Re Cochrane

• Jurisdiction: Ireland
• Judgment Date: 26 February 1906
• Date: 26 February 1906
• Court: King's Bench Division (Ireland)

In re The Finance Act, 1894, and Cochrane (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.

1905.

Revenue — Estate duty — Settlement — Gift inter vivos — Interest retained by settlor — Customs and Inland Revenue Act, 1881 (44 & 45 Vict. c. 12), sectton 38 (2), as amended by the Customs and Inland Revenue Act, 1889 (52 Vict. c. 7), section 11, and the Finance Act, 1894 (57 & 58 Vict. c. 30), section 2 (c).

C. made a settlement more than twelve months before his death, whereby he conveyed a mortgage debt of £15,000 to trustees, upon trust to pay £575 of the income to his daughter S. for life, and after her death in trust for her children who should answer a particular description, with power, however, by her will, to appoint to her husband during his life a yearly sum of £300, payable out of the income. If there should be no child who would answer the description specified, the trustees were to hold the trust funds after the death of S. (but subject to the annuity to S.'s husband) in trust for C. absolutely. The trustees, during the life of S., were to hold the balance of the income, after the payment of the yearly sum of £575 to S. or the annuity to S.'s husband, upon trust for C. absolutely:—

Held, that, upon the death of C., neither the ultimate contingent trust for C. of the corpus of the fund, nor the trust for C. of the surplus income, rendered the gift one “of which bona fide possession and enjoyment shall not have been assumed by the donee immediately upon the gift, and thenceforward retained to the entire exclusion of the donor, or of any benefit to him by contract or otherwise,” within the meaning of clause (a) of the Customs and Inland Revenue Act, 1881, sect. 38 (2), as amended by sect. 11 of the Customs and Inland Revenue Act, 1889, and the Finance Act, 1894, sect. 2, clause (c) (2).

Held, also, that the settlement did not reserve to the settlor any interest “for life, or any other period determinable by reference to death,” within the meaning of clause (c) of the Customs and Inland Revenue Act, 1881, sect. 38 (2), as amended by sect. 11 of the Customs and Inland Revenue Act, 1889, and the Finance Act, 1894, sect. 2, clause (c) (2).

Held, therefore, that neither estate duty nor “settlement estate duty” was payable by the executors of C. in respect of such part of the £15,000 as constituted the benefits conferred upon S., her issue and her husband.

Held, also, that “estate duty,” but not “settlement estate duty,” was payable in respect of the expectancy of C. in the £15,000, in the event of there

being a failure of children to take under the trusts, but that the executors were entitled to postpone payment until the interest might fall into possession.

Held, also, that estate duty, but not settlement estate duty, was payable in respect of the principal value of the interest of C. during the lifetime of S. in the surplus income over the £575 a-year.

Petition.

By an indenture of September 4, 1902, between the late Sir Henry Cochrane of the one part, Ernest Cecil Cochrane and James Robertson Coade as trustees of the other part, Sir Henry Cochrane directed and declared that the trustees should stand possessed of the sum of £15,000, and all interest to become due on same, and the benefit of all securities for the same, in trust out of the income to pay the sum of £575 to Sara Elizabeth Graham Day for her life for her separate use, without power of anticipation, and after her decease, in trust, as to the said sum of £15,000, for such child or children, or remoter issue, of Sara Elizabeth Graham Day, by her present or any after-taken husband, at such age or time, or ages or times (not being earlier as to any object of.

that power than his or her age of twenty-one years, or day of marriage), in such shares, if more than one, and upon such conditions, and in such manner as Sara E. G. Day should by deed or deeds, or by her last will, appoint, and, in default of such appointment, or so far as same should not extend, for all the children of Sara E. G. Day, who being sons should attain the age of twenty-one years, or being daughters should attain that age or marry; and if only one child, then the whole to be in trust for that child. It was provided that, notwithstanding the preceding trust, it should be lawful for Sara E. G. Day, by her will, to appoint to her husband, Joseph Michael Day, during his life, a yearly sum not exceeding £300 payable out of the income of the £15,000. If there should be no child of Sara E. G. Day, whether by her present or any after-taken husband, who being a son, should attain the age of twenty-one years, or being a daughter should attain that age or marry under that age, the trustees should hold the trust funds after the death of Sara Elizabeth Graham Day (but subject to the payment to Joseph M. Day of any annuity appointed to him) in trust for Sir Henry Cochrane absolutely; the trustees should, during the life of Sara E. G. Day, hold the balance of the income of the £15,000 after payment of the yearly sum of £575, or the annuity to Joseph M. Day, upon trust for Sir Henry Cochrane absolutely.

The sum of £15,000 was, at the time of the execution of this indenture, invested on mortgage at 4¹/₂ per cent. per annum on properties of Lord Clanmorris known as the Cloughline estate and Summerhill estate, both in the county of Mayo, and by two indentures executed prior to, but of even date with, the indenture of trust, the mortgage debt of £15,000 and all securities therefor were, at the request of Sir Henry Cochrane, transferred to and vested in the trustees.

Ever since the execution of the indenture the trustees had been in bona fide possession of the £15,000, and had received yearly the interest from Lord Clanmorris, amounting to £675 per annum, and had paid in each year, up to the month of June, 1904, the sum of £575 to Sara E. G. Day, and £100, the balance of the income, to Sir Henry Cochrane.

Sir Henry Cochrane, on March 4, 1904, wrote to Sara E. G. Day that he gave her a life interest in the balance of the income over £575, and shortly after he directed the trustees to pay in future the entire of the income on the £15,000 to Sara E. G. Day during her life, and the trustees accordingly had since paid to her the entire of the income.

Sir Henry Cochrane died on September 11, 1904, and probate of his will was, on November 1, 1904, duly granted to David Francis Moore, of 46 Kildare-street, Dublin, and James R. Coade, of Carlton, Sandford-road, Ranelagh, the executors.

The Commissioners of Inland Revenue claimed payment of estate duty at 7¹/₂ per cent., and settlement estate duty at 1 per cent., on the death of Sir Henry Cochrane on the entire £15,000, and the executors, who acted in the matter at the request of the trustees, were obliged to pay to the Commissioners £1268 15s. 4d.

The executors submitted that neither estate duty nor settlement estate duty was payable on the death of Sir Henry Cochrane on the interests in the sum of £15,000 given by the indenture of September 4, 1902, to Sara E. G. Day, her husband and children, that there was an absolute and complete gift of these interests respectively, and that in such interests Sir Henry Cochrane did not reserve to himself, either expressly or by implication, any interest whatsoever, or any right by the exercise of any power to restore to himself the absolute interest in those interests, or the proceeds of sale thereof, and that the interests were given bona fide more than twelve months before the death of Sir Henry Cochrane, and that possession and enjoyment of those interests were bona fide assumed and enjoyed by the trustees and Sara E. G. Day immediately on the execution of the indenture, and thenceforth retained to the entire exclusion of Sir Henry Cochrane, or of any benefit to him by contract or otherwise.

The executors admitted that estate duty was payable in respect of the interest, under the trust indenture of the late Sir Henry Cochrane, in the £15,000 contingent upon the decease of Sara E. G. Day without issue who would take interests; but they claimed that they were entitled, under section 7 (6) of the Finance Act, 1894, to defer payment of such estate duty until the contingent interest fell into possession. They further submitted that no settlement estate duty was payable in respect of this contingent interest, as it was not settled by the will or by the trust deed; nor did it pass under any disposition on the death of Sir Henry Cochrane to any person not competent to dispose of it.

The executors admitted that estate duty was payable in respect of the capital value of the life interest of Sara E. G. Day in the balance over and above the sum of £575 of the income of the £15,000 given to her by Sir Henry Cochrane within twelve months of his death; but submitted that settlement estate duty was not payable in respect thereof for the same reasons, as exemption was claimed for the contingent interest.

The Commissioners of Inland Revenue submitted that estate duty at the rate of 7¹/₂ per cent., and settlement estate duty at the rate of 1 per cent., were properly assessed by them on the death of Sir Henry Cochrane, in respect of the sum of £15,000 under the provisions of the Finance Act, 1894, sects. 1, 2 (1) (c), and 5 (1). They claimed that under the circumstances there was not an absolute and complete gift to Sara E. G. Day and her children and husband of the interest mentioned in the £15,000. Such interests were not given bona fide more than twelve months before the death of Sir Henry Cochrane; bona fide possession and enjoyment of the interests were not assumed by the trustees, or by Sara E. G. Day, immediately upon the execution of the trust deed, and thenceforward retained to the entire exclusion of Sir Henry Cochrane, or of any benefit to him by contract or otherwise, but...