Kerr's Trustees v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 31 January 1974 |
| Date | 31 January 1974 |
| Docket Number | No. 13. |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION.
RevenueEstate dutyAggregation of property passing on deathProperty in which deceased never had an interestAssurance policies effected by deceased on own lifeIntimation of deceased's intention made to beneficiaries' parents and to deceased's accountant and solicitor prior to policies coming into forceWhether such intimation equivalent to delivery of trust fundWhether mode and content of intimation adequateWhether parents and professional advisers appropriate persons to receive intimationFinance Act, 1894 (57 and 58 Vict, cap. 30), sec. 4.
TrustConstitutionIrrevocabilityTruster as sole trusteeIntimation to beneficiary as equivalent of deliveryIntimation made before trust property in existenceWhether effective to render trust irrevocable.
TrustConstitutionTrustee in posseWhether truster constituted as such trustee so as to exclude any right in her to trust property.
The Finance Act, 1894, enacts by sec. 4:"For determining the rate of estate duty to be paid on any property passing on the death of the deceased, all property so passing in respect of which estate duty is leviable shall be aggregated so as to form one estate, and the duty shall be levied at the proper graduated rate on the principal value thereof: Provided that any property so passing, in which the deceased never had an interest shall not be aggregated with any other property but shall be an estate by itself, and the estate duty shall be levied at the proper graduated rate on the principal value thereof "
In the course of the year 1963 K., a lady then aged 84 and unmarried, had discussions with her accountant, L., with a view to mitigating the incidence of estate duty on her death. On the advice of L., who was advised by an assurance company, K. on 24th September 1963 addressed a letter of request to the company, in which, under reference to a proposal and declaration of even date for a sum assured of 36,000, she stated that she intended that nine policies, each for 4000, should be issued and that each one should from the moment of its commencement be held upon an irrevocable trust for the benefit of a beneficiary to be named. She further requested that the policies should be expressed as payable to herself as trustee or other the trustee or trustees for the time being of the policies, the full benefit thereof and all moneys which might become payable thereunder to be held by herself or such other trustee or trustees for the benefit absolutely and indefeasibly of nine named beneficiaries, one under each policy, of whom six were the children of her niece Mrs C., and three the children of her niece Mrs R.-K. The first premium on the policies was paid on 26th September, and the company was thereafter at risk. The policies were delivered to L. on 25th November 1963, on which day he delivered them to K.'s solicitors, and thereafter they remained in the hands of the solicitors till after the death of K. and were never at any time in her possession.
On 15th May 1963 L. had informed Mrs C., whose two eldest children had by then attained majority, that K. had instructed him to effect a policy on K.'s life for 4000 for the absolute benefit of each of Mrs. C.'s children. On 20th August 1963 K. had herself informed the husband of Mrs R.-K., who was the father and curator of Mrs R.-K.'s children, that she had taken out life policies for each of her grandnieces and grandnephews, including the children of Mrs R.-K., and that each of them was to be treated equally. On the same day K. had told Mrs R.-K. that she had been advised by L. to take out life policies and that there would be a life policy for each of Mrs R.-K.'s three children.
On 17th September 1963 K. had informed her solicitors that the policies would be delivered to them by L., and that they were to hold the policies for the sole benefit of her grandnieces and grandnephews, who were to have an irrevocable right in them. She instructed L. that he was to arrange for the policies, when written, to be delivered direct to him for the beneficiaries alone, and that he was then to deliver them to her solicitors to be held by them likewise for the sole benefit of her grandnieces and grandnephews.
K. died on 10th March 1965, leaving a trust disposition and settlement, by which she appointed trustees and executors. The executors intimated claims to the assurance company under the policies and duly received payment of sums totalling 36,000. A question then arose whether these sums, being property passing on K.'s death, were property in which she never had an interest. Her trustees contended that the intimation to Mrs C. on 15th May 1963 and to the husband of Mrs R.-K. on 20th August 1963 operated as constructive delivery of the trust fund which was brought into existence on 26th September 1963 by payment of the first premium, and that consequently each policy, being subject to an irrevocable trust from the moment it came into existence, was property in which K. never had an interest.
Held that the intimations on 15th May and 20th August did not have the effect contended for, (a) because on those dates the policies were not yet in existence; (b) because the information given on those dates was insufficient, and the manner in which it was conveyed was inappropriate, to constitute such intimation as would amount to constructive delivery; and (c) (quoad the children of Mrs C. only) because Mrs C. was not an appropriate person to whom to make intimation on behalf of her family, especially as on 15th May 1963 two of them were of full age; and consequently that the proceeds of the policies fell to be aggregated with the remainder of K.'s estate.
Held further by Lord Kissen (with whom Lord Keithconcurred) (1) that the instructions by K. to L. and to her solicitors were similarly ineffectual, since these were not appropriate persons to receive intimation on behalf of the beneficiaries; and (2) that when K. gave instructions to L. and her solicitors on 17th September 1963, she was not acting (as was contended) as a trusteein posse for the beneficiaries, that she had not effectively excluded her interest in the policies as from that date, and that on the contrary she was in control of them between 26th September 1963 and the date when they were issued.
Observed (Lord Kissen reserving his opinion) that the existence of a prior undertaking by a truster to a beneficiary to make a provision in his favour (as distinct from advance intimation) might lead to a different result.
Allan's Trustees v. Lord Advocate, 1971 S.C. (H.L.) 45, and Clark's Trustees v. Lord Advocate, 1972 S.C. 177, considered, with particular reference to whether the concessions by the Crown in those cases were rightly made.
Alexander Gardner Cook And Others, the surviving executors and trustees acting under the trust disposition and settlement of Miss Isabelle Kerr, who died on 10th March 1965, appealed to the Court of Session under section 10 of the Finance Act, 1894, against an assessment to estate duty made by the Commissioners of Inland Revenue upon a sum of 36,000, being the proceeds of nine policies of assurance on the life of Miss Kerr. The Lord Advocate lodged answers on behalf of the Commissioners of Inland Revenue. The question in issue was whether the rate of estate duty payable in respect of the policies fell to be ascertained by aggregating the sum of 36,000 with the value of the other aggregable property passing on the death of Miss Kerr, or whether each policy fell to be assessed as an estate by itself, as being property in which she never had an interest, in terms of the proviso to section 4 of the Finance Act, 1894.
The appeal set forth the following facts:"(1) The late Miss Isabelle Kerr, who resided at Heywood, 1 Margaret Street, Greenock (hereinafter referred to as the deceased) died on 10th March 1965. (2) The deceased, who was unmarried and had no children of her own, had the following grandnephews and grandnieces: (a)the children of her niece, Mrs Janet Main Kerr or Cook: (1) Miss Gillian Margaret Cook (now Mrs Gillian Margaret Cook or Tripp), born on 17th April 1936; (2) Miss Allison Gardner Cook, born on 21st June 1938; (3) Miss Hilary Jean Cook, born on 18th September 1944; (4) Miss Elizabeth Ann Cook, born on 26th February 1947; (5) Hamish Alexander Cook, born on 15th June 1948; (6) Harry Colin Cook, born on 21st May 1952; and (b) the children of her niece, Mrs Mona Kerr or Reid-Kerr: (7) Miss Carolyn Landon Kerr, born on 8th May 1943; (8) Miss Olive Pandora De Maillard Kerr, born on 10th November 1946; (9) Miss Janet Isabelle Kerr, born on 9th June 1948. (3) In or about 1963 Mr Hugh Lindsay, chartered accountant, of Messrs J. M. Kerr & Lindsay, C.A., 4 Argyll Street, Greenock, suggested to the deceased, who was then 84 years of age, that, in order to mitigate the incidence of estate duty in the event of her death and increase her net annual income, she should invest some of her capital in the purchase of an annuity, and that she should use part of her annuity for the payment of the premiums on policies of life assurance on her own life which were to be taken out at the same time. Mr Lindsay had acted as her accountant since 1952, when he joined the said firm, of which he became a partner in 1960, and had also attended to her personal affairs, including the payment of domestic bills. The founder of the firm was a brother of the deceased, and no accounts were ever rendered to the deceased for these services, which were gratuitous. Mr Lindsay had also acted since 1952 as accountant to the said Mrs Cook, the said Mrs Reid-Kerr and her husband, Sheriff Robert Reid-Kerr. (4) In making the suggestion referred to in the preceding paragraph Mr Lindsay envisaged that each policy should be so taken out as to constitute an estate by itself in terms of the proviso to section 4 of the Finance Act, 1894, then in force. He fully appreciated from the outset that it was...
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