Commissioners of Inland Revenue v Broadway Cottages Trust
| Jurisdiction | England & Wales |
| Judgment Date | 26 July 1954 |
| Date | 26 July 1954 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Income Tax-Title to income-Whether trust void for uncertainty.
Both Respondents, who were bodies established for charitable purposes only, received certain sums of money from the trustees of a settlement under which they were named as beneficiaries. This settlement directed (inter alia) that the trust funds were to be held in equal shares for such of the beneficiaries as should be living, or (being a charitable trust) existing, at the end of an appointed period. The class of beneficiaries was one the members of which were unascertainable at any given moment. The settlement also directed that during the appointed period the trustees should hold the income of the trust funds on trust (inter alia) to apply it for the benefit of all or any one or more of the settlor's wife and the beneficiaries in such shares, proportions and manner as the trustees in their discretion from time to time thought fit.
The Respondents claimed repayment of Income Tax under Section 37 (1) (b) of the Income Tax Act, 1918, in respect of the sums paid to them by the trustees out of the income of the trust funds, and the claims were refused by the Commissioners of Inland Revenue on the ground that the deed of settlement was void for uncertainty and that the sums received by the Respondents were not, therefore, their income. On appeal to the Special Commissioners, the Respondents contended that the validity of the trusts affecting the income of the settled fund was not affected by the validity or otherwise of the trusts relating to the capital, that in regard to the income the trustees had a power of selection among the beneficiaries and that, since it could be determined whether any given person qualified as a beneficiary, the power was valid. The Special Commissioners accepted the Respondents' contention and held that they were entitled to the repayments claimed; the Crown demanded Cases.
Held, that the trust of income under the deed was void and the sums received by the Respondents from the trustees of the deed were not income of the Respondents, who were accordingly not entitled to any repayment of Income Tax.
Commissioners of Inland Revenue v. Broadway Cottages Trust
CASE
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Chancery Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 22nd October, 1952, the Respondent, Broadway Cottages Trust, a trust established for charitable purposes only, being aggrieved by a decision of the Appellants, the Commissioners of Inland Revenue, on a claim made for exemption from Income Tax in respect of the years 1950-51 and 1951-52 under the provisions of Section 37 (1) (b) of the Income Tax Act, 1918, applied to have the said claim heard and determined by the Special Commissioners. This claim related to certain sums of money, alleged to be the income of the Respondent, received by the Respondent from the trustees of a settlement dated 14th July, 1950 (hereinafter called "the trustees"), and made between Mr. Alan Geoffrey Timpson (hereinafter called "the settlor") of the one part and the trustees of the other part. The question we were asked to determine was whether the said sums were income of the Respondent, and it was common ground that this question depended upon the validity or invalidity of certain of the provisions in the said settlement.
2. The said settlement (a copy of which is annexed hereto, marked "A"(1) )) provided, inter alia:-
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(1) In this Settlement the following expressions shall where the context so admits have the following respective meanings and shall be construed in the following manner viz.:-
(c) "The appointed period" means a period beginning on the date hereof and continuing until terminated under the power hereinafter contained or if not so terminated until twenty years after the death of the last survivor now living of the issue of his late Majesty King George V.
(d) "The Beneficiaries" mean the persons specified in the schedule hereto and "beneficiary" means one of the Beneficiaries.
(4) The Trustees shall hold all such investments as aforesaid and the varied investments and property and interests in property from time to time representing the same and all other investments and property and interests in property (if any) from time to time subject to the trusts hereof (all of which are hereinafter included in the expression "the Trust Fund") upon trust for such of the Beneficiaries as shall be living or (being a charitable trust) existing at the termination of the appointed period and if more than one in equal shares.
(5) The interest to be taken under the last preceding clause hereof by any beneficiary at the termination of the appointed period shall be absolute interest.
(6) Provided always that the Trustees at any time or times not being less than six years after the said day of declaration … if in their discretion they think fit so to do may by deed declare the appointed period to be terminated either as to the whole of the Trust Fund or as to any aliquot or specific part thereof to the intent that the Trust Fund or (as the case may be) the part thereof to which such declaration relates and the income of the same may be held upon the trusts and subject to the powers and provisions upon and subject to which the same would at the date of such declaration be held if the appointed period had then been terminated by effluxion of time and such declaration should be effectual.
(7) And if all the beneficial trusts hereinbefore declared shall fail … then the Trust Fund and the income thereof shall be held upon charitable trusts to be declared by the Trustees … to the intent that neither the Donor
or any wife or widow of his shall in any event whatsoever take an interest by way of resulting trust or otherwise in the Trust Fund or the income thereof or any accretions thereto or in any part of the same.(8) During the appointed period the Trustees shall hold the income of the Trust Fund from the date or respective dates from which the Trustees shall become entitled to such income upon trust to apply the same for the benefit of all or any one or more of the Donor's said wife and the Beneficiaries in such shares proportions and manner as the Trustees in their discretion from time to time think fit (and so that such moneys as the Trustees may from time to time think fit to apply for the benefit of any of the Beneficiaries who shall have attained the age of twenty one years be paid to him or to her on his or her receipt which shall be a complete discharge to the Trustees).
(9) Provided always that the Trustees shall have the power from time to time at their discretion to capitalise the said income or any part thereof either by investing the same and treating such investments as part of the capital of the Trust Fund or in any other mode of capitalisation which may appear to the Trustees to be expedient and pending such application as aforesaid of such income the Trustees may temporarily invest or place on deposit the same and all income thereby produced shall be treated as the income of the Trust Fund.
(10) The Trustees shall also have power during the appointed period to apply the whole or any part of the capital of the Trust Fund in their discretion for the benefit of all or any one or more of the Beneficiaries either by way of advancement on account of his or her or their share or shares or not as the Trustees may in their discretion think fit and notwithstanding in the case of any beneficiary that the total amount so applied for the benefit of such beneficiary may exceed the share to which he or she is contingently entitled to any share in the capital of the Trust Fund.
The Schedule
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1. All persons (other than the Settlor and any wife of his and any infant child of his) who have been in the past or (as the case may be) at the date of these presents or subsequently thereto at any time during the period ending on the 31st day of December 1980 or during the appointed period whichever shall be the shorter employed by:-
(a) The Settlor
(b) The wife of the Settlor
(c) William Timpson deceased (father of the Settlor and who died on the 20th day of January 1929)
(d) Katherine Chapman Timpson deceased (mother of the Settlor and who died on the 16th day of December 1940)
(e) William Timpson Limited or by any other limited company which may succeed to the business of William Timpson Limited
(f) Any other limited company of which the Settlor is a director at the date of these presents
2. The wives and widows of any such persons as is specified in clause 1 of this schedule
3. All persons (other than the Settlor and any wife of his and any infant child of his) who are the issue however remote of the said William Timpson deceased (father of the Settlor and who died on the 20th day of January 1929) and Charles Henry Rutherford deceased (father of the wife of the Settlor and who died on the 17th day of February 1930)
4. Helen Hobson Mursell
5. Ethel May Willmot
6. Maud Hall-Neale
7. Arthur Rutherford
8. Alastair John Grenville Stevenson and any spouse of his or issue of him
9. The said William Drake Lee and any spouse of his or issue of him and the said Peter Thomas Matthew Wilson and any spouse of his
10. Joseph Baker and any spouse of his or issue of him
11. Godchildren of the Settlor or his wife as follows:-
Elizabeth Worsfold (nee Meggitt)
Jennifer Webb
Timothy Dalton
Roger Baker
Michael Allison
Rosemary Guest
Peter Joseph Wilson
Anthony Weston
12. Broadway Cottages Trust and Sunnylands Trust (both being Charitable Foundations).
3. Oral evidence was given at the hearing of the appeal by Mr. Martin Dominic Frayme, an incorporated...
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