The Treasury and New Issues

of Capital.

(Effect of not Obtaining Treasury Consent.)

THE Treasury at present require that all fresh issues of capital shall be approved by them before they are made; and the Treasury sanction is granted only where it is shown to the satisfaction of the Treasury that (fresh issues) are advisable in the national interest.") See the announcement which appeared in the Press on January 19th, 1915.) Such sanction was announced as necessary (by a Notice which appeared in the Press on January 29th, 1915) in the case of Private as well as of Public Companies.

In the case of Public Companies, and even in the case of certain Private Companies, the regulations of the Treasury are obviously desirable at the present time. But complaints are numerous regarding the recent refusal of the Treasury to grant their sanction in cases where no amounts of public money would be locked up. And the registration of many Private Companies, the existence of which would have been materially in the national interest," has been abandoned owing to the Treasury consent having been withheld. In a recent case such consent was refused notwithstanding that the Company was to be registered as a Private Company; that the authorised capital was £1,000 only; that the whole of the capital was to be supplied by two persons (who were to become the sole Directors); and that the objects of the Company were obviously in the public interest.

The question naturally arises, what are the consequences of registering a Company and issuing its share capital without the Treasury sanction having first been obtained? It is submitted that, apart from incurring the disfavour of the Treasury, they are nil, and that no Director or other officer of the Company will incur any penalties, or be liable to any action, by reason of having issued shares or debentures in spite of the fact that the sanction of the Treasury to the issue has been actually refused.

The Registrar of Joint Stock Companies does not, in fact, require the Treasury consent to be produced upon lodging the necessary documents to effect incorporation; but no debentures can be registered without the previous consent of the Treasury; for the Commissioners, it is understood, will not stamp any debenture without production of the Treasury sanction, and the Registrar will not register any debenture until it is stamped.

:

It is, however, unwise, in most cases, to effect incorporation and proceed to allotment without having first obtained the consent of the Treasury for although no penalties or liabilities are at present incurred by so doing, the Government have hinted that a Bill may be introduced penalising Companies which have not observed the regulations of the Treasury.

The views here expressed have, in fact, been confirmed by the Prime Minister, who, in the House of Commons on May 18th, 1915, stated, in reply to a question on the subject by Mr. McCallum Scott, that the Treasury have no legal power to make their disapproval of fresh issues of capital effective." And until an Act of Parliament is passed which provides to the contrary, the sanction of the Treasury to new issues may be regarded as advisable, but not imperative, to obtain.

"Conciseness" in
in Drafting.

THE present tendency is to make drafts of practically all Conveyancing Documents (excluding, perhaps, Companies' Memoranda of Association, which continue to contain, for reasons which are not appreciated, provisions which are wholly unnecessary, and, in many instances, most confusing) as concise as possible; and the practice will undoubtedly become more popular as times goes on. This conciseness has very naturally been the subject of much criticism, and has been adopted with considerable reluctance by the older generation of Conveyancers. But the conveniences afforded by concise (and paragraphed) drafts as compared with drafts which were prepared on the basis of Davidson and other of the older Precedents is obvious. It must be borne in mind, however, that "there are worse mistakes than a little length"; and that too great conciseness may lead to the omission of some essential word or paragraph. In this connection the following passage contained in 'Prideaux's Precedents (21st Ed., at page 11) on Preliminary Hints on Drafting" may well be carefully observed:

"The temptation to run to length is not, however, so great to a beginner as to those who rejoiced in the old practice. However praiseworthy an attempt may be to obtain a concise and readable draft, it does not free the draftsman from blame if for the sake of brevity he omits any power or clause properly required for carrying out the trust or transaction. In particular the tendency to give way to the desire of a testator to have a Will that can be written on a sheet of notepaper, though it settles valuable property or attempts to affect some other complicated arrangement, is most harmful."

Conciseness can be effected in numerous ways, for instance, (1) by giving short definitions of the parties immediately after stating their names, &c.; (2) by providing that a certain expression is to include not only the present but future owners, as, in the case of a Lease, by stating that the expression Lessor includes, where the context so admits, the person or persons for the time being entitled in reversion expectant upon the term hereby granted "; (3) by reciting only that which is really material; (4) by omitting unnecessary words, as where a person is to be indemnified "from and against a liability, by deleting the words 'from and "; (5) by making Deeds" Supplemental to the Principal Deeds; and (6) by the employment of Schedules for the description of property, deeds, &c.

The cutting of lengthy documents into numbered clauses and sub-clauses is another mode of ensuring conciseness; and a document so drafted is clearly more readable and the more easily construed than documents not so framed. We believe it was Mr. Arthur Underhill who first popularised numbered paragraphs by means of the Precedents appearing in the Encyclopædia of Forms and Precedents edited by him. But several 'up-todate" Practitioners adopted the method some years previously, frequently, however, to the amazement of the older generation, who were wholly unaccustomed to peruse, say, a Will, claused and numbered as if it were an Act of Parliament or the Rules of a Club. To-day, it is quite uncommon to be asked to peruse a draft of any length which is framed on the old lines, even though it is the production of a lawyer who is notoriously" old

fashioned."

[8 157/10/25/ 415

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Hire-Purchase Agreements. Principal Points to be Borne in Mind when Drafting 344 By WILLIAM H. RUSSELL.

(Author of "The Hire-Purchase System," 5th Ed.) A HIRE-PURCHASE agreement (a Form of which will appear in an early Number of The Conveyancer) is a document (not usually under seal) by which the owner of personal chattels let them on hire upon terms that, when a certain total sum has been paid by the hirer, the latter will become the absolute owner of the goods.

Most of the provisions of a hire-purchase agreement are necessarily in the interests of the owner. They are inserted chiefly for the purpose of enabling him to obtain payment of the hire-rent or, in case of the hirer's breach of his agreement, to put the owner in a position to recover possession of his goods, either from the hirer or from some third person into whose hands they have come through a purported sale or pledge made by the hirer, or a lien created by him, or in consequence of execution, distress, or bankruptcy.

In order to safeguard an owner, the following points should be borne in mind, when drafting a hire-purchase agreement :

If possible, do not let the agreement be made with a person who is the tenant of the premises in which the goods are to be placed, as goods comprised in a hirepurchase agreement made by a tenant cannot be protected from distress, under the Law of Distress Amendment Act, 1908. If the hirer's husband or wife (being the tenant) is intended to be a guarantor for the hirer (who is not the tenant), do not make the guarantor a party to the hire-purchase agreement, but let the guarantee be carried out by a separate document. This will prevent any question arising as to whether the agreement is made by a tenant.

Describe the goods carefully, so that, if an action in detinue eventually results, the goods can be identified clearly.

Make the hirer undertake to pay the hire-rent punctually, without previous demand, at the owner's address. This last stipulation will enable the owner to sue for the hire-rent in the County Court of the district in which he carries on business.

Provide that the hirer shall indemnify the owner against any and every loss and damage, from whatever cause and under whatever circumstances arising. This will make the hirer responsible for loss or damage caused by accidental fire, unpreventable robbery, an act of God (lightning, earthquake, flood, &c.), an act of the King's enemies (bombardment, air raid, invasion, &c.), or any other inevitable accident. In respect to these contingencies, a hirer is under no liability in the absence of a special contract.

Negative the power of the hirer to create a lien on the goods for the cost of repairs or as regards any other matter.

Stipulate that the hirer shall produce the receipts for the last payments due from him in respect of rent, rentcharge, rates, taxes, and other outgoings of his premises. Do not say merely that he shall produce the last receipts, as other payments may become due subsequently to the date of such receipt.

Provide that, on the hirer's default, the owner may terminate the hiring by merely giving notice to the hirer to that effect, and do not, as is so often done, stipulate only that the owner may put an end to the hiring by

seizing the goods. An owner is often prevented from seizing, and, if this is the sole power he possesses, he frequently loses his goods on a distress by the hirer's landlord.

Make the owner's power to terminate the hiring exercisable both upon an active breach by the hirer of any term of the agreement and also upon any nonperformance by him of any term.

Declare that the licence given to the owner to enter the hirer's premises to seize the goods, on the termination of the hiring, is irrevocable.

There is nothing illegal in a clause which provides that an owner may break open doors and windows of a hirer's premises, in order to enter to seize the goods, on the termination of the hiring, but the question whether or not such a clause should be inserted is one of policy. It is generally considered by hire-traders that the clause should not be inserted in agreements dealing with small transactions and that it is more suitable to agreements relating to matters of some magnitude, such as machinery placed in a factory. A question has arisen as to whether, when the agreement does not give power to break open doors but there is a simple licence to enter, it is justifiable to break open an inner door. To set at rest any doubt on this point, it is as well to give the owner a licence to enter" with the right to exercise the powers of a distraining landlord."

In order to prevent the hirer having power, under the Factors Act or the Sale of Goods Act, to confer a title to the goods on a third person, under any attempted sale, pledge, or other disposition, the agreement must not make the hirer a person who has agreed to buy goods." The hirer can be prevented from becoming such a person in two ways. One method is to provide that, when a certain total sum has been paid by way of hire-rent, the goods shall become the property of the hirer, who is given power to determine the hiring at any time by returning the goods and is not bound to pay all the hire-rent, but only such proportion of it as accrues whilst he thinks fit to continue the hiring. This form of agreement is generally adopted in the case of such goods as furniture and pianos. When the hirer has power to return the goods, it is usual to stipulate that he shall pay a certain minimum amount of hire-rent and carriage both ways. This will be some compensation to the owner for having secondhand goods thrown on his hands. The other method is to bind the hirer to retain the goods during the whole period of the hiring and to pay the whole of the hire-rent and to give him the option to purchase the goods, at the end of the hiring, for a few shillings. This form of agreement is used in reference to railway waggons, motor cars, &c.

It should be provided that if the hiring is determined (whatever the cause may be) the hirer shall, at his own risk and cost, return the goods to the owner's address. If this last point is provided for and the hirer does not return the goods and possession cannot be obtained by the owner, the latter will be able to bring an action in detinue in the County Court of the district in which he carries on business.

When the hirer is tenant of the premises in which the goods are placed, a clause should be inserted enabling the owner to cancel the agreement in toto, if the hiring is terminated and the hirer does not deliver up or allow the owner to retake possession of the goods. If the agreement is cancelled under this clause and the hirer's landlord subsequently distrains, the owner will be able

to recover the goods from the landlord, because they will not be goods comprised in a hire-purchase agreement made by a tenant within the meaning of the Law of Distress Amendment Act, 1908.

It is most important that a wide clause should be inserted providing how notices shall be given by an owner to a hirer. Owners are frequently defeated through not being able to prove service of a notice terminating the hiring or cancelling the agreement. The following clause is suggested :-"Any notice required to be given by the owner, under this agreement, if verbal, may be communicated to the hirer or any other person at the premises in which the said chattels shall then be placed, or to the hirer elsewhere, or, if in writing, may be served upon the hirer personally, or left at the lastknown place of abode or business of the hirer, or affixed or left on the said premises, or sent by post addressed to the hirer at the aforesaid place of abode or business of the hirer, or at the said premises; and any notice required to be given by the hirer, under this agreement, shall be in writing and sent by registered post to the address for the time being of the owner.'

2. Consideration for the Transfer. Under Section 26 of the Companies Act, 1867, every share in any Company was deemed to have been issued "for cash unless otherwise determined by a contract in writing filed with the Registrar of Joint Stock Companies at or before the issue of the shares." This provision was repealed by the Act of 1900, since which shares have been able to be issued as they might have been prior to the Act of 1867, i.e., in money or money's worth, or as Lord Justice Giffard put it in Drummond's Case (4 Ch. 779), “in meal or in malt." Hence, shares may be issued as fully paid up in consideration of goods or property transferred, or work done, or services actually rendered (Drummond's Case, ibid.; Pell's Case, 5 Ch. 11; Schroder's Case, 11 Eq. 131); and the court will not inquire into the adequacy of the consideration or require it to be shown that the consideration given was

THE

Private Companies.

1. Rights of Creditors. ✔

conversion" of businesses into limited liability Companies has become of frequent occurrence during the last few years, and such conversion offers, of course, numerous trading facilities which are not at the disposal of the individual trader. But the formation of a Company and the subsequent transfer to it of all the trader's assets will not be permitted to stand where the conversion was effected for the purpose of defeating creditors. Unless the trader effecting the conversion was solvent at the time of the transfer of the property, the transfer will be impeachable, either under the Statute of Elizabeth, or under the Bankruptcy Acts.

The position is one which is not always borne in mind in practice, many remembering the decision in Salomon v. Salomon (1897), A. C. 22, the case which first established the validity of one man companies, but forgetting or being unfamiliar with the later cases bearing upon the subject.

"Salomon's Case (in the words of Lindley, M.R.) decided a great deal, and people have not been slow to take advantage of it; it has decided that a Company can be legitimately formed. . . by one person, or one or two persons, with all the rest men of straw. But the question was never raised there whether the creditors of a sole trader who had converted himself into a Company, and transferred all his assets to the Company, could not impeach the transaction either as a fraud upon the creditors under the Statute of Elizabeth, or as an act of bankruptcy under the Bankruptcy Act, 1883" (Re Hirth (1899), 1 Q. B. 619; and see Re Ely, 48 W. R. 693; Re Darby (1911), 1 K. B. 95; Re Slobodinsky (1903), 2 K. B. 517). See, now, Bankruptcy Act, 1914.

To reach the transaction under the Statute of Elizabeth it must be shown that the sale was of the whole, or substantially the whole, of the trader's property; and it must be shown that the Company had notice that he was defeating his creditors. But section 4 (1) of the Bankruptcy Act, 1883, extended 'the Statute of

(Ooregum Co. v. Roper (1892), A. C. 140; Re Wragg, Ltd. (1897), 1 Ch. 830). But if the consideration is an illusory one, or the transaction is a sham-entered into with the object or result of enabling shares to be issued at a discount-the shares will not have been paid for (Re Eddystone Co. (1893), 3 Ch. 9; Re Wragg, Ltd., ibid.; Mosely v. Koffyfontein Mines (1904), 2 Ch. 108).

3. When the Contract for Sale Must be Filed.

If shares are allotted for a consideration other than cash the contract for sale, together with a contract constituting the title of the allottee to the allotment, must be filed with the Registrar of Joint Stock Companies. The meaning of the term "cash" has been considered in numerous cases; and it is well decided that any bona fide transaction between a Company and a shareholder which, if the Company brought an action against the shareholder for calls, would support a plea of payment, is payment in cash. Where a transaction resolves itself into paying money by A. to B., and then handing it back again by B. to A., if the parties meet together and agree to set one demand against the other, they need not go through the form and ceremony of handing the money backwards and forwards (per Mellish, L.J., in Spargo's Case, 8 Ch. 414; and see North Sydney Co. v. Higgins (1899), A. C. 263).

Where shares are issued on a cash basis, the contract for sale need not be filed with the Registrar; and as in many cases it is desirable to keep the Contract off the file, it is sometimes considered advisable to transfer the property to the Company, not for so many fully paid up shares, but for £ cash, the Vendor having previously subscribed the Memorandum of Association for a like amount of share capital and a resolution having been previously passed calling up the whole amounts unpaid on the shares. Cheques for the two amounts can then be exchanged and simultaneously paid in, or the two amounts can be " set off in the Company's books. Sometimes this method of issuing shares is adopted for the purpose of evading the payment of stamp duties; for a Contract will not be accepted for filing until it has been properly stamped.

To be continued.]

The Real Property and Con-
veyancing Bill (1915).

IF the Real Property and Conveyancing Bill recently reintroduced by Lord Haldane comes in force substantially as it now stands, it will materially effect alterations in almost every branch of Conveyancing. Having regard to the present state of public affairs, it is unlikely that the Bill will come to the fore for a considerable time; and when it is considered by the Commons amendments of an extensive character will doubtless be made.

It may be of convenience, however, to set out here the "Memorandum to the Bill, which states that the object is to facilitate the transfer of land," and that the means by which this object is sought to be attained are as follows:

1. All land is made subject to the law relating to ordinary freehold land, known in legal parlance as land held in free and common socage.

This is effected

(a) By enfranchising all copyhold land subject to compensation to the lord of the manor for any loss which the abolition of the incidents affecting copyhold tenure entail on him, being paid by the tenant or secured by a rentcharge and to compensation to stewards of manors for the abolition of their office. (The compensation will, except in very small cases or where the parties otherwise agree, take the form of a rentcharge.)

(b) By abolishing special customs affecting the descent and alienation, &c., of freehold land. Incidentally fines, heriots, and similar incidents of special tenures would be abolished.

2. Perpetually renewable leaseholds are converted into leaseholds for terms of 2,000 years, thus avoiding constantly recurring and unnecessary costs of renewal.

3. Provision is made whereby there shall be at all times some person or other capable of making title to settled land and of overreaching estates and charges which can be overreached by a tenant for life under the powers of the Settled Land Acts.

The present Settled Land Acts already provide machinery for this purpose in the vast majority of cases, and all the present Bill does is to fill up such gaps as are left by the Settled Land Acts, e.g. :

(a) Where there is a person entitled to the fee simple of the land subject to certain family charges subsisting under a former settlement.

(b) Where there is a married woman entitled in fee simple but restrained from anticipation.

are

(c) Where there is no tenant for life. 4. The powers of dealing with settled land extended, e.g., power is given to vary leases and apportion rent; to grant options for mining leases; with the leave of the court, to grant leases for any term, and subject to any rent, covenants, and provisions which the court may approve.

5. The purposes to which capital money may be applied and the classes of improvements authorised are extended. 6. The classes of persons who are to be deemed trustees for the purposes of the Settled Land Acts are extended; and consequently the necessity for applications to the court will in many cases be obviated.

7. Difficulties which have arisen with respect to what are known as "compound settlements have been removed.

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10. Power is given to a tenant in tail in possession to dispose of entailed land by will though no disentailing assurance has been executed.

But care has been taken that general devises should not be construed as including entailed land, a result which might defeat the intention of testators. There must be a reference in the will either to the specific land subject to entail, or the instrument under which the specific property was acquired, or to entailed property generally.

11. Provision is made enabling mines to be worked which are at present unworkable owing to conflicting interests. These conflicting interests may arise by reason of the reservation of rights in mines on the enfranchisement of copyhold land, whether under the Copyhold Act, 1894, or under the present Bill, or by reason of the surface being vested in one person and the mines in another, which is often the result of the numerous Inclosure Acts which have been passed. The consequence is that large bodies of valuable minerals are at present unworkable. To remedy this evil the Bill proposes to enable either party to acquire compulsorily such rights as may enable the minerals to be worked. In cases where both parties are anxious to exercise the powers, the determination as to which is to exercise them is left to the Board of Agriculture and Fisheries. 12. The making of title on the sale, mortgage, &c., of an estate in fee simple is greatly simplified. This is effected :

(a) By abolishing legal limitations such as estates for life, estates in tail, springing and shifting uses, which in the future will take effect only in equity, so that there will always be some person entitled to the fee simple with whom the purchaser can deal;

(b) By making the conveyance

to a purchaser operate to discharge the land of all estates, rights, and interests, except what are in the Bill termed paramount estates (e.g., leases and mortgages) and paramount rights (e.g., regis. tered land charges, easements, &c.). Other estates, rights, and interests will be overreached whether the purchaser has notice of them or not; but for the protection of persons entitled to estates, rights, and interests which would be overreached by the conveyance, a system is established by which, in the case of settled land, such rights will be protected by Settled Land Act Trustees, and in other cases cautions and inhibitions can be registered. An estate, right, or interest protected by a caution or

inhibition in force at the date of the conveyance will not be overridden;

(c) By doing away with the necessity, in almost all cases, of tracing pedigrees, obtaining evidence of births, deaths, and marriages. This is effected by making the land, even when settled, pass on death to the personal representative of the deceased proprietor, so that in the future an abstract of title will practically be confined to conveyances and probates of wills or grants of administration;

(d) By freeing the land when it passes to a purchaser for money or money's worth from all claims of the Inland Revenue to death duties, &c., unless they are registered as land charges;

(e) By relieving purchasers from some of the risks at present incurred in cases where vendors have committed acts of bankruptcy, but without prejudicing the creditors where there is any want of bona fides;

(f) By making, in the case of settled land, the conveyance conclusive evidence in favour of the purchaser that the conveyance is within the powers of the proprietor making the conveyance if the purchase money is paid to the trustees for the purposes of the Settled Land Acts or into court;

(g) By reducing the period of commencement of title, which a purchaser may require in the case of an open contract from forty years to thirty years. The making of title on dealings for value with terms of years absolute is simplified on the same lines.

The provisions by which the simplification of title is sought to be attained will not materially affect the law of settlements except that the successive interests will take effect in equity only.

13. The provisions of the Land Transfer Act, 1897, with respect to the real representative are re-enacted with such amendments as are necessary to meet the defects in the existing law which experience has disclosed, and to enable the appointment of special or additional personal representatives to be made where settled land, on the death of a tenant for life, passes to his executors or his personal representatives in order to meet the case where the personal representatives of the deceased tenant for life would not be friendly to the person next entitled in succession.

The foregoing provisions (except those relating to death duties and bankruptcies, as to which special provision is made with respect to registered land) apply to land whether registered or unregistered. Part VIII. contains amendments of the Land Transfer Acts, 1875 and 1897, based chiefly on the recommendations of the Royal Commission on those Acts.

The amendments include provisions suggested by the experience of the working of those Acts and for increas ing the facilities for registering absolute titles and for carrying out various dealings with the land on the register. Certain alterations consequential on other legislation and on the preceding parts of the Bill have been made.

The area in which registration of title is compulsory is left untouched.