namely, the tramways undertaking and the electric lighting undertaking, and contrasting them, the position before 1901 would be that the Corporation could borrow for the purposes of the tramways undertaking on the security of the city fund and city rate, and were bound to carry to the city fund so much of any moneys received from that undertaking as might in their opinion not be required for carrying on the undertaking and paying the expenses connected therewith and the interest on the borrowed money, and any deficiency in the revenues on receipts on account of the undertaking was to be made good out of the city rate-see sections 23, 27, and 28 of the Leeds Corporation Tramways Act, 1896. Those sections remain unrepealed by the Leeds Corporation Act of 1901, although certain provisions as to the appointment of a receiver are thereby repealed. The position before 1901 of the electric lighting undertaking, on the other hand, was that it was not, strictly speaking, a municipal matter at all, but the profits would go into the consolidated fund, and any deficiency in such profits would have to come out of the consolidated rate-see section 7 of the Electric Lighting Act, 1882. Again the Act of 1901, although it has given the creditors a wider range of security, has not altered the statutory duties imposed upon the Corporation in respect of either of these undertakings. There was a profit on the tramways undertaking and a deficiency on the electric lighting undertaking, and therefore that profit could not lawfully be used to meet the deficiency in the latter undertaking. The Corporation have not, in fact, done that, but their contention is that, in view of the Act of 1901, they might have done so. The Municipal Corporations Act, 1882, however, by sections 139 to 143, provides in express terms for the disposition of the money which goes into the borough fund, in this case the city fund, and consequently the surplus profit on the tramways undertaking can only be dealt with in the way prescribed by those sections. The circumstance that a creditor of the Corporation who has lent money on the electric lighting undertaking is given, by the Act of 1901, a right in the last resort to lay his hands on every source of profit or revenue is not a proof that the primary statutory duties as to the surpluses on the respective undertakings have been altered or destroyed. Before 1901 the Corporation could not have paid interest on the consolidated fund undertaking out of the profits of the city fund undertaking, and we submit that, notwithstanding the Act of 1901, that obligation still remains, and the Corporation cannot claim to set off against the income tax paid on the profits of the city fund undertaking the income tax deducted from the interest of the consolidated fund debt. The city fund is required for a number of things, amongst others the Recorder's salary, and after the profits from the waterworks (£14,500) and the tramways (£47,000) had been transferred to that fund, the Corporation had to raise £78.043 by means of the city rate to make the fund balance, so that ultimately there was in that fund £140,443 which was needed for city purposes. Admitting that the creditor has a general charge, it does not follow that the Corporation can pay the interest out of any fund whatsoever. The position of the Corporation is similar to that of the executors of a deceased debtor. The creditor is entitled to get his money out of any part of the deceased's estate, his right being that of a creditor 1911. having a charge over the whole, but that does not prove that the Leeds executors can pay the debts otherwise than out of the residuary estate, Corporation and and in a given order of priority. Another v. Sugden [FARWELL L.J. Why does not the rule that Lord Davey suggests (Surveyor of in London County Council v. Attorney-General, 1901, A. C. 26, 46; Taxes.) 70 L. J. K. B. 77, allow the Corporation to say, We have income bearing funds which we charge with debts, and we adjust the rights of the ratepayers afterwards, inter se?] Lord Davey was there dealing with a case where there is no dividing line between two sets of activities. Here the Corporation are engaged in two different sets of operations at the same time, for they are exercising the function of a municipal corporation under the regulations of the Municipal Corporations Acts, 1835 and 1882, and as a rating authority they are also exercising the functions of an urban sanitary authority, and are accordingly subject to the regulations of the Public Health Acts. There is nothing in Lord Davey's statement that would have justified, before the Act of 1901, the application by the Corporation of money which they had quâ municipality for the purpose of discharging the obligations which attached to them quâ sanitary authority, and the Act of 1901 has not altered the case in that respect. To sum up, our propositions are: (1) in point of fact the interest the income tax upon which the Corporation seek to retain, namely, the £78,519, was not paid out of profits. (2) Before 1901 it would not have been lawful for the Corporation, under the statutes then existing, to take money which they did not require to maintain their tramways and use that money in paying interest due on their electric lighting undertaking. (3) Those statutes are kept alive and must have full effect given to them notwithstanding the Act of 1901. Some of the earlier Acts are not private Acts. The Municipal Corporations Act, 1882, is a public Act, and it would be a strong thing to say that it is repealed by the Act of 1901. This is not a case of the Crown interfering in a. domestic matter between the Corporation and the ratepayers of Leeds, because any ordinary Leeds ratepayer would have the right to come and ask for an injunction to restrain the Corporation from using the tramway surplus for the purpose of paying the interest on the electric lighting debt, and thereby diminishing such surplus. The RYDE, K.C., in reply. The argument for the respondent assumes that the city fund and the consolidated rate are two entirely distinct funds, and that the loans and the ownership of the property were independent of one another. Any surplus of the Corporation goes to reduce the rates, and any deficiency increases the rates. result is that the group of ratepayers have the benefit of the profit on the gas and water undertakings when they have to pay the rate on the electric undertaking. The ultimate adjustment between the Corporation and the different groups of ratepayers still remains to be dealt with. In order to ascertain the income of the Corporation for the purpose of income tax the money received by them must be treated 1911. Leeds as one fund belonging to them as a single corporate body and not in their dual capacity of municipal authority and sanitary authority: Corporation and Andrews v. Ryde Corporation (1874), L. R. 9 Ex. 302; 43 L. J. Ex. 174. Another v. Sugden Cur. adv. vult. July 29. The following written judgments were delivered. COZENS-HARDY M.R. The question in this appeal is whether the Leeds Corporation can, as against the Crown, pool the profits arising from their municipal undertakings in respect of which they have paid income tax, and retain an equivalent sum out of income tax deducted from the dividends or interest payable on Corporation loans. The answer to the question involves the consideration of several sections of the Income Tax Acts, of three decisions of the House of Lords, and of the Leeds Corporation (General Powers) Act, 1901. I say The Leeds Corporation had, prior to 1901, acquired five separate undertakings, viz. (a) the waterworks undertaking, (b) the gasworks undertaking, (c) the tramways undertaking, (d) the markets undertaking, and (e) the electric lighting undertaking. In respect of each of these undertakings large loans had been contracted on the security of the revenues of the particular undertaking, and of either the "city fund" or the "consolidated fund." In no instance did the security extend to both funds. Although the same body of ratepayers contributed to both funds, the proportions payable by the contributors varied. An amalgamation of the two funds was directly contrary to local and general statutes. There were express provisions for carrying over the balance of the net receipts in respect of a particular undertaking, after payment of interest on moneys borrowed for the purposes of the undertaking and in providing for a sinking or redemption fund, to the credit of the "city fund" or the "consolidated fund," as the case might be. The Leeds Act of 1901 is certainly one of the most remarkable Acts it has fallen to me to attempt to understand. attempt, because I think it passes the wit of man to discover a consistent and intelligible meaning. If I read section 37, it seems that all existing securities upon separate undertaking are destroyed, and that all loans are charged indiscriminately upon all the assets of the Corporation. Section 37 says: "All principal moneys shall be charged indifferently upon the lands and estates, the water, the gas, and other, the undertakings of the Corporation, and upon all the revenues of the Corporation, and each and all such principal moneys or any of them, whether raised or owing before or after the passing of this Act, together with the dividends, interest, annuities, and all other annual sums for the time being payable thereon (such dividends. interest, annuities, and other annual sums being hereinafter referred to as 'dividends '), shall rank equally and pari passu without any priority or preference by reason of any precedence in the date of any statutory borrowing power or in the date of the raising of the money or in the date of the money becoming owing, or in the date of the security issued or given in respect thereof, or on any other ground whatsoever." Before reading subsection (2) of that same section, I 1911. ought to refer to the definition of "principal moneys," which means Leeds "any moneys owing or to be owing or borrowed or to be borrowed by Corporation and the Corporation under any statutory borrowing power (including bor- Another v. rowing powers under this Act), or whether raised or secured upon or Sugden by Corporation stock, annuity, certificate, funded debt, Corporation (Surveyor of Taxes.) bills or promissory notes, mortgages, bonds, Leeds Gas Light Company's debenture stock, Leeds New Gas Company's debenture stock, or otherwise howsoever. The definition of "Revenues of the Corporation" is that it "includes the revenues of the Corporation from time to time arising from any land undertakings or other property for the time being of the Corporation and rates, or contributions leviable by or on the precept of the Corporation." Now let me turn to subsection (2) of section 37, which says: The provisions of the Corporation Acts and Orders authorising the raising of the principal moneys and the securities granted, issued, and subsisting in respect thereof shall be read and construed as though the charge by this section authorised had been the charge in the said provisions and securities respectively authorised and given." Section 48 apparently authorises any creditor to obtain a receiver in the widest possible terms, although there are some words which may be held to reserve the rights against particular funds. But section 33, which expressly authorises the borrowing of upwards of £800,000, makes the sums so borrowed "primarily chargeable" upon the particular undertakings for the purposes of which the money is to be borrowed. This is absolutely contradictory of section 37, and is a continuation of the old practice, and there is to be found, in sections 46, 47, and 49, language which it is not easy to reconcile with section 37. I only say, with reference to section 37, that the prolonged attempts I have made to understand it, or to put any rational meaning upon the section, have been utterly fruitless and vain. Sections 38, 39, and 40, which deal with a new fund, to be called the "dividends fund," are important. Section 38 says: "(1.) For payment of dividends there shall be established and formed a fund called the 'dividends fund.' (2.) In each year the Corporation shall pay into the dividends fund a sum or sums equal to the aggregate amount of dividends payable in that year on the principal moneys. (3.) The amount of such sum or sums shall be the amount ascertained to be required in that behalf according to the respective amounts of dividends properly payable out of the several revenues of the Corporation." Then 39: "The Corporation shall from time to time apply the dividends fund in paying the dividends on the principal moneys, and by section 40 it is provided: "As parts of the general account of the dividends funds the Corporation shall keep separate accounts, distinguishing and showing in relation to each undertaking or purpose, for or in respect of which any of the principal moneys are borrowed by them, all moneys paid into the dividends fund from the revenues of the Corporation in respect of dividends on the several amounts of the principal moneys chargeable to that undertaking or purpose." Upon the whole, though with considerable hesitation, I have come to this conclusion: that the dividends or interest on all the loans are Leeds 1911. Corporation and no longer payable out of the net receipts of the particular undertaking, and that such net receipts cannot be earmarked for that purpose. The obligation of the Corporation is to pay into the dividends fund the required amount, without regard to the source from which the money, or any portion of it, may be derived. No doubt there is an obligation upon the Corporation to keep separate accounts showing the profits of each undertaking, and the principal which is still in some sense chargeable to that undertaking. One reason for this is that there are different periods for paying off different loans. If I am right in the above view, it seems irrelevant to consider whether there is a surplus upon any one undertaking and a deficiency upon another undertaking. The Corporation are entitled to say that their aggregate profits upon which they have paid tax are X, and that the amount upon which dividends are payable is X and Y, and that to the extent of X they must be considered to have paid interest out of income brought into charge within the meaning of section 102 of the Act of 1842, and that they are only liable to account to the Crown for income tax on Y, which sum has been provided out of rates. The opposite contention really involves the payment of double duty. This seems to follow from the decision of the House of Lords in the first County Council case. [1901, A. C. 26; 70 L. J. K. B. 77.] I have not overlooked the fact that the Corporation have, in their accounts, adhered to the old system; but the decision of the House of Lords in the Edinburgh case, 1910, A. C. 143; 79 L. J. P. C. 41, seems to cover this point as soon as it is established that there was a common fund, each and every part of which was applicable to satisfy income charges. Nothing that I have said must be taken to suggest any doubt that it will be the duty of the Corporation in some way to adjust accounts between the city fund and the consolidated fund. I foresee grave difficulty in settling the principle of such adjustment except upon the old lines. But happily that question does not arise for our decision. In my opinion the decision of Mr. Justice Hamilton cannot be supported, and the appeal must be allowed. The costs here and below must follow the event. FARWELL L.J. The appellants are a Corporation by charter, and are also a municipal corporation within the Municipal Corporation Acts, and an urban sanitary authority within the meaning of the Public Health Acts, and, prior to 1901, they had raised large sums of money under their various statutory powers for various purposes, such sums being charged specifically on different properties of the Corporation and on different rates raisable by them, payable at various times, some by way of annuity perpetual or for terms of years, some with and some without special sinking funds. In 1901 the Corporation obtained a private Act, one of the preambles to which is that it is expedient that "better provision should be made as in this Act mentioned in regard to the loans of the Corporation, the securities upon which they are charged, the discharge of borrowed moneys, and other financial matters," and, accordingly, the Act contains |