Jamieson v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 20 June 1963 |
| Date | 20 June 1963 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
HOUSE OF LORDS-
Surtax - Settlement - Settlement on settlor's infant children - Power to appoint fund absolutely to spouses of grandchildren - Whether settlement "revocable" - Income Tax Act, 1952 (15 &16 Geo. VI &1 Eliz. II, c. 10), Sections 397 to 399.
The Appellant in the first case settled a fund in trust for all or such one or more of his children and remoter issue and their wives, husbands, widowers and widows, in such shares, and either absolutely or with such trusts, as the trustees should appoint. At the material times, in default of such appointment, the fund was held in trust for the Appellant's three children, who were infants and unmarried, at 25. All the income was accumulated.
Assessments to Surtax for the years 1955-56 to 1957-58 were made on the Appellant in respect of the income arising under the settlement on the footing that it was a revocable settlement for the purposes of Sections 397 to 399, Income Tax Act, 1952 (as in force for those years). On appeal the Appellant contended, inter alia, (1) that any exercise of the power of appointment would constitute the effectuation of the settlement and not the determination thereof within Section 399(b); alternatively, (2) that, having regard to the facts at the material times, only the children of the settlor could benefit from such determination within proviso (ii) to Section 399. For the Crown it was contended that the terms of the settlement provided for the determination thereof by appointment of the fund absolutely, and in such manner that the determination could benefit persons not mentioned in proviso (ii), viz., spouses of the settlor's remoter issue. The Special Commissioners upheld the Crown's contentions.
The facts and contentions in the second case were similar to those in the first case, except that the settled fund could be appointed to existing beneficiaries outside proviso (ii) to Section 399, and the Special Commissioners' decision was the same.
Held, that the Commissioners' decision was correct.
(1) Jamieson v. Commissioners of Inland Revenue
Stated under the Income Tax Act, 1952, Sections 64 and 229(4), by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 13th April, 1960, Major David A. Jamieson, V.C. (hereinafter called "the Appellant") appealed against the following assessments to Surtax which had been made upon him:-for the year 1955-56, an additional assessment in the sum of £1,519; for the year 1956-57, an assessment in the sum of £5,100; for the year 1957-58, an assessment in the sum of £6,300.
2. The sole question in dispute was whether certain income (which is more particularly described in paragraph 4(4) of this Case) should be treated as the income of the Appellant for the years in question by virtue of Sections 397, 398 and 399 of the Income Tax Act, 1952. It was common ground between the parties:
(a) that if the Appellant's contentions succeeded, the 1955-56 assessment should be discharged and the assessments for 1956-57 and 1957-58 should be reduced to £2,541 and £3,968 respectively; and
(b) that if the Crown's contentions should succeed, the 1955-56 assessment should be confirmed and the assessments for 1956-57 and 1957-58 should be reduced to £4,234 and £5,664 respectively.
3. There is annexed thereto, marked "A" and forming part of this Case(1), a copy of a deed of settlement (hereinafter called "the settlement") made on 9th August, 1950, between the Appellant (who is therein called the settlor) and a body of trustees.
Clause 3 of the settlement provides that the trustees shall hold the trust fund therein described on the following trusts:
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(2) In trust for all or such one or more exclusively of the others or other of the following class of persons (that is to say) the issue (including children hereafter to be born and issue more remote than children) of the Settlor and the wives husbands widows or widowers (whether or not remarried) of such issue in such shares if more than one and either absolutely or for such successive or other interests or with such trusts and provisions for their respective benefit at the discretion of the Trustees or any other persons and generally in such manner for the benefit of the said class or any of them as the Trustees shall from time to time or at any time by any deed or deeds revocable or irrevocable (with due regard to the rule against perpetuities) appoint Provided that no such appointment may be made or revoked whether wholly or in part after
the perpetuity date and Provided Further that the Trustees may at any time or times by deed wholly or partially release or restrict the foregoing power of appointment (3) In default of and until and subject to any such appointment as aforesaid in trust for all or any the children or child of the Settlor born before the Twentieth day of February One thousand nine hundred and seventy-five who shall either attain the age of twenty-five years or being a daughter shall marry under that age or be living on the perpetuity date and attain the age of twenty-one years or being a daughter shall marry under that age and if more than one in equal shares
(4) The foregoing trust in default of appointment shall carry the intermediate income so long as any member of the said class of children shall be in existence but not otherwise and the statutory powers of maintenance and advancement shall apply.
(2) It was not disputed that the Appellant was the "settlor" in relation to the settlement for the purposes of Sections 397, 398 and 399 of the Income Tax Act, 1952.
(3) The trustees have not exercised the power of appointment given to them by clause 3(1) of the settlement, nor have they released or restricted such power.
(4) At all material times there have been three children only of the Appellant, who were born on 20th February, 1950, 28th May, 1951, and 4th July, 1956, respectively. There are no issue of the Appellant more remote than children.
(5) The income arising under the settlement and forming the subject matter of this appeal is: for the year 1955-56, £1,519; for the year 1956-57, £1,693 10s.; for the year 1957-58, £1,696.
(6) At all material times the trustees have accumulated all the net income of the trust fund under, or by virtue of, clause 3(2) and (3) of the settlement and Section 31 of the Trustee Act, 1925.
5. It was contended for the Commissioners of Inland Revenue:
(2) that clause 3(1) of the settlement provided for "the determination of the settlement by the act…of any person" (i.e., the trustees) within Section 399(b) of the Income Tax Act, 1952;
(3) that clause 3(1) of the settlement provided for the determination of the settlement in such manner that the determination could benefit persons other than those described in proviso (ii) to the said Section 399, inasmuch as the trustees could make an appointment in favour of the wives, husbands, widows or widowers of issue of the settlor more remote than children;
(4) that, by virtue of the said Section 399, the settlement could not be deemed to be irrevocable;
(5) that the settlement was not an irrevocable settlement for the purpose of Section 398 of the Income Tax Act, 1952;
(6) that the provisions of Section 398(1) had effect in relation to the income of the trust fund;
(7) that the said income must be treated as the income of the Appellant by virtue of Section 397 of the Income Tax Act, 1952, and that the amounts of the assessments under appeal should be determined accordingly.
6. It was contended on behalf of the Appellant:
(2) that the settlement was by its terms irrevocable, and accordingly the prohibition in Section 399 against deeming certain settlements to be irrevocable had no application;
(3) in the alternative, that clause 3(1) did not provide for the determination of the settlement by the act of any person, in that any exercise of the power of appointment contained therein would constitute the effectuation of the settlement, and the condition expressed in Section 399(b) should not, in the context, be construed as satisfied by the existence of such a power;
(4) as a further alternative, that if clause 3(1) should be held to provide for the determination of the settlement by virtue of section 399(b), then, having regard to the facts which existed at the material times, the only beneficiaries who could have benefited within the meaning of proviso (ii) were the children of the settlor;
(5) that the settlement was an irrevocable settlement to which Section 398(2)(a) applied and Section 398(1) did not apply;
(6) that Section 397 did not apply to the income in question;
(7) that the amounts of the assessments should be adjusted accordingly.
7. We, the Commissioners who heard the appeal, gave our decision as follows:
The central question in this appeal is whether the settlement was at the material times an irrevocable settlement to which Section 398(2)(a) of the Income Tax Act, 1952, applies. The contentions and arguments fell into three parts.
(I) For the Crown it was contended that the settlement could not be deemed to be irrevocable in view of the provisions of Section 399. The Appellant's first contention was that, as the settlement contained no power of revocation, it was in truth irrevocable; there was no question of "deeming" it to be irrevocable, and therefore Section 399 (which provides that certain settlements "shall not be deemed to be irrevocable") was irrelevant. It seems to us that this contention involves giving the word "deemed" a meaning equivalent to "pretended" or "treated as something other than what it is". We can find no justification for this. We note that in certain places in the Income Tax Act the word "deem" is...
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