Muir v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 25 May 1966 |
| Date | 25 May 1966 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Surtax - Settlement - Settlement in which settlor has an interest - Uncertainty as to end of trust period - Payment to settlor in compromise of possible claim that income trusts invalid - Whether those trusts invalid - Power to apply income in payment of insurance premiums - Trust fund appointed by trustees on original trusts excluding this power - Whether power effectually released - Whether settlor has an interest in settlement (a) owing to doubt as to validity of income trusts resulting in payment to him or (b) because income may be applied in paying up policy in which he has an interest - Income Tax Act 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), s. 405.
Procedure - Appeal - Case Stated - Party successful on one of two alternative contentions - Case demanded by unsuccessful party only - Whether successful party may maintain alternative contention.
Under a settlement made by the Appellant in 1947 the income of the trust fund arising during an appointed period was declared to be applicable for the benefit of all or any one or more of the beneficiaries as the trustees might from time to time think fit. The beneficiaries were the settlor's descendants and "all persons who have married or may marry" any of his descendants. The appointed period was expressed to end (subject to the trustees' power to terminate it earlier) on the earlier of 90 years from the date of the settlement and 21 years from the death of the last survivor of the beneficiaries born before that date. The trustees were empowered to capitalise income by (inter alia) applying it in paying premiums on any policy of assurance in which a beneficiary had (whether under that or any other settlement or otherwise) a beneficial interest; they also had a power to appoint capital to or in trust for any of the beneficiaries. On 10th September 1952 the trustees purported to appoint the entire capital on trusts identical in all material respects with the original trusts excluding the power to capitalise income. In 1953 the Appellant made a substantial addition to the trust fund.
In 1956 Counsel advised the trustees that (inter alia) the trusts of income during the appointed period might be invalid, and on 7th July 1957 a compromise was sanctioned by the Chancery Division whereby the Appellant accepted £20,000 (being substantially equivalent to the aggregate amount of the trust income, less tax at the standard rate, from 6th April 1953 to 7th July 1957) in full satisfaction of any claim under a resulting trust or otherwise. The Appellant stated that he had no wish to take anything out of the trust, and had agreed to accept the said £20,000 on his solicitor's advice as the lowest sum which he could reasonably accept for his consent to the compromise.
The Appellant was assessed to surtax for the years 1953-54 to 1957-58 in respect of income arising under the settlement. On appeal, it was contended for the Crown that the trusts of income were void for uncertainty because the words
"all persons who…may marry" made either the appointed period or the class of beneficiaries uncertain, so that the income was held on a resulting trust for the Appellant: alternatively, that since it was thought during the relevant years that there might be a resulting trust for the Appellant, and a payment out of the trust fund was received by him in this connection, on the facts of the case s. 405, Income Tax Act 1952, applied to the undistributed income. The Special Commissioners rejected the first contention, but upheld the second; there was no substantial difference between the liabilities under the two contentionsIn the High Court it was contended for the Appellant that the Crown was not entitled to maintain the contention as to uncertainty since it had not demanded a Case, or, alternatively, that since the issue was not stated in the Case as one on which the Court's opinion was required, the Court had, and should exercise, a discretion not to entertain it. It was contended for the Crown, as a new point, that the purported release of the power of capitalisation in 1952 was void, and that s. 405 applied because income might under that power be applied in paying premiums on a policy in which both a beneficiary under the settlement and the Appellant had beneficial interests.
Held, in the Chancery Division, that s. 405 did not apply merely because of the existence of a doubt as to the validity of an income trust.
Held, in the Court of Appeal, (1) that it was open to the Crown, on giving due notice, to support the decision in their favour on any ground of law available; (2) that there was no uncertainty as to the appointed period, nor would the possibility of such uncertainty arising later have made the trusts at present uncertain; (3) that the deed of 1952 was valid under the powers contained in the deed of 1947, and accordingly s. 405 did not apply.
Stated under the Income Tax Act 1952, ss. 229(4) and 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 26th and 27th November 1963 Rowland H. Muir (hereinafter called "the Appellant") appealed against the following additional assessments to surtax:
Year |
Amount of Assessment |
£ |
|
1953-54 |
475 |
1954-55 |
10,208 |
1955-56 |
10,916 |
1956-57 |
11,592 |
1957-58 |
10,467 |
2. Shortly stated, the question for our decision was whether the income arising under the settlement and variation deed hereinafter mentioned was to be treated as the Appellant's income during the relevant years.
3. The Appellant gave evidence before us.
4. The following documents were proved or admitted before us:
(a) copy settlement dated 23rd May 1947;
(b) copy deed of appointment dated 10th September 1952;
(c) copy affidavit of Jocelyn Olaf Hambro and Beatrice Sydney Muir, sworn 26th March 1957 and filed 2nd April 1957, in proceedings in the High Court of Justice, Chancery Division, entitled "Re Settlement dated 23rd May 1947, Re the Trustee Act, 1925, Hambro and Another v. Muir and Others", 1956 M. No. 2985;
(d) copy exhibit JOH. 4 to (c) above;
(e) copy letter dated 14th December 1955 from Special Commissioners of Income Tax to Messrs. Spicer & Pegler;
(f) copy letter dated 3rd January 1956 from Messrs. Coutts & Co. to Inland Revenue;
(g) original letter dated 6th January 1956 from Messrs. Spicer & Pegler to Special Commissioners of Income Tax;
(h) copy affidavit of Arthur Walter James, sworn 15th May 1957, in the proceedings mentioned in (c) above;
(i) copy case and opinion of Counsel dated 13th May 1957, advising on behalf of the infant defendants, exhibited to (h).
Copies of such of the above as are not annexed hereto as exhibits are available for inspection by the Court if required(1).
5. As a result of the evidence, both oral and documentary, adduced before us we find the following facts proved or admitted:
(a) By the settlement (hereinafter called "the 1947 settlement") dated 23rd May 1947 and made between (1) the Appellant (therein called "the Settlor") and (2) the Appellant and the said Jocelyn Olaf Hambro (therein called "the First Trustees"), a sum of £100 was settled upon the trusts therein contained. A copy of the 1947 settlement is annexed hereto, marked "A"(1).
(b) The trust fund comprised in the 1947 settlement was increased on 6th August 1947 by the transfer of 8500 shares in Clewer & Co. Ltd. from the Appellant to the first trustees.
(c) By a deed of appointment dated 9th September 1952 and made between (1) the Appellant, (2) the said Jocelyn Olaf Hambro, (3) the said Beatrice Sydney Muir and (4) Maurice Ashton Nelson, the said Beatrice Sydney Muir was appointed trustee of the 1947 settlement in place of the Appellant and to act jointly with the said Jocelyn Olaf Hambro.
(d) By the deed of appointment (hereinafter called "the variation deed") dated 10th September 1952, made by the said Jocelyn Olaf Hambro and Beatrice Sydney Muir (hereinafter called "the trustees"), and expressed to be supplemental to the 1947 settlement, the trustees purported, in exercise of the power reserved to them by the 1947 settlement, to declare new trusts concerning the trust fund comprised in the 1947 settlement. Such new trusts were (so far as material) identical with the trusts declared by the 1947 settlement except that the power to capitalise income (contained in clause 8 of the 1947 settlement) was omitted.
(e) Between the dates of the 1947 settlement and of the variation deed certain accumulations of income were made under the 1947 settlement.
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(f) The trust fund of the 1947 settlement was further increased on 23rd February 1953 by the transfer of 161,500 shares in the said Clewer & Co. Ltd. from the Appellant to the trustees.
(g) The Appellant, who was born in or about the year 1886, has been married once only, namely, to the said Beatrice Sydney Muir. There has been issue of such marriage two children, namely, Silvia Ann Hambro, born on 4th September 1920, and Charles Robert Muir, born on 8th April 1922.
(h) The said Silvia Ann Hambro has been married once only, namely to the said Jocelyn Olaf Hambro, and there has been issue of such marriage three children, namely, Rupert Jocelyn Hambro, born 26th June 1943, Richard Alexander Hambro, born 1st October 1946, and James Daryl Hambro, born 22nd March 1949.
(i) The said Charles Robert Muir was married on 26th June 1953 to the Rt. Hon. Rosemary Mildred Spencer Muir and there has been issue of such marriage three children, namely, Alexander Pepys Muir, born on 8th November 1954, Simon Muir, born in the year 1958, and Mary Muir, born in the year 1962.
(j) By a settlement (hereinafter called "the 1953 settlement") dated 11th August 1953 and made between (1) the Appellant, (2) the trustees and (3) Coutts & Co., 18,500 of the said shares...
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