creditors, who have to bear the "burden if that step turns out to be '* a disastrous one." (Cave, J.) D. That the bankrupt has contracted any debt provable in the bankruptcy with- out having at the time of contracting it any reasonable or probable ground of expectation (proof whereof shall lie on him) of being able to pay it. E. That the bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities. F. That the bankrupt has brought on, or contributed to, his bankruptcy by rash and hazardous speculations, or by un- justifiable extravagance in living or by K 2 Discharge] 132 [Discharge gambling, or by culpable neglect of his business affairs. *' A man is bound, not to keep up " appearances but to pay his debts, and "if his profits will not allow of his "living at the particular rate he has " been accustomed to live at, then his "plain duty is to reduce his scale ol "living, and not to go on living out of " the money of creditors." (Cave, J.) G. That the bankrupt has put any of his creditors to unnecessary expense by a frivolous or vexatious defence to any action properly brought against him. H. That the bankrupt has within three months preceding the date of the receiving order incurred unjustifiable expense by bringing a frivolous or vexatious action. I. That the bankrupt has within three months preceding the date of the receiving order, when unable to pay his debts as they became due, given an undue preference to any of his creditors. Noie. — An undue preference is wider than a fraudulent preference, for although a preference may not be such as would be avoidable as a fraudulent preference, it may never- theless be deemed undue, and affect the debtor's discharge. /. That the bankrupt has within three months preceding the date of the receiving order incurred liabilities with a view of making his assets equal to ten shillings in the pound on the amount of his unsecured liabilities. K. That the bankrupt has on any previous occasion been adjudged bank- rupt, or made a composition or arrangement with his creditors. Z. That the bankrupt has been guilty of any fraud or fraudulent breach of trust. The Court may also refuse or suspend an order of discharge, or grant an order subject to conditions, where the bankrupt has made a fraudulent or unjustifiable marriage settlement. The powers of the Court of suspending and of attaching conditions to a bankrupt's discharge may now be exercised con- currently. An order of discharge does not release the bankrupt — (i) From any debt on a recognisance, nor from any debt with which the bank- rupt may be chargeable at the suit of the Crown, or of any person for any offence against a statute relating to any branch of the public revenue, or at the suit of the sheriff or other public officer on a bail bond entered into for the appearance of any person prosecuted for any such offence, unless the Treasury certify their consent in writing to his being dis- charged therefrom. (2) From any debt or liability incurred by means of any fraud or fraudulent breach of trust to which he was a party, nor from any debt or liability whereof he has obtained forbearance by any fraud to which he was a party. (3) From any liability under a judgment against him in an action for seduction, or under an affiliation order, or under a judgment against him as co- respondent in a matrimonial cause, except to such an extent and under such conditions as the Court expressly orders in respect of such liability. With the foregoing exceptions, an order of discharge releases the bankrupt from all debts provable in the bankruptcy. With regard to debts contracted by a person with the debtor after notice of an available act of bankruptcy having been committed by the debtor, it has been held that the Bankruptcy Act 1883 (sec- tion 37 (2) does not provide that such a debt is non-provable in the bankruptcy, but only that the creditor shall not prove in respect thereof. [Buckwell v. Normany 1898.) The effect of this decision is important, for as the debt is not deemed non-provable, the bankrupt will be releastsd therefrom on obtaining his discharge. So Discharge] ^33 [Discharge that the creditor (i) may not prove in the bankruptcy by reason of a personal dis- ability, nor (2) may he at any time sue the c'ebtor therefor. An order of discharge does not release any person who at the date of the receiving order was a partner or co-trustee with the bankrupt, or was jointly bound or had made any joint contract with him, or any person who was surety or in the nature of a surety for him. An order of discharge is conclusive evi- dence of the bankruptcy and of the validity of the proceedings therein, and in any pro- ceedings that may be instituted against the bankrupt who has obtained an order of dis- charge in respect of any debt from which "he is released by such order, the bankrupt may plead that the cause of action occurred before his discharge, and may give the Bankruptcy Acts and the special matter in evidence. Where one member only of a firm has been adjudicated bankrupt his discharge operates to release him from his joint as well as his separate debts {Ex parte Hammond^ 1873), and where all the members of a firm have been adjudicated bankrupt and each has been granted his discharge they are released from the separate and joint liabilities. [Howard v. Poole, 1734.) A discharged bankrupt shall, notwith- standing his discharge, give such assistance as the trustee may require in the realisa- tion and distribution of such of his pro- perty as is vested in the trustee, and if he fails to do so he will be guilty of a con- tempt of Court, and the Court may also, if it thinks fit, revoke his discharge. (1890 Act, sections 8 and 10; and Rule 235.) Where a bankrupt is discharged subject to the condition that judgment shall be entered against him, or subject to any other condition as to his future earnings or after-acquired property, it shall be his duty, until such judgment ot condition is satis- fied, from time to time to give the Official Receiver such information as he may require with respect to his earnings and after-acquired property and income, and not less than once a year to file in the Court a statement showing the particulars of any property or income he may have acquired subsequent to his discharge. (Rule 244.) Any statement of after-acquired property or income filed by a bankrupt whose dis- charge has been granted subject to con- ditions shall be verified by affidavit, and the Official Receiver or trustee may require the bankrupt to attend before the Court to be examined on oath with reference to the statement contained in such affidavit or as to his earnings, income, after-acquired pro- perty, or dealings. Where a bankrupt neglects to file such affidavit or to attend the Court for examination when required so to do, or properly to answer all such questions as the Court may put or allow to be put to him, the Court may, on the application of the Official Receiver or trustee, rescind the order of discharge. (Rule 244A..) Upon every application for an order of discharge a fee of ^i los. is payable (which includes the expense of gazetting) and a further fee is payable at the rate of one shilling for each creditor who has to be notified of the application, A bankrupt is not entitled to have any of the costs of or incidental to his application for his dis- charge allowed to him out of his estate. (Rule 239.) [See Undischarged Bankrupt.) Discharge of a Bill of Exchange.— A bill is discharged when all rights of action thereon are extinguished. It then ceases to be negotiable, and subsequent holders acquire no right of action on the instru- ment. The discharge of a bill does not, however, extinguish any right of action which a party to the bill may have in respect of a transaction which arose out of the bill, but which is nevertheless inde- pendent of it. For example, a bill is dis- charged by payment in due course, by or on behalf of the drawee or acceptor (1882 Act, section 59), and although payment of a bill by one of joint acceptors operates as a discharge of the bill, the payer still has his right of contribution from his co- acceptors. Discharge] 134 [Disclaimer If a bill (duly accepted) be given for a debt, and the acceptance is paid, both the debt and the bill are discharged. Where an accommodation bill is paid in due course by the party accommodated the bill is discharged (section 59), but if paid by an accommodating acceptor he has a personal right of action for indemnity from the party accommodated. The discharge in bankruptcy of an acceptor does not operate as a discharge of the bill ; it operates only as a discharge of the acceptor to the extent of the amount proved for, and as a discharge of the drawer and indorsers to the extent of any dividends received. The discharge of a bill must also be care- fully distinguished from the discharge of one or more parties thereto by reason of want of notice of dishonour, or some other informality. " Payment in due course " for the pur- pose of determining the discharge of a bill means payment made at or after the maturity of the bill to the holder thereof in good faith and v^ithout notice that his title to the bill is defective. (Section 59.) Part payment of a bill in due course operates as a discharge ■pro tanto. When the acceptor of a bill is or becomes the holder of it at or after its maturity in his own 'right the bill is discharged. (Section 61.) When the holder of a bill at or after its maturity absolutely and unconditionally re- nounces his rights against the acceptor the bill is discharged. The renunciation must be in writing unless the bill is delivered up to the acceptor. (Section 62.) The importance of this formality has been emphasised by the Court.. A drawer renounced his rights on a bill verbally, but delivered the bill to a devisee of the acceptor (the latter having died). On the death of the drawer also, the executors of the drawer sued upon the bill and recovered, the ratio decidendi being "that " the bill had not been renounced in "writing nor had it been delivered up to " the acceptor, the latter at the time being " dead." Where a bill is intentionally cancelled by the holder or his agent, and the cancella- tion is apparent thereon, the bill is dis- charged. The intentional cancellation by the holder, or his agent, of the signature of a party liable on a bill operates as a dis- charge of that party and also of those who would have had a right of recourse against him. (Section 63.) The unintentional cancellation of a bill, or of a signature or a cancellation made under a mistake or without authority, is inoperative on proof that the cancellation was made unintentionally, or under a mistake or without authority. (Section 63.) The right of action under a bill of exchange is (under ordinary circumstances) barred after six years from the date it falls due. [See Alteration, Renewal of a Bill.) Disclaimer.— Bankruptcy. A trustee in bankruptcy may disclaim land of any tenure, burdened with onerous covenants, contracts, shares, stocks, or other property unsaleable or not readily saleable owing to its possession entailing the payment of money or the perform- ance of onerous acts. This right is not affected by the exercise of any act of ownership by the trustee over the property, whether in an endeavour to sell, in taking possession of it, or otherwise. The dis- claimer must be in writing, signed by the trustee (the signature of the trustee's solicitor is not sufficient), and made within twelve months of the first appointment of a trustee, or if the existence of the property should not come to his knowledge within one month of his appointment, the disclaimer should be made within 12 months after the trustee first becomes aware of it. Should^ however, any person interested make appli- cation in writing requiring the trustee to decide whether he will disclaim or not, he must so decide within 28 days after the receipt of such application, otherwise he loses his right of disclaimer, and in the case of a contract, if the trustee after such Disclaimer] 135 [Disclaimer application does not within the proper period disclaim the contract, he is deemed to have adopted it (but see infra). All the above periods may, however, be extended by the Court in a proper case. Leaseholds cannot be disclaimed without the leave of the Court except — (i) Where the premises have not been sub-let nor any mortgage created on the lease, and [a] The rent is less than £20 per annum, or {b) The estate is being summarily administered, or [c) The lessor has been served with notice of intention to disclaim, and does not within seven days give notice that he requires the matter to be brought before the Court ; or (2) Where the premises have been sub-let or a mortgage has been created on the lease, and the lessor, sub-lessee, or mortgagee has been served with notice of intention to disclaim and none of such persons has within 14 days required the matter to be brought before the Court. A disclaimer made without leave of the Court in pursuance of the above rule will not be void or otherwise affected on the ground only that the notice required by the rule has not been given to some person who claims to be interested in the demised pro- perty. W^here any person claims to be interested in any part of the property of the bankrupt burdened with onerous covenants he must, at the request of the Official Receiver or trustee, furnish a statement of the interest so claimed by him. Where the "trustee is entitled to disclaim without leave, the Court cannot impose terms [e.g.., order compensation to the land- lord). {Ex parte Zerfass, 1885.) Where a trustee disclaims a leasehold interest he must forthwith file the dis- claimer with the proceedings in Court, and the disclaimer must contain particulars of the interest disclaimed, and a statement of the persons to whom notice of the diclaimer has been given. Until the disclaimer is filed by the trustee it is inoperative. A disclaimer operates to determine fronx the date of the disclaimer the rights and. liabilities of the bankrupt, and also dis- charges the trustee from all personal liability in respect of the property dis- claimed as from the date when it vested in him, but, except so far as is necessary for releasing the bankrupt and his property and the trustee from liability, a disclaimer does not affect the rights of other persons. Note. — Notwithstanding the latter portion of the above sub-section (55 (2) of 1883 Act), the Court of Appeal held in Stacey v. Hill (1901) that the guarantor of the rent of the premises tenanted by the bankrupt was relieved from liability for any rent accruing after the date of the disclaimer of the lease by the trustee. If the trustee does not disclaim a lease he becomes personally responsible for the rent and covenants as from the date of his appointment — that is, from the date the lease first vested in him, irrespective of the question of actual or beneficial occupation by him. [Titterton v. Cooper, 1882.)^ But the trustee is entitled to indemnity from the estate. As the disclaimer of an onerous lease is not now retrospective, but operates from the date of the disclaimer (if duly filed in Court), the trustee may before disclaiming remove the tenant's fixtures or call upon the landlord to take them over at a valua- tion. Should the landlord decline to pay for the fixtures he must give the trustee reasonable time and opportunity to remove them. On the application of any party claiming an interest in any disclaimed property the Court may make a vesting order on such terms as it may think fit, and the property vests without further conveyance or assign- ment. In the case of leaseholds the vest- ing order will be made in favour of a sub- lessee or mortgagee on the condition that he takes the property with the same liacbili- ties as the bankrupt was subject to at the date of the petition, but under the Act of Disclaimer] 13.6 [Disclaimer 1890 (section 13) the Court has now a further discretion in the matter, and may- vest the property subject to the same liabilities and obligations as if the lease had been assigned at the date of the petition, and (if it be necessary) as if the lease comprised only the property dealt with in the vesting order. If no person claiming under the bankrupt is willing to accept a vesting order under such terms, the Court may vest the bankrupt's interest in any person in any way liable to perform the lessee's covenants, but freed and dis- charged from all incumbrances created by the bankrupt. It is now settled that the lessor may apply for a vesting order as well as the parties claiming under the bankrupt. [Ex parte Shilson, 20 Q.B.D. 343.) A trustee in bankruptcy may disclaim shares held by the bankrupt in a company (registered under the Companies Act 1862) either before or after the commencement of the winding-up, notwithstanding the provisions of section 153 of that Act. With regard to onerous contracts which have not been disclaimed, some difference of opinion exists as to the meaning of the words of section 55, subsection 4, of the 1883 Act, to the effect that if the trustee does not disclaim the contract " ke shall le deemed to have adopted it.'''' (i) In case of adoption the trustee will be held to be personally liable in respect of the contract, subject to such indemnity as he may be entitled to out of the estate. (Robson.) (2) The effect of the provision as to adoption of the contract is not to make the trustee personally liable, but only to effect a novation by which the trustee as representing the body of creditors is substituted as the party liable for the trustee as representing the bankrupt contractor. (Williams; also Benjamin on Sale.) Any person injured by the operation of a disclaimer is deemed to be a creditor of the bankrupt to the extent of the injury, and may accordingly prove the same as a debt under the bankruptcy, but if it is the true interpretation that a trustee who adopts a contract is personally liable thereon, there would apparently be no right of proof against the bankrupt's estate in respect of a breach of contract after the date the trustee was deemed to have adopted it. Again, the Board of Trade, in the regula- tions issued to trustees, notifies them that any neglect on their part to disclaim onerous contracts, &c., will be taken into consideration when application is made for release, presumably because such neglect is deemed prejudicial to the respective estates being administered. The Court may, on the application of any person whO' is as against the trustee entitled to the benefit or subject to the burden of a contract made with the bankrupt, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract or otherwise as to the Court may seem equitable, and any damages payable under the order to any such person may be proved by him as a debt under the bank- ruptcy. The above provision as to power to apply for rescission does not appear to be limited as to time 5 if, therefore, an application to rescind the contract be made after the trustee is deemed to have adopted the contract the effect of an order rescinding a contract would be to relieve the trustee personally of any liabilities he may have incurred in the meantime, for it is expressly provided that the damages (if any) payable under the order shall be proved as a debt under the bankruptcy. In the case of a lease, the measure of damages under a disclaimer would ordi- narily be the present value of the rent payable under the lease, less the rent obtain- able lor the residue of the term in the event of the premises being re-let ; if there is a liability for dilapidations that would need to be considered also. Where the premises can be re-let immediately at a similar rent there would be no injury (so far as regards rent) as a result of the dis- claimer ; compensation may also be pay- Disclaimer] ^37 [Disclosure able to a lessor in respect of occupation by the trustee where such occupation has pro- duced a benefit to the bankrupt's estate " or was contemplated as likely to produce a benefit." In the case of shares of a company, the company may prove for the whole amount due on the shares, whether by way of arrears of calls or the liability to future calls. The measure of damage as to shares is also subject to any value in the shares which the company may ac- quire by reason of the disclaimer. (But see Debts Provable in Bankruptcy.) The provisions of the Bankruptcy Acts relative to a trustee's power of disclaimer are binding on the Crown. (1883 Act, sections 55 and 150 ; 1890 Act, section 13, Rule 320.) Company Liquidation. A liquidator of a duly registered company has nO' power of disclaimer, for he does not by taking or retaining possession become personally liable for the rent and covenants of leases ; the company's property does not vest in him and the occupation is not that of the liquidator but of the company, whose "ministerial officer" the liquidator is whilst the company remains in existence. {Wearmouth Co., 19 Ch. D. 640.) Assignment. ' A trustee under a deed of assignment will become personally liable for the rents and covenants reserved by any lease which may be comprised in the property assigned, and as the trustee has no power of disclaimer it is usual in practice to exclude from the deed any leaseholds under rack-rent or burdened with onerous covenants, the assignor declaring that he stands possessed of same upon trust for the trustee and the creditors. Should the deed include a lease- hold in respect of which the trustee becomes liable for the covenants he may rid himself of all subsequent liability by assigning the lease to another, even though the assignee be a " man of straw." Disclosure of Contracts. — Every pro- spectus issued by or on behalf of a company, or by or on behalf of any person who is or has been engaged in the formation of the company, must state: — The dates of and parties to every material contract, and a reasonable time and place at which any material contract or a copy thereof may be inspected. (Companies Act 1900, section 10, sub-section (i) {k).) The following contracts are excepted, viz. : — (i) Those entered into in the ordinary course of the business to be carried on by the company. (2) Those entered into more than three years before the publication of the prospectus. (3) Those entered into more than two years before the publication of the prospectus, if same is published more than one year after the company is entitled to commence business. And the section does not apply to an invita- tion to existing members or debenture- holders tO' subscribe for further shares or debentures (Companies Act 1900,' section 10, sub-section (4) ), the intention being to compel the disclosure of all contracts which might reasonably be expected to influence persons reading the prospectus in making up their minds whether or not they will apply for shares. These provisions supersede those of sec- tion 2>^ of the Companies Act 1867, which did not apply to debentures, and under which the practice of requiring applicants to " waive " notice of contracts had grown up. But now, any condition purporting to affect any applicant for shares or deben- tures with notice oi any contract, docu- ment, or matter not specifically referred to in the prospectus shall be void. (1900 Act, section 10, sub-section (5).) As to the remedy of an applicant for shares upon the faith of a prospectus which omits to disclose any material contract, see Prospectus. Section 11 [ibid) provides that a company shall not prior, to the statutory meeting vary the terms of a contract referred to in the prospectus, except subject to the approval of the statutory meeting. Discount] 138 [Discovery Discount. — An abatement from a debt or any principal sum. The difference between a sum due at a future date and its present value. There are various classes of discount, viz. — Cash Discount. — A deduction (in the nature of interest) made in consideration of paj-ment on or before -a fixed date, or for prompt payment, as the case may be. The amount allowed depends — (i) Upon the period of credit generally allowed in the particular trade ; (2) The length of the unexpired period of credit at the date of payment ; and (3) The rate per cent, allowed. There are two kinds of cash discount, viz., true discount and banker's (or mercantile) discount. When discounting a bill [i.e.^ paying the cash value of same prior to maturity) the banker deducts such an amount as repre- i sents the rate per annum on the face value | of the bill for the period prior to maturity, 1 but the true discount would be the difference between the present value of the bill at the required rate of discount (or interest) and its face value ; for in the latter case the amount advanced would be such a sum as, with the required interest thereon^ would amount to the face value of the bill at the date of maturity. Trade Discount. — An allowance made according to the particular class of trade or goods, and irrespective of the time of payment therefor. The rate allowed also varies according to the extent of the trade done with the various customers ; thus, instead of quoting different prices accord- ing to the volume of business done, traders are enabled to issue " list prices " applic- able to all, the adjustment of the actual prices paid being regulated by the varying rates of trade discount. Allowance. — Sometimes an abatement is made from a debt for no special reason other than to induce a settlement or to make the sum payable an even amount. This should not be confused with a credit in respect of " goods returned." {See Allowance, Debts Provable in Bankruptcy, and Gross Profit.) Discovery, Examination, &c.— The Court may, on the application of the Official Receiver or trustee, at any time after a receiving order has been made against a debtor, summon before it the debtor or bis wife, or any person known or suspected to have in his possession any of the estate or effects belonging to the debtor or supposed to be indebted to the debtor, or any person whom the Court may deem capable of giving information respecting the debtor, his dealings or property, and the Court may require any such person to produce any documents in his custody or power relating to the debtor, his dealings or property. If any person so summoned, after having been tendered a reasonable sum, refuses to come before the Court at the time appointed,, or refuses to produce any such document, having no lawful impediment made known to the Court at the time of its sitting and allowed by it, the Court ma}^, by warrant, cause him to be apprehended and brought up for examination. The Court may examine on oath, either by word of mouth or by written interrogatories, any person so brought before it concerning the debtor, his dealings or property. If any person on examination before the Court admits that he is indebted to the debtor, the Court may, on the application of the Official Receiver or trustee, order him to pay to the Official Receiver or trustee, at such time and in such manner as to the Court seems expedient, the amount admitted, or any part thereof, either in full discharge of the whole amount in question or not, as the Court thinks fit with or without costs of the examination. If any person on examination before the Court admits that he has in his possession any property belonging to the debtor the Court may, on. the application of the Official Receiver or trustee, order him to deliver to the Official Receiver or trustee such pro- perty or any part thereof, at such time and in such manner and on such terms as to the Court may seem just. The Court may, if it thinks fit, order that any person who, if in England, would be liable to be brought before it under this Discovery] 139 [Dishonour section, shall be examined in Scotland or \ Ireland, or in any other place out of England. (1883 Act, section 27.) The provisions of this section have been 1 held not to apply to orders for the adminis- tration of the estates of deceased insolvents. {Re Heivitt, 1885.) Every application to the Court under sec- tion 27 shall be in writing, and shall state shortly the grounds upon which the appli- cation is made. Where the application is made on b&half of the trustee, Official Receiver, or Board of Trade, it need not be verified by affidavit. (Rule 78.) The Court has [mutatis mutandis) similar powers in connection with the winding-up of companies. (1862 Act, section 115.) [See Public Examination.) Dishonoured Bill (of Exchange).— A bill which on due presentment has been refused acceptance or payment, or of which accept- ance or payment has been neglected, as the case may be. When a bill is duly presented for accept- ance, and is not accepted within the custom- ary time, the person presenting it must treat it as dishonoured by non-acceptance. If he do not, the holder loses his right of recourse against the drawer and indorsers. (1882 Act, section 42.) When a bill is dishonoured by non- acceptance, an immediate right of recourse against the drawer and indorsers accrues to the holder and no presentment for payment is necessary (section 43), but such right of re- course will be suspended where the holder resorts to a " case of need " and obtains an acceptance for honour {q.v.). (Section 65.) When a bill is duly presented for payment and payment is refused or cannot be obtained, or when presentment for payment is excused and the bill is overdue and unpaid, the bill is dishonoured by non-payment, and an immediate right of recourse against the drawer and indorsers accrues to the holder (section 47) unless payment for honour {q.v.) has been obtained. (Section 68.) Where a bill is dishonoured the measure of damages, which are deemed to be liquidated damages, is as follows : — (i) The holder may recover from any party liable on the bill, and the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser : — . (a) The amount of the bill ; (6) Interest thereon from the time of presentment for payment, if the bill is payable on demand, and from the maturity of the bill in any other case. {c) The expenses of noting, or when protest is necessary, and the protest has been extended, the expenses of protest. (2) In the case of a bill which has been" dishonoured abroad, in lieu of the above damages the holder may recover from the drawer or an indorser, and the drawer or indorser who has been compelled to pay the bill may recover from any party liable to him, the amount of the re-exchange (^. v.), with interest thereon until the time of payment. (3) Where interest is recoverable as damages, such interest may, if justice require it, be withheld wholly or in part ; and where a bill is expressed to be payable with interest at a given rate, interest as damages may or may not be given at the same rate as interest proper. (Section 57.) Dishonour (Notice of).— When a bill has been dishonoured by non-acceptance or by non-payment, notice of dishonour must be given to the drawer and each indorser, and any drawer or indorser to whom such notice is not given is discharged, provided that — (i) Failure to give notice of dishonour by non-acceptance dees not prejudice the rights of a subsequent holder in due course without notice of the omission, and (2) Where notice of dishonour by non- acceptance has been given it is un- necessary to give a subsequent notice Dishonour] 140 [Distinguishing of dishonour by non-payment unless the bill has been accepted in the mean- time. (1882 Act, section 48.) The rules as to notice of dishonour requi- site for a valid and effectual notice may be summarised thus : — By whom given. — The holder or any indorser liable on the bill at the time of giving notice, or any person acting on their behalf. Notice to a party enures for the benefit of all parties having a right of recourse against that party. How given.— \n writing, or verbally, or both. It may be informal so long as it is unmistakable as to effect. A misdescription of the bill is not material unless the party is really misled thereby. To return the bill itself is sufficient notice of dishonour as regards form. Due notice is deemed to have been given if pro- perly addressed and put into the post office, notwithstanding its miscarriage. To whom given. — To a party liable or his agent. Where there are two or more drawers or indorsers who are not partners, notice must be given to each of them unless one has authority to receive notice for the others. The notice may be given when a party (a) is bankrupt, to him or the trustee; (b) is dead, to his personal representative ; (c) is a company in liquidation, to the liquidator. When given. — Notice w^jV be given at once, but must be given within a reasonable time. In the absence of special circumstances notice is not deemed to have been given within a reasonable time unless : — (i) Where the party giving and the party receiving notice reside in the same place the notice is sent off so as to be received the day after the dishonour of the bill. (2) Where they reside in different places the notice is sent off the day after the dishonour of the bill, or if no post at a convenient hour on that day, by the first post thereafter. An agent of a party, which includes a branch bank as regards the head office, or another branch, is treated as an indepen- dent party for the purpose of giving notice of dishonour, and may give notice to his prin- cipal or to any parties liable. Where a party to a bill receives notice he has the same period of time for giving notice to antecedent parties as the holder has after dishonour. (Section 49.) Excuses for delay. — Delay in giving notice is excused where the delay is caused by circumstances beyond the control of the party giving notice, and not imputable to his default, misconduct, or negligence. Notice dispensed with. — Notice is dispensed with — {a) When, after reasonable diligence, notice cannot be given to, or does not reach, the party sought to be charged. [h) By waiver, express or implied, before or after the time for giving notice has arrived. [c] As regards the drawer : — (i) Where the drawer and drawee are the same person. (2) Where the drawee is a fictitious person or one incapable of con- tracting. (3) Where the drawer is the person to whom the bill has been pre- sented for payment. (4) Where the drawee or acceptor is as between himself and the drawer under no obligation to accept or pay the bill. {5) Where the drawer has counter- manded payment. {d) As regards an indorser : — (i) Where the drawee is a fictitious person or one incapable of con- tracting, and the indorser was aware of the fact at the time of indorsing the bill. (2) Where the indorser is the person to whom the bill has been pre- sented for payment. (3) Where the bill was made or accepted for the accommodation of the indorser. (Section 50.) It is not necessary to give notice of dis- honour to the acceptor of a bill in order to render him liable thereon. (Section 52 (3).) Distinguishing (or Distinctive) Num- bers. — The consecutive numbers given to each of a succession of things whereby they may be distinguished from each other; or numbers given to a series of things in order to Distinguishing] 141 [Distress identify them. The sections of an Act of Padiament, the clauses of articles of associa- tion, articles of partnership, or memoranda of association are instances in one direction, whilst the shares in a public company, or debenture bonds, admission tickets to public gatherings, invoices for goods purchased, vouchers for money paid, are also given distinguishing numbers for identification and reference. Distress. — The seizure of goods and chattels as a pledge for the satisfaction of a demand. All chattels and personal effects found upon the premises may be distrained by a land- lord for rent due to him, whether they belong to the tenant, a sub-tenant, or a stranger, with the exception of :^ (i) Fixtures which, having once been removed, cannot be restored to their original condition. (2) Goods delivered to a person in the way of his trade, e.g., a chattel for the purpose of repair. (3) Wearing apparel and bedding of the tenant or his family, and the tools and implements of his trade, to the value of;^5, unless the tenant's interest has expired, and distress has not been made until seven days after a demand has been made for possession. (4) Loose money. (5) Goods in the custody of the law, e.g., the sheriff, under a writ of execution. (6) Lodger's goods, provided the lodger pay or tender to the superior landlord the aniount of rent (if any) due from him to the intermediate landlord, or so much as may be necessary to dis- charge the superior landlord's claim. There are other exceptions in addition to the above, subject to special conditions ; but the foregoing are the more important. A distress must be made between sunrise and sunset. A purchase by a landlord of the goods distrained on by him is invalid. [Moore, Nettle/old v. Singer, 1903-) A landlord as such is neither a secured nor a preferential creditor in respect of rent due to him from a bankrupt (or a company being wound up). He is an unsecured creditor, but possesses a right of distress subject to certain limitations and conditions. Bankruptcy. Rent due from a "bankrupt" may be distrained for either before or after bank- ruptcy, provided that, if the distress be levied after the commencement of the bank- ruptcy, it is available only for six months' rent accrued due prior to the date of the order of adjudication, but the landlord or other person to whom the rent may be due from the bankrupt may prove under the bankruptcy for any surplus due, for which the distress may not have been available. (1883 Act, section 42 ; 1890 Act, section 28.) Where in order to avoid distress a trustee undertakes to treat a landlord's claim for rent as a first charge upon the proceeds of the goods which were so liable to distress, he must satisfy the landlord's claim out of such proceeds before deducting the cost of adminis- tration. [Re Chapman, ex parte Goodyear, 10. T.L.R.) If a trustee does not disclaim a lease he becomes personally liable for the rent as from the date of his appointment— that is, from the date the lease first vests in him. And it is not necessary to show, in order to- make the trustee liable, that he has had beneficial or actual occupation of the pro- perty. [Titterton v. Cooper, 1882.) But the trustee is entitled to indemnity from the estate. Winding-up. Section 163 of the Companies Act 1862 provides that a distress against the estate or effects of a company (being wound up by or under the supervision of the Court), after the commencement of the winding-up, is void to all intents. This section has, however, been held to be subject to, and to be controlled by, sections 85 and 87 of the same Act, so that the right of a landlord to distrain after the commence- ment of the winding-up is in the discretion of the Court ; but ordinarily such distress is not allowed in respect of rent accrued due prior to the commencement of the winding-up. As regards rent accrued after the com- mencement of the winding-up, the Court may, upon the application of the landlord or other person, give liberty to distrain, or direct Distress] 142 [Distringas payment of such rent, for, under ordinary circumstances, the company or the liquidator will be responsible for the rent of premises demised to the company during the period of the company's or the liquidator's bene- ficial occupation, if possession has been retained by the liquidator. These restrictions do not apply to a land- lord who is a " stranger " to the company, e.g., where the company is in possession under an assignment of a lease which has been made without the landlord's consent [ex parte Heavan, 6 Ch. 462), for the landlord cannot prove as a creditor of the company, and, therefore, his only remedy is to distrain upon the goods on the land. In the event of a landlord or other person distraining or having distrained on any goods or effects of a bankrupt, or a company being wound up, within three months next before ■the date of the receiving order or the winding- up order respectively, the debts to which priority is given by the Preferential Pay- ments Act 1888 [i.e., wages, rates, &c.) are, by •section i (4), constituted a first charge upon the goods or effects so distrained on, or the proceeds of the sale thereof, provided that, in respect of any money paid under any such charge, the landlord or other person attains the same rights of priority as the person to whom such payment is made. Note. — It has been suggested that, as sub- -section i of section i of the Act of 1888 refers to the commencement of a winding-up, while sub- section 4 refers to the date of a icinding- np order, the latter sub-section might possibly be held not to apply to a voluntary winding- up, inasmuch as no winding-up order is made in such a case. When any rent or other payment falls due at stated periods, and the receiving order (or order or resolution to wind up, as the case may be) is made at any time other than one of those periods, the person entitled to the rent or payment may prove for a propor- tionate part thereof up to the date of the receiving order (or winding-up order or resolution) as if the rent or payment grew due from day to day. (Bankruptcy Act 1883, 2nd Schedule, Rule 19, and Winding-up Rule 99.) {See Rent.) Distribution, Statutes of. —Statutes of Car. II. providing for the distribution of the effects of a deceased intestate, after payment of his debts and funeral and testamentary expenses. The estate is distributable amongst the next of kin of the deceased (if any) in certain proportions, according to the nature of their relationship. In the event of a married woman dying intestate, her husband takes the whole of the personal estate, and by the Intestates Act 1890 an important alteration was made in the law as regards the provision for the widow of a man dying intestate, this Act pro- viding that, where an intestate leaves a widow hut no children, his real and personal estate passes absolutely to the widow to the value of ;^5oo. If the total estate is less than ;^500, the widow takes the whole ; if the estate exceeds /500 in value, the widow obtains a charge upon the estate for ;^5oo, with interest at 4 per cent per annum from the date of the death until the date of payment ; in addition to which the widow will take out of the balance of the estate such proportion as she would have been entitled to under the law previously in force. {See Hotchpot.) Distringas (that you distrain). — Formerly a distringas was issued to restrain the transfer of stock or the payment of dividends by the Bank of England, but the Rules of the Supreme Court provide that no such distringas shall in future be issued, and substitute therefor a ' ' notice in lieu of distringas, ' ' which has the same effect upon any company served therewith, as a writ of distringas would have had against the Bank of England. Where any person claims to be beneficially interested in any stock, shares, or securities of a company, whether incorporated or not, such person may make and file at the Central Office of the High Court of Justice an affidavit in the prescribed form, setting forth his title to the stock, shares, or securities, and annexing thereto a notice in the prescribed form. An office copy of the affidavit, and a sealed duplicate of the notice, may then be served upon the company sought to be affected. Distringas] 143 [Document On receipt of notice, the company will not transfer the stock, shares. Sec, or pay divi- dends thereon (if dividends included) without giving eight days' notice to the person so claiming to be beneficially interested. The notice may be withdrawn by the person by whom, or on whose behalf, it was given, on a written request signed by him, or its operations may be made to cease by an order of the Court obtained by any other person claiming to be interested in the stock, shares, &c. The object of serving a "notice in lieu of distringas" is to prevent improper dealings with securities registered in the names of trustees, for the person who serves the notice, or someone on his behalf, upon being informed by the company that application has been made to transfer the securities, may take steps to obtain a restraining order. This must be done within the eight days allowed, otherwise the effect of the distringas ceases. Having regard to the fact that no notice of any trust express, implied, or constructive shall be entered on the Register of Members of any company registered under the Com- panies Acts (1862 Act, section 30) the power to issue a " notice in lieu of distringas " is important. Dividend. — Something to be divided ; com- mercially, the sum distributed periodically amongst the shareholders and stockholders of a railway, banking, or other company. The dividend is apportioned among the various holders of stock or shares in propor- . tion either to the nominal or paid-up amounts of stock, shares, &c., they respectively hold, but in accordance with the particular rights attached thereto, as prescribed by the com- pany's regulations. The term is also applied to the sum or sums distributed among the creditors and/or contributories of a bankrupt or of a company in liquidation as the case may be. Although, strictly, the term " dividend " is applicable to the total sum distributable, it is usually adopted when referring to the portion received by any one holder of stock, &c. {See Profits available for Dividend.) (For dividends in winding-up and bank- ruptcy procedure see Liquidator and Trustee respectively.) Dividend Warrant. — An order or authority (generally issued upon a banker) by means of which shareholders, stockholders, and others obtain payment of their dividends. The document must be stamped as a bill of exchange, so that if payable upon demand a penny stamp (either adhesive or impressed) is necessary. The following, inter alia, are exempt from stamp duty : — (i) Coupons or warrants for interest, &c., whether attached to and issued with any security or issued subsequently in a sheet. (2) Warrants for the payment of interest or dividend out of the Government Funds. Section 95 of the Bills of Exchange Act 1882 enacts that : " The provisions of this •* Act as to crossed cheques shall apply to a " warrant for the payment of dividend." Section 97, subsection 3, clause d, of the same Act recognises as valid " any usage re- ' ' lating to dividend warrants or the indorse- " ment thereof." The practice of paying dividend warrants payable to the order of two or more persons upon the indorsement of any one of such persons has thus received the sanction of the Legislature, although the regulations of the company issuing a warrant may affect this. Docket. — A slip or ticket. Petty cash dockets are memoranda (as distinct from formal re- ceipts) given by employees and others, stating the particulars of petty expenditure. {See also title Slip Bookkeeping.) Doclc Warrant.— A receipt given by the owner of a dock for goods deposited with him. The receipt must bear a 3d. stamp, and will pass the property in the goods by endorsement. Dock warrants are often de- posited with bankers as security for advances. Document of Title. — The expression "docu- ment of title" (within the meaning of the Factors Act) includes any bill of lading, dock warrant, warehousekeeper's certificate and warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by indorse- ment or delivery, the possessor of the docu- ment to transfer or receive goods thereby Document] 144 [Double represented. The Act (supra) further pro- vides that a pledge of the documents of title to goods is deemed to be a pledge of the j goods. {See Factor.) < Domicile.— The place where a person has his home ; legally, his principal place of abode, to which whenever absent he intends to return. There are three kinds of domicile— origin, choice, and operation of law. The domicile of a limited company is its registered office for the time being. A creditor is not entitled to present a bank- ruptcy petition against a debtor unless {inter alia) such debtor is domiciled in England, or within the preceding year has ordinarily resided or had a dwelling-house or place of business in England. This requirement, how- ever, is only applicable to petitions, for it has been held that a receiving order can be made against a foreigner in lieu of a committal order (under section 103, Act of 1883). Donatio mortis causa.— A gift of personal property made by a person who anticipates death, the gift being evidenced either by manual delivery by him (or by another in his presence at his direction) to the donee or someone for him, either of the property itself or of the means of obtaining same, and upon the condition that the gift is only to take effect absolutely in the event of the death of the donor from the existing disorder and before revocation of the gift. It would appear that the subject of a valid donatio mortis causa must be property, the title, or the evidence of title, to which will pass by delivery. A donatio mortis causa differs from a legacy and resembles a gift inter vivos, thus : — (i) It takes effect {suh modo) from the delivery in the donor's lifetime ; and (2) It requires no assent upon the part of the executor. It differs from a gift inter vivos and resembles a legacy thus: — (i) Revocable during donor's lifetime ; (2) Liable to donor's debts on a deficiency of assets ; and (3) Subject to estate and legacy duty. Note. — A gift inter vivos is, however, subject to estate duty, if made by the deceased within a year of his death. Dormant Partner.— One whose name does not appear and who is not known to be a partner, except perhaps to comparatively few. He is sometimes referred to as a sleeping or silent partner. He has all the rights of a partner as regards profits, and has all the liabilities of a partner, but he remains passive, taking no part in the conduct of the business. On retirement, however, he ceases to be liable for debts contracted subsequently, and need not notify the world at large of his retirement, but merely those (if any) who were aware of his position. Ordinarily a dormant partner cannot be held liable for " holding out " (see that title). Double-Account System. -A system of accounting adopted where the capital of a company is contributed by the shareholders for a specific purpose, such as the construction of a railway or the acquisition of a gas under- taking, &c., the amount actually paid for or in respect of same being shown against the total capital raised in the form of receipts and payments, the balance only being brought into the General Balance Sheet ; in other words, the Balance Sheet is divided into two parts. The double- account system is compulsory in the case of certain railway and tramway companies, and all gas companies incorporated by special Act of Parliament. The system is applicable, however, to many classes of companies which sink their capital in w*hat are called " permanent assets," and it is frequently adopted by such companies. The term is also applied to the method of ascertaining the profits of a concern, whereby the Revenue or Profit and Loss Account is kept entirely distinct from Capital Account, the excess of income over the expenditure properly chargeable there- against being considered as profit. The difference between computing pro- fits by double-account and single-account respectively is one of principle, and invari- ably affects the financial result. The system of single-account recognises the principle Double] 145 [Draft that wastages of capital should be made good out of revenue in ascertaining the profits. Double-account regards capital and revenue as distinct accounts, so that an excess of receipts on Revenue Account over revenue expenditure is regarded as profit, irrespective of capital losses. Single-account endeavours to ascertain the true profit by providing for wastage of capital out of revenue ; double- account only recognises the necessity for repairs, renewals, and maintenance, dis- regarding depreciation and all fluctuations in the value of the capital assets other than the sale of existing assets and the pur- chase of additional property. The terms "double-account" and "single-account" must be carefully distinguished from the terms "double-entry" and "single-entry." Profits may be ascertained by double- account or by single-account, and the particular system adopted will generally affect the amount shown as profit. Books may be kept by double-entry or by single- entry, but the particular system adopted need not necessarily affect the amount shown as profit, although the procedure is different and the result under single-entry is not con- firmed. {See titles Bookkeeping, Profit, and Single Account System.) Double Entry.— 5^^ Bookkeeping. Double Insurance. — The effecting of an insurance with two different insurers for the same loss in respect of the same subject- matter. As insurance (save in certain cases of life insurance) is a contract of indemnity only, the assured can only recover the amount of his loss, but he may recover against either insurer, the one paying being entitled to recover contribution from the other. Sometimes it is provided in policies that if there are other insurances on the same subject-matter, the insurer's liability shall only be in proportion to his ultimate liability, to obviate the necessity of recovering contribution from other insurers who may also be liable. Under certain circumstances, where the insurer has really never been under risk for the whole amount of the policy, a proportion of the premium may be recovered. Double Proof. — If a debtor, at the date of the receiving order, be liable in respect of distinct contracts as a member of two or more distinct firms, or as a sole contractor and also as a member of a firm, the circumstance that the firms are in whole or in part composed of the same indi- viduals, or that the sole contractor is also one of the joint contractors, shall not prevent proof in respect of the contracts against the properties respectively liable thereon. (1883 -^ct, 2nd Schedule, Rule 18.) That is, if there are distinct contracts, and distinct estates being wound up, a creditor may prove against the respective estates, but double proof is not allowed in respect of the same debt on any one estate, although there may be two distinct con- tracts. [Re Oriental Commercial Bank, 1871.) Thus a surety cannot prove for a debt in respect of which the creditor has already proved. [See Joint and Separate Estates, Proof in respect of Bills of Exchange.) Doubtful Debts Ledger. — A Ledger to which all debts are transferred from the Debtors' Ledger so soon as they are con- sidered doubtful, in order that they may not be overlooked (as they might be amongst so many other accounts), but rather receive special attention. Such a Ledger is usually specially ruled to allow of extra informa- tion being recorded, both as to the circum- stances connected with the debt, and as to the progress made in respect of same since its transfer to the Doubtful Debts Ledger. It is also found useful to arrange the book alphabetically, similarly to a Sundries Ledger {g^'V.). This class of Ledger, if -properly attended to, affords considerable assistance to an auditor when engaged upon the question of the debts outstanding. [See Bad and Doubtful Debts.) Draft. — A written order for the payment of a sum of money addressed to some person who holds money in trust, or who acts in the capacity of agent or servant of the drawer. A draft must be distinguished from a bill, in so far as the former is not drawn upon a debtor. The terms " bill " and "draft" appear, however, to be used indiscriminately in business circles. L Draft] 146 Draft against Cargo.— Where the seller of \ goods draws on the buyer for the price and ! transmits the bill of exchange and bill of :ading to the buyer together to secure the acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange, and if he wrongfully retains the bill of lading the property in the goods does not pass to him. Drawback. —A term applied to those duties of Customs or Excise which are repaid by the Government after a certain period, when the goods, upon which the duties have been previously levied, are exported. Thus the exporter can sell his goods in a foreign maiket unburdened with duties. The certificate given to the exporter by the Custom House authorities, entitling him to receive payment of the duties, is called a '• debenture." Drawback must be dis- tinguished from a bounty. A bounty enables a commodity to be sold abroad for less than its natural cost, whereas a draw- back enables it to be sold at its natural cost, so far as taxation is concerned. Drawee. — The person on whom a bill of exchange is drawn. He is not liable on the bill until he has signed it, when he becomes the acceptor. {1882 Act, section 23.) He must be named or otherwise indicated in the bill with reasonable certainty. Capacity to incur liability on a bill is co-extensive with capacity to contract. There may be two or more drawees, whether partners ox not, but alternative or successive drawees are not permissible. (Section 6.) Where in a bill the drawer and the drawee are the same person, or whe.re the drawee is a fictitious person, or a person not having capacity to contract, the holder may, at his option, treat the instrument either as a bill of exchange or as a promissory note. (Section 5.) [See Acceptance of a Bill, Acceptor.) Drawer.— The person who makes a bill of exchange and addresses it to the drawee. Capacity to incur liability on a bill is co- extensive with capacity to contract, provided that a corporation may incur no liability on a [Drawings bill either as drawer, acceptor, or indorser, unless it is competent so to do under the law for the time being in force relating to corporations. Where a bill is drawn or indorsed by an infant or a corporation having no capacity or power to incur liability on a bill, a holder may nevertheless enforce payment of the bill against any other party thereto. (1882 Act, section 22.) The drawer engages that on due present- ment the bill shall be accepted and paid according to its tenor, and that if dis- honoured he will compensate the holder or any indorser who is compelled to pay it, provided due notice of dishonour be given, and the drawer is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse. (Section 55.) The drawer is not liable on the bill until he has signed it as such (sec- tion 23) and delivered the bill (section 21), and then he becomes secondaril}^ and con- ditionally liable thereon to^ the holder, the primary liability resting with the acceptor. Where a bill is payable to the order of the drawer and the drawer is a fictitious person luithin the contemplation of the bill it may be treated as payable to bearer. [See Fictitious Person.) Drawings. — The term applied to the sundry sums withdrawn by a proprietor out of the business funds on account of the accruing profits, or in reduction of his capital. In a partnership concern the drawings are some- times regulated in proportion to profits, so that interest need not be computed thereon. In other instances, an amount is allotted to each partner, free of interest, irrespective of his proportion, whilst another system is to treat with interest in current account, and allow each partner to draw the amount or amounts he may think fit, provided such amounts are reasonable under the circum- stances. There should be no " drawings " in the accounts of a joint stock company, the ofiEicers receiving fixed sums as pre- scribed. Should (say) a director draw moneys of the company on account of divi- dend on the score of his holding a large proportion of the capital, such moneys are Drawings] 147 [Earnest really loans from the company, and apart from the impropriety of the proceeding such sums should bear interest, because divi- dends, be they ever so certain, do not belong tO' the shareholders until declared. Duces tecum subpoena. — A summons to appear at a trial in Court or before an arbitrator (Arbitration Act 1889), requiring the person upon whom the summons is served to bring with him and produce at the trial certain written documents which it is desired shall be put in evidence thereat. Due. — A debt is due immediately it comes into existence as a debt, although it may be payable at a future time. For instance, the liability of a member of a com- pany registered under the Companies Acts creates a debt in respect of the money pay- able on his shares at the time he becomes a member, but such debt is payable as and when calls are formally made upon the members. The word due may, however, mean either " owing " or " payable," according to the context in special cases. Rent and other periodical payments, although deemed to accrue from day to day, are not due until the expiration of the par- ticular period in question, the Apportion- ment Act providing that, on the appor- tionment of an accruing amount, the apportioned part is tO' be payable when the next entire portion shall have become due. So, where a testator directed his executors *' to forgive to any tenant all rent or *' arrears of rent which may be due and " owing from him at the time of my " decease," it was held that this only applied to rent due at the quarter-day pre- ceding the date of the death, and not to the accruing rent apportioned to the date of the death, but where rent is by agreement pay- able in advance it is not subject to appor- tionment, for under such circumstances the whole of the rent for a period is deemed to have already accrued due on the first day of each period. {Ellis v. Rowbotham, App. Cas. 1900.) A covenant in a mortgage deed for "punctual payment" has been held to mean "payment upon the day fixed for payment." Dues.— Charges for accommodation of various kinds afforded to ships, such as: — Dock Dues or Harbour Dues. — For use of a dock or harbour. Canal Dues. — For the right of passing through a canal. Light Dues. — A levy on vessels as a con- tribution towards the expense of maintain- ing lighthouses, lightships, &c. Dummy Men. — The term applied to fictitious names placed upon a wage sheet by a fraudulent clerk, or number of clerks acting together, whereby money is obtained for the (extra) wages alleged to be due, and fraudulently retained by the perpetrators. Dunnage. - Pieces of wood, planks, mats, or other articles used for protection in stowing a vessel's cargo. Duress. — Compulsion, either by unlawful and tortious imprisonment, or by threats, whereby the person subjected thereto is in fear of either himself or his wife, parent or child, suffering bodily harm. A contract entered into by a person under duress is voidable at the option of the party so com- pelled, provided the duress was practised by the other party to the contract, or some person acting with his knowledge and for his advantage. Dutch Auction.— Ordinarily, at a sale by auction, the highest bidder in an ascen- ding scale of competition becomes the purchaser ; but in what is called Dutch auction the article is put up at a certain nominal price which is gradually lowered, and the first person who offers to pay the sum mentioned by the auctioneer becomes the purchaser. Duty Paid Stock.— S^^ Bonded Stock. E. Earnest. — A sum (generally nominal) given by a buyer of goods to the seller with the express intention of ratifying the contract of sale. An earnest is one of the alternative requirements of the Sale of Goods Act 1893, as evidence of a contract for the sale of goods of the value of £\o or upwards. L 2 Easement] 148 [Equation Easement. —A privilege which the owner of one neighbouring tenement has of another, in respect of their several tenements, e.g., a right of way over another's land. Elective Auditors. — See Borough Auditors. Eleemosynary Corporations. — Corporate bodies constituted for the perpetual distribu- tion of alms. Elegit. — (He has chosen.) A writ of execution, so called because a creditor ** has chosen" this writ in preference to others. Prior to the Bankruptcy Act 1883, by means of this form of writ, a creditor could come upon the goods and chattels of his debtor and value them, instead of selling ; he would then take delivery of the goods and chattels to himself at such valuation, in satisfaction or part satisfaction of his judgment debt. If he had not fully satisfied his debt by this means, he could then take possession of the lands. As, in the above procedure, the goods were not sold, it did not amount to an act of bankruptcy to suffer execution of this writ, but now, as a result of section 146 of the Bankruptcy Act 1883, the sheriff is no longer allowed to deliver goods under a writ of elegit. Embargo. — A prohibition to pass ; a detention of ships imposed by belligerent States in time of war. Embezzlement. — The taking of the moneys of an employer by his servant or clerk for his own use. Embezzlement is distinguished from larceny, as the subject-matter is not at the time of the embezzlement in the actual possession of the owner. Emblements. — Such vegetable products as yield an artificial annual profit as a result of labour bestowed upon land. They are personal property, and are included in the term "goods" within the meaning of the Sale of Goods Act 1893. Endowment. — The application of moneys to some special purpose ; the creation of a fund to provide for the maintenance of an institution. Endowment Policy.— One in respect of which the premium is payable only (i) for a stated number of years should the assured survive, or (2) until death should it occur before the maturity of the policy. The sum assured is payable at the end of a fixed period or at death, whichever event happens first. The premium payable upon an endowment policy is much heavier than that which would be required for a " whole life " policy for a similar amount. Enfranchisement. — Making free. The con- ferring of a right of voting at a Parliamentary election. The conversion of a copyhold tenure into a freehold. Entail. — An estate settled with regard to the rule of its descent. Entering a Vessel.— The act of announcing its arrival to the Custom House authorities and lodging the necessary documents, such as the manifest. Entering Short.— 5^f Short Bills, Stated short. Entry. — A record of a transaction in the appropriate book. Wtien a transaction is set down in writing for the first time in the books of account such entry is called the original entry, and the book containing same is termed a *' book of original or first entry.*' All subsequent dealings with the original entry in the books of account are called "post entries," and the operations are termed '• posting." Equation of Payments. — An arithmetical operation whereby a date is determined upon which a single payment can be made in lieu of several payments upon various dates. The following extract from The Accountant of 14th May 1898 was in reply to the follow- ing enquiry : — Find the average date (or equated date) of the following advances : — July I .. £^65 Aug. 9 .. 29 Sept. 20 . . 350 Oct. 4 .. 216 " The method of making these calcula- " tions may be stated in general terms as " follows : — Take any date from one of the " dates mentioned in the question, multiply "each of the amounts mentioned in the '• question by the number of days' interval " between that date and the date previously Equation] 149 [Equitable " fixed, divide the sum of the products by " the sum ot the original amounts, and the "quotient will be the number of days " between the average due date and the ' • date originally taken. " Applying this rule, suppose we take as " our arbitrary date July ist, the first date "mentioned in the question; then the " position appears as follows : — Amounts. Days. Products. ^465 X o = o 29 X 39 = 1,131 350 X 81 = 28.350 216 X 95 = 20,520 ;^I,060 50,001 " Dividing 50,001, the sum of the pro- " ducts, by 1,060, the sum of the original "amount, we find a quotient of approxi- " mately 47. The average due date is thus " 47 days after July ist — that is, the 17th " August. '* Now, supposing, instead of taking "July ist, we had selected October 4th as "our arbitrary date from which to base " our calculations, then the position would " be as follows : — £^^5 X 95 = 44,175 29 X 56 = 1,624 350 X 14 =-- 4,900 216 X o = o ;^I,060 50,699 " Dividing the sum of the products by "the sum of the amounts as before, the " result is that the average due date is ** nearly 48 days previous to October 4th — " that is, the 17th August, or the same " result as that shown previously. "It is not essential, however, that either " of the outside dates should be selected as " the basis of calculation, the only modifi- '* cation necessary being that, if one of the " inside dates is employed, then the ^' diffetence must be taken between the pro- * ' ducts previous to, and subsequent to, *' that date. "Thus, supposing we select the 20th " September as the basis of our calculation, " the problem works out as follows : — ;^465 X 81 = 37.665 29 X 42 = 1,218 350 X o = o 216 X 14 = 3,024 " The sum of the amount is, as before, *' 1,060 ; but in this case we have to deduct " the last product from the two previous, " giving a net sum of the products of *' 35.859- Dividing this by the 1,060 as "before, we produce a quotient of 34 " nearly ; and as the products are the higher " previous to the date selected, this means " 34 days hejore the 20th September — that " is, the 17th August as before. " In practice, it is convenient to take one " of the dates named in the problem, as " there is then one less product to be cal- " culated (any figure multiplied by o pro- " ducing o) ; but the same result would be " produced whatever date be taken. On " the score of convenience also, it is pre- " ferable to select either the first or the **last date, rather than an intermediate "one." In order to average accounts— that is to say, ascertain an equated date whereon to pay the balance of debit and credit items of varying dates : (i) Treat each side independently (as shown in the above example) and ascertain the debit and credit "products." (2) Divide the difference between the products by the actual balance of the account. (3) The quotient shows the number of days from the " base date." Equitable Assets.— S^^ Legal Assets. Equitable Execution. — Where the only property of a judgment debtor is such that it cannot be taken in execution under the ordinary process of the Court, a receiver may be appointed by the Court by way of equit- able execution. Instances of this are where the property consists of an equity of redemp- tion or the reversionary interest under a will. For the purposes of the Bankruptcy Acts an execution against an equitable interest is Equitable] 150 [Error completed by the appointment of a receiver. (1883 Act, section 45 (2).) •• Equitable execution is not like legal "execution; it is the equitable relief which " the Court gives because execution at law "cannot be had. It is not execution, but a "substitute for execution." (Bowen, L.J.) Equitable Lien.— S^^ Lien. Equitable Mortgage.— A contract for a mortgage ; it may take the form of : — (i) A written agreement (only) to make a mortgage, or (2) A deposit of title deeds of lands with a creditor with or without a written memorandum, or even without a verbal communication. This has been referred to as an apparent "judicial repeal " of the Statute of Frauds. [See Frauds, Statute of.) The memorandum of deposit (if any) must bear an ad valorem stamp duty of one shilling for every /^loo or fraction thereof of the charge thereby created upon the property. Charges of this kind, when made by a company registered under the Companies Acts, should be recorded in the Register of Mortgages. [See that title.) They are not, however, of such a character as to require registration with the Registrar of Joint Stock Companies under section 14 of the Act of 1900. Equity. — See Law. Equity of Redemption. — The right of a mortgagor to compel the mortgagee to re- convey the legal estate of the mortgaged lands to him upon payment of principal, interest, and costs. The right must be exercised before foreclosure, or within 12 years from the date the mortgagee took possession, or from the date of the /as/ written acknowledgment of the mortgagor's title. Although the conveyance to the mortgages is absolute at law, in equity it is regarded as security only, and ordinarily no arrangement between the parties is allowed which will tend to clog the borrower's right to redeem ; but where a mortgage deed provided for the con- tinuance of the loan for five years, and the mortgagor covenanted that he would not take, during the continuance of the loan, any malt liquors except such as were purchased from the mortgagee (the latter covenanting to supply same at stated prices) it was held that as the covenant as to the malt liquors was not unconscionable or oppressive, and did not interfere with the right of redemption, the mortgagee was entitled to an injunction against its breach. On the other hand, in Rice v. Noakes (C.A. 1900), where the mortgagor of the lease of a licensed house had covenanted in the mortgage deed not to purchase during the lease any malt liquors except from the mortgagees, it was held that upon paying off all principal, interest, and costs, the mortgagor was entitled to a reconveyance of the leasehold, free from the "tie" as to liquors, although the lease did not expire for a further 20 years. "It is idle to say that the equity of " redemption would not be clogged if a housa "which was mortgaged as a 'free' house " was to be taken back by the mortgagor as " a ' tied' house." (Rigby, L.J.) Error. — Errors in accounts may be divided into three main classes— principle, commission, and omission. Examples of errors of principle may be given from the accounts of a joint stock company, viz. : — [a) Capitalising revenue items, and vie? versa. [b) Preparing the accounts in a form other than that prescribed in the company's regulations. [c) Issuing share capital or borrowing in excess of or outside the scope of the company's powers ; and {d) Anticipating profits as a result of the method adopted in valuing the stock- in-trade or other assets. Errors of commission take the form of entering items in the books of account which ought not to be so treated, or of recording transactions (legitimate in themselves) in- correctly as regards amount or otherwise. One particular type of error of commission is termed an error of " transposition." For instance, an entry of £'j 4s. od. instead of 7s. 4d. Error] 151 [Estate Errors of omission arise from the failure to enter transactions in the books of account, although essential to a correct record. Errors of commission and omission may be either intentional or arise through in- advertence. Errors (whether of commission or omission) made with an intention to defraud are generally difficult to detect — certainly more so than a clerical error {i.e., a mistake in entering or copying made inadvertently). It may also be said that errors of omission, whether accidental or intentional, are generally more difficult to trace than those of commission. There is another type of error (or rather errors) whereby the effect of one or more of them will obscure the effect of another or others. For instance, a " short-post " of _^io to the debit side of one Ledger Account would be neutralised by a " short-post " of £6 to the credit side of another Ledger Account, and (say) a " miss-post " of ;^4 in respect of the credit side of another Ledger Account. The arithmetical accuracy of the accounts may thus appear to have been tested by means of a Trial Balance, if constructed with Ledger Balances or Ledger totals only, although these compensatory errors have not been discovered and corrected. Errors and Omissions Excepted.— (E. and O. E.) A note sometimes appended at the foot of an account sales, invoice, or other such document, reserving the right to amend the account in question should any errors be subsequently discovered. Escrow. — See Deed. Establistiment Expenses. — The general expenses of a manufacturing concern which cannot be directly charged against any par- ticular process or commodity. [See Cost Accounts, Head-Office Charges, Manufac- turers' Accounts.) Estate. — Technically, the quantity of interest a person possesses in property ; as commonly applied, the property itself. An estate may be legal, customary, or equitable. The assets of a deceased person or of a bankrupt, or the lands, houses, &c., of a land- lord, are colloquially referred to as " the estate." Estate Duty.— A duty created by the Finance j Act 1894, which, with the exceptions ex- I pressly provided by that Act, is payable upon the principal value of all property, real and personal, settled or not settled, which passes on the death of any person dying after I St August 1894. Property passing on the death is deemed to include [inter alia) for the purposes of estate duty : — (i) Property of which the deceased was at the time of his death competent to dispose. (2) Property in which the deceased, or any other person, had an interest ceasing on the death of the deceased, to the extent to which a benefit accrues or arises by the cesser of such interest, but exclusive of property the interest in which of the deceased or other person was only an interest as holder of an office or recipient of the benefits of a charity, or as a corporation sole. (3) Gifts of realty or personalty {e.g., donationes mortis causa) made within a year preceding the death. [The provisions of the Finance Act 1894 were extended in respect of surrenders and dispositions of property prior to death by section 11 of the Finance Act 1900 (^.y.).] (4) Gifts, inter vivos, of realty or per- sonalty, even when made over twelve months from the death, if there has been reserved, by contract or other- wise, some interest or benefit to the donor. (5) Any annuity or other interest pur- chased or provided by the deceased, either by himself alone, or in concert or by arrangement with any other person, to the extent of the beneficial interest accruing or arising by survi- vorship or otherwise on the death of the deceased (subject to Exemption No. 2 below). Immovable property situate out of the United Kingdom is not chargeable with estate duty, but movable property so situate is chargeable where (i) the deceased was the owner and was domiciled in the United Kingdom at the time of his death, or (2) speaking generally, where the deceased Estate] 152 Estate was only interested for life, and at his death the property formed the subject of a British trust, or was vested in a British trustee. Exemptions [inter alia) : — (i) Estates under ;^ioo gross value, (2) A single survivorship annuity not exceeding £2^, or if more than one such annuity, the first only. (3) Property held by the deceased as trustee only. (4) Property passing only because of a \ bond fide purchase from the person under whose disposition it passes, for full valuable consideration paid to the vendor for his own benefit. (5) The property of common seamen, marines, or soldiers, who are slain or die in the service of the Crown. [Further remissions of duties in respect of the estates of officers and men may be made under certain circumstances [see section 14 of the Finance Act 1900).] (6) Works of art, &c., given for national purposes, if the Treasury remit the duty ; and pictures, prints, books, manuscript, &c., and other things not yielding income which appear to the Treasury to be of national, scientific, or historic interest, and settled so as to be enjoyed in kind in succession by different persons ; provided that the exemption will only continue until the property is sold or comes into the possession of a person competent to dispose of it. Valuation : — The principal value of any property shall be estimated to be the price which, in the opinion of the Commissioners of Inland Revenue, such property would bring if sold in the open market at the time of the death of the deceased ; provided that in the case of agricultural property (when not affected by expectation of increased income therefrom) the principal value shall not exceed twenty- five times the annual value as assessed under Schedule A. of the Income Tax Acts, after making such deductions as have not been allowed in that assessment but are allowed under the Succession Duty Act [i.e., all necessary outgoings), and also a deduction for expenses of management not exceeding five per cent, of the annual value so assessed. The Commissioners may authorise any person to make a valuation of property for the purpose of estate duty, but the Commis- sioners must defray the expense of such valuation. Every estate shall include all income accrued upon the property included therein down to, and outstanding at, the date of the death of the deceased. Deductions .— (i) Reasonable funeral expenses. Note. — The costs of mourning, tomb- stone, and/or transfer of the body of the deceased to any distant place of interment are not allowed to be de- ducted under this head. (2) Debts and incumbrances (including mortgages) incurred or created by the deceased bona fide for full consideration in money, or money's worth, wholly for his own use or benefit, and taking effect out of his interest in the principal value of the estate. No deduction is allowed in respect of any debt whereof there is a right of reimbursement from any other estate or person, unless such reimbursement cannot be obtained. An allowance will not be made in the first instance for debts due from the deceased to persons resident out of the United Kingdom (unless contracted to be paid in the United Kingdom or charged on property situate within the United Kingdom) except only from the value of any personal property of the deceased situate out of the United King- dom in respect of which estate duty is paid ; and there shall be no repayment of estate duty in respect of any such debts except to the extent to which it is shown that the personal property of the deceased, situate in the foreign country or British possession in which the person to whom such debts are due resides, is insufficient for their pay- ment. Where any property liable to duty is situate out of the United Kingdom, and its administration or realisation will necessitate increased expense, an allowance not exceed- ing 5 per cent, of the value of the property Estate] 153 Estate may be made out of the principal value of such property. Where any " death duty " is payable in a foreign country upon property situate therein, the amount of such duty may be deducted from the principal value of the property. Where any '* death duty " is payable in a British possession (to which the Finance Act has been applied by an Order in Council) in respect of property situate therein, a sum equal to such duty may be deducted from the estate duty, which would otherwise be payable. This provision has been applied by successive Orders in Council to practically the whole of the British possessions. Aggregation : — For determining the rate of estate duty Dayable on any property passing on the death of the deceased, all property so passing in respect of which estate duty is leviable must b3 aggregated so as to form one estate, and the duty shall be levied at the proper graduated rate on the principal value thereof with the following exceptions : — (i) Property in which the deceased never had an interest. (2) Where the net value of the property, real and personal, in respect of which estate duty is payable on the death of the deceased, exclusive of property settled otherwise than by the will of the deceased, does not exceed ;^I,000. Estates coming within the above excep- tions are not to be aggregated with any other property, but are to be treated as separate taxable estates, and estate duty levied thereon at the proper graduated rate accordingly. Graduated Rates of Estate Duty Payable : — Rate Where the % principal value of the ■ does not exceed . . .. £100 . .nil estate when aggregated but does Do. exceeds f.ioo not • £500 . . I exceed Do. „ 500 n 1,000 . . 2 Do. „ 1,000 „ 10,000 . • 3 Do. „ 10,000 n 25,000 . ■ 4 Do. „ 25, coo „ 50,000 . • 4i Do. „ 50,000 „ 75,000 . • 5^ Do. „ 75,000 „ 100,000 . • 1* Do. ,^ 100,000 „ 150,000 . . 6 Do. „ 150,000 „ 250,000 . . 6i Do. ,, 250,000 „ 500,000 . • 7 Do. „ 500,000 „ 1,000,000 . • l^ Do. „ 1,000,000 .. .. . 8 By the Finance Act 1900 it is provided that estate duty is to be computed upon the exact net value of the estate. The executor or administrator of a deceased person shall pay the estate duty in respect of all personal property, and may pay the estate duty upon any other property which is under his control, or where not under his control, if the persons account- able for the duty in respect thereof request him to make such payment. Estate duty is due upon the delivery of the Inland Revenue Account by the repre- sentatives or upon the expiration of six months from the death, whichever first happens, interest at 3 per cent, per annum without deduction of income tax being payable upon the duty from the date of the death until pay- ment, or until the expiration of six months from the death, whichever first happens Should payment of estate duty be in arrear the rate oi interest is raised to 4 per cent, per anniim. Provided (i) That the duty due upon an account of real property may, at the option of the persons delivering the account, be paid by eight equal yearly instalments, or 16 half-yearly instalments, with interest at the rate of 3 per cent, per annum, without deduction of income tax, from the expiration of 12 months from the death, and the interest on the unpaid portion of the duty is to be added to each instalment and paid accordingly; but the duty for the time being unpaid with interest to date of payment may be paid at any time. Where such property is sold, the portion of duty unpaid, if any, must be paid upon completion of the sale, otherwise the unpaid duty will be treated as duty in arrear, and interest will be payable thereon at 4 per cent, per annum. (2) That the duty due in respect of an annuity or other definite -annual sum, whether terminable or perpetual, may, at the option of the person delivering the account, be paid by four equal yearly instalments, the first of which shall be due at the end of 12 months Estate] 154 [Excepted from the date of the death, and after the end of those 12 months interest at the rate of 3 per cent, per annum, without deduction of income tax, upon the unpaid portion of the duty is to be added to each instalment, and paid accordingly ; but the duty for the time being unpaid with interest to date of payment may be paid at any time. Note. — Interest upon estate duty is recoverable in the same manner as if it were part of the duty. Small Estates : — Estates under ;^ioo gross value are net liable to estate duty, and where the gross value of an estate exceeds ;^ioo, but does not exceed ;^3oo, a fixed duty of thirty shillings is payable, and where the gross value of the estate exceeds ;^3oo but does not exceed ;^5oo a fixed duty of fifty shillings is payable. Where, however, the net value of the estate as compared with the gross value is such that it would be more advan- tageous to the estate to pay " by scale," the latter method may be resorted to. A further benefit is conferred upon smal: estates, for probate may be obtained bv payment (in addition to the fixed duty of 30s. or 50s.) of fifteen shillings for Court fees and expenses, and two shillings and sixpence for sealing the probate. Where the fixed duties of 30s. or 50s. are paid within 12 months of the death, no interest is payable. Where the net value of the property, real and personal, in respect of which estate dut}' is payable on the death of the deceased, exclusive of property settled otherwise than by the will of the deceased, does not exceed _j^i,ooo, such property for the purpose of estate duty is not to bs aggregated with any other property, but is to form an estate by itself (as already men- tioned), and where estate duty has been paid upon the principal value of such estate, settlement estate duty, legacy duty, or succession duty shall not be payable in respect thereof. Estate duty is payable out of the general residue of the estate of the deceased so far as such duty relates to property of which the deceased at his death was competent to dispose. [See Legacy Duty, Settlement Estate Duty, Succession Duty.) Estoppel. — "Where one by his words or " conduct causes another to believe the " existence of a certain state of things, and " induces him to act on that belief so as to " alter his own previous position," the former is estopped from denying the exist- ence of such state of things. Estoppel is one of the characteristics of a deed, or contract under seal, for *' where a " man has entered into a solemn engage- " ment by and under his hand and seal as " to certain facts he shall not be permitted " to deny any matter he has so asserted." Examination. — See Public Examination. Excepted Articles.— Bankruptcy. — The following articles of a bankrupt are not divisible amongst his creaitors : — " The tools (if any) of his trade and the " necessary wearing apparel and bedding of " himself, his wife and children, to a value, " inclusive of tools and apparel and '' bedding, not exceeding twenty pounds in " the whole." (1883 Act, section 44.) Administration Order. — Where an admini- stration order has been made against a debtor and it appears to the Registrar of the County Court that the property of the debtor exceeds in value ten pounds, he shall at the request of any creditor and without fee issue execution against the debtor's goods, but the household goods, wearing apparel, and bedding of the debtor and his family, and the tools and implements of his trade, to the value in the aggregate of twenty pounds, shall to that extent be pro- tected from seizure. (1883 Act, section 122.) Note. — The exception in section 44 extends only to necessary wearing apparel, bedding, and tools, but under section 122 household goods are pro- lected from seizure. Distress for Rent. — The wearing apparel and bedding of a tenant and his family, and. Excepted] 155 [Execution the tools and implements of his trade, to the value of five pounds, are protected from distress for rent, unless the tenant's interest has expired and distress has not been made until seven days after a demand has been made for possession. Exchange. — See Par of Exchange, Rate of Exchange. Exchequer Bills. — Bills issued by the Treasury to raise money for the temporary purposes of the Exchequer. They are issued in multiples of ;^ioo with interest coupons for five years payable to bearer, and may be renewed after that time. The interest is only fixed for a year, therefore the amount of interest is not stated on the coupons. The holder may, however, demand repayment of the principal at the end of any one year from the date of issue. [See Treasury Bills.) Exchequer Bonds. — Although issued by the same Commissioners and for the same pur- pose as Exchequer bills, the bonds differ as follows: — (i) They are issued for a definite period not exceeding six years, interest ceasing upon maturity of the bond. (2) The rate of interest payable is fixed at the time of issue for the whole period, and the amount of interest is printed on each coupon. (3) The bonds may be inscribed in the books of the Bank of England and certificates of registration given in lieu of bonds. In this event no coupons are issued, the interest being paid as in the case of Consols. {See Treasury Bills.) Excise Duties. — Those laid on certain articles produced and consumed at home. {See Draw- back.) Ex dividend. — See Cum dividend. Execution Creditor. — A writ of fieri facias, or other writ of execution against goods, shall bind the property in the goods of the execution debtor, as from the time when the writ is delivered to the sheriff to be executed ; and for the better manifestation of such time, it shall be the duty of the sheriff, without fee, upon the receipt of any such writ, to endorse upon the back thereof the hour, day, month, and year when he received the same. Provided that no such writ shall prejudice the title to such goods acquired by any person in good faith and for valuable consideration, unless such person had, at the time when he acquired his title, notice that such writ or any other writ by virtue of which the goods of the execution debtor might be seized or attached, had been delivered to, and remained unex- ecuted in the hands of, the sheriff. (Sale of Goods Act, 1893, section 26 (i).) Note. — The term "sheriff" includes any officer charged with the enforcement of a writ of execution. The above section is a re- enactment of section 16 of the Statute of Frauds, and section i of the Mercantile Law Amendment Act 1856. With regard to notice of the writ, Bramwell , B., in Gladstone v. Padwick (1871), stated that notice of the probable delivery to the sheriff of a writ of/./;?, did not amount to a notice suffi- cient to take the case out of the operation of the section. " A notice of something certain "and inevitable — as of the rising of the "tide — though given beforehand, might "perhaps, after the event, be treated as "notice of the fact, but thi's cannot be said " with respect to what is merely probable." Bankruptcy. The rights of judgment creditors who have issued execution against the property of a bankrupt debtor are restricted by the Bank- ruptcy Acts 1883 and 1890. Section 45 of the Act 1883 provides : — (i) Where a creditor has issued execution against the goods or lands of a debtor, or has attached any debt due to him, he shall not be entitled to retain the benefit of the execution or attachment against the trustee in bankruptcy of the debtor, unless he has completed the execution or attach- ment before the date of the receiving order, and before notice of the presen- tation of any bankruptcy petition by or against the debtor, or of the com- mission of any available act of bank- ruptcy by the debtor. (2) For the purposes of this Act, an execu- tion against goods is completed by Execution] 156 [Execution seizure and sale ; an attachment of a debt is completed by receipt of the cebt ; and an execution against land is completed by seizure, or in the case of ■ an equitable interest, by the appoint- ment of a receiver. Section 11 of the Act of 1890 provides : — (i) Where any goods of a debtor are taken in execution, and before the sale thereof, or the completion of the execu- tion by the receipt or recovery of the full amount of the levy, notice is served on the sheriff that a receiving order has been made against the debtor, the sheriff shall, on request, deliver the goods and any money seized or received in part satisfaction of the execution to the Official Receiver, but the costs of the execution shall be a first charge on the goods or money so delivered, and the Official Receiver or trustee may sell the goods, or an adequate part thereof, for the purpose of satisfying the charge. (2) Where, under an execution in respect of a judgment for a sum exceeding twenty pounds, the goods of a debtor are sold or money is paid in order to avoid sale, the sheriff shall deduct his costs of the execution from the proceeds of sale or the money paid, and retain the balance for 14 days, and if within that time notice is served on him of a bankruptcy petition hdivmg been presented against or by the debtor, and a receiving order is made against the debtor thereon or on any other petition of which the sheriff has notice, the sheriff shall pay the balance to the Official Receiver or, as the case may be, to the trustee, who shall be entitled to retain the same as against the execution creditor. Note. — The 14 days run from the date of the completion of the sale, and not from the time the purchase money is paid. {Re Cripps S'Co., 1888.) These sections (45 and 11) are not applicable to the administration of the estate of a deceased insolvent under section 125 of the Act of 1883. {Hashich v. Clark, 1899.) Section 46 of the 1883 Act provides that : — An execution levied by seizure and sale on the goods of a debtor is not invalid by reason of its being an act of bankruptcy, and a person who pur- chases the goods in good faith under a sale by the sheriff shall in all cases acquire a good title to them against the trustee in bankruptcy. In order that a landlord's right of distress may not be defeated by collusion between tenants and their respective judgment creditors, the statute 8 Anne, chap. 14, pro- vides that no goods or chattels shall be liable to be taken by virtue of any execution, unless the judgment creditor shall, before the removal of the goods from the premises by virtue of such execution, pay to the landlord all sums due for rent not exceeding one year's rent, and the sheriff shall levy and pay the execution creditor as well the money so paid for rent, as the execution money. In commenting upon the above an in- teresting point was drawn attention to in an article in the Laiv Times of 17 December 1898 as to the effect of section 11 of the 1890 Act upon an execution levied in disregard of the precise provisions of the statute of Anne: — "There is no doubt that it is almost the " universal practice of sheriffs by their " officers to disregard the plain provisions of " the statute of Anne, and notwithstanding " notice of rent due to the landlord, to sell, " without requiring the execution creditor to " satisfy the landlord's claim as a condition ^^ precedent to the sale. The sheriff satisfies "the claims of the landlord and of the " execution creditor out of the proceeds of " the sale, and no one complains "Thus, if a sheriff follows the ordinary "practice, and with notice of rent due "proceeds to sell (without causing the " execution creditor to pay the rent), after " sale he (the sheriff) is personally liable to "pay the rent to the landlord, and he may " be liable (under section 11 of 1890), if he "has notice of a receiving order made "against the debtor within the 14 days, to " hand over the whole of the proceeds of " sale (less the costs of the execution) to the " trustee in the bankruptcy." But shortly after the above article appeared it was decided by the Court of Appeal, in re Neil Mackenzie (August 1899), that notwith- standing section 11 of the Act of 1890 the Execution] 157 [Execution sheriff was justified in paying the landlord three months' rent then due, and handing the Official Receiver the balance only of the proceeds of the levy. Where the sheriff sells the goods of a debtor under an execution for a sum exceed- ing twenty pounds (including legal incidental expenses), the sale shall, unless the Court from which the process issued otherwise orders, be made by public auction and not by bill of sale or private contract, and shall be publicly advertised by the sheriff on and during three days next preceding the day of sale. (1883 Act, section 145.) Company Liquidation. A judgment creditor of a company in course of liquidation or about to be wound up is in a somewhat different position from a judgment creditor in bankruptcy {supra). The Bankruptcy Acts do not apply to executions against a company, and the sheriff is not required to hold the proceeds of an execution as in the case of a prospective bankruptcy. \ The Court may, at any time after the pre- sentation of a petition and before the making of a winding-up order, upon the application of the company, or of any creditor, or con- tributory, restrain further proceedings in any action, suit, or proceeding against the com- pany ; upon a winding-up order being made, no suit, action, or proceeding shall be pro- ceeded with, or commenced, against the company except with the leave of the Court. Subject to the foregoing, where any company is being wound up (i) by the Court, (2) subject to the supervision of the Court, any execution put in force against the estate or effects of the company, after the commence- ment of the winding-up, shall be void to all intents. (1862 Act, sections 85, 87, 163.) It is in the discretion of the Court whether a creditor is allowed to proceed or not, and where a creditor, having obtained judgment, issues execution, acting bona fide, and the sheriff is in possession at the date of the presentation of the petition, the creditor will not, in the absence of special circumstances, be prevented from realising his judgment. If proceedings are threatened against the property of a company in voluntary liquidation the protection of the Court should be applied for by the liquidator under section 138 of the Act of 1862. Should there be several actions brought or threatened, application to stay the proceedings of each action would be necessary, and in such a case the Court might make a compulsory order or a super- vision order. With regard to property constituting a floating security for debentures, the rights of the debenture-holders will not be post- poned to those of an execution creditor if the former have lawfully enforced their security by the appointment of a receiver, or other- wise, before the property has been sold. {In re The Opera, 1891.) Although property which is subject to a floating charge may be validly dealt with by the company in the ordinary course of business as if the charge had not been given, a seizure under an execu- tion on a judgment against the company is not a dealing within the ordinary course of business. It is not a dealing by the company at all — it is a compulsory legal process directed against the company, not a dealing by them. {Davey &• Co. v. Williamson &> Sons, 1898.) {See title Floating Charge.) Partnership Prior to the Partnership Act 1890, the partnership property was liable to be taken in execution for a separate debt of a7iy partner, the sheriff selling the debtor's interest in the goods seized, although, in the absence of accounts, it was obviously difficult to ascertain what such interest was. But section 23 of the Partnership Act pro- vides that a writ of execution shall not hence- forth issue against any partnership property, except on a judgment against the firm. The Court may, upon the application of any judg- ment creditor of a partner, make an order charging that partner's interest in the partner- ship property and profits with payment of the amount of the judgment debt and interest thereon, and may, by the same or a subse- quent order, appoint a receiver of that partner's share of profits (whether already declared or accruing), and of any other money which may be coming to him in respect of the partnership, and direct all accounts and inquiries, and give all other orders and directions which might have been Execution] 158 Executor directed or given if the charge had been made in favour of the execution creditor by the partner, or which the circumstances of the case may require. The other partner or partners may at any time redeem the partner's interest so charged, or, in case a sale is directed, may purchase same. As in the case of an assignee under an assignment by a partner of his share in the partnership property, a receiver is bound to accept the account of profits agreed to by the partners, but upon a dissolution the receiver is entitled to an account as from the date of dissolution showing the realisation of the assets. {Brown Janson v. Hutchinson.) Where any partner suffers his share of the partnership property to be charged for and in respect of his separate debt, the partner- ship may be dissolved at the option of the other partners. (Partnership Act i8go, sec- tion 33 (2).) Executor.—" One to whom the execution and " performance of another man's will after his " death is commended or committed. Where " there is no will there can be no executor." Executors may be appointed by nomina- tion or by implication, the latter being termed executors according to the tenor. Executors may also be absolute or qualified. The testator need not himself appoint the executors, but may delegate such appoint- ment to another, and the delegate may appoint himself. Idiots and lunatics are incapable of being appointed executors because of their dis- ability and want of understanding, but where a person is nominated executor mere weak- ness of mind will not be sufficient ground for excluding him from grant of probate. Infants are capable of being executors, but probate will not be granted during minority, and where the sole executor is an infant, adminis- tration with the will annexed is granted during minority. A married woman may be appointed ex- ecutrix, and, since 1882, may act indepen- dently of her husband. An alien, a corporation aggregate, a corpo- ration sole, and a partnership firm, are all eligible as executors. In the case of a corpo- ration aggregate being appointed, the Court will grant letters of administration with the will annexed to a representative of the corpo- ration ; whilst in the case of a firm, probate would be granted to the partners indivi- dually. One named executor is not bound to accept the office. He may renounce, but having renounced, the Court has power to permit him to retract his renunciation, if considered desirable in the interests of the estate. {Re Stiles, 14 T.L.R. 61.) Renunciation must be made before any executorial act has been per- formed, or before the person has other- wise shown that he has elected to act. An executor cannot accept in part and refuse in part — he must either accept the office or wholly renounce. If an executor delays in making up his mind whether he will act or not, he may be " cited " to accept or refuse. The time which an executor is allowed to consider depends upon the nature of the estate to be administered. But in this con- nection, for the better securing the duties pay- able upon probates of wills, section 37 of 55 Geo. III., c. 184, provides that if any party named executor takes possession of or in any manner administers the estate and effects of a deceased person without obtaining probate within six months after the death of the deceased, he is liable to a penalty. Although one who has been named as ex- ecutor and has intermeddled can be com- pelled to take probate, one who has not been so named and has intermeddled {i.e, executor de son tort) cannot be compelled to take a grant of administration. Powers : — Where there are two or more executors of the same testator they are considered as one person, and upon the death of one of them the office survives, and in general their power is joint and several. Before probate has been taken, an executor may do most of the acts that he could do afterwards — he may release debts, realise the testator's estate, assent to a legacy, and other- wise administer, for he receives his interest as executor from the will and not from the probate. "Probate is a mere ceremony" evidence of the executor's right, the property of the deceased vesting in the executor at the date of the death. An executor may even com- mence an action before taking probate, but Executor] 159 [Executor he cannot proceed beyond the stage at which he will be required to prove his title ; which can only be done by producing the probate. Executors have power to sell, mortgage, assign, and pledge the assets of the testator, and grant a lease for a term of years, subject to any special restrictions imposed by the will. Executors may also compromise debts, or submit claims to arbitration ; they may indorse bills of exchange and promissory notes, give or refuse assent to a legacy, and pay statute-barred debts. But they cannot pay debts which are statute-barred if the Court has actually declared them irrecover- able on that account, nor can they pay a debt if it could not be enforced by reason of the provisions (as to evidence of contract) of the Statute of Frauds, Sale of Goods Act, and other statutes ; to pay such debts would amount to a devastavit. Executors have a right of preference and retainer, but exerciseable only in respect of creditors of an equal degree. {See Preference, Retainer.) Duties : — The duties of an executor may briefly be stated as follows : — (i) To bury the deceased, incurring only such funeral expenses as are necessary and reasonable, due regard being had to the estate and condition of the deceased. {See Funeral Expenses.) (2) To prepare an inventory of the deceased's goods and chattels. (3) To obtain probate of the will, and pay the necessary duties. (4) To realise, collect, or otherwise get in the estate. (5) To pay the debts of the deceased. (6) To pay the legacies. (7) To make any necessary investments. (8) To distribute the residue. (9) To keep proper accounts, showing the manner in which the estate has been adminstered. In order to secure an indemnity to execu- tors, and also to afford the creditors of a deceased person an opportunity of making their claims against their deceased debtor's estate, Lord St. Leonard's Act provides that notice may be given to creditors by adver- tisement in the London Gazette or another London paper (and a local paper where necessary), to the effect that such creditors and others must send in their claims against the estate before the expiration of a time stated in the notice ; and such notice may further declare that on the expiration of the stated time the assets will be distributed, having regard to the claims of which the executors shall then have notice, and that the executors will not be liable to any person of whose claim they shall not have had notice at the time of the distribution of the assets so distributed ; but without prejudice to the right of a creditor to follow the assets into the hands of any person receiving the same. An executor who has distributed the assets after taking the precaution directed by the Act, has the same protection as if he had administered the estate under a decree of the Court. Some companies decline to register probate without at the same time registering a transfer of the shares into the executor's name ; but, whatever the company's articles of associa- tion may prescribe, it is not competent for the company to compel an executor (who is no party thereto) to undertake any personal liability, and the attempt should therefore be resisted. An executor is empowered to deal with shares standing in the name of the deceased by virtue of his office as executor, and cannot be compelled to have them regis- tered in his own name before disposal of them to a third party. Testator's Business : — When an executor carries on the business of the testator, even though so directed in the will, he renders himself personally liable to the creditors of that business, without reference to the extent of the testator's assets. The amount of loss actually sustained by the executor will, however, depend upon the extent to which he is entitled to and can obtain indemnity from such assets. A direction in the will that the executors shall carry on the testator's business does not, per se, authorise the employment in such business of more of the testator's assets than were so employed at the date of the death, Executor] i6o [Executor and directions as to the carrying on of the business must at all times be most distinct and positive, for the Court will not act upon " a bare conjecture that the testator contem- " plated the business being carried on." Where executors are authorised to carry on the testator's business, but are confined to the assets engaged in it at the date of the death, and find it impossible to carry on the trade within such limits, they should apply to the Court for directions. Where a partner in a firm by his will authorises bis executors to allow his share of the capital to remain as a loan to the firm, his executors are bound, on a change in the personnel of the firm, to call in the loan, subject, of course, to any special provision in the will as to the effect of such change. A distinction must be drawn between executors actively carrying on business and executors merely sharing in the profits of a trading partnership in pursuance of the articles of partnership to which the testator was originally a party. Ordinarily, executors of a deceased partner are not liable for the debts contracted by the partnership subsequently to the testator's death ; but subject to the prior payment of the separate debts, the estate of the deceased partner is liable severally for the debts and obligations of the firm incurred whilst he was a partner. The Partnership Act (section 36) provides that, irrespective of notice, as required in the case of retirement, the death of a partner, ipso facto, terminates the liability of a partner's estate for any debts which may subsequently be contracted by the partnership ; and by section 14 of that Act, where after a partner's death the partnership business is continued in the old firm's name, the continued use of that name, or of the deceased partner's name as part thereof, does not of itself make his executor's (or administrator's) estate or effects liable for any partnership debts contracted after his death. The doctrine of " holding out ' ' does not extend to bind the estate of a deceased partner, whether the creditors of the firm are aware or not of the death of the partner whose name remains as part of the firm's name. Executors of a deceased partner are there- fore not entitled to an injunction restraining the surviving partners from continuing to use the deceased partner's name in the firm name. Remuneration : — An executor is not entitled to any remunera- tion for his trouble and services as executor, unless it be expressly stated in the will that he be so compensated. The remuneration may take the form of a salary, a commission, or, in the case of a professional man, his ordinary professional charges. Generally, however, the testator bequeaths a legacy to the executor expressly for his pains as such. The Court of Appeal in re White [Accountant Law Reports, 1898, p. 105) upheld a decision to the effect that a solicitor who was executor and trustee, although empowered by the will to charge for his services, was not entitled to do so should the estate prove to be insolvent. The power to charge "profit costs" is in the nature of a legacy, and Chitty, L.J., said, " No one can claim the bounty of a testator " until his creditors have been paid. This " rule applies not only to a solicitor-trustee, " but equally to a trustee who is an " accountant, a surveyor, or an architect." The Revenue authorities at one time claimed legacy duty upon the profits arising from the office of executorship, whether by way of professional charges or otherwise, but now the authorities do not press the claim in respect of profit costs, although they still enforce the payment of the duty on ordinary pecuniary legacies to professional executors, and on fixed annual payments for the services of executors. Release : — An executor cannot demand a formal re- lease from a pecuniary legatee^ for in respect of a single transaction, such as the payment of the legacy, the executor must be satisfied with a simple receipt. But where, as in- variably is the case, an executorship involves a series of complicated transactions — re- ceiving and paying, making investments and changing same— the executor has a right to demand a release under seal from the resi- duary legatee. " He has a right to be clearly " discharged, and not to be left in a position " in which he may be exposed to further " litigation, because he fairly says, 'unless " ' you give me a discharge on the face of it BxecutorJ i6i [Executorship " ' protecting me, I cannot safely hand over " ' the fund.' " Where the executor is doubtful as to the title of the parties to the funds in his hands, he may pay them into Court, but he may thereby subject himself to the costs of obtaining the funds out of Court by the parties rightly entitled thereto, if his actions in this respect are afterwards held to have been improper. If the estate is administered and the accounts have been taken by the Court, the executor will not have need to demand a release when paying over the residue under an order of the Court, for, having stated all the facts fully, he will in such a case be pro- tected from any further demands. Executor-Trustee : — An executor is in a sense a trustee, but when he has fully performed the duties of his executorship {i.e.^ when he has paid the funeral and testamentary expenses, debts, and legacies), and stands possessed of the surplus, he ceases to be an executor and becomes a trustee in a proper sense. " The executorial duties consist in ascer- " taining the proper net amount of the various "parts of the testator's property after pay- " ment of debts and expenses, and distribut- " ing them amongst the persons entitled; " these persons may be trustees who hold " . . . in trust for others, or the executors " themselves may be, and frequently are, the " trustees, who receive or retain as trustees '* the fund ascertained by themselves as " executors." Although, generally, an executor cannot be treated as a trustee of a specified fund until the residue has been ascertained, yet if he expressly sever some portion of the estate and appropriate it to a particular purpose as directed by the will, he will be deemed to be acting as a trustee. {See Acknowledgment of Debt, Actio per- sonalis, &c.. Administration (Letters of). Administration of Assets, Apportionment, Breach of Trust, Citation, Contributory, Deceased Insolvent, Devastavit, Estate Duty, Executor de son tort, Executorship Accounts, Land Transfer Act 1897, Legacy, Legacy Duty, Preference, Retainer, &c., &c.) Executor according to the tenor.— A person is constituted executor according to the tenor when, although the will does not expressly name him executor, it appears from a reasonable construction thereof that it was the testator's intention that such person should act as executor. Executor de son tort. — One not named executor who takes upon himself to act as such by intermeddling with a deceased person's goods, or otherwise purporting to administer the estate, is termed an executor de son tort (of his own wrong), and is liable as an executor; but he is not entitled to any of the privileges of the office. He cannot retain his own debt (if any) out of the assets. He cannot sue on behalf of the estate of the deceased, but he is liable to be sued by a creditor or legatee. Although one named executor having "intermeddled," can be compelled to take probate, one not so named cannot, because he has intermeddled, be compelled to take a grant of administration. An executor de son tort may relieve himself from liability by accounting to the rightful representative before any action is brought against him. Mere acts of humanity or necessity, such as feeding the deceased's cattle, burying the deceased, or placing his goods in a place of safety, will not amount to such an inter- meddling as will render a person liable as executor de son tort. Executor of an Executor.— The executor of a sole or last surviving executor becomes the executor of the original deceased, if he takes probate of his own testator. The first executor must, however, have taken probate of the original deceased, for if he died before taking probate the " chain of representation " would be broken. This devolution of ofiice does not apply to administrators — for instance, if an executor die intestate, his administrator will not repre- sent the original deceased ; and so, also, if an administrator die, a fresh grant of adminis- tration must be granted. Executorship Accounts.— An executor is an " accounting party," and, as a consequence, he must be always ready with his accounts M Executorship] 162 [Executorship and vouchers, so that he may give a satisfac- tory explanation of his administration of the estate. The precise manner in which an executor's accounts should be framed has long been the subject of discussion, two distinct systems being in use, both of which are strongly sup- ported by their respective adherents. The first system is based upon the doctrine that executors are responsible for the property left by the deceased, but not for its value until it is actually realised, and that, as a conse- quence, an executor's accounts must be based solely upon the actual receipts and payments of the executor, the unrealised assets whilst unrealised being recorded in " inventory form." The advocates of the second system are of opinion that no difference in principle should exist between the accounts showing the administration of a deceased person's estate, and those accounts which in the ordinary course would have recorded, or have con- tinued to record, his transactions had he lived. They, therefore, deem it essential that the particulars of the estate (as shown by the affidavit for probate) be immediately passed into the executor's accounts by means of a Journal entry. Much can be said in favour of both systems ; and as the vital principles involved may, in both cases, be considered sound, it will be difficult to convince the supporters of either side of their '• error." The difference between the two systems has, in fact, been termed by one authority as " little more than an office detail." It is undeniable that the "cash basis" is the older form of account, and the following extracts from Cory on Accounts, published over sixty years ago, will not be without interest : — *• A person intrusted with an estate, like " an executor, is put in possession of all "the estate, and, consequently, he is " accountable for it all ; but he is not " answerable for it all. It may be impos- *' sible for him to recover some portions *' such as bad debts." And again : — " Though he is thus accountable for " all, he will only be answerable, or " chargeable, with what he has actually "recovered, or with what, but for his " own wilful default, he might have "recovered." Cory then proceeds to explain the method of keeping the ordinary Cash Account, and further suggests (as being "the scientific " method of constructing an executor's "accounts"), the journalising of the Probate Account, but only as regards the items, " as their value in money would not yet be inserted J ^ "As an executor, in starting, deals " only in estimates, he need not insert " the values of the items ; but as many " of the real accounts may not be dis- " posed of when his time to account "comes, he should use a double-columned " Ledger, one column to contain the sums " actually received, and the other to " contain the (probate) value of the " items still outstanding." [Cory.) With regard to the system of adopting the probate values en bloc in the accounts, Mr. O. Holt Caldicott, F.C.A., has said : — " To my mind it has one great defect, in " that it is founded upon unreal figures, the " result of valuations some of which are a " mere matter of opinion, and some of ' ' which are only temporary in their relation " to the property. I consider that an " account is a record of transactions and " not a schedule of valuations, and my " opinion is that the executor should refer " to the affidavit for probate for particulars "of the estate at the death, and that he ** should produce his accounts to show how " far he has administered the estate, and " what estate is outstanding." The following extract from an article in The Accountant newspaper of 25th September 1897 was in reply to Mr. Caldicott's state- ment quoted above : — " We appreciate thoroughly the intention " of Mr. Caldicott's form of accounts, but *' we suggest that a bare record of transac- *' tions which have been made is not abso- " lutely all that an executor is required to " keep, with a view to giving an account of " his stewardship. It seems to us that he is "required to keep such accounts as will " show not only what he has done, but also Executorship] 163 [Executorship " what he ought to have, and, perhaps, has "not, done. Moreover, there are circum- " stances which, perhaps, come under '* neither category, but which have a " material bearing upon the position of the " estate, and these also should be recorded "in Executorship Accounts— unless, in- " deed, it is to be conceded that Executor- " ship Accounts need not be complete. •' The form of accounts which we are ■' advocating has, according to Mr. ' Caldicott, the one great defect that it is " founded upon ' unreal figures,' the result ' of valuations some of which are a mere ' matter of opinion, and some of which are ' only temporary in their relation to pro- ' perty. This is an objection which must, ' under all normal circumstances, apply to * every set of books of account. We venture ' to think that no Balance Sheet which can ' be said to be entitled to the name at all ' has ever been prepared which was not — *at all events, to a certain extent — based ' upon figures which would be the ' result ' of valuations,' which valuations in all ' cases are naturally a * mere matter of ' opinion,' while in most cases they ha,ve ' only a ' temporary relation ' to the pro- ' per ties to which they refer. If this be a ' defect at all, it is an indictment against ' bookkeeping as a whole, and not against ' Executorship Accounts in particular, ' unless any special reason can be advanced ' in the case of Executorship Accounts ' which makes it more desirable that such ' valuations should not be introduced • therein. If Mr. Caldicott is aware of any ' certain special reason he would strengthen ' his argument by naming it. . . . Any ' account which (whether annual or other- ' wise) is in the nature of an intermediate ' account, showing the progress of a venture, during a certain period, and its ' position at a certain date, must, in the nature of things, be of a tentative type. This applies, like every other principle in ' bookkeeping, whether the person whose ' property is being dealt with is alive or dead at the time ; and this circumstance, ■ in itself, so far as we can see, need have ' no bearing whatever upon the funda- mental principles upon which the system of bookkeeping is to be founded. If there is any fundamental distinction, as " we have already stated, we think it a pity " that Mr. Caldicott does not emphasise it. " At the moment we are unaware of any " such, and, therefore, it seems to us " Executorship Accounts should be kept on " the same lines as any other accounts " dealing with transactions of a similar ** description." Quoting again from The Accountant of 9th October 1897 : — " The executors have to give an account " of the property which passes through ** their hands, and this can be best shown •' if only the ascertained facts are recorded " in the books. Indeed, it is difficult to " suggest any reason for either failing to " record the full details which we have "suggested ... or for recording ',' additional details which do not directly "bear upon the matter at issue; unless, " indeed, the idea be to so complicate the "accounts as to render any detection of ^'devastavit upon the part of executors " more than usually difficult." Having stated the salient features of the two systems in vogue, the main points in CO nnection with the preparation of Executors' Accounts may now be summarised thus : — Books. — A Cash Book and Ledger must be kept, but it is optional whether a Journal be utilised, and where the "cash basis" is adopted, a Journal may readily be dispensed with. Cash Book. — The Cash Account will com- mence with the amount of "cash in the house" and the bank balance as at the death. As to whether the Cash Book will be columnar or not must depend upon circumstances. Some suggest that the bank items be separated from the cash, whilst others advocate separate columns for Capital and Revenue. The former is, however, inadvisable to the extent that no cash transactions should be encouraged. All receipts should be specifi- cally lodged in the bank, and all payments made by cheque. The receipts and payments should be entered in order of date, the vouchers for * payments being numbered consecutively in the order in which the entries appear in the Cash Book. M 2 Executorship] 164 [Executorship Moneys received or paid by the executors, in the " nature of income," but in respect of a period wholly prior to the date of the death of the testator must be treated as on account of capital of the estate, but receipts and payments of such a character which are in respect of a period extending over the date of the death must be care- fully apportioned as between the capital and income of the estate. Rents, annuities, dividends, and other periodical payments in the nature of income are, in the absence of an express stipulation to the contrary, to be considered as accruing from day to day, and apportionable in respect of time accordingly, so that the portion of ' ' income ' ' accruing due to the date of the death must be treated as capital of the estate, and the portion accruing subsequently to the death as income thereof. The principles involved in the apportionment of capital and income are dealt with under the title "Apportionment." Should any difl&culty arise in connection with the appor- tionment of an item as between capital and income, the "golden rule" is to place the doubtful amount to capital, being obviously the lesser of two evils. Having the fund in hand, an executor can more readily satisfy a tenant-for-life, in the event of such fund being declared income, than he could recover the amount should it be declared capital, after it has been distributed as income. Subject to modification by the Court, in special cases where the circumstances are peculiar, the rights of a life-tenant and remainderman respectively, and the adjust- ments as between capital and income which are consequently necessary in the accounts of an executor or executor-trustee, are governed by the following : — A life-tenant of specific property under a settlement whether by deed or will without any trust for conversion, is entitled to the income actually produced during the life-tenancy, whether the property be permanent, such as real estate, or of a wasting character, such as a leasehold. But where a property so settled is of a wasting nature a«i there is a trust for sale, without any express provision in the settlement as to the income derived there- from pending sale, the life-tenant is not entitled to the whole of the income actually produced, but only to so much of it as would equal the dividends from such an amount of Consols or other authorised securities as might have been purchased with the proceeds of sale had the settled property been converted at the end of a year from the testator's death, the income actually received in excess of such computed amount of dividend being treated as capital. Where settled property is placed in a state of investment which is unauthorised and produces income in excess of 4 per cent., the life-tenant is not entitled to retain such excess. A life-tenant of residue is not generally entitled to the income produced by unauthorised invest- ments, the rule (generally referred to as the rule in Howe v. Lord Dartmouth) being that such investments must be converted into Consols or other authori sed securities of a permanent nature for the benefit of all parties interested. This rule is not based upon any presumed intention of the testator that the property should be so converted, but rather upon the presumption that he intended the property to be enjoyed in succession, an intention which can only be carried out by con- version and investment in permanent securities. The rule obviously applies to property of a wasting or perishable nature, such as terminable annuities and lease- holds ; and if property to which this rule applies be not converted, an apportion- ment as between capital and income will be necessary either on a 4 per cent, basis or upon the basis of what income would have been derived from a proper invest- ment of the proceeds of conversion. The rule in Howe v. Lord Dartmouth may be excluded if it appears from the will that the settlor intended, either by express declaration or by necessary implication, that the property should be enjoyed in specie. With regard to {a) dividends and bonuses in respect of shares in companies; {h) profits of a firm ; [c] the apportionment of the proceeds of sale of non-income pro- ducing assets, where, for the benefit of the estate, such sale has been postponed ; {d) the apportionment as between capital and income of the purchase money or proceeds of sale on a change of investment^ when Executorship] 165 [Executorship the payment or receipt, as the case may be, includes accruing dividend ; and (e) the apportionment of a loss of principal and interest on realisation of a mortgage security, see title Apportionment. With regard to fire insurance a life- tenant does not appear to be liable to pay the premiums therefor, unless there is some provision in the settlement that the property be insured at the expense of income. Nor is a life-tenant liable to bear the cost of repairs unless made liable by some provision in the settlement or by statute in special cases ; but, on the other hand, a life-tenant is not entitled to have repairs done out of capital. In certain special cases substantial repairs, which have been ordered to be done by the Court so that a property might be rendered tenantable, have, however, been allowed out of capital. As between the life-tenant and the remainderman, the life-tenant is not liable to repair even in respect of leaseholds, although the lease may contain a covenant to keep in repair ; but this also may be affected by the settlement, and in some cases is affected by statute. With regard to death duties, estate duty is payable out of capital, but if it is borrowed on the security of the capital the life -tenant must pay the interest on the loan. Legacy duty is payable out of capital when so directed by the will, but it is payable out of the respective legacies when not bequeathed free of duty. So, succession duty is a charge against the particular interest liable therefor, but where legacy or succession duty is payable in respect of a life interest, the duty is payable out of capital only if the rate of duty payable by the life-tenant and remaindermen would be the same. If the rate of either legacy or succession duty chargeable on the life interest is different from that chargeable to the remainderman, then the duty on the life interest is payable by the life-tenant and the duty on the remainder is payable by the remainder- man. Settlement estate duty payable in respect of a legacy or other personal property settled by will (unless the will contains an express provision to the contrary) payable out of such settled legacy or property in exoneration of the rest of the deceased person's estate. Calls on shares which are the subject of a settlement are payable out of capital unless a contrary intention is expressed in the settlement. Where the settled property is subject to incumbrance, the life - tenant is responsible only for the interest thereon out of the rents and profits" of the estate and is not, in the absence of a provision to the contrary in the settlement, liable to discharge any part of the principal sum owing. If the rents and profits are insufi&cient to pay such interest, the life- tenant is entitled to have part of the property sold to reduce the incumbrance, but where the income is only temporarily insufficient to pay the interest on the incumbrance, the arrears may be recouped out of subsequent income accruing during the same life-tenancy ; but apparently any arrears of interest on the death of one life- tenant are not recoverable out of the income of a subsequent life-tenant. Losses properly incurred in carrying on a business as authorised by a settle- ment are as a rule liable to be made good out of subsequent profits and not out of capital, but losses incurred in carrying on a business under an order of the Court where postponement of sale has been authorised because the business could not previously be profitably sold, are apportionable as between capital and income on the basis of such loss repre- senting the accumulation of a sum at 4 per cent, for compound interest from the time when the business ought to have been sold, the amount representing such interest being charged against income, and the balance of the loss being charged against capital (see the method of computation as applied to the apportionment of non- income producing property under title " Apportionment.") Annuities bequeathed by a will are payable out of the income of the residue, and a life- tenant is not entitled to call upon the trustees to purchase an annuity out of the capital to satisfy the bequest, but is, per contra, entitled to the Executorship] i66 [Executorship additional income which would be the result of the death of the annuitant. {See title Annuity.) With regard to costs and expenses, those incurred in the preparation of an account for the purposes of estate duty are con- sidered payable out of capital, as is the estate duty itself. Accountancy charges for an annual audit of the books ot a business carried on by the executors (such audit having been expressly stipulated for by the testator) have been held payable out of capital. The costs of preparing accounts in respect of the life- tenant's interest are payable out of income, and so the costs of proceedings taken by a life- tenant in respect of his life interest under a settlement, are not chargeable against capital as a rule, particularly if the pro- ceedings have been taken for his sole benefit. But where a life-tenant's pro- ceedings are the means of determining the rights of the remainderman also, the costs and expenses are generally a capital charge. The costs of appointing a new trustee (and generally the costs of appointing an additional trustee) are payable out of capital. The costs of changing investments in accordance with directions in the settle- ment are a capital charge, as are also the expenses of a proper application to the Court by the trustees for directions. The foregoing are of course subject to the terms of the settlement and to the orders of the Court made in each case, for sometimes, owing to the wrongful acts of a particular party, the Court may order that party to pay the costs he has occasioned. As a general rule an executor or executor- trustee will be entitled to employ and remunerate an accountant to keep the books and accounts in connection with the testator's estate, particularly so where the work is of such a character that he could not reasonably be expected to do it himself. This may be emphasised or qualified, as the case may be, by the terms of the will. The will may also direct in what manner such expense is to be borne, and if the estate becomes the subject of litigation, orders of the Court may decide what proportions are payable out of capital and income respec- tively. In the absence of anything which would affect the matter, it is usual to charge the whole or the greater part of the expense in connection with the preparation of the first year's accounts to capital, and in subsequent years to charge the whole or the greater part of the accountant's charges to income. This apportionment will depend to some extent upon the nature of the estate. It may be that a considerable amount has been charged in respect of income matters even during the first year, and it may be that owing to various causes a substantial sum may be attributable to Capitc(,l Account in later years, so that to some extent the appor- tionment of accountants' charges will be largely a matter of circumstances. But apart from any direction contained in the will or any special order of the Court, the general practice is, as already stated, to charge capital with practically all the first year's accountancy charges, and incomawith all subsequent charges, leaving the extent to which this general rule should be departed from to be decided by the circumstances affecting each estate. Journal. — Where the probate values are in- corporated in the accounts, a Journal may be used for opening the books and " adjusting " the items from time to time. The Journal is also useful for transferring the Ledger balances or other items from one account to another. Ledger. — Where the probate values are not incorporated in the accounts, it is usual to set out in detail, at the commencement of the Ledger, the schedule of the estate as pre- pared for probate, so that the assets may be "marked off" as and when realised, with particulars of the realisation recorded against each; but under either system (probate values or cash) a copy of the will and codicils (if any), with an epitome of same, is generally placed on the front pages of the Ledger — a few plainly ruled pages being pro- vided for this purpose. Note. — A copy of the will, with codicils (if any), and of the schedule of the estate as prepared for probate, are indispensable to one who is responsible for the preparation Executorship] 167 [ExecutorshiiJ of the accounts in connection with the administration of a deceased person's estate. Where the probate values are incorporated in the accounts the Ledger should be ruled with three cash columns for (i) the nominal value of investments ; (2) the assessed value of same ; and (3) income items. Where the probate values are treated in the Ledger Accounts in memo form only, or where all un- realised values are ignored, the cash columns must be modified accordingly. A separate Ledger Account should be kept for each asset, but where several investments are made in the same class of stock or shares, they should be recorded in the same account. The Ledger Accounts usually opened are : — (i) Capital {or Estate) Account. All capital receipts and payments are respectively credited and debited to this account either direct (from the Cash Book or Journal as the case may be, and accord- ing to the system adopted) or by transfer from some special account as explained below. (2) Income Account. All receipts and payments on account of income are respectively credited and debited to this account. Sometimes a specified sum has been set apart so that the income thereof may be enjoyed by certain beneficiaries, in which case such income must be recorded distinct from the general income of the estate. (3) Interest and Dividends accrued to date of Death. This account records the apportioned parts of any receipts in the "nature of income" (in respect of a period covering the date of the death) which are deemed capital of the estate, and also all interest and dividends due or declared or wholly earned prior to the date of the death, but not actually received until after the death. [See also the rule in Allhusen v. Whittell (1867) 4 Eq. 295, referred to under title Apportionment.) When all such items are included, the total of same is carried to the credit of Estate Account. (4) Debts due to the Testator. This account records all receipts in re- spect of moneys due (or where probate values are adopted, the whole of the moneys due) to the testator at the date of the death, the total of same when ascer- tained being carried to the credit of the Estate Account. (5) Debts due by the Testator. This account records all payments in re- spect of the debts of the testator, the total of same when ascertained being carried to the debit of the Estate Account. (6) Funeral and Testamentary Expenses. These expenses may be kept together or in separate accounts ; when the total of same has been ascertained, it is carried to the debit of Estate Account, being a charge against capital. {See Funeral Expenses, Testamentary Expenses.) With regard to an account for legacy duty, see below. (7) Executorship Expenses. An executor may charge against the- estate all proper expenses incurred by hinv in carrying out the provisions of the will^ but he will not be allowed any remunera- tion for his own time and trouble, nor will he be allowed to remunerate out of the testator's property any agent (solicitor, accountant, &c.), unless the services rendered were (i) really necessary, and (2) of such a character that he could not reasonably have been expected to perform them himself. But this general rule of law as to remuneration and reimbursement is, of course, subject to any contrary direction in the will ; where the will, how- ever, confers power upon an executor to apply some portion of the estate towards his remuneration, the authorities may require legacy duty to be paid upon the amount of same. {See title Executor, (Remuneration). ) (8) Legacies. A separate account should be kept show- ing the payment of all legacies, and it is also advisable, where some legacies are be- queathed free of duty, and others not so, to keep a separate account for legacy duty paid, so that the books may show that the precise provisions of the will in this con- nection have been carried out. {See I.^gacy Duty.) In addition to the foregoing, separate accounts should be opened for {a) each in- vestment (or asset where probate values are Executorship] i58 adopted) ; (b) each annuitant, tenant-for-life and/or residuary legatee according to circum- stances. Where the testator was the pro- prietor, or part proprietor, of a trading concern, and whether the executor carries on or assists in carrying on the business or not, the assets and liabilities thereof should be kept distinct in the books of such business and not incorporated in the executor's accounts. All that is required to be done in this connec- tion is to pass through the estate books such moneys, whether on account of capital or in- come, as may from time to time be received from the business, meanwhile keeping a record of its financial position as shown by the Balance Sheets prepared from time to time. Where the probate values are adopted, the value of the deceased partner's (or pro- prietor's) mterest in the trading concern will, of course, be passed into the Ledger as a single item to the credit of Estate Account, and treated as an asset in the accounts. Quite apart from the question of the "pro- bate value " or " cash basis " systems, it is essential that the detailed accounts of a '* trading executor " be not incorporated with the ordinary accounts of the administration, particularly where the executor's powers as to trading are limited to the amount of capital invested in the business at the death, or are otherwise restricted. [Expectation 11 The accounts of the estate should be periodically balanced, and this is generally done annually, either upon the anniversary of the death of the testator, or upon some other convenient date. In particular, the accounts should be carefully balanced before making any specific appropriation of either capital or income to particular beneficiaries ; so that where income is distributed half-yearly or otherwise, the accounts should be prepared and balanced accordingly. For this purpose, however, no apportionment of income should be made in favour of the Income Account on the assumption that as dividends, interest, &c. , are accruing due they will ultimately be re- ceived by the executor. In fact, it is just possible that even the advocates of the *' pro- bate value " system will not go so far as to suggest that the "commercial plan" of crediting income with accrued interest, &c., should be adopted. The position of the estate at any date wi be exhibited as follows : — (i) Where the accounts are kept upon a cash basis, by a Balance Sheet record- ing the result of the executor's transac- tions, supplemented by (a) a schedule of the outstanding liabilities, if any {e.g., unpaid legacies), and (b) an in- ventory of the assets as yet unrealised. (2) Where the probate values are adopted, b y a Balance Sheet showing upon the asset side (a) the unrealised assets at the probate values, [b) the investments of the executor at cost, and (c) any cash in his hands ; whilst the liability side will show (a) the liabihtie's of the estate, (b) any specific appropriation of capital or income, and (c) the balance or balances representing Estate Account and unappropriated income (if any). {See Executor.) Executrix. — A woman appointed by a testator to administer his estate. A married woman appointed executrix may sue and be sued, and may transfer stocks and shares independently of her husband as if she were a feme sole. Exhibit. — Something shown to a witness when giving evidence ; a document referred to in an affidavit and exhibited to the witness at the time of being sworn. The commissioner, or other person before whom such an affidavit is sworn, certifies the exhibit for the purpose of identification. Expectation of Life.— The average " after- lifetime" of persons of a given age, formed by taking the excess from those who live long, and distributing it amongst those who die early, so as to place all upon an equality. The term can only be applied to the average expected after-lifetime of a large number of persons, for the expectation of life has no relation whatever to the probable after-life- time of any given individual at any given age. The expectation of life is chiefly used by actuaries for the purpose of comparing the vitality exhibited by various classes or com- munities, but it is not one of the functions involved in the calculation of the values of Expectation] 169 [Factor life annuities and the amounts of life assur- ance premiums, although an impression to the contrary is widespread. " Life assurance is based upon the fact " that although the duration of life of a " particular individual is proverbially uncertain " yet out of a large number of persons the '* number of deaths that may occur at each age " is capable of very accurate determination." " The actual basis of all life assurance " monetary calculations is the Mortality " Table, which consists simply of three " columns :— (i) The age; (2) the number of " persons surviving at each age out of a given *' number living at the initial age of the table '* (say age 10) ; and (3) the number of per- " sons dying between each age and the next." The probabilities of living and dying are thus ascertained, and when taken in con- junction with compound interest they are used in the calculation of the values of life annuities and the amounts of life assurance premiums ; but these probabilities are quite distinct from the function called " expecta- tion of life," the latter being obtained by dividing the total future lifetime of all the persons of a given age by the number of those persons. The complete expectation of life allows for the portion of a year lived by each person in his year of age at death by adding half a year. When this is not taken into account it is called the curtate expectation of life. Mr. Manley, President of the Institute of Actuaries (1899) said that if a person asked him what his expectation of life was, he would reply : — " I do not know how long you are going to *' live, but if there were a thousand of you *' I could tell \ery nearly how long on the " average you would all live. That average " after-lifetime, however, has nothing what- *' ever to do with the calculation of the " premiums. When we insure your life we " cease to look upon you as a unit, and you *' become to us one of a large class of persons '* like yourself. Now we know within " reasonable limits how many claims out of ' ' that class we shall have to pay the first " year, how many the second year, and so •' on, until all are dead ; and we have to ** find the average contribution (after allowing "■for accumulations of interest) which you " will all have to make to enable us to pay " these claims as they arise. That contribu- " tion is the premium which you have to " pay." {See Life Annuity.) Express Contract. — An agreement ex- pressed either in writing or verbally. Extension of Protest.— To note a bill and return it is sufficient protest with regard to bills returned to parties in the same city or town, but where the protest is required to be sent abroad, as in the case of foreign bills, the notary issues the recognised formal docu- ment, which proceeding is technically called the Extension of Protest. Extraordinary General Meeting. — See General Meeting Extraordinary Resolution.— 5^^ Resolution. F. Face Value. — The nominal value of a security, such as a bond, debenture, or share certifi- cate, as distinct from the market value. [See Book Value.) Factor. — Mercantile agents may be divided into two classes — factors and brokers. A broker ordinarily has not the possession of the goods in which he deals — he is a " mere negotiator ' ' ; but a factor is either entrusted with such possession, or the goods are held subject to his control. The general principles of the law of agency are, of course, applic- able, whilst the Factors Act 1889 has ex- tended the powers of, and afforded protection to, persons having bond fide dealings with mercantile agents as therein defined. An outline of the Act of 1889 is given below, but the particular rights, duties, and authority of a factor are as follow : — Rights : — (a) The factor has a possessory lien upon the goods he holds qua factor for any moneys due to him in the same capacity, unless there is an agreement to the contrary. {b) The factor has a right to sue in his own name in respect of contracts made on behalf of his principal, subject to the latter's right to intervene under certain circumstances. Factor] 170 Factor Duties : — (a) The factor must render to his prin- cipal correct accounts of the agency transactions, and pay over on demand all moneys properly due from him. (b) The factor must take reasonable care of the goods in his charge, and if it be in the usual course of dealing he must insure the goods. Authority : — (a) In the absence of instructions to the contrary, a factor may sell the goods entrusted to him in his own name. He may sell upon credit and upon such other terms as he may think advisable. (6) Having sold goods in his own name, a factor may afterwards collect the proceeds. (c) Being an apparent owner, it is the ostensible, rather than the actual, authority of the factor which will bind the principal as regards third parties acting bond fide and without notice of any special restrictions. This is a general principal of agency, and has been extended by the Factors Act. The main provisions of the Factors Act 1889 may be summarised as under : — A factor may make a valid disposition of goods by way of sale, pledge, or other- wise, as if he had been expressly author ised to make same, provided that the factor (i) is, with the consent of the owner, in possession of — (fl) the goods, or (6) the documents of title thereto, and (2) is acting in the ordinary course of business, and the person taking under the disposition (i) acts in good faith and gives con- sideration, and (2) is unaware at the time of the disposi- tion of any want of authority on the part of the factor. Consent of the owner is presumed in the absence of evidence to the contrary, and a pledge of the documents of title to goods is deemed to be a pledge of the goods. A pledge of goods by a factor as security for an already existing debt due from him gives the pledgee no further right to the goods than could have been enforced by the factor at the date of the pledge {e.g., the factor's lien upon the goods for moneys due). The consideration necessary for a valid sale, pledge, or other disposition of goods, is : — (i) cash, or (2) other goods, or (3) documents of title to other goods, or (4) a negotiable security, or (5) any other valuable consideration. Provided that where the disposition is by way of pledge and the consideration given is other than cash, the pledgee only acquires a right in the goods to the value of the consideration given. A factor may act through sub-agents if in the ordinary course of business. Where a seller of goods retains, or a buyer obtains, possession of the goods or the documents of title thereto, such seller or buyer, as the case may be, may make a valid disposition thereof to any person receiving same in good faith and without • notice of the rights of prior parties. The lawful transfer of a document of title to goods to a person taking in good faith and for valuable consideration will defeat the vendor's lien and right of stop- page in transitu. The Act does not authorise an agent to exceed or depart from his authority as between himself and his principal, nor does it exempt him from any civil or criminal liability for so doing. The rights of the true owner are : — (i) Before sale or pledge by the factor — the owner may recover the goods from the factor or his trustee in bankruptcy. (2) After sale by the factor — the owner may recover from the buyer the price agreed to be paid for the goods, subject to any right of set-off the buyer might have against the factor. (3) After pledge by the factor, but before subsequent sale by the pledgee— the owner may redeem the goods upon satisfying the claim of the pledgee, and Factor] 171 [Fire paying the factor any money in respect of which he might have been entitled to a lien upon the goods. (4) After pledge by the factor, and subsequent sale by the pledgee — the owner may recover from the pledgee such portion of the proceeds of the sale as may be in excess of the pledgee's claim. [See Document of Title, Mer- cantile Agent.) Factorage. — The commission allowed to a factor by his principal. Falsification of Accounts Act 1875.— This Act provides that if any clerk, officer, or servant shall wilfully and with intent to defraud, destroy, alter, or falsify any book, writings, oraccountsof his employer, he shall be guilty of a misdemeanour, and be liable to imprisonment. Fee Simple. — A freehold estate of inherit- ance, absolute and unqualified. This is the highest and most ample estate possible in lands within England. Although in theory there is no such thing as ownership of land by a subject, an owner in fee has absolute power of disposition. Fictitious Person. — " Whenever a name in- *'serted in a bill of exchange as that of '* payee is so inserted by way of pretence "merely, without any intention that pay- " ment shall be made in conformity there- " with, the payee is a fictitious person within " the meaning of the statute (Bills of Ex- " change Act 1882), whether the name be ** that of an existing person or of one who has " no existence, and the bill may in each case " be treated by a lawful holder as payable to *' bearer." — (Lord Herschell, re Vagliano.) Fiduciary Relationship. — The relationship of trustees to their cestui que trust, extending to constructive trustees, such as guardians, attorneys, partners, directors, and promoters of public companies. If a person stands in this relation and takes any gift or makes any bargain with his cestui que trust, ward, or client he must be able to show that he dealt with the other party as a stranger would have done, taking no advan- tage of his influence or knowledge, and that he informed such other party of everything in connection with the transaction which he himself knew. A person in this relation cannot ordinarily make a profit out of his position or office, and in particular he cannot make a secret profit, but under certain circumstances a bargain or transaction between the persons in such a position will be supported. There must, how- ever, be the utmost good faith and a full dis- closure of facts in all dealings, for where " in- '• fluence is acquired and abused, or confi- " dence is reposed and betrayed," the trans- action may be set aside. {See Promoter.) Fieri Facias. — Usually abbreviated fi. fa. A writ whereby one who has recovered judg- ment for any debt or damages may obtain execution of the personal property of the judgment debtor, excepting only his wearing apparel, &c., to the extent of £^. {See Execution Creditor.) Final Judgment.— 5^^ Bankruptcy Notice. Finance. — The science of regulating money matters; the adjustment of income to pro- posed expenditure, and expenditure to avail- able resources ; the raising of money by sub- scription or otherwise to carry out, or assist in carrying out, a public or commercial undertaking. Finance Act 1894.— This Act amended the death duties and inter alia created a new duty called " estate duty," in which the "pro- bate and account " duties previously payable are now merged. The Act came into operation as regards the death duties on the 2nd August 1894. In addition to the above, the Act amended the provisions of the Income Tax Acts. {See Estate Duty, Income Tax, Legacy Duty, Settlement Estate Duty, Succession Duty.) Financial Boolcs.— The books of a concern which record its financial transactions ; they are the Ledger, Journal, Cash Book, Pur- chase and Sales Books, &c. These books are more often referred to as the " Books of Account." {See Statistical Books.) Fire Insurance.— A contract whereby the insurer in consideration of a sum paid to him, called a premium, undertakes to indemnify the insured from any loss he may sustain (not exceeding the amount insured) in regard to the subject-matter of insurance by damage from fire. Where, however, as is now usual, the policy qontains an average clause, the insurer is Fire] 172 [Fixed only liable to pay such proportion of the loss as the sum insured bears to the whole amount at risk in respect of the property included in the policy. {See Insurable Interest.) Firm.— The collective name given to persons who have entered into partnership with one another. The name under which they carry on business is called the firm name. The number of persons who may constitute a partnership is limited to ten, when the object is to conduct a banking business, and to 20 persons for any other business. Any greater number necessitates registration under the Companies Act 1862, or some other Act of Parliament. Although in Scotland a firm is a legal person distinct from the partners of whom it is composed, the law of England does not recognise such a distinction, the use of the firm name being only a convenient form of referring to the existing partners of the firm. A ctions. — The firm name may be used in legal instruments, and actions may now be brought by or against partners in their firm name. Where a person trades alone in a name or style other than his own name, he may be sued in his own or the firm name, but he must sue in his own name. Bankruptcy. — For the purposes'of the Bank- ruptcy Acts a firm may act by any of its members, and may take proceedings or be proceeded against in the name of the firm. A receiving order made against a firm operates as if it were made against each of the existing partners, and the debtors must sub- mit a statement of their partnership affairs, and each debtor must submit a statement of his separate affairs. (1883 Act, sections 115, 148. Rules 262, 263. ■> No order of adjudication is made against a firm in the firm name, but against each partner individually. (Rule 264.) (For the administration of the assets see Joint and Separate Estates.) Executorship. — A firm may be appointed executors, but in such an event probate would be granted to the individual members of the firm. [See Partnership.) (As to infant members of a firm see Infant.) First Meetings. — Company Liquidation. When the Court has made an order for winding up a company the Official Receiver must summon separate (first) meetings of the creditors and contributories for the purpose of determining whether or not application is to be made to the Court : — (i) For the appointment of a liquidator other than the Official Receiver. (2) For the appointment of a committee of inspection to act with the liquidator, and also for the purpose of selecting the members of the committee of inspection should one be appointed. (1890 Act, section 6.) These separate meetings should be held within 21 days from the date of the winding- up order, unless a special manager has been appointed, in which case the meetings should be held within one month from the date of the order. The Court may, how- ever, extend these periods. (1890 Act, ist Schedule.) Bankruptcy. The first meeting of creditors should be summoned for a day not later than 14 days after the date of the receiving order, unless the Court for some special reason extends the time. (For first meeting of Joint Stock Company see title Statutory Meeting.) First Mortgage.— A charge upon property having priority to all others. If it is a legal mortgage the legal ownership of the pro- perty is vested in the mortgagee, the equitable ownership remaining with the mortgagor, who has a right to redeem his property. First of Exchange.— 5^^ Bill in a Set. Fixed Capital.— Capital employed in the pur- chase of lands, in executing works, erecting buildings and machinery, with the expectation of making a profit, or a series of profits, from I their use and employment during a period of ; time. Such capital, however, is not, strictly I speaking, fixed, it is only fixed for a time 1 (varying according to circumstances), as the Fixed] 173 [Fixtures assets representing the outlay are subject to wear and tear and other depreciating factors. In ascertaining the profits derived from the outlay, the necessary " replacement " should therefore be allowed for. Legal decisions have in certain instances been given, relieving joint stock companies of the necessity of pro- viding for the shrinkage of " fixed " assets, such as quarries, mines, patents, permanent investments, &C., but this does not affect the fact that such a policy is unsound financially, for there is obviously no necessary relation- ship between that which should be done as dictated by accountancy principles, and that which need not be done, merely because no legal obligation exists. Fixed Charges. — Expenditure more or less inevitable, occurring periodically in deter- mined amounts. Ordinarily, such expenditure does not vary with the volume of trade done in the particular period, but remains fixed, rent, taxes, and debenture interest being familiar instances of it. Fixed Plant. — Machinery and its accessories employed in manufacture or in carrying on a business ; so called from the fact that it is permanently located upon the business pre- mises or lands— ^.^., engines, boilers and shaftings. [See Depreciation, Loose Plant and Tools.) Fixtures. — Things annexed to houses, build- ings, or lands, which on annexation become part of the land. As between landlord and tenant where chattels are not let into the land they may be removed by the latter, not being deemed fixtures ; but where they are affixed to the land or the premises thereon, they cannot again be severed without the landlord's assent. Machinery and the like may, however, be erected in such a manner that they will not be deemed fixtures, and may then be removed. In any case trade utensils and accessories may be removed by the tenant provided the removal does not injure the landlord's property, and it is upon this principle that market gardeners, nurserymen, &c., are allowed to remove their fruit trees and shrubs, as forming part of their stock-in-trade. Bankruptcy .—¥i\iViXes are not included in the term " goods " within the meaning of the " order and disposition " clause, but if they are removable by the tenant they form part of the property divisible amongst his creditors in the event of bankruptcy. As the disclaimer of an onerous lease is not now retrospective but operates from the date of disclaimer (if duly filed in Court), a trustee in bankruptcy may before disclaiming remove the tenant's fixtures, or call upon the landlord to take them over at a valuation. Should the land- lord decline to pay for the fixtures, he must give the trustee reasonable time and oppor- tunity to remove them. Mortgage. — In the absence of a contrary intention, fixtures annexed to the land will pass to the mortgagee under a mortgage of the land, and form part of the security. Fixtures are within the scope of the Bills of Sale Acts when separately assigned or charged, but fixtures (which here exclude trade machinery) are not within the Acts when assigned together with the freehold or leasehold interest in the land to which they are annexed. Trade machinery is therefore deemed to bs "personal chattels" for the purposes of the Acts, and is_there defined as " machinery used in or attached to any factory or workshop," exclusive of fixed motive powers, bailers, shafting, steampipes, &c. Thus, if a mortgagee acquires an interest m the trade machinery above defined distinct from the land with powers of selling such machinery separately, the Acts will apply and he must take a bill of sale. Sale. — The expression " goods " in the Sale of Goods Act 1893 includes "all things "attached to or forming part of the lands " which are agreed to he severed before sale or "under the contract of sale." To bring a sale of fixtures within the Act there must therefore be an agreement as to severance, and it appears that an implied agreement to that effect is insufficient. Accounts. — Although the fixtures of a trader may not be removable by him, he has a bene- ficial interest in them during the period of his tenancy, and as a consequence he may rightly consider the fixtures as an asset, at a value dependent upon circumstances. The probable fixity of tenure must be considered in dealing with the asset, and where a lease exists the matter is simplified. Assuming a trader has a lease of his premises, the cost of the fixtures would form the "foundation Fixtures] 174 [Folio value." The fixtures, with their respective costs, then require to be divided into " remov- able " and "immovable." The " removable " class must then be depreciated at such a rate as will reduce the book value to the residual or " break up " value at the date of sale or expiration of lease, whichever happens first. The rate of depreciation of the " immovable " class must be such as will entirely exhaust the book value at the expiration of the lease, but some reduction may be made in such rate in special cases where there is reasonable cause to expect a renewal of the lease. On the other hand, in assessing the rate of depreciation consideration must be given in some cases to the possibility of being com- pelled to replace some of the fixtures at a late period in the lease with little opportunity of subsequently writing same off out of profits. Of course, in common with other assets which are subject to wear and tear and depreciation, the fixtures should be classified in order to arrive at the respective rates for the different groups, but where the " life " of a wasting asset is longer than that of the lease of the premises wherein it is fixed, and the asset is immovable on the expiration of the lease, the length of the lease is the material factor in assessing the rate of the depreciation. {See Depreciation.) Floating Capital. — The assets of a trader which are being continually transformed ; such assets as he parts with and replaces (in some cases at a profit) in a single operation. Cash, debts, and stock-in-trade, are instances of floating capital. Floating Charge. — " A floating security is " an equitable charge on the assets for the " time being of a going concern. It attaches " to the subject charged in the varying con- "ditions in which it happens to be from '* time to time. It is the essence of such a "charge that it remains dormant until the " undertaking charged ceases to be a going "concern, or until the person in whose " favour the charge is created intervenes. " His right to intervene may, of course, be . " suspended by agreement. But if there is " no agreement for suspension he may exer- "cise his right whenever he pleases after " default." (Lord Macnaghten, Manila Rail- way case, 1897, A.C. 81.) " They (rhe debentures) constitute a float- " ing security — that is to say, they allow the "company to deal with its assets in the " ordinary course of business until the com- *• pany is wound up, or stops business, or a " receiver is appointed at the instance of the "debenture-holders; or, as it has been said, " they constitute a charge, but give a licence " to the company to carry on its business. " So long as the debentures remain a mere " floating security, or, in other words, the " licence to the company to carry on its " business has not been terminated, the pro- "psrtyof the company maybe dealt with " in the ordinary course of business, as if " the debentures had not been given, and "any such dealing with a particular pro- " perty will be binding on the debenture- " holders, provided that the dealing be com- " pleted before the debentures ceased to be "merely a floating security." (Romer, J., Robson V. Smith, 1895, 2 Ch. 118.) A seizure under an execution on a judg- ment against the company is not a dealing by the company in the ordinary course of business. The transaction cannot be called a dealing by the company at all — it is rather a compulsory legal process directed against the company. {Davey 6- Co. v. Williamson &> Sons, 1898, 2 Q.B. 194.) (See Debenture, Execution Creditor, Undertaking.) Floating Policy. — One issued for a large amount to cover a certain specified class of risk, which amount is subsequently appro- priated in smaller amounts by declaration made from time to time by the insured. Flotsam. — See Jettison. F.O.B. — Free on board. Goods purchased " f.o.b." are not at the risk of the purchaser until on board, but when on board they are at the purchaser's risk and he is liable for the freight. [See C.F.I.) Folio. — A sheet so folded as to make two leaves without further folding ; in law writing, a folio sometimes means a single page, and in other cases so many words, varying from 72 to 100 ; in bookkeeping, a folio, strictly, con- sists of the two pages presented to view when a book is laid wide open, both of which are indicated by the same "page number"; the term folio, however, is often used to Folio] denote all types of page notation, whether " folio " or otherwise. Footage. — The royalty payable by the lessee of a mine is sometimes calculated at a fixed rate "per foot in thickness" of the area worked during the period. This is termed " footage." Foreclosure. — The determination of a mort- gvigor's right to redeem his pledge; the extinguishment of the equity of redemption. Foreign Bill.— See Inland Bill, Protest. Foreign Exchanges. —5^^ Par of Exchange, Rate of Exchange. Forfeiture of Shares. — The articles of association of a company limited by shares invariably confer power upon the directors to forfeit the shares of a member upon default in respect of calls. The formalities required by the articles must be strictly complied with, for any irregularity may invalidate the forfeiture. The forfeiture must be exercised for the benefit of the company and adversely to the shareholder ; if the purpose of forfei- ture is to enable a member to avoid his liabilities as such, the transaction may beset aside. The articles generally provide that, notwithstanding forfeiture, a member remains liable for calls owing at the date of forfeiture, together with interest. But in any case, the forfeiture of a share would not relieve the quondam holder of the liability to be placed upon the list of contributories ; nor would a "past" member who transferred his shares within a year from the winding- up escape theliabiHty of a "B list " contribu- tory even though the shares had been sub- sequently forfeited through the default of his transferee. A valid forfeiture of shares does not amount to a reduction of capital within the meaning of the Companies Acts, and ordinarily the directors may re-allot, or otherwise dispose of, the forfeited shares as they may think fit. " Table A " provides for forfeiture of shares in case of default in respect of calls, and the pro forma Balance Sheet annexed thereto recognises forfeited shares as still formmg part of the capital of the company. The annual return of capital must also state the particulars of any forfeited shares. Thus, 175 [Forged shares once issued, together with any moneys received in respect thereoi, remain part of the capital of the company notwithstanding sub- sequent forfeiture. But it is necessary in the Balance Sheet of the company to state such shares and moneys separately from the "dividend bearing" capital; and when the forfeited shares are re-issued, any surplus thus obtained may be transferred to a Reserve Account, but as a matter of fact there is no general rule of law against such a surplus being distributed in dividend. That money received in respect of shares which have subsequently been forfeited may, nevertheless, remain part of the capital of the company is shown by the decision in Moryison's case (1898). Here the articles of association of the company provided that forfeited shares should be deemed to be the property of the company, and that the directors might sell, re-allot, or otherwise dispose of the same in such manner as they might think fit. The company having a number of forfeited shares upon which the sum of at least £^ per share had been paid, entered into an agreement for the sale of these shares for 30/- per share on the con- dition that such shares be credited in the books of the company as being paid up to the extent of £2 5s. per share. An action was brought by a shareholder to restrain the company from carrying out the agreement on the ground that the transaction amounted to the issue of the shares at a discount ; but it was decided that the company could deal with the shares, and credit them as partly paid up to such extent as might be agreed upon, provided the amount so credited as having been paid up did not exceed the sum which had been paid up on each share at the time of forfeiture, and provided, of course, such sum had remained undistributed. Forged Acceptance. — See Acceptance. Forged Indorsement. -S^^ Indorsement. Forged Transfers of Shares, &c.— The Forged Transfers Acts iSgi and 1892 pro- vide : — (i) That any local authority or company duly incorporated 7nay compensate by a cash payment out of its funds for any loss occasioned through the invalidity of a forged transfer. Forged] 176 [Founders (2) That the company or other body may charge a fee for each transfer {i.e., an additional fee) to provide a fund for such compensation. (3) That the company or other body may pay compensation to a person who has suffered loss from a forged transfer, whether he has contributed to such fund or not. A number of the larger companies pay compensation or have undertaken to do so without any fee, but the Acts do not impose an obligation to compensate — they merely give a power which the company may exercise if it thinks fit. The above provisions refer to the loss in- . curred by the transferee under the forged transfer, for the real owner of the stock or shares in question is entitled to be re- registered, whether the "transferee" be compensated or not, and any dividends paid whilst his name has been off the register must be repaid to him by the company, but the latter can recover such dividends from the transferee under the forged transfer. In practice, to ensure greater security, a letter is sent to the transferor or to each of the transferors named on a transfer deed, stating that certain stock or shares is or are about to be transferred from him to another, and that such transfer will be registered unless due cause to the contrary be shown within a stated number of days. This must necessarily have beneficial results, for knowledge on the part of a fraudu- lently inclined person that such a practice is carried out by a company will act as a pre- ventative, quite apart from the opportunity thus afforded to holders of stock to prevent a forged transfer being registered, but (i) The company is under no obligation to give this notice ; and (2) Having given the notice, the alleged transferor is not estopped from subse- quently impeaching a forged transfer by reason only of his neglect to reply to such notice. Formation Expenses. — The expenses in connection with the formation of a company, syndicate, or other similar body. As regards a company, they are sometimes re- ferred to as the "expenses of promotion," but more generally as the "preliminary expenses." {See Preliminary Expenses.) Form of Assent. — When a debtor executes a deed of assignment for the benefit of his creditors, or makes any proposal, and it is inconvenient to send out the original document for execution by each creditor, a circular letter in the form of an assent to the arrangement is issued to each creditor so that he may sign and return same should he think fit. {See Deed of Arrange- ment.) Founders' Shares.— Shares in the nominal capital of a joint stock company allotted to the founders or to other persons under the following circumstances : — (i) To the promoters or underwriters of the company by way of remuneration for their services, or in consideration of their undertaking to pay the prelimin- ary expenses of the company or to guarantee the issue of the capital. (2) A vendor sometimes desires part of his purchase money in founders' shares, or in a speculative concern he may be re- quired by the company to take pay- ment in that way. {3) As an inducement to likely subscribers of capital it is sometimes arranged that for, say, every /i,ooo of ordinary shares subscribed for by any one person, such subscriber will be entitled to an allot- ment of, say, one founder's share. Founders' shares are generally few in number and of a small (nominal) amount, and in a successful undertaking may prove of great (intrinsic) value. The shares, as a rule, carry exceptional rights, such as one-fourth of the surplus pro- fits after paying a stated dividend upon the ordinary shares, and this may easily result in a return of 100 per cent, per annum or more, because of the comparatively small (nominal) value of the shares. There are numerous instances of a /lo founder's share being worth over ;^i,ooo. The value of a founder's share may be con- siderably affected by a discretionary clause in the company's regulations relative to Reserves, Depreciation Fund, and such like. Where the founders' shares were entitled to a certain proportion of all the profits Founders] 177 [Fraud available for dividend in excess of 15 per cent., it was held that " profits available for dividend" meant the profits remaining after the directors had made such deductions as they considered proper under the discre- tionary clause in the articles of association, and they were accordingly entitled to carry part of the profits to a Reserve Fund, although as a consequence the founders' shares were deprived of a dividend. {Fisher V. Black and White Publishing Co. (App. Cas. 1900.) The rights attached to the shares may be stated in the articles of association, but it is more general to specify them in the memo- randum, and thus render the rights im- mutable. In addition to a special share in the profits, extra voting powers may be attached, together with a specified proportion of the surplus assets (if any) in the event of the company being wound up. The number of founders' or management shares [if any), and the nature and extent of the interest of the holders in the property and profits of the company are to be stated in every prospectus. F.P.A. — Free from particular average. [See Particular Average.) Fraud. — Fraud is a false representation of fact made with a knowledge of its falsehood, or recklessly without belief in its truth, with the intention that it should be acted upon by the complaining party and actually inducing him to act upon it. — [Anson.] A contract induced by fraud is voidable — not void — and the person defrauded may eitjier (i) Adopt the contract, and require (a) per- formance, or {b) damages for non- performance, or (2) Avoid the contract. But on becoming aware of the fraud notice of intention to avoid must be given, or the party may be held to the contract, subject, of course, to a right of action for deceit. If third parties acquire rights in property bona fide and for value before the avoidance of a fraudulent contract under which the property was originally obtained, such rights are valid as against the defrauded party, with one exception, viz., where goods are obtained by personation. Prior to the Sale of Goods Act 1893 a defrauded owner might recover his goods from a bond fide purchaser for value, on prosecuting the offender to conviction, but section 24 of that Act provides that " where * ' goods have been obtained by fraud or other '* wrongful means not amounting to larceny, the " property in such goods shall not re-vest in " the person who was the owner of the goods, " or his personal representative, by reason only " of the conviction of the offender." The convicting Court may, however, make a " restitution order." (See Larceny.) From an accountant's point of view fraud is more particularly of importance in con- nection with the falsification of books and accounts. Frauds of this nature may be committed from various motives, but the most usual are : — (i) To conceal a fraudulent abstraction of cash or stores. (2) To manipulate accounts so as to show a particularly desired trading result, such as a false rate or amount of profit for a particular period. The mere fact that one in a position to commit fraud will gain no apparent benefit by it should not be taken as suggestive that fraud will not take place. Cash frauds will usually take the form of:— (i) The suppression of cash received and failure to account therefor. (2) A false statement as to cash paid away. It will considerably assist an auditor, in the prevention of fraud of this nature, if a thorough system of bookkeeping is in force and a close internal check is kept by the various members of the staff upon each other ; and particularly, as a matter of individual arrangement, no cashier should be concerned in the wri ting-up of Ledgers, and no Ledger clerk should be accountable for cash. One of the most common forms of tamper- ing with cash is the falsification of the Bank Pass Book {q.v.), either by an alteration of the entries therein, or by the obtaining of a duplicate from the bank under the plea that the old book has been lost, or otherwise. An auditor should, therefore, carefully verify N Fraud] 178 [Frauds the entries in the Bank Pass Book, and also satisfy himself by application to the bank that the Pass Book submitted to him is genuine, or obtain a certificate as to the balance of the account from time to time. In addition to the internal check by the staff, referred to above, cash received may be verified, where practicable, by Counterfoil Receipt Books, by surprise visits of the auditor, and, w^here possible and expedient, by changing the person in charge of the cash, and such like. Payments should be carefully vouched, and care taken that all sums of any magni- tude are paid by cheque. The petty cash should be kept upon the "imprest" system {q.v.). Ledger " transfers" and items written off as "allowances" and "bad debts" should also be examined, and, where pos- sible, independently vouched. Frauds having for their object the manipu- lation of accounts will usually take the form of:— (i) Understatement of liabilities [a] To trade creditors ; {b) To loan creditors ; and (c) To subscribers of capital. (2) Overstatement of assets, such as (a) Inflation of stock-in-trade ; (b) Inflation of book debts, e.g., by the retention upon the Ledger of debts which have been collected or which are known to have become worthless ; and (c) Overvaluation of plant and other assets. All these are matters for careful scrutiny by an auditor. {See Investigation.) Frauds, Statute of [1679].— This statute requires certain transactions to be in writing or otherwise evidenced, to prevent fraud and perjury. The provisions with regard to leases and conveyances have been amended by the Real Property Act 1845, and the combined effect of the two statutes may be summarised thus : — (i) Leases for three years or less may be by parol if the reserved rent is at least two-thirds of the improved annual value. (2) Leases for upwards of three years must be in writing, signed by the party or his agent authorised in writing (Statute of Frauds), also sealed and delivered (Act of 1845). (3) Leases required to be by deed, but reduced to writing only, may be enforced 'as agreements for leasesj but parol agreements for leases cannot be so enforced, even if for less than three years, because of section 4 of the Statute of Frauds. [See below.) (4) Assignments, grants, and surrenders of leases must be by deed. This applies to all leases, so that although certain leases may validly be by parol [see No. i above), they can only be assigned by deed. The provisions as to leases for three years or less may be re-stated thus: — \a) A parol lease is good; [b) a parol agreement for a lease is not enforce- able ; and [c) the assignment of a parol lease must be by deed. The fourth section of the Statute of Frauds provides that no action shall be; brought in respect of the following unless the agreement or some memorandum or note thereof upon which such action is brought is in writing signed by the party to be charged or his agent duly authorised, viz. : — ^i) A promise by an executor or adminis- trator to answer damages out of his own estate. (2) A promise by any person to answer for the debt, default, or miscarriage of another [i.e., a guarantee, but not an indemnity). (3) An agreement made in consideration of marriage. [Note — not a promise to marry.) (4) A contract for the sale of lands, &c.> or any interest in or concerning them. Note. — A deposit of title deeds of lands with a creditor without a written memorandum has been held sufficient to create an equitable charge on such lands notwithstanding the provisions of section 4. This has Frauds] 179 [Frauds been referred to as a " judicial repeal " of the Statute of Frauds. Various reasons for this exception to the provisions of the section have been given, the following being the chief of them : — {a) Such a contract is partly executed, and is not a contract io be performed. [b) The solemnity of the act of deposit is presumptive evidence that an agreement for an equitable mortgage v^as intended (although in fact no such agreement was made in writing). [c) To regard the deposit as invalid would be incompatible with, the recognition oi equitable mortgages. [d) Deeds so deposited could not be recovered at law, and if an attempt to recover them were made in equity the depositor would be required to do equity — that is, to pay the money he had borrowed on the security of the deeds. (5) An agreement which is not to be per- formed within the space of one year from the making thereof. Note. — An agreement which the parties intend shall not be performed within a year is within the statute, but an agreement not so intended will not be within the statute merely because the performance does, in fact, extend beyond a year. As an instance, a contract for a year's service to com- mence a month hence would require to be in writing. The fourth section does not require the whole of the contract to be in writing, a note or memorandum thereof will suffice ; and no special formalities are necessary, but the memorandum should contain (i) The names of the parties. (2) The subject-matter of the contract. (3) The terms of the contract. (4) The consideration (except in the case of a guarantee). (5) The signature of the party to be charged or his agent duly authorised. These particulars or requirements need not necessarily appear on one document — they may be evidenced by several [e.g.t correspondence) provided they are con- nected, and the note or memorandum may be made at any time before action is brought. Although for the purposes of the first section of the Act (leases, &c.) an agent must be authorised by writing, the fourth section requires no such formality ; the agent may be appointed verbally, in writing, or by inference ; he may act by prior authority, whilst ratification of his signature is sufficient ; but one party cannot act as agent for the other. It has been held that the signature on a telegram form is sufficient to comply with the statute, and it is conceived that the use of the sender's telegraphic sobriquet in lieu of his own name would suffice. After the " fall of the hammer" an auctioneer is agent for both buyer and seller, and may sign a memo- randum to satisfy the statute. [See Sale of Goods.) It must be noted that a contract which is within section 4, but not entered into in compliance therewith, is neither void nor voidable, but merely unenforceable by action for want of proof. The 7th section provides that " all " declarations or creations of trusts or con- " fidences of any lands, tenements, or " hereditaments, shall be manifested and " proved by some writing signed by the " party who is by law enabled to declare " such trusts, or by his last will in writing, " or else they shall be utterly void and of " none effect." The above provision does not require the trust to be declared in writing, but only manifested and proved in such manner, so that no form is necessary either as to the language or the nature of the instrument by which it is sought to establish the trust, so far as regards satisfying the provisions of the statute. The statute does not apply to chattels personal, so that, provided they are to take effect in the lifetime of the creator, such trusts may be created by parol. {See Will.) N 2 Frauds] i8o [Fraudulent The 17th section, as amended by Tenter- den's Act, is now embodied in the Sale of Goods Act {q.v.). Fraudulent and Voluntary Conveyances and Settlements.— The statute 13 Eliza- beth, c. 5, provides that all conveyances and gifts of lands, goods, &c., " to the end, pur- "pose and with intent to delay, hinder, or " defraud creditors and others of their just " and lawful actions, debts, &c.," shall be utterly void. The Act does not affect con- veyances, &c., for valuable consideration and otherwise bond fide, " The principles and rules of the *' common law, as now universally known " and understood, are so strong against " fraud in every shape, that the common " law would have attained every end pro- " posed by the statute 13 Elizabeth, chap. "5. . . . It cannot receive too liberal " a construction or be too much extended in "suppression of fraud." (Lord Mansfield.) Any conveyance of property or creation of a charge thereon, which would in the event of bankruptcy be deemed a fraudulent pre- ference, is an act of bankruptcy, and such act may in such event be the commencement of the bankruptcy. Section 47 of the Bankruptcy Act 1883 provides that any settlement of property (not being (i) a settlement made before and in consideration of marriage, or (2) made in favour of a purchaser or incumbrancer in good faith and for valuable considera- tion, or (3) a settlement made on or for the wife or children of the settlor of property which has accrued to the settlor after marriage in right of his wife) shall be void against the trustee in bankruptcy under the following circumstances: — (i) Where the settlor becomes bankrupt within two years after the date of the settlement ; (2) Where the settlor becomes bankrupt at any subsequent time within ten years after the date of the settlement, unless the parties claiming under the settlement can prove tba> — {a) The settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in the settlement, and {b) That the interest of the settlor in such property had passed to the trustee of such settlement on the execution thereof. It should be noted that, although a settlement may not be impeachable under the Bankruptcy Act 1883, it is still subject to the provisions of 13 Eliz., c. 5. On the other hand, whilst a past debt will consti- tute a valuable consideration for the pur- poses of the Act of Elizabeth, a conveyance under such circumstances may amount to a fraudulent preference under the Act of 1883. The word " void " in section 47 of the Act of 1883 [supra) should be read as " void- able," so that the title of a bond fide pur- chaser for value from the donee will not be defeated in the event of the subsequent bankruptcy of the donor. But where a person in order to defeat his creditors transferred his property to a bogus company, he thereby committed an act of bankruptcy, and upon bankruptcy supervening his trustee was held entitled to the assets of such company, even though it had gone into liquidation. [Re Hirth, 15 T.L.R. 153.) The questions as to whether (i) a pur. chaser for value could obtain an unim- peachable title under a voluntary settlement before the expiration of the periods men- tioned in the Act of 1883, and whether (2) such a title could be forced upon an unwilling purchaser (having ascertained the facts), have been the subject of conflicting decisions. The point was last decided by the Court of Appeal [Carter's case, 1897) to the effect that: — (i) A voluntary settlement was not void under section 47, except as against the trustee in bankruptcy of the settlor. (2) A settlement could not be void as against such a trustee until there was one. Fraudulent] i8i [Fraudulent (3) A trustee in bankruptcy could only avoid ^ settlement as against the volunteers, but a bond fide purchaser for value could make a good title ; and (4) The vendors of property who derived their title as grantees under a volun- tary settlement could, therefore, force such a title upon the purchaser. The trustee of a settlement (which but for the bankruptcy of the settlor would have been valid) is entitled to a lien upon the property for expenses properly incurred by him as trustee, notwithstanding the subse- quent avoidance of the settlement under the above section. [Re Holden, 20 Q.B.D. 43.) It was held, prior to 1890, that section 47 does not apply to administration orders in respect of the estates of deceased debtors, and section 21 of the 1890 Act has apparently not affected this decision. [See Deceased Insolvent.) Ante-nuptial Settlements. (i) Where a settlement is made before, and in consideration of, marriage, and the settlor is not at the time of making the settlement able to^ pay all his debts without the aid of the property comprised in the settlement; or (2) Where a covenant or contract is made in consideration of marriage for the future settlement on or for the settlor's wife or children of any money or property wherein he had not at the date of his marriage any estate or interest (not being property of, or in right of, his wife) ; and the settlor is adjudged bankrupt, or compounds or arranges with his creditors, the Court may refuse or suspend an order of discharge, or grant a conditional dis- charge, or refuse to approve a composition or arrangement, as the case may be (in like manner as if the debtor had been guilty of fraud) if it appears to the Court that {a) Such settlement, covenant, or con- tract was made in order to^ defeat or delay creditors, or [b) Was unjustifiable having regard to the state of the settlor's affairs at the time when such settlement was made. (Bankruptcy Act 1883, section 29.) Marriage being a valuable consideration — " the highest of all considerations " — ante-nuptial settlements are excluded from section 47 of the Act of 1883, and are not voidable at the instance of the trustee ; but the granting of same under the above circumstances is punishable in so far as such an act will affect the bankrupt's discharge. Where, however, such a covenant or contract is made for the future settlement on or for the settlor's wife or children of any money or property wherein he had not at the date of his marriage any estate ar interest, whether vested or contingent in possession or remainder (not being money or property of, or in right of, his wife), and the settlor becomes bankrupt before the property or money has been actually trans- ferred or paid pursuant to the covenant or contract it will be void against the trustee in bankruptcy, notwithstanding that it was made in consideration of marriage. (Section 47 (2).) An application to set aside or avoid any settlement or conveyance must be heard and determined in open Court. (Rule 6.) Fraudulent Debtors. — The Debtors Act 1869 enumerates certain acts the commis- sion of which by a bankrupt with intent to defraud renders him liable to imprison- ment. [See Debtors Act 1869.) Fraudulent Preference. — Bankruptcy. Every conveyance or transfer of property, or charge made thereon, every payment made or obligation incurred, and every judicial proceeding taken or suffered, by any person unable to pay his debts as they become due, from his own money, in favour of any creditor or any person in trust for any creditor with a view of giving such creditor a preference over the other creditors, shall, if the person making, taking, paying, or suffering the same is adjudged bankrupt on a bankruptcy Fraudulent] 182 [Freehold petition presented within three months after the date of making, taking, paying or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy. The rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt are not affected by the above provisions. (1883 Act, section 48.) Where a receiving order is made against a judgment debtor in lieu of committal under the Debtors Act 1869, .... the provisions as to the avoidance of fraudu- lent preferences shall apply as if the debtor had been adjudged bankrupt on a bank- ruptcy petition presented at the date of the receiving order. (1890 Act, section 20.) The intention of the bankrupt is the main factor in deciding whether any given trans- action is a " preference " or not, i.e., the bankrupt must have acted with a view of giving a creditor preference over the other creditors, and the payment which it is sought to impeach must have been made to that particular creditor, so that a payment made to a creditor in order to relieve a surety cannot be recovered by the trustee a^ a fraudulent preference. Where the transaction is the result of hond fide pressure, the trustee in bankruptcy will have some difficulty in making out a case of fraudulent preference. So where a trustee has committed a breach of trust, and before his bankruptcy makes good the breach out of his own pro- perty, the trustee in the bankruptcy cannot recover the property, for it has been decided that such an act does not amount to a fraudulent preference, but an endeavour by the bankrupt to cover up his wrong and so prevent proceedings being taken against him. [New v. Hunting, 1897.) Nor does the payment of a debtor's trade bills, in due course and in the ordinary way of business, amount (of itself) to a fraudulent preference, the inference primd facie being that the bills are paid, not to prefer the bill-holders, but to enable the debtor to continue his business. [Re Clay &^ Sons, 1896.) To make a conveyance or transfer of pro- perty, or to create a charge thereon, which would be void as a fraudulent preference if the transferor were adjudged bankrupt, is now an act of bankruptcy, and the fact that a bankrupt has within three months pre- ceding the date of the receiving order given an undue preference to any of his creditors must be considered by the Court when. hearing the application for the bankrupt's discharge. " An undue preference," it must be noted, is a wider term than " a fraudulent preference," for although a transaction may not be of such a nature that it could be set aside as fraudulent, it may, nevertheless, be " undue," and so affect the bankrupt's discharge. To avoid an alleged fraudulent prefer- ence, the trustee must first prove that the debtor was insolvent when the payment, &c., was made ; the party supporting the payment, &c., must then show that it was not made with a view of giving him a preference. (7?^ Eaton &= Co., 1897.) Company Ltquiidation. Any act relating to property which would, if done by or against any individual trader, be deemed in the event of his bankruptcy to have been done by way of undue or fraudulent preference of the creditors of such trader, is, if made or done by or against any company, deemed, in the event of the company being wound up, to be done by way of undue or fraudulent preference of the creditors of the company, and is invalid accordingly ; and for this purpose the presentation of the petition, in. the case of a company being wound up by or under the supervision of the Court, and a resolution for winding up the company in the case of a voluntary winding-up, are deemed to correspond with the act of bank- ruptcy in the case of an individual trader. (1862 Act, section 164.) Freehold. — In theory there is no such thing as absolute ownership of land, all land being held either directly or indirectly from the Crown, and a person can only Freehold] 183 [Free hold an estate in land which may vary in extent of interest. A freehold is the most extensive estate which can exist in land, and is virtually equivalent to absolute ownership. It carries with it the right of absolute dis- posal or settlement by the holder, and if he dies intestate the land descends to his heirs generally. {See Fee Simple.) Free of Duty.— Legacies : — In the absence of express direction to the contrary in the will, legacy duty is payable by the legatee, even though the legacy is to a creditor in discharge of a debt due from a third person. A direction to pay legacy duty will not include succession duty payable in respect of leaseholds. A general direction in the will to pay all legacies free of duty will include legacies given by the codicil, but a direction in the will to pay the duty on all legacies herein given will not include legacies given in the codicil. Legacies given ' ' free from deduction and expense ' ' will be payable free of legacy duty, but a bequest of an annuity "free from de- duction," although relieving the annuitant of the legacy duty, will not extend to income tax. A testator may, however, expressly direct that the income tax upon an annuity be payable out of his estate. A direction that a legacy is to be paid free of duty amounts to an increase of the legacy itself, and a specific bequest free of duty amounts to a further pecuniary legacy to the extent of the duty, so much so that in the event of a deficiency of assets, such pecuniary legacy must abate pari passu with the others of that class. The "extra legacy," however, is not liable to duty, the Act 36 Geo. III., c. 52, sec. 21, providing that money left to pay legacy duty, if payable out of a fund other than the legacy {e.g., the residue), is not liable to duty. Thus, a bequest to a stranger in blood of ^100 free of duty would "cost" the estate /no altogether. Had the testator, however, bequeathed the whole ;^iio to the stranger in "blood, directing him to pay his own duty, the legatee would receive £1 less, the legacy duty being ^i more. This is the result of the above section, which exempts from duty money left to pay duty, but only when payable out of some fund other than the legacy itself. It is, therefore, obvious that if a testator desires to bequeath certain sums subject to legacy duty he can first decide upon his bequests, and after deducting the legacy duties respectively payable, leave the net sums to the various legatees free of duty. By so doing, he gives the pecuniary legatees the amounts desired, and increases the residue by the amount of the legacy duty upon the legacy duty, which would other- wise have been payable. Successions : — The duty upon successions is chargeable to the successor in the absence of express directions tO' the contrary, and is a first charge upon the succession. As in the case of legacy duty, property applied to pay suc- cession duty under trust for that purpose is not itself liable to succession duty, but the exemptions in the Legacy Duty Act and the Succession Duty Act apply only to the duties respectively levied by them — that is to say, there is no "cross exemption." If, therefore, a succession is directed to be free of succession duty, and it is further directed that such duty is to be paid out oiihe personalty oi the testator the duties payable would be : — (i) Succession duty upon the succession, and (2) Legacy duty upon the succession duty. Settlements : — The settlement estate duty (of i per cent.) leviable in respect of a legacy or other personal property settled by the will of a deceased person is, unless the will contains an express provision to the contrary, pay- able out of the settled legacy or property in exoneration of the rest of the deceased's estate. In the above the term "free of duty" has been dealt with as regards the incidence of duty as between the estate and the bene- ficiaries. For the circumstances entitling Free] 184 [Freight to exemption, see Estate Duty, Legacy Duty, Settlement Estate Duty, Succession Duty. Free of Income Tax.— A term denoting that a dividend or other payment in the nature of income is not subject to specific deduc- tion in respect of income tax. In such cases the tax is payable to the Revenue authorities by the payer of the dividend, &c., and not by the payee. Dividends on preference stocks and shares, and interest on bonds, debentures, mortgages, or other forms of loan, are not payable free of tax, a deduction at the current rate being made from the respective amounts payable. Ordinary dividends are, however, often paid "free of tax," but it is necessary in the interest of the holders of the ordinary stock or shares that all prior and fixed pay- ments be subject to deduction in this respect, as they are not admitted by the Revenue as " outgoings " in assessing the profits of the undertaking in question for income tax purposes. As a consequence, to pay (say) a 5 per cent, preference dividend free of tax would be tantamount to a dividend in excess of 5 per cent, to the extent of the income tax thereon at the current rate. But there is nothing to pre- vent a preference dividend being paid free of tax if the regulations of the company so provide, and in rare cases this has been done. Although a dividend on ordinary shares may be declared and paid free of tax, it must be noted that the income tax upon the dividend is really paid by the com- pany, so that the income is only free of tax as between the company and the share- holder. Where tax is deducted the divi- dend or interest warrant is generally accompanied by a formal certificate of such deduction, which is accepted by the Revenue either (i) as justification for the omission of such income from the return of taxable income, or (2) as evidence of a right to repayment of the tax deducted, or part of it, if the total income from all sources justifies exemption or abatement. When claiming exemption or abatement, as the case may be, the taxpayer must obviously include all income, whether already taxed or not, in stating his total income from " all sources whatsoever." Freight. — The sum payable by merchants or others either for chartering a ship or part of her, or for sending goods in a general ship. The amount is generally fixed by the charter-party, or bill of lading, as the case may be, but in the absence of any arrange- ment a sum would be payable in accord- ance with custom. In the absence of agreement to the contrary, freight is not payable unless the goods are delivered or are ready for delivery according to the contract. In practice, however, bills of lading provide otherwise, for instance, [a) freight payable on shipment of goods, or {V) freight payable in exchange for bills of lading, or [c) freight payable on departure of vessel, &c. It is almost invariably provided that freight be payable " ship lost or not lost." Where freight or a proportion thereof is paid before delivery of the cargo it is called advance freight, and if the goods are lost by perils which have been excepted in the bill of lading, the advance freight will not be recoverable from the shipowner ; a shipper has therefore an insurable interest in the advance freight, in the form of an addi- tional value upon the goods to be carried. A shipowner may have a lien on goods, carried for the freight, either by common law or by express agreement. The common law lien (possessory)- applies to all goods coming to the same consignee on the same voyage for freight due on all or any of them, but it does not extend to goods on different voyages under different contracts. The lien may be waived (i) by agreement to that effect, or (2) by delivering the goods without demanding payment, or (3) by taking a bill for the amount of freight. The common law lien does not extend to> port charges and wharfage dues on the goods, nor for dead freight or demurrage. Liens may be expressly stipulated for, to- cover almost all charges, but the clause in a bill of lading giving a lien, otherwise non-existent, should be clearly brought to the notice of the shipper. Freight] 185 [Funeral Freight pro rata itineris.— Freight propor- tional to the whole, as the actual distance carried is to the distance originally con- templated, when a shipowner delivers goods short of their destination. Such freight is ordinarily not payable, but it may be claimed under certain circumstances, such as (i) where there is an agreement express or implied to that effect, or (2) where there is a voluntary acceptance of the goods in such a way as to show that the carrying of the goods to the port of destination is dispensed with by the consignee. French Rente. — See Rente. Friendly Societies. — The Friendly Societies Act 1896 provides that every registered society and branch is required, once at least in every year, to submit its accounts for audit either: — (i) To one of the public auditors appointed by the Treasury, who determine from time to time the rates of remuneration to be paid them, or (2) To two or more persons appointed, as the rules of the society provide. In the case of certain societies receiving contributions by collectors, termed " col- lecting societies," the accounts must be certified by some person carrying on publicly the business of an accountant. The auditors are entitled to access to all the books and accounts of the society or branch, and are (i) To examine the annual return (here- after mentioned) and verify the same by comparison with the accounts and vouchers relating thereto, and (2) To sign the same as correct, duly vouched and in accordance with law, or specially report to the society if otherwise. The society or branch must once in every year send to the Registrar of Friendly Societies a return (called the annual return) of the receipts and expenditure, funds and effects of the society or branch, as audited, and a copy of any special report of the auditors. A copy of the last Balance Sheet, together with any special report of the auditors, is always to be hung up in a conspicuous place at the registered office, and every member is entitled to a copy thereof, and is also entitled to inspect the books of the society. Fructus Industriales. — Industrial growing crops; emblements; e.g., corn and potatoes. Fructus Naturales. — Natural productions of the land, such as grass and timber. Funy=paid Shares. — Shares in respect of which there is no further liability, the total cash originally payable thereon being either paid or considered as paid. Funding. — The process by which a floating debt is converted into stock ; the blending together of several debts of different denominations into one great debt clearly defined in amount, upon which interest is to be paid at a stated rate until the debt is redeemed. Funeral Expenses. — The reasonable ex- penses of burying a deceased person are always a first charge upon the deceased's estate. Such expenses may be de- ducted from the value of the estate for the purpose of arriving at the amount of estate duty payable, but the costs of mourning, the tombstone, and/or the transfer of the body of the deceased to a distant place of interment, are not allowed as a deduction. As between the various beneficiaries of a deceased person's estate, the funeral expenses constitute a capital charge. In the administration in bankruptcy of the property of a deceased debtor, the claim of the personal representative of the deceased to the payment of the proper funeral expenses incurred by him is deemed a preferential claim, and is to be paid in full out of the debtor's estate in priority to all other debts. The Preferential Pay- ments in Bankruptcy Act 1888 expressly reserves this priorit}' to funeral expenses. The question as to what are reasonable and proper funeral expenses depends upon the circumstances of each particular case, special regard being had to the state of life FuneraP i86 [Gazette in which the deceased had lived. If a clear case of extravagance be made out against the executor in this connection (particu- larly if the estate is insolvent) it will amount to a devastavit to the extent of the excess over what would have^ been right and propter. Future Book Debts.— A person may validly assign all or any of the book debts due and owing, or which, during the currency of a given period, may become due and owing to the assignor, provided that in order to give the assignee of a future chose in action a right to the same, it must, upon coming into existence, answer the description in the assignment — that is to say, it must be capable of being identified as that which was intended to be assigned. [Tailby v. Official Receiver, 13 App.Cas. 523.) Futures. — Future goods may be the subject of a contract of sale, and they are defined by the Sale of Goods Act as "goods to be " manufactured or acquired by the seller "after the making of the contract of sale." [See Differences.) G. Oarnishee. — A person upon whom an order has been served by the Court, upon the application of a judgment creditor of a third party, warning him not to pay a debt he owes to the third party. [See Attach- ment of Debt.) Oazette Notice. — The Gazette is a Govern- ment newspaper, and is issued every Tuesday and Frida}'- for the publication of official orders, notices, &c. All notices for insertion in the Gazette must be properly authenticated. Where the notices are not supplied by the Board of Trade the signature of a solicitor as witness is generally sufficient. Where the attestation is not made by a solicitor, a declaration is required. (But see Voluntary Winding-up, infra.) The principal matters necessitating a notice in the Gazette, so far as regards an accountant's sphere, may be summarised as under : — Bankruptcy. Receiving order. First meeting of creditors. Appointment of trustee. Public examination. Adjudication. Approval of composition or scheme. Intention to declare a dividend. Declaration of dividend. Intention to transfer a surplus from a separate estate to a joint estate on the ground that there are no creditors under such separate estate. Application for discharge by debtor. Order on application for discharge. Release of trustee. All the above bankruptcy notices must be gazetted through and by the Board of Trade. (Rule 280.) The notices must be in the pre- scribed form, and a fee of five shillings per notice is payable, which may be charged against the estate. A copy of the London Gazette containing any notice inserted therein in pursuance of the Bankruptcy Acts shall be evidence of the facts stated in the notice. The production of a copy of the London Gazette containing any notice of a receiving order, or of an order adjudging a debtor bank- rupt, shall be conclusive evidence in all legal proceedings of the order having been duly made, and of its date. (1883 Act, section 132-) Compulsory Winding-up. Winding-up order. First meetings of creditors and con- tributories. Appointment of liquidator. Public examination of directors and others. Intention to declare a dividend. Declaration of dividend. Release of liquidator. All the foregoing " winding-up " notices requiring publication in the Gazette are to be gazetted by the Board of Trade. (Rule 192.) The notices must be in the prescribed OazetteJ 187 [General form, and a fee of five shillings per notice is payable, which may be charged against the estate. Voluntary Winding-up. Notice of any special or extraordinary resolution passed for winding-up a company voluntarily must be given by advertisement in the Gazette. (1862 Act, section 132.) (For requirements as to filing with Regis- trar see title Resolution.) The notice for the Gazette must be signed by the chairman oi the meeting at which the resolution was passed — the confirma- tory meeting in the case of a special resolu- tion. The signature is generally attested T>y a solicitor (not necessarily a commis- sioner for oaths), which attestation is .accepted by the Gazette officials as sufficient evidence, and according to the printed regulations the signature of a Chartered Accountant in certain cases will be accepted in place of that of a solicitor ; but where the attesting witness is not a solicitor, or other person whose attestation is accept- able, such witness is required to make a declaration to the effect [inter alia) (i) that the resolution was duly passed at the meet- ing or meetings; (2) that the signatory to the resolution was the duly appointed chair- man ; and (3) that the signature to the copy of the resolution is the chairman's proper handwriting. The declaration requires a 2s. 6d. stamp, and, for the purpose of ■Gazette notices, such declarations are not 'exempt from stamp duty. [See Declaration.) The liquidator must give at least one month's previous notice in the Gazette of the final general meeting of a company at which the accounts of the liquidator are to be presented. There is no express provision that advertisements for claims should appear in the Gazette, but "proper advertisements" •should be published ; and in the case of a •company being wound up by the Court a •notice in the Gazette will generally be •ordered. Partnership : — An advertisement in the Gazette stating that a partnership has been dissolved is deemed notice erf such dissolution to all persons who have not had dealings with the firm before the date of the dissolution so advertised. The Gazette officials require the notice of dissolution to be signed by all the partners named therein or by their legal representa- tives, and attested by a solicitor. If the notice is not signed by all the partners or their legal representatives, it must be accompanied by a statutory declaration made by a solicitor to the effect that such notice is given in pursuance of the terms of the partnership to which it relates. Administration : — The statutory advertisement for claims under Lord St. Leonard's Act should be inserted in the Gazette, as the Court must be satisfied, in the event of any action arising, that the representatives gave proper notice, and the insertion of a notice in the Gazette would invariably form part of a "proper notice." The notice for the Gazette must be signed by the solicitor for the legal representatives, or by the representatives themselves and attested by the solicitor. General Acceptance. — Sec Acceptance, General Agent. — See Agent. General Average is a loss arising from a necessary sacrifice purposely made for the preservation of the ship and cargo and all on board from danger. The sacrifice may consist of throwing some of the cargo over- board, or destroying a portion of the ship, or may take the form of extraordinary- expenditure. The sacrifice having been made on behalf of all must be replaced by the contribution of all. This is a right of contribution which exists independently of marine insurance, but a person having paid such contribution has a right (if insured) to recover the amount from the underwriter. General Ledgers. — This term will include all Ledgers other than the Private Ledger, and is often used in contradistinction to the General] GeneraJ latter. Where, however, special Ledgers are kept, such as Personal, Nominal, Con- signment, and the like, they should be referred to by their special names, so that the term General Ledger might be restricted to one which includes the Personal Accounts (debtor and creditor), the Nominal and the Real Accounts — in fact, the accounts of the trader generally, excluding only the private accounts, which are recorded in the Private Ledger. General Legacy.— S^^ Legacy. General Lien. — S^^ Lien. General Meeting.— A general meeting of the members of a company registered under the 1862 Act must be held once at least in every year, ending on 31st December — not the period of twelve months ending upon the anniversary of the incorporation of the company. The -first meeting of the company must be held within a period of not less than one month nor more than three months from the date at which the company is entitled to commence business. In "private " companies this is the date of the certificate of incorporation. This meeting is called the " Statutory Meeting " {q.v.). Any number of meetings may be held in each year, but the first general meeting in each year is called the ordinary (annual) general meeting, all other general meet- ings being called extraordinary general meetings. Members of a company are entitled to written notice of any general meeting in accordance with the regulations of the com- pany. The length of notice is generally seven (clear) days, but in default of regulations as to summoning a general meeting the Act of 1862 provides that seven days' notice in writing shall be served upon every member. [See Clear Days.) Notwithstanding anything in any regula- tions of a company, the directors of a com- pany shall, on the requisition of the holders of not less than one-tenth of the issued capital of the company upon which all calls or other sums then due have been paid, forthwith proceed to convene an extra- ordinary general meeting of the company. The requisition may consist of several documents in like form, but must state the objects of the meeting, and each must be- signed by one requisitionist or more and deposited at the company's office. If directors do not hold the meeting within 21 days of the requisition being so- deposited, the requisitiotiists, or a majority of them in value, may themselves convene- the meeting at any time within three months from the date of such deposit. If at any such meeting a resolution requiring confirmation at another meeting is passed, the directors are forthwith to- convene a further extraordinary general meeting for the purpose (if thought fit) of confirming the resolution as a special resolution : if the directors do not convene the meeting within seven days from the passing of the first resolution, a majority in value of the requisitionists may do so. Any meeting convened under this section by the requisitionists shall be convened in the same manner, as nearly as possible, as; that in which meetings are to be convened by directors. (Companies Act, 1900, section 13.) Companies incorporated by special Act are required to hold general meeting at such times as may be prescribed by such special Act ; if no time be prescribed, the Companies*^ Clauses Consolidation Act 1845 applies, and general meetings must be held half-yearly, either in the months of February or August, or such other stated periods as may be appointed by an order of a general meeting. [See Ordinary Business.) General Ship. —A term applied to a ship which is not chartered wholly to one person, the owner offering to carry the goods of all comers ; or where the ship is chartered to one person but the charterer offers her to several sub-freighters. The contract entered into between the shipoAvner (or charterer, as the case may be) and the shipper of goods under these circumstances is contained in a bill of lading. Gift] 189 [Goods Co., Lim., 23 QB.D. 579.) Whether goodwill is realty or personalty depends upon the nature of the property to which it is attached and upon other affecting circumstances. Goodwill was recognised as an asset in the Courts at least as early as 1743, but one of the earliest legal definitions of the present subject was that in Cnitwell v. Lye (1810, 17 Ves. 335), when Lord Eldon said, " Goodwill " is nothing more than the probability that the " old customers will resort to the old place." In this case, however, the business was that of a waggoner or carrier, and the value of the goodwill depended almost wholly upon locality, but obviously this would not always be the chief consideration, and some years later, in the case of Churton v. Douglas (1859, 28 L.J. Ch. 841), Vice-chancellor Wood said : — " Lord Eldon did not mean to con- " fine the rights involved in the term "goodwill to the advantage of occupying "premises to which customers were in the " habit of going." " Goodwill" (the Vice- Chancellor proceeded to say) " must mean "every advantage (affirmative advantage, if I " may so express it, as contrasted with the " negative advantage of the vendor not " carrying on the business himself) that has ' ' been acquired by the old firm by carrying " on its business, everything connected with "the premises and the name of the firm, ' ' and everything connected with or carrying " with it the benefits of the business." Goodwill is the " benefit arising from connection and reputation." [Lindley.] Goodwill is " the advantage or benefit " which is acquired by an establishment " beyond the mere value of the capital stock, " funds, or property employed therein in • ' consequence of the general public patronage " and encouragement which it receives from " constant or habitual customers on account " of its local position, or common celebrity or " reputation for skill or affluence or punc- " tuality or from other accidental circum- " stances and necessities or even from " partialities or prejudices." [Story.] Goodwill] igi [Goodwill In the case of the Commissioners of Inland Revenue v. Muller (App. Cas. 1901, p. 217), the question as to whether the words " property locally situate " used in the Stamp Act, 1891, could be applied to goodwill was decided in the affirmative, and the following extracts from the statements made by the law lords are important. Lord Macnaghten said — "What is goodwill? It is a thing very " easy to describe, very difficult to define. It is " the benefit and advantage of the good name, " reputation, and connectionof a business. It * ' is the attractive force which brings in custom. " It is the one thing which distinguishes an " old-established business from a new business " at its first start. The goodwill of a business " must emanate from a particular centre or *' source. However widely extended or diffused " its influence may be, goodwill is worth " nothing unless it has power of attraction " sufficient to bring customers home to the " source from which it emanates. Goodwill " is composed of a variety of elements. It " differs in its composition in different trades " and in different businesses in the same trade. " One element may preponderate here and " another element there. . . . For my " part, I think that if there is one attribute " common to all cases of goodwill it is the " attribute of locality, for goodwill has no " independent existence. It cannot subsist by " itself. It must be attached to a business. " Destroy the business and the goodwill " perishes with it, though elements remain " which perhaps may be gathered up and be " revived again. No doubt, where the repu- " tation of a business is very widely spread, " or where it is the article produced rather " than the producer of the article that has " won popular favour, it may be difficult to " localise goodwill. " Mr. T. M. Stevens, D.C.L., summarised the various definitions upon goodwill thus: — " All that can be gathered from the various " definitions is that where the locality of the " business premises makes the trade, good- '• will represents the advantage derived from " the chance that customers will frequent the " premises in which the business has been ' ' carried on ; that where the business is one ' ' which depends upon the reputation of a firm, " the good will consists of the advantage which ** the owner derives from being allowed to *' represent himself as such ; that where the " business is due to the individuality of the ♦' owner, and where its reputation cannot be " separated from his, the goodwill is all but " non-existent; and that where the value of " the business depends upon the business •' connection, the goodwill consists of the right " to be properly introduced to those connec- '* tions." Mr. L. R. Dicksee, F.C.A., in discussing the basis of value of goodwill, says that : — " When a man pays for goodwill he pays " for something which places him in the '* position of being able to earn more money " than he would be able to do by his own " unaided efforts." Mr. E. Guthrie, F.C.A., has said : — " The term goodwill is a very natural one^ "and, I think, indicates what is meant " better than any other word would do. " It represents the goodwill with which the "person, the place, the name, or the " association is regarded. It assures the " direction of the footsteps of customers " towards the customary place — that '* involuntary cerebration, as the philoso- " pher puts it, whereby the act of walking " is performed without conscious exertion " of the will. It is a magnetism generated " in and about a person and his entourage ; "sometimes exerted solely from within, " sometimes exerted solely from without,, " but, most generally, partly from within '* and partly from without. "And what is the measure of value in " pecuniary terms of this intangible thing? " I state it as the difference between the " value of the normal results of the working ** of a7iy business or profession which may " be established by, and as worked by, atiy "person in any place, and the results of "working any individual business of a " similar character. Thus, given a busi- " ness, the goodwill of which is for dis- "posal, there would be no valuable " goodwill if anyone could do just as well " by establishing a business de novo. To " start a business has its risks, which may " often be described as very serious risks, " but apart from the more perilous risks of ^'failing to take proper root, there is the " often weary time sometimes a long term OoodwillJ 192 [Goodwill of years, during which a sufficient con- ■ nection is being got together to bring the business up to a standard paying basis which will give it a goodwill value, or bring a goodwill value into sight. To be spared this period of what I may call ' perilous probation is something worth ' paying for, even though its maintenance from this point needs the continued energy and industry by which it was built up by the original proprietor. Time, money and anxiety saved is money made. This is what is worth paying for, and, in this degree, a goodwill value attaches to an established business." Partnership. In the absence of an express agreement io the contrary between the partners the goodwill of the partnership is the common property of the firm, and on a dissolu- tion, whether by the death of a partner or otherwise, each of the partners or his representative has the right to have the goodwill sold or otherwise brought into account for the benefit of all the partners, pending which sale (or other mode of settlement) the partners or surviving partners ishould not so conduct themselves (by recom- mencing business individually or otherwise) so as to affect in any way the value of their common property. But the surviving or -continuing partners cannot be restrained from continuing in business, that is to say, unless the surviving or continuing partners voluntarily agree to withdraw from the business, or such class of business, or from the particular district, the goodwill of the business in question can only be sold, or brought to account upon the basis of and subject to the right of the surviving or continuing partners to compete against the buyer, subject, of course, to the general limitations imposed upon vendors set out under the heading Sale {infra). This right, therefore, considerably reduces the value of goodwill under the circumstances, even if it ■does not destroy it altogether. The method of dealing with the goodwill •of a partnership business in the event of a dissolution arising from the death, bank- :ruptcy, or retirement of a partner is, however, nowadays invariably provided for in the articles of partnership, not only the basis of valuation, but the mode of payment therefor being carefully settled. Sometimes it is expressly stated that upon a dissolution no allowance whatever shall be made for good- will, while in other instances a fixed sum is stated as being the agreed value for the {Jurpose of adjusting the rights of the partners between themselves. A more equitable method, however (and one largely adopted), is to agree to take the goodwill as being worth one, two, three, or more years' purchase (dependent upon circumstances) of the annual profits of the business, such profits to be ascertained upon the average annual profits of the two, three, or more years immediately preceding the date upon whicli the dissolution arises. As to the mode of payment of a deceased or retiring partner's share in the partnership (including goodwill), it is generally agreed that payment can be made in instalments spread over one, two, or three years, with stipulations as to interest upon unpaid portions of the share- value. It should be stated here that where a partner retires under an agreement with his co-partner or co-partners, one of the terms of the agreement being that the good- will of the business shall belong to the continuing partner or partners he (the retiring partner) is subject to the same general restrictions with regard to competi- tion, solicitations, &c,, as a vendor of a goodwill for valuable consideration, [Trego v. Hunt, 1896, App. Cas. 7.) In the articles of partnersliip in Hunter v. Dowling (1895, 2 Ch. 223) it was agreed that if any partner should die during the con- tinuance of the partnership the amount of his share and interest in the partnership should be taken as being the amount appearing as standing to his credit at the last annual Balance Sheet. Here the repre- sentatives of a deceased partner were not allowed to claim anything for his share in the goodwill, because no amount repre- senting the value of the goodwill had been included in any of the Balance Sheets. But in the above case the partners had really agreed in their articles upon the question of goodwill, and this decision does not affect the general rule that, apart from an agree- ment to the contrary between the partners. Goodwill] 193 [dpodwiH the goodwill of the partnership (for what it is worth under the circumstances set out above) is the comniDi property of the partners, and the ra^re fact that the good- will is not valued and included among the assets in the periodical Balance Sheets of the partnership whilst a going concern, does not of itself deprive a retiring partner or the representative of a deceased partner of his dae share of the value of the goodwill whatever that value may be. Sale, — The purchaser of th3 goodwill of a business acquires the right to represent him- self as being the successor to the business in question, aad (ordinarily) he may use the trade nam3 by which the business has become known [Levy v. Walked, 1879, 10 Ch.D. 436), but he will not be permitted to use the old name in such a manner as would render the vendor liable for any debts incurred by the purchaser in the old name {Thyniie v. Shore, 1890, 45 Ch.D. 577). Per contra, the vendor may be restrained from continuing to trade in his own 7iame if it was in that name that he formerly carried on the business, and it can also be shown (i) that he is attempting to deceive the public into the belief that he is still the owner of the old business ; or (2) that it would be impossible so to trade without misleading the public {Cash, Lim. v. Cash, no L.T. 427). Nor can the vendor of the goodwill of a business set up another business under any name which might lead people to infer that he was still carrying on the old business, and in particular the vendor may not personally or by circular solicit the customers of his former business, and so deteriorate the value of the goodwill he has sold. But he may publicly advertise the fact thit he has commenced a new business, for the restrictions imposed upon the vendor by the general law (as distinguished from any special covenants between the parties) do not extend so far as to prevent the vendor of a business from dealing with his former customers under any circumstances, or to grant the purchaser the right to insist upon the virtual retirement from the trade of the late owner of the business. [See TregO' v. Hunt, 1896, App, Cas. 7, and the various decisions there cited.) In the course of the judgment in Trego v. Hunt Lord Macnaghten said : — " And so it has resulted that a person who "sells the goodwill of his business is under " no obligation to retire from the field. Trade " he undoubtedly may, and in the very same " line of business. If he has not bound him- "self by special stipulation, and if there is no "evidence of the understanding of the parties " beyond that which is to be found in all '* cases, he is free to carry on business wher- " ever he chooses. But then how far may "he go? He may do everything that a " stranger to the business, in ordinary course, " would be in a position to do. He may set " up where he will. He may push his wares " as much as he pleases. He niay thus " interfere with the custom of his neighbour "as a stranger and an outsider might do; " but he must not, I think, avail himself of " his special knowledge of the old customers " to regiin, without consideration, that "which he has parted with for value. He " must not make his approaches from the " vantage ground of his former position, " moving under cover of a connection which "is no longer his. He may not sell the "custom and steal away the customers in "that fashioa. . . . It is quite true that " it would be better that the purchaser should "protect himself by taking apt covenants " from the person with whom he is dealing. "But tills, I think, is rather a counsel of " perfection than a reason for leaving the " purchaser entirely at the mercy of the " vendor." Of course, the above considerations affect and control a person who parts with his rights in the goodwill of a business for valuable consideration, but it would appear that the restrictions as to competition and the solicitation of the old customers do not apply where the alienation of the goodwill is involuntary, the Court having refused to restrain a bankrupt from soliciting orders from his old customers after the trustee in the bankruptcy had sold the business. {Walker v. Mottram, 1881, 19 Ch.D. 355.) It has been held, however, that a debtor under a deed of arrangement is not an involuntary party to the sale of his business. Thus, where a trustee under a deed of assign- ment for the benefit of creditors sold the goodwill of the debtor's business, the estate was held responsible for the damage done to O Goodwill] 194 [Goodwill a purchaser as the result of subsequent can- I vassing by the debtor of the customers of the \ business which had been sold. I To avoid any possible misunderstanding. it is obviously desirable for a purchaser to protect himself by requiring the vendor to enter into an agreement expressly restraining him from competing against, or otherwise acting so as to deteriorate the business he is selling. This is more satisfactory for both vendor and purchaser, for the latter, instead of relying upon the general protective provi- sions of the law, may prescribe for himself such protective clauses as, in his opinion, the particular business and the peculiar circumstances demand, while the vendor, finding in a concise form what is required of him in regard to his future conduct, may more fairly assess the consideration for the sale of his business, for it naturally follows that the more restrictive the agreement of sale, the more valuable the business will be to the purchaser, and the less valuable the future business prospects of the vendor. But it must be remembered that an agree- ment purporting to restrain trade must be reasonable, for if it be unreasonable it cannot be enforced, because such restraints are deemed injurious to the public interests of the country. The elements of reasonableness in this connection are : — (a) Valuable consideration for the restraint (even though the agreement be under seal) ; and [b) Partial restraint only, i.e., limited as to a particular area or a given number of years. In an exceptional case {Nordenfeldt v. Maxivi Nordcnfeldt Guns, &c., 1894, App. Cas. 535) an agreement for total restraint was upheld, but that does not appear to affect the general rule that an unreasonable restraint of trade — an agree- ment going further than is really necessary for the protection of the purchaser — cannot be enforced. The question as to whether or not the goodwill of a business passes with a sale or under a mortgage of the premises where such business is carried on, depends upon whether the goodwill and the premises are severable or not. If not severable the good- will will pass with the property, but where the goodwill is dependent upon the personal skill of the mortgagor it will not pass under a mortgage of the business premises. [Cooper V. Metropolitan Board of Works, 1883,, 25 Ch.D. 472.) The vendor of ths goodwill of a business who sells in consideration of a share in the future profits of the business, will be postponed (as against other creditors) as regards any claim he might have in respect of same against the purchaser of the business in the event of such purchaser becoming insolvent. (Partnership Act 1890, section 3.) Where a person pays a premium by way of pur- chase of an interest as a partner in the goodwill (or profits) of a business, and the partnership is prematurely dissolved through no fault of that person, provision is made in the Partnership Act ibgo, section 40V whereby such person may obtain a return of a proportionate part of the premium so paid unless an agreement of dissolution has actually been entered into be ween the partners, and such agreement contains no provision for a return of any part of the premium. Valuation. Not only the value of a goodwill, but also the method adopted in arriving at the value> must necessarily depend upon circum- stances, for the annual profits of a given business ascertained in the ordinary way will not, as a rule, be the precise basis for the valuation, while the number of years'' purchase also varies considerably, depend- ing so much upon the particular circum- stances affecting each business. The annual profits to be taken as the basis of valuation (assuming same to be agreed upon as a factor) require to be carefully examined and adjusted where considered necessary, so as to make proper allowance for— (i) The skilled supervision or other ser- vice necessary for the maintenance of the business, which has been exercised in the past by the proprietors. This, on a sale of the goodwill, would have to be undertaken either by the vendors (at a salary) or by the purchaser himself, or by a manager at a salary, and should be allowed for accordingly. (2) The interest on the capital which would necessarily be employed in the Goodwill] 195 [Goodwill business (including in the case of purchase the amount about to be paid for the good- will). The capital employed to purchase and carry on the business would need to be withdrawn from some other income pro- ducing investment, and allowance for the resultant loss of income must therefore be made. (3) Some accountants contend that in ascertaining the annual profits, income tax (Schedule D) should not be treated as an expense in carrying on the business, while others are of the contrary opinion. But it is advisable, when negotiations for the purchase of the goodwill of a business are proceeding upon the basis of so many years' purchase of the average annual profits, to state specifically not only the number of years' purchase, but also the number of years over which the annual average is to be computed, the rate of allowance (if any) to be made for the pro- prietors' services, and the rate of interest to be allowed on the capital to be employed (including the cost of goodwill), and how special outgoings [e.g., income tax) are to be treated in ascertaining the amount of the average annual profits. The number of years' purchase of the annual profits (as adjusted) will vary according to circumstances, and will depend mainly upon the probability of the continuity of the business with similar results to those of the past, notwithstand- ing the change in the proprietorship or management. Bearing upon this question of continuity, the following points may be considered : — (i) Date the business was established. (2) Whether proprietors are continuing their services. If not, will they compete with the purchaser or be restrained? Nature and extent of services rendered in the past. If not continuing, can they be replaced without loss to the business? If to be replaced, what is the estimated ccst of such replacement? (3) Nature of the business. Is the subject-matter of trading a necessity, or a luxury, or something affected by the caprice of fashion? Is the business attached to the " person " of the pro- prietor, or the premises, or the reputation connected with the trade name? Is the volume of business done the result of suc- cessful competition, or has the proprietor a monopoly? Are there any circumstances or conditions likely to affect the future working which were not applicable to the past [e.g., recent establishment of a rival) ? (4) Tenure of premises. If leasehold, whether the future rent under the lease is to be higher than in the past — what is the probability of renewal, and at what rent ? (5) Number of customers, whether changeable or constant? Is there any falling off in best customers? Generally, whether a declining business so far as can be judged from past results? Whether business mainly conducted by sales under large contracts requiring periodical renewal? Whether, assuming renewal, the same prices will be obtainable in the future? W^hether any unfavourable con- tracts are to be taken over? Some con- tracts may have been favourable up to the ending date of the period under review, whilst subsequent circumstances may have affected them considerably. Whether the results of the period investi- gated have been inflated by the happen- ing of events, or the obtaining of excep- tional contracts, which it cannot reason- ably be expected will recur? (6) Whether the purchases for the past have been made upon an ordinary basis, and upon which it may reasonably be sup- posed future purchases may be effected, or whether exceptionally large purchases were made by contract or otherwise under conditions which cannot reasonably be expected to recur? Sometimes a business is offered for sale at a price which contains little or nothing for goodwill [qua goodwill), but as the purchase involves the acquisition of a large amount of machinery (some of which may be old fashioned), or the taking over O 2 Goodwill] 196 [Goodwill of an onerous lease, it should be remem- bered that the amount which is really being paid for goodwill is larger than the amount nominally fixed for the same. The number of years' purchase of the goodwill of a trading concern varies from one to four or five, although many high- class businesses have brought even more. The goodwill of a purely personal business {e.g., a solicitor's) is of a doubtful value apart from the continued co-operation of the person who has actually built it up, or of one who has at least been actively con- nected with the clients for some time. But with regard to a professional business, such as that of a solicitor, some advantage in the nature of g'oodwill can be obtained by pur- chase, e.g., introductions to the clients, the draft papers, particularly those relating to pending matters, the books of account, and, lastly, but by no means the least, the tenancy of the offices where the business has been carried on. In the event of a business being acquired by a company where, as Mr. L. R. Dicksee, F.C.A., says, " the shareholders are not workers, but investors," the amount charged for goodwill is generally larger than would be obtainable from a single individual. This fact, however, is con- siderably affected by the circumstance of a vendor, or the vendors, being paid to a great extent in ordinary shares ; so much so, that where — to take an extreme case— a vendor takes the whole of the ordinary or deferred ordinary shares in pa3^ment or part payment of purchase-money, and the nominal value of such shares equals or exceeds the amount stated as being paid for goodwill, the magnitude of the amount so stated does not seriously affect the holders of the shares carrying prior rights to those allotted to the vendor. The question of how much was " paid " for the goodwill would, however, affect any subsequent purchasers of the vendor's shares. It should be noted that section 10 of the Companies Act 1900 provides that: — Every prospectus issued by or on behalf of a company, or by or on behalf of any person who is or has been engaged or interested in the formation of the company, must state {infer alia) the amount (if any) payable for goodwill. Compensation. Where a trader is compelled to vacate his premises by reason of the lands being taken under statutory powers, he is entitled to compensation for such disturbance to the extent of any diminution or extinction of his goodwill in consequence of the removal, quite apart from any compensation he may be entitled to in respect of loss or damage to stock, fixtures, or other assets. " When lands, however, are taken "■ under compulsory powers, the goodwill "is not purchased by the promoters but " remains the property of the trader, and *' the loss suffered by him is the " diminution in its value in consequence " of his compulsory ejectment from the " premises he is occupying. So far from " the goodwill being purchased or " destroyed by the promoters, there are " many cases in which the diminution in "its value is hardly appreciable, " although the trade premises have com- " pulsorily been taken. If a business is " of a wholesale character, or is one " which consists of orders from a widely " extended area, a compulsory change of " trade premises would be productive of " small loss. If, in addition, convenient "premises can be acquired in the " immediate neighbourhood of the "premises taken, the loss incurred "through diminution in the value of "goodwill becomes merely nominal, and " the owner's only claim to compensa- " tion is in respect of any reasonable "expenses which the taking of equally " convenient new premises has rendered " necessary. On the other hand, there " are cases in which the diminution in the " value of a goodwill may almost equal " the entire value of a goodwill. This is " the case where a business is retail and "local, depending on neighbouring "customers, and no suitable premises " can be found in the locality within " which the business connection extends. Goodwill] 197 [Goodwill " . . . Where premises are taken and " business is carried on at a loss, the " owner may be entitled to compensation *' on the ground that, but for compulsory " powers, he would have been entitled to " remain on the premises and to carry on "his business." [Cripps.] Treatment of Goodwill in Accounts. (i) Partnership. — Ordinarily the Balance Sheet of a partnership does not include any item for goodwill as an asset, and it has been already stated that the mere fact that no value for goodwill is stated in the accounts does not of itself affect the respective partners' rights in regard thereto' in the event of a dissolution. Where because of — (i) the purchase of the goodwill of the business ; (2) the purchase of an additional business ; (3) the sale of a portion of the existing business; (4) the admission of a new partner on terms as to goodwill ; (5) the retirement or death of a partner involving a payment in respect of his share in the goodwill, or because of some other special circumstance, an amount for goodwill does " transpire " (whether receivable ot pay- able), it is as a rule either withdrawn entirely from the partnership property, or passed in proper proportions to the credit or debit (as the case .may be) of the Capital Accounts of all or such of the partners who, in accordance with the arrangements entered into in each particular case, may be entitled thereto or responsible therefor. In eliminating the item goodwill from the accounts, it must, in the absence of an agreement to the contrary, be dealt with on the basis upon which profits are divided. For instance, if A. and B. are partners, sharing profits as to A. three-fourths and B. one-fourth, and C. pays ;^i,ooo for one-fifth share in the future profits of the business, and brings a further ;^i,ooo into the business as his capital, the latter ;^i,ooo will be added to the assets of the firm, and credit therefor will be given to C. in his Capital Account with the firm. As regards the ^1,000 paid for one-fifth share in the profits, A. and B. are entitled to it in the proportions of three-fourths and one-iourth respectively, for in future their shares of the profits will be less (viz., three-fifths and one-fifth respectively), and the price paid by C. for one-fifth share of the profits is the capital value of the for- bearance by A. and B. in taking three-fifths and one-fifth in future instead of three- fourths and one-fourth as in the past. Thus A. is entitled to ^750, and B. to ;^25o, and this may be dealt with in various ways. The ;^i,ooo need not appear in the Partner- ship Accounts at all (or may appear merely as a memorandum), and A. and B. can take their respective shares of the ;^i,ooo directly from C. On the other hand, it may be con- sidered that, owing to the possible develop- ments caused by C.'s admission, the ^1,000 introduced by him (as capital) is not sufficient additional capital, and A. and B. may arrange to take credit for the ^1,000 paid as goodwill in their Capital Accounts in the proper proportions, thus leaving the ^2,000 in the business as additional capital. Another method of dealing with the above example is as follows: — A. and B. might put a value (say ^5,000) upon the goodwill and include it among the assets, adding ;^3j75o and £T-,2.e^o respectively to their Capital Accounts, and then approach C, offering to allow him to place ;^2,ooo in the business as his capital on the basis of the ^5,000 for goodwill being deemed an asset of the firm as newly constituted. This would amount to the same thing as regards the three partners as under the previous arrangement, for upon the elimination of the item of goodwill from the Balance Sheet at any future time, C. would be charged with one-fifTJi of the amount, leaving his capital, apart from his share in the good- will, ;^i,ooo as before. A point to be borne in mind where an amount for goodwill does appear as an asset in the Balance Sheet is this : it may have been " created " when partners divided profits in certain propor-- tions, and it should certainly be eliminated by a proportionate charge against the Capital Accounts before any change takes place in the manner of dividing profits among the partners inter se. (2) Joint Stock Company. — The " capital adjustment" of the item of goodwill Goodwillj ig8 [Goodwill (permissible in the accounts of a private individual or a partnership) cannot be effected in the case of a joint-stock com- pany, the capital of which can only be increased or reduced by statutory methods, and some difference of opinion exists among accountants as to the proper method of dealing with the item of goodwill after it has once become engrafted in the Balance Sheet, and included as part of the capital of the company. It is, of course, clear that, if it is decided to eliminate the asset from the Balance Sheet, the amount cannot be deducted from the capital of the company. If, therefore, it is to be written off, in whole or part, it can only be so dealt with by an appropria- tion of revenue, whether current or accumu- lated. That such a course is incorrect in principle, so far as regards current profits, can hardly be doubted ; and it may be pointed out that, as ordinari'y the value of the goodwill of a business depends for its continued existence upon the profitable results of such business, the "writing off" of such an asset out of current profits would be in many cases theoretically improper, in that the possibility of its elimination in this way may afford the best proof of its value. At the same time, directors and share- holders may wisely agree to forego a portion of the "legally divisible profit" in order to reduce or eliminate the amount at which I the goodwill stands in the books, and so enhance the financial position of the com- pany, for, notwithstanding the reduction of the book value of the goodwill, the actual value, if any, is unaffected (at all events not reduced) by such a proceeding. Some companies have written off the whole of the original cost of the goodwill by an appro- priation of profits, but the Balance Sheets issued from time to time continue to state the original cost of the goodwill upon the assets' side, placing the amount in an inner column ; and this practice overcomes to a great extent one of the objections raised by those who favour the retention of the goodwill at the original cost. The following extract from The Account' ant newspaper of 3rd April 1897 may be taken as an expression of the more generally accepted accountancy view of this matter : — " Inasmuch as goodwill is a fixed asset, " it is an item which it is not necessary " to value for Balance Sheet purposes at " its actual realisable value at the date of " the balancing. The general principle " upon which the fixed or permanent " assets of a company are valued for " Balance Sheet purposes is that of a "going concern — that is to say, there is " no occasion to take into account tempo- " rary fluctuations which might involve " gains or losses, if the whole under- " taking had to be converted intO' cash at " short notice. Consequently, fluctuations " in the value of goodwill arising from an " increase or decrease in the average " profits of the company are an item " which, from an accountancy point of " view at least, ou.s^ht not to be taken into " account in. arriving at its true position " of affairs by means of a Balance Sheet. " The question as to whether ox not it is " desirable or necessary that something " should be periodically written off the " value of goodwill is quite another " matter, however, and one upon which " there is a less unanimous opinion." It has been held and stated by no less an authority than Mr. T. A. Welton, F.C.A., that it is undesirable to write anything off the value of goodwill as stated in the original accounts, he being of the opinion that it is very much more desirable that anything which it may be considered expedient to put aside out of profits should be accumulated in the form of a reserve fund. There is certainly much to be said in favour of this view ; and notwithstand- ing the fact that goodwill may either appreciate or depreciate, it is quite wrong, as a matter of principle, that either varia- tion should be considered as affecting, either one way or the other, the actual profits earned by the undertaking. If a temporary depreciation of goodwill is to be given effect to in the accounts Goodwill] 199 [Goodwill by charging the difference against diminished profits, the only effect is that the temporary decrease in the com- pany's prosperity is enormously exagge- rated, and vice-vcrsd. The first object of accounts is to record a true statement, not only of the company's financial position, but also of its trading for the current period ; and this latter is naturally obscured if any extraneous profits or losses (which are entirely unrealisable or problematical, as the case may be) are allowed to affect the Profit and Loss Account. Even when it is thought desirable to write off goodwill gradually, the proper method of doing so is un- doubtedly not by means of a charge to Profit and Loss Account, but by an allocation of a portion of the net profits to that purpose, instead of the whole of such profits being distributed in dividends. That is to sa}'', anything which is credited to Goodwill Account (like anything which may be credited to the reserve fund) must be a sum set aside out of profits, and is not a charge against profits. The further views of Mr. T. A. Welton, F.C.A., are as follow: — " As for depreciation of goodwill *' where an amount has been paid for *' same, I think a great deal depends on *' the question whether, by the light of *' experience^ it appears that too heavy a " price has been paid ; if so, then a depre- " ciation is desirable down to the point *' at which the real value is arrived at. I *' mean the value upon which a fair divi- *' dend can be earned. But the very paucity " of earnings is likely to stand in the way " of specially providing for a deprecia- " tion, which practically affects the share- " holder in the form of a fall below par in *' the market value of the shares. The *' poor income attainable needs to be *' again decreased for the sake of replacing *' misspent capital and bringing the ^'market value to par. Existing share- *' holders ordinarily object to do so much ■" for posterity. . . . One of the most *' singular contrasts I know of • is that ** between a grave person who holds, " against all argument, that goodwill is an " unreal asset and ought to be written off *' out of profits, and the same person who " buys, say, North-Western Railway " Stock at 160 per cent, (written in 1887), " or bank shares at 2]/^ times the sum paid " upon them. Such people are oblivious " that in paying such prices they are *' recognising goodwill handsomely ; nor " did I ever meet with one of them who " forbore to eat up his dividend in such a " case until out of profits he had replaced "the premium in his purse." Mr. E. Guthrie, F.C.A., has said that as (with few, if any, exceptions) no goodwill may be properly treated as eternal, some provision, however small, ought to be made for its gradual reduction. However commendable and prudent it may be upon the part of the directors and shareholders of a company, it should be noted that no legal obligation rests upon, them to provide for the reduction of the book value of the goodwill before declaring a dividend ; and the attitude of an auditor of a company in this connection is well defined by Mr. L. R. Dicksee, E.G. A., in his excellent work on "Auditing": — " The amount at which goodwill is " stated in a Balance Sheet is never sup- " po'sed to represent either its maximum " or minimum value ; no one who thought " of purchasing a business would be in " the least influenced by the amount at " which the goodwill was stated in the " accounts ; in short, the amount is abso- " lutely meaningless, except as an indi- " cation what the goodwill may have cost " in the first instance. Inasmuch, there- " fore, as nobody can be deceived by its " retention, there is no necessity for the " amount of Goodwill Account to be " written down. On the other hand, the " practice is so usual, where any profits " are being made, that the desirability of " such a course need hardly be discussed. " The question is not, however, one upon " which the auditor is required to express " an opinion ; and so long as the item is Goodwill] 200 [Goodwill " separately stated on the Balance Sheet, " it is scarcely desirable that he should " interfere with the discretion of the "management, although there is, of " course, no objection to his offering an " opinion when he is invited to do so." It should be noted, however, that the above remarks apply to the amount at which the item goodwill stood originally in the accounts of a particular company, and not to expenditure upon advertising or losses and expenses in experimenting, &c., incurred by the company with the object of creating a goodwill, for although such expenses or losses may have a value in that they are the inevitable means tO' a desirable end, yet they should be capitalised most cautiously. In such a case, an auditor should see that the item is separately and plainly stated upon the Balance Sheet, so that shareholders may know that certain expenditure is being made or loss incurred which is not being charged to Revenue Account. Where, from the nature of the business to be carried on by a company, it is anticipated that extraordinary expendi- ture on advertising, &c., will be necessary at the outset, the articles of association generally provide for the temporary capitalisation of same so that it may be gradually written off against profits. It may be mentioned that Table A contains such a provision. In such cases an auditor may safely follow the provisions of the articles in this respect, although even under these circumstances he should see that the expenditure capitalised (for the time being) is plainly stated in the Balance Sheet. As regards the treatment of the item good- will in the accounts of a limited company, the position maj be summarised thus: — (i) Fluctuations in the "value" of good- will should not be recorded in the accounts. (2) In particular, such fluctuations should not be allowed to affect the current profits. (3) There is no legal necessity to reduce the amount representing the original cost of the goodwill. 'Note. — In Wilmer v. McNamara (1895, 2 Ch. 245) it was held that the good- will of a trading company was in the nature of fixed capital, and accordingly it was not necessary (in the absence of some special provision in the company's regulations) to make good any deprecia- tion of the goodwill in ascertaining the amount of profits available for dividend. (4) The auditor therefore cannot object to- the amount representing the original coist of goodwill being kept intact, so long as it is plainly stated in the Balance Sheet. But he should, never- theless, carefully scrutinise capitalised expenditure (such as advertising, &c.) and see [a) that it is plainly stated in the Balance Sheet, [b) -that the provisions (if any) in the articles in this connec- tion are carried out, and (c) that no items are included which are clearly chargeable wholly against the current ■period' s profits. (5) If the goodwill be written down it must be understood as an appropriation of profits, and not as a charge against same. (6) If a portion of the profits be so appropriated instead of being dis- tributed in dividend, some authorities consider it better separately to accumu- late same, leaving intact the original amount representing the book value of the goodwill. Note. — Against this plan it is urged that in practice there is some difficulty in depriving the shareholders of certain companies of the " full divi- dend " for general reserve purposes only, whereas if the portion of profit the directors desire to retain is "appro- priated" to reduce or eliminate the goodwill, the difficulty is to a great extent removed, although the financial effect is the same. It is also contended by some that, if the amount of undis- tributed profit be not actually utilised in reducing or eliminating the good- will, but is allowed to accumulate separately, there is a temptation to GoodwillJ 201 [Gross write such profits back again at some future date and distribute same in dividend should necessity arise. (7) In applying to the Court for sanction to reduce the capital, on the ground that such capital is not wholly repre- sented by available assets, the goodwill of the business (if of value) must not be ignored when ascertaining the amount of available assets for this purpose. [In re Barrow Hcematite- Steel Co, 1900, 2 Ch. 846.) [The foregoing article on Goodwill was contributed by the author to Volume 3 of the Encyclopaedia of Accounting, and is reproduced here by special permission.] Qoverning Director.— In certain " private" limited companies the proprietor or chief partner of the concern being converted is appointed a governing director of the com- pany. The term.s of his appointment, the extent of his powers, &c:., are enumerated in the articles of association, and generally take the following form : — Appointment. — For life, or until he volun- tarily retires or ceases to hold a stated number of shares in the company ; in the latter event it is generally provided that he does not retire altogether, but becomes an ordinary director. Powers.— To control the ordinary directors generally, and in particular it is sometimes provided that all transactions of the ordinary directors involving an amount by way of purchase or loan in excess of a stated sum shall be subject to his veto. To appoint and remove the ordinary directors. Gratuitous Agent.— 5^^ Agent. Gross Profit.— The difference between the cost of goods which have been sold, and the proceeds of their sale, without any deduction in respect of the expenses of distribution of the goods or the cost of the general manage-, ment and maintenance of the business. The cost of the goods includes, in the case of a manufacturer, materials, pro- ductive labour, rent, rates, &c., in respect of the premises used for manufacture, deprecia- tion of such premises and of the machinery employed, and any other expei:diture directly attributable to the manufactory. The account which shows the gross profit is called the Trading Account, but in the case of a manufacturing business the Trading Account may be divided into two parts, the Manufacturing Account and the Selling Account. There are differences of opinion among: accountants as to whether or not discounts upon purchases and sales are factors in the determination of the gross profit of a concern. Some contend that discounts on sales are expenses of distribution, whilst discounts on purchases are the result of the financial resources and arrangements of the concern, and as a consequence must not be included in the Trading Account. It is submitted that trade discounts on sales or purchases (viz., such as would be allowed by or to the concern irrespective of the .date of payment) should be deducted from the sales and pur- chases respectively in preparing the Trading Account, whilst cash discounts must be excluded therefrom and treated in the account which determines the net profit. Carriage upon goods inward [i.e., purchases) should be treated as part of the purchasing price and as a consequence it constitutes a Trading Account charge, but carriage upon goods outward {i.e., sales) is usually treated as an "expense of distribution," although the principle involved is apparently the same, viz., that the price of goods purchased or sold " carriage paid " presumably includes the cost of carriage, whilst consignments "carriage forward" would (ordinarily) be priced lower in consequence. {See Carriage and Cartage.) The ascertainment of the gross profit of a concern is of great importance, for by a proper system of percentages a trader is enabled to institute comparisons and obtain valuable information as to the results of his past trading. In this manner the weak or strong points of the business may be revealed, a guide for the future selling prices is obtained (where not restricted by competi- tion), and a check upon the stock of materials, and the cost of labour is to some extent afforded. When the costs of distribu- tion, management, maintenance, and every other expense pertaining to the particular period have been charged against the gross profit, the resultant balance is the net profit Gross] 202 [Guarantee or loss, as the case may be. {See Manu- ' facturers' Accounts, Percentage.) I Ground Rent. — The rent payable for land j let on a building lease. The buildings | erected by the tenant " fall in " with the land on the termination of the lease, and become ' the property of the lessor. The rent is subject to deduction, by the tenant, of income tax at the current rate, but the tenant must, of course, account to the Revenue therefor. Growing Crops. — These are "goods" within the Sale of Goods Act 1893 ; they are \ also " personal chattels" within the Bills of Sale Acts, when assigned separately from the land. Friictiis industvialcs {e g , corn and potatoes) are deemed personal property, and \ on the death of the owner or other person entitle! theretobefore he has actually cut or gathered same, they pass to the personal repre- sentative, but a crop of natural grass growing at the date of the death of a life-tenant would pass to the remainderman. I Industrial growing crops may be taken in execution subject to regulations imposed by statute, and they are also subject to distress \ for rent. | Guarantee. — An undertaking by one to answer i for a liability, or the performance of a duty on the default of another who is primarily \ responsible therefor — that is, a guarantee is an engagement collateral to some other engagement. The person giving the undertaking is called the guarantor or surety ; the person to whom . it is given, the creditor ; the person in respect of whose debt or liability it is given, the principal debtor. The Statute of Frauds provides that no action shall be brought to charge any person upon any special promise to answer for the debt, default, or miscarriage of another person unless the agreement upon which such action shall be brought, or some ' memorandum or note there dF, shall be in writing, signed by the party to be charged '''• therewith, or his agent duly authorised. Originally, in order to satisfy the statute, it was required that the memorandum or note should at least contain : — (i) The names and descriptions of the parties. I • (2) The essential terms of the contract. (3) The consideration, and (4) The signature of the party to be charged or his agent duly authorised. But now the Mercantile Law Amendment Act 1856, whilst in no way dispensing with the necessity for consideration for the promise, provides that no promise to answer for the debt or default of another is to be deemed invalid to support an action by reason only that the consideration for such promise does not appear in writing or by necessary inference from a written document. A guarantee need not necessarily be embodied in one document, but may be evidenced by several. An offer to guarantee is not binding upon the guarantor until expressly or impliedly accepted by the creditor, nor has the surety upon payment of the debt or compensation a right of recoupment from the debtor unless the latter was a consenting party to the suretyship. The main object of the parties to the guarantee (viz., the guarantor and the creditor) must be to secure the payment of a debt or the fulfilment of a duty by a third party — for this reason an agreement with an agent del credere is not within the Statute of Frauds, and need not be in writing, for the guarantee itself is not the object of the agree- ment with the agent, but merely one of the terms of the agent's appointment. Moreover, a del credere agent does not really guarantee the solvency of his ' ' customers ' ' or promise to answer for their default. He rather promises to indemnify his principal against any loss which might result from his inadvertence in entering into contracts on behalf of his principal with persons who either cannot or will not perform them. Where a third party is never liable to pay the debt or perform the duty in question, or where the promise is made not to the creditor but to the debtor, to indemnify the latter against his oivn liability, the contract is not one ot guarantee, but of indemnity. An indemnity is not within the Statute of Frauds, and does not need to be in writing. " If two persons come into a shop and ' • one buys, and the other to gain him credit " promises the seller, ' // he does not pay you Guarantee] 203 [Guarantee " / will,' this is a collateral undertaking, •' and requires to be in writing under the '• Statute of Frauds. But if he says, ' L?t *' him have the goods, I will see you paid,' this " is an undertaking as for himself, and he " is intended to ba the very buyer, and the " other to act as but his servant." The following extracts from the judgments delivered in Guild v. Conrai (Court of Appeal, 1894) will illustrate the distinction between a guarantes and an indemnity : — " A promise to hi liable for a debt con- " ditionall) on the principal debtor making " default is a guarantee, and is a promise to " make good the default, within the statute. " On the othsr hand, a promiss to be:ome '• liable for a debt whenever the person to " whom the promise is made should become ** liable is not a proniss within the Statute " of Frauds, and need not be in writing." " It has been held that where one person '• induces another to enter into an engage- " ment by a promise to indemnify him " against liability, that is not an agreement " within the Statute of Frauds, and there- " fore doss not require to be in writing." [Lopss, L.J.] " There isaplain distinction bet ween (i)a " promise to piy the creditor if the princi- " pal debtor makes default in payment, and " (2) a promise to keep a person who has ' ' entered or is about to enter into a contract " of liability, indemnified against that " liability, iiidipendently of the question " whether a third party makes default or " not." [Davey, L.J.] Liability of Surety. — To pay the debt or compensation for and on the default of the principal debtor, but strictly within the terms of the contract of guarantee, for the rights of the creditor against the surety are wholly regulated by the instrument of suretyship. Rights and Remedies : — (i) Although the contract of suretyship " would be invalidated by material " though innocent misrepresentation, " or by such non-disclosure of a *' fact as would amount to an implied " misrepresentation that such fact •' did not exist," it does not require the same fulness of disclosure so essential to contracts uberrimce fidei, such as the sale of land or the allotment of shares in a public company. But when once the contract of suretyship has been entered into, •' the surety is " entitled to be informed of any agree- " ment which alters the relations of " creditor and debtor, or any circum- " stance which might give him a right " to avoid the contract." [Anson.] (2) Although apparently a surety cannot compel the creditor to proceed against the debtor, he (the surety) may himself institute proceedings against the debtjy to compel him to pay the creditor so soon as the latter has a right to sue and refuses to do so. (3) The surety, on paying the debt or com- pensation for and on default, is entitled to recoupment or reimbursement from the principal debtor for all money properly paid, together with interest and costs. (4) The Mercantile Law Amendment Act 1856 provides that on the surety pay- ing the debt or performing the duty, he is entitled to have assigned to him, or to a trustee for him, every judg- ment, specialty, or other security which is held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security is deemed at law to have been satis- fied by the payment or performance by the surety or not. The surety is also entitled to stand in the place of the creditor, and to use all remedies, and, if need be, upon a proper indemnity, to use the name of the creditor in any action to recover from the principal debtor or a co-surety indemnification for the advances made, or loss sustained. The right of a surety (whjlly or in proportion to his liability) to the benefit of the securities held by the creditor in respect of the particular debt or duty is unaffected, notwith- standing the fact that (a) He was unaware of the existence of the securities, or {b) The securities were obtained by the creditor after the contract of suretyship was entered into. Guarantee] 204 [Guard (5) One of several co-sureties has a right of contribution against his co- sureties, if he has paid more than his just proportion of the liabiUty. [See Co-surety.) Discharge of Surety : — The surety will be entitled to be discharged from liability in the following cases : — (i) Where the surety was induced to enter into the contract of guarantee by fraud on the part of the creditor. (In such a case the guarantee is void ah initio.) (2) Where the creditor has discharged the principal debtor. (3) Where the creditor has altered the terms of the original contract with the principal debtor, or materially altered the guarantee itself, or failed to perform a condition therein without the consent of the surety. (4) Where the creditor has been negligent in his dealings with the principal debtor so that the surety's remedies are thereby affected. (5) Where the creditor has misused any securities he may have held against the debt. (6) Where one of several co-sureties jointly hable is released, the other sureties being thereby deprived pro tanto of their right of contribution ; or where the surety entered into the agreement on the faith that another or others should become sureties, and that other or any one of the others does not join, those who have already executed the agreement may consider their liability at an end. Neither the discharge in bankruptcy of the principal debtor, nor the acceptance of an arrangement under the Bankruptcy Acts, will operate to relieve the surety or sureties. Creditors whose claims are guaranteed by a third party, i.e., a surety, should require a clause in the deed itself reserving their rights against the surety, or else obtain the permission of the surety before assenting to a deed of arrangement. To assent to a private arrangement without such permission or reservation of rights would operate as a release of the surety. In some cases the rights of the surety upon paying the debt may be larger than those of the creditor, for where a creditor had obtained judgment against one of the two joint debtors and thus precluded himself from suing the other, the surety was nevertheless not bound by this act, being held entitled to sue both debtors. Before a creditor can proceed against a surety he must prove his debt against him, for a previous admission by, or judgment against, the principal is not available against the surety. This, however, may be affected by a special arrangement between the creditor and surety — in fact, the general rights and remedies of the parties inter se may be varied by express agreement, provided the law as to contracts generally is complied with. Sureties are entitled to the benefit of the Statutes of Limitation, the periods being 20 years when the guarantee is by deed and six years in other cases. The statute begins to run from the time the creditor can enforce his claim against the surety. An instrument of guarantee or indemnity (if the latter be in writing), in common with other agreements, if made under hand only, is liable to a stamp duty of 6d., unless (i) the subject-matter is not of the value of ;^5, or (2) it is made for or relating to the sale of any goods, wares or merchandise — in which two cases no stamp dnty is payable. The duty may be denoted by an adhesive stamp. [See Continuing Guarantee, Co-Surety, Representation of Credit, Secured Creditor.). Guaranteed Stocks.— Stocks of an under- taling, the interest upon which is guaranteed by some other undertaking, or by a Government, The term is, however, applied in different senses, sometimes to stocks equivalent to preference or preferred stocks, and at other times to those entitling the holders to a charge upon surplus lands, &c., &c. Guard Book. — A book wherein are collected (i) the original invoices for goods purchased ; (2) the receipts for payments made, or any other class of documents, a separate Guard Book being kept for each class. The docu- ments are affixed in the order in which the entries referring to them respectively appear in the Purchase Book, Cash Book, or otherwise.