Commissioner of Taxation (Cth) v Students World

Commissioner of Taxation (Cth) v Students World - [1978] HCA 1 - HCA 1978 case summary — Zoe

[70]

The detailed facts are set out in the judgment of Mason J. and I shall not repeat them here. I would add only that it seems to me to be clear upon a reading of both the evidence placed before the Board of Review and the reasons of Mr. O'Neill, with whose statement of the facts the other members of the Board agreed, that Mrs. Macpherson had no real recollection of the events of the day upon which the shares had been transferred or of the relevant meetings held, and that she had no understanding of business or corporate matters generally. She said that she was a director "in name only" and took no part in the business operations of the taxpayer company which had in fact been in liquidation since 1961. Her recollection of the events of the relevant day was indeed no worse and no better than that of the liquidator who however did understand the nature of the events. Their lack of recollection is not surprising in view of the fact that the events took place in March 1967 and their evidence was given before the Board in June 1971. In the end the only witnesses who had any reliable recollection of the events were those who kept contemporaneous notes and had access to the contemporaneous documents. The only other observation that I would make about the facts is that I would not myself think that the inference is warranted that the reason why those who assumed control of the taxpayer company did not send notices of meetings to Mrs. Macpherson was an apprehension that if she was reminded of her position she might assert her rights to the extent of threatening to transfer her shares. The witness who dealt with this matter said that the taxpayer company became a member of a large group of companies when 60 per cent of its shares were acquired in the manner referred to. He said first that the failure to send notices to Mrs. Macpherson was accidental in that there were only two or three companies in the group which had among their shareholders persons who were not members of the family group and that all companies in the group were treated alike in respect of notices. He subsequently said that the group adopted the practice of not sending notices of meetings to any of its shareholders and indeed did not hold what were described as "physical meetings" but merely had minutes drawn up and signed. I do not find anything inherently improbable in that statement. In the end however it does not appear to me to matter whether it was apprehension or a standard practice of not sending notices to anybody which produced the result that none were sent to Mrs. Macpherson.

[71]

I agree with the view that there is no ground for disturbing the finding of fact made by the Board of Review and confirmed by Mahoney J., that there was no arrangement that Mrs. Macpherson would not dispose of her residual 40 per cent shareholding or that she would not receive dividends on the retained shares. The reasons given by Mr. O'Neill in the Board of Review and by Mahoney J. for reaching this conclusion appear to me to be correct and they are confirmed by a reading of the evidence recorded in the transcript of the proceedings before the Board of Review. In the circumstances it seems to me to be proper to accept the conclusion reached by Mr. O'Neill that all the witnesses were truthful to the extent of their recollection. That conclusion was not dissented from by the other members of the Board and appears to have been acted on by Mahoney J. I agree with the view expressed by Mason J. that this mode of procedure is unsatisfactory but it was not the subject of objection or comment by either party. It is perhaps not surprising that neither party wished to embark upon a repetition of the original hearing which had occupied some three days, notwithstanding that the so-called appeal from a Board of Review is a proceeding de novo in the original jurisdiction of this Court and of the Supreme Court of New South Wales. That situation does not appear to have been changed by the recent legislation which confines "appeals" from Boards of Review to the Supreme Courts of the States and Territories. It is open to those Courts to adopt their own procedure and, at least in cases where both parties agree, to treat the material placed before a Board of Review as if it were evidence given in the proceedings. Where no critical questions of credibility arise, and where the parties are content to accept the view adopted by a Board, or a majority of its members, on credibility, no serious difficulties are likely to arise. In the present case the whole of the oral evidence and all the documents before the Board were included in the material before Mahoney J. and before this Court.

[75]

The first question therefore is whether their assent to that scheme, either alone or in combination with their ultimate compliance with the request made by the scheme trustee that Mr. Macpherson should transfer the whole of his shares and that Mrs. Macpherson should transfer 20 per cent of her shares (making a total of 60 per cent of the issued shares), constituted a "contract, agreement or arrangement" falling within s. 80B (5). It will be seen from the terms of cl. 27 that the scheme trustee could, if he chose, call upon Mrs. Macpherson to transfer the whole of her shares or only part thereof, although it is clear that if he exercised his right to the extent of 60 per cent of the total number of each category of shares he would have to call upon each of the two shareholders to transfer some shares, since each held 50 per cent of each category. It is clear that the scheme of arrangement gave the trustee the right to nominate the number of shares to be transferred by each of the two shareholders. I agree with the conclusion expressed in the judgment of Jacobs J. that the arrangement between the trustee and Mr. and Mrs. Macpherson, approving the scheme of arrangement constituted an "agreement or arrangement" and that such agreement or arrangement "while it remained executory conditionally affected the beneficial interest of Mrs. Macpherson in all her shares as well as the beneficial interest of Mr. Macpherson in all his shares. However it did so only at the time of its making and while it remained executory". During the period when it was executory (i.e. from 28th February 1967, when the scheme became operative, until 15th March 1967 when the transfers were signed, approved by the directors and registered), it affected the whole of the shares held by her (including those which she in fact retained in the year of income). It was however an agreement or arrangement such that, upon the power being exercised by the trustee to the full extent, i.e. exercised in respect of some part of the shareholding of each of Mr. and Mrs. Macpherson to a total extent of 60 per cent of the shares, the power was incapable of further exercise. The agreement or arrangement thereafter ceased to have any effect or operation upon the remaining shareholding of Mrs. Macpherson and could not affect Mr. Macpherson's shares for he no longer held any. The agreement or arrangement was therefore wholly spent. It did not thereafter relate to, affect, or depend for its operation upon any of the matters referred to in pars (i) to (iv) of s. 80B (5) (b). Thus the shares which Mrs. Macpherson held beneficially during the year of loss and had also held beneficially during the year of income were, at the time of the transfer of the balance of her shares in 1967, no longer conditionally or at all subject to or affected by the agreement or arrangement. No other arrangement was made by Mrs. Macpherson which related to, affected or depended for its operation upon any of the matters referred to in pars (i) to (iv) in accordance with the finding of the Board of Review and the trial judge.

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Court

Decision date

Before

Source

Judgment (82 paragraphs)

Parties

Cited By (2)