Sneddon and Others v Lord Advocate as Representing the Commissioners of Inland Revenue (Second Appeal)
| Jurisdiction | England & Wales |
| Judge | Lord Morton of Henryton,Lord MacDermott,Lord Reid,Lord Keith of Avonholm |
| Judgment Date | 25 February 1954 |
| Judgment citation (vLex) | [1954] UKHL J0225-3 |
| Date | 25 February 1954 |
| Court | House of Lords |
[1954] UKHL J0225-3
House of Lords
Lord Morton of Henryton
Lord MacDermott
Lord Reid
Lord Keith of Avonholm
Whereas this day was appointed for hearing Counsel upon the Petition of the Appellants, presented on Friday last, in the matter of the Appeal Sneddon and others against Lord Advocate as representing the Commissioners of Inland Revenue (Second Appeal), praying, That inasmuch as the Appeal is governed by the judgment lately given by this House in the Appeal "Sneddon and others against Lord Advocate as representing the Commissioners of Inland Revenue," the Interlocutor complained of in the said Appeal may be reversed; that the assessment made by the Commissioners of Inland Revenue may be discharged; that a declaration may be made as to the sum on which estate duty is payable; and that the Respondent may be ordered to pay to the Appellants their Costs here and in the Court of Session, which said Petition of the Appellants was consented to on behalf of the Respondent; Counsel were accordingly called in; and Counsel having prayed for an order in terms of the said Petition; and due consideration being had of the said Petition:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Interlocutor of the 10th day of October 1952, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the assessment dated 9th January 1952, for Estate Duty made upon the Appellants in the sum of £9,250 thereby sustained, be, and the same is hereby, Discharged: And it is hereby Declared, That the property taken under an inter vivos disposition made by the late William Galbraith Hetherington within the meaning of section 2 (1) ( c) of the Finance Act, 1894, as amended by subsequent legislation, was the sum of £5,000, and that duty is payable on the said sum: And it is further Ordered, That the said Cause be, and the same is hereby, remitted back to the Court of Session in Scotland to do therein as shall be just and consistent with this Judgment: And it is further Ordered, That the Respondent do pay, or cause to be paid, to the said Appellants the Costs of the Action in the Court of Session and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That unless the Costs, certified as aforesaid, shall be paid to the party entitled to the same within one calendar month from the date of the certificate thereof, the Court of Session in Scotland, or the Judge acting as Vacation Judge, shall issue such summary process or diligence for the recovery of such Costs as shall be lawful and necessary.
My Lords,
On the 19th of December, 1946, William Galbraith Hetherington executed a Deed of Trust whereby he nominated himself and three others as trustees "for the ends, uses and purposes aftermentioned", and declared that "the Trust Fund consists of the sum of Five thousand pounds sterling which is vested in the Trustees and which, or investments representing the same, shall be held and applied for the trust purposes afterwritten, videlicet". Then follow trusts in favour of the truster's daughter Elizabeth for her life with remainders over. The Trust Deed gave the trustees wide powers of investment, including power to purchase, subscribe for, pay for and take up any shares or stock in a number of companies, including Creamola (England) Limited.
On the 21st December, 1946, the trustees' solicitors, on the instructions of the trustees, applied for an allotment of 5,000 new £1 ordinary shares of Creamola (England) Limited at par. On that date and at the date of his death the truster was a director of that company and had a controlling interest in it. On the 24th December, 1946, the truster, by cheque in favour of the trustees' solicitors, paid over to the trustees the sum of £5,000 to be held by them on the trusts declared by the Deed of Trust. On the same date the trustees' solicitors sent their own cheque to Creamola (England) Limited in payment of £5,000 due in respect of an application by the trustees for an allotment of 5,000 new £1 ordinary shares in that company. These shares were allotted to the trustees and are still held by them. They were at the time of the truster's death, and still are, the only investment held by the trustees.
The truster died on the 5th February, 1948, and thus did not live for a period of five years after the execution of the Deed of Trust and the payment of £5,000.
Section 2 (1) (c) of the Finance Act, 1894, as amended by subsequent legislation, provides that property passing on the death of the deceased shall be deemed to include (inter alia) "any property … taken under a disposition made by any person … purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust or otherwise, which shall not have been bona fide made five years before the death of the deceased". Section 7 (5) of the same Act provides—
"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."
No one doubts that the truster made a disposition which comes within the section and that estate duty is payable upon certain property which is deemed to pass upon his death, but the question is—what is the property which is deemed to pass; is it the £5,000 or is it the trust fund constituted by the deed of trust, in its state of investment at the death of the truster, i.e. the Creamola shares? It is common ground that £9,250 was the value of the Creamola shares at the truster's death. Thus no question as to value or as to the proper method of valuation arises in the present case.
What, then, is the property which is deemed to pass? The Statute says it is the "property taken" under the disposition made by the truster. My Lords, I feel no doubt that the property taken under that disposition was the sum of £5,000. That was the only property which passed from the truster, and it was the only property taken by the trustees from the truster under his disposition. They took that property, of course, as trustees for the Creamola shares and, therefore, these shares could not be "taken" under any disposition made by him. As soon as the trustees received the £5,000 it became in their hands a trust fund to be held on the trusts declared by the deed of trust, and it was, of course, proper for the trustees to invest that sum in some one or more of the numerous investments authorised by the trust deed. They invested it in the Creamola shares, but they did not take these shares under the disposition made by the truster; they took the shares because, in the exercise of their discretion, they decided to apply for them and because the company decided to allot them to the trustees.
Some discussion arose in the course of the argument as to whether the "disposition" in the present case was the drawing of a cheque for £5,000 by the truster, coupled with the sending of the cheque to the trustees' solicitors, or was the execution of the trust deed by the truster. I think the former is the true view, because the trustees "took" nothing until the £5,000 reached their solicitors, but to my mind it makes no difference to the result of this appeal whether the "disposition" was made by the cheque or by the trust deed. In the former case the disposition carried the sum of £5,000 and nothing else. In the latter case the truster, by the trust deed, "disposed" of property which was to be vested by him in the trustees, and that property was again £5,000 and nothing else.
At one time counsel for the Crown seemed disposed to place some reliance on the words in the trust deed—"And I provide and declare that the Trust Fund consists of the sum of Five thousand pounds sterling which is vested in the Trustees and which, or investments representing the same, shall be held and applied for the trust purposes afterwritten, videlicet:—". In my view these words are far indeed from helping the Crown. The truster declares that the trust fund consists of £5,000. Must not the "property … taken under a disposition" be the sum which he declares to be the trust fund? The words "and which, or investments representing the same" etc., in no way assist the Crown. They merely introduce the trusts upon which the trustees are to hold the Trust Fund (already defined as the sum of £5,000) or the investments which the trustees decide to make with that fund.
My Lords, if the gift of £5,000 had been made to a donee who was to retain it for his own benefit, there could surely have been no doubt that duty would have been payable, on the donor's death within five years, on £5,000 cash, even if the donee had forthwith invested the gift in Creamola shares and still held these shares at the donor's death. If authority were needed for this proposition, it is to be found in the case of Lord Strathcona v. Inland Revenue 1929 S.C. 800, applied and approved in Attorney-General for Ontario v. National Trust Company, Limited [1931] A.C. 818 at pp. 822-3; see also Attorney-General v. Oldham [1940] 1 K.B. 599, [1940] 2 K.B. 485.
There is, however, one case in which a distinction appears to have been drawn between a gift to a person for his own benefit and a gift to trustees for the benefit of persons entitled in succession. That is the case of In re Payne's Declaration [1939] 1 Ch. 865, [1940] 1 Ch. 576. The three learned judges who formed the majority in the Second Division of the Court of Session in the present case all placed some reliance on Payne's case, but, in my view, it was...
To continue reading
Request your trial