Re Whitfield's Estate
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAMP,THE MASTER OF THE ROLLS,LORD JUSTICE LAWTON,LORD JUSTICE BRIDGE |
| Judgment Date | 25 February 1976 |
| Neutral Citation | [1976] EWCA Civ J0225-4 |
| Judgment citation (vLex) | [1976] EWCA Civ J0130-4 |
| Docket Number | 1973 W. No.236 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 February 1976 |
In The Matier of the Estate Duty payable on the death of the late Rebeoca Augusta Writfield and In The Fltter of the Crown Proceedinos Act, 1947
[1976] EWCA Civ J0130-4
Lord Justice Stamp and
Lord Justice Goff
In The Supreme Court of Judicature
Court of Appeal
On Appeal from The High Court of Justice Chancery Division Group A (Mr. Justice Walton)
MR. A.J. BALCOMBE, Q.C. and MR. P. GIBSON (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Plaintiffs (Respondents).
MR. M. NOURSE, Q.C . and MR. L.L. WARE (instructed by Messrs. Gegory Rowcliffe & Co., Solicitors, London, agents for Messrs. Archer, Parkin & Townsand, Solicitors, Stockton-on-Tees) appeared on behalf of the Defendants (Appellants).
The judgment I am about to read is the judgment of the court.
The facts of this case are fully stated in the Judgment of Mr. Justice Walton reported in 1975 Chancery at page 293 and we will not repeat them except to summarise the vital transactions which took place on the 16th November, 1963 at the Weybridge Branch of Barclays Bank Ltd. There were present, so far as is material, a representative of the Bank, & representative of the Sun Life Assurance Society Ltd., the deceased's solicitor Mr. Townsend and the deceased's son Mr. Whitfield, Mr. Whitfield was armed with a power of attorney conferring upon him an authority to carry out on behalf of the deceased the transactions which then took place. We shall make a further reference to that authority hereafter because it was a very limited power and that fact explains one feature of the transactions upon, which reliance was placed on behalf of the Inland Revenue.
At the moment when the four parties gathered together at the bank and before anyone became bound in law to carry either of them into effect, two transactions were in contemplation. Pursuant to discussions which had taken place it was contemplated that in consideration of four several sums of £20,000 to be paid to the Sun Life Assurance Society by the deceased the Sun Life Assurance should issue to her four policies of life assurance each securing the payment of a principal, sum upon her death. It was to be a term of each contract of assurance that the deceased should have no benefit thereunder but should from the outset hold the policy and all its benefits upon trust for the beneficiary therein named. By this means it was thought that the sums which became payable on the death of the deceased, though liable to estate duty, would not be aggregable one with the other or with the restof Mrs. Whitfield's estate in ascertaining the rate of duty payable on her death. We have referred to these contracts of assurance as a single transaction – and it is convenient so to do – but there were in truth four transactions in contemplation between the deceased, always acting by her attorney, and the Assurance Society.
To carry out the transaction with the Assurance Society Mrs. Whitfield required the sum of £80,000; and the second transaction which was in contemplation was a borrowing from the bank by Mrs. Whitfield of £80,000 on the security of scrip which had been deposited with the bank as security for the contemplated loan. It is at this point that the terms of the power of attorney held by Mr. Whitfield become relevant. That power was, as we have said a limited power. It empowered Mr. Whitfield to effect such policies of assurance as were in fact effected and although it was open to Mr. Whitfield to effect them with some assurance society other than the Sun it did not extend to allow the attorney to effect policies other than policies of the character there specified for the benefit of the specified beneficiaries. It of necessity empowered the attorney to borrow "for the purpose of paying the premiums on the said … policies and on such terms and either with or without security as he should think fit". If the bank was to act on the authority so conferred by its customer on Mr. Whitfield and lend £80,000, it was essential for the bank to see that "the sums of money which he might think fit to borrow" were applied "for the purpose of paying the premiums" on the policies which the attorney was empowered to effect. Had the bank failed to do so it would have been in breach of its duty to Mrs. Whitfield its customer. (See for example London Chartered Bank of Australia v. Mcmillan 1892 Appeal cases 292). The bank accordingly required that the money tobe lent should be paid to the Assurance Society. We would add at this point that had Mrs. Whitfield herself been present it is probable that the transactions would have taken place in precisely the way in which they did take place. A customer who has overdraft facilities with his bank naturally draws a cheque in favour of the payee to whom he wishes to make a payment and does not first obtain mastery or dominion over the amount which he is permitted to overdraw.
A cheque was drawn by the Attorney on a new No. 2 account opened with the bank's customer in favour of the Sun Assurance. In order that the contemplated contract of assurance should thereupon become a binding contract, the representative of the Sun thereupon presented the cheque which was credited to the bank's "Draft Account" and received in return a banker's draft for £80,000. We accept that as from that moment, and not before, the debt to the bank was "incurred".
As between the bank and Mrs. Whitfield it appears to us that the transaction was a normal banking transaction. Mrs. Whitfield incurred a liability to the bank to pay £80,000 in return for the bank paying to the Sun by her order the sum of £80,000. Nothing whatsoever in the way of bounty passed from the bank to the payee of Mrs. Whitfield's cheque and we are unable to accept that the debt was incurred, or that the consideration was, otherwise than "wholly for" the customer's "own use and benefit". A bank who complies with its customer's order to pay does not in any ordinary sense do so "for the use" or "benefit" of the payee although the payee will no doubt normally use and benefit from the payment. As between the bank and the customer nothing is withheld by the bank from the consideration which supports the debt. The argument to the contrary fails in our judgment to distinguish between the two transactions: the transaction by which Mrs. Whitfield borrowedthe money and the transaction by which she paid it to the Sun Assurance in return for the promises contained in the policy of assurance. The Sun Assurance was no party to the former transaction and the bank was no party to the contract of assurance. Nor was the bank in the least concerned with the latter contract except to see that the money lent to its customer was not dealt with otherwise than in accordance with her authority.
Finding nothing in Section 7(1)(a) of the Finance Act, 1894 which in terms introduces the requirement that the consideration should have been received by the deceased or that he should have it under his personal control we would decide this case on the short grounds which we have given. We must however deal with the submission to the contrary. It is based upon the view that in order to satisfy the condition of Section 7(1)(a) the consideration for the debt which was incurred must at some point of time have been received by the deceased in the sense that he had dominion over or was master of it. Only if at some moment was the deceased master of the consideration, so the argument on behalf of the Revenue runs, can it be said to have been "wholly for the deceased's own use and benefit".
Section 7(1) of the Finance Act 1894 cannot be read out of context but falls to be construed by reference to the scheme and other Sections of the Act. The Act introduced a new tax or duty on the principal value of the property of a deceased passing on his death. There was deemed to be included in the property so passing property "taken under a disposition made by 'the deceased not more than twelve months before the death of the deceased" (see the joint effect of Section 38(2)(a) of the Customs and Inland Revenue Act, 1881 as amended by Section 11 of the Customs and InlandRevenue Act, 1889). We remark in parenthesis that it is not in question that the policies effected by airs. Whitfield in the instant case were property "taken under a disposition made by" the deceased; and apart altogether from the fact that the contention of the Revenue regarding the construction of paragraph (a) of Section 7(1) of the Act would, if well founded, involve in effect a double charge for duty, we find a difficulty in seeing how the disposition can have been " made by "the deceased unless the consideration for the debt incurred by the deceased was "wholly for the deceased's own use and benefit": for you cannot make a disposition by way of gift of something of value if you are not the beneficial owner. We say "by way of gift" because Section 3 of the Act exempted from the duty property passing "by reason only of a bona fide purchase from" the deceased "where such purchase was made… for full consideration in money or money's worth paid to the vendor … for his own use or benefit".
Section 7(10) of the Act is also we think relevant to the construction of Section 7(1)(a) for it provided in terms that property passing on the death should not be aggregated more than once, nor should estate duty in respect thereof be "more than once levied on the same death". A construction of subsection (1) of that section which would disallow a debt incurred for a consideration which became the subject of a disposition falling within Section 2(1)(c) would operate to impose duty on Mrs. Whitfield's investments as well as upon the policies purchased out of...
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