Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW) [1958] HCA 22

High Court of Australia Dixon C.J. McTiernan, Webb, Kitto and Taylor JJ. Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW) [1958] HCA 22

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

May 9, 1958 Dixon C.J.

The facts upon which this difficult case really turns may be reduced to a very brief statement indeed. The appellant, Davis Investments Pty. Ltd., having become solely entitled to the shares in D. Davis & Co. Pty. Ltd. proceeds to obtain transfers of certain of its valuable assets including fifty-seven shares in three other companies. There are no creditors who could complain of the transaction. It is therefore immaterial to the parties, except for purposes of the revenue laws of State or Commonwealth, for what consideration the assets are transferred to the holding company, that is Davis Investments Pty. Ltd., by the company whose issued share capital it holds, that is by D. Davis & Co. Pty. Ltd. By an agreement that is drawn up and executed by the respective companies the transaction is expressed as a sale and purchase of the shares in the other companies at prices which are in fact par, that is to say at £1 each. But the value of the fifty-seven shares is not £57: it is £54,382. By the transfer of the shares the holding company (Davis Investments Pty. Ltd.) gained no accession of wealth: for the value of the shares which it held in the other company (D. Davis & Co. Pty. Ltd.) dropped correspondingly; that is to say, their value decreased by £54,382 less £57, or £54,325. What the transfer meant to the holding company was a change of the form of property containing this value. That is to say, by the transfers that company would become the immediate owner of the shares which theretofore were the property of the company whose share capital it held. The latter company (D. Davis & Co. Pty. Ltd.) of course parted with the ownership and so depleted the value of its assets. But as it did so to its only shareholder it thereby satisfied the potential demand of its shareholders upon its assets, demands that under the company law were exercisable or capable of effectuation by securing either the declaration of a dividend or dividends or a reduction of capital or a winding-up. There is nothing to suggest that the transfer of the shares at par worked an unauthorised reduction of capital of D. Davis & Co. Pty. Ltd.: so presumably the same result might have been obtained by a distribution in specie by way of dividend or by way of reduction of capital (see Ex parte Westburn Sugar Refineries Ltd. [1] ) or in a winding-up.