Succession Duty-16 & 17 Vict. c. 51-Unoccupied and Unproductive Land-Annual Value-Duty payable. In 1855, the defendant succeeded under his father's will, to real property, which, at the testator's death was, and for ten years previously had been, unoccupied and unproductive. For building purposes, however, the land was of great value; but there was no demand for it in the market at the time of the succession; and from that time, until 1862, the land remained wholly unoccupied and unproductive, nor was any income or annual profit derived from it. In 1862, part of the land was sold at a high price, and the Crown having claimed | duty in respect thereof at the rate of 11. per cent. it Held, by POLLOCK, C. B., and WILDE, B., that the defendant was not liable to pay the duty claimed, and that annual value in the 21st section meant present actual annual value. Per MARTIN, B., that the defendant was liable to pay the duty; that the 39th section showed that all beneficial | succession to real property was to be subject to the duty; or that the defendant might be made liable under the 37th and 26th sections. This was an information to recover succession duty from the defendant at the rate of 17. per cent., in respect of property left to him by his father's will. The late earl died in 1855, and under his will the defendant became entitled to certain real property, for the greater part of which he paid succession duty at the rate of Il. per cent., but as to the remainder disputed his liability. The defendant in 1862 sold some part of this land, viz., 1,561 square yards, at 16s. per square yard, and a second portion, containing about 1,000 square yards, at 6s. per square yard, and upon the land so sold succession duty at the rate aforesaid was claimed in the information. It was alleged, as the information showed, by the defendant, and not disputed by the Crown, that at the time of the testator's death, and when the defendant became entitled as aforesaid to the land in respect of which he declined as aforesaid to pay succession duty, the same was not in demand, nor marketable as building land, nor was it capable of being sold or let profitably as such, and that the custom in Liverpool (where the land was situate) was for the owner of land, which was building land, to sell it absolutely for building on, and not to let it upon long leases or otherwise for building; and that the said land was not, at the time of the defendant's becoming entitled thereto, capable of being used productively for agricultural or other purposes, and that such land was then, and had been for ten years previously, and (except that portion thereof which had been sold as before stated) ever since been wholly unoccupied and unproductive, and that during no portion of that time had any income or annual profit been derived from it; and the portion thereof which had been sold as before stated had, ever since the defendant became entitled thereto, up to the times when the same was sold, been wholly unoccupied and unproductive, and that during no part of that time was any income or annual profit derived from such portion. The Attorney-General, The Solicitor-General, Locke, Q.C., and A. Hanson, for the Crown. This is a claim under the Succession Duty Act, 16 & 17 Vict. c. 51. There can be no doubt this is a succession. Beyond all question the land was of value, and what took place in 1862, should be considered with regard to the quantum of value. Section 37 shows that duty is payable if the land is of any value when the duty becomes payable. The Crown, at any rate, is entitled to have the land valued as at the time of the late Earl's death, and to have the amount of duty payable in respect of such value. The defendant has had the "beneficial enjoyment" of the land within the meaning of sect. 21 of the Act, and several clauses of that Act show, that when the beneficial enjoyment is postponed, the Crown may delay their claim until the additional value has accrued. The 2nd sect. of the Act defines what a succession is, the 10th states the amount of duty, and the 39th concludes the matter with respect to the present claim. We rely, however, upon sect. 10. Astbury v. Henderson, 24 L. J. C. P. 20, was cited in the course of the argument. Mellish, Q.C., and C. Hutton, for Lord Sefton. The property must produce an income, either certain or fluctuating, to render it subject to succession duty. Succession duty is not payable in respect of an unopened mine. The counsel for the Crown have strained the cases in which there was some present value, in order to make them applicable to this case, where there was none. Assessment must be according to the annual value, and it matters not whether he is tenant for life or in fee. If it were not for the 24th sect., a successor would not be chargeable with duty in respect of an advowson; and there is no similar exception in the Act which affects property like the present. There is again the case of an unopened mine. Anything which did not yield a present income was intended to be exempt from duty. Was there any annual value here so as to bring the case within the 21st sect. The exceptional cases which follow that section are in the defendants' favour rather than that of the Crown. The Attorney-General, in reply. The argument on the part of the defendant amounts to this; viz., that the words "annual value" must be read as meaning annual income. [WILDE, B.-The two important sections are the 10th and 21st, and when you have arrived at the value of the land, have you not also arrived at the annual value ?] Even supposing that the 21st sect. does not apply, still there is nothing to discharge the defendant from liability to pay duty under the 10th sect. Cur. adv. vult. There being a difference of opinion between the learned Barons, judgment was delivered on the 6th of July as follows :— MARTIN, B.-This is a question of considerable importance. The late Earl of Sefton died on the 2nd of August, 1855. He was the owner of land in Toxteth Park, Liverpool. This land then, and for ten years previously, had been wholly unoccupied and unproductive, and was incapable of being used productively for agricultural or other purposes, and no income or annual profit had been derived from it. It was not then in demand, or marketable building land, nor capable of being sold or let profitably as such, and it is stated that by the custom of Liverpool, owners of such land sell it absolutely for building, and do not let it upon long leases, or otherwise dispose of it. It is not stated whether the land was of value on the 2nd of August, 1855, when the defendant, the present Earl, became possessed of it; but it must have been of great value, for in 1862 he sold part of it at the rate of upwards of 40007. an acre, which is forty times the value of the best agricultural land. The question is, whether he is liable to succession duty? and it is of importance, for a great quantity of by far the most valuable land in the kingdom is similarly circumstanced. When noblemen and gentlemen are owners of land in the immediate neighbourhood of large towns, and new streets and buildings come close to it, such land is liable to constant and perpetual trespass; people walk over it, carpets are beaten upon it, children play on it, and except a wall be built round it, which is frequently of little avail, or constant and perpetual legal proceedings for trespass be kept up, it gets into the condition in which the defendant's land was. The present income is nil, but the land is of enormous value,-thousands of pounds per acre; more valuable than the very best agricultural land. property, although there be no annual income, there is conferred upon him a succession. Now the defendant became entitled to the property. It is true that it would not have been wise or prudent in him to have sold it immediately upon his father's death; but, nevertheless, it could have been sold, and many successors to it would, by reason of their pecuniary circumstances, have been compelled to sell it, and it would, in comparison with ordinary land, have produced an enormous money price. The succession to the property was, therefore, a benefit, and a great one to the defendant. The 10th section imposes a duty, and enacts that there shall be paid in respect of every succession, according to the value thereof, a duty upon such value. Now, as regards individual cases, except in the cases specially provided for, as timber by the 23rd section, and advowsons by the 21st, the duty is to be calculated upon the value of an annuity; and there must, therefore, be an annual sum for the basis of the calculations, and unless one can be attained to, the taxation cannot be effected. The argument on the part of the defendant was, first, that such property as the present was intended by the Legislature not to be subject to the tax, but in this I cannot concur. It was said to be like an unopened mine, which it was said is not to be considered in the value for the taxation; but, I think, this is not so. By the 21st section, the interest of the successor to be taxed is the value of an annuity equal to the annual value of the 'property. Now, suppose land containing coal, which the owner did not think fit to let, was situated in a district where the landowners generally let their coal at rents, which is very generally the case; I think, in estimating the annual value, the rent which the owner could get from the coal ought to be taken into consideration, although the mere circumstances of there being coal under land in the neighbourhood, of which no coal was being worked, might be considered as not materially adding to it. If this were otherwise, the consequence would be, that one owner of land, precisely similarly circumstanced, who let his coal, would pay a higher tax than another, who, for his own convenience, and possible future benefit, at his own mere will, did not let it. Mines may afford a fluctuating yearly income in two ways, first, to any person actually working the mines; and, secondly, to the owner of the mine who does not work it himself, it being a very frequent practice for the owner of land under which there is a mine to let it at a minimum rent certain, but to increase it according to the quantity of mineral got. I do not think that any inference could be drawn from this, that an unopened mine is to be excluded from the calculation of value under the 31st section. The 26th section was relied upon to show that this was so, but I do not think it does. The section deals with property of a fluctuating yearly income, If, therefore, a man becomes beneficially entitled to and the first instance is a manor which is clearly of The contention is, that the succession to such land is not liable to succession duty. This depends upon the construction of the Succession Duty Act, the 16 & 17 Vict. c. 51. It may be that the case is one omitted, but I cannot believe it was the deliberate intention of the Legislature to relieve such land from the payment of duty. That Act enacts that the term succession shall denote property chargeable with duty, and by section 2, a devolution of property, by reason whereof any person shall become beneficially entitled to property or the income thereof, shall be deemed to confer a succession. that character; the second instance is an opened mine. It was argued that the 22nd and 26th sections showed that real property to be taxed, except that in respect of which express provision was made, must be capable of yielding yearly income, either not of a fluctuating character or of a fluctuating one; but the 39th section, in my opinion, conclusively shows that it was the intention of the Legislature that all real property, however disposed or circumstanced, should be subject to the tax, and the inference from it seems to me irresistible, that all beneficial succession to real property should be subject to the duty. It was, secondly, contended on behalf of the defendants, what, in my opinion, is the real difficulty in the case, that the statute has not expressly provided for it. If the 39th section had been framed like the 26th, there would be no difficulty; for the latter provides first for an agreement between the Commissioners and the successor, and if this cannot be done, it enacts a very reasonable rule, viz., that the principal value of the property shall be ascertained, and the annual value shall be considered to be 3 per cent. on the amount of principal value. The result of the argument is, that, in my opinion, the Legislature did not intend that property circumstanced like the present should be free from the tax. It would be most unjust and unfair to owners of agricultural or grazing lands,-which constitute the great bulk of the land of the kingdom,--that a tax should be imposed upon them in respect of land, not one hundredth part of the value of the land alleged to be free; and, in order to prevent such injustice, I am prepared either to apply the 37th section, and hold this case to be within it ; viz., that the defendant did not at the time of his father's death obtain the whole of his succession, and that he is chargeable with duty on the value of the property, or benefit from time to time obtained by him, to be calculated according to the mode prescribed by the 26th section—that is, at the rate of 3 per cent. upon the amount of the sales; or that the word "compound" in the 39th section means to fix or assess, and give the Commissioners authority to impose a duty, which, of course, must be done in conformity with the spirit of the Act of Parliament. I am, therefore, of opinion, that the Crown is entitled to our judgment. POLLOCK, C.B.-In this case I am of opinion that the defendant is entitled to our judgment; first, because I think, on the true construction of the Act der which the claim of the Crown is made, actual annual value is the basis on which the succession duty is to be calculated, and not possible or prospective annal value; secondly, because the special provisions made in certain cases, such as timber-trees and wood, advowsons, fines on beneficial leases, and opened mines, afford, in my judgment, strong evidence that such a case as the present was not to be dealt with in the way proposed, without some clause in the Act to authorise it; and lastly, because, if the principle on which the present claim is made be a sound one, it must apply to cases where the present annual value is less than prospectively it will probably become, as well as to cases where it is absolutely nothing, and it is to my mind perfectly clear that the Act was not framed with any such intention. The real question before us is, what is the meaning of "annual value" in the 21st section? Does it mean present actual annual value, or does it mean the annual value which the owner might immediately obtain from it were he minded to apply it to a different purpose, or the possible prospective value which there is every reason to suppose it will obtain in a very few years? I am of opinion that it means present actual value. The 23rd section makes especial provisions for timber-trees or wood, which timber is to be paid for when sold. The successor to timber is not bound to sell it; he may, if so minded, allow it to stand as an ornament to his estate, till it has lost all value as timber, and then he will pay nothing. The 24th section makes a similar provision as to an advowson. A successor to an advowson is chargeable only for any profit he may make by selling it, or by selling a next presentation; but he is not chargeable on account of the possibility of profit, if he does not avail himself of it by disposing of either the advowson or the next presentation. The 25th section provides for fines on beneficial leases. The 26th section gives the rule for manors, opened mines, and other real property of fluctuating value; but a successor having valuable mineral property is not bound to open mines or to pay for their value if for any reason he determines not to open them. When opened and worked they would come into charge as part of the succession, and may have an annual value or be wholly unproductive; but if they are to be charged with succession duty every time there is a succession, whether they are opened or not, the effect may be that in the result they would be paid for ten times over. The value of timber when actually sold, of an advowson turned into money or money's worth, or a fine on renewing a beneficial lease, of the income of an opened mine, after deducting all necessary outgoings, are easily ascertained; but the possible future demand for land as building land (not at the time of the succession, in respect of which the duty is claimed in demand at all, which is the case here) is utterly incapable of present appreciation, and there are obvious reasons why the fluctuating value of real property should not be an element in fixing the amount of duty to be paid by a successor. If the probable increase in value were to be estimated, the probable decrease ought to be taken into account. If increased duty is to be paid when land rises in value after a successor has obtained possession of it, duty ought to be returned should its value fall. But if the principle of this claim be correct, the successor to a mansion and park close to a large town, and adapted immediately for building, ought to pay, not according to the fair rental of the estate as it is, but according to the increased value of it when sold for building land, a claim which I think could not be made, and if made could not be supported. The proprietor of property in this country has, in my judgment, a right to make what reasonable use of it he pleases, and sometimes even an unreasonable use, and he is not bound so to use it as to yield the largest revenue to the government, or to pay taxes as if he did. A landed proprietor whose park is over the most valuable mineral property, has a right, in my judgment, to say, I prefer living where my ancestors have lived to obtaining the wealth which opening the mines would afford; and on a succession to such property, in my judgment, the duty ought to be calculated on the fair rental which such a residence and park would command, and without any reference to the value of the undisturbed minerals. The last consideration which I shall present is this; according to the principle involved in the present claim, if the proprietor of a large estate did not make the most of it, and exact the largest rent it was capable of affording on a succession, the successor might be called upon to pay according to a valuation to be made, not of what its annual value actually was, but upon that which it might be made to produce, a proposition which I think wholly untenable. For these reasons, I think our judgment ought to be for the defendant. My brother Wilde, who is not here, concurs in the judgment I have just delivered. He has sent a written judgment, which I do not think it necessary should be read. CHANNELL, B.-I was obliged to leave the Court in the course of the argument to attend Chambers, so that I heard only part of Mr. Mellish's argument, and no part of the reply on the part of the Crown. Under these circumstances, I take no formal part in the judgment delivered by the Court. At the same time, I beg leave to say that I have carefully read and considered the judgments prepared by my brother Martin, by the Lord Chief Baron, and by my brother Wilde, and as far as I can properly take any part in the decision, I agree in the result at which the Lord Chief Baron and my brother Wilde have arrived. Adm. 10 Nov. 1863. Judgment for the defendant. } THE LAUREL. Before the Right Hon. Dr. LUSHINGTON. Bottomry-Pleading-Lien under Local LawCommissions-Costs separable. the ordinary reference of the fairness of the commissions to the Registrar and merchants. The existence of such a local law may be properly pleaded as material evidence to support an allegation that the agreement was to make advances on the credit of the ship and freight, and that the commissions were customary. The existence of such a law will be assumed by the Court, unless contradicted by plea. If contradicted, either party may produce evidence, the party failing in the particular issue to pay the costs of it. This was a motion to strike out the 3rd article of the plaintiffs' reply. The plaintiffs, Finlay, Hodgson, & Co., in their petition, sued as holders of a bottomry bond, dated the 13th December, 1862, given upon the ship Laurel," and her freight, to Messrs. MacLaine Watson & Co., Batavia. The defendants, John Willis & Son, in their answer, pleaded that the "Laurel," being on a homeward voyage from China, with a valuable cargo of tea and silk, was forced to put into Batavia for repairs; that the master there consigned the ship to the firm of MacLaine Watson & Co., who accepted the consignment, and agreed to make the necessary advances on the personal credit of the owners without bottomry; that, on the repairs the master with an account, which charged not only being completed, MacLaine Watson & Co., furnished 13287. 6s. on account of disbursements, but also 27741. 3s., as a commission of 24 per cent. on the estimated or assumed value of the cargo: that for the aggregate amount of these two sums they required the master to give a draft on the defendants, and also the bottomry bond; that no maritime premium was charged in the bond; and it was averred that, notwithstanding the form of the bond, the repayment of the money was not dependent on sea-risk. The plaintiffs, in their reply, denied the agreement alleged in the answer; and in their 3rd article further pleaded, that by the law of Java MacLaine & Co. were entitled to a lien on the "Laurel and her freight for the several items in the bond, and to enforce payment of the items by arrest and sale of the "Laurel,” and arrest of her freight; and that, had not such bond been given, they would have proceeded to enforce payment accordingly. By the 5th article, they pleaded that the commissions included in the bond were the ordinary commissions according to the custom of Batavia. Lushington now moved that the 3rd article should be struck out. The law of Java is immaterial to the issue, which is, whether or not the agreement was made for advances or personal credit for A lien on the ship and freight existing by local law for advances and commissions, cannot convert a trans-sonal credit would operate as a waiver. action on personal credit into a bottomry transaction, so as to render valid a bond subsequently given, or prevent 1st. Supposing a lien to exist, an agreement on per 2nd. A lien could not render valid a bottomry bond given subsequent to advances made on personal credit, for, if so, every bond would be valid, the lien being after the actual advance: if for personal credit, the universal, Augusta, 1 Dod. 288. Aurora, 1 Wheaton, R. 104. Nor bond is not valid, and Lord Stowell's judgment in the Augusta shows that a lien existing by the local law cannot convert a transaction on personal credit into a even, if the consideration were release from an bottomry transaction, so as to render valid a bond actual arrest, subsequently given. Such a law is, however, material evidence in support of an allegation that the advances were made upon the credit of the ship and freight, as appears by the decision of the same Judge in the Alexander. But, it cannot be conclusive, for the agreement might have waived the lien, and accepted personal credit. In the same manner the fact, if it be a fact) that the commissions are justified by local custom and enforced by lien under the local law, constitutes some evidence that they are not exorbitant, but not conclusive, for they are always referred to the registrar and merchants who decide upon equitable considerations. I shall therefore admit the 3rd article ; but, in order to prevent either party from creating unnecessary expense and delay by demanding an investigation into the local law, I shall assume the existence of a local law granting a lien, unless it be counter-pleaded by the defendant. If contradicted by plea, both parties are at liberty to produce evidence as to the local law, but the party failing on this issue will have to pay the costs of the issue, whatever be the ultimate result of the whole litigation. I pass no opinion as to the validity of the bond. Costs of the motion to be costs in the cause. VOL. III. D |