Oughtred v Commissioners of Inland Revenue
| Jurisdiction | UK Non-devolved |
| Judge | Lord Radcliffe,Lord Cohen,Lord Keith of Avonholm,Lord Denning,Lord Jenkins |
| Judgment Date | 04 November 1959 |
| Judgment citation (vLex) | [1959] UKHL J1104-2 |
| Date | 04 November 1959 |
| Court | House of Lords |
[1959] UKHL J1104-2
Lord Radcliffe
Lord Cohen
Lord Keith of Avonholm
Lord Denning
Lord Jenkins
House of Lords
After hearing Counsel, as well on Monday the 5th, as on Tuesday the 6th, days of October last, upon the Petition and Appeal of Phyllis Brown Oughtred, of Woodlands Brough, in the East Riding of the County of York, Widow, praying. That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 15th of May 1958, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioner might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of the Commissioners of Inland Revenue, lodeed in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 15th day of May 1958, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The facts of this case are very simple. Mrs. Oughtred and her son were respectively entitled to the life interest and absolute reversion in a settled fund consisting of shares in a limited company. They thus owned between them the whole equitable interest in those shares, which were vested in Mrs. Oughtred and two other persons as trustees of the settlement. On the 18th June, 1956, an oral agreement was made between Mrs. Oughtred and her son to the effect that on the 26th of the same month she would transfer to him certain other shares in the same company which were her own absolute property and in exchange he would make her the absolute beneficial owner of the settled shares by giving up to her his beneficial reversionary interest.
On the 26th June three documents were executed. It is obvious that they were all part of the same transaction, though I will mention them in the order which gives them logical coherence. First, Mrs. Oughtred transferred her own shares to her son. Secondly, the two of them joined in giving a release to the Trustees of the settlement in respect of any "act deed matter or thing done or omitted by the Trustees or any of them in or about the execution of the trusts and provisions of the Settlement", and, the Trust Fund being (I quote from recital (F) of the Deed of Release) "now held by the Trustees in trust for Mrs. Oughtred absolutely as the Trustees hereby acknowledge", the Trustees undertook to transfer the settled shares to Mrs. Oughtred or as she should direct. Thirdly, the Trustees executed a Deed of Transfer accordingly vesting the legal title to the shares in Mrs. Oughtred.
It is this last-mentioned Deed which is claimed by the Commissioners of Inland Revenue to be a conveyance on sale of the son's equitable reversionary interest within the meaning of section 54 of the Stamp Act, 1891, and, as such, liable to ad valorem duty upon the value of the shares transferred by Mrs. Oughtred in exchange for it. The Case Stated, upon which this appeal arises, presents that claim as a question for decision by the Court.
It is plain, of course, that ostensibly the transfer is not a conveyance of the equitable reversionary interest at all. It deals with the shares themselves, not with any beneficiary's particular interest in them. The Commissioners, however, arrived at their opinion that the transfer was chargeable ad valorem by a process of reasoning which is set out in paragraph 12 of the Case. They took the view that, having regard to paragraph ( c) of subsection (1) of section 53 of the Law of Property Act, 1925 (a provision which requires that any "disposition" of an equitable interest subsisting at the time of the disposition must be in writing), they must treat the recital that the shares held by the Trustees were "now held" in trust for Mrs. Oughtred as incorrect; and they appear to have concluded, without more, that, as apart from the transfer now in question no instrument in writing stamped with ad valorem duty transferring the son's equitable reversionary interest had been produced to them, they ought to treat the transfer of shares itself as constituting the necessary instrument.
This line of reasoning is, in my view, fallacious. It contains two false assumptions. One is that under English law it must have been wrong to describe the settled shares as held by the Trustees on 26th June in trust for Mrs. Oughtred absolutely unless the son's reversion had been assigned to her in writing so as to satisfy section 53 (1) ( c) of the Law of Property Act, 1925. The other is that somehow there must exist as a result of the transaction covered by the recited facts an instrument of conveyance capable of being charged to duty ad valorem, since otherwise there would be no ad valorem duty payable. The second assumption is one which, I am bound to say, appears to me to be the foundation of the argument for the Commissioners' claim, no matter in what form it is expressed.
Yet the law with regard to liability to stamp duty is clear enough. The duty is charged upon instruments, if they exist and come within any of the categories prescribed by the Act. It is not charged upon transactions. Thus property such as chattels which by law pass on delivery can be transferred from one owner to another without attracting duty. Again, though an agreement for sale may be chargeable ad valorem, since the Act has so required, an oral agreement for the sale of property involves no charge to duty because no instrument is brought into existence to effect or to record it. The whole point of the present appeal seems to me to turn on the question whether it is open to a Court of Law to deduce from the documents of this case that Mrs. Oughtred's title to her son's equitable reversionary interest rested upon anything more than the oral agreement which admittedly took place.
My Lords, on this short point my opinion is that such a deduction is not open to a Court of Law. The materials that would support it are simply not there. I think that the judgment of Upjohn, J. in the High Court, which was in favour of Mrs. Oughtred, was correct and I agree with his reasons. I am afraid that I do not agree with the judgment of the Court of Appeal, which was in favour of the Commissioners, or with the conclusion which, as I understand, commends itself to a majority of your Lordships.
The reasoning of the whole matter, as I see it, is as follows. On the 18th June, 1956, the son owned an equitable reversionary interest in the settled shares: by his oral agreement of that date he created in his mother an equitable interest in his reversion, since the subject-matter of the agreement was property of which specific performance would normally be decreed by the Court. He thus became a trustee for her of that interest sub modo: having regard to subsection (2) of section 53 of the Law of Property Act, 1925, subsection (1) of that section did not operate to prevent that trusteeship arising by operation of law. On the 26th June Mrs. Oughtred transferred to her son the shares which were the consideration for her acquisition of his equitable interest: upon this transfer he became in a full sense and without more the trustee of his interest for her. She was the effective owner of all outstanding equitable interests. It was thus correct to recite in the Deed of Release to the Trustees of the settlement, which was to wind up their trust, that the Trust Fund was by then held upon trust for her absolutely. There was in fact no equity to the shares that could be asserted against her, and it was open to her, if she so wished, to let the matter rest without calling for a written assignment from her son. Given that the Trustees were apprised of the making of the oral agreement and of Mrs. Oughtred's satisfaction of the consideration to be given by her, the Trustees had no more to do than to transfer their legal title to her or as she might direct. This and no more is what they did.
It follows that, in my view, this transfer cannot be treated as a conveyance of the son's equitable reversion at all. The Trustees had not got it: he never transferred or released it to them: how then could they convey it? With all respect to those who think otherwise, it is incorrect to say that the Trustees' transfer was made either with his authority or at his direction. If the recital as to Mrs. Oughtred's rights was correct, as I think that it was, he had no remaining authority to give or direction to issue. A release is, after all, the normal instrument for winding up a trust when all the equitable rights are vested and the legal estate is called for from the trustees who hold it. What the Release gave the Trustees from him was acquittance for the trust administration and accounts to date, and the fact that he gave it in consideration of the legal interest in the shares being vested in his mother adds nothing on this point. Nor does it, with respect, advance the matter to say, correctly, that at the end of the day Mrs. Oughtred was the absolute owner of the shares, legal and equitable. I think that she was: but that is description, not analysis. The question that is relevant for the purpose of this appeal is how she came to occupy that position: a position which, under English law, could be reached...
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