Discretionary trust and estate duty: death of one object did not trigger a passing on death where the trust continued unchanged.

A discretionary trust of income did not fall within section 2(1)(b) because the objects' rights were not an ascertainable interest in the whole income and could not be aggregated into one. Estate duty also did not arise under section 1 simpliciter, because the husband's death did not create a new trust, a new class, or a new beneficial arrangement. The original discretionary trust continued unchanged, and the wife merely became the sole surviving object within the same trust purpose. Estate duty was therefore not chargeable on the trust funds, and the appeal succeeded.

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Issues: (i) Whether section 2(1)(b) of the Finance Act, 1894 applied to a discretionary trust of income where, on the husband's death, the wife became the sole surviving object. (ii) Whether, notwithstanding the inapplicability of section 2(1)(b), the trust funds passed on the husband's death within section 1 of the Finance Act, 1894 simpliciter.

Issue (i): Whether section 2(1)(b) of the Finance Act, 1894 applied to a discretionary trust of income where, on the husband's death, the wife became the sole surviving object.

Analysis: The charge to estate duty arises under section 1, while section 2(1) specifies situations in which property is treated as passing on death. In a discretionary trust, the rights of individual objects are not an ascertainable interest in the whole income, and the competing rights of the class cannot be aggregated into such an interest for section 2(1)(b). The earlier authorities on discretionary trusts established that this provision does not fit the case of a bare discretionary class.

Conclusion: Section 2(1)(b) was not applicable.

Issue (ii): Whether, notwithstanding the inapplicability of section 2(1)(b), the trust funds passed on the husband's death within section 1 of the Finance Act, 1894 simpliciter.

Analysis: Section 1 is not exhausted by section 2, and a passing on death may exist even where no section 2 situation is present. The decisive question was whether the husband's death created a new trust, a new group, or a new qualification for enjoyment. It did not. The original discretionary trust continued unchanged, and the wife merely became the sole surviving object within the same trust purpose. The cases relied on by the Crown were distinguished because they involved a fresh trust or a different beneficial scheme.

Conclusion: The trust funds did not pass on the husband's death under section 1 simpliciter.

Final Conclusion: Estate duty was not chargeable on the trust funds on the husband's death, and the appeal succeeded.

Ratio Decidendi: In a continuing discretionary trust, the death of one object does not amount to a passing on death for estate duty purposes unless the death gives rise to a new trust or a new beneficial arrangement; section 2 is not exhaustive, but section 1 is not triggered where the same trust purpose continues unchanged.

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