Scottish Court of Session Decisions

The Finance (1909–10) Act 1910 (10 Edw. VII, cap. 8), sec. 66, by which super tax was first imposed, provides, sub-section (1)—“In addition to the income tax charged … under this Act there shall be charged, levied, and paid … in respect of the income of any individual, the total of which from all sources exceeds [a certain amount, varied by subsequent Acts], an additional duty of income tax (in this Act referred to as a super tax) at the rate of …”

George Buchanan of Gask, Perthshire, and others, the testamentary trustees of Peter Wordie, who died on 27th June 1913, first parties, and Mrs Mary Storey M'Gregor or Wordie, his wife, second party, presented a Special Case for the opinion and judgment of the Court. The questions with which the Special Case dealt were, inter alia ( first) Whether a certain annuity, which was to be paid to the second party under Mr and Mrs Wordie's antenuptial marriage contract free of income tax, was to be paid free of super tax and ( second) whether an annuity given under Mr Wordie's will and codicil in addition to the annuity under the marriage contract was payable free of income tax and super tax.

The antenuptial contract of marriage in question was dated 16th August 1902, and in terms thereof Mr Wordie, in the event of Mrs Wordie surviving him, bound himself and his heirs, executors, and representatives, “to pay during her life after his death, and for her behoof as after mentioned, to the trustees hereinafter named, a free liferent annuity or yearly sum of £1000, free of income tax.’ By his trust-disposition and settlement, dated 28th February 1911, Mr Wordie directed his trustees, in the event of his wife surviving him, to implement the provisions of the antenuptial contract as regards this annuity. By the same deed he directed his trustees to pay to his wife “during all the days of her life so long as she remains my widow, a yearly annuity of five hundred pounds sterling, and that in addition to the annuity conceived in her favour under said marriage contract.” By a subsequent codicil, dated 18th January 1913, he provided—“I increase the annuity to her to one thousand pounds instead of five hundred pounds as mentioned in the foregoing settlement.”

The contentions of parties as stated in the case were as follows:—“With regard to the payment of super tax upon the annuity of £1000 payable under the antenuptial contract of marriage, the first parties contend that the direction to pay that free of income tax does not extend to super tax, and that they are not bound to pay any super tax to which the second party may be assessed. With regard to the annuity of £1000 payable under the trust-disposition and settlement and codicil, the first parties contend that it is not payable free of income tax, and the direction with reference to the annuity payable under the antenuptial contract does not attach to that payable under the trust-disposition and settlement and codicil.”

The following questions of law were, inter alia, stated—“6. Is the second party entitled to payment of the annuity of £1000 under the antenuptial contract of marriage, free of super tax? 7. Is the second party entitled to payment of the annuity of £1000 under the trust-disposition and settlement and codicil, free of ( a) income tax, and ( b) supertax?”

Argued for the first parties—The annuity was conferred by a contract entered into long before the imposition of super tax, and it must therefore be read as applying only to income tax— In re Crawshay, [1915] W.N. 412. The annuities in the present case were contained in separate deeds, and it was impossible to infer any intention to treat the two funds together— Urquhart's Trustees v. Gordon, 1900, 3 F. 242, 38 S.L.R. 148. Oldham v. Crosse, [1920] 1 Ch. 240, founded on by the second party, was not in point, because in that case this will was made after super tax came into existence, and the whole provision was contained in the one deed.

Argued for the second party—There was no difference other than amount between income tax and super tax. Super tax was treated as an additional income tax in the Finance (1909–10) Act 1910 (10 Edw. VII. cap. 8) and succeeding Acts— Oldham v. Crosse; Brooke v. Inland Revenue Commissioners, [1918] 1 K.B. 257, per Swinfen Eady, L. J., at p. 266;

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Bowles v. Attorney-General, [1912] 1 Ch 123, per Parker, J., at p. 134; Doxat v. Doxat, [1920] W.N. 262. Wimble v. Bowring, [1918] W.N. 265, 34 T.L.R. 575, showed the method of apportioning the super tax. The terms of the marriage contract interpreted the additional annuity conferred by the will.

At advising—