Perpetual Trustee Company (Limited) v Federal Commissioner of Taxation

Perpetual Trustee Company (Limited) appealed to the High Court against an assessment of estate duty made by the Federal Commissioner of Taxation. The dispute concerned the valuation of the dutiable estate of the late Sir James Murdoch, with the Commissioner's valuation significantly exceeding that contended for by the executor. Key issues included the inclusion of life insurance policy proceeds and the valuation of shares in a proprietary company, Murdoch's Investments Ltd., which formed a substantial part of the estate.

The court was required to determine whether the proceeds of a life insurance policy, payable to the testator's wife, should be included in the dutiable estate, and how the shares in Murdoch's Investments Ltd. should be valued for estate duty purposes. Specifically, the court had to consider the impact of restrictions on the transfer of shares in a proprietary company, the earning capacity of the company, the value of its assets, and the control exercisable by a majority shareholder. The court also had to assess the value of gifts made by the testator shortly before his death, which were used to acquire shares in the company.

Williams J. held that the life insurance policy proceeds should be excluded from the dutiable estate. Regarding the shares in Murdoch's Investments Ltd., the court determined that the testator's majority shareholding, which conferred control over the company, should be valued on the basis of substantial equivalent to absolute ownership. This control meant that the restrictions on share transfer, while present, did not adversely affect the value of the shares, provided the fair price did not exceed twenty shillings per share. The court found that the main factors in valuing shares were earning power and capital asset safety, and that transferability restrictions in certain companies did not necessarily depreciate value unless they destroyed the right of transfer altogether. The court ultimately valued the testator's shares at seventeen shillings per share.

The appeal was allowed, and the matter was remitted to the Commissioner to reassess the estate duty. The reassessment was to exclude the life insurance policy proceeds, value the gifts to the daughters at £11,086, and value the testator's 360,000 shares in Murdoch's Investments Ltd. at seventeen shillings each, totalling £306,000. The respondent was ordered to pay one-half of the appellant's taxed costs.