Kildrummy (Jersey) Ltd v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 30 August 1990 |
| Date | 30 August 1990 |
| Court | Court of Session |
Court of Session (Inner House).
Lord President Hope, Lord Sutherland and Lord Clyde.
Mr WG Penrose QC and Mr MCN Scott (instructed by Dundas & Wilson) for Kildrummy (Jersey) Ltd.
Mr AC Hamilton QC and Mr JW McNeill (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the opinions:
Church of Scotland Endowment Committee v Provident Association of London LtdENR1914 SC 165
Clark Taylor & Co Ltd v Quality Site Development (Edinburgh) LtdSC 1981 SC 111
Faulds v CorbetUNK (1859) 21 D 587
Gibson v Trotter (1710) Mor 5695
Grey v EllisonENR (1856) 1 Giff 438
Henderson v AstwoodELR [1894] AC 150
Kerr's Trustees v Lord AdvocateSC 1974 SC 115
Mann v Houston 1957 SLT 89
Pickard v PickardSC 1963 SC 604
Robertson v DuffUNK (1840) 2 D 279
Wight v Earl of Hopeton (1763) Mor 10,461
Stamp duty - Voluntary disposition of estate by owners to Jersey company - Purported grant of lease by estate owners to nominee for themselves before disposition - Purported lease assigned by nominee to owners after disposition - Whether lease a nullity - Whether stamp duty chargeable on value of property subject to lease or, if lease ineffective, on higher value of property free of lease - section 74 subsec-or-para (1)Finance (1909-10) Act 1910, sec. 74(1) (Repealed byFinance Act 1985 section 82 subsec-or-para (1)Finance Act 1985, sec. 82(1)).
This was an appeal by a company incorporated under the laws of Jersey ("Jersey") by way of case stated by the Inland Revenue Commissioners for the opinion of the Court of Session as to the stamp duty chargeable on the voluntary disposition of an estate in Scotland by the owners to Jersey.
In 1979 Mr and Mrs S owned and occupied Kildrummy Estate. On 26 July 1979 they executed a lease of the estate in favour of a company ("Estates"). On the previous day, Estates had executed a deed of trust which declared that they were about to enter into the lease and would hold it "in trust and as nominee for" Mr and Mrs S. The lease was registered under the Registration of Leases (Scotland) Act 1857.
On 3 September, by a voluntary conveyance, Mr and Mrs S conveyed the estate to Jersey. On 18 October Estates, with the consent of Jersey, assigned its rights under the lease to Mr and Mrs S who thus became the tenants in occupation of the estate.
The disposition of the estate to Jersey contained a warrandice clause excepting all rights of possession granted by Mr and Mrs S and expressly excepting the lease of 26 July 1979.
Jersey disputed a stamp duty assessment made in the sum of £22,000 pursuant to the section 74 subsec-or-para (1)Finance (1909-10) Act 1910, sec. 74(1) on the basis of the value of the estate conveyed free of any occupancy rights under the lease to Estates. Jersey claimed that the value of the estate was reduced by the existence of a valid and binding lease so that the correct stamp duty chargeable was £7,000.
The Inland Revenue took the view that the lease was a nullity because Estates, by virtue of the deed of trust, was the nominee of Mr and Mrs S. A person could not grant a lease to his nominee any more than he could grant a lease to himself, neither was the lease validated by the subsequent disposition of the estate to Jersey. Alternatively, if the lease was effective, the disposition conveyed both the estate and the lease so that ad valorem stamp duty of £60 was payable on the lease in addition to the £22,000 on the value of the estate.
Jersey contended that the deed of trust merely separated the title to the lease from the beneficial interest and, in any event, on the disposition of the estate to Jersey, any invalidity resulting from the identity of the parties was cured, Jersey becoming the lessor and Estates the lessee. Further, the lease could not be void as it had been duly registered with the result that third parties, such as existing tenants, could be affected by it.
Held, dismissing the appeal:
1. A contract between a principal and his nominee would be equivalent to a person contracting with himself. Thus a lease entered into between a principal and his nominee was a mere fiction.
2. Registration could not validate an invalid lease. By section 2sec. 2 of the 1857 Act it was a prerequisite that the lease should be valid and binding. A lease which was a nullity did not acquire validity by being put on the register if it should not have been on the register in the first place.
1. The opinion of the Court of Session as the Court of Exchequer in Scotland is desired as to the stamp duty chargeable on a disposition (hereafter referred to as "the disposition") which was presented to the respondents for their opinion as to the stamp duty with which it was chargeable. The disposition was presented by Messrs Burnett & Reid, advocates, 15 Golden Square, Aberdeen on behalf of the appellant under the provisions of Stamp Act 1891 section 12sec. 12 of the Stamp Act 1891. The appellant is Kildrummy (Jersey) Ltd, a company incorporated under the laws of Jersey and having its registered office at 45 La Motte Street, St Helier, Jersey, Channel Islands ("Jersey"), and the respondents are the Commissioners of Inland Revenue ("the commissioners").
2. The disposition, which is dated 3 September 1979, was granted in favour of Jersey by James Pearson Smith and Mrs Hylda Stell or Smith ("Mr and Mrs Smith"). The subject matter of the disposition was Kildrummy Estate, Aberdeenshire (which heritable subjects are hereinafter referred to as "the subjects").
3. The disposition in favour of Jersey proceeds on the following narrative:
WE, JAMES PEARSON SMITH and MRS HYLDA STELL or SMITH, both sometime residing at Branshaw, Oakworth, Keighley, Yorkshire, and now at Kildrummy, Aberdeenshire, heritable proprietors of the subjects hereinafter disponed, for certain good causes, DO HEREBY DISPONE TO and IN FAVOUR OF KILDRUMMY (JERSEY) LIMITED, incorporated under the Laws of Jersey and having its Registered Office at Forty-five La Motte Street, St Helier, Jersey, Channel Islands, heritably and irredeemably ALL and WHOLE our respective equal pro indiviso shares of (PRIMO) ALL and WHOLE the Lands and Estate of Kildrummy with ALL and WHOLE the Salmon and other fishings in the River Don appertaining thereto all lying in the Parishes of Auchindoir, Kildrummy and Towie in the County of Aberdeen, being the subjects described in and disponed by the Disposition granted by Rafael Gordon in favour of James Ogston dated the Twelfth and recorded in the Division of the General Register of Sasines for the County of Aberdeen on the Eighteenth both days of November Eighteen hundred and Ninety-eight … And (SECUNDO) by way of conveyance and not by way of exception ALL and WHOLE the subjects in the said Parishes of Auchindoir, Kildrummy and Towie described in and disponed by the Disposition granted by the Trustees of the late The Most Noble Alexander William George, Duke of Fife, in favour of me the said James Pearson Smith and Others dated the Fourth and recorded in the said Division of the General Register of Sasines on the Fifteenth both days of March Nineteen Hundred and Fifty-eight …
4. The warrandice clause in the disposition is in the following terms:
And we grant warrandice but excepting therefrom all feu rights, current leases and other rights of possession granted by us or our authors and excepting in particular without prejudice to the said generality the lease between us and Kildrummy Estates Limited dated the Twenty-sixty day of July Nineteen Hundred and Seventy-nine, the said disponee and its foresaids being bound by acceptance hereof it binds itself to free and relieve us at and from the said term of entry of all obligations of every kind in favour of the tenants of the subjects hereby disponed.
5. The disposition was one of a series of five deeds whereby Mr and Mrs Smith firstly granted, or purported to grant, a lease of Kildrummy Estate and of a dwelling-house known as Stone-Circle Cottage, Glenkindie to Kildrummy Estates Ltd ("Estates"), a company which had previously agreed to hold the lease as nominee for Mr and Mrs Smith, secondly conveyed the said subjects to Jersey, and thirdly received in their favour from Estates, with consent of Jersey, an assignation of the lease, or purported lease, which they had previously granted. The other four deeds in the series were as follows:
(a) a deed of trust by Estates dated 25 July 1979 relative to the lease of Kildrummy Estate which was about to be granted.
(b) a lease by Mr and Mrs Smith dated 26 July 1979 in favour of Estates of Kildrummy Estate and Stone-Circle Cottage, Glenkindie (hereinafter referred to as "the lease").
(c) a disposition by Mr and Mrs Smith in favour of Jersey of Stone-Circle Cottage, Glenkindie dated 3 September 1979.
(d) an assignation of the lease by Estates, with consent of Jersey, favour of Mr and Mrs Smith dated 3, 4 and 18 October 1979.
6. It is common ground:
-
(a) as regards the principal contention of the commissioners -
(i) that the disposition is assessable to stamp duty as a "conveyance or transfer operating as a voluntary disposition inter vivos" within section 74sec. 74 of the Finance (1909-10) Act 1910;
(ii) that if Jersey took the subjects free of any right of occupation on the part of Estates the stamp duty chargeable on the disposition is £22,000 (by reason of section 74 subsec-or-para (1)sec. 74(1) of the Finance (1909-10) Act 1910 andFinance Act 1963 section 55 subsec-or-para (1)sec. 55(1)(c) of the Finance Act 1963 as amended byFinance Act 1974 section 49sec. 49 of, andFinance Act 1974 schedule 11Sch. 11 to, theFinance Act 1974, whereas, if Jersey took the subjects subject to a right of occupation on the part of Estates under the lease, the stamp duty chargeable on the disposition is £7,000 (by reason of the aforementioned provisions);
(b) as regards the alternative contention of the commissioners, that if...
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