MASTER OF THE ROLLS: On the 30th March, 1943, one Eric Hamilton Rose (since deceased) executed two transfers of shares in a company known as the Leweston Estates Company. That company, as its name implies, was an unlimited corporation. The first transfer was expressed to be in favour of his wife, Rosamond Mary Rose, and to be in consideration of his love and affection for her. The second transfer was in favour of Mrs. Rose and another individual, and in that case the intention was that the transferees should thereupon hold the shares upon certain trusts which it is not material to consider. These two transfers were presented for stamping on the 12th April, 1943. In due course the duty was adjudicated by the Commissioners and the requisite ad valorem stamp duty impressed upon the transfers. The transfers, with the relative certificates, were then presented to the Leweston Estates Company for registration and were, in fact, registered on the 30th June, 1943.
Unfortunately, the transferor, Mr. Rose, died some few years afterwards, and the question which has arisen in the two appeals is whether there elapsed, prior to Mr. Rose's death, a sufficient length of time, in accordance with the provisions of a number of Finance Statutes, so that these shares were not taken into account for the purpose of assessing death duty upon his death and having to be aggregated with the rest of his estate. I do not find it necessary to expand the matter of time at all because it is not in dispute in this case that the vital date, for the purpose of determining whether duty was or was not payable on the transferor's death, was the 10th April, 1943: in other words, unless the transfers were effected within the meaning of certain provisions of the Customs and Inland Revenue Acts 1881 and 1889 (to which I shall allude in a moment) before the 10th April, 1943, there is no doubt that the Crown's claim for duty is well-founded.
Before I turn to the sections, I should state one other fact about the Leweston Estates Company. It was a private company and, therefore, its regulations comprehended Articles of a very familiar character restrictive of the right of members to transfer their shares. In brief, the directors of the company had an absolute right to refuse registration. There was also an Article in common form, Article 9, which provided,
"The Company shall be entitled to treat the person whose name appears upon the register in respect of any share as the absolute owner thereof, and shall not be under any obligation to recognise any trust or equity or equitable claim to or interest in such share, whether or not it shall have express or other notice thereof".
Now the first provision of the Statutes to which I wish to allude is sub-section 2(a) of section 38 of the Customs and Inland Revenue Act, 1881, which is in these terms:
"(2) The personal or moveable property to be included in an account shall be property of the following descriptions, viz:- (a) Any property taken as donatio mortis causa made by any person dying on or after the first day of June 1881, or" — and these are the material words — "taken under a voluntary disposition, made by any person so dying, purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust or otherwise, which shall not have been bona fide made three months before the death of the deceased".
To that sub-section an amendment was made by section 11 sub-section 1 of the Customs and Inland Revenue Act, 1889, for it was there provided that
"The description of property marked (a)" (and that alludes to the description I have read) "shall be read as if the word 'twelve' were substituted for the word 'three'" — that, of course, is a reference to the number of months — "and the said description of property shall include property taken under gift, whenever made, of which property bona fide possession and enjoyment shall not have been assumed by the donee immediately upon the gift and thenceforward retained, to the entire exclusion of the donor, or of any benefit to him by contract or otherwise".
Those provisions, as is well known, were picked up and re-enacted in the Finance Act of 1894.
It was the claim of the Crown in both the present oases that the property, namely, the shares which were the subject of the two transfers I have mentioned, were not properly comprehended within the language of the two sub-sections I have read so as to be freed from liability thereunder; and anticipating what I shall later on say, it is plain that the Crown's argument may be put on alternative grounds: (1) That the shares were not taken under a voluntary disposition made by a person purporting to operate as an immediate gift; or, alternatively, if they were, (2) that bona fide possession and enjoyment was not assumed on the date of the transfers by the donee immediately upon the gift and thenceforward retained to the entire exclusion of the donor, For it is said by the Crown that until the transfers were registered in the books of the Leweston Estates Company on the 30th June, 1943; either there was no effective transfer of the shares to the donee or, alternatively, there was not until that date an entire exclusion of the donor from all benefit in respect of the shares.
By way of illustration, the matter has been put thus for the purposes of the argument; that the result of these transfers was such that if, between their date, the 30th March, and the date of registration, the 30th June, the company had declared and paid a dividend in respect of its shares, that dividend must have been paid to the donor, Mr. Rose, and could have been retained by him for his own benefit, and, indeed, that the donees respectively could have had against him no claim whatever to have the amount of the dividend handed over to her or to them respectively.
That is the problem; and Mr. Justice Roxburgh decided the question which arose in both cases adversely to the Grown. From those decisions the Crown has appealed. It will be sufficient and convenient for me now to confine myself to one of the transactions, the subject of one of the appeals, and I take that of the first transfer which I mentioned, from Mr. Rose to his wife. It is not in question that a decision upon that matter will necessarily involve a similar decision in the case of the other. I will first read the document, the Transfer. It was in this form:
"I Eric Hamilton Rose of Leweston Manor, Sherborne in the County of Dorset, Esquire, in consideration of the love and affection I have for my wife Rosamond Mary Rose of Leweston Manor, Sherborne aforesaid (hereinafter called 'the said Transferee') do hereby transfer to the said Transferee 10,000 (ten thousand) shares of £1 each Nos. 3 to 10,002 inclusive in the undertaking called The Leweston Estates Company TO HOLD unto the said Transferee subject to the several conditions on which I held the same at the time of the execution hereof.; and I, the said Transferee, do hereby agree to accept and take the said shares subject to the conditions aforesaid";
and that document was executed under seal by both transferor and transferee.
Now there are certain observations which may be made upon that document. The first is this. It was in form in exact correspondence with the requirements of the company's regulations; for in Article 29, dealing with the transfer of shares, it is provided that
"Shares in the company shall be transferred in the following form or as near thereto as circumstances will permit".
And the form which followed was that which Mr. Rose adopted. And upon the execution of the transfer the deed was beyond question delivered to the transferee, and there was also delivered to her the certificate relative to those shares. It follows, therefore, that so far as lay in his power the transferor, Mr. Rose, did all that he could — he followed carefully and precisely the obligations imposed upon a proposing transferor by the Article — to divest himself then and there in favour of his wife of all his interest, legal and equitable, in the 10,000 shares number 3 to 10,002 inclusive.
The next thing to notice (and it is, I think, not without significance) is this. The company was unlimited, and this form of transfer differed, therefore, in one respect from the forma of transfer commonly found in the case of limited companies in that it contained what was, in effect (because it was under seal) a covenant by Mrs. Rose to accept and take the shares subject to the conditions — that is, the conditions imposed upon shareholders by the regulations of the company — and it was executed not only by the transferor but also by the transferee.
There is a third matter to which I think some relevance also attaches in considering the validity of the Crown's claim. I have said that on the 12th April, 1943, the transfer was presented for adjudication to the stamping authority, and it bears upon it an ad valorem stamp. The impressing of that stamp is justified by section 74 of the Finance Act 1910 on the ground that
"Any conveyance or transfer operating as a voluntary disposition inter vivos shall be chargeable with the like stamp duty as if it were a conveyance or transfer on sale"
subject as thereinafter provided.
Approaching the matter then as one of commonsense, or from which the application of commonsense is not excluded, and having regard to the terms of the transfer, I should have thought it was exceedingly difficult to contend successfully that on the date of the transfer, the 30th March, 1943, Mr. Rose did not, within the terms of section 38 sub-section (2)(a) of the Act of 1881, make, and Mrs. Rose did not take under, a voluntary disposition purporting to operate as an immediate gift. But that, of course, is not conclusive, for there still remains on any view the question whether, during the period up to the 30th June, 1943, the transferor did not, by virtue of the peculiar characteristics attaching to shares in companies, and particularly in this company, retain an interest which interest did not cease until the 30th June, a date too late for the purposes of the Respondents.
The burden, I think, of the case presented by the Crown may be briefly put as it was formulated in reply by Mr. Pennycuick, and I hope I shall do justice to his forceful argument if I attempt myself to state it. This document, says he, on the face of it, was intended to operate and operated, if it operated at all, as a transfer. If for any reason it was at its date incapable of so operating it is not legitimate, either by reference to the expressed intention in the document or upon principles of law well-established, to extract from it a wholly different transaction — that is, so as to make it take effect not as a transfer but as a declaration of trust. Now I agree that on the face of the document it was obviously intended (if you take the words used) to operate and operate immediately as a transfer — "I do hereby transfer to the transferee" these shares "to hold unto the transferee, subject to the several conditions on which I held the same at the time of the execution hereof". It plainly was intended to operate, and operate immediately, as a transfer of rights. To some extent at least, it is said, it could not possibly so operate. To revert to the illustration which has throughout been taken, if the company had declared a dividend during this interregnum then it is not open to question that the company must have paid that dividend to the donor. So that vis-a-vis the company, this document did not and could hot operate to transfer to the donee the right against the company to claim and receive that dividend. And shares, it is said by Mr. Pennycuick, are property of a peculiar character consisting, as it is sometimes put, of a bundle of rights — that is, rights against or in the company. It has followed from Mr. Pennycuick's argument that if such a dividend had been paid, Mr. Rose could, consistently with the document to which he has set his hand and seal, have retained that dividend, and if he had handed it over to his wife it would have been an independent gift. I think myself that such a conclusion is startling. Indeed, I venture to doubt whether to anybody but a lawyer such a conclusion would even be comprehensible — at least without a considerable amount of explanation. That again is not conclusive; but I confess that I approach a matter of this kind with a preconceived notion that a conclusion that offends commonsense so much as would this prima facie ought not to be the right conclusion.
My brother Jenkins carried the matter a stage further by illustration. He said: Suppose, on the Crown's view, the donor, retaining, pending registration, full rights over these shares (for Mr. Pennycuick argued that this document not only did not transfer the legal estate but that it transferred no interest or estate whatever), repented of his generosity and had then told the company not to permit his wife to get the transfer registered. And suppose that the wife went to the company and the director of the company had nevertheless expressed themselves willing to register the transfer. Let it be then further supposed that the donor proceeded to take action to restrain the company by injunction from registering the transfer. If the donor in truth retained at that time a proprietary interest, it may seem to flow from the Crown's argument that the Court would be bound to protect it by granting an injunction. That, indeed, was perhaps too startling for Mr. Pennycuick, for he said that he thought the Court would not grant an injunction and that, the document having at least operated as a gift of a piece of paper, namely, the share certificate, the donor could not be heard then to claim the Court's assistance so as to restrain the company from doing that which possession, as upon gift, of the certificate and of this transfer, enabled the donee to require the company to do.
I do not pursue these examples; but it seems to follow from testing this matter by such extreme cases, that the assertion that nothing whatever passed under this deed except the right to possess, as articles, as physical things, two pieces of paper, is not right. I will now go to the case of Milroy v. Lord, which is in truth the foundation of the Crown's argument since it is upon that case that depends the proposition that I have already tried to state, that if this document was intended to operate as a transfer, effect cannot be given to what may be thought to have been the intention behind it by treating it as operating as a declaration of trust. It is necessary to examine the case with a little care because, being a decision of this Court, it is, of course, binding upon us. It was a case in which a Mr. Medley was the proprietor of a number of shares in a company known as the Bank of Louisiana. It was provided by the regulations of that bank that shares could be transferred in a particular way: they could be transferred in the books of the bank by following particular formalities which the regulations specified. Mr. Medley, out of the love and affection which he expressed to have for his niece, proceeded to execute a Deed Poll, and by that Deed Poll he said that he conveyed, transferred, set over and delivered and by those presents conveyed, transferred, set over and delivered to Samuel Lord 50 shares, which were specified, such shares thereupon to be held by Lord as trustee upon the trusts set out in the Deed Poll. The Deed Poll was executed under the hand and seal of Medley and of Lord. Now that Deed Poll was not a form of transfer which was. apt to procure a transfer of shares in the books of the bank according to the bank's regulations. That difficulty, in actual fact, was not necessarily of any significance, because Lord, at the same time, had a power of attorney from Medley whereby Medley gave power to Lord to do what was necessary by following the regulations of the company — among other things, to transfer to himself these shares. But Lord did not avail himself of the power of attorney and nothing was done until Medley died; and then the question a rose, to whom did these shares properly belong? The Plaintiff, Mrs. Milroy, was the niece in whose favour the Deed Poll had been made, and she claimed to be entitled, as beneficiary under the deed, to the benefit of the shares and to be beneficially entitled to them to the exclusion of Medley's estate. The Court of Appeal rejected that view. But I think it is quite plain that the basis upon which they so decided was that this purported gift was incomplete or imperfect in this sense, that the donor had not done all that lay in his power to do in accordance with the terms on which the shares were held by him to make his gift effective and to divest himself of his beneficial and other interests in the shares. It is pointed out, for example, by Lord Justice Knight Bruce, at page 272 of the Report in 4 De Gex, Fisher & Jones, that
"He might, however, have affected the legal title. It was in his power to make a transfer of the shares so as to confer the legal proprietorship on another person or other persons. But, as I have said, no such thing was done".
Then Lord Justice Turner, to the same effect, emphasises the point at page 276 when he says that the shares were never vested in Lord,
"and the only ground on which he can be held to have become a trustee of them is, that he held a power of attorney under which he might have transferred them into his own name; but he held that power of attorney as the agent of the settlor".
Then he observes that, the settlor having died, the power ceased with him.
But it is upon certain other passages in the Judgment of Lord Justice Turner that Mr. Pennycuick has mostly founded himself. I refer to what is said at page 274. I think I should read a substantial passage:
"I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may, of course, do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust".
Now those last few sentences form the gist of the Crown's argument and upon it is founded the broad, general proposition that if a document is expressed as, and on the face of it intended to operate as, a transfer, it cannot in any respect take effect by way of trust — so far I understand the argument to go. In my judgment, that statement is too broad and involves too great a simplification of the problem; and in my view it is not warranted by authority. I agree that if a man purporting to transfer property executes documents which are not apt to effect that purpose, the Court cannot then extract from those documents some quite different transaction and say that they were intended merely to operate as a declaration of trust which ex facie it is not; but if a document is apt and proper to transfer the property — is in truth the appropriate way in which the property must be transferred — then it does not seem to me to follow from the earlier statement that, as a result, either during some limited period or otherwise, there may not arise, for the purpose of giving effect to the transfer, some trust. The simplest case will, perhaps, provide an illustration. If a man executes a document transferring all his equitable interest, say, in shares, that document, operating, and intended to operate, as a transfer, will give rise to and take effect as a trust; for the assignor will then be a trustee of the legal estate in the shares for the person in whose favour he has made an assignment of his beneficial interest. And, for my part, I do not think that the case of Milroy v. Lord is an authority which compels this Court to hold that in this case — where, in the terms of Lord Justice Turner's Judgment, the settlor, did everything which, according to the nature of the property comprised in the settlement, was necessary to be done by him in order to transfer the property — the result necessarily negatives the conclusion that, pending registration, the settlor was a trustee of the legal interest for the transferee.
The view of the limitations of Milroy v. Lord which I have tried to express was much better expressed by my brother Jenkins in the recent case which also bears the same name of re Rose (though that is a coincidence), reported in 1949 1 Chancery at page 78. It is true that the main point, the essential question to be determined, was whether there had been a transfer eo nomine of certain shares within the meaning of a Will. The testator in that case, Rose, by his ill had given a number of shares to one Hook but the gift was subject to this qualification, "if such shares have not been transferred to him previously to my death". The question was, had the shares been transferred to him in these circumstances? He had executed (as had this Mr. Rose) a transfer in appropriate form and handed the transfer and the certificate to Hook; but at the time of his death the transfer had not been registered. It was said, therefore, that there had been no transfer; and (following Mr. Pennycuick's argument) there had been no passing to Hook of any interest, legal or beneficial, whatever, by the time the testator died. If that view were right then, of course, Hook would be entitled to the shares under the Will. But my brother went a little more closely into the matter because it was obvious that on one view of it, if it were held that there was a "transfer" within the terms of the Will, though the transfer was inoperative in the eye of the law and not capable of being completed after the death, then Mr. Hook suffered the misfortune of getting the shares neither by gift inter vivos nor by testamentary benefaction. Therefore, my brother considered the case of Milroy v. Lord and in regard to it he used this language:
"I was referred on that to the well known case of Milroy v. Lord, and also to the recent case of In re Fry. Those cases, as I understand them, turn on the fact that the deceased donor had not done all in his power, according to the nature of the property given, to vest the legal interest in the property in the donee. In such circumstances it is, of course, well settled that there is no equity to complete the imperfect gift. If any act remained to be done by the donor to complete the gift at the date of the donor's death the Court will not compel his personal representatives to do that act and the gift remains incomplete and fails. In Milroy v. Lord the imperfection was due to the fact that the wrong form of transfer was used for the purpose of transferring certain bank shares. The document was not the appropriate document to pass any interest in the property at all".
Then he refers to In re Fry, which is another illustration.
"In this case, as I understand it, the testator had done everything in his power to divest himself of the shares in question to Mr. Hook. He had executed a transfer. It is not suggested that the transfer was not in accordance with the company's regulations. He had handed that transfer together with the certificate to Mr. Hook. There was nothing else the testator could do".
I venture respectfully to adopt the whole of the passage I have read which, in my judgment, is a correct statement of the law. If that be so, then it seems to me that it cannot be asserted on the authority of Milroy v. Lord, and I venture to think it also cannot be asserted as a matter of logic and good-sense or principle, that because, by the regulations of the company, there had to be a gap before Mrs. Rose could, as between herself and the company, claim the rights which the shares gave her vis-a-vis the company, Mr. Rose was not in the meantime a trustee for her of all his rights and benefits under the shares. That he intended to pass all those rights, as I have said, seems to me too plain for argument. And I think the matter might be put perhaps in a somewhat different fashion though it reaches the same end. Whatever might be the position during the period between the execution of this document and the registration of the shares, the transfers were on the 30th June, 1943, registered. After registration, the title of Mrs. Rose was beyond doubt complete in every respect; and if Mr. Rose had received a dividend between execution and registration and Mrs. Rose had claimed to have that dividend handed to her, what would Mr. Rose's answer have been? It could no longer be that the purported gift was imperfect; it had been made perfect. I am not suggesting that the perfection was retroactive. But what else could he say? How could he, in the face of his own statement under his seal, deny the proposition that he had, on the 30th March, 1943, transferred the shares to his wife? — and by the phrase "transfer the shares" surely must be meant transfer to her "the shares and all my right title and interest thereunder". Nothing else could sensibly have been meant. Nor can he, I think, make much of the fact that this was a voluntary settlement on his part. Being a case of an unlimited company, as I have said, Mrs. Rose had herself to undertake by covenant to accept the shares subject to their burdens — in other words, to relieve her husband of his liability as a corporator. I find it unnecessary to pursue the question of consideration, but it is, I think, another feature which would make exceedingly difficult and, I think, sensibly impossible, the assertion on Mr. Rose's part of any right to retain the dividend I have mentioned. Nor is the Crown's argument made any easier by the circumstance that another emanation of the Crown has adjudicated that stamp duty ad valorem under section 74 of the Act of 1910 was payable upon this transfer as a disposition of the subject-matter transferred.
For the reasons I have stated, I do not think that Milroy. v. Lord covers the case and I agree with Mr. Justice Roxburgh in his conclusion to that effect. I also think that upon principle the statement which Mr. Pennycuick has made the foundation of his argument, if it covers this case, is too widely stated. If, as I have said, the phrase "transfer the shares" is taken to be and to mean a transfer of all rights and interests in them, then I can see nothing contrary to the law in a man saying that so long as, pending registration, the legal estate remains in the donor, he was, by the necessary effect of his own deed, a trustee of that legal estate. Nor do I think that that is an unjustifiable addition to or gloss upon the words used in transfer. I find it, indeed, for my part, a less difficult matter in the way of interpretation than to say that this was, upon its terms, merely a conditional gift, merely a transfer as a gift to Mrs. Rose of a particular right, namely, the right to get herself registered and thenceforward, but not before, to enjoy the benefits which the donor previously had in these shares. That, I think, is nothing like what the deed sets out to do. I have said that I reject the proposition that the distinction between a case such as this and a case such as Milroy v. Lord is, as Mr. Pennycuick urged, indefensible, I think it is sensible and real; and for these reasons I would dismiss the appeals.
LORD JUSTICE JENKINS: I agree. The combined effect of section 38, sub-section 2 (a), of the Customs and Inland Revenue Act, 1881, section 11 sub-section 1 of the Customs and Inland Revenue Act, 1889, and section 2 sub-section 1 (c) of the Finance Act, 1894, together with subsequent legislation affecting the period of time before the death of a deceased within which transactions inter vivos are to be taxable, is that any disposition made by a deceased person purporting to operate as an immediate gift inter vivos not made at least the prescribed minimum period before the death attracts duty. Furthermore, any gift, whenever made, of which bona fide possession and enjoyment is not assumed forthwith upon the gift and thenceforth retained to the entire exclusion of the donor, or of any benefit to him, by contract or otherwise, likewise attracts duty unless there has been complete exclusion of the donor and of any benefit to him for at least the prescribed minimum period prior to the death.
As the law stood at the date of the death, on the 16th February, 1947, of the deceased with whom this case is concerned, the relevant minimum period before the death had in general been increased to five years; but by virtue of certain transitional provisions applicable to his case a transaction of either of the kinds I have mentioned would escape duty, provided that any such gift or disposition made by him was made before the 10th April, 1943, and provided, further, that as regards any gift or disposition made by him before that date bona fide possession and enjoyment had been assumed by the donee to the entire exclusion of the deceased and any benefit to him, by contract or otherwise, from before the same date, the 10th April, 1943.
The question in this case therefore is whether the transfers of shares, admittedly effected, so far as the deceased was concerned, on the 30th March 1943 and therefore before the critical date, were caught by the provisions to which I have referred so as to attract duty. There is no doubt, as my Lord has said, that on the 30th March, 1943, the deceased did execute, under seal, instruments of transfer purporting in each case to transfer 10,000 shares in the company, the instruments of transfer complying strictly with the clause in the company's articles which states the manner in which shares are to be transferred. Furthermore, before the 10th April, 1943, those transfers, and the relative share certificates, were duly delivered to the respective transferees or their agent. So far, all seems plain; but as the property transferred consisted of shares in a company a further event was necessary in order to perfect the legal title of the transferees, and that further event was the entry of the names of the transferees in the company's register of members as holders of the shares transferred.
I should next briefly refer to some of the relevant regulations of the company. By Article 9 of the company's Articles of Association
"The Company shall be entitled to treat the person whose name appears upon the register in respect of any share as the absolute owner thereof, and shall not be under any obligation to recognise any trust or equity or equitable claim to or interest in such share, whether or not it shall have express or other notice thereof".
Article 28, dealing with transfers, is in these terms:
"The instrument of transfer of any share in the Company shall be in writing, and shall be executed both by the transferor and transferee, and duly attested, and the transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the register in respect thereof".
By Article 29:
"Shares in the Company shall be transferred in the following form, or as near thereto as circumstances will permit":
then is set out the form of transfer used in the present case. Lastly, the Articles contain provisions of a not unusual character restrictive of the transfer of shares. I need only refer to Article 33, the first sentence of which is in these terms:
"The Directors may at any time, in their absolute and uncontrolled discretion and without assigning any reason, decline to register any proposed transfer of shares".
On the deceased executing the transfers and handing them over, together with the relative share certificates, to the transferees or their agent, the matter, then, stood thus. The deceased had done all in his power to divest himself of and to transfer to the transferees the whole of his right, title and interest, legal and equitable, in the shares in question. He had, moreover, complied strictly with the procedure prescribed by the company's articles. Nevertheless, he had not transferred the full legal title, nor could he do so by the unaided operation of any instrument of his; for under the articles to which I have referred the company was only bound to recognise and in fact would only recognise the registered holder of a share, and none other, as the absolute owner of the share. The deceased had thus done all he could, in appropriate form, to transfer the whole of his interest, but so far as the legal title was concerned it was not in his power himself to effect the actual transfer of that, inasmuch as it could only be conferred on the transferees in its perfect form by registration of the transfers. But he had, in my judgment, transferred to the transferees the right to be placed on the register in his stead as the owners of the shares, subject to the directors' power to refuse registration.
That being the nature of the transactions, two questions arise: First, when was the disposition or gift made; secondly, if it was made before the 10th April, 1943, did the transferees forthwith (or at least before the last-mentioned date) assume possession or enjoyment under the gift and thenceforth retain the same to the entire exclusion of the deceased, or any benefit to him, by contract or otherwise? As to the first question, with respect to those who have contended otherwise, it seems to me plain enough that this gift or disposition must have been made on the date when the deceased executed instruments of transfer and delivered them, with the certificates, to the transferees. After all, any transaction of gift imports a donor and a donee — a disposition by the donor and receipt of the subject-matter of the disposition by the donee. In this case the only gift or disposition by the deceased, the only act of bounty on his part as regards either parcel of shares, took place before the 10th April, 1943* This olaim for duty could not have been made at all except on the footing that the transferees derived their beneficial title to these shares from a disposition or gift made by the deceased. To say that the gift was made on the date subsequent to the 10th April, 1943, when the company's directors in fact registered the transfers, and was therefore dutiable, seems to me a quite untenable proposition; for the registration of the transfers was an act over the doing or refusing of which the deceased had no relevant control, and was moreover an act the doing of which he could not, consistently with his own deeds, oppose. In my view, the directors of the company, when they registered the transfers, registered them because, by virtue of the transfers, the transferees had become owners of the shares, and as such had become entitled to get in the legal estate by being put on the register in respect of the shares.
The second question — that is to say, did the disposition or the gift operate to the entire exclusion of the transferor, and so forth — can be expressed alternatively by the question: was this an incomplete gift which was only completed by the registration? That, I think, is the real basis of the Crown's contention. The Crown claims that this was an incomplete gift because until the moment of registration of the transfers the company could not be compelled to recognise any other person than the deceased as the holder of the shares, and until that happened the gift was incomplete.
It seems to me that the formulation, in terms of an incomplete gift, of the character and effect of the disposition constituted by the execution of the transfers and delivery of them to the transferees with the certificates involves considerable difficulty. I can understand that in given circumstances a gift might, rightly or wrongly, be claimed to be incomplete because it could be recalled by the donor. If here it could be said that the deceased, had he changed his mind at any moment before registration, could, by the taking of appropriate proceedings, recall the transfers and recover the certificates and restrain the directors of the company from registering the transfers, then I would understand the proposition that the gift was incomplete, inasmuch as the property had never passed irrevocably to the donees. But that argument is disclaimed by the Crown, for reasons which I can well understand. It seems to me impossible to suppose that any such action could have been brought by the deceased in this case with any prospect of success. That contention having been disclaimed, it is said, on the part of the Crown, that nevertheless the gift is incomplete because, although the deceased could not recall it, he remained the owner of the shares until the transferees were registered in respect of them. That proposition seems to me to disregard entirely the form of the transfers. And indeed Mr. Pennycuick, for the Crown, in the end said that the effect of the transfers was no more than some sort of conditional authority or promise that, if the directors of the company chose to register the transfers, then but not otherwise the transferees should become the owners of the shares. That is a proposition which I cannot accept, and it seems to me to read into the transfers — which are simple and straightforward documents, apt, as I think, to effect an immediate out-and-out transfer and nothing else — conditions of which the language of the documents themselves contains no trace whatever, for the purpose of bringing these transactions within the charge for duty. Accordingly, I adhere to the view I have already expressed, that these transfers were nothing more nor less than transfers of the whole of the deceased's title, both legal and equitable, in the shares, and all the advantages attached to the shares, as from the date on which he executed and delivered the transfers — subject, of course, as regards the legal title, to the provisions of the Articles of Association of the company as to registration, and to the directors' discretionary power to refuse registration.
If that was the effect of the transfers, what was the position between the delivery of the transfers and the actual registration of the transferees as the holders of the shares? Mr. Pennycuick has referred us to the well-known case of Milroy v. Lord, which has been his sheet-anchor. He says that on this authority we must be forced to the conclusion that, pending registration, the transfers had no effect at all, and he arrives at that conclusion in this way. He says that these transfers, while purporting to be transfers of the property in the shares and not declarations of trust, did not transfer the property in the shares because registration was necessary in order to get in the legal title. He says further that being transfers purporting to be transfers of the property in the shares and failing of their effect as such for want of registration, they could, pending registration, have no operation at all because in the case of Milroy v. Lord it was held that a defective voluntary disposition purporting to operate as a transfer or assignment of the property in question would not be given effect to in equity as a declaration of trust. I agree with my Lord that the case of Milroy v. Lord by no means covers the question with which we have to deal in the present case. If the deceased had in truth transferred the whole of his interest in these shares so far as he could transfer the same, including such right as he could pass to his transferee to be placed on the register in respect of the shares, the question arises, what beneficial interest had he then left? The answer can only be, in my view, that he had no beneficial interest left whatever: his only remaining interest consisted in the fact that his name still stood on the register as holder of the shares; but having parted in fact with the whole of his beneficial interest he could not, in my view, assert any beneficial title by virtue of his position as registered holder. In other words, in my view the effect of this transaction, having regard to the form and the operation of the transfers, the nature of the property transferred, and the necessity for registration in order to perfect the legal title, coupled with the discretionary power on the part of the directors to withhold registration, must be that, pending registration, the deceased was in the position of a trustee of the legal title in the shares for the transferees. Thus in the hypothetical case put by the Crown of a dividend being declared and paid (as it would have been paid in accordance with the company's articles) to the deceased as registered holder, he would have been accountable for that dividend to the transferees, on the ground that by virtue of the transfers as between himself and the transferees the owners of the shares were the transferees, to the exclusion of himself.
In my view, in order to arrive at a right conclusion in this case it is necessary to keep clear and distinct the position as between transferor and transferee and the position as between transferee and the company. It is, no doubt, true that the rights conferred by shares are all rights against the company, and it is no doubt true that, in the case of a company with ordinary regulations, no person can exercise his rights as a shareholder vis-a-vis the company or be recognised by the company as a member unless and until he is placed on the register of members. But in my view it is a fallacy to adduce from that the conclusion that there can be no complete gift of shares as between transferor and transferee unless and until the transferee is placed on the register. In my view, a transfer under seal in the form appropriate under the company's regulations, coupled with delivery of the transfer, and certificate to the transferee, does suffice, as between transferor and transferee, to constitute the transferee the beneficial owner of the shares, and the circumstance that the transferee must do a further act in the form of applying for and obtaining registration in order to get in and perfect his legal title, having been equipped by the transferor with all that is necessary to enable him to do so, does not prevent the transfer from operating, in accordance with its terms as between the transferor and the transferee, and making the transferee the beneficial owner. After all, where duty is concerned the only relevant type of ownership is beneficial ownership, and the situation of the legal estate does not affect the question.
For these reasons, as well as those given by my Lord, I am of opinion that the learned Judge came to a right conclusion in this case, and that the shares comprised in these transfers did not attract duty on the death of the deceased.
LORD JUSTICE MORRIS: I am in agreement with the Judgments which my Lords have delivered.
MR GRANT: Would your Lordships say: Both appeals dismissed with costs?
MR PENNYCUICK: My Lords, I cannot resist that, I think. There is one other matter. These appeals raise a question of law of considerable general importance. I am instructed to ask for leave to appeal to the House of Lords.
THE MASTER OF THE ROLLS: What do you say about that, Mr. Grant?
MR GRANT: I hope your Lordships will say that Mrs. Rose has been in the arena long enough on this question.
THE MASTER OF THE ROLLS: Is the Crown willing to make any offer about this? If it is a matter of general interest I feel pretty sure they would.
MR PENNYOUICK: There has already been an agreement as to the costs in this case in the event of the Crown being successful. May I take instructions?
THE MASTER OF THE ROLLS: Yes, will you take instructions?
MR PENNYOUICK (after consultation): My Lord, the Crown would give the usual undertaking not to oppose an application by the Respondents for payment of their costs in the event of our succeeding.
THE MASTER OF THE ROLLS: You mean the costs in the House of Lords, and not to disturb the Order as to costs here?
MR PENNYCUIOK: Not to disturb the Order as to costs in this Court or the Court below, and to pay their costs in the House of Lords.
(Their Lordships conferred).
THE MASTER OF THE ROLLS: Mr. Grant, quite frankly I think we are inclined to the view that leave should not be given, but of course the Crown has made a very generous offer; and of course there is nothing to prevent the Crown asking for leave from the House of Lords.
MR GRANT: I must leave the matter in your Lordships' hands. I have made my submission and I must leave it there.
THE MASTER OF THE ROLLS: On the whole we think this is not a case in which we should give leave; but of course it is right to record that the Crown, in asking for it, have made what is, I think, a generous offer.
MR GRANT: If your Lordship pleases.
