Commissioner of Taxation (Cth) v St Helens Farm - [1981] HCA 4 - HCA 1981 case summary — Zoe

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Commissioner of Taxation (Cth) v St Helens Farm

[1981] HCA 4

High Court of Australia|1981-07-01|Before: Wilson JJ, Sheppard J

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Source facts

Court

High Court of Australia

Decision date

1981-07-01

Before

Wilson JJ, Sheppard J

Source

Original judgment source is linked above.

Judgment (231 paragraphs)

[1]

For the reasons which I have expressed in the Ceedon appeal the primary judge should have applied s. 18 (1) (a) and ignored the contingency that Mr. Field might reconvert his cumulative preference shares into ordinary shares. Accordingly, I would allow the appeal, dismiss the cross appeal and remit the matter to the Supreme Court.

[2]

Again s. 18 (1) (a) should have been applied so as to ignore the contingency that Mr. Wright might, during his lifetime, reconvert his cumulative preference shares into ordinary shares. I would allow the appeal, dismiss the cross appeal and remit the matter to the Supreme Court.

[3]

Ord Forrest Pty. Ltd. v. Federal Commission of Taxation [8] was a decision by an evenly divided court dismissing an appeal from Stephen J. Such a decision is referred to as a statutory majority, a consequence of the directions in the Judiciary Act 1903, as amended, s. 23. Those directions are of questionable validity. If Parliament can direct that on an even division a certain judgment follows, for example that in certain cases, the opinion of the Chief Justice or if he is absent, the opinion of the Senior Justice present, shall prevail, presumably it can direct that in those or other cases the opinion of the junior or some other Justice shall prevail, and of course it can change the directions from time to time. If Parliament can direct that a Full Court consisting of less than all the Justices shall not give a decision on a question affecting the constitutional powers of the Commonwealth, unless at least three Justices concur in the decision, (see s. 23 (1)), presumably it can direct that the decision shall not be given unless it is unanimous. If Parliament can give such directions, why can it not direct that no decision shall be given which invalidates an Act (or on a question affecting the validity of an Act) or which challenges the validity of any governmental action, or which is adverse to the Government, unless the decision is unanimous. Section 79 of the Constitution states that "The federal jurisdiction of any court may be exercised by such number of judges as the Parliament prescribes". Assuming this is intended to apply to the High Court, it does not authorize directions on how the individual opinions or votes of justices should be transformed into judgments of the Court, which seems to be well within the sphere of the judicial branch. The validity of these provisions has not been raised, perhaps because the main provision that an appeal fails if it does not attract a majority conforms to a widespread convention (see Dixon J. in Tasmania v. Victoria [9] ). The provision about equal division in the original jurisdiction does not. It is very disturbing that an Act or State Act should be held invalid on an even division of this Court (see Logan Downs Pty. Ltd. v. Queensland [10] ).

[67]

The proper operation of s. 18 (2) (c) must take account of the fact that the opening words of sub-s. (2) express the preliminary condition that the Commissioner is of opinion that it is necessary that the provisions of pars. (2) (b) and (c) should apply. There is then added in par. (c) the words "the Commissioner may, in his discretion, notwithstanding anything contained in the last two preceding paragraphs [adopt the winding-up basis]". Thus it appears to be a two-stage process, namely, the Commissioner having first concluded that it is "necessary" that the provisions should apply, nonetheless retains a discretion as to whether or not par. (c) shall in fact be applied. It appears to me that the purpose of the sub-section is to be ascertained by giving due attention to the use of the word "necessary". The proper operation of the sub-section is to give the Commissioner this discretion in cases where the application of the ordinary principles of valuation does not enable a conclusion to be arrived at which satisfies the mind of the Commissioner or the Judge, as the case may be, that it is as close as he can come to a true and fair value. It is in effect to be a "last resort" available to the Commissioner or the Judge when all else fails to produce a rational conclusion. It is not a mechanical solution for application in difficult cases; it is in my opinion to be applied only where other endeavours to provide a true and fair valuation fail. The additional discretion given to the Commissioner and the court by par. (c) appears to me to be designed to ensure that it is not to be used to produce an unjust solution, and to require a re-examination on ordinary principles of valuation if the result of the winding-up process appears to produce an unjust result. The case of a person holding a substantial majority of the shares in a proprietary company, the assets of which are listed shares, has sometimes been regarded as an example of a case where it is "necessary" to adopt a hypothetical winding-up basis of valuation, but that cannot always be so because in the general run of such cases, ordinary principles of valuation would produce a realistic figure. The hypothetical willing but not anxious purchaser of a majority of the shares in such a company would after completion of his purchase be in as good a position as the former owner of the shares to procure the winding-up of the company and obtain access to the underlying assets if he did not regard the yield as appropriate. Such a hypothetical purchaser would of course impose a discount against the risk that the underlying assets would diminish in value during the period of delay which would be necessary before the winding-up could be completed. It would be also necessary for the hypothetical purchaser to bear in mind in particular two possibilities, the first being opposition from the remaining shareholders including the possibility of attempted reliance on the "oppression" provisions of the Companies Acts and Ordinances, and the second the delays made necessary by the operation of s. 215 of the Income Tax Assessment Act 1936 Cth. That section prevents any distribution by a liquidator without the consent of the Commissioner. Moreover the hypothetical purchaser would have regard to any tax which would be payable upon the distribution of any retained profits.

[79]

Sheppard J., having rejected the Commissioner's argument that s. 18 (2) (c) should be applied, then considered and rejected the alternative assets-backing basis of valuation adopted by Mr. Robinson which was to take the assets valuation less a discount of 20 per cent. In cross-examination Mr. Robinson was not prepared to agree to a discount greater than 25 per cent. Sheppard J. said that if he had thought that method appropriate he would have regarded a much larger discount as necessary because that discount was no more than that allowed by the market price of listed investment companies as against their assets-backing of shares in other listed companies and allowed nothing for the lack of an available market and restrictions on transfer. He concluded however that it was more appropriate to adopt an earnings basis notwithstanding the disparity between the value of the principal asset, namely the B.H.P. shares on the date of issue of the ordinary shares and the earnings value of the shares in St. Helens Farm. That disparity he regarded as perhaps exaggerated somewhat in view of the boom market and in fact on the particular day in question those shares reached their highest price on the Stock Exchange. The nature of the market may be illustrated by the fact that, between 15th March 1968 when Mrs. Palfreyman sold her B.H.P. shares to St. Helens Farm and 25th June 1968 when the five ordinary shares were issued, the market price rose by some 40 per cent, i.e. from $17.70 to $25 per share. He then considered whether the earnings approach should be based upon a substantially lower capitalization rate than those selected by the valuers. The lowest capitalization rate adopted by the company's valuers was 5 per cent, and one of the Commissioner's valuers, in considering an earnings basis, used the same figure. Sheppard J. said that he preferred the approaches of Mr. Bagnall (5 per cent) and Mr. Goddard (6 per cent) rather than that of Mr. Young who had arrived at the lowest figure using a capitalization rate of 10 per cent. Sheppard J. adopted a rate of 4 per cent rather than the rates selected by the two valuers with whose valuations he otherwise agreed.

[98]

The critical question is whether there was a contingency and if so whether it did affect the interests of the donees. It was not contested by counsel for Ceedon that there was a contingency, namely the possible exercise of the power to reconvert the preference shares into ordinary shares. However the contingency of which the section speaks is one "affecting the interests of the donees". It is clear that the possibility of the power to convert being exercised would affect the value of the shares and this was not in dispute. The word "donee" is defined in s. 4 (1) of the Act as meaning "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". Light is thrown on the proper meaning of s. 18 (1) (a) if one reads the definition of donee into the paragraph. So read it becomes: "any contingency affecting the interests of any person who acquires any interest in property under a gift". In my opinion the word "interest" should be given the same meaning as in the phrase from the definition of donee. The natural meaning of the words in par. (a) so read is that it is referring to interests in property. Moreover the phrase "interest in property" is defined in s. 4 (1) of the Act to mean "any estate, interest, right of power whatsoever, whether at law or in equity, in or over any property". There seems to me to be no basis for reading the expression as including the value of property. In my opinion par. (a) of s. 18 (1) on its proper construction applies to contingencies which affect the proprietary rights of the donee in the property given. In the present case it is clear that the proprietary rights of the ordinary shareholders would not be affected by the exercise of the power to reconvert. It was argued for the Commissioner that the word "interest" was not confined to legal or equitable interests of a proprietary nature in the subject-matter of the gift and that it was used in the sense of a "commercial interest". It was said that the power to reconvert affected the commercial interest of the donee in that it would reduce the value of its commercial rights, its effect being not upon title but upon value. This argument was rejected by Sheppard J. He relied on the decision of Gibbs J. in Bray v. Federal Commissioner of Taxation [No. 2] [26] . That case concerned an agreement by which an amount of £88,000 was lent to a company repayable on demand. A month later the parties entered into an agreement which provided that the amount should be repayable at the rate of £2,200 per annum without interest unless the lender gave ninety days' written notice that the amount should become repayable in full. The Commissioner relied on s. 18 (1) (a) and assessed gift duty on the basis that the value of the promise to repay at that rate per annum was only £22,350 and assessed gift duty on the difference, i.e. £65,650. It was held by Gibbs J. that the taxpayer's appeal should succeed on the ground that s. 18 (1) (a) did not apply because the possibility that the lender might call for repayment of the total amount did not affect the interest of the donee within the meaning of the Act, but he held that there was a gift of the amount of £1,283, being interest for the ninety day period at 6 per cent.

[103]

In the alternative it was argued that the term "interests" did not refer or was not confined to interests in property but included value of property. Reliance was placed on Way v. Commissioner of Stamp Duties (N.S.W.) [30] , a case concerning death duties on notional estate. The question there was whether a discretion conferred on the settlor under a deed of settlement exercised during his life was "an interest in or benefit out of or connected with (the trust funds), or the proceeds of sale thereof". In a joint judgment Dixon, McTiernan, Williams and Webb JJ. said [31] that the right which the settlor had was - "at most a right to have his real or personal property purchased with trust moneys or exchanged for trust property on terms advantageous to the trust and only when the settlor in the exercise of a fiduciary power thought it proper to direct the trustees to acquire his property on these terms. This is not an interest in or benefit out of or connected with the settled funds within the meaning of the paragraph. It is simply a power to alter the investment of the trust funds for the benefit of the trust. The power does not confer on the settlor any beneficial interest in or the right to receive any payment out of or connected with the income or corpus of the trust as it exists from time to time. To fall within the paragraph such an interest in or benefit out of or connected with the trust fund must confer on the settlor some legal or equitable right to obtain some benefit in money or money's worth for his own advantage out of or connected with the trust property." The statutory expression there dealt with was "an interest in or benefit out of or connected with (the trust funds), or the proceeds of sale thereof"; one would expect that expression to be wider than the word "interest" in the context of s. 18 (1) (a). The Court treated it as confined to a legal or equitable right to obtain a benefit in money or money's worth "out of or connected with the trust property". Even if such an expression could be transferred to s. 18 (1) (a), it would not assist the Commissioner because that provision speaks only of the interest of the person who acquires any interest in property under a gift. The statutory provision there in question dealt with an interest in or benefit out of or connected with the trust funds or the proceeds of sale thereof and it was held not to cover the provision in the settlement referred to in the passage quoted. The subsequent statement [32] that "the interest or benefit must be such that the beneficiaries under the settlement would derive an advantage from the death of the settlor or some other person" does not warrant the conclusion sought to be drawn by counsel for the Commissioner.

[109]

The next question which arose in the Ceedon case was the effect of the escalator clause quoted above. Sheppard J. held that this agreement involved an impossibility because under the Act the Commissioner would not proceed to issue an assessment unless he took the view that the consideration was inadequate. If however there were an obligation to pay the difference between the stated price and the true value there would be no gift and the Commissioner would not be authorized to determine any such value. Sheppard J. concluded that for that reason the agreement had from its inception been void and of no effect. He concluded that the only consideration moving from Nodeec was the $600 payable by way of application money and premium and that the escalation agreement was of no effect. It was submitted on behalf of Ceedon both before Sheppard J. and before this Court that that agreement was a fundamental part of the arrangement between the parties and that if it were impossible of performance the whole arrangement including the allotment failed whereas Sheppard J. held that the escalator provision in the agreement was severable. He concluded that in fact the shares were allotted for a consideration amounting to $600 and a promise impossible of performance. Accordingly he held that the agreement was impossible of performance because whatever amount of premium might be fixed there could never be full consideration after taking into account the value of the "surplus assets", i.e. after taking into account the amount of preference capital, because however large the premium might be it would never catch up with full value. This would be so because any increase in the premium would simply increase the assets of the company. That argument was considered briefly in Ord Forrest by Gibbs J. [35] and by Mason J. [36] . The observations made in that case do not deal with precisely this point but only with the general effect of the issue of shares at a premium and do not assist in the resolution of the present point.

[112]

The next question in Ceedon was whether s. 18 (2) (c) should be applied. Sheppard J. concluded that the case was not appropriate for the application of s. 18 (2) (c). Sheppard J. took the view that the case was a much stronger one against the application of s. 18 (2) (c) than was St. Helens Farm. He pointed out that the average expectation of life of a man of Mr. Donald's age was approximately 15 years and that the value of $1 payable at the expiration of that period at a discount rate of 12 per cent was 18c. He agreed with submissions made on behalf of Ceedon that if the matter were approached by valuing the assets it would need to be discounted by 82 per cent to take into account the powers of Mr. Donald and that other discounts would need to be taken into account because of lack of negotiability on the shares. He added a further reason against the application of this provision, namely that art. 112 of the articles of association dealing with a winding-up provided that the liquidators with the sanction of a special resolution could make a division of the property otherwise than in accordance with the legal rights of the contributories in the winding-up so that Mr. Donald could, immediately prior to a voluntary winding-up, procure a special resolution directing the assets away from Nodeec to himself. He therefore concluded that the winding-up basis would lead to an unfair and unreal result and that the appropriate method would be an earnings basis. In this case he again preferred the valuation of Mr. Bagnall who took into account the possibility that the preference shares could be converted into ordinary shares and the effect of that on the period during which the ordinary shareholders could expect to receive substantial dividends. Mr. Bagnall had concluded that the uncertainties were such that the hypothetical willing but not anxious buyer would not be prepared to pay more than $5,000 for the shares. Mr. Goddard who adopted a somewhat similar approach arrived at a figure of $9,216, the primary difference in the reasoning being that Mr. Bagnall did not attribute the same effect to the possibility that the preference shares might be converted into ordinary shares. Sheppard J. preferred the reasoning and conclusion of Mr. Bagnall and accordingly valued the six shares at $5,000.

[154]

I have already dealt, in what I have said about St. Helens Farm, with the proper approach to s. 18 (2) (c) and in the case of each of the other four companies the same reasons appear to me to apply. I can see no ground upon which a winding-up basis could be regarded as "necessary" in order to arrive at a true and fair value of shares in any of the four other cases, any more than I can see such a necessity in St. Helens Farm. I am satisfied that the fact that a company has no income-earning assets but does have assets of substantial value is not of itself a reason why a winding-up basis should be regarded as necessary. The dominant feature of each of the companies other than St. Helens Farm is that the ordinary shareholders lack the characteristic which such shareholders usually have, namely ultimate control of the company's affairs by reason of the power to remove and appoint directors, and entitlement on a winding-up to the balance of the assets of the company after allowance for debts and the costs of liquidation and the nominal value of preference shares, without the risk of being "flooded" at any time chosen by the governing director by the conversion of a large number of preference shares into ordinary shares. No doubt they have in the case of each of these companies an expectation that if all goes well their shares will ultimately have those characteristics, but to value them upon the basis that the event upon which the achievement of that result depends has already happened is to depart from reality. It is of course true that the event is certain to happen but the time at which it will is uncertain and the probability that it will happen within a short time is low. In the case of a gift the subject matter of which is neither money nor some item of property for which there is a ready market and a readily ascertainable market price, the process of valuation cannot be expected to be easy. The basic principle by which that fair value is to be ascertained is by reference to a hypothetical market in accordance with principles which were established in Australia in Spencer v. The Commonwealth [3] , namely that the price which would be arrived at between a willing but not anxious vendor and a willing but not anxious purchaser, a method which was by no means new at that time. There are of course minor qualifications to deal with particular situations one of which is the well-known distinction between the approach in cases of compulsory acquisition and that in the case of the position of taxation by reference to value though it is probably no more than a slight difference.

[157]

What is termed "allotment" is generally neither more nor less than the acceptance by the company of the offer to take shares. To take the common case, the offer is to take a certain number of shares, or such a less number of shares as may be allotted. That offer is accepted by the allotment either of the total number mentioned in the offer or a less number, to be taken by the person who made the offer. This constitutes a binding contract to take that number according to the offer and acceptance. To my mind there is no magic whatever in the term "allotment" as used in these circumstances. It is said that the allotment is an appropriation of a specific number of shares. It is an appropriation, not of specific shares, but of a certain number of shares. It does not, however, make the person who has thus agreed to take the shares a member from that moment; all that it does is simply this - it constitutes a binding contract under which the company is bound to make a complete allotment of the specified number of shares, and under which the person who has made the offer and is now bound by the acceptance is bound to take that particular number of shares. In most cases the act of placing the person who has agreed to become a member on the register is a mere matter of form, and may be described as a mere ministerial act; but it appears to me that in point of law all that is done by the process I have just indicated, and all that was done in this case, was to make a complete and binding contract. His Lordship then quoted from Baggallay L.J. in In re Scottish Petroleum Co. [7] and continued by saying [8] : There Lord Justice Baggallay used the term "allotment" in what appears to me to be the proper sense of the term. It is only as constituting one of the steps which go to form a complete contract. There have been other cases in which the term has been used by Judges, but I am satisfied that all they meant was that there had been, in the particular case before them, complete allotment; that is, that the name of the person who had "agreed to become a member," to use the language of the 23rd section of the Act, had been entered upon the register. 1. (1885) 29 Ch. D. 421. 2. (1885) 29 Ch. D., at p. 426. 3. (1883) 23 Ch. D. 413, at p. 430. 4. (1885) 29 Ch. D., at pp. 426-427.

[161]

It thus becomes necessary to decide what the word "issue" means. It is a word which in other departments of the law has a definite meaning, but not in this. In Levy v. Abercorris Slate and Slab Co. [12] , Chitty J., in considering the nature of a debenture, said: "It must be "issued", but "issued" is not a technical term, it is a mercantile term well understood; "issue" here means the delivery over by the company to the person who has the charge." InKoffyfontein Mines Ltd. v. Mosely [13] the House of Lords affirmed the decision of the Court of Appeal sub. nom. Mosely v. Koffyfontein Mines Ltd. [14] . Fletcher Moulton L.J. [15] deals with the creation of shares as distinct from the issue of shares. Farwell L.J. [16] points out that "the words "creation," "issue" and "allotment" are used with three different meanings familiar to business people as well as to lawyers." His Lordship says: "There are three steps with regard to new capital; first it is created; till it is created the capital does not exist at all. When it is created it may remain unissued for years When it is issued it may be issued on such terms as appear for the moment expedient. Next comes allotment. To take the words of Stirling J. in Spitzel v. Chinese Corporation [17] he says: "What is an allotment of shares? Broadly speaking, it is an appropriation by the directors or the managing body of the company of shares to a particular person." " Speaking generally the word "issue" used in relation to shares means, where an allotment has taken place, that the shareholder is put in control of the shares allotted. A step amounts to issuing shares if it involves the investing of the shareholder with complete control over the shares. In re Ambrose Lake Tin and Copper Co. (Clarke's Case) [18] makes that quite clear. Cockburn L.C.J. said [19] : "inasmuch as the term "issue" is used, it must be taken as meaning something distinct from allotment, and as importing that some subsequent act has been done whereby the title of the allottee becomes complete, either by the holder of the shares receiving some certificate, or being placed on the register of shareholders, or by some other step by which the title derived from the allotment may be made entire and complete." Cotton L.J. [20] speaks of the steps by which the allottee becomes complete master of the shares. Thesiger L.J. [21] says that: "there is no magic to be attributed either to an allotment or to the issue of certificates, but in each case the Court must look at all the circumstances of the case, and see whether practically and substantially there has been an issue of shares at a time when there was not a contract registered." 1. (1949) 78 C.L.R. 594. 2. (1949) 78 C.L.R., at pp. 599-600. 3. (1887) 37 Ch. D. 260, at p. 264. 4. [1911] A.C. 409. 5. [1911] A.C. 1 Ch. 73. 6. [1911] 1 Ch., at pp. 82-83. 7. [1911] 1 Ch., at p. 84. 8. (1899) 80 L.T. 347, at p. 351. 9. (1878) 8 Ch. D. 635. 10. (1878) 8 Ch. D., at p. 638. 11. (1878) 8 Ch. D., at p. 641. 12. (1878) 8 Ch. D., at p. 642.

[178]

In this Court expedient to be adopted in such a case for pronouncing upon the rights of the litigants has been prescribed by s. 23 (2) (a) and (b) of the Judiciary Act 1903-1933 as follows: "If the Court is equally divided in opinion - (a) in the case where a decision of a Justice of the High Court (whether acting as a Justice of the High Court or in some other capacity), or of a Supreme Court of a State or a Judge thereof, is called in question by appeal or otherwise, the decision appealed from shall be affirmed; and (b) in any other case, the opinion of the Chief Justice, or if he is absent the opinion of the Senior Justice present, shall prevail." But whether under this provision, the judgment of a Supreme Court, or of a Judge of this Court, is left unreversed or unimpaired, or in matters where no such judgment is called in question, the judgment of the Chief Justice or the Senior puisne Justice present prevails, the decision so arrived at does not, in my opinion, become a precedent which in this Court has authority. Courts other than the House of Lords do not regard a decision which they pronounce as a result of an equal division of opinion as binding authorities. In The Vera Cruz [No. 2] [37] Brett M.R. referred to - "the question whether any Court is bound by a decision of its own, which decision was grounded on the fact that the members of the Court present were equally divided," and said: "It was the custom for each of the Courts in Westminster Hall to hold itself bound by a previous decision of itself or of a Court of co-ordinate jurisdiction. But there is no statute or common law rule by which one Court is bound to abide by the decision of another of equal rank, it does so simply from what may be called the comity among judges. In the same way there is no common law or statutory rule to oblige a Court to bow to its own decisions, it does so again on the grounds of judicial comity. But when a Court is equally divided this comity does not exist, for there is no authority of the Court as such, and those who follow must choose one of the two adverse opinions. And if the books are examined I have no doubt it would be found, if authority there be, that when a Court is equally divided, if the case comes before it again, it will exercise an independent opinion and abide by one of the two views. The case may be different as regards the House of Lords, since it is the ultimate court of appeal, for if it is otherwise there exists an uncertainty as to the law." This doctrine was repeated in Hobson v. Sir W. C. Leng & Co. [38] , and is followed by the Supreme Court of Canada (Stanstead Election Case [39] ). The House of Lords, as is well known, adopted an opposite rule (Beamish v. Beamish [40] ; London Street Tramways Co. v. London County Council [41] ; Inland Revenue Commissioners v. Walker [42] ). But this appears to be a consequence of the special view which the House took of the conclusiveness and finality of its rulings (see Pollock, First Book of Jurisprudence, 6th ed. (1929) c. VI., pp. 334-341).

[209]

A transferee from one of the original shareholders becomes entitled to all the rights and interests to which that shareholder was entitled or would have become entitled if he had continued as a shareholder, but the consideration for which the new shareholder acquired the shares passed from him to the old shareholder and not to the company. It does not seem to me that in such a case Archibald Howie can be used for the purpose of demonstrating that full consideration in respect of the bonus share or the shares issued at a figure less than their market value had passed from the shareholder to the company. It is worth considering also the situation where a shareholder (whether original or otherwise) disposes of his entitlement to new issue shares by "selling his rights" to a stranger and receiving for those rights the current market price. In such a case the purchaser of the rights becomes entitled on application to the company and payment of the issue price to have the relevant number of shares allotted to him and entered in the register in his name. This is a commonplace transaction in the case of listed public companies. In that case shares are issued by the company to the purchaser of the rights at a price below the market value of those shares. The consideration passing from the purchaser of the rights to the company would be only the figure at which they were offered by the company to existing shareholders. The new shareholder would have paid separately for the rights of the existing shareholder and would pay to the company only the favourable price available to existing shareholders. Archibald Howie does not assist in such a situation to demonstrate that the complete allotment of the shares to a stranger by the company was made for fully adequate consideration passing from the allottee to the company. It would follow from Ord Forrest that a stranger who purchased rights on the open market and paid the existing shareholder for those rights and then applied for the shares would receive a "gift" from the company for an amount equal at least to that which he had paid for the rights. Such a gift might be of a larger value if at the time of the complete allotment of the shares the price of the rights had increased on the open market. Such a new shareholder would incur liability for gift duty, as would the company itself, each being obliged to indemnify the other to the extent of one-half of the gift duty.

[226]

The chose in action created by the policy was, no doubt, "property", but the bringing into existence of that chose in action did not, in my opinion, amount to or involve any alienation of property within any reasonable meaning of that expression. It is clear, I think, that every one of the transactions mentioned in par. (a) of the definition denotes an act done by the deceased in his lifetime. In and about the issuing of the policy there was no conveyance or transfer or assignment or delivery of anything by him. He created no power of appointment. "Payment" I take to mean payment of money to or in trust for a donee. There was no such payment by the deceased. He paid a premium on the issue of the policy, and he paid many subsequent premiums. But Sarah Grinblat took no interest of any sort or kind in any premium paid. It seems to me to be out of the question to suggest that the payment of the premium was a "disposition of property". If it were, what ought to be brought into charge would be not the amount assured plus bonuses but the total sum of premiums paid. It may be said that the transaction involved a "creation of a trust" or of an "interest in property" - expressions which occur in the parenthesis in the definition. But the definition does not take into its scope creations of trusts or creations of interests in property. It takes in alienations of property by way of creations of trusts or of interests in property. There was no alienation of property by the deceased. Another anomaly involved in the view that the company is the donor in the case of an allotment is that the gift and the gift duty both enter into the computation of the value of the shares, at least in a case where there is no market value as in the case of shares listed on a stock exchange. The amount payable upon allotment, or prior to complete allotment, will to some extent increase the assets of the company and therefore the total value of those assets, but one-half of the amount of the gift duty will be payable by the company because s. 35 places the liability for payment of duty both upon the donor and the donee with the result that each must contribute half the amount. No doubt the company and the allottee might agree as to who should bear that burden, but that too might involve a gift. This is not an impossible calculation but it is a somewhat odd result and adds to the anomalies. 1. (1960) 105 C.L.R. 126. 2. (1960) 105 C.L.R., at p. 140.