Commissioner of Estate and Succession Duties v Bowring
| Jurisdiction | UK Non-devolved |
| Judge | Lord Cohen |
| Judgment Date | 27 July 1960 |
| Court | Privy Council |
| Docket Number | P.C.A. No. 9 of 1960 |
Privy Council
Lord Reid; Lord Cohen; Lord Keith of Avonholm
P.C.A. No. 9 of 1960
Peter Foster, Q.C, and Raymond Walton for the appellant.
J.S.B. Dear for the respondent.
Revenue law - Estate duty — Deed of trust — Whether restraining power of trustees under deed by virtue of their discretion to withhold consent amounted to such a fetter on the donor's right to revoke the trust as to render her not competent to dispose as she thought fit.
Lord Cohen delivered the judgment of the Board: The question for the decision of the Board is whether Lady Gilbert-Carter, who died on November 12, 1953,in Boston, Massachusetts, was at the date of her death “competent to dispose” (within the meaning of that phrase in the Estate and Succession Duties Act 1941) of property comprised in the deed of trust dated June 16,1936, made between Lady Gilbert-Carter as donor of the one part and Old Colony Trust Company and Charles Kane Cobb as trustees of the other part.
If she was competent to dispose it is common ground that the respondent as an executor of her will dated March 15, 1952, is accountable under s. 20(1) of the Act for the estate duty payable in respect of the property comprised in the deed of trust; otherwise he is not so accountable notwithstanding that there was a passing of property within the meaning of s. 6 (1) of the Act. There is no dispute between the parties as to the amount of duty exigible if the respondent is accountable for it.
It will be convenient in the first place to refer to those sections of the Act which deal with the questions of competency to dispose. They are ss. 3 (a) and (a) which read as follows:
“3. For the purposes of this Act:
(a) a person shall be deemed competent to dispose of property if he has such an estate or interest therein or such general power as would, if he were sui juris, enable him to dispose of the property, including a tenant in tail whether in possession or not; and the expression ‘general power’ includes every power or authority enabling the donee or other holder thereof to appoint or dispose of property as he thinks fit, whether exercisable by instrument inter vivos or by will, or both, but exclusive of any power exercisable in a fiduciary capacity under a disposition not made by himself or exercisable as mortgagee.”
“7. Property passing on the death of the deceased shall be deemed to include the property following, that is to say:–
(a) property of which the deceased was at the time of his death competent to dispose.”
In the course of the argument reference was also made to s. 35 of the Act, which so far as material provides as follows:
“35. On the death of any person who dies after the commencement of this Act there shall be levied and paid, in addition to the estate duty imposed by this Act, a further duty called succession duty as set out in Schedule B hereto in respect of every interest or absolute power of appointment acquired or possessed by any person as the successor of the deceased in the property passing or deemed to pass on the death of the deceased and chargeable with estate duty.”
The expression “absolute power” which appears in s. 35 is perhaps used in contrast with conditional power, but it is contained in that part of the Act which deals with succession duty, and in their Lordships' opinion it throws no light on the meaning of general power in s. 3(a).
This case really turns on the construction of s. 3(a), but before dealing with that section their Lordships must consider the terms of the deed of trust. It was executed in the State of Massachusetts and it contained a provision that it should be governed by the laws of Massachusetts. Under it, in its original form, Lady Gilbert-Carter was entitled to the net income for her life together with such parts of principal as she might from time to time in writing request. After making provision for certain payments to be made on the death of Lady Gilbert-Carter, the deed of trust provided that after the death of the donor and after the foregoing payments had been made, the net income together with such parts of principal as he might from time to time in writing request, should be paid over to Lady Gilbert-Carter's son, with remainder as he should appoint with provisions in default of such appointment.
Clause 4 is important and was in the following terms:
“4. The donor during her life, and her said son after her death, shall have the right at any time or times to amend or revoke this trust, in whole or in part by an instrument in writing, delivered to the Trustees. If the agreement is revoked in its entirety the revocation shall take place upon the delivery of the instrument in writing to the Trustees, but any amendment or any partial revocation shall take effect only when consented to in writing by the Trustees.”
Had the power thereby given to revoke the trust in whole without the necessity for anybody's consent been exercised, clearly Lady Gilbert-Carter would have been competent to dispose of the property since there was no obligation on her to re-settle it. But she executed a number of deeds of amendment with the consent of the trustees in exercise of the more limited power given her under clause 4. It is unnecessary to consider these in detail. It is sufficient to say that prior to her death, clause 1 had been modified to read as follows:
“1. To pay the net income to the Donor from time to time as long as she shall live, together with such parts of principal as the Trustees in their uncontrolled discretion shall deem advisable for the comfort and support of the Donor.”
A more important amendment was made by revoking clause 4 and substituting the following clause therefor:
“4. The Donor during her lifetime shall have the right at any time or times to amend or revoke this trust, either in whole or in part by an instrument in writing, provided, however, that any such amendment or revocation shall be consented to in writing by the Trustees.”
Thus at the date of her death any revocation by her would be ineffective unless the trustees consented in writing to it.
It is common ground between the parties that the settlement must be considered in accordance with Massachusetts law and that the effect under that law or a provision reserving power to revoke a settlement with the consent of the trustees is correctly set out in s. 330 (1) of the American Restatement of the Law of Trusts. The portion of that section relevant to the decision of the case before their Lordships reads as follows:
“If a settlor reserves a power to revoke the trust only with the consent of the trustee, he cannot revoke the trust without such consent. Whether the trustee can properly consent to the revocation of the trust and whether he is under a duty to consent to its revocation depends upon the extent of the power conferred upon the trustee by the terms of the trust. To the extent to which discretion is conferred upon the trustee, the exercise of the power is not subject to the control of the court, except to prevent an abuse by the trustee of his discretion (see s. 187).
If there is a standard by which the reasonableness of the trustee's judgment can be tested, the court will control the trustee in the exercise of the power where he acts beyond the bounds of a reasonable judgment, unless it is otherwise provided by the terms of the trust. Thus, if the trustee is authorised to consent to the revocation of the trust if in his judgment the settlor is in need, he cannot properly consent to the revocation of the trust if it clearly appears that the settlor is not in need. So also, if the trustee is authorised to consent to the revocation of the trust if in his judgment the beneficiaries of the trust are not in need, he cannot properly consent to the revocation of the trust if it clearly appears that the beneficiaries are in need.
There may be a standard by which the reasonableness of the trustee's judgment can be tested even though there is no standard expressed in specific words in the terms of the trust, and even though the standard is indefinite. Thus, it may be provided merely that the settlor can revoke the trust with the consent of the trustee. Such a provision may be interpreted to mean that the trustee can properly consent to the revocation of the trust only if he deems it wise under the circumstances to give such consent. In such a case the court will control the trustee in the exercise of a power to consent to the revocation of the trust where the circumstances are such that it would clearly be unwise to permit the revocation of the trust; as for example where the beneficiaries are wholly dependent upon the trust for their support, and the settlor desires to terminate the trust for the purpose of dissipating the property. So also, the circumstances may be such that it would clearly be unwise not to permit the revocation of the trust and in such a case the court can compel the trustee to permit...
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