Trust settlements and estate duty: original corpus only, accretions excluded, while personal account balances were treated as debts.

Trust funds credited to accounts controlled by the deceased remained fiduciary property, not ordinary debts, because the beneficiaries' rights were enforceable in trust despite later mixing with his business funds. Section 22 could not itself create estate duty chargeability, and section 10 was held confined to gifts simpliciter, not trust settlements without consideration, except within the amended statutory exception. Even where section 10 applied, only the original corpus could be treated as passing; later accretions and credited interest were excluded. Personal account balances for family members were treated as debts rather than trust moneys and were liable to abatement only where statutory conditions were met.

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Issues: (i) Whether the amounts standing to the credit of the three trust accounts were held on trust by the deceased or were debts due by him; (ii) whether section 22 could be invoked to bring those trust amounts into charge, and whether section 10 applied to dispositions made without consideration by way of trust; (iii) whether only the original corpus or also the accretions in the trust accounts could be included in the estate under section 10; (iv) whether the sums standing to the credit of the individual accounts of the wife, daughters and grandchildren were trust moneys or debts, and whether the debts were liable to abatement under section 46; (v) whether the gifts received by the grandchildren and the amount contributed by the wife to the charitable trust were liable to abatement.

Issue (i): Whether the amounts standing to the credit of the three trust accounts were held on trust by the deceased or were debts due by him.

Analysis: The trust deeds showed that the deceased was one of the trustees and, as long as he continued as trustee, he had the powers of sole managing trustee. The amounts were later deposited with him, mixed with his funds, and used in his business, but those features did not alter the character of the original arrangement. The decisive factor was that the beneficiaries' rights remained enforceable in trust and not as ordinary creditors. The nature of the obligation was therefore fiduciary rather than debtor-creditor.

Conclusion: The amounts in the three trust accounts were held on trust and were not debts due by the deceased.

Issue (ii): Whether section 22 could be invoked to bring those trust amounts into charge, and whether section 10 applied to dispositions made without consideration by way of trust.

Analysis: Section 22 is an exception from charge and cannot itself create a charge of estate duty. Once the trust character of the funds was accepted, the proper charging provision, if any, had to be found elsewhere. On construction, section 10 was held not to apply to a disposition made without consideration by way of trust, except where the trust fell within the amended relative-gift provision. The expression "property taken under any gift" in section 10 was confined to gifts simpliciter and did not extend to trust settlements without consideration.

Conclusion: Section 22 could not be used as a charging provision, and section 10 did not apply to dispositions made without consideration by way of trust, save within the amended statutory exception.

Issue (iii): Whether only the original corpus or also the accretions in the trust accounts could be included in the estate under section 10.

Analysis: Even assuming section 10 applied, the property deemed to pass would be only the property originally taken under the gift. Accretions, interest, or later increases were not part of the subject-matter of the original disposition. They could not be treated as property taken under the gift merely because they had been credited to the trust account later. In the case of the two trusts where the balance exceeded the original corpus, the excess could not be brought to charge under section 10.

Conclusion: Only the original corpus was potentially includible under section 10, and the later accretions were not includible.

Issue (iv): Whether the sums standing to the credit of the individual accounts of the wife, daughters and grandchildren were trust moneys or debts, and whether the debts were liable to abatement under section 46.

Analysis: Moneys received by the beneficiaries from the trust and then re-deposited with the deceased, or credited to their personal accounts with their consent, lost their character as trust moneys and became ordinary debts. For the wife and the grandchildren, the account balances were therefore debts due by the deceased. As to the daughters, the same result depended on whether the trust income was in fact received and re-deposited or credited with consent. Those debts were subject to abatement because the consideration was traceable to property derived from the deceased within the statutory definition, and the proviso protecting dispositions not made with a view to enabling the later transaction was available.

Conclusion: The relevant personal account balances were debts, not trust moneys, and the debts were liable to abatement to the extent indicated by the statutory scheme.

Issue (v): Whether the gifts received by the grandchildren and the amount contributed by the wife to the charitable trust were liable to abatement.

Analysis: The grandchildren's gifts were not shown with sufficient certainty to have come from the deceased, and the burden of establishing abatement lay on the revenue. The amount contributed by the wife to the charitable trust did not fall for abatement on the footing urged by the revenue in the circumstances found.

Conclusion: The gifts received by the grandchildren were not liable to abatement, and the separate contribution question was not decided against the accountable persons on the material adopted.

Final Conclusion: The trust funds were held on trust, section 22 did not create chargeability, section 10 was confined to the original corpus and did not extend to trust accretions, and the personal account balances were treated as debts subject to abatement only where the statutory conditions were met; the accountable persons obtained substantial but not complete relief.

Ratio Decidendi: A trust settlement without consideration is not, merely because the trustee later uses or mixes the funds, converted into a gift caught by section 10; only the original subject-matter of the gift can be deemed to pass, and later accretions or re-deposited trust income are governed by their own legal character under the debt and abatement provisions.

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