CHAMBERS Vs. CHAMBERS

JUDGEMENT

(1.) The late George Alexander Chambers of Madras, being minded to make provisions for his wife and children and other relations, and being also animated with the less laudable desire to prevent the Government of India, as he put it, from "grabbing death duties" on the whole of his estate, took certain steps which he conceived would achieve these objects. The present proceedings are concerned with the question of the legal effect of these steps. Mr. Chambers carried on business as a leather merchant in Madras under the style of The Chrome Leather Company. The business belonged to and was conducted by himself alone and the company name was no more than an alias for himself, but for the object he had in view he purported to treat the company as if it had an independent being. At the time of the transactions about to be narrated, Mr. Chamber's family consisted of his wife Ethel Mary Chambers, a son who is the present appellant, and two daughters, Phyllis Dora Chambers (Mrs. Michell) and Sheila Florence Chambers. His wife died in 1924. He married a second wife who died in 1927 leaving an infant son, who is respondent 4. In 1930 he married respondent 1 as his third wife. Respondents 1, 2 and 3 are the trustees and executors of Mr. Chambers, who died on 16 November 1937, and respondent 1 is also the guardian of her infant step-son respondent 4. The appellant is the sole trustee and executor of his mother, the first wife of Mr. Chambers, hereinafter called "Mrs. Chambers."

(2.) In the year 1917 Mr. Chambers caused entries to be made in the books of the Chrome Leather Company crediting Mrs. Chambers, his children by her, and certain other relatives with various sums of money and debiting his capital account in the company's books with these sums. Separate accounts were opened in the respective names showing the sums so credited. In particular in the case of Mrs. Chambers a separate account was opened in the company's books in May 1917, showing two sums of Rs. 15,000 and Rs. 30,000 credited to her in that month. A further sum of rupees 1,55,000 was credited to her account on 1 April 1919, as a "transfer" from Mr. Chambers' "capital account." In the balance-sheets of the company the sums at the credit of Mrs. Chambers were entered at first as "deposits" and subsequently as "unsecured loans."

(3.) On the death of Mrs. Chambers in 1924, she left a will in which she referred to the two lakhs "deposited" on her behalf with the company as belonging to her. No interest was credited to her account after about November 1924, when the National Bank of India Ltd., to which the business was largely indebted, objected. In 1930 accounts were opened in the names of the beneficiaries under the will of Mrs. Chambers, showing them as creditors in respect of shares in the amount which had stood to her credit at her death as apportioned by her will. Letters waiving payment of interest were signed by the beneficiaries under the will of Mrs. Chambers in 1931 in order to satisfy the company's auditors. In December 1932, Mr. Chambers caused the two lakhs which had been proportionately credited to the beneficiaries under the will of Mrs. Chambers as well as all the other similar credits in favour of his children and relations to be re-transferred to his own capital account in the company's books, and all the credit accounts were cancelled and closed. Mr. Chambers appears to have taken this action in consequence of advice received by him from a lawyer brother in Canada to the effect that none of the parties to whom he had caused sums to be credited in the company's books had any legal claim thereto, in consequence of the absence of any consideration. On 12 November 1932 he had written to the company's auditors a letter containing the following passage : "Certain transfers from my capital in our books were made of my own free will and I have no intention of cancelling same, but I have never received any 'loans,' and there was never any consideration either given or accepted, and as regards payment of interest I am under no obligation to anyone."