St Aubyn v Attorney General (No.2) [1951] UKHL 3

House of Lords
Between
St AubynAppellantAttorney General (No.2)Respondent
Before
Lord SimondsLord NormandLord OakseyLord RadcliffeLord Tucker
[1]Die Jovis, 12° Julii 1951 Parliamentary Archives, HL/PO/JU/4/3/1010 HOUSE OF LORDS Lord Simonds Lord Normand Lord Oaksey Lord Radcliffe Lord Tucker ST. AUBYN AND OTHERS v. ATTORNEY-GENERAL (on behalf of His Majesty), et e contra 12th July, 1951. Lord Simonds MY LORDS, This appeal and cross appeal are brought from an order of the Court of Appeal, by which that Court as to the subject matter of the appeal reversed an order of Croom-Johnson, J., and as to the subject matter of the cross-appeal thought fit to make no order. The facts of the case are somewhat involved but present no real difficulty. It is in the application to them of the relevant sections of the Finance Act, 1940, that I have found it impossible to reach any conclusion that is wholly satisfactory. I will give a broad outline of the relevant facts supplementing it as occasion demands. Immediately before the execution by the late Lord St. Levan, who died on the 10th November, 1940, and to whom I will refer as Lord St. Levan, of the instruments dated in March, 1927, which are next mentioned, he was, under a Resettlement dated the 26th April, 1879, tenant for life in possession of certain settled property consisting of(a) freehold lands in the counties of Devon and Cornwall(b) investments representing capital moneys arising under the Resettlement and(c) equitable interests which by virtue of the Law of Property Act, 1925, represented certain undivided shares in land which at the date when that Act came into operation were subject to the Resettlement. The whole of the settled property was under the Resettlement and a Deed Poll dated the 9th January, 1905, subject to an overriding general power of appointment exercisable by Lord St. Levan and Sydney Alexander Ponsonby (hereinafter called " Mr. Ponsonby ") who was one of the trustees of the Resettlement but had no beneficial interest thereunder. The subsequent limitations of the Resettlement, as varied by the said Deed Poll and other instruments, were such as to cause the settled property to devolve together with the Barony of St. Levan, which on the death of Lord St. Levan without having had a son devolved on and is now held by his nephew Francis Cecil St. Aubyn. On the 21st March, 1927, St. Aubyn Estates Ltd. (hereinafter called " the Company ") was incorporated under the Companies Acts, 1908 to 1917 (by the name of St. Aubyn Settled Properties Ltd. which was afterwards changed) with a nominal capital of £200,000 divided into 200,000 shares of £1 each with power to issue any part of its capital with such preferential rights as might be thought expedient. The Company's Memorandum of Association was subscribed by seven persons, including Lord St. Levan and Mr. Ponsonby, each of whom agreed to take one share. These seven shares were held by the subscribers as nominees of the Trustees of the Resettle- ment. By the Company's Articles of Association it was provided that Lord St. Levan should be the Governing Director of the Company. By a Deed Poll dated the 23rd March, 1927, Lord St. Levan and Mr. Ponsonby exercised their overriding power of appointment in such manner as to authorise the transactions next mentioned. By an Agreement dated the 24th March, 1927, to which Lord St. Levan, Mr. Ponsonby and the Company were parties it was agreed that the whole of the settled property should be sold to the Company for £1,700,000 of which £950.000 was to be paid to the Trustees of the Resettlement (herein- after called " the Trustees ") in cash on completion of the sale (which was to 2 take place on the 26th March, 1927) and the balance of £750,000 was to be paid to the Trustees in cash by 40 half yearly instalments of £18,750 each (the first payment to be made on 24th June, 1927) without interest except that any instalment not paid within 21 days of becoming due was to carry interest at 5 per cent, per annum from the date on which it ought to be paid until actual payment thereof. On the same date (the 24th March, 1927) the Company allotted 100,000 7 per cent. Cumulative Non-participating Preference shares of £1 each to Lord St. Levan at par and 49,993 Ordinary shares to the Trustees at a premium of £16 a share. By a Deed dated the 25th March, 1927, Lord St. Levan as tenant for life directed, and he and Mr. Ponsonby in exercise of their overriding power of appointment ratified such direction, that the Trustees should invest the capital money subject to the Resettlement in Ordinary shares of the Company at the premium required by the Company. On the 26th March, 1927, the sale to the Company of the freehold lands and equitable interests which I have already mentioned was completed by two conveyances of that date. The sales to the Company of the investments already mentioned were completed on or about the same date by appropriate separate instruments. The consideration payable immediately in cash (£950,000) was so paid but as to £850,000 immediately repaid by the Trustees to the Company in consideration of the issue to them or their nominees of 50,000 Ordinary Shares of the Company (including the shares for which the Memorandum had been subscribed) at the price of £17 a share. The balance of £100,000 was dealt with as hereafter stated. The net result of the transactions so far described was that the property formerly subject to the Resettlement had been converted into (a) 50,000 fully paid Ordinary Shares of the Company (b) the right to receive from the Company a capital sum of £750,000 by the instalments already mentioned and (c) the above mentioned sum of £100,000 paid by the Company to the Trustees. By a Deed Poll dated the 28th March, 1927, Lord St. Levan and Mr. Ponsonby in exercise of their overriding power appointed that the said sum of £100,000 and the said sum of £750,000 payable by instalments and any interest which might become payable in respect of any instalment should be held upon trust for Lord St. Levan and that he should be entitled thereto for his own sole use and benefit instead of for his life only. The Trustees thereupon paid over the said sum of £100,000 to Lord St. Levan and he immediately paid the like amount to the Company in con- sideration of the issue to him of 100,000 Preference Shares fully paid. By a further, and final, Deed Poll dated the 29th March, 1927, Lord St. Levan and Mr. Ponsonby in exercise of their overriding power appointed new trusts of (in effect) the whole of the property then remaining subject to the Resettlement i.e., the 50,000 issued Ordinary Shares of the Com- pany. The terms of the new trusts so declared were somewhat complicated but they admittedly had the effect of extinguishing the life interest of Lord- St. Levan in the 50,000 Ordinary Shares and of excluding him from all benefit so far as those shares and the income thereof were concerned. The following further facts are not now in dispute: — That the Trustees are to be regarded for the purposes of section 43 (2) (a) of the Finance Act, 1940, as having assumed bona fide possession and enjoyment of the 50,000 Ordinary Shares immediately after the determination by the Deed Poll of the 29th March, 1927, of the late Lord St. Levan's life interest therein. That the Company is a Company to which section 56 of the Finance Act, 1940, applies and was concerned in associated operations (as defined by section 59 of that Act) of which the determination of Lord St. Levan's life interest was one. Lord St. Levan having, as I have said, died on the 10th November, 1940, claims for estate duty were made against his executors in respect of the outstanding instalments of the purchase money and the 100,000 Preference 3 shares which he still retained and these claims were admitted and paid. But other claims also were made which are the subject of the present appeal and cross-appeal. They were (a) a claim under section 43 of the Finance Act, 1940, against the Appellants, the present Trustees of the Resettlement, for estate duty on the 50,000 Ordinary shares of the Company, and, alternatively, (b) a claim under section 46 of that Act against the Company for estate duty on a proportion of the Company's assets corresponding to the benefits accruing to Lord St. Levan from the Company. These claims were not admitted and proceedings were accordingly begun by English Information for their enforcement. On the 20th May, 1949, Mr. Justice Croom-Johnson dismissed the information in regard to both claims. His Majesty's Attorney- General appealed to the Court of Appeal, which allowed the appeal under claim (a) but made no order upon claim (b). From that order the Appellant Trustees have appealed to this House in respect of claim (a) , and in respect of claim (b) the Attorney-General has similarly appealed. To his appeal the Trustees and the Company are respondents. The two claims are for the purpose of the present proceedings admitted to be strictly alternative and it was for that reason that the Court of Appeal, having decided in favour of claim (a) , refused to make any order upon claim (b). In the result your Lordships are deprived of the assistance which you would otherwise have had from the consideration by the learned Judges of the Court of Appeal of the very difficult problems that arise under the latter claim. The two claims, my Lords, are not only alternative but wholly independent of each other, and I find it convenient to deal with them separately. I have said that the first claim arises under section 43 of the Finance Act, but this claim must be considered under two aspects. For the Crown, while contending that the claim would be valid, even if section 43 stood alone, invoke also the provisions of section 56 if their primary claim fails. I propose therefore first to consider the question whether there is a valid claim under section 43 and for the time being to disregard section 56. Section 43, so far as relevant and in force at the death of Lord St. Levan, provided as follows :— " 43. (1) Subject to the provisions of this section, where an interest " limited to cease on a death has been disposed of or has determined, " whether by surrender, assurance, divesting, forfeiture or in any other " manner . . . and whether for value or not, after becoming an interest " in possession,— " (a) if apart from the disposition or determination the property " in which the interest subsisted would have passed on the death " under section one of the Finance Act 1894, that property shall be " deemed by virtue of this section to be included as to the whole " thereof in the property passing on the death .... " (2) Where the relevant disposition or determination was bona fide " effected or suffered three years before the death . . . the preceding " sub-section shall not have effect— " (a) if bona fide possession and enjoyment of the property in " which the interest subsisted was assumed immediately thereafter " by the person becoming entitled by virtue of or upon the dis- " position or determination and thenceforward retained to the entire " exclusion of the person who had the interest and of any benefit " to him by contract or otherwise . . . ." I apply the provisions of this section to the facts that I have stated. On the 27th March, 1927, Lord St. Levan had an interest in possession limited to cease on his death in the settled property which on that date had assumed the form of (1) 50.000 Ordinary shares of the Company and (2) the sum of £750,000 payable in the instalments that I have mentioned and (3) the sum of £100,000 paid or immediately payable by the Company. But he had also jointly with Mr. Ponsonby an overriding general power of appointment which could be exercised so as to vest all or any part of the settled property in him absolutely. They so exercised it as to vest in him the properties I have numbered (2) and (3), and, when they had done so, he surrendered his life interest in the Ordinary shares. It is agreed that bona fide possession 4 and enjoyment of the shares was assumed immediately thereafter by the persons becoming entitled upon the determination of Lord St. Levan's interest. But was it—and this is the only question—thenceforth retained to the entire exclusion of Lord St. Levan and of any benefit to him by contract or otherwise? My Lords, 1 cannot think that any doubt could be entertained upon this matter but for the use which the Crown seeks to make of certain decisions, particularly A.G. v. Worrall [1895] 1 QB 99 and Grey v. A.G. [1900] A.C. 124, to which I will refer later. If A., being the owner in fee of an estate in Yorkshire and an estate in Wiltshire, gives outright to B. his estate in Yorkshire, it is an irrelevant circumstance that he retains his estate in Wiltshire: equally it is irrelevant, if, being tenant for life of the two estates, he surrenders his interest in one and retains it in the other: and equally so if, his interest being not in two geographically separate estates but in land and capital moneys subject to the same settlement, he surrenders his interest in the one form of property and retains it in the other. But let it be supposed that he is neither the owner in fee, nor the tenant for life and nothing more, but that he is tenant for life with an overriding general power of appointment, by virtue of which he can dispose of all or any part of the settled property at his absolute discretion. I cannot doubt that, if he chooses so to exercise the power as to make some part of the settled properly his own, it is wholly irrelevant that by a contemporaneous or later transaction he surrenders his life interest in other parts of it. It is true that he has disposed of his life interest in one part of the property and it is true that he has enlarged his life interest in the other part of it into an absolute interest, but these two truths do not add up to the proposition that the property in which he has surrendered his interest is not retained by the donees to the entire exclusion of him and of any benefit to him by contract or otherwise. I do not think that the examples that I have given of cases, where duty would not be exigible in respect of property in which a life interest had been surrendered, were or could be seriously challenged. If so, it can only be due to a radical misconception of the facts in the present case that the learned Attorney-General pressed the claim under section 43 unaided by section 56. For though truly the overriding power of appointment was not vested in Lord St. Levan alone, there is nothing to suggest that there was a bargain of any kind between him and Mr. Ponsonby. They were together masters of the situation, and, if they thought fit to appoint to Lord St. Levan an absolute interest in part of the settled property, the effect, so far as section 43 is concerned, is precisely the same as if Lord St. Levan had had the sole power and had exercised it. It is not necessary to determine what the result might be if there had been a bargain between Lord St. Levan and the remaindermen or even between Lord St. Levan and Mr. Ponsonby. It is sufficient that these two in their united wisdom thought fit to do what he in his single wisdom, had he had the sole power, might have done. I am therefore of opinion that the claim for duty upon the Ordinary shares, so far as it is based on section 43 alone, is not well founded. 1 will defer my observations upon the cases, which I have men- tioned, until an attempt has been made to discover the scope and effect of section 56. Section 56 of the Finance Act, 1940, so far as relevant, provides as follows (the subsections being inverted for the sake of clarity):.— " 56. (2) Where a company to which this section applies was con- " cerned in the disposition or determination of an interest limited to " cease on a death effected or suffered as mentioned in sub-section (2) " of section 43 of this Act ... or was concerned in any one or more " of associated operations of which the disposition or determination . . . " formed one, the conditions as to the entire exclusion of the person " who had the interest . . . and of any benefit to him, specified in the " said sub-section (2) ... shall be treated as having been satisfied if " and only if they would have been so treated in the circumstances " aforesaid." 5 The " circumstances aforesaid " so referred to are those stated in sub- section (1) of the same section 56 in the following words:— " the following circumstances, namely, if the assets of the company " had been held by it on trust for the members thereof and any other " person to whom it is under any liability incurred otherwise than " for the purposes of the business of the company wholly and exclusively, " in accordance with the rights attaching to the shares in and debentures " of the company and the terms on which any such liability was " incurred, and if the company had acted in the capacity of a trustee " only with power to carry on the business of the company and to " employ the assets of the company therein." It is, as I have said, admitted that the Company is a company to which the section applies. The assets of the Company consisted of the settled property or the property for the time being representing it, and the members were at the relevant date (i.e., immediately before the surrender by Lord St. Levan of his life interest in the Ordinary shares) the Trustees as holders of the Ordinary shares and Lord St. Levan as holder of the Preference shares and as the person to whom the Company owed the instalments of purchase money. This flows from the definitions of " member " and " debenture " in the Act. Then—and here I paraphrase the subsection— the conditions as to the entire exclusion of Lord St. Levan from the property in which he surrenders his interest, i.e., the Ordinary shares, and of any benefit to him by contract or otherwise are only satisfied, if they would have been so treated, i.e., would have been satisfied, if the Company had held its assets on trust for the Trustees and Lord St. Levan in accordance with the rights attaching to the Ordinary and Preference shares and the Debenture. My Lords, 1 must admit that I find this a bewildering conception. The Court of Appeal in a judgment delivered by Jenkins, L.J., found it possible to give a meaning to the section and summarised its conclusion in words which I think it worth while to quote. " We think ", they said, " that " for this purpose ' the property in which the interest subsisted ' within the " meaning of section 43 (2) (a) must be taken as being the settled property as " it stood before the sale to the company, the subsequent creation of the " different equitable interests which the statutory hypothesis supposes being " merely in the nature of a preliminary carving up of the property into the " appropriate beneficial interests with a view to securing the desired benefit " to the deceased out of it upon the intended determination of his life interest. " But even if we are wrong in this, and ' the property in which the " ' interest subsisted ' must, as Sir Andrew contended, be considered as " consisting only of the residue of the property remaining after provision " for the other interests, we are satisfied that the benefit taken by the " deceased in the shape of the creation and vesting in him of the right " to receive the half-yearly instalments, though on this view not taking effect " out of the ' property in which the interest subsisted, ' was on the facts so " clearly referable to and connected with the determination of the deceased's " life interest in that property as to constitute a fatal objection to exemption " under section 43 (2)." It had been stated earlier in the judgment that the application of the statutory hypothesis (as it was conveniently called) was to eliminate com- pletely the element of sale from the Trustees to the Company and the consequent conversion of the property and to make the case stand for the purpose of section 43 as if the property had been transferred to the Company as trustee upon trust (1) to pay thereout to the Trustees £750,000 by the instalments and on the dates mentioned to be held by them as capital moneys on trust for Lord St. Levan for life with remainders over, (2) subject thereto to raise and pay to Lord St. Levan £100,000, on whatever future event should be taken as corresponding for the purposes of the hypothetical trust to the winding-up of the Company and in the meantime to pay him interest on that sum at 7 per cent, per annum out of the net income of the property, and (3) subject thereto upon trust both as to income and capital for the Trustees upon trust for Lord St. Levan for life with remainders 6 over in accordance with the terms of the settlement. And this view is emphasised by saying that the right to receive the instalments of the £750,000 is converted into "an equitable interest charged by way of primary trust " on the entire income and capital of the settled property as it stood before " the sale to the Defendant Company ". My Lords, I will assume that the Court of Appeal rightly stated the effect of applying the statutory hypothesis to the facts of this case. The question whether duty is exigible still remains one of great difficulty. Whatever the words, which have appeared in a series of Acts, might have meant to your Lordships if the matter were res integra, it cannot in face of the decision in A.G. v. Worrall be denied that it is possible for possession and enjoyment of property not to be retained by the donee to the entire exclusion of the donor or of any benefit to him by contract or otherwise, though the donor himself no longer has any sort of interest in it. But the words, and particularly the word " exclusion ", are singularly inapt to cover a benefit which does not arise by way of reservation out of that which is given, and I am not disposed to travel further than I am constrained by authority along a line of interpretation which appears to me difficult to justify. Two recent cases in the Privy Council are of great assistance upon this matter. In Munro v. Commissioner of Stamp Duties [1934] AC 61 , the facts were that the owner of a large area of land in New South Wales, on which he carried on the business of a grazier, in 1909 agreed with his six children that thereafter the business should be carried on by him and them as partners at will, the business to be managed by him and each partner to get a share of the profits. In 1913 he transferred by way of gift to his children or to trustees for them all his right, title and interest in the land. He remained a partner in the business until his death in 1929 and duty was then claimed in respect of the land because, as it was said, it had not been retained by the donees to the entire exclusion of him or of " any benefit to him of whatsoever kind or in any way whatsoever whether " enforceable at law or in equity or not". But upon this Lord Tomlin, delivering the judgment of the Board, said, " What was comprised in the " gift was, in the case of each of the gifts to the children and the trustees, " the property shorn of the right which belonged to the partnership, and " upon this footing it is in their Lordships' opinion plain that the donee " in each case assumed bona fide possession and enjoyment of the gift " immediately upon the gift and thenceforward retained it to the exclusion " of the donor. Further, the benefit which the donor had as a member " of the partnership in the right to which the gift was subject was not in " their Lordships' opinion a benefit referable in any way to the gift. It " was referable to the agreement of 1909 and nothing else, and was not " therefore such a benefit as is contemplated by section 102, subsection " (2)(d) ". Here are words of great significance. The benefit, if it is to attract duty to the subject of the gift, must be a benefit referable to it. The words are not easy to construe but they clearly import that the owner of property may in certain circumstances retain a benefit when he makes a gift and yet the subject matter of the gift be not dutiable. More important is the case of Commissioner of Stamp Duties for N.S.W. v. Perpetual Trustee Company Ltd. [1943] AC 425 , for in that case the Judicial Committee took the opportunity of reviewing the earlier cases and in particular Worrall's case, Grey's case, and In re Cochrane [1905] 2 I.R. 626 and in the Court of Appeal [1906] 2 I.R. 200. And it is to the latter case that I must first turn, for the judgment of the Irish Court of Appeal was expressly approved by Lord Russell of Killowen delivering the opinion of the Board and its bearing on the case now under appeal will be seen to be immediate. For that reason I venture to repeat the facts substantially as stated by him. Sir Henry Cochrane was the mortgagee of estates in Mayo in a sum of £15,000 with interest at 41/2 per cent. The mortgage debt and securities having been vested in trustees, Sir Henry by an indenture made in 1902 declared that they were to stand possessed 7 thereof in trust out of the income to pay in each year to his daughter, Mrs. Day, the sum of £575 for her life, and after death upon trust as to the principal sum for her children as therein mentioned with power to Mrs. Day to appoint an annual sum to a surviving husband during his life. If no child of Mrs. Day attained a vested interest in the trust funds, they were to be held in trust for Sir Henry absolutely and there was also a trust of the balance, if any, of the yearly income for Sir Henry absolutely. The trustees received the interest of the mortgage which amounted to £675 per annum and paid £575 to Mrs. Day and the balance to Sir Henry. In March, 1904, he directed them to pay the whole income to Mrs. Day, but, as he died within a year thereafter, this direction could not affect the claim to duty which the Crown made in respect of the entire sum of £15,000 as property passing on his death under section 2 (1) (c) of the Finance Act, 1894. It was held by Palles, C.B., and his decision was affirmed by the Court of Appeal, which consisted of Walker, L.C., and Fitzgibbon and Holmes, L.JJ., that duty was not payable in respect of the £15,000 but only in respect of the values of Sir Henry's interest in the balance of income and his contingent interest in the principal sum. It is important to see how Lord Russell of Killowen summarises the judgment of the Chief Baron. " Gift", he says, " in the context meant beneficial gift. A person who " declares trusts of property only gives the beneficial interests covered by " the trusts. Everything else he retains and does not give; and there is an " entire exclusion of the donor from the property taken under the disposition " of the gift. Sir Henry Cochrane obtained no benefit either by way of " reservation out of the gift, or collaterally in reference to the gift." Then, after citing Holmes, L.J., he said, " If In re Cochrane was rightly decided, as " their Lordships think it was, it covers the present case ". Lord Russell of Killowen then proceeded to a close analysis of Grey v. Attorney-General, convincingly showed that it was not inconsistent with In re Cochrane and said of it:
" There is nothing laid down as law in that case which conflicts " with the view that the entire exclusion of the donor from possession and " enjoyment which is contemplated by section 11 (1) of the Act of 1889 " is entire exclusion from possession and enjoyment of the beneficial " interest in property which has been given by the gift, and that possession " and enjoyment by the donor of some beneficial interest therein which " he has not included in the gift is not inconsistent with the entire exclusion " from enjoyment and possession which the sub-section requires."
It followed from the approval given to the decision in In re Cochrane that the claim against the Perpetual Trustee Company failed. In that case a settlor vested certain shares in trustees, of whom he was himself one, upon trusts for the benefit of an infant son but with a resulting trust for himself if the son did not attain the age of 21. It was contended that as the settlor (a) was a trustee and (b) had an equitable interest in reversion, there was not an entire exclusion of him and of any benefit to him of whatsoever kind and in any way whatsoever. The contention failed because the settlor in his capacity of donor " was entirely excluded from possession and enjoy- " ment of what he had given to his son .... In the interval between the " gift and his death, the settlor received no benefit of any kind or in any " way from the shares, nor did he receive any benefit whatsoever which was " in any way attributable to the gift ". As Dixon, J., said in the same case in the High Court of Australia (64 C.L.R. 492 at 511), "The settlement con- " tained nothing defeating, revoking or destroying any interest given. It " contained no reservation out of the interest given and no recompense or " benefit in reference to the interest given ". It appears to me, my Lords, that this is nothing but the logical application to a more complex situation of the proposition which I venture to think was self evident, viz., that the life tenant of two separate pieces of property can surrender his life interest in one and retain it in the other without duty becoming exigible in respect of the former. The question is what he has given: it may be a life interest in part of the settled property ; it may be a part of the income of settled funds and that part may be a fixed sum which is payable in priority or the residue after the prior payment of a fixed sum thereout. I venture to think that much of the argument that was addressed to the House in this case and much of the confusion 8 that has arisen in the past upon this admittedly difficult branch of the law have been due to the failure to bear in mind that that of which enjoyment is to be assumed and retained and from which there is to be exclusion of the donor and any benefit to him by contract or otherwise is that which is truly given, a proposition which is obvious enough in the case of two separate estates but more difficult to follow and apply where trusts are declared of a single property which are not completely exhaustive in favour of a donee. It should at last be clear from the judgment of Lord Russell of Killowen that by retaining something which he has never given a donor does not bring himself within the mischief of the section. I venture to repeat in other words what I have already said when dealing with section 43 alone, for its underlying principle is not altered by an alliance with section 56. In the simplest analysis, if A gives to B all his estates in Wiltshire except Black- acre, he does not except Blackacre out of what he has given: he just does not give Blackacre. And if it can be regarded as a " benefit" to him that he does not give but keeps Blackacre, it is a benefit which is in no relevant sense (to use the language of Lord Tomlin) " referable " or (to use that of Lord Russell of Killowen) " attributable " to the gift that he made of the rest of the Wiltshire estate. Applying this principle to the artificial situation created by the statutory hypothesis, I see no reason for saying that that which Lord St. Levan gave was not retained by the donee to the entire exclusion of him and of any benefit to him by contract or otherwise. To avoid misunderstanding I must add that different considerations arise where the donor obtains some benefit which is " referable " to the gift or " attributable " to it. Thus, if in the present case there had been a bargain by which in con- sideration of the surrender of his life interest in part of the settled property Lord St. Levan had been enabled to enlarge his life interest in another part of it, it might well be that following Worrall's case I should be bound to hold that he had not been excluded from the surrendered part. But as I have already pointed out, here was no bargain of any kind. What Lord St. Levan chose to give he gave, and what to keep he kept. He made no bargain and he was entirely excluded from, and obtained no benefit referable to, that which he gave. My Lords, in order to test the claim under section 43 aided by section 56 I have been content to assume that the statutory hypothesis requires that the trusts upon which the Company is to be deemed to hold its assets should be written out in the terms advocated by the Crown and accepted by the Court of Appeal. And even upon this footing I am satisfied that the claim must fail if the principle established in the cases that I have cited is applied. But I am far from being convinced that I am entitled to write out the trusts in a manner so favourable to the Crown's contention. It would perhaps be beyond the wit of the most skilful conveyancer to set out with any degree of accuracy the trusts which should correspond with the rights of the members of the Company as that word is defined: for the legal relations in which the members stand to each other and to the Company cannot be transmuted into those of trustee and cestui que trust. I need not however pursue this matter, since I hold that even upon the ground which the Crown has chosen the claim for estate duty on the Ordinary shares of the Company fails and the appeal must be allowed. The alternative claim which arises under section 46 of the Finance Act, 1940, must now be considered. It involves the consideration of provisions which are, I think, of unrivalled complexity and difficulty and couched in language so tortuous and obscure that I am tempted to reject them as meaningless. I must set out not only section 46 but certain other sections which have to be read with it. They are as follows:— " 46.—(1) Where a person dying after the commencement of this Act " has made to a company to which this section applies a transfer of " any property (other than an interest limited to cease on his death or " property which he transferred in a fiduciary capacity), and any benefits " accruing to the deceased from the company accrued to him in the " three years ending with his death, the assets of the company shall " be deemed for the purposes of estate duty to be included in the property 9 " passing on his death to an extent determined, in accordance with " subsection (2) of this section, by reference to the proportion that the " aggregate amount of the benefits accruing to the deceased from the " company bore to the net income of the company. " (2) The proportion aforesaid shall be ascertained for each accounting " year that fell wholly or partly within the three years ending with the " death, by comparing the aggregate amount of the benefits accruing " to the deceased from the company which accrued to him in that year " with the net income of the company for that year, and the extent " to which the assets of the company are to be deemed to be included " in the property passing on the death shall be the average of the " proportions so ascertained: ..." "47.—(1) The following shall be treated as benefits accruing to the " deceased from the company, that is to say— " (a) any income of the company, and any periodical payment " out of the resources or at the expense of the company, which " the deceased received for his own benefit whether directly or " indirectly, and any enjoyment in specie of land or other property " of the company or of a right thereover which the deceased had " for his own benefit whether directly or indirectly; . . ." " (2) In this Part of this Act the expression ' periodical payment' " means a payment by way of dividend or interest, a payment by way " of remuneration not being a single lump sum payment, and any other " payment being one of a series of payments, whether inter-connected " or not, whether of the same or of varying amounts and whether " payable at regular intervals or otherwise . . . ." " 58.—(2) A person shall be deemed for the purposes of this Part " of this Act to have made a transfer of property to a company if the " property came to be included in the resources of the company by the " effect of a disposition made by him or with his consent or of any " associated operations of which such a disposition formed one. . . ." " (4) References in this Part of this Act to a disposition's being made " by any person, to a power's being exercised or exercisable by any " person, or to any other act's being done by any person, include " references to its being made, or being exercised or exercisable, or " being done, by him and another jointly or by another at his " direction. . . ." " (5) References in this Part of this Act to a person having any " power or control or doing any act in a fiduciary capacity shall be " construed as references to his having that power or control or doing " that act in a fiduciary capacity imposed on him otherwise than by a " disposition made by him and in such a capacity only." The claim of the Crown rests on two conditions; first, it must be shown that Lord St. Levan transferred property to the Company and did so in some other than a fiduciary capacity (for this I will coin the expression " non-fiduciary capacity "), and, secondly, that benefits accrued to him from the Company in the three years ending with his death. Upon the first of these questions numerous points arise for discussion. What property was transferred to the Company by Lord St. Levan? So far as he transferred it, did he do so in a fiduciary capacity? What is the effect of the ratification and confirmation or further assurance by Lord St. Levan and Mr. Ponsonby contained in the several deeds of conveyance or transfer? What is the effect of the several subsections of section 58 which I have set out and how do they operate inter se? These and other points I must deal with seriatim. The first point arises on the subscription by Lord St. Levan for 100,000 Preference shares. For these he paid cash according to the ordinary use of language. Did he then " transfer property " to the Company within the mean- ing of section 46? My Lords, I have no hesitation in saying that the payment of cash to a company upon a subscription for shares is not a transfer of property to the company. No one, lawyer, business man or man in the street, was ever heard to use such language to describe such an act and I decline to 10 stretch the plain meaning of words in an Act of Parliament in order to comply with what is said to be its purpose. Lord Wensleydale's familiar words, which were cited by Lord Halsbury in Tennant v. Smith [1892] AC 150 , may again be repeated:
" It is a well established rule that the subject is not to be " taxed without clear words for that purpose; and also, that every Act " of Parliament must be read according to the natural construction of its " words "
. Lord Halsbury adds that in a taxing Act it is impossible to assume any intention or governing purpose in the Acts to do more than take such tax as the statute imposes: it must be seen whether the tax is expressly imposed. This is true doctrine which I must bear in mind as I listen to the constant refrain of learned Counsel for the Crown that this or that is just the transaction at which this or that section is aimed. The question is not at what transaction the section is, according to some alleged general purpose, aimed but what transaction its language, according to its natural meaning, fairly and squarely hits. Applying this, the one and only proper test, I say that when Lord St. Levan paid for his shares he did not transfer property to the Company. The next point arises in this way. The conveyance of the settled land to the Company, to which I have already referred, took the form of a grant by Lord St. Levan in exercise of (to put it shortly) his Settled Land Act powers and the extended powers given by the St. Aubyn settlement and the Deed Poll of the 23rd March, 1927. It is beyond question, first, that this grant operated to convey the fee to the Company, and, secondly, that the grant by Lord St. Levan as tenant for life, whether made in pursuance of statutory or extended powers, was a transfer by him in a fiduciary capacity. But the conveyance contained not only a grant by Lord St. Levan. By it also he and Mr. Ponsonby in exercise of their general power of appoinment " by way of ratification " appointed and confirmed unto the Company the land which he had granted. Therefore, it was said, the property was not transferred by Lord St. Levan in a fiduciary capacity but by him and Mr. Ponsonby in a non-fiduciary capacity. This is not a valid argument. The ratification and confirmation and appointment could have no operation in law except to the extent to which the grant by Lord St. Levan was ineffective to convey the fee. Ex concessis that grant was wholly effective: therefore the ratification, etc.. effected no transfer of property nor anything else. The same point arises, but with a refinement upon it, in regard to the investments representing capital moneys of the settlement. These were transferred to the Company by the Trustees by the usual deeds of transfer. The Trustees no doubt acted in a fiduciary capacity, but they acted (a) upon the direction of Lord St. Levan as tenant for life and (b) upon the exercise by Lord St. Levan and Mr. Ponsonby of their joint power of appointment " by way of ratification ". Then, the argument runs, under section 58 (4) the transfer by the Trustees becomes the transfer of those who directed it: and those who directed were not only Lord St. Levan as tenant for life but he and Mr. Ponsonby in exercise of a non-fiduciary power. If Lord St. Levan was competent to direct the transfer under the Settled Land Act or under the extended powers given to him by the Deed of the 23rd March, 1927, then the argument fails for the reasons given in regard to the settled land: for the direction by Lord St. Levan and Mr. Ponsonby added nothing to that already given by Lord St. Levan. But at this point the argument opened a question of a far-reaching character, which I am sorry to have to decide without the assistance of Judges who have a greater familiarity with such problems. It is the broad question whether it is competent for a tenant for life to direct the trustees to change an investment of capital moneys into another investment authorised by the Act or by the settlement. Upon this question Counsel on either side agreed in saying that there was no direct authority and they agreed too that the reason for that was that the answer was clear. But unfortunately here harmony ended, for the clear answer given on the one side was the exact opposite of the clear answer given on the other. It falls therefore to your Lordships to determine a question which I should have expected to find well settled long ago. Part III of the Settled Land Act, 1925, which is entitled " Investment or " other application of capital money ", provides by section 73 (1) that capital 11 money arising under the Act shall subject as therein mentioned be invested or otherwise applied wholly in one or partly in one and partly in another or others of the following modes: then follow twenty-one so-called modes, of which the first is "investment in Government securities, or in other " securities in which the trustees of the settlement are by the settlement " or by law authorised to invest trust money of the settlement, with power " to vary the investment into or for any other such securities" and the others are the numerous forms of application which experience had shown to be necessary or expedient. So far there is nothing to indicate with whom the direction or initiative lies. This is to be found in section 75, which provides by subsection (1) that "capital money arising under this " Act shall, in order to its being invested or applied as aforesaid, be paid " either to the trustees of the settlement or into court at the option of the " tenant for life, and shall be invested or applied by the trustees, or under " the direction of the court, as the case may be, accordingly ". At this stage the tenant for life, having exercised his option for payment to the Trustees or into Court, appears to leave the scene. But subsection (2) provides that " the investment or other application by the trustees shall " be made according to the direction of the tenant for life, and in default " thereof according to the discretion of the trustees . . . and any investment " shall be in the names or under the control of the trustees ", subsection (3) provides that "the investment or other application under the direction of " the Court shall be made on the application of the tenant for life or of " the trustees " and subsection (4) that " any investment or other application " shall not during the subsistence of the beneficial interest of the tenant " for life be altered without his consent". I do not think that any assistance is to be got from subsection (5) or subsection (6), but subsection (7) provides that " those securities " [i.e. the securities representing capital money] " may be converted into money, which shall be capital money arising under " this Act ". By definition " capital money arising under this Act ", unless the context otherwise requires, means " capital money arising under the ' powers and provisions of this Act or the Acts replaced by this Act, ' and receivable for the trusts and purposes of the settlement and includes " securities representing capital money ". Upon these sections the contention of the Crown is that the tenant for life, having under section 75 (2) directed the application of capital money in the mode first mentioned, viz., in investment in authorised securities, has no power to direct a change of investment into other authorised securities, that the power to vary rests with the Trustees and that, though under subsection (4) of section 75 they cannot exercise that power without the consent of the tenant for life, he has no power of direction. On the other hand it is argued that, just as the tenant for life has the initial power of direction and the further power (which is not denied) of directing that investments shall be realised and the proceeds applied in some authorised mode of application, e.g., in discharge of incumbrances, so he has power to direct that an investment shall be realised and the proceeds shall be invested in other investments, or, in other words that the words " with "power to vary" which occur in section 73 (1) (i) do not confer a power on the Trustees apart from the tenant for life but merely indicate that the right of the tenant for life to direct is not exhausted when he has directed that the mode of application of capital money shall be the investment in securities. My Lords, between these two views, both of which are, I think, possible, I choose the latter without hesitation. It would be at once illogical and inconsistent with the scheme of the Settled Land Act to give to the tenant for life the right to say whether capital money should be applied in investment in securities or (say) in the discharge of incumbrances (section 73 (1) (ii)), or in the purchase of land in fee simple (section 73 (1) (xi)) and the right too to direct the sale of securities and the application of the proceeds in some other mode, but to deny him the right to direct a variation of investment. It is not, I think, inconsistent with this view that section 75 (4) contemplates the consent of the tenant for life, which presupposes action initiated by the Trustees: for under section 75 (2) the Trustees may in default of direction by the tenant for life act at their own discretion and section 75 (4) is apt to cover such a case. Nor can I disregard 12 section 75 (7). If securities can be converted into money (which I take to be something that can and must be done at the discretion of the tenant for life) the proceeds become capital money of which the tenant for life can direct the application and, if he directs the investment in securities, he can choose the securities so long as they are authorised. I am therefore of opinion that a tenant for life can direct an exchange of investments, assuming always that he acts within and according to his statutory or extended powers, and, coming from the general to the particular, I am of opinion that Lord St. Levan was competent to give the direction, to which I have referred, in regard to the investments forming part of the settled property. Accordingly the ratification and appointment by himself and Mr. Ponsonby added nothing to his direction. It was that which was effective and it was given by him in a fiduciary capacity. The same point was raised also in regard to a third class of property which was transferred to the Company, viz.: the property which has been called " the equitable interests ". What I have already said covers this class of property also and I do not think it necessary further to explain why this property too was transferred to the Company by Lord St. Levan in a fiduciary capacity. So far, my Lords, I have endeavoured to interpret and apply section 46 of the Act to the facts of this case with only an oblique glance at section 58. But now I must turn to the contentions of the Crown which are based on that section and first to a contention based on subsection (5). That subsection provides that " references in this Part of this Act to a person " having any power or control or doing any act in a fiduciary capacity " shall be construed as references to his having that power or control or " doing that act in a fiduciary capacity imposed on him otherwise than " by a disposition made by him and in such a capacity only " It was urged on behalf of the Crown that, inasmuch as the additional powers by the exercise of which Lord St. Levan, as tenant for life, was enabled to transfer or direct the transfer of property to the Company, owed their existence to a disposition made by him, viz., the Deed Poll of 23rd March, therefore the fiduciary capacity in which he exercised those powers was imposed on him by that disposition. I do not think that this argument is valid. Admittedly he was a trustee of the powers and therefore could only exercise them in a fiduciary capacity, but this flowed from the pro- visions of section 107 of the Settled Land Act, 1925. It was Lord St. Levan who created the power but the capacity in which he exercised it was imposed by the Act. Take any settlement that you will and suppose that the tenant for life exercises a power conferred on him by the settlement in extension of his powers under the Settled Land Act. Whether the settlement is made by himself or another, it could not be said that the fiduciary capacity, in which he exercised the power, was " imposed " by the settlement. The word " impose " is, I think, apt to describe a consequence which flows from a statutory provision but inapt to describe a power voluntarily created. The next contention that I must notice is founded upon section 58 (2) which must be read in conjunction with section 58 (4). Subsection (2) provides that " a person shall be deemed for the purposes of this Part " of this Act to have made a transfer of property to a company if the " property came to be included in the resources of the company by the effect " of a disposition made by him or with his consent or of any associated " operations of which such a disposition formed one ". The argument here is that it was by the effect of a disposition made by Lord St. Levan in a non-fiduciary capacity, viz., the Deed Poll of the 23rd March, or at least by the effect of associated operations, of which that disposition formed one, that the property came to be included in the resources of the Company and that therefore Lord St. Levan must be deemed to have transferred the property to the Company within section 46 and to have done so in a non-fiduciary capacity. Here it is regrettably necessary to make further distinctions, for there were, as I have already pointed out, different species of property, and they demand separate consideration. First, it was urged that the cash paid by Lord 13 St. Levan for the Preference shares was caught by the subsection. I have already expressed the view, which is, I understand, held by the majority of your Lordships, that section 46 does not cover a cash subscription for shares. If this is so, it is I think impossible to say that the cash is " property included in the resources of the company" which anyone is deemed to have transferred. The transaction is outside the purview of the section and the subsection. Next, the argument turned to the land. This was a kind of property which was in fact and in law transferred by Lord St. Levan himself to the Company. The sale and the conveyance were made by him as tenant for life and were therefore made by him in a fiduciary capacity. I see no room for what I may call a deeming provision when that which is to be deemed has effectively taken place without it. Lord St. Levan transferred the property in a fiduciary capacity: the subsection does not in my opinion entitle me to deem him to have transferred it in a non-fiduciary capacity. Next, and more difficult, come two other kinds of property which I can take together, the investments representing capital moneys and the equitable interests, and I must now turn to section 58 (4). This subsection so far as relevant provides as follows:
" References in this Part of this Act to a " disposition's being made by any person ... or to any other act's being " done by any person, include references to its being made ... or being " done by him and another jointly or by another at his direction . . . "
. I have already expressed the opinion and will assume that it was competent for Lord St. Levan as tenant for life to direct the Trustees of the settlement to invest capital moneys in the purchase of or in exchange for shares of the Company, and that the effect of the deed of the 25th March was that he validly exercised that power of direction with the result already pointed out that the confirmatory direction by him and Mr. Ponsonby in exercise of the overriding power added nothing to it. If so, the act of the Trustees in transferring the investments was an act done by another at his direction and accordingly it was under this subsection his act: it was he who trans- ferred the property, and ex concessis he transferred it in a fiduciary capacity, for he was acting in exercise of additional Settled Land Act powers. But here comes the crux. If subsection (2) stood alone, and subsection (4) had not been enacted, I could not avoid the conclusion that Lord St. Levan must be " deemed " to have transferred the investments. The deeming provision would not (as it was in the case of the land) be excluded by an actual transfer, and, even though the direction to transfer was given in a fiduciary capacity, that could not alter the fact that the property became included in the resources of the Company not as in the case of the land by an actual transfer by Lord St. Levan, but by a series of operations of which the exercise of the non-fiduciary overriding power was one. But subsection (2) does not stand alone and the question is what part subsection (4) is to play. The latter like the former is in effect a deeming provision. Am I then to say that as the result of subsection (4) Lord St. Levan was for the purposes of section 46 the actual transferor of the investments, just as he was of the land, so as to exclude the operation of the deeming provision of subsection (2)? Or am I to say that subsection (4) is to be denied any operation where subsection (2) would without it be brought into play? It may be urged that as subsection (2) expressly does, but subsection (4) does not refer to transfers, the former section should apply. But this is a very tenuous thread on which to hang a taxpayer, for subsection (4) does not the less apply to transfers because it uses general words such as " disposition " and " act " which cover both transfers and other operations. I have come after much hesitation to the conclusion that the provision of subsection (4) must prevail. It is, I think, a subsection which is intended and is apt to cover every case : its language is absolutely general: it does not open as it might by a saving reference to subsection (2) and it should not be restricted unless it is necessary to do so in order to give some meaning to that subsection. But this clearly is not necessary: for subsection (2) has in any case ample scope where no question arises as to the capacity, fiduciary or non-fiduciary, in which a transfer is made but the question is whether that which was done, by whomsoever done, amounted to transfer. 14 My Lords, having come to the conclusion that Lord St. Levan did not transfer any property to the Company within the meaning of section 46 except in a fiduciary capacity, I am of opinion that upon this ground the alternative claim for duty which is made against the Company fails and the cross-appeal of the Crown must be dismissed. But in case your Lordships take a different view on this very difficult question, it is right that I should state my opinion on the further question whether any and what benefit within the meaning of the section accrued to Lord St. Levan from the Company in the three years ending with his death. That some benefit so accrued to him is admitted by the Company, for he received the proper instalments of the sum of £750,000 which were payable within those years and he also received dividends upon the Preference shares. But a dispute has arisen in regard to certain sums received by Lord St. Levan from the Company in the circumstances which I must now state. By a Mortgage Deed dated 30th January, 1933, and made between Lord St. Levan of the one part and the Company of the other part the Company covenanted to advance to Lord St. Levan on every 25th March, 24th June, 29th September and 25th December, during the joint lives of Lord St. Levan and his nephew Francis Cecil St. Aubyn (now the third Baron St. Levan) at four per cent, interest a sum of £500 unless and until Lord St. Levan should give notice to the Company that he did not require such advance to be made and it was thereby agreed that payment of the said sums and of the interest thereon should not be required by the Company until the expiration of a period of two years from the death of Lord St. Levan unless he or his personal representatives should desire to repay the same previously and in the meantime interest becoming due thereon should be added to the principal money and carry interest accordingly and the said Deed contained a provision for deduction of the said debt by instalments from any instalment of the said sum of £750.000 remaining outstanding at the expiration of the period of two years and for charging the same upon such instalments. By another like Deed dated 4th August, 1936, the Company covenanted to advance to Lord St. Levan on every 1st January and 1st July during the same joint lives a further sum of £500 upon the same terms as the advances to be made under the said Deed of 30th January, 1933. Pursuant to the said Deeds the Company advanced to Lord St. Levan in each of the three years preceding his death sums amounting in all to £3.000 all of which with the interest thereon remained due and owing at his death. The question is whether the advances so made were " benefits " within the meaning of section 46. The argument for the Crown is a simple one. Under section 47 (which I have already cited) any periodical payment out of the resources of the Company is to be " treated as a benefit ": the loans or advances were payments made to Lord St. Levan out of the resources of the Company and they were made periodically: and they were received by Lord St. Levan for his own benefit directly or indirectly. Therefore they were " benefits". The Company on the other hand appeals once more to the plain use of ordinary words and denies that a man can fairly be said to receive for his own benefit a sum which he receives by way of loan and has to repay, and further relies on the omission of loan from a definition which refers to payment by way of dividend or interest or by way of remuneration or any other payment. The latter argument may derive some force from the contention of the Crown that a transaction of loan was just what the section was aimed at. But perhaps that contention had only become common form by the time this stage of the case had been reached. My Lords, here again is a question upon which I find it impossible to express a confident opinion. It is indeed strange that no reference is made to a transaction of loan and the result of holding such a transaction to be a benefit must, as learned Counsel for the Crown was constrained to admit, have strange results. But I have come to the conclusion, nevertheless, that the contention of the Crown must be upheld. I cannot escape from the fact that as each periodical loan was made to Lord St. Levan there 15 was a payment to and receipt by him. And I cannot think that he received it any the less for his own benefit because he had, or his estate had, at a later date to repay it. He had the beneficial use of what he received and can fairly be said to have received it for his own benefit. I may add that I do not find it possible to find in the definition of periodical payment any genus of payments created from which, by the application of the ejusdem generis rule, a loan could be excluded nor can I get any assistance from the provisions of the Seventh Schedule to the Act to which reference was made, I am therefore of opinion that the loans were " benefits " within section 46. But this is only relevant if Lord St. Levan transferred property to the Company within the same section except in a fiduciary capacity, and this, in my opinion, he did not. It follows from what I have said that in my opinion the appeal should be allowed with costs and the cross appeal dismissed with costs and the judgment of Mr. Justice Groom-Johnson restored. Lord Normand MY LORDS, I have had the advantage of reading the opinions of my noble and learned friends Lord Simonds and Lord Radcliffe, and I am in agreement with them at all points where they are at one. It will, therefore, be possible for me to deal with the case without trespassing for long on your Lordships' patience. On the Crown's claim under sections 43 and 56 of the Finance Act. 1940, I can state my view quite briefly. After the death of Lord Amherst on 7th March, 1927, there was vested in Lord St. Levan and Mr. Ponsonby a joint power of appointment over all the property comprised in the settle- ment, which they were free to exercise for the personal benefit of Lord St. Levan. Mr. Ponsonby was not a trustee in relation to that power, and Lord St. Levan was the effective dominus of the settled property. He also had the powers of a tenant for life under the Settled Land Act, 1925. His powers, derived from one or the other of these sources, enabled him to bring about an enlargement of the powers of investment and a realization and reinvestment of the settled property, to appropriate to himself in fee the whole or any part of the property or of substituted investments of the proceeds, and to make a gift or settlement of such part as he did not appropriate in favour of persons selected by him. By his exercise of these powers, the original settled property, the lands, equitable interests and invest- ments, were sold to the Company, part of the price was invested in the Ordinary shares of the Company and the balance was appropriated by Lord St. Levan, who also resettled the Ordinary shares in trust in such a way as to extinguish his life interest and to exclude himself from all further interest in them. In substance and in form, therefore, he took part of the trust property as his own absolutely, and made a gift of what remained under trust to donees selected by himself. Admittedly the trustees for the donees immediately assumed bona fide possession and enjoyment of the Ordinary shares of the Company. These shares were an item of property separate from the part of the purchase price which had not been invested in them, and which was represented by the preference shares of the Company and a jus crediti in a balance payable by the Company, both owned by Lord St. Levan. If Lord St. Levan had been the holder of debentures and preference and ordinary shares in the Company and had transferred the ordinary shares, whether by gift or for value, the transferee thenceforth would have retained possession and enjoyment of the ordinary shares to the entire exclusion of Lord St. Levan and of any benefit to him by contract or otherwise. The present case is in no way different from that and the effect of the transactions is that the possession and enjoyment of the ordinary shares by the trustees were retained by them to the entire exclusion of Lord St. Levan and of every benefit to him by contract or otherwise. 16 The application of the statutory hypothesis as provided for by section 56 can in this respect make no difference. The fictional mutation of the Com- pany into a trust and of the Company's creditors and shareholders into beneficiaries, however far it is carried, still leaves the beneficial rights repre- senting the ordinary shares and the beneficial rights representing the prefer- ence shares and the instalments separate items of property ; and the beneficial rights representing the ordinary shares are, when the statutory hypothesis is applied, still enjoyed by the donees thereof to the entire exclusion of Lord St. Levan and of any benefit to him. On the case law of this branch of the appeal I need say nothing, since it has been fully dealt with by my noble and learned friends. The Crown's cross appeal and claim under section 46 and the sections which have to be read with it, as set out in the opinion of my noble and learned friend Lord Simonds, raise questions of some difficulty. The first point is whether Lord St. Levan, when he paid £100,000 for the preference shares in the Company, made a transfer of property within the meaning of section 46. My opinion is that " transfer of property " are not the usual words which would be naturally selected to describe a payment of money, though it cannot be denied that money is property or that payment is a transfer. I think that if it had been intended to strike at money payments the simple words necessary to make that intention clear would have been added. The next question is whether Lord St. Levan made a transfer to the Com- pany of the lands, equitable interests and investments which formed the original settled property otherwise than in a fiduciary capacity (section 46 (D). The precise wording of the subsection is of importance. If the question had been whether Lord St. Levan transferred the lands, to take the clearest case, otherwise than in a fiduciary capacity, the answer might well have been that he did not. For it was he who transferred the lands by the conveyance of 26th March, 1927, and he did so in pursuance of the fiduciary power imposed on a tenant for life by the Settled Land Act, 1925. It could then have been argued with some plausibility that the inquiry was complete, and that there was neither necessity nor justification for pursuing it further by recourse to a provision under which a person may be deemed to have made a transfer of property. But when the inquiry is whether Lord St. Levan made a transfer of the lands, the answer may be different. I find it impossible to read section 46 and the related sections without being forced to recognise that the same party may make more than one transfer within their meaning, and that the making of one such transfer otherwise than in a fiduciary character satisfies pro tanto the conditions for charging the company's assets under section 46. It is no answer that the same party made another transfer in a fiduciary capacity. Now by the appointment of 23rd March, 1927. Lord St. Levan made a disposition, as defined in section 59, by the effect of which the lands, equitable interests and investments, came to be included in the resources of the company and therefore he must be deemed to have made a transfer of the property to the company (section 58 (2)). Admittedly this transfer was not made in a fiduciary capacity. A further disposition was necessary to complete the transfer of the property to the company. But I think that the whole trust property came to be included in the company's resources by the effect of the appointment of the 23rd March, for without it the sale of the trust property to the company would not have been carried out. Lastly, I see no way of escaping the conclusion that the advances made under the Deeds of 30th January, 1933, and 4th August, 1946, were periodical payments and therefore benefits within the meaning of section 47, despite the arbitrary results and crude anomalies to which such a conclusion may lead. For these reasons I would concur in my noble and learned friend Lord Radcliffe's proposals for disposing of the appeal and cross appeal. 17 Lord Simonds MY LORDS, My noble and learned friend Lord Oaksey, who is unable to be here today, has asked me to say that he concurs at all points in the Opinion which I have just delivered. Lord Radcliffe MY LORDS, The original appeal relates to the Crown's claim to Estate Duty under section 43 of the Finance Act, 1940, that claim being assisted or encumbered by the provisions of section 56 of the same Act. It is no doubt convenient to dispose of the questions which are involved in that appeal before going on to deal with the cross appeal of the Crown. No one could suppose that section 43 is anything but an obscure section. So was section 11 of the Finance Act, 1900, the statutory parent of the present enactment. So were section 35 and section 39 of the Finance Act, 1930, which extended the scope, without elucidating the meaning, of the charge imposed by the 1900 Act. All these sections have now disappeared and their place is taken by section 43 and the accompanying provisions of the Finance Act, 1940. But there still appears as a condition upon which freedom from duty depends that difficult phrase about bona fide posses- sion and enjoyment of the property being assumed and " thenceforward " retained to the entire exclusion of the person who had the interest " and of any benefit to him by contract or otherwise." There was very general uncertainty as to what, if not all, benefits were intended to be covered by these words, and as to the circumstances in which, if there were indeed any circumstances, a person might legitimately be found in the enjoyment of some contractual benefit after the termination of the limited interest without involving the property in continuing liability for duty. I think it regrettable that when, in 1940, opportunity was found to wipe out the old sections and to enact a new set of provisions, opportunity was not at the same time found to make those provisions more readily intelligible. I can appreciate that at any rate some of the transactions with which section 43 and section 56 appear to be concerned are deplorable from the point of view of those interested in revenue collection, but for all that, the taxpayer is entitled to be told with some reasonable certainty in what circumstances and under what conditions liability to tax is incurred or else to be told explicitly that the circumstances and conditions of liability are just those which the Commissioners, of Inland Revenue in their administrative discretion may consider appropriate. The seventeen sections which constitute Part IV of the Finance Act, 1940, are expressed with what proves on investigation to be a vagueness so diffuse and so ambiguous that they may well produce in practice the second alternative while adopting in form the requirements of the first. This would be an unfortunate situation to have brought about. The prayer of Ajax—' —has been heard before in your Lordships' House, but I think its appeal is even stronger when obscurity is created by deliberate legislation than when it arises from the less wilful confusions of the common law. My Lords, I have formed the opinion that the fate of this appeal must turn upon the meaning that you attribute to the phrase which appears in sub- section 2 (a) of section 43: —" if bona fide possession and enjoyment of " the property in which the interest subsisted was assumed immediately there- " after by the person becoming entitled by virtue of or upon the disposition " or determination and thenceforward retained to the entire exclusion of " the person who had the interest and of any benefit to him by contract or " otherwise." For the facts of this case, complicated as they may seem, come down to a simple legal issue. Those facts have been fully stated in the opinion of my noble and learned friend, Lord Simonds, and it is quite unnecessary for me to travel through them again. What it comes down to 18 is this. The Crown's claim is for Estate Duty on the Ordinary shares of St. Aubyn Estates Ltd. Those shares constitute the property in which the deceased had a life interest at the date when he and Mr. Ponsonby executed the Deed Poll of 29th March, 1927 ; and it is because that Deed had the effect of determining his life interest in that property that the Crown prefers its claim under section 43. So far there is nothing in controversy. The Appellants, however, maintain that upon the 29th March the deceased was immediately and thereafter continued to be excluded from any possession or enjoyment of those Ordinary shares, since the whole beneficial interest in them belonged to others than himself, and that the possession and enjoy- ment so taken by or on behalf of those others was such as to exclude him from any benefit by contract or otherwise. This is where the whole con- troversy comes. For the Crown, while not disputing that after the Deed of 29th March the whole beneficial interest in the Ordinary shares belonged to others than the deceased, contends that the existence of those interests of which he had become the absolute owner by virtue of the Deed of 28th March, 1927. made it impossible to say that the possession and enjoyment of the Ordinary shares which had been assumed by or on behalf of those others was retained to the entire exclusion of any benefit to the deceased by contract or otherwise. At first sight it is difficult to see any basis for this contention. No right or interest that was left to Lord St. Levan after the 29th March interfered with the new owners' full possession and enjoyment of that " bundle of " rights " which constituted the Ordinary shares and which formed the pro- perly in which he had given up his life interest. It is true that, putting aside his ownership of the Preference shares, he continued to enjoy the benefit of the Company's contract to pay such part of the purchase price as was to be discharged by half-yearly instalments of £18,750 each. Certainly this was a benefit by contract: certainly the right to receive this money in this way had been created as one step in the series of transactions which began with the Deed of 23rd March and ended with the Deed of 29th March, 1927. Moreover, I do not think it necessary to treat it as less than certain that Lord St. Levan and Mr. Ponsonby, the joint authors of all that was brought about at that time, intended from the first that the benefit of this contract, when created, should become the absolute property of Lord St. Levan and that the Ordinary shares should be resigned to follow the trusts declared by their Deed of the 29th March to the exclusion of any further interest of Lord St. Levan in those shares. But unless it is a valid pro- position of law that for the purposes of section 43 bona fide possession and enjoyment of property is not assumed and retained to the entire exclusion of any benefit to a person by contract or otherwise merely because it is found that after releasing a limited interest in the property that person continues to enjoy a contractual benefit created as part of the whole scheme in which that release is involved, I do not see that the recital of the facts that I have set out above brings the Crown any nearer to establishing its case under section 43. I am afraid that there is a good deal that is yet to be said on this appeal: but in substance the case for the Crown stands or falls by that proposition. If it is right, the wording of the section is indeed inapt to express its meaning: for to adopt it requires no more than to ascertain whether the deceased was left in possession of any contractual benefit at all at the end of the transaction and gives no significance to the question whether that benefit, whatever it is, is such as to trench upon the possession and enjoy- ment of the property in which the interest has been surrendered. My own view is that the whole proposition is fallacious. Nor do I think it the better founded if the qualification is introduced that a benefit by contract, to be within the mischief of the section, must be " referable to " the transaction by which the life interest is determined. Your Lordships were invited to accept that qualification because the words in question had been used by Lord Tomlin when delivering the Opinion of the Judicial Committee in Munro v. Com- missioner of Stamp Duties [19341 A.C.61. But there is a difference between using words to explain a point and using words to define a proposition: and the words " referable to " are in themselves of too ambiguous an import to afford any satisfactory gloss upon the meaning of the section. 19 There is this much, and not more than this much, to be said for the proposi- tion advanced by the Crown. It was decided long ago in A.G. v. Worrall, [1895] 1 QB 99 , that a contractual benefit may interfere with the exclusive possession and enjoyment required by such a provision (in that case, section 11 (1) of the Customs and Inland Revenue Act, 1889) even though it does not amount to a reservation out of the property that is the subject of the gift. My Lords, so it may. For my part I see nothing in the decision of Worrall's case that cannot readily be accepted as good law. But what did it decide? A father had made a present to his son of a sum of about £24,000 secured on mortgage and the son had bought in the equity of redemption for a small sum: in return for his father's gift the son had covenanted to pay him an annuity of £735 per annum during his life. In effect the son was returning to the father the income on the property given during the remainder of the father's life. It seems to me reasonable enough for a Court to hold in those circumstances that the son had not obtained the enjoyment of what was given free from a contractual benefit to the father which encumbered the enjoy- ment of the very thing that was given. To hold otherwise would have been to stop at the mere form of the transaction. Even if I did not think that Worrall's case was rightly decided, as I do, I should not think it right at this date to suggest that it ought to be overruled. It has stood too long, and has been too often relied upon. But I think it a very mistaken form of reason- ing to deduce from a decision that a benefit, to be within the mischief of the section, need not necessarily be by way of reservation out of the subject matter of a gift the general proposition that all benefits are within the mis- chief of the section, whether they are by way of reservation out of the subject matter of the gift or not. To deny the validity of one general proposition is not to assert the general validity of its opposite. I suggest, therefore, that your Lordships can safely put aside the case of A.G. v. Worrall as having no further bearing on this appeal than that of showing that the benefit of the instalment payments which Lord St. Levan retained was not without the mischief of the section merely because the Company's contract to pay them was neither a charge upon nor a reservation out of the property which con- sisted of the Ordinary shares. But it leaves unresolved the essential question whether that benefit was nevertheless within the mischief of the section. I do not believe that there is any great difficulty in answering that question. I think that in this, as in other cases arising on similar legislative provisions, there are two matters that have to be attended to before the answer can be given. The first is, How did the deceased come to be in enjoyment of that benefit by contract, the existence of which is said to compromise the possession and enjoyment of the property released? The second is, What precisely is the property the life or other interest in which has been deter- mined? On the first point the answer is plain. The deceased enjoyed that contractual benefit because he decided to create it and to take it for himself. This is not a case in which he had to bargain to get what he wanted: nor is it a case in which by some ambiguous arrangement he took back in substance a part of that of which he had affected to dispose. The whole of this scheme was brought about by an exercise of the powers of the deceased alone or of the deceased in conjunction with Mr. Ponsonby. Between them they brought the Company into being; created the instalment debt, the Preference and the Ordinary shares ; secured that the instalment debt, the cash and the Ordinary shares should become the property held on the trusts of the Resettlement instead of the land, investments and other interests transferred to the Company ; and then withdrew the cash and the instalment debt to become the deceased's absolute property and put an end to any further interest of his in the Ordinary shares. Nor can there be any doubt about the answer to the second point. It was the Ordinary shares in which the life interest was determined; not the Ordinary shares as they might have been had some scheme been operated other than that which was in fact adopted, but the Ordinary shares as in fact they were, shares in a Company which had acquired assets on the terms of paying for them in part by the satisfaction of this instalment debt. Now, if that was the situation, the possession and enjoyment of the rights which constituted the Ordinary shares were only affected by the existence of the instalment debt in the sense that the half-yearly payment 20 of the instalments reduced the resources which, had there been no debt, would have been available for the benefit of the shareholders of the Company. But I think that there is formidable authority against the view that in such a situation the possession and enjoyment of the relevant property is not exclusive of a benefit to the donor or releasor of such property. A man may have an arrangement which gives him contractual benefits that affect an estate and may subsequently make a gift of his interest in that estate: if he does the donee has possession and enjoyment of what is given, to the entire exclusion of the donor or of. any benefit to him. That is the Munro case [1934] AC 61 . Shares may be made the subject of a trust for another person, the maker of the trust having the right under it to be one of the trustees, to retain in his control the voting-power in respect of the shares and to take an ultimate resulting interest: yet that benefit does not bring the property within the mischief of a similar provision. That is the Perpetual Trustee Co. case [1943] AC 425 . No more is possession and enjoyment of a gift compromised if a man vests property in trustees upon trust to provide out of it certain limited benefits for a donee, but subject thereto upon trust for himself. That is the Cochrane case [1905] 2 I.R. 626; 1906, 2 I.R. 200. All these decisions proceed upon a common principle, namely, that it is the possession and enjoyment of the actual property given that has to be taken account of, and that if that property is, as it may be, a limited equitable interest or an equitable interest distinct from another such interest which is not given or an interest in property subject to an interest that is retained, it is of no consequence for this purpose that the retained interest remains in the beneficial enjoyment of the person who provides the gift. My Lords, I think that the application of that principle is sufficient to destroy the Crown's claim under section 43. In substance the position of Lord St. Levan was the position of a man who creates a rent charge in his own favour upon property which is in his absolute disposition and then makes a gift of that property subject to that charge. Nothing is then given except the interest so charged. Is possession and enjoyment of what is given exclusive of the donor or of any benefit to him, despite his continued receipt of the amounts secured by his charge? I conclude that it is, for I cannot imagine that, had the law been otherwise, the case of Grey v. A.G. [1898] 2 QB 534 ; [1900] AC 124 , would have taken the course that it did. In that case Earl Grey had at least created a rent charge for himself on parting with his estates: but I think that the judgments in the Court of Appeal make it plain that it was not because he had done that, but because he had done and secured for himself so much more than that, that liability for duty attached. The explanation of that decision which was offered by the Irish Court of Appeal in the Cochrane case makes it turn upon the existence of the covenants which the transferor had secured for himself by the trans- action and which left him still the effective master of all that he had trans- ferred, and the reasoning of Lord Russell in the Perpetual Trustee case seems to me to be directed to making the same point. I agree with those views, and I cannot more aptly conclude my opinion on this part of the appeal than by quoting what Lord Russell there says on this point (see [1943] A.C. at 446):
" the entire exclusion of the donor from possession and enjoyment which is " contemplated ... is entire exclusion from possession and enjoyment " of the beneficial interest in property which has been given by the gift. " and . . possession and enjoyment by the donor of some beneficial interest " therein which he has not included in the gift is not inconsistent with the " entire exclusion from possession and enjoyment which the subsection " requires."
Hitherto I have made no reference to section 56. I have not done so because, in face of the considerations which I regard as the determining considerations in this matter and which I have tried to set before your Lordships, I do not see what difference it makes whether section 56 (2) is applied or not. But, since it was the existence of this section that caused the Court of Appeal to decide the appeal in favour of the Crown, a decision to which, I gather, they would not have come had section 43 been unfortified by section 56, I must state briefly why it is that I do not regard that section as having any importance in this case. It introduces what has been called " the statutory hypothesis"; but it introduces that hypothesis 21 for a limited purpose only. The property on which Estate Duty is claimed remains the same: the Ordinary shares. The property in which the life interest has been determined remains the same: the Ordinary shares. It is only when the further question arises under section 43 (2) (a) whether possession and enjoyment of that property has been assumed and retained to the exclusion of the releasor and of any benefit to him that the statutory hypothesis comes in to test the exclusion by asking whether, even if it has been completely achieved in circumstances as they are, it would have been equally true to say that it was achieved if the Company had been trustee of its property to give effect to equitable rights analogous to those in fact created by the shares and " debentures " of the Company. If the answer would have been No in the imaginary state of things postulated by the hypothesis, then the protection of section 43 (2) (a) cannot be invoked by the taxpayer. Of course this is a clumsy device. It is impossible to say with any precision what are the equitable rights which ought to be thought of as analogous to the existing rights represented by shares and " debentures". It is particularly difficult in the case of shares, for the section throws no light on the extent to which one is supposed to retain or to discard the managerial powers to which the rights of Ordinary and other share- holders are subject but which they may ultimately control. But I do not think that it is necessary for Che present purpose to investigate these details or to try to resolve them. It can certainly be accepted that on the assumptions required by the hypothesis the Company holds all its assets as a trust fund upon trust in the first place to make thereout the payments to Lord St. Levan required by the instalment debt, subject thereto to make such payments to the Preference shareholders as may correspond to the rights that they would have as Preference shareholders, and subject thereto upon such trusts for the Ordinary shareholders as may correspond to their share rights, but not so as to prejudice or destroy the prior equitable rights. Thus there is one trust fund and different sets of equitable rights to be satisfied out of that fund. Thus, too, the imaginary situation on the 29th March, 1927, was that Lord St. Levan had the equitable rights in that trust fund corresponding to the Preference shares and the instalments and he had surrendered to those interested under the Resettlement his life interest in the equitable rights in the trust fund corresponding to the Ordinary shares. If it were enough for the Crown to succeed that it should be possible to point out that after 29th March Lord St. Levan continued to enjoy an interest in the same trust fund as was bound in equity to satisfy those other equitable rights in which he had determined his life interest, then section 56 would be very important in this case. I think that the Court of Appeal held that it was enough. Here I part company with them, and the sentence that I have already quoted from Lord Russell's opinion in the Perpetual Trustee case as a summary of existing authority shows why I do. In brief, I do not think that turning the instalments into one kind of equitable right in property and the Preference and Ordinary shares into other kinds of equitable rights in property, as the statutory hypothesis does, makes them any the less distinguishable interests or properties than they were in their actual non-hypothetical form. I must now come to the Crown's cross appeal under section 46. It raises three principal questions. The first is whether Lord St. Levan " made " a transfer " of any property to St. Aubyn Estates Limited. The second is, whether, if he did, that was property which he " transferred in a fiduciary " capacity ". The third is whether, if he did make a transfer of some property and did not make that transfer in a fiduciary capacity only, any " benefits " accrued to him from the Company within the three years ending with his death. It is perhaps sufficient to say, since at this stage we are dealing with matters of principle only, that if the first question is answered in the affirmative, the second in the negative and the third in the affirmative, section 46 has imposed a charge of Estate Duty, payable by the Company and arising on the death of Lord St. Levan. 22 The first question requires that your Lordships should consider the manner in which three separate classes of property came to be included in the resources of the Company: —the freehold lands ; the investments representing capital moneys and the equitable interests and rights in respect of undivided shares of land, these interests and rights being considered as one class with the investments for the present purpose; and thirdly, the moneys paid on the subscription of Lord St. Levan's 100,000 Preference shares. It is con- venient to deal first with the investments in relation both to the first and to the second questions, since the consideration of their case raises most of the difficulties of interpretation that affect the others and one at least that is peculiar to themselves. If the word " transfer " is taken in its primary sense, a person makes a transfer of property to another person if he does the act or executes the instrument which divests him of the property and at the same time vests it in that other person. In this sense the only persons who made a transfer of the investments to the Company were Mr. Drummond and Mr. Ponsonby, the Trustees of the St. Levan Resettlement. If section 46 stood alone that would, I think, conclude the matter. Lord St. Levan would not have made this transfer. But section 58 imposes various interpretations of the language of the preceding sections, to which interpretations effect must be given: and, as I see it, it is in applying those interpretations and in discerning the true inter-relation between them that the first major difficulty is en- countered. For, in one way or another, they do certainly constitute Lord St. Levan a transferor. To begin with, there is section 58 (2). There is more than one reason why it should be considered before section 58 (4). It comes the earlier in the section. It deals explicitly with the subject of " transfer ", which sub- section (4) does not. And, since it refers to a disposition being made by a person, it incorporates within its own provisions all the extended or artificial meanings of that phrase which subsection (4) itself lays down. Now sub- section (2) is concerned to declare what persons are to be " deemed " to have made a transfer of property to a company. It identities them, rather unhappily, not so much by what they have done as by the results of what they or other persons have done. The word "deemed" is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible. I think that it is in the last of these three ways that it is used in section 58 (2), for the subsection begins its description of the class of persons who are to be deemed to have made a transfer with the person the effect of whose own disposition has been to add the property transferred to the resources of the company, and ends with the person who has done no more than make a disposition which is " associated " with operations that have had a similar result. If I apply to Lord St. Levan this statutory conception of a transferor I find this consequence. The investments were transferred to the Company at his direction, for he so directed as tenant for life when he and Mr. Ponsonby jointly executed the Deed of Appointment dated 25th March, 1927. It will save time in this very long opinion if I say that I accept the Company's argument that under the Settled Land Act, 1925, he had power to direct the Trustees of the Resettlement to change the investments that represented capital moneys, and that this power had to be exercised by him in a fiduciary manner. I have had an opportunity of reading in advance the opinion of my noble and learned friend Lord Simonds and I am in full agreement with what he says on this point. By virtue of this operation then Lord St. Levan is deemed to have made a transfer of those investments to the Company, for they came to be included in the resources of the Company "by the effect of" a disposition made at his direction, and this by sub- section (4) is the same thing as a disposition made by him. But that is not the only way in which section 58 (2) requires that he must be deemed to have made a transfer, for it was the execution of the Deed 23 of Appointment dated 23rd March, 1927, made by him and Mr. Ponsonby that alone made possible the transfer of the investments to the Company in the manner in which and for the consideration for which they were in fact transferred. This Deed, which was the first step in the whole scheme, was a disposition which formed one of a series of associated operations of which the actual transfer of the investments was another; and on this ground also, therefore, I think that the Crown is entitled to treat Lord St. Levan as a person who made a transfer to the Company. There remain two points that have to be disposed of before an answer can be given to the problems which are raised by section 46. One is this: if the suppositious transfer by Lord St. Levan which arises by virtue of the fact that he directed the transfer of the invest- ments is exempted from recognition for the purposes of section 46 by the further supposition that he made such a transfer in a fiduciary capacity, does this prevent Lord St. Levan from being treated as having made a transfer by virtue of the appointment dated 23rd March, 1927? On no view can that act be said to have been done in a fiduciary capacity. My Lords, I can only say that I can see no reason why, if one way of looking at the position involves no liability, that should prevent it being looked at in another way that does involve liability. A provision that is drawn in the form of section 58 (2) brings it about that quite different acts may indepen- dently of each other constitute a person a transferor on the occasion of a single transfer. If they do, the alternative is this: either the subject is entitled to select that act the circumstances of which suit his interest best as leading to exemption from or reduction of duty and to insist that the Crown's claim succeed or fail by consideration of those circumstances, or the Crown is entitled to found upon either or both of the acts and to succeed if its claim is good by either test. I think that the latter is the right alterna- tive, for I think that it accords with what are in effect the cumulative provi- sions of section 58 (2) and that an option of this sort is not unusual in taxing statutes. In my opinion therefore Lord St. Levan did make a transfer of the investments to the Company for the purposes of section 46 because he and Mr. Ponsonby executed the Appointment dated 23rd March, 1927. The second question is, whether, in so far as he was a transferor by virtue of having given a direction as tenant for life for the change of invest- ment that led to the investments representing capital moneys being exchanged for ordinary shares of the Company, he made that suppositious transfer " in a fiduciary capacity " within the meaning of section 46. That he acted in a fiduciary capacity I have already accepted: and, though the Act is wholly obscure on this point, I think that when a person is a suppositious transferor by virtue of a suppositious transfer the act, whatever it may be, that makes him subject to the supposition must itself be treated as a transfer in order to see whether the suppositious transfer was made " in a fiduciary "capacity" or not. The effect of section 58 (5) is to impose a special meaning on the words " fiduciary capacity ": it must be a fiduciary capacity imposed on the actor otherwise than by a disposition made by him and no other sort of capacity. I have felt some doubt whether the circumstance that Lord St. Levan created the power of investment by making the Appointment of 23rd March, 1927, did not result in the fiduciary capacity in which he gave his direction being imposed by a disposition made by him. But your Lordships, I believe, are unanimous in rejecting this construction of section 58 (5) and it is with something less than regret that I waive my doubts in the matter and accept the view that in giving the direction Lord St. Levan made a suppositious transfer in a fiduciary capacity only and that, regarded in this way, his transfer is exempted from recognition under section 46. But, as I have already said, I think that he was a supposi- tious transferor of the investments in another way and, as such, did not act in a fiduciary capacity. So much for the investments; and it was conceded that the equitable interests in undivided shares of land are for this purpose governed by the same considerations as apply to the investments. So I think that those too were transferred by Lord St. Levan. Then there is the settled land. Its situation is different from that of the investments in that Lord St. Levan was himself the conveying party and therefore made a transfer to the 24 Company in the ordinary sense. This he was in a position to do because the freehold in fee simple had been vested in him by the operation of the Settled Land Act, 1925, to hold the same upon trust to give effect to the equit- able interests from time to time subsisting under the settlement. He sold the land as tenant for life and transferred as trustee to give effect to the sale that he had made: and in this case I do not think that he could possibly be said to have imposed the fiduciary capacity in which he transferred by any disposition made by himself, for in fact the Resettlement of 1879 neither vested in him an estate in fee simple nor gave him a power of sale. It was the Act of 1925 that both transferred the fee simple to him and enacted that he should hold it as a trustee. Therefore when he came to transfer it he acted in a fiduciary capacity imposed upon him otherwise than by a disposition made by himself. But for section 58 (2) that would be enough to exempt the transfer of the settled land from the operation of section 46. That sub- section however raises the same difficulty as I have discussed in relation to the investments. If it were no more than a provision supplementary to section 46, in the sense that it was so drawn as to apply only to cases which section 46 did not cover by its own terms, it might be proper to ignore it in a case where, as here, section 46 did, in the natural and ordinary sense of " transfer ", apply. But, as I have said, I do not think that section 58 (2) can be regarded in this way. It applies directly to Lord St. Levan, for the settled land came to be included in the resources of the Company by the effect of his conveyance. It applies to him also in the extended sense, for the transfer that he made was one of a series of associated operations of which the Appointment dated 23rd March, 1927, was one: without that appointment that transfer could never have been made, as it was, for a consideration consisting in part of payment by instalments. Here again therefore Lord St. Levan can be treated as a transferor in two distinct ways, one, as actual transferor but in a fiduciary capacity, the other, as suppositious transferor but acting, as such, not in a fiduciary capacity. Here again I think that the Crown is entitled to choose whichever way of presenting the matter under section 58 (2) may better suit its case and, accordingly, I think that there was a transfer of the settled land also for the purposes of section 46. Lastly, there is the £100.000 which Lord St. Levan paid as his subscription for the Preference shares. My Lords, I must say quite briefly that in my opinion, when he did this, he made a transfer of £100,000 to the Company within the meaning of this statute. Certainly the Company got £100,000 as part of their resources: first a cheque, then a credit with Messrs. Glyn, Mills & Co. Certainly Lord St. Levan by giving the cheque which led to the transfer of bank credit reduced his own credit by an equivalent amount. I have spoken of Lord St. Levan as having given a cheque for £100,000, for I assume that he must have. In any event he must have given some authority to the Bankers to debit his account with £100,000 and to credit the Company with a like amount, and that is, I think, sufficient for the purpose. Whatever form the authority took, it was a disposition made by him and it was an essential part of the transaction by which the Company's resources were augmented by this £100,000. I am bound to say that in that state of affairs Lord St. Levan seems to me plainly to have made a transfer of £100,000 to the Company for the purposes of section 46 as interpreted by section 58 (2). One question remains upon which I must express my opinion. It only arises if your Lordships should consider, as I do, that one or more items of property were transferred by Lord St. Levan within the meaning of section 46. During the three years preceding his death he received from the Company sums amounting in the aggregate to £3,000 in each year by way of loan. These loans carried interest at the rate of 4 per cent, per annum, but the Company could not call for repayment of either principal or interest until the expiration of two years after Lord St. Levan's death. Were the sums so received " benefits" accruing to him from the Company within the meaning of section 46? I would answer this question by saying that they were benefits because section 47 of the Act has declared them so to be. That section does in terms declare that among the things to be treated as benefits accruing to a 25 deceased transferor from a company are any periodical payments out of the resources of the company which the deceased received for his own benefit. A man receives for his own benefit moneys paid to him on an advance by way of loan, not the less because the transaction involves an obligation to repay an equivalent amount at a future date with interest in the meantime. A " periodical payment" is defined by section 47 (2) in terms which give it the widest possible scope and show at any rate that a payment may be a benefit by way of periodical payment even though it is made in consideration of services rendered or by way of interest on money lent I can appreciate the force of several criticisms if loans are treated as benefits for this purpose. To have money advanced to one is, no doubt, a benefit: but to treat the whole sum advanced as itself the benefit seems a curious procedure. Yet the statute makes no provision for any valuation of the benefit, since it treats the payment itself as being the benefit. The procedure becomes the more curious when it is discovered that a payment made in respect of a loan without interest is treated as equivalent to other payments made in respect of loans at normal interest, high interest or even exorbitant interest. A loan made within the statutory period and repaid before death is treated as equivalent to a loan still outstanding. I appreciate the force of these criticisms, as I do of other criticisms that might be levelled at the width of the definition of " periodical payments ". But I am unable to find in the wording of the Act any warrant for allowing them to cut down what seems to me the arbitrary interpretation that is deliberately imposed upon us. It is not as if these criticisms depended on obscure or complicated considerations. They are fairly obvious, and I think that the only possible conclusion is that the Legislature, intending to prescribe for a branch of enterprise that may often involve what are at least highly artificial opera- tions, decided to impose its charge in the widest and most comprehensive terms: a decision which excludes the more normal distinctions between what is reasonable and what is unreasonable and the usual connotations of the English language. For these reasons I would be in favour of allowing the cross appeal of the Crown and of making a declaration to the effect that for the purposes of section 46 Lord St. Levan made a transfer of (a) the investments and the equitable interests in undivided shares of land (b) the settled freeholds and (c) the £100,000 paid as subscription for the Preference Shares, and a further declaration that the moneys advanced to him on loan during the statutory period are benefits within the meaning of the same section. Lord Tucker MY LORDS, I have nothing to add to what has already been said in stating my agree- ment with the view which is held by all Your Lordships that for the reasons which have been given the appeal in the present case should be allowed. With regard to the cross appeal and dealing first with the investments and equitable interests, I have formed the view—accepting as I do that Lord St. Levan as tenant for life had power under the Settled Land Act, 1925, to direct a change of investment of the capital monies—that by the joint effect of Section 58 (2) and Section 58 (4) of the Finance Act, 1940, he must be deemed to have made a transfer, but I think that such transfer was made by him in a fiduciary capacity, because the Act which results in the notional transfer was done in a fiduciary capacity, so that the resulting transfer must be regarded as having been made in that capacity It was, moreover, in my view a fiduciary capacity imposed upon him solely by the provisions of the Settled Land Act, 1925. But Lord St. Levan must, I think, also be deemed to have made a transfer of the investments by reason of the Deed of Appointment of 23rd March, 1927, made by him and Mr. Ponsonby, without which the subsequent 26 direction and transfer could not have been given and made. In executing this deed he was clearly not acting in a fiduciary capacity and this act on his part was accordingly sufficient to bring it within Section 58 (2). I agree with the view that if one operation which is within Sub-section (2) was performed in a fiduciary capacity and another operation within the sub- section in a non-fiduciary capacity the taxpayer cannot avoid the con- sequence that the second operation becomes by the " deeming" process a transfer within Section 46 (1). My Lords, I do not deal in greater detail with this aspect of the case, as I am content to say that the reasoning of my noble and learned friend Lord Radcliffe on the inter-relation of Sub- sections (2) and (4) of Section 58 and the results that follow therefrom appear to me convincing. When, however, I come to apply these sub-sections to the transfer of the lands the position seems to me wholly different. Here Lord St. Levan was himself the conveying party. He was, I think, for the reasons which have been stated, acting in a fiduciary capacity imposed on him by the Settled Land Act and in such capacity only. Like my noble and learned friend on the Woolsack I can see no ground for calling in aid a " deeming " section when that which is to be deemed has in fact taken place without its assistance. If the notional transfer is to supersede the real transfer with consequences detrimental to the taxpayer this should I think be made plain by unambiguous language. As to the £100,000 paid for the Preference Shares, I agree that to refer to money paid by way of subscription for shares as a transfer of property to the Company is an unusual use of words, none the less, not without some doubt, I have come to the conclusion that the words in their present context are wide enough to include payment in cash or by cheque. It must be remembered that the companies referred to are only those to which the section applies and that one of the commonest ways in which benefits of the kind enumerated in Section 47 are obtained is as a result of payment of money. Furthermore, Section 58 (2) once again requires consideration and, although it does not elucidate the meaning of the word property, it would be odd if a sum of money which " comes to be included in the " resources of the Company " is not property. Some support for this view is, I think, also to be obtained from Section 51. My Lords, I am accordingly of opinion that there have been transfers of property within the meaning of Section 46 which are not exempted by the terms of that section in the case of the investments and equitable interests and in the case of the £100,000 paid for the Preference Shares, but that the transfer of the lands is exempted. With regard to the benefits accruing to the deceased from the Company, I agree that the sums amounting to £3,000 advanced to Lord St. Levan during the 3 years preceding his death were benefits which accrued to him from the Company. I feel con- siderable doubt whether they come within the definition of periodical pay- ments in Section 47 (2), a definition which on the Crown's construction would include loans which had been repaid at the date of death, but I do not regard Section 47 as containing an exhaustive definition of the word " benefits " but merely as enumerating certain matters which are " to be " treated as benefits ". It does not, I think, exclude other transactions, such as the present, which in the circumstances of particular cases may clearly confer benefits on the deceased in the natural and ordinary meaning of that word. I would accordingly allow both appeal and cross-appeal. (12700) Wt. 8025-142 35 7/51 D.L/PA/19 This appeal and cross appeal are brought from an order of the Court of Appeal, by which that Court as to the subject matter of the appeal reversed an order of Croom-Johnson, J., and as to the subject matter of the cross-appeal thought fit to make no order. The facts of the case are somewhat involved but present no real difficulty. It is in the application to them of the relevant sections of the Finance Act, 1940, that I have found it impossible to reach any conclusion that is wholly satisfactory. I will give a broad outline of the relevant facts supplementing it as occasion demands.[2]Immediately before the execution by the late Lord St. Levan, who died on the 10th November, 1940, and to whom I will refer as Lord St. Levan, of the instruments dated in March, 1927, which are next mentioned, he was, under a Resettlement dated the 26th April, 1879, tenant for life in possession of certain settled property consisting of(a) freehold lands in the counties of Devon and Cornwall(b) investments representing capital moneys arising under the Resettlement and(c) equitable interests which by virtue of the Law of Property Act, 1925, represented certain undivided shares in land which at the date when that Act came into operation were subject to the Resettlement. The whole of the settled property was under the Resettlement and a Deed Poll dated the 9th January, 1905, subject to an overriding general power of appointment exercisable by Lord St. Levan and Sydney Alexander Ponsonby (hereinafter called " Mr. Ponsonby ") who was one of the trustees of the Resettlement but had no beneficial interest thereunder. The subsequent limitations of the Resettlement, as varied by the said Deed Poll and other instruments, were such as to cause the settled property to devolve together with the Barony of St. Levan, which on the death of Lord St. Levan without having had a son devolved on and is now held by his nephew Francis Cecil St. Aubyn.[3]On the 21st March, 1927, St. Aubyn Estates Ltd. (hereinafter called " the Company ") was incorporated under the Companies Acts, 1908 to 1917 (by the name of St. Aubyn Settled Properties Ltd. which was afterwards changed) with a nominal capital of £200,000 divided into 200,000 shares of £1 each with power to issue any part of its capital with such preferential rights as might be thought expedient. The Company's Memorandum of Association was subscribed by seven persons, including Lord St. Levan and Mr. Ponsonby, each of whom agreed to take one share. These seven shares were held by the subscribers as nominees of the Trustees of the Resettle- ment. By the Company's Articles of Association it was provided that Lord St. Levan should be the Governing Director of the Company.[4]By a Deed Poll dated the 23rd March, 1927, Lord St. Levan and Mr. Ponsonby exercised their overriding power of appointment in such manner as to authorise the transactions next mentioned.[5]By an Agreement dated the 24th March, 1927, to which Lord St. Levan, Mr. Ponsonby and the Company were parties it was agreed that the whole of the settled property should be sold to the Company for £1,700,000 of which £950.000 was to be paid to the Trustees of the Resettlement (herein- after called " the Trustees ") in cash on completion of the sale (which was to 2 take place on the 26th March, 1927) and the balance of £750,000 was to be paid to the Trustees in cash by 40 half yearly instalments of £18,750 each (the first payment to be made on 24th June, 1927) without interest except that any instalment not paid within 21 days of becoming due was to carry interest at 5 per cent, per annum from the date on which it ought to be paid until actual payment thereof.[6]On the same date (the 24th March, 1927) the Company allotted 100,000 7 per cent. Cumulative Non-participating Preference shares of £1 each to Lord St. Levan at par and 49,993 Ordinary shares to the Trustees at a premium of £16 a share.[7]By a Deed dated the 25th March, 1927, Lord St. Levan as tenant for life directed, and he and Mr. Ponsonby in exercise of their overriding power of appointment ratified such direction, that the Trustees should invest the capital money subject to the Resettlement in Ordinary shares of the Company at the premium required by the Company.[8]On the 26th March, 1927, the sale to the Company of the freehold lands and equitable interests which I have already mentioned was completed by two conveyances of that date. The sales to the Company of the investments already mentioned were completed on or about the same date by appropriate separate instruments. The consideration payable immediately in cash (£950,000) was so paid but as to £850,000 immediately repaid by the Trustees to the Company in consideration of the issue to them or their nominees of 50,000 Ordinary Shares of the Company (including the shares for which the Memorandum had been subscribed) at the price of £17 a share. The balance of £100,000 was dealt with as hereafter stated.[9]The net result of the transactions so far described was that the property formerly subject to the Resettlement had been converted into(a) 50,000 fully paid Ordinary Shares of the Company(b) the right to receive from the Company a capital sum of £750,000 by the instalments already mentioned and(c) the above mentioned sum of £100,000 paid by the Company to the Trustees.[10]By a Deed Poll dated the 28th March, 1927, Lord St. Levan and Mr. Ponsonby in exercise of their overriding power appointed that the said sum of £100,000 and the said sum of £750,000 payable by instalments and any interest which might become payable in respect of any instalment should be held upon trust for Lord St. Levan and that he should be entitled thereto for his own sole use and benefit instead of for his life only.[11]The Trustees thereupon paid over the said sum of £100,000 to Lord St. Levan and he immediately paid the like amount to the Company in con- sideration of the issue to him of 100,000 Preference Shares fully paid.[12]By a further, and final, Deed Poll dated the 29th March, 1927, Lord St. Levan and Mr. Ponsonby in exercise of their overriding power appointed new trusts of (in effect) the whole of the property then remaining subject to the Resettlement i.e., the 50,000 issued Ordinary Shares of the Com- pany. The terms of the new trusts so declared were somewhat complicated but they admittedly had the effect of extinguishing the life interest of Lord- St. Levan in the 50,000 Ordinary Shares and of excluding him from all benefit so far as those shares and the income thereof were concerned.[13]The following further facts are not now in dispute: —[14]That the Trustees are to be regarded for the purposes of section 43 (2) (a) of the Finance Act, 1940, as having assumed bona fide possession and enjoyment of the 50,000 Ordinary Shares immediately after the determination by the Deed Poll of the 29th March, 1927, of the late Lord St. Levan's life interest therein.[15]That the Company is a Company to which section 56 of the Finance Act, 1940, applies and was concerned in associated operations (as defined by section 59 of that Act) of which the determination of Lord St. Levan's life interest was one.[16]Lord St. Levan having, as I have said, died on the 10th November, 1940, claims for estate duty were made against his executors in respect of the outstanding instalments of the purchase money and the 100,000 Preference 3 shares which he still retained and these claims were admitted and paid. But other claims also were made which are the subject of the present appeal and cross-appeal. They were(a) a claim under section 43 of the Finance Act, 1940, against the Appellants, the present Trustees of the Resettlement, for estate duty on the 50,000 Ordinary shares of the Company, and, alternatively,(b) a claim under section 46 of that Act against the Company for estate duty on a proportion of the Company's assets corresponding to the benefits accruing to Lord St. Levan from the Company. These claims were not admitted and proceedings were accordingly begun by English Information for their enforcement. On the 20th May, 1949, Mr. Justice Croom-Johnson dismissed the information in regard to both claims. His Majesty's Attorney- General appealed to the Court of Appeal, which allowed the appeal under claim (a) but made no order upon claim (b). From that order the Appellant Trustees have appealed to this House in respect of claim (a) , and in respect of claim (b) the Attorney-General has similarly appealed. To his appeal the Trustees and the Company are respondents. The two claims are for the purpose of the present proceedings admitted to be strictly alternative and it was for that reason that the Court of Appeal, having decided in favour of claim (a) , refused to make any order upon claim (b). In the result your Lordships are deprived of the assistance which you would otherwise have had from the consideration by the learned Judges of the Court of Appeal of the very difficult problems that arise under the latter claim.[17]The two claims, my Lords, are not only alternative but wholly independent of each other, and I find it convenient to deal with them separately. I have said that the first claim arises under section 43 of the Finance Act, but this claim must be considered under two aspects. For the Crown, while contending that the claim would be valid, even if section 43 stood alone, invoke also the provisions of section 56 if their primary claim fails. I propose therefore first to consider the question whether there is a valid claim under section 43 and for the time being to disregard section 56.[18]Section 43, so far as relevant and in force at the death of Lord St. Levan, provided as follows :— " 43.(1) Subject to the provisions of this section, where an interest " limited to cease on a death has been disposed of or has determined, " whether by surrender, assurance, divesting, forfeiture or in any other " manner . . . and whether for value or not, after becoming an interest " in possession,— " (a) if apart from the disposition or determination the property " in which the interest subsisted would have passed on the death " under section one of the Finance Act 1894, that property shall be " deemed by virtue of this section to be included as to the whole " thereof in the property passing on the death .... "(2) Where the relevant disposition or determination was bona fide " effected or suffered three years before the death . . . the preceding " sub-section shall not have effect— " (a) if bona fide possession and enjoyment of the property in " which the interest subsisted was assumed immediately thereafter " by the person becoming entitled by virtue of or upon the dis- " position or determination and thenceforward retained to the entire " exclusion of the person who had the interest and of any benefit " to him by contract or otherwise . . . ." I apply the provisions of this section to the facts that I have stated. On the 27th March, 1927, Lord St. Levan had an interest in possession limited to cease on his death in the settled property which on that date had assumed the form of (1) 50.000 Ordinary shares of the Company and (2) the sum of £750,000 payable in the instalments that I have mentioned and(3) the sum of £100,000 paid or immediately payable by the Company. But he had also jointly with Mr. Ponsonby an overriding general power of appointment which could be exercised so as to vest all or any part of the settled property in him absolutely. They so exercised it as to vest in him the properties I have numbered (2) and (3), and, when they had done so, he surrendered his life interest in the Ordinary shares. It is agreed that bona fide possession 4 and enjoyment of the shares was assumed immediately thereafter by the persons becoming entitled upon the determination of Lord St. Levan's interest. But was it—and this is the only question—thenceforth retained to the entire exclusion of Lord St. Levan and of any benefit to him by contract or otherwise?[19]My Lords,[19]1 cannot think that any doubt could be entertained upon this matter but for the use which the Crown seeks to make of certain decisions, particularly A.G. v. Worrall [1895] 1 QB 99 and Grey v. A.G. [1900] A.C. 124, to which I will refer later. If A., being the owner in fee of an estate in Yorkshire and an estate in Wiltshire, gives outright to B. his estate in Yorkshire, it is an irrelevant circumstance that he retains his estate in Wiltshire: equally it is irrelevant, if, being tenant for life of the two estates, he surrenders his interest in one and retains it in the other: and equally so if, his interest being not in two geographically separate estates but in land and capital moneys subject to the same settlement, he surrenders his interest in the one form of property and retains it in the other. But let it be supposed that he is neither the owner in fee, nor the tenant for life and nothing more, but that he is tenant for life with an overriding general power of appointment, by virtue of which he can dispose of all or any part of the settled property at his absolute discretion. I cannot doubt that, if he chooses so to exercise the power as to make some part of the settled properly his own, it is wholly irrelevant that by a contemporaneous or later transaction he surrenders his life interest in other parts of it. It is true that he has disposed of his life interest in one part of the property and it is true that he has enlarged his life interest in the other part of it into an absolute interest, but these two truths do not add up to the proposition that the property in which he has surrendered his interest is not retained by the donees to the entire exclusion of him and of any benefit to him by contract or otherwise. I do not think that the examples that I have given of cases, where duty would not be exigible in respect of property in which a life interest had been surrendered, were or could be seriously challenged. If so, it can only be due to a radical misconception of the facts in the present case that the learned Attorney-General pressed the claim under section 43 unaided by section 56. For though truly the overriding power of appointment was not vested in Lord St. Levan alone, there is nothing to suggest that there was a bargain of any kind between him and Mr. Ponsonby. They were together masters of the situation, and, if they thought fit to appoint to Lord St. Levan an absolute interest in part of the settled property, the effect, so far as section 43 is concerned, is precisely the same as if Lord St. Levan had had the sole power and had exercised it. It is not necessary to determine what the result might be if there had been a bargain between Lord St. Levan and the remaindermen or even between Lord St. Levan and Mr. Ponsonby. It is sufficient that these two in their united wisdom thought fit to do what he in his single wisdom, had he had the sole power, might have done. I am therefore of opinion that the claim for duty upon the Ordinary shares, so far as it is based on section 43 alone, is not well founded. 1 will defer my observations upon the cases, which I have men- tioned, until an attempt has been made to discover the scope and effect of section 56.[21]Section 56 of the Finance Act, 1940, so far as relevant, provides as follows (the subsections being inverted for the sake of clarity):.— " 56. (2) Where a company to which this section applies was con- " cerned in the disposition or determination of an interest limited to " cease on a death effected or suffered as mentioned in sub-section (2) " of section 43 of this Act ... or was concerned in any one or more " of associated operations of which the disposition or determination . . . " formed one, the conditions as to the entire exclusion of the person " who had the interest . . . and of any benefit to him, specified in the " said sub-section (2) ... shall be treated as having been satisfied if " and only if they would have been so treated in the circumstances " aforesaid." 5 The " circumstances aforesaid " so referred to are those stated in sub- section (1) of the same section 56 in the following words:— " the following circumstances, namely, if the assets of the company " had been held by it on trust for the members thereof and any other " person to whom it is under any liability incurred otherwise than " for the purposes of the business of the company wholly and exclusively, " in accordance with the rights attaching to the shares in and debentures " of the company and the terms on which any such liability was " incurred, and if the company had acted in the capacity of a trustee " only with power to carry on the business of the company and to " employ the assets of the company therein."[22]It is, as I have said, admitted that the Company is a company to which the section applies. The assets of the Company consisted of the settled property or the property for the time being representing it, and the members were at the relevant date (i.e., immediately before the surrender by Lord St. Levan of his life interest in the Ordinary shares) the Trustees as holders of the Ordinary shares and Lord St. Levan as holder of the Preference shares and as the person to whom the Company owed the instalments of purchase money. This flows from the definitions of " member " and " debenture " in the Act. Then—and here I paraphrase the subsection— the conditions as to the entire exclusion of Lord St. Levan from the property in which he surrenders his interest, i.e., the Ordinary shares, and of any benefit to him by contract or otherwise are only satisfied, if they would have been so treated, i.e., would have been satisfied, if the Company had held its assets on trust for the Trustees and Lord St. Levan in accordance with the rights attaching to the Ordinary and Preference shares and the Debenture. My Lords, 1 must admit that I find this a bewildering conception. The Court of Appeal in a judgment delivered by Jenkins, L.J., found it possible to give a meaning to the section and summarised its conclusion in words which I think it worth while to quote. " We think ", they said, " that " for this purpose ' the property in which the interest subsisted ' within the " meaning of section 43 (2) (a) must be taken as being the settled property as " it stood before the sale to the company, the subsequent creation of the " different equitable interests which the statutory hypothesis supposes being " merely in the nature of a preliminary carving up of the property into the " appropriate beneficial interests with a view to securing the desired benefit " to the deceased out of it upon the intended determination of his life interest. " But even if we are wrong in this, and ' the property in which the " ' interest subsisted ' must, as Sir Andrew contended, be considered as " consisting only of the residue of the property remaining after provision " for the other interests, we are satisfied that the benefit taken by the " deceased in the shape of the creation and vesting in him of the right " to receive the half-yearly instalments, though on this view not taking effect " out of the ' property in which the interest subsisted, ' was on the facts so " clearly referable to and connected with the determination of the deceased's " life interest in that property as to constitute a fatal objection to exemption " under section 43 (2)."[23]It had been stated earlier in the judgment that the application of the statutory hypothesis (as it was conveniently called) was to eliminate com- pletely the element of sale from the Trustees to the Company and the consequent conversion of the property and to make the case stand for the purpose of section 43 as if the property had been transferred to the Company as trustee upon trust(1) to pay thereout to the Trustees £750,000 by the instalments and on the dates mentioned to be held by them as capital moneys on trust for Lord St. Levan for life with remainders over,(2) subject thereto to raise and pay to Lord St. Levan £100,000, on whatever future event should be taken as corresponding for the purposes of the hypothetical trust to the winding-up of the Company and in the meantime to pay him interest on that sum at 7 per cent, per annum out of the net income of the property, and(3) subject thereto upon trust both as to income and capital for the Trustees upon trust for Lord St. Levan for life with remainders 6 over in accordance with the terms of the settlement. And this view is emphasised by saying that the right to receive the instalments of the £750,000 is converted into "an equitable interest charged by way of primary trust " on the entire income and capital of the settled property as it stood before " the sale to the Defendant Company ".[24]My Lords,[24]I will assume that the Court of Appeal rightly stated the effect of applying the statutory hypothesis to the facts of this case. The question whether duty is exigible still remains one of great difficulty.[25]Whatever the words, which have appeared in a series of Acts, might have meant to your Lordships if the matter were res integra, it cannot in face of the decision in A.G. v. Worrall be denied that it is possible for possession and enjoyment of property not to be retained by the donee to the entire exclusion of the donor or of any benefit to him by contract or otherwise, though the donor himself no longer has any sort of interest in it. But the words, and particularly the word " exclusion ", are singularly inapt to cover a benefit which does not arise by way of reservation out of that which is given, and I am not disposed to travel further than I am constrained by authority along a line of interpretation which appears to me difficult to justify.[26]Two recent cases in the Privy Council are of great assistance upon this matter. In Munro v. Commissioner of Stamp Duties [1934] AC 61 , the facts were that the owner of a large area of land in New South Wales, on which he carried on the business of a grazier, in 1909 agreed with his six children that thereafter the business should be carried on by him and them as partners at will, the business to be managed by him and each partner to get a share of the profits. In 1913 he transferred by way of gift to his children or to trustees for them all his right, title and interest in the land. He remained a partner in the business until his death in 1929 and duty was then claimed in respect of the land because, as it was said, it had not been retained by the donees to the entire exclusion of him or of " any benefit to him of whatsoever kind or in any way whatsoever whether " enforceable at law or in equity or not". But upon this Lord Tomlin, delivering the judgment of the Board, said, " What was comprised in the " gift was, in the case of each of the gifts to the children and the trustees, " the property shorn of the right which belonged to the partnership, and " upon this footing it is in their Lordships' opinion plain that the donee " in each case assumed bona fide possession and enjoyment of the gift " immediately upon the gift and thenceforward retained it to the exclusion " of the donor. Further, the benefit which the donor had as a member " of the partnership in the right to which the gift was subject was not in " their Lordships' opinion a benefit referable in any way to the gift. It " was referable to the agreement of 1909 and nothing else, and was not " therefore such a benefit as is contemplated by section 102, subsection " (2) (d) ".[28]Here are words of great significance. The benefit, if it is to attract duty to the subject of the gift, must be a benefit referable to it. The words are not easy to construe but they clearly import that the owner of property may in certain circumstances retain a benefit when he makes a gift and yet the subject matter of the gift be not dutiable. More important is the case of Commissioner of Stamp Duties for N.S.W. v. Perpetual Trustee Company Ltd. [1943] AC 425 , for in that case the Judicial Committee took the opportunity of reviewing the earlier cases and in particular Worrall's case, Grey's case, and In re Cochrane [1905] 2 I.R. 626 and in the Court of Appeal [1906] 2 I.R. 200. And it is to the latter case that I must first turn, for the judgment of the Irish Court of Appeal was expressly approved by Lord Russell of Killowen delivering the opinion of the Board and its bearing on the case now under appeal will be seen to be immediate. For that reason I venture to repeat the facts substantially as stated by him. Sir Henry Cochrane was the mortgagee of estates in Mayo in a sum of £15,000 with interest at 41/2 per cent. The mortgage debt and securities having been vested in trustees, Sir Henry by an indenture made in 1902 declared that they were to stand possessed 7 thereof in trust out of the income to pay in each year to his daughter, Mrs. Day, the sum of £575 for her life, and after death upon trust as to the principal sum for her children as therein mentioned with power to Mrs. Day to appoint an annual sum to a surviving husband during his life. If no child of Mrs. Day attained a vested interest in the trust funds, they were to be held in trust for Sir Henry absolutely and there was also a trust of the balance, if any, of the yearly income for Sir Henry absolutely. The trustees received the interest of the mortgage which amounted to £675 per annum and paid £575 to Mrs. Day and the balance to Sir Henry. In March, 1904, he directed them to pay the whole income to Mrs. Day, but, as he died within a year thereafter, this direction could not affect the claim to duty which the Crown made in respect of the entire sum of £15,000 as property passing on his death under section 2 (1) (c) of the Finance Act, 1894. It was held by Palles, C.B., and his decision was affirmed by the Court of Appeal, which consisted of Walker, L.C., and Fitzgibbon and Holmes, L.JJ., that duty was not payable in respect of the £15,000 but only in respect of the values of Sir Henry's interest in the balance of income and his contingent interest in the principal sum. It is important to see how Lord Russell of Killowen summarises the judgment of the Chief Baron. " Gift", he says, " in the context meant beneficial gift. A person who " declares trusts of property only gives the beneficial interests covered by " the trusts. Everything else he retains and does not give; and there is an " entire exclusion of the donor from the property taken under the disposition " of the gift. Sir Henry Cochrane obtained no benefit either by way of " reservation out of the gift, or collaterally in reference to the gift." Then, after citing Holmes, L.J., he said, " If In re Cochrane was rightly decided, as " their Lordships think it was, it covers the present case ". Lord Russell of Killowen then proceeded to a close analysis of Grey v. Attorney-General, convincingly showed that it was not inconsistent with In re Cochrane and said of it:
" There is nothing laid down as law in that case which conflicts " with the view that the entire exclusion of the donor from possession and " enjoyment which is contemplated by section 11 (1) of the Act of 1889 " is entire exclusion from possession and enjoyment of the beneficial " interest in property which has been given by the gift, and that possession " and enjoyment by the donor of some beneficial interest therein which " he has not included in the gift is not inconsistent with the entire exclusion " from enjoyment and possession which the sub-section requires."
[30]It followed from the approval given to the decision in In re Cochrane that the claim against the Perpetual Trustee Company failed. In that case a settlor vested certain shares in trustees, of whom he was himself one, upon trusts for the benefit of an infant son but with a resulting trust for himself if the son did not attain the age of 21. It was contended that as the settlor(a) was a trustee and(b) had an equitable interest in reversion, there was not an entire exclusion of him and of any benefit to him of whatsoever kind and in any way whatsoever. The contention failed because the settlor in his capacity of donor " was entirely excluded from possession and enjoy- " ment of what he had given to his son .... In the interval between the " gift and his death, the settlor received no benefit of any kind or in any " way from the shares, nor did he receive any benefit whatsoever which was " in any way attributable to the gift ". As Dixon, J., said in the same case in the High Court of Australia (64 C.L.R. 492 at 511), "The settlement con- " tained nothing defeating, revoking or destroying any interest given. It " contained no reservation out of the interest given and no recompense or " benefit in reference to the interest given ". It appears to me, my Lords, that this is nothing but the logical application to a more complex situation of the proposition which I venture to think was self evident, viz., that the life tenant of two separate pieces of property can surrender his life interest in one and retain it in the other without duty becoming exigible in respect of the former. The question is what he has given: it may be a life interest in part of the settled property ; it may be a part of the income of settled funds and that part may be a fixed sum which is payable in priority or the residue after the prior payment of a fixed sum thereout. I venture to think that much of the argument that was addressed to the House in this case and much of the confusion 8 that has arisen in the past upon this admittedly difficult branch of the law have been due to the failure to bear in mind that that of which enjoyment is to be assumed and retained and from which there is to be exclusion of the donor and any benefit to him by contract or otherwise is that which is truly given, a proposition which is obvious enough in the case of two separate estates but more difficult to follow and apply where trusts are declared of a single property which are not completely exhaustive in favour of a donee. It should at last be clear from the judgment of Lord Russell of Killowen that by retaining something which he has never given a donor does not bring himself within the mischief of the section. I venture to repeat in other words what I have already said when dealing with section 43 alone, for its underlying principle is not altered by an alliance with section 56. In the simplest analysis, if A gives to B all his estates in Wiltshire except Black- acre, he does not except Blackacre out of what he has given: he just does not give Blackacre. And if it can be regarded as a " benefit" to him that he does not give but keeps Blackacre, it is a benefit which is in no relevant sense (to use the language of Lord Tomlin) " referable " or (to use that of Lord Russell of Killowen) " attributable " to the gift that he made of the rest of the Wiltshire estate. Applying this principle to the artificial situation created by the statutory hypothesis, I see no reason for saying that that which Lord St. Levan gave was not retained by the donee to the entire exclusion of him and of any benefit to him by contract or otherwise. To avoid misunderstanding I must add that different considerations arise where the donor obtains some benefit which is " referable " to the gift or " attributable " to it. Thus, if in the present case there had been a bargain by which in con- sideration of the surrender of his life interest in part of the settled property Lord St. Levan had been enabled to enlarge his life interest in another part of it, it might well be that following Worrall's case I should be bound to hold that he had not been excluded from the surrendered part. But as I have already pointed out, here was no bargain of any kind. What Lord St. Levan chose to give he gave, and what to keep he kept. He made no bargain and he was entirely excluded from, and obtained no benefit referable to, that which he gave.[31]My Lords,[31]in order to test the claim under section 43 aided by section 56 I have been content to assume that the statutory hypothesis requires that the trusts upon which the Company is to be deemed to hold its assets should be written out in the terms advocated by the Crown and accepted by the Court of Appeal. And even upon this footing I am satisfied that the claim must fail if the principle established in the cases that I have cited is applied. But I am far from being convinced that I am entitled to write out the trusts in a manner so favourable to the Crown's contention. It would perhaps be beyond the wit of the most skilful conveyancer to set out with any degree of accuracy the trusts which should correspond with the rights of the members of the Company as that word is defined: for the legal relations in which the members stand to each other and to the Company cannot be transmuted into those of trustee and cestui que trust. I need not however pursue this matter, since I hold that even upon the ground which the Crown has chosen the claim for estate duty on the Ordinary shares of the Company fails and the appeal must be allowed.[32]The alternative claim which arises under section 46 of the Finance Act, 1940, must now be considered. It involves the consideration of provisions which are, I think, of unrivalled complexity and difficulty and couched in language so tortuous and obscure that I am tempted to reject them as meaningless. I must set out not only section 46 but certain other sections which have to be read with it. They are as follows:— " 46.—(1) Where a person dying after the commencement of this Act " has made to a company to which this section applies a transfer of " any property (other than an interest limited to cease on his death or " property which he transferred in a fiduciary capacity), and any benefits " accruing to the deceased from the company accrued to him in the " three years ending with his death, the assets of the company shall " be deemed for the purposes of estate duty to be included in the property 9 " passing on his death to an extent determined, in accordance with " subsection (2) of this section, by reference to the proportion that the " aggregate amount of the benefits accruing to the deceased from the " company bore to the net income of the company. " (2) The proportion aforesaid shall be ascertained for each accounting " year that fell wholly or partly within the three years ending with the " death, by comparing the aggregate amount of the benefits accruing " to the deceased from the company which accrued to him in that year " with the net income of the company for that year, and the extent " to which the assets of the company are to be deemed to be included " in the property passing on the death shall be the average of the " proportions so ascertained: ..." "47.—(1) The following shall be treated as benefits accruing to the " deceased from the company, that is to say— " (a) any income of the company, and any periodical payment " out of the resources or at the expense of the company, which " the deceased received for his own benefit whether directly or " indirectly, and any enjoyment in specie of land or other property " of the company or of a right thereover which the deceased had " for his own benefit whether directly or indirectly; . . ." " (2) In this Part of this Act the expression ' periodical payment' " means a payment by way of dividend or interest, a payment by way " of remuneration not being a single lump sum payment, and any other " payment being one of a series of payments, whether inter-connected " or not, whether of the same or of varying amounts and whether " payable at regular intervals or otherwise . . . ." " 58.—(2) A person shall be deemed for the purposes of this Part " of this Act to have made a transfer of property to a company if the " property came to be included in the resources of the company by the " effect of a disposition made by him or with his consent or of any " associated operations of which such a disposition formed one. . . ." " (4) References in this Part of this Act to a disposition's being made " by any person, to a power's being exercised or exercisable by any " person, or to any other act's being done by any person, include " references to its being made, or being exercised or exercisable, or " being done, by him and another jointly or by another at his " direction. . . ." " (5) References in this Part of this Act to a person having any " power or control or doing any act in a fiduciary capacity shall be " construed as references to his having that power or control or doing " that act in a fiduciary capacity imposed on him otherwise than by a " disposition made by him and in such a capacity only."[33]The claim of the Crown rests on two conditions; first, it must be shown that Lord St. Levan transferred property to the Company and did so in some other than a fiduciary capacity (for this I will coin the expression " non-fiduciary capacity "), and, secondly, that benefits accrued to him from the Company in the three years ending with his death.[34]Upon the first of these questions numerous points arise for discussion. What property was transferred to the Company by Lord St. Levan? So far as he transferred it, did he do so in a fiduciary capacity? What is the effect of the ratification and confirmation or further assurance by Lord St. Levan and Mr. Ponsonby contained in the several deeds of conveyance or transfer? What is the effect of the several subsections of section 58 which I have set out and how do they operate inter se? These and other points I must deal with seriatim.[35]The first point arises on the subscription by Lord St. Levan for 100,000 Preference shares. For these he paid cash according to the ordinary use of language. Did he then " transfer property " to the Company within the mean- ing of section 46? My Lords, I have no hesitation in saying that the payment of cash to a company upon a subscription for shares is not a transfer of property to the company. No one, lawyer, business man or man in the street, was ever heard to use such language to describe such an act and I decline to 10[36]stretch the plain meaning of words in an Act of Parliament in order to comply with what is said to be its purpose. Lord Wensleydale's familiar words, which were cited by Lord Halsbury in Tennant v. Smith [1892] AC 150 , may again be repeated:
" It is a well established rule that the subject is not to be " taxed without clear words for that purpose; and also, that every Act " of Parliament must be read according to the natural construction of its " words "
. Lord Halsbury adds that in a taxing Act it is impossible to assume any intention or governing purpose in the Acts to do more than take such tax as the statute imposes: it must be seen whether the tax is expressly imposed. This is true doctrine which I must bear in mind as I listen to the constant refrain of learned Counsel for the Crown that this or that is just the transaction at which this or that section is aimed. The question is not at what transaction the section is, according to some alleged general purpose, aimed but what transaction its language, according to its natural meaning, fairly and squarely hits. Applying this, the one and only proper test, I say that when Lord St. Levan paid for his shares he did not transfer property to the Company.[37]The next point arises in this way. The conveyance of the settled land to the Company, to which I have already referred, took the form of a grant by Lord St. Levan in exercise of (to put it shortly) his Settled Land Act powers and the extended powers given by the St. Aubyn settlement and the Deed Poll of the 23rd March, 1927. It is beyond question, first, that this grant operated to convey the fee to the Company, and, secondly, that the grant by Lord St. Levan as tenant for life, whether made in pursuance of statutory or extended powers, was a transfer by him in a fiduciary capacity. But the conveyance contained not only a grant by Lord St. Levan. By it also he and Mr. Ponsonby in exercise of their general power of appoinment " by way of ratification " appointed and confirmed unto the Company the land which he had granted. Therefore, it was said, the property was not transferred by Lord St. Levan in a fiduciary capacity but by him and Mr. Ponsonby in a non-fiduciary capacity. This is not a valid argument. The ratification and confirmation and appointment could have no operation in law except to the extent to which the grant by Lord St. Levan was ineffective to convey the fee. Ex concessis that grant was wholly effective: therefore the ratification, etc.. effected no transfer of property nor anything else. The same point arises, but with a refinement upon it, in regard to the investments representing capital moneys of the settlement. These were transferred to the Company by the Trustees by the usual deeds of transfer. The Trustees no doubt acted in a fiduciary capacity, but they acted(a) upon the direction of Lord St. Levan as tenant for life and(b) upon the exercise by Lord St. Levan and Mr. Ponsonby of their joint power of appointment " by way of ratification ". Then, the argument runs, under section 58 (4) the transfer by the Trustees becomes the transfer of those who directed it: and those who directed were not only Lord St. Levan as tenant for life but he and Mr. Ponsonby in exercise of a non-fiduciary power. If Lord St. Levan was competent to direct the transfer under the Settled Land Act or under the extended powers given to him by the Deed of the 23rd March, 1927, then the argument fails for the reasons given in regard to the settled land: for the direction by Lord St. Levan and Mr. Ponsonby added nothing to that already given by Lord St. Levan. But at this point the argument opened a question of a far-reaching character, which I am sorry to have to decide without the assistance of Judges who have a greater familiarity with such problems. It is the broad question whether it is competent for a tenant for life to direct the trustees to change an investment of capital moneys into another investment authorised by the Act or by the settlement. Upon this question Counsel on either side agreed in saying that there was no direct authority and they agreed too that the reason for that was that the answer was clear. But unfortunately here harmony ended, for the clear answer given on the one side was the exact opposite of the clear answer given on the other. It falls therefore to your Lordships to determine a question which I should have expected to find well settled long ago. Part III of the Settled Land Act, 1925, which is entitled " Investment or " other application of capital money ", provides by section 73 (1) that capital 11 money arising under the Act shall subject as therein mentioned be invested or otherwise applied wholly in one or partly in one and partly in another or others of the following modes: then follow twenty-one so-called modes, of which the first is "investment in Government securities, or in other " securities in which the trustees of the settlement are by the settlement " or by law authorised to invest trust money of the settlement, with power " to vary the investment into or for any other such securities" and the others are the numerous forms of application which experience had shown to be necessary or expedient. So far there is nothing to indicate with whom the direction or initiative lies. This is to be found in section 75, which provides by subsection (1) that "capital money arising under this " Act shall, in order to its being invested or applied as aforesaid, be paid " either to the trustees of the settlement or into court at the option of the " tenant for life, and shall be invested or applied by the trustees, or under " the direction of the court, as the case may be, accordingly ". At this stage the tenant for life, having exercised his option for payment to the Trustees or into Court, appears to leave the scene. But subsection (2) provides that " the investment or other application by the trustees shall " be made according to the direction of the tenant for life, and in default " thereof according to the discretion of the trustees . . . and any investment " shall be in the names or under the control of the trustees ", subsection (3) provides that "the investment or other application under the direction of " the Court shall be made on the application of the tenant for life or of " the trustees " and subsection (4) that " any investment or other application " shall not during the subsistence of the beneficial interest of the tenant " for life be altered without his consent". I do not think that any assistance is to be got from subsection (5) or subsection (6), but subsection (7) provides that " those securities " [i.e. the securities representing capital money] " may be converted into money, which shall be capital money arising under " this Act ". By definition " capital money arising under this Act ", unless the context otherwise requires, means " capital money arising under the ' powers and provisions of this Act or the Acts replaced by this Act, ' and receivable for the trusts and purposes of the settlement and includes " securities representing capital money ".[38]Upon these sections the contention of the Crown is that the tenant for life, having under section 75 (2) directed the application of capital money in the mode first mentioned, viz., in investment in authorised securities, has no power to direct a change of investment into other authorised securities, that the power to vary rests with the Trustees and that, though under subsection (4) of section 75 they cannot exercise that power without the consent of the tenant for life, he has no power of direction. On the other hand it is argued that, just as the tenant for life has the initial power of direction and the further power (which is not denied) of directing that investments shall be realised and the proceeds applied in some authorised mode of application, e.g., in discharge of incumbrances, so he has power to direct that an investment shall be realised and the proceeds shall be invested in other investments, or, in other words that the words " with "power to vary" which occur in section 73 (1) (i) do not confer a power on the Trustees apart from the tenant for life but merely indicate that the right of the tenant for life to direct is not exhausted when he has directed that the mode of application of capital money shall be the investment in securities.[39]My Lords,[39]between these two views, both of which are, I think, possible, I choose the latter without hesitation. It would be at once illogical and inconsistent with the scheme of the Settled Land Act to give to the tenant for life the right to say whether capital money should be applied in investment in securities or (say) in the discharge of incumbrances (section 73(1) (ii)), or in the purchase of land in fee simple (section 73 (1) (xi)) and the right too to direct the sale of securities and the application of the proceeds in some other mode, but to deny him the right to direct a variation of investment. It is not, I think, inconsistent with this view that section 75 (4) contemplates the consent of the tenant for life, which presupposes action initiated by the Trustees: for under section 75(2) the Trustees may in default of direction by the tenant for life act at their own discretion and section 75 (4) is apt to cover such a case. Nor can I disregard 12 section 75 (7). If securities can be converted into money (which I take to be something that can and must be done at the discretion of the tenant for life) the proceeds become capital money of which the tenant for life can direct the application and, if he directs the investment in securities, he can choose the securities so long as they are authorised. I am therefore of opinion that a tenant for life can direct an exchange of investments, assuming always that he acts within and according to his statutory or extended powers, and, coming from the general to the particular, I am of opinion that Lord St. Levan was competent to give the direction, to which I have referred, in regard to the investments forming part of the settled property. Accordingly the ratification and appointment by himself and Mr. Ponsonby added nothing to his direction. It was that which was effective and it was given by him in a fiduciary capacity.[40]The same point was raised also in regard to a third class of property which was transferred to the Company, viz.: the property which has been called " the equitable interests ". What I have already said covers this class of property also and I do not think it necessary further to explain why this property too was transferred to the Company by Lord St. Levan in a fiduciary capacity.[41]So far, my Lords, I have endeavoured to interpret and apply section 46 of the Act to the facts of this case with only an oblique glance at section 58. But now I must turn to the contentions of the Crown which are based on that section and first to a contention based on subsection (5). That subsection provides that " references in this Part of this Act to a person " having any power or control or doing any act in a fiduciary capacity " shall be construed as references to his having that power or control or " doing that act in a fiduciary capacity imposed on him otherwise than " by a disposition made by him and in such a capacity only "[42]It was urged on behalf of the Crown that, inasmuch as the additional powers by the exercise of which Lord St. Levan, as tenant for life, was enabled to transfer or direct the transfer of property to the Company, owed their existence to a disposition made by him, viz., the Deed Poll of 23rd March, therefore the fiduciary capacity in which he exercised those powers was imposed on him by that disposition. I do not think that this argument is valid. Admittedly he was a trustee of the powers and therefore could only exercise them in a fiduciary capacity, but this flowed from the pro- visions of section 107 of the Settled Land Act, 1925. It was Lord St. Levan who created the power but the capacity in which he exercised it was imposed by the Act. Take any settlement that you will and suppose that the tenant for life exercises a power conferred on him by the settlement in extension of his powers under the Settled Land Act. Whether the settlement is made by himself or another, it could not be said that the fiduciary capacity, in which he exercised the power, was " imposed " by the settlement. The word " impose " is, I think, apt to describe a consequence which flows from a statutory provision but inapt to describe a power voluntarily created.[43]The next contention that I must notice is founded upon section 58 (2) which must be read in conjunction with section 58 (4). Subsection (2) provides that " a person shall be deemed for the purposes of this Part " of this Act to have made a transfer of property to a company if the " property came to be included in the resources of the company by the effect " of a disposition made by him or with his consent or of any associated " operations of which such a disposition formed one ".[44]The argument here is that it was by the effect of a disposition made by Lord St. Levan in a non-fiduciary capacity, viz., the Deed Poll of the 23rd March, or at least by the effect of associated operations, of which that disposition formed one, that the property came to be included in the resources of the Company and that therefore Lord St. Levan must be deemed to have transferred the property to the Company within section 46 and to have done so in a non-fiduciary capacity.[45]Here it is regrettably necessary to make further distinctions, for there were, as I have already pointed out, different species of property, and they demand separate consideration. First, it was urged that the cash paid by Lord 13[46]St. Levan for the Preference shares was caught by the subsection. I have already expressed the view, which is, I understand, held by the majority of your Lordships, that section 46 does not cover a cash subscription for shares. If this is so, it is I think impossible to say that the cash is " property included in the resources of the company" which anyone is deemed to have transferred. The transaction is outside the purview of the section and the subsection.[47]Next, the argument turned to the land. This was a kind of property which was in fact and in law transferred by Lord St. Levan himself to the Company. The sale and the conveyance were made by him as tenant for life and were therefore made by him in a fiduciary capacity. I see no room for what I may call a deeming provision when that which is to be deemed has effectively taken place without it. Lord St. Levan transferred the property in a fiduciary capacity: the subsection does not in my opinion entitle me to deem him to have transferred it in a non-fiduciary capacity.[48]Next, and more difficult, come two other kinds of property which I can take together, the investments representing capital moneys and the equitable interests, and I must now turn to section 58 (4). This subsection so far as relevant provides as follows:
" References in this Part of this Act to a " disposition's being made by any person ... or to any other act's being " done by any person, include references to its being made ... or being " done by him and another jointly or by another at his direction . . . "
. I have already expressed the opinion and will assume that it was competent for Lord St. Levan as tenant for life to direct the Trustees of the settlement to invest capital moneys in the purchase of or in exchange for shares of the Company, and that the effect of the deed of the 25th March was that he validly exercised that power of direction with the result already pointed out that the confirmatory direction by him and Mr. Ponsonby in exercise of the overriding power added nothing to it. If so, the act of the Trustees in transferring the investments was an act done by another at his direction and accordingly it was under this subsection his act: it was he who trans- ferred the property, and ex concessis he transferred it in a fiduciary capacity, for he was acting in exercise of additional Settled Land Act powers. But here comes the crux. If subsection (2) stood alone, and subsection (4) had not been enacted, I could not avoid the conclusion that Lord St. Levan must be " deemed " to have transferred the investments. The deeming provision would not (as it was in the case of the land) be excluded by an actual transfer, and, even though the direction to transfer was given in a fiduciary capacity, that could not alter the fact that the property became included in the resources of the Company not as in the case of the land by an actual transfer by Lord St. Levan, but by a series of operations of which the exercise of the non-fiduciary overriding power was one. But subsection (2) does not stand alone and the question is what part subsection (4) is to play. The latter like the former is in effect a deeming provision. Am I then to say that as the result of subsection (4) Lord St. Levan was for the purposes of section 46 the actual transferor of the investments, just as he was of the land, so as to exclude the operation of the deeming provision of subsection (2)? Or am I to say that subsection (4) is to be denied any operation where subsection (2) would without it be brought into play? It may be urged that as subsection (2) expressly does, but subsection (4) does not refer to transfers, the former section should apply. But this is a very tenuous thread on which to hang a taxpayer, for subsection (4) does not the less apply to transfers because it uses general words such as " disposition " and " act " which cover both transfers and other operations. I have come after much hesitation to the conclusion that the provision of subsection (4) must prevail. It is, I think, a subsection which is intended and is apt to cover every case : its language is absolutely general: it does not open as it might by a saving reference to subsection (2) and it should not be restricted unless it is necessary to do so in order to give some meaning to that subsection. But this clearly is not necessary: for subsection (2) has in any case ample scope where no question arises as to the capacity, fiduciary or non-fiduciary, in which a transfer is made but the question is whether that which was done, by whomsoever done, amounted to transfer. 14[49]My Lords,[49]having come to the conclusion that Lord St. Levan did not transfer any property to the Company within the meaning of section 46 except in a fiduciary capacity, I am of opinion that upon this ground the alternative claim for duty which is made against the Company fails and the cross-appeal of the Crown must be dismissed. But in case your Lordships take a different view on this very difficult question, it is right that I should state my opinion on the further question whether any and what benefit within the meaning of the section accrued to Lord St. Levan from the Company in the three years ending with his death.[50]That some benefit so accrued to him is admitted by the Company, for he received the proper instalments of the sum of £750,000 which were payable within those years and he also received dividends upon the Preference shares. But a dispute has arisen in regard to certain sums received by Lord St. Levan from the Company in the circumstances which I must now state.[51]By a Mortgage Deed dated 30th January, 1933, and made between Lord St. Levan of the one part and the Company of the other part the Company covenanted to advance to Lord St. Levan on every 25th March, 24th June, 29th September and 25th December, during the joint lives of Lord St. Levan and his nephew Francis Cecil St. Aubyn (now the third Baron St. Levan) at four per cent, interest a sum of £500 unless and until Lord St. Levan should give notice to the Company that he did not require such advance to be made and it was thereby agreed that payment of the said sums and of the interest thereon should not be required by the Company until the expiration of a period of two years from the death of Lord St. Levan unless he or his personal representatives should desire to repay the same previously and in the meantime interest becoming due thereon should be added to the principal money and carry interest accordingly and the said Deed contained a provision for deduction of the said debt by instalments from any instalment of the said sum of £750.000 remaining outstanding at the expiration of the period of two years and for charging the same upon such instalments.[52]By another like Deed dated 4th August, 1936, the Company covenanted to advance to Lord St. Levan on every 1st January and 1st July during the same joint lives a further sum of £500 upon the same terms as the advances to be made under the said Deed of 30th January, 1933.[53]Pursuant to the said Deeds the Company advanced to Lord St. Levan in each of the three years preceding his death sums amounting in all to £3.000 all of which with the interest thereon remained due and owing at his death.[54]The question is whether the advances so made were " benefits " within the meaning of section 46. The argument for the Crown is a simple one. Under section 47 (which I have already cited) any periodical payment out of the resources of the Company is to be " treated as a benefit ": the loans or advances were payments made to Lord St. Levan out of the resources of the Company and they were made periodically: and they were received by Lord St. Levan for his own benefit directly or indirectly. Therefore they were " benefits". The Company on the other hand appeals once more to the plain use of ordinary words and denies that a man can fairly be said to receive for his own benefit a sum which he receives by way of loan and has to repay, and further relies on the omission of loan from a definition which refers to payment by way of dividend or interest or by way of remuneration or any other payment. The latter argument may derive some force from the contention of the Crown that a transaction of loan was just what the section was aimed at. But perhaps that contention had only become common form by the time this stage of the case had been reached. My Lords, here again is a question upon which I find it impossible to express a confident opinion. It is indeed strange that no reference is made to a transaction of loan and the result of holding such a transaction to be a benefit must, as learned Counsel for the Crown was constrained to admit, have strange results. But I have come to the conclusion, nevertheless, that the contention of the Crown must be upheld. I cannot escape from the fact that as each periodical loan was made to Lord St. Levan there 15 was a payment to and receipt by him. And I cannot think that he received it any the less for his own benefit because he had, or his estate had, at a later date to repay it. He had the beneficial use of what he received and can fairly be said to have received it for his own benefit. I may add that I do not find it possible to find in the definition of periodical payment any genus of payments created from which, by the application of the ejusdem generis rule, a loan could be excluded nor can I get any assistance from the provisions of the Seventh Schedule to the Act to which reference was made, I am therefore of opinion that the loans were " benefits " within section 46. But this is only relevant if Lord St. Levan transferred property to the Company within the same section except in a fiduciary capacity, and this, in my opinion, he did not.[55]It follows from what I have said that in my opinion the appeal should be allowed with costs and the cross appeal dismissed with costs and the judgment of Mr. Justice Groom-Johnson restored. Lord Normand MY LORDS, I have had the advantage of reading the opinions of my noble and learned friends Lord Simonds and Lord Radcliffe, and I am in agreement with them at all points where they are at one. It will, therefore, be possible for me to deal with the case without trespassing for long on your Lordships' patience.[56]On the Crown's claim under sections 43 and 56 of the Finance Act. 1940, I can state my view quite briefly. After the death of Lord Amherst on 7th March, 1927, there was vested in Lord St. Levan and Mr. Ponsonby a joint power of appointment over all the property comprised in the settle- ment, which they were free to exercise for the personal benefit of Lord St. Levan. Mr. Ponsonby was not a trustee in relation to that power, and Lord St. Levan was the effective dominus of the settled property. He also had the powers of a tenant for life under the Settled Land Act, 1925. His powers, derived from one or the other of these sources, enabled him to bring about an enlargement of the powers of investment and a realization and reinvestment of the settled property, to appropriate to himself in fee the whole or any part of the property or of substituted investments of the proceeds, and to make a gift or settlement of such part as he did not appropriate in favour of persons selected by him. By his exercise of these powers, the original settled property, the lands, equitable interests and invest- ments, were sold to the Company, part of the price was invested in the Ordinary shares of the Company and the balance was appropriated by Lord St. Levan, who also resettled the Ordinary shares in trust in such a way as to extinguish his life interest and to exclude himself from all further interest in them. In substance and in form, therefore, he took part of the trust property as his own absolutely, and made a gift of what remained under trust to donees selected by himself. Admittedly the trustees for the donees immediately assumed bona fide possession and enjoyment of the Ordinary shares of the Company. These shares were an item of property separate from the part of the purchase price which had not been invested in them, and which was represented by the preference shares of the Company and a jus crediti in a balance payable by the Company, both owned by Lord St. Levan. If Lord St. Levan had been the holder of debentures and preference and ordinary shares in the Company and had transferred the ordinary shares, whether by gift or for value, the transferee thenceforth would have retained possession and enjoyment of the ordinary shares to the entire exclusion of Lord St. Levan and of any benefit to him by contract or otherwise. The present case is in no way different from that and the effect of the transactions is that the possession and enjoyment of the ordinary shares by the trustees were retained by them to the entire exclusion of Lord St. Levan and of every benefit to him by contract or otherwise. 16[57]The application of the statutory hypothesis as provided for by section 56 can in this respect make no difference. The fictional mutation of the Com- pany into a trust and of the Company's creditors and shareholders into beneficiaries, however far it is carried, still leaves the beneficial rights repre- senting the ordinary shares and the beneficial rights representing the prefer- ence shares and the instalments separate items of property ; and the beneficial rights representing the ordinary shares are, when the statutory hypothesis is applied, still enjoyed by the donees thereof to the entire exclusion of Lord St. Levan and of any benefit to him.[58]On the case law of this branch of the appeal I need say nothing, since it has been fully dealt with by my noble and learned friends.[59]The Crown's cross appeal and claim under section 46 and the sections which have to be read with it, as set out in the opinion of my noble and learned friend Lord Simonds, raise questions of some difficulty. The first point is whether Lord St. Levan, when he paid £100,000 for the preference shares in the Company, made a transfer of property within the meaning of section 46. My opinion is that " transfer of property " are not the usual words which would be naturally selected to describe a payment of money, though it cannot be denied that money is property or that payment is a transfer. I think that if it had been intended to strike at money payments the simple words necessary to make that intention clear would have been added.[60]The next question is whether Lord St. Levan made a transfer to the Com- pany of the lands, equitable interests and investments which formed the original settled property otherwise than in a fiduciary capacity (section 46 (D). The precise wording of the subsection is of importance. If the question had been whether Lord St. Levan transferred the lands, to take the clearest case, otherwise than in a fiduciary capacity, the answer might well have been that he did not. For it was he who transferred the lands by the conveyance of 26th March, 1927, and he did so in pursuance of the fiduciary power imposed on a tenant for life by the Settled Land Act, 1925. It could then have been argued with some plausibility that the inquiry was complete, and that there was neither necessity nor justification for pursuing it further by recourse to a provision under which a person may be deemed to have made a transfer of property.[61]But when the inquiry is whether Lord St. Levan made a transfer of the lands, the answer may be different. I find it impossible to read section 46 and the related sections without being forced to recognise that the same party may make more than one transfer within their meaning, and that the making of one such transfer otherwise than in a fiduciary character satisfies pro tanto the conditions for charging the company's assets under section 46. It is no answer that the same party made another transfer in a fiduciary capacity.[62]Now by the appointment of 23rd March, 1927. Lord St. Levan made a disposition, as defined in section 59, by the effect of which the lands, equitable interests and investments, came to be included in the resources of the company and therefore he must be deemed to have made a transfer of the property to the company (section 58 (2)). Admittedly this transfer was not made in a fiduciary capacity. A further disposition was necessary to complete the transfer of the property to the company. But I think that the whole trust property came to be included in the company's resources by the effect of the appointment of the 23rd March, for without it the sale of the trust property to the company would not have been carried out.[63]Lastly, I see no way of escaping the conclusion that the advances made under the Deeds of 30th January, 1933, and 4th August, 1946, were periodical payments and therefore benefits within the meaning of section 47, despite the arbitrary results and crude anomalies to which such a conclusion may lead.[64]For these reasons I would concur in my noble and learned friend Lord Radcliffe's proposals for disposing of the appeal and cross appeal. 17 Lord Simonds MY LORDS,[65]My noble and learned friend Lord Oaksey, who is unable to be here today, has asked me to say that he concurs at all points in the Opinion which I have just delivered. Lord Radcliffe MY LORDS,[66]The original appeal relates to the Crown's claim to Estate Duty under section 43 of the Finance Act, 1940, that claim being assisted or encumbered by the provisions of section 56 of the same Act. It is no doubt convenient to dispose of the questions which are involved in that appeal before going on to deal with the cross appeal of the Crown. No one could suppose that section 43 is anything but an obscure section. So was section 11 of the Finance Act, 1900, the statutory parent of the present enactment. So were section 35 and section 39 of the Finance Act, 1930, which extended the scope, without elucidating the meaning, of the charge imposed by the 1900 Act. All these sections have now disappeared and their place is taken by section 43 and the accompanying provisions of the Finance Act, 1940. But there still appears as a condition upon which freedom from duty depends that difficult phrase about bona fide posses- sion and enjoyment of the property being assumed and " thenceforward " retained to the entire exclusion of the person who had the interest " and of any benefit to him by contract or otherwise." There was very general uncertainty as to what, if not all, benefits were intended to be covered by these words, and as to the circumstances in which, if there were indeed any circumstances, a person might legitimately be found in the enjoyment of some contractual benefit after the termination of the limited interest without involving the property in continuing liability for duty. I think it regrettable that when, in 1940, opportunity was found to wipe out the old sections and to enact a new set of provisions, opportunity was not at the same time found to make those provisions more readily intelligible. I can appreciate that at any rate some of the transactions with which section 43 and section 56 appear to be concerned are deplorable from the point of view of those interested in revenue collection, but for all that, the taxpayer is entitled to be told with some reasonable certainty in what circumstances and under what conditions liability to tax is incurred or else to be told explicitly that the circumstances and conditions of liability are just those which the Commissioners, of Inland Revenue in their administrative discretion may consider appropriate. The seventeen sections which constitute Part IV of the Finance Act, 1940, are expressed with what proves on investigation to be a vagueness so diffuse and so ambiguous that they may well produce in practice the second alternative while adopting in form the requirements of the first. This would be an unfortunate situation to have brought about. The prayer of Ajax—' —has been heard before in your[67]Lordships' House, but I think its appeal is even stronger when obscurity is created by deliberate legislation than when it arises from the less wilful confusions of the common law.[68]My Lords,[68]I have formed the opinion that the fate of this appeal must turn upon the meaning that you attribute to the phrase which appears in sub- section 2 (a) of section 43: —" if bona fide possession and enjoyment of " the property in which the interest subsisted was assumed immediately there- " after by the person becoming entitled by virtue of or upon the disposition " or determination and thenceforward retained to the entire exclusion of " the person who had the interest and of any benefit to him by contract or " otherwise." For the facts of this case, complicated as they may seem, come down to a simple legal issue. Those facts have been fully stated in the opinion of my noble and learned friend, Lord Simonds, and it is quite unnecessary for me to travel through them again. What it comes down to 18 is this. The Crown's claim is for Estate Duty on the Ordinary shares of St. Aubyn Estates Ltd. Those shares constitute the property in which the deceased had a life interest at the date when he and Mr. Ponsonby executed the Deed Poll of 29th March, 1927 ; and it is because that Deed had the effect of determining his life interest in that property that the Crown prefers its claim under section 43. So far there is nothing in controversy. The Appellants, however, maintain that upon the 29th March the deceased was immediately and thereafter continued to be excluded from any possession or enjoyment of those Ordinary shares, since the whole beneficial interest in them belonged to others than himself, and that the possession and enjoy- ment so taken by or on behalf of those others was such as to exclude him from any benefit by contract or otherwise. This is where the whole con- troversy comes. For the Crown, while not disputing that after the Deed of 29th March the whole beneficial interest in the Ordinary shares belonged to others than the deceased, contends that the existence of those interests of which he had become the absolute owner by virtue of the Deed of 28th March, 1927. made it impossible to say that the possession and enjoyment of the Ordinary shares which had been assumed by or on behalf of those others was retained to the entire exclusion of any benefit to the deceased by contract or otherwise.[69]At first sight it is difficult to see any basis for this contention. No right or interest that was left to Lord St. Levan after the 29th March interfered with the new owners' full possession and enjoyment of that " bundle of " rights " which constituted the Ordinary shares and which formed the pro- perly in which he had given up his life interest. It is true that, putting aside his ownership of the Preference shares, he continued to enjoy the benefit of the Company's contract to pay such part of the purchase price as was to be discharged by half-yearly instalments of £18,750 each. Certainly this was a benefit by contract: certainly the right to receive this money in this way had been created as one step in the series of transactions which began with the Deed of 23rd March and ended with the Deed of 29th March, 1927. Moreover, I do not think it necessary to treat it as less than certain that Lord St. Levan and Mr. Ponsonby, the joint authors of all that was brought about at that time, intended from the first that the benefit of this contract, when created, should become the absolute property of Lord St. Levan and that the Ordinary shares should be resigned to follow the trusts declared by their Deed of the 29th March to the exclusion of any further interest of Lord St. Levan in those shares. But unless it is a valid pro- position of law that for the purposes of section 43 bona fide possession and enjoyment of property is not assumed and retained to the entire exclusion of any benefit to a person by contract or otherwise merely because it is found that after releasing a limited interest in the property that person continues to enjoy a contractual benefit created as part of the whole scheme in which that release is involved, I do not see that the recital of the facts that I have set out above brings the Crown any nearer to establishing its case under section 43. I am afraid that there is a good deal that is yet to be said on this appeal: but in substance the case for the Crown stands or falls by that proposition. If it is right, the wording of the section is indeed inapt to express its meaning: for to adopt it requires no more than to ascertain whether the deceased was left in possession of any contractual benefit at all at the end of the transaction and gives no significance to the question whether that benefit, whatever it is, is such as to trench upon the possession and enjoy- ment of the property in which the interest has been surrendered. My own view is that the whole proposition is fallacious. Nor do I think it the better founded if the qualification is introduced that a benefit by contract, to be within the mischief of the section, must be " referable to " the transaction by which the life interest is determined. Your Lordships were invited to accept that qualification because the words in question had been used by Lord Tomlin when delivering the Opinion of the Judicial Committee in Munro v. Com- missioner of Stamp Duties [19341 A.C.61. But there is a difference between using words to explain a point and using words to define a proposition: and the words " referable to " are in themselves of too ambiguous an import to afford any satisfactory gloss upon the meaning of the section. 19[70]There is this much, and not more than this much, to be said for the proposi- tion advanced by the Crown. It was decided long ago in A.G. v. Worrall, [1895] 1 QB 99 , that a contractual benefit may interfere with the exclusive possession and enjoyment required by such a provision (in that case, section 11 (1) of the Customs and Inland Revenue Act, 1889) even though it does not amount to a reservation out of the property that is the subject of the gift. My Lords, so it may. For my part I see nothing in the decision of Worrall's case that cannot readily be accepted as good law. But what did it decide? A father had made a present to his son of a sum of about £24,000 secured on mortgage and the son had bought in the equity of redemption for a small sum: in return for his father's gift the son had covenanted to pay him an annuity of £735 per annum during his life. In effect the son was returning to the father the income on the property given during the remainder of the father's life. It seems to me reasonable enough for a Court to hold in those circumstances that the son had not obtained the enjoyment of what was given free from a contractual benefit to the father which encumbered the enjoy- ment of the very thing that was given. To hold otherwise would have been to stop at the mere form of the transaction. Even if I did not think that Worrall's case was rightly decided, as I do, I should not think it right at this date to suggest that it ought to be overruled. It has stood too long, and has been too often relied upon. But I think it a very mistaken form of reason- ing to deduce from a decision that a benefit, to be within the mischief of the section, need not necessarily be by way of reservation out of the subject matter of a gift the general proposition that all benefits are within the mis- chief of the section, whether they are by way of reservation out of the subject matter of the gift or not. To deny the validity of one general proposition is not to assert the general validity of its opposite. I suggest, therefore, that your Lordships can safely put aside the case of A.G. v. Worrall as having no further bearing on this appeal than that of showing that the benefit of the instalment payments which Lord St. Levan retained was not without the mischief of the section merely because the Company's contract to pay them was neither a charge upon nor a reservation out of the property which con- sisted of the Ordinary shares. But it leaves unresolved the essential question whether that benefit was nevertheless within the mischief of the section. I do not believe that there is any great difficulty in answering that question. I think that in this, as in other cases arising on similar legislative provisions, there are two matters that have to be attended to before the answer can be given. The first is, How did the deceased come to be in enjoyment of that benefit by contract, the existence of which is said to compromise the possession and enjoyment of the property released? The second is, What precisely is the property the life or other interest in which has been deter- mined? On the first point the answer is plain. The deceased enjoyed that contractual benefit because he decided to create it and to take it for himself. This is not a case in which he had to bargain to get what he wanted: nor is it a case in which by some ambiguous arrangement he took back in substance a part of that of which he had affected to dispose. The whole of this scheme was brought about by an exercise of the powers of the deceased alone or of the deceased in conjunction with Mr. Ponsonby. Between them they brought the Company into being; created the instalment debt, the Preference and the Ordinary shares ; secured that the instalment debt, the cash and the Ordinary shares should become the property held on the trusts of the Resettlement instead of the land, investments and other interests transferred to the Company ; and then withdrew the cash and the instalment debt to become the deceased's absolute property and put an end to any further interest of his in the Ordinary shares. Nor can there be any doubt about the answer to the second point. It was the Ordinary shares in which the life interest was determined; not the Ordinary shares as they might have been had some scheme been operated other than that which was in fact adopted, but the Ordinary shares as in fact they were, shares in a Company which had acquired assets on the terms of paying for them in part by the satisfaction of this instalment debt.[72]Now, if that was the situation, the possession and enjoyment of the rights which constituted the Ordinary shares were only affected by the existence of the instalment debt in the sense that the half-yearly payment 20 of the instalments reduced the resources which, had there been no debt, would have been available for the benefit of the shareholders of the Company. But I think that there is formidable authority against the view that in such a situation the possession and enjoyment of the relevant property is not exclusive of a benefit to the donor or releasor of such property. A man may have an arrangement which gives him contractual benefits that affect an estate and may subsequently make a gift of his interest in that estate: if he does the donee has possession and enjoyment of what is given, to the entire exclusion of the donor or of. any benefit to him. That is the Munro case [1934] AC 61 . Shares may be made the subject of a trust for another person, the maker of the trust having the right under it to be one of the trustees, to retain in his control the voting-power in respect of the shares and to take an ultimate resulting interest: yet that benefit does not bring the property within the mischief of a similar provision. That is the Perpetual Trustee Co. case [1943] AC 425 . No more is possession and enjoyment of a gift compromised if a man vests property in trustees upon trust to provide out of it certain limited benefits for a donee, but subject thereto upon trust for himself. That is the Cochrane case [1905] 2 I.R. 626; 1906, 2 I.R. 200. All these decisions proceed upon a common principle, namely, that it is the possession and enjoyment of the actual property given that has to be taken account of, and that if that property is, as it may be, a limited equitable interest or an equitable interest distinct from another such interest which is not given or an interest in property subject to an interest that is retained, it is of no consequence for this purpose that the retained interest remains in the beneficial enjoyment of the person who provides the gift.[73]My Lords,[73]I think that the application of that principle is sufficient to destroy the Crown's claim under section 43. In substance the position of Lord St. Levan was the position of a man who creates a rent charge in his own favour upon property which is in his absolute disposition and then makes a gift of that property subject to that charge. Nothing is then given except the interest so charged. Is possession and enjoyment of what is given exclusive of the donor or of any benefit to him, despite his continued receipt of the amounts secured by his charge? I conclude that it is, for I cannot imagine that, had the law been otherwise, the case of Grey v. A.G. [1898] 2 QB 534 ; [1900] AC 124 , would have taken the course that it did. In that case Earl Grey had at least created a rent charge for himself on parting with his estates: but I think that the judgments in the Court of Appeal make it plain that it was not because he had done that, but because he had done and secured for himself so much more than that, that liability for duty attached. The explanation of that decision which was offered by the Irish Court of Appeal in the Cochrane case makes it turn upon the existence of the covenants which the transferor had secured for himself by the trans- action and which left him still the effective master of all that he had trans- ferred, and the reasoning of Lord Russell in the Perpetual Trustee case seems to me to be directed to making the same point. I agree with those views, and I cannot more aptly conclude my opinion on this part of the appeal than by quoting what Lord Russell there says on this point (see [1943] A.C. at 446):
" the entire exclusion of the donor from possession and enjoyment which is " contemplated ... is entire exclusion from possession and enjoyment " of the beneficial interest in property which has been given by the gift. " and . . possession and enjoyment by the donor of some beneficial interest " therein which he has not included in the gift is not inconsistent with the " entire exclusion from possession and enjoyment which the subsection " requires."
[74]Hitherto I have made no reference to section 56. I have not done so because, in face of the considerations which I regard as the determining considerations in this matter and which I have tried to set before your Lordships, I do not see what difference it makes whether section 56 (2) is applied or not. But, since it was the existence of this section that caused the Court of Appeal to decide the appeal in favour of the Crown, a decision to which, I gather, they would not have come had section 43 been unfortified by section 56, I must state briefly why it is that I do not regard that section as having any importance in this case. It introduces what has been called " the statutory hypothesis"; but it introduces that hypothesis 21 for a limited purpose only. The property on which Estate Duty is claimed remains the same: the Ordinary shares. The property in which the life interest has been determined remains the same: the Ordinary shares. It is only when the further question arises under section 43 (2) (a) whether possession and enjoyment of that property has been assumed and retained to the exclusion of the releasor and of any benefit to him that the statutory hypothesis comes in to test the exclusion by asking whether, even if it has been completely achieved in circumstances as they are, it would have been equally true to say that it was achieved if the Company had been trustee of its property to give effect to equitable rights analogous to those in fact created by the shares and " debentures " of the Company. If the answer would have been No in the imaginary state of things postulated by the hypothesis, then the protection of section 43 (2) (a) cannot be invoked by the taxpayer. Of course this is a clumsy device. It is impossible to say with any precision what are the equitable rights which ought to be thought of as analogous to the existing rights represented by shares and " debentures". It is particularly difficult in the case of shares, for the section throws no light on the extent to which one is supposed to retain or to discard the managerial powers to which the rights of Ordinary and other share- holders are subject but which they may ultimately control. But I do not think that it is necessary for Che present purpose to investigate these details or to try to resolve them. It can certainly be accepted that on the assumptions required by the hypothesis the Company holds all its assets as a trust fund upon trust in the first place to make thereout the payments to Lord St. Levan required by the instalment debt, subject thereto to make such payments to the Preference shareholders as may correspond to the rights that they would have as Preference shareholders, and subject thereto upon such trusts for the Ordinary shareholders as may correspond to their share rights, but not so as to prejudice or destroy the prior equitable rights. Thus there is one trust fund and different sets of equitable rights to be satisfied out of that fund. Thus, too, the imaginary situation on the 29th March, 1927, was that Lord St. Levan had the equitable rights in that trust fund corresponding to the Preference shares and the instalments and he had surrendered to those interested under the Resettlement his life interest in the equitable rights in the trust fund corresponding to the Ordinary shares.[75]If it were enough for the Crown to succeed that it should be possible to point out that after 29th March Lord St. Levan continued to enjoy an interest in the same trust fund as was bound in equity to satisfy those other equitable rights in which he had determined his life interest, then section 56 would be very important in this case. I think that the Court of Appeal held that it was enough. Here I part company with them, and the sentence that I have already quoted from Lord Russell's opinion in the Perpetual Trustee case as a summary of existing authority shows why I do. In brief, I do not think that turning the instalments into one kind of equitable right in property and the Preference and Ordinary shares into other kinds of equitable rights in property, as the statutory hypothesis does, makes them any the less distinguishable interests or properties than they were in their actual non-hypothetical form. I must now come to the Crown's cross appeal under section 46. It raises three principal questions. The first is whether Lord St. Levan " made " a transfer " of any property to St. Aubyn Estates Limited. The second is, whether, if he did, that was property which he " transferred in a fiduciary " capacity ". The third is whether, if he did make a transfer of some property and did not make that transfer in a fiduciary capacity only, any " benefits " accrued to him from the Company within the three years ending with his death. It is perhaps sufficient to say, since at this stage we are dealing with matters of principle only, that if the first question is answered in the affirmative, the second in the negative and the third in the affirmative, section 46 has imposed a charge of Estate Duty, payable by the Company and arising on the death of Lord St. Levan. 22[76]The first question requires that your Lordships should consider the manner in which three separate classes of property came to be included in the resources of the Company: —the freehold lands ; the investments representing capital moneys and the equitable interests and rights in respect of undivided shares of land, these interests and rights being considered as one class with the investments for the present purpose; and thirdly, the moneys paid on the subscription of Lord St. Levan's 100,000 Preference shares. It is con- venient to deal first with the investments in relation both to the first and to the second questions, since the consideration of their case raises most of the difficulties of interpretation that affect the others and one at least that is peculiar to themselves.[77]If the word " transfer " is taken in its primary sense, a person makes a transfer of property to another person if he does the act or executes the instrument which divests him of the property and at the same time vests it in that other person. In this sense the only persons who made a transfer of the investments to the Company were Mr. Drummond and Mr. Ponsonby, the Trustees of the St. Levan Resettlement. If section 46 stood alone that would, I think, conclude the matter. Lord St. Levan would not have made this transfer. But section 58 imposes various interpretations of the language of the preceding sections, to which interpretations effect must be given: and, as I see it, it is in applying those interpretations and in discerning the true inter-relation between them that the first major difficulty is en- countered. For, in one way or another, they do certainly constitute Lord St. Levan a transferor.[78]To begin with, there is section 58 (2). There is more than one reason why it should be considered before section 58 (4). It comes the earlier in the section. It deals explicitly with the subject of " transfer ", which sub- section (4) does not. And, since it refers to a disposition being made by a person, it incorporates within its own provisions all the extended or artificial meanings of that phrase which subsection (4) itself lays down. Now sub- section (2) is concerned to declare what persons are to be " deemed " to have made a transfer of property to a company. It identities them, rather unhappily, not so much by what they have done as by the results of what they or other persons have done. The word "deemed" is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible. I think that it is in the last of these three ways that it is used in section 58 (2), for the subsection begins its description of the class of persons who are to be deemed to have made a transfer with the person the effect of whose own disposition has been to add the property transferred to the resources of the company, and ends with the person who has done no more than make a disposition which is " associated " with operations that have had a similar result.[79]If I apply to Lord St. Levan this statutory conception of a transferor I find this consequence. The investments were transferred to the Company at his direction, for he so directed as tenant for life when he and Mr. Ponsonby jointly executed the Deed of Appointment dated 25th March, 1927. It will save time in this very long opinion if I say that I accept the Company's argument that under the Settled Land Act, 1925, he had power to direct the Trustees of the Resettlement to change the investments that represented capital moneys, and that this power had to be exercised by him in a fiduciary manner. I have had an opportunity of reading in advance the opinion of my noble and learned friend Lord Simonds and I am in full agreement with what he says on this point. By virtue of this operation then Lord St. Levan is deemed to have made a transfer of those investments to the Company, for they came to be included in the resources of the Company "by the effect of" a disposition made at his direction, and this by sub- section (4) is the same thing as a disposition made by him. But that is not the only way in which section 58 (2) requires that he must be deemed to have made a transfer, for it was the execution of the Deed 23 of Appointment dated 23rd March, 1927, made by him and Mr. Ponsonby that alone made possible the transfer of the investments to the Company in the manner in which and for the consideration for which they were in fact transferred. This Deed, which was the first step in the whole scheme, was a disposition which formed one of a series of associated operations of which the actual transfer of the investments was another; and on this ground also, therefore, I think that the Crown is entitled to treat Lord St. Levan as a person who made a transfer to the Company.[80]There remain two points that have to be disposed of before an answer can be given to the problems which are raised by section 46. One is this: if the suppositious transfer by Lord St. Levan which arises by virtue of the fact that he directed the transfer of the invest- ments is exempted from recognition for the purposes of section 46 by the further supposition that he made such a transfer in a fiduciary capacity, does this prevent Lord St. Levan from being treated as having made a transfer by virtue of the appointment dated 23rd March, 1927? On no view can that act be said to have been done in a fiduciary capacity. My Lords, I can only say that I can see no reason why, if one way of looking at the position involves no liability, that should prevent it being looked at in another way that does involve liability. A provision that is drawn in the form of section 58 (2) brings it about that quite different acts may indepen- dently of each other constitute a person a transferor on the occasion of a single transfer. If they do, the alternative is this: either the subject is entitled to select that act the circumstances of which suit his interest best as leading to exemption from or reduction of duty and to insist that the Crown's claim succeed or fail by consideration of those circumstances, or the Crown is entitled to found upon either or both of the acts and to succeed if its claim is good by either test. I think that the latter is the right alterna- tive, for I think that it accords with what are in effect the cumulative provi- sions of section 58 (2) and that an option of this sort is not unusual in taxing statutes. In my opinion therefore Lord St. Levan did make a transfer of the investments to the Company for the purposes of section 46 because he and Mr. Ponsonby executed the Appointment dated 23rd March, 1927.[81]The second question is, whether, in so far as he was a transferor by virtue of having given a direction as tenant for life for the change of invest- ment that led to the investments representing capital moneys being exchanged for ordinary shares of the Company, he made that suppositious transfer " in a fiduciary capacity " within the meaning of section 46. That he acted in a fiduciary capacity I have already accepted: and, though the Act is wholly obscure on this point, I think that when a person is a suppositious transferor by virtue of a suppositious transfer the act, whatever it may be, that makes him subject to the supposition must itself be treated as a transfer in order to see whether the suppositious transfer was made " in a fiduciary "capacity" or not. The effect of section 58 (5) is to impose a special meaning on the words " fiduciary capacity ": it must be a fiduciary capacity imposed on the actor otherwise than by a disposition made by him and no other sort of capacity. I have felt some doubt whether the circumstance that Lord St. Levan created the power of investment by making the Appointment of 23rd March, 1927, did not result in the fiduciary capacity in which he gave his direction being imposed by a disposition made by him. But your Lordships, I believe, are unanimous in rejecting this construction of section 58 (5) and it is with something less than regret that I waive my doubts in the matter and accept the view that in giving the direction Lord St. Levan made a suppositious transfer in a fiduciary capacity only and that, regarded in this way, his transfer is exempted from recognition under section 46. But, as I have already said, I think that he was a supposi- tious transferor of the investments in another way and, as such, did not act in a fiduciary capacity.[82]So much for the investments; and it was conceded that the equitable interests in undivided shares of land are for this purpose governed by the same considerations as apply to the investments. So I think that those too were transferred by Lord St. Levan. Then there is the settled land. Its situation is different from that of the investments in that Lord St. Levan was himself the conveying party and therefore made a transfer to the 24[83]Company in the ordinary sense. This he was in a position to do because the freehold in fee simple had been vested in him by the operation of the Settled Land Act, 1925, to hold the same upon trust to give effect to the equit- able interests from time to time subsisting under the settlement. He sold the land as tenant for life and transferred as trustee to give effect to the sale that he had made: and in this case I do not think that he could possibly be said to have imposed the fiduciary capacity in which he transferred by any disposition made by himself, for in fact the Resettlement of 1879 neither vested in him an estate in fee simple nor gave him a power of sale. It was the Act of 1925 that both transferred the fee simple to him and enacted that he should hold it as a trustee. Therefore when he came to transfer it he acted in a fiduciary capacity imposed upon him otherwise than by a disposition made by himself. But for section 58 (2) that would be enough to exempt the transfer of the settled land from the operation of section 46. That sub- section however raises the same difficulty as I have discussed in relation to the investments. If it were no more than a provision supplementary to section 46, in the sense that it was so drawn as to apply only to cases which section 46 did not cover by its own terms, it might be proper to ignore it in a case where, as here, section 46 did, in the natural and ordinary sense of " transfer ", apply. But, as I have said, I do not think that section 58 (2) can be regarded in this way. It applies directly to Lord St. Levan, for the settled land came to be included in the resources of the Company by the effect of his conveyance. It applies to him also in the extended sense, for the transfer that he made was one of a series of associated operations of which the Appointment dated 23rd March, 1927, was one: without that appointment that transfer could never have been made, as it was, for a consideration consisting in part of payment by instalments. Here again therefore Lord St. Levan can be treated as a transferor in two distinct ways, one, as actual transferor but in a fiduciary capacity, the other, as suppositious transferor but acting, as such, not in a fiduciary capacity. Here again I think that the Crown is entitled to choose whichever way of presenting the matter under section 58 (2) may better suit its case and, accordingly, I think that there was a transfer of the settled land also for the purposes of section 46.[84]Lastly, there is the £100.000 which Lord St. Levan paid as his subscription for the Preference shares. My Lords, I must say quite briefly that in my opinion, when he did this, he made a transfer of £100,000 to the Company within the meaning of this statute. Certainly the Company got £100,000 as part of their resources: first a cheque, then a credit with Messrs. Glyn, Mills & Co. Certainly Lord St. Levan by giving the cheque which led to the transfer of bank credit reduced his own credit by an equivalent amount. I have spoken of Lord St. Levan as having given a cheque for £100,000, for I assume that he must have. In any event he must have given some authority to the Bankers to debit his account with £100,000 and to credit the Company with a like amount, and that is, I think, sufficient for the purpose. Whatever form the authority took, it was a disposition made by him and it was an essential part of the transaction by which the Company's resources were augmented by this £100,000. I am bound to say that in that state of affairs Lord St. Levan seems to me plainly to have made a transfer of £100,000 to the Company for the purposes of section 46 as interpreted by section 58 (2).[85]One question remains upon which I must express my opinion. It only arises if your Lordships should consider, as I do, that one or more items of property were transferred by Lord St. Levan within the meaning of section 46. During the three years preceding his death he received from the Company sums amounting in the aggregate to £3,000 in each year by way of loan. These loans carried interest at the rate of 4 per cent, per annum, but the Company could not call for repayment of either principal or interest until the expiration of two years after Lord St. Levan's death. Were the sums so received " benefits" accruing to him from the Company within the meaning of section 46? I would answer this question by saying that they were benefits because section 47 of the Act has declared them so to be. That section does in terms declare that among the things to be treated as benefits accruing to a 25 deceased transferor from a company are any periodical payments out of the resources of the company which the deceased received for his own benefit. A man receives for his own benefit moneys paid to him on an advance by way of loan, not the less because the transaction involves an obligation to repay an equivalent amount at a future date with interest in the meantime. A " periodical payment" is defined by section 47 (2) in terms which give it the widest possible scope and show at any rate that a payment may be a benefit by way of periodical payment even though it is made in consideration of services rendered or by way of interest on money lent I can appreciate the force of several criticisms if loans are treated as benefits for this purpose. To have money advanced to one is, no doubt, a benefit: but to treat the whole sum advanced as itself the benefit seems a curious procedure. Yet the statute makes no provision for any valuation of the benefit, since it treats the payment itself as being the benefit. The procedure becomes the more curious when it is discovered that a payment made in respect of a loan without interest is treated as equivalent to other payments made in respect of loans at normal interest, high interest or even exorbitant interest. A loan made within the statutory period and repaid before death is treated as equivalent to a loan still outstanding. I appreciate the force of these criticisms, as I do of other criticisms that might be levelled at the width of the definition of " periodical payments ". But I am unable to find in the wording of the Act any warrant for allowing them to cut down what seems to me the arbitrary interpretation that is deliberately imposed upon us. It is not as if these criticisms depended on obscure or complicated considerations. They are fairly obvious, and I think that the only possible conclusion is that the Legislature, intending to prescribe for a branch of enterprise that may often involve what are at least highly artificial opera- tions, decided to impose its charge in the widest and most comprehensive terms: a decision which excludes the more normal distinctions between what is reasonable and what is unreasonable and the usual connotations of the English language.[86]For these reasons I would be in favour of allowing the cross appeal of the Crown and of making a declaration to the effect that for the purposes of section 46 Lord St. Levan made a transfer of(a) the investments and the equitable interests in undivided shares of land(b) the settled freeholds and(c) the £100,000 paid as subscription for the Preference Shares, and a further declaration that the moneys advanced to him on loan during the statutory period are benefits within the meaning of the same section. Lord Tucker MY LORDS, I have nothing to add to what has already been said in stating my agree- ment with the view which is held by all Your Lordships that for the reasons which have been given the appeal in the present case should be allowed.[87]With regard to the cross appeal and dealing first with the investments and equitable interests, I have formed the view—accepting as I do that Lord St. Levan as tenant for life had power under the Settled Land Act, 1925, to direct a change of investment of the capital monies—that by the joint effect of Section 58 (2) and Section 58 (4) of the Finance Act, 1940, he must be deemed to have made a transfer, but I think that such transfer was made by him in a fiduciary capacity, because the Act which results in the notional transfer was done in a fiduciary capacity, so that the resulting transfer must be regarded as having been made in that capacity It was, moreover, in my view a fiduciary capacity imposed upon him solely by the provisions of the Settled Land Act, 1925.[88]But Lord St. Levan must, I think, also be deemed to have made a transfer of the investments by reason of the Deed of Appointment of 23rd March, 1927, made by him and Mr. Ponsonby, without which the subsequent 26 direction and transfer could not have been given and made. In executing this deed he was clearly not acting in a fiduciary capacity and this act on his part was accordingly sufficient to bring it within Section 58 (2). I agree with the view that if one operation which is within Sub-section (2) was performed in a fiduciary capacity and another operation within the sub- section in a non-fiduciary capacity the taxpayer cannot avoid the con- sequence that the second operation becomes by the " deeming" process a transfer within Section 46 (1). My Lords, I do not deal in greater detail with this aspect of the case, as I am content to say that the reasoning of my noble and learned friend Lord Radcliffe on the inter-relation of Sub- sections (2) and (4) of Section 58 and the results that follow therefrom appear to me convincing.[89]When, however, I come to apply these sub-sections to the transfer of the lands the position seems to me wholly different. Here Lord St. Levan was himself the conveying party. He was, I think, for the reasons which have been stated, acting in a fiduciary capacity imposed on him by the Settled Land Act and in such capacity only. Like my noble and learned friend on the Woolsack I can see no ground for calling in aid a " deeming " section when that which is to be deemed has in fact taken place without its assistance. If the notional transfer is to supersede the real transfer with consequences detrimental to the taxpayer this should I think be made plain by unambiguous language.[90]As to the £100,000 paid for the Preference Shares, I agree that to refer to money paid by way of subscription for shares as a transfer of property to the Company is an unusual use of words, none the less, not without some doubt, I have come to the conclusion that the words in their present context are wide enough to include payment in cash or by cheque. It must be remembered that the companies referred to are only those to which the section applies and that one of the commonest ways in which benefits of the kind enumerated in Section 47 are obtained is as a result of payment of money. Furthermore, Section 58 (2) once again requires consideration and, although it does not elucidate the meaning of the word property, it would be odd if a sum of money which " comes to be included in the " resources of the Company " is not property. Some support for this view is, I think, also to be obtained from Section 51.[91]My Lords,[91]I am accordingly of opinion that there have been transfers of property within the meaning of Section 46 which are not exempted by the terms of that section in the case of the investments and equitable interests and in the case of the £100,000 paid for the Preference Shares, but that the transfer of the lands is exempted. With regard to the benefits accruing to the deceased from the Company, I agree that the sums amounting to £3,000 advanced to Lord St. Levan during the 3 years preceding his death were benefits which accrued to him from the Company. I feel con- siderable doubt whether they come within the definition of periodical pay- ments in Section 47 (2), a definition which on the Crown's construction would include loans which had been repaid at the date of death, but I do not regard Section 47 as containing an exhaustive definition of the word " benefits " but merely as enumerating certain matters which are " to be " treated as benefits ". It does not, I think, exclude other transactions, such as the present, which in the circumstances of particular cases may clearly confer benefits on the deceased in the natural and ordinary meaning of that word. I would accordingly allow both appeal and cross-appeal. (12700) Wt. 8025-142 35 7/51 D.L/PA/19