Estate Brownstein v Commissioner for Inland Revenue

• Jurisdiction: South Africa
• Judge: Schreiner ACJ, Reynolds JA, Brink JA, Beyers JA and Malan JA
• Judgment Date: 23 May 1957
• Hearing Date: 14 May 1957
• Court: Appellate Division

C Schreiner, A.C.J.:

At the date of his death on the 25th July, 1951, the late J. I. Brownstein, who was ordinarily resident in the Union, owned 6,500 shares of the value of £48,343 15s. in Nchanga Consolidated Copper Mines Limited, a company registered in England in 1937 but D carrying on the business of copper mining in Northern Rhodesia, to which country its head office and management were transferred at the beginning of 1951. The deceased was also at the date of his death entitled to a dividend of £2,437 10s. on the 6,500 shares which had been declared but not yet paid. Questions having arisen as to the liability E of his estate to pay estate duty under Act 29 of 1922 on the sums of £48,343 15s. and £2,437 10s., the executor applied to the Witwatersrand Local Division for an order declaring that no liability existed in respect of either amount. NESER, J., dismissed the application with costs and, the parties having consented in terms of sec. 5 of Act 1 of 1911 to a direct appeal to this Court, that appeal is now before us.

F Secs. 1 and 2 of Act 29 of 1922 imposed estate duty on the dutiable amount of the estates of persons dying after the 1st July, 1922, and sec. 3 (1) provided that the estate should consist of all property which passes or is deemed to pass on the death. Sub-sec. 3 (2) defined 'property' by listing various forms of it in paras. (a) to (h). What has G to be decided in the present appeal is whether the 6,500 shares are property within the meaning of paras. (g) and (h) and whether the right to the dividend is property within the meaning of para. (f). Paras. (g) and (h) use the term 'company' and this is defined in sec. 40. So far as material the provisions read -

'3. (2)

Property in relation to any estate includes -

(f)

Any debt recoverable or right of action enforceable in the H courts of the Union;

(g)

any stocks or shares in any company . . . if any transfer whereby any change of ownership in such stocks or shares is recorded is required to be registered in the Union;

(h)

any stocks or shares in any company . . . whether those stocks or shares are transferable by delivery or by registration and wheresoever such registration may be required to be effected, provided that the deceased person whose estate is chargeable with duty was ordinarily resident in the Union.

Schreiner ACJ

40. In this Act . . . unless inconsistent with the context - 'company' includes any association incorporated or registered under any law in force in any part of the Union relating to companies, banking companies or insurance companies, or under a special law, and further includes any association which, though incorporated or registered outside the Union carries on business or has an office or place of business therein.'

In regard to the shares it is not in dispute that if the Nchanga company A is a company as that term is used in paras. (g) and (h) the estate is liable. But the appellant contends that those paragraphs have no application unless the Nchanga company falls within the definition in sec. 40; this definition, it is submitted, is exhaustive and does not cover the Nchanga company because it is not incorporated or registered under any law in force in the Union and because it does not carry on B business or have an office or place of business in the Union. The Commissioner contends, firstly, that the definition in sec. 40 is not exhaustive and that the Nchanga company is a company in the ordinary sense and so is covered by 'any company' in paras. (g) and (h). He contends, secondly, that the Nchanga company does carry on business in C the Union and that it has an office and a place of business there. It was upon this second contention in all its three aspects - carrying on business, having a place of business and having an office in the Union - that NESER, J., found for the Commissioner. On the Commissioner's first contention the learned Judge found for the appellant.

D In regard to the right to the dividend it was contended by the Commissioner that the fact that at the date of the deceased's death it was possible to attach property (for example, the sum of money available to pay the dividend) ad fundandam jurisdictionem by itself sufficed to bring the case within para. (f). The Commissioner further contended that, in any event, having regard to the activities of the Nchanga E company within the Union and to the fact that the liability to pay the dividend arose out of the entry of the deceased's name in the register in Johannesburg, the company's liability was enforceable in the courts of the Union. These contentions of the Commissioner were challenged by the appellant, whose counsel contended that the possibility of attachment does not suffice by itself to bring para. (f) into operation, F and that unless the Nchanga company carried on business in the Union, which was disputed, the courts of the Union had no jurisdiction to enforce payment of the dividend.

Before I examine the strength of the rival contentions it will be convenient to set out some further facts concerning the Nchanga company. G Soon after its registration in 1937 it appointed a local committee in Johannesburg and caused a branch or dominion register of members to be opened there. The sections of the English Companies Act of 1948 dealing with dominion registers are quoted in Lamb v Commissioner for...