Associated. Newspapers of Ceylon v. Commissioner of Stamps. 241
1941' Present r Moseley S.PJ. and Keuneman J.
THE ASSOCIATED NEWSPAPERS OF CEYLON, LTD.
V. COMMISSIONER OF STAMPS
In the Matter of an Appeal under Section 31of the Stamp Ordinance
Stamps—Distribution of assets in payment of dividend—No conveyance ofmovable property for pecuniary consideration—Stamp Ordinance(Cap. 189), item 23 (2) and (S) of Part i. of Schedule AThe Associated Newspapers of Ceylon, Ltd., at an extraordinarymeeting passed a resolution authorizing the distribution, as a specialdividend, among the ordinary shareholders of the Company the assetconsisting of 19,500 ordinary shares of the Landscape Estate, Ltd., heldby the Company.
The resolution was passed in virtue of Article 152 of the Articles ofAssociation of the Company which is as follows : —
Any general meeting may direct payment of any dividend whollyor in part in currency other than that of Ceylon, by means of drafts orcheques or by the distribution of specific assets and in particular ofpaid up shares debentures …. .. of the Company or of any
other company or in any other form of specie or in any one or more ofsuch ways.
In pursuance of this resolution a transfer of the ordinary shares of theLandscape Estates Company, Ltd., was made to a shareholder of theAssociated Newspapers of Ceylon, Ltd.
Held, that the instrument in question was not a conveyance of movableproperty for a pecuniary consideration within the meaning of item 23 (2)of Part I., Schedule A of the Stamp Ordinance and that it was liable toduty under item 23 (8) of Part I. of Schedule A.
PPEAL from an order of the Commissioner of Stamps under section29 of the Stamp Ordinance.
N. E. Weerasooria, K.C. (with him A. R. H. Canekeratne, K.C.,and N. M. de Silva), for appellant.—The adjudication of the Commissionerof Stamps proceeds on a wrong basis. Table A of the CompaniesOrdinance has no application as the Company has expressly excludedTable A and is not bound by it. The Articles of Association of theCompany authorise the distribution of assets in specif by way of adividend. That is all the resolution of the Company seeks to do. Theconveyance of the shares of Landscape Estates, Ltd., by way of a dividendis not a conveyance for consideration. There is no consideration as knownto law for such a transfer. The conveyance therefore comes underitem 23 (8) of Part 1. of Schedule A of the Stamps Ordinance and shouldbe stamped at only Rs. 10.
It was not a cash dividend that was distributed but specific assets ofthe Company, namely, its holdings in another Company. The share-holders were not entitled to receive or demand a cash payment in lieu ofthe dividend declared. The Commissioner proceeding on Table A hasmisconceived the whole situation.
H. H. Basnayake, C.C., for respondent.—Article 151 of the Articlesof Association of the Associated Newspapers of Ceylon, Ltd., authorises
242 KEUNEMAN J.—Associated Newspapers of Ceylon v. Commissioner of Stamps.
the shareholders to declare a dividend. Article 152 authorises theshareholders to direct the payment of a dividend in kind instead ofin money. A dividend must be paid in cash unless there is powerto direct payment of a dividend in kind. (Wood v. Odessa Waterworks-Company ) In this case the appellant Company has taken powerto pay a dividend in kind. The shareholders cannot therefore refuseto take shares in lieu of cash. But the resolution authorising thepayment of the dividend in shares should be preceded by thedeclaration of a dividend in cash. In the present case the Companyhas not declared a dividend under Article 151, but in considering theinstrument under consideration the Company shall be deemed to havedeclared a dividend under Article 151 because it is a sine qua non to aresolution under Article 152. The transfer of shares in pursuance of aresolution under Article 152 is therefore for a money consideration, theconsideration being the amount of dividend in cash the shareholderis entitled to.
Cur. adv. vult.
February 14, 1941. Keuneman J.—
This is an appeal from an adjudication by the Commissioner of Stampsunder section 29 of the Stamp Ordinance (Cap. 189).
The facts are as follows : —
The Associated Newspapers of Ceylon, Ltd., at an ExtraordinaryGeneral Meeting, passed the following resolution :
“ That it is desirable to distribute, as a special dividend, among the• holders of 7,000 ordinary shares of the Company, the asset consistingof 19,500 ordinary shares of The Landscape Estates,. Limited, of thevalue of ten rupees per share, held by the Company, and that the saidshares of The Landscape Estates, Limited, be distributed among theholders of the 7,000 ordinary shares according to the number of ordinaryshares now held by them in the proportion which 19,500 bears to7,000 . .. .”.
This resolution was passed in virtue of Article 152 of the Articles ofAssociation of the Company which runs as follows : —
. “ Any General Meeting may direct payment of any dividend . … wholly or in part in a currency other than that of Ceylon; by
means of drafts or cheques or by the distribution of specific assets andin particular of paid-up shares, debentures, or debenture stock of theCompany or of any other Company or in any other form of specie or inany one or more of such ways ..
Our attention has also been drawn to Article 151 (not referred to by theCommissioner), which inter alia confers upon the Company in generalmeeting the power to “declare a dividend to be paid to the members”,and declares that “ no dividend shall be payable out of the capital of theCompany ”.
In pursuance of this resolution, a transfer of 15,471 ordinary shares ofThe Landscape Estates, Limited, was made to Don Richard Wijewardene
1 42 L. R. CJi. D. 636.
KEUNEMAN J.—Associated Newspapers of Ceylon v. Commissioner of Stamps. 243
as a shareholder of The Associated Newspapers of Ceylon, Limited(Document “ A ”). It is the stamping of this instrument which is inquestion.
The Commissioner ruled that the instrument in question was a convey- “ance of movable property for a pecuniary consideration under item 23 (2)of Part I. of Schedule A of the Stamp Ordinance.
It is conceded that if the instrument in question does not come withinthis item, it must fall under item 23 (8) of Part I. of Schedule A, namely,
“ conveyance or transfer of property of any kind whatsoever not chargedin the schedule
In arriving at the decision that there was consideration within themeaning of the English law, the Commissioner took into account Regu-lations 91 and 95 in Table A of the First Schedule of the. CompaniesOrdinance, No. 51 of 1938, which stated (a) that no dividend shall be paidotherwise than out of profits, and (b) that a dividend may be paid bycheque or warrant. He argued that on the declaration of the dividendthe shareholder become vested with the right to receive payment out ofprofits, i.e., in cash, and that the mere distribution of assets is illegal. Inthis case, he said, “ there is consideration for the conveyance of theseshares in the sense that the conveyance is made in satisfaction of a claimto payment of a dividend ; or, in other words, the real transaction is thatthe company has sold to the shoreholders some of its assets in considerationof sums payable as dividend ”.
It is clear that this finding is based upon a mistaken view. If theCommissioner held that the shares in The Landscape Estates, Limited,were not profits, or, to put it in the. language of Article 151, were capital,there was no evidence whatever to support his view, and in this appealthis point has not been urged. Further, the reference to Regulations 91and 95 (supra) is unwarranted. Sections 9 and 307 (3) of the CompaniesOrdinance show that Table A of the Ordinance does not apply unlessadopted by special resolution. In this case, not only was Table A notadopted, but Article 152 gave a general meeting the power to directpayment of any dividend by the distribution' of specific assets includingpaid-up shares in other companies or in any other form of specie. CrownCounsel did not seek to support the adjudication in this respect.
Driven from this position, Crown Counsel sought to support the adjudi-cation on grounds not urged by the Commissioner. I have some doubtsas to whether such a course is permissible in a special appeal of this nature,but I do not think it necessary to determine that point. Shortly statedthe argument is as follows :—Under Article 151, the general meeting has todeclare a dividend. This means a dividend in cash. When the generalmeeting resolves to pay the dividend by distribution of assets, it issubstituting for payment in cash payment in® a different medium.Accordingly, there is consideration for the latter transaction.
This argument is ingenious, but I do not think it is sound. My opinionis that the declaration of the dividend and the declaration of the mannerof payment of the dividend are two phases of the .same matter. I do riotagree that on the declaration of the dividend the shareholder is entitledto payment in cash. The general meeting decides not only what dividendis to be paid, but also how it is to be paid. The manner in which the
244,The King v. Mendias.
shareholder is entitled to payment is governed by Article 152, and wherethe general meeting resolves that the payment is to be by distribution ofassets there is no substitution of one method of payment for another.
Crown Counsel depended on Wood v. Odessa Waterworks Co.1 for theproposition that, where the Articles of Association provide that thedirectors may with the sanction of the general meeting declare a dividendto be paid to the shareholders, that prima facie means to be paid in cash.1 do not' think the argument is correct. Article 151 must be read withArticle 152 which sets out the method of payment, not only in cash butotherwise, and where the general meeting adopts by resolution paymentby distribution of assets, which is permitted by Article 152, there is notand never has been any right on the part of the shareholder to receivepayment in any other manner.
Further, if we examine the resolution (Document B), it appears clearthat the “ special dividend ” declared by the Company was “ the assetconsisting of 19,500 ordinary shares of The Landscape Estates, Limited”.There was no declaration of a cash dividend. The 19,500 shares were tobe distributed to the shareholders of the Company in proportion to theshares held by them. It was suggested by Crown Counsel that theCompany had no authority to declare a dividend in this manner, but weare not here concerned with that question. The only matter before usrelates to the stamping of the transfer, and we have to examine thequestion whether this was a transfer “ for any consideration ”.
I am of opinion that the argument of Crown Counsel fails. I hold thatthe instrument in question in this case must be stamped in accordancewith item 23 (8) of Part I. of Schedule A.
The appeal is allowed with costs.
Moseley S.P.J.—I agree.
THE ASSOCIATED NEWSPAPERS OF CEYLON, LTD v. COMMISSIONER OF STAMPS