other person "-Shares in company purchased by governing director and allotted to sons-Retention by governing director during his life of voting and dividend rights and right to assets in a winding up-Reduction of capital of company-Resultant gain by sons on return of capital-Whether transaction dutiable as gift by governing director to sons- Gift Duty Act 1941 (No. 53 of 1941), S. 4-Gift Duty Assessment Act 1941-1942 (No. 52 of 1941-No. 17 of 1942), 38. 4, 11.*

In 1936 G. formed an investment company the assets of which consisted of shares in companies which G. transferred to the company in consideration The Gift Duty Assessment Act 1941-

than by will (whether with or without 1942 provided :-By S. 4: disposi-

an instrument in writing), without tion of property' means any convey-

consideration in money or money's ance, transfer, assignment, settlement,

worth passing from the disponee to the delivery, payment or other alienation

disponor, or with such consideration of property and, without limiting the

so passing if the consideration is not, generality of the foregoing, includes

or, in the opinion of the Commissioner, (a) the allotment of shares in a com-

is not, fully adequate' "; property pany; (b) the creation of a trust in

includes real property and personal property; (c) the grant or creation of

property and every interest in real any lease, mortgage, charge, servitude,

property or personal property." By licence, power, partnership or interest

S. 11 Subject to this Act, gift duty in property; (d) the release, discharge,

at rates declared by the Parliament, surrender, forfeiture or abandonment,

shall be levied and paid in respect of at law or in equity, of any debt, con-

every gift made on or after the date tract or chose in action, or of any in-

of the commencement of this Act-(a) terest in property; (e) the exercise of

by a person (not being a body cor- a general power of appointment of

porate) who is domiciled in Australia, property in favour of any person other

or by a body corporate which is incor- than the donee of the power; and (f)

porated under the law of any State or any transaction entered into by any

Territory which is part of the Com- person with intent thereby to diminish,

monwealth-of any property wherever directly or indirectly, the value of his

situated or (b) by any other person- own property and to increase the value

of any property which is situated in of the property of any other person"

Australia at the time when the gift is gift means any disposition of property which is made otherwise

78 CLR 200

of shares issued as fully paid to him and by his direction to his sons. There were two classes of £1 shares, A shares and B…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Grimwade v Federal Commissioner of Taxation

Details

AGLC: Grimwade v Federal Commissioner of Taxation [1949] HCA 9
Case: [1949] HCA 9
Decision Date: 4 April 1949

CaseChat Overview and Summary

The case of *Grimwade v Federal Commissioner of Taxation* concerned appeals by the executors of the estate of E. N. Grimwade against assessments of gift duty. The dispute arose from resolutions passed by a company, Batman Exploration Co. Pty. Ltd., to reduce its share capital. The Commissioner of Taxation contended that these capital reductions constituted gifts by E. N. Grimwade to his sons, who held the B shares in the company, and were therefore subject to gift duty.

The primary legal issues before the court were whether the capital reductions constituted a "disposition of property" as defined by the *Gift Duty Assessment Act 1941-1942*. Specifically, the court had to determine if the transaction fell within paragraph (d) of the definition, which includes the release, discharge, surrender, forfeiture, or abandonment of any interest in property, or paragraph (f), which covers any transaction entered into with the intent to diminish one's own property and increase another's.

The Full Court, affirming the decision of Williams J. on one point and reversing it on another, held that there was no "disposition of property" under paragraph (d). The court reasoned that E. N. Grimwade, as a shareholder, possessed no legal or equitable interest in the company's assets that he could forfeit or abandon. His power to influence company decisions, including liquidation, was considered a power over property in a commercial sense, not a legal or equitable interest. However, the court reversed Williams J.'s finding regarding paragraph (f), holding that the capital reductions did constitute a "transaction" within the meaning of that paragraph. The court found that E. N. Grimwade, by voting for or failing to vote against the resolutions, must be presumed to have intended the consequence of diminishing the value of his A shares and increasing the value of his sons' B shares, thereby satisfying the conditions for a dutiable gift.

The appeals were dismissed, with the court finding that E. N. Grimwade's actions in relation to the capital reductions constituted a transaction entered into with the intent to diminish his own property (the value of his A shares) and increase the property of his sons (the value of their B shares), thus attracting gift duty under paragraph (f) of the definition of "disposition of property."

Orders