Barclay's Trustee v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | Lord Reid,Lord Morris of Borth-y-Gest,Viscount Dilhorne,Lord Wilberforce,Lord Kilbrandon |
| Judgment Date | 27 November 1974 |
| Judgment citation (vLex) | [1974] UKHL J1127-3 |
| Docket Number | No. 1. |
| Court | House of Lords |
| Date | 27 November 1974 |
[1974] UKHL J1127-3
House of Lords
Lord Reid
Lord Morris of Borth-y-Gest
Viscount Dilhorne
Lord Wilberforce
Lord Kilbrandon
My Lords,
James Barclay, on 22nd December, 1962, submitted to the Sun Life Assurance Society a proposal for three whole life policies of £15,000 each. This was accompanied by requests one of which was in these terms:
"I desire the Policy to be issued under the provisions of the Married Women's Policies of Assurance (Scotland) Act, 1880, for the benefit of:
My Son … Stuart Lothian Barclay, whom failing
My Son … Norman Veitch Lothian Barclay, whom failing
My Wife … Mrs. Florence Winifred Lothian Barclay".
The other requests were similar but the beneficiaries were placed in different orders.
This proposal was accepted and the first premiums were paid on 4th January, 1963. Mr. Barclay died on 31st January, 1963. It is common ground that a contract was completed on payment of the first premium so that the three sums of £15,000 became payable on Mr. Barclay's death. The question at issue in this case is whether Etate Duty falls to be paid on the basis that they must be aggregated with the rest of Mr. Barclay's estate in which case the rate of duty would be 75 per cent or whether they are to be treated as estates by themselves in which case the rate of duty would be 8 per cent.
It is clear that it was contemplated that if Mr. Barclay had lived longer policies would have been issued in terms slightly different from those in the requests, superseding the contract made on payment of the premium, but we are not concerned with that. We must take the destinations set out in the requests. This case is only concerned with the destination which I have quoted but we are entitled to bear in mind the existence of the other two.
Section 4 of the Finance Act, 1894 , requires the property to be aggregated unless the deceased "never had an interest" in it. It is common ground that the Appellant can only succeed if he can shew that in no possible event could Mr. Barclay have become beneficially entitled to the policy.
Section 2 of the Married Women's Policies of Assurance (Scotland) Act, 1880 , provides by section 2:
"A policy of assurance effected by any married man on his own life, and expressed upon the face of it to be for the benefit of his wife, or of his children, or of his wife and children, shall, together with all benefit thereof, be deemed a trust for the benefit of his wife for her separate use, or for the benefit of his children, or for the benefit of his wife and children; and such policy, immediately on its being so effected, shall vest in him and his legal representatives in trust for the purpose or purposes so expressed, or in any trustee nominated in the policy, or appointed by separate writing duly intimated to the assurance office, but in trust always as aforesaid, and shall not otherwise be subject to his control, or form part of his estate, or be liable to the diligence of his creditors, or be revocable as a donation, or reducible on any ground of excess or insolvency:"
It is admitted that the effect of the request which I have quoted being incorporated in the contract is that so long as any of the beneficiaries mentioned in it survived Mr. Barclay had no interest in the policy. The case for the Crown is that in at least one possible event—the death of his wife followed by the deaths of the two sons during his lifetime—Mr. Barclay would have become beneficially entitled to the policy. If that is right then the appeal fails. But the Appellant maintains that even in that event Mr. Barclay would have acquired no interest in the policy. So I turn to consider the meaning and effect of the destination in the context in which it appears.
This raises a question of vesting. If there were no vesting in anyone until Mr. Barclay's death then the Crown succeeds. It has always been said that the time of vesting depends on the intention of the maker of the deed, derived from reading the deed as a whole. But at one time in the interests of certainty when dealing with destination in terms well known to the law, Courts were reluctant to seek the real intention of the testator: they deemed that he must have intended a result based on a long series of decided cases. More recently there has I think been more flexibility but we must still say that in the absence of any clear indication of a contrary intention the normal meaning of a destination established by the authorities must prevail.
I agree with the Crown's contention to this extent. When a gift is payable at a date later than the date when the deed takes effect, and it takes the form of a gift to A whom failing to B whom failing to C the normal rule is that vesting is suspended or delayed until the date of payment, so that if A, B and C all predecease the date of payment none of them takes anything.
So the first question here must be whether it can be shewn clearly that Mr. Barclay had a different intention. In my view it is clear from the terms of the bequest that he intended the whole benefit of these policies to go to one or other of the three named beneficiaries. The policies were to be issued under the provisions of the Act of 1880 for the benefit of one or other of the three named beneficiaries and of no one else. The purpose of the Act is to protect the beneficiaries against the donor's creditors. It only affords protection to gifts to the donor's wife or children, so a gift over to issue would not be protected. In the case of a gift by will there may be a competition between the institute or conditional institute and the residuary legatee and it may be proper to interpret strictly the gift to an institute or conditional institute. But here if the gifts to institute and conditional institute all failed the result would be that by virtue of his residual right the donor himself would become entitled to the policy. In my view it is quite clear that Mr. Barclay never intended to retain any interest in any event.
But it is possible that by unskillful conveyancing his intention has been defeated. That would be so if it is not reasonably possible to construe the destination so as to avoid the possibility of total failure of the gift.
Three constructions of the destination have been suggested, any one of which would avoid this result, (1) vesting subject to defeasance, (2) immediate vesting in the last survivor if two of the three beneficiaries should die during the donor's lifetime, (3) the implication of a further conditional institution of the estate of the last mentioned conditional institute, the donor's wife.
There have always been two schools of thought with regard to vesting subject to defeasance. One regards it as an anomaly introduced into the law of Scotland by this House in Taylor v. Gilbert's Trustees 5 R. (H.L.) 217 and opposes any extention of the doctrine beyond existing authorities. The other regards it as an acceptable principle to be applied, as all principles should be applied, to new cases which appear to call for its application. I would support the view of Gloag and Henderson (Introduction to the Law of Scotland, p. 608):
"There are three types of cases in which the application of the doctrine is now definitely recognised and beyond which it will not readily be extended".
The key word is "readily". I would not lay down hard and fast rules. For example, I think it at least unwise to say "there cannot be a vested right "in a conditional institute so long as there is an ascertained prior institute "in existence ( Dickson's Trustees v. Elliot 1949 S.L.T. 359).
In Hicks' Trustees v. Inland Revenue 1974 S.L.T. 62 arguments put forward in the present case were not adduced. I am doubtful whether the doctrine of vesting subject to defeasance ought to have been applied. In my view the case ought to have been decided in favour of the trustees on grounds similar to those which I shall later explain as my reasons for allowing the present appeal.
The present case is so far removed from any in which the doctrine of vesting subject to defeasance has hitherto been applied that I would not be prepared to apply it here.
In my view there was here no immediate vesting in any of the three named beneficiaries because the donor intended that only one of the three named beneficiaries should take and so long as more than one of them remained the matter was still in doubt. But if two of them died during the donor's lifetime the doubt was resolved. He intended to benefit one or other and there was only one left. The only reason for postponing vesting would then have disappeared.
In an ordinary testamentary disposition if there is no vesting a morte the presumption is that vesting is postponed until the date of payment. Often the gift takes the form of a direction to pay at that date. But even where it does not the presumption is that survivance of the date of payment is a condition attached to the gift. Vesting at a date intermediate between the death of the testator and the date of payment is certainly unusual but it is not impossible. Professor Henderson dealt with the matter at p. 84 of his book on Vesting and I can see no reason why, even in the case of a gift in a will to X in liferent, and in fee to A whom failing B, there should not be vesting in B on the death of A during the life of the liferenter if that will best achieve a purpose which clearly appears from the will. Normally if both A and B die before the liferenter the fee falls into residue. But that must depend on intention presumed or expressed and presumed intention must give way to expressed intention or intention clearly to be inferred.
There is a further element in cases like the present case. The donor is under no obligation...
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