COURT OF APPEAL

Nelson Evening Mail, Volume LXVI, 12 April 1934, Page 6

COURT OF APPEAL

ESTATE TAKEN OVER BY COMPANY QUESTION OF INCOME TAX (By Telegraph—Press Association) WELLINGTON, lOlli April. The hearing of an appeal by liic Commissioner of Taxes against a Supreme Court decision in favour of (he Pratt Estate Company, Ltd., was begun In tile Court of Appeal to-day. By his will, William l.’ratt, of Christchurch, who died in empowered his trustees to form a company with the object, inter alia, of taking over his estate, which consists mainly of two valuable city properties in Christchurch. The company was formed in August, Kbit*, with a. capital of CSIO divided into 1(1 ordinary £1 shares held by testator's children, and two of the trustees, and 81)1) £1 preference shares held by the trustees, who arc also the directors of the company. After providing for a dividend on the ordinary shares, depreciation, etc., the net income of the company, or so, much thereof as (lie shareholders determine. is divisible rateable among the preference shareholders. The trustees hold the preference shares upon trust for the hentieiaries as provided by the will. Si nee its formation the company has been uhm ssed for income tax. as an ordinary commercial company. It objected to the assessment for the year ended March, 1032. and, upon the objection being disallowed by tile Commissioner of Taxes, it required the ease to he stated for an opinion of the Supremo ( ottrl. ’I ite matter was heard by his Honour Mr Justice Ostler at Christchurch, and judgment was given in December, 11)3.3, in favour of the company, liis Honour holding that the company was merely the agent of the henlieiaries and not an independent person having control of the disposal of the whole of its income. The Commissioner of Tuxes is appealing from this decision. Mr A. T. .Donnelly, of Christchurch, is appearing for appellant, and Mr F. S. Wilding, with Hi nr Mr A. C. Perry, both of Christchurch, for respondent. After referring to flic provisions of the will and memorandum and articles of association of the company, Mr Donnelly submitted argument on the true construction of the relevant section (102) A of the Land and Income Tax Act, 1923. Ho submitted that the company was the absolute owner of the property of the. estate and that three was no trustee relationship between the company and the benelieiariqs. The beneficiaries could not demand payment of the income until it had reached the trustees from the company. The beneficiaries could not sue the company for income and were, therefore, not beneficiaries entitled in possession to receipt of income within the meaning of the statute. Fur respondent, Mr Wilding submit led that the beneficial ownership of hoth tlie capital and the income was vested in ihe henelieiaries and not in the company. The company was trustee and under a fiduciary relationship with each beneficiary. He emphasised the trustee relationship between the company and the beneficiaries. Mr Donnelly replied briefly, and the court reserved its decision.

THE TRUDA CASE

DISMISSAL OF APPEAL

Continuing argument in the Court of Appeal in the Truda ease Air Leicester for appellant submitted that the payments made by respondent into her husband's account when her own account had reached (lie maximum of £20(10 wore payments made in furtherance of an illegal purpose and such payments could not accordingly lie recovered. The whole intention of Savings Bank legislation was to prevent a person from obtaining interest on a sum in excess of £2OOO by depositing moneys in excess of this sum in the name of a dummy. Air Schramm, for respondent, submitted that the finding of the trial judge should not he overruled by the Court of Appeal. The trial judge bad expressly stated that ill view of the conflict of evidence be was unable to make any finding as to a contract between the parties. As no contract was proved it was unnecessary to discuss the question as to its legality or otherwise. After bearing Mr Leicester in reply, the Court delivered its decision in favour of respondent. Air Justice Herd' man slated that the main question was as to whether a contract bail been established or not. In view of the conflict of evidence he was unable to express opinion tlmt the dialings of the trial judge should he overruled. In spite of very able argument of counsel tor appellant he was of opinion that the findings of the trial judge were not sufficient for the Court of Appeal itself to liiul. illegal contract, and accordingly the appeal should he dismissed. Alt’ Justice Blair stated that the whole argument for appellant wa based upon a story told by respondent in the court below. This story had not been accepted by the trial judge. -Appellant was in the unfortunate position ol not having sufficient facts upon which the appeal could ho granted, and therefore it would have to he dismissed. Air Justice Kennedy concurred.