1968 PLP 23 (PTD)

5. It was contended on behalf of the appellants :‑(1) that having regard to clause 2 (5) of the deed, the term `year' in clause 1 meant a year commencing with the commencement of the deed, and not a calendar year ; (2) that since, in the absence of express provision, an annuity did not fall due for payment until the end of the year in respect of which the annuity was payable, the first year's annuity was payable, the first years' annuity would not, but for the provision that it was to be paid forthwith, have been payable until May 4, 1954, and the second year's annuity would not have been payable until May 4, 1955 ; (3) that therefore the direction in clause 1 of the deed to make the subsequent payments on May 1 in each year meant in relation to the payment of the second year's annuity, May 1, 1955, and not May 1, 1954 ; (4) that, consequently, the deed of covenant imposed on the respondent no obligation to make any payment to his son in the year ended April 5, 1955 ; and (5) accordingly, that no deduction was allowable in computing the respondent's liability to surtax for the year 1954‑1955.

6. We, the commissioners, who heard the appeal gave our decision as follows : In this appeal we are faced with the construction of a home‑made deed. On the face of it, clause 1, which provides for `payments on the first day of May in each year,' quite clearly, in our view, provides for a payment on May 1 in each calendar year. It was argued for the Crown that in view of the provisions of clause 2 (5) of the deed the phrase `each year' in clause 1 should be construed as each year ended on May 1, and that following the first payment on the execution of the deed on May 5, 1953, no further payment was due thereunder until May 1, 1955. We are unable to accept this contention. We hold that clause 1 which imposed the obligation to pay an annuity is clear in its terms and created an obligation to make a payment of 450 on May 1, 1954 ; and that the terms of clause 2 (5), which are part of the provisions defining the limit of the covenant, do not override the clear terms of clause

1. If we are wrong as regards this and there is ambiguity as to the obligation imposed on the respondent, then we hold that the deed must be construed against the respondent, who was the covenantor, and in favour of the beneficiary. On either ground we hold that the payment made by the respondent was an annual payment made by virtue of an obligation imposed upon him by the deed of covenant. We are reinforced in this decision by the consideration that, unless compelled by the clear terms of the deed, we should be loth to accept an interpretation which had the result that an annual allowance from a father to his son was paid on May 5, 1953, and did not become due again until May 1, 1955, i.e., nearly two years later. We accordingly allowed the appeal and reduced the surtax assessment made upon the respondent for the year 1954‑1955 to 20,751.

7. The representative of the appellants, immediately after the determination of the appeal, declared to us his dissatisfaction therewith as being erroneous in point of law, and in due course required us to state a case for the opinion of the High Court.

3. The question of law for the opinion of the High Court is whether on a proper construction of the deed of covenant of May 5, 1953, we were right to hold that the respondent was under an obligation to make an annual payment of 450 on May 1, 1954." Sir Harry Hylton‑Foster Q. C., S.‑G. and Sir Reginald Hills for the Crown. John Pennycuick Q. C., and Eric Griffith for Respondent. Solicitors : Solicitor of Inland Revenue ; Alsop, Stevens & Co. I need not trouble you, Mr. Pennycuick. On this appeal, it seems to me that the decision of the commissioners, which was in favour of the taxpayer, was perfectly correct. It relates to a deed made on May 5, 1953, by which the respondent to this appeal covenanted to pay what is described an "annual sum of four hundred and fifty pounds less income tax" to his son. The terms of the deed, so far as material, are as follows: "The grantor hereby covenants with the said son to pay him henceforth during the continuance of this covenant the annual sum of 450 less income tax thereon at the current rate for the time being the first payment to be due forthwith and the subsequent payments on the first day of May in each year." At that point, certainly, I should have thought plainly "the first day of May" meant that day in each calendar year. It would not be natural to think anything else. Then comes clause 2 : "This covenant shall continue in operation until the happening of the first to occur of the following events or dates, viz. :‑(1) the death of the grantor ; (2) the death of the son ; (3) the bankruptcy of the son ; (4) the execution or attempted execution by the son of any assignment or of any charge on the said annual sums payable hereunder," and then this is the most important one, "(5) the expiration of eight years from the date hereof". It is argued on behalf of the Inland Revenue that "eight years" in sub-clause (5) must mean eight years calculated not as years from January 1, but of years beginning from May 5, 1953, and, of course, that is perfectly true. It means that the period of the covenant will expire on May 4, 1961. It is said, therefore, that this was contrary to the provisions contained in clause 1 of the deed, and that the year is a year of the same kind, dating from May 5 in each year and not from January

1. I cannot see why that should be' so at all. The result of the construction which is sought to be put on the deed apparently means that on May 1, 1954, the son Would not get any money from his father under the covenant, which seems a very odd result. It seems to me that the way the commissioners have put the matter is perfectly correct. They say : "On the face of it, clause 1, which provides for `payments on the first day of May in each year' quite clearly, in our view, provides for a payment on May 1 in each calendar year. It was argued for the Crown that in view of the provisions of clause 2 (5) of the deed the phrase `each year' in clause 1 should be construed 'as each year ended on May 4, and that, following the first payment on the execution of the deed on May 5, 1953, no further payment was due thereunder until May 1, 1955" (which I should have thought would have been a great sock to the son). "We are unable to accept this contention. We hold that clause 1, which imposed the obligation to pay an annuity, is clear in its terms and created an obligation to make a payment of 450 on May 1, 1954 ; and that the terms of clause 2 (5), which are part of the provisions defining the limit of the covenant, do not override the clear terms of clause 1." That seems perfectly correct, and I agree with it. The appeal is dismissed. Appeal dismissed.