The Finance Acts, 1894 and 1896, and James Fitzgerald Lombard

• Jurisdiction: Ireland
• Judgment Date: 20 June 1904
• Date: 20 June 1904
• Court: King's Bench Division (Ireland)

In the Matter of the Finance Acts, 1894 and 1896, and James Fitzgerald Lombard (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.

Revenue — Estate duty — Deduction-Marriage settlement — Bonâ fide purchase — Partial consideration in money or money's worth — Succession Duty Act, 1853, s. 17 — Finance Act, 1894, s. 3 (1), (2).

By a settlement on the marriage of L. and D., L., the husband, in consideration, partly of the transfer to him by D., the wife, of 600 Grand Canal shares and partly of the marriage, granted certain lands in trust for himself for life, and after his death for D. absolutely. Upon L.'s death the lands, portion of which had in the meantime been sold, were represented by £8119 4s. The Commissioners of Inland Revenue claimed estate duty upon the full sum of £8119 4s. as being the principal value of the property passing to D. upon the death of L., ascertained in accordance with the provisions of the Finance Act, 1894. They disputed D.'s right to a deduction of: £6600, being the value at the date of the settlement of the consideration in Grand Canal shares, upon the ground that the transaction embodied in the settlement was not one in which the £8119 4s., the value of the land, was to pass to her upon the death of L., by reason only of a bona fide purchase from him for partial consideration in money or money's worth, within the meaning of section 3 (2) of the Act:—

Held, that the expression “partial consideration in money or money's worth,” in section 3 (2), was intended to relate to contracts in which the consideration was partly money or money's worth and partly marriage, and that the sum in respect of which D. was liable to pay estate duty was to be ascertained by deducting £6600, the value of the consideration in money or money's worth, from £8119 4s., the value of the property passing to her under the settlement upon the death of L.

Petition on behalf of Sarah A. Lombard, widow of James Fitzgerald Lombard, of South Hill, Upper Rathmines, Dublin, to have it declared that the value of 600 ordinary shares in the Grand Canal Company should, for the purposes of estate duty, be allowed as a deduction from the value of certain property passing to her under an indenture of marriage settlement, dated the 12th September, 1896, on the death of her husband, James Fitzgerald

Lombard. By the indenture in question the late James Fitzgerald Lombard, upon his marriage with the petitioner, in consideration of the marriage, and of the transfer to him of the 600 Grand Canal shares by the petitioner, then Sarah A. Dunne, granted and conveyed to himself and to the petitioner the lands of Clonturk, to hold portion of the said lands to himself and the petitioner, their executors, administrators, and assigns, for the residue of a term of years then subsisting in them upon certain trusts therein declared, and to hold the residue of the said lands unto and to the use of himself and the petitioner, their heirs and assigns, as joint tenants upon certain trusts therein declared. The trusts were that James Fitzgerald Lombard and the petitioner should, after the solemnization of their marriage, hold the first-mentioned lands upon trust for James Fitzgerald Lombard during his life, if the term of years should so long last, without impeachment of waste, and from and after his death, upon trust for the petitioner, her executors, administrators, and assigns, absolutely, and should hold the second set of lands also upon trust for James Fitzgerald Lombard, during his life, without impeachment of waste, and from and after his death upon trust for the petitioner, her heirs and assigns, for ever. The marriage was solemnized shortly after the execution of the indenture. All the lands of Clonturk, with the exception of a portion known as St. Mell's Terrace, were subsequently sold by James Fitzgerald Lombard and the petitioner, and the proceeds of the sale were invested in the purchase of 1206 preference shares in Clery & Co., Limited, Sackville-st., Dublin. James Fitzgerald Lombard died on the 23rd September, 1901. After his death a claim was made by the Commissioners of Inland Revenue for payment by the petitioner of estate duty on the 1206 preference shares in Clery & Co., Limited, and on St. Mell's Terrace. In the account which was passed, the preference shares in Clery & Co., Limited, were valued at £6030, and St. Mell's Terrace at £2089 4s., making in all £8119 4s., and the amount of estate duty claimed was £405 19s. 2d., together with £19 3s. 8d. interest.

The petitioner's solicitors, when passing the account, claimed that the value of the 600 ordinary shares in the Grand Canal Company, part consideration for the conveyance of the lands of Clonturk, should be deducted from the value of the property charged with duty. The value of the Grand Canal shares, as at the date of the indenture of the 12th September, 1896, was £6637 10s. The Commissioners refused to allow any such deduction, and, after considerable correspondence, the petitioner's solicitors delivered on the 12th January, 1904, a statement of her grounds of appeal against the refusal of the Commissioners to allow the deduction. The grounds were as follows:—“1. The appellant contends that the decision or claim of the Commissioners is erroneous, inasmuch as no deduction from the value of the property charged with duty is allowed for the value of 600 ordinary shares in the Grand Canal Company, which were part consideration for the transfer of the said property made by the said indenture. 2. The appellant contends that she is entitled to the deduction aforesaid under the provisions of sect. 3, sub-sect. 2, of the Finance Act, 1894, inasmuch as the property charged with duty passed to her by reason only of the bonâ fide purchase by her of same, partly in consideration of marriage and partly in consideration of the transfer of the said 600 shares by her to the deceased for his own use. 3. Alternatively the appellant contends that by the transfer of the said 600 shares to the deceased for his own use, she purchased the property charged with duty to the extent of the value of the said shares, and that she was the disposer of the said property in the said indenture to the said extent, and that such property to such extent as aforesaid is exempt from estate duty by sect. 15, sub-sect. 1, of the Finance Act, 1896. 4. The value of the said shares at the date of the said purchase was £6600, and deducting same from the value of the said property charged, viz., £8119 4s., the principal value of the property chargeable as at the date of the death of the deceased would be £1519 4s. The duty on the said£1519 4s. at five per cent. would be £75 19s. 3d., and this sum, together with the sum of £4 13s. 6d. (interest thereon at three per cent., from the 23rd September, 1901, to the present date), making in all the sum of £80 12s. 9d., the appellant admits to be due, and hereby tenders in satisfaction of the claim herein.”

On the 11th February, 1904, the Commissioners through their solicitor notified in writing to the petitioner's solicitors that they had determined to maintain their decision, and stated their grounds as follows:—“1. That the property passing on the death of James Fitzgerald Lombard, deceased, is subject, under the provisions of the Finance Act, 1894, sect. 1, to the payment of estate duty on the principal value thereof ascertained under the provisions of the Act. 2. That the appellant is not entitled to be allowed any deduction from the value of the property for the value of the 600 ordinary Grand Canal Company shares, inasmuch as the property did not pass to her on the death of James Fitzgerald Lombard by reason only of a bonâ fide purchase from the said James Fitzgerald Lombard, the person under...