Revenue Commissioners v Cookman

• Jurisdiction: Ireland
• Judgment Date: 25 February 1915
• Date: 25 February 1915
• Court: King's Bench Division (Ireland)

Inland Revenue Commissioners

and

Cookman (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.

1915.

Revenue — Estate Duty — Land purchased under Land Purchase Acts and subject to Annuity — Property passing on Death — Principal Value — Method of Ascertainment — “Incumbrance” — Finance Act, 1894 (57 & 58 Vict. c. 30), ss. 1, 7(1) (5) — Finance (1909 — 10) Act, 1910 (10 Edw. 7, c. 8), s. 60 (2).

The principal value, for the purposes of estate duty, of a holding purchased under the Land Purchase Acts, is the price which the property would fetch if sold in the open market, at the time of the death of the deceased, subject to the annuity payable to the Land Commission.

Such annuity is not an “incumbrance” within the meaning of section 7, sub-sect. 1, of the Finance Act, 1894.

Appeal, by the Commissioners of Inland Revenue, against the decision of a referee under sect. 33 of the Finance (1909–10) Act, 1910. The facts, as set out in the petition of appeal, were as follows:—

William Cookman, late of Kiltrea House, Enniscorthy, county Wexford, justice of the peace, died on the 19th November, 1911, possessed, inter alia, of certain lands of Kiltrea and Newtown, in the county of Wexford, containing 114a. 2r. 32p. statute measure, which had been purchased under the Irish Land Purchase Acts, and were then subject to an annuity of £52 6s. 6d., payable to the Irish Land Commission, the redemption value of which, at the date of the said William Cookman's death, was £1557 17s. 7d. The net value of all the property passing on the death of the deceased exceeded £1000. The Commissioners of Inland Revenue, under the provisions of sect. 7 (5) of the Finance Act, 1894, and sect. 60 of the Finance (1909–10) Act, 1910, estimated the principal value of the aforesaid lands of Kiltrea and Newtown at the sum of £2357 17s. 7d.

Under the provisions of sect. 60, sub-s. 3, of the Finance (1909–10) Act, 1910, the executor of William Cookman appealed against the decision of the Commissioners as to the value of the

said lands, upon the grounds that the property would not have fetched £2300 in the open market at the time of the death, and that “the practice in vogue of adding to the price which the property, it is supposed, might fetch, if sold subject to a mortgage, the amount of the mortgage, and deducting the mortgage from the amount, is not authorized by the instructions addressed to the Commissioners of Inland Revenue under the Finance Acts in order to ascertain the net principal value for assessments.”

Mr. George Hewson, the referee duly authorized in that behalf, gave his decision in respect of said appeal in the following terms:—

“The value of the lands in Kiltrea and Newtown, containing 114a. 2r. 32p. statute measure, purchased under the Land Purchase Acts subject to an annuity to the Irish Land Commission of £52 6s. 6d., is £1917.

I find the appellant entitled to £10 10s., expenses in this appeal.

The point I am asked to decide is the principle on which the principal value of property should be arrived at under sect. 60 of the Finance Act, 1910, the Inland Revenue contending that, in the case of holdings bought under the Land Purchase Acts, it should be calculated on the sum that the lands would fetch, subject to the annuity, in the open market, in this case estimated at £800, to which should be added the redemption value of the annuity at the date of death, which was calculated at £1557 17s. making in all a round sum of £2357.

The appellant contends that the principal value means the fee-simple value in the open market of the property, free of all incumbrances.

I think the latter is the correct view. If the principle on which the Inland Revenue assess the principal value is accepted, it would create the position that every year the payments to the sinking fund by the occupier, who is the owner in fee, would reduce the capital value, and this would be effected in a marked degree in holdings bought under the earlier Land Purchase Acts, where annuities can be redeemed in stock which can at present be bought at a discount of 20 to 25 per cent.

I cannot hold that a different principle should be adopted in estimating the value of incumbered land and land free of incumbrances.

It was not contended by the Treasury that the principal value was represented by the amount originally advanced to the occupier to buy the fee-simple, plus what may, for convenience, be called the tenant-right.

The Treasury gave no evidence of value, and I have, therefore, fixed the principal value, as above, on the only evidence before me, which was not of a very satisfactory character.”

The petitioners submitted that the decision of the referee was erroneous on the following ground:—

That the principal value, within the meaning of sect. 7 (5) of the Finance Act, 1894, and sect. 60 of the Finance (1909–10) Act, 1910, of the lands of Kiltrea and Newtown, at the date of William Cookman's death, was correctly estimated by the Commissioners of Inland Revenue at £2357 17s. 7d.

They prayed that it might be declared that the principal value of the said lands on the 19th November, 1911, the date of the death of William Cookman, within the meaning of sect. 7 (5) of the Finance Act, 1894, and sect. 60 of the Finance (1909–10) Act, 1910, was £2357 17s. 7d.

In his answer, the respondent submitted, (1) that in arriving at the principal value of the lands under s. 60, sub-s. 2, of the Finance (1909–10) Act, 1910, the Commissioners of Inland Revenue were not entitled to have regard to the existence of the annuity or mortgage payable out of the lands; (2) that the redemption value of the annuity could only be regarded by way of deduction from the principal value when ascertained; (3) that the principal value as fixed by the referee was correct.

During the hearing in the King's Bench Division the petitioners were given leave to amend their petition by claiming in the alternative that the property passing within the meaning of sect 1 of the Finance Act, 1894, was the equity of redemption in the said lands; that the “principal value” within the meaning of sect. 7 (5) of the Finance Act, 1894, and sect. 60 (2) of the Finance Act, 1910, was the value of that equity of redemption; and that the principal value at the date of the death of the deceased amounted to £800.

The Attorney-General (Jonathan Pim K.C.), with him the Solicitor-General James O'Connor K.C.), and Rearden, for the petitioners:—

Under the Finance Acts of 1894 (57 & 58 Vict. c. 50)...