Attorney General for Ireland v Jameson

• Jurisdiction: Ireland
• Judgment Date: 13 February 1904
• Date: 13 February 1904
• Year: 1904
• Court: High Court

His Majesty's Attorney-General For Ireland

Informant

and

John Jameson, George Jameson, and Wm. Robertson

Defendants (1)

K. B. Div.

CASES

DETERMINED BY

THE KING'S BENCH DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL,

AND BY

THE COURT FOR CROWN CASES RESERVED.

1904.

Company — Articles of association — Shares — Restrictions on transfer — Right of pre-emption — Estate duty — Principle of valuation — Sale in open market — Property passing on death — Repugnancy — Rule against perpetuity — Companies Act, 1862 (25 & 26 Vict. c. 89), s. 16 — Finance Act, 1894 (57 & 58 Vict. c. 30), ss. 1, 2, 3, 5; 7, sub-s. 5; 13, 22 (b).

By will, dated the 26th July, 1901, a testator devised all the residue of his property to his executors upon trust, to pay the interest of one-sixth part thereof to each of five of the testator's sons and daughters, respectively, for life; and of the remaining one-sixth part, to such of the children of a deceased daughter as should then be living, in equal shares; and he directed that, subject to the said life estate, his trustees should hold the said respective sixth parts or shares (save as to the share of one daughter, which, after her death, was to be held in trust for the remaining residuary legatees) upon trust, for such person or persons as the parties respectively entitled to a life interest in the said shares might by deed or will appoint.

The testator died on the 15th September, 1901, and the said will was duly proved by the three executors therein named. The residuary estate of the testator included 750 fully paid-up shares in the firm of J. J. & Son, Ltd., a Company registered on the 9th October, 1891, under the Joint Stock Companies Acts, dividends upon which had been paid by the Company for some years previously to the testator's death at the rate of twenty per cent. per annum.

The articles of association of the Company contained an elaborate series of provisions relating to the registration of holders and to the alienation of shares in the Company, whereby it was (inter alia) provided that any member proposing to transfer a share should serve a “transfer notice” upon the Company (who were not bound to recognise any equitable claim in a share) of his intention to transfer, which notice constituted the Company his agent for the sale of the share to any member at the “fair value thereof,” the latter being defined as a sum of £100, or such other sum as should from time to time be fixed as the “fair value” by resolution of the Company in general meeting. No share could, save as therein provided, be transferred to a non-member so long as any member was willing to purchase the same at the “fair value,” the directors being empowered to refuse to register any transfer to a non-member

of whom they did not approve, such transfer being void. Upon the Company, within twenty-eight days after the service of the “transfer notice,” finding a member willing to purchase, the retiring member was bound, upon payment of the “fair value,” to transfer the share to the purchasing member, in default of which the Company might receive the purchase-money and enter the name of the purchasing member in the register as the holder of the share. In the event of the Company not finding a purchaser within the twenty-eight days specified, the retiring member might, within three months, sell and transfer the share to any person, subject to the approval of the directors, and at any price. It was also provided that the executors or administrators of a deceased member should be the only persons recognised by the Company as having any title to the shares registered in the name of such member, and that any person becoming entitled to a share in consequence of the death of any member might, subject to the regulations contained in the articles, transfer such share to himself or any other person; the executors of a deceased member being further empowered, subject to the approval of the directors, to transfer the share of such member to his son or brother, or to any son or brother of any existing member.

Upon the death of the testator the executors paid for estate duty in respect of the said 750 shares a sum calculated on the basis that the value thereof was, having regard to the right of pre-emption and restrictions on transfer and sale contained in the articles, limited to the “fair value” of each share fixed by the articles at £100, and refused to pay any further duty.

On an information by the Attorney-General, seeking a declaration that on the death of the testator estate duty became payable, under the Finance Act, 1894, upon the principal value of the said shares, being the price which same would fetch if sold in the open market at the time of the testator's death, and that such value was not limited to the “fair value” of £100 a share, or for the determination of the manner in which such value was to be ascertained:—

Held, (1) That the principal value of the shares to which the testator was entitled at the time of his death was to be estimated at the price which the same would, in the opinion of the Commissioners of Inland Revenue, fetch if sold in open market at the time of such death, and that such principal value was not necessarily limited to the par or “fair value” of £100 a share.

(2) Per Boyd and Kenny, JJ. (Palles, C.B., diss.), that in estimating such principal value regard was to be had by the Commissioners to the special provisions in the articles of association with reference to alienation and transfer of the shares of the Company, and as to the “fair value” thereof.

(3) Per Boyd and Kenny, JJ., that the articles of association were not invalid, either as infringing the rule against perpetuity, or as being repugnant to the right of alienation inherent in absolute ownership.

Held, per Palles, C.B. (without expressing any opinion as to the validity of the articles), that inasmuch as the entire legal and equitable interest in the shares was vested in the testator at the time of his death, the whole of such interest formed portion of the deceased's property passing on his death within section 1 of the Finance Act, 1894, and was accordingly subject to the payment of estate duty, that portion of the value of the shares which represented the right of pre-emption being properly within section 2, sub-section (b) of the Act, and therefore deemed to pass, and that, on the true construction of section 7, sub-sect. 5, of the Finance Act, the valuation of the shares ought to be based upon a supposititious, not an actual, sale in the open market, excluding the consideration of such provisions in the articles of association as would prevent a purchaser at the sale from becoming a member of the Company, and registered as such in respect of the shares purchased by him at such supposititious sale.

Borland's Trustee v. Steel, Bros., & Co., Ltd. ([1901] 1 Ch. 279), followed.

Information at the suit of His Majesty's Attorney-General for Ireland, on behalf of His Majesty, addressed to the Right Honourable the Lord Chief Justice of Ireland, and to the rest of the Judges of the King's Bench Division of the High Court of Justice in Ireland, as follows:—

Henry Jameson, late of Hermitage, Roebuck, in the county of Dublin, deceased, by his will, dated 26th July, 1901, appointed his two nephews, the defendants John Jameson and George Jameson, and his son-in-law, the defendant William Robertson, the executors thereof, and, after divers pecuniary and other bequests, devised all the rest of his property to his executors (thereinafter called his trustees) upon trust out of his said properties and effects other than his shares in the firm or business of John Jameson & Son, Ltd., Bow-street Distillery, in the city of Dublin, to pay or transfer to the defendant William Robertson the sum of £47,000, to be held by him upon trust to set apart such parts thereof, and to pay the dividends and interest in such parts during the times and to the persons therein particularly mentioned; and the testator directed that in case the property he should leave, other than his shares in the said firm of John Jameson & Son, should not be sufficient to pay the said sum, then his trustees should, out of the dividends, interest, and income of his entire properties and effects, including the said shares in the firm of John Jameson & Son, Limited, pay the dividends and interest on said sums, together also with the annuities therein mentioned to the persons therein specified. The testator (inter alia) directed that his trustees should hold the rest, residue, and remainder of his estate and effects, including therein his shares in John Jameson & Son, Limited, upon trust to pay the dividends, interest, and profits of one-sixth part thereof unto his son, John George Jameson, for his life; of one other sixth part thereof to his son, Henry Robert Jameson, for his life; of one other sixth part thereof to his daughter, Margaret Robertson, for her life, for her sole and separate use; of one other sixth part thereof to his daughter, Anna Jameson, for her life, for her sole and separate use; of one other sixth part thereof, to his daughter, Elizabeth Alice Jameson, for her life, for her sole and separate use; and of the remaining one-sixth part thereof to such of the children of his deceased daughter, Isabella Mary Cardew, as should be living, in equal shares; and he thereby directed that, subject to the respective life-estates thereinbefore given in the said several sixth parts of his said residuary estate, his trustees should hold the said respective sixth parts or shares of his said residuary estate, except the one-sixth share of his daughter, the said Anna Jameson (which after her death he directed to be held upon trust for the remaining residuary legatees), upon trust for such person or persons as the person or persons respectively entitled to a life-interest in the said respective sixth parts, except as thereinbefore...