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TMI Blog1957 (7) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants, Sir John Garmondsway Wrightson, Bt., and Oliver Wrightson, by originating summons pursuant to the Act of 1933 to have a similar question determined. WESTMINSTER BANK LTD. v. INLAND REVENUE COMMISSIONERS The originating summons in the matter of two several policies of assurance on the life of Sir John Milne Barbour, deceased, effected with the Scottish Amicable Life Assurance Society and comprised in a settlement dated March 5, 1929, raised the question "whether having regard to the provisions of the above-mentioned settlement and in the events that have happened estate duty became payable under section 2(1)(d) of the Finance Act, 1894, or otherwise on the death of the late Sir John Milne Barbour in respect of the life interest of James Barbour in the money or property assured by the above-mentioned policies of assurance." Harman J. held that estate duty did not become payable. The Court of Appeal reversed his decision. It was not contended that duty was payable otherwise than under section 2(1)(d). The facts, stated by Lord Morton of Henryton, were as follows: The settlement of March 5, 1929, was made between the settlor of the one part and the appellant, Wes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter directed to be made are hereinafter called 'the trust fund') in the name of the bank in or upon..." Then followed a list of investments which need not be set out. Clauses 3 and 4 were as follows: "3. The bank shall until June 30, 1942, accumulate the entire income of the trust fund by investing the same and the resulting income thereof at compound interest in any of the investments hereby authorized and shall hold and apply the accumulated fund as part of the capital of the trust fund." "4. From and after the said June 30, 1942, the bank shall pay the income of the trust fund and of the accumulations thereof and of the investments for the time being representing the same (the said policies and the proceeds thereof however not to be treated as income bearing until the amounts payable in respect thereof shall have been received and invested) to the settlor's son John Milne Barbour during his life and if necessary the said income shall be apportioned as between capital and income as of the said respective dates." Clause 5 contained trusts to take effect after the death of John Milne Barbour in favour of his sons and grandsons. In fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fe tenant in the policies was the same both before and after the death. One cannot separate the policy from the policy moneys. The only thing that happened on the death was that the date of payment had arrived. The respondents could only succeed if they showed that a beneficial interest arose on the death. If, however, the life tenant did not really have an interest in the policy at all, his only interest was in the proceeds as and when they came in, with the right to see that the trustees carried out their trust. That would be a beneficial right in relation to the trust fund and it would not change in character on the settlor's death. That situation produces a dilemma for the Crown. Reliance is placed on Lord Advocate v. Hamilton's Trustees(3), which was unanimously approved in the D' Avigdor-Goldsmid case(2) so far as related to the absolute interests of the sons. There is nothing in Tennant v. Lord Advocate(4) to support the view that the coming into possession of the policy moneys is the accruing of a beneficial interest in the policy. That authority does not help in this case in the least. All it decides is that if a man owns a policy it cannot be said that he nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the legislature means "property" it says "property", and here "interest" cannot be read as synonymous with "property"; it must have a lease extended meaning than "property." John Pennycuick Q.C. and E.B. Stamp for the respondents. This case satisfies the three conditions set out in D' Avigdor-Goldsmid's case*** which are necessary to bring it within section 2(1)(d). But that decision has no application to the present case, because here, before the settlor's death, the life tenant had no interest in the policies or policy moneys. That case was a case of an absolute gift of a policy, a gift taking effect once and for all on its being made. In Attorney-General v. Lloyds Bank Ltd.# liability under section 2(1)(d) was admitted so far as the children's interests at the date of the relevant death exceeded the value of those interests immediately before the death. The ordinary case under section 2(1)(d) is one where there is no interest in possession during the life of the settlor but an interest is taken on his death, so that during the settlor's life the beneficiary really has an interest in expectancy, e.g., a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in expectancy which becomes an in these policies so long as no moneys are payable under them. The life tenant they became payable. Whenever any money was paid under the policies, or the company came under a liability to pay any money under them, the life tenant acquired a life interest in possession in the money so paid. That interest in possession is different in quality from the previous life interest in expectancy and section 2(1)(d) is accordingly brought into play. Further, it must be treated as a life interest provided by the settlor. Admittedly if A gives B £ 2,000 and B buys a car with it, A has not provided the car. But a settlor provides anything which provided by him and the property in which that interest subsists is provided by him. This applies to investments as well as to policies. Sneddon v. Lord Advocate** was a different case, a gift inter vivos, a single operation. On the true construction of this settlement, neither the life tenant nor any or the beneficiaries was intended to have any enjoyment of the policy moneys until the settlor's death, except for any sum payable during his life on the redemption of a Victory Bond. This case, like any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the whole trust fund. One must not confuse the case of a life interest in a subject-matter not producing any income and a life interest subject to a prior life interest. Adamson v. Attorney-General turned on the fact that the interest there was defeasible. That case must not be carried too far, particularly in view of the powerful dissenting opinion. Attorney-General v. Lloyds Bank Ltd., adds nothing to that case. What the life tenant got here on the settlor's death was not sufficiently different from what he had before to bring in section 2(1)(d). A new interest did not arise on the death in a beneficial interest provided by the settlor. When there is a change from an interest in expectancy to an interest in possession, there is not a relevant change, unless there is an intervening interest. This life tenant always had an interest in possession. Their Lordships took time for consideration. WRIGHTSON v. INLAND REVENUE COMMISSIONERS. The facts, stated by Lord Morton of Henryton, were as follows: The originating summons issued in this case raised the question whether, having regard to the provisions of a settlement of June 21, 1932, and in the events that happened, estate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Wrightson until he shall attain the age of twenty-one years and shall thereafter pay the income thereof to the said Peter Wrightson during his life or until he shall become tenant for life of the said Neasham Hall Estate." Clauses 5 and 6 contained trusts in favour of the settlor's sons Rodney and Oliver respectively in the same terms as clause 4, save for the alteration in the name of the beneficiary. Clause 7 was as follows: "If and when any of them the said Peter Wrightson Rodney Wrightson and Oliver Wrightson shall become tenant for life of the said Neasham Hall Estate or shall die then the trustees shall pay or transfer his share of the trust fund and the investments for the time being representing such share to the then trustees of the Neasham Hall settlement to be held by them upon trusts and limitations and with powers corresponding to the trusts limitations and powers affecting the said Neasham Hall Estate so settled as aforesaid or such of the same trusts limitations and powers as shall then be subsisting and capable of taking effect And if there shall be no such trustees the trustees shall hold such share and the income thereof upon the like trusts as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlor's death, the case comes under section 2(1)(d). It is irrelevant whether or not all the beneficiaries are sui juris. Both in this case and in the previous one the beneficiaries concerned had only an interest in expectancy during the settlor's life, and on his death they acquired for the first time a right of present enjoyment. In the present case the terms of the settlement make it clear beyond question that none of the brothers was intended to take any beneficial interest in the policies or proceeds in the lifetime of the settlor. That was so also in the previous case, but here it is particularly plain. There is also a distinction between a contingent and vested reversionary life interest : see In re Legh's Settlement Trusts.* If it be held that these beneficiaries had some kind of interest in possession in the settlor's lifetime. nevertheless on his death there arises an indefeasible right which brings the case within Adamson v. Attorney-General.** The present case is different from the previous case, because each son had only a contingent interest during the settlor's lifetime. On the settlor's death each son took a vested interest for the first time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apparent that in order to answer the question raised by the originating summons your Lordships have to determine--(1) whether by the settlement of March 5, 1929, the settlor provided "any annuity or other interest" within the meaning of section 2(1)(d); and (2), if so, whether, on the death of the settlor, a beneficial interest in the property so provided accrued or arose to James Barbour within the meaning of the same section. [His Lordships stated the facts and continued:] I now turn to the first of the two questions stated above. My Lords, in the case of D' Avigdor-Goldsmid v. Inland Revenue Commissioners* I expressed a doubt whether a policy of assurance was an "annuity or other interest" within the meaning of section 2(1)(d) of the Act of 1894, and if I had to decide that question in the absence of authority, I should feel the same doubt today. The argument presented by counsel for the appellant has considerable attractions. However, in Attorney-General v. Murray the Court of Appeal answered that question briefly in the affirmative. That decision has stood unquestioned for over 50 years and very many policies must have been dealt with on the footing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I made certain observations which may not accord with my present view that the settlor provided the policy moneys as well as the policies. For instance, I said##: "The only' other interest' purchased or provided by the deceased (Sir Osmond) was the policy." That observation was not necessary for the decision of the case. The point which all the members of the House, including myself, were concerned to establish was that it was not only the policy moneys which were provided by the deceased, for he also provided the policies the source from which these moneys came. No other member I now refer, although Lord Porter approved of my analysis of certain authorities and Lord Asquith of Bishopstone expressed his concurrence with my opinion. In these circumstances I feel free to say that, in my opinion, any observations of time which stated or implied that the deceased, Sir Osmond, did not "provide" the policy moneys were to that extent incorrect. I would answer the first question, already stated, in the affirmative. I now turn to the second question, whether on the death of the settlor a beneficial interest in the property provided by the settlor accrued or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase* differs from the present case to this extent, that in the former case the appellant had the entire beneficial interest in the policy both before and after the death of his father; but, in my opinion, the principles there stated go far to decide the present case in favour of the appellant. Nor does the matter end there. In the speeches delivered in the D' Avigdor-Goldsmid case*, reference was made to Lord Advocate v. Hamilton's Trustees, and the facts of that case were summarized by me as follows##: "In that case the deceased, who died in 1936, had in 1912 settled certain policies on his life on trusts for the benefit of his sons and daughter. The sons were to become absolutely entitled on attaining the age of 25 and the daughter's share was settled on her for life with remainders over. The trust deed stated that these provisions in favour of the children 'shall vest in them respectively at the date hereof.' The policies became fully paid in 1914 and 1915, and the premiums payable in the meantime were borrowed by the trustees from the deceased. On the deceased's death, duty was claimed under section 2(1)(d) on the amount of the policy moneys less th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued: "The question arises then: By virtue of what beneficial interest did James Barbour become entitled to receive this income? The answer to this must surely be, by virtue of the beneficial interest in the policy to which he was entitled under the settlement. The next question is : By virtue of what beneficial interest did James Barbour become entitled to receive the income of the moneys which were paid to the trustees under the policies on the death of the settlor? The answer would again appear to be, by virtue of the beneficial interest in the policies to which he was entitled under the settlement. "Does, then, the beneficial interest which, entitled him to receive the income of the last-mentioned moneys differ in quality from the interest which entitled him to receive the income of the £ 750, and would have entitled him to receive the trustees during the settlor's lifetime? I confess that I cannot see in what respect it does differ. the £ 750 and the moneys received on the settlor's death were equally moneys which became payable under the policies (or 'proceeds' of the said policies) and James Barbour's right to receive the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le if, after the death, the beneficiary has some right different from any rights which he had before. When the settlors died no new rights against the insurance companies arose or accrued to the trustees of these settlements. Using the language of Lord Porter in D' Avigdor-Goldsmid's case* the trustees did not then get new interests: they obtained the fruition of the interests which they already held. But it does not necessarily follow that no new beneficial interest then accrued or arose to any beneficiary under the settlements. The provisions made by a settlor may be in such a form that a new beneficial interest does accrue or arise to a particular beneficiary at the time of the settlor's death, and the question in each of these cases appears to me to be whether, on a proper construction of each settlement, a beneficial interest did accrue or arise to the life tenants on the settlor's death. In my opinion, Lord Advocate v. Hamilton's Trustees** was rightly decided in all respects. In that case policies on the life of the truster were held by trustees for his four children equally. The three sons had vested rights to the capital of their shares and it follows f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlement that before the death of the settlor the sons had any right with regarded to the policies other than the right common to all beneficiaries, however remote the contingency in which they might take beneficial interests--the right to prevent the trustees from acting improperly and to ensure the preservation of the trust fund. It seems to me that the only beneficial interests declared by the settlement was beneficial interests in the policy moneys received by the trustees on maturity of the policies. If that be so, then beneficial interests did accrue or arise to the sons on the settlor's death and, with some hesitation, I have come to the conclusion the appeal in this case ought to be dismissed. LORD RADCLIFFE. My Lords, I am afraid that I do not find it possible to arrive at the conclusion which, as I understand, commends itself to the majority of your Lordships. I entertain the clear opinion that the orders made by the court of Appeal in these cases were correct. I will try to be as short as is, I think, the point itself. In considering whether and, if so, to what extent a beneficial interest accrued or arose on the death of Sir Thomas Wrightson, Bart, (to take the Wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestments so made. Again, it seems to me an explanation that does not explain to say that all this change was merely the expression of the fact that the son had had from the first a vested life interest in the trust fund "whatever it might be" for the time being. It was the whole scheme of the settlement in question that there should not be a trust fund at all for anyone to be tenant for life of until the settlor died and the moneys fell in. Trust funds do not exist as ideal conceptions without material substance; nor, I would suppose, does the form of a settlement take shape without reference to the nature and incidents of the property that is to be the subject of settlement. When a man takes out a policy on his life and ties it up in this way it is of the essence of the arrangement that he makes and the benefits that he provides that those benefits arise on and by virtue of this death and not before. I am sorry that an approach to the subject as simple as this does not commend itself to your Lordships. What divides us, as I understand it, is not any difference as to the legal effect of the settlement made--it is indisputable that there was to be no trust fund for a son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lastly, I cannot understand how the words "by survivorship" in section 2(1)(d) can be thought to have any connexion with the Crown's claim to duty in this case. There is no joint tenancy here. The words "by survivorship" in this subsection are, in my view, the usual words of art to denote the interest which one joint tenant takes on the death of another. So used, they have the same import as the words "by survivorship" in section 38(2)(b) of the Customs and Inland Revenue Act, 1881, which is incorporated by section 2(1)(c) of the Finance Act, 1894. I have never known a suggestion that they have any other meaning and, so far as I know, all the established textbooks on estate duty treat them as relating to joint tenancies. I do not think, therefore, that this case can be solved by any refining on the significance of the words "by survivorship." I would dismiss the appeal. LORD KEITH OF AVONHOLM. My Lords, this is my opinion in the Westminster Bank case. The facts in this case have already been sufficiently stated. I only note (1) that the four several policies of assurance were assigned by the settlor to the bank, as trustee of the settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways of saying the same thing. What did the settlor put in trust? Surely the policies. If not, how could the trustees realize the policies? When the settlor died there were no proceeds in existence but there were policies in existence by virtue of which the trustees were enabled to obtain the proceeds. If the policies are to be distinguished from the proceeds I have difficulty in seeing how a beneficial interest can ever accrue or arise by survivorship, on the death, in the proceeds, because the proceeds are not there at the death. I would observe also that it is the interest provided that is to be deemed to pass at the death, but the value of this interest is quantified, for the purposes of duty, by the extent of the beneficial interest accruing or arising by survivorship at the death. This is noted, for example, by my noble and learned friend, Lord Morton of Henryton, in D' Avigdor-Goldsmid v. Inland Revenue Commissioners* in commenting on Attorney-General v. Dobree** by Lord President Normand and Lord Fleming in Tennant's Trustees v. Lord Advocate***, and by the Court of Appeal in Westminster Bank Ltd. v. Attorney-General#. If no beneficial interest accrues or arises by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est provided in the policy was a life-interest. Where the interest provided is an absolute indefeasible interest in the proceeds of the life policy to be paid over by trustees to the person absolutely entitled on the death of the settlor, it has been decided by this House in D' Avigdor-Goldsmid v. Inland Revenue Commissioners* that no beneficial interest arises on the death of the settlor. It would be a remarkable thing, in my opinion, that where the right at the death is cut down to a life-interest a different result should follow. In Lord Advocate v. Hamilton's Trustees** a father had placed in trust during his lifetime certain policies of insurance on his life and whole sums of money to be divided therefrom to be held for behoof of three sons and a daughter. The sons were to take each a quarter of the proceeds of the policies at his death, but the daughter was restricted to a life-rent of a quarter of the proceeds with fee to her issue. It was held that no estate duty was exigible on the death of the truster on the proceeds of the policies. In that case no argument was directed to showing that there was a difference in respect of the sons' shares and in respect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be an interest in expectancy which has become an interest in possession. But that is merely to describe the nature of the interest given. The nature of the interest provided was fixed once and for all when it was originally conferred. The same would hold good, in my opinion, where the annuity was to commence on the death of the father. That event merely fixes the date of the maturity of the policy. It will be observed that this illustration would fall exactly under the opening words of subsection 2(1)(d)--an "annuity purchased or provided by the deceased. "But it is not caught, in my opinion, by the concluding words of the subsection," to the extent of the beneficial interest accruing or arising by survivorship...on the death of the deceased." The beneficial interest would arise, in my opinion, not be survivorship, but by virtue of the contract made with the insurance company when the policy was taken out, fixing the commencement date of the annuity as the date of the deceased's death. It is not, in my opinion, possible to distinguish this case from a case where any other date for commencement of the annuity is stipulated for in the policy. My noble a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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