Re Weir's Settlement Trusts
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HARMAN,LORD JUSTICE RUSSELL |
| Judgment Date | 30 July 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0730-4 |
| Date | 30 July 1969 |
| Court | Court of Appeal (Civil Division) |
[1969] EWCA Civ J0730-4
In The Supreme Court of Judicature
Court of Appeal
(Civil Division)
(From: Mr. Justice Cross)
Lord Justice Harman
Lord Justice Russell and
Lord Justice Megaw
In the Matter of a Settlement dated the 26th day of November 1957 and made between The Right Honourable William Douglas Viscount Weir of the first part Eustace Benyon Hoare of the second part Elspeth Marjory Jessie Cartwright of the third part and Others of the fourth part
and
In the Matter of the Administration OF Justice (Miscellaneous Provisions) Act 1933:
Mr. W.A. BAGNALL, Q.C. and Mr. H. HILLABY (instructed by Messrs. Currey & Co.) appeared on behalf of the Appellants (Plaintiffs)
Mr. J.A. BRIGHTMAN, Q.C. and Mr, P.W.E. TAYLOR (instructed by Solicitor of Inland Revenue) appeared on behalf of the Respondents (Defendants).
The judgment which lord Justice Russell is about to deliver is the judgment of the Court.
This case on estate duty raises questions concerning the relationship between sections 1 and 2 of the Finance Act, 1894, and concerning their impact on discretionary trusts at a time when the answer to these questions on future deaths is about to be provided by Parliament in the Finance Act, 1969.
The settlement dated the 26th November, 1957, was made by Viscount Weir on the occasion of the marriage of his widowed daughter Mrs. Cartwright ("the wife") to Mr. Eustace Hoare ("the husband"). The sum settled was £50,000. A trust period was laid down, expiring 21 years after the death of the survivor of the then living descendants of King George V or the earlier expiration of 80 years. Clause 4 was in the following terms:
"From and after the solemnisation of the said intended marriage and subject as hereinafter provided the Trustees shall pay or apply the income of the Trust Fund during the Trust Period to or for the maintenance and support or otherwise for the benefit of all or such one or more to the exclusion of the others or other of the Husband and Wife and the children or remoter issue of the said marriage for the time being living as the Trustees (being at least two in number or a trust corporation) in their absolute discretion think fit with power for the Trustees to pay any income which they may decide should be applied for the maintenance or otherwise for the benefit of any child or remoter issue of the said marriage to the guardian or guardians of such child or remoter issue without being bound to see to the application thereof".
Clause 5 empowered the trustees during the trust period (but only with the written consent of the wife during her life) to transfer the whole or parts of capital to the wife or any issue of the marriage: also to revoke trusts and resettle the funds on other trusts in favour of the husband, the wife, or issue of the marriage, or on a subsequent marriage of the wife in favour of her and that husband and issue of that marriage.
Subject to those trusts capital was given to issue of the marriage with Mr. Hoare living at the end of the trust period per stirpes, and if none to the issue of any subsequent marriage of the wife then living. The ultimate trust was for the wife's daughter by her first marriage and her family if the trustees should so appoint, and subject thereto for that daughter absolutely.
The relevant facts are that (1) the husband died on the 9th July, 1961, (2) there was no issue of the marriage, and (3) at all times the whole income was paid by the trustees to the wife. The wife was thus left as the sole surviving member of the group of discretionary objects. The Crown claimed estate duty on the trust funds on the husband's death on the ground that an interest extending to the whole income ceased on his death (see sections 2 (1) (b) and 7 (7) (a) of the 1894 Act): or on the ground that the trust funds were property which passed on the husband's death within the language of section 1 of that Act unaided by section 2.
The contention of the Crown based upon section 2 (1) (b) was but faintly urged before us, and we consider could not be sustained in the light of the decision of the House of Lords in the Gartside case. That case concerned a claim under section 43 of the 1940 Finance Act. There had been an advancement of capital to a beneficiary during the currency of a discretionarytrust over income expressed to determine on a death, and the question was whether on that death duty was exigible in respect also of the advanced funds. The answer depended firstly upon whether there was an "interest" under section 43 that had been determined by the advance. In order to see whether an "interest" existed the House decided that it must bear the same meaning as that word bore in sections 2 (1) (b) and 7 (7), and in considering the word "interest" in those two sections further decided that the rights of any one object of the discretion could not be so described, and that it was not permissible to attempt in some way to group the competing rights of all discretionary objects and label the result as an "interest" ceasing on the death extending to the whole income. It would indeed appear to us difficult in the extreme, the deceased being one of the discretionary objects, to fit such a concept to the language of section 2 (1) (b;, which refers to "property in which the deceased or any other person had an interest". It is true that Gartside was a case of a non-exhauiTive discretionary power or trust over income, there being provision for accumulation of unapplied income. But we are unable to distinguish the present case on that ground.
Accordingly the next problem that faces us is whether estate duty was leviable by force of the language of section 1 simpliciter, unaided by section 2. The first question hereunder is the vexed question of the relationship between sections 1 and 2. For the appellant it was argued that the decision in the Arnholz case established the complete reverse of the views expressed by Lord Macnaghten in the Cowley case, that is to say established that section 2 exhaustively laid down the only circumstances in which estate duty was leviable, and that if the circumstances could not be brought within section 1 as being circumstances set out in section 2, that was the end of" the matter, the phrase in section 1 "property which passes on the the death" having no content independent of section 2.
Our view of the relationship of the two sections is as follows. It is section 1 that imposes the charge of estate duty on the value of property described as "property which passes on the death". Section 2 (1) does not describe a different category of property, being property deemed to pass on a death. Section 2 (1) states certain situations in relation to property which involve that property in section 1 as property which passes on a death. We see no reason to hold that section 2 (1) was intended exhaustively to define and limit the situations in relation to property which thus involve that property. The language is not apt for that purpose: and the fact that the situations envisaged embrace occasions when without guidance from section 2 (1) the property would be manifestly "property which passes on the death" does not mean that they embrace all such occasions.
On the other hand, if section 2 states a particular situation and qualifies in some respect in that particular situation the imposition of the charge, for example by an exception in particular instances, that qualification must, whenever that situation arises, operate. Inasmuch as, for example, the situation stated in section 2 (1) (b) must be read into the phrase "property which passes on a death" in section 1, so must the exceptions to it.
This was the decision in Arnholz and in our view the only one. It was certainly not decided by the majority that as a matter of construction the entire content of "property which passes on a death" in section 1 was to be found in section 2: nor do we consider that had Viscount Simonds or Viscount Radcliffe intended to express that opinion they would have expressed themselves otherwise than in that direct manner. Moreover, such an expression of opinion would not have been necessary to the decision in Arnholz. Viscount Simonds in certain passages in his opinion certainly used language capable of the meaning forwhich the appellants contend: hut at page 413 he said: "Section 2 may well not he a definition section in the sense that any property escapes the charge which is not included in it, though I have not for myself been able to think of any property which would not be so included". Viscount Radcliffe in Sanderson's case ( 1956 Appeal Cases) (in which he first showed his disapproval of the Cowley approach) had said, at page 498, "I have never known it disputed that the exclusion provision which is contained in section 2 (3) applies to all property passing, whether it passes under section 1 simpliciter or under section 1 so enlarged or interpreted by section 2 (1)". In Gartside, Lord Reid, at page 610, expressed the ratio decidendi of Arnholz as follows: "What the case did was to decide that sections 1 and 2 are not mutually exclusive and that the excepting words in section 2 (1) (b) are operative in regard to property which falls within that sub-section even though that property may also fall within the wide words of section 1 (per Lord Simonds)".
Accordingly in our judgment the fact that a situation described in section 2 does not exist does not necessarily mean that there is no charge to estate duty: though if a situation described in section 2 does exist, but by reason of an exception or otherwise the section makes the charge impossible or reduces its impact, the Crown cannot resort to section 1...
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