Duke of Buccleuch v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | Lord Reid,Lord Morris of Borth-y-Gest,Lord Hudson,Lord Guest,Lord Wilberforce |
| Judgment Date | 20 December 1966 |
| Judgment citation (vLex) | [1966] UKHL J1220-1 |
| Date | 20 December 1966 |
| Court | House of Lords |
[1966] UKHL J1220-1
House of Lords
Lord Reid
Lord Morris of Borth-y-Gest
Lord Hodson
Lord Guest
Lord Wilberforce
Upon Report from the Appellate Committee, to whom was referred the Cause Duke of Buccleuch and another (Trustees of the Chatsworth Settlement) against Commissioners of Inland Revenue, that the Committee had heard Counsel, as well on Monday the 24th, as on Tuesday the 25th and Wednesday the 26th, days of October last, upon the Petition and Appeal of Walter John Montagu Douglas Duke of Buccleuch, of Bowhill, Selkirk, Scotland, and Mary Alice Gascoyne Dowager Duchess of Devonshire, of 5 Cheyne Walk, London S.W.3 (Trustees of a Settlement dated the 14th March 1946 and made between Edward William Spencer 10th Duke of Devonshire (since deceased) of the one part and the above-mentioned Trustees of the other part), praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 23d of July 1965, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of the Commissioners of Inland Revenue, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 23d day of July 1965, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The Appellants are trustees of a settlement made by the 10th Duke of Devonshire in 1946. The Duke died on 26th November, 1950, within five years of making the settlement and estate duty is admittedly payable on the whole of the settled property. This case is concerned with shares of the Chatsworth Estate Company and admittedly they must be valued with reference to the company's assets. These included 119,000 acres of land in England.
In 1961 the Respondents determined the value of this land to be £3,176,646. The Appellants appealed to the Lands Tribunal maintaining that the valuation ought to be £2,743,760. The Tribunal upheld the determination of the Respondents and stated a case for the decision of the Court of Appeal, the question of law being:
"Whether upon the findings of fact we came to a correct decision in law".
On 23rd July, 1965, the Court of Appeal by a majority dismissed the appeal.
It is not very easy to determine what were the findings of fact of the Tribunal or to state precisely the question of law which must now be decided. I think it best first to state the relevant law as I understand it and then to attempt to discover whether and if so where the Tribunal misdirected themselves.
Section 7 of the Finance Act, 1894 provides that in determining the value of "an estate" certain deductions are to be made. Estate there means the whole estate. Then section 7(5) provides:
"(5) The principal value of any property shall be estimated to be the price which, in the opinion of the Commissioners, such property would fetched if sold in the open market at the time of the death of the deceased;"
In my view "any property" does not refer to the whole estate of the deceased. His estate generally consists of a wide variety of different kinds of property—land, chattels, and incorporeal rights—and it would clearly be impossible to value it as a whole. The context shews that "any property" must mean any part of the estate which it is proper to treat as a unit for valuation purposes. This case turns on the determination of what are the correct principles to apply in subdividing an estate into units for valuation purposes, and it shews how greatly the total value of the estate may differ according to how it has been subdivided. The statute is silent as to the proper methods of division.
Subsection (5) only applies after the division has been made but I think that it throws some light on this matter. It requires an estimate of the price which a particular unit would fetch if sold in a certain way, so one must envisage a hypothetical sale of the actual unit. And that sale must be supposed to have taken place "in the open market" and "at the time of the death". The section must mean the price which the property would have fetched if sold at the time of the death. I agree with the argument of the Respondents that "at the time of the death" points to a definite time—the day on which the death occurred: it does not mean within a reasonable time after the death. No doubt the words "at the time of" are capable of such a meaning but I see nothing to recommend this meaning in this context. The value of some kinds of property fluctuates from day to day and there at least a particular day must be taken.
There was some argument about the meaning of "in the open market". Originally no doubt when one wanted to sell a particular item of property one took it to a market where buyers of that kind of property congregated. Then the owner received offers and accepted what he thought was the best offer he was likely to get. And for some kinds of property that is still done. But this phrase must also be applied to other kinds of property where that is impossible. In my view the phrase requires that the seller must take—or here be supposed to have taken—such steps as are reasonable to attract as much competition as possible for the particular piece of property which is to be sold. Sometimes this will be by sale by auction, sometimes otherwise. I suppose that the biggest open market is the Stock Exchange where there is no auction. And there may be two kinds of market commonly used by owners wishing to sell a particular kind of property. For example it is common knowledge that many owners of houses first publish the fact that they wish to sell and then await offers: they only put the property up for auction as a last resort. I see no reason for holding that in proper cases the former method could not be regarded as sale in the open market.
But here what must be envisaged is sale in the open market on a particular day. So there is no room for supposing that the owner would do as many prudent owners do—withdraw the property if he does not get a sufficient offer and wait until a time when he can get a better offer. The Commissioners must estimate what the property would probably have fetched on that particular day if it had then been exposed for sale, no doubt after such advance publicity as would have been reasonable.
I am confirmed in my opinion by the fact that the Act permits no deduction from the price fetched of the expenses involved in the sale (except in the case of property abroad under subsection (3)). It is notorious that the rough and ready provisions of many sections of this Act can lead to great injustice with estate duty at its present level. But one must construe the Act keeping in mind that the maximum rate of duty which it provided was 8 per cent. Parliament—or the Liberal Government of the time—seems to have thought that it was best to keep the scheme simple and to omit things which justice would seem to require if the practical difference with a low rate of duty would in most cases be negligible or would at worst be small. I find it impossible to suppose that they can have contemplated that the kinds of hypothetical sale which they envisaged would involve heavy expenses. In applying the provisions of any Act one must always try to find a construction which is not unreasonable.
With these matters in view I turn to consider the main question of law in this case—how the whole estate of the deceased should be divided into units for separate valuation. Generally the estate will consist of what one may call natural units—units or parcels of property which can be easily identified without there being any substantial difficulty or expense in carving them out of the whole estate. In my opinion it is implicit in the scheme of the Act that section 7(5) should be applied to each of such units, and there is no justification for requiring elaborate subdivision of natural units on the ground that if that had been done before the hypothetical sale the total price for the natural unit would have been increased. We must take the estate as it was when the deceased died; often the price which a piece of property would fetch would be considerably enhanced by small expense in minor repair or cleaning which would make the property more attractive to the eye of the buyer. But admittedly that cannot be supposed to have been done. And I can see no more justification for requiring the supposition that natural units have been subdivided. This subsection applies to all kinds of property. A library was instanced by Winn, L. J. Generally there would be little difficulty, delay or expense in getting someone knowledgeable to pick out valuable books for separate valuation and I would therefore regard such books as natural units. But suppose that the deceased had bought a miscellaneous and mixed lot of surplus stores intending to sort out and arrange them in saleable lots. That might involve a great deal of work, time and expense and I see no justification for requiring the supposition that that...
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