The Gazette 1961

defendant was well aware at the time in his capacity

as solicitor to the company that parcel H and

parcel B were both incumbered with mortgages

already and that there were judgments against the

company. He did not take any steps to ensure that

the plaintiff's mortgage would have priority over the

existing mortgages. In his defence it was urged that

this could be done. It was found by the court that

on receipt of the mortgage loan of money the

defendant and his client Mr. Kerwin proceeded

within three days to disperse all but $1,000 of this

fund to various creditors of the company.

It was

held that the plaintiff's claim did not rest solely on

the breach of the solicitor's duty in registering and

perfecting his client's security but that the relation

ship created between them was one from which

flowed duties more important and more extensive.

The court was satisfied that the defendant was aware

that the plaintiff was relying upon his knowledge

and experience to guide her in investing in a foreign

country under a legal system with which she was

unfamiliar. He was possessed of certain information

which he knew could be vital to her decision to

carry on or stop the transaction. Whereas there is no

objection

the common employment of one

solicitor by both mortgagor and mortgagee a

conflict may arise when the solicitor is in receipt of

confidential information as against the mortgagor

which he knows or should know will affect the

decision of the mortgagee.

In such circumstances

he cannot act fairly in a fiduciary relationship for

either and if he continues to do so he may be liable

for the consequences that ensue.

The court gave judgment for the plaintiff and

directed an assignment of the plaintiff's interest in

the mortgage to the defendant upon his satisfying

the decree for damages and costs.

(Western Weekly ~L<m> Reports (British Columbia)*

Vol. 40, 1962, page 129.)

Defence costs paid by company—whether taxable

emolument

The High Court allowed an appeal by a company

director against

the decision of Special Com

missioners who had held that the amount of £641

spent by the company for his defence at his trial

for causing the death of a pedestrian by reckless or

dangerous driving (of which he was acquitted) was

spent for his benefit and was chargeable to income

tax under Schedule E as part of his emoluments for

the year 1958-59.

Buckley J. giving judgment said that Mr. Rendell

was a full-time director of the company and, on

July 23'rd, 1958, while returning to the head office

of the company after making a call on its business,

the car belonging to the company and driven by the

taxpayer left the road and killed a pedestrian. Mr.

Rendell instructed his secretary to get in touch wtih

the Automobile Association to arrange for a solicitor

to give him legal advice. The managing director of

the company, however, contacted the company's

solicitors, by whom he was advised that if the

taxpayer was convicted, he would be imprisoned

and his conviction might involve the company in

liability. If the taxpayer went to prison the company

might have lost business and the managing director

instructed the company's solicitors to spare no

reasonable

expense

obtain

the

taxpayer's

acquittal.

The taxpayer was subsequently charged with

causing the death of another person by reckless or

dangerous driving and was acquitted. His defence

was undertaken by the company's solicitors without

consulting the taxpayer. The company paid the bill

of costs of his defence, which amounted to £641.

Counsel for the taxpayer contended that the sum

was expended by the company for its own business

purposes and it was not an expense incurred in

providing a benefit for the taxpayer.

Counsel for the Crown contended that the whole

of the sum of £641 was an expense incurred by the

company in or in connection with the provision for

the taxpayer of a benefit or facility, and it was to be

treated as his emoluments assessable to income tax.

The crucial point in this case was whether what

was provided to the taxpayer by the company was of

benefit to him. Obviously what was provided for

him was of benefit to him, but if the company chose

to be extravagant it would be hard that the taxpayer

should be charged for that.

What ought to be considered was the sum the

company must have reasonably spent for the defence

and only that sum could be regarded as spent

beneficially for the taxpayer ; so far as the company

chose to spend more than required, it must be

assumed that it was for the company's own benefit

and not for the benefit of the taxpayer. The case

should be referred back to Special Commissioners to

find as a matter of fact what sum was reasonable for

the defence of the taxpayer and he would be

chargeable for that sum only.

(Rendell

Went (Inspector of Taxes),

The Times,

March i9th, 1963.

Solicitors Journal,

March 29th,

page 253.)

Application

the court for settlement of a mental

patient's property—basisfor taxation of costs of applicant

and other interested parties

An application was made to the Court of Protec

tion in England for a settlement of a patient's

property under sections 102 and 103 of the Mental

Health Act, 1959. Certain relatives applied for the