Commissioners of Inland Revenue v Bernstein
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE HARMAN,LORD JUSTICE DONOVAN |
| Judgment Date | 09 December 1960 |
| Judgment citation (vLex) | [1960] EWCA Civ J1209-1 |
| Date | 09 December 1960 |
| Court | Court of Appeal |
[1960] EWCA Civ J1209-1
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls
(Lord Evershed)
Lord Justice Harman and
Lord Justice Donovan
The Hon. B. L. BATHURST, Q.C., Mr E. BLANSHARD STAMP and MR ALAN S. CRR (instructed by the Solicitor of Inland Revenue) appeared as Counsel for the Appellants.
SIR LYNN UNGOED-THOMAS, Q.C. and Mr C.N. BEATTIE (instructed by Messrs Gouldens) appeared as Counsel for the Respondent.
: By a deed of May 16th, 1947, the respondent in this Court, MR William Bernstein, transferred to the trustees of the deed the sum of £500 to be held on the trusts therein declared. In that document Mr Bernstein was thereafter referred to as the settler and I will therefore call the document a settlement, though it is, as will appear, of a somewhat unusual nature and also, if I may say so, not in all respects very elegantly drafted. The object of the document was to make provision for a lady, Sagle Norah Thoms, called the Beneficiary. At the time of the document the settler and the Beneficiary were not married but we have been informed that at some date two or three years thereafter they did become man and wife. The object of the deed manifestly was to make provision upon the settler's own death for the Beneficiary and for any children they might have, whether born in or out of wedlock, and there is, as trill appear, a final trust in favour of the Beneficiary's sister.
In the circumstances I must I think take a little time referring to the detail of the clauses. In the first clause the settler declared that the trustees should hold the sum of £500 and any further sums which may become vested in the trustees upon trust for investment. The clause proceeded: "The trustees shall henceforth hold the said sum of £500 and the money and investments for the time being representing the same and any further sums monies property or investments which may become vested in the trustees (all of which are hereinafter called 'the trust fund') and the income there from" upon the subsequent trusts. Clause 2 I road in full: "The trustees shall during the life of the settler accumulate the income of the trust fund at compound interest by investing the same and the resulting income thereof in any of the investments hereby authorised in augmentation of the capital of the trust fund and for the benefit of the person or persons who shall eventually become entitled thereto". Clause 3 provides that after the death of the settler the trust fund is to be hold "as to one third part in trust for all or any of the children or child then living of the settler by the Beneficiary and as to two equal third parts the roof in trust for the Beneficiary absolutely but if the beneficiary dies in the lifetime of the settler leaving children or a child her surviving", then the trust fund is to be held in its on tirety for such a child children, Clause 4: "If at the death of the settler there shall be living no child of the settler by the Beneficiary the trustees shall hold the trust fund in trust for the beneficiary absolutely but if the beneficiary dies in the lifetime of the settler without leaving any children or a child by the settler or her surviving then the trustees shall hold the trust fund in trust for "the sister of the beneficiary absolutely. It is to be noted that in her case alone there is no requirement of there survivors the settler in order that she may take a vested interest. It follows that there is no resulting trust in favour of the settler. The other clauses are administrative only.
As I have indicated, the settler and beneficiary were not at the time married but they did subsequently marry. At some date considerably after the date of the settlement and the marriage it appears to have occurred to these responsible in the Department of the Inland Revenue that here was a case in which, as a result of the application of the provisions of Section 32 of the Trustee Act 1925, a claim for surtax fell to be made upon Mr Bernstein; and according to the Case the assessments against which he later appealed were in respect of the four years 1950-51 to 1953-54 inclusive, and these assessments, according to the Case (though Mr Bathurst has said the figures are not to be accepted as correct) amounted to no less than £18,729. On the face of it the case is a little startling. No advancement pursuant to Section 32 of the Trustee Act has ever purported to have been made, and we have been informed by Sir Lynn that at some date, after the claim first arose, by an appropriate instrument, which obviously it would be competent for the parties to execute, the trusts of the settlement have been varied so as henceforth to exclude any possibility of advancement to the Beneficiary who is now the wife of the settler. I do appreciate that these responsible might well take the view that by instruments of this general nature it might be possible for persons of means to provide, as the phrase goes, for a "rolling up" of the income, yet thereafter to make the resultant capital available to a substantial extent by way of advancement to the settler's wife, and thus to avoid what otherwise might have been a liability to substantial taxes. As it is, the variation which has been made has shown that in this case, at any rate, that is no longer in any circumstances possible.
I must now turn to the relevant sections of the two Acts of Parliament with which we are concerned. The claim is made by virtue of Section 405 of the income Tax Act 1952. By the first sub-section it is said: "If and so long as the settler has an interest in any income arising under or property comprised in a settlement" — and I pause to observe that it is not here in doubt that this instrument is a settlement within the meaning of this section — "any income so arising during the life of the settler in any year of assessment shall, to the extent to which it is not distributed, be treated for all the purposes of this Act as the income of the settler for that year and not as the income of any other person". Sub-section (2): "For the purpose of sub-section (1) the settler shall be deemed to have an interest in income arising under or property comprised in a settlement if any income or property which may at any time arise under or be comprised in that settlement is, or will or may become, payable to or applicable for the benefit of the settler or the wife or husband of the settler in any circumstances whatsoever". Anticipating the argument for the Crown, it is this that by the incorporation into the settlement of the powers under Section 32 of the Trustee Act 1925 to make advancements, in this case to the Beneficiary, so it follows that the settler must be deemed to have an interest in property comprised in the settlement because property comprised in that settlement may at some time become payable for the benefit of the wife of the settler in some circumstances, videlicet, upon the exercise of the power of advancement. It will be seen, therefore, that the claim rests on the promise that the provisions of Section 32 of the Trustee Act must be treated as available for the trustees of this settlement.
Section 32 is, as I have already indicated, the section which confers upon trustees the power of advancement. I need not read it at length; it is in general terms. Trustees may at any time apply any capital money subject to a trust for the advancement of any person entitled to the capital of the trust property, whether absolutely or contingently. There follows a proviso, the third paragraph of which states: No such application shall be made 30 as to prejudice any person entitled to any prior life or other interest, whether vested or contingent, in the money applied unless such person is in existence and of full age and consents in writing to such payment or application. I should have stated that by the first paragraph of the proviso the limit of one half of the presumptive or vested share or interest of the person to whom the advancement is made is imposed upon the power of advancement in any case. Sub-section (2) confines the application of the section to what I may broadly call personalty settlements but no point turns upon that.
Section 32, like its immediate predecessor relating to maintenance and many other sections in the Trustee Act, is in terms general and unqualified. But Section 69 of the same Act states thus in the second sub-section: "The powers conferred by this Act on trustees are in addition to the powers conferred by the instrument, if any, creating the trust, but these powers, unless otherwise stated, apply if and so far only as a contrary intention is not expressed in the instrument, if any, creating the trust and have effect subject to the terms of that instrument". I should have stated, as is indeed obvious from the figures that I have mentioned, that the trust property here involved is by no means confined now to the £500 originally paid over to the trustees. Plainly the settler has from time to time very substantially increased the capital moneys vested in the trustees.
Having road the relevant sections, I may restate the problem in this way. Put in the form, of a question, it is this: does the power of advancement conferred by Section 32 of the Trustee Act apply in this case or is its application excluded by the general terms of Section 69, sub-section (2)? A second point arises: if the power of advancement does here apply, then is its effect for practical purposes wholly negatived by the third paragraph of the proviso, seeing that there are not in existence any children of the settler and the beneficiary, on the ground that such children, if in existence, would have a prior life or other interest in the money which might be applied by the...
To continue reading
Request your trial
-
Morrells of Oxford Ltd v Oxford United Football Club Ltd
...would on a fair reading be "inconsistent with the purport of the instrument" (the expression used by Lord Evershed MR in IRC v Bernstein [1961] Ch 399, 412, which is in another line of analogous cases on s.69(2) of the Trustee Act 1925; the two lines finally met in Re Evans [1967] 1 WLR 129......
-
Rajabali Jumabhoy and Others v Ameerali R Jumabhoy and Others
...have taken a more liberal approach to construing the expression `contrary intention`. 62.In Inland Revenue Commissioner v Bernstein [1961] Ch 399, the Court of Appeal held that the terms of the trust which expressly provided for accumulation of income during the life of the settlor showed a......
-
Re Delamere's Settlement Trust
...1971 Appointment, "one can say that such application would be inconsistent with the purport of the instrument": see the Commissioners of Inland Revenue v. Bernstein (1961) Ch. 399 at page 412, per Lord Evershed, M.R., see also He Turners Will Trusts (1937) Ch. 15. 14 Before setting out the ......
-
Figg v Clarke
...39 Ch 155 Deloitte, Re, Griffiths v Deloitte ELR[1926] Ch 56 Hocking, Re, Michell v Loe ELR[1898] 2 Ch 567 IR Commrs v Bernstein TAX(1960) 39 TC 391 Jee v Audley ENRENR(1787) 1 Cox 324; 29 ER 1186 Lowman, Re, Devenish v Pester ELR[1895] 2 Ch 348 Pettifor's Will Trusts, Roberts v Roberts ELR......