VALUE OF SHAKES

Press, Volume LXXVIII, Issue 23818, 11 December 1942, Page 7

VALUE OF SHAKES

ASSESSMENT FOB DEATH

DUTIES

OBJECTION UPHELD

A depision that the assessment by the Commissioner of Stamp Duties of shares in Kennedy Brothers, Ltd., running a motor-bus service at Greymoutli. should he amended, was given by Mr Justice Northcroft, in a reserved Judgment delivered in the Supreme Court yesterday. His Honour came to the conclusion that wiien John James Kennedy died on December 15 1989. the 10,295 fully paid up share." of £1 each held by him were worth (is a share In the returns furnished by tlie Public Trustee as administrator of Kennedy's estate, under the Death Duties Act. it was claimed that at the date of death tlie value of the shares was Gs Tlie Commissioner of Stamp Duties fixed the value at Iss The Public Trustee's objection was disallowed and tlie Commissioner was required to state a case '

“Much the most important pari of the company's activities is the operating of passenger buses." said the judgment. "Having regard to the system of licences now prevailing, this business is in a sense monopolistic, but being subject to licence it suffers from uncertainty of tenure. The licence requires to be renewed from time to time and it is well known that over the last 10 years or so there have been changes of policy upon this subject. In tlie result, operators of passenger transport services cannot count upon the same degree of permanence as attaches to normal businesses, nor even to such as a hotel business which is subject to periodical licensing, A passenger transport business might be profitable enough to those already involved, but it has these unattractive features when being considered by outsiders contemplating Investment in it.”

After discussing the evidence in detail ,his Honour said that In tlie result it rejected as Inappropriate to this case a calculation based solely upon the value of the assets less the cost of realisation It must be remembered that tlie Court was asked to value, not assets of the company, but shares owned bv the deceased; that is to say, the Court must endeavour to ascertain the mind of a potential purchaser of those shares. Such a person, if he were prepared to purchase tlie shares so as to get possession of the assets, would not be disposed to pay tor the shares at a bare estimate of the value of the assets. He would have regard not merely to the break-up value, but to the break-up value plus a profit to himself upon (heir realisation. That applied if such a person were prepared to buy at all, (laying regard to tlie unfortunate trading history of the company. For these reasons, therefore, he felt bound to make a reduction, and indeed a substantial reduction from (he figure of between 10s and 11s, which was ascertained by calculation based upon the assumed realisable value of the assets. Furthermore, he preferred the valuation of Mr Ernest Warnes, of £2500 for the debatable item of land and buildings to that of £4OBI given in the special Government valuation. On the assumption that the land was worth only £2500, the calculated value of the shares upon (he method employed by tlie respondent and bis witnesses would be 7s lid. The reduction which he thought a prospective purchaser might be expected to make so as to allow a profit for himself from the realisation would he about 2s per share, hv which process lie arrived at a figure of 6s. Purchaser’s Expectations Turning to the value of the shares by reference to the balance-sheets, which was the method employed by witnesses for the appellant, they, ignoring the assets "break-up" value, arrived at figures of 3? 4d and 5s 6d. He was not disposed to accept so depressing a view of the value of the shares On the assumption that a purchaser was procurable, one must assume, he thought, that lie would have sufficient enterprise or optimism to expect a belter return than those upon which the appellant’s valuers based their estimate. Unless ho could do better than that, his Honour suspected he would not purchase the shares at ail, If was not suggested that the shares were entirely unsaleable. Furthermore, everyone agreed that the books of account had been kept badly and both sides seemed to assume that' better results ought to have been attained.

‘T am in a quandary as I must try to decide the value of the shares not, as in the case of the land, by considering opposing views upon the same subject; but by a reconciliation of two opposing lines of approach," said his Honour. “Giving the best consideration to assessment in relation to trading possibilities, again

I think a purchaser might be expected to pay 6s a share." As appellant had justified his appeal, costs were allowed. At the hearing. Mr K. M, Gresson appeared (or appellant, and Mr A. W. Brown for respondent.