Midland Bank Executor and Trustee Company Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE ROMER |
| Judgment Date | 18 December 1958 |
| Judgment citation (vLex) | [1958] EWCA Civ J1218-5 |
| Date | 18 December 1958 |
| Court | Court of Appeal |
[1958] EWCA Civ J1218-5
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Jenkins
Lord Justice Romer and
Lord Justice Willmer.
MR JOHN PENNYCUICK, Q.C. and MR K.J.T. ELPHINSTONE (instructed by Messrs Gerrish & Co.) appeared as Counsel for the Appellants.
MR MILNER HOLLAND, Q.C. and MR E. B. STAMP (instructed by The Solicitor for Inland Revenue) appeared as Counsel for the Respondents.
: This is an appeal by the present Trustees of the Will and Codicil dated respectively the 4th and 19th June, 1935. of Charlos Willis Harrison (here in after called "the Testator"), who died on the 20th July, 1937, from an Order of Mr. Justice Danckwerts dated the 26th February, 19458, whereby it was deolared that in the evonts which had happened estate duty became payable unde Section 1 of the Finance Act 1894 on the death of Gcoffrey Ainsworth Harrison (here in after called "the deceased") in respect of a one equal fifth share of the capital of the "retained shares" referred to in the said Codicil.
It is unnecessary for the present purpose to refer to any of the provisions of the Testator's Will. By the Codicil thereto the Testator (by Clause 1) bequeathed to his Trustees 10,000 of the ordinary shares held by him in Harrison Trust Ltd. and 10,000 of the ordinary shares held by him in the Atherton. Investment Corporation Ltd. and directed that his Trustees should hold such shares there in after oallod "the retained shares" upon the trusts there in after declared concerning the same.
By Clause 2 of the Codicil the Testator declared the following trusts concerning the retained shares: "My Trustees shall until the expiration of a period of twenty one years from my death or until my daughter Jeannette Adeline Wightman-Harrison shall die whichever shall first happen apply the income of the retained shares in making such grants to the Shipping Companies mentioned in Clause 5 of my said Will or to any two or more of them as for a period of twenty one years from my death my Trustees are directed to make under Clause 6 of my said Will and upon the undertaking in that clause mentioned, and at the expiration of such period or at the death of my said daughter whichever shall first happen my trustees shall hold the retained shares Upon trust if my said daughter shall dde before the expiration of the said period of twenty one years to accumulate the income thereof until the expiration of the said period by investing the same and the resulting income from such investments in any mode of investment authorised by my said Will and from and after the expiration of such period of twenty one years my Trustees shall hold two fifths of the income of the retained shares and such accumulations aforesaid if any upon protoctive trusts as deolared by Section 33 of the Trustee Act 1925 for the benefit of Anne Harrison wife of my nephew Francis Joseph Harrison for the period of her life Subject thereto my Trustees shall during the lives of my said nephew Francis Joseph Harrison and his said wife and the survivor of them apply the residue of the income of the retained shares and such accumulations as aforesaid if any for the benefit of such child or children of my said nephew and his said wife as shall for the time boing be living and if more than one in such manner and in such shares as during the life of my said nephew and his said wife my said nephew and his said wife shall jointly and during the life of the survivor of my said nephew and his said wife the survivor of them shall in writing from time to time direct".
By Clause 3 of the Codicil the Testator directed that from and after the death of the survivor of his said nephew and his said wife his Trustees should hold the retained shares and such accumulations if any in trust (to put it shortly) for the children or remoter issue of his said nephew and his said wife as they or the survivor of them should appoint with a trust in default of appointment for their children who should attain the ago of 21 years or being daughters marry under that age.
The Testator was survived by his daughter, Jeannette Adeline Wightman-Harrison (here in after called "the daughter") by his nephew, Francis Joseph Harrison (here in after called "the nephow") and by the nephew's wife, Anne Harrison (here in after called "the nephew's wife"). The nephew died on the 11th December, 1957. The nephew's wife is still living. They had two daughtors who are still living and have attainod the age of 21 years and one son, namely, the deceased, Geoffroy Ainsworth Harrison, who attained the age of 21 years and died on the 7th October, 1955, and on whose death the present claim to estate duty arose. The period of 21 years from the death of the Testator expired on the 19th July, 1958, in the lifetime of the daughtor, so that the trust under Clause 2 of the Codicil for accumulation of the income of the rotained shares in the event of her dying before the expiration of such period in fact never became operative.
It will be soon that if the matter had been loft to depond upon the Codicil alone, there could have been no quostion. of any liability to estate duty on the death of the deceasod in rospect of any share or interest in the retained shares, as on that footing his only intorests would have been an intorest in expectancy in the income of the rotained shares under the trusts limited to take effect after the expiration of the period of 21 years from the Testator's death, which by reasen of the death of the deceased would have failed or determined before at became an intorest in possession (see Finance Act, 1894, Section 5(3)), and the possibility of an interest under the trusts in default of appointment contained in Clause 3, which could only constitute property for estate duty purposes in the event of both his parents dying without fully appointing the fund.
But after the death of the Tostator an arrangement was carried out by means of the dccuments and Order of the Court, to which I am about to refer, and the Commissioners of Inland Revenue claim that what was then done had the effect either (a) of bringing about a passing on the death of the deceased under Section 1 of the Finance Act 1894 of a one-fifth share in the capital of the trust fund (the view which commended itself to the learned Judge); or alternatively (b) of conferring on the deceased an interest ceasing on his death in a like propertion of the trust fund under Section 2(l)(b), which having regard to Section 7(7)(b) would have the same result as the primary claim undor Section 1.
By an Agreement dated the 15th July, 1940, the parties to which included amongst others the two Companies named in Clause 1 of the Codicil, the four Shipping Companies named in Clause 5 of the Will, and the daughter, provision was made for the reconstruction of the two Companies named in Clause 1 of the Codicil, which involved the exchange of the retained shares for shares in two new Companies formed to take the place of the two Companies named in Clause 1 of the Codicil: and it was a torm of this Agreement that the further agreement to which I am about to refer should be entered into.
By a further Agreement, also dated the 15th July, 1940, and made between the four Shipping Companios of the one part and the daughter of the other part, it was agreed and declared as follows: (1) Mrs. Wightman-Harrison and the Shipping Companies shall upon the Reconstruction Agreement becoming absoluto execute an instrument in the form of the draft instrument annexed hereto marked VIII or in such other form as may be agreed botweon Mrs. Wightman-Harrison and the Shipping Companies and approved by the Chancery Division of the High Court of Justice. This agreement is conditional on: (a) An order being obtained from the Chancery Division of the High Court of Justice sanctioning the exchango provided for by the Reconstruction Agreement as respects the ton thousand shares in Harrison Trust Ltd. and the tenthousand shares in The Atherton Investment Corporation Ltd. specifically bequeathed by the Codicil dated the 19th day of June 1935 of Charles Willis Harrison and (b) The Reconstruction Agreement becoming absolute and (c) Unless Mrs. Wightman-Harrison and the Shipping Companies otherwise agree an Order being obtained from the Chancery Division of the High Court of Justice providing in substance that the income of the said shares and of the investments for the time being representing the same accruing between the date of the death of Mrs Wigtman-Harrison and the expiration of twonty one years from the date of the death of the testator shall be held upon the trusts which are applicable under the said Codicil of the testator to the same income after the expiration of the said twenty one years".
A Deed in the terms of the draft annexed to the last mentioned Agreement was in fact executed by the four Shipping Companies, the daughter and the Trustees on the 25th October, 1941, and as I will in due course be referring to the terms of the Deed itself I need not recite those of the draft.
By an Order made by Mr Justice Simonds (as he then was) on the 1st November, 1940 (re Harrison deed. 1940 H. No. 2453) approval was given to the accoptance and retention by the Trustces of the Will and Codicil of the shares to be taken in excnange for the retained shares under the Reconstruction Agreement, and it was ordered (inter alia): "That (subject to the interests of the Plaintiff Jeannette Adeline Wightman-Harrison and the Defendants The Willis Steamship Company Limited National Steamship Company Limited The Gowland Steamship Company Limited and J. & C. Harrison Limited in the income to ariso from the said shares settled by the Codicil and the...
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