Oughtred v Inland Revenue Commissioners [1959] UKHL 3

House of Lords

Between

OughtredAppellant

Inland Revenue CommissionersRespondent

Before

Lord Radcliffe

Lord Cohen

Lord Keith of Avonholm

Lord Denning

Lord Jenkins

LORD COHEN

My Lords,

The facts of this case are very simple, Mrs. Oughtred and her son were respectively entitled to the life interest and absolute reversion in a settled fund consisting of shares in a limited company. They thus owned between them the whole equitable interest in those shares, which were vested in Mrs. Oughtred and two other persons as trustees of the settlement. On the 18th June, 1956, an oral agreement was made between Mrs. Oughtred and her son to the effect that on the 26th of the same month she would transfer to him certain other shares in the same company which were her own absolute property and in exchange he would make her the absolute beneficial owner of the settled shares by giving up to her his beneficial reversionary interest.

On the 26th June three documents were executed. It is obvious that they were all part of the same transaction, though I will mention them in the order which gives them logical coherence. First, Mrs. Oughtred transferred her own shares to her son. Secondly, the two of them joined in giving a release to the Trustees of the settlement in respect of any " act " deed matter or thing done or omitted by the Trustees or any of them " in or about the execution of the trusts and provisions of the Settlement", and, the Trust Fund being (I quote from recital (F) of the Deed of Release) " now held by the Trustees in trust for Mrs. Oughtred absolutely as the " Trustees hereby acknowledge", the Trustees undertook to transfer the settled shares to Mrs. Oughtred or as she should direct. Thirdly, the Trustees executed a Deed of Transfer accordingly vesting the legal title to the shares in Mrs. Oughtred.

It is this last-mentioned Deed which is claimed by the Commissioners of Inland Revenue to be a conveyance on sale of the son's equitable reversionary interest within the meaning of section 54 of the Stamp Act, 1891, and, as such, liable to ad valorem duty upon the value of the shares transferred by Mrs. Oughtred in exchange for it. The Case Stated, upon which this appeal arises, presents that claim as a question for decision by the Court.

It is plain, of course, that ostensibly the transfer is not a conveyance of the equitable reversionary interest at all. It deals with the shares them- selves, not with any beneficiary's particular interest in them. The Com- missioners, however, arrived at their opinion that the transfer was chargeable ad valorem by a process of reasoning which is set out in paragraph 12 of the Case. They took the view that, having regard to paragraph (c) of subsection (1) of section 53 of the Law of Property Act, 1925 (a provision which requires that any " disposition " of an equitable interest subsisting at the time of the disposition must be in writing), they must treat the recital that the shares held by the Trustees were " now held " in trust for Mrs. Oughtred as incorrect; and they appear to have concluded, without more, that, as apart from the transfer now in question no instrument in writing stamped with ad valorem duty transferring the son's equitable reversionary interest had been produced to them, they ought to treat the transfer of shares itself as constituting the necessary instrument.

This line of reasoning is, in my view, fallacious. It contains two false assumptions. One is that under English law it must have been wrong to describe the settled shares as held by the Trustees on 26th June in trust for Mrs. Oughtred absolutely unless the son's reversion had been assigned to her in writing so as to satisfy section 53 (1) (c) of the Law of Property Act, 1925. The other is that somehow there must exist as a result of the transaction covered by the recited facts an instrument of conveyance capable

of being charged to duty ad valorem, since otherwise there would be no ad valorem duty payable. The second assumption is one which, I am bound to say, appears to me to be the foundation of the argument for .the Commissioners' claim, no matter in what form it is expressed.

Yet the law with regard to liability to stamp duty is clear enough. The duty is charged upon instruments, if they exist and come within any of the categories prescribed by the Act. It is not charged upon transactions. Thus property such as chattels which by law pass on delivery can be transferred from one owner to another without attracting duty. Again, though an agreement for sale may be chargeable ad valorem, since the Act has so required, an oral agreement for the sale of property involves no charge to duty because no instrument is brought into existence to effect or to record it. The whole point of the present appeal seems to me to turn on the question whether it is open to a Court of Law to deduce from the documents of this case that Mrs. Oughtred's title to her son's equitable reversionary interest rested upon anything more than the oral agreement which admittedly took place.

My Lords,

on this short point my opinion is that such a deduction is not open to a Court of Law. The materials that would support it are simply not there. I think that the judgment of Upjohn, J. in the High Court, which was in favour of Mrs. Oughtred, was correct and I agree with his reasons. I am afraid that I do not agree with the judgment of the Court of Appeal, which was in favour of the Commissioners, or with the conclusion which, as I understand, commends itself to a majority of your Lordships.

The reasoning of the whole matter, as I see it, is as follows. On the 18th June, 1956. the son owned an equitable reversionary interest in the settled shares : by his oral agreement of that date he created in his mother an equitable interest in his reversion, since the subject-matter of the agree- ment was property of which specific performance would normally be decreed by the Court. He thus became a trustee for her of that interest sub modo: having regard to subsection (2) of section 53 of the Law of Property Act, 1925. subsection (1) of that section did not operate to prevent that trustee- ship arising by operation of law. On the 26th June Mrs. Oughtred trans- ferred to her son the shares which were the consideration for her acquisition of his equitable interest: upon this transfer he became in a full sense and without more the trustee of his interest for her. She was the effective owner of all outstanding equitable interests. It was thus correct to recite in the Deed of Release to the Trustees of the settlement, which was to wind up their trust, that the Trust Fund was by then held upon trust for her absolutely. There was in fact no equity to the shares that could be asserted against her. and it was open to her, if she so wished, to let the matter rest without calling for a written assignment from her son. Given that the Trustees were apprised of the making of the oral agreement and of Mrs. Oughtred's satisfaction of the consideration to be given by her. the Trustees had no more to do than to transfer their legal title to her or as she might direct. This and no more is what they did.

It follows that, in my view, this transfer cannot be treated as a conveyance of the son's equitable reversion at all. The Trustees had not got it: he never transferred or released it to them : how then could they convey it? With all respect to those who think otherwise, it is incorrect to say that the Trustees' transfer was made either with his authority or at his direction. If the recital as to Mrs. Oughtred's rights was correct, as I think that it was, he had no remaining authority to give or direction to issue. A release is, after all, the normal instrument for winding up a trust when all the equitable rights are vested and the legal estate is called for from the trustees who hold it. What the Release gave the Trustees from him was acquittance for the trust administration and accounts to date, and the fact that he gave it in consideration of the legal interest in the shares being vested in his mother adds nothing on this point. Nor does it, with respect, advance the matter to say, correctly, that at the end of the day Mrs. Oughtred was the absolute owner of the shares, legal and equitable. I think that she was: but that is description, not analysis. The question that is relevant for the purpose of this appeal is how she came to occupy that position : a position which, under English law, could he reached by more than one road.

Lastly, I ought perhaps to say that I do not myself see any analogy between the operations embraced by the oral agreement and documents and the common case of a sale of shares by an owner for whom they are held by a nominee or bare trustee. What is sold there is the shares themselves, not the owner's equitable interest. What is passed by the transfer executed by his nominee is the shares, according to the contract, without any incum- brance on the title, equitable or legal. It is, I think, a misunderstanding of the law to speak of the nominee as transferring his beneficiary's previous equitable interest to the purchaser.

For the reasons which I have given I am in favour of allowing the appeal.

Lord Cohen

My Lords,

The question for your Lordships' decision is whether the Inland Revenue were entitled to claim ad valorem duty on a deed (to which I shall refer hereinafter as "the Transfer") dated 26th June whereby four transferors (the Trustees of the settlement hereinafter mentioned) were expressed to transfer 100,000 preference shares of 10s. each and 100,000 ordinary shares of 15s. each in a company called William Jackson & Son Ltd. to the Appellant in consideration of ten shillings.

The Commissioners upheld the claim of the Inland Revenue but at the request of the present Appellant stated a Case for the determination of the High Court. This came before Upjohn, J. on the 3rd December, 1957. He answered the question in favour of the present Appellant, directed that the ad valorem duty which had been paid should be repaid and fixed the duty at 10s. The Commissioners appealed to the Court of Appeal, and on the 15th May, 1958, the Court of Appeal, holding that the Transfer attracted ad valorem duty, allowed the appeal and ordered the present Appellant to pay £662, 10s. 0d., that is, the agreed amount of the ad valorem duty (£663) less the 10s. paid under the Order of Upjohn, J. It is from that Order of the Court of Appeal that the appeal now before your Lordships is brought.

My Lords,

the facts have already been sufficiently stated by the noble and learned Lord on the Woolsack. I agree with him that to give logical coherence to what was done your Lordships should treat the three documents executed on the 26th June as having been executed in the following

Before Upjohn, J. the Respondents argued that having regard to section 53 (1) (c) of the Law of Property Act no equitable interest passed to the present Appellant under the contract and therefore Peter's beneficial interest in the settled shares must have passed under the Transfer. The material portions of section 53 are as follows :—

" 53.—(1) Subject to the provisions hereinafter contained with respect " to the creation of interests in land by parol—

• ••••••

" (c) a disposition of an equitable interest or trust subsisting at the " time of the disposition, must be in writing signed by the person " disposing of the same, or by his agent thereunto lawfully authorised " in writing or by will.

" (2) This section does not affect the creation or operation of resulting, " implied or constructive trusts."

Upjohn, J. rejected the Respondents' argument. He held that subsection (2) afforded a complete answer to it, saying:

" This was an oral agreement for value, and accordingly, on the " making thereof, Peter the vendor became a constructive trustee of " his equitable reversionary interest in the trust funds for the Appellant.

" No writing to achieve that result was necessary, for an agreement of " sale and purchase of an equitable interest in personalty (other than " chattels real) may be made orally, and Section 53 has no application " to a trust arising by construction of law."

The Court of Appeal did not accept Upjohn, J.'s conclusion as to the effect of subsection (2) but did not find it necessary to express a concluded opinion as to the effect of section 53.

Before your Lordships Mr. Wilberforce was prepared to agree that on the making of the oral agreement Peter became a constructive trustee of his equitable reversionary interest in the settled funds for the Appellant, but he submitted that none the less section 53 (1) (c) applied and accordingly Peter could not assign that equitable interest to the Appellant except by a disposition in writing. My Lords, with that I agree, but it does not follow that the Transfer was a conveyance of that equitable interest on which ad valorem stamp duty was payable under the Stamp Act, 1891. It might well be that there has been no document transferring the equitable interest. The Appellant may have been content to rely on getting in the legal interest by the Transfer and on the fact that it would be impossible for Peter to put forward successfully a claim to an equitable interest in the settled shares once the consideration shares had been transferred to him or his nominees by the Appellant.

In the Court of Appeal Mr. Wilberforce argued that ad valorem duty was payable on the Transfer since immediately before the execution of the Transfer Peter's equitable reversionary interest remained in him and since the Transfer vested in the Appellant full legal and beneficial title to the settled shares, the Transfer must have operated both to assign to the Appellant Peter's reversionary interest and also the legal estate. The Court of Appeal did not accept this argument as they could see no answer to the objection that Peter was not a conveying party and his equitable reversionary interest was never vested in the transferors.

Mr. Wilberforce argued alternatively that the transfer, read in the light of the contemporary transfer of the consideration shares to Peter's nominees, and of the Deed of Release, was in truth nothing other than the completion and the contemplated method ol' completion of the oral contract and so was a "conveyance or transfer on sale of property" within the meaning of section 54 of, and the First Schedule to. the Stamp Act, 1891. This alternative argument the Court of Appeal accepted, saying:

" The distinction between the two alternative presentations of the " Crown's case may be a fine one, but it is real. It is of the essence of " the former alternative that the transfer operated to convey two separate " and distinct " properties ". viz.. the legal estate and Peter's rever- " sionary equitable interest, the Crown claiming duty in respect of " each ' conveyance '. Though the vendor under the contract need not " be a conveying party, the latter must, as we conceive, be in a position " to convey the property alleged to pass. The second alternative treats " the three documents of 26th June (being the date fixed by the " contract for completion) as contemporaneous, and deduces—particu- " iarly from the terms of the Release—that the Trustees were thus " enabled and entitled to transfer to Mrs. Oughtred (as the Transfer " on the face of it purports to do) the shares themselves with all rights " and benefits attached thereto."

My Lords,

the distinction is too fine for me. The Stamp Act, 1891, imposes stamp duty on documents, not transactions. The Transfer does not attract ad valorem duty unless, to use the language of section 54 of the Act, it is an " instrument . . . whereby any property, or any estate or " interest in any property, upon the sale thereof is transferred to or vested " in a purchaser ". The words " upon the sale thereof " must, in relation to this case, mean " on the sale of Peter's equitable interest". It is, as the Court of Appeal recognise, impossible to say that the Transfer had the effect of transferring the equitable interest since the transferors never had that interest to transfer, nor, in my opinion, can it be said that by the Transfer Peter's equitable interest was vested in the Appellant. The Appellant as a result of what was done on the 26th June was, as the Release

recognised, absolutely entitled to the settled shares, but that was not because the equitable interest was transferred to or vested in her by the Transfer but because Peter, having become a constructive Trustee for her of his equitable interest, could not, after his nominees had received the consideration shares, as they did on the 26th June, 1956, dispute the Appellant's title to the settled shares.

I too, would allow the appeal.

Lord Keith of Avonholm

My Lords,

I have had the advantage of reading the Opinion which will be delivered by my noble and learned friend, Lord Jenkins. I agree with it and have nothing to add.

Lord Denning

My Lords,

Stripped of all trimmings, the case is simply this: the Trustees of a settlement held the legal title in 200,000 shares in trust for Mrs. Oughtred for life and after her death for her son Peter. Mrs. Oughtred also owned 72,700 shares which were her very own. On 18th June, 1956, Peter and his mother agreed by word of mouth that they would, on 26th June, 1956, effect an exchange: He would make over to her his reversionary interest in the 200,000 shares, and she in exchange would make over to him the entire interest in the 72,700 shares. On 26th June, 1956, the exchange was implemented in this way :

(i) By a simple Transfer Mrs. Oughtred transferred her 72,700 shares direct to Peter, or rather to nominees for Peter. It was said to be " in consideration of 10s. "

(ii) Peter did not transfer his reversionary interest in the 200,000 shares direct to his mother but he authorised the Trustees of the settlement to transfer the 200,000 shares to her to the intent that her life interest should be enlarged into absolute ownership of them: The authority so given by Peter was implicit in the recitals of a Deed of Release executed by himself and his mother which was said to be " in consideration of " the premises and of the transfer so to be made as aforesaid ".

(iii) By a simple Transfer the Trustees transferred the 200,000 shares to Mrs. Oughtred. It was said to be " in consideration of 10s.". There is no doubt that the Transfer was intended to. and did, vest in Mrs. Oughtred the absolute ownership of the 200,000 shares both in law and in equity. No interest was left in Peter or anyone else. His reversionary interest was squeezed out. The Trustees would not have dreamed of executing this Transfer unless Peter had authorised them to do it.

Was this Transfer " a conveyance or transfer on sale, of any property " such as to attract stamp duty on the value of the consideration? I have no doubt it was. Peter had agreed to sell his reversionary interest in the 200.000 shares to his mother for a stated consideration (the 72,700 shares). He did not convey 'this reversionary interest direct to her, nor did he convey it to the Trustees of the settlement. But he authorised the Trustees to convey it to her—not in the shape of a reversionary interest as such—but by way of enlarging her life interest into absolute ownership. It is clear to me that, by the Transfer so made by his authority, she acquired his reversionary interest as effectively as if he had conveyed it direct to her. And that is quite enough to attract stamp duty. In my opinion every conveyance or transfer by which an agreement for sale is implemented is liable to stamp duty on the value of the consideration. It is not necessary for the instrument of implementation to be between the same parties as the agreement for

sale, nor for it to relate to the selfsame property as the agreement for sale. Suffice it that the instrument is the means by which the parties choose to implement the bargain they have made. It is then a " conveyance or transfer " on sale " of any property—which I take to mean a conveyance or transfer consequent upon the sale of the property and in implementation of it. Such is, I think, clearly borne out by Attorney-General v. Brown (1849) 3 Ex. 662 and by the illustrations given in the course of the argument. Thus when an equitable owner of shares (registered in the name of a nominee) agrees to sell them to a purchaser, and it is implemented by a transfer by the nominee to the purchaser, the transfer is a conveyance upon sale of any property—although, of course, the parties to the agreement are different from the parties to the transfer. And when two people are equitable co-owners of shares—and one of them agrees to sell his interest to the other—and it is implemented by a transfer of the shares by the trustees (with the authority of the one) to the other, the transfer is a conveyance upon sale of any property—although, of course, the property which is transferred is different from the property in the agreement.

I do not think it necessary to embark upon a disquisition on constructive trusts: because I take the view that, even if the oral agreement of 18th June, 1956, was effective to transfer Peter's reversionary interest to his mother, nevertheless when that oral agreement was subsequently implemented by the Transfer, then the Transfer became liable to stamp duty. But I may say that I do not think the oral agreement was effective to transfer Peter's reversionary interest to his mother. I should have thought that the wording of section 53(1) (c) of the Law of Property Act, 1925, clearly made a writing necessary to effect a transfer: and section 53

(2) does not do away with that necessity.

For these reasons, which are in substance the same as those given by the Master of the Rolls, I would dismiss this appeal.

Lord Jenkins

My Lords,

The question in this case is whether a Transfer under seal dated the 26th June, 1956, whereby the Trustees of the settlement hereinafter mentioned transferred to the Appellant, Mrs. Phyllis Brown Oughtred, 100,000 ordinary and 100,000 preference shares of 10s. each in a company called William Jackson & Son Ltd., attracted ad valorem stamp duty as a conveyance or transfer on sale within the meaning of the head of charge " conveyance " or transfer on sale, of any property . . ." in the First Schedule to the Stamp Act. 1891, or was liable only to the fixed duty of 10s. as a " con- " veyance or transfer of any kind not hereinbefore described ".

The matter came before Upjohn, J. on an appeal by way of Case Stated under section 13 of the Act of 1891 at the request of the Appellant by the Commissioners of Inland Revenue, who had assessed the stamp duty charge- able on the transfer in question at £663 10s. 0d. made up of £663 ad valorem transfer on sale duty together with the fixed duty of 10s.

Upjohn, J. by an Order dated the 3rd December, 1957, allowed the appeal, stated the opinion of the Court to be that the transfer in question was not chargeable with ad valorem duty, declared that it was chargeable with the fixed duty of 10s. only, and ordered the £663 ad valorem duty paid on the Transfer to be repaid.

The Commissioners appealed to the Court of Appeal, and by an Order of that Court (the Master of the Rolls and Morris and Ormerod, L.JJ.) dated the 15th May, 1958, the appeal was allowed, the Transfer in question was held to be chargeable with the ad valorem duty of £663 but not with the fixed duty of 10s., and the present Appellant was ordered to repay to the Commissioners the sum of £662 10s. 0d., being the amount of the ad valorem duty held to be payable, less the fixed duty of 10s. held not to be payable.

From that Order the Appellant now appeals to your Lordships' House.

The facts leading up to the execution of the disputed Transfer are fully set out in the Stated Case and I need not repeat them at length.

Immediately before the making of the oral agreement to which I am about to refer the shares later transferred by the disputed Transfer (which I will call " the settled shares ") were under and by virtue of a Settlement dated the 1st January, 1924, a Deed of Appointment dated the 18th June, 1956, and made by the Appellant, and a Deed of Release also made by the Appellant and dated the 18th June, 1956, and in the events which had happened', held by the Trustees of the Settlement in trust for the Appellant for life with remainder to her only child Peter Bentham Oughtred (whom I will call " Peter "), absolutely.

By an oral agreement made on the 18th June, 1956, between the Appellant and Peter it was agreed that Peter would, on the 26th June, 1956, exchange his interest under the Settlement and the above-mentioned Deed of Appoint- ment and Deed of Release for 28,510 preference shares and 44,190 ordinary shares in William Jackson & Son Ltd. then owned by the Appellant (which I will calf "the free shares") to the intent that the life interest of the Appellant in the trust fund (which consisted wholly of the settled shares) should be enlarged into absolute ownership thereof.

The oral agreement was followed by the execution of three documents, all dated the 26th June 1956, namely: —

(1)a Deed of Release (which I will call " the Release ") made between the Appellant of the first part, Peter of the second part and the Trustees of the Settlement of the third part, which appears in fact to have been executed only by the Appellant and Peter.

A Transfer by the Appellant of the free shares to nominees for Peter expressed to be made in consideration of 10s.

The disputed Transfer, likewise expressed to be made in considera- tion of 10s.

The Release, after recital of the facts to which I have already referred down to and including the oral agreement, the terms of which are fully stated in recital (F), continued in the same recital as follows: —

" (F) . . . The Trust Fund which now consists of" the settled shares " is accordingly now held by the Trustees in trust for " the Appellant " absolutely as the Trustees hereby acknowledge and it is intended that " the same shall forthwith be transferred to " the Appellant " or as she " shall direct".

After a further recital (G) to the effect that the Appellant and Peter being satisfied with all matters and things relating to the execution of the trusts of the settlement had agreed to make the Release thereinafter contained, the Release by its operative part was expressed to witness that " in consideration " of the premises and of the transfer to be made as aforesaid " the Appellant and Peter—to put it shortly—gave the Trustees a general release in respect of their trusteeship of the settlement. The Transfer of the free shares and the disputed Transfer were common form share transfers the terms of which call for no special comment.

As to the order in which the three documents of the 26th June, 1956, were executed, it seems clear from the terms of recital (F) and from the phrase " and of the transfer to be made as aforesaid " in the operative part of the Release, that this document must have been executed before the disputed Transfer, but there is no means of telling whether the execution of the Transfer of the free shares preceded or followed the execution of the Release or, in the latter case, whether it preceded or followed the execution of the disputed Transfer. In my view nothing turns on this, inasmuch as the three documents were interdependent parts of the same transaction, all executed on the same day. I am, however, prepared to assume in the Appellant's favour that the Transfer of the free shares to Peter preceded the Transfer of the settled shares to the Appellant, so that when the Transfer of the settled shares was executed the Appellant had already performed her part of the bargain.

Ad valorem duty was not claimed on the Release or on the Transfer of the free shares, but only on the disputed Transfer.

The provisions of the Stamp Act, 1891, directly relevant to the claim are these:

Section 1 (which contains the charge of stamp duties) provides that the stamp duties " upon the several instruments specified in the First Schedule " to this Act shall be the several duties in the said schedule specified . . ." Section 54 provides as follows: —

" 54. For the purposes of this Act the expression ' conveyance on " ' sale' includes every instrument . . . whereby any property, or any " estate or interest in any property, upon the sale thereof is transferred " to or vested in a purchaser, or any other person on his behalf or by " his direction."

The First Schedule imposes under the head of charge " conveyance or " transfer on sale, of any property " (except as therein mentioned) ad valorem duty upon " the amount or value of the consideration for the sale " ; and under the head of charge " conveyance or transfer of any kind not herein- " before described " a fixed duty of 10s.

Reference should also be made to section 53 of the Law of Property Act, 1925. which (so far as material for the present purpose) provides as follows:- " 53.--(1) Subject to the provisions hereinafter contained with respect " to the creation of interests in land by parol . . . (c) a disposition " of an equitable interest or trust subsisting at the time of the disposition. " must be in writing signed by the person disposing of the same, or by " his agent thereunto lawfully authorised in writing or by will.

" (2) This section does not affect the creation or operation of resulting, " implied or constructive trusts."

The question, then, is whether upon the true construction of section 54 of the Act of 1891, and having regard to the terms and effect of the oral agreement and the nature of the interests with respect to which that agree- ment was made, the disputed Transfer was an instrument whereby property in the shape of the settled shares or any estate or interest in that property was transferred "upon the sale thereof" to a purchaser in the person of the Appellant.

To revert to the terms of the oral agreement, it was made on the 18th June, 1956, and provided that on a fixed future date, namely, the 26th June, 1956, Peter should exchange his interest under the settlement (that is his absolute interest in the settled shares subject to the Appellant's life interest therein) for the free shares belonging to the Appellant to the intent that the life interest of the Appellant in the Trust Fund (that is, in the settled shares) should be enlarged into absolute ownership thereof. The effect of the agreement according to the expressed intention of the parties thus was that on the 26th June the Appellant should become absolutely and beneficially entitled in possession to the settled shares discharged from the Trusts of the settle- ment, subject to her obligation to make over to Peter the free shares which formed the consideration for the exchange, or in other words the considera- tion for the sale to her by Peter of his reversionary interest in the settled shares. By way of corollary to the oral agreement, recital (F) of the Release after stating its terms went on to acknowledge that the Trust Fund, consisting of the settled shares, was accordingly held by the Trustees in trust for the Appellant absolutely and that it was intended that the same should forthwith be transferred to the Appellant or as she should direct.

It is not open to doubt that the oral agreement as above described amounted to an agreement for the sale by Peter, for a purchase consideration consisting of the free shares, of his reversionary interest in the settled shares to the Appellant. It is also plain that the parties intended that the sale should have the effect of enlarging the Appellant's life interest in the settled shares into absolute ownership thereof and should accordingly be completed on the 26th June by an immediate out and out transfer of the settled shares by the Trustees to the Appellant for her own absolute use and benefit, against the satisfaction by her of the consideration due to Peter in the shape of the free shares. The expressed intention of the parties that the Appellant's life interest should be enlarged into absolute ownership appears to me to be

indistinguishable in its effect from an intention that the Appellant's life interest should merge in the reversionary interest, so as to convert that interest into an immediate absolute interest in possession, discharged from the life interest.

Such being the nature of the transaction in connection with which the disputed Transfer was executed, the Appellant's case is put in this way.

It is said, and said truly, that stamp duty is imposed on instruments, not transactions, and that a transaction of sale carried out without bringing into existence an instrument which has the effect of transferring to or vesting in the purchaser the property sold attracts no duty. See per Lord Esher, M.R. in Commissioners of Inland Revenue v. Angus, 23 Q.B.D. 579 at p. 589, where he said:

" The first thing to be noticed is, that the thing which is made liable " to the duty is an ' instrument'. If a contract of purchase and sale, " or a conveyance by way of purchase and sale, can be, or is, carried " out without an instrument, the case is not within the section, and " no tax is imposed. It is not the transaction of purchase and sale " which is struck at; it is the instrument whereby the purchase and " sale are effected which is struck at. And if anyone can carry through " a purchase and sale without an instrument, then the legislature have " not reached that transaction. The next thing is that it is not every " instrument which may be brought into being in the course of a trans- " action of purchase and sale which is struck at. It is the instrument " ' whereby any property upon the sale thereof is legally or equitably " ' transferred'. The taxation is confined to the instrument whereby the " property is transferred. The transfer must be made by the instrument. " If a transfer requires something more than an instrument to carry it " through, then the transaction is not struck at, and the instrument is " not struck at because the property is not transferred by it."

It is said further that in the present case the disputed Transfer transferred nothing beyond a bare legal estate, because in accordance with the well settled principle applicable to contracts of sale between contract and com- pletion the Appellant became under the oral agreement beneficially entitled in equity to the settled shares, subject to the due satisfaction by her of the purchase consideration, and accordingly the entire beneficial interest in the settled shares had already passed to her at the time of the execution of the disputed Transfer, and there was nothing left upon which the disputed Transfer could operate except the bare legal estate.

The Commissioners of Inland Revenue seek to meet this argument by reference to section 53 (1) (c) of the Law of Property Act, 1925. They contend that as the agreement of the 18th June, 1956, was an oral agree- ment it could not, in view of section 53 (1) (c) , effect a disposition of a subsisting equitable interest or trust, and accordingly that Peter's subsisting equitable interest under the trusts of the settlement, in the shape of his reversionary interest, remained vested in him until the execution of the disputed Transfer, which in these circumstances operated as a transfer on sale to the Appellant of Peter's reversionary interest and additionally as a Transfer not on sale to the Appellant of the legal interest in the settled shares. It was by this process of reasoning that the Commissioners arrived at the opinion expressed in the Case Stated that the disputed Transfer attracted both the ad valorem duty exigible on a transfer on sale of the reversionary interest and also the fixed duty of 10s.

This argument is attacked on the Appellant's side by reference to sub- section (2) of section 53 of the Act of 1925, which excludes the creation or operation of resulting, implied or constructive trusts from the provisions of subsection (1). It is said that inasmuch as the oral agreement was an agree- ment of sale and purchase it gave rise, on the principle to which I have already adverted, to a constructive trust of the reversionary interest in favour of the Appellant subject to performance by her of her obligation to transfer to Peter the free shares forming the consideration for the sale. It is said that this trust, being constructive, was untouched by section 53 (1) (c) in view of the exemption afforded by section 53 (2), and that the Appellant's Primary argument still holds good.

I find it unnecessary to decide whether section 53 (2) has the effect of excluding the present transaction from the operation of section 53 (1) (c) , for assuming in the Appellant's favour that the oral contract did have the effect in equity of raising a constructive trust of the settled shares for her untouched by section 53 (1) (c) , I am unable to accept the conclusion that the disputed Transfer was prevented from being a transfer of the shares to the Appellant on sale because the entire beneficial interest in the settled shares was already vested in the Appellant under the constructive trust, and there was accordingly nothing left for the disputed Transfer to pass to the Appellant except the bare legal estate. The constructive trust in favour of a purchaser which arises on the conclusion of a contract for sale is founded upon the purchaser's right to enforce the contract in proceedings for specific performance. In other words, he is treated in equity as entitled by virtue of the contract to the property which the vendor is bound under the contract to convey to him. This interest under the contract is no doubt a proprietary interest of a sort, which arises, so to speak, in anticipation of the execution of the Transfer for which the purchaser is entitled to call. But its existence has never (so far as I know) been held to prevent a subsequent transfer, in performance of the contract, of the property con- tracted to be sold from constituting for stamp duly purposes a transfer on sale of the property in question. Take the simple case of a contract for the sale of land. In such a case a constructive trust in favour of the purchaser arises on the conclusion of the contract for sale, but (so far as I know) it has never been held on this account that a conveyance subsequently executed in performance of the contract is not stampable ad valorem as a transfer on sale. Similarly, in a case like the present one, but uncomplicated by the existence of successive interests, a transfer to a purchaser of the investments comprised in a trust fund could not. in my judgment, be pre- vented from constituting a transfer on sale for the purposes of stamp duty by reason of the fact that the actual transfer had been preceded by an oral agreement for sale.

In truth, the title secured by a purchaser by means of an actual transfer is different in kind from, and may well be far superior to, the special form of proprietary interest which equity confers on a purchaser in anticipation of such transfer.

This difference is of particular importance in the case of property such as shares in a limited company. Under the contract the purchaser is no doubt entitled in equity as between himself and the vendor to the beneficial interest in the shares, and (subject to due payment of the purchase con- sideration) to call for a transfer of them from the vendor as trustee for him. But it is only on the execution of the actual transfer that he becomes entitled to be registered as a member, to attend and vote at meetings, to effect transfers on the register, or to receive dividends otherwise than through the vendor as his trustee.

The parties to a transaction of sale and purchase may no doubt choose to let the matter rest in contract. But if the subject-matter of a sale js such that the full title to it can only be transferred by an instrument, then any instrument they execute by way of transfer of the property sold ranks for stamp duty purposes as a conveyance on sale notwithstanding the constructive trust in favour of the purchaser which arose on the conclusion of the contract.

On this part of the case, reference may be made to Commissioners of Inland Revenue v. Angus (supra) in which the converse question whether an agreement for sale of property in the shape of goodwill amounted to a conveyance of the property for stamp duty purposes under section 70 of the Stamp Act, 1870, was discussed by the Court of Appeal and answered in the negative; and to the observations of Lord Somervell in Escoigne Proper- ties Ltd. v. Inland Revenue Commissioners [1958] A.C. 549 at p. 563.

In the present case recital (F) of the Release plainly shows the intention of the parties to the oral contract to have been that the transaction should be completed by the disputed Transfer, and this seems to me hardly possible to reconcile with the view that nothing passed under it.

A further argument raised on the Appellant's side is to the effect that in any case the disputed Transfer was not a transfer of the property sold, but was a transfer of the settled shares, whereas the property sold was Peter's

reversionary interest. It is said that the disputed Transfer was accordingly outside the definition in section 54 of the Act of 1891 because it was not an instrument whereby property or any estate or interest therein was transferred on a sale thereof.

I cannot accept this argument, in considering which I adhere to the assump- tion made above as to the exclusion of section 53 (1) (c) of the Act of 1925. It appears to me that in transferring the settled shares to the Appellant the disputed Transfer was transferring to her the property then representing the reversionary interest, which under the oral contract had been converted into an immediate interest in possession by virtue of the expressed intention that the sale to the Appellant of the reversionary interest should have the effect of enlarging her life interest into absolute ownership, which, as I have said above, appears to me to be indistinguishable from an intention that the Appellant's life interest should merge in the absolute reversionary interest.

It is obvious that the sale of an absolute interest in remainder such as this includes the absolute interest in possession in the property comprised in it when it falls into possession. Here, as it seems to me, the reversion was brought into possession in the hands of the Appellant by the merger of her life interest, which was necessary if she was to be put in a position to call for an immediate transfer of the settled shares, as it was intended she should be; and accordingly the settled shares as transferred to her actually represented the reversionary interest which she had bought and which had been converted into an immediate interest in possession by the terms of the oral agreement.

One may take by way of illustration the simple case of an agreement for the sale of a reversionary interest in a trust fund subject to a life interest. Suppose in such a case that the life-tenant dies while the matter rests in contract, and that after the life-tenant's death the trustees of the settlement, by the direction of the vendor and purchaser, transfer to the purchaser by appropriate instruments the investments then representing the trust fund. In such a case it would, I should have thought, be impossible to maintain that such instruments did not constitute transfers whereby the investments were transferred to the purchaser on a sale thereof, on the ground that what he purchased was the reversionary interest whereas the property conveyed to him consisted of the investments.

This, it appears to me, would also have been the position here if the Appellant had died between the 18th and the 26th June, 1956, and her personal representatives had called for a transfer of the settled shares to implement the oral agreement.

In that event it would, in my view, have been impossible to contend that the Transfer of the settled shares was not a transfer of property on a sale thereof within the meaning of section 54. The property sold would have been the reversionary interest and the property transferred would have consisted of the property comprised in the reversionary interest upon its falling into possession.

I do not see why there should be any difference in result between the imaginary case of the reversionary interest falling into possession by the death of the life-tenant and the actual case now before your Lordships, in which the reversionary interest was brought into immediate possession by merger of the life interest.

It can at all events safely be said that the life interest and the reversionary interest either continued in existence as separate items of property or they did not. I think the terms of the oral agreement were consistent only with the merger of the life interest and the consequent acceleration of the rever- sionary interest sold, so as to bring it, and the shares which it comprised, into immediate possession.

(a) the Appellant's life interest and (b) Peter's

absolute interest in remainder expectant on the Appellant's life interest. If that was the position, then, as it seems to me, the disputed Transfer must have operated to transfer to the Appellant an estate or interest in property (namely, in the settled shares) consisting of Peter's interest in the shares in remainder expectant on the death of the Appellant, which interest had undeniably been sold to the Appellant by Peter.

I should next refer to the point taken on the Appellant's side that the

disputed Transfer was made not by the vendor, namely Peter, but by the Trustees. In my view there is no substance in this. Where property sold is outstanding in some person other than the vendor, being a trustee for or nominee of the vendor so as to be bound to transfer the property according to the vendor's direction, then in my view a transfer by such person at the direction of the vendor is for the present purpose equivalent to a transfer by the vendor himself. See. for example, Attorney-General v. Brown, 3 Ex. 662, and consider the common case of sub-sales of land in which the vendor conveys by the direction of the original purchaser to the sub-purchaser. It is plain enough from the Release in the present case that the disputed Transfer was made in effect by the direction of both beneficiaries.

I cannot accept Upjohn. J.'s view that the disputed Transfer was not stampable ad valorem because it was a Transfer not on sale but on the winding up of the Trust. This seems to me to beg the question. The fact that the disputed Transfer was made on the winding up of the Trust does not. in my view, prevent it from being also a transfer on sale.

Let a case be supposed in which trustees hold a net fund in trust for some person who before the fund is distributed orally agrees to sell his interest to a purchaser, and upon the conclusion of this agreement the original beneficiary and purchaser from him direct the trustees to transfer the invest- ments representing the fund to the purchaser against a proper Release, and the trustees execute the appropriate transfers accordingly. In such a case it appears to me that the resulting transfers would plainly be transfers on sale although they also effected the winding up of the trust.

For the reasons I have endeavoured to state I am of opinion that this appeal fails and should be dismissed.

(32680) Wt. 8056-5 35 12/59 D.L./PA/19

order

—(1) the transfer by the Appellant to her son Peter of the shares which were the consideration for the oral agreement by Peter to make her the absolute beneficial owner of the settled shares;

(2) the Deed of Release ;

(3) the Transfer.