Scottish Court of Session Decisions

Hugh Finnigan died on 28th May 1886, and his brother Arthur Finnigan on 6th April 1890. During Hugh's lifetime the brothers had for some years carried on a pawnbroking business in Caledonia Road and in Lyon Street, Glasgow, under the firm name of H. & A. Finnigan. They had also kept a saleroom for jewellery at 218 Argyle Street, Glasgow, where they lived. After Arthur's death, his sisters Mrs M'Court and Mary Finnigan were appointed his executors-dative qua next-of-kin, and his whole estate, amounting to £4723, was divided equally between them.

On 15th August 1892 the present action was raised by the Lord Advocate, on behalf of the Board of Inland Revenue, against Mrs M'Court and Mary Finnigan, with the object of having them ordained to exhibit a true inventory of the personal estate of Hugh Finnigan, duly stamped with inventory duty, or otherwise a true account, duly stamped, of the moveable property belonging to the said Hugh Finnigan, “taken from him as a donation mortis causa by the deceased Arthur Finnigan, and further, to pay legacy duty on said estate.”

The pursuer averred—“(Cond. 2) On the death of the said Hugh Finnigan, the said Arthur Finnigan took possession of his whole estate and effeets, including his share of the partnership property and the jewellery and furniture. The said Arthur Finnigan alleged a right to do this in

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respect of a document bearing to be in the form of a receipt by the said Hugh Finnigan, dated 15th February 1886. This document did not represent an out-and-out sale or divest the said Hugh Finnigan, but was merely a simulate transaction. In any event, it did not effect, and was not intended to effect, more than a donation mortis causa in favour of the said Arthur Finnigan.”

The defenders denied that the said receipt represented a simulate transaction, and averred—“In February 1886 the brothers entered into an arrangement whereby Hugh sold for £100 his interest in the pawnbroking offices and saleroom and stock of jewellery and household furniture to Arthur, and Arthur was to pay all the debts of Hugh and of the firm, and was to receive all debts due to the firm at the date of the said receipt. This arrangement was immediately acted upon and carried out. Hugh, as from its date, ceased to have any interest in the business, and had no interest therein at the time of his death, while Arthur took immediate possession of all that Hugh had sold to him, and obtained from Hugh the pawnbroker's and plate licences duly endorsed, and having paid Hugh the £100, obtained the receipt above referred to.”

The defenders pleaded—“(2) The said deceased Hugh Finnigan having died without leaving any estate subject to duty, no inventory falls to be given up or duly paid.”

Proof was allowed. It appeared that down to the year 1885 Hugh and Arthur Finnigan had both attended to the business, but that towards the end of that year Hugh, who had for some years been suffering from mortification in one of his legs, took to bed, and was confined to bed from that date until his death. The doctor who attended him during the month preceding his death deponed—“The condition of the leg showed me that the mortification was of some years' standing. The man was a living skeleton when I saw him, and the condition of his leg must have disabled him for a long time… . I should think that he was incapable of business for months before his death.”

On 15th February 1886 Hugh Finnigan granted the receipt founded on by the defenders. It was in these terms—“Received from Mr Arthur Finnigan the sum of £100 sterling for my interest in pawnbroking offices and saleroom at 104 and 106 Caledonia Road, S.S., and 4 Lyon Street, also stock of jewellery and household furniture at 218 Argyle Street, cash in bank, all debts to be paid by Arthur Finnigan, and to receive all debts due to H. & A. Finnigan at this date.” Hugh had no estate except what was mentioned in the receipt, but it was not disputed that the sum of £100 was totally inadequate as a consideration for the sale of that estate.

The day after the said receipt was granted, the bank account kept in the name of H. & A. Finnigan was closed, and a new account was opened in the name of Arthur Finnigan. About the same date the licences for the various businesses were endorsed by Hugh to Arthur, and from and after the end of the following month the pawntickets were issued in Arthur's name alone, and the pledge-books were kept in his name.

There was no evidence that Hugh Finnigan had ever mentioned to anyone that he had transferred his estate to Arthur, but there was the following evidence of statements made by Arthur. Stephen Henry, a witness examined for the pursuer, deponed—“(Q) Do you remember of Arthur Finnigan referring in conversation to the receipt that had been signed in his favour by Hugh some time before he died?—(A) He told me about it. I cannot remember the special conversation we had, but he certainly gave me to understand that as Hugh was in very indifferent health, and indeed as he was not likely to recover, he sold him his interest in the business. (Q) Did he tell you for what purpose the receipt had been granted?—(A) I really could not say positively that he gave me any other reason beyond what I have stated, viz., that owing to illness Hugh had made up his mind to part with his interest in the business. (Q) Do you remember of his saying anything to you about escaping duty?—(A) I should not like to say that that was really mentioned by Arthur, although at the time I may have had my own impressions. I don't think that Arthur said anything further than what I have already stated.” James Marsh, who was also a witness for the pursuer, and who had been in the employment of H. & A. Finnigan and afterwards of Arthur Finnigan, deponed in cross-examination—“I knew the fact that Hugh Finnigan had parted with his interest in the business to Arthur. I remember him saying something to the effect that it had been given away.” Another witness for the pursuer, James Allan, who had also been in the employment first of H. & A. Finnigan and afterwards of Arthur Finnigan, deponed in cross-examination—“Arthur Finnigan told me that he had acquired Hugh's interest in the business, but I cannot say whether that was before or after Hugh's death.” There was no evidence that the £100 referred to in the receipt had ever been paid directly to Hugh, but Mr M'Groary deponed that Arthur had told him “that the expenses of Hugh's last illness were sufficient to swallow up the whole £100.”

On 24th January 1888 Mr Dwight, Deputy Controller, Inland Revenue, wrote to Arthur Finnigan requesting him to explain why no inventory of Hugh's estate had been lodged. By Arthur Finnigan's instructions, his law-agent, Mr M'Groary, replied on 28th January in the following terms—“My client Mr Arthur Finnigan, 153 Oxford Street, Glasgow, has handed to me your notice to him of date 24th Jany. curt., regarding the estate of the late Hugh Finnigan, and I am instructed to intimate to you that he has in no way intromitted with the estate of the late Hugh Finnigan after his death (the deceased having left no estate), and cannot understand why he

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should be called upon to give up an inventory. The late Hugh Finnigan was a partner of the firm of H. & A. Finnigan, pawnbrokers, Glasgow, of which my client was also a partner. On the 15th February 1886, three and a-half months before his death, the late Mr Finnigan conveyed his whole interest in the business carried on by that firm to my client. For many years before his death the late Mr Finnigan had been suffering from a lingering disease which ultimately took his life; the great expense incurred during the last stage of that illness swallowed up whatever means Mr Finnigan had. He had no estate at the date of his death.” Mr Dwight then wrote asking Mr M'Groary to send him the deed of conveyance executed by Hugh Finnigan in his brother's favour, but this letter was apparently left unanswered. In November 1888 the Inland Revenue again wrote Mr M'Groary on the subject of Hugh Finnigan's estate, and to this letter Mr M'Groary replied—“I beg to refer you to my letter to Mr Dwight on the same subject, of 28th January 1888.” The correspondence then closed.

Towards the end of the year 1888 Mrs M'Court raised an action in the Sheriff Court of Glasgow against Arthur Finnigan for a share of Hugh's estate. In defence to this action Arthur Finnigan founded on the receipt, and stated that Hugh had died possessed of nothing, having conveyed everything to him. He did not, however, produce the receipt in process until after considerable pressure from Mrs M'Court's agent. In her revised condescendence Mrs M'Court averred that the receipt was a simulated receipt, granted by the deceased with the object of evading payment of the death duties, and that “a short time after the alleged pretended sale was executed the deceased stated to the pursuer and her husband and her daughter, both severally and collectively, that he was master of all the places of business, and would continue so as long as he lived.” The agents of both parties were examined, and deponed that the averments made for their respective clients faithfully reflected their clients’ instructions. On this point Mrs M'Court's evidence (which was not credited by the Lord Ordinary) was in conflict with that of her agent, and she denied that Hugh Finnigan had ever made to her the statement ascribed to him in the averment above quoted. Prior to the raising of the above-mentioned action by Mrs M'Court, Arthur Finnigan had been living with her, and after that action was raised he raised a counter action against Mr and Mrs M'Court for delivery of some articles of furniture which he alleged had been left by him in her house. These litigations were terminated by an agreement, whereby Arthur, who had returned or was about to return to the M'Courts’ house, agreed to pay Mrs M'Court £2 a-week during her lifetime, and £1000 in the event of his predeceasing her.

On 27th January 1893 the Lord Ordinary ( Wellwood) pronounced this interlocutor:—“Finds that the deceased Hugh Finnigan, pawnbroker, Glasgow, died on 28th May 1886: Finds that on his death his brother Arthur Finnigan took possession of his whole estate and effects, including his share in certain partnership property belonging to himself and the said Arthur Finnigan: Finds that shortly before his death Hugh Finnigan transferred his said estate and effects to Arthur Finnigan as a donation mortis causa: Finds that the said Arthur Finnigan died on 6th April 1890, and that the defenders Mrs M'Court and Mary Finnigan, as his executors qua next-of-kin, have intromitted with and divided his whole estate equally between them: Finds that no inventory or account has been given up of the personal or moveable means and estate of the said Hugh Finnigan: Finds that the defenders are bound to give up an account of the personal or moveable estate of the said Hugh Finnigan: Therefore appoints them to lodge such an account within four weeks for the purpose of ascertaining what account and legacy duties are due and payable in respect of such means and estate, &c.

“ Opinion.—… Arthur Finnigan died on 6th Apil 1890. The present defenders, his sisters Mrs M'Court and Mary Finnigan, are his executors qua next-of-kin. His estate was given up at £4723, 15s. 2d., which has been divided equally between the two defenders. In this action the defenders are called upon to pay inventory duty, or otherwise account duty (as on a donatio mortis causa), and also legacy duty at 3 per cent. on the estate of Hugh Finnigan. The defence is that Hugh Finnigan possessed no estate at his death, and no duty therefore falls to be paid.

This defence is rested upon the averment that on 15th February 1886 Hugh Finnigan sold his whole estate to Arthur Finnigan. No deed of transfer is produced, but the following writings and facts are founded on to instruct this statement—First, The following receipt, No. 9 of process, is produced—[ His Lordship then quoted the terms of the receipt].

Next, it is proved by the documents Nos. 11 to 14 of process that about the same date the licences for the various businesses carried on by the two brothers were transferred to the name of Arthur Finnigan, with consent of Hugh Finnigan.

At the same time the pawntickets were altered to the name of Arthur Finnigan, and the bank account kept on in the name of H. & A. Finnigan with the Bank of Scotland was closed on 16th February 1886, and an account opened in the name of Arthur Finnigan.

Now, these documents and facts certainly afford prima facie evidence that a sale or gift, inter vivos, of some at least of the estate took place. But the mere fact that delivery, actual or constructive, is proved, is not of itself conclusive that an absolute irrevocable sale or gift was intended or made. If it were so, such questions would seldom arise. In the present case I think that this view of the transaction is negatived or overcome by certain considerations which I shall enumerate. I preface

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my observations, however, by observing that undoubtedly Hugh Finnigan had it in his power either to sell his whole estate for what he pleased or to give it away by absolute gift inter vivos, and that such a transaction would be unchallengeable, even though its object was to escape inventory duty, provided always that he was completely divested. I think, however, that the evidence shows that although Hugh Finnigan professed to have sold his whole estate to his brother, it was intended and understood, as between him and Arthur Finnigan, that the transfer should only become absolute on the death of Hugh Finnigan, and that the transfer or gift was at most a donatio mortis causa.

The considerations which have led me to this conclusion are these—1. The transfer was made intuitu mortis. In February 1886 Hugh's health had become decidedly worse, and death at no distant day appeared to be imminent. 2. On the face of the transfer Hugh was, on the statement of the defenders now, and of Arthur Finnigan in 1888, divested of the whole of his means and estate. After the transfer, according to them, he possessed absolutely nothing. If he had recovered, he would have been destitute; and if Arthur had predeceased him, the estate would have passed under Arthur's will, if he left one, or to his legal representatives. 3. It is said that Hugh received an equivalent for his estate—£100. Taking the roughest view of the value of the property possessed by the brothers, that sum was absolutely absurd as a consideration for the transfer, but apart from that, there is strong evidence to lead us to the belief that no money passed. Neither do I find, at least as regards the stock of jewellery and household furniture in Argyle Street, where Hugh lived, satisfactory evidence that actual transference or delivery took place. 4. Arthur Finnigan's own conduct is, in my opinion, tantamount to a confession that the transaction was not in truth a sale. He concealed the receipt No. 9 of process, and obstinately refused to produce it or show it until his hand was forced by the defender Mrs M'Court in a Sheriff Court action in 1888. He evaded the demand for its production made by the Board of Inland Revenue, and it was only produced in the Sheriff Court action under pressure of Mrs M'Court's agent Mr Smith. Arthur Finnigan having at length been forced to produce the receipt, the litigation in the sheriff Court proceeded. In it the present defenders called upon Arthur Finnigan to account for his intromissions with Hugh Finnigan's estate, on the footing that he left considerable means and died intestate, and to make payment to each of them of £4000. Arthur Finnigan's defence was that now stated by the defenders, that Hugh died possessed of nothing, having conveyed everything to him. In the revised condescendence for Mrs M'Court it was averred that the receipt produced by Arthur Finnigan was simulate, and was granted in order to evade inventory and legacy duty. Arthur Finnigan also raised a counteraction against Mr and Mrs M'Court, claiming certain articles of furniture said to have been left in the house in which he and the M'Courts had been residing. The end of the litigation was that Arthur Finnigan and Mrs M'Court settled their disputes by the minute, No. 29 of process, dated 26th February 1889, the result of which was that Arthur Finnigan undertook to make the following payments to Mrs M'Court—Two pounds a-week during the whole of her lifetime, and £1000 on his death, and to pay Mrs M'Court's agent's business account as between agent and client. Those were pretty substantial undertakings on the part of a man who, according to his own account, was under no legal obligation to pay a farthing. The statement can only be explained on the supposition that Arthur Finnigan was forced to admit that the transfer of 15th February 1886 was not really a sale. The settlement of the action was no doubt hastened in consequence of its being seen to be for the interests of both parties that undue attention should not be drawn to the terms of the receipt No. 9 of process, which the Board of Inland Revenue at the time were anxious to inspect. Lastly, I think it right to say that I find myself unable to attach any weight to the defender Mrs M'Court's evidence given in this action. In the action at her instance against her brother Arthur Finnigan, she had instructed her agent to make certain statements which she now finds inconvenient for, if not fatal to, her present defence. She accordingly in the box endeavoured to throw the responsibility for those statements upon Mr Smith, and actually charged him with having said to her that she should have burned the receipt No. 9 of process when she had it in her hand. That was not put to Mr Smith when he was examined for the pursuer, and he was allowed to leave the Court. I allowed him to be recalled on a subsequent day, when he solemnly denied the averments of Mrs M'Court and her husband. He was not cross-examined. I believe his evidence and disbelieve that of the said defender. She also equivocated badly as to the settlement between herself and Arthur Finnigan. She was evidently well aware of the importance of the bearing of that transaction on the present case.

Now, all these things'satisfy me that the pretended transaction of 15th February 1886 was not truly a sale, but was given that colour in order to evade payment of inventory and legacy duty. As matters now stand, it is not material to inquire whether Hugh Finnigan died intestate or made a donatio mortis causa to Arthur, but I am inclined to think that the latter is the true view. I think there is sufficient evidence of animus donandi in favour of Arthur Finnigan.

The defenders relied upon the case of the Lord Advocate v. Galloway, February 8, 1884, 11 R. 541, as an authority to the effect that where actual delivery is proved to have taken place, it will be held that an absolute irrevocable gift has been made. Although from the shape the case took in the Inner House it gives some colour to

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this contention, I think that when it is examined it does not go far to support the defender's argument. The deceased Robert Tervit was possessed of certain stocks and debentures, and also of certain deposit-receipts containing considerable sums of money. He died on 28th July 1879, but from the year 1875 he had been gradually carrying out a scheme to avoid payment of inventory duty and legacy duty on his death by transferring from time to time the various stocks and deposit-receipts to the name of his nephew Galloway, whom he intended to make his heir. By the time of his death he had practically made over to Galloway the whole of the capital of his moveable estate. But then there was a distinction between the way in which the securities so transferred were dealt with. It appears that the interest on the deposit-receipts was used for the purposes of a farm carried on by Mr Tervit, and that after the change made in the deposit-receipts, no change was made in the application of the income derived from them. In contrast with this treatment of the deposit-receipts was the way in which the stocks and shares were dealt with. The transfers were formally executed by Tervit, and thereafter duly registered, and after the transfer the dividends were credited to Galloway, and apparently were not applied for the benefit of Tervit. I confess it seems to me that the evidence on this head was very slight, because the stocks and shares were not transferred until March or April 1879, and Tervit died in July of the same year. Perhaps that part of the case did not receive close attention in the Inner House, because the case went there, not on a reclaiming-note by the pursuer, but on a reclaiming-note by the defender, in whose favour the Lord Ordinary had decided as regarded the stocks and shares, although he had decided against him in regard to the deposit-receipts. The point, however, is that there were facts in the case apart from the mere transfer of the shares which enabled the Court to draw the distinction. I may also draw attention on this point to the exhaustive opinion of Lord Chancellor Truro in the leading case of Staniland v. Willott, 1850, 3 M'N. & G. 664. He says, p. 675—‘As to the gift being made by an actual transfer in such a way as to pass the complete legal interest as much as if a purely irrevocable gift, inter vivos, had been intended, I would observe that the plaintiff may have thought that an actual transfer was necessary to the completeness of the donatio mortis causa.’ And at p. 676—‘But it has never been held that because the act of delivery is such as would in the case of a gift, inter vivos, confer a complete legal title, the gift cannot be a donatio mortis causa.’ In Staniland v. Willott a transfer of the shares in question which belonged to the plaintiff was duly executed in favour of the defendant, and yet on the plaintiff recovering from his illness the defendant was ordered to retransfer the shares and to account, on the footing of his having held them as trustee for the plaintiff.

I shall therefore order the defenders to lodge an account of the personal or moveable property belonging to the deceased Hugh Finnigan taken from him as a donation mortis causa by the deceased Arthur Finnigan.”

The defenders reclaimed, and argued—Although there was a general presumption that a man would not divest himself of his whole estate during his life, the strength of that presumption varied according to the circumstances of each particular case, and it was greatly weakened where, as here, the alleged transfer was made by a man whose state of health precluded any hope of recovery. At all events, the presumption entirely disappeared if the fact that a transfer had actually been made by the alleged donor during his life was satisfactorily established, and the evidence showed clearly that Hugh Finnigan, after granting the receipt dated 15th February 1886, had proceeded at once to divest himself in favour of his brother. No other conclusion could be drawn from his indorsation of the licences in his brother's favour, or from the alteration made in the bank account, the pawntickets, and the pledge-books, and that conclusion was supported by the attitude which it was proved Arthur had consistently maintained with regard to the transaction. What Mrs M'Court had averred in the proceedings in the Sheriff Court was of little importance, as there was evidence to show that the averments then made by her had been founded on knowledge derived from either Hugh or Arthur Finnigan. Besides, she did not sign the pleadings, and so they were not evidence against her— Marianski v. Cairns, July 1, 1852, 1 Macq. 212; Fenwick v. Thornton, 1827, 1 Moody & Malkin; Boileau v. Ruthin, 1848, 2 Exch. (O.S.) 665; Taylor on Evidence, i. 710. The result of the whole evidence was to establish the fact that an inter vivos transfer or donation had been made by Hugh Finnigan— Lord Advocate v. Galloway, February 8, 1884, 11 R. 541. A donation would rather be presumed absolute than mortis causa—Bankton, i. 9, 19—and the consideration for the transfer stated in the receipt was against the idea of a mortis causa donation. Indeed, the case presented none of the usual features of a mortis causa donation— Morris v. Riddick, July 16, 1867, 5 Macph. 1036; Blyth v. Curie, February 20, 1885, 12 R. 674; Crosbie's Trustees v. Wright, May 28, 1880, 7 R. 823.

Argued for the pursuers—The transaction between the brothers could not be looked upon as a bona fide sale, for the consideration was confessedly grossly inadequate, and this threw suspicion on the whole transaction. If the transaction were viewed as a donation, the defenders had a strong presumption to overcome, for there was always a strong presumption against a man divesting himself during life of his whole estate. In this case there was no proof that the alleged donor was convinced in his own mind that his recovery was hopeless, and the evidence must not be

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considered on the footing that he had given up all hope of recovery. The result of the evidence was that the presumption against donation inter vivos had not been overcome— Sharp v. Paton, &c., June 21, 1883, 10 R. 1000. The most reasonable inference from the whole circumstances of the case was that the transaction embodied in the receipt was a simulate one entered into with the view of evading payment of the death duties— Buchanan v. Buchanan, March 7, 1876, 3 R. 556.

At advising—