Bowring v The Commissioner of Estate and Succession Duties
| Jurisdiction | Caribbean States |
| Judge | Hallinan, CJ.,Rennie, J.,Archer, J. |
| Judgment Date | 18 July 1958 |
| Court | Federal Supreme Court (West Indies) |
| Docket Number | Civil Appeal |
| Date | 18 July 1958 |
Federal Supreme Court
Hallinan, C.J.; Rennie, J.A.; Archer, J.A.
Civil Appeal
Mr. J.S.B. Dear instructed by Messrs. Cottle, Catford & Co. for the appellant.
Mr. C.A. Burton, Attorney General, instructed by the Crown Solicitor for the respondent.
Trust and trustees - Power of trustees to approve revocation of trust — Barbados Estates and Succession Duties Act, 1941, ss. 3(a) and 20(1).
Lady Gilbert-Carter settled the property which is the subject matter of this case by deed of trust dated June 16, 1936, referred to in this judgment as the Boston Trust. The trustees under deed of trust were to pay the net come to the donor, Lady Gilbert-Carter. Under clause 4 of the trust, the donor was entitled to revoke or amend the trust in whole or in part by an instrument in writing delivered to the trustees.
The respondent seeks to charge Lady Carter's executor with liability for death duties on the property settled in the Boston Trust. The respondent does not claim under s. 7 (b) of the Barbados Estate and Succession Duties Act, 1941, which relates to the life interest of a deceased person, for the person chargeable thereunder is not the executor but the person to whom the benefit accrues. Owing to the circumstances of this case, the respondent must endeavour to recover death duties from the executor who under s. 20 of the Barbados Estate and Succession Duties Act of 1941 is only liable in respect of property of which the deceased was competent to dispose at her death.
The question which falls for decision in this case is whether the requirement that Lady Gilbert-Carter should obtain the consent of trustees before revoking or amending the trust constituted such a fetter on her power to dispose of the property that she was not “competent to dispose” within the meaning of that phrase in s. 20 and as defined in s. 3 (a) of the Barbados Estate and Succession Duties Act of 1941.
The Commissioner of Estate and Succession Duties (the respondent) held that Lady Gilbert-Carter was competent to dispose within the meaning of the section, and that death duties are payable on the property settled by the deed of trust. Upon appeal to the Court of Chancery in Barbados the Vice-Chancellor upheld the contention of the respondent and this appeal has been brought against that decision.
Section 3 of the Barbados Estate and Succession Duties Act of 1941 is for all purposes material to these proceedings the same as s. 22 (2) (a) of the Finance Act, 1894, and the respondent in this case has therefore relied on the official practice in England under statutes similar to the Barbados Act. The position in England is concisely summarised in Hanson on Death Duties, 10th Edn., paragraph 549:
“A property over which the deceased had general power of disposition jointly with some other person is not within this subsection [s.22 (2) (a) of the Finance Act (1894], such power not being ‘such general power’ as would enable ‘him’ to dispose of the property ‘as he thinks fit.’ Whether a general power exercisable with consent of some other person is within the subsection seems doubtful …. It seems difficult to say that, where consent of another person is necessary, the deceased was competent to dispose of the property ‘as he thinks fit’, there seems little difference in substance between a power of this kind and a joint power.”
Hanson then mentions the case of Re Phillips (1931) 1 Ch. 347 and the case Re Watts (1931) All E.R. Rep. 786 (to which I shall refer in this judgment) and he' concludes this paragraph of this book as follows:
“The official practice is to claim duty in the Phillips type of case but not in the Watts type of case. In view of the observation of Roxburgh. 7., in Re Churston Settled Estates [1954] 1 Ch. at p. 334, the question seems an open one.”
Maugham, J. [as he was then], who decided Re Phillips, stated that the earlier case, Re Dilke, supported his view. Under a deed Dilke had a general power to appoint subject to the consent of his trustees. He, with the trustees' consent, appointed to such persons as he might by will appoint. It was held that the trustees were not tired to approve of the persons who were to benefit under the exercise of the power, and, therefore, the appointment was good. But I do not think this case is authority for the proposition that, if the trustees had refused to agree to such an agreement and withheld their consent, then the court would have compelled them give it.
In Re Phillips Maugham, J., went a step further. A testator with a general power of appointment to be exercised with his trustees' consent made an appointment to his daughter. His creditors sued, as in equity they could recover out of the fund so appointed if the power was general and unfettered. Did the consent of the trustees create such a fetter? Maugham, J., held that it did not, because the trustees could only veto the exercise of the power but were not concerned in the selection of the objects of the power, so that the power was general. The judgment does not say so, but the logical implication of this decision is that where a trustee has no duty as to the selection of the objects, in this respect he has no powers either. This case, perhaps in order to give effect to the equitable rule in favour of creditors, went beyond Dilke's case. Phillips' case has been followed in Re Joicey [1915] 2 Ch. 115. These cases are authority for the view that where a settlement does not indicate that the trustees are to exercise a discretion in the selection of objects, they have no power to withhold their consent to the objects selected by the donee.
In Re Phillips the main question was whether a power was general and unfettered so that a testator's creditors could benefit. In Re Watts the question was ether this power was or was not general since, if it was general, it would not tinge the rule against perpetuities; whereas if it was, it would. The consent of the they of the donee of the power was expressly required not only to revoke the trust of the settlement but to declare new trusts, and Bennett, J., distinguishing PhiIlips' case, held that it was a sufficient fetter to make the power not general or as he called it “special”. In Re Churston Settled Estates the application of the rule against perpetuities to a power of appointment was again in issue and Roxburgh, followed the decision in Watts' case.
As indicated in the passage I have cited from Hanson, the observation of Roxburgh, J., in the Churston case has left open to doubt the soundness of the distinction between the powers and duties of trustees in cases like that of Re Phillips, on the one hand, and Re Watts, on the other. I share these doubts. I should be slow to adopt this distinction when interpreting the expression “competent to dispose” in a revenue statute. It seems to me that the position of a trustee whose consent is required for the exercise of a power of appointment resembles the position of the donee of a power of appointment to be exercised jointly, rather than that of a special power where the donee can only appoint among a restricted class. In A-G v Charlton a joint power was held not to be a general power because it required the concurrence of two minds: I consider that the same may he said of a power requiring the consent of a trustee.
Furthermore, where the ordinary settlor creates a power of appointment subject to a trustee's consent without specifying anything more he would surely expect his trustee to veto the selection of objects of the power if the choice of the donee was foolish. That I should have thought was one of the functions of a trustee. In my view Re Phillips introduces a highly artificial construction in order to turn what should not have been a general power (because it required the concurrence of two minds) into a general power so as to save the equitable right of creditors to share in the fund appointed under the power. Phillips' case did this by deciding that it not enough for a settlor to say, “The trustee must concur before the donee appoints”; he must make it clear that the trustee is to exercise a discretion in the selection of objects by the donee. The law has been further confused by the decision in Watts' case, where a power that is subject to the consent of a trustee having a discretion to veto the selection of objects is called a special power. The term “special power” hitherto in English law has meant a power of appointment to a limited class, not a power subject to the veto of a trustee on the selection of objects. This last kind of power is not a general power but it is not a special power either, just as a power to be exercised jointly is not a general power but is not a special power.
Happily, the Boston Trust contains a provision that it is to be governed by the laws of Massachusetts so that we need not decide whether the English practice of the Commissioners of Estate and Succession Duties in applying the distinction between the Phillips' type of case and the Watts' type of case is correct; but I think that a consideration of the English authorities serves by contrast to throw into relief the powers, duties and discretion of the trustees in this case according to the law of Massachusetts.
The learned Vice-Chancellor had before him two treatises by Professor Scott, an eminent authority on the law of trusts in Massachusetts, and these treatises and the application of the law as stated therein to the Boston Trust were expounded by three expert witnesses, all qualified lawyers from America, two being called by the appellant and one by the respondent.
The Vice-Chancellor found that the law of Massachusetts to be applied is as stated in Professor Scott's Restatement at s. 330, paragraph 1, a long passage headed “Where power to revoke with the...
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