Flower's Settlement Trusts, Re Flower v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE JENKINS |
| Judgment Date | 25 January 1957 |
| Judgment citation (vLex) | [1957] EWCA Civ J0125-2 |
| Docket Number | 1955, F. No. 796. |
| Court | Court of Appeal |
| Date | 25 January 1957 |
[1957] EWCA Civ J0125-2
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls,
(Lord Ever shed)
Lord Justice Jenkins and
Lord Justice Ormerod.
In the Matter of the Trusts of the Settlement dated the 30th day of April, 1936, and made between Sir Archibald Dennis Flower of the one part and the said Sir Archibald Dennis Flower, Dame Florence Flower (wife of the said Sir Archibald Dennis Flower) Fordham Flower, John Keane Flower and Evadne Lloyd (Married woman) of the other part.
Mr GEofFREY CROSS, Q.C., and Mr G.L. DAWSON (instructed by Messrs Stanley & Co., Agents for Messrs R. Evans Parr & Co., Birmingham) appeared on behalf of the Appellants (Plaintiffs).
Mr JOHN PENNYCUICK, Q.C., and Mr E. BLANSHARD STAMP (Instructed by the Solicitor of Inland Revenue) appeared on behalf of the Respondents (Defendants).
I will ask Lord Justice Jenkins to deliver the first Judgment.
: This Is an appeal from a Judgment of Mr Justice Upjohn dated 39th May 1956 in a case concerning the alleged liability to estate duty on the death of Sir Archibald Dennis Flower of a fund comprised in a settlement made by him. The learned Judge held that there was a passing of this fund so as to attract estate duty on the death of Sir Archibald? and from that Judgment the trustees of the settlement (who are also beneficiaries under the settlement) now appeal to this Court.
The settlement was dated 13th April 1936, and was made between Sir Archibald thereinafter called "the Settlor" of the g one part, and Sir Archibald and his wife Dame Florence Flower and his three children Fordham Flower, John Keane Flower and Evadne Longsdon, who are the present plaintiffs, of the other part, the parties of the second part being joined as trustees of the settlement.
Omitting formal parts the settlement was in these terms so far as material. "(2) The Trustees shall out of the income of the Trust Funds pay and discharge the costs and expenses of and incidental to the preparation and completion of these presents and the vesting of the said shares and subject thereto shall stand possessed of the Trust Funds during the life of the Settlor to use apply and pay the income of the Trust Funds for the charitable and benevolent purposes as follows:-
"In each year during the life of the Settlor to pay and apply the income of the Trust Funds for such charitable and benevolent purposes as the Trustees may from time to time direct with power within the statutory limits to accumulate any income not so paid or applied and to pay and apply such accumulations for the like purposes as those for which the income of the Trust Funds were applicable.
"Provided always and it is agreed and declared that the objects of the above trust are not confined to purposes which according to law may be held to be charitable purposes but shall include purposes of a benevolent and or public character for the "benefit of Institutions and individual persons and for subscriptions and gifts to objects whether of a national political or local character and that such advances and payments may be either by way of absolute gift or by way of loan and either with or without security and either with or without payment of any interest with power for the Trustees to enter into contracts for the payment of subscriptions or gifts for any term of years but determinable on the death of the Settlor.
"Provided always that no such application or payment shall be made which shall directly or indirectly benefit the Settlor or any of the Trustees.
"(3) After the death of the Settlor the Trustees shall hold the Trust Funds:- (I) Upon trust to pay the net annual income thereof to the said Florence Flower for her life and (II) On the death of the survivor of them the Settlor and the said Florence Flower to hold the capital of the Trust Funds and any undistributed income thereof in trust for the said Fordham Flower John Keane Flower and Evadne Longsdon in equal shares".
The only other provision to which I need refer is contained in paragraph 1 of a series of provisions introduced by the words: "It is hereby agreed and declared as follows". That provision, which may have some bearing on the relevance to undistributed income in the earlier paragraph (3) (II) is in these terms: "(1) There shall be no apportionments at the date hereof or at the date of the death of the said Florence Flower as between capital and income of dividends interest or other income but all such dividends interest or other income paid or received after the date hereof or after the date of the death of the said Florence Flower as the case may be whether wholly or partially accruing before the date hereof or the date of the death of the said Florence Flower as the case may be shall be regarded and distributed as if wholly arising or accruing after the date hereof or after the death of the said Florence Flower as the case may be".
The wife, Dame Florence Flower, died on the 15th January, 1946, and the Settlor died on the 22nd November 1950. The fund comprised in the settlement consisted of 4,000 ordinary shares of £1 each in Flower & Sons Limited. We were told that the capital value of these shares was £22,000, and there have been accumulations amounting to some £10,000 which have for the most part been distributed. The fund is thus a substantial one in itself, but the question of duty is made of even greater Importance to the parties because if there was a passing of this fund on the death of Sir Archibald, it would fall to be aggregated with the rest of his very substantial estate.
It will have been observed that the trust declared during the life of the Settlor comprised a discretionary power given to the trustees to apply the income of the fund to an extremely wide and varied range of objects not confined to charitable purposes nor even to benevolent purposes, for the first proviso to paragraph 2 expressly provided "that the objects of the above trust are not confined to purposes which according to law may be held to be charitable purposes but shall include purposes of a benevolent and/or public character", and so on. I will not read the words again, but the potential objects cover a very wide field.
It is common ground that the discretionary trust declared to take effect during the life of the Settlor in these extremely wide terms was and is void for uncertainty, so that no effective disposition was made of the income of the fund during the Settlor's life. In that state of affairs it is contended by Mr Cross for the appellants that on the principle recognised in a long line of cases, the result of the invalidity of the trusts declared during the Settlor's lifetime was to bring about an acceleration of the interests of the persons taking in remainder. The effect of that, as I understand it, would be that forthwith upon the execution of the settlement Dame Florence Flower, the widow, became tenant for life in possession of the fund with remainder to the three children in equal shares. If that were so, it is common ground that no estate duty could be exigible on the death of Sir Archibald under the provisions of section 1 of the Finance Act 1894 or otherwise.
On the other hand it is contended on the part of the Crown by Mr Pennycuick that the invalidity of the trusts declared in respect of the income during the Settlor's life brought about a resulting trust in favour of the Settlor and consequently that at the time of his death he had a beneficial interest in possession for the period of his life in the fund. If that argument is well founded it is common ground that estate duty must have been exigible on his death by virtue of a passing under section 1 of the Act of 1894.
Mr Cross referred us to several of the numerous cases bearing upon this topic. The principle, I think, is well settled, at all events in relation to wills, that where there is a gift to...
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