Case: Commissioner of Taxation (NSW) v Stevenson [1937] HCA 72 ; (1937) 59 CLR 80 
Outcome: cited
By way of elaboration of the Commissioner's submissions relating to the theme framed by the Commissioner as to 'how did [Lend Lease] regard the rights', conferred in its favour by the FPA, it was pointed out that the Lend Lease internal documentation disclosed that Lend Lease '... was desirous of disposing of a significant proportion of its holding in Westpac', though '[o]bviously, it would not dispose of assets to an arms length party at less than market value, especially not for $3.52 in 1996 plus 1 [cent] in 2000 when the market price on the contract date was $5.39.' However as I have earlier emphasised, Lend Lease remained entitled to receive the dividend income to be derived in the meantime on its ongoing holding of its Westpac portfolio. The Commissioner emphasised in that context that '[w]hen valuing a share, its value is the value in exchange and is ascertained by the reference to the sum obtainable upon sale', and that such '... sum represents the influence of two factors, namely, the amount of the accumulated funds or assets of the company and the expectation of future dividends annually or periodically distributed'. I was referred by the Commissioner in that latter context to dicta of the High Court in Commissioner of Taxation (NSW) v Stevenson [1937] HCA 72 ; (1937) 59 CLR 80, where the following appears in the joint judgment of Rich, Dixon and McTiernan JJ at 97: '... A share in a company is a piece of property the alienation of which is subject to few or no restrictions. Its value is a value in exchange and is ascertained by reference to the sum obtainable upon sale. That sum represents the influence of two factors, namely, the amount of the accumulated funds or assets of the company and the expectation of future dividends annually or periodically distributed. ...' 74 Purportedly upon that footing, the Commissioner acknowledged that '[a]s a commercial matter, the contractual right to retain ownership and dividends made up the shortfall between the money consideration and the market value', and that such contractual right hence purportedly '... reflected the value of expected future dividends over the following 4 years'. The Commissioner observed that the financial accounts of Lend Lease showed that dividends were treated as being 'proceeds of sale of Westpac shares when they were declared', the Commissioner referring in that regard to the consolidated statements for the year ended 31 December 1996. However a right to receive future income to be derived over an ensuing period of time does not necessarily translate to crystallisation of the derivation for capital gains tax purposes of the present day value of that future income. Normally contracts entered into for the sale of realty envisage a period of time to elapse between entry by the vendor and purchaser into a contract of sale and completion of that contract of sale, although the structure of the subject transaction may probably not be described as normal, given the size and potentially strategic proportion of the Westpac capital the subject thereof. 75 As at 7 June 1996, Lend Lease would have no likely basis for predicting with any precision the quantification of the dividend income it would or might well derive from its Westpac shareholding from that time until 31 July 2000, or earlier on 30 April 2000 (see again clause 5.2 of the FPA, and the terms of the so-called subsequent Amending Deed to the Forward Purchase Agreement bearing date 17 January 2000). Each of Lend Lease and County Natwest having been involved in decision-making with the evident benefit of experienced and qualified professional assistance, would not have obtained any significantly larger lump sum consideration, up front as it were in the context which occurred, than was furnished by County Natwest at arm's length, once account be taken as to Lend Lease's entitlement to continue to receive and retain Westpac dividends until the fiscal year 2000.