Later decisions that cite For example, in Duke of Northumberland v Attorney-General
Lorp MacnacutTen. My Lords, besides the question as to the effect of a disentailing assurance in the case of property chargeable with duty under the Succession Duty Act, 1853, this appeal involves the consideration of two reported decisions— Solicttor-General v. Law Reversionary Society (2) and In re Cooper and Allen. (1) The question as to the effect of a disentailing assurance is not, as it seems to me, reasonably arguable, and if it were it would be concluded, I think adversely to the appellants, by the decision of this House in the case of Lord Lilford v. Attorney- General. (8) In many ways the Succession Duty Act, 1853, is a remarkable piece of legislation. Drawn with consummate skill it avoids all technical expressions, and yet there is not a single word misused or out of place, nor any expression which it would be ' easy toimprove. The Act was fortunate in its passage through Parliament. It was not mangled or marred or amended. The result is that it is consistent throughout, and as clear as the nature of the subject and the novelty of treatment which it required would permit. But to understand the Act thoroughly it is necessary to lay aside all preconceived notions and to follow patiently and persistently the clue which the Act itself provides. The key to the Act is found in s. 2, which defines the terms "'successor"' and "predecessor," and explains the relation between predecessor and successor. The Attorney-General argued that the word 'successor '"' was a word of flexible meaning, and occasionally used rather loosely in the Act. 'With the utmost deference, I protest against that view. It has been the cause and I think the sole cause of all the difficulties that judges have discovered in the Act. There are two things plain on the face of the Act. In the first place, it is clear that the terms "' disposition and "' devo- lution' must have been intended to comprehend and exhaust (1) 4 Ch. D. 802. (2) L. R. 8 Ex. 233. @) LR. 2h... A. C. AND PRIVY COUNCIL. 411 every conceivable mode by which property gan pass, whether H.L.(&.) by act of parties or by act of the law. In the next place, it is 1905 to be borne in mind that a " successor" must be beneficially Normonnen- entitled. When a person takes a succession he may not have _,"4%? . (DvEE oF) actual possession. A husband, for instance, may have posses- ins . 5 A e - 2 ; TTORNEY- sion in right of his wife, a guardian on behalf of an infant. Guyerat. But a successor, to be a true successor within the meaning of Lord Macnaghten. the Act, must have the beneficial interest in the property sub- ject to duty, whoever may have the actual possession or the right of management. These are obvious considerations. But they are frequently lost sight of, and then all sorts of difficulties arise. Let me put this case: a limitation after a death to A. for life, remainder to B. for life, remainder to C. in fee. In the lifetime of A. and B., C. sells his reversionary interest to X. Does X. become a successor? The Act says "Yes." But the learned judges in Solicitor-General v. Law Reversionary Soctety (1) answer '' No." In that case the Court said: '' the language of the 2nd section does not deal with the position of an alienee of a succession. .... The position of an alienee is a matter of legal consequence from the 2nd section, and not touched by the words of it." I must confess I cannot follow that observation. It seems to me that the position of an alienee is within the very words of s. 2. That section declares that '' Every . . . . disposition of property," by reason whereof any person becomes beneficially entitled to property upon death, either immediately or after an interval, shall be deemed to confer on the person so entitled a succession, and it adds: "' the term 'successor' shall denote the person so entitled.'' Now in the case I have supposed X. undoubtedly becomes entitled to property answering the description contained in s. 2 under the circumstances there mentioned, if the sale to him be a '' dispo- sition of property" within the meaning of the Act. In many cases the purpose of the Act would be defeated unless you give to the term "' disposition" the largest possible signification— not only so, but the Act shews on the face of it that the term '' disposition' includes a sale. Sect. 7 speaks of ' any dispo- sition of property not being a bona fide sale." And s, 17 is (1) L. R. 8 Ex. 233. 412 H. L. (E.) 1905 —~ NoRTHUMBER- LAND (Dvx= or) Vv ATTORNEY- GENERAL. Lord Macnaghten. HOUSE OF LORDS [1905] more significant still. It is to be inferred from it that the framers of the Act thought the expression "' disposition of pro- perty'' wide enough even to include contracts for the payment of money on post obits and under policies of insurance. Now, if an alienee be a true successor, the difficulties with which the Court of Exchequer struggled in the case of the Law Rever- sionary Society vanish altogether. The rate of duty and the time of payment are fixed by s.15. The value of the annuity on which the duty is to be computed is determined by s. 21. There is no difficulty left except the difficulty, such as it is, which has been suggested in the construction of s. 44. And that vanishes too, if the alienee be a true successor within the meaning of the Act. The difficulty suggested was that s. 44 declares that '' besides the successor'' certain persons shall be accountable to the Crown for succession duty, and reckons among the persons accountable "' every person" in whom any property or the management of any property subject to duty '* shall be vested by alienation or other derivative title at the time of the succession becoming an interest in possession." It was said that an alienee cannot be a successor within the mean- ing of the Act, for here you have the alienee distinguished from the successor and placed in a different class. But there is no substance in that objection. Beneficial interest is the badge of a true successor, and a necessary qualification in his case, while the management of the property or the right to receive the rents may be vested in some other person, and so vested by alienation or other derivative title. It may be observed that unless an alienee coming into possession be a successor within the meaning of the Act he would be in a different position from a successor not taking by alienation. He would not be under the liability of s. 42, but only under the limited liability of s. 44—that is, only under the liability attaching to persons who have not the beneficial interest—a result which could hardly have been contemplated by the framers of the Act. In the case of the Reversionary Law Society the learned judges of the Court of Exchequer got over the difficulty which they had themselves created by considering the inconvenience that might arise if a successor, after having parted with his A. C. AND PRIVY COUNCIL. 413 succession, were still to be treated as the successor for the H.L. (E.) purpose of ascertaining the value of the annuity on which duty —_ 1905 is to be computed. And so they arrived at a right conclusion, yonmnouner- but not, I think, by the most direct road. (Doma 8 r) I now come to the case of In re Cooper and Allen. (1) The v : : ye : ATTORNEY- question there turned on s.15. That section is in my view the Geneaat. natural and necessary outcome of the position which the Act Tord assigns to the alienee of a succession. He becomes a '"'suc- *™#°"™ cessor' within the meaning of the Act, though the succession conferred on him is not a new succession. Who, then, is the "predecessor"? The predecessor must be the original suc- cessor who has parted with his succession, and so the duty on a succession by alienation could never be less than 10 per cent. when the alienee is not of kin to the person from whom title is derived. To prevent a result so unreasonable and inconvenient a special provision is introduced which declares that, in the case of a succession becoming vested by alienation, or by any other title not conferring a new succession in any person other than the original successor before he becomes entitled thereto in possession, neither the rate of duty nor the time of payment is to bealtered. Sect. 15 says nothing about the value of the succes- sion simply because, according to the view which I have ventured to present to your Lordships, the value of the succession is dealt with expressly by s. 21. Then ins. 15 occasion is taken to deal with the kindred subject of ''acceleration'' by the surrender or extinction of a prior interest. In the case of acceleration, but for the provision introduced at the end of the section, it might have been open to contention that duty would become payable at once on the surrender or extinction of the prior interest. The rate of duty, of course, would not be altered, nor the value of the succession. And so the section says quite properly that the duty is to be payable at the same time and in the same manner as if no such acceleration had taken place, and it says no more. Some difficulty seems to have been created in some cases by the; words '"'or by any title not conferring a new succession in}any other person,' which follow the words '' vested by (1) 4 Ch. D. 802. 414 H.L.() 1905 HOUSE OF LORDS [1905] alienation" ins. 15. In the case of In re Cooper and Allen (1) Sir George Jessel appears to have been pressed by the diffi- Noxrnumsme- culty, and perhaps misled by it. But a little consideration will LAND (Dvxz oF) » ATTORNEY- GENERAL. Lord Macnaghten. shew that a succession may be transferred without conferring a new succession, not merely by alienation pure and simple, but also by a title which is either not alienation at all, strictly speaking, or alienation combined with something else. Take the case of escheat as the law stood when the Succession Duty Act was passed, or the case of leaseholds (which are real estate under the Act) seized under a fi. fa., or the case of a husband alienating his wife's reversionary interest in a term of years. These and other cases would come under the words in question and under the words ''or other derivative title,' which are used as their equivalent if held not to fall under the word alienation." The judgment of Sir George Jessel M.R. in In re Cooper and Allen (1) was disapproved of in the case of Lord Wolverton v.. Attorney-General. (2) Your Lordships have heard an ingenious argument intended to set it up again. Can it be supported ? I think not. The language of the Succession Duty Act, 1853, is too plain. In s. 15 it declares that '"'where.... any succession shall before the successor shall have become entitled thereto or to the income thereof in possession have become vested by alienation . . . . in any other person, then the duty payable in respect thereof, shall be paid at the same rate and ' time as the same would have been payable if no such alienation 9? had been made... That is an enactment of general appli- cation. There is no exception to be found in the Act. But Sir George Jessel introduces an exception. He says in effect that the rule does not apply if there be a disposition or devolu- tion conferring a new succession in respect of which duty is payable before duty becomes payable in respect of the succes- sion transferred by alienation. In the present case it is not disputed that the succession of the seventh Duke was trans- ferred to Lord James Murray, and that if the sixth Duke had died in the lifetime of Lord James duty would have been payable in respect of the seventh Duke's succession, and again (1) 4 Ch. D. 802. (2) [1898] A. C. 535. A. C. AND PRIVY COUNCIL. 415 on Lord James' death, if on the death of Lord James the H.L.() property had passed by disposition or devolution to Miss — 1905 Murray. Why should payment of.duty on the property left by jopmonnen- Lord James discharge the duty with which the property was une ea) chargeable when he bought it? For such a vicarious exonera- v tion there is no warrant in the Act. Nor is there in reason. an When there is a sale of property chargeable with succession Tou duty, provision is ordinarily made to meet the claim for duty pesca: pias when it arises. The Commissioners have power to commute the duty; the vendor may covenant to bear it, or it may be left to fall on the purchaser. In any case the duty is, or ought to be, taken into consideration in arriving at the price, and the money which goes into the pocket of the vendor is or ought to be so much the less. Why should the vendor, or it may be the purchaser's estate, get a windfall, and why should the Crown lose because the vendor happens to outlive the purchaser ? I think the appeal fails on all grounds, and ought to be dismissed with costs. Lorp Davey. My Lords, the Succession Duty Act, 1853, dealt for the first time with a difficult and complicated subject of legislation, but a careful consideration of the scheme and language of the Act will render the solution of the questions submitted to your Lordships for decision on this appeal free from any extraordinary difficulty. By the disentailing deed of December 19, 1868, estates com- prising the lands in question were conveyed by the sixth Duke (tenant for life) and the present Duke (then Earl Percy and tenant in tail in remainder) to such uses as they should jointly appoint, and in default to the subsisting uses. By a deed dated December 1, 1870, the sixth Duke and the present Duke in exercise of the power appointed the lands in question to Lord James Murray in fee. The joint power created by the first deed was but the appropriate machinery for enabling the parties to make a con- veyance of their respective interests by a simultaneous act, and so as to create one estate. Mr. Danckwerts, however, argued that the effect of the exercise of the joint power was to 416 H. L. (E,) 1905 ~~ NoRTHUMBER- LAND (DURE OF) v ATTORNEY- (GENERAL. Lord Davey. HOUSE OF LORDS [1905] destroy the succession which previously existed in the present Duke, and therefore no duty under this Act became payable on the death of the sixth Duke. I am of opinion that the exer- cise of the power in favour of Lord James Murray had precisely the same legal effect as if the sixth Duke had con- veyed his life estate, and the present Duke having disentailed, had conveyed the fee simple directly to the appointee by the deed of December 19, 1868, and he had been named as grantee in that deed, or as if the present Duke had conveyed the fee simple in remainder, and the sixth Duke had surrendered his life estate so as to pass the fee simple in possession. While I agree that the subject is not to be taxed by implication or unless he comes within the letter of the taxing Act, I think that the forms of conveyancing make no difference where the legal effect and substance is the same. The principal point on this appeal depends on the con- struction of the 15th section of the Act. By the 1st section the term '' succession' denotes '' any property chargeable with duty under this Act," which, I think, would be more accurately expressed as any estate or interest in property which is charge- able with duty, though this is probably covered by the definition of property. By the 2nd section every disposition by reason whereof any person becomes beneficially entitled to any property upon the death of any person, and every devolution by law of any beneficial interest in property upon the death of any person, confers on the person entitled '' a succession," and the term 'successor'? denotes the person so entitled. The cardinal fact to be borne in mind in the construction and application of ss. 14 and 15 is that in the case of real estate the successor, although entitled in fee simple, is charged only on an annuity commensurate with his personal enjoyment, 1.e., In most icases for his life. Consequently, s. 14, which prescribes the rule in case of a succession passing by reason of death, can have no application to real estate, and is in terms confined to personal property. Sect. 15 deals with a different class of cases, and applies both to real estate and personalty. Grammatically, the words "' not conferring a new succession" apply only to the word " title,' and should be so construed ; A.C. AND PRIVY COUNCIL. 417 but whether they are or are not applied to the word "'aliena- H.L. (A) tion," I think that word in itself prim4 facie means and should _1905 be construed as meaning only transfers inter vivos (either Nonmonnon- gratuitous or for value). The word is not apt to describe the (sew on) passing of property from the dead hand, either by will or by eae intestacy. I think that a new succession can only be conferred Genzrat. by a new disposition or devolution by law to take effect om Lord Davey. death, and conversely every derivative title by reason of death confers a new succession under s. 2 of the Act. The section, therefore, applies only to a title acquired by transfer or other- wise in the lifetime of the successor. It is not necessary to define how such other derivative title can be created. The words may only be intended to bring such title within the operation of the section, if any such title there be. Lord Herschell, however, has pointed out one instance of such title, namely, by bankruptcy, and there may conceivably be other circumstances and events in which the interest of the successor might become divested in favour of another. I am further of opinion that the transferee or person otherwise acquiring. title thereby becomes the '' person entitled'' under the disposition or devolution conferring the succession within the meaning of s. 2, and "' the successor'' for the purposes of the Act, unless the context shews that the word is used in a different sense. And as at present advised (though it is unnecessary to decide it in the present case), I think that if the transferee of a suc- cession in real estate were to die before he became entitled in possession to the property comprised in the succession, his devisee or heir would be a person holding by a title conferring a new succession in the same position exactly as the devisee or heir of an original successor so dying. So far I agree with Sir George Jessel. But the present case is not one of a transfer of the succes- sion only. I have already expressed my opinion as to the effect of the appointment under the joint power to Lord James Murray. I am disposed to think he became thereby in the position of a successor whose title in possession has been accelerated by the surrender or extinction of the prior interest, and, apart from the provision at the end of the 15th section, would have been presently liable to pay the duty, but by that 418 H. L. (E.) 1905 —\~ 'NoRTHUMBER- LAND (DUKE OF) " ATTORNEY- GENERAL. Lord Davey. HOUSE OF LORDS [1905] provision for the benefit of the successor the duty is made payable only at the same time and in the same manner as such duty would have been payable if no acceleration had taken place. The words ''in the same manner" are a little puzzling, but I think they mean that the Crown is not to lose the duty by reason of the estate of the successor having become an estate in possession or the limitations of the existing settle- ment being exhausted, and the duty is to be paid on the happening of the same event as it would if there had been no surrender of the prior interest, although nothing passed and no title in possession was acquired on that event. In any case the transferee became entitled to a fee simple in possession, which became the subject of other dispositions and devolutions conferring successions depending on other events on which duty was properly payable; but that was not a satisfaction of the duty payable in the event of the death of the sixth Duke, which became a charge on the property, and all that can be said is that Lord James Murray purchased a property subject to an incumbrance. Iam therefore of opinion that by the effect of the provisions in s. 15 of the Act a duty became payable to the Crown on the death of the sixth Duke at the same rate as it would have been payable if no transfer had been made. It remains to inquire on whose life the duty is to be calcu- lated under s. 21. It is argued that the opinion which I have expressed that the transferee becomes the successor for the purpose of the Act is inconsistent with subsequent sections, and that the word denotes only the original successor or transferor. I do not think so, and I think that such a construction would introduce confusion into the scheme of the Act. Ins. 20 the words are: ''The duty imposed by this Act shall be paid at the time when the successor or any person in his right or on his behalf shall become entitled in possession to his succession." Those words are not apt language in which to describe the transferee of the original successor. Bearing in mind that the Act applies to personalty as well as realty, and only to bene- ficial interests, I think the words relied on mean only any trustees, executors, husband entitled in right of his wife (as the law stood at the date of the Act), guardian of an infant A. C. AND PRIVY COUNCIL. 419 successor, committee of a lunatic successor, and so forth, and H.L. (E.) in subsequent parts of the section the word '' successor" must at 1905 least include a person having a derivative title to the succession. Norruvunen- Passing by s. 21 for the present, I think that in ss. 23 to 26 Give of) the word must from the context mean the person entitled to pen the succession at the date when it becomes an interest in Genera. possession. Ins. 28 you again have the words '' successor Or Lond Davey. any person on his behalf," and the succession is spoken of as his—i.e., the successor's succession, which it would not be if the successor meant only the original successor. Sect. 42 is not inconsistent with the construction I have placed on the Act, and in s. 44 the words used are, "'every person in whom any property or the management of any property subject to duty shall be vested," and so forth. The object of this enact- ment seems to be to make the trustee or person having the management of the property liable for the duty as well as the "* successor." Returning to s. 2, I think the word "successor" is used in the sense which I have attributed to it. It would, however, be sufficient for the present purpose to say that the word is capable of either sense, but the context of this section shews that the '' successor'? means the person entitled to the suc- cession at the date when it becomes an interest in possession. The appellant, Miss Murray, is in the position of such a suc- cessor, and I am of opinion that the duty should be assessed on the value of an annuity according to the tables for the residue of her life. I agree in the result with the judgment of Cleasby B. in Solicttor-General v. Law Reversionary Society. (1) I am, therefore, of opinion that this appeal should be dis- missed with costs. Lorp Linputzy. My Lords, the judgments of the Master of the Rolls and of Romer and Mathew L.JJ. upon two out of the three questions raised by the appellants are so obviously correct that I feel unable usefully to add anything to them. Succession duty clearly became payable on two successions, 'and not upon one only, and the contention that the disentail- ing deed and conveyance to Lord James Murray extinguished (1) L. R. 8 Ex. 233. 420 H. L. (£.) 1905 —y~ NoRTHUMBER- LAND (DUKE or) v. ATTORNEY- GENERAL. Lord Lindley. HOUSE OF LORDS [1905) or otherwise got rid of the duty payable on the death of the sixth Duke of Northumberland is, in my opinion, quite untenable. The third question, namely, whether the duty now payable should be calculated on the life of the seventh Duke or on that of Miss Murray, is much more difficult, and turns upon ss. 2, 15, and 21 of the Succession Duty Act, 1853. The Court of Appeal considered this question settled by the decision of the Court of Exchequer in the case of Solicitor-General v. Law Reversionary Society (1) in 1873. This case has been acted upon ever since, and the Court of Appeal did not think it ought to be now overruled, even if wrongly decided, which they did not think it was. My Lords, I concur with the Court of Appeal in the view thus taken. Until I had the advantage of reading the judgment of my noble and learned friend Lord Macnaghten, I felt more diffi- culty than I do now in dealing with some of the arguments addressed to your Lordships by the counsel for the appellants. But that judgment has put the matter so clearly that I will not trouble your Lordships with any additional observations on the construction of the Act. I am satisfied that his view of it is the true one, and that the appeal should be dismissed with costs. Danckwerts, K.C., applied that the duty should not be claimed from the seventh Duke, appellant. Order of the King's Bench Dwvision varied by omitting the clavm of duty and interest against the Duke; subject to this variation order of the King's Bench Dwision and order of the Court of Appeal affirmed and appeal dismissed with costs: cause remitted to the King's Bench Division. Lords' Journals, July 8, 1905.