Stewart Dawson and Company (Vic) Pty Ltd v Federal Commissioner of Taxation [1933] HCA 4

Stewart Dawson and Company (Vic) Pty Ltd v Federal Commissioner of Taxation [1933] HCA 4 - HCA 1933 case summary — Zoe

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was decided to form separate companies for each of the four States in which business was carried on. In the cases of Stewart Dawson & Co. (N.S.W.) Ltd., Stewart Dawson & Co. (Vict.) Ltd., and Stewart. Dawson & Co. (W.A.) Ltd., it appears that the new company took over the assets belonging to the business in the State in which it was formed and paid for them in shares allotted at the direction of Stewart Dawson & Co. (Aust.) Ltd. to its shareholders in proportion to their interests. In the case, however, of Stewart Dawson & Co. (Queensland) Ltd., the assets were paid for in cash. David Stewart Dawson paid £30,000 to the Queensland Company for 30,000 paid-up shares of £1 each, which, together with seven shares subscribed for in its memorandum, brought the share issue to 30,007. Thereupon as consideration for the Queensland assets the Queensland Company paid this sum to Stewart Dawson & Co. (Aust.) Ltd., which has in fact advanced it to David Stewart Dawson for the purpose of paying up the shares. Stewart Dawson & Co. (Aust.) Ltd. then went into liquidation, and in the liquidation the debit of £30,000 to David Stewart Dawson's loan account with the Company was extinguished. It does not appear from the evidence that any part of this sum was debited against the interest in the surplus assets to which other allottees of shares in the Queensland Company were or may have been entitled. Before these transactions 5,000 shares in Stewart Dawson (Aust.) Ltd. stood in the name of Mrs. Arnold and 5,000 in the name of Mrs. Jerrard. None stood in the name of Miss Joyce Verrall, but some appear to have been standing in the name of her mother Mrs. Bertha Verrall. Upon the reconstruction Mrs. Arnold and Mrs. Jerrard were each allotted 3,334 fully paid up shares in the New South Wales Company ; 3,666 in the Victorian Company, and 1,334 in the Western Australian Company. It does not appear whether Miss Joyce Verrall was allotted any shares in the New South Wales Company, but she was allotted 1,000 shares in the Victorian and 500 in the Western Australian Company and this was done at the instance of her grandfather, David Stewart Dawson, and presumably out of the shares to which he became entitled in those Companies in respect of his shareholding in Stewart Dawson & Co. (Aust.) Ltd. Under his direction, of the shares for which the sum of £30,000 was paid, 3,000 each were allotted to his daughters Mrs.

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she would get dividends, At or about the same time some difficulties arose about Federal income tax upon undistributed income which the Commissioner might or did claim could reasonably have been distributed, and her father asked Mrs. Arnold to sign a paper stating that she had received all dividends. Her evidence, while plainly truthful, cannot be relied upon for the order of events or for the business significance of these occurrences, because, as she says, she was very careless about it and did not seem to trouble and left her affairs in her husband's hands. What is clear, however, is that she received directly from the Queensland Company about 30th December 1922 a dividend of 4 per cent on her shares, a sum of £120; about 20th October 1923 a dividend of 6 per cent, a sum of £180; and about 29th December 1924 another dividend of 6 per cent, £180. She also received a notice or notices of meeting from the Queensland Company and a notice or notices from Stewart Dawson & Co. (Aust.) Ltd., or some other source relating to the scheme of reconstruction. It appears that within a day or so of 29th December 1925, when Mrs. Arnold was actually paid a dividend of £180, her father telegraphed instructions to the manager of the Queensland Company that it should be paid to him. These instruc- tions he confirmed by a letter in which he directed that dividends should always be sent to him as he paid his daughter monthly on account and "kept the dividends against same." The Arnolds left for England at about thistime. Mrs. Arnold had, while in Australia, refused her father's request to sign an acknowledgment that she had received all dividends from her shares in the Companies. On 12th February 1925 her father cabled to the London office : - ' The Arnolds gone to London. Do not pay them any money refer them to me." On 22nd April 1925 he cabled authorizing payment of a month's allowance to Mrs. Arnold on her signing a paper at the office of his London solicitors. The nature of the paper may be inferred from a letter which he wrote to his solicitors on 14th May 1925. This letter is not, I think, evidence of the facts it narrates, but the instructions it contains are relevant and admissible. It instructed them to make out acknowledgments that Mrs. Arnold

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names," but added a postscript: " This applies to the original « ae vied that stood in their names and also to the shares that at mid : t stand in their names." Acknowledgments were drawn Fxperan rn x Comaas- rdingly and signed, one by Mrs. Arnold and the other by Mrs. stoyer or ard, and sent to David Stewart Dawson in Australia. Mrs. Laan nold's allowance had been stopped until she agreed to sign an acknowledgment. About a month before the next dividend was paid by the Queensland Company, the manager received from David Stewart Dawson a note directing that " all family dividends" should be sent to him. Except for the three Queensland dividends aid in 1922, 1923 and 1924 respectively to Mrs. Arnold, all dividends upon shares standing in the names of Mrs. Arnold, Mrs. Jerrard and Miss Joyce Verrall were in fact paid by the Companies to David Stewart Dawson. In no year did the aggregate amount of dividends able in respect of all the shares standing in the name of any one these ladies reach the amount of her annual allowance. Indeed, largest total sum payable in respect of all the shares standing the name of Mrs. Arnold or of Mrs. Jerrard was £506 13s. 7d. The inference which should be drawn from these facts is in contest. Commissioner relies upon the presumption established by the provisions contained in sec. 23 (1) of the Land Tax Assessment Act 1910-1926, which operates to place upon the taxpayer the onus of blishing to the reasonable satisfaction of the Court that the ment is wrong. The appellant does not deny that in the ent case the onus rests upon it of establishing that the shares question, or a sufficient number of them, were not held on behalf David Stewart Dawson, but it contends that upon its showing i the shares were placed in the name of a child by a parent or 'a person in loco parentis, this onus is satisfied unless and until it is nade to appear affirmatively that the child was not intended to beneficially but that a resulting trust arose. In Scott v. Pauly it is suggested by Isaacs J., as he then was, that the so-called "presumption " of advancement is but "an inference which the

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Judgment (44 paragraphs)

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