Scottish Court of Session Decisions

This was an action at the instance of the Lord Advocate on behalf of the Board of Inland Revenue against James Galloway, sole executor and universal legatee of the late Robert Tervit, for the purpose of recovering a sum of £105 as inventory stamp-duty, and £200 as legacy-duty, in addition to what had been paid by the defender in respect of Tervit's estate. The action was brought in the following circumstances:—Robert Tervit was the tenant of the farm of Bagmoors, in the county of Lanark. His lease expired at Martinmas 1870 and Whitsunday 1871. His nephew, the defender James Galloway, had resided with him for many years, assisted him in the management of the farm, and had became joint-tenant with him in a new lease, which was granted in their favour on 13th and 19th July 1872. In April 1873 Tervit made a will disposing of his heritable and moveable property, the greater part of which he left to his nephew Galloway, leaving him his executor. About the time at which this will was executed, Tervit consulted Alexander Paterson, agent for the Royal Bank at Lanark, with whom he did a portion of his banking business, both as to the validity of the will and also as to the amount of legacy and inventory duties which his nephew would probably have to pay when the succession opened to him, and Paterson explained to him from the table of duties in an almanac what they would be, and that they might be saved by handing over the money to his nephew during his life. Tervit's mode of conducting his banking business was by means of deposit-receipts, the interest upon which he uplifted from time to time in part-payment of the rent for the farm, but the capital amount of which he periodically increased.

About the month of August 1875, Tervit, being then in perfect health, began to transfer some of the deposit-receipts standing in his name in two banks in Lanark to the name of his nephew Galloway. The first sum thus transferred was a deposit-receipt for £500, and various other sums were afterwards transferred to Galloway's name, until upon 12th August 1878 the amount standing at Galloway's credit was £3048 in the Royal Bank, and £1000 in the Commercial Bank, at their respective branches at Lanark, there being nothing left standing at that date in Tervit's name.

In November 1878 Tervit made a new will, which was similar to the original will, with this exception, that a legacy of £250 to his brother John Tervit, who had meanwhile died, was cancelled.

In April 1879 Galloway, by Tervit's desire, instructed a writer in Lanark to get certain certificates of stock and debentures transferred from Tervit to Galloway. Transfers were accordingly executed of a number of stocks in favour of Galloway. The new certificates in Galloway's name were retained by the agent. No interest or dividend on the stocks accrued during Tervit's life, but the interest on the deposit-receipts was applied as before to rent and other farm purposes.

Tervit died on 28th July 1879, aged about 74 years. By the provisions of his last settlement, with the exception of certain heritable property at Carnwath, which he conveyed to his brother James Tervit, his whole estate, heritable and moveable, passed to Galloway, whom he nominated his sole executor and universal legatee.

Galloway gave up an inventory of the personal estate, and was duly confirmed executor on 13th December 1879. The amount of inventory given up was £650, 12s., and inventory-duty to the amount of £15 was paid.

This action was raised to compel him to give up a further inventory of and pay duty on, first, the sum of £3048 which stood in the Royal Bank of Scotland as above mentioned, on seven deposit—receipts; second, the £1000 which stood on two deposit-receipts with the Commercial Bank; and third, the various stocks and debentures mentioned above.

The pursuer averred that the changes in the deposit-receipts and additional deposits were not made animo donandi, but the sums remained the deceased's property; and there was no change in the custody of the receipts, which were never delivered to the defender. As to the stocks, he averred that the transfers when executed were retained in the custody of the law-agent on behalf of the deceased, and were not delivered to the defender. They formed part of the deceased's estate, and so were liable in inventory and legacy—duty.

The defender averred that the stocks and debentures and the money in the deposit-receipts were transferred to him absolutely without condition, and that deceased had no control over or interest in them at the date of his death.

The pursuer pleaded that the deposit-receipts referred to on record not having been taken in defender's name animo donandi, and never having been delivered to him, formed part of the deceased's moveable estate, for which the defender was bound to pay inventory and legacy duties. “(4) If the said securities or any of them were transferred or delivered to the defender, it was custodiœ causa merely, and to facilitate the defender's administration of the estate as executor. (5) Separatim — The transfer of the securities amounted only to a donation mortis causa, or conferred

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a succession within the meaning of the Succession Duty Act 1853, and legacy-duty or otherwise succession-duty is payable.”

The Lord Ordinary allowed the parties a proof, the defender to lead. The material portions of the evidence are fully referred to in the Lord Ordinary's opinion.

The Lord Ordinary pronounced this interlocutor:—“Finds that the deceased Robert Tervit died on 28th July 1879, leaving a settlement whereby he nominated the defender to be his sole executor and universal legatee: Finds that at the time of his death he had right to, and was the owner of, moneys contained in the deposit-receipts specified in the fourth article of the condescendence, and to debenture bond p. £100 of the Atlantic and Great Western Railway Company, and that therefore the defender, as his executor-nominate, is bound to give up an inventory of the moneys contained in the said deposit-receipts and in said bond, and to pay to the pursuer the inventory stamp-duty payable thereon according to law, together with interest on the sum in the said deposit-receipts and bond at the rate of five per cent. from 28th January 1880: Finds that the said Robert Tervit during his life did convey over and transfer to the defender the stocks and debentures, other than said debenture bond of the Atlantic and Great Western Railway Company, specified in the said fourth article of the condescendence, absolutely, and that the said stocks and debentures, other than said bond, constituted no part of his personal estate at the time of his death, and that therefore the defender is not bound to give up an inventory thereof, and to pay inventory stamp-duty thereon,” &c.

“ Opinion.—Robert Tervit, a farmer at Bag—moors, in the parish of Pettinain, who died on 28th July 1879, aged seventy-four, had moneys belonging to him deposited in the Royal Bank of Scotland at Lanark, and in the Commercial Bank of Scotland there. The deposit-receipts containing these moneys were, during his lifetime, by himself or with his authority, changed from his name to that of the defender. He was also owner of shares in joint-stock and railway companies, and was creditor in debenture bonds of other companies. These stocks, so far as requiring transfers, were transferred by him to the defender, and the debenture bonds being payable to bearer, not requiring transfers, were delivered to the defender.

“The defender is the executor under the will of Robert Tervit, and it was his duty as such to give up an inventory upon the proper stamp of the deceased's personal estate. He did give up an inventory, but it is averred on behalf of the Crown that he did not give up a full and true inventory, in respect that he did not include therein the moneys contained in the deposit-receipts, and the value of the stocks, shares, and debentures just alluded to. The defender refuses to give up an inventory containing these sums, and the value of these shares, because he avers that he was absolute owner of them during the deceased's lifetime, and they formed no part of Robert Tervit's estate at his death. The Crown, on the other hand, maintain—1st, That the deposit-receipts were not changed into the defender's name, and the transfers of the shares and stocks and delivery of the debentures were not made animo donandi, but custodiœ causa; 2dly, That the transference of the property was a donation mortis causa, and being so, it is liable to duty as a legacy, as is enacted by 8 and 9 Vict. c. 76, sec. 4; 3dly, That the mode in which the defender obtained the property conferred upon him was a succession in terms of the Succession Duty Act 1853, and that if legacy-duty was not payable, succession—duty was.

“The last ground of claim by the Crown may at once be dismissed. There is nothing in the facts of this case to bring it within the Succession Duty Act.

“But if the allegation of the Crown be true that the transaction was not an absolute irrevocable donation, or if it be true that it was a donation mortis causa, then duty can be demanded.

“The defender was the nephew of Robert Tervit, and had gone with his mother to live with his uncle at at early age, and had helped him to cultivate his farm, while his mother managed the house. This the defender, as he expressed it, did during the greater part of his life, and never received any money from bis uncle in the shape of wages. He got his food in the house, and money for his clothing and pocket-money, but that was all. The uncle and he lived upon very affectionate terms, and nothing could be more natural than that the uncle should bequeath his means to the defender. The lease of Robert Tervit's farm expired at Whitsunday 1871, and a new lease was then obtained in the joint names of Tervit and the defender, the object being to get the defender made tenant of the farm, which the landlord would only allow if Tervit (who was a man of means) became a joint-tenant. Tervit, while he left the active management of the farm to the defender, continued to attend to his own banking business down to a period of eighteen months prior to his death. He had been informed that there was a means of giving to his nephew his estate in such a way as to escape the payment of inventory and legacy-duty. He did his chief business at the branch of the Royal Bank of Scotland at Lanark, and he asked advice upon the subject of escaping payment of the duty from Mr Paterson, the agent of the bank there, who exhibited to him the table of stamp-duties contained in Oliver & Boyd's Almanac, and who informed him that if he handed over during his lifetime his personal estate to his nephew, it would no longer be treated as his estate at his death, and consequently would escape duty. This was as early as the year 1875. He informed Mr Paterson that he intended to adopt the course pointed out to him. It was with this view that the deposit—receipts were changed into the name of the defender, and the transfers of the stocks and shares were made.

“There can be no doubt that Robert Tervit had the animus donandi, and he thought that he carried out his intention sufficiently by the change into the name of his nephew. Now, in regard to the deposit-receipts. Taking it to be proved that he did intend to give the money represented by them to the defender, there was something more necessary to be done than the changing the name; and this not having been done, there was no effectual donation inter vivos. In the first place, there is no proof that Tervit ever delivered the new receipts to the defender, except the evidence of the defender himself; and this, according to the recent decisions of the Court, is

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not sufficient to prove that important fact. It is said by the defender that they were delivered to him and kept in a drawer which was also the repository for the papers of Tervit; that the latter's papers were at the left end of the drawer, and the defender's at the other end; and at the defender's end were the new deposit-receipts. Now, no one confirms this evidence, and no person is brought forward who can say that Tervit had ever said he had made delivery. After the proof was closed the Lord Ordinary was asked to allow the defender's wife to be examined, and this was granted; but her examination did not advance the defender's case. Some observations of the deceased were reported by her as to more consideration being due to his wishes by the defender and his wife in consequence of his having given them all he had,—observations which might be referable to the fact that he had made a will in the defender's favour. In short, there is upon this point a failure of evidence which disentitles the defender to the position which he takes up of having obtained a donation inter vivos.

“And, in the second place, this is confirmed by what was done with the interest upon the deposit—receipts, which was regularly drawn at Candlemas and Lammas, sometimes by the deceased and sometimes by the defender. It was applied, not to the defender's own uses, but to the payment of the rent for which they were jointly liable. In short, Tervit, down to the day of his death, by drawing the interest or by allowing the defender to draw it, and applying it in payment of the rent, indicated that he had not divested himself of the right to the money.

“But as regards the stocks and shares, a different conclusion may be reached, consistently with holding the defender bound to prove, in a manner the most unmistakeable, that there was delivery. The transfers were formally executed by Tervit with reference to those shares that required a transfer in writing. The documents were sent to him for execution, and duly returned signed by him. They were then sent to the companies for registration; and here comes the important fact, which tells so materially in the defender's favour. The secretaries of the companies wrote to Tervit intimating that these transfers had been lodged for registration, and that if he did not object thereto the defender would be registered as the owner of them. Now, he returned no answer to these letters, and therefore he had no objection to the registration being carried out. This was an equipollent to actual handing over the deeds to the transferee, and equipollents to actual delivery have been recognised in this class of cases. See per Lord Deas in Gibson v. Hutchison, 10 Macph. 923; Crosbie's Trustees v. Wright, 7 R. 823.

“The transfers, after being registered, were received back by Mr Tennent, writer, Lanark, agent for the defender, and retained by him for behoof of the defender, and they were in Mr Tennent's possession at the time of Tervit's death. There were, however, two debentures in regard to which there were no written transfers, viz., £100 debenture bond of the River Plate and Brazil Telegraph Company, and £100 debenture bond of the Atlantic Great-Western Railway Company. These bonds were payable to bearer, and did not need to be transferred by writing. The first was delivered and in possession of Mr Tennent, for behoof of the defender, at Tervit's death. The second was not delivered, and duty must be paid on the sum contained in it.”

Thereafter the Lord Ordinary, having resumed consideration of the case, pronounced an interlocutor ordaining the defender to pay to the pursuer £65 of inventory-duty, and £119, 6s. 8d. of legacy-duty.

The defender reclaimed, and argued—As the deposit-receipts had been duly transferred during Tervit's lifetime, defender must be held to have been duly vested in these funds. The best evidence of donation was the possession by defender of these deposit-receipts, the interest of which might have been used by him in payment of his uncle's debts, but the capital of which was never touched for that purpose. This was not a case of endorsing a deposit-receipt, but actually of renewing it. The animus donandi was proved, and there could be no doubt that it existed to the end. The animus donandi, and delivery of the document being proved, it lay upon the Crown to prove that the delivery was in trust only— Morris v. Riddick, July 16, 1867, 5 Macph. 1036, and M'Farquhar v. Mackay, May 18, 1869, 7 Macph. 766, in which cases was to be found a definition of a mortis causa donation— Muir v. Ross's Executors, June 15, 1866, 4 Macph. 820, and Crosbie's Trustees v. Wright, May 28, 1880, 7 R. 823; Thomson v. Thomson, June 8, 1882, 9 R. 911. There could not be a mortis causa donation in the present case, because the animus donandi was not qualified by being subject to revocation. It was an absolute divestiture to save legacy duties— Henderson, June 12, 1839, 1 D. 927; Fife v. Kedslie, March, 1847, 9 D. 853; British Linen Company v. Martin, March 8, 1849, 11 D. 1004; Sharpy. Raton, June 21, 1883, 10 R. 1000; Lord Advocate v. M'Neill, February 6, 1864, 2 Macph 626, and 4 Macph. (H. of L.) 10.

Argued for pursuer—Though Tervit intended to make defender his heir, there was no proof that he intended to divest himself of all control of his money. What he wanted was to leave his money by will to his nephew, and at the same time to save the Government duties. The fact of delivery rested virtually upon the testimony of the donee. It was a question if this was even a mortis causa donation; if not, then both inventory and succession-duty were exigible. If it was, then legacy-duty was payable. The interest of this capital was used to defray the farm expenses, for which both uncle and nephew were jointly liable.

At advising—