KILDRUMMY (JERSEY) Ltd v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 30 August 1990 |
| Docket Number | No. 1. |
| Date | 30 August 1990 |
| Court | Court of Session (Inner House - First Division) |
FIRST DIVISION.
Heritable property and conveyancingConstitution of lease by dispositionWarrandice clause in disposition purporting to recognise subsisting lease which was in fact voidWhether lease constituted by terms of dispositionLand Tenure Reform (Scotland) Act 1974 (cap. 38). sec. 17.1
Landlord and tenantLeaseWhether lease constituted verbally where grantor thereof having beneficial interest in subjects of let only under terms of trust deed.
RevenueStamp dutyVoluntary dispositionGratuitous transfer of subjects by dispositionTransfer chargeable to stamp duty as voluntary disposition inter vivos on value of subjects conveyed affected by lease with same grantor and grantee.
A company (J. Ltd.) sought the opinion of the Commissioners of Inland Revenue under sec. 12 of the Stamp Act 1891 as regards the extent to which a disposition granted in its favour was chargeable to stamp duty. The disposition in question was in respect of a gratuitous transfer of certain subjects inter vivos, the effect of which was agreed to be that stamp duty was exigible on the value of the property transferred. The point of contention between the parties was in respect of the effect which a lease of the subjects, which had been granted and recorded in the General Register of Sasines prior to the disposition being granted, had had on that value. That lease had been disponed to another company (E. Ltd.) and ex facie its terms was a transaction for full value at arm's length. However, it was preceded by a deed of trust by which that company had declared that it would hold the subjects in trust and as nominee for all the grantors. The commissioners assessed duty on the basis that the subjects had been conveyed free of all right of occupation on the part of E. Ltd., as they considered: (1) that the lease had been a nullity; (2) that, if it had been capable of being rendered effectual by a supervening event, then the disposition had not been such an event; and (3) that, if the disposition had rendered the lease effectual, it would follow that for the purpose of stamp duty it both conveyed the subjects to the appellant company and effected a lease thereof in favour of E. Ltd., in which case it would fall to be charged separately and distinctly to duty in respect of each of these matters in terms of sec. 4 (a) of the Stamp Act. The appellant company appealed to the Inner House of the Court of Session by way of stated case and argued that the purpose of the deed of trust had been to separate the title to the lease from the beneficial interest therein, thereby creating a bare trust with E. Ltd. being the nominee for the grantors; and that this had been sufficient for its purpose to be achieved. Additionally, in terms of sec. 17 of the Land Tenure Reform (Scotland) Act 1974, the grant of one interposed lease was deemed to be effectual for all purposes as a lease of land, and the matter was put beyond doubt, having regard to the provisions of the Registration of Leases (Scotland) Act 1857, when the lease was recorded and, in terms of the disposition, the appellant company, having accepted a warrandice clause which excepted all current leases, was barred from disputing the lease. It also argued that the only conceivable objection to the lease's validity, namely the identity of interest between the grantors as tenants on the one hand and as landlords on the other, had been removed by the disposition which had adopted and perfected the lease.
Held (1) that as E. Ltd. had been acting from the outset as the grantors trustee or agent and as their nominee, the grantors were in effect seeking to enter into a contract with themselves for their own benefit; (2) that for that reason there had never been any trust property and the commissioners had, accordingly, been right to regard the lease as a nullity; (3) that no agreement between the grantors and E. Ltd. as their trustee, agent or nominee could alter the fact that the lease which had been contemplated by them was something which could not exist, and that the lease which was a nullity could be neither an interposed lease in terms of sec. 17 of the 1974 Act nor a lease binding on singular successors in terms of the 1857 Act, irrespective of the fact that the purported title had been recorded; (4) that the warrandice clause in the disposition, according to its own terms, was merely an obligation of relief from the date of entry and there was nothing to prevent the appellants from bringing a reduction of the lease on any grounds competent in law in order to remove the burden of this obligation; and (5) that with regard to the commissioners' contention that, had the lease been effectual the two transactions would fall to be charged to duty separately, title to the lease could not vest in E. Ltd. as it had not been a party to the disposition; and appealrefused.
Kildrummy (Jersey) Limited, a company incorporated under the laws of Jersey, sought the opinion of the Commissioners of Inland Revenue under sec. 12 of the Stamp Act 1891 in respect of its liability to pay stamp duty in respect of a gratuitous disposition of Kildrummy Estate, Aberdeenshire, granted by James Pearson Smith and Mrs Hylda Stell or Smith in favour of Kildrummy (Jersey) Limited dated 3rd September 1979 and subsequently recorded in the division of the General Register of Sasines for the county of Aberdeen.
The disposition contained inter alia the following clause:"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-Sixth day of July in Nineteen Hundred and Seventy-Nine, the said disponee and its foresaids being bound [as] 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."
A lease of the same subjects had been granted by Mr and Mrs Smith, in favour of Kildrummy Estates Ltd., on 26th July 1979 and recorded on 28th August in that year. The lease had itself been preceded by a deed of trust, dated 25th July 1979, by Kildrummy Estates Ltd. in favour of Mr and Mrs Smith, which was in the following terms:"WE, KILDRUMMY ESTATES LIMITED, a Company incorporated under the Companies Acts and having our Registered office at Twelve Golden Square, Aberdeen, HEREBY DECLARE that we are about to enter into a Lease in our favour by James Pearson Smith and Mrs Hylda Stell or Smith of (One) the Lands and Estate of Kildrummy together with the Salmon and other Fishings in the River Don appertaining thereto and (Two) the dwellinghouse known as Stone-Circle Cottage, Glenkindie all lying in the Parishes of Auchindour, Kildrummy and Towie in the County of Aberdeen: AND WE FURTHER DECLARE that we shall hold said Lease in trust and as nominee for the said James Pearson Smith and Mrs Hylda Stell or Smith."
On 2nd November 1987 the Commissioners of Inland Revenue assessed liability to pay stamp duty on the disposition in the sum of 22,000.
The facts and circumstances are adequately set forth in the opinion of their Lordships in the First Division.
The company thereafter appealed by way of stated case to the Inner House.
The cause called before the First Division, comprising the Lord President (Hope), Lord Sutherland and Lord Clyde, for a hearing thereon.
At advising on 30th August 1990,
LORD PRESIDENT (Hope).The dispute which has arisen in this case relates to the amount of the stamp duty chargeable on a disposition of heritable subjects known as Kildrummy Estate in Aberdeenshire. The disposition, which is dated 3rd September 1979, was granted by Mr and Mrs Smith in favour of Kildrummy (Jersey) Ltd. It was presented for registration in the General Register of Sasines on 1st October 1979. This was a gratuitous transaction and it is agreed that the disposition is chargeable with stamp duty as a voluntary dispositioninter vivos under sec. 74 (1) of the Finance (1909-10) Act 1910 on the value of property conveyed or transferred. The point at issue is whether the value of the property is affected by a lease of the same heritable subjects dated 26th July 1979 which Mr and Mrs Smith granted in favour of Kildrummy Estates Ltd. and which was recorded in the General Register of Sasines on 28th August 1979.
The lease, which was for a period of 99 years and at a rent of 500 subject to review after 20 years and every fifth year thereafter, has all the appearance of a transaction entered into for full value and at arm's length. But it was preceded by a document called a deed of trust dated 25th July 1979 by Kildrummy Estates Ltd. in favour of Mr and Mrs Smith. In terms of this deed the Estates declared that they were about to enter into a lease of the subjects in their favour by Mr and Mrs Smith and that they would hold the lease in trust and as nominee for them. It was in these circumstances that Kildrummy (Jersey) Ltd. sought an opinion from the commissioners under sec. 12 of the Stamp Act 1891 as to the stamp duty with which the disposition in their favour was chargeable. Jersey's contention was that the subjects should be valued on the basis that Estates already had a right of occupation of the subjects in terms of the lease or, in any event, that the subjects were conveyed to them subject to such a right of occupation in favour of Estates. But the commissioners were of the opinion that Jersey took the subjects free of any right of occupation on the part of Estates because they considered the lease to be a nullity. They were also of opinion that, if the lease were capable of being rendered effectual by some supervening event, the disposition was not such an event. That was sufficient to dispose of the question raised under reference to sec. 74...
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