Commissioner of Stamp Duties (NSW) v Perpetual Trustee Company Limited [1929] HCA 27

Commissioner of Stamp Duties (NSW) v Perpetual Trustee Company Limited [1929] HCA 27 - HCA 1929 case summary — Zoe

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upon him unfettered authority over its affairs. The company had p lend and borrow money, and S., his wife, his daughter and each of his sons had personal accounts in its books, 8, operated upon his perscnal ac as upon a banking account. 'The capital of the company was in June 1920 by the issue of 50,000 £1 shares - 40,000, on which each had been paid, being allotted to the wife and children of s,, 1 expressed his intention of making a gift of such shares, the re 10,000, on which nothing had been paid, being allotted to H. On 29th: 30th November 1920 cheques for various amounts were drawn on the com banking account for the £49,000 due in respect of the shares, and the amount was on 30th November 1920 debited to S.'s personal account with tl company, which immediately prior to this transaction was in credit te extent of £19,091 17s. 3d. 'Three of these cheques of the company, amount to £36,262, and six cheques of three of s.'s children, amounting to £12,7% were handed to the company either by or on behalf of the allottees shares. Cheques of the company totalling £12,738 were paid into the b accounts of the three children in order to meet their cheques for that ot Scrip was duly issued to each of such applicants, who were also enteres the register of members in respect thereof. All this was done on both sid the instruction of S. On 1st July 1921 S. changed his intention and caused sum of £30,000 to be credited to his own account and debited to the respec accounts of his wife and of his five sons in proportion to the number of issued to them, which transactions were effected without the knowledge of hi and/or children. On 30th September 1922 S. caused the sum of £9,450, the difference between par and interest earned on 10,000 shares, to" debited to the account of one of his children and credited to his account. The debits then appearing in the accounts of the wife an children with the company at that time totalled £39,450, which amow was reduced by credits of dividends and by the transfer of 3,500 sh from one of the children to S., and on 3ist May 1925 stood at sum of £27,098 2s. 7d. On 7th September 1925 S, caused his the company's books to be debited with this sum, for which he took the ¢ pany's cheque. He paid this cheque into his bank account, upon whi¢ drew his own cheques for a corresponding total amount. These were p the company either directly by him or through his children to meet the appearing in the accounts of the wife and children, His personal account ¥ then in credit to an amount greater than £27,098 2s. 7d., and at the d his death was still in credit. a Held, by Knox C.J., Isaacs and Dixon JJ. (Starke J, dissenting as to qu only), that the amount of £13,232 3s. 7d., mentioned below, formed p of the dutiable estate of S, as being property comprised in a gift m by him within three years before his death within the meaning of 102 (2) (b) of the Stamp Duties Act 1920-1924 (N.S.W.). The d £49,000 made in s.'s acccunt on 30th November 1920 operated extinguishment of the then existing credit of £19,091 3s, 7d. and attempt to create an indebtedness as to the balance of £29,908 2s. 9d. extinguishment lawfully operated to pay the calls upon the shares p

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The memorandum annexed to the said schedule No. 10 was in the words and figures following : - The history of these partic : shares and the transactions surrounding them is as under : - (a) n the early part of 1920 A. C. Saxton & Sons Ltd. had an opportunity purchasing the freehold property at Pyrmont from the Harris Hsta on which its mill premises are located, and for other business reaso deemed it desirable to make a further issue of capital; Mr. Alexand Charles Saxton at that time was absent abroad. (6) Mr. Heath consulted Mr. Russell (of Sly & Russell, solicitors) freely at the and it was decided to cable Mr. Saxton and secure his permission carry this into effect. The permission was duly received, and in June 1920 the Company passed a resolution authorizing the i of 50,000 shares of £1 each that were then held in reserve. issue of 50,000 shares then made the total issue of the Company equal to its nominal capital of £250,000. Applications were invit for the shares, and were received as follows : - Mrs. Janet Ss 10,000 shares; Miss Janet Cuthbertson Saxton, 10,000 Harold Saxton, 4,800 shares; Alexander Wilson Saxton, 4,400 shares; Charles Donald Saxton, 4,000 shares; Malcolm Ne Saxton, 3,500 shares; Geoffrey Saxton, 3,300 shares; A. E. Hi 10,000 shares. (c) The shares were duly allotted at a meeting
directors held on 21st June 1920, and were payable: on allotn 6d. ; on first call, 9s. 6d., due 21st August 1920; on 2nd call, 10s due 21st October 1920. (d) The whole of the purchase-money 0 £50,000 was paid by Mr. Saxton by a cheque drawn on the Company and debited to his personal account in the Company's books ¢ 30th November 1920, he having then returned from abroad. | With the exception of the shares allotted to A. E. Heath, Mr. Saxtt at that time stated that they were to be a gift to the various set out above, while those allotted to A. E. Heath were mentioned in what is referred to, for convenience, as agreement No. ] and have been dealt with in accordance with the provisions of agreement, subject to the variations concerning which a sep

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that were allotted to them on the date first above mentioned. These were as follows : - Mrs. Janet Saxton, £10,000; Harold Saxton, £4,800; A. W. Saxton, £4,400; C. D. Saxton, £4,000; Geoffrey Saxton, £3,300; M. N. Saxton, £3,500: £30,000. (g) Mr. Saxton then had an entry passed in the Company's books debiting the above individuals with the amount set opposite their respective names and crediting his personal account with £30,000. In the Company's books each individual account was headed with the name of the party with the addition of the words " Advance Account." (h) At a subsequent date the above shares of Malcolm Nevitt Saxton, together with others, amounting in all to 20,000 shares, which he held, were repurchased by Mr. Saxton during his trip to America, and Malcolm Nevitt Saxton from that point disappeared from the transaction, the shares so transferred still being registered in Mr. Saxton's name at the date of his death. (j) Dividends from time to time as received were credited by the Company against the Advance Accounts of the individuals named above. (k) Before proceeding further, however, it is necessary to state that while Mr. Saxton made a gift to Miss Janet Cuthbertson Saxton of the 10,000 shares allotted on 21st June 1920, he subsequently altered this, and on 30th November 1922 the Company advanced to Miss Janet Cuthbertson Saxton the sum of £9,450 against the security of those shares. This sum of £9,450 was arrived at by taking the original sum of £10,000 which Mr. Saxton had paid on her behalf and which he always referred to as a gift, and taking therefrom such dividends as he had received between the date of the gift and the date of the taking over of the liability by the Company, and which said dividends amounted to £550, so that on 30th November 1922 in the Company's books an entry was passed debiting Miss Janet Cuthbertson Saxton's Advance Account with £9,450 and crediting Alexander Charles Saxton's personal account with £9,450. (1) From this point onwards various dividends and other amounts were duly received by the Company, and the Advance Accounts were reduced to the following

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Saxton, £2,767 12s. 3d.; Geoffrey Saxton, £2,434 10s. 1d.; Janet Cuthbertson Saxton, £7,970 7s. 3d. : £27,098 2s. 7d. (m) Saxton informed Mr. Heath that he wished to clear these del from the Company's books, and stated that he would like to mal a gift to the various parties concerned of the outstanding amour He therefore paid to the Company his cheque for the amounts d on Advance Account and drew from the Company, in order to himself in funds to meet these cheques, a similar sum, the tra being a cheque drawn on the Company's bank and banked by Saxton to his private banking account and the debt being to hi personal account in the Company's books. These cheques w duly passed on 7th September 1925. (n) At the same time he d that Miss Janet Cuthbertson Saxton should cease to be a sharehold in the Company, as he stated to Mr. Heath that, in view of the tru st already existing covering 10,000 shares in the Company and the fe that he was making other provision for her, he thought his five should have the shares. He desired, however, that the sons regard to this particular 10,000 shares) should be treated as te over the liability which he had discharged to the Company o account of Miss Janet Cuthbertson Saxton and amounting £7,970 7s. 3d. (0) Mr. Russell was consulted; and this amount divided into five equal parts, was made the consideration for tl transfer of 1,594 shares to each of the five sons, transfers bei signed by Miss Janet Cuthbertson Saxton as transferor and 1 sons as transferees, the remaining 406 shares to each son bei transferred by Miss Janet Cuthbertson Saxton to the sons for nominal consideration of 10s. The first set of transfers went thro on 16th November 1925, and the second set on 11th December 19 although the cash paid by Mr. Saxton to discharge Miss Janet' debt in the Company's books was actually paid to the Company ' 7th September 1925. (p) In the Company's books when the chequé were received from Mr. Saxton they were entered and credi ed i accordance with the figures set out above , but the cheques draw i 4 Mr. Saxton were only drawn in favour of Mrs. Janet Saxton, Mes

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is one of fact. The proceedings are by way of case stated und sec. 124 of the Stamp Duties Act, and the Commissioner has the fullest advantage of the fact that sub-sec. 2 requires hi do no more than state the facts " before him on making the ment." He has contented himself with setting out what alle the taxpayer made to him from time to time, without stating wl he considers the real facts to be. No steps were taken un sub-sec. 6, but the Supreme Court decided the case upon its o1 view of the effect of the taxpayer's statements. Although very unsatisfactory to determine the matter upon such mat eri the character of the case stated ought not to be allowed to o per against the taxpayer, who is not, in law, responsible for statement of the case. Accordingly, unless it were now ¢ necessary to exercise the powers given by sub-sec. 6, any as to what the facts are should be resolved in the taxpayer's fay Adopting this method of dealing with the facts, it seems to I that the deceased should be treated as having intended the tra action of 30th November 1920 to be final and irrevocable. this view the precise steps which it involved must be consid: After the allotment of 40,000 shares to the deceased's wife children and payment thereon of 6d. a share (by means which not be discussed) and the allotment of 10,000 shares to Heath, calls were made as a result of which 19s. 6d. per share was October 1920 due and owing by the holders of these 40,000 and apparently £1 per share on his 10,000 shares by Heath. 29th and 30th November 1920 cheques on the Company's banl account were drawn for the whole £49,000 thus due, but in vat amounts, and the total sum was debited to the deceased's pers0 account with the Company. Three of these cheques of the amounting to £36,262, and six cheques of three of the d sons, totalling £12,738 (the balance of £49,000), were h the Company either by or on behalf of the allottees of the Cheques of the Company totalling £12,738 were paid banking accounts of these three sons in order to meet their for that sum. All this was done on both sides upon the ins of the deceased.

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replenished, paid, independently, their debts for calls? The answer is found in the facts of the transaction. It never was intended that the Company should put any funds under the control of the supposed borrowers, nor even incur an obligation to do so. The Company after issuing its cheques remained entitled to recover back the very cheques or their proceeds. It was one inseverable transaction which could not, and was not intended to, increase the total assets of the Company. The Company was to obtain nothing. The purpose of the operation was to substitute the simple contract indebtedness of the deceased for the shareholders' liability for calls. Whatever may be the position when a company receives back from a shareholder in payment for calls money which it advances to him generally and not specifically for the purpose of paying them, such a transaction as that attempted by the entries made on 30th November 1920 and by the exchange of cheques is ineffectual and void; always upon the assumption that the debit of £49,000 was not made against an existing credit. On this supposition, therefore, the liability for calls would have temained unsatisfied, and the deceased would have been at liberty to reverse the credit and debit for £49,000. It would follow upon this supposition that at that time the shares of Heath would be wholly unpaid, and those of the deceased's wife and children would be paid up to sixpence only. But this supposition is not wholly true. In fact, on 29th November 1920 the deceased's account was in credit £19,091 17s. 3d. On the following day the £49,000 was debited to this account. Two other items were also debited on this date but, in the absence of proof to the contrary, it must be presumed that the £49,000 was the first debit against the credit of £19,091 17s. 3d. When'this debit was made to the account so in credit, the transaction did not operate simply as an attempt to create an indebtedness in this sum. It operated as an extin- guishment of the amount of £19,091 17s. 3d. and as an attempt to create an indebtedness as to the balance, namely, £29,908 2s. 9d. This extinguishment might and did lawfully operate to pay the

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lls. 3d.) (7) Various entries in the books establish that this sum of £18,269 was applied - if not directly, still indirectly - in liquidating the amount due in respect of the 50,000 shares. (8) There was left, however, a sum of £31,731 on the shares in respect of which the Company had not been paid cash and which, despite the entries in the Company's books, was still due and payable to the Company. (9) On 21st July 1921 the following debits and credits were made in the Company's books : - Dr. - Mrs. Janet Saxton £10,000, Harold Saxton £4,800, Alex. W. Saxton £4,400, Chas. D. Saxton £4,000, Geoffrey Saxton £3,300, Malcolm N. Saxton £3,500: £30,000. Cr. - A. C. Saxton (the deceased) - By sundry persons £30,000. These entries were made because the deceased changed his mind, and arranged with the Company to debit the parties with £30,000 as an advance on the shares allotted to them, and credit him with the amount. The entries were made without the knowledge or consent of the persons debited with the amounts, totalling £30,000. (10) But in my opinion these entries establish the intention of the deceased of throwing upon these persons the obligation - an existing obligation and one that the Companies Act imposed upon them - of providing for the shares taken up by them respectively, and of not discharging that obligation for them. They also establish, in my opinion, the appropriation by the Company and the deceased of the £18,269 in and towards the discharge of the obligation arising out of the allotment of 10,000 shares to the daughter and to Heath respectively. (11) The deceased took over M. N. Saxton's shares, and the debit to the latter's advance account was transferred, about November 1922, to the deceased. (12) About November 1920 the deceased altered the arrangement as to his daughter's shares. A sum of £9,450 was debited to the daughter's Advance Accdunt in the Company's books, and a credit of £9,450 passed to the deceased's personal account. This sum of £9,450 represented the amount paid or payable in respect of the 10,000 shares allotted to the daughter, less a sum of £550 paid in dividends. The daughter thus assumed a responsibility to the Company for an advance of £9,450 which was credited to her father, the deceased. The daughter does not appear to have dissented

At a glance

Court

Decision date

Before

Source

Judgment (173 paragraphs)

Cited By (2)