Stewart Dawson and Co (Vic) Pty Ltd v Federal Commissioner of Taxation

Stewart Dawson and Co (Vic) Pty Ltd (the appellant) appealed to the High Court of Australia against a joint assessment for land tax, made under section 40 of the *Land Tax Assessment Act 1910-1927* (Cth). The Commissioner of Taxation had deemed four companies, including the appellant, to be a single company for the purposes of assessment, based on the contention that shares representing not less than three-fourths of the paid-up capital of each company were held by or on behalf of shareholders of the other companies. The appellant objected to the inclusion of Stewart Dawson & Co (Queensland) Limited (the Queensland Company) in this aggregation.

The central legal issue before the court was whether shares in the Queensland Company, held by the daughters and granddaughter of David Stewart Dawson, were held beneficially by them or in trust for David Stewart Dawson. Section 40(2) of the Act stipulated that two companies would be deemed to consist substantially of the same shareholders if shares representing not less than three-fourths of the paid-up capital of each were held by or on behalf of shareholders of the other. The Commissioner's assessment relied on the argument that certain shares in the Queensland Company, registered in the names of David Stewart Dawson's daughters and granddaughter, were in fact held on his behalf, thereby satisfying the three-fourths threshold for aggregation.

Dixon J. applied the equitable principles concerning the presumption of advancement. He held that where a parent purchases property in the name of a child, there is a rebuttable presumption that the child takes beneficially. The evidence demonstrated that David Stewart Dawson had directed the allotment of 3,000 shares each in the Queensland Company to his daughters, Mrs. Arnold and Mrs. Jerrard, and to his granddaughter, Miss Joyce Verrall. Despite David Stewart Dawson's subsequent actions in intercepting dividends and requiring acknowledgments that allowances covered dividends, the court found that the evidence did not repel the presumption of advancement. The court was satisfied that David Stewart Dawson intended his daughters and granddaughter to be the beneficial owners of these shares, and therefore, they were not held on his behalf.

Consequently, the court found that the shares in the Queensland Company held by Mrs. Arnold, Mrs. Jerrard, and Miss Joyce Verrall were not held on behalf of David Stewart Dawson. This meant that the condition in section 40(2) of the *Land Tax Assessment Act 1910-1927* was not met, and the four companies should not have been assessed jointly. The appeal was allowed, the assessment was set aside, and the Commissioner was ordered to pay the costs of the appeal.