Re Codd; Fitzgerald v Codd

JurisdictionIreland
CourtSupreme Court
Judgment Date08 Dec 1937

Supreme Court.

In re Codd; FitzGerald v. Codd.
In the Matter of the Estate of EUGENE F. CODD, Deceased; EDWARD M. FITZGERALD and JOHN E. GEOGHEGAN
Plaintiffs
and
REBECCA TERESA CODD and CHARLES H. O'CONOR
Defendants.
and by order to proceed
SAME
Plaintiffs
and
GEORGE AUGUST KING MAGEE and ROBERT STANLEY STOKES, Executors of REBECCA TERESA CODD, Deceased, and CHARLES H. O'CONOR
Defendants.

Will - Construction - Bequest of residuary estate, real and personal, upon trust for conversion - Trustees to pay income to wife for life - Pending contract of malting at date of death - Payment by commission on barrels of barley received for malting - Process completed at date of death - Delivery not completed - Whether commission residuary estate or income of estate.

Summary Summons.

The plaintiffs were two of the trustees of Eugene Francis Codd, deceased, who died on the 1st March, 1935, having made his will on the 2nd September, 1933, and a codicil thereto dated the 10th August, 1933. The material provisions of the will have been summarised in the headnote and are stated in the judgment of Meredith J., as also are the material facts of the case.

The summary summons was brought to have the following questions determined by the Court:—

"1. Do the net profits derived from the malting business carried on by the deceased for the period between the 1st September, 1934, and the 7th September, 1935, form part of the estate of the deceased?

2. Are the net profits income of the residuary estate of the deceased and payable to the defendant, Rebecca Teresa Codd, as tenant for her life of the residuary estate?

3. Are the said net profits in part portion of the estate of the deceased and in part income of the residuary estate? If the answer be in the affirmative, how, and in what sums, are the same divisible between the executors of the deceased and the defendant, Rebecca Teresa Codd?"

The defendant, Charles H. O'Conor, applied to the Supreme Court (1) by way of appeal from that part of the order of Meredith J. which declared that, in calculating the net profits of the malting business as from the date of the death of the deceased, commission payable under the contract between the deceased and Messrs. Arthur Guinness, Son & Co., Ltd., in respect of barrels of malt delivered after the date of the death of the deceased, and expenditure incurred

after the said date for the purposes of the said contract, were to be included, and commission so payable in respect of barrels delivered and expenditure incurred for the said purposes prior to the date of the death of the deceased were to be excluded. In lieu thereof, he applied for a declaration that the value of the work done prior to the date of the death of the deceased in respect of the barrels of malt delivered after the date of death was part of the estate of the deceased, and that the net profits only of the barrels of malt delivered after the date of death of the deceased were portion of the income of the residuary estate, and that in calculating such net profits the expenditure in respect of the said barrels of malt incurred prior to the date of the death was to be included.

The grounds of the appeal were set out as follows:—

1. That the learned Judge misdirected himself in law in making the part of the order appealed against.

2. That the learned Judge was wrong in holding that the assets of the deceased should not include any sum to be allowed in respect of the value of the work done and services rendered on the malt which was in store or any barley in process of treatment which was not delivered until after the date of the death.

3. That the learned Judge was wrong in holding that the entire sum received in respect of the barrels delivered after the date of the death must be entered on the receipts side of the profit and loss account to be made out as an account from 1st March, 1935, and that no entry should be made on the debit side of such account in respect of the expenditure on the malt delivered after the date of the death.

A cross notice was served on behalf of the respondents, George Augustus King Magee and Robert Stanley Stokes that, on the hearing of the appeal, they would submit and consent that the order of Meredith J. should be varied as follows:—

1. By discharging the declaration made in the said order in answer to Question 3 and the reference therein to Questions 1 and 2.

2. By substituting therefor declarations that the Court doth answer the said Question 1 in the negative and said Question 2 in the affirmative, and doth not deem it necessary to answer said Question 3.

The cross notice stated that the respondents would rely on that notice and on the letter of 10th February, 1937, written by their solicitors to the solicitors for the appellant. The said letter is set forth in the judgment of FitzGibbon J.post.

By his will, a testator, after making a number of specific and pecuniary bequests, left all the residue and remainder of his property, whether real or personal, to trustees upon trust to sell, call in and convert into money, with power to postpone such conversion, and he directed the trustees to hold the said residuary real and personal estate before, pending and after conversion upon trust to pay the annual income thereof to his wife during her life and upon further trusts. He authorised his trustees to carry on the trade or business of master carried on by him during such period (but no longer) as might be necessary to complete the existing contracts for the manufacture of malt during the current malting season and for that purpose to retain and employ therein capital which should at his death be employed therein.

At the date of his death, there, was an existing contract for the manufacture of malt for one firm of brewers. By the terms of the contract, the testator was to receive a commission of 8s. 6d. per barrel of barley received for malting and the malt was to be stored and from time to time delivered as required by the brewers. Prior to his death, a number of barrels of barley had been received by the testator under the contract and the barley had been malted but only about half the malt had been delivered. The remainder of the malt was kept in store after his death and delivered from time to time to the brewers. The brewers, shortly after his death, paid the full amount of the commission due under the contract to his executors.

Held by the Supreme Court (Sullivan C.J., FitzGibbon, Murnaghan and Geoghegan JJ.), reversing Meredith J., that the amount so paid formed part of the residuary estate of the testator and no part of it was income of that estate.

Cur. adv. vult.

Meredith J. :—

The deceased by his will devised and bequeathed the residue of his real and personal estate to his trustees upon trust for sale, and he directed that his trustees should hold the said residuary real and personal estate both before and after conversion upon trust to pay the annual income thereof to his wife, Rebecca Teresa Codd, during her life, and after her death upon the further trusts therein mentioned.

A large portion of the said residuary estate consisted of the premises in which the decased carried on a malting business, together with the goodwill of the said business.

The Court is asked to determine several questions in respect of the net profits derived from the malting, but the real questions that require to be determined do not seem to me to be questions that arise immediately as questions in respect of the net profits of the business for the malting season.

As from the death of the deceased, which occurred on 1st March, 1935, the tenant for life was entitled to the income of the residuary estate, and, so long as the malting business was carried on, that income would include the net profits of the malting business. It is only as from that date that the distinction between net profits, or income, and capital, becomes material, and as from that date the question of what is capital and what income does not seem to present any difficulty. What was income and what capital prior to 1st March is immaterial, since either way it equally, and undistinguished, comes into the hands of the executors and trustees, who only after the death come to hold it as a residue, the income of which has to be paid to the tenant for life. Hence the real question is as to what are to be regarded as assets of the deceased at the date of his death. In this connection the Apportionment Act gets over many difficulties that would otherwise arise. But this Act does not touch the sums payable in respect of a certain contract with Messrs. Arthur Guinness, Son & Co., Ltd., the performance of which in point of fact constituted the entire of the business of the said malting business carried on by the deceased, and that fact is supposed to give rise to difficulties which have suggested the questions asked.

The contract was in the form of a proposal by the deceased, accepted by Messrs. Arthur Guinness, Son & Co., Ltd., and was in this form: "We hereby propose to contract with you for the manufacture of about 22,000 barrels of pale malt during the coming season in our Mountmellick Maltings, our remuneration to be at the rate of eight shillings and six pence per barrel, and the conditions to be those set out in the contract, dated 20th September, 1928."

The barley from which the malt was made was purchased either by Messrs. Guinness or by the deceased on their behalf. It was the property of Messrs. Guinness and the remuneration...

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