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Foo Ying And Another v Commissioner Of Estate Duty

Judgment Cited authorities 6 Cited in Precedent Map Related
Vincent
Judgment Date31 March 1989
Year1989
Judgement NumberHCMP1/1988
Subject MatterMiscellaneous Proceedings
CourtHigh Court (Hong Kong)
HCMP000001/1988 FOO YING AND ANOTHER v. COMMISSIONER OF ESTATE DUTY

HCMP000001/1988

Headnote

Section 31 of the Estates Duty Ordinance, Chapter 111 provides : -

"Where the Commissioner is satisfied that estate duty has become payable on any property consisting of leasehold property .... or any interest in leasehold property .... passing upon the death of any person, and that subsequently within five years estate duty has again become payable on the same property or any part thereof passing on the death of the person to whom the property passed on the first death, the amount of estate duty payable on the second death ... in respect of the property so passing shall be reduced ...."

F and his sons died in an air crash on 9.7.82. (the 1st death). In consequence F's residuary estate, including leasehold property upon which estate duty was paid, devolved upon M. Less than 3 months later M died (the 2nd death) before F's estate had been administered or distributed. On M s death the same leasehold property was assessed for estate duty. M's executor contended that the leasehold property qualified for quick succession relief under Section 31 of the Ordinance on the 2nd death.

The Commissioner refused relief on the grounds that as the leasehold property formed part of undistributed residuary estate no legal or equitable interest in that property passed to M on the 1st death.

On appeal by the executor:-

Held: Allowing the appeal, that property passing to M s estate on the 1st death is to be equated with property passing to her in her lifetime. That 'property passing on the death' in Section 31 of the Ordinance includes property passing on account of the death. That in the circumstances the leasehold property passed to M on account of F's death (the 1st death), the same leasehold property attracted duty on M's death (the 2nd death) and the leasehold poperty qualified for quick succession relief under the section.

Quaere : Whether in any event sufficient beneficial interest (a 'floating equity') in the leasehold property passed to M on the 1st death to satisfy the section. See Warren's Trustees v. Inland Revenue (1928) S.C. 806.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ESTATE DUTY APPEAL NO. 1 of 1988

______________

IN THE MATTER of Section 31 of the Estate Duty Ordinance

and
IN THE MATTER of an Appeal by FOO YING (傅楹)Executor to the Estate, of LAW CHOY WAN(羅賽雲) also known as FOO LAW CHOY WAN or IVY FOO deceased against an assessment dated 1st September, 1988 under Section 22 of the Estate Duty Ordinance

______________

BETWEEN

FOO YING Executor to the Estate of LAW CHOY WAN also known as FOO LAW CHOP WAN or IVY FOO deceased

Appellant

and

COMMISSIONER OF ESTATE DUTY

Respondent

___________

Coram: The Hon. Mr. Justice Mortimer in Court

Date of Hearing: 27th February 1989

Date of Delivery of Judgment: 31st March 1989

______________

J U D G M E N T

______________

Mortimer J:

The facts

1. Foo Shun and his two sons Fu Kwok Yee and Fu Kwok Bun died in an aeroplane crash on 9th July 1982. By reason of their deaths 5/11th of Foo Shun's residuary estate under his will devolved upon his mother Ivy Foo.

2. Fu Shun's estate included leasehold property and interest in leasehold property. This is listed in Exh. FY-7 pages 10/11 paras. 19(a) to (g) and (i) and paras. 20(a) to (e). 5/11th interest amounted to $26,162,968.52 based on a net full value of the estate at $72,113,304 00. Estate duty was payable under Section 5 of the Estate Duty Ordinance. The duty included duty on the leasehold and interest n leasehold property

3. Less than 3 months later on 28th October 1982 Ivy Foo died. Her estate was valued at $26,982,600.00 of which $26,162,968.52 was the 5/11th share of Foo Shun's estate. Estate Duty was payable and was assessed upon the leasehold property and interest in leasehold property which had devolved upon her from Foo Shun.

4. When Ivy Foo died, Foo Shun's estate had not been administered or distributed but the same leasehold property or part of it was assessed for estate duty on Ivy Foo's death as part of her estate. It became part of her estate on completion of the administration after the first death.

The issue

5. Ivy Fools executor contend s that this leasehold property and interest in leasehold property qualifies for quick succession relief under Section 31 of the Estate Duty Ordinance Cap. 111. It was disallowed by the Commissioner and the executor appeals

6. This Section provides quick succession relief for leasehold property and businesses. The relevant parts are as follows :

"31. Where the Commissioner is satisfied that estate duty has become payable on any property consisting of leasehold property..... or any interest in leasehold property..... passing upon the death of any person, and that subsequently within five years estate duty has again become payable on the same property or any part thereof passing on the death of the person to whom the property passed on the first death, the amount of estate duty payable on the second death...... in respect of the property so passing shall be reduced..."

Four conditions must therefore be satisfied:

(1) the property must be leasehold property.

(2) the duty must have become payable on the death of a person upon that property (the first death).

(3) Within five years estate duty must have become payable again on the same property or part of it (the second death).

(4) The se duty must have become payable on the death of the person to whom the property passed on the first death.

7. The issue is whether the leasehold property (the same property or any part thereof) passed to Ivy Foo on Foo Shun's death, that is the first death.

The contentions

8. The taxpayer contends that as the 'same property or part thereof' attracted duty on both deaths the only question is whether Ivy Foo is "the person to whom the property passed on the first death". Summarized the submissions are:

(1) That the words "passing on death" is not a term of art.

(2) That the section is concerned with the liability to pay duty upon certain property and not with the mechanics of transfer of that property nor with the particular time of such transfer:

(3) That "the person to whom the property passed on the first death" is a question of fact and that the words do not mean "at the time of" the first death but "on account of" or "as a result of" the first death. (see Warren's Trustees v. Inland Revenue, [1928] S C 806).

(4) That if the quoted words of the section are ambiguous, then Section 19 of the interpretation and General Clauses Ordinance Cap. 1 has to be applied and if applied will result in the interpretation contended for See Section 19 which reads:

"19. An Ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Ordinance according to its true intent, meaning and spirit."

(5) That Sudeley v. the Attorney General [1897] A.C 11; Dr. Barnardo's Homes v. Special Income Tax Commissioners [1921] 2 A C 1 and Commissioner of Stamp Duty v. Livingston [1965) A C 694 are not in point because they address. The narrow proprietary issue of what passes immediately after death with which the relevant section is not concerned.

(6) that in any event sufficient interest in residuary estate passes to a beneficiary at the time of the death of the testator to satisfy the section; that is on the first death. (See Warren's case already cited.)

On the other hand, the Commissioner submits:

(1) That Ivy Foo was never "the person to whom the property passed on the first death" because the leasehold property was part of the residuary estate and that at the time of death or immediately after nothing passed to her save a 'chose in action' being a right against the executors to have the estate properly administered and distributed.

(2) As only a 'chose in action' passed this is not the leasehold property, and therefore cannot be "the same property or part of it" within the Section (see Sudeley v. the Attorney General and the cases following already cited).

(3) Further, the estate on the first death had not...

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