Lawson v Revenue Commissioners

• Jurisdiction: Ireland
• Judgment Date: 07 November 1895
• Date: 07 November 1895
• Court: Exchequer Division (Ireland)

Lawson

and

The Commissioners of Inland Revenue.

Ex. Div.

CASES

DETERMINED BY

THE QUEEN'S BENCH AND EXCHEQUER DIVISIONS

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL,

AND BY

THE COURT FOR CROWN CASES RESERVED.

1896.

Revenue — Estate duty — Finance Act, 1894 (57 & 58 Vict. c. 30, s. 2) — Property situate out of the United Kingdom — Foreign mortgages — Legacy Duty Acts, construction of — Implied repeal of earlier by later statute — 56 Geo. c. 56, s. 115; 5 & 6 Vict. c. 82, s. 2.

A testatrix domiciled in Ireland died possessed of mortgages on freehold property situate in the colony of Victoria and in Switzerland.

The Finance Act, 1894, sect. 1, imposes on the property, real or personal, which passes on the death of a person dying after the commencement of the Act, a duty, called “Estate Duty.” Section 2 (2) enacts that “property passing on the death of the deceased, when situate out of the United Kingdom, shall he included only if, under the law in force before the passing of this Act, legacy or succession duty is payable in respect thereof, or would be so payable but for the relationship of the person to whom it passes.”

56 Geo. 3, c. 56, s. 115 (Ir.), enacts that “the stamp duties from time to time imposed by law upon receipts for legacies or shares or proportions of any estate or effects, shall be deemed and taken to be chargeable and charged, and payable and paid, only in respect of such legacies as shall be payable out of estates and effects in Ireland.”

5 & 6 Vict. c. 62, repealed the duties payable in Ireland under 56 Geo. 3, c. 56, and substituted the duties then payable in England under 55 Geo. 3, c. 184.

The Commissioners of Inland Revenue having decided that estate duty was payable in respect of these mortgages, the executors presented a petition under the Finance Act, 1894, to have the question determined by the Court. It was contended on behalf of the executors that estate duty was not payable on two grounds: first, that the mortgages were immoveable property, situate out of the United Kingdom, and therefore not liable to legacy duty before the passing of the Finance Act, 1894; and, secondly, that the mortgages were “estates and effects” out of Ireland, and therefore exempt from duty under 56 Geo. 3, c. 56, s. 115, which was still in force.

It was contended on behalf of the Commissioners, first, that the mortgages were personal or moveable property, and therefore liable to legacy duty; and, secondly, that 56 Geo. c. 56, s. 115, was impliedly repealed by 5 & 6 Vict. c. 82:—

Held, that the contention of the Commissioners on both points was correct, and that estate duty was payable.

Petition.

This was an appeal by way of petition under the Finance Act, 1894, by the executors of the late Mrs. J. M. Lawson of Dublin, against the decision of the Commissioners of Inland Revenue that estate duty was payable under the above Act upon certain mortgages situate out of the United Kingdom, on the ground that legacy duty would have been payable in respect of them before the passing of the said Act, and that therefore by section 2, sub-sect. 2 of the Act, they were liable to estate duty.

The material facts of the case were stated in the petition of the executors, which was entitled “In the matter of the Finance Act, 1894, and in the matter of the estate duty on the property passing on the death of Jane Margaret Lawson, late of 27, Upper Fitzwilliam-street in the city of Dublin, widow,” and were as follows:

The deceased was at the time of her death possessed of property situate out of the United Kingdom, namely a mortgage upon house property in Switzerland and mortgages on lands situate in the colony of Victoria. The above property was mentioned in the affidavit of the petitioners for the Inland Revenue, but they contended that it was not liable to estate duty. The Commissioners of Inland Revenue having notified in writing to the solicitors for the petitioners that they were advised that estate duty was payable, the petitioners being desirous of applying to the Court pursuant to the said Act, delivered to the Commissioners a written statement of the grounds of their appeal pursuant to the Rules of Court made under the said Act. These grounds were as follows:—

1. That the said mortgages were immoveable property situate out of the United Kingdom. 2. That the said mortgage debts were locally situate in Switzerland and Victoria respectively, and could not be considered as mere debts or choses in action apart from the property on which they were secured, or regarded as moveable property. 3. That the said mortgages and mortgage debts were property situate out of the United Kingdom, and that no legacy or succession duty would have been payable in respect thereof prior to the passing of the Finance Act, 1894, and that therefore no estate duty was payable in respect thereof under the said Act. 4. That in or about the year 1892 possession was taken on behalf of the mortgagee of the premises comprised in one of the Victorian mortgages, namely a mortgage for £600, and that the deceased as mortgagee was by her agent and receiver in possession of the rents and profits thereof at the date of her death, and that no estate duty was payable under the said Act in respect of the moneys secured by the said mortgage for £600.

The said Commissioners notified in writing to the solicitors for the petitioners that they had determined to maintain in the whole their claim for estate duty in respect of the said property, on the ground that the said mortgages were personal property in respect of which under the law in force before the passing of the Finance Act, 1894, legacy duty was payable or would be so payable but for the relationship of the person to whom it passed, and as such should be included under section 2 (2) of the said Act, as property passing on the death of the deceased.

The Commissioners filed an answer, admitting the above facts, and stating that at the time of her death the deceased was domiciled in Ireland, and repeating the grounds relied on by them as above stated.

The petition having been set down for hearing, now came on before the full Court.

Samuels, Q. C. (with him, Frederick Fleming), for the petitioners:—

First, the mortgages are immoveable property situated out of the United Kingdom, and are not liable to legacy duty, which attaches only to moveable property situate abroad. That a mortgage is immoveable property appears from Story's Conflict of Laws, s. 447; Westlake's Private International Law, ss. 148,150; Dicey on Domicil, p. 38. In Freke v. Lord Carbery (1) the passage from Story referred to is cited with approval, as it is also in In the Goods of Gentili (2), where it is pointed out that the distinction is between things moveable and immoveable and not between things real and personal. It was held in these two cases that leasehold property, though a chattel real, and personal estate according to English law, is immoveable property, and follows the lex loci rei sitœ, and

not the law of the domicil of the deceased. The passage in Hanson on Succession Duty, p. 160, to the effect that a mortgage debt is to be considered as assessable in the domicil of the mortgagee on the ground that the debt is to be considered apart from the security itself, is not supported by authority, and cannot apply to the mortgages situate out of the United Kingdom. In Trevor on Succession Duty, p, 60, the opinion is expressed that the liability to legacy duty of immoveable property such as leasehold property and real estate pur autre vie and of legacies charged upon or payable out of real estate is not affected by domicil. See also So ward on the Finance Act, 1894, p. 10. If the mortgagee dies, although the money goes to his executor, it is the charge on the land that vests in him, and not the mere debt. The land is given as security for the money. Attorney-General v. Lord Sudeley (1) shows that the mortgages here are assets in the colony of Victoria. Walsh v. The Queen (2) is in favour of the petitioners. The contention of the Crown here, as there, is that the personal obligation of the debtor is what is to be looked to in considering whether legacy duty is payable. That case goes the whole length of our contention, namely, that the mortgage is to be considered as assets where the mortgaged lands are situate, and that what is to be regarded is the immoveable security and not the mere personal obligation of the mortgagor.

That a mortgage is an interest in land is further shown by the decisions in England that a mortgage cannot be disposed of in mortmain in that country. See Cornford v. Elliott (3), where it was held that a mortgage was an interest in land under 9 Geo. 2, c. 36, s. 3, which could not be given by will to a charity. The point is not, is the mortgage real estate, but is it moveable property? It may become moveable, if e.g., the money is recovered by action from the mortgagor. So, too, if the testatrix had had lands in the Colony, and they had been sold, the proceeds would have become moveable. The contention of the Crown would not be maintainable if the property here were chattels real. See Freke v. Lord Carbery (4), and In the Goods of Gentili (5).

As a chattel real is an estate or interest in land, so a mortgage creates an estate or interest in land. That the dominant factor in a mortgage is the land is shown by Sutton v. Sutton (1), where it was held that if the remedy against the land was gone, the personal remedy was gone also. That case is cited with approval in Lindsell v. Phillips (2). If the contention of the Crown is right that the personal obligation of the mortgagor is what is to be looked at, then a legal mortgage would be placed in an inferior position to an equitable mortgage by deposit of title deeds by reason of the existence of the covenant in the legal mortgage. The cases in which it has been held that legacy duty is...