Scottish Court of Session Decisions

By his trust-disposition and settlement and relative codicils James Sprot of Spott, who died on 5th July 1882, directed his trustees to hold the sum of £100,000 for the purchase of lands to be entailed in favour of his nephew Edward William Sprot, and the heirs-male of his body, whom failing certain substitutes. Pending the purchase of lands he directed that the income of the said sum was to be paid by the trustees to Edward William Sprot, whom failing to the substitute of entail who would have been entitled to the rents had a deed of entail been executed. In pursuance of these directions the trustees purchased the estate of Drygrange with part of the £100,000 held by them, and by deed of entail dated 28th January and 2nd and 6th February 1888 conveyed it to Edward William Sprotand the substitutes of entail. The balance of the said sum of £100,000, amounting to about £60,000, was retained by the trustees, and the income thereof was paid to Edward William Sprot. Edward William Sprot died on 1st February 1898, and his son Edward Mark Sprot succeeded as heir of entail to the estate of Drygrange, and to the income of the entailed money held in trust. He was born before the date of the entail, and was therefore not entitled to disentail without consent.

On the death of Edward William Sprot a question arose as to liability for estate-duty and settlement-estate-duty under section 23, sub-section (16), of the Finance Act 1894 in respect of the money held in trust.

The Finance Act 1894 (57 and 58 Vict. c. 30), sec. 23, sub-sec. (16), enacts as follows:—“When an entailed estate passes on the death of the deceased to an institute or heir of entail who is not entitled to disentail such estate without either obtaining the consent of one or more subsequent heirs of entail, or having the consent of such one or more subsequent heirs of entail valued, and dispensed with, settlement estate-duty as well as estate-duty shall be paid in respect of such estate.” The expression “entailed estate” is not defined in the Finance Act.

The trustees paid estate-duty and settlement estate-duty on Drygrange, and also estate-duty on the balance of moneys in their hands, but afterwards reclaimed the estate-duty so paid upon said balance. They declined to pay settlement-estate—duty in respect of said balance, and accordingly the present action was raised against them by the Lord Advocate on behalf of the Inland Revenue. The pursuer concluded for decree ordaining the trustees to deliver to the Commissioners of Inland Revenue an account of the money held in trust by them, and to pay the sum of £600, or such other sum as should be found to be due as settlement-estate-duty in respect of such money.

The trustees lodged defences, and pleaded—“(1) The balance of legacy being ‘settled property’ within the meaning of the Finance Act 1894, and the trust-deed having taken effect before the commencement of that Act, the defenders are not liable to settlement estate-duty. (2) The balance of legacy not being entailed estate within the meaning of the Finance Act 1894, settlement estate-duty is not due.”

On 18th July 1900 the Lord Ordinary ( Stormonth Darling) pronounced an interlocutor, by which he ordained the defenders to deliver the account called for in the summons.

Opinion.—“Mr Sprot of Spott, who died in 1882, left £100,000 to be applied by his trustees in the purchase of lands, which were to be entailed on his nephew Edward William Sprot and a series of heirs. Until the purchase should be made and the entail executed, the income or rents, as the case might be, were to be paid to Edward William Sprot, whom failing to the substitutes of entail. In pursuance of these directions the trustees spent part of the sum entrusted to them in the purchase of the estate of Drygrange, and they conveyed that estate to Edward William Sprot and the substitutes of entail in 1888. Edward William Sprot died on 1st February 1898, at which date there remained unexpended a balance of about £60,000, which is still held in trust for the purchase of lands in terms of James Sprot's will.

On the death of Edward William Sprot his son succeeded to Drygrange and to the income of the entailed money. Estate-duty and settlement-duty were paid on Drygrange in February and September 1899. Estate-duty was also paid on the unexpended balance of £60,000, but the defenders explain that they made this payment in error, and that they are re-claiming it from the Crown. The present

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question therefore, although it relates in form only to settlement estate—duty, is truly whether estate-duty and settlement-estate-duty are exigible in respect of the unexpended balance of £60,000, just as they are admittedly in the case of Drygrange.

Now, if this unexpended balance is ‘entailed estate’ within the meaning of the Finance Act of 1894, the answer to this question must be in the affirmative, because section 23 (16) of that Act provides, “Where an entailed estate passes on the death of the deceased to an institute or heir of entail, who is not entitled to disentail such estate without either obtaining the consent of one or more subsequent heirs of entail, or having the consent of such one or more subsequent heirs valued and dispensed with’ (and that is the position of the present heir) ‘settlement estate-duty as well as estate—duty shall be paid in respect of such estate.’ This provision is to be found in the part of the Act which relates to Scotland, and it precisely meets the present case if, as I have said, the expression ‘entailed estate’ includes what for convenience may be called entailed money. It is perhaps unfortunate that that expression is not defined in the Act itself, even by way of reference to the Entail Statutes. The defenders say that the omission of any such reference is all the more marked, because section 22 ( i), in defining the word ‘settlement,’ does refer to the English Settled Land Act of 1882. But I have come to think that where an artificial expression like ‘entailed estate’ is used, there must of necessity be implied a reference to the statutes which created the legal conception of which it is the expression. Entails having no existence apart from statute, it is difficult to see how there can be any such thing as a popular meaning attached to them. And if so, you cannot solve the meaning of ‘entailed estate’ by going to a dictionary, or inquiring how the phrase is used in common conversation—you must go to the Entail Acts, and to these alone.

If I am right so far, there cannot be much doubt of the construction which the phrase must receive. From the time of the Rutherfurd Act downwards it has been the policy of the Legislature to provide that—if I may quote the words of the rubric of section 27 of the Rutherfurd Act—‘money vested in trust for the purchase of land to be entailed may be dealt with as if it were the entailed land.’ It is true that not till the Act of 1875 was there a distinct provision (by section 3) that ‘entailed estate’ should include ‘all money or other property, real or personal, invested in trust for the purpose of purchasing land to be entailed,’ but in the latest Act of all (the Act of 1882) it is provided by section 2 that the Entail Acts ‘shall for all purposes and to all effects to be read as one Act.’ I admit that there are passages in these Acts where the context requires that the phrase ‘entailed eestate’ shall be read in its more restricted meaning of landed property held under entail; but never the less the effect of the sections I have referred to is to make the phrase cover entailed money, and that is, of course, enough for the Crown's argument in this case.

The main contention for the defenders is that you do not require to go outside the Finance Act itself, because this money answers the description of ‘settled property’ as there defined, and by the combined effect of section 21 (1) and (4), neither estate-duty nor settlement estate-duty shall be payable in respect of personal property settled by a will or disposition made by a person dying before the commencement of this part of the Act, at least as regards estate-duty, where inventory-duty has already been paid (as was the case here in 1882), unless the deceased was at the time of his death competent to dispose of the property. But then section 21 must be read along with section 23 (14), which provides that ‘settled property shall not include property held under entail,’ and with section 23 (15), which provides that ‘an institute or heir of entail in possession of an entailed estate shall, whether sui juris or not, be deemed for the purposes of this Act to be a person competent to dispose of such estate.’ It is thus impossible, even on the view presented by the defenders, to avoid coming to a conclusion as to whether this unexpected balance is ‘entailed estate’ or not. If it is, the Finance Act forbids its being treated as ‘settled property,’ and declares that the late Mr Edward Sprot was competent to dispose of it. Accordingly, the question comes back to that with which I have already dealt, and makes the whole thing depend on whether you are to interpret ‘entailed estate’ according to the definition in the Entail Acts, or according to some popular meaning which the words are supposed to bear, but which, in my opinion, has and can have no existence except as derived from these Acts.

I do not know that considerations of hardship have much bearing on the construction of a Revenue statute; but it did at first sight strike me as unfair that the Crown should claim to tax this money on the same footing as the land which has actually been purchased and entailed, and at the same time exact from it a considerable sum (£1789) of legacy-duty, which Drygrange has not borne anything corresponding to. It appears, however, that this apparent inequality of treatment arises from the special provision in the Finance Act (section 1 and Schedule I.), whereby payment of estate-duty exempts from payment of succession-duty in the single case of the duty of 1 per cent. payable on the succession of the lineal issue or ancestor. But for this provision Drygrange would have paid succession-duty, and the only inequality would have been in the rate (3 per cent. as against 1 per cent.), which again arises from the very special terms of the Legacy Duty Act of 36 George III. c. 52. But considerations of that kind, while they may dispose one to adopt a construction of a Revenue statute as favourable for the subject as the language will admit of, can have no place if the language

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is clear; and here I think the language fairly answers that description.”

The defenders reclaimed, and argued—The trust money was unquestionably “settled property” unless it was an “entailed estate,” and so fell within the scope of section 23, sub-section 16 ( quoted supra.) As “entailed estate” was not defined in the Finance Act, its meaning must be sought in its ordinary interpretation as a legal phrase. So interpreted, the phrase could only refer to land, and not to money, whether held in trust for entail or not, because at common law, and under the Act 1685, cap. 22, by which entails were made effective, only lands could be entailed. An entail of money was quite ineffective— Baillie v. Grant, May 21, 1859, 21 D. 838; Kinnear v. Kinnear, June 5, 1875, 2 R. 765, and March 20, 1877, 4 R. 705. At common law and under that statute the expression “entailed estate” had acquired an established meaning, and connoted an estate in land. The provisions in the later Entail Acts, referred to in the opinion of the Lord Ordinary, by which “entailed estate” was defined as including entailed money, were applicable only to the Entail Acts themselves, and did not affect the interpretation of a statute in which they were not referred to. The interpretation proposed by the defenders was according to the system by which money left to be entailed had been dealt with in previous Revenue statutes, i.e., it paid or escaped duty according as it had or had not been actually invested in land— Lord Advocate v. Dunlop's Trustees, January 12, 1894, 21 R. 348.

The argument for the respondent sufficiently appears from the opinion of the Lord Ordinary supra.

At advising—