Words and Phrases - "investments"
Re Lilly's Will Trust, [1948] 2 All E.R. 906 (Ch. D.)
In finding that an exclusion in a bequest for "investments securities for money or leasehold property" did not include proceeds of life insurance policies, Harman J. first quoted a statement in Jarman on Wills that "'investment' is a vague term and no general rule can be laid down as to its meaning,'" and went on to state (p. 907):
Counsel rested his claim on the word 'investments' saying that anything was an investment which is a mode of laying out money with a view to obtaining a return, and that a man who put out his money to buy himself a policy to be returned a sum, whether at 65 or at his death, was investing money, and that the proceeds will properly be called an investment. I have no doubt that is so, but I think the problem is: What did this testator mean when he excepted 'investments' and 'securities for money?' I think he meant stock exchange investments - stocks in shares - and things which were not stocks or shares but were securities, such as debentures. I do not think he intended to include policy monies in that phrase.
In Re Ferry, Allen v. Allen, [1945] N.Z.L.R. 448 (S.C.)
In finding that the phrase "my investments of all descriptions" in a will did not include money on current account at a bank, Kennedy J. stated (p. 451-452):
I do not think in popular parlance the word 'investment' covers money lodged in a post-office savings-bank. Such money is withdrawable at will just as money in a current account with the bank is. The only difference is until recent times the Post-Office Savings-Bank paid a low rate of interest - that is, a rate of interest lower in comparison with the rate obtainable elsewhere in what are sometimes termed gilt-edged investments. An investment is, I think, the antithesis of ready money, and ready money is usually used in a sense including money on current account or money withdrawable on demand.
C.I.R. v. Desoutter Bros., Ltd. (1945), 29 TC 155 (C.A.)
Greene M.R. found that royalties derived by the taxpayer from the licensing of patents covering improvements in electrically operated hand tools were profits of its trade or business, rather than income from the holding of investments, in light of the relation of the patents to its business and the fact that it did not receive the royalties as a "mere passive owner". He also doubted the test of Macnaghten J. in C.I.R. v. Rolls-Royce, Ltd. (No. 2) (1944), 29 TC 137 (K.B.D.) that an investment involves the laying out of money, and cited the example of a son who is bequeathed a patent from which he thereafter passively derives investment income.
MacKinnon L.J., in concurring, stated (p. 165):
I think that the word 'investments' in the relevant Sections of the statute is not a word capable of legal definition. Like so many words in modern legislation, it is a word of current vernacular.
Pennsylvania Ry. Co. v. Interstate Commerce Commission, 66 F. (2d) 37 (3d C.A. (1933))
An acquisition by one railroad company of shares in another railroad company was found not to be contrary to the Clayton Act by virtue of an exemption which stated that "this section shall not apply to corporations purchasing such stock solely for investment". Davis C.J. stated (p. 39):
The word 'investment', as the Commission said, 'is one of broad application, including in its various uses purchases of practically every kind and description and for every purpose.' One of these purposes is the purchase of property for the sake of the direct return which can be realized from such property. This is the definition to which the Commission restricted the word in this case, but it is not primarily a technical word and has other meanings. It ordinarily signifies the use of money to purchase property, personal or real, for any purpose from which income or profit is expected, presently or in the future, speculatively or permanently.
Commissioner of Taxes v. Australian Mutual Provident Society (1902), 22 N.Z.L.R. 445 (C.A.)
When the holder of a life insurance policy fell into arrears on the payment of premiums, the taxpayer was entitled to charge the cash surrender value of the policy with the amount of the arrears plus accrued interest thereon, such amounts being a first charge on monies payable under the policy. In finding that the interest was "income from investments of any kind other than investments in or on land" for purposes of the Land and Income Assessment Act, 1900 (New Zealand) Edwards J. found that the amounts which were so charged should be characterized as sums advanced upon the security of the policy and bearing interest, and therefore should be regarded as investments, it being "quite immaterial that no money actually passes: the premium, if paid, would be available for investment" (p. 458). He earlier stated (pp. 456-457):
There is no statutory definition of the word 'investment'. The word must therefore be read in its popular meaning. That popular meaning embraces, I think, every mode of application of money which is intended to return interest, income, or profit. Money employed as capital in a business is, in popular language, money invested in the business; money used for the purchase of negotiable instruments is an investment; so also money lent upon a bond or other personal security; so money deposited with the bank or other financial institution at interest. Money advanced by the defendant society upon the security of its own policies is therefore, in my opinion, clearly an investment.
Tootal Broadhurst Lee Co. Ltd. v. I.R.C., [1949] 1 All E.R. 261 (HL)
In finding that royalties received by a manufacturer from patents which it had developed in its research department or acquired from others were not income from investments for purposes of the exclusion from excess profits tax on profits arising from a trade or business, Lord Simonds stated (p. 264):
['Investments'] is a word of which the meaning may vary according to its context. ... Here, the meaning is limited by the context, and the context is one in which a distinction has to be made between the income of investments and the other profits of a trade or business ... It appears to me that the problem may be solved in this way. I would take a schedule of the assets of the trading company concerned and, omitting assets such as stocks and shares to which ... the title of investments can in no circumstances be denied, would ask of each other asset: 'Is this an asset which the company has acquired or holds for the purpose of earning profits in, or otherwise for the promotion of, its particular trade or business?' ... Applying this test to the facts of the present appeal, I cannot believe that any business man (who may be regarded as the touchstone in such a case) would describe the patents rights here in question as investments of the taxpayer ...
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| Tax Topics - Statutory Interpretation - Ordinary Meaning | 38 |