High Court of Australia Webb J. Sands v Federal Commissioner of Taxation ORDER Appeal dismissed with costs. March 28. Webb J. stated the facts as above set out and continued: Now it was the long-standing policy of the Minister, from which there was no departure, not to give his consent under s 11 during the ten years specified in s 8A except on the condition that the purchase price should not exceed the value of the improvements, but at the end of the ten years to consent to a transfer at the full value of the holding. No question was raised before me as to the propriety of this attitude of the Minister. In fact the appellant relies upon it as fixing the value of the holding for estate duty purposes at the value of the improvements effected by the holder. Evidence was called by the appellant as to the existence of this policy of the Minister. But she called no evidence of value apart from the value of improvements effected by the deceased as to which there was no question. On the other hand the respondent commissioner, although he did not other-wise call evidence as to the full value of the holding, adduced evidence as to that value based on a freehold value of £20,850, which the parties agreed was in fact the freehold value as at 8th November, 1959. This sum the commissioner's witness discounted because the holding was a perpetual lease and also because of the existence of the Minister's policy and of the contingencies that might occur while that policy was in operation during the ten years from the commencement of the lease of the holding. The veracity of the witnesses was not challenged, and as there were no manifest errors in the calculations, allowances or estimates of the commissioner's witness I accept his evidence as giving a reliable indication of the full value of the holding as at the date of the testator's death on 6th February, 1953. Then the question is, which of the two values I should accept, the improvements value or the full value? I have decided to reject the value limited to the amount spent by the testator on improvements and to accept as the value the amount which the holding was worth to the testator at the date of his death, having regard on the one hand to the fact that he had the right to retain the property until the expiration of the ten years specified in s 8A and on the other hand to the limitation imposed on its transfer and to the events that might happen to prevent the full value being eventually realized. To do otherwise would be to disregard the incontestable right of the deceased to retain the property throughout the ten years. I have decided therefore to apply the reasoning in The Commonwealth v. Arklay [(1)] to the extent that it was applied by the Privy Council in Minister for Public Works v. Christopher Bowes Thistlethwayte [(2)] . The reasoning in Royal Sydney Golf Club v. Federal Commissioner of Taxation [(3)] upon which the appellant relies seems to me to be rendered inapplicable by the consideration that the provisions of the County of Cumberland Planning Scheme Ordinance promulgated under the New South Wales Local Government (Amendment) Act 1951, were not expressed to be of limited duration and no allowance could be made for their probable repeal. Here there was a definite date for the termination of the control under s 8A and moreover that date was not too remote as at the date of the testator's death, i.e., six and three-quarter years thereafter. 1. (1952) 87 C.L.R. 159. 2. (1954) A.C. 475; 19 L.G.R. (N.S.W.) 352. 3. (1955) 91 C.L.R. 610, 20 L.G.R. (N.S.W.) 48. The evidence for the respondent commissioner that I accept is that of Archibald Clive Fairley who, until his retirement last year had been chief Commonwealth valuer for estate duty purposes and a valuer since 1923. He began by taking £20,850, the agreed freehold value, and deducting there-from £6,430, being the Crown rental of approximately £161 per annum capitalized at two and one-half per cent. This revealed the perpetual leasehold value to be £14,420. Then allowing for the operation of s 11, and the possible operation of s 8A i.e. in the events that might happen before November, 1959, and adopting two methods of calculation—one by way of a check on the other—both of which methods appear to me to be unobjectionable, he arrived at a valuation as at the date of the testator's death of £11,500 by the one method and of £11,760 by the other. That indicates that the respondent commissioner's valuation of £8,000 which led to the appellant's objection and this appeal was not excessive, but, on the contrary, was inadequate to the extent of £3,500 to £3,760, if, as I hold to be the case, the cost of the improvements on the holding effected at the expense of the testator is not to be taken as its value for estate duty purposes. Although I uuderstand the real contest is as to the rejection of the value of the improvements effected by the testator as the value for estate duty purposes and not as to the accuracy of the calculations made by the respondent commissioner's witness, still I think I should briefly state my understanding of the two methods adopted by this witness and the allowances he made for s 8A contingencies. His first method allowed a thirty per cent reduction for the whole period of ten years, averaging three per cent per annum. But only six and three-quarter years of the ten years had to run as from the testator's death. Now three per cent per annum for six and three-quarter years amounts to twenty and one-quarter. This reduced the perpetual leasehold value of £14,420 to £11,500. The second or check method took into account the difference between the real rental value taken at five per cent of the freehold value of £20,850, £1,042 per annum and the Crown rent of £161 per annum, namely £881 per annum which for six and three-quarter years discounted at five per cent to produce the present value of this item amounts to £4,933. Add this to the perpetual leasehold value discounted at the same rate and for the same period and the result is £15,315. This calculation does not take into account the contingencies that might occur to bring s 8A into operation. Discounting for these contingencies at ten per cent per annum the value of the rent advantage is reduced to £4,176 and the value of the lease to £7,584. The total of these two sums is £11,760, as compared with £11,500. The arithmetical correctness of these calculations was not questioned. It does not appear what rests were taken for interest purposes; but taking the most favourable rests for the appellant the result would still be at least £3,000 above the respondent commissioner's valuation of £8,000 for estate duty assessment purposes. The appeal is dismissed and the assessment confirmed. The appellant will pay to the respondent commissioner his costs of the appeal.