Grimwade v Federal Commissioner of Taxation
(1949) 78 CLR 19923 ALJ 247
[1949] ALR 609
(Judgment by: Williams J)
Between: Grimwade
And: Federal Commissioner of Taxation
Judges:
Williams JLatham CJ
Rich J
Webb J
Subject References:
Gift Duty (Cth)
Judgment date: 4 April 1949
Judgment by:
Williams J
The appellants, Frederick Norton Grimwade, Geoffrey Holt Grimwade and Reginald Gordon Grimwade, in their capacity of executors of the will of Edward Norton Grimwade, who died on 28th April 1945, aged seventy-eight years and eleven months, have appealed to this Court from two assessments of gift duty made on 22nd August 1947 under the provisions of the Gift Duty Assessment Act 1941-1942. The two appeals have been heard together because they depend upon substantially the same evidence and raise the same questions of law. (at p201)
In order to understand the basis of the assessments, it is necessary to refer shortly to the facts. On 16th April 1936 the deceased caused to be incorporated under the provisions of the Victorian Companies Acts a proprietary company under the name of Batman Exploration Co. Pty. Ltd. The two subscribers to the memorandum and articles of association were R. W. Bland and R. W. Shepheard. Clause 4 of the memorandum of association provides that the share capital of the company is 250,000 pounds divided into 250,000 shares of 1 pound each with power to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferential preferred qualified or special rights, privileges or conditions. Clause 4 of the articles of association provides that the company's capital of 250,000 pounds is divided into 20,000 A shares of 1 pound each and 230,000 B shares of 1 pound each. During the lifetime of the first governing director the A shares alone shall confer voting and dividend rights on the holders thereof and in the event of the company going into liquidation during the lifetime of the first governing director the assets of the company remaining after the payment of liabilities shall be distributed amongst the shareholders in the following manner: the holders of the B shares shall receive in proportion to the B shares held by them two and one-half per centum of the capital paid up or deemed to be paid up on the B shares and the holders of the A shares shall receive the balance of the assets. During the lifetime of the first governing director the B shares shall not confer any voting or dividend rights on the holders thereof and in the event of the company going into liquidation during the lifetime of the first governing director shall not except as aforesaid confer any rights in a liquidation to share in the distribution of the company's assets. In all other respects the A and B shares shall rank equally. (at p201)
Clause 27 of the articles of association provides that the company may from time to time by special resolution reduce its capital by paying off capital or by cancelling unallotted, forfeited or surrendered shares or by cancelling capital which has been lost or is unrepresented by available assets or by extinguishing or reducing the liability of any of its shares or otherwise as may seem expedient and capital may be paid off on the footing that it may be called up again or otherwise. Clause 67 of the articles of association provides that on a show of hands every member shall have one vote and upon a poll every member shall have one vote for every share held by him provided that during the lifetime of the first governing director the holders of the B shares shall have no right to receive notice of or to be present or to vote at any general meeting by virtue or in respect of their holding of B shares. Clause 77 of the articles of association provides that a majority of the subscribers to the memorandum of association may by writing under their hand appoint a person to be the first governing director. The governing director shall retain office until he resigns the office or dies or until he becomes bankrupt or insolvent or a lunatic and whilst he retains office and notwithstanding anything to the contrary shall have authority to exercise all the powers, authorities and discretions vested in the directors generally and all the other directors, if any, shall be under his control and shall be bound to conform to his directions in regard to the company's business. (at p202)
At the first meeting of directors of the company held on 17th April 1936, E. N. Grimwade was appointed the first governing director of the company by the subscribers to the memorandum of association and he then appointed his four sons, that is to say the three appellants and L. C. Grimwade who died soon afterwards, directors. One A share was allotted to each of the two subscribers of the memorandum and articles of association, 10,000 A shares were allotted to E. N. Grimwade and 130,000 B shares were allotted by his direction equally amongst his four sons. The whole of the purchase money for the A and B shares so allotted, that is to say 140,002 pounds, was paid to the company by E. N. Grimwade. At the same meeting the company purchased from E. N. Grimwade for 141,873 pounds 15s. Od. 34,785 shares in Commonwealth Industrial Gases Ltd. and 54,000 shares in Drug Houses of Australia Ltd. At a meeting of directors held on 17th August 1936, the A share in the name of R. W. Bland was transferred to T. C. Alston, the solicitor of the company, and the A share in the name of R. W. Shepheard was transferred to H. M. Mogensen, the secretary of the company. At a meeting of directors held on 12th January 1937, 4,920 B shares were allotted equally amongst F. N. Grimwade, G. H. Grimwade and R. G. Grimwade by direction of E. N. Grimwade. The whole of the purchase money for these shares, that is to say 4,920 pounds, was paid to the company by E. N. Grimwade. At the same meeting the company purchased from E. N. Grimwade, for 4,919 pounds, 14,757 shares in Carba Dry Ice (Aust.) Ltd.
At a meeting of directors held on 8th July 1937, 45,840 B shares were allotted equally amongst F. N. Grimwade, G. H. Grimwade and R. G. Grimwade by direction of E. N. Grimwade. The whole of the purchase money for these shares, that is to say 45,840 pounds, was paid to the company by E. N. Grimwade. At the same meeting the company agreed to purchase from E. N. Grimwade for 45,840 pounds an A.M.P. policy, 21,200 shares in Cuming SmithCo. Pty. Ltd. and 5,000 shares in Australian Glass Manufacturing Ltd. At a meeting of directors held on 6th April 1938, E. N. Grimwade transferred one A share to F. N. Grimwade, one to G. H. Grimwade and one to R. G. Grimwade. (at p203)
As a result of these allotments and transfers of shares the shareholding of the company became and thereafter remained E. N. Grimwade 9,997 A shares, F. N. Grimwade, G. H. Grimwade, R. G. Grimwade, T. C. Alston and H. M. Mogensen one A share each; F. N. Grimwade, G. H. Grimwade, G. H. Grimwade and R. G. Grimwade 49,420 B shares each, and the executors of the estate of L. C. Grimwade 32,500 B shares, the total allotment of shares being 10,002 A shares and 180,760 B shares. (at p203)
At an extraordinary general meeting of the company held on 20th November 1942 at which E. N. Grimwade was present the following resolution was passed as a special resolution: -
"That the Capital of the Company (which now is 250,000 pounds divided into 20,000 A shares of 1 pound each and 230,000 B shares of 1 pound each of which 10,002 of the said A shares and 180,760 of the said B shares are issued and are fully paid up) be reduced to 47,690 pounds 10s. divided into 10,002 A shares of 5s. each and 180,760 B shares of 5s. each and that such reduction be effected by cancelling 9,998 of the existing A shares and 49,240 of the existing B shares which have not been taken or agreed to be taken by any person and by returning to the holders of the 10,002 A shares and to the holders of the 180,760 B shares that have been issued paid up capital to the extent of 15s. per share (the capital represented thereby being in excess of the wants of the Company) and by reducing the nominal amount of each of the said issued A and B shares from 1 pound to 5s." (at p203)
At a further extraordinary general meeting of the company held on 31st March 1943 at which E. N. Grimwade was present the following resolution was passed as a special resolution: -
"That the Capital of the Company (which now is 47,690 pounds 10s. divided into 10,002 A shares of 5s. each and 180,760 B shares of 5s. each all of which are issued and are fully paid up) be reduced to 23,845 pounds 5s. divided into 10,002 A shares of 2s. 6d. each and 180,760 B shares of 2s. 6d. each and that such reduction be effected by returning to the holders of the said 10,002 A shares and to the holders of the said 180,760 B shares paid up capital to the extent of 2s. 6d. per share (the capital represented thereby being in excess of the wants of the Company) and by reducing the nominal amount of each of the said A and B shares from 5s. to 2s. 6d." (at p204)
Both reductions of capital were subsequently confirmed by orders of the Supreme Court of Victoria and the orders and minutes approved by the court registered with the Registrar-General, those relating to the first reduction on 11th December 1942 and those relating to the second reduction on 6th July 1943. The Companies Act 1938 (Vict.), s. 58 (2) contains the usual provision that upon registration of the order and minute and not before the resolution for reducing share capital as confirmed by the order so registered shall take effect. (at p204)
The only business in which the company was engaged was the investment of its funds, principally in the shares which it had purchased from E. N. Grimwade. In order to find the cash necessary to make the repayments of capital to the shareholders authorized by the special resolutions the company sold large parcels of these shares either on the stock exchange or to the shareholders themselves. The moneys authorized to be paid by the first special resolution were paid to the shareholders in two equal instalments on 17th December 1942 and 28th January 1943. The moneys authorized to be paid by the second special resolution were paid to the shareholders on 27th July 1943. The total amount paid to the holders of the B shares pursuant to the first special resolution was 135,570 pounds. The total amount paid to the holders of the B shares pursuant to the second special resolution was 22,590 pounds. (at p204)
The commissioner contends that these amounts less in the first case two and one-half per cent of three-fourths of the paid-up capital on the B shares, that is 3,389 pounds, and in the second case two and one-half per cent or one-eighth of such paid-up capital, that is 568 pounds, to represent the proportionate amounts which the holders of the B shares would have received upon the liquidation of the company in the lifetime of E. N. Grimwade were gifts by E. N. Grimwade to his sons within the meaning of the Act. He therefore assessed the appellants for gift duty on the sum of 132,181 pounds in respect of the first special resolution and 22,030 pounds in respect of the second resolution. The amount claimed in the former assessment is 34,591 pounds and in the latter 5,765 pounds. (at p204)
The Act provides for the taxation of gifts that are dispositions of property made otherwise than by will whether with or without an instrument in writing without consideration in money or money's worth passing from the disponee to the disponor, or with such consideration so passing if the consideration is not, or, in the opinion of the commissioner, is not, fully adequate. It defines disposition of property to mean any conveyance, transfer, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing includes... (d) the release, discharge, surrender, forfeiture or abandonment, at law or in equity, of any debt, contract or chose in action, or of any interest in property;... (f) any transaction entered into by any person with intent thereby to diminish, directly or indirectly, the value of his own property and to increase the value of the property of any other person.
It lay within the power of E. N. Grimwade during his life as the holder of all but five of the issued A shares to convene at any time a general meeting of the company and pass a special resolution that the company be wound up voluntarily. He would then have become entitled to practically the whole of the net assets of the company less the sixpence per share payable to the B shareholders. The company had practically no debts and its assets consisted of shares which could be easily realized or divided among the contributories in specie so that the cost charges and expenses of a winding up would have been small. The value of these assets exceeded the amount of the issued capital. It was contended for the respondent that by voting for or failing to vote against the special resolutions E. N. Grimwade had allowed himself to be deprived of this power and had thereby disposed of property to his sons in that he had forfeited or abandoned an interest in property to them within the meaning of par. (d). Alternatively it was contended that by so voting or failing to vote E. N. Grimwade had in each case entered into a transaction with the intent to diminish, directly or indirectly, the value of his own property, that is the value of the A shares, and to increase the value of the property of his sons, that is the value of the B shares, within the meaning of par. (f). It was contended that on either view the dispositions of property took place, that is the gifts were made, at the point of time when the special resolutions were passed. (at p205)
Section 4 of the Act defines property to include real property and personal property and every interest in real property or personal property, and interest in property to mean any estate, interest, right or power whatsoever, whether at law or in equity, in or over any property. The definition of interest in property is very wide. It would seem to include a contractual right or power over property but the interest must be a legal or equitable right or power in or over particular property. It does not include a right or power which is only a right or power over property in a commercial sense. The power of E. N. Grimwade to put an end to the company by summoning an extraordinary general meeting of the company and voting in favour of a special resolution that the company be wound up voluntarily and thereby acquire the net assets was at most a power over property in a commercial sense. For it is clear that a company is the complete legal and equitable owner of its property and that a shareholder has no legal or equitable interest in any of its assets. The nature of the property in a share is described by Lord Russell of Killowen in Commissioners of Inland Revenue v. Crossman; Commissioners of Inland Revenue v. Sir Edward Mann, Bt. [1937] AC 26 , at p 66, as
"the interest of a person in the Company, that interest being composed of rights and obligations which are defined by the Companies Act and by the memorandum and articles of association of the company."
In Short v. Treasury Commissioners [1948] AC 534 , at p 545, Lord Porter said that
"a shareholder has no direct share in the assets of a company, he has such rights as the memorandum and articles give him and nothing more."
The only right which E. N. Grimwade exercised or failed to exercise at the general meetings of the company at which the special resolutions to reduce its capital were passed was the right to vote. The right to vote has been said to be a right of property, and it is a right that in general a shareholder can exercise in general meeting as he thinks best in his own interests. He can also enter into a contract for valuable consideration which the court will enforce by an injunction to exercise or not to exercise his right to vote in general meeting as the other contracting party may direct: Pender v. Lushington (1877) 6 Ch D 70; Greenwell v. Porter (1902) 1 Ch 530; Puddephatt v. Leith (1916) 1 Ch 200. If E. N. Grimwade had entered into a contract with his sons to vote in favour of the special resolutions or not to vote against them so that the sons should thereby derive a pecuniary benefit, and the consideration had been inadequate, it would have been open to argument that there had been a disposition of property made for an inadequate consideration.
But there is no evidence of any such contract. The only evidence is that E. N. Grimwade attended both meetings and exercised his right to vote as he thought fit. He appears to have voted for both resolutions but nothing turns upon whether he so voted or allowed the resolutions to be passed by not voting against them. The Companies Act 1938 (Vict.), s. 55, empowers a company limited by shares subject to confirmation by the court if so authorized by its articles by special resolution to reduce its share capital in any way and in particular (without prejudice to the generality of the foregoing power) a company may... (c)... pay off any paid-up share capital which is in excess of the wants of the company. The present company was authorized by its articles to pay off such capital. It is impossible for a company to go into liquidation in order to make a partial return of capital to the shareholders. Such a return can only be made by reducing the capital of the company. Upon the special resolution taking effect the company becomes indebted to those shareholders who are entitled to participate in the return of capital. Upon a reduction of capital the A and B shares were entitled to rank equally.
A reduction of capital requires to be confirmed by the court principally to ensure that the creditors are not prejudiced but also to ensure that the reduction will not operate unfairly between the shareholders. It is the money of the company which becomes repayable to the shareholders. By voting for or failing to vote against the special resolutions E. N. Grimwade could not be said to have forfeited or abandoned any interest in property. He had no legal or equitable interest in the property of the company which he could forfeit or abandon. He became entitled to receive certain sums of money from the company when the special resolutions became effective. But he did not dispose of any interest in that money to his sons and the moneys to which his sons became entitled were the property of the company and not property in or over which he had at any time a legal or equitable interest or power. For these reasons I am of opinion that there was no disposition of property within the meaning of par. (d). (at p207)
The more difficult question is whether there was a disposition of property within the meaning of par. (f). It was contended for the respondent that read in its context "transaction" means a transaction which is a disposition or alienation of the property of the disponor to the disponee, disposition being used in its widest sense to include the creation of a new right of property or the transfer of an existing right or the release or surrender of an existing right, and that the paragraph does not apply to transactions which are not in any sense dispositions or alienations by a disponor to a disponee of his own property or property over which he has a power of appointment. Section 25 (2) of the Act provides that gift duty shall constitute a duty jointly and severally due by the disponor and disponee to the King on behalf of the Commonwealth. It was submitted that Parliament could not have intended to impose liability for duty on a donee for a gift made in invitum, so that the transaction entered into must mean a transaction voluntarily entered into between a donor and a donee.
Paragraph (f) appears to have been taken from s. 39 (f), which is contained in Part IV. of the Death Duties Act 1921 (N.Z.). Section 39 is the section which defines the meaning of disposition of property for the purposes of gift duty payable in respect of property situated in New Zealand. Section 50 of the New Zealand Act provides that gift duty shall constitute a debt due and payable by the donor to the Crown on the making of the gift. Accordingly in New Zealand the donee is not made liable for gift duty jointly with the donor as he is in Australia. Section 5 of the New Zealand Act provides that the estate of a deceased person shall be deemed to include any property comprised in any gift within the meaning of Part IV. of the Act made by the deceased within three years before his death. In Finch v. Commissioner of Stamp Duties [1929] AC 427 , the meaning of par. (f) of s. 39 of the New Zealand Act, as incorporated in s. 5, was considered by the Privy Council. Lord Hailsham L.C. (1929) AC, at p 429, delivering the judgment of the Privy Council, said that:
"In their Lordships' view when the statute brings in as a gift a transaction entered into with intent to diminish the value of one estate and to increase the value of another, what is hit at by the statute is a transaction which the person entering into it intends to have the effect stated in the sub-section. It is not enough merely to prove that the result which is stated in that sub-section accrued." (at p208)
The whole emphasis of par. (f) is upon a transaction entered into by one person, which seems to me to mean that where there is an act done by one person with the requisite intent, and as a result there is a transfer of value from any property of that person to the property of another person, the conditions of liability are satisfied. I do not think that the circumstance that the Australian Act makes the donee liable jointly with the donor for the duty is sufficient to limit the meaning of a transaction entered into to a transaction which is a disposition or other alienation of property of a donor to a donee entered into with intent to diminish the value of the property of the donor and increase the value of the property of the donee. Such a disposition or alienation would operate under some other words of the definition of disposition of property and would not be dependent on the intent with which it was entered into. It appears to me that pars. (a) to (f) were included in the definition of disposition of property for the purpose of including in the definition transactions which might otherwise not be held to fall within the ordinary meaning of a disposition or other alienation of property and that each paragraph is complete in itself. (at p208)
The Act does not make the assessment prima-facie evidence of any facts. The onus is therefore on the respondent to satisfy the court that E. N. Grimwade voted for the special resolutions or failed to vote against them with the intention of diminishing the value of the A shares and increasing the value of the B shares. If this is proved then it appears to me that E. N. Grimwade on each occasion entered into a transaction which was a disposition of property within the meaning of the Act. He had paid the company a pound for each of the B shares. But it is evident that they were not worth anything like this sum in his lifetime. The holders of these shares in this period had no right to vote or to dividends whilst the company was a going concern and were only entitled to sixpence per share upon a winding up. The company would seem to have been formed by E. N. Grimwade so that by using the machinery of company law he could create the equivalent of a life estate in the funds invested in the B shares with a general power to appoint the capital less sixpence per share during his life by deed with trusts in default of appointment to his sons without causing the funds so invested to be notionally included in his dutiable estate for the purposes of death duties.
By virtue of his control of the company E. N. Grimwade could at any time during his lifetime place the company in voluntary liquidation and recover practically the whole of the moneys he had invested in the B shares. He was under no obligation to take this course but it is difficult to see how the B shares could have been worth more than sixpence per share so long as it lay in his power to do so. On the other hand the A shares were entitled to the whole of the dividends whilst the company was a going concern and to the whole of the net assets of the company less sixpence per B share upon a liquidation. Accordingly there can be no doubt that the result of the special resolutions was to diminish on the one hand the value of the A shares which were the property of E. N. Grimwade and to increase the value of the B shares which were the property of the sons. The only evidence of intent on the part of E. N. Grimwade to bring about this result is that he was present at the meetings of the company and voted for or failed to vote against the special resolutions. But he must be presumed to have intended the consequences of his acts. These consequences were that the capital returned to the B shareholders no longer formed part of the assets of the company available for distribution upon a winding up and became capable of earning income in their hands and for their benefit in lieu of its previous capacity to earn profits out of which dividends could be declared on the A shares.
No evidence was tendered of any intent on the part of E. N. Grimwade to effect some other purpose and in the circumstances I think that I am bound to find that E. N. Grimwade voted for or failed to vote against the special resolutions with the intent that they should have the effect stated in par. (f). The respondent contended that dispositions of property within the meaning of the paragraph were made by E. N. Grimwade when he voted for or failed to vote against the special resolutions at the meetings of the company. I am inclined to think that the gifts were made when the special resolutions became effective but the point is of no importance. (at p210)
Section 18 (b) of the Act provides that, subject to this Act, the value of a gift shall be taken to be the value thereof at the time of the making of the gift. The values of the gifts in the present case would be the extent to which the values of the A shares were diminished and those of the B shares increased by the reductions of capital. After the nominal amounts of the A and B shares had been reduced by the first special resolution to 5s. each the B shares were only entitled to 1 1/2d. upon a winding up in the lifetime of E. N. Grimwade, and after the nominal amounts had been further reduced to 2s. 6d. the B shares were only entitled to 3/4d. upon such a winding up. The B shares would not therefore have been worth more than 1 1/2d. between the dates of the two special resolutions and 3/4d. between the dates of the second special resolution and the death of E. N. Grimwade. On the other hand the holders of the B shares received 15s. per share on the first reduction and 2s. 6d. upon the second reduction, so that if the diminutions in value of the B shares in the first instance 4 1/2d. and in the second instance 3/4d. are deducted from these receipts the balance represents the extent to which the value of the A shares was diminished and the value of the B shares was increased by the reductions of capital. This was the basis on which the respondent calculated the values of the gifts for the purposes of the assessments under appeal. No evidence was tendered by the appellants to prove that these values were incorrect, and I can see no reason for not accepting them. (at p210)
For these reasons I must dismiss the appeals with costs. One order may be taken out in both appeals. Liberty to apply. (at p210)
From this decision the appellants appealed to the Full Court. (at p210)
T. W. Smith K.C. (with him Winneke), for the appellants. The judgment appealed from is wrong in that it treats the question of liability to duty as depending simply on the question whether the case is within par. (f) of the definition of "disposition of property" in s.4 of the Gift Duty Assessment Act. It is necessary to go further and to find whether the case is within the provision imposing liability to duty, which is narrower in that it applies only to a dispositive transaction by the alleged donor. The liability to duty is declared by s. 11 of the Assessment Act, and s. 4 of the Gift Duty Act 1941, which is in substantially the same terms, imposes the duty. Under these sections what is taxed is a gift of property having the prescribed situation (as to which, see s. 13 of the Assessment Act).
The scheme of the legislation is, first, to define "disposition of property"; then, to define "gift" so as to exclude from duty some dispositions of property; and, lastly, to impose liability, not on every "gift" (as defined), but only on such as come within the description of a "gift" (as defined) of "property" (as defined) which has an ascertainable location. The result is that, despite the wide language of par. (f) of the definition of "disposition of property," a "transaction" falling within the literal meaning of that paragraph is not dutiable unless it is a "gift" of "property" with the required location. Accordingly, duty is levied on a transaction within par. (f) only if it is a disposition (in the widest sense) by a donor of "property" with the required location. The word "property" has this restrictive effect in relation to par. (d) of the definition of "disposition of property," as was recognized by Williams J.; but he did not advert to the fact that the very same situation arises in relation to par. (f) because of the terms of s. 11 of the Assessment Act and s. 4 of the Gift Duty Act.
The view that, to be dutiable, a transaction must be dispositive on the part of a donor is supported by other sections of the A ssessment Act. In s. 12 "disposition of property" would seem to be used in the ordinary (not the defined) sense; here it cannot mean a transaction "with intent" & c. as in par. (f). In cases within ss. 11 (b) and 13 a local situation of the subject matter of the gift must be ascertained. It would be impossible to locate a mere increase or diminution in value; it can only be done where some "property" is disposed of. In ss. 16 and 17 it is assumed that property the subject of the "disposition" can be identified. (He referred to Broome v. Chenoweth (1946) 73 CLR 583 , at pp 591, 592, 603; Vicars v. Commissioner of Stamp Duties (N.S.W.) (1945) 71 CLR 309 , at pp 333, 334, 336, 337; Finch v. Commissioner of Stamp Duties (1927) NZLR 807, at p 811; [1929] AC 427 ; Commissioner of Stamp Duties v. Card (1940) NZLR 637, at pp 648, 649, 651.) Under the New Zealand Act the cases cited show that the disposition must be, not only by a donor, but by him to a donee. It is not necessary for the appellants here to go as far as that; it is sufficient to say that there must be a dispositive transaction by a donor to a donee or another person with the required intent. Some support, however, is to be found in our legislation for the view that the position is the same as in New Zealand; even if not sufficient to support a contention to that effect, it at least confirms the view that the transaction must be dispositive of property by a donor. Provisions which support this view, when read with the Gift Duty Act and with the definition of "donee" in s. 3 of the Assessment Act are ss. 16, 18, 19 and 25 of the latter Act; they all seem to make it essential that there shall be a donee who acquires an interest in property under the gift. If the appellants' view of the law is correct, it follows that there was no dutiable transaction here.
By voting for, or refraining from voting against, the reduction of capital, E. N. Grimwade did not enter into any transaction which was dispositive in any sense of any "property" of his. The appellants' view does not - as Williams J. seems to have thought - deny to par. (f) any effect beyond that of pars. (a) to (e); for instance, par. (f) would bring in a case in which A pays B 1,000 pounds in consideration of B's undertaking to transfer the same amount to C. Moreover, even if the view already submitted is not correct, nevertheless there must be a "transaction entered into"; these words are quite inapt to cover the casting of a vote, and more so the refraining from voting against a resolution. (at p212)
Tait K.C. (with him Eggleston), for the respondent. The word "property" in s. 11 is not itself a limitation. The definition of "property" in s. 4 does not apply where "the contrary intention appears." Moreover, it is not exhaustive; it uses the word "includes," not "means." The word "property" is used in s. 11 only to define the thing as to which a local situation is required. By s. 11 duty is levied on every "gift," i.e., "any disposition of property" without considerationc. For the purposes of s. 11, therefore, every transaction covered by par. (f) of the definition is a "disposition of property", whether it is dispositive or not. In relation to par. (f) the word "property" must be regarded as including whatever is the appropriate equivalent of property in the transactions to which the paragraph refers. This is the natural interpretation; it gives full effect to all the words used, whereas the appellants' construction gives par. (f) something less than its literal meaning.
The appellants have advanced no valid reason for restricting the meaning of the words of the paragraph, as is admittedly the result of their construction. It is significant that, whereas pars. (a) to (e) deal in terms with dispositions of property (in the general sense), par. (f) departs from that form of expression; it is clearly intended to bring in cases which are not of that character. In none of the cases cited for the appellants was there any question whether a "transaction" was "dispositive." Broome v. Chenoweth (1946) 73 CLR 583 is not an apt analogy. In Vicars Case (1945) 71 CLR, at p 333 Rich J. was not concerned with any such question. In Finch's Case (1927) NZLR 807 : see pp 811, 815; [1929] AC 427 : see pp 429, 430 the question was one of intent. In Card's Case (1940) NZLR 637 : see pp 648, 649 there was no question of non-dispositive acts. As to sections of the Assessment Act which were relied on as supporting the appellants' construction of par. (f): In s. 25, the references to a donee mean no more than "donee, if any"; ss. 12, 16 and 18 are concerned only with bilateral transactions, and they shed no light on par. (f). In that paragraph "transaction" is a word of very wide meaning; it is not necessarily confined to cases having the bilateral element; it would include, but is not limited to, such cases. In the present case the act of voting would constitute a transaction as between the donor and the company. On the question of intent, there is a finding in the respondent's favour. As to the diminution of "the value of his own property," what is meant is "the whole or any part of his property." Here E. N. Grimwade clearly diminished the value of his whole estate, and that is sufficient for present purposes. Value means market value (Commissioners of Inland Revenue v. Crossman; Commissioners of Inland Revenue v. Sir Edward Mann, Bt. [1937] AC 26 ; Myer v. Commissioner of Taxes (1937) VLR 106; Abrahams v. Federal Commissioner of Taxation (1944) 70 CLR 23 ). (at p213)
T. W. Smith K.C., in reply.
Cur. adv. vult. (at p213) July 28.