TMI Blog1971 (11) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... assets means the price which those assets might reasonably be expected to fetch on a sale in the open market. But when we come to securities that are quoted on the London Stock Exchange, subsection (3) supplies a measuring rod, and, so far as now material, the terms of subsection (3)-and I read in the extended definition of market value which is found in subsection (1)-are these. In effect it says that in the cases of shares or securities quoted on the London Stock Exchange, the price which they might reasonably be expected to fetch on a sale in the open market shall, except where in consequence of special circumstances prices so quoted are by themselves not a proper measure of the price which the shares or securities might reasonably be expected to fetch on a sale in the open market, be as follows-and then it sets out references, with which I need not concern myself, to quotations in the London Stock Exchange Official Daily List and bargains recorded therein. The first question in this case is : Is it correct as a matter of law to say that there existed on April 6, 1965, in this case, special circumstances in consequence of which the Stock Exchange prices were not by thems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in considering the open market under subsection (1), the special commissioners were right to treat the possible purchasers as people having information as to the take-over negotiations. In this connection he referred to In re Lynall, decd. [1970] Ch. 138 ; 75 I.T.R. 564 while at the same time he had, and expressed, reservations as to how far the analogy should be taken. He did, however, rely on it to some extent as indicating that the price to be reasonably expected on a sale in the open market was in a market in which all prospective purchasers had all such information as is normally available to purchasers in that market. In re Lynall, decd. [1970] Ch. 138 ; 75 I.T.R. 564 was a case of an unquoted private company. It was a case of valuation for estate duty purposes-though it is not suggested that the principles of estate duty valuation are any different from the principles and the law applicable to capital gains tax valuation. The evidence was that in such cases a proposing purchaser of a substantial block of shares in such a company as that would approach the board of the company before buying the shares and ask all reasonable questions of the board, and that the board as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the non-event of non-publication of the negotiations was that the Stock Exchange quotation would produce less than the price on a sale in the open market ? It was argued that a block of stock of this importance in this sort of company would more likely be offered on expert advice to financial institutions and not through the Stock Exchange. Well, there was no evidence of this, but I am prepared to accept for the purposes of this judgment that the open market would thus be wider than those who buy only through the London Stock Exchange. Mr. Graham said that the owner of such a block would go for advice to somebody like Mr. Gillum, and that the institutions approached by Mr. Gillum, or the proposed vendor, would ask questions. It was then suggested that those questions would lead not to a private disclosure to a few of the negotiations, but to publication. But, of course, we must forget that this block of shares happened to be owned by the taxpayer, who was a director and knew all about the negotiations. We must assume a shareholder with the same block who knew nothing about them. I cannot for myself see how it can be realistically said that the open market must be assumed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns tax. To that end, subsection (3) provided that as regards securities thus quoted the price which they might reasonably be expected to fetch on a sale in the open market, to recite the words of subsection (1), must in general be assessed by reference to the quotations to be found in the Stock Exchange Official Daily List of the relevant date or to the recorded prices for bargains done on that date. It is to be observed that the quotations on no other stock exchange were given a parallel ranking by the statute. The provisions of subsection (3) plainly stem from the experience gained over many years of the practice that has matured in regard to calculations made for the purposes of assessing estate duties. Thus this obligatory method of measurement imposed by this subsection must be taken to have been selected in full knowledge of both the advantages and disadvantages inherent in the bargaining processes that prevail on the London Stock Exchange. In essence the legislature took that market as it found it. Apart from certain specific provisos. the only exception to this obligatory method is where in consequence of special circumstances prices so quoted are by themselves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, caused an announcement to be made in advance of the former's offer of August 17. To my mind, there was no material before the special commissioners on which it could be held that on or before April 6 either the Stock Exchange or those dealing there were entitled as of right to be told of the negotiations, such as they were then. Be that as it may, the fact remains that day in and day out there occur on the London Stock Exchange situations in which it may well be said that an announcement should have been made by some company which if made would affect the prices of the quoted shares. This can and does happen in relation to many various events. For instance, it happens in relation to news of the success or failure of bore holes affecting the prospects of mining companies ; to the publication of a company's accounts being deferred beyond the proper time ; to the effects of important matters which may only later become public when published accounts appear ; or to the imminence of the successful completion of some negotiations relating to a highly valuable contract. Sometimes the absence of that information may result in the quoted prices on the Stock Exchange being hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r proposed by Russell L. J. should be made. BUCKLEY L. J. I also agree, and but for the fact that we are differing from Pennycuick J. I should not think it necessary to add anything. However, what I am going to say can be stated quite briefly. Pennycuick J. in the course of his judgment said [1970] Ch. 626, 640 ; 78 I.T.R. 684 : It seems to me that the market value of any asset, i.e., the price which that asset might reasonably be expected to fetch on a sale in the open market, must be the price in a market where the prospective purchasers have all such information as to any relevant factors as is normally available to purchasers in that market, having regard to the nature of the market . . . having regard to the evidence of Mr. Gillum which the commissioners accepted, the commissioners were, it seems to me, clearly justified in finding that prospective purchasers on the Stock Exchange were entitled to have information as to the take-over negotiations. Once they reached this conclusion, it necessarily follows that the absence of this information represents a special circumstance which renders the quoted value something other than a proper measure of market value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s view it would have been appropriate for the directors of R. W. Crabtree Sons Ltd. to have made a public announcement to the effect that discussions were in progress which might lead to a cash offer being made for the whole of the issued capital with a caveat attached to such a statement. The commissioners go on to say : Were there in those circumstances special circumstances in consequence of which the quoted prices were not a proper measure of market value as defined in section 44(1) ? Analysing their findings precisely, the only fact relevant to the present consideration that they seem to take into consideration at that stage is Mr. Gillum's view that it would have been appropriate that the directors should have made an announcement, and in the light of that they come to the conclusion that there were special circumstances. They go on to say : . . . on the evidence before us we were satisfied that the London Stock Exchange prices on April 6, 1965, were substantially less than they would have been if an announcement of the kind which Mr. Gillum considered should have been made had been made before that date. When one comes to look closely at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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