1960 PLP 287 (PTD)

written off ... 1,174,935‑30 No. 2 Account As per last Balance Sheet ... 393,401‑67 Additions during year ... 368,485‑24

761,88691 Less : Redemption‑‑33,052 tons at Sh. 7/26 ... 239,957‑52

Representing Current‑ Development 521,929'39 Nigoti Claims As per last Balance Sheet 20,318'61 Additions during year 451'05 20,769‑66 Less : Loss Claims Nos. 7588/89‑ 7592 and 7594 abandoned ... 4,000‑00 Amount w/off ...11,769'66

15,769'66

5,000‑00 It was agreed in the Courts below that the sum of 1,147,935 shillings shown in Development No.

1. Account " had to be written off completely as the mine to which it related was a failure. This was the only material relied on by the respondent to establish his case in the Courts below. Accepting his statement that there had been a loss on the first item, the balance sheet does not reveal the value of the assets of the company. The figures set against the items of assets are their " cost less depreci ation " and not' market value. With regard to the item " No. 2 Account " in the balance sheet the Court of Appeal said :‑

" The Company has two mines of which one is worthless. A large sum spent on that worthless trine has been lost and is being written off. The other mine is working and producing profits. A large sum spent on developing it is rightly regarded as an asset ; but no attempt has been made to show in the balance sheet or otherwise the value of the mine itself ", and it went on to hold " the balance sheet is valueless for the purpose of estimating, the company's true capital position ". There can be no doubt that these views are correct. Both the Courts in Africa have held, and it is clear .to their Lordships, that the respondent has failed to establish that the Company sustained a loss of capital and, as this is the only loss the respondent sought to establish, it has not established a loss of any kind whatsoever. The case for the respondents was that the Company had suffered considerable losses in previous years. There was no assertion of " smallness of profits " the alternative ground appearing in section

21. As the respondent failed to establish losses of any kind its case fails and must inevitably fail before the Commissioner on the material the respondent chose to rely upon, if, as ordered by the Court of Appeal, it is sent back for a second decision by the Commissioner. It was argued that some losses were established and therefore it was for the Commissioner to find out for himself whether there had been compensating gains. Their Lordships do not think that there is anything in the language of the Ordinance which casts any such duty upon the Commissioner. It would moreover be, in the generality of cases, a task, which a person with the limited knowledge of the affairs of a company which can be imputed to the Commissioner, could not efficiently perform. It is, for the reasons already, given unnecessary for their Lordships to decide whether the Commissioner should under section 21 take capital losses into account. But their Lord ships will consider it as it has been fully argued and a decision upon it would be helpful in the future application of the section. The word "loss " is defined in the Act thus in section 2 :‑

"

2. In this Ordinance, unless the context otherwise requires :‑ loss , in relation to a trade, business, profession or vocation means loss computed in like manner as profits ". It is common ground that if this meaning is given to the word " loss " it would bear the meaning it does in every other part of the Ordinance and would not include a loss of capital. It is not possible in law to give to the word " losses " any meaning other than the meaning given to it in the defining section of the statute unless, as stated by the statute itself, the " context otherwise requires ". To do so would be to disregard and disobey the terms of the statute. Their Lordships are of the view that the context does not " require " any departure from the meaning already set out. They are therefore of the opinion that the word " losses " does not include capital losses. It was said in the course of the argument that on the ground of fairness the ‑word " losses " should be interpreted to include capital losses. It will be seen from what follows that the interpretation already given does not lead to unfairness but, even if it did, it would not be possible to alter the interpre tation plainly laid down by the statute on the ground of fairness. It does not follow from what has been said that capital losses should not be taken into account by the Commissioner. Two matters are mentioned specifically in the words which give him a direction, the first is " losses " (as interpreted above) and the second is " smallness of profits ". The Commissioner is directed to come to a decision upon the question whether " the payment of a dividend or a larger dividend than that declared " is unreasonable. The form of words used no doubt lends itself to the suggestion that regard should be paid only to the two matters mentioned but it appears to their Lordships that it is impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other relevant factors. Moreover the statute does not say " having regard only " to losses pre viously incurred by the company and to the smallness of the profit made. No answer, which can be said to be in any measure adequate can be given to the question of " unreasonable ness " by considering these two matters alone. Their Lordships are of the opinion that the statute by the words used, while making sure that " losses and smallness of profits " are never lost sight of, requires all matters relevant to the question of unreasonableness to be considered. Capital losses, if established, would be one of them. For the reasons which they have given their Lordships will humbly advise Her Majesty that the appeal be allowed and the decision of the High Court restored. It was agreed between the parties that the appellant should pay the costs of this appeal. The respondent must pay the costs in the High Court and in the Court of Appeal. Appeal allowed.