Scottish Court of Session Decisions

The Succession Duty Act 1853, which by section 1 provides that the term “succession” shall denote any property chargeable with duty under the Act, enacts—Section 2—“Every past or future disposition of property, by reason whereof any person has or shall become beneficially entitled to any property or the income thereof upon the death of any person, … and every devolution by law of any beneficial interest in property or the income thereof upon the death of any person … to any other person in possession or expectancy, shall be deemed to have conferred or to confer on the person entitled by reason of any such disposition or devolution, a ‘succession,’ and the term ‘successor’ shall denote the person so entitled, and the term ‘predecessor’ shall denote the settler, disponer, testator, obligor, ancestor, or other person from whom the interest of the successor is or shall be derived.” Section 15—“Where … any reversionary property expectant on death shall be vested, by alienation or other derivative title, in any person other than the person who shall have

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been originally entitled thereto, under any such disposition or devolution as is mentioned in the second section of this Act, then the person in whom such property shall be so vested shall be chargeable with duty in respect thereof as a succession at the same time and at the same rate as the person so originally entitled would have been chargeable with if no such alienation had been made or derivative title created, and where … any succession shall, before the successor shall have became entitled thereto or to the income thereof in possession, have become vested by alienation or by any title not conferring a new succession in any other person, then the duty payable in respect thereof shall be paid at the same rate and time as the same would have been payable if no such alienation had been made or derivative title created, and where the title to any succession shall be accelerated by the surrender or extinction of any prior interests, then the duty thereon shall be payable at the same time and in the same manner as such duty would have been payable if no such acceleration had taken place.”

On 30th April 1906 the Lord Advocate on behalf of the Commissioners of Inland Revenue raised an action against the Right Honourable Shipley Gordon Stuart Erskine, Earl of Buchan, in which he concluded for delivery of an account of the Earl's succession to the lands and estate of Strathbrock, Kirkhill and others in the county of Linlithgow, so that the amount of succession duty payable by him upon the death of his predecessor, the late David Stuart Erskine Earl of Buchan, in respect of said lands, might be ascertained, and for £4000 in name of such duty, with interest from the date of the death of the late Earl.

The pursuer pleaded—“(1) The succession to the said entailed estates having been accelerated by the surrender or extinction of the deceased's interest as heir of entail in possession, succession duty is payable as if no such acceleration had taken place. (2) The defender as successor in a statutory sense being liable for the duty claimed, decree as concluded for should be given.”

The following narrative of the facts is taken from the opinion of the Lord President:—“The Lord Ordinary has so succinctly and correctly set forth the facts on which the present controversy arises that I borrow the first portion of his opinion. He says—‘The late Earl of Buchan was in 1872 heir of entail in possession of the entailed estates of Strath brock, &c., in the county of Linlithgow, under an entail dated in 1064 and registered in 1720. His eldest son and heir-apparent, then Lord Cardross, and now Earl of Buchan, was born on 27th February 1850. The late Earl of Buchan was in embarrassed circumstances and had been for a considerable time under trust, and shortly before 1872 his estates were sequestrated. By an agreement dated 23rd and 27th March 1872 he agreed to propel the estates to the present Earl as from 13th September 1871, and completed the propulsion by the disposition dated 24th May 1872. But this deed of propulsion did not contain the real or whole terms of the transaction. These are to be found in the agreement of March preceding, which dealt with many details, and imposed very onerous conditions upon the present Earl, which it will be necessary to refer to later. But two important parts of the arrangement embodied in this agreement were, that the Earl of Buchan should dispone to his son his fee-simple estate of Ammondell, and should, whenever his son reached twenty-five years of age, do whatever was necessary on his part at once to disentail Strathbrock, &c.’ I here interpolate that at the date in question the power to disentail still rested on the second section of the Rutherfurd Act, or, in other words, that while an heir in possession under an old entail, but born after August 1848, could disentail when of full age, an heir-apparent could not give consent to the heir in possession born before 1848 until he, the heir-apparent, was twenty-five years of age. Accordingly, what happened in 1875 is described in condescendence 9, which is as follows:—‘On 19th March 1875 the deceased and the defender presented a petition to the Court for authority to disentail the said lands and estates. The petition set forth that the deceased had succeeded to the said entailed lands and estates as nearest and lawful heir-male of tailzie and provision, that he had propelled the whole of the said entailed estates to the defender and the heirs-male of his body, whom failing the other substitute heirs of entail, and that the defender was heir of entail in possession, or otherwise the deceased himself was. In a deed of consent, dated 9th June and recorded 17th September 1875, the defender consented to the disentail; and by interlocutor dated 20th July 1875 the Court interponed authority, and authorised instruments of disentail to be recorded. Accordingly two instruments of disentail, dated 9th June 1875, the one by the deceased and the other by the defender, were recorded on 17th September 1875.’ I resume the Lord Ordinary's narrative—‘The late Earl died on 3rd December 1898, survived by his son Lord Cardross, who then succeeded to the title. The Crown now lay claim to succession duty on the entailed estates so propelled in 1872 to the present Earl, and the record leaves it somewhat in doubt whether the claim does not extend to succession duty on the fee simple estates also.’

“As regards the last sentence no argument has been adduced to your Lordships as to the fee-simple estate. I do not see how it could possibly be contended that a disposition of fee-simple estates inter vivos, followed by complete possession on the part of the disponee, could give rise to a claim for succession duty at the death of the disponer twenty-six years afterwards, and that matter may be dismissed once for all.”

On 30th November 1906 the Lord Ordinary ( Johnston) assoilzied the defender with expenses.

Opinion.—“… [ After passages quoted by the Lord President, supra] … The questions at issue, stripped of a great deal

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of detail, are, I think ( first) whether, if the deed of propulsion be alone regarded, the defender, who holds under it, was liable for succession duty on the estates propelled when his father died; and ( second) whether the propulsion is to be looked at as an isolated act independently of the agreement of which it was part, or whether it is competent to look at the whole composite transaction embodied in the agreement and carried out by several deeds, of which the deed of propulsion was only one, and by a variety of procedure; and if it be so competent, whether consideration of the whole transaction as an unum quid affects the liability.

First.—The Succession Duty Act 1853 provides— … [ quotes sections 1 and 2, supra] …

Section 5 provides that any increase of benefit accruing to any person by the extinction of any charge on property determinable by the death of any person, should be deemed a succession accruing to the person beneficially entitled to the property.

Section 7 provides that ‘when any disposition of property, not being a bona fide sale, and not conferring an interest expectant on death on the person in whose favour the same shall be made, shall be accompanied by the reservation or assurance of or contract for any benefit to the grantor, or any other person for any term of life,’ the cesser of the benefit so contracted for is to be deemed a succession.

By section 10 ‘there shall be levied and paid to Her Majesty in respect of every such succession as aforesaid, according to the value thereof,’ the following graduated duties, viz., &c.

Now I think it necessary to consider at this point how the matter would have stood had the defender succeeded to his father under the entail in ordinary course.

The entail of Strathbrock, executed in 1664 by Sir James Stewart in favour of William Stewart, his second son, called in succession under the destination Katherine Stewart, the entailer's youngest daughter, and the heirs-male of her body, &c. It would appear that by 1720 the lands had devolved on Katherine Stewart, then Lady Cardross, under the entail, and that thereafter they descended in the direct line to the late Earl of Buchan, and, had nothing occurred, would have so descended to the defender. The defender would therefore have taken up the estate by serving heir of provision to his father under the entail on his father's death in 1898. In these circumstances the defender would have taken by devolution of law from his father, and not by disposition from the entailer— Earl of Zetland v. Lord Advocate, 1878, 5 R. (H.L.) 51, where the series of decisions on the subject was reviewed. And it must be kept in mind that the position of the heir of entail in possession is that of fee-simple proprietor, except so far as fettered, and not in any sense of liferenter, with a fee in reversion to the next substitute heir. The estate which descends from him to the next substitute heir ‘is the same estate in law which was in the preceding owner, which was none the less a beneficial fee, though the law placed fetters upon it so far as the power of alienation was concerned,’ per Lord Selborne in the Earl of Zetland's case supra, at page 58. Accordingly, the late Earl would have been the predecessor and the defender successor in the sense of section 2 of the Succession Duty Act 1853, and the defender would have paid duty accordingly under section 10.

Let me revert now to what was done in 1872. A disposition, which may be called a deed of propulsion, but is none the less a disposition, was granted by the late Earl to the defender. This deed would have been a contravention of the entail had the grantee been any other than the defender. But as he was apparent heir, as there was no change in the destination, and as the conveyance was under the fetters of the entail, it was a disposition which the late Earl could competently grant and the defender safely accept. Now, turning to section 2, this deed did not create a succession in the sense of the Act, for though it was a disposition whereby the defender became beneficially entitled to the Strathbrock estates he did not do so on the death of any person. Again, if it passed the property beneficially from the late Earl to the defender in 1872, was there any devolution by law of a beneficial interest on the late Earl's death to the defender in possession? I do not think that it is possible to maintain—at least, counsel for the Crown did not attempt to do so—that whatever the destination was on which the fee-simple estate of Ammondell stood prior to 1872, that after the disposition of that estate to the defender on 24th May 1872 there could be any devolution by law of that fee-simple estate or any interest in it upon the defender on his father's death. Having regard to the legal position of an heir of entail in possession and his apparent heir, and to the appropriate terms of the disposition or deed of propulsion of the entailed estate, I am unable to see any difference in this respect between the entailed and the fee-simple estate.

Accordingly, in my opinion there was no dutiable succession, in the sense of the 2nd section of the Act at the death of the late Earl of Buchan on which the defender fell to be assessed, although it is possible that there was an extinction of a charge or a cessor of a benefit reserved, which, under section 5 or 7, might have been deemed a dutiable succession. I think that a consideration of these sections tends to support the view I have indicated on the bearing of section 2 on this matter.

I pass now to section 15 of the Succession Duty Act 1853. It provides in its first two paragraphs for the case of the alienation of any reversionary property expectant on death, and declares that the alienee shall be chargeable with duty in respect thereof as a succession, at the same time and at the same rate as the person originally entitled would have been chargeable if no such alienation had been made. I do not think that these provisions have any bearing on the case before me. But the

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section proceeds—… [ quotes supra]….

Now, even if I had nothing to consider except the propulsion of the entailed estate in 1872 by the late Earl of Buchan to the defender, I should have doubted whether the devolution imported a surrender or extinction of a prior interest in the sense of the Act. If the estates of Strathbrock, &c. had been held by the late Earl on a destination, that is, a tailzie without fetters, under which his son, the defender, would have succeeded as heir of provision, I conceive, as I have already said, that it would have been open to the late Earl to propel the estate to his son, that is, to dispone it to his son, without leaving his son liable to the same claim for succession duty as he would have been had he taken under the destination on his father's death. If so, then as the heir of entail in possession is fee-simple proprietor except so far as fettered, and the fetters do not prevent propulsion or disposition to the next heir, being heir-apparent, I cannot see that liability for duty survives any more on propulsion in the case of a strict entail than of an unfettered destination. I think, in fact, that the term ‘prior interests,’ the surrender or extinction of which is contemplated, does not appropriately describe the right of an heir of entail in possession, but covers only such interests as are a charge on the fee. I assume that the propulsion is bona fide and absolute, and that there is no question of donatio mortis causa.

Second.—But I do not rest my opinion entirely on this view, for I think that the latter part of the clause affords strong ground for the same conclusion.

Assuming that the propulsion is an acceleration in the sense of the provision, still the duty is only to be payable ‘at the same time and in the same manner as such duty would have been payable if no such acceleration had taken place.’ This involves, I think, not that duty might have been payable if nothing but the acceleration had taken place, but must have been payable whatever else took place.

Now, in 1872 Lord Cardross was heir-apparent under an old entail. In 1875 he attained the age of twenty-five, necessary at that date to consent to disentail. He was then capable of giving his consent, even without consideration to his father's disentailing, and acquiring in fee-simple, or burdening or disposing of the estate. If no such acceleration had taken place and the estate had remained under the entail, there was nothing to prevent at any moment this course being taken, and the duty, in whole or in part, would have disappeared. There was, therefore, no must during the late Earl's life about the payability of the duty at the late Earl's death. The above course was not taken by reason of the fact that Lord Cardross, though of age, was not yet twenty-five in 1872. But the real and whole transaction was this—The late Earl agreed to execute in favour of the defender a deed of propulsion of Strathbrock, a conveyance of Ammondell, and an assignation of certain other rights and interests, including any reversion of his estates under trust and in sequestration. The late Earl and the defender bound themselves to take the earliest possible steps to disentail Strathbrock, and to that end the late Earl bound himself to execute and deliver, unico contextu with the deed of propulsion, an irrevocable mandate to the defender's nominee, empowering him to do all acts required of the late Earl to carry out the disentail and vest the estates in fee-simple in the defender. Simultaneously with the deed of propulsion and the granting of such irrevocable mandate by his father, the defender undertook to borrow on the estates or otherwise £46,000 for payment of the late Earl's debts, and he undertook to pay certain annuities, a comparatively small part only of which were determinable on the death of the late Earl. These considerations were not considerations merely for the propulsion, but in a greater degree, if not entirely, for the disentail and the vesting of the estates in the defender in fee-simple. At the earliest moment possible the estates, which had been propelled to the defender, were disentailed and acquired by him in fee-simple.

I cannot separate up the transaction as the Crown would have me do, and say that the defender is caught in a net woven of the form of conveyancing rendered necessary by his being under twenty-five when this family arrangement was entered into, which he would have escaped if he had been twenty-five. Had the defender been twenty-five in 1872, the late Earl and he might have proceeded straight to disentail, and to transfer the estates reduced to fee-simple from the late Earl to the defender, after putting on them the burdens necessary to pay the late Earl's debts and the other charges agreed upon. There would have been in the terms of this necessarily complicated family agreement the quid pro quo on both sides involved in a disentail, and all succession by the defender to his late father would have been ended. What was done in a slightly different form, by reason of the defender being only twenty-two years of age and not twenty-five, in 1872, produced exactly the same result. There was the same potentiality in the situation after the deed of propulsion was executed as there was before it was thought of. That potentiality has resulted in accomplished fact; and it is, in my opinion, impossible now to say that any ‘duty would have been payable’ if no such propulsion had taken place.

Accordingly, on both grounds, I do not think that the propulsion of an entailed fee in Scotland is the surrender or extinction of a prior interest in the sense of the statute. These words cover, and I think are intended alone to cover, not a fee, though it may be a fettered fee, but a charge upon the fee, as the interest of the tenant for life is a charge on the estate of a tenant in tail in England.

I was much pressed by counsel for the Crown with the decision of the House of Lords in Duke of Northumberland's case, (1905), A.C. 406. Did I think the decision in that case in point I should be bound by it, but I do not think that it is in

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point. All that it, or rather a subordinate part of it, does is, in conjunction with Lord Lilford's case, L.R. 2 E. & I. App. 63, to satisfy me that though the provision of the 15th section in question may apply to the interest of the tenant for life under an English entail, it does not apply to the right of an heir in possession under a Scottish entail.

I shall therefore assoilzie the defender with expenses.”

The pursuer reclaimed, and argued—The deed of propulsion only brought the beneficial possession of the estate to an heir already having under the entail a right defeasible only by his death. Its effect was just what the death of the granter would have — Viscount Dupplin v. Hay, November 15, 1871, 10 Macph. 89, Lord Kinloch at p. 93, 9 S.L.R. 74. It could not be said that the propulsion here was really a disentailing and re-entailing, for when it was granted the late Lord Buchan could not have disentailed, his son the defender not being of consenting age — Viscount Fincastle v. Earl of Dunmore, January 14, 1876, 3 R. 345, 13 S.L.R. 410. The Lord Ordinary, therefore, was mistaken in holding that the estate passed to the defender by the propulsion. It was merely an anticipation of his ordinary succession under the entail— Halkett Craigie v. Halkett Craigie, December 4, 1817, F.C. The right to succeed existing previously under the entail, and passing by devolution of law, a succession was established within the meaning of the Act which no manipulation of the parties could get rid of— Duke of Northumberland v. Attorney-General, [1905] AC 406, Lord Halsbury at p. 409. There had been an acceleration by extinction of a prior interest, and section 15 applied— ex parte Sitwell, L.R., 21 Q.B.D. 466, Manisty (J.) at p. 470. The Lord Ordinary was wrong in construing the expression “prior interests” in that section as synonymous with interests which were a charge on the fee. The words “charge, estate, or interest,” were used together in section 20, showing them to be different, and the expression “prior interest” covered a propulsion. The defender had succeeded his father in the entailed estates by devolution of law, and was liable in duty under section 2, and the succession having been accelerated by the extinction of his father's prior interest, that duty was payable in terms of section 15, viz., as at the death of the late Lord Buchan. It was to be noted that section 15 was in fact a charging section — Baron Wolverton v. Attorney-General, [1898] AC 535, Lord Halsbury (L.C.) at p. 544. This case was distinguished from Attorney-General v. Earl of Selborne, [1902] 1 KB 388; since there a new line of succession was introduced; here the regular succession under the entail was preserved. The Lord Ordinary's interlocutor should be recalled.

Argued for the defender and respondent — The succession for which duty was claimed was said to have arisen by devolution of law under the Succession Duty Act 1853. Under that statute there was a succession in two cases only—(1) When the right under which beneficial interest arose upon the occurrence of a death was conferred by disposition, or (2) When a devolution by law took place upon death. In the former case the duty attached whenever the disposition took effect, under section 2, although by section 15, which was ancillary to section 2 and regulated the time of payment, duty could not be exacted until the death of the liferenter or other person to whose interest the succession was postponed. When on the other hand the succession was by devolution of law the duty did not attach until that devolution took place, i.e., until the death of the person formerly entitled to the beneficial interest. Here the claim must be on the ground of succession by devolution of law, the defender being called under the destination in the entail to the heirs of the body of Katherine Stewart. Had he succeeded his father under that destination on his father's death there would have been a succession by devolution of law— Earl of Zetland v. Lord Advocate, February 12, 1878, 5 R. (H. of L.) 51, 15 S.L.R. 373. But there had been so such succession by devolution, because of the propulsion and because of the disentail. Devolution meant a passing from a person dead to a person living—Hanson on Death Duties, 5th ed. 492. The late Lord Buchan had, however, propelled his fee in 1872, more than 26 years before death, and he had thereby absolutely divested himself and vested the full fee in the defender, subject only to the feiters of the entail— Halket Craigie v. Halket Craigie, December 4, 1817, F.C. It was conceded that no duty would have been exigible had Lord Buchan been a fee-simple owner and conveyed to the defender inter vivos, and it made no difference that the estate was entailed— Baron Wolverton v. Attorney-General, ut supra, Lord Halsbury (L.C.) at 542. The expectancy in the case of entailed lands as well as unentailed was merely a spes successionis. In England it had been held competent for the parties to defeat the operation of the statute in cases similar to this— Attorney-General v. Earl of Selborne, ut supra, Collins (M.R.) at 396, Stirling (J.) at 398. This case was not within section 2 on a fair construction of it. Nor was the case within section 15, which was not a taxing section, but merely declaratory, and regulated the amount and time of payment of duty imposed by section 2— Duke of Northumberland v. Attorney — General, ut supra, Lord Macnaghten at p. 413. Here there was no duty payable in 1872, since the requisite relation of predecessor and successor was lacking, and in 1898 nothing passed by way of succession. Therefore the statute did not apply. Duke of North-umberland v. Attorney — General merely decided that if a liferenter and fiar in England combined to sell to a third party, the succession duty imposed inchoately by section 2 was a first charge on the property sold under sections 15 and 42. The case of ex parte Sitwell was not in point here, since

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the succession which came into effect there had been established by disposition, and took effect on the marriage as a new right. The interlocutor of the Lord Ordinary should be sustained.

At advising—