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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Turnbull v. Turnbull [1910] ScotLR 668 (26 May 1910)
URL: http://www.bailii.org/scot/cases/ScotCS/1910/47SLR0668.html
Cite as: [1910] SLR 668, [1910] ScotLR 668
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SCOTTISH_SLR_Court_of_Session
Page: 668↓
Court of Session Inner House Second Division.
[
v.
Facts:
A disponed an estate to himself in liferent and after his death to B in liferent and to C in fee. On A's death B paid estate duty and presented a petition for an order on C to grant a bond and disposition in security over the estate in her (B's) favour for the amount of the duty.
Held (1) that the subject chargeable with the duty was the fee of the estate and not merely the liferent, and that B was entitled to have the duty charged on the estate by way of bond and disposition in security, and was not bound to charge it by way of a terminable charge; and (2) that B was entitled to an order on C to grant the bond notwithstanding an averment by C that B had in her hands the proceeds of sales of timber the fee of which belonged to him.
The Finance Act 1894 enacts — section 1—that in the case of every person dying after the commencement of the Act, estate duty shall be levied on the principal value of all property passing on his death. Section 2 (1)—“Property passing on the death of the deceased shall be deemed to include … ( b) property in which the deceased or any other person had an interest ceasing on the death of the deceased, to the extent to which a benefit accrues or arises by the cesser of such interest.” Section 9 (5)—“A person authorised or required to pay the estate duty in respect of any property
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shall, for the purpose of paying the duty or raising the amount of the duty when already paid, have power, whether the property is or is not vested in him, to raise the amount of such duty, and any interest and expenses properly paid or incurred by him in respect thereof, by the sale or mortgage of or a terminable charge on that property or any part thereof.” Section 23—(Providing for the application of part of the Act to Scotland)—(18)—“Where any person who pays estate duty on any property, and in whom the property is not vested, is by this Act authorised to raise such duty by the sale or mortgage of that property or any part thereof, it shall be competent for such party to apply to the Court of Session ( a) for an order of sale of the property or part of it … or ( b) for an order ordaining the person in whom the property is vested to grant a bond and disposition in security over the property in favour of the person who has paid the estate duty for the amount of the said duty.…” On 24th November 1909 Mrs Annette Amelia Turnbull, widow of Colonel George Wilmot Maitland Turnbull, presented a petition for authority to raise and charge estate duty under the Finance Act 1894 (57 and 58 Vict. cap. 30).
The petitioner averred that by disposition and settlement dated 12th June 1900 the said Colonel George Turnbull disponed to and in favour of himself in liferent, and on his death to his wife, the petitioner, in liferent, and to his brother Colonel Charles Frederick Alexander Turnbull in fee, his one-half share of the lands of Dalladies and others; that Colonel George Turnbull died on 18th June 1907; that in respect of the passing of said lands on the death of Colonel George Turnbull estate duty became exigible in terms of the Finance Act 1894, and was paid by the petitioner. The petitioner, in virtue of sections 9 (5) and 23 (18) of the Finance Act, craved the Court to grant an order on Colonel Charles Turnbull to grant a bond and disposition in security over the said lands in favour of the petitioner or her nominee for the said estate duty and expenses attending the settlement of the same.
Answers were lodged by Colonel Charles Turnbull, in which he averred—“Before presenting the petition the petitioner asked the respondent to grant a bond over the estate in question for the amount which she now wishes charged upon the estate, and was informed by him that he could not agree to do so, in respect that she had in her hands moneys received for timber sold off the estate to the fee of which he was entitled—more than sufficient to pay the death duties. From time to time since the granting of said disposition various sums of money have been received by the petitioner and her deceased husband for timber sold off the estate, the property in which belongs to the respondent, and for which the petitioner's estate will be liable on the termination of the liferent by her death.… When the present question was raised, the respondent, through his agents, obtained from Messrs Macrae, Flett, & Rennie (the petitioner's agents) estate accounts showing receipts and alleged expenditure of timber money. He has now made up a statement of the payments he objected to, and it is herewith produced and referred to. He avers that the respondent is accountable to him for a sum of over £500. … The petitioner is the sole executrix and universal legatory of her late husband. When asked to grant a bond over the estate for the amount of the death duties, the respondent was willing to let the question of the timber money stand over, and informed the petitioner's agents that he would himself pay the estate duty, or consent to the petitioner paying it, and raising the money by means of a terminable charge over the estate. Notwithstanding this the petitioner paid the duty without consulting the respondent, and now seeks to have the amount charged upon the estate In these circumstances the respondent submits that the prayer of the petition should not be granted (1) in respect that the petitioner is accountable to him as fiar of the estate for timber money, which is more than sufficient to pay the death duties; (2) that in any event he is entitled to insist on the money being raised by means of a terminable charge over the estate.”
On 22nd December 1909 the Lord Ordinary ( Cullen) repelled the answers, remitted to a man of business to inquire and to report, and granted leave to reclaim.
Opinion.—“There must be a remit in this petition, but I think it is proper that I should deal with the answers at this stage in order that the scope of the inquiry under the remit may be defined.
I am of opinion that the answers are irrelevant. The petitioner has paid estate duty to the Crown in respect of a statutory liability which lay upon her, and it is not disputed that she has a right to a charge upon the estate mentioned in the petition, of which she is liferentrix, apart from the two points which are raised at the end of the answers.
In the first place, the respondent asserts, rather than relevantly avers, that there have been dealings with the timber on the estate over a considerable period of years, as the result of which, he says, he will on the petitioner's death have a claim against her estate for money. This does not, however, seem to me to raise such a consideration as the Court can entertain as an answer to the petitioner's right to a charge for the duty which she has undoubtedly paid. I think the respondent's claim must, if well founded, be made good against the petitioner in some other kind of proceeding.
In the second place, the respondent contends that esto the petitioner is entitled to a charge, that charge should be in the form, not of a mortgage as proposed, but of ‘a terminable rent charge.’ It appears to me, on a consideration of section 9, sub-section 6, and section 23, sub-section 18, that the respondent is not well founded in this contention, and that in such a case
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as this, where a liferenter has paid duty, her right is to a charge in the form of a mortgage. These being my views regarding the answers, I shall repel them, and make the usual remit to a man of business.” The respondent reclaimed, and on 12th February 1910 the Court recalled the interlocutor of the Lord Ordinary hoc statu and remitted to a man of business to inquire into the facts set forth in the petition and answers, with the exception of the question regarding timber money.
The reporter (Mr Thomas Ranken, W.S.) lodged his report, in which he stated that in his opinion the prayer of the petition might be granted and an interlocutor pronounced ordaining the respondent to grant a bond and disposition in favour of the petitioner over the said lands for the estate duty and expenses incurred in settling the same.
On the case being again heard in the Division the respondent and reclaimer argued — (1) What passed on the death of Colonel George Turnbull was only the liferent of the lands, the fee being already vested in the respondent. The duty was therefore chargeable on the liferent—Finance Act 1894 (57 and 58 Vict. cap. 30), sections 1, 2 (1) ( b), 9 (5), and 23 (18). (2) Assuming that the duty was chargeable on the fee of the estate, the petitioner could not be entitled to any charge on the estate, so long as she had the proceeds of sales of timber, which formed part of the fee, in her hands. She could only take credit for the estate duty in accounting for the sums received from the sales of timber. At least the respondent was entitled to have the present proceedings sisted pending the decision of the action which had now been raised regarding the timber money— Ross v. Ross, March 9, 1895, 22 R. 461, 32 S.L.R. 337. In any event the respondent was entitled to have the money raised by means of a terminable charge instead of a bond and disposition in security.
Argued for the petitioner—The estate on which duty was payable on the death of Colonel George Turnbull was the fee and not the liferent—Finance Act 1894 (57 and 58 Vict. cap. 30), sections 2 (1) ( b) and 7 (7); Lord Advocate v. Maclachlan, June 13, 1899, 1 F. 917, 36 S.L.R. 727. The petitioner was therefore entitled to charge the fee of the estate with the estate duty paid by her, and the proper method of doing that was by bond and disposition in security — Finance Act 1894, sec. 23 (18); Laurie, February 22, 1898, 25 R. 636, 35 S.L.R. 496; Menzies, February 18, 1903, 10 S.L.T. 636; Morris v. Morris' Trustees, March 21, 1904, 11 S.L.T. 793. Nor was the petitioner bound to pay the duty out of the timber money, even assuming that the respondent's averments regarding the same were well founded. It followed therefore that the petition should not be sisted to await the decision in the action regarding the timber money.
At advising, the opinion of the Court ( the Lord Justice-Clerk, Lords Low, Ardwall, and Dundas) was delivered by
By section 9 (5) of the Finance Act 1894 it is provided—[ His Lordship quoted the section].
Then by section 23 (which provides for the application of the Act to Scotland) it is enacted (sub-section 18) — [ His Lordship quoted the sub-section].
The petitioner accordingly presented the present petition for the purpose of obtaining an order from the Court ordaining Colonel Charles Turnbull to grant in her favour, or in favour of any person whom she might name, a bond and disposition in security over the estate for the amount of the estate duty.
Colonel Charles Turnbull has lodged answers in which he opposes the application upon two grounds, namely, (1) that the petitioner is bound to account to him as fiar for the price of timber which Colonel George Turnbull cut and sold, and which is more than sufficient to pay the death duties; and (2) that he (the respondent) is at all events entitled to insist that the money shall be raised by means of a terminable charge over the estate, and not by bond and disposition in security.
I shall deal with the first of these objections by-and-by, but as regards the second I may say at once that in my opinion it is untenable. In the first place, in the application of the Act to Scotland (section 23), while the Court are empowered to order a sale of the estate or the granting of a bond and disposition in security, no power is given to authorise a terminable charge. In the second place, even under section 9 (5) of the Act, I do not think that the petitioner could be compelled to charge the amount of the death duties which she has paid by way of a terminable charge and not by bond and disposition in security, because to do so would be to her prejudice. I take it that a terminable charge would involve a yearly payment of such an amount as would meet the interest and also repay the capital within a certain number of years, and the result would be that until that period had expired (which might not occur during the petitioner's lifetime) her liferent would be reduced by a yearly amount much larger than the interest payable under a bond and disposition in security.
There was another view, however, which was urged upon us by the respondent's counsel, although nothing is said about it in the answers. It was argued that the property which passed on the death of the
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That argument is rested mainly upon the first section of the Act, which provides that “In the case of any person dying after the commencement of this Act, there shall be levied and paid upon the principal value of all property which passes on the death of such person a duty called estate duty.”
Now if that enactment had stood alone there would have been much force in the respondent's argument, but I think that the next section of the Act shows that it is not well founded. By that section 2 (1) ( b) it is provided that—[His Lordship quoted the section].
The effect of that enactment seems to me plainly to be that for the purposes of the Act the property which passed on the death of the petitioner's husband was to be deemed to be, not his liferent interest in the property, but the property itself to the extent to which a benefit accrued or arose by the cesser of that life interest. How the value of that benefit is to be calculated is provided for by section 7 (7) ( a), which provides that “if the interest extends to the whole income of the property” the value shall be “the principal value of the property.”
It therefore seems to me to be clear that the property which the petitioner is entitled to charge in terms of the 9th and 23rd sections of the Act with the death duties, which she has paid, is the property itself and not merely the life interest to which she succeeded.
I now come to the question of the price of the timber alleged to have been cut upon the estate and sold by the petitioner's husband during the period when he was only a liferenter. The respondent's contention is that the death duties which the petitioner has paid should be taken out of that money and not charged upon the estate. That might be a very reasonable arrangement for the parties to make, but I do not know upon what ground it can be held that the respondent can demand as a matter of right that it shall be done. We were not referred to any provision in the statute giving him any such right. The Lord Ordinary's view was that the respondent's statements in regard to the timber money did not amount to a relevant objection to the prayer of the petition. At the same time his Lordship indicated that the respondent's claim that the petitioner had in her hands a sum of money which represented the price of timber might properly be raised in a separate proceeding, and the respondent has accordingly brought an action, which is pending before the Lord Ordinary, in regard to that money. Again, when the reclaiming note first came before this Division, I gather that the same view was taken as that expressed by the Lord Ordinary, because when the usual remit was made to a man of business there was specially excepted from the remit “the question regarding timber money.” The respondent now asks that procedure in the petition should be sisted to await the result of the action which he has raised. I am of opinion that that motion should not be granted. The petitioner has paid the duties which became due in respect of the heritable estate, and her statutory right is to have the amount charged upon that estate. The fact that there may be a sum of money in petitioner's hands which belongs in fee to the respondent, and to the petitioner in liferent only, is not a sufficient ground in my opinion for the postponement of the exercise of the petitioner's right. I suppose that if the respondent is able to prove the existence of a sum of timber money additional duty will require to be paid in respect thereof, and it may be that the amount will be a proper charge against the fund. But that appears to me to have nothing to do with the present application. I am accordingly of opinion that an interlocutor should be pronounced in terms of Mr Ranken's report.
The Court remitted to the Lord Ordinary to pronounce an interlocutor in terms of the report.
Counsel for Petitioner— W. L. Mackenzie. Agents— Macrae, Flett, & Rennie, W.S.
Counsel for Respondent — Pitman. Agents — Tait & Crichton, W.S.