Martin v. Commissioner of Stamps.
1937Present: Moseley J. and Fernando AJ.
MARTIN et al. v. COMMISSIONER OF STAMPS.
23—D. C. (Inty.), Colombo, 1£01.
Estate duty—Settled property—Life interest in favour of widow—No settlementestate duty paid on death of testator—Death of widow—Liability toestate duty on cesser of life interest—Ordinance No. 8 of 1919, s. 16 (1)and (2).
Property was bequeathed by last will to trustees upon trust as to>half the annual income for the testator’s two sons and as to the remainderof such income for his wife during her widowhood, and upon her death'or marriage the entire estate was bequeathed -to the two sons.
On the death of the testator estate duty was paid- in respect of theproperty but no " settlement estate duty ” was paid in view of the-exemption created by section 16 (1) (a) of the Estate Duty Ordinance.
Held, that on the death of the widow no estate duty was payable on.’the footing of the cesser of her life interest in half the estate.
HIS was an appeal from an order condemning the appellants topay estate duty in respect of the estate of Rear-Admiral Baker,
deceased, on the death of the latter’s widow. The appellants who aretrustees under the last will of Rear-Admiral Baker paid estate duty onthe value of his property in Ceylon on his death in 1922. The estatewas bequeathed to the trustees upon trust as to half the annual incomefor the testator’s two sons and as to the remainder of such income for-his wife during her widowhood.
The widow died in 1934 and the Commissioner of Stamps assessedestate duty on the footing that the cesser of her life interest in half theproperty was liable to duty.
H. V. Perera, K.C. (with him F. C. W. van Geyzel), for the appellants.—By the provisions of section 16 the legislature intended to exempt fromthe payment of estate duty more than once, property settled fn accordance'with the section until that property passed out of the settlement andin order to counteract the benefit of such exemption section 16 (a) imposed!a further duty called settlement estate duty leviable at the rate of oneper cent; where, however, the settlement was in favour of a survivingspouse even this additional duty is not levied.
The words “ under the last preceding sub-section ” occurring in section;16 (2) must be read as qualifying the words “ settled property ” whichthey follow. They are not found in the corresponding section of theEnglish Act and it is submitted that they were introduced into thelocal section in order to make it quite clear that the exemption wasrestricted to settlements within the meaning of section 16 (1).
There are two objections to the respondent’s contention that thewords “ under the last preceding sub-section ” qualify “ paid ”, namely : —(1) it would lead to the anomaly that property settled in favour of astranger and therefore paying the comparatively small settlementestate duty would escape further taxation until the settlementcame to an end whereas no such exemption Would operate-where the settlement was in favour of a spouse, and'
50MOSELEY J.—Martin v. Commissioner of Stamps.
if that had been the intention of the legislature the draftsmanwould either have used the term settlement estate duty insub-section (2) or have interposed the words “ under the lastpreceding sub-section ” after the words “ estate duty ” on theword “paid” in the first line of sub-section (2).
J. E. M. Obeyesekere, C.C., for the Commissioner of Stamps, respondent.—Lady Baker had an interest in one-half -of Mahagastotte estate, whichwas terminable upon her death. This interest is property passing onher death, within the meaning of section 8 (1) (b) of the Estate DutyOrdinance, No. 8 of 1919. Estate duty is payable on such propertyunless the appellants can bring the case under some exemption to befound in the Ordinance. Section 16 (2) does not apply because estateduty has not been paid in respect of this property under section 16 (1).The words “ under the last preceding sub-section ” occurring in' section 16(2), qualify the word “paid”. Estate duty paid under section 16 (1)is settlement estate duty. No settlement estate duty was paid on thedeath of Admiral Baker. The exemption created by section 16 (2)does not therefore apply and estate duty is consequently payable onLady Baker’s interest in the estate, which ceased upon her death.
Cur. adv. quit.
June 14, 1937. Moseley J.—
The appellants are the trustees appointed under the last will of Rear-Admiral Julien Alleyne Baker, deceased. On his death in 1922 estateduty was paid on the value of his assets in Ceylon, which,- included theMahagastotte estate. That estate was bequeathed to the trusteesupon trust as to half the annual income for the testator’s two sons andas to the remainder of such income for his wife during her widowhood.Upon her death or marriage the entire estate was bequeathed to thesaid two sons.
The widow died in 1934, and the Commissioner of Stamps has assessedestate duty on the footing that the cesser of her life interest in half theMahagastotte. estate is liable to estate duty.
It may be convenient to set out here the relevant portion of the sectionof the Estate Duties Ordinance, No. 8 of 1919, which regulates thepayment of estate duty on settled property. It is as follows : —
“ 16 (1) Where property in respect of which estate duty is leviableis settled by the will of the deceased, or having been settled by thedeceased by some other disposition passes under that disposition onthe death of the deceased to some person not competent to disposeof the property—
A further estate duty (called settlement estate duty) on the
value of the settled property shall be levid at the ratehereinafter specified, except where the only life interest inthe property after the death of the deceased is that of awife or husband of the deceased ; but
During the continuance of the settlement, the settlement estate
duty shall not be payable more than once.
MOSELEY J.—Martin v. Commissioner of Stamps.51
(2) If estate' duty has already been paid in respect of any settledproperty under the last preceding sub-section since the date of thesettlement, the estate duty shall not be payable in respect thereofuntil the death of a person who was at the time of his death, or hadbeen at any time during the continuance of the settlement, competentto dispose of such property”.
The appellants appealed against the assessment on the ground thatthe widow had not at any time been competent to dispose of the property,that' estate duty has already been paid in respect of it, and that conse-quently in view of the exemption contained in section 16 (2) no estateduty was payable on her death. -The appeal was dismissed and theappellants have now appealed to this Court.
Now, sub-sections (1) and (2) of section 16 of the Ceylon Ordinance'follow practically verbatim sub-sections (1) and (2) of section 5 of theFinance Act, 1894. There is one notable difference and that is theinsertion in sub-section (2) of the local Ordinance after the words'“ settled property ” of the words “ under the last preceding sub-section ”.
The last preceding sub-section provides for the payment, in the caseof property settled in specified manner, of a special estate duty, called'“ settlement estate duty ”. That duty has been fixed at one per cent,of the value of the estate. The obvious purpose of such a duty is to-relieve an estate which is comprised of property subject to a successionof life interests from paying the full duty on the cesser of each life interest.Settlement estate duty is paid in such cases, “ except where the onlylife interest in the property after the death of the deceased is that of a-wife or husband of the deceased
In the case now before us the only, life interest was that of the wifeof the deceased. Consequently settlement estate duty was hot paid.This fact, coupled with the insertion in section 16 (2) of the words abovementioned, has led to the difference of opinion between the trustees andthe Commissioner.
On behalf of the appellants it is contended that the words “underthe last preceding sub-section ” qualify the words “ settled property ”which immediately precede them, the intention being to make it quiteclear that the exemption from payment of estate duty can only be claimedin respect of settled property within the meaning of sub-section (1), andnot in respect of settled property generally. If that contention isaccepted, it follows that, since estate duty was paid on the death ofAdmiral Baker on settled property coming within the meaning of sub-section (1), no further estate duty is payable until the death of someperson competent to dispose of the property. Geraldine Baker, thewidow, is no such person.
The argument put forward on behalf of the Commissioner is that thewords “ under the last preceding sub-section ” qualify the openingwords of sub-section (2) viz., “ If estate duty has already been paid ”,so that the estate duty referred to is the settlement estate duty. Insupport of this argument Counsel contended tha.t the expression “ settledproperty under the last preceding sub-section ” is ungrammatical andthat neither the legislature nor the draftsman would have been a party
MOSELEY J.—Martin v. Commissioner oj Stamps.
to a solecism of such a nature. While it must be conceded that theexpression lacks elegance, it is not an unusual one, and, assuming thatit bears the meaning attributed to it by the appellants, is not, I ventureto think, an example of bad grammar. On the other hand, to read the■words as interpolated where the Commissioner would have us read them,one has to And that the draftsman avoided at least two more obviousand neater methods of giving expression to his intention. Firstly, hemight have inserted the words in the place where we are invited to readthem, and secondly, and still better, he might have used the phrasewhich he had just coined, if I may use the term, in sub-section (1) (a),viz., “ settlement estate duty ”. In this connection it is noteworthythat the phrase is repeated in sub-section (1) (b). It is difficult thereforeto believe that the draftsman having used the expression twice hasimmediately afterwards employed a paraphrase.
Moreover, Counsel for the appellants has pointed out that to read thewords in dispute as the Commissioner would have them read wouldlead to a manifest absurdity in that, in the case of the disposition of alife interest to a stranger with remainder to the testator’s children, only“ estate duty ” and “ settlement estate duty ” would be paid, whereas,in the case of a disposition of a life interest to the testator’s widow withremainder to the children, estate duty would be payable twice at thefull rate. Such partiality can hardly have been the intention of thelegislature which, while imposing the settlement estate duty, expresslyexempts from liability thereto the case where the only life interest inthe property is that of a wife or a husband of the deceased. Again, ifwe are to hold that the words “ estate duty ” where they first occur insub-section (2) mean “ settlement estate duty ” then surely the samemeaning must be applied to the words where they recur in the samesub-section, a process which would lead to another absurdity.
Counsel for the Commissioner has invited us not to assume that theintention of the local legislature was to follow exactly English law,while Counsel for the appellants urges that we should not assume anintention to depart from the model. I do not know that it is necessaryin this case to estimate the intention of the legislature, except in sofar as it can be gathered from giving to the words used their ordinarymeaning. If I were in. any doubt as to that meaning, I should feelinclined to hold that the insertion of the words which do not appear inthe model was made with the intention of removing any doubt as to theclass of settled property to which the sub-section applies. In spite ofthe inelegance of the expression, however, I have no doubt but thatthat is what the words mean.
Finally, it is fundamental that the intention to impose a charge- onthe subject must be shown by clear and unambiguous language, andthat in cases of doubtful expression the party sought to be made liablemust be deemed to be exempt.
The appeal is allowed vjith costs here and in the Court below.Fernando A.J.—I ag
MARTIN et al. v. COMMISSIONER OF STAMPS