WEIR'S SETTLEMENT TRUSTS MACPHERSON & WEIR (VISCOUNT) Versus INLAND REVENUE COMMISSIONERS
1. On November 26, 1957, Lord Weir settled 50,000 in con templation of the marriage of his daughter, Elspeth Marjory Jessie, then the widow of a Mr. Cartwright, to Eustace Benyon Hoare. The parties to the settlement were Lord Weir, the settlor ; Mr. Hoare (called "the husband") ; Mrs. Cartwright (called "the wife ) ; and James Kenneth Weir and Henry Edmund Sargant as trustees.
2. By clause 1 the settlement was declared to be made in consideration of the intended marriage, and that it should become void unless the marriage were solemnised before December 31, 1957. By clause 2, the expression the trustees" was defined as meaning "the original trustees or the survivor of them or other the trustees car trustee for the time being" of the settlement ; "the trust fund" was defined as "the said sum of 50,000... and the investments and property from time to time representing the same" ; and "the trust period" was defined as meaning "whichever is the shorter of the following periods, namely, (1) the period commencing at the date of the solemnisation of the said marriage and continuing until the expiration of a period of 80 years and (ii) the period commencing at the said date and continuing until the expiration of 21 years (less the last day) from the death of the last survivor of all the lineal descendants now living of His Late Majesty King George V." By clause 3 the trustees were directed to invest the said sum of 0,000 as therein mentioned.
3. Clause 4 read as follows :
4. "From and after the solemnisation of the said intended marriage and subject as hereinafter provided the trustees shall pay or apply the income of the trust fund during the trust period to or for the maintenance and support or other wise for the benefit of all or such one or more to the exclusion of the others or other of the husband and wife and the children or remoter issue 'of the said marriage for the time being living as the trustees (being at least two in number or a trust corporation) in their absolute discretion think fit power for the trustees to pay any income which they may decide should be applied for the maintenance or other wise for the benefit of any child or remoter issue of the said marriage to the guardian or guardians of such child or remoter issue without being bound to see to the application thereof."
5. By clause 5 it was provided that notwithstanding the trusts therein before contained the trustees (being at least two in number or a trust corporation) might at any time or times during the trust period with the consent in writing of Mrs. Hoare during her life and thereafter at the discretion of the trustees transfer the whole or any part of the trust fund to her or to any child or remoter issue of the said intended marriage for his or her absolute use and benefit and might with such consent or at such discretion as aforesaid by deed or deeds revoke all or any part of the trusts and appoint such new trusts of the trust fund or any part or parts thereof in favour of the said Eustace Benyon Hoare, Mrs. Hoare or any child or children or remoter issue of the said intended marriage or in the event of Mrs. Hoare marrying again in favour of any after taken husband of hers and any child or remoter issue of such subsequent marriage subject to a proviso that so long as any child or remoter issue of the said intended marriage should be living the power of revocation and new appointment in favour of any after taken husband of Mrs. Hoare or any child or remoter issue of any subsequent marriage conferred on the trustees should only extend to one moiety of the trust fund.
6. By clause 6, subject to the trusts and powers thereinbefore contained, the trustees were directed to bold the trust fund upon trust for such of the children of the said intended marriage as should be living at the expiration of the trust period if more than one in equal shares with a substitution of the issue then living of any child then dead in the place of such child and if There should be no child or remoter issue of the said intended marriage then living upon the like trusts mutatis mutandis for the children and remoter issue of any subsequent marriage of Mrs. Hoare.
7. By clause 7 it was provided that if the trusts thereinbefore declared should fail or determine then subject to the powers thereby or by law vested in the trustees and to every exercise of such powers the trustees should hold the trust fund upon trust for Elizabeth Cartwright (Mrs. Hoare's daughter by her first marriage) and any husband, child or remoter issue of Elizabeth as the trustees in their absolute discretion should at any time before the expiration of the trust period by deed or deeds appoint, "and in default of and until and subject to any such appointment upon trust for the said Elizabeth Armine Julia Cartwright absolutely".
8. Mr. and Mrs. Hoare were married on November 29, 1957 ; they had no children ; and Mr. Hoare died on July 9, 1961. None of the powers contained in clause 5 had been exercised. As the trustees were obliged to distribute the whole income, Mr. and Mrs. Hoare, acting together, could have directed them to deal with each accruing instalment in any way they wished, but subject to any such joint direction‑and, so far as I know, none was ever given‑it was the duty of the trustees to make up their minds within a reasonable time of the receipt of any income whether to pay it to Mr. Hoare or to Mrs. Hoare. In fact, in exercise of their discretion, they paid all the income to Mrs. Hoare during the joint lives. On Mr. Hoare's death, the trustees ceased to have any discretion to exercise, since Mrs. Hoare was the only surviving object of the trust, and since that date she has received the income as of right. The Inland Revenue Commissioners claimed estate duty on the whole of the trust fund as passing on the death of Mr. Hoare.
9. The facts are simple enough, but it will not surprise anyone acquainted with this branch of the law to learn that the argument lasted for over four days‑during which counsel at all events wasted no words‑‑and that some 30 authorities, many of them in the House of Lords, were referred to. The law of estate duty has indeed now attained a degree of refinement which would have gladdened the heart of Lord St. Leonards. I will begin by setting out those parts of the Finance Act, 1894, which are immediately relevant to this problem.
10. [His Lordship read sections 1, 2(1) and 7(7). ]
11. During the first 60 years of this century the theory of the relationship between section 1 and section 2 of this Act which was generally accepted by the Courts was that propounded by Lord Macanaghten in his speech in Cowley v. Inland Revenue Commissioners ((1899) A C 198). This was that the two sections were mutually exclusive ; that any property which "passed on the death" in the ordinary sense of the word‑a sense which it was left to the Courts to determine‑passed under section 1 ; and that section 2(1) was not intended to explain what was meant by the expression "property passing on the death" but was a purely "deeming" section which brought into charge to duty various items of property which could not be said to "pass on the death" in the ordinary sense of the word.
12. In Public Trustee v. Inland Revenue Commissioners ((1960) A C 398), the Arnholz case, the House of Lords rejected this theory. It held that the two sections were not mutually exclusive but that section 2(1) was explanatory of section 1 at least to the extent that an item of property which was chargeable under section 2(1), if the words used in the relevant sub‑paragraph were given their ordinary meaning, could not be chargeable under section 1. But the House left open the question whether the explanation of the meaning of "passing on the death" given by section 2 was exhaustive, or whether section 1 might itself catch property which did not fall under any of the sub‑paragraphs of section 2(1) but which the Courts might think could nevertheless fairly be said to "pass on the death".
13. I shall have to come back to this question later in this judgment, but in view of the decision in the Arnholz case, there can at least be no doubt that a Judge should first address his mind to section 2(1) and ask himself whether the property with which he is concerned falls within any of its sub‑paragraphs. In this case, of course, the only relevant sub‑paragraph is section 2(1)(b).
14. The question of the application of section 2(1)(b) to discre tionary trusts was considered by Maugham L. J. in Attorney General v. Burrell ((1935) 153 L T 393). There, under the will of the testator, there was a discretionary trust during the life of H., the primary beneficiary, for payment of so much of the income as the trustees thought fit to or for the benefit of H. and his wife and children‑a class, in the events which happened, of five persons and after the death of H. a similar trust during the life of the eldest son W., the next primary beneficiary, for payment of so much of the income as the trustees should think fit to or for the benefit of another class which consisted immediately after the death of H. of three persons‑W., his wife and his brother M., two of whom (namely, W. and M.) had been discretionary objects during the life of H. So far as the trustees did not distribute the income to one or other of the discretionary objects, it was payable by operation of law to the heir‑at‑law or next‑of‑kin.
15. Maugham L. J. asked himself first, as he thought Lord Macnaghten's theory obliged him to do, whether the trust fund "passed" under section 1 on the death of H. This he thought it could only have done if it "changed hands as a whole" on that event. Having regard to the fact that two of the discretionary objects were members of both the old class of five and the new class of three, he found it impossible to say that there had been a passing under section 1, and so he turned to consider section 2(1)(b).
16. His remarks on this point were as follows [(1935) 153 L T 402]:
17. " . I ask myself whether there has been a cesser of an interest within the meaning of section 2, subsection (1)(b), in the circumstances of the case on the death of Harry. I observe in the forefront of that problem the fact that it is immaterial to determine anything in regard to the property as a whole, since section 2, subsection (1)(b), will apply to a cesser of an interest. All that is necessary, as I see it, in order that there should be a cesser within the subsection I am considering is, first, that there should be property in which the deceased or any other person must have had an interest ceasing on the death, and, secondly, there must be a benefit accruing to someone by reason of the cesser of that interest. The section in its first line say; : Property in which the deceased or any other person had an interest. 'Person' here, of course, would include a class, and I see no objection to regarding the class of persons who during the lifetime of Harry had a discretionary right to share in the income, plus the persons ascertained upon the death of the testator, as being the persons who were the heir and the next‑of‑kin, as a composite person.
18. In my opinion, then, there was an interest in the whole of the Income, belonging to the composite person or composite class, which ceased on the death of Harry, since under the will, as I read it, there is in effect provision that the income of the estate during the lifetime of Harry is to be distributed in the way in which I have mentioned, and on the death of Harry, in the events which have happened, ascertained at the death of Harry, there became a trust during the life of William Reginald to divide or distribute the income according to the discretion of the trustees between William Reginald, his wife and his children, if any (he has none at the present time), and the balance to the heir‑at‑law and the next of‑kin of the original testator.
19. The next question which I have to ask myself is : Has a benefit accrued or arisen by reason of the cesser of such interest to someone? The section does not say to whom. In my opinion a benefit has accrued or arisen, by reason of the cesser of the interest to which I have referred, for the benefit of the new class, consisting of William Reginald, his wife, his children (if any). and possible other persons and the balance again has to go to the heir‑at‑law and the next‑of- kin of the testator. There is nothing in the subsection I am considering from which a conclusion can, I think, properly be drawn to show that the persons to whom the benefit accrues may not be to some extent persons who had an interest prior to the death of the deceased. The new class is a different class, the benefit which accrues to members of the new class, discretionary I agree, is yet a benefit which accrues to them by reason of the different trust and a different relationship to the original testator.
20. These considerations would no doubt lead me to say that the property passed within section 1 if it were not for the doubt I have whether it can fairly be said that the property as a whole changed hands. Under section 2, subsection (1)(b), I have not any trouble such as that which confronts me under section 1, and I say, regarding the class of beneficiaries before the death of Harry as a single composite person, their interest has ceased and a benefit has accrued to the new class of beneficiaries as a whole, so that the case comes within the words of clause (b) of subsection (1) of section 2."
21. Lord Hanworth agreed ((1937) A C 286) with Maugham L. J., but Romer L. J. thought that the property passed under section 1. His view of the matter was approved by the House of Lords ((1937) A C 286) and Lord Russel of Killowen, who delivered the only speech did not indicate whether, if he had not thought that section 1 applied, he would have agreed with Maugham L. J. in thinking that section 2(1)(b) could be made to fit this case.
22. Since the decision in the Arnhoiz case ((1960) A C 398), references in judgments to section 2 (1)(b) have naturally become more frequent than they were previously, but until the recent decision of the House of Lords in Gartside v. Inland Revenue Commis sioners ((1968) A C 553), there was not, so far as I know, any dissent expressed from Maugbam L. J.'s view that the subsection could be applied to discretionary trusts by treating all the objects as a composite class possessed of a single interest In the income of the fund which ceased on the death, which put an end to the current discretionary trust (see, for example, Russell L. J. in In re: Kirkwood ((1965) Ch. 286), and Lord Guest in the same case in the House of Lords). [1966 A C 520].
23. The facts in the Gartside case were that by his will a testator gave a share of his residuary estate to trustees upon trust:
24. "(1) to apply the income of the fund at their discretion for the maintenance or benefit of all or any of his sons, his son's wife or children (if any), and to accumulate surplus income as an addition to capital with power at any time to resort to the accumulations and to apply them as current income ; (2) after the son's death, to hold the capital, income, and accumulations upon trust for such of the son's children who being male attained 21 or being female attained that age or married, and if more than one equally; and (3) to advance at any time to the grandchildren of the testator sums of up to one‑half of the presumptive or rested share of that grandchild in the fund."
25. The question for decision was whether the testator's grand sons to whom advances had been made about a year before their father's death had "interests in possession" in the fund within the meaning of section 43 of the Finance Act, 1940.
26. In the course of discussing the nature of objects of a discretionary trust, Lord Reid commented 1968 A C 605 on what I may call the "group" theory as follows :
27. "There are in some of the cases indications of a view that, while each of the objects of a discretionary trust has an interest in the trust fund, this interest does not extend to the whole or any part of the interest accruing from the fund. But, on the other hand, all the objects together have a single class or group interest which does extend to the whole interest of the fund. Counsel for the respondents in the clear and well‑reasoned argument expressly declined to adopt that view and I think he was well‑advised in taking that course. Where a number of persons are members of a company or other incorporation which has a separate legal personality, the incorporation can, of course, have a single right different from the rights of any of its members. But otherwise two or more persons cannot have a single right unless they hold it jointly or in common. But clearly objects of a discretionary trust do not have that : they each have individual rights they are in competition with each other and what the trustees give to one is his alone."
28. Lord Morris of Borth‑y‑Gest and Lord Guest concurred in the speech of Lord Reid. Lord Wilberforce, with whose speech [1968 A C 613] Lord Hodson concurred did not say anything about the "composite class" theory, but there is nothing in his speech to indicate that he dissented in any way from Lord Reid's view. I do not think that that view was part o! the ratio decidendi of the Gartside case, but even if I disagreed with it I would hesitate to dissent from it. In fact, however, if I may say so, I agree with it entirely. The objects of a discretionary trust‑together, if there is a power of accumulation, with those interested in capital‑may no doubt be said to be collectively the persons interested in the income as it accrues before the trustees have decided how to deal with it. But they do not have concurrent interests in the income. They have separate interests in it which are individually unquantifiable, though added together they cove the whole.
29. In the immediately following passage [1968 A C 606] in his speech Lord Reid painted out that the considerations applying to discretionary trusts under which the trustee have to distribute all the income may not be in all respects the same as those applicable to discretionary trusts under which there is a power to add income to capital instead of distributing it. I shall have to come back to this distinction in a moment ; but I do not think that Lord Reid was intending to suggest that the distinction was relevant to his discussion of the "group" theory. Even if the trust is exhaustive and there is no power to withhold income, the objects have individual competing interests, not concurrent interests in the income.
30. Indeed, counsel on both sides accepted that in seeking to apply section 2 (1)(b) to the facts of this case it could not be suggested that Mr. and Mr. Hoare formed a group which had a single interest in the income ceasing on the death of Mr. Hoare, but that the argument must proceed on the footing that such interests as they may have had during their joint lives were separate competing interests. On that footing, counsel for Mrs. Hoare submitted that Mr. Hoare had an interest in the income of the trust fund which ceased on his death, and that on his death a benefit accrued or arose to Mr. Hoare by reason of its cesser. The property, therefore, passed to ice extent of the benefit. As the value of the benefit could not be quantified, no duty was payable ; but the fact that there was a claim‑albeit a valueless claim‑for duty under sec tion 2(1)(b) precluded any separate claim under section 1, assuming such a claim to be possible in any case. Counsel for the Crown, on the other hand, submitted that Mr. Hoare and Mrs. Hoare both had interests in the income of the fund which ceased on the death of Mr. Hoare ; that the cesser of their two interests caused two benefits to accrue or arise : and that in applying section 7(7) to the case one could add the two interests ceasing together so as to arrive at a benefit extending to The whole income of the property.
31. These arguments have to be considered in the light of the Gartside case. In that case, over and above what Lord Reid said about the "group" theory [1968 A C 605] two points were decided. They were (a) that the discretionary objects in the case before the House had not anything which could fairly be described as an "interest"‑and a fortiori not an "interest in possession" in the income of the fund‑and (b) that no interest can be an interest ceasing on death within the meaning of section 2(1)(b) unless it extends either to the whole income of the property or to a defined part of the income of the property: see on this latter point the speeches of Lord Reid and Lord Wilberforce [1968 A C 603].
32. Now it is true that both Lord Reid and Lord Wilberforce, who delivered the only speeches, stressed the fact that they were dealing with a discretionary trust under which the trustees were not bound to distribute all the income but could accumulate any or all of it, and expressly reserved the question whether their decision would apply to what one may call an exhaustive discretionary trust, such as this is, under which all the income has to be distributed as it accrues. I can well see that this distinction may have a bearing on point (a). If Mr. and Mrs. Hoare had assigned to a third party all the income of the trust fund to accrue during their joint lives and the life of the survivor or the earlier birth of a child of the marriage, the trustees would have been obliged to pay this income to the third party during that period. One might, I suppose, regard Mr. and Mrs. Hoare as having something analogous to a joint power over the income in question without any underlying property in the income ; but it is certainly more natural to regard each of them as having an interest in an undefined portion of the income ceasing on the death of Mr. Hoare. In view of the reservations in Gartside case with regard to exhaustive discretionary trusts, I would be prepared to hold that Mr. Hoare had something which could sensibly be described as an interest ceasing on his death in the income of the fund. But the view expressed both by Lord Reid and by Lord Wilberforce that section 2(1)(b) has no application to any interests casing on death which are not interests either in the whole or a measurable part of the income of the fund must, as I see it, exclude interests under exhaustive discretionary trusts from the ambit of section 2(l)(b) just as much as it excludes "non exhaustive" discretionary trusts. The presence or absence of a power of, or a trust for, accumulation of undistributed income seems to be irrelevant to the question of construction of the section. If this is so, then the argument for the tax‑payer under section 2(1)(b) must fail because Mr. Hoare had no such interest ceasing on his death as is contemplated by the sub‑paragraph.
33. The argument for the Crown on this branch of the case is open to various further objections. Assuming that Mrs. Hoare's interest under the discretionary trust during the joint lives can be described as an interest ceasing on the death of Mr. Hoare when it was enlarged into a pure life interest, I am unable to see how any benefit accrued in respect of the cesser of that interest over and above the benefit which accrued on the death of Mr. Hoare on the cesser of his own interest. That interest, taken by itself, was not within the sub‑paragraph because the benefit arising on its cesser was not measurable.
34. Further, even if there are two benefits arising I cannot see how one can amalgamate the two cessers and the two benefits so as to produce a single benefit extending to the whole Income. To do so would be to introduce the exploded "group" theory by a back door. As I see it, the House of Lords, by rejecting the "group" theory and by holding that no interest is within section 2(1)(b) unless it is an interest in the whole or a defined part of the income, has in effect held that sec tion 2(1)(6) is inapplicable to interests under discretionary trusts both on the death of a single object of a continuing trust and on the death of someone, whether an object or not, on which the trust is brought to an end.
35. I turn now to the claim under section 1, assuming for the time being that a claim under section 1 in circumstances which do not fall under any head in section 2 is possible. On this aspect of the case the Crown relied on the Burrell case (1937 A C 286), to which I have referred, and also and more particularly on Scott v. Inland Revenue Commissioners ((1937) A C 174). In the Scott case the essential facts were that by the joint effect of a number of documents the Cadogan estates were held during the life of the sixth earl, who succeeded to the title in 1915, upon discretionary trusts for the benefit of the sixth earl, his wife, his children and the remoter issue, and subject thereto upon trust to accumulate the income for the discharge of incumbrances, and after the death of the sixth earl, which occurred in 1933, for his son the seventh earl as tenant in tail in possession. There it was held that the whole property passed on the death of the sixth earl under section 1 notwithstanding the fact that the seventh earl had been an object of the discretionary trust during his father's lifetime. Here, the Crown argued, there was a discretionary trust during the joint lives of Mr. and Mrs. Hoare followed on the death of Mr. Hoare by a life interest to Mr. Hoare, and the fact that Mr. Hoare was an object of the discretionary trust during her husband's lifetime could not prevent the trust fund from passing on Mr. Hoare's death. In this case, of course, Mrs. Hoare was the primary object of the discretionary trust during the joint lives and was in fact the sole recipient of all the income, but the Crown contended that this could not make any difference in principle, and counsel for the trustees was, I think, disposed to agree that it did not.
36. The ground, or at all events the chief ground, on which he sought to distinguish the Scott and Burrell cases was that in them there were two entirely separate trusts‑cane operating before the death, the other taking its place after the death‑whereas here clause 4 of the settlement declared a single discre tionary trust. If there are three objects of a discretionary trust and one dies, admittedly no duty is payable. Why should duty become payable when one of two objects dies ?
37. To reinforce his argument, counsel relied strongly on a passage in the judgment of Russell L. J. in the Kirkwood case which reads as follows :‑
38. "I think in this connection that while mere form may not be a deciding factor in the incidence of estate duty, methods adopted may be. If under a settlement the settlor creates in terms during the life of A a discretionary trust of income for such of A, B, C, D and E as should from time to time be living and the issue of any who should be dead, and then proceeds to declare from and after the death of A a further discretionary trust of income until a further occasion for such of B, C, D and E as should from time to time be living and the issue of any who should be dead and the issue of A, estate duty would be charge able on A's death. But if he had adopted ab initio the method of a discretionary trust until that further occasion for such of A, B, C, D and E, as should from time to time be living and the issue of any who should be dead, estate duty would not be chargeable on A's death."
39. Here, said counsel, although the trust might have been framed in such a way as to cause a passing on the death of Messrs Hoare, framed as it was there was no such passing. I cannot accept that argument. It is true that clause 4 says that the discretion of the trustees as to the payment or application of the income is to extend throughout the trust period, but in fact it would necessarily end not only when there were no longer any objects in existence but also during such periods as there was only one object. On Mr. Hoare's death the trustees ceased to have any discretion but became bound to pay the income to Mrs. Hoare. To make sense of the clause one must really read in after the words "in their absolute discretion think fit" some such words as "so long as there are at least two objects and during such period or periods as there are only one pay the income to that one."
40. This consideration seems to me to distinguish this case from the type of case envisaged by Russell L. J. Here, one is not re‑writing the clause in order to give a life interest to Mrs. Hoare as from the death of Mr. Hoare. The clause itself, properly construed, gives her such a life interest and by no ingenuity could it have been framed in a way which did not produce this result. Consequently, I think that this case is on all fours with the Scott case.
41. I turn now to consider whether there can in fact be a passing under section 1 of the Act in circumstances not falling within any of the heads of section 2 (1). In the Arnholz case, Lord Simonds [1960 A C 398] and Lord Radcliffe [1960 A C 419], who gave the leading speeches, both pointed out how unlikely it was that Parliament, when it enacted the Finance Act, 1894, would have failed to explain what it meant by the novel expression "property passing on the death". They rejected Lord Macnaghten's view [1899 A C 198] as to the limited scope of the word "deemed" pointing out that it could properly be used to include not only the impossible but also the obvious and the uncertain.
42. Approaching section 2 (1) In that way, they were able to give the words in sub‑paragraphs (a) and (b) their natural wide meaning and not the forced narrow meaning given to them by Lord Macnaghten. Thus sub‑paragraph (a), instead of being confined to the case of an unexercised general power of appoint ment, covered as well all property to which the deceased was absolutely entitled, and sub‑paragraph (b), instead of being confined to the cesser on death of charges on income, covered the cesser of all forms of life interest. Sub‑paragraph (c) brings Into charge property which, having been given away before the death, does not "pass" on the death in any ordinary sense of the word at all. Sub‑paragraph (d) brings into charge types of property which some people might think did and others might think did not pass on the death in the ordinary sense of the word. Thus sub‑paragraphs (a) and (b) are examples of the obvious and cover all the ordinary cases; sub‑paragraph (c) is an example of the impossible, and sub‑paragraph (d) of the uncertain.
43. The natural conclusion to draw from this method of approach would be that section 2 provided an exhaustive explanation, by inclusion and exclusion, of the property which was to be charged with the duty granted by section 1, as indeed the marginal note says it does. Moreover, although he reserved the point, I think that Lord Simonds, at any rate. thought that the explanation was exhaustive. Thus he said. [1960 A C 398]:
44. "My Lords, if I were today looking at this Act for this first time, I should say that these sections were straightforward and clear, the first section imposing the charge in general terms and the second defining by inclusion and exclusion the precise area of that charge."
45. Indeed, to hold that section 2 explains the meaning of "passing on the death" in section 2(1) but does not explain it exhaustively would be to attribute to Parliament a most unlikely intention‑far more unlikely than that, attributed to it by Lord Macnaughten [(1899) A C 198]. If I may use homely language, Parliament on this view would to saying to the tax‑payer and the revenue authorities: "You have never hard the words `passing on the death' before. You will, of course, need help as to their meaning, and that help we are giving you in section 2(1). Sub‑paragraphs (a) and (b) cover all the ordinary cases, and you might very likely have concluded that they were Included even if we had given no explana tion and had left section 1 to stand alone. Sub‑paragraph (c) Includes a case which you would certainly never have thought was included. Sub‑paragraph (d) covers cases which you might or might not have thought were included. No doubt there may be other borderline cases where some people might think the property `passed' on the death while others might not. As we say nothing about any other borderline cases, you might naturally suppose that they are not in any event to be Included` but you would be wrong. We wish the question‑ex hypothesi it will be a difficult question‑whether any other borderline case is or is not included to be decided by the Courts in proceedings which will probably go up to the House of Lords without any help from us." It would be ironic Indeed if the endeavout made by the House of Lords in the Arnholz case to put a rational construc tion on sections 1 and 2 of the Act were to end in their being construed in so totally irrational a fashion.
46. I turn now to consider whether there is anything in the cases decided since the Arnholz case which would prelude me from holding that there can be no passing under section 1 in circum stances which do not fall under any head in section 2(1). I do not think that there is, for the point has never been argued. In some cases, Judges have assumed that a separate claim under section I was possible‑Lord Reid so assumed In the Gartside case‑but sometime Judges have expressly envisaged the possibility that no such claim could be made: see, for example. Russell L. J. in the Kirkwood case. There has apparently been only one case in which it made a difference to the result whether section 1 or section 2 (1) (b) applied. That was In re: Harris's Will Trusts (1966 Ch. 475). But there, counsel, who was contending for the application of section 2 (1) (b), did not argue that a passing under section 1 alone was impossible.
47. If, therefore, the matter rested there I would I think have been able to give effect to my own view of the matter and hold that any claim by the Crown under section I alone must fall. But the matter does not rest there. Although the claim of the Crown is far less meritorious in this case than it was in the Burrell and Scott cases, I cannot (as I have said) draw any distinc tion In principle between those cases and this case. Further, the decisions in those cases are clearly binding on me. It is no doubt true that in deciding those cases under, section 1 alone the House of Lords was taking a view of the relationship of section 1 and section 2(1) which must now be considered to have been to some extent at least erroneous, and if I could see that the same result could have been achieved under section 2 (1) (b) I might be prepared to view them as decisions in which the right result was reached for the wrong reason. But, as I have already said, the decision in the Gartside case as I read it shows that section 2 (1) (b) is not applicable to the cesser of a discretionary trust.
48. The truth, as I see it, is that Parliament ill 1894, in giving an exhaustive explanation of what it meant by passing on the death", failed to take discretionary trusts into account at all, either from the point of view of the death of one object of a continuing trust or from the point of view of the cesser of the discretionary trust as a whole on some death. It is not in the least surprising that Parliament should have been guilty of this omission, for in 1894 it must have been rare for a testator or settlor to create an immediate discretionary trust of income.
49. But though no doubt it would be open to the House of Lords to give effect to this view‑‑if they shared it‑and so force the authorities to undertake the task of recasting this part a least of the law of estate duty, it is certainly not open to me to give effect to it. All that I can do is to say that in view of the Burrell and Scott cases I am bound to hold that duty is payable but that in view of the Arnholz and Gartside decisions I can find no satisfactory reason why duty should be payable.
50. Declaration accordingly.