Re Hastings-Bass Deed. Hastings and Ors. (Appellants — Plaintiffs) v Commissioners of Inland Revenue (Respondents — Defendants)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MEGAW,Lord Justice Buckley |
| Judgment Date | 14 March 1974 |
| Judgment citation (vLex) | [1974] EWCA Civ J0314-1 |
| Date | 14 March 1974 |
| Court | Court of Appeal (Civil Division) |
(Appeal of Plaintiffs from Order of Mr. Justice Plowman, London, dated November 2, 1972.)
[1974] EWCA Civ J0314-1
Lord Justice Megaw.
Lord Justice Buckley and
Lord Justice Roskill.
In The Supreme Court of Judicature
Court of Appeal
MR CHRISTOPHER SLADE, Q. C. and MR HECTOR HILLABY, (instructed by Messrs. Bircham & Co.) appeared on behalf of the Appellants (Plaintiffs).
MR. M.C.H. BROWNE-WILKINSON, Q.C. and MR P.L. GIBSON, (instructed by The Solicitor of the Inland Revenue) appeared on behalf of the Respondents (Defendants).
The Judgment which Lord Justice Buckley is about to deliver is the judgment of the court.
This appeal raises a difficult question relating to an advancement under the Trustee Act 1925, Section 32, by way of sub-settlement, some of the beneficial trusts of which are void for perpetuity. The appeal is from a Judgment of Mr. Justice Plowman delivered on 2nd November, 1972.
By a settlement dated 1st April, 1947 (which we will call "the 1947 settlement"), made on the marriage of Peter Robin Hood Hastings (who later assumed the additional surname of Bass, and whom we will call "Captain Hastings-Bass) his uncle, Sir William Bass, settled property upon trusts under which the beneficial interests were as follows: (a) a protected life interest for Captain Hastings-Bass; (b) after his death upon trust for such of his sons or remoter male issue as Captain Hastings-Bass should by deed revocable or irrevocable or by will or codicil appoint; (c) in default of and subject to any such appointment upon trust for such son of Captain Hastings-Bass as should first attain the age of 25 years before the expiration of 21 years after the death of Captain Hastings-Bass and, if there should be no such son, upon trust for such son of Captain Hastings-Bass as should first attain the age of 21 years; (d) with remainders upon similar trusts to two other nephews of the settlor and their respective male issue and an ultimate trust in favour of a named person; (e) with power for Captain Hastings-Bass by deed revocable or irrevocable executed prior to and in contemplation of any marriage or by will or codicil to appoint a life or less interest in not exceeding one half of the trust fund in favour of any wife who might survive him. Captain Hastings-Bass had four children, a son (William) born on 30th January, 1948, a son (Simon) born on 2nd May, 1950, a son (John) born on 5th June, 1954, and a daughter.
By a revocable deed of appointment dated 2nd January, 1958, Captain Hastings-Bass in exercise of his power in that behalf under the 1947 settlement appointed that the trustees should from and after his death (and subject to any interest appointed in favour of his widow) stand possessed of the trust fund in trust for his son William, if and when he should attain the age of 25 years absolutely. William was then nearly ten years old, and he was bound to attain the age of 25 years, if at all, within 21 years of his father's death. The appointment appears to have had no significant effect upon his contingent interest.
In the preceding year, on 29th October, 1957, Miss Diana Hastings, a sister of Captain Hastings-Bass, had made a settlement of a sum of £500 upon trusts under which the beneficial interests were as follows: (a) a life interest for William; (b) after his death in trust for such of his issue as he without transgressing the rule against perpetuities should by deed revocable or irrevocable or by will or codicil appoint; (c) in default of and subject to any such appointment in trust for his children who should attain the age of 21 years and if more than one in equal shares subject to hotchpot; (d) if there should be no such child of William In trust for such of theissue of Captain Hastings-Bass living at the date of the failure of the foregoing trusts as the trustees without transgressing the rule against perpetuities should by deed appoint; (e) in default of and subject to any such appointment in trust for Captain Hastings-Bass's youngest son John absolutely; (f) with power for William by deed made in contemplation of marriage or by will or codicil to appoint to any wife who might survive him a life or lesser interest in the whole or any part of the trust fund. This settlement (which we will call the 1957 settlement) contained a power for the trustees in their absolute discretion from time to time and at any time after William should have attained 21 to hand over the whole or such part of the capital of the trust fund to him free from the trusts of the settlement as they might think fit. It also contained a power for the trustees at their discretion with the consent in writing of William to revoke by deed all or any of the trusts therein contained concerning the whole of the trust fund or any part or parts thereof and to declare such new or other trusts for the benefit of William or any child or remoter issue of his as the trustees might think proper.
The rate of estate duty prospectively payable upon property passing upon the death of Captain Hastings-Bass was high, and accordingly the solicitor to the 1947 settlement trustees devised a scheme which was described by Captain Hastings-Bass in a contemporary letter as "a scheme whereby some of the enormous death duties may be reduced on the settlement". This scheme took the form of a transfer by the 1947 settlement trustees under the statutory power of advancement to the 1957 settlement trustees upon the trusts of the 1957 settlement of a fund valued at £50,000. On 21st March, 1958, the 1947 settlement trustees with the consent of Captain Hastings-Bass and in exercise of the statutory power of advancement transferred out of the 1947 settlement to the trustees of the 1957 settlement investments to the value of £50,000 by way of advancement for the benefit of William to be held on the trusts of the latter settlement. The trusts of the 1957 settlement, as applied to the trust fund settled by that settlement, wore innocent of any offence against the perpetuity rule. It is evident that the trustees' solicitor conceived that the trusts of the 1957 settlement as applicable to the funds transferred out of the 1947 settlement would also escape infringing the perpetuity rule. This view was consistent with the subsequent decision of Mr. Justice Danckwerts dated 14th May, 1959, in Re: Pilkington's Will Trusts (1959 1 Ch p. 699). But the Inland Revenue appealed from that decision and eventually In the House of Lords ( 1964 A.C. p. 612) it was held that a power of advancement was a special power and that accordingly trusts called into existence by its exercise must be written into the instrument creating the power for the purposes of applying the perpetuity rule.
William was not a life in being at the date of the 1947 settlement, and accordingly it is now common ground that all the powers and beneficial trusts of the advanced fund declared by reference to the 1957 settlement other than the life interest of William are void for perpetuity.
It is also common ground that, If the transaction of 21st March, 1958, was effective to create a life interest in possession in William in the advanced fund, no estate duty became payable on that fund upon the death of Captain Hastings-Bass, which occurred on 4th June, 1964. The Inland Revenue, however, contend that the effect of the transaction was not to create any new beneficial interests in the £50,000 fund, but that this fund at all times remained subject to the trusts of the 1947 settlement. On this footing it is clear that estate duty would have become payable on the fund upon Captain Hastings-Bass's death.
In these circumstances, the plaintiffs, who are the present trustees of the 1947 settlement, applied by originating summons in the Chancery Division for the determination of the question whether estate duty did or did not become payable on the death of Captain Hastings-Bass in respect of the advanced fund. The only defendants to these proceedings are the Commissioners of Inland Revenue. William attained the age of 25 years on 50th January, 1973, and accordingly no-one but he has any interest in the capital of the 1947 settlement fund, and the only persons interested in the income of that fund are himself and his mother, who is at present entitled under a testamentary appointment made by Captain Hastings-Bass to half the income of the fund. She does not, however, seek to assert that the 1958 advancement was not effective to create a life interest in possession in William in the advanced fund.
The case came in due course before Mr. Justice Plowman for decision, and, following an earlier decision of Mr. Justice Cross (as he then was) in Re: Abrahams' Will Trust (1969 1 Ch. p. 463), the learned judge held that the result actually produced by the 1958 advance was substantially or essentially different from the intentions of the 1947 settlement trustees when they made it. Following Mr. Justice Cross, Mr. Justice Plowman took the view that the 1947 settlement trustees never effectively exercised the power of advancement, and that accordingly the £50,000 fund at all times remained subject to the trusts of the 1947 settlement. He therefore decided that estate duty did become payable on that fund upon the death of Captain Hastings-Bass. From that decision the plaintiffs appeal.
We have had the advantage of excellently clear arguments on both sides in the appeal. The contentions can be shortly stated in this way. The appellant plaintiffs contend, first, that, notwithstanding that the 1958 advancement did no more than create a valid life interest for William, it was nevertheless for his benefit and fell within the terms of the trustees' statutory power of advancement; secondly, that...
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