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TMI Blog1969 (7) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... nded marriage and subject as hereinafter provided the trustees shall pay or apply the income of the trust fund during the trust period to or for the maintenance and support or otherwise for the benefit of all or such one or more to the exclusion of the others or other of the husband and wife and the children or remoter issue of the said marriage for the time being living as the trustees (being at least two in number or a trust corporation) in their absolute discretion think fit with power for the trustees to pay any income which they may decide should be applied for the maintenance or otherwise for the benefit of any child or remoter issue of the said marriage to the guardian or guardians of such child or remoter issue without being bound to see to the application thereof. 4. Clause 5 empowered the trustees during the trust period (but only with the written consent of the wife during her life) to transfer the whole or parts of capital to the wife or any issue of the marriage : also to revoke trusts and resettle the funds on other trusts in favour of the husband, the wife, or issue of the marriage, or on a subsequent marriage of the wife in favour of her and that husband and iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onary objects, to fit such a concept to the language of section 2(1)(b), which refers to property in which the deceased or any other person had an interest. It is true that Gartside was a case of a non-exhaustive discretionary power or trust over income, there being provision for accumulation of unapplied income. But we are unable to distinguish the present case on that ground. 8. Accordingly the next problem that faces us is whether estate duty was leviable by force of the language of section 1 simpliciter, unaided by section 2. The first question hereunder is the vexed question of the relationship between sections 1 and 2. For the appellant trustees it was argued that the decision in the Arnholz case, Public Trustee v. Inland Revenue Commissioners [1960] AC 398, established the complete reverse of the views expressed by Lord Macnaghten in Earl Cowley v. Inland Revenue Commissioners [1899] AC 198 that is to say established that section 2 exhaustively laid down the only circumstances in which estate duty was leviable, and that if the circumstances could not be brought within section 1 as being circumstances set out in section 2, that was the end of the matter, the phrase in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioners [1956] AC 491 (in which he first showed his disapproval of the Cowley [1899] AC 198 approach) had said, at p. 498 : I have never known it disputed that the exclusion provision which is contained in section 2(3) applies to all property passing, whether it passes under section 1 simpliciter or under section 1 so enlarged or interpreted by section 2(1). 13. In Gartside (supra) Lord Reid expressed the ratio decidendi of Arnholz'scase (supra) as follows, at p. 610: What the case did was to decide 'that sections 1 and 2 are not mutually exclusive and that the excepting words in section 2(1)(b) are operative in regard to property which falls within that sub-section even though that property may also fall within the wide words of section 1' (per Lord Simonds). 14. Accordingly, in our judgment the fact that a situation described in section 2 does not exist does not necessarily mean that there is no charge to estate duty : though if a situation described in section 2 does exist, but by reason of an exception or otherwise the section makes the charge impossible or reduces its impact, the Crown cannot resort to section 1 as if section 2 did not exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t involved the proposition that Gartside 's case (supra) had apparently by a side-wind established that Scott ( supra) and Burrell ( supra) had been wrongly decided, together with, perhaps, the accumulation cases of In re Hodson's Settlement Trusts [1939] Ch. 343 and Westminster Bank v. Attorney-General [1939] Ch. 610. Having regard to our subsequent conclusions we need not express a view on this argument. 18. This brings us to the final question-whether in the light of cases such as Scott's case (supra) , Burrell's case(supra), and Kirkwood (supra ) the trust funds should be said to have passed on the husband's death under section 1 simpliciter. 19. The Crown contends: (1) that the effect of the trusts declared by clause 4 in the events which happened is the same as if the clause had in terms provided at its end that in the event of the husband dying leaving the wife but no issue of the marriage him surviving, the trustees should hold the trust funds upon trust to pay the income thereof during the trust period to the wife for life : and accordingly (2) the clause provides for a passing of the beneficial enjoyment of the property from the discretionary cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Burrell (supra) or Kirkwood (supra) lead to the conclusion that there was here a passing on the death under section 1 simpliciter. It appears to us that they are distinguishable both on their facts and in respect of the ratio decidendi. In this connection we would refer also to the quotation from a judgment in this court in Kirkwood (supra) approved by Lord Guest in the House of Lords in the same case in [1966] A.C. 520, 545, and by two other members of the House, concerning the relevance of the method employed in considering liability to estate duty. In Burrell ( supra) (decided on the same day as Scott (supra)) the test was applied of finding a new trust for a new group with new qualifications. In the pr sent case there was not a new trust, the wife's rights were as a member of the original group and not by virtue of any new qualification. In Kirkwood(supra) there was a new trust by a different settlor with necessarily a different qualification. In each case there was a fresh start, a new trust theme or purpose compared with the previous trust. In Scott (supra ) at the death a different trust began from that which then ended: the trust that began was the tenancy in tail under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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