Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW)
100 CLR 3921958 - 0509B - HCA
(Judgment by: Webb J)
Between: Davis Investments Pty Ltd
And: Commissioner of Stamp Duties (NSW)
Judges:
Dixon CJ
McTiernan J
Webb JKitto J
Taylor J
Subject References:
Corporations
Share transfer
Consideration
Taxation and Revenue
Legislative References:
Stamp Duties Act 1920 (NSW) - s 41; s 66
Judgment date: 9 May 1958
SYDNEY
Judgment by:
Webb J
For the reasons given by Kitto J. I would allow this appeal and answer the questions as his Honour proposes.
As stated by Lord Macnaghten in Birch v Cropper: [F7]
"Every person who becomes a member of a company limited by shares of equal amount becomes entitled to a proportionate part in the capital of the company, and, unless it be otherwise provided by the regulations of the company, entitled, as a necessary consequence, to the same proportionate part in all the property of the company". [F8]
Referring to this statement Isaacs J. in Osborne v The Commonwealth [F9] observed that incorporation "does not annihilate, but on the contrary is in aid of, the ultimate truth which underlies the matter, namely, the beneficial ownership of those who for the moment compose the company. Incorporation gives a special character and status to the partnership, and surrounds it with certain legal attributes and conditions, but it does not destroy it". [F10] Earlier in Osborne's Case [F11] Griffith C.J., after quoting Lord Macnaghten's statement in Birch v Cropper [F12] referred to the "substantial beneficial interest" of shareholders in the property of the company.
The vendor company here is of the type contemplated in these cases, the reasoning in which was applied by this Court to s. 66 (3A) in Archibald Howie Pty Ltd v Commissioner of Stamp Duties (N.S.W.), [F13] more particularly by Dixon J., as he then was, where his Honour speaks of the shareholders' "proportionate `interest' in the assets, an interest consisting of a congeries of rights in personam". [F14] There a division of the assets in specie among the shareholders had taken place and his Honour observed as to this that "There is an equivalence not only from a logical but from a realistic point of view. The reduction in both the amount and value of the share affords an adequate consideration in money and in money's worth." [F15]
That reasoning appears to me to be applicable to the facts of this case. I see no material difference between the position of shareholders who on a reduction of capital receive assets in specie and that of shareholders who purchase assets from the company. It is true that in each case the shareholders obtain thereby not only the legal interest but also the equitable interest to the same extent as would a non-shareholder who purchased the assets of the company. But from both the logical and the realistic point of view it is essential that the value of the interest of the shareholders as such in the assets of the company just before the conveyance to them takes place should be taken into the calculation of the consideration moving from them on the conveyance which terminates that interest and substitutes the legal and equitable interest in the assets themselves.