Inland Revenue v. Montgomery's Trustees [1914] ScotLR 377 (03 March 1914)

Inland Revenue v. Montgomery's Trustees [1914] ScotLR 377 (03 March 1914)

The forfeiture of Sir Basil's life interest in the trust fund upon divorce and its subsequent reversion to him upon Lady Montgomery's death did not constitute a 'disposition' by Sir Basil within the meaning of section 15(1) of the Finance Act 1896. The transfer of interest occurred by operation of law as a consequence of the divorce decree, not by any act or deed of Sir Basil. Therefore, the trust fund was property passing on the death of Lady Montgomery and was subject to estate duty under the Finance Act 1894 and succession duty under the Succession Duty Act 1853.

Citation
[1914] ScotLR 377
Parties
Pursuer/respondent: Inland Revenue; Defenders/reclaimers: Montgomery's Trustees (Sir Robert Drummond Moncreiffe of Moncreiffe, Bart., and another)
Jurisdiction
Scotland
Judgment Date
03 March 1914
Procedural Posture
Civil Appeal / Inner House, First Division, Reclaiming Motion (appeal) Against Lord Ordinary's Interlocutor
Outcome
Appeal dismissed; Lord Ordinary's interlocutor affirmed.
Legal Topics
Estate Duty, Succession Duty, Interpretation of 'disposition' Under Finance Act 1896, Operation of Marriage Settlements on Divorce, Taxation of Trust Interests
Revenue Law Trusts and Estates Estate Duty Succession Duty Interpretation of 'disposition' Under Finance Act 1896 Operation of Marriage Settlements on Divorce Taxation of Trust Interests

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Parties

Inland Revenue

Pursuer/respondent

Montgomery's Trustees (Sir Robert Drummond Moncreiffe of Moncreiffe, Bart., and another)

Defenders/reclaimers

Procedural Posture

Civil Appeal / Inner House, First Division, Reclaiming Motion (appeal) Against Lord Ordinary's Interlocutor

Legal Issues

  1. 1 Whether the forfeiture of a husband's life interest in a trust fund upon divorce, with the interest passing to the wife and reverting to the husband upon her death, constitutes a 'disposition' within the meaning of section 15(1) of the Finance Act 1896, thereby exempting the property from estate duty under the Finance Act 1894 and succession duty under the Succession Duty Act 1853.

Ratio Decidendi

The forfeiture of Sir Basil's life interest in the trust fund upon divorce and its subsequent reversion to him upon Lady Montgomery's death did not constitute a 'disposition' by Sir Basil within the meaning of section 15(1) of the Finance Act 1896. The transfer of interest occurred by operation of law as a consequence of the divorce decree, not by any act or deed of Sir Basil. Therefore, the trust fund was property passing on the death of Lady Montgomery and was subject to estate duty under the Finance Act 1894 and succession duty under the Succession Duty Act 1853.

Court Disposition

Appeal dismissed; Lord Ordinary's interlocutor affirmed.

Orders

  • Defenders (Montgomery's Trustees) are liable to pay estate duty and succession duty on the trust fund as property passing on the death of Lady Montgomery.