- (1.) LORD EVERSHED M. R. The originating summons in this case raised the question of the liability to estate duty under the Finance Act, 1894, in respect of a share of the income of the estate of the late Lord Northcliffe which one Henry Preuss Arnholz, who died on August 31, 1955, had enjoyed for his life. I do not think it necessary that I should go at length into the facts or, indeed into the arguments of this case, both of which are fully stated in the judgment of Dankwerts J. Suffice then to say that under Lord Northcliffes will the income of the residuary estate was, for a period terminating as provided by the will, divided among a number of income beneficiaries, each taking a specified share or fraction, so that when any one income beneficiary died, the total income was then divided among the survivors or survivor.
(2.) AT the date of Arnholzs death his share amounted to the three of the 49 1/2 shares into which the income was then divisible; but the interest in the income which Arnholz enjoyed was expressed to be given to him by paragraph (26) of clause 6 of Lord Northcliffes will as being in respect of his acting as executor and trustee, and by way of remuneration for his so doing; though the will also contained as reference to the fact that Arnholz was indeed a very old friend of the testator. By an order of the court made in In re Northcliffe, it was held that on the death of any income beneficiary, save at any rate the last, there was a 'passing' within the terms of section I of the Finance Act, 1894, of a share of the corpus of the estate corresponding to the share of the income which at his death the dying income beneficiary had enjoyed. The claim to duty has been resisted by the Public Trustee, as the present trustee of Lord Northcliffes estate, in reliance upon the last three lines of paragraph (b) of section 2(1) of the Finance Act, 1894. In order to make that statement intelligible, I will read the whole paragraph, which is introduced by the opening sentence of the sub -section : 'Property passing on the death of the deceased shall be deemed to include the property following, that is to say : -.... (b) Property in which the deceased or any other person had an interest ceasing on the death of the deceased, to the extent to which a benefit accrues or arises by the cesser of such interest; but exclusive of property the interest in which of the deceased or other person was only an interest as holder of an office....' Accordingly, it has been the contention of the Public Trustee, following an earlier decision in Attorney -General v. Eyres, that the interest which Arnholz had as an income beneficiary was only an interest as the holder of an office, namely, the office of executor and trustee; but since the exemption appears in the second half of paragraph (b) of section 2(1), and since it has been held and is conceded that there was here a passing of a proportionate share of the corpus under section 1, it will be apparent that the contest has raised the question of the application (and, indeed, under Mr. Pennycuicks argument, the validity today) of the celebrated dichotomy between section 1 and 2(1) of the Finance Act, 1894, which is enshrined in the well -known speech of Lord Macnaghten in Earl Cowley v. Inland Revenue Commissioners in 1899. Mr. Pennycuick has also contended that even though the dichotomy has the consequence, if valid, that the Crown cannot charge under the terms of paragraph (b) of sub -section (1) of section 2, but must direct their attention exclusively to section 1 of the Act, none the less the exempting words, introduced after a semi -colon by the words 'but exclusive of property,' amount to an exemption which is not limited by the scope of paragraph (b), but is of general application and corresponds accordingly to the exemptions which sub -sections (2) and (3) of section 2 of the Act of 1894 confer. I understand that Mr. Pennycuick finds some peg in the semi -colon to which he seeks to attach that argument. I confess that upon that last matter I have not been at all persuaded that those words of exemption in paragraph (b) can be interpreted save as a qualification of the earlier language of paragraph (b) itself : and, if that is right, then Mr. Pennycuick is faced, as he concedes, with the formidable difficulty that if he dictum of Lord Macnaghten must be treated as binding upon us today, then he cannot rely upon something which is exclusive to paragraph (b) of section 2(1) of the Act, since the charge admittedly is made under section 1.
(3.) ON the other side, Sir Lynn Ungoed -Thomas, for the Crown, has intimated an argument - though he has not developed it - that, on the facts of this case, Arnholz could not be said to have enjoyed his interest as holder of an office within the meaning of paragraph (b) of section 2(1), so that no question at all arises on that paragraph. In the circumstances, I do not find that Danckwerts J. rejected it. However, Sir Lynn has also contended, as I follow him, that even if today the dichotomy cannot be as rigid as might have previously been supposed, still, if the subject is to rely upon those exempting words in paragraph (b), he must say that his interest is one which is properly described and brought into charge by virtue of the enlarging effect of paragraph (b), as distinct from being something which has come into charge by virtue of section 1 of the Act. Again, in the circumstances, I do not find it necessary to say anything upon that point either. Mr. Pennycuicks argument concedes that until a very recent case, that of Sanderson v. Inland Revenue Commissioners, he would have been in very great difficulty in prevailing upon this court to say that we could now treat Lord Macnaghtens dictum as not excluding him from any reference to paragraph (b) of section 2(1) of the Act; but in that case Lord Radcliffe, in the course of his speech, indicated that this dictum should, to use his own words, be resigned 'to the list of the many minor mysteries of the law.' Mr. Pennycuick says that we, having so resigned it, can treat the matter as res integra, and, in so doing, should decide the matter in his favour.;