CT. OF APP.]

does not make the gift, if it be a gift, of this fund, a gift out of the personal or moveable estate or effects of the testator. In my opinion, it does not come under the third condition, either. It is not "out of any personal or moveable estate or effects which such person hath had or shall have had power to dispose of." I need not repeat what I said with regard to the meaning of the words " power to dispose of." I think " power to dispose of" in that section is the same power that is contemplated by the words "competent to dispose of" in the section of the Act of 1894 to which I have already referred. This power, if any power existed, is not such a power, in my opinion. That seems to be the view taken in the textbook Hanson on Death Duties, and I think it is a correct view.

It was argued by the Attorney-General that the testator had power to dispose of it because in this indirect way he could dispose of it. The learned Attorney-General said he could leave it to any individual he liked; and this was the way he got at it. He said when the death duties were paid it does not matter what the amount was, but, say, 1000l.-as a matter of fact it would be a great deal more-but take it at 1000l. when that 1000l. was paid then the testator, as a matter of fact, had an extra 1000l. that he could play with, and therefore he could leave that extra 1000l. to any individual he liked. That, said the Attorney-General, is disposing of the fund that was in the American settlement. In my opinion, it is doing nothing of the sort. The fund that is in the American settlement discharges some liabilities, and that discharge of the liabilities gives the testator an opportunity of making another gift which he had not got before; but that is not disposing by will of the fund that comes from the American settlement.

I think this appeal fails in every way, and that it should be dismissed with costs.

WARRINGTON, L.J.—I am of the same opinion. The Crown in this case claim estate duty and legacy duty on a fund settled by an American settlement executed by the testator of property wholly in America. The fund in question and the trusts of it are described in these terms in the American settlement: "The trustees shall, out of the capital, raise and pay "I am reading it shortly" to the executors or trustees of the English will of the grantor "—that is, of the deceased testator"the amounts of all sums which may be payable or may have been paid by the executors or trustees for any English death duties payable on or by reason of the death of the grantor upon or in respect of any property whatsoever and wheresoever and to whomsoever belonging, and directed by his English will or any codicil thereto to be paid by the executors or trustees of such will or for any interest or expenses." Now that is the fund in respect of which the Crown claim estate duty and legacy duty on the death of Lord Astor, the creator of that trust.

[CT. OF APP.

If

The Attorney-General in the first place relies upon sect. 1 of the Finance Act 1894, and he says that this fund, and, in fact, the whole of the funds settled by the American settlement, pass on the death of Lord Astor. I rather think they do, and I will assume that they do so pass for the purposes of this judgment. so, the fund now in question would of course be subject to estate duty in this country, because it passes on the death. But it is exempt from the estate duty by reason of sect. 2, sub-sect. 2, of the same Act, which provides that “ property passing on the death

of the deceased when situate out of the United Kingdom shall be included only if under the law in force before the passing of this Act legacy or succession duty is payable in respect thereof."

I will come back to that presently, but at present I wish to deal with both contentions put forward by the Attorney-General under the Finance Act 1894. The alternative contention under that Act was that if it did not become chargeable under sect. 1, then it became chargeable under sect. 2 (1) (a) as being “property of which the deceased was at the time of his death competent to dispose." But, in my opinion, the deceased was not at the time of his death competent to dispose of this property at all. It was disposed of absolutely by the settlement, and by the trusts of the settlement. It is quite true that when the trustees of the settlement are called upon to pay the money over, they have to ascertain whether the money is payable or has been paid by the executors, and also whether the testator has directed his executors to pay it. But that is only the condition attached to the payment of the money and the description of the money which the trustees have to pay. It does not confer upon the testator any power of disposition. At the most it is only a power to dispose in some particular way, though it is not even that, in my opinion; but if it were such a power as that it would still be not property of which the testator was competent to dispose within the meaning of the Finance Act 1894.

So far with regard to the Act of 1894. The question that remains to be determined is whether the property becomes chargeable under sect. 2, sub-sect. 2, notwithstanding that it is situate out of the United Kingdom by being by law in force before the passing of this Act property in respect of which legacy or succession duty would be payable. Now succession duty, of course, is out of the question; it is legacy duty if anything.

Well, now I turn to the only statutory provision which is relied upon as establishing that this fund is subject to legacy duty, or would have been but for the passing of the Act of 1894. That is the Revenue Act of 1845, s. 4, which defines what are to be treated as legacies within the meaning of the Legacy Duty Acts. I need not read the words again; they have been read by the Master of the Rolls, and many times in the course of the argument. But what I do say with regard to them is this. In the first place

this is not a gift by will. The provision under which this fund becomes applicable for the estate duties or death duties payable here is not any direction in the testator's will, but it is the trust contained in the American settlement. That, of course, is enough of itself to dispose of the case for the Crown. But even if that is wrong, the section goes on to include property "which by virtue of such will is or shall be payable or shall have effect or be satisfied out of the personal or moveable estate of the testator." But this fund is not part of the personal or moveable estate of the testator. It was not payable to the executors virtute officio. The testator had no interest in it in his lifetime, and it does not fulfil that condition.

Then the next condition which it has to fulfil is that it is to be payable "out of any personal or moveable estate or effects which such person hath had or shall have had power to dispose of." As I have already said, the testator in this case never had power to dispose of this particular fund. The disposition of this fund was effected by the settlement. Therefore this particular fund satisfies none of the conditions which would render it liable to legacy duty. Inasmuch as it was not at the date of the Act of 1894 by law then in force liable to legacy duty, it is not liable to estate duty.

In my opinion the decision of Sankey, J. was right, and the appeal ought to be dismissed.

ATKIN, L.J.-It was conceded before us in argument that the Crown had to show, first of all, that, under sect. 1 of the Finance Act 1894, the property in question passed on the death of the testator, and, secondly, that, under sect. 2, sub-sect. 2, this is a case where legacy duty is payable in respect thereof. I agree with the judgments which have just been delivered, but it appears to me that the short mode of disposing of this case is by saying that in respect to this property legacy duty is not payable in respect thereof.

66

In order to ascertain whether it is or is not, one has to turn to the Revenue Act of 1845, sect. 4 of which contains the present definition of "legacy." It is sufficient to read this much : Every gift by any will or testamentary instrument of any person which by virtue of any such will or testamentary instrument is or shall be payable," as stated by the Act. To my mind this sum of money which is in question in this case is not a gift by any will or testamentary instrument, but is a gift by reason of the American settlement, which is not a will or testamentary instrument.

Therefore I think the Crown do not come within sect. 2, sub-sect. 2, and, therefore, I think the decision of the learned judge is quite right. Appeal dismissed.

Solicitors: Solicitor of Inland Revenue ; Janson, Cobb, Pearson, and Co.

Thursday, Feb. 8

[CT. OF APP.

(Before Lord STERNDALE, M.R., WARRINGTON and YOUNGER, L.JJ.).

Re WELD. (a)

Lunacy — Practice — Percentage · · Clear annual income-Deductions-Legal expenses-Rules in Lunacy 1892, r. 126.

An application was made to the Master in Lunacy as to whether the legal expenses in connection with the general management of land in which the lunatic had a life interest should be deducted from the receipts of the accounts of the receiver in arriving at the amount upon which lunacy percentage provided for by rule 126 of the Rules in Lunacy 1892 ought to be paid. The master found that the items ought not to be deducted. From this decision the applicants appealed. Held, that, having regard (1) to the fact that many of the items were expenses which arose and had to be paid out of the income for life, because of his unfortunate condition, such as applications to the court, &c., and (2) to the fact that the dissection of the costs of general management which would be necessary for the purpose of ascertaining whether some deductions ought to be allowed, would, owing to the elaborate and complicated process which would be involved, probably throw upon the lunatic's estate considerably more expense than would be represented by the amount of deduction in the percentage which would result from it, there was no ground for interfering with the decision of the master, and that the appeal must be dismissed.

APPEAL from a decision of the Master in Lunacy.

The committees of a lunatic so found by inquisition appealed from the decision of the Master in Lunacy fixing the amount of the percentage to be paid on the passing of the committees' ninth account. The account showed gross receipts of 27,6791. 3s. 3d., and payments amounting to 25,000l. 7s 8d., there being a balance due from the receiver on the 31st March 1922 of approximately 26781. Various "legal expenses were incurred in connection with the Lulworth Castle Estate of which the lunatic was tenant for life; in connection with the reinstatement as agricultural land of other property which had been occupied during the war as a training camp; and in connection with certain arbitration proceedings relating to a claim for dilapidations against the lessee of Lulworth Castle under which the sum of 25261. 7s. 6d. was awarded to the lunatic. The committees and receiver appealed against the order of the master, refusing to allow the legal expenses to be deducted, but making a special allowance of the party and party costs with respect to the arbitration proceedings.

The application came before Younger, L.J. in chambers, and was adjourned by him into court in order that the Treasury Solicitor might have an opportunity of attending and arguing (a) Reported by J. L. DENISON, Esq., Barrister-at-Law.

66

the question, viz., the meaning of the words clear annual income" contained in rule 126 of the Rules in Lunacy 1892.

That rule is as follows: "There shall be paid a percentage at the rate of 4 per cent. per annum on the clear annual income amounting to 1007. and upwards, of every lunatic so found by inquisition, but so that no larger sum shall be payable in any case in any one year than 4001."

Stamp for the appellant.

Sir Douglas Hogg (A.-G) and Dighton Pollock for the Crown. The actual items allowed are set out in the Yearly Practice 1923, at p. 2400.

The following cases were referred to :

Re Alston, July 27th, 1917, unreported;
Bateman v. Faber, 83 L. T. Rep. 7;
Hamilton v. Bass, 1852, 12 C. B. 631 ;
Re Lothian (Marquis), Jan. 24th, 1923,
unreported.

Lord STERNDALE, M.R.-I do not see my way to grant the application, except so far as the Attorney-General has agreed to extend as a concession—I say nothing more than that -the concession that has already been made as to the costs of the arbitration in regard to Lulworth to the solicitor and client costs which are not at present included in it, and also to similar costs and expenses in respect of the matter with regard to Littlemore Camp, that is to say, the obtaining of the 1000l. from the War Office. I think it is perfectly obvious, and I do not think Mr. Stamp contends to the contrary, that the two large items of 6381. odd and 7697. odd, could not possibly be allowed as they stand. The whole bill of costs would have to be dissected. I think from what has been said that it is quite clear that a considerable proportion of the items contained in those large sums could not possibly be allowed as deductions from income, and a great many of them, I think, probably are incurred, not from the necessity of earning income, but from the unfortunate position of the tenant for life of these estates being a person of unsound mind. They are expenses that arose, and that have to be paid out of his income, because of that unfortunate condition; matters such as applications to the court, and so on. We are asked to lay down a principle. I find it impossible to lay down any principle which would be of any use to anybody. The principle suggested by Mr. Stamp which, on the face of it, has a good deal to recommend it, is one which would involve long, difficult, and expensive investigation of all the charges of the description which he mentioned in order to see under which category each particular item fell. I doubt very much whether, by the time that expense had been incurred, except in very exceptional cases, the lunatic's estate would be in any way benefited, and any rule which has been suggested to us, except that by the Attorney-General, which I may call a rule of thumb, would involve that prolonged and expensive investigation. I think there is a good deal of force

[CT. OF APP.

in the argument that the present rule which was made, using an expression that had been employed for a great many years, was made with knowledge, on the part of the maker of the rule, of the practice that had obtained with regard to it, that is to say, obtained with regard to the ascertainment of clear annual income. I cannot impute ignorance to the Lord Chancellor of all the affairs of the lunatics with whose affairs he is the person who, in the ultimate event, is charged. I think there is a good deal of force in that argument, but I think it is enough to say that the rule, perhaps a rough and ready rule, perhaps a rule of thumb which has been applied by the master in this case, is one that is not unfair, and works, on the whole, as well as any rule that could be laid down. If that is to be altered it probably would necessitate the making of a new rule altogether. Probably the Lord Chancellor would have to revise these rules, that is, make a new rule as to the payment of the percentage, and rules as to the ascertainment of clear annual income which would, in all probability, in the end, work out no better than the present rough and ready rule that is applied. Therefore, I think there is no ground for interference with the master's decision in this case. It was, in my opinion, quite a fair case to bring before the court, and I do not think there ought to be any costs of this appeal.

WARRINGTON, L.J.-I am of the same opinion The rule by which the percentage is now regulated is rule 126 of the Rules of Lunacy of 1892, that there should be paid a percentage at the rate of 4 per cent. per annum on the clear annual income. That rule embodies a principle which was originally enacted in the statute of 3 & 4 Will. 4, c. 36, s. 8, where the same expression "clear annual income," is used.

66

The appellant asks us to direct that there shall be allowed as a deduction from income for percentage purposes solicitors' costs incurred in the management of the estate, or, at least, so much of those costs as may be costs incurred in acquiring the income; "acquiring was the expression used by Mr. Stamp, and, on another occasion, earning the income;" it does not matter which expression you use. The practice in the office which has prevailed for a great many years, long before the rule of 1892 was made, has been not to allow such solicitors' charges incurred in the management of the lunatic's estate, and to make no distinction between the charges incurred in acquiring or earning the income, and the other charges. If we were to accede to the views put forward on his client's behalf by Mr. Stamp the result would be that every solicitor's bill would have to be elaborately dissected in order to ascertain what charges came within those which it is said ought to be allowed, and what charges did not. I think if we were to accede to that demand we should probably throw a great deal more expense upon the lunatic's estate than would be represented by the amount of deduction in the percentage which would result from it.

HIGH COURT OF JUSTICE.

CHANCERY DIVISION.
Jan. 16, 17, and 26.
(Before RUSSELL, J.)

Re HUMMELTENBERG; BEATTY V. LONDON
SPIRITUALISTIC ALLIANCE. (a)

Charity-Bequest for establishment of college for training and development of spiritualistic mediums-Whether trust beneficial to the public Question for decision of court, not testator.

A testator bequeathed the sum of 3000l. to the London Spiritualistic Alliance Limited for the purpose of establishing a college for the training and developing of suitable persons, male and female, as mediums. This summons was taken out by the executors of the will for the determination of the question whether the bequest was a valid charitable bequest. Held, that, although, as was indicated in the cases of Re Cranston (1898, 1 Ir. R. 431) and Re Foveaux; Cross v. London Anti-Vivisection Society (73 L. T. Rep. 202; (1895) 2 Ch. 501), the private opinion of the judge was immaterial on the question whether a gift of this nature would operate for the benefit of the public, the question was one for the decision of the court, basing its opinion on the evidence before it (the cases of Re Cranston, sup., and Re Foveaux; Cross v. London Anti-Vivisection Society, sup., not being followed, as regards indications to be found in those cases that the donor ought to be regarded as the judge of that question); that in the present case it had not been proved to the satisfaction of the court (1) that the gift would or might operate for the benefit of the public, and (2) that the trust was one which the court could, if necessary, administer and control; and that, as it was necessary to establish these two facts in order that a gift might be held to be charitable in the legal sense, the gift in question was not a valid charitable gift, and failed. Morice v. Bishop of Durham (10 Ves. 521) referred to.

(a) Reported by J. L. DENISON, Esq., Barrister-at-Law.

ORIGINATING SUMMONS.

This summons was taken out by the executors for the determination of the question whether a gift under the will of a testator was a valid charitable bequest. The gift was in the following terms: 'I give and bequeath to the Treasurer for the time being of the London Spiritualistic Alliance Ltd., of 110, St. Martin'slane, W.C., the sum of 3000l. to form the nucleus of a fund for the purpose of establishing a college for the training and developing of suitable persons, male and female, as mediums, preference being given to healing mediums and those for diagnosis of disease, and I direct that a committee of three of the council shall control the said sum of 3000l. by investing the same in sound securities and use the interest thereof for the above express purpose of developing such mediums. It would be desirable if mediums during development could be employed in garden or farm work, such occupation might be helpful to their development. If at any time it should be found by the council to be no longer necessary or impracticable to develop such mediums, then the said sum of 30001. or the interest thereof or both capital and interest shall be used for the general purpose of spreading and advancing the cause of spiritualism as seems best to the council of the said alliance. Should at any time the London Spiritualistic Alliance cease to exist then the said sum of 3000l. and interest thereof, if any, or as much thereof as remains unexpended shall be divided in equal parts between six spiritualistic societies of England as the said council may decide."

Errington for the executors.

G. B. Hurst, K.C. and Peck for the defendant society.

Preston, K.C. and Vaisey; Bryan Farrer ; and Andrewes-Uthwatt for residuary legatees. The following cases were referred to: Commissioners of Income Tax v. Pemsel, 65 L. T. Rep. 621; (1891) A. C. 531 ; Re Cranston (1898) 1 Ir. R. 431; Re Foveaux ;

Cross V. London AntiVivisection Society, 73 L. T. Rep. 202 ; (1895) 2 Ch. 501;

Re Macduff; Macduff v. Macduff, 74
L. T. Rep. 706; (1896) 2 Ch. 451 ;
Morice v. Bishop of Durham, 10 Ves. 521 ;
Thornton v. Howe, 6 L. T. Rep. 525; 31
Beav. 14;

Re Wedgwood; Allen v. Wedgwood, 112
L. T. Rep. 66; (1915) 1 Ch. 113.

Cur. adv. vult.

Jan. 26.-RUSSELL, J. stated the question for decision and continued: Primâ facie the gift is bad as creating a perpetuity; but the defendants, the London Spiritualistic Alliance Limited, claim the gift to be good on the ground that it is a valid charitable bequest. Although the testator has added certain qualifications and directions to the gift, the gift which is the subject matter of these proceedings is a gift for

In

CH. DIV.] the purpose of “ training and developing suitable persons male and female as mediums." The London Spiritualistic Alliance Limited, alive to the fact that it lies with them to satisfy the court as to the validity of the gift, have filed four affidavits. They are, probably of necessity, vague and lacking in detail, and they afford little or no assistance to the court. the absence of evidence all parties relied without objection on definitions contained in dictionaries and other works, and from these I learn that in connection with what is known as spiritualism the primary meaning of the word “medium” is (I am using my own language), an individual who professes to act as an intermediate for communication between the living and the spirits of persons now dead. Is a gift for the purpose of training and developing such individuals a good charitable gift?

Mr. Hurst claims that it is on three grounds. First, he says it is a trust for the advancement of education, being a trust to train persons to pursue a calling which is not unlawful.

Secondly he says it is a trust beneficial to section of the public, namely, that section which proposes or intends to engage in the calling of a medium.

Thirdly he says it is a trust beneficial to the whole community because its object is to increase the number of trained mediums in the world, and especially those trained for the purpose of diagnosing and healing disease.

His second and third contentions are framed so as to bring the case within the fourth branch of Lord Macnaghten's well known classification of charitable gifts in Pemsel's case (sup.). But no matter under which of the four classes a gift may prima facie fall, it is still, in my opinion, necessary (in order to establish that it is charitable in the legal sense) to show (1) that the gift will or may be operative for the public benefit, and (2) that the trust is one the administration of which the court itself could if necessary undertake and control.

To quote what Lord Eldon said in the case of Morice v. Bishop of Durham (10 Ves., at p. 539) "As it is a maxim that the execution of a trust shall be under the control of the court, it must be of such a nature that it can be under that control, so that the administration of it can be reviewed by the court; or, if the trustee dies, the court itself can execute the trust: a trust, therefore, which, in case of mal-administration, could be reformed; and a due administration directed; and then, unless the subject and the objects can be ascertained, upon principles, familiar in other cases, it must be decided, that the court can neither reform mal-administration, nor direct a due administration."

In the present case the defendants, The London Spiritualistic Alliance Limited, have wholly failed to satisfy me on either point. There is no evidence worthy of the namenothing but vague expressions of opinions and belief, directed in the main to alleged powers of diagnosis and healing attributed to some mediums. Even if I were to assume that some of these persons called mediums possess powers

of diagnosis or powers of healing, or both (in which event it could scarcely be denied that a gift the object of which was to increase their number would be operative for the public benefit) still the gift here is not limited to that purpose. It is a gift which consistently with its terms could be wholly applied in the training and development of mediums other than what for convenience may be termed therapeutic mediums.

I am not satisfied that a gift for that purpose is or may be in any sense of the words operative for the benefit of the public. Further, I am wholly unable to say, upon the evidence, that a trust for either the more limited purpose or the more general purpose is a trust the administration of which the court could in any way undertake or control. Indeed, so far as one can form an opinion upon the present materials, it would appear to be a trust the administration of which the court would be quite unable to undertake or control.

It was contended that the court was not the tribunal to determine whether a gift or trust was or was not a gift or a trust for the benefit of the public. It was said that the only judge of this was the donor of the gift or the creator of the trust. For this view reliance was placed

on the views expressed by the Master of the Rolls and by some members of the Court of Appeal in Ireland in the case of Re Cranston (sup.). Reliance was also placed on a sentence in the judgment of Chitty, J., in Re Foveaux; Cross v. London Anti-Vivisection Society (sup.).

So far as the views so expressed declare that the personal or private opinion of the judge is immaterial, I agree; but so far as they lay down or suggest that the donor of the gift or the creator of the trust is to determine whether the purpose is beneficial to the public, I respectfully disagree. If a testator by stating or indicating his view that a trust is beneficial to the public can establish that fact beyond question, trusts might be established in perpetuity for the promotion of all kinds of fantastic (though not unlawful) objects of which the training of poodles to dance might be a mild example.

In my opinion the question whether a gift is or may be operative for the public benefit is a question to be answered by the court by forming an opinion upon the evidence before it.

The grounds upon which I decide this case render it unnecessary for me to consider another point which was urged before me, namely, that the training of mediums necessarily involves, or tends to involve, illegality, and is therefore illegal, or at all events against public policy. There is much to be said on both sides, and I prefer to express no opinion until it becomes necessary to do so. I hold this gift to be invalid, involving as it does a perpetuity, because it has not been established that the trust is one which is or may be operative for the public benefit, or one which the court could administer or control.

There will be a declaration that the bequest is not a valid charitable bequest, and that it