COURT OF APPEAL

Dominion, Volume 9, Issue 2812, 1 July 1916, Page 14

COURT OF APPEAL

LEGACY DUTY CASE LARGE AMOUNT'INVOLVED. The Court,of Appeal sat jesterday morning to hear argument in tiie case on appeal between the 'Comniissionen of Stamps (appellant) and M'cssrs. Alex. Milne Begg and, Charles Begg, of the company of A. C. Begg and Co., ltd., of Dunedin and -Wellington, executors of Mrs. Jessie Begg, widow, deceased. The presiding Judges were: Sir llobort Stout (Chief Justice), alid Justices Ed.wards, Denniston, and Stringer. Mr. .T. W. Salmond, K.C., f-i-licitor-General, with him Mr. V. R, Meredith, appeared for the Commissioner of Stamps, and Sir John Findlay, K.C., rith him Mr. D. R. Hoggard for the respondent. Tho Solicitor-General briefly narrated the .facts of the case, which were not disputed by the other side. The late Mrs. Begg died in January,. 1914. Thc. miondents were her sons and executors. Presumably sho left something, over itSOto. 6n which estate duty had been paid, amounting to lis. 9d., which.lvnd to b«' deducted from the amount claimed by' the Commissioner of Stamps, namely, JEBBlllss. 5d., and interest at 5 per cent., duty on an estate of 13s. 10d., which it is computed by the Department was the value of tho shares held l.y tho deceased in A. C. Begg-and r 'o., Ltd., at the time of her death. The question was: Did the u'ft and division of her interest in A. C. Begg and Co.,' T;td., to her children and grandchild in 1908 render that, interest immune from duty under the Death Duties Act, 1909? The Solicitor-General proceeded to show that the original company went iato voluntary, liquidation, and that a new company was-formed under the same lirmc. Mrs". Begg was-the liquidator of the aid compariv. and sold her interest for 70,000 fully paid-up £1 shares in the.new enmnan'y, in which she stipulated lo be an irremovable director for life. She, however; gave, away the whole of her shares in tlie company, and an arrangenvjnt was entered into whereby she was n'lowed ■ nn annuity from the business of .£"500.' Of this money she never drew one penny, although it was credited to her in tho company's boolt's with interest thereon, together with interest on all at 5 per cent., "P to the date of l.er death. Mr. Justice Chapman .had held that Mrs. Begg designed -to make a voluntary gift, but the Solicitor-General contended that the final allotment of the shares held by Mrs. Begg as liquidator was made alter the members of the family had passed the annuity, resolution. Mr. Justice Chapman had given judgment for Ihe respondents in the court below, hence the appeal. 111 his argument, the Solicitor-Gejicral cited the case of the late Mr. Fiddiford. and also Macfarlane's case, and said if a man gave away any property in his lifo time, which was accompanied by a contract for the benefit of himself, that property was dutiable. If it were not so, 110 death duties would be payable at all. Now, in'l9oß Mrs.'Begg was a wealthy woman. She was the largest shareholder in the original company, holding 2,'1.39G out of 31,655 shar« the balancc being

owned by her children and granddaughter. Mrs. Begg'e shares .were worth .£50,000 at that date, and she was "5 years of age. The difficulty was how to get out of the frying pan of death duties without falling into the firo of gift duty, and so her solicitor had an inspiration, and it would liavo been successful, observed Mr. Salmond, but for tho Death Duties. Act of 1909. • The scheme was devised for the purpose of evading gift duty.

The Chief Justice noted that Mrs. Begg had not touched the revenue or the property she had gifted away. Mi-. Justice Denniston - She lived quietly, and did not draw or spend any of the proceeds of the estate sho had voluntarily disposed of.

There was considerable discussion as to how. Mrs. Begg's account in the books of the company wa6 kept. The Solicitor-General's chief point was that he relied upon the granting of the annuity to bring the distributed shares into Mrs. .Begg's estate for the purpose of assessing duty under the Death Duties Act, 1909; aud he submitted that Mr. Justice Chapman's judgment was erroneous in point of fact and law. , Sir John Findlay reviewed the evidence at considerable length, and cited numbers of cases in support of his submissions. Mrs. Begg, lie held, did'not desire to retain, aiid had no motive in retaining,, .'aiiy'interest in the shares she was parting with. If she. had died before the Death Duties Act, 1909, the case would never have troubled the Court. There .was. no enforceable obligation on the part of, the children to pay the annuity they had aereed to pay. And the question was: Did the children or Mrs. Begg ever arrange that the annuity was an agreed , upon equivalent for a gift of tile shares?; There was no contract. If a mother having a negotiable instrument valued at iilO.OOp gave it to lier children, and they in turn gave lier a motor-car, could the gift of the motor-car he regarded as an agreed upon equivalent? If there was a contract it would be enforceable at. law, and Mrs. Begg having given the shares unconditionally, could not have enforced payment of the annuity in court. 1 Moreover, she. drew 1107 thing from the business, and, her annuity accumulated to her account. That was not her doing. There was 110 consideration for the annuity. The gilt of the shares may . have prompted it, but it was not'a consideration. Their Honours reserved their decision.