§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ 4.45 p.m.
§ Mr. Manningham-Buller
I should like to ask the Financial Secretary, now that he is trespassing on the preserves of the Attorney-General, if he will commit an act of trespass again in order to answer a few simple questions about this Clause. I am sure that if he knows the anwser he will read it as well as he did the answer to the last point raised on the previous Clause.
I am a little puzzled about this Clause, because looking at Estate Duty, I find that the Clause does no more than set out what has been the law of the land not only with regard to Income Tax and Surtax, but also for Estate Duty for many years. I am not certain how long it goes back, but I think it is a long time. That being so, I ask the hon. Gentleman: What is the reason for the sudden inclusion of this provision in the Finance Bill? Is it to provide us with work to keep us occupied, or is it because of a recent decision? Is there any connection between this Clause and the decision to which the hon. Gentleman referred in his speech explaining the previous Clause in the Bill? We should like to know why suddenly it has been found necessary to put this Clause into the Bill and whether, in fact, in the opinion 2162 of the Attorney-General the Clause makes any difference to the law at all?
§ Mr. Hylton-Foster
Would the Financial Secretary explain something else? So far as I understand it, in connection with Income Tax it has always been the practice that the case could not be re-opened if the practice which had been followed was the practice generally prevailing at the time of the bargain between the Revenue and the subject. This Clause seems to do the opposite in relation to Estate Duty in so far as the matter is governed by this Clause and by the view of the law prevailing then as opposed to the practice generally prevailing.
I should be most grateful if the Financial Secretary, when he replies, could explain why this practice, if it is the right test for Income Tax, is not the right test for Estate Duty, and, if that is so, why it is not applied in this Clause, because it seems to me to demand some explanation which I feel the Committee will appreciate.
§ Mr. Renton
I feel that there are further matters on this Clause which require explanation. One might explain, which is possibly taken for granted, that under the general law of England a mistake in the law does not, as a rule, offer a ground for relief, when money has been paid as a result of that mistake. But in the Finance Act of 1894 there is an exception to that general rule. As I understand, the effect of this Clause is that that exception is being varied but it is being varied in a rather extraordinary way, as my hon. and learned Friend the Member for York (Mr. Hylton-Foster) has already pointed out, and in a way which I also find extraordinary for this further reason.
It is to be the law in future that if there is settlement of a claim, presumably either by negotiation or by the Commissioners themselves, and there is a subsequent change in the law or in the interpretation of the law, the settlement shall be of no effect whatsoever, even though a subsequent decision shows quite clearly what principles of law shall be applied to the settlement or adjustment of the claim.
We may reach this rather extraordinary position, that when a claim has been made, either by or against the Commissioners and has been settled on a Thursday of a particular week by the party to 2163 the dispute, that the next day there is a contrary decision, perhaps in the High Court on appeal from the Commission. Under those circumstances that subsequent decision shall be of no effect at all. In any event, who is to decide in interpreting this Clause or in administering it—because it would be more a matter of administration rather than a legal decision—what was the generally adopted law upon which the claim was settled or adjusted?
It may very well be that no principles of law at all were applied. It may perfectly well have been that the Commissioners made their claim without looking at the matter very much. It was accepted in those circumstances. The interests of the subject would demand a clear decision of the law, made the next day. In circumstances of that kind where does the subject stand? Who is to decide what is the generally received or adopted principle of the law?
§ Mr. Higgs (Bromsgrove)
I had some difficulty in discovering what the Clause means, so I thought it would be better to purloin words which I have found in Green's Estate Duty, 1947. It says:Where estate duty was properly levied and paid as the law was believed at the time time to stand, it is not repaid on the ground that a subsequent judicial decision has shown the former view to be incorrect, or that (without any such decision) the Commissioners have since departed from the proper view.That seems to express as accurately as possible, and rather more simply, what the Clause says. Those words are said to be the law up to 1947, and up to the date when the Bill will come into operation. When one sees that the Government take the trouble to set out in complicated language what the law shall be or what it has been in the past, it must be taken to mean something in the nature of a change in the law. I hope that the Minister will tell us, for the avoidance of doubt in the matter, why and in what way the Clause departs from the principles which have been hitherto followed.
There are particular points of detail upon which this matter has been brought into the arena. The first is in subsection (2) which relates to the transitional case, which is on the files of Somerset House at this moment. There it is said that the Clause shall come into effect from 11th April, 1951. 2164but not so as to affect any appeal to a court of law which was brought before that day under section ten of the Finance Act, 1894.When is an appeal "brought"? Is it when notice is given of the appeal, or is it when counsel gets up to open the case?
On two other cases we ought to have information. First of all, it is said in the existing text books that where Estate Duty which has been paid and receipt given, that case may not be reopened either way. The Treasury cannot claim more duty if a subsequent decision shows that more duty could have been claimed at the time. The text books also say that, as things stand at the moment, if duty is agreed upon to be paid over a period by instalments, the matter may be reopened before the final instalment is known. Does the Clause mean any change in these arrangements that might involve any substantial difference?
The second case seems rather unfair. Sometimes people may believe that the duty should be less than Somerset House claims, but Somerset House persists. What happens when people are compelled to pay up, under duress, and it subsequently turns out that there has been a mistake? Are we to say that because people have given way to force majeure that the matter is not to be reopened? Where one has paid under firm protest, one should have the right to reopen the matter.
A question might arise, in the case of a person who was killed, whether he was killed on active service or not. When the decision in such a case was made one way or the other, duty should be repaid, one way or the other. It would be very much better that duty should be paid under firm protest, and reserve the right that the duty should go, in the end, to those whose view of the law turns out to be correct. All these cases depend on the question of whether we are making a change in the law, or are declaring what the law has been—as a result of my researches—since 1774.
§ The Attorney-General
This Clause is designed to create a degree of stability in an area where there has been uncertainty. The law dealing with Estate Duty has evolved over a number of years, but one occasionally gets a decision of the courts which seems to alter the settled practice in regard to 2165 these matters, and it is only when one looks at the thing from the commonsense point of view that there is a general acceptance in regard to the law in this class of case.
Often a case may have been decided and acted upon for years and years in the courts. Hon. Members will have in mind various cases on which these things depend. Recently we had the case of Earl Fitzwilliam, deceased, a decision which overruled a view of law which had been entertained for nearly 44 years as it depended upon a case decided in 1905.
When we get that state of affairs, an enormous amount of money changes hand over the years. Estates are settled and wound up and everybody concerned thinks that the matter is finally disposed of. Hon. Members know that if a subsequent decision is given overruling that accepted state of the law a situation of great inconvenience may arise. The Finance Act, 1894, contains a provision in Section 24 (12) which, upon its true construction—which has now been decided as a result of advice given—provides that even though a payment may have been made to the Estate Duty Office upon an accepted view of the law it can become repayable and can be reclaimed if, subsequently, it transpires from some later judicial decision that that view of the law was wrong.
In the case of Earl Fitzwilliam, deceased, the law having been declared in that decision in a contrary sense to that which had been accepted 44 years before that, the result may be that very large sums of money may have to be repayable. That is a very disastrous state of affairs, and it does not operate only one way. It means that the estates of deceased persons have claims for repayment and it equally means that the Estate Duty Office has claims for further payments or for payments not made because those payments have been withheld upon an accepted view of the law.
The result is that unless some degree of certainty is introduced into this sphere of the law, when we get a legal decision which upsets what has been regarded as the settled law we may have a flow of claims one way or the other, either by the Estate Duty Office or by the estates of deceased persons. The Estate Duty Office has not for a long time past exercised its right 2166 to make claims for money which subsequent legal decisions have shown to be due to it, but, strictly, the claims can be made either way.
It was thought, particularly in view of the urgency of the problem as brought to light in the case of Earl Fitzwilliam, deceased, that it really would be in everybody's interest if we firmly laid down as a principle that once we could say that a state of law was accepted as settled and verified if payments had been made either way—to the Estate Duty Office or the other way—or a claim had not been made by the Estate Duty Office in the belief that that was the correct law, that should be final and the situation should not be liable to be overturned in the event of its subsequently transpiring—perhaps 10, 25 or 50 years hence—that the view of law was a wrong view of law.
That is the situation which the Clause is designed to remedy. If hon. Members will look at it more closely they will see that where there was a payment, in so far as it appears that the payment and its acceptance were regarded as satisfying the claim of duty and regarded on a view of the law which at the time was generally received or adopted in practice, it shall be determined for good and all upon that view and it shall not make any difference if that settled view of law is subsequently overturned by a legal decision.
That is what the Clause is designed to do, and it is, obviously, in the interests of the Revenue and equally in the interests of every testator and the estates of all deceased persons that there should be ultimate finality about the matter. Where receipts have been given and certificates issued, the matter in any case cannot be re-opened. This adds to that that when a payment has or has not been made upon an existing state of law in the belief that that existing state of law is the right state of law it cannot ultimately be re-opened.
Hon. Members have asked what is really meant by the words:… a view of the law which at the time was generally received or adopted in practice …I can only say that those words mean what they prima facie seem to mean, and that is that when everybody has acted upon a judicial decision always accepted as being correct we can say that these words are brought into operation and 2167 when that situation arises claims both ways are to be deemed finally settled once and for all and not subject to be re-opened in the event of the law being shown to be different from what it was supposed to be.
§ Mr. Renton
The Attorney-General has given us a most interesting description of the state of affairs which exists, but he has left us in a state of somewhat fascinated uncertainty about some of the matters. If he could follow the illustration he gave to its logical conclusion and tell us about the situation created by the decision in the case of Earl Fitzwilliam, deceased, it would be of interest. Can he say whether there are outstanding claims for repayment based upon the previous and different view of the law which was taken in cases decided before that case was dealt with? Are there any such cases outstanding?
Perhaps he would answer the simple but important question put by the hon. Member for Bromsgrove (Mr. Higgs), whether the Clause is declaratory or makes a change in the law. It would appear that it is declaratory or the practice which the Treasury would like to have followed but that, in fact, it makes a change in the law. May we be enlightened about that?
The Attorney-General did not say who was to be responsible for deciding what was the generally received or adopted view of the law in practice. One has to guess from the procedure which would be applied in such cases. It is not set out in the Clause. It is the procedure which follows from a claim by the Commissioners or a claim against the Commissioners after a mistake has already been made in the payment of duty, but the question is: Who will be responsible for saying what was the received or adopted view of the law in practice at a certain time? Who makes that decision, and in what circumstances?
§ The Attorney-General
I should like to answer those questions. The Clause makes certain what was previously somewhat uncertain. It depended upon Section 8 (12) of the Finance Act, 1894, which laid down that where it was provided to the satisfaction of the Commissioners that too much Estate Duty had been paid, the excess should be repaid by 2168 them. There was some uncertainty as to the effect of the words in that subsection and, in particular, whether they operated where the payment had been made under a mistake of law. The Clause finally lays down the position.
As to who is to decide this, in the first place it will be those who are immediately concerned with a particular estate. That is to say, the Estate Duty Office and the solicitors concerned in administering an estate will have to decide and advise their clients whether there is a settled state of law or not. In the event of there being a difference of view between those representing the estate and the Estate Duty Office, the matter would ultimately come before the court and it would be the court which had to decide whether there was a settled view of law at a given time.
With regard to the question of claims outstanding, if the view is right—this is the view which has recently been preferred—that money paid under a mistaken view of the law has to be repaid, the effect of the Earl Fitzwilliam, deceased, case is that claims can be made against the Estate Duty Office going back to 1905 when the principle which the Fitzwilliam case overruled was first established. Therefore, were it not for this Clause, claims might be made for years and years back; and, of course, vice versa.
If any accepted principle of law at present acted upon is decided by some future legal decision to be wrong, the Estate Duty Office, were it not for this Clause, would have claims going back for years to the date when the law upon which they had formed their claim was laid down.
§ Mr. Renton
I hope that the hon. and learned Gentleman will forgive me for pursuing this. He has told us what could happen as a result of the Fitzwilliam case. What I was asking is what will happen? Are there claims outstanding at the moment against the Estate Duty Office? This is an important thing, because this Clause would appear to defeat such claims and we should be clear about it.
§ The Attorney-General
The final subsection excludes the operation of the law in relation to any appeal to a court of law brought about after 11th April, 1951. 2169 So, anything outstanding in the way of an appeal there would be excepted from the Clause. The effect of the Fitzwilliam decision, and I cannot elaborate it any further, is that there would be claims against the Estate Duty Office relating to estates settled over the last 40 years, were it not for the fact that we are now settling the law once and for all, with the result that they cannot be brought except in so far as concerns any fresh appeal up to the date of the passing of the Clause.
§ Mr. Higgs
I did ask the right hon. and learned Gentleman if he could tell us when "brought" happens, of I may put it that way. Is it when the notice is given or when the actual hearing begins? I also asked, and this is a matter which will affect the administration of the Clause, whether this Clause over-rules what has hitherto been stated in the text books to be the law. If duty is being paid in instalments or has otherwise not been fully discharged a claim for repayment may well be entertained. Does this Clause alter the law in that rather important respect? In the case of the larger estates it is often the case that duty is paid in instalments, and if it is discovered during the currency of the payments that a mistake has been made either way is it then possible for the matter to be re-opened?
These points are dealt with in the text books and the question will arise whether the books are still correct. There is the other question of payment under protest. At present, the law appears to be that it makes no difference to the operation if one pays money under protest, but if there is anything in the nature of compulsion on the part of the Revenue then the rule does not apply. This is referred to in Halsbury's, Hailsham Edition, Vol. XXVIII, page 332, footnote (b):It makes no difference that the money had been paid under protest, where it was not extorted under duress and colore officii.If that is so the position is that if one pays under protest the case cannot be reopened but if Somerset House uses compulsion, and one turns out to be right, one can. What we want to know, and what Somerset House will have to know, is whether this Clause over-rules that, or does it merely leave it as it was?
§ The Attorney-General
The appeal is "brought," I should have thought, when it was initiated and when the first steps to bring it before the court were taken. I think that is the position, but I cannot be bound to that without further consideration. In the case of money being paid by instalments on account of Estate Duty the Clause is expressed to operate in respect of money actually paid; that is to say, if the money has already been paid under the terms of the existing state of law it cannot be repaid. I should have thought the same applied whether under protest or under compulsion. Money paid on a view of the law generally accepted is paid once and for all and cannot be re-claimed.
§ 5.15 p.m.
§ Mr. C. Williams
I think the Committee is entitled to an answer to the question put by my hon. Friend the Member for Huntingdon (Mr. Renton). We understand that this Clause may have been put down because of difficulty in paying. We also understand that the Clause will prevent certain things happening in the future and in that way will be a clarifying Clause. But I think the Committee is entitled to know whether there are many small cases—not big cases like the Fitzwilliam case—coming up over the last few years.
The Chancellor will bear me out that Clauses are not inserted needlessly into the Bill, and, therefore, the Treasury should know that they may have to deal with a number of smaller cases. I wish to know how big a clearance of smaller cases we may expect under this new Clause. That is something which the Treasury must obviously know and I cannot understand why the right hon. and learned Gentleman has not answered it. He has answered the difficult question. This is a simple one, but if he cannot answer it perhaps the Chancellor may be able to do so.
§ The Attorney-General
I have no doubt that over the last 40 years there are both small and large claims. That stands to reason. But I have not with me particulars of all the cases which are affected by the Fitzwilliam case stretching back over 40 years, and, with respect, I would submit that it is not necessary to have all that detailed information to decide whether this Clause is one which should be accepted or not. If we do not pass 2171 this Clause the results of the Fitzwilliam case, which upsets the principle which has been in existence for over 40 years, will mean that claims can be made against the Estate Duty Office in respect of estates thought to have been finally disposed of over those years. That would be a deplorable situation. There are, no doubt, large and small estates involved, but to have to re-open them now would no doubt cost a large sum of money and would really be most unfortunate.
§ Mr. C. Williams
I have not for one moment asked for all the facts and figures. That would be unreasonable. But my hon. Friend did put a simple question and I am sorry we have not had better luck in getting a sensible answer. I assume that there is a possibility of other cases being opened up and I am thankful that the Government put in this Clause which prevents lawyers carrying on the needless legislation which might have arisen if it had not been put into the Bill. I congratulate the Government on that. There is so little over which to congratulate them. They are mismanaging things so badly, but I think it would be ungenerous if I did not take this last point and congratulate them on this crumb of sense in the Clause.
§ Clause ordered to stand part of the Bill.