MELVILLE AND OTHERS v COMMISSIONERS OF INLAND REVENUE [2001] EWCA Civ 1247

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (REVENUE LIST)
Lightman J.
[2001] EWCA Civ 1247Case No Case No: CHRVF/2000/2451/A3Venue Royal Courts of Justice, Strand, London, WC2A 2LL, Tuesday 31st July 2001
Between
MELVILLE AND OTHERSRespondentsCOMMISSIONERS OF INLAND REVENUEAppellants
Before
Lord Justice Peter GibsonLord Justice KayLady Justice ArdenMr. Edward Nugee Q.C. (instructed by Messrs Salans Hertzfeld & Heilbronn HRK of London for the Respondents)Mr. Michael Furness Q.C. (instructed by the Solicitor of Inland Revenue for the Appellants)Date 31 July 2001
[1]PETER GIBSON L.J.: This appeal gives rise to a short but difficult question of construction of the Inheritance Tax Act 1984 ("the Act"): is a general power of appointment exercisable by the holder over property comprised in a settlement "property" forming part of the estate of the holder? In the case of the settlement with which we are concerned the Commissioners of Inland Revenue ("the Revenue") claimed that it was not and by notices of determination dated 5 August 1999 under s. 222 of the Act informed the settlor of the settlement, Leslie Melville, and the settlement trustees, Philip Enoch and Lawrence Melville, that they had so determined. I shall call the settlor and the trustees "the taxpayers". On an appeal to the High Court by the taxpayers, Lightman J. on 20 June 2000 (in a judgment reported at [2000] STC 628) allowed the appeal, upholding their argument that the power was "property". The Revenue now appeal to this court with the leave of the judge.[2]The facts can be stated shortly.[3]By a settlement made on 3 December 1993, it was recited that the settlor, wishing to make provision for himself and his family, had paid £10 to the Trustees to hold on the trusts of the settlement. By cl. 1 "the Trust Fund" was defined as the £10 and all additions to the Trust Fund and the property representing the same, "the Vesting Day" was defined as the day on which the period of 80 years from the date of the settlement expires, "the Appointed Class" was defined as the settlor, his wife or widow, his children and remoter issue and their spouses, widows and widowers and any persons added to the Appointed Class by the Trustees before the Vesting Day, "the Accumulation Period" was defined as the period of 21 years from the date of the settlement and "the Relevant Day" was defined as the day on which the period of 90 days from the date of the settlement expires (i.e. 3 March 1994).[4]By cl. 3, subject to cl. 4, the Trustees were to pay or apply the income of the Trust Fund to or for the benefit of all or any of the Appointed Class, subject to a power to accumulate the income during the Accumulation Period. Cl. 4(a) gave the Trustees an overriding power of appointment over the Trust Fund and its income in favour of all or any of the Appointed Class, but the exercise of the power was subject to the prior written consent of the settlor during his life and after his death to the prior written consent of at least two adult members of the Appointed Class.[5]Cl. 4 (c) contained what in effect amounted to a general power of appointment (even though the settlor could not dispose directly of the settled property: see Re Penrose [1933] Ch. 793). It was in this form:
"The Settlor shall have power exercisable during his lifetime at any time or times after the Relevant Day and before the Vesting Day by deed or deeds to direct the Trustees to exercise any one or more of the powers conferred by sub-clause (a) above in such manner as shall be specified in such deed And it is hereby declared that the Trustees shall forthwith exercise such power or powers accordingly (and for the avoidance of doubt the Settlor shall have power to direct the Trustees to transfer the whole of the Trust Fund to the Settlor absolutely freed and discharged from the trusts powers and provisions of this Settlement and to join with the Settlor in making a claim to the Inland Revenue for hold-over relief from capital gains tax pursuant to section 260 of the Taxation of Chargeable Gains Act 1992 in respect of any assets thereby disposed of by the Trustees to the Settlor)."
[6]By cl. 5 the ultimate beneficiary was the settlor's daughter. Cl. 8 declared the settlement to be irrevocable.[7]On 22 February 1994 the settlor paid £6,000 to the Trustees to be added to the Trust Fund. By a Deed of Gift dated 23 February 1994 the settlor transferred 923,077 Development Securities plc Ordinary shares and £11,100,000 Unsecured Loan Notes 2000 issued by that company on 5 January 1994 to the Trustees as further additions to the Trust Fund.[8]By the notices of determination dated 5 August 1999 the Revenue gave notice that they had determined that the power in cl. 4 (c) of the settlement was not property to which the settlor was beneficially entitled under s. 5 of the Act and that in ascertaining the value of the settlor's estate for the purpose of calculating the value transferred by the settlor on the making of each disposition on 22 and 23 February 1994 respectively, having regard to the provisions of s. 3 (1) of the Act, the power was not taken into account.[9]The relevant sections of the Act are as follows.[10]By s. 1 inheritance tax is to be charged on the value transferred by a chargeable transfer. A chargeable transfer is defined in s. 2(1) as a transfer of value which is made by an individual but is not an exempt transfer. It is not in dispute that the transfers made by the settlor to the trustees were not exempt transfers.[11]S. 3, relating to transfers of value, provides (so far as is relevant):
"(1) Subject to the following provisions of this Part of this Act, a transfer of value is a disposition made by a person (the transferor) as a result of which the value of his estate immediately after the disposition is less than it would be but for the disposition; and the amount by which it is less is the value transferred by the transfer. (2) For the purposes of subsection (1) above no account shall be taken of the value of excluded property which ceases to form part of a person's estate as a result of a disposition. (3) Where the value of a person's estate, or of settled property in which no interest in possession subsists, is increased by the first-mentioned person's omission to exercise a right, he shall be treated for the purposes of this section as having made a disposition at the time (or latest time) when he could have exercised the right, unless it is shown that the omission was not deliberate."
[12]It is unnecessary to refer to s. 3 A, relating to potentially exempt transfers, as it is not suggested that the transfers made by the settlor fall within that section.[13]S. 4 (1) provides that on the death of any person tax is to be charged as if immediately before his death he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death.[14]S. 5 is in this form (so far as material):
"(1) For the purposes of this Act a person's estate is the aggregate of all the property to which he is beneficially entitled, except that the estate of a person immediately before his death does not include excluded property. (2) A person who has a general power which enables him, or would if he were sui juris enable him, to dispose of any property other than settled property, or to charge money on any property other than settled property, shall be treated as beneficially entitled to the property or money; and for this purpose "general power" means a power or authority enabling the person by whom it is exercisable to appoint or dispose of property as he thinks fit." "
Settled property" is defined in s. 43 (1) as property comprised in a settlement and the meaning of "settlement" is given in s. 43 (2). By s. 43 (3) it extends to leases for lives. The settlement in the present case is plainly within the meaning in s. 43 (2).[15]S. 6 defines "excluded property" but has no application to this case. S. 47 provides that in the Act "reversionary interest" means a future interest under a settlement, whether it is vested or contingent. By s. 48:
"(1) A reversionary interest is excluded property unless – (a) it has at any time been acquired (whether by the person entitled to it or by a person previously entitled to it) for a consideration in money or money's worth, or (b) it is one to which either the settlor or his spouse is or has been beneficially entitled, or (c) it is the interest expectant on the determination of a lease treated as a settlement by virtue of section 43 (3) above."
[16]On the death of a beneficiary with an interest in possession tax is chargeable on the property in which the interest subsisted, the beneficiary being deemed to be "beneficially entitled to the property in which the interest subsists" (s. 49 (1)). Thus in the ordinary case of a tenant for life in possession he would be treated as beneficially entitled to the settled property, regardless of any powers of appointment which might be exercised to create other trusts. By s. 52 a charge also arises on the termination of an interest in possession during the life of the person entitled to that interest. S. 53 (3) provides that tax is not to be chargeable under s. 52 if the interest comes to an end during the settlor's life and on the same occasion the property in which the interest subsisted reverts to the settlor. But it is common ground that this exemption will not apply if and when the trustees transfer capital to the settlor (on the footing that the trust of cl. 3 continues) because such transfer will not cause the termination of an interest in possession.[17]Ch. III of Part III of the Act relates to settlements without interests in possession. If a settlement contains "relevant property" there is a periodic charge every 10 years (s. 64) as well as at certain other times such as when the property ceases to be comprised in the settlement (s. 65 (1)). "Relevant property" means settled property in which no qualifying interest in possession (such as an interest in possession to which an individual is beneficially entitled) subsists other than property held for what are sometimes called favoured trusts (such as charitable trusts) and excluded property. The settled property in the present case is relevant property.[18]S. 151 relates to certain approved pension schemes and funds. This provides (so far as is relevant):
"(2) An interest in or under a fund or scheme to which this section applies which comes to an end on the death of the person entitled to it shall be left out of account in determining for the purposes of this Act the value of his estate immediately before his death, if the interest – (a) is, or is a right to, a pension or annuity, and (b) is not an interest resulting (whether by virtue of the instrument establishing the fund or scheme or otherwise) from the application of any benefit provided under the fund or scheme otherwise than by way of a pension or annuity. (3) Sections 49 to 53 above shall not apply in relation to an interest satisfying the conditions of paragraphs (a) and (b) of subsection (2) above. (4) In relation to an interest in or under a fund or scheme to which this section applies, section 5 (2) above shall apply as if the words "other than settled property" were omitted (in both places)."
S. 151 (4) is the only provision in the Act which expressly deals with the treatment of a general power of appointment over settled property but only in the limited cases of funds or schemes to which s. 151 applies.[19]Finally I must refer to s. 272. This extends the ordinary meaning of "property" by an inclusive definition, providing (so far as is relevant): "In this Act, except where the context otherwise requires, - …. "property" includes rights and interests of any description".[20]It is not in dispute that the provisions of s. 102 Finance Act 1986 relating to gifts with reservation have no application while the settlor is alive. It is common ground that the transfers made by the settlor are chargeable transfers within ss. 2 (1) and 3 (1) of the Act and that inheritance tax is chargeable as at the date of the transfer on the value transferred at the appropriate rate depending on the amount of the value transferred.[21]The taxpayers say that the value transferred is, by reason of the cl. 4 (c) power retained by the settlor, very small, the face value of the assets transferred at the date of each transfer having to be heavily discounted because the settlor if he survived until 4 March 1994 could reclaim the assets. The Revenue say that that is not correct, claiming that the cl. 4 (c) power is not "property" and so does not fall within the estate of the settlor. The value transferred is on that basis the full value of the assets transferred to the trustees.[22]I should also refer to the relevant capital gains tax provisions, because it seems likely that the shares and loan notes transferred were pregnant with an unrealised capital gain for the settlor and a primary purpose of the transfer of shares and loan notes by the settlor appears to have been to defer and shift away from the settlor the liability for the capital gains tax which would be chargeable on a disposal of those assets. By ss. 17 and 70 of the Taxation of Capital Gains Act 1992 ("the 1992 Act") a charge to capital gains tax arises on the transfer of assets into a settlement, the gain (in essence) being the difference between the base cost of the assets to the settlor and the market value of the assets at the date of transfer. But by s. 260 of the 1992 Act gains which would otherwise be chargeable under s. 17 may be deferred until the trustees dispose of the assets and the liability shifted to the trustees, the trustees being treated as having acquired the assets at the same cost as that at which the settlor acquired them. The only circumstance in which a settlor can trigger s. 260 is by a chargeable transfer for inheritance tax purposes (see s. 260 (2)(a) of the 1992 Act). What therefore the settlor appears to have been trying to achieve was a transfer of assets into a settlement in such a way as to give rise to a charge to inheritance tax in respect of the entire transfer while at the same time procuring that the amount of inheritance tax payable was minimal. It may well be that the settlor intended to take other steps thereafter to avoid or reduce the inheritance tax which would otherwise be payable on his death in respect of the Trust Fund.[23]The judge commenced his consideration of the arguments by looking at the meaning of the terms "property", "rights" and "interests" and the authorities relating thereto. It is unnecessary for me to rehearse the judge's review of the authorities because the judge's conclusion on this point is not challenged. The judge said ([2000] STC para. 13 at p. 634):
"In summary, whatever the technical meaning of the word 'property', it seems to me that the terms 'property', 'interest' and 'right' are capable of embracing a general power of appointment depending on the legislative context, for they are terms capable (as is such a general power) of embracing anything which is capable of producing value, being realised and turned into money, and a general power is capable of exactly this: it may be exercised to vest property in the appointor and it may be released for valuable consideration. Whether the words do bear this meaning in s 3(1) of the …. Act must depend upon the legislative scheme and purpose of the …. Act."
[24]The judge then took as his starting point the statutory definition of "property" in s. 272, which, he said, required a two-stage exercise to be undertaken:(1) does the cl. 4 (c) power constitute as a matter of law "property" or a right or interest of any description within the meaning of s. 272, and, if so,(2) does the context in which "property" is found require some other answer?[25]The judge referred to a submission by Mr. Furness Q.C. for the Revenue that at the first stage the court must decide, in the context of the Act as a whole, the meaning of the words "property", "rights" and "interests" and whether the cl. 4 (c) power answers one or more of those descriptions. The judge rejected that submission, holding that the words "right" and "interest" connote any form of proprietary right or interest which is of value to its holder and which may be turned to account, and concluding that the cl. 4 (c) power constituted a form of proprietary right or interest and so constituted part of the settlor's property for the purpose of s. 3 (1).[26]The judge said that it was for the Revenue to establish at the second stage that the context required some other conclusion. He had been referred to no authority which considered the meaning of the formula in s. 272 "except where the context otherwise requires," but he said that the term "requires" connotes a degree of necessity and that the statutory interpretation must be adopted unless the context compels the adoption of another. In examining the legislative context he referred to s. 5 (2) with its specific provision for general powers of appointment. He said (para. 17 at p. 635):
"If the subsection had merely provided that a person who has a general power over or to charge unsettled property should be treated as having a right or interest in that property, this provision might have afforded an indication that, in the absence of such an express provision and in particular in the case of settled property, such a general power did not constitute such an interest. But what is significant about this subsection is that it stipulates that the existence of the power is deemed to constitute not merely a right or interest, but the beneficial ownership of (i.e. "the property in") the unsettled property. In the circumstances beyond showing that the draftsman of the [Act] had in mind general powers of appointment, this subsection affords limited guidance as to whether he intended such a power to constitute a right or interest in [the] case of settled property."
[27]The judge did not refer to s. 151 (4), to which the only reference made in the court below appears to have been in a footnote to Mr. Furness' skeleton argument. Little, therefore, was made of that provision by either side, and indeed it was only referred to by Mr. Furness before us in a footnote in his skeleton argument and orally at a late stage in his reply.[28]The judge referred to two submissions made by the Revenue. One was the fact that the existence of powers under trusts does not diminish the value of the settled property in the hands of the life tenant, and should not constitute property in the hands of the donee of the power. The other was that a general power, if "property" within the meaning of s. 3 (1), will constitute a reversionary interest whilst a future interest, but once it is presently exercisable there will be double taxation on the death of the holder of the general power who exercises the power by will so as to terminate an interest in possession. The judge accepted that those were arguments in favour of the Revenue's construction. But, the judge said, the arguments were not all one way. He pointed to a number of other considerations, saying (para. 22 at p. 636):
"Further the reality is that a general power of appointment is something of a very real value vested in the appointor, and the definition of property in Section 272 is deliberately of the widest character. Looking at Section 3 (1) in the context of the [Act] as a whole I do not think that it can be held that the context requires that the statutory definition should not apply in case of Section 3 (1)."
He accordingly held that the cl. 4 (c) power fell within the definition of "property".[29]Before this court arguments are presented to us similar to those addressed to the judge. There is a marked difference of approach between Mr. Furness for the Revenue and Mr. Edward Nugee Q.C. for the taxpayers. Mr. Furness concentrates on the taxation consequences for the settled property, Mr. Nugee on the taxation consequences for the individual who makes or is deemed to make a chargeable transfer. Both are agreed that while in this case the construction found by the judge favours the taxpayers, in other circumstances that construction could be disadvantageous to the other taxpayers. The old truism that one can only look fairly at the language used in a taxing statute is well illustrated in this case.[30]Mr. Furness, while accepting that "property" is capable of including a general power of appointment, submits that the term is used in the Act in a more limited sense because the draftsman clearly intended to distinguish between powers to alter trusts and the property subject to those trusts. He relies on the distinction drawn by Fry L. J. in Re Armstrong (1886) 17 QBD 521 at 531 between property and a power. Mr. Nugee rightly does not dispute that, absent a special context, there is such a distinction and that but for s. 272 a general power would not be property. For my part I do not think that reference to that distinction assists, given the acceptance which I have noted at the start of this paragraph.[31]Mr. Furness repeats before us the argument rejected by the judge that before one applies the interpretation provisions in s. 272, the court should consider the scheme of the Act and conclude that "property" is being used in contradistinction to powers. No authority is cited in support of that proposition and in my judgment it runs counter to the obvious purpose of the statutory interpretation provision in s. 272, which is to provide an extended meaning for "property" in the Act unless the context otherwise requires. If the context in which "property" relevantly appears, when read in the light of the scheme of the Act, does require that "property" should not have that extended meaning, then the basic distinction between property and powers will prevail, but not otherwise.[32]A right to dispose of valuable assets as one thinks fit is plainly a valuable right. Given the Revenue's acceptance that, apart from the question whether the context otherwise requires, "property" is capable of including a general power of appointment, the real question in the case is whether the context otherwise requires. The industry of Mr. Furness brought to light two cases on the 1925 property legislation on the meaning of the phrase "unless the context otherwise requires". In Gaul and Houston's Contract [1928] Ch. 689 Lawrence L.J. at p. 700 indicated that where effect can be given to words, if interpreted in accordance with the statutory interpretation provision, sensibly and properly, the context cannot be said to require otherwise. In Re Cowley Settled Estates [1926] Ch. 725 at p. 736 Astbury J. held that in order to justify departing from the statutory definition, there must be a "necessary context or requirement". In my judgment those authorities confirm the correctness of the judge's approach that the statutory interpretation has to be adopted unless the context compels the adoption of another interpretation.[33]Does the context in which "property" is used in s. 5 (1) require that a general power should be left out of account?[34]I start with the sections which expressly or referentially deal with general powers of appointment to see if they provide the necessary contextual requirement. Ss. 5 (2) and 151 (4) show that the draftsman plainly had general powers of appointment in mind, s. 5 (2) by excluding such powers over settled property, s. 151 (4) by treating the possession of such a power over settled property in a fund or scheme to which s. 151 relates as having an inheritance tax consequence, viz. that the holder of the power is treated as beneficially entitled to the settled property (or the money which he can charge). The pertinent question to which these provisions give rise is whether they show that but for the provisions a general power of appointment would not be a right or interest and so not "property". As the judge pointed out in the passage cited in para. 26 above, it would have been very significant if the provisions had merely indicated that the general power of appointment in the circumstances stipulated were to be treated as property. But the provisions go further: they require that the person who has the general power is to be treated as beneficially entitled to the property or money over which the general power may be exercised. Thus the general power itself is not to be treated as property to which the holder is beneficially entitled but instead the holder is treated as owning the assets the subject of the power. That seems to me to give uncertain guidance as to what the draftsman thought was the position in the absence of the deeming provisions, and it may be because of the recognition of that fact that Mr Furness placed only slight reliance on the provisions. Thus he submitted of s. 5 (2):
"If anything the terms of section 5 (2) give support to the Revenue's approach, not the taxpayers"
. Similarly he did not suggest that s. 151 (4) was a conclusive or significant point in favour of the Revenue's view, merely saying in his footnote on s. 151 in his skeleton argument:
"If the taxpayers' argument is correct it is difficult to see why it was necessary to apply section 5 (2) to such powers, because the powers themselves would have formed part of the pensioner's estate."
I think it understandable why the draftsman might have wanted to state expressly what was to be the inheritance tax consequence of a pensioner having a general power under an approved fund or pension scheme. By s. 151 (2) and (3) the ordinary consequences for inheritance tax purposes of the termination on death of the pensioner's primary interests under the fund or scheme were made inapplicable, and it might have been thought desirable to spell out the tax consequences for the one right or interest which it was intended to tax.[35]Mr. Furness rightly drew attention to the clear possibility, if the taxpayers are right, of double taxation in the form of two individuals taxed by reference to the value of the same property. Thus he instanced the case of a trust for A for life, with remainder to B but with a general power of appointment in C. On the taxpayers' construction, not only is the settled property treated as belonging to A but also C has an asset of a value equal to the settled property. If C dies his estate will be liable to pay tax on the value of the general power and if A then dies tax will be paid on the value of the settled property. He points out that no quick succession relief (under s. 141 of the Act) will be available. He conjured up the spectre of more than 100% taxation at times when the top rate of capital transfer tax (the previous name for inheritance tax) exceeded 50%. He submitted that the very fact that this legislation proceeded on the basis that the life tenant was deemed to be beneficially entitled to the trust property (disregarding the fact that the life tenant's interest was subject to powers of appointment) shows that any construction of the legislation which imposed tax on the power of appointment was most unlikely to have been intended, unless, as in s. 48 (1), the contrary is expressly provided. He submitted that a similar problem arose with settlements of relevant property which would be subject to tax every 10 years on the value of the settled property regardless of the general power of appointment whilst the power is also taxable on death in the holder's hands. He acknowledges that there is a possibility of double taxation in relation to reversionary interests in the limited circumstances specified in s. 48 (1) which causes those interests not to constitute excluded property. But he submits that the fact that in limited circumstances and for understandable tax avoidance reasons the legislation contemplates double taxation does not mean that the taxpayers' construction, producing double taxation in all circumstances for a person entitled to exercise a general power, is acceptable.[36]Mr. Nugee acknowledges that this is an imperfection in the inheritance tax scheme if he is right in his construction. But he drew attention to two matters. The first is that a similar possibility of double taxation existed for estate duty throughout the time it was in force, a trust for A for life subject to a general power of appointment in C causing the settled property to pass both on A's death under s. 2 (1)(b) Finance Act 1894 and on C's death under s. 2 (1)(a), C being deemed by s. 22 (2)(a) of that Act as competent to dispose of that property. He submits that it is not surprising that the possibility of double taxation viewed with apparent equanimity for over 80 years whilst estate duty applied should recur in the successor tax which was largely modelled on estate duty. The second is that on any view the inheritance tax regime produces instances of double taxation which are not limited to the circumstances specified in s. 48. A clear example is one falling within s. 5 (2) of the Act, the very common case of a joint bank account which permits any holder to draw on that account. The same property, the moneys in the account, is under s. 5 (2) taxable on the death of each holder. The Revenue in practice do not strictly enforce that provision and treat each holder as beneficially entitled only to the proportion of monies in the account which he has contributed. But the provisions of the Act fall to be construed by reference to its provisions and not to the concessions of the Revenue (see Dawson v C.I.R. [1990] 1 AC 1 at p. 11 per Lord Keith). It has to be acknowledged that the Act permits of double taxation.[37]I conclude on the double taxation point that whilst it is a factor that tells in favour of the Revenue's construction it is far from being determinative.[38]Mr. Furness' main thesis was that the statutory context for the treatment of settled property did not permit general powers of appointment over settled property to be treated as "property" but required them to be ignored for inheritance tax purposes. He said that just as powers to change the trusts on which property is held fall to be disregarded for valuing the assets by reference to which the settled property of a settlement with an interest in possession or with relevant property is valued, so the appropriate and symmetrical treatment of such a power is that it should not give rise to any increase in the estate of the holder of the power. He contended that the treatment of reversionary interests showed that that was the appropriate treatment of a power. He said that it was very significant that reversionary interests qualifying for excluded property status were confined to future interests and that if the draftsman had thought that general powers were interests in settlor property he would have included them in the definition of reversionary interests. The scheme of this Act, he said, leads one to expect(a) that powers under the settlement which did not reduce the value of the settled property ought not as a general rule to constitute valuable property (other than excluded property) in the hands of beneficiaries, and(b) that a person who is entitled to exercise a general power to alter the trusts of a settlement ought to be treated in the same way as any reversionary beneficiary and not be taxed on the value of the power in his estate. He argued that the Revenue's construction met those expectations whereas the taxpayers' construction cut across the scheme of the legislation by including in a taxpayer's estate an asset which is not reflected in a corresponding reduction in the value of the trust assets.[39]Skilfully and attractively though these submissions were made, I am not persuaded by them. They seem to me to concentrate too much on the settled property in a settlement while ignoring the basic scheme of the Act to charge tax on chargeable transfers made, or deemed to be made, by individuals. The holder of a general power of appointment (in contrast with the holder of a special power which he cannot exercise in his own favour) unquestionably has a valuable right, the value of which must be taken into account in the value of the holder's estate under s. 5 (1) unless excluded by some provision of the Act. As Mr. Nugee submitted, the truly remarkable proposition is that put forward by the Revenue that although the holder of the general power has effective dominion over the settled property if he chooses to exercise it, nevertheless it is to be left out of account on the death of the holder. The nub of Mr. Furness' submissions is to assimilate a general power to a reversionary interest. A power is of a wholly different character from a reversionary interest, and whilst the cl. 4 (c) power was not presently exercisable during the first 90 days of the settlement, once that period was over the power became presently exercisable and even less like a reversionary interest. There is nothing which I can see in the Act to suggest that it was the draftsman's intention or thought that a general power is a reversionary interest. I do not accept that it is inappropriate or asymmetrical to recognise the reality that a general power of appointment is a valuable asset in the holder's estate, while at the same time recognising that, for example, the life tenant of settled property subject to an unexercised power of appointment can be deemed to be entitled to the settled property the income of which the life tenant enjoys. Mr. Nugee was right to say that the reason why the provisions relating to settled property do not include any reference to powers is that those provisions are designed to apply to the beneficial interests in settled property as they exist at any given time and to the persons for the time being entitled to them. In short there is nothing in the settled property provisions which causes or requires the cl. 4 (c) power to be excluded property or otherwise prevents it from being, as a valuable right or interest, property the value of which is to be included in the settlor's estate. I conclude, in agreement with the judge, that the context does not require "property" to have a meaning other than the statutory meaning.[40]For these reasons I would dismiss this appeal. KAY L.J.[41]I agree. ARDEN L.J.[42]I also agree.

ORDER

Appeal dismissed with costs subject to detailed assessment if not agreed. (Order does not form part of approved Judgment)

Cited in 5 later judgments