Tawse's Trustees v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 18 December 1942 |
| Date | 18 December 1942 |
| Docket Number | No. 15. |
| Court | Court of Session (Inner House - Second Division) |
2ND DIVISION.
RevenueEstate dutyProperty deemed to pass on deathInter vivos trustOption therein to truster to require reconveyance of shares at par valueWhether option property of which truster "competent to dispose" at the time of his deathFinance Act, 1894 (57 and 58 Vict. cap. 30), sec. 2 (1) (a).
The Finance Act, 1894, by section 2, enacts:"(1) Property passing on the death of the deceased shall be deemed to include (a) Property of which the deceased was at the time of his death competent to dispose."
By a deed of trust executed in 1929 by T and his daughter, T transferred to the trustees therein nominated certain shares in a private company of which he was chairman. The deed contained a provision that the trustees should be bound from time to time, when called on by T, to reconvey to him at his expense some or all of these shares in exchange for other stocks and shares of a capital value equal to the par value of the shares so withdrawn from the trust. T died in 1940 without having made any call on the trustees to reconvey the shares. An additional assessment to estate duty which bore to be an assessment on property consisting of the "right or option" so reserved was made against his testamentary trustees in respect of the difference between the market value and the par value of these shares at T's death.
Held that, on a true construction of the provision regarding the option, the option was personal to T, and, being neither assignable nor transmissible, was not property of which he was "at the time of his death competent to dispose," and so not liable to estate duty as property deemed to pass on death.
Skelton v. YounghouseELR, [1942] A. C. 571,followed.
Mrs Louise Gordon Or Tawse and others, the testamentary trustees of the late William Tawse, appealed to the Court of Session under section 10 of the Finance Act, 1894,1 against an assessment to estate duty made by the Commissioners of Inland Revenue.2
The appellants averred:"(1) The late William Tawse, public works contractor, died at Aberdeen on 6th April 1940. At the time of his death he was chairman of the company of William Tawse, Limited, public works contractors, Aberdeen, which had an issued capital of 50,000 in ordinary shares of 1 each, of which the deceased at the date of his death held 18,250 shares. The company was a private company within the meaning of section 26 of the Companies Act, 1929. (2) By deed of trust dated 22nd and 27th March 1929, Mr Tawse and his daughter, Dorothy Gordon Tawseafterwards Mrs Macdonaldon the narrative that he had taken out a policy on the life of his daughter with the London Life Association, Limited, for 10,000 transferred to the trustees thereinafter mentioned 100 shares of 5 each, 1, 5s. paid, of the North British and Mercantile Insurance Co., Limited., and 7,150 ordinary shares of 1 each fully paid of William Tawse, Limited, in trust for the purposes therein mentioned. The purposes of the trust were for payment of the expenses of executing the trust, to pay the premiums on said policy till such time as it became fully paidwhich it became after ten premiums had been paid: the trustees thereafter to retain the funds thereby conveyed (including the proceeds of the said policy but subject to the qualification aftermentioned regarding the shares of William Tawse, Limited) invested in their own names and pay the income thereof as an alimentary provision for his said daughterthe capital on her death to go to
her children [as was provided by the deed of trust]. The qualification made regarding the shares of William Tawse, Limited, was that the trustees should be bound from time to time when called on by Mr Tawse to reconvey to him at his expense some or all of the said 7,150 shares of William Tawse, Limited, in exchange for stocks and shares on the following basis, namely:Until the said life policy has become fully paid up the stocks and shares tendered in exchange must produce an income equal to the income yielded by the shares of William Tawse, Limited, so withdrawn from the trust, and subsequent to the said life policy becoming fully paid up the stocks and shares so tendered in exchange must be equal in capital value to the par value of the shares of William Tawse, Limited, so withdrawn from the trust. The right to call for a reconveyance of the said shares on the above terms was personal to the said William Tawse and did not transmit to his trustees or executors. (3) The value of the shares of William Tawse, Limited, as at the date of Mr Tawse's death, was adjusted with the Commissioners of Inland Revenue at 1, 10s. per share, and estate duty on the deceased's holding of 18,250 shares was duly paid on that value. (4) The Inland Revenue have now intimated an additional claim for 903, 11s. 10d., being the estate duty and interest in respect of the difference between the agreed market value and the par value of said 7,150 shares on the ground that under the power reserved to the said William Tawse in the deed of trust he had up to the time of his death the right to have the said shares reconveyed to him on payment of their par value, and that he was accordingly at the date of his death competent to dispose of these shares subject to his making payment of the par value. (5) The said William Tawse made no application to the said trustees to reconvey to him the said 7,150 shares, and all of them are still vested in the trustees for the purposes of the said deed of trust."Answers were lodged by the Lord Advocate as representing the Commissioners of Inland Revenue. He averred:"(1) Admitted. (2) Denied that the right to call for a reconveyance of the said shares on the said terms was personal to the said William Tawse and did not transmit to his trustees or executors. Quoad ultra admitted under reference to the said deed of trust for its terms, subject to the explanation that no reference was made in the grounds of appeal submitted by the appellants to the Commissioners to the alleged non-transmissibility of the said right. (3) Admitted. (4) Admitted that the Commissioners of Inland Revenue intimated an additional claim for 903, 11s. 10d. of estate duty and interest in respect of the difference between the agreed market value and the par value of the said shares. Quoad ultra denied. Explained that the said assessment is based not on the ground stated but is, as set forth in the assessment, on property consisting of the right or option reserved by the deceased to have the said shares reconveyed to him on payment of their par value, the agreed market value of the said shares being 1, 10s. per share, the said difference amounting to 3,575. (5) Admitted."
The contentions of the parties were stated as follows:
"The appellants contend that the claim of the Inland Revenue is erroneous, and the grounds upon which they so contend are as follows:(1) It was a condition precedent of the said William Tawse acquiring any right over the said 7,150 shares or any part of their value that he should tender in exchange for them stocks and shares equal in value to the par value of the said shares or such of them as he proposed to acquire. This condition he did not fulfil. (2) At no time between the date when the deed of trust was granted and the date of his death was the said William Tawse in a position to dispose of the said 7,150 shares or any part of their value, because the said shares did not then belong to him and he had not chosen to acquire them by paying the agreed on price for them. (3) At no time between the said dates could the said William Tawse freely have acquired the said shares. He could only do so by giving onerous consideration for them and this he did not choose to do. (4) The fact that the said William Tawse reserved a right in the deed of trust to acquire the said shares on specially favourable terms is irrelevant since in fact he did not exercise the right. Unless and until he chose to ask for a reconveyance of the shares and tendered the agreed on price in exchange for them he remained without any right over these shares or any part of their value. (5) In these circumstances the said William Tawse was not at the date of his death competent to dispose of the said shares or any part of their value within the meaning of the Finance Act, 1894."
"The respondent maintains that the said assessment was properly made, in respect either that the said right or option was propertyin bonis of the deceased at his death and being an asset of his estate passed under section 1 of the said Finance Act, 1894; or that the said right or option so reserved was property chargeable to estate duty on the ground that the deceased was competent to dispose either of the said shares or of the said right or option within the meaning of section 2 (1) (a) of the said Act; or that the said right or option so reserved was property chargeable to estate duty on the ground that by reserving the right or option to re-acquire the said shares the deceased reserved an interest in them within the meaning of section 2 (1) (c) of the said Act."
The appellants craved the Court "to recall the assessment complained of: and to direct the said Commissioners to repay the amount paid by the appellants with interest."
The case was heard before the Second Division on 2nd December 1942.
At advising on 18th December 1942,
LORD JUSTICE-CLERK (Cooper).The late Mr Tawse, who died in 1940, was chairman of a private company called William Tawse, Ltd., public works contractors, in which he held at the date of his death 18,250 shares out of a total issued capital of 50,000 1 ordinary shares. In 1929 the deceased and his daughter executed a deed of trust under which each party conveyed to trustees certain stocks and shares to be held in the first instance for the purpose of paying the ten annual premiums due on a policy for 10,000 on the life of the daughter, and thereafter for the benefit of the daughter and her issue...
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