Re Nichols, decd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date20 December 1974
Judgment citation (vLex)[1974] EWCA Civ J1220-8
Date20 December 1974

[1974] EWCA Civ J1220-8

In The Supreme Court of Judicature

Court of Appeal

Civil Division

On appeal from Order of Mr Justice Walton.


Lord Justice Russell,

Lord Justice Cairns (Not present) and

Mr Justice Goff

re Nichols, deceased.

re Administration of Justice (Miscellaneous Provisions) Act, 1933.

Francis Paul Bowyer Nichols
Commissioners of Inland Revenue

Mr JEREMIAH HARMAN, Q.C. and Mr W.H. GOODHART (instructed by Messrs Freshfields) appeared on behalf of the Appellant (Plaintiff).

Mr A.J. BALCOMBE, Q.C. and Mr PETER GIBSON (instructed by Solicitor of Inland Revenue) appeared on behalf of the Respondents (Defendants).


Mr Justice Goff will deliver the Judgment of the Court.


This case (reported below in 1974 1 Weekly Law Reports, 296) raises an estate duty question whether a conveyance dated and taking effect on the 24th June, 1955, by a father to his son by way of gift affecting the freehold of the Lawford Hall Estate in the circumstances of the case brought that freehold estate on the father's death within the statutory description of "property taken under any gift… of which property bona fide possession and enjoyment shall not have been assumed by the donee immediately upon the gift and thenceforward retained to the entire exclusion of the donor, or of any benefit to him by contract or otherwise": see the Customs and Inland Revenue Act, 1881, section 38, as amended by section 11(1) of the Customs and Inland Revenue Act, 1889.


This poses the problems whether all that was given was the beneficial interest in the estate shorn of the benefit of the rights and interests of the donor under the lease back, in which case prima facie the gift must fall outside the statutory provision, or whether the gift was of the whole beneficial interest in the property, in which case it is not disputed that the lease back must have prevented the son from assuming bona fide possession and enjoyment immediately upon the gift to the entire exclusion of the father, and also whether the covenants in the lease are such that in any case the son cannot be said to have assumed such possession and enjoyment to the entire exclusion of any benefit to the father by contract or otherwise within the meaning of the section.


As appears from the report of the case below, the learned Judge concluded that had it been established by theevidence that the arrangement between father and son involved an equitable obligation on the son immediately upon the execution of the conveyance of the freehold to grant the lease back, the property forming the subject of the gift would have been the reversion only, that is to say the freehold interest shorn of the lease, but he formed the view that the evidence showed no more than a filial duty, so that the whole fee simple interest passed under the gift. The appellant son contends that in that view the Judge erred. The Crown however supports that finding and alternatively contends that even if there were such an equitable obligation, the Judge's view of the law on that basis was wrong, so that either way the actual decision that the Lawford Hall Estate was subject to estate duty on the father's death was correct.


There is a further point arising out of the fact that the form of the lease back was altered before its final implementation on the 16th July, 1955, concerning the liability to discharge the tithe redemption annuity affecting the property.


An additional point was taken in the argument that as the son refrained during his father's lifetime from exercising his right under the lease to give notice determining it, there was a benefit to the father at the expense of the reversion even if the property the subject of the gift was the freehold shorn of the lease. We can see no substance in this argument, which accordingly we reject.


The facts of the case are to be ascertained from the son's affidavit. No attempt was made to challenge this by cross-examination. It was given as a reason that the question as propounded in the Originating Summons appeared to dependsolely upon the construction of documents, and the question whether there was on the facts an obligation on the son enforceable in equity did not emerge until the hearing. However, the Grown could have sought an adjournment, which it did not, and in any case paragraph 11 of the affidavit expressly set out the contention. Accordingly, we must take the facts stated as unchallenged.


Paragraph 1 of the affidavit states that Messrs Freshfields at all material times had acted as Solicitors to both father and son. Then paragraphs 3, 4, 5 and 6 of the affidavit are as follows: "3. Towards the end of the year 1954 my father determined to make a gift to me of the Lawford Hall Estate, which consists of a mansion house known as Lawford Hall and the adjoining grounds, woodland, farm land and saltings, comprising in all some 512 acres. Lawford Hall was my father's home at the time, and he had lived there for some time previously when not resident abroad by reason of his duties as an officer of the Foreign Service. The agricultural land was farmed in hand, with the exception of an area of about 32 acres let to a Mr Poole. 4. At the time when my father decided to give the Lawford Hall Estate to me, he and my mother wished to continue living there. I was then an undergraduate aged 22 and naturally I did not wish to make Lawford Hall my home at the time, and had no expectation of wishing to do so for some years afterwards. In fact, after 1955 1 spent a year as a student in the U.S.A. followed by six years overseas as an employee of the Colonial Development Corporation, and I did not return to live in England until 1962. 5. It was therefore decided, on the advice of our solicitors and accountants, that the Estate should be given to me and that I should immediatelylease the Estate back to my father for an initial term of five years from the 24th June 1955 and thereafter from year to year. The whole Estate was to be leased back, except for the 32 acres let to Mr Poole, and the lease was to contain a reservation of timber in my favour. The rent was, on the advice of our solicitors and accounts, fixed at £557.10.0. which was the amount of the gross annual value for Schedule A tax of the part of the Estate leased back. 6. The proposed gift and lease back were regarded by me as essentially the two halves of a single transaction. It vas certainly not my understanding that I could have accepted the gift and refused to execute the lease back, even if I had wished to do so". In paragraph 7 the son asserted that certain further facts appeared from the correspondence (Exhibit F.N.3) as follows: "(a) It was agreed, prior to the execution of the deed of gift and the lease, that they should both take effect on the 24th June 1955.


(b) Engrossments of both instruments were sent to my father on the 15th June 1955 and were returned by him to Freshfields, having been signed by my father and myself, on the 20th June 1955. (o) The Deed of gift was duly dated, and took effect on the 24th June 1955. (d) Owing to a last-minute difficulty concerning the liability of the Estate to tithe redemption annuity, which it was thought might make appropriate an alteration in the amount of the rent, the lease did not take effect on the 24th June 1955. In fact it was slightly amended (by adding the words 'Tithe Redemption Annuity and Land Tax (if any)' at the end of Clause 2(1)), and it was returned to my father on the 11th July 1955 to enable him and me to initial the amendment. This we did, and my father returned the amended lease to Freshfields on the 16th July 1955. It was dated andtook effect that day".


In our view, that assertion is correct, although it will be necessary to make some references later to that correspondence.


The position, therefore, is that the conveyance of the Lawford Hall Estate took effect on the 24th June, 1955, and simultaneously the son came under an obligation, whether legally enforceable or not, to grant a lease back with effect from the same day. As it happened, however, the lease back did not take effect until the 16th July, 1955, although the term was measured and the liability for rent was calculated from the 24th June.


It is convenient to deal first with the question whether the Judge was right in his conclusion that that obligation to grant the lease back was rooted only in honour or filial piety, or was it an obligation that would, if necessary, be enforced in equity by the Court? The Judge in taking the former view concluded that, since there was according to the correspondence never any direct communication between Messrs Freshfields and the son, this was solely a unilateral scheme on the part of the father and his solicitors in which the son played no part save as an obedient son- He rejected the idea that Messrs Freshfields were solicitors for the son as well as for the father, but, as we have already observed, it is positively stated in the son's affidavit that that firm was acting for him as well as the father, and we do not consider that evidence can be ignored or disbelieved.


It is, of course, true that reliance on honour alone is sometimes to be met with, and indeed in the context of many schemes for tax avoidance that may often be essential, but insuch cases the absence of enforceable obligation would generally be expressed. In the present case, if the execution of the lease having been delayed, as it was, the son had then refused to execute it and the father had sued for an Order that ho do so, upon the evidence which we find in the son's affidavit, we do not see how the action could have failed on the ground that the son had received the legal estate under the conveyance free from any obligation which equity...

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