Sanderson v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE ROMER,LORD JUSTICE PARKER |
| Judgment Date | 28 October 1954 |
| Judgment citation (vLex) | [1954] EWCA Civ J1028-2 |
| Date | 28 October 1954 |
| Court | Court of Appeal |
[1954] EWCA Civ J1028-2
In the Supreme Court of Judicature
Court of Appeal
Lord Justice Jenkins,
Lord Justice Romer, and
Lord Justice Parker.
re Hall'S Settlement Trusts.
re Administration of Justice (Miscellaneous Provisions) ACT, 1933.
Counsel for the Appellant: MR F. N. BUCHER and MR J. A. ARMSTRONG, instructed by Messrs Peacock & Goddard, Agents for Messrs Sanderson & Co., Hull.
Counsel for the Respondents: MR B. L. BATHURST, Q. C., and MR J. H. STAMP, instructed by the Solicitor of Inland Revenue.
This is an appeal from a judgment of Mr Justice Upjohn dated the 30th June, 1954, in a case concerning the valuation, for the purposes of Estate Duty, of some shares in a private limited company. The deceased, Mr Harold Hall, formerly owned 2,951 shares of the Company in question out of a total issued capital of 5,514 shares. He was, therefore, in control of the Company. On the 27th July, 1942, he made a gift of 400 of those shares to the Trustees of a voluntary settlement. He, unfortunately, died on the 30th December, 1943; that is to say, well within the minimum period of three years by which, as the law then stood, a donor had to survive a gift inter vivos in order that it should escape Duty on his death. In these circumstances, Duty admittedly became payable on the 4000 shares under Section 2, sub-section (1) (c), of the Finance Act, 1894. It is, further, not in dispute that the Company is a Company to which the provisions of Section 55 of the Finance Act, 1940, apply, that section being one which substitutes, in respect of shares or Debentures of companies in certain cases, a special, and usually more onerous, method of valuation for the common method of valuation by reference to market value prescribed by Section 7, sub-section (5), of the 1894 Act.
The Plaintiffs, now Appellants, are the Trustees of the voluntary settlement, and they claim that the 400 shares held by them are, by reason of the gift inter vivos, not subject to the special provisions of Section 55 of the 1940 Act, but should be valued in the ordinary way by reference to their market value.
Mr Justice Upjohn held that the appropriate method of valuation was that prescribed by Section 55 of the 1940 Act, and from his decision the Trustees now appeal to this Court.
I should next briefly refer to some of the provisions of the Finance Act, 1894.
The first section, as is well known, contains the grant of Estate Duty; "In the case of every person dying after the commencement of this Part of this Act, there shall, save as herein-after expressly provided, be levied and paid, upon the principal value ascertained as herein-after provided of all property, real or personal, settled or not settled, which passes on the death of such person a duty, called 'Estate Duty', at the graduated rates herein-after mentioned, and the existing duties mentioned in the First Schedule to this Act shall not be levied in respect of property chargeable with such Estate duty."
Section 2 provides that: "Property passing on the death of the deceased shall be deemed to include the property following, that is to say", and then there is the well-known list of items, including in particular sub-paragraph (c) of sub-section (1) of Section 2, which brings in, amongst other things, gifts inter vivos made (as the law stood at the relevant date) within three years of the death.
The common method of valuation prescribed by Section 7, sub-section (5), is this: "The principal value of any property shall be estimated to be the price which, in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased"; and that is the method of valuation which the Trustees say is the right one in the present case.
It is maintained on behalf of the Crown that the method of valuation prescribed by Section 55 of the 1940 Act is the appropriate one. That section, so far asmaterial for the present purpose, provides as follows. There is a side-note: "Valuation for estate duty of shares and debentures of certain companies", and the section itself reads thus: "(1) Where for the purpose of estate duty there pass, on the death of a person dying after the commencement of this Act, shares in or debentures of a company to which this section applies, then if—(a) the deceased had the control of the company at any time during the three years ending with his death; or", if certain other conditions apply, "the principal value of the shares or debentures, in lieu of being estimated in accordance with the provisions of subsection (5) of section seven of the Finance Act, 1894, shall be estimated by reference to the net value of the assets of the company in accordance with the provisions of the next succeeding subsection."
Those are the two alternative methods of valuation, Section 7, sub-section (5), of the Act of 1894, and Section 55 of the Act of 1940, and the question for this Court is whether Mr Justice Upjohn was right in holding, as he did, that the appropriate method of valuation was the method prescribed in Section 55.
It will be seen, if I may refer to them again, that the opening words of Section 55, sub-section (1), are: "Where for the purposes of estate duty there pass, on the death of a person dying after the commencement of this Act, shares in or debentures of a company to which this section applies." Accordingly, the applicability of Section 55 essentially depends on there having been a passing, on the death of a person dying after the commencement of the Act, of such shares or debentures. Mr Bucher, for the Trustees, contends that this condition was not fulfilled here. He says that the words "wherethere pass on the death of a person" mean "where there actually pass on the death of a person"; that is to say, where there is a passing under the provisions of Section 1 of the 1894 Act. He claims there is no warrant for extending these words so as to include what is commonly called a notional passing; that is to say, a passing of property which is only deemed to pass by virtue of the provisions of Section 2 and does not actually pass within the meaning of Section 1.
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