Sharp's Trustees v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 28 March 1951 |
| Date | 28 March 1951 |
| Docket Number | No. 43. |
| Court | Court of Session (Inner House - Second Division) |
2ND DIVISION.
Revenue—Estate duty—Aggregation of property passing on death—Property in which deceased "never had an interest"—"Estate by itself"—Life assurance policies effected by deceased for benefit of wife whom failing the executor or assignees of the deceased—Married Women's Policies of Assurance (Scotland) Act, 1880 (43 and 44 Vict. cap. 26), sec. 2—Finance Act, 1894 (57 and 58 Vict. cap. 30), sec. 4.
The Finance Act, 1894, enacts:—Sec. 4. "For determining the rate of estate duty to be paid on any property passing on the death of the deceased, all property so passing in respect of which estate duty is leviable shall be aggregated so as to form one estate, and the duty shall be levied at the proper graduated rate on the principal value thereof: Provided that any property so passing, in which the deceased never had an interest … shall not be aggregated with any other property but shall be an estate by itself, and the estate duty shall be levied at the proper graduated rate on the principal value thereof. …"
The Married Women's Policies of Assurance (Scotland) Act, 1880, enacts:—Sec. 2. "A policy of assurance effected by any married man on his own life, and expressed upon the face of it to be for the benefit of his wife, … shall, together with all benefit thereof, be deemed a trust for the benefit of his wife for her separate use … and such policy … shall vest in him and his legal representatives in trust for the purpose or purposes so expressed … and shall not otherwise be subject to his control, or form part of his estate, or be liable to the diligence of his creditors. …"
A husband took out two assurance policies on his own life, each of which bore to be effected under the provisions of the 1880 Act in favour of his wife, "whom failing the executor or assignees whomsoever" of the husband. The husband having predeceased the wife, his testamentary trustees claimed that the value of the policies should not be aggregated with the remainder of his estate for the purpose of determining the rate of duty but that they were separate estates in which he never had an interest in terms of the proviso to sec. 4 of the 1894 Act.
Held (diss. Lord Mackay) that the deceased had a contingent interest in the policies, in respect that, in the event of the wife's failure, power to dispose of them by assignation or by testamentary provision remained in him, and that accordingly their value fell to be aggregated with the remainder of his estate.
Mrs Alison Rua Wenley or Sharp and others, the surviving trustees acting under the will and codicils of Harold Sidney Sharp, of Balruddery, by Dundee, appealed to the Court of Session under section 10 of the Finance Act, 1894, against an assessment to estate duty made by the Commissioners of Inland Revenue.
Mr Sharp, who died on 27th January 1949, survived by his wife, Mrs Alison Rua Wenley or Sharp, had on 14th February 1919 (by which date he was already married to Mrs Alison Rua Wenley or Sharp) effected two policies on his own life with the Royal Exchange Assurance Corporation, London, one for £18,000, the other for £2000, each of which provided that the sum assured should be payable on the death of the life assured to his executors, administrators or assigns and contained a special provision in the following terms:—"This policy is effected under the provisions of the Married Women's Policies of Assurance (Scotland) Act, 1880 (43 and 44 Vict. cap. 26) in favour of Mrs Alison Rua Wenley or Sharp, wife of the said Harold Sidney Sharp, whom failing the executor or assignees whomsoever of the said Harold Sidney Sharp." After the death of Mr Sharp the sums of £18,000 and £2000 were duly paid by the assurers to Mrs Sharp. The Commissioners of Inland Revenue, in assessing the deceased's estate to estate duty, aggregated the two sums with the remainder of his estate, which, including the two sums, amounted to £241,222, 2s., and was accordingly liable to estate duty at the rate of 45 per cent.
The trustees appealed against this assessment, in so far as it included the two sums, stating as their grounds of appeal:—"(7) The appellants admit that estate duty falls to be assessed upon the said policies but they maintain that said assessment is erroneous. They maintain that the value of the policies should not be aggregated with the deceased's other estate but that each of the policies falls to be assessed as an estate by itself, as being property in which the deceased never had an interest in terms of the proviso to section 4 of the Finance Act, 1894. The rate of duty exigible on the policy for £18,000 on the basis of assessing the said policy as an estate by itself is 10 per cent. The rate of duty exigible on the policy for £2000 on the basis of assessing the said policy as an estate by itself is nil. For these reasons the appellants maintain that the estate duty exigible in respect of the said policies should be assessed at the rate of 10 per cent on the value of the said policy for £18,000 and at nil on the said policy for £2000."
The respondent answered the grounds of appeal as follows:— (Ans. 7) "Admitted that estate duty falls to be assessed upon the proceeds of said policies. Admitted that if the proceeds of each of said policies fall to be assessed as estates by themselves the rate of duty exigible in respect of said policy for £18,000 would be 10 per cent. Explained that in such circumstances there would be no duty exigible in respect of said policy for £2000. Quoad ultradenied. Explained that the proceeds of said policies were not property in which the deceased never had an interest. The respondent maintains that the proceeds of said policies were not estates by themselves in terms of the proviso to section 4 of the Finance Act, 1894, as amended by section 12 of the Finance Act, 1900 (63 and 64 Vict. cap. 7), that they fell to be aggregated with the other estate of the deceased and that the assessment appealed against was properly made."
The appellants craved the Court:—"To recall the assessment complained of, to find that the appellants are liable only for estate duty in respect of the said sum of £18,000 at the rate of 10 per cent, and that they are not liable for any estate duty in respect of the said sum of £2000. …"
The case was heard before the Second Division on 6th, 7th and 8th March 1951.
At advising on 28th March 1951,—
LORD JUSTICE-CLERK (Thomson).—The late Mr Sharp died on 27th January 1949. On 14th February 1919 the deceased effected two
policies on his own life, one for £18,000 and one for £2000. Each policy provided that the sum assured should be payable on his death to his executors, administrators or assigns. Each policy also provided that "this policy is effected under the provisions of the Married Women's Policies of Assurance (Scotland) Act, 18801… in favour of Mrs Alison Rua Wenley or Sharp, wife of the said Harold Sidney Sharp, whom failing the executor or assignees whomsoever of the said Harold Sidney Sharp." The deceased was survived by his wife.
The issue in the case is whether the value of these policies falls to be aggregated with the deceased's other estate for the purpose of determining the rate of duty on the policies or whether each of the policies falls to be assessed as an estate by itself.
The case turns on section 4 of the Finance Act, 1894.2 It was not disputed that there must be aggregation unless the policies fell within the proviso to that section as being property in which the deceased never had an interest.
"Interest" in this connexion has been widely construed. I need cite only the pronouncement in this Division in Liberton and Craigmillar Estates v. Lord AdvocateSC,3 where Lord Justice-Clerk Cooper said (at p. 410): "From the series of cases culminating in Tennant's TrusteesSCSCELR4 andWestminster BankELR,5 it can be deduced that the deceased's “interest” will suffice to exclude exemption from aggregation even if it is only a partial interest, or a contingent interest which never took effect, or a former temporary interest which ceased to exist (or was disposed of by the deceased) during his lifetime. Even an indirect interest will be enough, since it was held inTennant's TrusteesSCSCELR4 that the deceased's previous interest in a policy of insurance on his own life gave him an interest in the proceeds even assuming that these proceeds, and not the policy, constituted the property which passed. These illustrations do not exhaust the characteristics of the “interest” referred to in the proviso, but they show how little in the shape of “interest” will suffice to attract liability to aggregation." I have no doubt that the deceased did have an interest and that the Crown contention must be sustained.
Counsel for the appellant laid great stress on section 2 of the 1880 Act.1 That section undoubtedly protects the wife's interest in the policies but it does no more. It does not protect the policies as such or any interest other than the wife's. If the wife had predeceased, no protection was afforded to the contingent interest of Mr Sharp's executor or assignees. That contingent interest was one which, in my view, clearly falls within the ambit of the Lord Justice-Clerk's words. The prospect of the wife's death was always present. Its occurrence would have given the deceased a negotiable asset and
indeed the very possibility of its occurrence would have had the same effect.
It was the consciousness of this difficulty which drove the Dean of Faculty to an ingenious argument. He said that the destination "whom failing the executor or assignees whomsoever of the said Harold Sidney Sharp" must be construed as limited to his legal representatives, that is to say, his heirs in mobilibus in intestacy. That being so, the beneficiaries in the destination were fixed once and for all and could not be varied by the deceased. The result, on the Dean's argument, was that it could not...
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