Re Parkes' Settlement ; Midland Bank Executor and Trustee Company Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE JENKINS |
| Judgment Date | 12 March 1956 |
| Judgment citation (vLex) | [1956] EWCA Civ J0312-1 |
| Date | 12 March 1956 |
| Court | Court of Appeal |
[1956] EWCA Civ J0312-1
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls (Lord Evershed)
Lord Justice Jenkins
Lord Justice Birkett
In the Matter of the Trusts of a Settlement dated 4th January 1929, and made between Ebenezer Thomas Parkes of the first part, Marjorie Parkes and Rosalind Hilda Parkes of the second part and Midland Bank Executor and Trustee Company Limited, Reginald Parkes and Marjorie Parkes of the third part and certain deeds supplemental thereto
In the Matter of the Administration of Justice (Miscellaneous Provisions) Act, 1933
MR, J. PENNYCUICK, Q.C., and MR. S.M. YOUNG, instructed by Messrs. Baddeleys & Co., appeared for the Appellants (Plaintiffs).
MR, E. BLANSHARD STAMP, instructed by the Solicitor of Inland Revenue, appeared for the Respondents (First Defendants).
In this appeal is raised the familiar question of the applicability, on the death of a settlor, of section 2(1)(d) of the Finance Act, 1894, in relation to certain of the beneficial interests created by the settlement. The settlor was Ebenezer Thomas Parkes. The settlement was made by him on the 4th January, 1929, in favour of his four children, two sons and two daughters. All four children survived their father, who died on the 13th February, 1952, though one of the sons has since died. Both daughters are still unmarried.
The subject-matter of the settlement consisted partly of freehold property and investments and partly of policies on the life of the settlor. The terms of the settlement are of a somewhat unusual character. So far as material to the present question, they are (as will appear) to be found in clauses 3 and 4 of the settlement. By clause 3 it was provided that, during the life of the settlor, the trustees should stand possessed of the income of the premises settled and the investments for the time being representing the same upon trust: (1) to pay the same unto and equally between the settlor's two daughters "so long as they shall remain unmarried and after the death or marriage of either of them then to the other so long as she shall remain unmarried, but so that the income so to be paid to each or either of the daughters under this provision shall not exceed £250 in any year during which they shall both be alive and unmarried or in case either of them shall have died or married then the income so payable to the other shall not exceed £410"; (2) subject to the trust aforesaid, to pay the said income or the surplus arising in each year of the trust unto and equally between the four children of the settlor or such of them as should from time to time be living.
By clause 4 it was provided that, on the death of the settlor, (1) the trustees should appropriate and retain out of the trust fund (the policy moneys then having become payable) "in respect of each or such of the before mentioned daughters of the settlor who shall then be unmarried a fund sufficient at the time of appropriation to produce out of the annual income thereof an annuity of £250, which annuity shall be paid by the trustees to each such daughter respectively during her life and so long as she shall continue unmarried and so that if the income of the funds or fund so appropriated shall at any time prove insufficient for payment in full of the annuities or annuity so payable there out respectively resort may be had to the capital thereof from time to time to make good such deficiency, but the surplus income (if any) of the said appropriated funds or fund from time to time remaining after the payment of the said annuities or annuity shall be applicable as income of the remainder of the trust fund; (2) as and when the said annuities or annuity shall cease the funds or fund appropriated in respect thereof shall revert to and become subject to the trusts hereinafter declared concerning the trust fund: (3) Subject to the trusts aforesaid the trustees shall stand possessed of the capital and future income of the trust fund upon trust for such one or more of" the four children of the settlor "as shall be living at the death of the settlor and if more than one in equal shares absolutely".
By clause 5 each of the daughters covenanted with the settlor and separately with the trustees to pay in equal shares between them the premiums on the settled life policies as they became due, and they also charged the income payable to them under clause 3(1) – that is, their prior right to income up to the maximum of £250 each – withpayment by them of the premiums.
Clause 10 was expressed to empower the settlor to bring further life policies on his own life into the settlement, on the terms (1) that, if he did so, the rights of the daughters under clause 3(1) to the first £500 between them of the income of the settlement should be increased by the amount of the premiums on the additional policies brought into the settlement; and (2) that the covenants on the daughters' part for payment of premiums and the charges on their priority income rights should extend also so as to be applicable to the premiums on the additional policies.
By the terms of certain later memoranda and deeds, the income of the daughters was wholly released from the charges above mentioned. The settlor did in fact bring into settlement further policies and what I have called the daughters priority income rights were augmented accordingly. The daughters remained liable to pay all the premiums on all the settled policies under their covenants to that effect and they have in fact paid all such premiums down to the settlor's death.
It appears from the evidence that the income of the settled property during the settlor's life barely sufficed to provide for the daughters' priority income rights, and during the whole of that period the total of the surplus income divisible among all four of the settlor's children amounted to no more than about £77.
I have referred to these various matters of fact and to the original imposition and the subsequent release of the charges upon the daughters' priority income rights; but it was conceded before us by Mr. Pennycuick and Mr. Stamp, as I understood them, that, for the purposes of determining the questions before us, all such matters and also the existence and performance of the daughters' covenants should be ignored, and that we should equally disregard actual figures; in other words, that we could proceed as though the relevant terms of the settlement were confined to the terms which are found in, and which I have recited from, clauses 3 and 4 of the settlement. I should add on the figures that, from the time when the added policies were brought into settlement, the daughters' priority income rights were in fact in each year above the original maximum of £250 each.
Upon these premises, it was contended by the Crown that duty under section 2(1)(d) of the Finance Act, 1894, became exigible on the death of the settlor (a) in respect of the annuities, so expressly described, payable to the two daughters under clause 4(1) of the settlement and (b) in respect of the shares of corpus of the settled property to which the four children of the settlor, all having survived him, became absolutely entitled by virtue of clause 4(3) of the settlement; the annuities in the one case and the absolute interests in possession in the other constituting beneficial interests in the subject-matter of the settlement which arose to the two daughters and the four children respectively for the first time on the settlor's death, within the meaning of section 2(1)(d) of the Act.
The learned judge, Mr. Justice Danckwerts, accepted these contentions and decided in favour of the Crown under both heads. The present appeal is brought against these conclusions.
As regards the second of the two heads of claim, I entertain for myself no doubt that the view of Mr. Justice Danckwerts is correct. It was the submission of Mr. Pennycuick, for the appellants, that the Joint effect of clause 3(2) and clause 4(3) of the settlement was, as regards the interests there under of any one of the settlor's four children, in substance entirely the same as an immediate and absolute gift in favour of A, subject only to the liability of being divested in the event of A not surviving the happening of a particular event, for example, the death of the donor - a kind of gift which in fact, it was said, had never given rise to a claim for duty upon the donor's death, Mr, Pennycuick submitted further that the existence of a right in possession to an aliquot share of surplus income during the settlor's life distinguishes this case from the case of Adamson, reported in 1933 Appeal Cases, page 257, But whatever the "substance" of the children's interests might be in the sense in which Mr. Pennycuick used that term, it is to my mind incontrovertible that the legal effect of the settlement was to confer or give rise for the first time on the death of the settlor to an absolute interest in capital in favour of each of the settlor's four children, contingently upon their surviving the event of the settlor's death. Those interests were, to my mind, distinct and different in kind and quality from the rights of the four children to share in surplus income during the life of the settler.
I therefore agree with the view of Mr. Justice Danckwerts which he expressed as follows at page 10 of his Judgment: "It seems to me that, as regards the capital, the interests which the beneficiaries got were interests which arose only upon the death of the settlor. Until then they had merely contingent interests in the capital, dependent upon them surviving his death and it was upon the...
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