Papua New Guinea Law Reports - 1978
[1978] PNGLR 474
SC143
PAPUA NEW GUINEA
[SUPREME COURT OF JUSTICE]
THIESS BROS. (PACIFIC) PTY. LTD.
V
CHIEF COLLECTOR OF TAXES
Waigani
Raine DCJ Pritchard Wilson JJ
26-27 June 1978
18 December 1978
INCOME TAX - Allowable deductions - Losses of previous years - Requirement of beneficial holding of 50% of shares - “Beneficially held” - Whether required to be entered in share register - Absolute entitlement to registration sufficient - Income Tax Act 1959, s. 101d[dclxxiv]1 (as operative from 1st July, 1967 to 30th June, 1972).
WORDS AND PHRASES - “Beneficially held” - Income Tax - Requirement of beneficial holding of 50% of shares - Absolute entitlement to registration sufficient - Income Tax Act 1959, s. 101d (as operative from 1st July, 1967 to 30th June, 1972).
The appellant taxpayer company incurred losses in the tax years ending 30th June, 1968, 1969, and 1970 and produced an assessable income in each of the tax years ending 30th June, 1971, 1972 and 1973. On 30th June, 1970 a company, Thiess Holdings Pty. Ltd., (hereinafter called “Holdings”) entered into an agreement for the purchase of 1,529,989 shares in the appellant company (in a total shareholding of 1,750,000), the purchase price was paid in full on that date, the vendors and purchasers executed appropriate share transfers on that date, and a meeting of directors of the appellant company was held in Sydney on that date at which, inter alia, approval was given for the transfer and a direction was given for them to be registered; also on that date an instruction was given by telephone and by telex to make the necessary entries in the share register (located in Port Moresby) forthwith, but the actual entries (recorded as having been made “as at” 30th June, 1970) were not made until 1st July, 1970.
Section 101d of the Income Tax Act (as operative from 1st July, 1967 to 30th June, 1972) provided that no loss incurred by a company in any year preceding the year of income should be an allowable deduction unless that company satisfied the Chief Collector of Taxes “that on the last day of each year of income subsequent to the year of loss, shares of the company carrying not less than fifty percent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than that percent of the voting power on the last day of the year of loss”.
In its income tax returns for the years ending 30th June, 1971, 1972 and 1973, the appellant claimed the allowability of past years’ losses pursuant to s. 101 of the Income Tax Act 1959 which claims were disallowed (for the years ending 30th June, 1971 and 1972 and allowed in part for the year ending 30th June, 1973) and the disallowance upheld on appeal to a Review Tribunal constituted under s. 240 of the Income Tax Act 1959, and on appeal therefrom to the National Court, were upheld on the basis that the shares in the appellant company were not “beneficially held” by Holdings unless its name appeared on the company register as holder thereof with the corresponding voting rights.
On appeal from the decision of the National Court:
Held
(1)      That for the purposes of s. 101d of the Income Tax Act 1959 (as operative from 1st July, 1967 to 30th June, 1972) shares in a company are “beneficially held” by a person, not only when actually entered in the company share register but also where all acts have been done so that a person is absolutely entitled as against the company to be registered and the company is absolutely precluded from denying such registration.
Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353, at pp. 361-363; Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation (1952) 86 C.L.R. 335 at pp. 341, 343; Patrick Corporation Ltd. v. Commissioner of Taxation (Cth) (1974) 48 A.L.JR. 283 at p. 293, and Patcorp Investments Ltd. v. Commissioner of Taxation (Cth) (1976) 51 A.L.JR. 40 at p. 49, adopted and applied.
(2)      Accordingly, the company Holdings was on 30th June, 1970, entitled as against the appellant company to be registered and was a company whom the appellant company was absolutely entitled to register as a member, and therefore “beneficially held” the subject shares on 30th June, 1970 within the meaning of s. 101d of the Income Tax Act 1959 (as operative from 1st July, 1967 to 30th June, 1972).
(3)      The appeal should be upheld.
Appeal
This was an appeal from a decision of the National Court of Justice Thiess Bros. (Pacific) Pty. Ltd. v. Chief Collector of Taxes [1977] P.N.G.L.R. 62 affirming the decision of a Review Tribunal constituted under s. 240 of the Income Tax Act 1959, to reject certain losses of previous years as allowable tax deductions.
Counsel
R. J Bainton Q.C. and V. Bruce, for the appellant company.
L. J Priestley Q.C. and T. Reiner for the respondent, The Chief Collector.
Cur. adv. vult.
18 December 1978
RAINE DCJ: I agree with the judgment that is about to be delivered by my brother Pritchard and with the orders that he proposes.
Excellently argued though it was, I found this appeal extremely difficult, and my views changed this way and that after the court reserved its decision. However, I have, after anxious thought, come down hard in favour of the appellant, this, largely, because of the judgment that I read in draft, of my brother Pritchard, and, further to this, discussion with my brother Wilson.
In retrospect, I think my early unease stemmed from the way in which the High Court of Australia dealt with two earlier decisions of that court in Patcorp Investments Ltd. (and several other companies) v. Federal Commissioner of Taxation[dclxxv]2 (Patcorp). The earlier decisions, relied on heavily by the respondent, were Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation[dclxxvi]3 (Avon Downs) (a single judge decision by Dixon J, as he then was), and Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation[dclxxvii]4 (Dalgety Downs). The latter case was a Full Court decision.
My difficulty was that in Patcorp the High Court, so it seemed to me, rather skated over Avon Downs and Dalgety Downs. I hasten to add that in no way is this said disrespectfully. However, I would have expected the Patcorp judgments to have dealt more explicitly with Avon Downs and Dalgety Downs. Instead, as I see it, the High Court has rather passed them by, or passed over them, neither disagreeing with nor expressly distinguishing the earlier judgments.
I therefore repeat what I have already indicated, that the appeal should be allowed with costs.
PRITCHARD J: This matter is an appeal from the National Court, itself sitting on appeal from a Review Tribunal constituted under s. 240 of the Income Tax Act 1969 (as amended). The appellant, in its returns of income for the financial years 30th June, 1971, 1972 and 1973, had claimed losses incurred in preceding years as allowable deductions pursuant to the provisions of s. 101 of the Act. Due to the repeal of the old s. 101d in 1972 and the insertion of a new section in its place, consideration of the 1973 financial year is no longer relevant and it is the first two years abovementioned with which this appeal is concerned.
The old section was in the following terms:
“101d(1)        Notwithstanding any of the provisions of Sections 101, 101a, 101b and 101c of this Ordinance, in the case of a taxpayer that is a company a loss incurred by the company in a year preceding the year of income is not an allowable deduction unless the company establishes to the satisfaction of the Chief Collector that, on the last day of each year of income subsequent to the year of loss, shares of the company carrying not less than fifty percent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than that percentage of the voting power on the last day of the year of loss.
(2)      For the purposes of Sub-section (1) of this section, shares of a company beneficially held by a person on the last day of a year of income shall be deemed to have been beneficially held by the same person on the last day of the year of loss if:
(a)      the person has died and the shares were, on the last day of the first-mentioned year, beneficially held by the trustee of his estate or a shareholder who received the shares as a beneficiary in his estate; or
(b)      the shares have been transferred by that person to a company, the majority of the shares of which were on the last day of the first-mentioned year beneficially held by that person, or, if he has died, by the trustee of his estate or a shareholder who received the shares as a beneficiary in his estate.”
The appellant, in the three financial years ending 30th June, 1970 had accumulated losses of $1,444,507. It made a profit of $721,239 in the 1971 financial year and a profit of $603,177 in the following year. The appellant during this period had an issued share capital of 1,750,000 shares and 1,529,989 of these were purchased by Thiess Holdings Pty. Ltd. (hereinafter called “Holdings”) on 30th June, 1970 the last of the relevant loss years, which added to shares previously held by that company, gave it something like 90% ownership of the shares in the appellant. In fact, as a result of this take-over, the name of the appellant was changed from Bougainville Development Corporation Ltd. to the name it now bears.
This appeal is concerned with only one question, namely in acquiring this large parcel of shares in the manner it did on 30th June, 1970 did Holdings beneficially hold them on that date within the meaning of s. 101d?
The facts, although in dispute in several important respects before the Tribunal, have been agreed to for the purposes of this appeal. The appellant was incorporated in Papua New Guinea and at 30th June, 1970 had its registered office at the office of its accountants in Port Moresby. On the afternoon of that day its Board of Directors met in Sydney. (It appears that most of the Directors, as well as the Secretary, were based in Sydney and a meeting there was not unusual.) At that meeting a deed evidencing the sale to Holdings of the subject shares, was executed under seal by the appellant. The deed provided that the Vendors of the shares would cause a meeting of Directors of the appellant to be held at which the transfers “shall be approved by the Directors of the Company for registration by the Company”. The transfers of the 1,529,989 shares from the various vendors to Holdings were tabled and approved by the Board. The relevant share certificates were also tabled. The shares transferred had been paid for that day. It was resolved that new share certificates be issued for the shares thus transferred and that the seal of the appellant be affixed thereto. The Board then accepted the resignation of two Directors and appointed four new Directors who were the nominees of Holdings. The Board then accepted the resignation of three other former Directors. A telex was sent to the accountants in Port Moresby instructing them to register the transfers approved by the Board as at that date. A telephone call was also made to an employee of that firm late that afternoon stressing the need to register the transfers in accordance with the instructions in the telex. The telex arrived in Port Moresby Post Office that evening but was not delivered to the accountants until the next day, 1st July, on which date the transfers were entered in the register, the date actually written into the register being the previous day, 30th June, 1970.
In other words this matter turns on the failure to have the relevant transfers written up in the register of the appellant on that date, one day later being fatal, says the respondent, despite the fact that the entry was ante-dated a day to the date of the actual transfers.
Mr. Priestley Q.C. for the respondent argues firstly, that as the transfers were not entered in the register until 1st July, they were not “beneficially held” by Holdings in accordance with s. 101d on 30th June. The respondent relies in this submission on the judgment of Dixon J (as he then was) in Avon Downs Proprietary Ltd. v. The Federal Commissioner of Taxation[dclxxviii]5 (hereinafter referred to as Avon Downs) and the approval of that decision by the Full Court of the High Court of Australia in Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation[dclxxix]6 (hereinafter referred to as Dalgety Downs). Both of these decisions involved consideration of the then s. 80(5) of the Australian Income Tax Assessment Act 1936-1948, a section in similar words to our own s. 101d except that it applied only to “private” companies and the requisite shareholding on the appropriate days was 25%, not 50%. The headnote of Dalgety Downs reads:
“Shares are not ‘beneficially held’ by a person within the meaning of s. 80(5) of the Income Tax Assessment Act 1936-1948 unless the name of that person is entered in the register of members in respect of those shares and that person holds the shares for his own exclusive benefit. Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353, approved.”
The second argument advanced by Mr. Priestley is based on the fact that the transfers had not been stamped as required by the Stamp Duties Act 1952 (as amended). I will return to this matter later.
Mr. Bainton Q.C. for the appellant contends that despite the fact that the transfers were not physically entered in the register until 1st July, it is common accounting practice to enter share transfers “as at” the date of the approval by the Directors of the transfers, and that in the circumstances of this case, from the time of the Board’s meeting in Sydney on the afternoon of 30th June they were “beneficially held” by Holdings. He relies in argument firstly on the judgment of Mason J in Patrick Corporation Ltd. & Ors. v. Federal Commissioner of Taxation[dclxxx]7 (hereinafter called Patrick Corporation) and the upholding of that decision by the Full High Court (the appellant by then having changed its name) in Patcorp Investments Ltd. v. Federal Commissioner of Taxation[dclxxxi]8 (hereinafter called Patcorp).
The apparent conflict between Patrick Corporation and Patcorp on the one hand and Avon Downs and Dalgety Downs on the other, especially when the former two decisions appear to approve the latter, is perplexing to say the least. The resolution of such an enigma to my mind requires the closest possible examination of just what it was in the latter cases the former cases did approve.
Patrick Corporation involved eight appeals against the disallowance of objections against income tax assessments. The facts in each case differed in detail but in essence each involved a “dividend stripping” operation, the “stripped” companies having substantial profits available for distribution and, no longer being engaged in business, with the appellant companies buying all their shares. Dividends were then declared and under s. 46 of the Australian Income Tax Act the appellant companies, claiming they were shareholders which were resident non-private companies, sought rebates in their income tax assessments which as such, they claimed, the section permitted them. Their entitlements are irrelevant here. At p. 450 Mason J discussed the problem pertinent to this appeal:
“In all the other transactions (including the first dividend declared by Harbour Holdings) the dividends were declared and paid before the transfers of shares from the vendors to the purchasers were registered. Except in the case of Austin Sales, the transfers were subsequently recorded and the shares were registered in the names of the purchasers. But in the case of Austin Sales the vendors’ shares were transferred to Patrick Nominees Pty. Ltd., Mr. Keir and Mr. Davidson as nominees for the purchasers, with the result that the appellants’ names did not appear in the Austin Sales register of members at any time. On these facts it was submitted for the Commissioner that the moneys received by the appellants pursuant to the declaration of dividend made by each of the companies which were acquired were not ‘private company dividends’ within the meaning of this expression as it is defined by s. 46(1) of the Income Tax Assessment Act. The section must be read in the light of the definition of ‘shareholder’ contained in s. 6(1) of the Income Tax Assessment Act. The word is there defined so as to include ‘member or stockholder’.
The appellants’ answer (except as to Austin Sales) is that it is enough that their names were subsequently entered on the register in respect of the shares acquired and that entry in the register of members, when made, relates back to the date when it should have been made, that is, when the directors of the company approved the transfers or directed that they be registered.
Although the word ‘shareholder’ ordinarily signifies a person who is registered as the holder of shares (see Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353 at 363-365; 4 A.I.T.R. 195 at 204-205), the word ‘member’ may be wide enough to include a subscriber to the memorandum who is a person whose name is not entered in the register of members (Companies Act 1961, s. 16). And the provisions of s. 151(1) with respect to keeping of the register of members indicate that a person’s character as a member is initially ascertained by reference to circumstances, dehors the register.
The requirement in s. 151 that there should be entered in the register ‘(b) the date at which the name of each person was entered in the register as a member’ in my view refers, not to the date on which the entry was physically made, but to the date on which he should have been entered in the register as a member, that is, in the case of a subscriber to the memorandum, the date on which he subscribed and, in the case of a transferee, the date on which the directors approved the transfer, or resolved that it be registered. It is the duty of the officers of a company to give effect promptly to the company’s obligation to enter the names of its members in the register. The statutory provision is to be read accordingly as authorizing, indeed requiring, the entry in the register of the date when the directors approved, or directed the registration of, the transfer to the transferee. In all cases other than Austin Sales, the entries in the registers of members correctly show the membership of Mining Traders as having commenced when the dividends in question were paid.
Consequently, I am of the opinion that the moneys received by the appellants pursuant to the declaration of dividend by each of the companies acquired other than Austin Sales were ‘dividends’ within the meaning of s. 46.”
It will be noted that his Honour did not refer to Dalgety Downs but his reference to Avon Downs as authority for what the word shareholder “ordinarily signifies” is important where one comes to examine just what Dixon J did decide in that case and whether the headnote in Dalgety Downs above quoted accurately summarizes what the Full High Court did decide when approving Avon Downs. It may also be noted that the definition of “shareholder” in s. 4 of the Papua New Guinea Income Tax Act is identical to that in s. 6 of the Australian Act to which his Honour refers.
On appeal in Patcorp McTiernan J made no reference to either of these two cases. Stephen J agreed with the two judgments of Gibbs and Jacobs JJ The judgment of Gibbs J from p. 430 is as follows:
“I now turn to consider whether the appellant companies were shareholders in the stripped companies at the respective times when the dividends in those companies were declared and paid. By s. 6(1) of the Act, ‘shareholder’ is defined to include ‘member or stockholder’, but that definition provides no assistance in the present case, because in the case of a company limited by shares a member must be a shareholder. For present purposes, the terms ‘shareholder’ and ‘member’ are synonymous. Their meaning must be sought in the rules of company law. Section 16 of the Companies Act 1961 (N.S.W.) as amended, provides, inter alia, as follows:
‘(4)     On and from the date of incorporation specified in the certificate of incorporation, but subject to this Act, the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum ...
(5)      The subscribers to the memorandum shall be deemed to have agreed to become members of the company and on the incorporation of the company shall be entered as members in its register of members, and every other person who agrees to become a member of a company and whose name is entered in its register of members shall be a member of the company.’
These provisions appear to declare, in the clearest possible way, that a person, other than a subscriber, does not become a member of a company until his name is entered on the register. By s. 151 the company is required to keep a register of its members and to enter therein, inter alia:
‘(a)     the names and addresses of the members ...
(b)      the date at which the name of each person was entered in the register as a member.’
Counsel for the appellant companies submitted that the effect of this section is that the register records the fact of membership but does not in itself confer the status of membership. This submission, however, gives too little weight to the words of s. 16 and is opposed to the views that have consistently been expressed in cases decided on similar company legislation.
In Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353; 4 A.I.T.R. 195 and Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation (1952) 86 C.L.R. 335; 5 A.I.T.R. 386 this Court considered the effect of s. 80(5) of the Act as then in force, which referred to ‘persons who beneficially held shares of the company carrying not less than twenty-five per cent of the voting power on the last day of the year in which the loss was incurred’. It was held that a person ‘held’ shares within this provision by having his name on the register. In Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation, one Jack L. Vivers had bought and paid for 258 shares before the last day of the year, but the resolution that the transfer be registered was not passed, and the transfer was not in fact registered, until after that day. Dixon J said (at C.L.R. p. 363: A.I.T.R. p. 204): ‘Beneficially the 258 shares belonged to Jack L. Vivers, but until his transfer was registered and his name placed on the share register he could not be said to “hold” them within the meaning of s. 80(5).’ In Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation it was again contended that a beneficial owner, not on the register, ‘held’ the shares, and again the contention was rejected. The Court said (at C.L.R. pp. 341-342; A.I.T.R. p. 389): ‘Indeed it is not too much to say that the verb “hold” and its variants, when used in relation to shares in companies, normally refers to the legal ownership of the shares according to the register of members. The Companies Acts of the United Kingdom and of the several States of the Commonwealth have uniformly used the word in this sense, and common usage has followed their example. Before a different meaning is accepted, some justification must be found in the context, or the subject-matter.’
Later in the judgment, the Court referred to the definition of ‘shareholder’ in s. 6 of the Act and to ss. 108 and 109 of the Act, and said (at C.L.R. p. 343; A.I.T.R. p. 390) ‘The policy manifested by these sections might quite well have led to their being expressed so as to be applicable to loans made or remuneration paid to persons entitled to shares in equity only, as well as to registered members, but evidently the uncertainty resulting from a desertion of the register of members as the sole source of information as to the persons in respect of whom the sections apply was considered a decisive practical reason for not carrying the policy to that length. The same uncertainty provides no less a cogent consideration in relation to s. 80(5) ...’
In Federal Commissioner of Taxation v. Angus (1961) 105 C.L.R. 489; 8 A.I.T.R. 201 a taxpayer was entitled under the will of her late father to a life interest in one-third of his residuary estate which consisted of shares in a company incorporated and resident in Singapore. Notwithstanding his death the shares continued to stand in his name on the company register but pursuant to a direction given to the company by the trustees of the estate one-third of the amount of the dividends was paid by the company direct to the taxpayer. The question which the Court had to decide, whether the income was exempt under s. 23(q) of the Act, is not one which now concerns us. However, if the taxpayer had been a shareholder she could not have claimed the protection of s. 23(q), because of the provisions of s. 44(1a). The Court held that she was not a shareholder: see per Dixon CJ at C.L.R. p. 501; A.I.T.R. p. 205, per Fullagar J at C.L.R. p. 506; A.I.T.R. p. 208 and per Menzies J at C.L.R. p. 515; A.I.T.R. p. 215. Dixon CJ said (at C.L.R. p. 501; A.I.T.R. p. 205) that the executors or trustees of the deceased shareholder should be regarded as shareholders for the purpose of the payment of dividend and any tax thereon; that does not indicate a departure from the general rule that the shareholder is the person whose name is entered on the register, for the name of the deceased shareholder remained on the register: see A. L. Campbell and Co. Pty. Ltd. v. Federal Commissioner of Taxation (1951) 82 C.L.R. 452; 5 A.I.T.R. 143 where the position of the personal representatives of a deceased shareholder is discussed.
These decisions affirm the general principle that entry on the register is necessary to constitute membership of a company, and clearly establish that the beneficial ownership of shares, without registration, does not make a person a shareholder. In my opinion it follows that none of the appellant companies was ever a shareholder in Austin. It is true that they became the beneficial owners of the shares in that company. However, no transfers of the shares were executed in favour of the appellant companies, no resolution was passed by Austin or its directors that the appellant companies be registered and they never were registered. Since they were not shareholders of Austin they were not entitled under s. 46 to a rebate in respect of the sums which they received as a result of the declaration of dividends in that company. For this reason, appeal No. 102 brought by Mining Traders, and appeals No. 103, 104, 105, 106 and 107 brought by the other appellant companies, must fail.
Mining Traders was clearly a shareholder in all the other stripped companies — it was duly registered as such — but (except in the two cases mentioned, of Remfore and Harbour Holdings) registration was not effected until after the dividend had been declared. The registration, when effected, showed that Mining Traders had become a member on the date on which registration had been approved — a date which was before that on which the dividends were declared. The register correctly showed the date ‘at which’ the name of Mining Traders was entered in the register (see s. 151(1)(b) of the Companies Act), rather than the date on which its name was registered. According to the register, therefore, Mining Traders was a shareholder in all the stripped companies (except Austin) when the dividends were declared. This is in my opinion sufficient for the purposes of ss. 44 and 46 of the Act. To depart from the register would lead to the practical inconvenience mentioned in Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation at 86 C.L.R. p. 343; 5 A.I.T.R. at p. 390. The present case of course is one in which the register does not need rectification — it is correct.”
I will return later to his Honour’s summary of the decisions in Avon Downs and Dalgety Downs. There are in each of these cases matters of fact and law discussed which are not referred to by his Honour and which are crucial to the appeal now before us. His Honour in the above passage refers to the transaction concerning the company “Austin”. His remarks accord with those of Mason J in Patrick Corporation at p. 451 immediately following the passage from his Honour’s judgment I have quoted above. I will refer to these references in discussing Dalgety Downs later in this judgment. In Patcorp Jacobs J said at p. 436:
“In the two appeals and the cross-appeal by the Commissioner the name of the purchaser Patcorp Investments Ltd. (or Mining Traders Ltd. as it was then named) was either prior to or subsequent to the declaration of dividends entered into the register of the respective companies as shareholder; but in each case the resolution of the directors of the companies approving the transfer to Patcorp Investments Ltd. was passed before the declaration of the dividend. Mason J concluded that, provided the resolutions approving the transfer had been passed, the transferees were correctly to be regarded as ‘shareholders’ within the meaning of s. 46 thenceforth even though the entries were made subsequently. In my opinion he was correct in this conclusion.
When the word ‘shareholder’ is used in the Income Tax Assessment Act it refers to a person who is regarded as a shareholder under the general law governing the relationship of a person so described to the association in which he has a share. It has been so held in the case of a shareholder in a corporation the capital of which is divided into shares. See particularly Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation (1952) 86 C.L.R. 335 at pp. 341-343; 5 A.I.T.R. 386 at pp. 389-391. By the definition in s. 6 the word ‘shareholder’ includes a member or a stockholder. The inclusion of the former word covers a subscriber to the memorandum of association and a member of a corporation the capital of which is not divided into shares and a member of an unincorporated association, not being a partnership, whether or not the capital is intended to be so divided. See the definition of ‘company’ in s. 6.
However, to say that in the law governing incorporated companies a person is only a ‘shareholder’ at any particular date if his name appears on the register of members at that date is an over-simplification. For some purposes, e.g. qualification as a director, it has been decided (prior to the enactment of what is now s. 116 of the Companies Act 1961 (N.S.W.)) that a person is only the holder of shares if at the date of his appointment as director he appears on the register of members. Spencer v. Kennedy [1926] Ch. 125; [1925] All E.R. Rep. 135. On the other hand it is fundamental to company law that despite the language of such sections as s. 16(5) and s. 151(1) the register of members is not conclusive. Indeed, s. 151(4) makes it clear that the register is no more than prima facie evidence of the matters which it is required or authorized to contain. The provision in s. 155 that the register may be rectified embodies the concept that, once it is rectified, the rights of the person whose name is entered therein or removed therefrom are determined as at the date at which the rectification is ordered to have effect. It appears to me that the question which arises in the present case is whether the meaning of ‘shareholder’ in the Income Tax Assessment Act is confined to a person whose name appears on the register of members. In my opinion it is not. It also includes a person who is entitled as against the company to be registered and whom the company is absolutely entitled to register as a member of the company. If a company is at the relevant date absolutely entitled to register the person concerned and he is absolutely entitled to have the register rectified so that his name appears thereon as a shareholder at that date, such a person has more than a beneficial interest in the shares enforceable primarily against the vendor. He is in a direct relationship with the company involving reciprocal rights and duties between them.
In the present case once the directors of each company had approved the respective transfers and directed registration the transferee was absolutely entitled to have its name entered on the respective registers. It was not only beneficially entitled to the shares as property with consequent rights against the vendor in whose name the shares stood. It was entitled vis-a-vis the companies to be treated as a shareholder and to be registered as such and was therefore a ‘shareholder’ within the meaning of the Income Tax Assessment Act. I do not regard this conclusion as inconsistent with the reasoning in the Dalgety Downs case, supra, despite the generality of some of the statements therein. The particular question now being considered did not there arise and my conclusion conforms with the approach of the Court in that case.”
On p. 438 his Honour summarizes what in fact happened in the “Austin” transaction. He says:
“Thus the appellants’ names did not, and were never intended to, appear in the Austin Sales register of members at any time. The shares were transferred to Patrick Nominees Pty. Ltd., Mr. Keir and Mr. Davidson as nominees, that is in the context, as trustees for the new beneficial owners, the appellants.
Mason J held that a person who is a beneficial owner of shares in a company (save perhaps a subscriber to the memorandum) but who is not, and has never been, registered in the register as the holder of those shares cannot accurately be described as a shareholder within the meaning of the Income Tax Assessment Act. It is this conclusion which is challenged by the appellant taxpayers.
The appellants, in respect of the amounts received from Austin Sales (Aust.) Pty. Ltd., were not ‘shareholders’ within the meaning of s. 46. They were not registered as such and they had no absolute right against the company Austin Sales (Aust.) Pty. Ltd. to be registered; nor did that company have any right to enter their names as members.”
I will, as I said, refer to this matter later. It will be noted that his Honour in the first passage above referred only to Dalgety Downs and in fact in his judgment he did not refer to Avon Downs at all.
The decision of the Review Tribunal and of Williams J in the National Court on appeal, were based on the premise that Avon Downs and Dalgety Downs were both authorities for the proposition that for the purpose of s. 101d, actual entry on the register on or before the relevant date is the sole criterion for deciding whether shares were “held” within the meaning of that section. Williams J said that these authorities were concerned with a different question to what was the meaning of “shareholder” in s. 46 of the Australian Act as discussed in Patrick Corporation and Patcorp. I fail to see the distinction, and to my mind it is clear that Mason J, Jacobs J and to a lesser extent Gibbs J agreed with the general principle that the register, in determining whether a person is a shareholder, is the normal source of reference in deciding such a question, but not the exclusive one, as I hope to demonstrate from the judgment of Dixon J in Avon Downs itself. Factually, the situations in both Avon Downs and Dalgety Downs were very different indeed to the situation involved in this appeal.
Avon Downs was in the first instance decided by Dixon J on a basis not referred to in Dalgety Downs or by any of the judges in Patrick Corporation or Patcorp. The judgment is in three distinct stages, the first deciding that the Commissioner’s decision should not be interfered with and set aside and giving his Honour’s reasons for such decision, the second propounding another reason why the taxpayer would fail had his Honour himself had to decide the matter on the facts and on the law and the third discussing generally the meaning of the word “held” in a provision such as s. 80(5). However, as in all generalizations mention of an exception to the general rule can be overlooked, and an assumption can be made which is not always necessarily so. In this last part of the judgment, I believe both of these possibilities unintentionally occurred, and the approval by Dalgety Downs of the general construction by Dixon J of s. 80(5) likewise did not take into account either of such possibilities, but on the facts of that matter it was unnecessary to do so. The head-note set out above however, is as a result, somewhat misleading.
It is not insignificant that both Avon Downs and Dalgety Downs were concerned with an examination of the shareholdings in the appellant companies at the end of the loss/profit situation envisaged by s. 80(5) of the Act as opposed to the beginning, particularly so in the instance of Avon Downs. In that case there is no doubt that the appellant company was the author of its own misfortune as an examination of the first two stages will indicate.
AVON DOWNS STAGE I
From p. 355 Dixon J examined the factual situation of the appellant company, the steps taken by it and the representations made on its behalf. In the relevant year the company had made a profit against which it intended to set off previous losses and as a result a sale of a number of the shares was arranged, as his Honour says “without a formal transfer, or at all events, a registered transfer of the actual shares so that the continuing shareholders would be reduced to the status of dry trustees or nominees”. His Honour later said: “No doubt the prospect of the company’s paying little or no tax in respect of those profits was reflected in the selling value of the shares.” The capital of the company at that time consisted of 3,907 shares held as follows:
G. A. Vivers	1,001	
Jack L. Vivers	2,900	
Beryl I. Vivers	4	
2 accountants	1 each	
Total	3,907	
By a document or documents dated 14th June, 1944 between these five shareholders as vendors and five men, three named McCauley and two named O’Neill as purchasers, it was agreed that 2,907 of the shares be sold for a consideration which was in fact paid on that day. Beryl I. Vivers and the two accountants were to transfer the six shares they held. G. A. Vivers was to transfer 743 leaving him with 258 shares. Jack L. Vivers was to transfer 2,158 leaving him with 742 shares. On that day transfers were executed. In another arrangement between G. A. Vivers and Jack L. Vivers the former transferred his remaining 258 shares to the latter for consideration and a transfer to that effect was also executed that day. Certain other resolutions were passed, one of which was that the purchasers should become the directors in the place of G. A. and Jack L. Vivers and another that certain new articles be adopted, one of which concerned voting power and was to the effect that each member of the company should have one vote for every share held by him and in addition one vote for every £1 lent by him to the company and for the time being owing. In fact before the end of that month the purchasers advanced £2,000 to the company. If they had become, before 30th June, members of the company in respect of the 2,907 shares which they had purchased they would have thus had a further 2,000 votes. None of the share transfers were approved by the Board on the day of the meeting mentioned above and thus none of the transfers could have been registered.
When the company submitted its return of income for that financial year it showed the three McCauleys and the two O’Neills as holders of 2,907 shares, Jack L. Vivers as the holder of 742 and G. A. Vivers as the holder of 258. The return stated that each shareholder owned the shares in his own right and not as nominee for any other party. Thereafter the Commissioner requested further information. In the following year the company’s accountants wrote letters which as Dixon J said “made the matter even worse”. The accountants claimed that at a meeting of the Board of Directors of 29th June, 1944 it had been resolved that the transfers to the purchasers abovementioned had in fact been “effected” and the Secretary instructed to make the necessary entries in the share register. No mention was made of the transfer of the 258 shares from G. A. Vivers to Jack L. Vivers as having been approved at that meeting, but it was claimed that that transfer was approved at a meeting on 3rd November, 1944. The accountants then went on to inform the Commissioner of the names of the lenders of the sum of £2,000 and the amount which each had lent. The net result of all of this, if it were true, would have meant that the purchasers had 4,907 votes against 1,000. As Dixon J said, the Commissioner refused to allow the deduction claimed and could not have done otherwise on the facts as stated. On the hearing before Dixon J evidence was called to show that the facts alleged by the accountants were wrong and that in fact the purported resolution of the 29th June was not a formal resolution at all but a result of three of the directors deciding that an informal discussion held by them on that date should be deemed to be a directors’ meeting because of certain proposed restrictions on the transfer of shares which the Government was about to introduce. The company then, after meeting with the Taxation Commissioner’s officers in June of the following year, held a meeting of directors at which it was acknowledged that the transfers to the purchasers abovementioned had not been registered and it was resolved that they should be then effected and that the secretary be instructed to make the necessary entries in the register. It was also resolved that the transfer of the 258 shares from G. A. Vivers to Jack L. Vivers be effected. As Dixon J said, it was not clear why this particular resolution was passed in view of what had supposedly taken place in the previous November. The Taxation Commissioner disallowed the objections and gave no reasons for doing so. Dixon J said that he himself was prepared to accept the explanation given before him relating to the supposed meeting of directors on 29th June, 1944 and to accept that no entry had been made in any share register of the company of the names of the transferees pursuant to the transfers of 14th June. His Honour then went on to say, at p. 360:
“But it is for the commissioner, not for me, to be satisfied of the state of the voting power at the end of the year of income. His decision, it is true, is not unexaminable. If he does not address himself to the question which the sub-section formulates, if his conclusion is affected by some mistake of law, if he takes some extraneous reason into consideration or excludes from consideration some factor which should affect his determination, on any of these grounds his conclusion is liable to review. Moreover, the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision. The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some such misconception. If the result appears to be unreasonable on the supposition that he addressed himself to the right question, correctly applied the rules of law and took into account all the relevant considerations and no irrelevant considerations, then it may be a proper inference that it is a false supposition. It is not necessary that you should be sure of the precise particular in which he has gone wrong. It is enough that you can see that in some way he must have failed in the discharge of his exact function according to law.”
I completely agree with his Honour’s views on this matter and the tests to which he refers are applicable in exactly the same fashion to the appeal now before this court.
The argument advanced by the company before Dixon J was that on 30th June none of the transfers was registered and the name of none of the purchasers had been entered in the share register and that because of this the votes carried by the shares could not be increased by the loans which had been made until the transferees became members of the company. His Honour said, at p. 360:
“the proposition that for want of entry in the register, and I suppose, in addition, for want of anterior approval of the transfers by the directors and a valid instruction to enter the names in the register, the transferees were not members, was persistently forced on the attention of the commissioner.”
His Honour then said at p. 361, (the underlining being mine):
“I do not know why it should be assumed that the commissioner disallowed the objections because of some misconception of the issue or of some error of law. In effect the contention is that he would not allow the deduction either because he thought that a person might be a member of a company before his name is entered on the register or because he thought that under the article it was enough that the person for whom the registered shareholder was a trustee, had lent money to the company. But these alternatives are by no means exhaustive. There are other possibilities. It is useful to divide up the composite issue formulated by sub-s. (5) into its components and to express them in terms of the facts of this case. The first step is to fix upon the persons who may be considered to fulfil the double condition of ‘beneficially holding’ shares at the end of the years of loss and beneficially holding shares at the end of the year of income. It has been assumed that the answer in the present case must be that nobody except Jack L. Vivers and possibly G. A. Vivers can fulfil the double condition. Certainly they alone had twenty-five per cent of the voting power at the end of each year of loss. Clearly the McCauleys and the O’Neills did not. The four shares transferred by Beryl I. Vivers and the two by the accountants do not matter, but strictly while the transferors remained on the register they were trustees for the transferees. Let it be supposed that between them the two Vivers ‘beneficially held’ 1,000 preference shares as at 30th June, 1944. I shall give reasons later for the conclusion that the 258 preference shares standing in the name of G. A. Vivers were not held by him ‘beneficially’ and were not ‘held’ by Jack L. Vivers at all. But for the moment let that pass. On the supposition stated the two Vivers between them had under the article a voting power of 1,000 votes at 30th June, 1944. The next inquiry must be whether ‘the voting power’ is more than four times this figure. What is meant by ‘the voting power’? On 30th June, 1944 the purchasers could not themselves have voted at all without first taking a formal step. But they had it in their power to take that formal step, without depending on anything but their own joint action. The formal step was to meet as directors and to cause their names to be written in the register as transferees of the shares. Indeed in strictness they could not even attend a meeting without doing so except by obtaining a proxy. But the formal step was open to them at any moment. It was a step which would occupy only a time reckoned in minutes. It would have resulted in 4,907 votes on their side. It is a step that neither the Vivers nor anybody else could have prevented them from taking at any moment they chose. If the commissioner had taken the view that in this situation they in fact did possess a ‘voting power’ of 4,907 because nothing but a formal act depending on their own volition stood in the way of their exercising that number of votes, I should not be prepared to say he was wrong. There is nothing to suggest that he did take such a view and I do not feel called upon to say whether or not if he did so it is a tenable application of the words ‘voting power’. My purpose in mentioning the matter by way of illustration is to show on what a very little step the question whether the total voting power in the company was 3,907 votes or 5,907 votes depends. For the question for the commissioner on this point was whether the McCauleys and O’Neills had stopped in time or had proceeded far enough to warrant the statement that they had a ‘voting power’ of 4,907 votes. Actual entry in a book used as a share register would of course be enough. But so would some act that would operate to preclude the question of their membership as between them and the company. The company, up to the making of the assessment, had supplied the commissioner with information which could mean only one thing, namely, that as between the company and the McCauleys and O’Neills they were full members. When the shoe was found to pinch, the commissioner was invited to adopt the contrary view and to do so on the faith of explanations which, however circumstantial, were necessarily ex parte. I do not know why he must be taken to have been filled with confidence in the later version, why he must be assumed to have entertained no doubt that the earlier version had no justification in the actual facts or why he must be taken to be reasonably satisfied that he had been told everything and there was no further fact which would show that before 30th June, 1944 the position had become such that all parties would have been precluded from denying that the purchasers were ‘members’. In the circumstances a commissioner can hardly be considered unreasonable if he fails to rid himself altogether of misgivings and refuses to be satisfied that the issue is established. I do not regard it as of any importance that I myself would be prepared to accept the explanation and believe that there was no directors’ meeting on 29th June, 1944 and no entry of the purchasers’ names in the share register. The evidence given on the hearing was fuller and more satisfying than the letter of 27th June, 1945. In any case the commissioner was entitled to entertain some scepticism and in the circumstances to be sceptical and silent. At all events I am not prepared to find that the commissioner’s refusal to be satisfied upon the issue formulated by s. 80(5) is due to any such misapprehension, mistake, misconception, unreasonableness or miscarriage of judgment as would authorize me to interfere and set aside his conclusion.”
This portion of his Honour’s judgment is the end of what I call Stage I of the judgment. For the reasons given in it the appellant company failed. The underlined two passages in this section of the judgment relate to the two possibilities I have referred to earlier in this judgment. The first passage I will refer to again in discussing Stage II of Avon Downs. The second passage is the one which I believe is the exceptional case which was overlooked in the general remarks made by his Honour in Stage III and approved in Dalgety Downs, namely, that an act which would operate to preclude the question of membership as between the shareholder and the company would have been enough for the commissioner to decide that in fact such a shareholder had the voting power required by the Act, and to so decide correctly in law.
AVON DOWNS STAGE II
Dixon J, having decided that the appeal must fail, went on in the first par. of p. 363 of the report to pose the question “What would I have done had I had to decide this matter upon the facts and the law?” His Honour referred again to the question he raised in the section of the judgment last quoted, concerning whether the two Vivers beneficially held 1,000 shares as at 30th June. His Honour then went on to say that in his view the 258 preference shares still standing at 30th June on the register in the name of G. A. Vivers could not be added to the 748 standing in the name of Jack L. Vivers so as to make up the 1,000 shares necessary to form 25% of the shares each carrying one vote. His Honour said at p. 363:
“Beneficially the 258 shares belonged to Jack L. Vivers, but until his transfer was registered and his name placed on the share register he could not be said to ‘hold’ them within the meaning of s. 80(5). They were ‘held’ by G. A. Vivers; but he was a trustee for Jack L. Vivers and therefore did not hold them beneficially.”
It is this section of the judgment which Gibbs J referred to in Patcorp in that section of his Honour’s judgment I have previously quoted above. However, it is to be noted that Dixon J said “until his transfer was registered and his name placed on the share register”. When one compares these words with the first underlined portion of the earlier section of his Honour’s judgment I have set out above, one gains the impression that Dixon J regarded registration in the sense of approval for registration by the Board and entry of the purchaser’s name in the register as the one act. In the underlined portion I refer to, his Honour on half a dozen occasions referred to this procedure as constituting one “step”. Avon Downs was decided in 1949. I am sure that even at that time, it was not assumed that every meeting of a Board of Directors would have present at it the Company Secretary and the register, and that every transfer of shares approved by such a meeting would be immediately entered into the register itself. It is obvious that the increased mobility of the modern world has resulted in many Board Meetings being held away from the place where the company’s share register is physically kept. As Mr. Bainton points out to us, today many share registers are kept by means of computer. These changes indicate to me that what Dixon J, even in those days was assuming, was that approval by the Board accompanied by a direction to register a transfer, was such a “formal step” as his Honour was referring to, and the filling in of the entry in the register was simply a clerical task in itself of no importance. This view would be consistent with what his Honour had earlier said about an “act that would operate to preclude the question of their membership as between them and the company”.
AVON DOWNS STAGE III
Dixon J, at p. 363, dealt generally with the meaning of the word “held” in such a provision as s. 80(5) and in the general remarks his Honour then makes he concludes that “shareholder” means the person who has his name on the register. His Honour goes on to say that s. 80(5) is concerned with voting. He says “its purpose is both to exclude nominees from the enumeration of voting power and to take in those who are members of the company and vote independently of control”. His Honour then goes on to discuss the meaning of the word “beneficially”. It is this section of his Honour’s judgment which was discussed by the Full Court in Dalgety Downs and is specifically quoted at p. 341 of that Report. A portion of that judgment is referred to by Gibbs J in that section of his Honour’s judgment I have quoted above. I will not go into detail in this judgment concerning the meaning of the word “beneficially” except to say that I agree completely with what Avon Downs and Dalgety Downs say in regard to it. There is no dispute in the appeal before this court that if Holdings “held” the subject shares in the appellant on 30th June, 1970 it held them beneficially, in other words on its own behalf and with no other person or body having any claim on them of any nature whatsoever.
The relevant portions of Dalgety Downs are set out in various places earlier in this judgment and it only remains for me to point out that after the discussion which the Full Court embarked on concerning the general meaning of the word “held” in s. 80(5), it said this at p. 343: “bearing this in mind, it cannot be said to be at all improbable that the words ‘beneficially held’ are used with their prima facie meaning”. This is a long way from saying that physical entry on the register on the relevant date is the sole test for the purposes of s. 80(5) to the exclusion of all others. It must also be pointed out that the shareholder in Dalgety Downs whose shares were under examination had himself chosen to transfer them to another person by way of security for a mortgage. Just like the shareholders in Avon Downs this shareholder had deliberately, but for a quite legitimate reason, chosen not to have his name on the register at the relevant date. He too, like the shareholders in Avon Downs, was the author of his own misfortunate.
I do not believe that there is in fact any real conflict between Avon Downs and Dalgety Downs on the one hand and Patrick Corporation and Patcorp on the other. Gibbs J in Patcorp in referring to the Austin case in the passage I have above quoted said “no transfers of the shares were executed in favour of the appellant companies, no resolution was passed by Austin or its directors that the appellant company be registered and they were never registered”. As I indicated above, Mason J, after the passage in Patrick Corporation I have above quoted, went on to deal with the Austin case in much the same manner. Jacobs J did the same. The approach of the judges to that transaction is virtually the same as the approach of Dixon J to the transactions in Avon Downs and, although the circumstances are different, the same as the full High Court in deciding Dalgety Downs. Gibbs J however, in holding that Mining Traders was a shareholder in all the stripped companies (except Austin), despite the ante-dating of the register entries, said this was sufficient for the purposes of ss. 44 and 46 of the Australian Act. Mason J in Patrick Corporation and Jacobs J in Patcorp did not qualify their views in similar fashion. In the passage I have quoted above Jacobs J said that to say a person is only a shareholder at any particular date if his name appears on the register of members at that date is an over-simplification. His Honour later on goes on to say in the same passage that despite the language of ss. 16(5) and 151(1) the register of members is not conclusive and he goes on to speak of the concept of rectification dating back to the date when the transfer should have been registered in the event that the transferee had an absolute right to registration on that date. In Mason J’s judgment in Patrick Corporation above quoted his Honour said it was the “duty of officers of a company to give effect promptly to the company’s obligation to enter the names of its members in the register”. This concept is reflected in Moore v. North Western Bank[dclxxxii]9 which referred to “some purely ministerial act” which alone remained to be done by a company. This decision also referred to “a present absolute unconditional right to have the transfer registered”. Subject to the matter of stamp duty, I believe Holdings enjoyed such a right on 30th June, 1970. In Re Stratton Iron and Steel Co.[dclxxxiii]10 a company reluctant to register transfers was ordered to do so. In Marks v. Financial News Ltd. & Ors.[dclxxxiv]11 the Court intervened to confirm the right of an executor of a deceased shareholder to vote. In Pender v. Lushington[dclxxxv]12 an injunction was granted restraining the directors of the company from refusing a shareholder the right to vote. He admittedly was on the register but I mention this and the previous authorities simply to indicate that a Court will readily intervene to enforce the right of shareholders to vote.
To sum this appeal up it is my view that Holdings, on 30th June, 1970 had a legally enforceable right to vote as the holder of the shares which they had purchased and paid for that day, the transfers of which had been approved by the Board and the registration of which had been directed. The fact that there is no authority of a Court ever enforcing such a right is understandable for the reason that no company, the Board of which has just approved transfers and directed their registration, could be reasonably understood to refuse the new shareholder’s right to vote. It is an utterly unlikely situation, when as in the case of the appellant company, its new directors were in fact the nominees of the purchaser of the shares. In my view the Chief Collector of Taxes has completely overlooked these matters and has not looked at the real situation existing between Holdings and the appellant on 30th June, 1970, a situation in which no possible dispute between company and shareholder could arise. The mere slip by a servant of the company in not writing up the register on 30th June did not affect the legal rights between the shareholder and the appellant at all. It is the Chief Collector of Taxes himself who has chosen to go behind the register in this matter. The register showing that Holdings owned the relevant shares on 30th June was correct. The Chief Collector had no right to go behind it when in fact there is not the slightest doubt that the transfers were approved and their registration directed on that date. This is not a case where a transaction has taken place at a later date and been dishonestly or incorrectly predated. The subject shares were in my view beneficially held by Holdings on 30th June, 1970 within the meaning of s. 101d of the Income Tax Act as it then was.
The only matter remaining to be considered is the respondent’s submission that as the transfers to Holdings had not been stamped on 30th June, there was not an absolute right in Holdings to compel the appellant to register them. The respondent relied on re Soci‚t‚ G‚n‚rale de Paris v. Walker[dclxxxvi]13 and the discussion of the Earl of Selbourne, at p. 28, concerning the fulfilment of all necessary conditions to give a transferee a “present, absolute, unconditional right to have the transfer registered”. I have mentioned this matter above and earlier in this judgment referred to Jacobs J’s discussion on the same matter in Patcorp. Section 70 of the Stamp Duties Act 1952 (as amended) makes it an offence to register a transfer of shares which is not duly stamped. Section 71 provides that the title of a transferee is not invalidated by reason only of a contravention of s. 70. The question of having a right to compel the appellant to register the transfers does not really arise as the appellant had in fact itself chosen to direct their registration. Furthermore, as Mr. Bainton points out, the transfers did not attract stamp duty until they physically arrived in Papua New Guinea, a defect in the legislation here which previously existed in the Stamp Duties Act in New South Wales, but which has been corrected there. This argument must therefore fail.
In my opinion this appeal must be upheld with costs, including the costs of the appeal to the National Court in the first instance. I do not know whether there are any problems concerning the costs of the proceedings before the Review Tribunal but in case there are, I would grant liberty to either party to apply in this regard.
WILSON J: This appeal raises for consideration the question of whether or not on 30th June, 1970 Thiess Holdings Pty. Ltd. can be said to have “held” a large parcel of shares in the appellant company which it had bought on that day from other shareholders.
The facts in this case are not, for the purposes of this appeal, in dispute. They are referred to in my brother Pritchard’s judgment (a draft of which I have had the opportunity to read) and need not be repeated in every detail. It is sufficient for me to emphasize that the agreement for sale and purchase was entered into on 30th June, 1970 that the purchase price was paid in full on that date, that the vendors and purchaser executed appropriate share transfers on that date, that also on that date a meeting of the directors of the appellant company was held in Sydney, at which meeting, inter alia, approval was given for the transfers and a direction was given for them to be registered, that also on that date an instruction was given by telephone and by telex to make the necessary entries in the share register forthwith, but that the actual entries (recorded as having been made “as at” 30th June, 1970) were not made until 1st July, 1970.
This case is the type of situation envisaged by Dixon J (as he then was) in Avon Downs Proprietary Ltd. v. Federal Commissioner of Taxation (supra)[dclxxxvii]14 (hereinafter referred to as “Avon Downs”) where he explained what he considered to be sufficient evidence of shares being “held”. He said (at p. 362):
“Actual entry in a book used as a share register would of course be enough. But so would some act that would operate to preclude the question of their membership as between them and the company.” (The emphasis is mine.)
The passage italicized should not be overlooked when considering what Avon Downs actually decided. His Honour asserted that an actual entry in a share register would be “enough”. By using the word “enough”, he was not purporting to remove the possibility that something short of an actual entry in the share register might also be enough. In my judgment the words underlined by me in the passage just quoted show that Dixon J envisaged the possibility of a situation such as the present occurring. In my view the failure to make such an entry until 1st July, 1970 in the circumstances of this case would (to adapt the words of Dixon J) not operate to preclude the appellant being a “holder” of shares.
It is recognized that Dixon J in the same case (at p. 363) said:
“... but shares are held by the person in whose name they are registered.”
In my opinion, those words should not be read too literally; to say that those words exclusively represent the ratio decidendi of Avon Downs is to place too narrow a construction upon the decision in Avon Downs and on Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation[dclxxxviii]15 (hereinafter referred to as “Dalgety Downs”) which approved Avon Downs; to do so is to indulge in “over-simplification” (see the judgment of Jacobs J in the Patcorp decision to which reference will be made later in this judgment). In Dalgety Downs Webb, Fullagar and Kitto JJ, in approving Avon Downs said (at p. 341):
“... we are of opinion that the construction of s. 80(5) upon which the deputy commissioner acted is correct. Dixon J so held in Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353, basing his conclusion upon the view that in the terminology of company law shares are said to be “held” by the person who is registered as a shareholder in respect thereof, and that s. 80(5), being concerned with voting power, should be treated as using that terminology. We share this view. Indeed it is not too much to say that the verb “hold” and its variants, when used in relation to shares in companies, normally refers to the legal ownership of the shares according to the register of members. The Companies Acts of the United Kingdom and of the several States of the Commonwealth have uniformly used the word in this sense, and common usage has followed their example. Before a different meaning is accepted, some justification must be found in the context, or the subject-matter.” (The emphasis is mine.)
By using the words which I have emphasized the Full Court of the High Court of Australia has also envisaged the possibility of circumstances other than registration on the share register justifying the conclusion that shares in a company are “held” on a particular date for the purposes of the taxation legislation in question. Support for this view is to be found in the judgment of Mason J in Patrick Corporation Ltd. v. Federal Commissioner of Taxation[dclxxxix]16 (hereinafter referred to as “Patrick Corporation”) where his Honour said (at p. 293):
“Although the word ‘shareholder’ ordinarily signifies a person who is registered as the holder of shares (see Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353, at pp. 363-365), the word “member” may be wide enough to include a subscriber to the memorandum who is a person whose name is not entered in the register of members (Companies Act 1961, s. 16). And the provisions of s. 151 (1) with respect to keeping of the register of members indicate that a person’s character as a member is initially ascertained by reference to circumstances dehors the register.” (The emphasis is mine.)
Further support for this view is also to be found in Patcorp Investments Ltd. v. Federal Commissioner of Taxation[dcxc]17 (hereinafter referred to as “Patcorp”) where Gibbs J said (at p. 431):
“These decisions (Avon Downs, Dalgety Downs and others) affirm the general principle that entry on the register is necessary to constitute membership of a company, and clearly establish that the beneficial ownership of shares, without registration, does not make a person a shareholder.” (The emphasis is mine.)
and Jacobs J said (at p. 436):
“However, to say that in the law governing incorporated companies a person is only a ‘shareholder’ at any particular date if his name appears on the register of members at that date is an over-simplification. For some purposes, e.g. qualification as a director, it has been decided (prior to the enactment of what is now s. 116 of the Companies Act 1961 (N.S.W.)) that a person is only the holder of shares if at the date of his appointment as director he appears on the register of members. Spencer v. Kennedy [1926] Ch. 125; [1925] All E.R. 135. On the other hand it is fundamental to company law that despite the language of such sections as s. 16(5) and s. 151(1) the register of members is not conclusive. Indeed, s. 151(4) makes it clear that the register is no more than prima facie evidence of the matters which it is required or authorized to contain. The provision in s. 155 that the register may be rectified embodies the concept that, once it is rectified, the rights of the person whose name is entered therein or removed therefrom are determined as at the date at which the rectification is ordered to have effect. It appears to me that the question which arises in the present case is whether the meaning of “shareholder” in the Income Tax Assessment Act is confined to a person whose name appears on the register of members. In my opinion it is not. It also includes a person who is entitled as against the company to be registered and whom the company is absolutely entitled to register as a member of the company. If a company is at the relevant date absolutely entitled to register the person concerned and he is absolutely entitled to have the register rectified so that his name appears thereon as a shareholder at that date, such a person has more than a beneficial interest in the shares enforceable primarily against the vendor. He is in a direct relationship with the company involving reciprocal rights and duties between them.” (The emphasis is mine.)
In my opinion this court should apply Patcorp which, although not overruling Avon Downs and Dalgety Downs, did explain those decisions. Just as in the Patcorp decision, so with the instant case, there are circumstances which do not “operate to preclude the appellant being a ‘holder’ of shares”. (See my adaptation of the words of Dixon J in Avon Downs referred to earlier in this judgment.) The circumstances of this case are “abnormal” and there is “justification ... in the context” for the acceptance of a different meaning, (cf. the words used by Webb, Fullagar and Kitto JJ and emphasized by me in the extract from Avon Downs (at p. 341) earlier in this judgment. The circumstances are “out of the ordinary” (cf. the word “ordinarily” used by Mason J and emphasized by me in the extract from Patrick Corporation (at p. 293) earlier in this judgment). Thiess Holdings Pty. Ltd. was on 30th June, 1970 “entitled as against the (appellant) company to be registered” and was a company “whom the (appellant) company was absolutely entitled to register as a member of the (appellant) company”; the appellant company was on 30th June “absolutely entitled” to register Thiess Holdings Pty. Ltd. and was “absolutely entitled” to have “the register rectified at that date so that (its) name appeared thereon as a shareholder at that date” and it had “more than a beneficial interest in the shares primarily against the share-holder” (see the words of Jacobs J in the extract from Patcorp (at p. 436) earlier in this judgment).
For these reasons and for the additional reasons so fully set out in my brother Pritchard’s judgment with which I completely agree, I would allow this appeal.
Appeal upheld. Respondent to pay the appellant’s costs of the appeal including the costs of appeal to the National Court in the first instance. Liberty to either party to apply concerning the costs of the proceedings before the Review Tribunal and generally.
Solicitors for the appellants: Gadens.
Solicitor for the respondent: C. Maino-Aoae, State Solicitor.

[dclxxiv]
[dclxxv](1976) 51 A.L.JR. 40.
[dclxxvi](1949) 78 C.L.R. 353.
[dclxxvii](1952) 86 C.L.R. 335.
[dclxxviii](1949) 78 C.L.R. 353.
[dclxxix](1952) 86 C.L.R. 335.
[dclxxx](1974) 48 A.L.JR. 283.
[dclxxxi](1976) 51 A.L.JR. 40.
[dclxxxii][1891] 2 Ch. 599.
[dclxxxiii](1873) L.R. Equity Cases Vol. XVI 559.
[dclxxxiv](1919) 35 T.L.R. 681.
[dclxxxv](1877) 6 Ch. D. 70.
[dclxxxvi](1886) 11 A.C. 20.
[dclxxxvii](1949) 78 C.L.R. 353.
[dclxxxviii](1952) 86 C.L.R. 335.
[dclxxxix](1974) 48 A.L.JR. 283.
[dcxc](1976) 51 A.L.JR. 40.