COMMISSIONER OF STAMPS v. DICKAPITIYA TEA RUBBER CO., LTD

007-NLR-NLR-V-30-COMMISSIONER-OF-STAMPS-v.-DICKAPITIYA-TEA-RUBBER-CO.,-LTD.pdf


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1928.
Present: Garvin and Drieberg JJ.
COMMISSIONER OF STAMPS v. DICKAPITIYATEA AND RUBBER CO., LTD.
167,167a—D. C. (Inly.) Colombo, 4,849.
Estate Duty—Property subject to a trust—Conversion to money—Property
unconverted till death of beneficiary—Interest ceasing on death—
Ordinance No. 8 of 1919, ss. 8 (1) (b) and 21 (4).
By his last will dated December 14, 1895, W. W. G. createda trust of his real and personal estate and directed the trusteesto sell and convert into money such part thereof as did not consistof money and after the payment of debts and legacies, to standpossessed of the residuary' fund in trust to pay the incomethereof to his wife Augusta and after her death to the childrenof the testator. Augusta was the dominant trustee and wasvested with an absolute discretion to postpone the conversion.of any part of the residuary estate.
W. W. G. died on March 18, 1897, possessed of a half share ofDickapitiya estate. His estate in Ceylon was administered,and the administrator conveyed the said half share to the trustees.
The Said property remained unconverted till the death ofAugusta, when the trustees sold the same to Dickapitiya Tea andRubber Company.
Held, that Augusta had cm “ interest ceasing on death ” in Dicka-pitiya estate within the meaning of section 8 (1) (6) of OrdinanceNo. 8 of 1919, and that the property was liable in estate dutyunder the Ordinance.
Held, further, that the Company was not bound to furnish theCommissioner of Stamps with a statement under section 21 (4)of the Ordinance.
The. liability to deliver a statement is not imposed on everyperson accountable for estate duty but only on persons to whoma beneficial interest in the property passes on the death.
A
PPEAL from an order made by the District Judge of Colomboon a citation issued under section 31 of the Estate Duty
Ordinance, No. 8 of 1919, on the Dickapitiya Tea and RubberCompany, Ltd., on the application of the Commissioner of Stamps,who claimed that the half share of Dickapitiya estate, whichwas bought by the Company from the trustees appointed by thelast will of W. W. Gascoyne was liable to estate duty as propertypassing on the death of Augusta, wife of W. W. Gascoyne.
Hayley, K.C. (with him J. R. V. Ferdinands), for Company,appellant in 167a and respondents in 167.—The District Judgehas held that the Company was not liable to furnish a statementunder section 21 (4) of the Ordinance. Having held with theCompany on that point, no order for costs should have been madeagainst the Company.
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On the main question raised—whether Estate Duty is payable 1928.in respect of a half share of Diokapitiya estate—it is submitted Commit-that duty is not payable. Under the will, Augusta had only a right sioner ofto certain income derived from the sale of the produce of the estate,she had no interest in Diokapitiya estate. Augusta's interest. TtaandRUb-was only a chose in action (vide Attorney-General v. Lord ber 0o» ^Sudeley1; In re Smyth, Leach v. Leach2 ; Attorney-Generalv. Johnson3). Augusta died domiciled in England, and thesurviving trustees of the will are domiciled and resident inEngland. In any event, duty is not payable in Ceylon;
Augusta’s interest, whatever the technical name given to it be,was not situated in Ceylon; it falls under the designationof movable property. The will direoted the physical corpus tobe sold and converted into money; the physical corpus must betreated as having been notionally converted into money underthe equitable doctrine of conversion. The doctrine of conversionis applicable in Ceylon, cf. section 118 of the Trusts Ordinance,
Voet bk. I., tit. 8 (Buchanan's Translation, p. 129); 2 Burge, p. 32(old edition). The Estate Duty Ordinance, section 2 (1), doesnot cover movable property of a person domiciled outBideCeylon.
Counsel cited section 17a of the Estate Duty Ordinance.
L. M. de Silva, Acting Deputy Solicitor-General (with MervynFonseka, C.C.), for the Commissioner of Stamps, appellant inNo. 167 and respondent in No. 167a.—Augusta Gascoyne wasentitled to a life interest in a half share of Diokapitiya estate.'
That interest ceased on her death. Though the “ cesser ” was ofa life-interest only, the “ property,” i.e., a half share of Diokapitiyaestate, must, for the purposes of section 8 (1) (6) of the EstateDuty Ordinance, be deemed to have passed on her death (Attorney-General v. Watson*).
As the interest which ceased extended to the whole income ofthe property, the value of the benefit arising from the cesser ofsuch an interest is the value of the property, i.e., of a half shareof Dickapitiya estate. Section 17 (6) of Ordinance No. 8 of 1919.
The English cases cited show that duty may be payable inEngland. They do not show that duty is not payable in Ceylon.
The Company does not under section 17 (2) claim a rebate onthe footing that estate duty has been paid in England. If thecontention of the Company is upheld, it may well be that theCompany will not pay duty either in Ceylon or in England.
»(1897) S. C. 11.* (1907) 2 K. B. 80S
* (1898) 1 Ch. 89.* (1917) 9 K. B. 427
30/6( 38 )
1928.
Commis-sioner ofStamps v.DickapitiyaTea and Rub-ber Go., Ltd.
So long as the property is situate in Ceylon, it is liable to payestate duty in.Ceylon. See the definition of “ property ” in section 2.The distinction between “ movable ” and “ immovable ” propertyis not analogous to that between “personalty” and “realty”(In re Berchtold1).
As Dickapitiya estate is now vested in the Company by alienation,the Company is “ accountable ” for estate duty (section 19 (2) );and the corpus of Dickapitiya estate is subject to a charge untilsuch duty is paid (section 18).
Even if the Company was not liable to make a declaration undersection 21 (4), it is submitted that such a declaration could havebeen called for under section 26 of Ordinance No. 8 of 1919.
August 28, 1928. Gabvin J.—
There are two appeals before us. They are both taken fromthe judgment entered by the learned District Judge in a proceedingby the Commissioner of Stamps against the Dickapitiya EstateCo., Ltd., upon their refusal to furnish him with a statement undersection 21 (4) of the Estate Duty Ordinance, No. 8 of 1919.
The claim of the Commissioner was resisted on two grounds :—
That no estate duty is payable in Ceylon in respect of a half
share of Dickapitiya estate as contended for by the
Commissioner; and
That in any event the Company is not a person under a
liability to deliver any such statement.
The learned District Judge held that estate duty is payablein Ceylon, but admitted the contention that the Company is underno liability to deliver a statement. For reasons given by himhe awarded costs of the proceedings to the Commissioner.
The Commissioner of Stamps appeals from this judgment inso far as it holds that the Company is under no liability to deliverthe statement, while the Company appeals from the order as tocosts and contends that the District Judge was wrong in holdingthat estate duty is payable in Ceylon in respect of a half shareof Dickapitiya estate.
Having heard lengthy arguments on all the points, it seems tome that the principal question for consideration is whether on thedeath of Augusta Gascoyne estate duty became payable underOrdinance No. 8 of 1919 in respect of a half share of certain premisessituated in Ceylon and known as Dickapitiya estate. If thisquestion be answered in favour of the Company it is decisive ofthese appeals. Augusta Gascoyne was not the owner of thishalf share nor had she any legal estate or interest in possessiontherein which formed part of her estate or actually passed at her
1 (1923) 1 Ch. 192.
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death. It is necessary therefore in the first place to inquirewhether Augusta Gascoyne had an “ interest ceasing on her death "in this company within the meaning of section 8 (1) (6) of OrdinanceNo. 8 of 1919.
W. W. Gascoyne, who was at one time the owner of this halfshare of Dickapitiya estate, by his last will dated December 14,1895, which was made in England devised all' his real estate andthe rest and residue of his personal estate to three trustees upontrust to sell and convert into money such part thereof as did notconsist of money and after payment of funeral and testamentaryexpenses and all debts and legacies to stand possessed of the resi-duary trust money, and the investments thereof in trust to paythe income thereof to his wife Augusta Gascoyne.
Auguste Gascoyne, who was one of the three trustees, was vestedwith power to control the investment of the moneys realized onconversion and an absolute discretion to postpone the conversionof any part of the residue. It was also provided that the nettrents and profits and other income produced from any part of thetrust estate previously to conversion were to be paid to the personor persons to whom and in the manner in which the income ofthe proceeds of such sale or conversion would for the time beingbe payable under the will if such conversion had been actuallymade.
Upon the death of Augusta Gascoyne the trustees were to continueto remain possessed of the residuary estate upon trust to pay acertain legacy to one of his sons and subject thereto in trust forall the children of the testator and the child or children of anychild who may have predeceased the testator.
W. W. Gascoyne died on March 18, 1897, possessed inter aliaof a half share of Dickapitiya estate. His estate in Ceylon wasduly administered, and the administrator in Ceylon conveyed thesaid half share of Dickapitiya estate to the trustees. The propertyremained unconverted up to the death of Augusta Gascoyne, afterwhich the trustees sold and conveyed the same to the DickapitiyaTea and Rubber Co., Ltd., as on and from January 1, 1926.•
The circumstance that Augusta Gascoyne was one of the trusteesdoes not affect the question which is concerned with her only inher capacity as beneficiary.
It is evident that upon the death of her husband AugustaGascoyne became entitled to receive the entirety of the nett rentsand profits and income of the trust estate constituted by his lastwill. The position of the Commissioner of Stamps is that in respectof the half share of Dickapitiya estate, which was part of thattrust estate, she had an interest ceasing on her death which extendedto the whole of the income derivable therefrom.
1988.
Gabvin J.
Commie,eionsr ofStamps v.Dickapitiya
Tea and Rub-ber Co., Ltd.
1628.
Garvin J.
Commit-turner ofStamps v.DickapitiyaTea arid Rub-ber Co., Ltd.
( 40 )
For the respondent it was urged relying on the eases of In re Smyth,Leach v. Leach1; and Attorney-General v. Lord Sudeley * that the in-terest of Augusta Gascoyne was not an interest in Dickapitiya estatein specie but an English chose in action and as such not liableto estate duty in Ceylon. But both these were cases of probateand not estate duty. In each case the question arose in connectionwith the estate of a beneficiary under a trust who at the date ofhis death was vested with certain rights which undoubtedly formedpart of his estate. The question in each case was whether theserights amounted to an interest in specie in certain foreign im-movables which formed part of the property of the trust and assuch free of the burden of probate duty. The determination ineach case was that at the death of the deceased he had acquiredno interest or estate in the foreign immovables; but that theright of the deceased and on his death the right of his executor,was to compel the trustee to execute the trust and pay the sharewhich by the terms of the trust became payable to the beneficiary—this right, whatever its value may be, was an asset and inasmuchas it was an English chose in action, an English asset liable toprobate duty.
But the interest of Augusta Gascoyne under this will whichpassed at her death to the other beneficiaries, however it may bedescribed or defined, was for her life only and ceased at her death ;it was never an asset of her estate and could not therefore passto her executors. She clearly had no right of property in Dicka-pitiya estate and in the strict terms of the common law her interestfor life in this trust may be described as a chose in action. It doesnot by any means follow that she had no “ interest'” in the propertyof the trust of which Dickapitiya estate was a part within themeaning of section 8 (1) (b) of the Estate Duty Ordinance. Thewords “ had an interest ” as used in that section are not used inthe restricted sense of an estate or right of property. They areused in a wider sense as in the English Act. An annuitant hasan “ interest ” in the residuary estate of the testator where noproperly had been specially charged or set apart to answer theannuity (vide Attorney-General v. Watson3 and Attorney-Generalv. Cook*). The rights conferred on Augusta Gascoyne by the lastwill of her husband are more comprehensive and bring her intomuch closer touch with the property.
The conclusion suggested by these considerations is that on thedeath of this lady estate duty became payable in Ceylon to theextent to which a benefit accrued or arose from the cesser of herinterest in Dickapitiya. But it is said that the case of Attorney-General v. Johnson5 and the-application of the principles of the
> (1898) 1 Ch. 89.3 (1917) 2 K. B. 427.
s (1895) 2 Ch. 526.* (1921) 3 K. B. 607.
* (1907) 2 K. B. 885.
( 41 )
judgment in that case lead to the opposite conclusion. The facts ofthat case are in all material respects identical with these with whichwe are concerned in this case. Estate duty was claimed in Englandupon the cesser by death of the interest of certain beneficiariesunder a trust for conversion -mid the claim was resisted on theground that the property of the trust consisted of immovableproperty in the Straits. The claim of the Commissioner was allowed.
But it . is necessary to examine the decision with care beforewe can say whether it is applicable to the case before us. In thefirst place one must bear in mind that in England (Finance Act,section 2 (2) ) “ Property passing on the death of the deceasedwhen situate out of the United Kingdom ” is. liable to estate duty“ if under the law in force before toe passing of the Act, legacy orsuccession duty is payable in respect thereof . .. . ”
. The estate in the Straits being foreign immovable propertywas primd facie not liable. But inasmuch as it was subject to atrust for conversion the doctrine of equitable conversion enabledthe Court to treat it as personalty. There was thus a successionunder a settlement of personalty .and the rule is well establishedthat succession duty is payable in respect of personal property,situate out of the United Kingdom where the settlement underwhich the property passes is a British Settlement and the forumof administration a British Court. The liability to successionduty is decisive of the question of liability to estate duty—FinanceAct, section 2 (2). There undoubtedly are in the judgment passagesin which the property is referred to as being in England, but thesepassages must, I think, be understood in the sense that the successionis an English succession in as full a sense as if the property weresituate in England.
The question whether the doctrine cf equitable conversionapplies in Ceylon in cases such as the one before us is one of somedifficulty. The classification of property into realty and personaltyhas no place in our system. I do not, however, propose to expressany opinion on the -question since the application of that doctrinewill not of itself suffice to give this property a locality elsewherethan in Ceylon.
Were Dickapitiya estate treated as equitably converted intopersonalty and even if it be possible for certain purposes to tre&tit as movable property, it seems to me that the situs of the propertybeing Ceylon it is liable to estate duty here. But since toe propertywas the subject of an English settlement and on the death ofAugusta Gascoyne a succession occurred, the rule of the Englishlaw that succession duty is payable upon an English successionin respect of personal property, wherever the same may be, wouldapply to the case, and inasmuch as succession duty is payable estateduty would presumably become payable in England by virtue of
1928.
Gabvin J.
Commis-sioner ofStamps v.DickapitiyaTea cum Rub-ber Co., Ltd.
( 42 )
1928. section 2 (4) of the Finance Act. It is to be noted that the Sue.
Gabvin j. cession Duty Act imposes a duty in respect of personal property
, whenever there is a “ succession.” A limitation upon the generality
aioner ofwords of the Act was first imposed in the case of Wallace v.
Stamps v. Attorney-General' by Lord Cranworth who confined their operationTea and Bub-persons who became entitled by virtue of the laws of England.
otr .Co., Ltd. Where a succession took place in regard to personal property*subject to a trust upon the death of a beneficiary, it was held that
Lord Cranworth’s rule was satisfied “ when the property is foundto be legally vested in a person subject to the jurisdiction of theEnglish Courts, and the title to the beneficial interest in that propertyis regulated and capable of being enforced by the laws of England. .” (Attorney-General v. Jewish Colonization Association.2)
In short personalty situated abroad but subject to a trust isbrought within the sphere of taxation of the Succession Duty Actas interpreted by Lord Cranworth in cases where the forum ofadministration of the settlement is England.
Liability to estate duty in Ceylon extends to movable andimmovable property situate or being in Ceylon. That such propertywhen subject to an English trust may in certain cases be madeliable to estate duty in England by way of the Succession DutyAct does not alter the fact that it is situate in Ceylon.
If it is situate in Ceylon then it is within the sphere of taxationof the local Estate Duty Ordinance. The half share of Dickapitiyaestate which formed part of the trust estate of W. W. Gascoynewhether it be treated as realty or personalty, immovable ormovable, is situate in Ceylon and became chargeable with dutyin Ceylon on the cesser of the interest of Augusta Gascoyne therein.
I also agree with the District Judge that the Dickapitiya EstateCompany is under no liability to deliver the statement called for bythe Commissioner. On the death of Augusta Gascoyne no beneficialinterest in the property passed to the Company. They acquiredthe property by purchase from the trustees after her death andas such may as alienees be persons accountable under section 19 (2)of the Ordinance. But the liability to deliver a statement is notimposed on every person accountable for estate duty but onlyon persons to whom a beneficial interest in the property passeson the death,
For these reasons the judgment of the learned District Judgeshould in my opinion be affirmed, save in regard to the order asto costs. The parties invited the decision of the Court on twopoints and each succeeded on one point. Each party should bearhis own costs in the Court below. I would make the same orderin regard to the costs of the Company’s appeal and the appealentered by the Commissioner.
l {1865 6) 1 Ch. Ap. 1.*
{1901) 1 K. B„ p. 123 at p. 142.
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Dbibbkbg J.—
These appeals are from an order made on a citation undersection 31 of the Estate Duty Ordinance, No. 8 of 1919, on theDickapitiya Tea and Rubber Company, Limited, on the applicationof the Commissioner of Stamps who claims that the half share ofDickapitiya estate, which was bought by the Company from thetrustee appointed by the last will of W. W. Gascoyne, is liableto estate duty as property passing on the death of Augusta Gascoyne,the wife of W. W. Gascoyne. By his last will of June 17, 1897,executed in England, W. W. Gascoyne created a trust of the entiretyof the residuary estate, the trustees being the executors of his will,viz., his wife and his sons, George Gascoyne and Edward BucknerGascoyne. He will directed the trustees to sell, call in, andconvert into money such part of the residuary estate as did notconsist of money and invest the entirety subject to certain paymentsin authorized investments. The entire income of the trust fundwas to be paid to Augusta Gascoyne and after her death the fundwas to be held in trust for all his children and on certain conditionsfor the issue of deceased children. Augusta Gascoyne was thedominant trustee with considerable powers: she alone was givenan absolute discretion to postpone the sale and conversion of anypart of tie residuary estate and in managing any real or leaseholdproperty which remained unsold.
W. W. Gascoyne died in England in 1895, and sole testamentaryjurisdiction to administer his estate was conferred on the DistrictCourt of Colombo. The three executors who had proved the willin England obtained in Ceylon a grant of letters with the willannexed, to their attorney, William Anderson, who by three deedsof January 13, 1898, September 8, 1898, and October 17, 1898,conveyed to the three trustees upon the trust created by the willW. W. Gascoyne’s half share of Dickapitiya estate. AugustaGascoyne died in England on November 24, 1924. We do notknow whether she left a will or whether her estate was administered.On April 13, 1926, the surviving trustees, George Gascoyne andEdward Buckner Gascoyne, sold the half share to the DickapitiyaTea and Rubber Company, Limited. The conveyance includeda three-fourths share of three small allotments in extent 3 acres1 rood and 46 perches and a similar share of an allotment of 12 acres3 roods and 30 perches title to which was acquired or perfectedby the trustees after the death W. W. Gascoyne. The pricepaid was Rs. 227,853'40. These proceedings are limited to W. W.Gascoyne’s half share of what is almost the entirety of the estate.
On July 7, 1926, the Commissioner of Stamps issued a noticeto the Company which stated that on the death of Augusta Gascoyneestate duty became payable to the Government of Ceylon on thecesser of her life interest in the half share of Dickapitiya estate
1928.
Dbiebeso j.
Commis-sioner ofStamps v.DickapitiyaTea and Rub-ber Co., Ltd.
■1988.
Dbtbbicbo J.
Commis-sioner ofStamps v. .DickapitiyaTea arid Rub-ber Co., Ltd.
( 44 )
to the extent to -which a benefit had accrued or arisen by suchcesser under the provisions of sections 8 (1) (6), 17 (6) (a) andthe proviso thereto, of the Estate Duty Ordinance, that the duty-,so payable had not been paid by the heirs of the trust dispositionof W. W. Gascoyne, and that the Company as the purchaser andas the party in possession of the half share was legally liablefurnish him with a declaration and a statement under the provisionsof section 21 (1) and the definition of “ executor ” in section 2 (1)of the Ordinance and was liable to pay the estate duty under section19 (2) in respect of the cesser of Augusta Gascoyne’s life-interest.The Company did not admit liability and later, on the applicationof the Commissioner of Stamps, the District Court in these pro-ceedings issued a citation under section 31 of the Ordinancecommanding the Company to deliver or make the statement ordeclaration required by the Commissioner of Stamps.
The learned District Judge rightlyheld that though the Companywas under section 19 (2) accountable for the estate duty on theproperty it could not be called upon to make the declaration ofparticulars under section 21 (4), for no beneficial interest in theproperty passed to the Company on the death of Augusta Gascoyne.It is not possible to regard the Company as liable under this sectionas an executor within the meaning of the word as defined in section2 (1). This is an anomaly which is not present in the FinanceAct of 1894 as will be seen from a comparison of section 8 (4) ofthat Act with sections 19 (2) and 21 (4) of our Ordinance.
It may, however, have been intended that of the many personswho are made accountable by section 19 (2) only the two classesreferred to in section 21 (4) should be under the obligation, whetherrequired to or not by the Commissioner of Stamps, of making thedeclaration within twelve months of the death of the deceased,and the others should only be liable to furnish information andproduce documents if called upon to do so under section 25 (1).
This application however was made in reference to section 21 (4)and the declaration is in the form prescribed in the rule made underthat section. The point is, however, now of no importance forthe parties agreed that the main question at issue between themwas whether Dickapitiya estate was liable to estate duty and thatthe proceedings should be regarded as following on a citationunder section 32. On this point the trial Judge held that AugustaGascoyne had an interest in a half share of Dickapitiya estatewhich ceased by reason of her death and that therefore undersection 8 (1) that share of Dickapitiya estate was property whichpassed on her death and was liable to estate duty to the extentto which a benefit accrued or arose by the cesser of such interest.He held that though the citation had wrongly issued, the Companyhad the opportunity of a decision on the substantive question
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and that the Commissioner of Stamps was entitled to costs. Both
parties have appealed; the Commissioner of Stamps appeals dhibbebo J
adnnst the finding that the citation had issued wrongly, the Com-pany appeals against the finding that the half share of Dickapitiya«yj£ate is liable to duty and against the order as to costs.
Iflt is clear that Augusta Gascoyne had in the trust propertyan interest which ceased on her death, but was it an interest inthe half share of Dickapitiya estate and is that share when in thehands of a purchaser who has bought ft from the trustees undera trust for sale liable to estate duty ?
Commis-sioner ofStamps v.DickapitiyaTea and Bub.btr Co,, Ltd.
Property is defined in the Estate Duty Ordinance -as includingmovable or immovable property of any kind situate or beingin the Colony and the proceeds of sale thereof respectively, andany money or investment for the time being representing .theproceeds of sale.
It is therefore necessary to know what was the nature of AugustaGascoyne’s interest, in what property was it, and is that property“ situate or being ” in Ceylon.
It has' been held that where there is a trust created in Englandwith all the parties to it residing there, the trust property abroad,whether movable or immovable, must be regarded as an Englishasset and one not situated abroad.
In re Smyth, Leach v. Leach1 was a case of an English trust theproperty of which consisted of a plantation in Jamaica. It wasa case of probate duty and the question before the Court waswhether the interest should be treated as an English asset or treatedas foreign because the plantation was in Jamaica. The plantation- was given to trustees for the benefit of certain persons for life andtheir issue, and upon the death of those persons and failure of issuethe property was to be sold and the proceeds divided among certainpersons referred to in the judgment as “legatees.” One of thelegatees died when the persons entitled for life were in existenceand the question was whether probate duty was payable in England.The trust for sale had been carried out and the proceeds wereavailable.
It was held that the interest was an English equitable chosein action recoverable in England and was an English and not aforeign asset, that the legatee was not entitled to the plantationitself or any specific part of it, and that his right was against thetrustee-to have the trust of the will administered, and whetherthis was an English or a foreign asset would depend on what wasthe proper forum for deciding the legatee’s claim-and this wasin England as all the parties to the trust resided there.
i {1898) 1 Ch. 89.
1028.
Dbibbkbo J.
Commis-sioner ofStamps v.DicleapitiyaTea and Rub-ber Oo., Ltd.
( « )
Romer J. held that the case was governed by the principleswhich led to the decision of Attorney-General v. Lord Sudeley* andsaid that the words of Lopes L.J. in the Court of Appeal “ apptejjalmost word to word to the case before me.”
Attorney-General v. Lord Sudeley (supra) was a case of an Englishtrust with the parties resident in England and the trust propertyconsisted of mortgages of land in New Zealand and the questionwas whether these were liable to probate duty. Algernon Tolle-mache by his will left his residuary estate which comprised theseNew Zealand mortgages on trust, the income was left to certainpersons including his wife Frances Tollemache during their jointlives and the life of the survivor and after their deaths one-fourthwas bequeathed to his wife absolutely.
The claim was by the executor of Frances Tollemache whoby the death of those entitled for life became absolutely entitledto a one-fourth share of the residue ; at the time of the applicationthe residuary estate had not been distributed. The New Zealandmortgages were treated not as a specific tangible asset, in whichcase there would be no difficulty in determining its locality, butas a chose in action the locality of which, by reason of the partiesbeing resident in England, was England.
The words of Lopes L.J. referred to by Romer J. In re Smyth,Leach v. Leach (supra) are these :—
“It is to be observed that neither Frances nor her executorscould claim any part of this estate in specie. The exe-cutors of her husband were hot trustees of the estatefor her; all she was entitled to was her proportion ofthe proceeds of her husband’s estate after realization.Neither Frances nor her executors had any claim againstthe mortgager to recover the mortgage debt or anyportion of it; that was a claim enforceable only by' theexecutors of Algernon.”
This judgment was affirmed in the House of Lords. The wordsI have quoted are from the judgment in the Court of Appeal wherethe judgment of Lord Russell C.J. and Charles J. in the Queen’sBench Division was set aside. They had held that it was a foreignasset as the executors could not possess themselves of it withoutthe intervention of the New Zealand Courts. It does not followfrom these cases that August Gascoyne had no interest in Dicka-pitiya estate within the meaning of section 8(1) (b) of the Ordinancewhich is the same as section 2 (1) (b) of the Finance Act of 1894.
In Attorney-General v. Watson2 which was a case of an annuityto be paid out of a trust estate created by a will it was held thatthe annuitant had for the purposes of the Finance Act an interest
l (1895) 11 Ch. 526; (1896) 1 Q. B. Court of Appeal 354.
* (1917) 2 K. B. 427.
( « )
in the corpus of the estate which consisted of real property, thatthough the annuitant had no estate in it she had an interest in it4>&ause it was the source of the annuity bequeathed to her.
It is not necessary therefore that Augusta Gascoyne shouldhave had an interest in Dickapitiya estate in specie : as the sourceof the income bequeathed to her she had an interest in it whichrendered it liable to estate duty on her death.
A difficulty arises from the decision in Attorney-General v. Johnson.1The will there contained similar provisions. The trust, whichwas one for sale, was of the residue which included the Melongestate in Upper Assam. The parties to the trust were in England.The trustees had the power of postponing the sale as long as theythought desirable and were empowered to continue the businessor trade of tea planting which the testator had carried out. Thequestion arose on the death of Marie Graf and H. J. Reeves, theformer of whom was given a fixed annuity out of the income andshared the balance with the latter and six others. The sale ofMelong estate had been postponed by the trustees' and it remainedunsold at the death of these persons. By section 2 (2) of theFinance Act of 1894, property passing on the death of the deceasedwhen situated out of the United Kingdom is not ordinarily liableto estate duty. It becomes so if it is subject to legacy or successionduty under certain circumstances. Bray J. stated that the mainquestion was whether the property in each case was situatedin the United Kingdom. The Crown claimed that it was situatedin England and the trustees of the will contended that it wassituated abroad- He said that it was conceded that it shouldbe regarded as situated in England, for by a trust for sale realtymay in equity be converted into personalty (Fletcher v. Ashbumer1),and that if so treated in equity it should be so converted for fiscalpurposes also (Attorney-General v. Dodd3): but that reliance wasplaced on the clauses of the will which gave the trustees power topostpone indefinitely the sale and carry on the business withadditional capital; that the estate had not in fact been convertedinto money at the time of the death of these two persons andmight never be converted. It was also contended that the rightsof these persons depended on the law of Upper Assam and thatthe Courts in England would not entertain an action to administerthe trusts of the will because it depended on that law. Theseobjections were considered, but the Court followed the principlein Attorney-General v. Lord Svddey (supra) and In re Smyth, Leach v.Leach (supra) and In re Cigala's Settlements4 and held “ that theproperty which passed on the death of these persons was notproperty situated out of the United Kingdom and therefore liableto estate duty and succession duty .”
I (1907) 2 K. B. 885.»(1894) 2 Q. B. 150.
* 1 White <Ss Tudor's L. C., 7th erf., 327.* (1878) 7 Ch. Div. 351.
1928.
Dkikbbbci J.
Commis-sioner ofStamps v.DickapitiyaTea and Bob-ber Co., Ltd.
1928.
Dbibbero J.
Commit-aioner ofStamp* v.DidkapitiyaTea and Rub-ber Co., Ltd.
( 48 )
It was contended that the rale of equitable conversion has noplace in our law.
The Trust Ordinance, No. 9 of 1917, is an endeavour to codifywith adaptation to local conditions in such matters as charitableand religious trusts, the law of trusts as it exists in England^Section 118 of the Ordinance enacts that—
“ All matters with reference to any trust, or with reference toany obligation in the nature of a trust arising or resultingby the implication or construction of law, for which nospecific provision is made in this or any other Ordinance,shall be determined by the principles of equity for thetime being in force in the High Court of Justice in Eng-land.”
There is no specific provision in the Ordinance on this point,but the distinction between real and personal property as it isunderstood in England does not exist in our law.
In Attorney-General v. Johnson (supra) it was held that therule applied so as to allow real property abroad to be consideredand dealt with as personal property in England'in appropriatecases to compel the performance of trusts without regard to thelaw of the country where the property is situated.
For all the purposes of the administration of the trust tlje propertyin this case can be regarded as situated in England even beforeit was sold and therefore liable to estate duty there, but can thisalter the character of immovable property which Dickapitiyaestate has under our law ?
The Deputy Solicitor-General contended that it could not havethis effect—that even though it was regarded as property situatedin England for the purposes of the administration of the trusts,its essential character of immovable property remained unchangedand it was therefore liable to estate duty here. In my opinion thiscontention is right. He referred us in this connection to the caseof Berchtold (Berchtold v. Capron1). Here there was a trust forsale comprising freehold in England. The beneficiary and hisheirs died in Hungary where there were domiciled. The mainquestion before the Court was whether intestate succession, so faras the freeholds in England which remained unsold were concerned,should be determined by the lex loci rei sitae or the lex domicilii,and this depended on whether they were immovable or movableproperty. Russell J. relied on the judgment of*Lord Selbourne inFreeke v. Lord Carberry2 where he said :
“ Domicil is allowed in this country to have the same influenceas in other countries in determining the succession ofmovable estate ; but the maxim of the law of the civilized
i (1923) 1 Ch. 192 and (1923) 92 Law Journal Rep. Ch. Div. 185.
* L. R. 16 Equity 461.
( 49 )
world is mobilia eequurUur personam, and is founded onthe nature of things. But land, whether held for achattel interest or held for a freehold interest, is in nature,as a matter of fact, immovable, and not movable. Thedoctrine is inapplicable to it. If, as the law unquestion-ably is, an owner of land in Ireland, no matter what hisdomicile is, can only' devise it by a will made in accordancewith the law of Ireland, I. am unable to hold that he can,if domiciled, say in Scotland, enable himself to disposeof it by a Scotch will, not in accordance with the law ofIreland, by previously vesting it in a trustee for sale,the trust being unperformed. It is still immovableproperty, in fact, and the disposition of it is a dispositionof immovable property, and not of something else, namely,the money by which, if sold, it would be represented,but which before the sale does not, in fact, exist.”
He dealt with the contention that the land should be consideredas sold and converted into money in the following passage :—
“…. it was argued that, according to English law,
land directed to be sold and turned into money mustbe considered to be money; and that on the principlethat equity considers done what should be done, theBirmingham freeholds are in the eye of the law money.This argument, to be effective, must add the words‘ for all purposes.’ That the Birmingham freeholdsare to be treated as money for some purposes no onedoubts. Thus the interest of the taker is personal estate.But this equitable doctrine of conversion only arisesand comes into play where the question for considerationarises as between real estate and personal estate. Ithas no relation to the question whether property is movableor immovable. The doctrine of conversion is that realestate is treated as- personal estate, or personal estateis treated as real estate; not that immovables are turnedinto movables, or movables into immovables.”
It was held that the freeholds were immovable and that successionto them was to be determined by the law of England.
I am therefore of opinion that whatever be the nature of therights of Augusta Gascoyne and the subject of those rights so faras the administration of the trust in England is concerned, Dicka-pitiya estate being immovable property, her interest in it, so longas it remained unsold, was an interest in immovable property forfor the purposes of estate duty.
I agree with the order made by my brother Garvin.
Judgment varied.
8J.H. 9487 (11/48)
1928.
Dbibhbm J.
Commit-aioner oj
Stamps v.Diclcapisipa
Tea and Rub-ber Go., Ltd,