Revenue-Estate Duty-Testamentary Expenses-Insufficient General Personal Estate to pay Duty-Specifically bequeathed Personalty-Undisposed of Realty-Order of Administration of Assets-Marshalling-Finance Act, 1894 (57 & 58 Vict. c. 30)-Land Transfer Act, 1897 (60 & 61 Vict. c. 65). Estate duty, which under the Finance Act, 1894, is payable in respect of personal property specifically bequeathed by a testator, being a testamentary expense, is payable in the same order of administration as other testamentary expenses are payable, and accordingly where the residuary personal estate is insufficient to pay the estate duty on the specifically bequeathed personalty the heir-at-law is not entitled to have the duty paid out of such personalty in exoneration of the undisposed of realty. Shepheard v. Beetham, (1877) 6 Ch. D. 597, distinguished. ADJOURNED SUMMONS. James Mathew Pullen, by his will dated February 21, 1894, specifically devised two freehold houses, one of which he charged with certain annuities which far exceeded its value. He also gave certain directions as regards a large number of leasehold houses which the Court decided amounted to a specific bequest of those leaseholds to his son James Pullen and his daughter Eliza Lucy Pullen as tenants in common, and he specifically disposed of his household effects. And the testator appointed his son James Pullen and Henry Charles Parker executors and trustees of his will. The testator died on August 1, 1901, and his will was duly proved by the executors therein named on October 28, 1901. The testator's son James Pullen, who was also his heir-atlaw, died on June 30, 1909, having by his will, dated March 18, 1903, appointed John Witcomb and Ebenezer Newman executors thereof, who on August 3, 1909, duly proved the will. The testator's estate consisted of the freeholds, leaseholds, and household effects specifically devised and bequeathed as above mentioned, and also of other freehold property, of the net value TON J. of 26081. after deducting the mortgages upon it, not disposed of WARRING. by the will, and certain personal estate valued for probate at 20897. 78. 6d., which was also not disposed of by the will. The gross value of the estate was 112,6567. 108. 3d., and the net value, after deducting funeral and testamentary expenses and unsecured debts and certain mortgage debts secured on various parts of the estate, was 49,801l. 138. 6d. The testator's funeral and testamentary expenses and debts (including estate duty on personalty, but not including mortgage debts or estate duty on the real estate) amounted to 48731. 78. 1d., thus exceeding the value of the personalty not specifically bequeathed by 27831. 198. 7d. The proportional part of the estate duty in respect of the value of the specifically bequeathed personalty according to the probate value thereof, and after deduction made in respect of mortgages thereon, amounted to 24891. Os. 4d. This was an originating summons taken out by H. C. Parker, the surviving executor of the will, for the determination (inter alia) of the question whether (having regard to the fact that the residuary or undisposed of personal estate was insufficient to pay the testator's funeral and testamentary expenses and debts) the estate duty attributable to and payable in respect of specifically bequeathed personalty was wholly payable out of the undisposed of real estate, or whether the same or any and what part thereof was payable out of the personalty comprised in the respective specific bequests and in what proportions. J. M. Gover, for the summons. Humphrey H. King, for the personal representatives of James Pullen, the testator's heir-at-law. The rules as to the order of administration of assets do not apply as regards realty in the case of estate duty. There is no authority for charging realty with deficiency of estate duty on personalty. In Shepheard v. Beetham (1) it was held that specifically bequeathed personalty must exonerate the real estate from probate duty. That decision applies to estate duty, which now takes the place of probate duty, and is governed by the same principles. By s. 8, sub-s. 1, of the (1) 6 Ch. D. 597. 1910 PULLEN, In re. PARKER PULLEN. TON J. 1910 PULLEN, In re. PARKER V. PULLEN. WARRING Finance Act, 1894, " The existing law and practice relating to any of the duties now leviable on or with reference to death shall, subject to the provisions of this Act and so far as the same are applicable, apply for the purposes of collection, recovery, and repayment of estate duty." The incidence of estate duty imposed by that Act is governed by the same principle as that which regulated the incidence of the old probate duty: In re Bourne (1); In re Hadley. (2) The Land Transfer Act, 1897, has not affected the incidence of estate duty. By s. 5 of that Act, "Nothing in this part of this Act shall affect any duty payable in respect of real estate or impose on real estate any other duty than is now payable in respect thereof"; and s. 2, sub-s. 3, enumerates the liabilities to which real estate is subject, but contains no reference to duty of any kind except so far as included in "testamentary expenses." It is true that now under that Act a devisee or heirat-law cannot enjoy the property until after the will is proved or administration granted; but if before that Act the heir-at-law was not bound to contribute to the payment of the estate duty on specifically bequeathed personalty he is not bound to do so now. The observations of Lindley M.R. in In re MaryonWilson (3) as to the incidence of settlement estate duty apply, mutatis mutandis, equally strongly to this case. The Finance Act, 1894, has carefully safeguarded the heir and the specific devisee, defining their liability by s. 9, which relates to the duty on realty. Sect. 6, sub-s. 2, which makes the payment by the executor of estate duty in respect of realty optional, also shews that the Legislature distinguished between the liability for estate duty in respect of personalty and that in respect of realty. The status quo before the Act is to be preserved, and what that is is stated by Malins V.-C. in Shepheard v. Beetham. (4) The marshalling must be from the beginning, and no increased burden is now to be placed on the realty. The Finance Act, 1894, must be construed as at the date of its passing, apart from the provisions of the Land Transfer Act, 1897: In re Palmer. (5) It will no doubt be (1) [1893] 1 Ch. 188, 192. (3) [1900] 1 Ch. 565, 570. (5) [1900] W. N. 9. TON J. 1910 PULLEN, In re. PARKER v. PULLEN. contended that the payment of estate duty is a testamentary WARRINGexpense; but so was probate duty, as was held by Malins V.-C. in Shepheard v. Beetham (1) and in Davies v. Fowler. (2) Estate duty is, it is submitted, an extraordinary expense. In In re Sharman (3) it was held, following In re Palmer (4), that estate duty payable in respect of real estate was not a "testamentary expense within the meaning of a direction contained in the will of a testator, who died after the Land Transfer Act, 1897, for payment of his debts and funeral and testamentary expenses out of his personal estate, and that the decisions of In re Clemow (5) and In re Treasure (6) had no reference to real estate. There is nothing, therefore, it is submitted, to make the heir liable to pay this estate duty. Horace Freeman, for Eliza Lucy Pullen, one of the specific legatees of the personalty. In re Maryon-Wilson (7) was not a decision as to estate duty, but as to settlement estate duty, and the grounds on which that case was decided do not apply to estate duty. Estate duty is a single duty imposed on the testator's estate generally, and is not apportionable between particular parts of the estate, except in so far as the Legislature has provided that a rateable part thereof is to be borne by property which does not pass to the executor as such. That is clearly recognized by the decision in In re Hadley (8): see particularly the remarks the remarks of Fletcher Moulton L.J. (9) The argument derived from the incidence of settlement estate duty does not therefore apply to estate duty. Shepheard v. Beetham (1), upon which reliance has been placed, is a decision on the old probate duty and prior to the Land Transfer Act, 1897, but, assuming it to have been rightly decided, it does not govern the present case. It dealt only with probate duty; but there is no distinction between probate duty or estate duty and other testamentary expenses. The only text-book in which that case with reference to duty is cited or referred to is Theobald on Wills, 7th ed. p. 803. The Vice-Chancellor in that TON J. 1910 PULLEN, In re. PARKER v. PULLEN. WARRING. case bases his judgment on the hardship on the heir of having to pay duty for the proof of a will under which he could have no interest. The ground of that decision has now disappeared. True it may still be said that the heir-at-law does not take under the will, but he is concerned with the payment of estate duty, which is a necessary preliminary to the grant of probate or administration, for he must make his title through the personal representatives. The law has been altered in this respect since Shepheard v. Beetham (1) by Part I. of the Land Transfer Act, 1897; the result of that Act is to make the heir-at-law as much concerned with proving the will as the next of kin is: In re Vickerstaff (2); and compare In re Shaw. (3) As regards the hardship on the heir, see the remarks of Lord Hardwicke in Galton v. Hancock. (4) Moreover, it is equally a hardship on the specific legatee that the estate duty should be thrown upon his specific legacy. In giving a specific legacy the testator shews an intention that the specific legatee should not have the value of his gift diminished by payment of funeral and testamentary expenses and debts: Robertson v. Broadbent. (5) If this duty is thrown on the specific legatees the result will be to deprive them of part of the bounty which the testator intended for them. The undisposed of realty is just as much part of the testator's estate as the specifically bequeathed personalty, and he must be supposed to have contemplated the possibility of its being resorted to, if necessary, to give effect to his intended bounty to the specific legatees. Apart from Shepheard v. Beetham (1) there is no authority in favour of the heir-at-law, and there is no reason why the undisposed of realty should not bear the estate duty where the general personalty is insufficient in the same way as it bears other testamentary expenses and debts. The Finance Act, 1894, contains no provisions as to the incidence of that part of the estate duty which the executor has to pay. The provisions of s. 6, sub-s. 4, and s. 9, sub-s. 1, of that Act are for the benefit of the revenue and the relief of the executor, and are not for the benefit of the heir-at-law. There (1) 6 Ch. D. 597. (3) [1894] 3 Ch. 615, 619. |