THE ATTORNEY- GENERAL , Appellant, and HALE , Respondent

063-NLR-NLR-V-53-THE-ATTORNEY-GENERAL-Appellant-and-HALE-Respondent.pdf


GBATIAEN J.—The Attorney-General v. Hale
1951Present : Grafclaen J. and Swan J.TFTF. ATTORNEY-GENERAL, Appellant, and HALE,Respondent
S. C. 329—D. C. Colombo, 73/T (Specialj
Estate Duty Ordinance (Cap. 187)—“Property pasting on death”—Bona fide alienationoperating from time of death—Exemption from estate duty—Sections 6 (a), {6),10, SO (1), 21, 24, 26.
Three solicitors were practising in partnership. It was clear from the partner-ship deed that they had undertaken to work with one another in partnershipto their mutual financial advantage and that their engagement was a businessdeal ", Clause 11 provided: *‘ In case of the death or retirement of any partnerduring the continuance of the partnership the share of such deceased or retiringpartner in the Beserve Fund and in the capital assets and goodwill of the partner-ship and in the office furniture books and papers shall accrue to and be purchasedby the surviving or continuing partners or partner in the proportions in whichthey are entitled to the net profits of the business
One of the partners died on 29th March, 1944. On his death, therefore,Clause 11 of the deed of partnership came into operation and his interest inthe entire assets of the partnership business consisting of the Beserve Fund,capital, assets and goodwill '* accrued to ” his surviving partners. The consi-deration for these assets was duly paid into his estate in accordance with tbebasis of computation provided by the partnership deed.
Held, that the interest of the deceased partner " in the Beserve Fund andin the capital, assets and goodwill " of the partnership business passed to hissurviving partners by reason only of a bona fide purchase for full considerationin^money or money’s worth which was paid to the vendor for his own benefit.Estate duty on the market value of the deceased’s interest in the goodwill andother partnership assets was therefore exempted under Section 10 of the EstateDuty Ordinance. Only the total sum paid into the deceased’s estate as fullconsideration for his share of the partnership assets (including his interest inthat part which constituted goodwill) was liable to duty under Section 6 (a).
ApPEAL from a judgment of the District Court, Colombo.
H. W. R. Weerasooriya, Crown Counsel, with G. U. Sethukavaler, .CrownCounsel, for the defendant appellant.
H. V. Perera, K.C., with J. R. V. Ferdinands and E. LaBrooy,- for theplaintiff respondent.
Cur. adv. vxdt.
November 29, 1951. Gbatiabn J.—
This is an appeal by the Crown under Section 43 of the Estate DutyOrdinance against an order made by the learned District Judge of Colomboin favour of the respondent who is the executor of the last will andtestament of the late Mr. O. P. Mount.
The deceased was at the date of his death, which occurred on 29thMarch, 1944, a Solicitor and Proctor of this Court carrying on businessin partnership with two other professional gentlemen in terms of a Deedof Partnership A 2 dated 10th May, 1937.
10J. N. B. 89182 (10/67)
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GBATIAEN J.—The Attorney-General v. Hale
Clause 2 provided that the profits and losses of the business should bedivided between the parties in certain agreed proportions, and that the{goodwill, capital and assets of the partnership should belong to themTin the same proportions. Each partner was to devote his whole timeand attention to the partnership business and was precluded fromengaging in any other, business or holding any office, appointment ordirectorate without the consent of the other partners- The other clausesin the Deed A 2 which are relevant to the present appeal are as follows: —
4. No partner shall sell give mortgage or otherwise dispose of orcharge his share of the partnership or any part thereof without theprevious written consent of the other partners.
“ 8. The death of a partner shall not determine the partnershipbetween the other partners.
“11. In case of the death or retirement of any partner during thecontinuance of the partnership the share of such deceased or retiringpartner in the Reserve Fund and in the capital assets and goodwill ofthe partnership and in the office furniture books aud papers shallaccrue to and be purchased by the surviving or continuing partnersor partner in the proportions in which they are entitled to the netprofits of the business.
“ 13. For the purposes of this deed the value of the goodwill of thepartnership business shall be taken to be a sum equal to two yearspurchase of the average net profits of the business for the three yearsending with the previous thirtieth day of September as appearing inthe annual accounts for those three years.
“ 15. None of the said partners shall (except on the ground of ill-health) be entitled to retire from the business without giving to thecontinuing partners twelve months previous notice in writing of hisintention so to retire ”.
The partnership had not been dissolved by mutual consent duringMr. Mount’s lifetime nor had any partner exercised his right of retire-ment under clause 15. On his death, therefore, clause 11 came intooperation and his interest in the entire assets of the partnership business■consisting of the Reserve Fund, capital, assets and goodwill “ accruedto ” his surviving partners. The consideration for these assets wasduly paid into his estate in accordance with the basis of computationprovided by A 2. The value of the deceased’s share in the goodwill wasfor this purpose computed at Rs. 63,230.53 in terms of clause 13.
The respondent, as the executor of Mr. Mount’s estate, in due coursesubmitted to the Commissioner of Estate Duty a declaration of thedeceased’s property wherein the value of the Ceylon estate was declaredat a total figure which included the entire sum payable and in fact paidby the surviving partners for his interest in the partnership (includinggoodwill). The Assessor, however, served on the respondent a noticeof assessment dated 11th June, 1947, valuing the Ceylon estate at a con-siderably higher figure. In particular, he assessed the deceased’s interestin the goodwill at Rs. 130,000. The basis of this computation has notbeen disclosed, but it in fact represents a figure slightly exceeeding four
QBATIAEN J.—The Attorney-General e. Hale
291
years’ purchase of the deceased’s average share of the net profits in the*business—whereas the sum actually payable under clause 13 as con-sideration for this asset by the surviving partners to whom it had accruedon Mr. Mount’s death was calculated with reference to only two years”purchase of the average net profits earned during the preceding threeyears. The respondent appealed from this assessment to the Com-missioner of Estate Duty, who (as far as the present dispute is concerned)reduced the “ value ” of the deceased’s interest in the goodwill toRs. 92,647—which was approximately the deceased’s proportionateinterest in three years purchase of the net profits. We are not required,for the purposes of this appeal, to decide the vexed question as to howthe market value of the goodwill in a solicitor’s business should be assessed.
The respondent appealed to the District Court of Colombo against theCommissioner’s assessment, and the .appeal proceeded, in terms ofSection 40 of the Ordinance, as an action between the respondent and theCrown. By his judgment dated 22nd March, 1950, the learned Judgeupheld the respondent’s contention that no sum in excess of the sum ofRs. 63,230.53 (computed as provided by clause 13) attracted duty underthe Ordinance in respect of the deceased’s interest in the goodwill whichhad passed on his death to the surviving partners. The present appealis from this decision. The amount of duty involved in the disputeis only Its. 1,765, but Mr. Weerasooriya informed us in the course of theargument that the revenue authorities were more particularly con-cerned to obtain an authoritative ruling as to the correct interpretationof Section 10 of the Estate Duty Ordinance.
Such provisions of the Ordinance as are relevant to the decision of thiscase have been taken over from the Finance Act, 1894, of England.Sections 10 (1) and 10 (2) of the Ordinance, for instance, correspondprecisely to Sections 3 (1) and 3 (2) of the Act.
The Ordinance provided that estate duty shall, subject to certainexceptions, be levied at prescribed rates upon the value of a deceasedperson’s property which “ passes ” or is “ deemed to pass ” On hisdeath.
Sections 6 (a) and 6 (fa)—which correspond to Sections 2 (1) (a) and2 (1) (fa) of the English Act—provide as follows: —
“ 6. Property passing on the death of the deceased shall be deemedto include the property following, that is to say: —
(a) Property of which the deceased was at the time of his deathcompetent to dispose ;
(fa) Property in which the deceased or any other person had aninterest ceasing on the death of the deceased to the extent towhich a benefit accrues Ur arises by the cesser of such interest;
. ” (The remaining part of the sub-section is notmaterial in the present context.)
An exception to Section 6 (fa) is provided by Section 10, the relevantparts of which declare as follows : —
‘ ‘ 10.(1) Estate duty shall not be payable in respect of property •
passing on the death of the deceased by reason only of a bona fide
tJ93G-BATIAEN J.—The Attorney-General ©. //ole
purchase from the person under whose disposition the property passes,where such purchase was made …. for full con-sideration in money or money's worth paid to the vendor ….for his own use or benefit ….
Where any such purchase • was made …. for partialconsideration in money or money's worth paid .to .the vendor ….for his own use or benefit …. the value of the considerationshall be allowed as a deduction from the value of the property for thepurpose of estate duty ”. .
Section 20 (1) provides that as a general rule the value of any propertyliable to duty shall be estimated at its market value, and, with referenceto cases falling under Section 6 (6) which are not wholly or partiallyexempted by the operation of Section 10, it is provided by Section 21that: —
“21. The value of the benefit accruing or arising from the ceasecof an interest ceasing on the death of the deceased shall—
if the interest extended to the whole income of the property,
be the value of that property ; and
if the interest extended to less than the whole income of the
property, be such proportion of the value of the property ascorresponds to the proportion of the income which passes onthe cesser of the interest.”
The liability to pay estate duty on property caught up by Section 6 (a)—that is, property “ of which the deceased was competent to dispose athis death —falls on the executor of the deceased’s estate (Section 24).On the other hand, it is important to note tha.t in cases covered bySection 6 (b), but not exempted or partially exempted by Section 10, theliability falls, to the extent provided by Section 25, on the person towhom the deceased’s interests have passed.
So much for the general scheme of the Ordinance. I now proceedto consider the purpose of the Legislature in exempting from the operationof Section 6 (b) cases where the deceased's property has passed on hisdeath to someone else by virtue of a transaction of the kind described bySection 10. It is important to appreciate the financial implicationswhich, but for Section 10, would otherwise result from a given hypotheticalsituation: —
"A. sells a valuable estate to B. for a consideration of Rs. 100,000which represents its full market value; the conditions specified in theconveyance provide that the sale shall become operative so as topass title to B only upon A’s death. A dies within a few days of thecompletion of the transaction, and the consideration is still lying to thecredit of A’s account in his Bank.”
In such a case, but for the protection afforded by Section 10,the executor would be liable under Section 24 to pay estate duty on thebasis that the sum of Rs. 100,000 lying to A’s credit at the Bank was“ property of which the deceased waS at the time competent to dispose ”within the meaning of Section 6 (a); and the purchaser would, at the
GRATTAEN J.—The Attorney-General t>. Hale293
same time, also be under an obligation under Section 25 to pay dutyon Rs. 100.000 representing the value (computed as provided by Section21) of the beneficial interest which had passed to him on A’s deathwithin the meaning of Section 6 (6).
Such a consequence would no doubt have been very agreeable to theminds of enthusiastic tax collectors, but it is precisely the result whichthe Legislature, by enacting Section 10 of the Ordinance, was anxiousto prevent. The aim Of this Section, as Lord Atkinson said with■ referenceto the corresponding Section of the English Act, is, while discountenancingany attempted evasion of estate duty by resorting to fictitious sales,“ to prevent the tax being in effect levied twice on the same propertyAttorney-General v. Duke of Richmond and Gordon1.“ It would be un-
just ”, he pointed out, " to tax first the property alienated and secondly themoney paid for it The same idea has been emphasised with charac-teristic clarity by Jessel, M.R., in Fryer v. Morland 3 when he said, withreference to the earlier Succession Duty Act, 1853, *' I approach this Actwith the impression that it is not intended to be a tax on alienation ”. Theintention of the Act, he said, was “ to giant duties on succession toproperty by persons succeeding to gratuitous estates. The man is topay the duty who gets something on the death of the prior owner eitherby way of settlement or gift or descent. It is opposed to that notion toimagine that a purchaser for value is to pay the duty besides. Hehad already bought the property, and he gets nothing more by the fallingin of the life. On the falling in of the life, the property comes into hispossession. It is bought and paid for, probably, according to the termsof its full value ”.
These general observations in Fryer v. Morland with reference to theprovisions of the Succession Duty Act, 1853, have been adopted by the__English Courts as having equal application to the scope of Section 3 of theFinance Act, 1894, On the same analogy, I would say that Section 10of the Estate Duty Ordinance is intended to grant immunity from dutyto a person “ who has bought something and paid for it at a price—aconsideration in money or money’s worth, but who is not to get the benefitof his purchase, until the death of his vendor ”. Attorney-General v.Dobree 3.
It is now convenient to examine the language of Section 10 in orderto determine whether it catches up the particular transaction to whichthe present appeal relates.
Admittedly the deceased’s interest in the partnership assets (includinggoodwill) was an interest in " property passing on his death ” to hissurviving partners within the meaning of Section 0 (6) of the Ordinance.Complete exemption from estate duty in respect of the properly canonly be claimed under Section TO (1) on proof of the following facts: —
that the property passed on death by reason only of a bona fide■purchase from the deceased;
11909) A. O. 466.
(1876) L. R. 3 Oh. D 675 (= 4.5 L. J. Ch. 817).
(1900) 1 Q. B. 442.
294
GRATIAEN J.—The Attorney-General v. Bale
that there was full consideration for the purchase in money or
money’8 worth; and
that such consideration was paid to the vendor (i.e., to the deceased)
for his “ own use or benefit ” within the meaning of the
Section.
If (a) and (c) be established, but only partial consideration is found tohave been paid, complete exemption from duty is not permissible, buta proportionate reduction of duty is sanctioned by Section 10 (2).
In the present case the Crown does not and cannot deny that, in termsof clause 11 of the deed of partnership A 2, the “ property ” passed tothe surviving partners by reason of “ a bona fide business or commercialtransaction between the parties founded on each side upon business orcommercial considerations only ”—per Lord Shand in Brown v. Attorney -General l. No “ donative element ” or “ act of bounty ” on the part ofthe deceased induced the deceased to dispose of his interest in the partner-ship business upon his death. On the contrary, in so far as the elementof “ commerce ” can appropriately be imputed to dealings betweenmembers of an honourable profession, it is very clear that all threesolicitors had undertaken to work with one another in partnership totheir mutual financial advantage. The engagement was “ a businessdeal ” from beginning to end. It was impossible to predict with certaintywhich partner would predecease the others, and the object of clause 11was to secure that the goodwill and other fruits of their association shouldnot be lost to the business but should be available to the survivors onpayment of a sum which would represent, in their honest opinion, a fairvalue of the interest of the first-dying (whoever he might be). The mutua-lity of the covenant was indeed the best evidence of the good faith of allconcerned.
The Crown rightly concedes that the sum of Rs. 63,230.53 paid in respectof the share in the goodwill represented “ full consideration in money ormoney’s worth ” within the meaning of Section 10. As Rowlatt J.points out in re Bateman a, “ the term means that the money paid orthe money’s worth paid is the full, fair price and that nothing is left eitherfor gift or for natural love or affection ” or for any other benevolent considera-tion. When it is the full and fair value of the thing as between buyerand seller, then it is full consideration in money or money’s worth ”. Theobservations of Hamilton J. (later Lord Sumner) in Attorney-General v.Boden * are equally pertinent in this context. “ Full consideration ”need not precisely correspond to what is later discovered to be the“ market value ” at the point of time when the property actually passedto the “ purchaser For the purpose of measuring whether full con-sideration was paid or not, “ one must look at the state of affairs at thetime of the contract and not at the issue of the matter. The mutualpromises and not their result or realisation forjn the subject-matter of theinquiry See also Attorney-General v. Kitchin *.
1 (1898) 79 L. T. 672.• (1926) 2KB 429.
(1912) 1 K.B 539.(1941) 2 A. E. B. 735.
GRATIAEN J.—The Attorney-General o. Hale
296
So much has been conceded by the Crown. It was neverthelesscontended by Mr. Weerasooriya that the benefit of Section 10 is notavailable in this case on the grounds that: —
(а)the consideration was not in fact paid to the deceased himself “ for
his own use and benefit " within the meaning of Section 10 ;
(б)the admittedly bona fide “ transaction ” whereby the .property
passed on death to the surviving partners did not constitutein law a “ purchase ” from the deceased within the meaningof Section 10.
I shall deal with each of these submissions in the order in which I haveset them out. It is appropriate, however, to make some preliminaryobservations of a general kind. Lord Justice Scrutton has pointed outthat Section 8 of the English Finance Act, 1894, which corresponds toSection 10 of the Ceylon Ordinance, " is intentionally wide and un-technical, so that the real substance of each transaction is to be lookedat rather than the precise legal terms in which it is contained ”. Attomey-General v. Earl of Sandwich l. The language of Section 10 must thereforebe construed with due regard to the object which the Legislature enactingit had in mind—namely, the avoidance of ‘‘a tax on alienation forvaluable consideration ” in a statute intended to impose duty inrespect of property over which the deceased had retained full dis-posing power at the time of his death and which had gratuitouslypassed to some other person upon that event.
If the matter be looked at in this way, it seems to me that Section 10can, without doing any violence to its language, receive a perfectlylegitimate construct’"" which is consistent with the object of theLegislature. The Section is specially designed to prevent the levyingof a double duty first from the bona fide purchaser on the market valueof the property which has accrued to him and secondly from the executoron the full consideration which may be—or which, as happened in thiscase, is in fact—available in its entirety to attract duty under Section 6 (a).The submissions made on behalf of the Crown cannot be acceptedunless there exists some canon of interpretation which compels us to givesome of the words in Section 10 a meaning so very technical as to defeatentirely the object of the Ordinance. In truth, however, the function of aCourt which is called upon to interpret a statute which has not, perhaps,been drafted with “ divine precision and perfect clarity ” is entirelydifferent. The Court must in such cases “ supplement the written word soas to give ‘ force and life ’ to it …. A Judge must not alter thematerial of which (the Act) is woven but he must and should iron outthe creases —per Denning L.J. in Seaford Court Estates, Ltd. v. Asher a.
It is no doubt correct, in a certain sense, to say that the purchase pricewas not actually “ paid ” in specie to the deceased in his lifetime; on thecontrary, payment was made into his estate by virtue of a binding contractwhich the deceased had entered into with his partners. The Crownadmits that the form and manner of this payment was such as effectivelyand automatically to attract liability to duty because the money, evenbefore it was actually received, was “ property of which the deceased wasat the time of his death competent to dispose ” within the meaning of Section* (1922) 2 K. B. 500 O. A.* (1949) 2 K. B. 4S1 at p. 49i.
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GRAT1AEN J.—The Attorney-General v. Hale
6 (a). The deceased was clearly entitled to, and I have no doubt that hedid in faet, dispose by will of the sum which would be paid into his estateby his surviving partners in the event of his dying before they did.Similarly, it was open to him to assign during his lifetime the right toreceive this money in due course. The correct meaning of the words“ paid to the vendor …. for his own use and benefit ” in Section10 -has been given by !Lord Macnaghten in Attorney-General : v. Dukeof Richmond and Gordon *. They are applicable to any transactionwhere “ the vendor’s purpose is to make himself master of a surk of moneyover which he and he alone has power of disposition The considerationmust be “ received ” by him in the sense that, upon its realisation,the money is, in the words of Lord Atkinson, “ his own, to be disposed byhim in any way he pleases, free from the control or interference of othersThe same idea is implicit in the decision of Hamilton J. in Boden’s case. Ihold that in the present case the consideration was “ paid ” to the deceased“ for his use and own benefit ” just as effectively as if it had been receivedby him personally before he died. Indeed, from the point of view of therevenue authorities, the additional advantage accruing from the formof " payment " provided by the deed of partnership A 2 is that it ensuresthat the money will be available to attract duty under Section 6 (a).
I now pass on to consider the final submission on behalf of the Crown,namely, that the present transaction did not constitute a “ purchase ”in the strict sense of the term. Here again Mr. Weerasooriya franklyconcedes that if this view be correct, Boden’s case was wrongly decidedand has been erroneously followed with unqualified approval by theCourts in England ever since the date of its pronouncement—vide forinstance the Duke of Sandwich’s case which was argued before the Courtof Appeal. Having given my best consideration to the argumentsaddressed to us, I am quite unable to subscribe -to an indictment whichimplies that the very distinguished lawyer, Sir John Simon, whorepresented the Crown in 'Boden’s case, was so remiss as to makeill-founded concessions to the detriment of his case.
Mr. Weerasooriya's argument is that there can be no “ purchase ”in law unless, at the time of the contract, the vendor divests himselfunconditionally and irrevocably of his title (except somewhat illogicallyperhaps, his life interest) in the property. On this hypothesis he pointsout that in the present case the deceased continued to be the absoluteowner of his interest in the partnership business until he died, and thatno title of any kind “ accrued to ” the surviving partners until that eventoccurred; the partnership could have been dissolved by mutual consent;the deceased could also have exercised, if he so wished, his right ofretirement under clause 15 in which event his interests would have beenpurchased by the others before he died. All these circumstances, hesubmits, are obnoxious to the ** true conception ” of a binding contractof purchase and sale.
It would have sufficed, I think, to reject this argument by pointingout that it manifests a spirit of undue subservience to the assumedtechnical meaning of a single word appearing in a statute which hadadvisedly been drafted in “ wide and untechnical ” language. But in 1
1 (1909) A. O. 466.
297
– GRATIA-EN J.—The Attorney-General v. Hale
truth the law of this country does not betray such a narrow con-ception of a legal contract of sale. The Roman-Dutch Law juristsrecognise the validity of such contracts which are entered into subjectto what are described as “ suspensive conditions “ When the condi-tion is fulfilled, the rights and duties of the parties are determined asfrom the date of the agreement and not as from the date of the fulfilmentof the condition—Wessells on Contract, Volume 1, page 452, para
1352. Wessells also pointed out (Volume 2, paragraph 4909) that althoughthe sale is not complete (perfecta venditio) until the condition is fulfilled,there still exists “ a legal relationship between the parties, for the onecannot withdraw from the conditional sale without the consent of theother, and the legal representative of each party can enforce the salewhen the condition is fulfilledUpon that event, “ the sale operates
retrospectively ”.
A Divisional Bench of this Court has decided that a sale by anticipationof even a contingent interest in land is not obnoxious to the Roman-DutchLaw, so that the instrument of sale operates automatically to vest thatinterest in the purchaser if and when it has been acquired by the vendor.Siriaoma v. Samelis Appuhamy *. A conditional sale by anticipationof an interest which is already vested in the vendor presents far lessdifficulty. It is therefore notpermissible toregardthe operationof
Section 10 as restricted only to transactions which were perfectaevenditiones from their very inception.
In Boden’s case, where, in comparable circumstances, a deceasedpartner's interests had been acquired by the survivors in terms of a deedof partnership not dissimilar from A 2 (apart from a single complicationwhich does not arise here) the Crown conceded that there had been a" purchase ”, to take effect uponthe deceased’s death, ofhis interest inthe
tangible assets. There too thetitle remainedin eachpartner untilhe
died, and the consideration was “ pafd ” only to the deceased’s estatebut nevertheless for his “ own use and benefit ” within the meaning ofthe Section. All the arguments which havenow been submittedto
us would have equally applied in that case. The only point of contro-versy in Boden’s case was as to whether the deceased’s interests in thegoodwill of the business had also been “ purchased ” by “ payment ”of consideration in “ money’s worth ” in the form of services, to be rendered.Hamilton J. held that no distinction could, for reasons which need nothere be closely examined, be drawn between the “ purchase ” of the■** goodwill " on. the one hand and of the tangible assets on the other.
After the argument was concluded before us, I was able to trace thejudgment of Lawrence J. in Attorney-General v. Ralli 3 referred to atpage 113 of Hanson on Death Duties (9th edition). That case dealt witha deed of partnership in a business whose activities necessitated the keep-ing of substantial reserves. The agreement provided that, on thedeath or retirement of any partner, his interest in the reserve fund shouldpass to the other partners without payment. Lawrence J. held that,on the diath of the partner Ralli, exemption from estate duty in respectof his interest in the fund which passed to the survivors was granted bySection 3 of the Finance Act, 1894.“ The transaction ”, he said, “ was
an ordinary commercial arrangement entered into between the three» (I960) SI N. L. B. 337.• (1936) IS A. T. C. 523.
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GKATIABN J.—The Attorney■ General v. Hale
partners for valuable consideration. It had none of the elements of a gift.All three partners were treated equally …. The consideration mov-ing from one partner to the others was the undertaking of each' partneron those terms, one of which was that his interest in the reservesshould pass to his partners if he retired or died ”. He accordingly con-cluded, following Boden’a case, that the transaction would not attractduty because the property passed “ by reason only of a bona fide purchasefrom the person under whose disposition the property passed, and fullconsideration in money or money’s worth was given for it ”. A fortiori,Section 10 of our Ordinance applies to the present case because, inaddition to the “ consideration ” given in the form of the reciprocalundertakings which affected each partner’s share, the deed A 2 alsoprovided for a payment of money proportionate to what all the partners•regarded as a fair pre-estimate of the value of the goodwill and otherassets of the business.
The judgments to which I have referred all proceed upon the basisthat the word “ purchase ” in the present context is a non-technical termemployed in contradistinction to a gratuitous disposition.
It is idle to suggest that the decision of this Court in the Commissioner ofStamps v. Logan 1 does not assume that Boden’s case was correctly decided.Dalton A.C.J. distinguished the case which he was considering becausethe goodwill of the partner Henderson had passed upon his death to thesurviving partner Hanscomb for servibes rendered in the past whichcould not therefore be regarded as “ consideration ” within the meaningeither of Section 3 of the English Act of of- Section 10 of the local Ordi-nance. Dalton A.C.J. did not purport to construe the ratio decidendi inBoden's case in a manner inconsistent with the interpretation which isgenerally placed upon it. Indeed, Logan’s case came up for adjudicationwhen Ceylon was still a Crown Colony, so that the interpretationplaced" on Section 3 of the English Finance Act by the Superior Courts ofEngland were at that time regarded as binding on the Ceylon Judges—Nadarajah Chettiar v. Tennekoon 3. I have already pointed out thatthe English Court of Appeal has consistently accepted the judgment ofHamilton J. as a correct decision.
For the reasons which I have given, I would hold that the interest of thedeceased O. P. Mount “ in the Reserve Fund and in the capital, assetsand goodwill ” of the partnership business passed to his survivingpartners by reason only of a bona fide purchase for full consideration inmoney or money’s worth which was paid to the vendor for his own benefit.Estate duty on the market value of the deceased’s interest in the goodwilland other partnership assets was therefore exempted under Section 10 ofthe Ordinance. On the other hand, this money, or at least the right toreceive it, was property of which he was at the time of his death competentto dispose. Only the total sum paid, into the deceased’s estate as fullconsideration for his share of the partnership assets (including his interestin that part which constituted goodwill) was for that reason liable to dutyunder Section 6 (a). The judgment of the learned District Judge mustin my opinion be affirmed, and the appeal dismissed with costs.
Swan J.— I agree.
Appeal dismissed.
• (1950) 51 N. Ii. R 491 S <7.
> (1933) 35 N. L. R. 393.