DEATH DUTY CLAIM.

New Zealand Herald, Volume LXII, Issue 19061, 4 July 1925, Page 14

DEATH DUTY CLAIM.

THE CASE FOR THE DEFENCE. OVERSTATEMENT OF EARNINGS. COMMENT BY THE JUDGE. The claim for '£7B9 under tho Death Duties Act by the Commissioner of Stamp Duties (Mr. Meredith and Mr. Paterston) against Mrs. Priscilla Catherine L. Napier (Mr. Northcroft) was continued in tho Supreme Court yesterday, before Mr. Justice Heed. The case concerned the question of goodwill in the estate of defendant's husband, the late Thomas Napier, and the point whether tho value of the plant was as stated in the stamp accounts. In continuing the case for the defence, Mr. Northcroft contended the plant had a decreased valiie for death duty purposes, because it was not in situ. Thero was the very important and significant fact that the offer of J. J- Craig, Ltd., was put before the Court by the prosecution to aid in ascertaining the goodwill, but their figure was not. Referring to, the evidence of the accountants, Messrs. Young and Seaman, counsel said the latter had admitted that Mr. Young omitted, in his calculation, to make any allowance /or depreciation. The method employed to arrive at the surplus profits was not objected to. "Perfectly Wrong Thing To Do," It could not be said the account submitted to the commissioner was in any sense a false account. Counsel admitted that £4OOO, the advertised earnings of tho business, was an overstatement and said ho did not support the procedure. His Honor: It was a very improper thing, a perfectly wrong thing to do. Mr. Northcroft pointed out the actual earnings were £3683 for the year ended March, 1922. His Honor: Where do you get £3683 from?— Those are the accounts submitted to Messrs. Craig. There are two matters that make that discrepancy —the allowance for Wages and tho difference in the valuation of the stock/

Mr. Northcroft stated there was no goodwill in the business at the date of Mr. Napier's death, because he did not own the site of the business and the site was by far the most valuable item. Moreover, the principal items manufactured—boiler frames and pipes—were at that time almost entirely stricken down.

Review of Negotiations. Ceorge E. L. Alderton, solicitor, said Mr. Napier, who died in September, 1922, was his client and Mrs. Napier became executrix and beneficiary of the estate. When Mr. Napier died litigation was pending regarding alleged infringement of certain rights in connection with the making of boiler frames. Judgment in the case wafi in favour of defendant.

Negotiations were isoon commenced by J. Craig, Ltd., for the purchase of the business and following their request for a balance-sheet, witness sent them one covering about 18 months, made up by Mr. Gladding, an accountant. The price asked was £16,000. In a counter-offer J. J. Craig, Ltd., made provision for £750 tor goodwill. They criticised the value of the stock, which subsequently was justified, and also reduced the value of a house property adjoining the site from £3OOO to £2OOO. Witness therefore assumed that they were submitting the goodwill to be worth £750 and were deducting £IOOO from the residential property. The negotiations finally lapsed. The assistant-commissioner of stamp duties requisitioned for profit and loss accounts for three years in connection with the assessment of ~ goodwill and witness instructed Mr. Gladding to make up the balance-sheet. Preparing Balance-sheet. There seemed to be no proper ipethod of costing the stock and its reduction affected the balance-sheet very materially. An assessment of the death duty payable was finally received by witness. Early in December he discussed with Mr. Wright, an accountant, the best method of dis-_ posing of the business and Wright up an advertisement stating the annual profit was £4OOO. This was based on the profit for 1922, the balance-sheot showing it to be £3683. Aboqt the following June or July negotiations started with Mr. Luke for the formation of a company. At no time did witness put any value on the goodwill. For stamp duty purposes there was no discrimination made between plant and goodwill. There was no suggestion that hie Government Valuation on the land, £29QO, was the figuro placed upon it by any of the parties-Cross-examined, witness said Gladding told him he wa3 having'the greatest difficulty in making out balance-sheets. These wore in process of preparation before J. J, Craig, Ltd., asked for them. Witness was satisfied the sheets showed proper results. Gladding had two valuations before him when he valued the plant at £606. The-itemised valuation of the plant given to J. J. Ltd., was £2IOO. The company knew it was paying £6OOO for goodwill. The apportionment of assets was made for stamp duty purposes. Valuation of tine Plant. Robert Sanders, contractor, who said ho had had 30 years' experience of concrete work, stated he had valued the. plant for death duty purposes, taking into account that the land belonged to someone else. He valued on the assumption that the plant was for realisation purposes, Alderton suggested this oonree. Robert Joseph Laird,, consulting engineer, also gave evidence regarding the value of the plant. Hendry Luke, manager of the Napier Concrete Company, Ltd., said that before ho purchased Mr. Napier's business for £13,000, he was given all facilities and information and was still satisfied with his purchase. He did not know there was any goodwill in the business and it was never mentioned. How could there be goodwill in a business of this kind ? Conwas in its infancy here and ideas were changing continually. In roply to Mr. Meredith, witness admitted seeing the agreement ratified by tho company allocating £2900 for the land, £2OOO for the piant and £6350 for tike goodwill. He had taken no exception to the last item,

The case was adjourned until Monday morning.