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JUL 11 56
JUDGES OF THE COURT OF SESSION DURING THE
PERIOD OF THE REPORTS IN THIS VOLUME.
LORD PRESIDENT– THE RIGHT HON. LORD CLYDE.
THE Hon. LORD SKERRINGTON, THE HON. LORD CULLEN,
AND THE HON. LORD SANDS.
LORD JUSTICE-CLERK—THE RIGHT HON. LORD ALNESS.
AND THE HON. LORD ANDERSON.
THE HON. LORD BLACKBURN (ROBERT F. L. BLACKBURN).
1 9 2 4. SCOTS LAW TIMES
W. R. GARSON, Esq.; MARCUS DODS, Esq., B.A.; MAURICE J. KING, Esq., M.A., LL.B.; J. A. LILLIE, Esq., M.A., LL.B.; WILLIAM GARRETT, Esq., B.A., LL.B.; M. G. FISHER, Esq., M.A., LL.B.; J. MACGREGOR, Esq., M.A., LL.B.; AND T, GRAINGER STEWART, Esq.,
NOTE.-Cases in this volume may be cited 1924, S.L.T. Thus:
Inland Revenue v. Fothringham, 1924, S.L.T. 2.
REPORTS-1924, SCOTS LAW TIMES.
granted leave to reclaim. His Lordship’s
opinion is printed in the previous report. Inland Revende v. (The Lord President, Lords Skerrington,
The Lord Advocate reclaimed, and the case FothringCullen, and Sands.)
was heard before the First Division on 23rd ham,
and 24th October 1923. November 17, 17th November 1923.
Argued for the Pursuer : The modus calcu
landi of the statute was to ascertain the number Inland Revenue v. Fothringham.
of years' purchase at which the property was
valued and use that number as the multiplier Revenue--Estate duty-Property passing on death of the amount of the annuity. The question
Heritable estate-Cesser of interest in property by had never been raised whether, in ascertaining
the the annual cost of repairs from the gross
an interest in the repairs of the estate on which and at which the annuity fell to be valued for the annuity was secured, since if the estate purposes of estate duty.
were not properly kept up the annuity might
possibly have to be curtailed. It was, there(Reported ante, sub. nom. Lord Advocate v. fore, necessary to figure a hypothetical addition Fothringham, 1923, S.L.T. 487.) to the property which yielded after deduction
for repairs a free annuity of £4000. Thus it Reclaiming Note against an Interlocutor of Lord was fair and right to deduct repairs from the Blackburn.
gross rental of the actual property before
calculating the number of years' purchase The Lord Advocate, on behalf of the Com- at which it was valued. Counsel referred to missioners of Inland Revenue, brought an action the following authorities : Attorney-General v. of accounting and payment, inter alia, of estate Coole,  3 K.B. 607, per Sankey J. at p. duty against Walter Thomas James Scrymsoure-618; Edinburgh and Glasgow Railway Co. v. Steuart Fothringham of Pourie and Grand- Hall, 1866, 4 M. 1006, per Lord Justice-Clerk tully. The conclusions of the action, the Inglis at p. 1008; Attorney-General v. Power, pleadings of the parties, and the relevant  2 I.R. 272, per Palles C.B. at p. 277 ; sections of the Finance Act, 1894, are all In re Elwes, 1858, 3 H. & N. 719, per curiam sufficiently set forth in the previous report. (Watson B.) at p. 716; Lord Advocate v.
On 8th June 1923 the Lord Ordinary (Black- Henderson's Trs., 1905, 7 F. 963; Lord Advocate burn) sustained the second and third pleas in v. Maclachlan, 1899, 1 F. 917, per Lord President law for the defender, continued the cause, and Robertson at p. 922, Lord Adam at p. 923, REPORTS-1924, SCOTS LAW TIMES.
and Lord MʻLaren at p. 924; In re Earl upon the principal value of all property which ist Div. Cowley's Estate,  1 Q.B. 355, per A. L. passes on the death of such person; and, by
Inland Smith L.J. at p. 367.
subsection (1) (6) of section 2,“ property Revende v. Argued for the Defender: This a passing on the death of the deceased ” is deemed Fotbringtaxing statute and in dubio must be construed to include “property in which the deceased or ham. in favour of the subject. There was
an interest ceasing on the November 17 authority beyond the ipse dixit of the Commis- death of the deceased to the extent to which sioners that the word income in section a benefit accrues or arises by the cesser of such 7 (7) of the Finance Act of 1894 meant income interest." after deduction for repairs. It was equally Accordingly, the Murthly property must be open to the defender to assert that the word deemed to have passed on the death of Lady meant gross income, and perhaps he had Douglas Stewart to whatever extent (if any) a conceded too much in not stating his objection benefit arose or accrued by the cesser of her to the deduction even of public burdens. If interest. The question whether a benefit the contention of the Crown was right, why did has or has not arisen is crucial to the incidence the Commissioners stop at repairs? They of estate duty. If no benefit arose, there is no might with equal logic have deducted the cost property subject to duty. It is obvious prima of insurance and management. But the de- facie that some benefit' did arise or accrue in fender had conceded the deduction of public respect of the release of a property worth burdens because they constituted a charge upon nearly £240,000 and having a rental of over income prior to the annuity. The cost of £13,000 gross, or £10,000 net (that is, after repairs was not prior to the annuity. The allowing for public burdens together with ordininterest of the deceased here was £4000 per ary and necessary repairs), from the burden annum, nothing more and nothing less. She of an annuity of £4000. The next question, had no concern with the repairs to the whole closely related to the first, is : What was the property. The benefit accruing to the defender extent of the benefit ? This is a question of was also £4000 per annum, neither more nor valuation; and the statute provides, in subless, and the number of years' purchase at which section (7) of section 7, two special rules, (a) that benefit should be valued must be ascer- and (6), for valuing the benefit. Which of tained by a consideration of the true annual these two rules is applicable in any given case value of the whole property to him. That depends-according to their terms-on the annual value was the gross rental less public result of a comparison between the extent of burdens. It was out of that annual value that the deceased's life interest and the whole he had to keep his property in repair. Besides, income of the property:’ Rule (a) applies to the cost of repairs had been already allowed the case in which the “ interest extended to the for in fixing the number of years' purchase at whole income of the property”; and directs which the whole property was valued. That that the value of the benefit arising or accruing calculation always included as a factor in it from the cesser of the interest shall be taken to the state of the property. Counsel referred to be “the principal value of the property”the following authorities, in addition to those which means (according to subsection (5) of cited for the pursuers : Earl of Galloway v. section 7) the market value of the property Dowager Countess of Galloway, 1903, 6 F. as at the death of the deceased. Rule (6) (H.L.) 1; In re Parker-Jervis,  2 Ch. applies to the case in which the “ interest 643. [Lord Skerrington referred to Austen- extended to less than the whole income of Cartmell on the Finance Acts, p. 80.]
the property," and directs that the value
of the benefit shall be taken to be the Avizandum, 24th October 1923.
principal value of an addition to the property
equal to the income to which the interest On 17th November 1923 the Court recalled extended.' the interlocutor of the Lord Ordinary, sustained The whole dispute between the parties is as the fifth plea in law for the pursuer, and to the meaning of the word income occurring remitted to the Lord Ordinary to proceed. in these rules. The revenue maintains that
by income the net income-after deduction of The Lord President (Clyde).-The late Lady public burdens together with ordinary and Douglas Stewart was entitled to an annuity necessary repairs—is meant. The Lord Ordinsecured over the property of Murthly. The ary has held that what is meant is the net interest which, as annuitant, she had in the income-after deduction of public burdens property ceased on her death on 6th October only. The respondents, while they did not 1916. By section 1 of the Finance Act, 1894, challenge the Lord Ordinary's findings, arguedestate duty is payable in the case of every person after some hesitation—that the true construcdying after the commencement of the Act tion to be put on the word income is gross