Commissioner for Inland Revenue v Estate Crewe and Another

• Jurisdiction: South Africa
• Judge: Watermeyer CJ, Tindall JA, Centlivres JA, Feetham JA and Fischer AJA
• Judgment Date: 30 September 1943
• Court: Appellate Division

Commissioner for Inland Revenue Appellant v Estate Crewe and Another Respondents
1943 AD 656

1943 AD p656

Citation	1943 AD 656
Court	Appellate Division
Judge	Watermeyer CJ, Tindall JA, Centlivres JA, Feetham JA and Fischer AJA
Heard	March 11, 1943; March 12, 1943; July 21, 1943; July 22, 1943
Judgment	September 30, 1943

Flynote : Sleutelwoorde

Revenue — Death duties — Estate duty — "Property of that person which passes on his death" — Meaning of — Succession duty — When succession accrues — Right must be vested and not merely contingent — Passing "on the death" — Covers passing subsequent to but in consequence of death — Succession to property not previously owned by predecessor — Settlements under Trust Deed — Gifts of income and capital payable only on donor's death — Liability for succession duty — Bequest to trustees under will with power to distribute income among persons selected — No succession accrues to trustees — Trust Deed — Nature of — Whether revocable prior to acceptance — Contract for benefit of third party — Act 29 of 1922, sections 3 and, 10.

Headnote : Kopnota

For the purpose of the Estate Duty sections in Act 29 of 1922, the expression " property of that person which passes on his death " means all proprietary rights of the deceased which continue in existence after his death and constitute assets in his estate.

For the purpose of succession duty under the Act a disposition to a beneficiary of a contingent interest is regarded as property the whole of which passes if and when the contingent interest ripens into a vested interest and not otherwise.

In cases falling under section 10 (a) of the Act, even if vesting in the beneficiary does not take place until some date subsequent to the death of the predecessor, a succession may nevertheless accrue, for the words referring to a passing " on the death of such predecessor " do not mean " at the moment of death " but " after and as a consequence of the death of such predecessor.

A succession may accrue notwithstanding the fact that the property acquired by the successor was not owned before such acquisition by the predecessor.

In 1930 under a registered Trust Deed a donor settled upon trustees certain shares, directed an accumulation of income until his death and that upon his death the accumulated income should be applied to meet payment of death duties payable on such portion of the donor's estate as might be bequeathed to his son; that an annuity of £1,000 per annum should be paid to his widow; that the balance of income should be paid to his son; that upon the death of his widow the whole of such income should be paid to his son; that upon the death of his son with issue the capital should devolve on such issue and that upon the death of the son without issue the capital should be held by the Trustees to make grants out of the income to such

1943 AD p657

public institutions and other objects within certain named districts as they considered deserving of assistance. It was not proved that the beneficiaries under the Deed had accepted the benefits conferred upon them. Under his will the deceased directed that the residue of his estate in the event of his son dying without issue should be formed into a permanent Trust Fund, the Trustees of such fund to utilise the income for the same objects as were stated in the above Trust Deed. The donor died in 1936. In March, 1937, his son died without issue and in April, 1937, his wife died. Certain questions as to estate duty and succession duty under Act 29 of 1922 having been raised by means of a special case.

Held, that the capitalised value of the annuity of £1,000 was not property which passed on the donor's death in terms of section 3 (1) (a) of the Act nor was it property deemed to be property passing in terms of section 3 (3) of the Act.

Held, further, that a contention that the whole of the shares transferred to the trustees was property ever which the donor-retained the control, order and disposition for his own benefit, inasmuch as there had been no acceptance by the beneficiaries under the Trust Deed and the Deed was therefore revocable, and that consequently the shares were property deemed - to be property passing on his death not having been raised as a contention in the special case nor considered by the trial Court could not be considered on appeal.

Held, further, that the right which the donor's son acquired against the Trustees to claim that they should pay his death duties out of the accumulated income of the Trust Fund, did not vest in him until the death of the donor inasmuch as, even if it were assumed that the son had accepted the benefit conferred upon him, his rights were contingent upon his becoming entitled on the donor's death to some bequest upon which death duties would be payable, and that consequently a succession accrued. to him upon which succession duty was payable.

Held, further, that inasmuch as the right to income conferred upon the donor's son was contingent partly upon the son surviving the donor's widow, partly upon there being an income of more than £1,000 per annum and wholly upon the son surviving the donor, no vesting took place until the death of the donor and that consequently a succession accrued to the donor's son upon which succession duty was payable.

Held, further, that no succession accrued to the Trustees under the will in respect of the residue of the donor's estate nor to the Trustees under the Trust Dead in respect of the Trust Funds.

The legal effect of a Deed of Trust whereby property is transferred by a donor to Trustees for the benefit of third parties; the nature of the rights of such third parties and as to whether such a Deed is revocable prior to acceptance by the beneficiaries discussed.

The cases of du Toit v Commissioner for Inland Revenue (1931 AD 28), Estate Reynolds v Commissioner for Inland Revenue (1937 AD 68), not followed; Mutual Life Assurance Society v Hotz (1911 AD 556); Ex parte Balsillie (1928 CPD 218), discussed; Bloemfontein Town Council v Richter (1938 AD 195); Collett v Priest (1931 AD 297), applied.

The decision of the Cape Provincial Division in Estate Crewe v Commissioner for Inland Revenue in part confirmed and in part reversed.

1943 AD p658

Case Information

Appeal from a decision of the Cape Provincial Division' (DAVIS, J., and DE BEER, J.).

The facts appear from the judgment of WATERMEYER, C.J.

W de Villiers, K.C. (with him L. de V. van Winsen), for the appellant: The beneficiary, Lady Crewe, had no rights in respect of the capitalised value of the annuity before deceased's death, (a) because the trust deed was a fideicommissum a debitore relictum which is indistinguishable from a donatio mortis causa. See de Wet's Thesis (pp. 5, 7); Hunter on Roman Law (p. 320); Dig. 24.1.9.2; Dig., 24.1.11; Dig., 39.6.43; Dig., 24.1.11, 9, 11; Voet (24.1.10; 39.6.4, 10); Modderman's Handboek voor het Romeinse Reg. (vol. 3, sec. 240, p. 344); cf. Estate Phillips v C.I.R. (1942 AD 35); Novel, 162; (b) because, on a true construction of the trust deed, the payment to her of the money after deceased's death was on a mandate from her husband and he accordingly remained the owner of the money until his death; or (e) because, if there was a voidable donation by the deceased to Lady Crewe, he remained the owner.

The trust deed constitutes a mandate to the trustees as deceased's agent and their acts were for all practical purposes his acts. See Estate Reynolds and Others v C.I.R. (1937 AD 57 at pp. 65, 66); Registrar of Deeds v Banham and Others (1922 AD 361 at pp. 371-2).

The mandate, being a mandate to make a gift, is revocable.

Assuming that the trust deed was a voidable contract, the deceased retained the ownership. See Huber (vol. 1, p. 474 of Gane's trans.); Voet (24.1.3); Sande on Restraints (1.2.2); van der Byl's Assignees v van der Byl and Others. (5 S.C. 170); van Niekerk's Trustee v van Niekerk (17 S.C. 470 at p. 474); Estate Reynolds v C.I.R. (supra) is distinguishable.

After deceased's death Lady Crewe was vested with the ownership in the capitalised value of the annuity. See Adamson and Another v Attorney-General (1933, A.C. 257 at p. 271).

Even if there was delivery to Lady Crewe at the time of the deed, the property changed hands in the sense contemplated by the Act on the deceased's death and therefore attracts duty. " Passing " should not be given a technical meaning. See Saltourn v Advocate-General (3 L.T. 40); Attorney-General v Middleton (27 L.J. Ex 229 & 21 E. & E. Digest cases, pp. 83 & 86); Union Government v de Kock N.O. (1918 AD at pp. 32, 33,

1943 AD p659

40, 41); C.I.R. v Estate Whiteaway (1933 T.P.D. 486); In re Earl Cowley's Estate (1898, 1 Q.B. 355); Nevill v Inland Commissioner (40 T.L.R. 341); Hanson on Death Duties (8th ed., p. 66); Attorney-General v Milne and Another (1914,. A.C. 765 at p. 776).

As the beneficiaries had no rights of which they could dispose till after the death of the deceased, the present case is distinguishable from Estate Reynolds and Others v C.I.R. (supra).

Alternatively, if the bare dominium passed to the trustees, the beneficial ownership remained in the deceased till his death.

Alternatively, if the beneficial ownership passed from the deceased on the signing of the trust deed, it did not vest in the beneficiaries fill his death.

Alternatively, Estate Reynolds and Others v C.I.R. (supra) was wrongly decided because the finding at page 66 that the deceased was the real payer of the premiums is irreconcilable with the finding at page 68 that the bare dominium in the money used for paying the premiums vested in the trustees and the beneficial ownership in the beneficiaries.

Hence the difference between what the beneficiaries had before and after deceased's death was a right to property which must be taken to have passed on the deceased's death.

For the...