JUDGMENTBY: WHYATT CJ, TAYLOR J

WHYATT CJ This is an appeal from a judgment of Sir Charles Murray-Aynsley (the then Chief Justice), affirming a decision of the Commissioner of Stamps by which the Commissioner adjudged that an instrument dated the 15th September 1952 relating to the retirement of a partner from the appellant firm was a conveyance on sale or an agreement for sale, of the retiring partners share in the firm and therefore chargeable with ad valorem duty.

Two broad questions are raised in this appeal, first, whether the transaction was, as the appellants contend, a partition of partnership property and not as the respondent contends, a sale or an agreement for sale, of a retiring partners share to continuing partners; and secondly, if the transaction is a sale or an agreement for sale, of the retiring partners share, whether the document of the 15th September 1952 is a conveyance on sale within the meaning of section 2 of the Stamp Ordinance, or, alternatively, an agreement for sale within the meaning of section 21 of the Stamp Ordinance, and thus liable to ad valorem duty under Article 25 of the Schedule of that Ordinance.

In support of the argument that this was a partition of partnership property, the appellants relied on the Scottish case of Macleod v Inland Revenue Commissioners (1885) 12 R (Ct of Sess) 1045, 22 Sc LR 674. In that case two partners, Macleod and Wilson, resolved to dissolve partnership but as Macleod wished to carry on the business whilst Wilson wished to retire, an arrangement was made whereby, instead of selling the partnership property and distributing the nett assets amongst the partners, the assets were divided between the two partners, those necessary for carrying on the business, namely the trading assets, being left in the hands of Macleod, and the other assets which consisted of an investment, being handed over to Wilson. As the trading assets were worth slightly more than the investment, an adjustment was made by paying Wilson£931 in cash. After emphasising that the substance of the transaction was alone to be considered, the Court found that this small payment of cash did not make any difference to the nature of the transaction which was in substance a division of partnership property and not a transfer on sale. The judgment made it clear that the test which distinguishes a partition from a sale is whether a retiring partner gets a portion of the partnership assets in specie or whether he gets paid out in cash. In the present case the retiring partner received cash and nothing else, while continuing partners retained "all the assets" to quote the very words of the document of the 15th September, 1952. It cannot, in my view, be said that partnership property has been divided as between continuing partners and a retiring partner when in fact all the partnership assets are left in specie in the hands of the continuing partners. Therefore I reach the conclusion that this is not a case of partition. On the contrary I think this particular transaction conforms very closely to the description of a transfer on sale of a partners interest given by Lord Shand at page 677 of Macleods (1885) 12 R (Ct of Sess) 1045, 22 Sc LR 674 case:--

"If you have a case in which a partner is to go on with the business,

retains the whole assets of the company, and merely gives an obligation

to the outgoing partner to pay him a certain sum by instalments upon

the footing that he is to go out, ... , the result of that plainly is

that, the companys estates remaining the same, the partner remaining

in the business is buying out the partner who goes out of it ... ".

In the present case, the continuing partners retained the whole of the assets of the firm and paid the outgoing partner a sum of money upon the footing that he went out. Lord Shand thought it was plain that the result of such a transaction was that the continuing partners were buying out the retiring partner; with res