permanent, as distinguished from circulating or floating, capital, there is no rule of law by which such capital must be maintained at its original or any particular value; but that, on the contrary, so long as there is a surplus, sufficient for dividend, of annual revenue over annual outgoings-that is to say, a surplus arising on a Revenue Account properly kept-the state of the company's Capital Account is, as affecting dividend, a matter of no moment. On the other hand, it was argued for the complainer that the decisions referred to have not yet been considered by the House of Lords; that they are contrary to previous decisions, and are not well founded in principle. It was further argued that, even assuming the law to be as there held with respect to fixed capital or assets, the horses and cars here in question are not properly assets of that character. They are, it is said, subject to continuous waste, and to waste requiring to be replaced, and that such waste (or, rather, the cost of its replacement), however large and however caused, must always and necessarily form a charge against revenue. Now, I may not perhaps be bound by these English decisions, although, of course, they are decisions of high authority; but I may say at once that I have no difficulty in accepting not only their results, but their general doctrine. At the same time, I do not myself see that the respondents in this case require to appeal to those decisions or to the principles new or old there expounded. Nor, on the other hand, am I quite clear that if the respondents' defence did require such an appeal, such appeal (I mean as an appeal to those particular authorities) would be entirely conclusive. The view I take of the present case is shortly this. It is not at all, in my opinion, a case such as might have presented itself if, for example (the respondents still working the tramways by horse traction), a fire or other catastrophe had occurred by which, say, their horses perished, and their cars were destroyed. In that case there would, of course, have been beyond question a loss of assets in the most real sense, and a loss beyond doubt requiring to be replaced. And that being so, questions I think of some difficulty would or might have occurred as to how far the necessary replacement could properly or justifiably be charged to capital. It does not, however, appear to me that (taking the facts of this case as they appear on the complainer's statement and the minute of admissions) we have here to deal with anything which can be considered as in any real sense a loss or depreciation, actual or prospective, of the respondents' assets. The selling off of their horses and cars is, or will be, a voluntary act on the part of the company. It is part of a scheme or transaction on which the company has embarked presumably for the benefit and not for the detriment of their undertaking, and if such scheme or transaction involves, by reason of enforced sale or otherwise, a sacrifice in one direction, such sacrifice will at least presumably be compensated by a corresponding gain in some other direction. I am, I think,

entitled to hold that that is the view of the directors and of the company. I am also, I think, entitled to hold that they entertain that view on reasonable grounds-grounds, at all events, which are not impeached by the complainer. But if that is so, it is surely a strong suggestion that I should assume without inquiry that the company, as a going concern, will suffer upon the total transaction a loss equal to the loss on its discarded assets, or, on the other hand, that I should allow a proof as to the effect on the company's general assets of the proposed conversion from horse to cable traction. I am certainly not prepared to make such an assumption, nor, on the other hand, am I prepared to allow such a proof except upon averments of a quite different kind from those with which I have here to deal. In saying so I do not proceed on any law or doctrine established or said to be established by recent decisions. I proceed on a principle as old as the beginning of company law-the principle, namely, that in matters of the kind here in question-matters necessarily of estimate and opinion-a company is presumably the best judge of its own affairs. In such matters the Court will not readily interfere with the company's action, and it will not do so at all except on averments which involve practically a case of fraud or dishonesty. The truth is that the complainer's argument involved, as it seemed to me, the assumption that capital sunk—that is to say, capital not represented by tangible and available assets-is in all cases to be considered as capital lost. Of course, if that were so, the question or kind of question would here arise which arose in the two English cases of which we have heard so much; but such a proposition has never, so far as I know, been, as yet at least, advanced. The case suggested by Lord Justice Lindley, of expenditure made in starting a newspaper, is a very good illustration of the impracticability of such a doctrine. But, apart from extreme cases, few things are, I should think, more common in ordinary business than operations of the kind with which we are here concerned. A merchant or manufacturer desires to enlarge his premises, satisfied that it will pay him to do so. He accordingly pulls down old buildings which have a certain value, and he replaces them by others at perhaps great cost. There is thus, of course, in a sense, the sacrifice of a permanent asset, and it may quite well happen that the new buildings if put into the market would not fetch a sum equal to the value of the old building plus the cost of the new. But for the purposes of the trader's business the result may be entirely the other way, and the presumption is that the trader is satisfied that it is so. If he is so satisfied he will certainly not consider that he has sustained a loss of capital, or feel bound to carry the cost of the old building to the debit of his Profit and Loss Account for the year. Similarly a manufacturer requires or resolves to discard certain machinery and to replace it with other machinery more effective or more economical. Here, again, the sacrifice in the case of the old

machinery is simply an item in the cost of the change. So, also, when a railway company, as sometimes happens, alters its gauge or substitutes, say, steel for iron rails. The operation necessarily involves a sacrifice of old material. But the assumption always is that the operation as a whole enhances the value of the concern or undertaking. And although it may be a prudent and proper thing to provide for the recurrence of such expenditure, and to set up a renewal is a question which the trader considers for himself, and one as to which, even in the case of limited companies, Courts of law are not accustomed to interfere. On the whole matter I am of opinion that the complainer has stated no relevant case for interfering with the proposed dividend, or for granting him interdict in terms of any part of his prayer. His Lordship accordingly refused the note, with expenses.

The case of REG. v. WILLIAMS.

(Decided before Lord RUSSELL, L.C.J., BRUCE, KENNEDY, RIDLEY, and DARLING, JJ., on 23rd January 1899.)

Falsification of Accounts.

This was a case stated for the consideration of the Court for Crown Cases Reserved from the quarter sessions for Cornwall.

The prisoner was convicted of falsifying accounts. He was collector of poor rates for the parish of Perranuthnoe, and had entered in the overseers' accounts with the parish a "balance in hand £131 10s. 5d.," though that money was not forthcoming. The facts sufficiently appear from the judgment, in which the conviction was upheld.

JUDGMENT.

The Lord Chief Justice said in this case the prisoner was indicted under 38 and 39 Vict., c. 24, section 1, for falsifying accounts. The facts were that on April 10 1890, the prisoner was appointed collector of poor rates for the parish of Perranuthnoe, in Cornwall, and he remained in that post. It appeared that there were two sets of accounts kept, one of which was referred to in the seventh and eighth counts of the indictment. This would appear to have been an account between the prisoner and the overseers; but no evidence had been offered at the trial on those charges. There was a second account which the prisoner kept for the overseers of the state of accounts between them and the parish. It was in respect of that account that the charges were made. That account was one which showed on the debit side the moneys

received from the poor rates and the balance, if any, from the last account, and on the credit side the moneys paid away by the overseers, as, for instance, to the treasurer of the union, or the parish council, or for salaries, &c. That being so, what was said to be the falsification? It was this-that the prisoner, with intent to defraud, made an entry thus, "balance in hand £131 10s. 5d." Was that entry true or false? So far as could be seen that was perfectly true, for it stated that £131 10s. 5d. was due from the overseers in respect of that account. If the balance had been stated in any other way it would have been erroneous. But it was stated that it must be taken to mean that the prisoner had that sum in his pocket, whereas he had in reality spent it. It certainly did not mean anything of the kind. If it had been his own account with the overseers different considerations would have applied; but, looked at as an account between the parish and the overseers, it was literally and exactly true, and the auditors had found it correct. It was quite true that the defendant had told one of the overseers a lie, for in answer to a question on the subject he had said that the money was all right when it was really gone, and it might be that the prisoner could have been convicted of embezzlement; but there was no evidence of falsification of accounts, and the appeal must be allowed.

The other learned Judges concurred.

The case of THE NATIONAL BANK OF WALES, LIM.

(Decided before the MASTER OF THE ROLLS, the PRESIDENT OF THE PROBATE DIVISION, and Lord Justice ROMER, in the Court of Appeal, on the 2nd August 1899.)

Company Liquidation ― Misfeasance Summons-Bank-Advances made without proper Security-Provision for Bad and Doubtful DebtsDividends out of Capital.

Judgment was delivered upon this appeal against a decision of Wright, J., reported in The Times of December 8 last and in The Times Law Reports, vol. 15, p. 88. The liquidator in the winding-up of this company under the supervision of the Court issued a summons against Mr. John Cory, a former director of the company, asking for a declaration that he as director was guilty of misfeasance or breach of trust (1) in authorising, sanctioning, or participating in the payment to shareholders of the company of interest or dividends on their respective shares out of the capital of the company,

and was liable and might be ordered to repay to the liquidator the amount so paid during the period in which he acted as director; (2) in making or sanctioning improper advances out of the funds of the company in contravention of the articles, whereby a loss accrued to the company, and that he might be ordered to pay to the liquidator the amount of that loss; (3) in making or sanctioning improper advances to customers, and allowing overdrawn accounts and debts of customers to continue, with knowledge that those customers were, or were reputed to be, insolvent or otherwise unable to pay the amount of their indebtedness, whereby a loss had accrued to the company, and that he might be ordered to pay to the liquidator the amount of that loss. An agreement was, on February 23 1893, entered into between the bank and the Metropolitan Bank of England and Wales for the purchase by the latter company of the assets and goodwill (other than the uncalled capital) of the National Bank, the Metropolitan Bank undertaking to satisfy the liabilities of the National Bank. In case the assets and goodwill should prove to be of less value than the liabilities, the National Bank or their liquidators were to call up sufficient of the uncalled capital to pay the deficiency. The agreement was made conditional upon the shareholders passing resolutions for the voluntary winding-up of the bank. This was afterwards done, and the agreement was approved by the shareholders and was carried out. There was an amount of £7 10s. per share uncalled upon the shares of the National Bank. In the result it turned out that the value of the assets and goodwill was less by about £41,000 than the amount of the liabilities. The creditors of the National Bank had been paid, and this summons was taken out really in order to obtain payment by means of it of the abovementioned deficiency of £41,000. Wright, J., held that the claims (2) and (3) made by the summons had not been established, but he held that claim (1) had, and he ordered Mr. Cory to pay to the liquidator a sum of £37,000, with interest at 5 per cent. The interest amounted to over £17,000. Mr. Cory appealed, and the liquidator gave a cross notice of appeal with regard to the claims (2) and (3) which had been dismissed. The cross notice asked that, "For the purpose of ascertaining the amount of the liability of the said John Cory in respect of the matters aforesaid, all necessary accounts and inquiries may be directed to be taken and made; and that in taking and making such accounts and inquiries the whole period during which the said John Cory acted as such director, as aforesaid, may be considered, notwithstanding that six years may have elapsed from the commencement thereof, on the ground that the losses arising from the wrongful acts aforesaid and that the true state of affairs of the said company were fraudulently concealed by the said John Cory, and that the said John Cory issued Balance Sheets that were false to the knowledge of the said John Cory, and, moreover, that parts of such interest and