Gartside and Another v Commissioners of Inland Revenue
| Jurisdiction | UK Non-devolved |
| Judge | Lord Reid,Lord Morris of Borth-y-Gest,Lord Hodson,Lord Guest,Lord Wilberforce |
| Judgment Date | 13 December 1967 |
| Judgment citation (vLex) | [1967] UKHL J1213-2 |
| Date | 13 December 1967 |
| Court | House of Lords |
[1967] UKHL J1213-2
House of Lords
Lord Reid
Lord Morris of Borth-y-Gest
Lord Hodson
Lord Guest
Lord Wilberforce
After hearing Counsel as well on Tuesday the 3d, as on Wednesday the 4th, Thursday the 5th, Monday the 9th, Tuesday the 10th, Wednesday the 11th, Thursday the 12th, Monday the 16th and Tuesday the 17th, days of October last, upon the Petition and Appeal of Edmund Travis Gartside, of Barnston, Chadwick Hall Road, Rochdale, in the County of Lancaster, and Donald Warburton, of 12/16 Booth Street, in the City of Manchester, 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 2d of March 1967 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 2d day of March 1967, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Order of the Honourable Mr. Justice Ungoed-Thomas, of the 27th day of May 1966, thereby Discharged, be and the same is hereby, Restored: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Courts below, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.
My Lords,
Thomas Gartside, the testator, died in January 1941. He left four children and this case is concerned with the share of his estate which he bequeathed for the benefit of his son John and his family. With regard to that share he provided that it should be held by his trustees:
"Upon trust during the lifetime of my son John Travis Gartside to pay or apply the whole or such part as my trustees shall in their absolute and uncontrolled discretion think fit of the income of such fourth share for or towards the maintenance support or otherwise for the benefit of my said son John Travis Gartside or during his life for his wife or children (if any) or any one or more exclusively of the other of others of them in such manner in all respects as my trustees shall in their absolute and uncontrolled discretion without being liable to account think fit and shall accumulate the surplus (if any) of the said income by investing the same and the resulting income thereof in manner hereinafter mentioned. To the intent that the accumulations shall be added to the fourth share and follow the destination thereof with power nevertheless for my trustees at any time to resort to the accumulations of any preceding year and apply the same for the maintenance support and benefit of my said son John Travis Gartside or (during his life) any wife or children of his or any one or more of them."
When the testator died John was unmarried. The next year he married and he had two sons, twins, born on 5th January, 1945. His wife and two sons survived during the period relevant to this case.
John died on 8th May, 1963, and the present case raised the question whether estate duty is payable on his death in respect of sums which the testator's trustees had advanced to his twin sons prior to his death.
From the testator's death until 1960 his trustees accumulated the whole income of John's share by virtue of the provision which I have already quoted. In 1961 they paid out of income sums of £786 for the benefit of John and of £50 for the benefit of his wife and accumulated the balance. By 1st January, 1962, the total accumulated income amounted to about £55,000.
On 2nd January, 1962, when the twin sons were nearly seventeen years of age the trustees, by virtue of a power to advance, executed two deeds poll whereby they declared that certain investments should be held in trust for each of the twin sons if he attained the age of twenty-one years. These two advances together amounted to nearly half the trust funds, apart from the accumulations, and they were worth about £47,000 at the date of John's death.
It is admitted that estate duty was payable on John's death on the whole of these trust funds, including the accumulations, with the exception of the £47,000 which had been advanced to his twin sons. The Respondents claim that estate duty is also payable on this sum under the provisions of section 43(1) of the Finance Act, 1940. That subsection provides:
"43.—(l) Subject to the provisions of this section, where an interest limited to cease on a death has been disposed of or has determined, whether by surrender, assurance, divesting, forfeiture or in any other manner (except by the expiration of a fixed period at the expiration of which the interest was limited to cease), whether wholly or partly, and whether for value or not, after becoming an interest in possession, and the disposition or determination (or any of them if there are more than one) is not excepted by subsection (2) of this section, then—
( a) if, had there been no disposition or determination as aforesaid of that interest and no disposition of any interest expectant upon or subject to that interest, the property in which the interest subsisted would have passed on the death under section one of the Finance Act, 1894, that property shall be deemed by virtue of this section to be included as to the whole thereof in the property passing on the death; or
( b) if, had there been no disposition or determination as aforesaid of that interest and no disposition of any interest expectant upon or subject to that interest, the property in which the interest subsisted would have been deemed by virtue of paragraph ( b) of subsection (1) of section two of the said Act to be included to a particular extent in the property passing on the death, the property in which the interest subsisted shall be deemed by virtue of this section to be included to that extent in the property passing on the death."
The case for the Respondents is that by making these advances the trustees determined an interest or interests limited to cease on the death of John, and that such interest or interests had before that date become interests in possession. Until the trustees advanced these funds they were bound under the testator's will to decide, from time to time as income accrued, whether and to what extent that income should be applied for the benefit of John, his wife and his two sons or any of them. After the advances had been made they were no longer entitled to deal with the income from the advanced funds in that way. If the advances had not been made the trustees would still have been bound from time to time to decide whether to exercise that discretion until the death of John when other trust provisions would have come into operation.
The argument for the Respondents was that the duty of the trustees to exercise that discretion from time to time gave to each of John, his wife and his two sons an interest in the fund, that that interest extended to the whole fund because the trustees could at any time have given the whole of the income from it to any one of them, and that these interests were interests in possession. They say that it is immaterial whether or not the trustees ever at any time in fact gave to any of these beneficiaries any sum or other benefit: they each had interests in possession of the whole fund even if none of them ever received anything from it. If that were right then the section would apply. But the Appellants argued that a person's right to require trustees of a discretionary trust to consider from time to time whether or not to apply the whole or some part of the income of the trust funds for his benefit is not an interest, and in any event is not an interest in possession, in the whole fund or in any part of it within the meaning of this section.
So the first and main question in this appeal is what is the meaning of the word "interest" in this section. The 1940 Act provides that it has to be construed as one with the Finance Act, 1894, and the two most closely allied provisions of the latter Act are section 2(1) ( b) and section 7(7). It seems clear that the word "interest" must have the same meaning in these three provisions. The word "interest", as an ordinary word of the English language, is capable of having many meanings, and it is equally clear that in these provisions its meaning cannot be limited by any technicality of English law. Not only do these provisions also apply to Scotland, but they may have to be applied where duty is claimed in respect of interests under deeds which have to be construed under the laws of other countries.
But that does not mean that everything which the man in the street might call an interest is covered by the word "interest" in these sections. A man might say that a son and heir has an interest in his father's property to which he might reasonably expect to succeed. But one can discard that meaning: the son not only has no right in or over his father's property but he has no right to prevent his father from dissipating it. The Respondents admit that, to be an interest...
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