Oughtred v Inland Revenue Commissioners

Factual and Procedural Background

The Appellant held a life interest in 200,000 shares in Company A; her son owned the equitable reversion in those same shares. On 18 June 1956 the two orally agreed that, on 26 June 1956, the Appellant would transfer 72,700 of her own shares in Company A to the son, and the son would surrender his reversionary interest so that the Appellant would become the absolute beneficial owner of the settled shares.

Three instruments were executed on 26 June 1956: (1) a transfer of the 72,700 “consideration shares” from the Appellant to nominees for her son; (2) a deed of release by the Appellant and her son in favour of The Trustees, reciting that the trustees now held the settled shares for the Appellant absolutely and directing a transfer to her; and (3) a share transfer by The Trustees vesting legal title to the settled shares in the Appellant (“the Transfer Deed”).

The Respondent assessed the Transfer Deed to ad valorem stamp duty as a “conveyance on sale” under the Stamp Act 1891. The Appellant unsuccessfully challenged the assessment before the Commissioners, then succeeded before the High Court (Judge Upjohn), but the Court of Appeal reversed that decision. The Appellant appealed to the House of Lords.

Legal Issues Presented

1. Whether the Transfer Deed was an “instrument … whereby any property, or any estate or interest in any property, upon the sale thereof is transferred to or vested in a purchaser” within the meaning of section 54 and the First Schedule to the Stamp Act 1891.
2. Whether section 53(1)(c) of the Law of Property Act 1925 required a written disposition of the son’s equitable reversion, thereby preventing the oral agreement from transferring that interest prior to execution of the Transfer Deed.
3. Consequently, whether ad valorem stamp duty was chargeable on the Transfer Deed or only the fixed duty of ten shillings.

Arguments of the Parties

Appellant's Arguments

• The oral agreement, being specifically enforceable, created a constructive trust in the Appellant’s favour; therefore, by 26 June 1956 she already owned the entire equitable interest, leaving the Transfer Deed to convey only the bare legal estate, which attracts only fixed duty.
• Section 53(2) of the Law of Property Act 1925 exempts constructive trusts from the writing requirement in section 53(1)(c), so the absence of a written assignment was immaterial.
• The Trustees, not the son, executed the Transfer Deed; hence it could not be an instrument transferring the son’s equitable reversion “on sale.”
• Stamp duty attaches to instruments, not transactions; there existed no instrument transferring the equitable reversion, and none was required.

Respondent's Arguments

• Because section 53(1)(c) demands a written disposition, the son’s equitable reversion remained vested in him until the Transfer Deed; accordingly, that deed conveyed both the legal estate and the equitable reversion on sale and was chargeable ad valorem.
• The three documents of 26 June 1956 formed a single completion of the sale contemplated by the oral agreement; the Transfer Deed was the instrument implementing that sale.
• A transfer by trustees at the vendor’s direction is, for stamp-duty purposes, equivalent to a transfer by the vendor himself (Attorney-General v. Brown).

Table of Precedents Cited

Court's Reasoning and Analysis

The Law Lords divided. Judge Radcliffe and Judge Cohen (dissenting) would have allowed the appeal, accepting that a constructive trust vested the equitable reversion in the Appellant upon the oral agreement, leaving the Transfer Deed to convey only the legal estate. They concluded that no instrument conveying the son’s equitable interest existed, so ad valorem duty was not chargeable.

The majority—Judge Jenkins (with whom Judge Keith concurred) and Judge Denning—upheld the duty assessment. Their key reasoning was:

• Section 53(1)(c) requires a written disposition of a subsisting equitable interest; absent such writing, the son’s reversion continued in him until the Transfer Deed.
• Even if a constructive trust arose, the purchaser’s equitable interest under an executory contract does not prevent a subsequent conveyance from being a “transfer on sale” for stamp-duty purposes; the deed confers a different and fuller title, especially important for company shares (registration, voting, dividends).
• The Transfer Deed implemented the parties’ agreed method of completing the exchange; it transferred to the Appellant the very property that represented the reversionary interest, now merged with her life interest. Therefore, it fell squarely within section 54 of the Stamp Act 1891.
• The fact that the Trustees, rather than the son, executed the deed was immaterial because they acted at the direction of both beneficiaries, analogous to the situation in Attorney-General v. Brown.

Holding and Implications

APPEAL DISMISSED. The majority held that the Transfer Deed was a conveyance on sale and therefore liable to ad valorem stamp duty of £663; the fixed duty of ten shillings did not apply.

Immediate effect: the Appellant must pay the assessed duty (minus the ten shillings already paid). Broader implication: where parties complete an oral agreement for the sale of equitable interests in shares by directing trustees to transfer the shares themselves, the resulting instrument will attract ad valorem duty, even if a constructive trust may have arisen earlier. The decision affirms the strict application of section 53(1)(c) of the Law of Property Act 1925 and underscores that stamp duty focuses on the instrument that perfects the purchaser’s title.