Blyth's Trustees v. Milne and Others [1905] ScotLR 42_676 (23 June 1905)

Blyth's Trustees v. Milne and Others [1905] ScotLR 42_676 (23 June 1905)

The company paid the sum in question as a dividend in money (or its equivalent), not as an appropriation to capital. The dividend was declared, warrants issued, and shareholders could have taken the cash. The form and substance of the transaction were a valid payment of dividend, not a conversion to capital. Therefore, the bonus dividend is income and belongs to the liferentrix.

Citation
[1905] ScotLR 42_676
Parties
Trustees (applicants/first Parties): Edward Lawrence Ireland Blyth's Trustees; Liferentrix and Her Husband (second Parties): Mrs Edith Louisa Blyth or Milne and Charles Milne; Residuary Legatees (third Parties): Olive Gwendoline Milne and other residuary legatees
Jurisdiction
Scotland
Judgment Date
23 June 1905
Procedural Posture
Special Case / Judgment of Inner House, Court of Session (first Division)
Outcome
First question of law (entitlement of liferentrix to bonus dividend) answered in the affirmative; second question (entitlement to new shares absolutely) answered in the negative.
Legal Topics
Distribution of Company Profits, Trustee Powers, Liferent and Fiar Rights, Bonus Issue From Reserve Fund, Capital Vs Revenue Distinction
Trusts and Estates Company Law Distribution of Company Profits Trustee Powers Liferent and Fiar Rights Bonus Issue From Reserve Fund Capital Vs Revenue Distinction

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Parties

Edward Lawrence Ireland Blyth's Trustees

Trustees (applicants/first Parties)

Mrs Edith Louisa Blyth or Milne and Charles Milne

Liferentrix and Her Husband (second Parties)

Olive Gwendoline Milne and other residuary legatees

Residuary Legatees (third Parties)

Procedural Posture

Special Case / Judgment of Inner House, Court of Session (first Division)

Legal Issues

  1. 1 Whether a bonus dividend paid from a company's reserve fund and used to purchase new shares is to be treated as income (revenue) or capital for trust purposes
  2. 2 Whether the liferentrix is entitled to the bonus dividend or the new shares absolutely

Ratio Decidendi

The company paid the sum in question as a dividend in money (or its equivalent), not as an appropriation to capital. The dividend was declared, warrants issued, and shareholders could have taken the cash. The form and substance of the transaction were a valid payment of dividend, not a conversion to capital. Therefore, the bonus dividend is income and belongs to the liferentrix.

Court Disposition

First question of law (entitlement of liferentrix to bonus dividend) answered in the affirmative; second question (entitlement to new shares absolutely) answered in the negative.

Orders

  • The bonus dividend is part of the revenue of the trust estate and the liferentrix is entitled to it.
  • The new shares purchased with the bonus dividend are not to be transferred to the liferentrix absolutely.