Commissioner of Stamp Duties (NSW) v Pearse

The Commissioner of Stamp Duties (NSW) appealed to the Privy Council against a decision of the High Court of Australia concerning the assessment of stamp duty on a transfer of shares. The dispute arose from the Commissioner's assessment of ad valorem stamp duty on a transfer of shares from the respondent, Mrs. Pearse, to her son. The Commissioner contended that the transfer was not made for nominal consideration, as argued by Mrs. Pearse, but rather for a substantial consideration, thereby attracting a higher rate of stamp duty.

The central legal issue before the Privy Council was whether the transfer of shares from Mrs. Pearse to her son constituted a "gift" for the purposes of stamp duty legislation, or if it was a transfer for consideration. Specifically, the court had to determine if the nominal sum of ten shillings paid by the son for the shares was sufficient to prevent the transaction from being considered a gift, and thus liable for ad valorem duty as a sale.

The Privy Council held that the transfer was indeed a gift and not a sale. Their Lordships reasoned that the ten shillings was a mere pretence or colourable payment, and that the true nature of the transaction was a voluntary disposition of property. The court applied the principle that where a transfer of property is made for a sum of money that is demonstrably not the true value of the property, and the intention is clearly to give the property away, the transaction should be treated as a gift. The court distinguished this from a genuine sale where the consideration reflects the value of the property being transferred.

Consequently, the Privy Council allowed the appeal, finding that the transfer of shares was a gift and therefore not subject to ad valorem stamp duty as if it were a sale.