Allan's Trustees v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 16 October 1969 |
| Docket Number | No. 2. |
| Date | 16 October 1969 |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION.
Revenue—Estate duty—Aggregation of property passing on death—Property in which deceased "never had an interest"—"Estate by itself"—Life assurance policy effected by deceased for benefit of named beneficiaries—Sum assured payable to deceased as sole trustee—No declaration of irrevocability in policy—No intimation or delivery to beneficiaries—Finance Act, 1894 (57 and 58 Vict. cap. 30), sec. 4.
Trust—Constitution—Revocability—Whole trust fund provided by sole trustee by means of assurance policy—No delivery or equivalent—No intimation to beneficiaries.
Contract—Jus quaesitum tertio—Constitution—No intimation or delivery to tertius—Whether intention to create irrevocable right.
The Finance Act, 1894, enacts by sec. 4:—"For determining the rate of estate duty to be paid on any property passing on the death of the deceased, all property so passing in respect of which estate duty is leviable shall be aggregated so as to form one estate, and the duty shall be levied at the proper graduated rate on the principal value thereof: Provided that any property so passing, in which the deceased never had an interest … shall not be aggregated with any other property but shall be an estate by itself, and the estate duty shall be levied at the proper graduated rate on the principal value thereof…"
A., with a view to mitigating the incidence of estate duty on her estate, made a proposal for an assurance policy, in which she stated,inter alia: "I intend that the policy shall from the moment of its commencement be held upon an irrevocable trust for the benefit of the beneficiary or beneficiaries aftermentioned; therefore I hereby request that the policy be expressed as payable to myself as trustee or other the trustee or trustees for the time being of the policy—the full benefit thereof and all moneys which may become payable thereunder to be held by myself or by such other trustee or trustees upon trust for the benefit absolutely and indefeasibly" of J. and M. to the extent of £20,000 each, and of R. to the extent of the remainder. The proposal further stated: "My only interest under the policy is as such trustee foresaid and I shall in no circumstances be entitled to any personal benefit thereunder." The policy, which was issued on 31st December 1963, stated that the sum assured was payable to the proposer as trustee of the policy. It further provided that the trustee should have power to deal with the policy by way of loan, surrender or otherwise for the benefit of the beneficiaries; that the only interest of the proposer at any time should be as trustee of the policy and that she should not under any circumstances be entitled to any benefit thereunder; and that the trustee should hold the policy and the full benefit thereof and all sums which might become payable thereunder upon trust for the benefit absolutely and indefeasibly of J., M. and R. to the extents proposed. It did not, however, state that the trust was irrevocable. A. was the sole trustee until 1st April 1964, when she resigned office after assuming new trustees. R. was at all times aware of the interest conferred on her by the policy, but during A.'s lifetime no intimation was made to J. or M. of the provisions in their favour.
On the death of A. a question arose as to whether, and, if so, to what extent, the sum payable under the policy, being property passing on the death of A., was property in which "the deceased never had an interest." The Crown conceded that R.'s right was property in which A. never had an interest, and was accordingly to be treated as an estate by itself, but claimed that the rights expressed in favour of J. and M. should be aggregated with the rest of A.'s estate. The trustees contended that an irrevocable trust had been created by the issue of the policy, the company being the truster and A. the trustee, with no power to vary the trust purposes; and alternatively that, even if the company was not the truster, the policy was a contract between the company and A. which created a jus quaesitum tertio in favour of J., M. and R.
Held (diss. Lord Walker) (1) that A. was the truster; (2) that in the absence of delivery or its equivalent there was no completed or irrevocable trust quoad the interests of J. and M., at least (per Lord Hunter) prior to 1st April 1964; (3) that there was insufficient evidence of an intention on the part of A. to confer an irrevocable right on J. and M.; and consequently (4) that the provisions in favour of J. and M. were not property in which A. never had an interest, since at least until 1st April 1964 she could have altered them and taken benefit to herself, and that they therefore fell to be aggregated with the remainder of her estate.
Alexander Irvine Robertson and Another, as "the trustees acting in connection with the trust created in the policy of assurance Number 532195, dated 31st December 1963, on the life of the late Miss Eliza Macnaughton Luke Allan, granted by the Scottish Provident Institution," appealed to the Court of Session under section 10 of the Finance Act, 1894, against an assessment to estate duty made by the Commissioners of Inland Revenue.
The following narrative of the circumstances is taken from the opinion of Lord Milligan:—"The appellants, who are designed as “the trustees acting in connection with the trust created in the policy of assurance Number 532195, dated 31st December 1963, on the life of the late Miss Eliza Macnaughton Luke Allan, granted by the Scottish Provident Institution” (hereinafter referred to as “the Institution”), have appealed against an assessment to estate duty in respect of two sums of £20,000 each, payable to a Mrs Jeffrey and a Miss Marr, amounting at the rate of 70 per cent to £26,668, 10s., together with interest amounting to £132, 19s. The appellants do not deny that estate duty is payable on the said sums, but they challenge the rate at which the said duty has been assessed. In fixing the rate at 70 per cent the Commissioners of Inland Revenue have treated the said sums as being aggregable with the other aggregable property passing on the death of Miss Allan, whereas the appellants maintain that the said sums of £20,000 are property in which the said Miss Allan never had an interest and that accordingly in terms of the proviso to section 4 of the Finance Act, 1894,1 they do not fall to be aggregated with any other property. They contend that they comprise interests in a policy of assurance on the life of Miss Allan, that they are subject to the provisions of section 33 (2) of the Finance Act, 1954,2 and that in terms of the said subsection the rate of estate duty to be paid is to be determined at the rate appropriate to these interests alone.
"The circumstances in which Miss Allan came to take out a policy of assurance on her own life are not in dispute; the averments of the appellants relative to these circumstances are admitted by the respondent. On 31st August 1963 Miss Allan, who was apparently possessed of considerable means and was at that time 77 years of age, executed a trust disposition and settlement, in which she disposed of her whole estate. By the second purpose she bequeathed a number of legacies, included among them being a legacy of £20,000 to a Mrs Jeffrey, whom failing to her daughter Mrs Kinloch, and a legacy also of £20,000 to a Miss Marr, whom failing to her sister Mrs Brown. After making certain other provisions she bequeathed the residue of her estate to a Miss Ramsay. She also made provision for the disposal of the residue of her estate in the event of Miss Ramsay predeceasing her, which did not happen.
"At the time when she executed her said trust disposition and settlement Miss Allan consulted her solicitor, Mr Robertson, for advice about mitigating the effect of estate duty in respect of her death. She had several discussions with her solicitor and with Miss Ramsay, who was a neighbour and very close friend. On 17th October 1963 Miss Allan executed a codicil, in which she revoked the legacies directed by the second purpose in her said trust disposition and settlement. At the end of October 1963 Mr Robertson and Miss Ramsay were informed that Miss Allan was suffering from an incurable cancer, but Miss Allan herself was not informed of this. This information led to Mr Robertson giving further advice to Miss Allan about mitigating estate duty.
"On 12th December 1963 Miss Allan submitted to the Institution a proposal and declaration for an endowment on her life of £1,345,164 after ten years, the endowment to be payable to “self as a trustee, per accompanying letter of request.” On the same date Miss Allan wrote to the Institution a letter of request, in which under reference to the proposal and declaration she wrote: “I intend that the policy shall from the moment of its commencement be held upon an irrevocable trust for the benefit of the beneficiary or beneficiaries aftermentioned; therefore I hereby request that the policy be expressed as payable to myself as trustee or other the trustee or trustees for the time being of the policy—the full benefit thereof and all moneys which may become payable thereunder to be held by myself or by such other trustee or trustees upon trust for the benefit absolutely and indefeasibly of Mrs Margaret Jeffrey, 733 Shields Road, Pollokshields, Glasgow, to the extent of £20,000, of Miss Ida Marr, The Old House, Eltisley, Saint Neots,
Huntingdonshire, to the extent of £20,000, and of Miss Mary Campbell Ramsay, 11 Hamilton Drive, Glasgow, to the extent of the remainder.” After referring to certain provisions which she wished to be incorporated in the policy she concluded her letter thus: “My only interest under the policy is as such trustee foresaid and I shall in no circumstances be entitled to any personal benefit thereunder.” On 13th December 1963 the branch manager of the Institution wrote to Mr Robertson informing him...To continue reading
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