Gorton v Federal Commissioner of Taxation
(1965) 113 CLR 60439 ALJR 343
(Judgment by: Windeyer JJ.)
GORTON
v FEDERAL COMMISSIONER OF TAXATION
Judges:
McTiernan J.
Barwick C.J. and Taylor
Windeyer JJ.
Judgment date: 22 January 1965
Judgment by:
Windeyer JJ.
I regret that I am unable to concur in the judgment of the Chief Justice and my brother Taylor. In the circumstances I shall state only briefly the reasons that lead me to conclude that there was a transaction amounting to a "disposition of property" within the definition of that term in the Act. I need say nothing as to the amount of duty that on my view of the matter would be exigible. That aspect of the matter was not fully argued, and having regard to the view of the majority of the Court it would be purposeless for me to consider it.
At two o'clock on 19th May 1960, Mrs. Abel was a woman of considerable wealth. Fifty minutes later she was not as well off as she had been, and each of her nephews was better off than he had been. That means, it seems to me, that the value of Mrs. Abel's property had been diminished and the value of the property of her nephews had been increased. I do not read par. (f) of the definition of "disposition of property" in the Act as confined to cases in which there has been a diminution of the value of some specific item of property belonging to one person and an increase in the value of some specific item of property belonging to another. Doubtless it would catch such a case, if one can be imagined that would not be caught by the earlier paragraphs of the definition. But it seems to me that it would do so because it deals with the value of a person's property in the sense of the value of all that is his. The word "property", to describe collectively a man's worldly wealth, his substance, is one of the oldest senses of the word in the English language. And it can bear that sense in the language of the law, for example when the property of the bankrupt is spoken of in bankruptcy legislation. The word "property" in par. (f), with which we are here concerned, has in my opinion much the same meaning as the word "estate" in the corresponding provision of the Death Duties Act 1921 of New Zealand, whence par. (f) was apparently derived. The view that I take accords, I think, with the statement in the judgment of Latham C.J. and Webb J. in Grimwade's Case (1949) 78 CLR 199 , at p 215 that: "Paragraph (f) is intended to cover cases of transactions entered into with the intent to diminish the value. . . of the donor's own property in globo and to increase the value of the property in globo of another person". But I do not wish to be taken as founding my opinion simply on that judgment in that case. Indeed I am inclined to doubt the validity of some of the observations in it.
I found my conclusion simply on the words of the Act. To read them as restricted in their application to a determination of the value of a specific item of property and the increase in the value of another item seems to me, with respect to those who think otherwise, to involve reading par. (f) as if the words were not "his own property" etc. but "some part of his own property" etc. or "any of his own property" or some such phrase. If as the result of a transaction one person is worse off and another person better off than they would have been if the transaction had not occurred, and if the transaction was entered into with intent to produce this result, then I consider the statutory description is satisfied.
The immediate result of what was done was, I think, to diminish the value of Mrs. Abel's property - that is to say, to make her property as a whole less valuable than it would have been if what was done had not been done. I appreciate that, by her control of the companies' affairs, she might later recover value for herself or restore value to her property. Her power to do so would have to be reckoned in any estimation of the diminution in value of her property. Nevertheless, in a case such as this a power to get something by taking certain actions is not, I think, the equivalent of presently having that thing.
As I see the matter, the transaction that diminished Mrs. Abel's property also increased the value of the properties of her nephews. The Act does not require that the diminution of the one and the increase of the other must necessarily correspond in amount.
I agree that the evidence shows that what was done by Mrs. Abel, and by those who participated in the transaction entered into, was done with the intent thereby to produce the consequences that in fact were produced.
For these reasons I consider that McTiernan J. was right in thinking that the facts satisfied the description in par. (f).
I have not thought it necessary to state the various steps by which, from the time when the two companies were formed, the transaction was carried through. What occurred on the afternoon of 19th May shows up the unreality and formalism into which the decision in Solomon's Case [1897] AC 22 has led the law. The utterance of the right ritualistic phrases in their proper sequence, the signing of documents prepared in advance to record that this was done was, if one ignores the transient transmutations theoretically involved, merely an elaborately occult means of making a gift. There is an increasing tendency of courts in England, and perhaps more markedly in the United States, to retreat from the position where they must refuse to look behind the legal personality which the law has given to a private corporation, and to examine the purpose of its creation and the manner of its control. Moreover I am by no means sure that the companies that were created to carry out what Mrs. Abel should direct ought not, if their separate legal personality be insisted upon, to be regarded as her agents, or as intermediaries, in the present transaction. However, this was not argued; and in the view I take it is not necessary to consider it.
It seems that the view of the facts of this case taken by the other members of the Court leaves open the question whether, there being no disposition of property by Mrs. Abel to her nephews, there were not gifts by the companies to her nephews. But that question does not arise on this appeal.
I would dismiss the appeal from the decision of McTiernan J. so far as it relates to liability to gift duty: I express no opinion as to the amount of the duty payable.