Scottish Court of Session Decisions

By disposition and settlement dated 22d October 1838, and subsequent codicil, two sisters, Miss Barbara and Miss Christian Constable, conveyed their whole joint estate to the survivor of them in liferent, and after her death to Mr James Nicoll and his spouse (their sister) and the survivor of them in liferent, and to their children nominatim in fee. By the codicil it was provided that Mr and Mrs Nicoll should assume the name of “Constable.” Mr and Mrs Nicoll had two sons and a daughter Miss Christian Constable Nicoll Constable, in connection with whose succession this case arose.

Miss Barbara Constable died on 3d October 1846, her sister then succeeding to the liferent of their joint estate. In 1846 Mr Nicoll borrowed £10,000 out of that joint estate from Miss Christian Constable on bond and disposition in security, £5000 to be repaid to her in liferent, for her liferent use allenarly, and £5000 to her and her heirs and assignees whomsoever, whom failing or at her death to the said three children of Mr Nicoll, equally amongst them, their heirs and assignees in fee, but under the real and preferable burden always of the liferent of their father and mother, and the survivor of them. By dispositions and assignations dated in 1847 and 1848 Miss Christian Constable acquired right, to the extent of £5000, to a bond and disposition in security, and instrument of sasine following thereon, by which Mr Nicoll had in 1846 became debtor to Euphemia Whitson for £5500. Miss Christian Constable died on 15th September 1848, and her right to the extent of £5000 in the

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last-mentioned bond and disposition in security was taken up by notarial instrument following upon the said mutual settlement and codicil, by Mr and Mrs Nicoll, now Nicoll Constable, and their children.

By discharge and renunciation, dated in 1852, in favour of Mr and Mrs Nicoll Constable, their said three children, with joint consent, and with consent of their father and mother, discharged (1) the bond and disposition granted to Miss Christian Constable in 1846 for £10,000, and (2) the bond and disposition granted to Euphemia Whitson for £5500. This discharge was granted in consideration of bonds and dispositions in security by which Mr and Mrs Nicoll Constable granted to their sons respectively certain lands therein set forth, and to their daughter Miss Christian Constable Nicoll Constable the sum of £5166, 13s. 4d., being her one-third share of the fee of the above sums of £10,000 and £5500 so discharged, the same to be payable at the first term of Whitsunday or Martinmas which should occur after the death of the longest liver of the granters (her parents), with the legal interest thereof from the date of the death of such survivor. Mr Nicoll Constable died on 21st March 1863, his wife died on 6th March 1868, and the said sum of £5166, 13s. 4d., with interest from the latter date, therefore became payable to Miss Christian Constable Nicoll Constable as at Whitsunday 1868.

The Lord Advocate on behalf of the Inland Revenue claimed succession-duty on £3333, 6s. 8d., being the one-third part of the two sums of £5000 to which Miss Constable had right—the one under Mr Nicoll's bond in her favour in 1846, and the other under bond to Euphemia Whitson, as above set forth. On the remaining portion of the said sum of £5166, 13s. 4d. duty was not claimed, the same having been already paid as a part of the succession of Miss Barbara Constable. On 11th August 1853 Miss Christian C. N. Constable granted a trust-deed in favour of her two brothers. A Special Case under 19 and 20 Vict. c. 56, was drawn up, to which the parties were on the one hand the Lord Advocate, and on the other hand these trustees. It was admitted that Miss C. C. N. Constable was a stranger in blood to Miss Christian Constable. The Lord Advocate maintained “that the said sum of £3333, 6s. 8d. was a ‘succession’ in terms of the ‘Succession-Duty Act 1853’ (16 and 17 Vict. c. 51), to which the said Christian Constable Nicoll Constable came into the beneficial possession on the death of her mother in 1868; that the said Christian Constable was the predecessor or person from whom her interest was derived; and that being a stranger in blood to the predecessor, duty at the rate of £10 per centum per annum is due upon the sum of £3333, 6s. 8d. That interest was payable upon the duty at 4 per cent. from the 6th March 1868 till paid.”

Miss Constable's trustees maintained “that the arrangement under which the original bonds and dispositions in security were discharged having been made prior to the passing of the Succession-Duty Act of 1853, was not and could not possibly have been entered into with a view to evading its provisions, and that the settlements of legacy-duty made on the estates of Miss Barbara Constable and James Constable did not enter into the question now raised. The succession left by Miss Christian Constable was an interest in a heritable security on which at the time of her death there could be no claim for duty on the part of the Crown. At the date of the arrangement for discharge of the heritable debts previously due by Mr and Mrs Constable, and which had come to belong to their children in fee, Miss Christian Constable Nicoll Constable's right to one-third of the contents of these heritable securities had become absolute, and there was nothing to prevent her then making any arrangement which she pleased with the debtors for payment or satisfaction. She discharged the original bonds and dispositions in security in consideration of a new bond and disposition in security, the lands conveyed in security not being the same as those in the bonds which she discharged, and the term of payment not being immediate as in the bonds discharged, but postponed to the death of the longest liver of her father and mother. The new arrangement truly extinguished the old and created a new heritable debt, for if the payment had been in money instead of by a bond with a postponed term of payment, the present money value at the date of the arrangement would have been the same as the value she got under the bond, viz., the amount of her one-third of the securities discharged, subject to the deduction of the value of the expectant liferent of her parents. The original bonds having thus, as far as Miss Constable was interested therein, been discharged, and Miss Constable herself having been the originator and proper creditor in the new bond, she was thenceforth entitled to the money upon a footing which did not make it a succession to the original lenders of the money in the £10,000 and £5500 bonds. If such was the case, Miss Constable did not take the money by succession to her father within the meaning of the Succession-Duty Act. She was not entitled under the bond and disposition in security—which she accepted in lieu of her claim against her father under the two bonds and dispositions in security for £10,000 and £5500 for loans made to him by her aunt—to payment till the first term after the death of the survivor of her father and mother. As it happened, her mother survived her father, and thus, apart from the general view that her right to demand payment of the bond at the first term after her mother's death was not a succession within the meaning of the Act, the trustees founded upon the exception in the 17th section of the Act, which declared that ‘no bond or contract made by any person bona fide for valuable consideration in money or money's worth, or for the payment of money or money's worth, after the death of any other person, shall create the relation, of predecessor and successor between the person making such bond or contract and the person to or with whom the same shall be made.’”

The questions submitted for the opinion and judgment of the Court were—“(1) Was the sum of £3333, 6s. 8d. a succession in the sense of ‘The Succession-Duty Act 1853’? (2) Assuming the first question to be answered in the affirmative, who was the predecessor in the sense of the said Act? and (3) Who was the successor within the meaning of the said Act?”

The Succession-Duty Act 1853 (16 and 17 Vict. c. 51) enacts (Sec. 2)—“Every past or future disposition of property by reason whereof any person has or shall become beneficially entitled to any

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property or the income thereof upon the death of any person dying after the time appointed for the commencement of this Act [viz., 19th May 1853—see section 54], either immediately or after any interval, either certainly or contingently, and either originally or by way of substituted limitation, and every devolution by law of any beneficial interest in property, or the income thereof, upon the death of any person dying after the time appointed for the commencement of this Act, to any other person, in possession or expectancy, shall be deemed to have conferred or to confer on the person entitled by reason of any such disposition or devolution a ‘succession;’ and the term ‘successor’ shall denote the person so entitled; and the term ‘predecessor’ shall denote the settler, disponer, testator, obliger, ancestor, or other person from whom the interest of the successor is or shall be derived.” (Sec. 12) “Where any person shall take a succession under a disposition made by himself, then if at the date of such disposition he shall have been entitled to the property comprised in the succession expectantly on the death of any person dying after the time appointed for the commencement of this Act, and such person shall have died during the continuance of such disposition, he shall be chargeable with duty on his succession at the same rate as he would have been chargeable with if no such disposition had been made; but a successor shall not in any other case be chargeable with duty upon a succession taken under a disposition made by himself, and no person shall be chargeable with duty upon the extinction or determination of any charge, estate, or interest created by himself, unless at the date of the creation thereof he shall have been entitled to the property subjected thereto expectantly on the death of some person dying after the time appointed for the commencement of this Act.”

The Lord Ordinary on Exchequer Causes ( Curriehill) found that the sum of £3333, 6s. 8d. was not a succession in the sense of the Succession-Duty Act 1853, and decerned against the Lord Advocate accordingly. His Lordship added this note:—

“ Note.—This is a case of considerable nicety. It arises out of a claim for succession-duty made by the Crown on the sum of £3333, 6s. 8d. which it is alleged Miss Christian Constable Nicoll Constable acquired as successor of the deceased Miss Christian Constable, The circumstances are fully disclosed in the Special Case, and are shortly as follows:—By a mutual settlement, dated 2d October 1838, the late Barbara Constable and Christian Constable conveyed and bequeathed to the survivor of them in liferent, and in favour of the said Christian Constable Nicoll (now Christian Constable Nicoll Constable), George Constable Nicoll, and James Charles Constable Nicoll, children of the marriage between James Nicoll of Chapelshade, near Dundee, and Agnes Maria Constable or Nicoll, his spouse, equally amongst them, their heirs and assignees in fee, the whole of their estate, heritable and moveable, and in particular a certain heritable subject in Dundee. By a codicil to that settlement, dated 24th December 1839, Barbara and Christian Constable, while ratifying the provisions of the mutual deed, interposed between the survivor of themselves and the fiars a liferent in favour of the parents of the fiars, namely, the said James Nicoll and Agnes Maria Constable or Nicoll, his spouse, and the survivor.

Barbara Constable died on 3d October 1846, and Christian Constable entered upon the possession and management of her personal estate as disponee, executrix, and legatee in liferent under the mutual settlement. As the whole succession was moveable, legacy-duty has been paid upon the sum settled by the said mutual settlement and codicil, in so far as it flowed from Barbara Constable, amounting to £5000. After Barbara's death Christian Constable invested the sum of £10,000—of which £5000 had belonged to Barbara—on heritable security, granted by the said James Nicoll, or Nicoll Constable, over his lands of Callie and Easter Butters Callie. In other words, Christian Constable lent to James Nicoll the sum of £10,000, for which he granted his bond and a conveyance of the lands of Callie in security. The destination in the bond was as follows:—The money was to be repaid to Christian Constable in liferent, and at her death to the three children of the said James Nicoll above mentioned, equally among them, their heirs and assignees in fee; but so far as regarded the rights of the said children, their heirs and assignees, under the real and preferable burden always of the liferent of their father and mother, and the survivor of them, with the annual-rent of the said principal sum of £10,000 at 3 per cent. Christian Constable and the fiars were infeft nominatim upon the said bond and disposition in security, conform to an instrument of sasine recorded in the General Register of Sasines 2d November 1846, but always under burden of the foresaid liferent in favour of their parents and the survivor. Christian Constable afterwards, in 1847 and 1848, acquired right to another bond and disposition in security for £5000, borrowed by the said James Nicoll Constable from Euphemia Whitson over his foresaid lands of Callie and Easter Butters Callie.

This bond for £5000 was part of an original bond for £5500, which to the extent of the remaining £500 was acquired by Patrick Scott, Dundee, as trustee for Agnes Maria Nicoll Constable in liferent, and her children in fee, and at the death of the said Patrick Scott, then to and in favour of the said Maria Constable herself in liferent and her children in fee. Although Christian Constable Nicoll Constable had right under the foregoing destination to the third of this sum of £500, no succession-duty is claimed by the Crown in respect thereof seeing that legacy-duty has been paid upon it.

The Crown, however, claims succession-duty upon the sum of £3333, 6s. 8d., being one-third of the two sums of £5000 which belonged to Christian Constable in her own right, and which were secured by the two bonds and dispositions in security already mentioned. These being heritable at the date of her death, which took place on 15th September 1848, no legacy-duty could be claimed upon them; but it is maintained by the Crown that the right of Christian Constable Nicoll Constable to one-third of these bonds was merely a right in expectancy during the life of her parents, and as they survived the passing of the Succession-Duties Act of 1853, succession-duty became payable by her on the death of the last survivor of her parents on 6th March 1868. Christian Constable Nicoll Constable has assigned her interest in the bonds to her brothers George Constable Nicoll Constable and James Charles Constable Nicoll Constable, by

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a trust-deed dated 11th August 1853, and the claim is formally made against them as trustees, although really and substantially against Christian Constable Nicoll Constable.

The defence which is maintained against the claim of the Crown is, in the first place, that the right of Christian Constable Nicoll Constable, after the death of the testator, if she may be so called, was absolute. It is said that from the death of Christian Constable in 1848 she was the absolute fiar in the two securities in question to the extent of one-third under burden merely of the liferent of her parents; that she could have disposed of her right of fee under that burden without the control of anyone; that she was fully vested with the beneficial right of the property; and that she was therefore at the passing of the statute in 1853 not a successor of Christian within the meaning of the Act. I cannot sustain that contention. I think that if matters had remained on the footing on which they were when Christian Constable died in 1848, Christian Constable Nicoll Constable must have been regarded during the life of her father and mother, and the survivor of them, as being not beneficially entitled to the property, and, at all events, as being during the life of her parents only to a partial extent beneficially interested in the succession; and that the death of her parents would have caused an increase of benefit to accrue to her by the extinction and termination of her parents’ liferent, which increased benefit would have been a succession within the meaning of the 5th section of the Act.

But in the view which I take of the case it is unnecessary to make that a ground of judgment. The question really comes to be, Whether, assuming Christian Constable Nicoll Constable to have had merely a right in expectancy during the life of her parents, certain transactions which took place between her and her brothers on the one hand, and her father and mother on the other, in 1852, had not the effect of surrendering and extinguishing her right in expectancy within the meaning of the 18th section of the statute, by which it is provided that no person shall be charged with duty under this Act in respect of any interest surrendered by him or extinguished before the time appointed for the commencement of this Act?

Now, if the proceedings of 1852 had the effect of surrendering and extinguishing the interest which Christian Constable Nicoll Constable took under the bonds and dispositions in security of 1846, it is impossible to hold that these proceedings were taken with the view of evading the claim of the Crown to succession-duty, seeing that they were all taken and completed a year before the commencement of the Succession-Duties Act in 1853, and there will therefore be little difficulty in holding that the claim of the Crown is excluded by the 18th section. It is maintained, however, on behalf of the Lord Advocate, that the transactions in 1852 did not constitute a renunciation and surrender of Miss Constable's interest under the deeds of 1846, but were merely a change of the investment. It is therefore necessary to examine minutely what was done in 1852.

Prior to that date the right of Miss Christian Constable Nicoll Constable was constituted solely by the two bonds and dispositions in security which had been taken by the deceased Christian Constable in 1846. Under these bonds she was fiar to the extent of one-third, under burden of the liferent of her parents. The fee was payable to herself, and could have been demanded by her immediately on the death of her surviving parent. The money was in the shape of a debt by her father James Nicoll Constable, secured over his lands of Callie and Easter Butters Callie. Her brothers had right each to another third of the sums secured by the bonds. On the 4th September 1852 a family arrangement was entered into to the following effect:—Miss Christian Constable Nicoll Constable and her two brothers, with consent of their father and mother, discharged the two bonds and dispositions in security which had been acquired by the deceased Christian Constable in 1846, and under which they were the fiars under burden of the liferent of her parents. So far as regards the brothers George Constable Nicoll Constable and James Charles Constable Nicoll Constable, their consent was given in consideration of absolute conveyances to the lands of Callie belonging to their father—that is to say, their father conveyed to them, out and out, the portions of the lands over which the bonds had been secured in consideration of their discharging the bonds, to the extent of two-thirds, and liberating him from his debt to them. The consideration in respect of which Christian Constable Nicoll Constable discharged and renounced her third share of the lands was the simultaneous execution of another bond and disposition in security by her father and mother, dated 4th September 1852, for the sum of £5166, 13s. 4d. (which included the £3333, 16s. 8d. now in question), secured over the lands of Balmyle, which also belonged to her father, but which were different lands from those over which the bonds and dispositions in security of 1846 had been granted. The term of payment was the first term of Whitsunday or Martinmas which should occur after the death of the longest liver of the granters, with the legal interest of the said principal sums from the date of the death of the longest liver.

The question is by no means free from difficulty; but, on the whole, I have come to be of opinion that the transaction must be regarded as both in form and in substance a proper surrender and renunciation by Christian Constable Nicoll Constable of the right in expectancy which she then had in the bonds of 1826. I think it was the intention of all the parties—that is to say, of Mr and Mrs Constable on the one hand, and their sons and daughter on the other—to put an end altogether to the connection which had subsisted between the late Miss Christian Constable and themselves under the original bonds. In the case of the sons this is perfectly clear, because they out and out discharged the debt owing to them by their father and surrendered their interest to him in consideration of obtaining an absolute conveyance of certain heritable property, and accordingly it was conceded that no claim either for legacy or succession-duty was competent at the instance of the Crown against either of the sons.

Now, does it make any substantial difference that Miss Christian Constable Nicoll Constable, instead of obtaining from her father an absolute conveyance to the lands of Balmyle, obtained

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from him an absolute security over these lands for her third share of the debt constituted by the original bonds over the lands of Callie and Easter Butters Callie? In point of fact she did absolutely discharge the debt owing to her by her father, no doubt in anticipation of the term of payment—but still she did discharge it. She surrendered her security for her debt over the lands which had been originally burdened with it, and she accepted from her father a new obligation directly in her own favour, without mention of the liferent of her father and mother, and payable at the first term of Whitsunday or Martinmas after their death, the security, moreover, being granted over an entirely different estate.

I think, therefore, that it must be held that this was not a mere change of investment, but a surrender and extinction of the interest which she had derived from the deceased Christian Constable; and as that took place before the Succession-Duties Act came into operation, no duty is chargeable, at all events as on succession from the deceased Christian Constable. And if I am right in this view, it follows that no claim for duty can be made under section 12 of the statute as on a succession under a disposition made by Christian Constable Nicoll Constable herself, the cases of Lord Braybrooke and of Sibthorp being, in my opinion, not applicable to the present case.

But it is contended that if the right of Christian Constable Nicoll Constable under the transaction of 1852 can no longer be regarded as a succession from the deceased Christian Constable, it is a succession from James Nicoll Constable, her father. I did not, however, hear much argument in support of that view on behalf of the Crown, and I do not think that it can be successfully maintained. The new bond of 1852 was, in my opinion, a bond granted to Christian Constable Nicoll Constable by her father for a valuable consideration in money's worth. He obtained what was apparently an important object to him—not only the discharge of the debt originally owing by him, but a release of the lands of Callie and Easter Butters Callie, over which the original debt had been secured. That release enabled him to deal with these lands as his own, unfettered and unencumbered, and his granting to his daughter the new bond with security over the lands of Balmyle was therefore a highly onerous transaction.

On the whole matter I am of opinion that the claim of the Crown for succession-duty cannot be maintained.”

The Lord Advocate reclaimed.

Authorities— Wilcox v. Smith, 1857, 26 L.J., (Chan. App.) 596; Attorney-General v. Lord Middleton, 1858, 27 L.J. (Exch.) 229; Attorney-General v. Sibthorp, 1858, 28 L.J. (Exch.) 9; Lord Braybrooke v. Attorney-General, 1860, 9 Clark H.L. 150, 29 L.J. (Exch.) 283; Earl of Zetland v. Lord Advocate, Feb. 12, 1878, 3 L.R., App. Ca. (new series) 505, 5 R. (H.L.) 51.

At advising—