Commissioners of Inland Revenue v Cookson
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAMP,LORD JUSTICE SCARMAN,LORD JUSTICE SHAW |
| Judgment Date | 27 January 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0127-4 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 January 1977 |
[1977] EWCA Civ J0127-4
In The Supreme Court of Judicature
Court of Appeal
(Civil Division)
(On appeal from the Chancery Division, Mr. Justice Goff).
Lord Justice Stamp
Lord Justice Scarman and
Lord Justice Shaw
MR. JOHN VINELOTT. Q.C. and MR. R. COZENS-HARDY HORNE (instructed by Messrs. Warrens, Agents for Messrs Dickinson Dees & Co., (Newcastle-upon-Tyne) appeared on behalf of the Appellant,
MR. P. L. GIBSON (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Respondents
(as approved by the Judges)
The first question in this case is whether a release whereby a life interest in parts of certain property settled in strict settlement was released by the settlor, who is the Appellant in this appeal and to whom the life interest had been reserved, operated not merely to release the life interest and accelerate the reversionary interests expectant thereon, but also to extinguish, do far as regards the properties affected by the release, a power conferred on the trustees of the settlement at the request of the settlor to pay or apply capital to or for the benefit of the settlor. I will refer to the power as the power of revocation, for although I do not think that is technically a correct description of it, as a practical matter it does conveniently describe it.
The matter comes before this Court on an appeal from an order of Mr. Justice Goff (as then he then was) dated 7th July, 1975 and made on appeal by way of Case Stated from a decision of the Commissioners for the Special Purposes of Income Tax discharging certain assessments to income tax made on the settlor. The Commissioners had held, without giving reasons, that on the true construction of the release, which as I have indicated extended only to part of the settled property, it extinguished the power of revocation. Mr. Justice Goff reversed that decision.
The importance of the question arises from the terms of section 404(2) of the Income Tax Act 1952, as amended, it being common ground that so long as the power of revocation remained exercisable the income arising under the settlement from the property released from the life interest fell to be treated for the purposes of the Income Tax Acts as the income of the settlor. So the taxpayer appeals from Mr. Justice Goff's decision.
The relevant settlement was effected by a trust instrument dated 19th March, 1953, made between the taxpayer, who was therein called the settlor, of the one part and certain trustees of the other part. It recited, inter alia, an earlier settlement and a disentailing deed, and it was witnessed by clause 1 that the settlor should hold what were called the "resettled" lands "upon trust (a) if Patricia Kathleen Iris Cookson" - the wife of the settlor's father - "shall survive the father that she and her assigns shall receive from the death of the father thenceforth during her life the yearly rent charge of £400 clear of all deductions (b) upon trust for the settlor and his assigns during his life without impeachment of waste and from and after his death (c) upon trust for the first and every other son of the settlor successively in remainder one after the other according to seniority in tail male" and then there are divers remainders over set out in paragraphs (d) to (m) inclusive of that clause.
There then followed provisions which are not, I think, relevant to anything which we have to decide. By clause 4 it was provided that "the settlor may at any time or times either before or after and as often as he shall marry by deed revocable or irrevocable or by will or codicil appoint to his wife or Intended wife in the event of her surviving him for her life or any less period a rent charge or rent charges by way of jointure" therein mentioned.
There was a provision In clause 5 where under the settlor might at any time or times by deed revocable or irrevocable or by will or codicil charge all or any part of the settled land with the payment for the portion or portions of his younger children, and there are provisions regarding such portions which could not in the aggregate amount to more than £18,000 in all, the amount being variable according to the number of children.
Clause 6 is the important clause. It provides as follows: "The trustees may in their absolute discretion and notwithstanding any other trust power or provision hereby declared or herein contained at any time or times during the lifetime of the settlor after five years from the date hereof at his request pay or transfer to the settlor for his own use and benefit, absolutely or apply for his benefit the whole or such part or parts of the property for the time being subject to the trusts hereof as the trustees shall think fit Provided always that the settlor may at any time or times and whether in conjunction with any appointment by the settlor under any power contained herein or not by deed revocable or irrevocable direct that the power of the trustees under this present clause shall cease to apply to the whole or ouch part or parts of the property for the time being subject to the trust hereof as the settlor may by such deed provide". And there is a further proviso that during the lifetime of Mrs. Cookson the trustees were not to make a payment or transfer which would in effect reduce her security for the yearly sum of £400 referred to in clause 1 (a).
By 1967 the settlor had an infant son, The settlor was then aged about 40. The deed of release on the construction of which the answer to the primary question turns, was dated 22nd March, 1967. It was made between the settlor of the first part, the trustees of the second part and Mrs. Cookson of the third part. It recited the trust instrument in these terns: "Whereas: (1) by a trust instrument (hereinafter called 'the trust instrument) dated the 19th day of March 1953 made between the life tenant" etc "certain parts of the Meldon estate in the County of Northumberland (hereinafter referred to as the trust fund) were settled by the life tenant upon trust that (a) if Mrs. Cookson should survive" (the father of the settlor) "that she and her assigns should receive from the death of the (father) thenceforth during her life the yearly rent charge of £400 clearof all deductions (including any estate duty which night become payable on the death of (the father) by equal quarterly payments on the usual quarter days and to be charged upon and issuing out of the land and property comprised in the trust fund and (b) subject thereto upon trust for the life tenant and his assigns during his life without impeachment for waste and (c) from and after his death upon trust for the first and every other son of the life tenant successively in remainder one after the other according to seniority in tail male and (d) thereafter upon the trusts set out in the trust instrument." It recited that the trustees were the present trustees of the trust instrument and then it was recited in the following terms: "The life tenant is desirous of releasing his life interest in that part of the trust fund which is set out in the schedule hereto (hereinafter called 'the released property') and Mrs. Cookson has agreed to release the released property from the said rent charge payable to her on the death of the said John Charles Blencowe Cookson" - the father - "to the intent that it should henceforth be charged on the remainder of the trust fund."
It is to be noted that neither in the recitals nor in the body of the deed which I shall read in a moment is there any specific reference either to the power of revocation or the power to jointure a wife or the power conferred on the settlor to charge portions for younger children.
The operative part of the deed of release is in these terms: "1. The life tenant hereby surrenders and assigns unto the trustees all that the life interest of the life tenant in the released properly to...
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