Henty House Pty Ltd (In Voluntary Liquidation)
v Federal Commissioner of Taxation

Judges: Williams ACJ, Webb J, Kitto J and Taylor J

Fullagar J

Subject References:
Taxation and revenue
Income tax
Assessable income
Disposal of assets
Compulsory acquisition of assets
Compensation
Lump sum payment

Legislative References:
Income Tax Assessment Act 1936 No 27 - s 59

SYDNEY

Judgment by:
Fullagar J

FULLAGAR J. This case is not free from difficulty. I was at first strongly inclined to think that we had here a typical example of a casus omissus, and to regard it as covered by what Lord Simonds said in Inland Revenue Commissioners v Wolfson ^[F19] , at p. 868. His Lordship said:"It is not the function of a court of law to give to words a strained and unnatural meaning because only thus will a taxing section apply to a transaction which, had the legislature thought of it, would have been covered by appropriate words."

The term "disposed of" is not a technical term, and its "ordinary" or "popular" meaning does not, to my mind, cover a case in which a person is deprived of his property against his will or without his consent. If A's house were compulsorily acquired by the Crown or by a public authority, he would not say "I have disposed of my house" or "My house has been disposed of". The idea of ordering, managing, controlling, arranging, the idea of the exercise of an existing power over a thing, is generally inherent in the word "dispose" itself, and this essential idea is not lost when the word is used with a preposition to denote an act of alienation or creation of a new interest in property.

However, I would not deny that the words "disposed of" may, in an appropriate context, properly be given a wider meaning than what I regard as their normal meaning. In the present case we have a provision for adjustment which may operate either in favour of the taxpayer or in favour of the revenue. One would certainly expect to find all cases of alienation covered. No reason suggests itself for distinguishing between a voluntary alienation and a compulsory acquisition. And I think that the case of Smith v Federal Commissioner of Taxation ^[F20] , justifies, if it does not compel, reading the words in s. 59 of the Income Tax Assessment Act 1936-1948 as including a case of compulsory acquisition on payment of compensation. It is a trite saying that a decision on the construction of one statute must be used very cautiously when one is construing another statute, and one feels that there is much to be said for the view expressed by Gavan Duffy J. and Evatt J. in Smith's Case ^[F21] . But I cannot find any satisfactory ground for distinguishing Smith's Case ^[F22] from this case. If it was right to read the word "sale" in that case as including compulsory acquisition, I cannot help feeling that it would be wrong to read the words "disposed of" in this case as excluding compulsory acquisition. There is, of course, no great difficulty in regarding a compulsory acquisition as a sale where the process of acquisition is by way of notice to treat, and a binding obligation to convey is created when, though not before, a price has been fixed by agreement or by arbitration. And in Smith's Case ^[F23] the majority of the Court appears to have thought that the substance of the matter could not be regarded as different where the transfer of legal ownership takes place automatically on a proclamation or on the doing of some prescribed act by the acquiring authority.

I agree with the proposed answers to the questions before the Court, though, if it had not been for Smith's Case ^[F24] , I think I should have taken a different view.