Brotherton v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAMP,LORD JUSTICE ORR,LORD JUSTICE SHAW |
| Judgment Date | 01 December 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J1201-1 |
| Docket Number | 1976 no. 27 & 28 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 December 1977 |
[1977] EWCA Civ J1201-1
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice Chancery Division
Revenue Paper (Final List)
Lord Justice Stamp
Lord Justice Orr
and
Lord Justice Shaw
MR. P. GIBSON (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Appellant Crown in each case.
MR. J. PARKER (instructed by Simpson, Curtis & Co.) appeared on behalf of the Respondent Taxpayer in each case.
The question which arises in these appeals, which are appeals by the Commissioners of Inland Revenue, is whether some considerable sums of income which accrued under a settlement between the respective 21st and 22nd birthdays of the primary beneficiaries under the settlement belonged to them or were undisposed of by the settlement and resulted to the settlor's estate. Only if the income belonged to the taxpayers is the claim of the Revenue for surtax thereon well founded. If the income did not belong to the two primary beneficiaries it is common ground that it goes back, or went back, to the settlor's estate, the settlor's having died between the date of the settlement and the date when the elder of the two beneficiaries attained the age of 21.
The facts were shortly stated by the learned judge in the court below, and I take my recital of them from his judgment with one or two slight modifications. On 12th February 1942 Mr. C. F. R. Brotherton (whom I shall call the settlor) made a settlement of £5,000, later increased very, very considerably, for the benefit of the two principal beneficiaries, David and Anne Brotherton (as they then were; Anne is now a married lady). They were the settlor's children. Anne was born on 2nd October 1939 and attained the age of 21 on 2nd October 1960. David was born on 20th April 1941 and attained the age of 21 on 20th April 1962. The settlor died in 1949. Both David and Anne have attained the age of 30 and have vested interests in the capital of their shares. For the tax year 1962/63 David was assessed for surtax on a sum of £46,692 and for the year 1963/64 on a sum of £49.916. For the year 1960/61 Anne was assessed for surtax on a sum of £19,969and for the year 1961/62 on a sum of £46,948. These figures were subject to some adjustment when the matter came before the Special Commissioners, but nothing turns on the figures, which in any event may not have been stated quite correctly by the learned judge. Nothing turns on that.
The taxpayers, David and Anne, appealed against the assessments to the Commissioners for the Special Purposes of Income Tax who, subject to adjustments, confirmed the assessments. The taxpayers each appealed by way of case stated from that decision. The appeal came before Mr. Justice Foster on 19th November 1976, when he allowed the appeal, holding that the sums in question were undisposed of by the settlement and did not form part of the respective taxpayer's income. From that decision the Crown now appeals.
It is common ground that the question turns entirely on the construction of the settlement, the relevant terms of which I shall now read. As I have said, it was made on 12th February 1942. It recites that the settlor "is desirous of making such settlement as hereinafter appearing for the benefit of his infant children David Ratcliffe Brotherton (hereinafter called 'the Son') and Anne Ratcliffe Brotherton (hereinafter called the Daughter'). "It recites the setting up of the trust fund and then provides that the trustees shall hold one moiety of the trust fund which has been thereby directed to be set up from the sum of £5,000 and any further investments for the time being representing the same and all other property (if any) from time to time given to or acquired by the trustees "In trust for the Son if and when he shall attain the age of Thirty years but if he shall die under that age then upon the trustsand subject to the powers and provisions hereinafter declared and contained concerning the other moiety of the Trust Fund and so as to form therewith a single fund for all purposes". Then by clause 4 it is provided that "THE TRUSTEES shall hold the other moiety of the Trust Fund In trust for the Daughter if and when she shall attain the age of Thirty years but if she shall die under that age then Upon the trusts and subject to the powers and provisions hereinbefore and hereinafter declared and contained concerning the other moiety of the Trust Fund and so as to form therewith a single fund for all purposes". Clause 5: "SO long as the Son or the Daughter shall be under the age of Twenty two years the whole of the income of his or her moiety of the Trust Fund shall he accumulated by way of compound interest by investing the same and the resulting income thereof as aforesaid and so long as he or she shall be over the age of Twenty two years but under the age of Twenty five years the provisions of Section 31 of the Trustee Act 1925 shall have effect as if he or she were under the age of Twenty one years to the intent that he or she shall not be entitled to direct the Trustees to pay the income of his or her moiety aforesaid to him or her". Then there is an ultimate trust for a charity, I think (it does not matter which it is for), if all the trusts hereinbefore declared concerning the Trust Fund shall fail or determine.
It is common ground that the direction to accumulate the income of his or her moiety of the trust fund so long as the son or the daughter shall be under the age of twenty two years offended Section 164 of the Law of Property Act 1925 inthat it extended the admissible period of accumulation from a period down to the date when the child attained the age of 21 to the date when the child attained the age of 22. So the question is to whom did the income belong in his or her 22nd year.
It is common ground that under Section 164 of the Law of Property Act that income is to go to and be received by the person or persons who would have been entitled thereto if the accumulation had not been directed. It is common ground that if the trust in favour of each of the taxpayers contained in clauses 3 and 4 of the settlement conferred a vested interest on the son and daughter respectively, he or she would have been the person designated by Section 164 as the person to whom the income accruing in his or her 22nd year was to go and be received by. So the great question is whether each of the taxpayers took a vested interest liable to be divested or a contingent interest.
It is clear that but for the provisions contained in clause 5 of the settlement each taxpayer would have taken a vested interest liable to be divested in the event of death under the age of 30. It was a rule of construction that "If real estate be devised to A. 'if,' or 'when,' he shall attain a given age, with a limitation over in the event of his dying under that age, the attainment of the given age is held to be a condition subsequent and not...
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Brotherton v Commissioners of Inland Revenue
...House of Lords refused. [Solicitors:-Simpson, Curtis & Co., Leeds; Solicitor of Inland Revenue.] 1 Reported (Ch D) [1977] STC 73; (CA) [1978] 1 WLR 610; [1978] 2 All ER 267; [1978] STC 201; 122 SJ 1 Reported (Ch d) [1977] STC 73; (CA) [1978] 1 WLR 610; [1978] 2 All ER 267; [1978] STC 201; 1......