RE ROSE

van Dyck, Anthony; Lord Strafford (1593-1641), and His Secretary Sir Phillip Mainwaring (1589-1661); Birmingham Museums Trust; http://www.artuk.org/artworks/lord-strafford-15931641-and-his-secretary-sir-phillip-mainwaring-15891661-33207

Voluntary corporate dispositions, and the prerequisite of company procedures are inextricably linked, yet where discrepancies arise, it falls to equity to resolve the inadequacies argued, before choosing to act.

In this instance, the two gestures of a settlor were challenged by the Crown in the hope of securing estate duties post-mortem.

In 1943, an unlimited company owner took the practical steps of transferring two amounts of 10,000 shares to both his wife on the first count, and his wife and secretary on the second.

Acting under strict observation of the associated articles of memorandum, namely art.9 which read:

“[T]he company shall be entitled to treat the person “whose name appears upon the register in respect of any share” as the absolute owner thereof, and shall not be under any “obligation to recognize any trust or equity or equitable claim” to or interest in such share, whether or not it shall have “express or other notice thereof.””

And article 28, which also read:

“[T]he transferor shall be “deemed to remain the holder of such share until the name of” the transferee is entered in the register in respect thereof.” 

It was further indicated by article 29, that:

“Shares in the company shall be transferred in “the following form, or as near thereto as circumstances will “permit.”” 

On this occasion, the documentation used was fully compliant with the terms prescribed by the company articles, in that sealed written instructions meant that the husband had willingly relinquished himself of any proprietary and beneficial ownership in order for legal title to succeed; along with any liability for estate duty fees; hence, the company would only need to register the transfer before a specified date. 

For one reason or another, the registration was incomplete until two days after the exemption period; and so, a number of years after the settlor’s death, the Inland Revenue sought to recover the duties on both transfers, under the combined effects of the Customs and Inland Revenue Act 1881, the Customs and Inland Revenue Act 1888 and the Finance Act 1895.

When first heard, the judge awarded in favour of the transferees, whereupon it was appealed by the Inland Revenue Commissioners, who primarily relied upon Milroy v Lord to argue against the previous decision.

Having considered the facts of both matters, the Court refused to support the far-reaching contradiction of the appellants, who contested that as the transfer had not been successfully completed by registration within the determined period it was non-effectual; and so, represented nothing more than a promissory gesture; and yet, once completed the settlor was unable to reverse the transfer and so held the shares in death as he did in life.

While in Milroy the deed-poll constituted little more than a written instruction, the explicit nature of the instrument of transfer in this instance had made it quite clear that at the date of execution (roughly ten days before the exemption threshold lapsed), the husband had expressly ceased to hold any beneficial or proprietary interest in the shares; and that by virtue of the gift, all beneficial ownership rights were now conferred to the wife and secretary, despite the absence of legal title.

It was this minor, yet crucial technicality that distinguished itself from Milroy, and negated the position taken by the appellants when seeking payment.

Deciding in unison, the previous judgment was vehemently upheld, while the point made clear that when a settlor acts within his duties, and in as exhaustible a manner as possible, any uncertainty of legal title does not preclude the completion of a gift; and that where duty commands it, beneficial ownership is sufficient answer when legal title is peripheral to judicial determination, while reminding the parties that:

“[A]ny transaction of gift imports a donor and a donee, a disposition by the donor and receipt of the subject-matter of the disposition by the donee.”