On the face of the documents they appear to be voluntary. The first states that the grantor Charles Parbury "doth hereby freely and voluntarily and without any valuable consideration grant" the land to the respondents. The others respectively state that they are "in consideration of the sum of five shillings."

The question is whether, in truth, the documents were executed without valuable consideration, and, if not, what the consideration must in fact and in law be taken to be.

As far as what may be termed the external circumstances are concerned, no dispute arises. Charles Parbury, formerly of Sydney, but now of London, was the sole owner in fee simple of all the land referred to, and its clear value was £48,306.

He has five sons - Charles Harold, of Sydney; Frederick, of Scone, New South Wales; Keith, of Shorncliffe, England; Colin, of Sydney; and Hugh, of Sialkot, India.

On 29th June 1911 a series of events took place, which, according as they are to be regarded as isolated and independent transactions, or as different but connected parts of the one transaction, will determine the questions now in issue.

On that day Messrs Flower & Hart, solicitors, of Brisbane, carried in for registration under the Companies Acts, the memorandum and articles of association of a company called "Parbury Estates Limited." The objects of the company are of a very usual character. They are to purchase or otherwise acquire in any manner whatever for investment or re-sale, and to traffic in land and house property, and to deal in any property real or personal, and this is followed by other objects for the most part of an ordinary business nature. The memorandum and articles were respectively signed by the father and sons, and one other person, Tremearne, described as a merchant, who is now, it is said, the manager of the company.

Each subscriber takes one share. The memorandum and articles bear date 29th June, but that must be the date of Tremearne's signature in Brisbane, the other signatures having been appended in Sydney, and, as it is to be gathered, on 27th June. Now, it is an important circumstance that the signatures of Charles (the father), of Keith, Colin and Hugh, were written by Charles Harold as their attorney under power; Frederick and Charles Harold signed personally, and so did Tremearne. Out of the six Parburys, therefore, all but Frederick acted by Charles Harold.

Among the clauses of the memorandum are two that may be referred to: - Clause 3, sub-clause (9) reads: "To distribute any of the property of the company in specie among the members;" and clause 5 provides: "The capital of the company is £50,000 divided into 50,000 shares of £1 each, whereof 45,000 shares shall be deemed for all purposes fully paid and shall be allotted as follows" - and then it is provided that Charles (the father) is to have 19,999 shares, each of the sons 5,000, and Tremearne 1.

Article 3 provides that "The company shall forthwith enter into an agreement with" the father, the sons, and Tremearne, in terms of a draft, identified by the subscription of Mr. Flower, and that "the directors shall carry the said agreement into effect," with full power, nevertheless, at any time and from time to time either before or after the adoption thereof, to agree to any modification of such agreement.

Article 5 says that the shares shall be under the control of the directors "subject nevertheless to the stipulations contained in the said agreement with reference to the shares to be allotted in pursuance thereof."

Article 76 appoints Charles Harold, Frederick, and Tremearne the first directors.

Now, it is of the utmost importance, in view of the judgment appealed against, and the argument addressed to us, to bear in mind the provisions of sec. 15 of the Companies Act 1863. That section declares that "The articles of association ... when registered ... shall bind the company and the members thereof to the same extent as if each member had subscribed his name and affixed his seal thereto and there were in such articles contained a covenant on the part of himself his heirs executors and administrators to conform to all the regulations contained in such articles subject to the provisions of this Act."

Without inquiring very closely as to the exact effect of that section, it is sufficient to say that it has considerable binding force in regulating the rights of members.

One case only may be referred to - Salmon v. Quin & Axtens Ltd.[1]. In the Court of Appeal[2] Farwell L.J. (Cozens-Hardy M.R. concurring), said: - "The Act does not say with whom that covenant is entered into, and there have no doubt been varying statements by learned Judges, some of them saying it is with the company, some of them saying it is both with the company and with the shareholders. Stirling J. in Wood v. Odessa Waterworks Co.342 Ch. D., 636, at p. 642. says: - The articles of association constitute a contract not merely between the shareholders and the company, but between each individual shareholder and every other." Then adds Farwell L.J.: - "I think that that is accurate subject to this observation, that it may well be that the Court would not enforce the covenant as between individual shareholders in most cases." Further on, he refers to the articles as "forming this contract;" and ultimately the Court acts on that view to the extent even of restraining the company in general meeting from controlling the directors' discretion, because the regulations vested it in them. The House of Lords[4] affirmed the decision, Lord Loreburn L.C. referring to the provision in the articles as "the bargain made between the shareholders."

We have, therefore, a method adopted by which, to the fullest extent possible consistent with law, and with very great legal assurance, the company when created - the father and the members of it - are bound to carry out the settled scheme of allotment of shares.

No reason or actuating motive or idea for the creation of the company is apparent, or suggested, except as an instrument for carrying out the desire of Charles Parbury to transfer the proprietorship in the land, from one of sole ownership by him, to an ownership by which its benefits would be distributed among himself and his children.

All the individuals named necessarily acted in concert in creating the company, and assumedly for the sole immediate purpose mentioned, and then the new persona which was thus brought into existence stood ready to play its destined part.

Before referring to the next step in the transaction, it is desirable to read a few words of Lord Halsbury in In re Johannesburg Hotel Co.; Ex parte Zoutpansberg Prospecting Co.[5]. The Lord Chancellor, sitting then in the Court of Appeal, said: - "It may be (indeed, it certainly is so) that the companies were but nominees - puppets - only intended to move as their manufacturers intended they should move ... But persons who engage in such transactions must at least make their puppets move in a legal manner. The knowledge of and intention of the individual persons is nothing to the purpose. It is the abstraction, the ideal legal personage, which is sought to be bound." And we would here add: It is the acts of the abstraction, the ideal legal personage, of which advantage is taken, and those acts must be adopted with all their legal consequences.

The company being, then, a live and actual person, distinct from all the individuals composing it, Messrs. Flower & Hart, who, as the case states, at all times material acted as solicitors for the said Charles Parbury and for his sons and for Tremearne and for the company, on the same date, 29th June 1911, lodged the conveyance and transfer for registration in the respective appropriate ways. On or about the same day, Charles Parbury - of course, by Charles Harold his attorney under power - delivered possession of the land to the company, and the company - no doubt by Charles Harold alone or in conjunction with his co-directors - assumed and still retains possession as owner. The instruments of title as registered were executed by Charles Parbury, by his attorney Charles Harold. Subsequently, on 18th August 1911, the other two transfers were similarly executed, and the agreement referred to in the articles was executed by all the required parties - Charles, Keith, Colin and Hugh signing by their attorney Charles Harold, the last-named signing for himself, Frederick and Tremearne signing for themselves.

It would, in our opinion, be doing violence to common-sense to regard these various events as other than successive steps in carrying out the one transaction.

Charles Parbury did not bring the company into existence to make it the recipient of his bounty. And he did not create it as a trustee; to do that would have made the scheme impossible. The company, therefore, is an independent personage receiving and retaining the full ownership, legal and equitable, in the land - the constituent members having no estate or interest whatever in the land which the law will recognize; none, except so far as their membership, which involves their recognition that the company is the owner, may enable them to profit by the changed ownership. If, then, Charles Parbury did not intend to make the company, as such, a gift, what was the legal quality of his transfers to the company? Learned counsel for the respondents strenuously contended that he did, in fact, make a gift to the company, that is, he transferred his property to the corporation without any consideration being stipulated for or required or asked; and that this gift was real, and not unnatural, because the father had no doubt in his mind that the directors, having the power to make the desired allocation of shares and the knowledge that the father desired it, would in fact do it. But that is contrary to the substance and reality of the matter. In the first place, as already indicated, the precautions taken in framing the memorandum and articles show that nothing was left to voluntary action or uncontrolled discretion that could be avoided, and very little, if anything, was suffered so to rest. Then the concert of the parties in placing the attorneyship of all absent persons in Charles Harold's hands, in making him and the parties here present directors, in the employment of the same firm of solicitors to act for all parties, is convincing proof that every step of every one of the parties was pursuant to a well-defined plan, and was, as it was intended to be, the accompaniment and complement of every other. That all the individuals agreed to form the company, the signatures attest; and when the company was formed there was in law, unmistakably deducible from acts and conduct, a tripartite agreement between Charles Parbury and the company and all the individuals: that Charles should transfer his land to the company; that the company should in return, and as required by him, allot the 45,000 fully paid shares representing approximately the value of the property to the individuals as his nominees in the proportions mentioned, and, lastly, that the individuals should accept these shares from the company.

As between the company and Charles Parbury, that is a sale within the meaning of the Stamp Act, which recognizes as a sale the case where the consideration is in shares. Once that position is reached, the rest is covered by authority, of which the most important illustrations are John Foster & Sons Ltd. v. Commissioners of Inland Revenue[6] and John Wilson & Son v. Commissioner of Inland Revenue[7]. Wilson's Case is a decision of the Court of Session in 1895, the late Lord Robertson presiding. There a private partnership conveyed its whole assets to a joint stock company, limited by shares, consisting exclusively of the same partners, in consideration of each partner getting shares in the new company equal in value to his holding in the old partnership, and it was held that the conveyance was a conveyance on sale under the Stamp Act 1891 (54 & 55 Vict. c. 39), secs. 54 and 55, and that the disposition was chargeable with ad valorem stamp duty on the value of the stock transferred. John Foster & Sons Ltd. v. Commissioners of Inland Revenue[8] was approved. It was argued that the identity of the parties, property and interests, took the transaction outside the notion of a sale. "But," said Lord Robertson[9], "the legal effect of what was done was that the private company parted with their rights in the specific articles of property, land, tubes, stock in hand and the like, handed them over to the limited liability company, and got in exchange merely shares in the limited liability company." Lord McLaren said[10]: - "I am unable to adopt the view that a case of substantial identity between sellers and purchasers who are theoretically distinct can be regarded as an exception to the scope of the Statute."

In short, then, the parties, no doubt with the desire to distribute the father's property in certain proportions between him and his sons, have adopted a course which offers considerable collateral and incidental advantages for the purposes of division and alienation, but at the same time is impressed by law with certain legal attributes; and among them are the distinctiveness of the artificial persona and the necessity of regarding it as a real entity both in receiving the property and distributing in return, and as the consideration for it, its own shares, and so becoming the purchaser of the land.

The same principle also prevents the application of the doctrine of family arrangement, according to the class of decisions of which Denn dem. of Manifold v. Diamond[11] is a leading case. In that case Holroyd J. said[12]: - "A sale imports a quid pro quo, in some way or other enuring to the benefit of the party selling." But in that, and in every other case of the kind, the gift was direct to the object of the bounty, or a trustee for him, and though that object undertook to do something else for the benefit of another, it represented really an indirect gift to that other by the original donor. But when a third person not an object of bounty is interposed, not as a trustee, but as having independent rights, and the property is transferred to him both in law and in equity, it cannot be supposed to be as a gift to the persons ultimately intended to be benefited; and if, as a condition of the transfer, or as an intended reciprocal act, the third person pays over his own money (or, if a company, hands over its own shares) to a person designated by the transferor, and by his direction, the natural inference is, that this is done by way of consideration and in discharge of a contractual obligation at the instance of the transferor.

The first question, then, should, in our opinion, be answered in the affirmative.

The second question is as to the proper amount of duty. To begin with, the shares must be valued as at or about 29th June 1911, when the company accepted the transfer and conveyance, took possession of the land, and became bound to issue the shares, the subsequent actual issue being a formal act. It is common ground that all parties intended that fully paid up shares should be allotted.

But a contention has been raised as to whether the shares in fact allotted should be regarded as fully paid up, or as wholly unpaid. A very serious question is thus involved in the interpretation of sec. 28 of the Companies Act Amendment Act of 1889. That section provides that "Every share in any company shall be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by the memorandum of association or by a contract duly made in writing, and filed with the Registrar of Joint Stock Companies at or before the issue of such shares."

It is argued, on the one hand, that, as no contract was filed, the mere statement in the memorandum that the "shares shall be deemed for all purposes fully paid" is not a compliance with the section, and therefore the shares are in law unpaid, because they were not paid in cash; and, on the other hand, it is urged that the statement in the memorandum is sufficient, and therefore they must be valued as fully paid.

In the circumstances it is unnecessary to determine the point for the following reasons. If the matter depended solely on the new provision as to the memorandum, then, on the assumption that it had not been complied with, the only remedy would probably be reconstruction. But it does not depend upon that; there was and is a contract which, apart altogether from the memorandum provision, could have been registered so as to support the shares as fully paid.

A distinct line of authorities, beginning with In re New Zealand Kapanga Gold Mining Co.[13] and including In re Darlington Forge Co.[14], In re Preservation Syndicate[15] and Smith v. Brown[16], establishes this: that if by some bonâ fide mistake, or in ignorance either of legal requirements or that they had not been complied with, a shareholder is struck by that section, he may apply under the rectification section (sec. 34 of the Act of 1863) and be removed from the register, with the view of restoration by a new issue after the contract is filed. The contract, if there is one, may then be registered, and the shares re-issued. The Statute is then complied with; it requiring, as Fry L.J. said in In re New Eberhardt Co.; Ex parte Menzies[17], the following conditions: - "First, there must be at or before the date of the issue of these shares, a contract; secondly, that contract must be duly made in writing; and thirdly, that contract must be filed with the Registrar. Now, all these things must be done or must be in existence at or before the date of the issue. You cannot have a contract filed before the issue of the shares if it is not a contract till after the issue of the shares."

On that is grafted a saving principle now well established, and exemplified in the case of In re S. Frost & Co. Ltd.[18]. It is this: a confirmatory contract which leaves the original contract standing and fairly sets out the terms of the original is as good for this purpose as the original, because it fulfils all the purposes of giving the required information. Rigby L.J.[19] points that out, and adds: - "My experience is that the practice is to file such confirmatory contracts. It is said that some text-writers doubt whether that is the right course to take; but I do not think their doubts can be taken to outweigh the practice of the profession."

Naturally, and as established by the cases, the course indicated cannot be permitted except on the terms of avoiding injustice to others - as, for instance, creditors.

Assuming then, but offering no judicial opinion upon the point, that the shares are to be regarded as unpaid for want of compliance with sec. 28, we entertain no doubt the circumstances here are such as to induce a Court to permit rectification of the register. There are no creditors or others to be prejudiced; and there was - taking, as we do, the statements in the various documents to be honest - an evident misapprehension as to the required formalities.

If such an application should be made, it may be decided that the provisions of the section are already satisfied, and that rectification is unnecessary. So that quacunque viâ the shareholders will be protected.

In these circumstances, it being practically in the power of the shareholders to obtain either a declaration that their shares (other than the subscription shares - see Dalton Time Lock Co. v. Dalton[20]) are now fully paid, or to obtain the necessary relief, we think the shares should be valued as fully paid.

The appeal will therefore be allowed, with £20 costs in the Supreme Court, and with the costs of this appeal.

Appeal allowed with £20 costs in the Supreme Court, and with the costs of this appeal.

Solicitor, for appellant, T. W. McCawley, Crown Solicitor, Brisbane.

Solicitors, for respondents, Flower & Hart, Brisbane.

[1] (1909) 1 Ch., 311; (1909) A.C., 442.

[19] (1899) 2 Ch., 207, at p. 214.