|Judgment - Ingram and Another v. Commissioners of Inland Revenue continued|
The argument advanced on behalf of the Commissioners was, in essence, that the leases purported to have been granted by Mr. MacFadyen to Lady Ingram were a nullity, because a nominee cannot effectively grant a lease to his principal. In consequence no leases were in existence when the freehold given by Lady Ingram vested in the trustees, but the trustees and the beneficiaries were subject to an equitable obligation in favour of Lady Ingram to give effect to the purported leases. Therefore the gift made by Lady Ingram was a grant of the whole fee simple with the obligation to make a lease back to Lady Ingram being a reservation out of the benefit of the gift rather than a grant of the property shorn of the leasehold interest which remained in the hands of Lady Ingram and which she had not given.
In the High Court Ferris J. accepted the first part of the Commissioners' argument and held that the leases purportedly granted by Mr. MacFadyen to Lady Ingram were a nullity. But he rejected the second part of the argument and he stated  S.T.C. 564, 580D:
In the Court of Appeal Nourse and Evans L.JJ. held (Millett L.J. dissenting), first, that the leases purportedly granted by Mr. MacFadyen to Lady Ingram were a nullity but, secondly, following the obiter dictum of the Court of Appeal in In re Nichols decd.  1 W.L.R. 534, 543C, they held that the leasehold interest was comprised in the gift itself and was a part of it, so that Lady Ingram's equitable right to the leasehold constituted a reservation from the gift for her benefit. In his dissenting judgment Millett L.J. held that a nominee may grant an effective lease to his principal and accordingly that the leases granted by Mr. MacFadyen to Lady Ingram were valid. In consequence Lady Ingram created two separate interests in the property and made a gift of only one of them which was the freehold reversion subject to the lease. In addition Millett L.J. went on to consider the case on the footing that the leases were invalid and stated that the beneficiaries were given only what was left after the trustees had fulfilled their equitable obligation to grant the leases to Lady Ingram. Therefore the property given was enjoyed to the entire exclusion of Lady Ingram.
My Lords, even if the leases granted by Mr. MacFadyen were a nullity, I consider that the gift did not fall within section 102 for the reasons stated by Ferris J. These reasons have to be considered in the context of the conflicting opinions of Walton J. and the Court of Appeal in In re Nichols decd. on the question whether a donor can make a gift of the freehold shorn of the leasehold interest which he retains and which never comprises part of the property which he gives. In the High Court  1 W.L.R. 296, 299D Walton J. stated:
And at p. 300H:
But in its judgment, delivered by Goff J., the Court of Appeal stated at  1 W.L.R. 534, 543:
My Lords, I consider that on this point the opinion of Walton J., rather than the opinion of the Court of Appeal, was correct. In my opinion, whether the equitable obligation to grant a lease back to Lady Ingram is regarded as imposed on the trustees or on the beneficiaries, this obligation arose as soon as the freehold vested in the trustees. In the present case there never was a time when, in equity, the donees held the property free from the donor's leasehold interest, and I am in agreement with the observation of Ferris J. at p. 580F that: "In terms of substance, Lady Ingram had her leasehold interests from the very same moment that the trustees and beneficiaries had the property subject to those interests." As a matter of conveyancing law, the leasehold interest is carved out of the freehold. This point was made by Isaacs J. in Lang v. Webb (1912) 13 C.L.R. 503, 515 where he said that the transaction of gift "had to be complete before the donee could execute to (the donor) the lease of the property. A lease is a conveyance; and it is more than form, it is substance, when the donor's interest has to be vested in the donee before the donee can convey a smaller interest." But in this case, where the equitable obligation arose as soon as the freehold was given to the trustees, to determine the point in accordance with conveyancing law would be to depart from the approach which should be followed and which was stated by Palles C.B. in In re Cochrane  2 I.R. 626, 637:
Accordingly, viewing the substance of the transaction, I consider that what was comprised in the gift made by Lady Ingram was the freehold shorn of the leasehold interest, and section 102 does not apply.
Therefore in my opinion the appeal should succeed and it becomes unnecessary to decide whether the leases granted by Mr. MacFadyen to Lady Ingram were a nullity, but as this question was argued I state that in my opinion the leases were valid for the reasons fully set out in the judgment of Millett L.J. in the Court of Appeal and I am also in agreement with the observations of my noble and learned friend Lord Hoffmann on this part of the case.
As I am of opinion that the gift made by Lady Ingram did not come within section 102 even if the leases were a nullity it is unnecessary to consider the Ramsay principle and I do not discuss it.
For the reasons I have given I would allow the appeal.
Lords Parliament Commons Search Contact Us Index
|© Parliamentary copyright 1998||Prepared 22 January 1998|