Grimwade v Federal Commissioner of Taxation
(1949) 78 CLR 19923 ALJ 247
[1949] ALR 609
(Judgment by: Rich J)
Between: Grimwade
And: Federal Commissioner of Taxation
Judges:
Williams J
Latham CJ
Rich JWebb J
Subject References:
Gift Duty (Cth)
Judgment date: 4 April 1949
Judgment by:
Rich J
RICH J. The facts which have given rise to this appeal are stated in the judgment of the primary judge, and it is unnecessary to recapitulate them. The question for our decision is whether these facts disclose within the Gift Duty Assessment Act 1941-1942 a "disposition of property" by Edward Norton Grimwade whom I will hereafter refer to as the propositus. (at p221)
The Act in question is cited as "The Gift Duty Assessment Act 1941-1942" and from this description one would presume that it was intended to provide for a duty on gifts. (at p221)
The definition section - s. 4 - has a material bearing on the question at issue. In it a "donor" means any person who makes a gift and a "donee" is any person who acquires any interest in property under a gift, and where a gift is made to a trustee for the benefit of another person, includes both the trustee and beneficiary. And a gift means
"any disposition of property which is made otherwise than by will... 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."
Then "disposition of property" is also defined. Thus it would appear from the material provisions of s. 4 that what is struck at by the Act is a gift constituted by a disposition of property made by a donor to a donee who thereby acquires an interest in the property In Carter v. Carter (1896) 1 Ch 62 it was held that a declaration of trust of copyholds by a married woman, tenant on the rolls of the manor, by a deed acknowledged under the Fines and Recoveries Act (1833) was a disposition within the meaning of s. 77 of the Act. Stirling J. (1896) 1 Ch, at p 67, as he then was, said:
"The words 'dispose' and 'disposition' in the Fines and Recoveries Act are not technical words, but ordinary English words of wide meaning; and where not limited by the context those words are sufficient to extend to all acts by which a new interest (legal or equitable) in the property is effectually created."
I take this statement to apply to a new interest created as between a donor and donee. (at p221)
The facts of this case do not, in my opinion, justify the conclusion that there was a gift made by the propositus. It is, I think, clear that what was done by him did not come within s. 4 (d) of the Act. The more difficult question to my mind is whether what was done came within s. 4 (f). This clause provides that a disposition of property includes any transaction entered into by any person with intent to diminish, directly or indirectly, the value of his own property and to increase the value of the property of any other person. "Transaction" in its dictionary meaning is an act, doing, negotiation or dealing. (at p222)
In Brewin, Nicholson and Mercer, Assignees of Katton v. Short, Cutts, North and Gallimore (1855) 5 E & B 227, at p 233 (119 ER 466, at p 468), during the argument Lord Campbell C.J. said:
"Johnson defines 'transaction' as 'negotiation; dealing between man and man'."
In the second edition of Dr. Johnson's Dictionary "transaction" is defined as follows:
"Negotiation: dealing between man and man: management; affairs; things managed."
Whatever may be the precise meaning of the word in s. 4 (f), it should in my opinion be construed as meaning some act, doing, negotiation or dealing by a donor in favour of a donee, whether by a direct or indirect method. (at p222)
What was done by the propositus in the present case was to form a holding company whose assets were provided by him, no doubt with the intention of reducing some of his liability to the Commissioner of Taxation. But the structure of this company as evidenced by the provisions set out in the judgment under appeal, does not show any intention on the part of the propositus to dispose of his property by gifts. (at p222)
The formation of the company might be considered as a transaction on the part of the propositus, but it has no connection between him and any donee or donees. Whatever the company did when it was incorporated was something for which the company was responsible, and there is no evidence that what it did, it did as the agent or trustee of the propositus. One cannot disregard the legal proposition that a company is an independent legal entity distinct from its members. In Aron Salomon (Pauper) v. A. Salomon and Company, Limited [1897] AC 22 , at p 30, Lord Halsbury L.C. said:
"I am simply here dealing with the provisions of the statute, and it seems to me to be essential to the artificial creation that the law should recognise only that artificial existence - quite apart from the motives or conduct of individual corporators. In saying this, I do not at all mean to suggest that if it could be established that this provision of the statute to which I am adverting had not been complied with, you could not go behind the certificate of incorporation to shew that a fraud had been committed upon the officer entrusted with the duty of giving the certificate, and that by some proceeding in the nature of scire facias you could not prove the fact that the company had no real legal existence. But short of such proof it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself, and that the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are." (at p223)
In Macaura v. Northern Assurance Company Limited [1925] AC 619 , at p 633, Lord Wrenbury said:
"My Lords, this appeal may be disposed of by saying that the corporator even if he holds all the shares is not the corporation, and that neither he nor any creditor of the company has any property legal or equitable in the assets of the corporation." (at p223)
In the instant case the propositus was responsible for the formation in April 1936 of the company known as Batman Exploration Co. Pty. Ltd., but this company when formed could only be regarded as Lord Halsbury said "like any other independent person with its rights and liabilities appropriate to itself and that the motives of those who took part in the formation of the company are absolutely irrelevant in discussing what those rights and liabilities are." In order to determine whether there is a disposition under s. 4 (f) one must examine the constitution of the Batman Company and the substance and form of the transactions entered into by it in the light of the principles I have mentioned. (at p223)
Thus examined it leads, I consider, to the conclusion that while on a surface appearance it might be said that the company was acting in accordance with the wishes of the propositus, yet it cannot be said that what was done by the propositus in the formation of the company and thereafter by the company constituted a gift by him under the Gift Duty Assessment Act. (at p223)
The appeal should be allowed. (at p223)