EVERSHED, M.R. I will ask Jenkins, L. J., to deliver the first judgment.
JENKINS, L.J., having stated the facts and read section 18 of the Finance Act, 1936, as set out above, continued : The case was stated by the special commissioners with great amplitude and elaboration but, in truth, the matters debated before us fall within a narrow compass. There is no doubt that Mr. and Mrs. Kipling did, within the meaning of section 18 of the Finance Act, 1936 make transfers of assets by virtue of which or in consequence whereof, either alone or in conjunction with associated operations, income became payable to a person resident or domiciled outside the United Kingdom, namely, Kamouraska Investments Ltd. There is further no doubt that Mrs. Bambridge did, within the meaning of the section, acquire rights by virtue of which she had power to enjoy the income of Kamouraska Investments Ltd., partly under the provisions of her fathers settlement and partly under the provisions of her mothers will. But it is contended on the part of Mrs. Bambridge that she did not acquire those rights by means of the transfers, either alone or in conjunction with associated operations, within the meaning of the section.
The argument for the Crown as regards Mrs. Bambridges interest under her fathers settlement is to the effect that she acquired the rights in question by means of the transfer to Kamouraska Investments Ltd. made by her father, in conjunction with an associated operation in the shape of his settlement of his shares and debentures in Kamouraska Investments Ltd.; and this argument was accepted by the judge.
The argument for Mrs. Bambridge as regards this same interest is to the effect that she acquired the rights in question not by means simply of the transfer and the settlement, but by means of those two transactions together with the deaths of her father and mother. It is said that those deaths constituted essential links in Mrs. Bambridges title to the rights in question; that the links were not associated operations within the meaning of the section; and that, in order to bring the rights in question within the mischief of the section, it must be shown that Mrs. Bambridge acquired them strictly in the way postulated by the section, that is to say, by means either of the transfer alone or of the transfer in conjunction with associated operations, and by no other alternative or ancillary means.
I agree with the submission that the deaths of Mr. and Mrs. Kipling were not associated operations within the meaning of the section, but I cannot accept the conclusion sought to be adduced from that submission. In my opinion, Mrs. Bambridge did acquire the rights in question by means of the transfer and settlement within the meaning of the section, and the deaths of Mr. and Mrs. Kipling were merely events upon the happening of which the rights acquired by Mrs. Bambridge by means of the transfer and settlement, or, in other words, her interest under the settlement, fell into possession by virtue of the terms and provisions of the settlement itself. It would, to my mind, be an abuse of language to say that Mrs. Bambridge acquired her interest under the settlement by means of the deaths of her father and mother. An interest in remainder, or, for that matter a contingent interest, given by a settlement is given by means of the settlement and not by means of the happening of the event which brings the interest into possession or, as the case may be, which fulfils the contingency. The prior interest or, as the case may be, the contingency, is in the nature of a qualification upon the interest given, and forms no part of the instrumentality or the means whereby the interest is given by the settlor or acquired by the beneficiary, which consist in the settlement and nothing but the settlement. The point is not one which can be usefully further elaborated, and on this part of the case I am content to accept the judges conclusion and the reasons on which it is based.
As regards Mrs. Bambridges interest under her mothers will, the argument on her side was to the effect that while the making of the will might have been an associated operation, if it had referred specifically to Mrs. Kiplings shares and debentures in Kamouraska Ltd., the mere making of the will effected nothing, as it was also necessary, before Mrs. Bambridge could acquire any interest under it, that Mrs. Kipling should die in the lifetime of Mrs. Bambridge, leaving her will unrevoked. It was further argued that as the will only disposed of Mrs. Kiplings shares and debentures in Kamouraska Investments Ltd. by means of the general residuary gift contained in it, the making of the will was not an operation 'in relation to the assets transferred' within the meaning of sub-section (2) of section 18. The judge rejected the former branch of this argument but accepted the latter. In my opinion he should have rejected both.
I agree with the submission made on Mrs. Bambridges side that the compound event in which alone the provision made for Mrs. Bambridge in the residuary gift could become effective, namely, the death of Mrs. Kipling in Mrs. Bambridges lifetime leaving the will unrevoked, was not an associated operation within the meaning of the section; but I think that the happening of this compound event amounted to no more than the fulfilment of the conditions essential to the efficacy of any testamentary disposition. In the events which happened, the testamentary disposition in this case became effective and, accordingly, Mrs. Bambridge acquired the relevant interest under and by virtue of, or in other words be means of, her mothers will. Certain events might have happened which would have prevented her from so taking, but none of them happened. One event had to happen before she could take anything under the will, namely, the death of her mother, the testatrix, and that event, of course, happened. But it does not follow that she acquired her interest otherwise than by means of the will, which, by its very nature, could only take effect on the death of the testatrix. I would say that Mrs. Bambridge took by means of the will on the happening of the event in which alone the will could take effect.
As to the second branch of the argument on this part of the case, which the judge accepted, namely, the argument to the effect that the residuary gift, although it undoubtedly disposed of the shares and debentures in question, did not suffice to make the will an operation 'in relation to' such shares and debentures, I confess and I find myself wholly unable to follow it. I fail to see how a will which disposes of property can reasonably be said not to have been made 'in relation to' the property of which it disposes; nor can I see any justification for distinguishing between property specifically disposed of and property comprised in a residuary gift, and holding that the will relates to the former but not to the latter. It seems to me abundantly plain that where a testator has made a will containing a residuary gift, he has made a will in relation to every item of property comprised in that gift, just as much as he would have done if he had disposed specifically of each item comprised in the residuary gift. I am not impressed by the argument, by way of reduction ad absurdum, which the judge seems to have found conclusive, to the effect that if a will containing a residuary gift, under which relevant assets passed, amounted to an associated operation, any will containing a residuary gift would amount to an associated operation, even though made before the date of any transfer, provided only that a transfer was made between the date of the will and the date of the testators death, and that on the happening of the latter event relevant assets passed under the residuary gift. It is not necessary for the purposes of the present case to decide whether this would be so or not, but if the supposition is well-founded I cannot see anything manifestly absurd in it. If a testator makes a will containing a general residuary bequest, and then embarks on what I may call 'a section 18 transaction,' as a result of which he receives shares and debentures in a foreign company, and leaves his will unrevoked, he must be taken to intend that result, just as much as if, after acquiring the shares and debentures, he had made a fresh will in identical terms.
Mr. Borneman and Mr. Watson for Mrs. Bambridge urged upon us as a reason for rejecting the Crowns arguments the extension of liability to an indefinite succession of persons, which acceptance of those arguments would entail. The answer to this submission in terrorem, if I may so describe it, seems to me to be that once it is recognized, as in view of the decision of the House of Lords in Congreve v. Inland Revenue Commissioners, it must be recognized, that liability under the section extends to persons who are in no way parties to the offending transfer, the result must be that the liability attaches to every person who, for the time being, has power to enjoy the income in question, and has acquired the right giving rise to such power by means which bring him within the mischief of the section, and continues so long as there is any person who fulfils these conditions.
A further point was taken that, if the making of a will was to be considered as an associated operation a capricious result would ensue inasmuch as a case in which shares or debentures of a foreign company devolved under a will would, or might, fix the legatee with liability, whereas a devolution of similar property on an intestacy could have no such result. I agree that it is indeed difficult to see how mere inactivity resulting in intestate succession could be held to amount to an associated operation, and in may well be, therefore, that in such a case the person taking under the intestacy would escape liability under the section. But the mere fact that such a case may be outside the net is no ground for excluding from the net cases which appear to fall fairly within the terms of the section.
Paying the best attention I can to its terms, I am of opinion that Mrs. Bambridge acquired the rights which gave her power to enjoy the income of Kamouraska Investments Ltd. wholly by means of transfers and associated operations within the meaning of section 18. For these reasons I would allow the appeal of the Crown and dismiss the cross-appeal of Mrs. Bambridge, and direct that the assessments should be restored.
EVERSHED, M. R. I am of the same opinion. Upon the cross-appeal our view is coincident with that of Harman, J. and the special commissioners, and I say but little upon it. I can appreciate the point of view which underlay Mr. Bornemans argument that until the House of Lords in the Congreve case had pointed out the true scope of the language used by Parliament in section 18 of the Finance Act, 1936, it was not, perhaps, generally realized how far-reaching that section might be. Mr. Borneman sought, on a priori grounds, to give a construction to the Act which would exclude it from operating on a person like Mrs. Bambridge, not herself a transferor or a party to the transfers or any of the operations associated therewith, but a daughter of the transferors, taking as a beneficiary under their dispositions, testamentary or inter vivos, as the case might be. But having regard to the decision in the Congreve Case, and on a fair construction of the language of the section, it seems to me that the limitation which Mr. Borneman seeks to put upon the section is not open to him.
Upon the appeal we have taken a different view from that which commended itself to Harman, J. I shall not, I hope, be thought disrespectful to him if I content myself again with but very few observations on this part of the case, for in truth, as my brother has observed, the argument is within a narrow compass and is not capable of long reasoning or, indeed, of much analysis. In the language of the judge : 'Can this will be said to have been made in relation to any of the assets transferred .......... If it had contained a specific bequest of these securities that would no doubt have been in relation to them, but a mere general bequest does not seem to me properly to be described as made in relation to any assets that happen to fall within it because they belong to the testator at his death.' I confess that upon my first approach to the case I was inclined to be sympathetic to that view; but I have since been persuaded by the argument that it cannot be sustained.
Mr. Stamp posed the question : To what property does a will relate The answer must, I think, be as Mr. Stamp submitted; that it relates to all the property that is comprised in it when it takes effect, whether the property is the subject of a specific devise or bequest, or is comprised within a residuary gift. In the light of that question and answer, it seems to me that this will was made 'in relation to' the assets here in question. For that reason, and for those which my brother has already expressed, I think that the appeal should be allowed. The cross-appeal, as I have already indicated, will be dismissed.
BIRKETT, L. J. I agree.
Appeal as to the securities under the mothers will allowed.
Cross-appeal as to the securities from the fathers settlement dismissed.