Consolidated Company Bultfontein Mine Ltd v De Beers Consolidated Mines Ltd

• Jurisdiction: South Africa
• Citation: 1917 AD 677

Consolidated Company Bultfontein Mine Ltd Appellant v De Beers Consolidated Mines Ltd Respondent
1917 AD 677

1917 AD p677

Citation	1917 AD 677
Court	Appellate Division, Bloemfontein - Cape Town
Judge	Innes CJ, Solomon JA and CG Maasdorp JA
Heard	November 8, 1917
Judgment	December 28, 1917

Flynote : Sleutelwoorde

Contract — Construction — Mining company — Agreement to pay taxes — Income and dividend tax.

Headnote : Kopnota

In October, 1889, appellant and respondent, being diamond mining companies, entered into a written agreement whereunder appellant consolidated company made over the entire control and management of its mines, assets and business to respondent company in return for an annual payment of 71/2 per cent. net on its share capital. No change of ownership was effected, but the right to carry on at discretion appellant's business and to retain any resulting profit passed to respondent. There was no obligation on respondent to work appellant's claims, but, whether worked or not the liability for the annual payment remained. The fourth clause of the agreement provided that respondent should pay "all duties, rates, taxes, and other outgoings payable in respect of the said lands, mines, mining claims or business" and also "the costs and charges incurred by the consolidated company in the carrying on of its business."

Held, that certain income tax and dividend tax levied upon appellant under Act 41 of 1917 were not taxes payable in respect of the lands, mines, mining claims or business of appellant and were not therefore payable, as between the parties, by respondent.

The decision of the Griqualand West Local Division in Consolidated Company Bultfontein Mine Ltd. v De Beers Consolidated Mines Ltd., confirmed.

Case Information

Appeal from a decision of the Griqualand West Local Division (LANGE, J.).

Appellant and respondent companies stated a special case for the decision of the Court as to whether under the terms of an agreement entered into between them in October, 1889, certain income and dividend taxes levied upon appellant under Act 41 of 1917 amounting respectively to £2,705 12s. 6d. and £4,222 19s. 5d. were payable by appellant or respondent.

The Court gave judgment for respondent company, holding that under the agreement there was no liability upon it to pay the taxes in question.

An appeal was now brought from this decision.

The facts are stated in the judgment of INNES, C.J.

S. B. Kitchin (with him F. K. Loewenthal) for the appellant.

1917 AD p678

Clauses 4 and 9 contain the points in issue. The words "in respect of" in clause 4 are the key words of the whole agreement. "Its business" is here used in a loose sense: the definition of "business" being important.

[INNES, C.J.: After the company was taken over did not a new business arise to distribute and declare dividends?]

A company is formed with a definite object - Smith v Anderson (15 Ch.D. 247 and at p. 260). The object being to make profits - Bisgood v Henderson's Estates (1908, 1 Ch. 743).

Only the Consolidated Co could put an end to this agreement: it was perpetual and ought to be considered as a lease - De Beers v Union Government (1911 CPD 1017).

Re meaning of Tax see sec. 6, Consolidation Act of 1917, L.C.C. v Attorney-General (1901, A.C. 26). "In respect of our business" covers profits and income tax see Hurst v Hurst (4 Ex. 571), Tatam v Reeve (1893, 1 Q.B. 44), Lovat v Duchess of Leeds (1862, E.R. 545, 2 Drew & Sm. 62), Festing v Taylor (3 Best & S. 217), Bannerman v Young (1882, 21 Ch. D. 105), Thompson v Lapworth (3 C.P. 149), Farlow v Stevenson (1900, 1 Ch. 128). The same applies to a dividend tax: Tennant v Smith (1892, A.C. 150), Coltness Iron Co. v Black (6 A.C. 315). On dividend tax see Golden Horshoe Estates Co. v The Crown (1911, A.C. 480), Rennie v Odendaal (1915 AD 122). A tax imposed on the profits of mining operations was imposed in respect of those operations. Porcelain Co. Case (1865, 1 Eq. 318), Scottish Provident Case (1901, A.C. 340), Mansfield. v Relf (1908, 1 K.B. 71), Corporation of London v Associated Newspapers (1915, A.C. 674).

H. F. Blaine, K.C. (with him E. G. Rainsford) for the respondent.

"Its business" in sec. 4 was inserted with a definite object: the directors continued to carry on a new business.

On the amount refunded to the directors of the Consolidated Co a dividend must be paid - De Beers v Union Government (supra). On the point of...