Hayes v Commissioner of Taxation (Cth) [1956] HCA 21

High Court of Australia Fullagar J. Hayes v Commissioner of Taxation (Cth) [1956] HCA 21

ORDER Appeal allowed with costs. Order that assessment be reduced by excluding from appellant's assessable income of the year ended 30th June 1951 the sum of £3,000 representing the value of shares in Richardson's Meat Industries Ltd. received by appellant in that year.

Cur. adv. vult.

May 23 Fullagar J. delivered the following written judgment:—

This is an appeal from a decision of a Taxation Board of Review. In the year ended 30th June 1951 the taxpayer received from one George William Richardson, in circumstances which will have to be examined, 12,000 fully paid shares of 5s. 0d. each in a company named Richardson's Meat Industries Ltd. The commissioner included the face value of these shares (£3,000) in the taxpayer's assessable income of that year. A majority of the board of review were of opinion that the sum in question was rightly so included, and from that decision the taxpayer appeals to this Court.

In 1939 the taxpayer, Hayes, who is an accountant, was residing in Melbourne. At that time Richardson was carrying on business in Hobart in meat and smallgoods under the name of "Richardson's Choice Provisions". His business was expanding, and he desired the services of a qualified accountant with special experience in costing. He went to Melbourne, where he was introduced to Hayes, who, at his invitation, came over to Hobart and entered into his employment. His exact position was not made very clear, but he seems to have been a sort of supervising accountant and general financial adviser in the business.

In 1944, on Hayes's advice, a proprietary company, Richardson's Choice Provisions Pty. Ltd., was formed to take over the business. This company had a paid-up capital of £17,000, about three-fifths of which was held by persons other than Richardson, who thus ceased to have a controlling interest in the business. Hayes was allotted either 2500 or 3000 shares of £1 in the company. He says that Richardson lent him £500 to enable him to complete payment for these shares. He became a director of the company, and also its secretary, retaining a right of private practice which he seems to have had since 1942.