Lord Advocate v Countess of Seafield
| Jurisdiction | Scotland |
| Judgment Date | 22 December 1954 |
| Docket Number | No. 13. |
| Date | 22 December 1954 |
| Court | Court of Session (Inner House - Second Division) |
2ND DIVISION.
Lord Birnam. Exchequer Cause.
RevenueSuccession dutyTimberPeriod of trust administration intervening between death of predecessor and date of successor's becoming entitled in possessionSales of timber in course of trust administrationPrice realised exceeding valuation of timber at death of predecessorWhether succession duty leviable only on valuation at death of predecessor"In like manner"Finance (1909l0) Act, 1910 (10 Edw. VII and 1 Geo. V, cap. 8), sec. 61 (5), as amended by Finance Act, 1912 (2 and 3 Geo. V, cap. 8), sec. 9.
The Finance (190910) Act, 1910, as amended, enacts by sec. 61: "(5) Where an estate, in respect of which estate duty is payable on the death of a person dying on or after the thirtieth day of April nineteen hundred and nine, comprises land on which timber, trees, wood, or underwood are growing, the value of such timber, trees, wood, or underwood shall not be taken into account in estimating the principal value of the estate or the rate of estate duty, and estate duty shall not be payable thereon, but shall, at the rate due to the principal value of the estate, be payable on the net moneys (if any), after deducting all necessary outgoings since the death of the deceased, which may from time to time be received from the sale of timber, trees, or wood when felled or cut during the period which may elapse until the land, on the death of some other person, again becomes liable or would, but for this subsection, have become liable to estate duty, and the owners or trustees of such land shall account for and pay the same accordingly as and when such moneys are received
"Provided that if at any time the timber, trees, or wood are sold, either with or apart from the land on which they are growing, the amount of estate duty on the principal value thereof which, but for this subsection, would have been payable on the death of the deceased, after deducting the amount (if any) of estate duty paid in respect of the timber, trees, or wood under this subsection since that date, shall become payable.
"This subsection shall apply to succession duty payable in respect of woodlands in like manner as it applies to estate duty, except that nothing in this subsection shall affect the rate of succession duty."
The proprietrix of a landed estate, who died in 1911, by her testamentary writings conveyed the estate to trustees, who, in the events which happened, became bound to convey it to a certain beneficiary on her attaining the age of forty. On the estate there was growing timber valued in 1911 for estate duty purposes at 220,782. Between 1911 and 1946, when the beneficiary reached the age of forty, the trustees in the course of their administration sold standing timber from the estate to the value of 1,451,539, with the result that they were enabled to repay heritable debt amounting to some 500,000 and to add some 600,000 to the moveable estate under their charge. In 1946, when succession duty became payable, questions arose as to the value of the property upon which the duty was leviable, the beneficiary contending that this value, in so far as it resulted from sales of timber, was limited to the value put upon the timber in 1911, on the ground, inter alia, that the effect of sec. 61 (5) was to equiparate succession duty with estate duty, which had been levied and paid on that valuation.
Held that there was nothing in sec. 61 (5) to alter the normal rule that succession duty is payable on the value of a succession as at the date when the successor becomes entitled to it in possession; and that consequently succession duty was leviable on such part of the sum of 1,451,539 as the beneficiary became entitled to possess in 1946, including such part of the sum as had been used to extinguish the heritable debt.
The Lord Advocate, as representing the Commissioners of Inland Revenue, brought an action against (first) the Right Honourable Nina Caroline Ogilvie-Grant-Studley-Herbert, Countess of Seafield, and (second) the trustees of the late Right Honourable Caroline, Countess Dowager of Seafield, for declarator "(First) that succession duty became payable on or in respect of all the actual property or assets to which or to the income and profits of which the first-named defender became on 17th April 1946 entitled as a successor under the trustdisposition dated 19th December 1891 and additions thereto of various dates granted by the Right Honourable Caroline, Countess Dowager of Seafield, all registered in the Books of Council and Session on 21st October 1911; (Second) that the value of the said property Countess of or assets is to be determined for the purpose of succession duty as at 17th April 1946; and (Third) that in determining the amount of succession duty payable, no deduction is to be made from the value of the said property or assets (a) in respect of any debts which may at any time have been charged upon the lands and others known as the Seafield Estates but which were paid off prior to 17th April 1946, or (b) in respect of the value of any property or assets to which the first-named defender became entitled as a successor as aforesaid, which represented the proceeds of sale of timber cut from the said Seafield Estates before 17th April 1946; and for the expenses of the action."
The facts of the case, so far as relevant to this report, were as follows:The Right Honourable Caroline, Countess Dowager of Seafield, died on 6th October 1911. By a trust-disposition dated 19th December 1891 and registered in the Books of Council and Session on 21st October 1911, she conveyed the Seafield Estates to trustees, with entry as at her death, with sundry directions as to their disposal in various events. In the events which happened, the trustees became bound (1) to convey the Estates by a formal disposition and deed of entail to the Right Honourable Nina Caroline Ogilvie -Grant-Studley-Herbert, Countess of Seafield, and the heirs of her body on her attaining the age of forty, i.e., on 17th April 1946; and (2) upon the same event to pay and make over to her the whole funds then in their hands, which included the residue of her own moveable estate. At the death of the Dowager Countess the Seafield Estates were burdened with heritable debt amounting to 515,365, 10s., and there was growing timber on the Estates then valued for estate duty purposes at 220,782. Estate duty, amounting to 30,909, 9s. 7d., was levied on the value of the timber and was paid in full by instalments between 1914 and 1922. In the course of their administration of the trust estate between 1911 and 1946 the trustees sold timber from the Estates to a total value of 1,451,539, 11s. 3d. Out of this sum the trustees repaid the heritable debt of 515,365, 10s. and expended 317,037, 5s. 4d. on woods management, replanting, &c. The balance of 619,136, 15s. lld. they administered as part of the trust estate under their charge. On 17th April 1946 the trust estate in their hands consisted of heritage of a gross annual value of 73,143, 15s. and moveable estate (including sums on deposit receipt and cash) of a total value of 1,080,780, 2s. 5d.
The pursuer averred, inter alia:(Cond. 17) "Having regard to the foregoing statutory provisions, and as the Countess Nina was of remote consanguinity to the Dowager Countess, the Commissioners of Inland Revenue claimed (first) succession duty at the rate of 10 per cent on the value of an annuity for the Countess Nina's life equal to the annual value, after making allowance for all necessary outgoings, of the heritable property to which she succeeded as aforesaid, being the heritable property which was to be the subject of the said disposition and deed of entail, the said annuity being regarded as payable from 17th April 1946, the date on which the Countess Nina became entitled in possession to her succession or to the receipt of the income and profits thereof; and (second) succession duty at the rate of 10 per cent on the value as at 17th April 1946 of her succession to the moveable assets then in the hands of the second defenders, so far as such moveable assets were derived from or represented heritable property conveyed in trust by said trust-disposition." (Cond. 27) "The pursuer avers that in computing the succession duty payable in respect of the Countess Nina's succession as aforesaid (first) that no deduction is allowable in respect of the annual interest on debts secured over heritable property which were paid off before the Countess Nina became entitled in possession to her succession, and (second) that no deduction is allowable in respect of the proceeds of sale of timber cut before the Countess Nina became entitled in possession to her succession. The defenders continue to maintain that such deductions are so allowable. Accordingly, this action is rendered necessary."
The pursuer pleaded:"(1) In the circumstances condescended on, succession duty having become payable on and in respect of all the actual property or assets to which or to the income or profits of which the first-named defender became entitled on 17th April 1946 under said trust-disposition and additions, decree of declarator should be pronounced as first concluded for. (2) In the circumstances condescended on, the value of said property or assets being properly determinable as at 17th April 1946, decree of declarator should be pronounced as second concluded for. (3) In the circumstances condescended on, no deduction from the value of said profits or assets being allowable in respect of debts charged upon said Seafield Estates paid off prior to 17th April 1946 for the purpose of calculating succession duty payable, decree of declarator should be pronounced as concluded for in the first head of the third conclusion of the summons. (4) In the circumstances condescended on, no deduction from said property or assets being allowable in respect of the value of property or assets to...
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