Perpetual Trustee Company (Limited) v Federal Commissioner of Taxation [1942] HCA 4

Isl, CL © JN 1942. Sve

SYDNEY,

Feb. 16-19;

Man. Mir.

Williains J.

THE FEDERAL COMMISSIONER OF TAXA-

HIGH COURT [1942.

(HIGH COURT OF AUSTRALIA.]

PERPETUAL TRUSTEE COMPANY (LIMITED) Apprtnant;

TION \ RESPONDENT.

Estate Duty (Cth.)—Assessment—Dutiable estate—Proprietary company—Shares—

Property — Mortgage — Valuation — Matters for consideration — Restrictions on transfer of shares—Shareholder—Power to remove or control directors and to alter articles—Hstate Duty Assessment Act 1914-1940 (No. 22 of 1914—No. 12 of 1940).

The main items to be taken into account in valuing shares which have no ordinary market are the earning power of the company and the safety of the capital assets in which the shareholders' money is invested. Transferability of the shares is also important, but, in certain classes of companies not regis- tered on the Stock Exchange, the value of the shares would not necessarily be depreciated by restrictions which were not such as to destroy such a right of transfer as was reasonable in the circumstances.

The articles of association of a proprietary company, in addition to giving a right to the directors to decline to register any transfer of shares, except transfers to certain relatives, without assigning any reason therefor, restricted the rights of members to transfer shares, apart from transfers to such relatives in the first instance, to members of the company at a fair price fixed in accord - ance with the articles and only allowed transfers to strangers if there was not any member willing to acquire shares at this price. The articles provided that the fair price should be fixed by the company in general meeting once in each financial year for the ensuing year, and if not so fixed in any year the fair price for such year should be the same as last fixed, and failing such fixing the fair price should be deemed to have been fixed at twenty shillings per share. Each share carried one vote and a director could be removed and the articles