Short v Treasury Comrs
| Jurisdiction | England & Wales |
| Judgment Date | 1947 |
| Date | 1947 |
| Court | Court of Appeal |
Emergency legislation - Company - Competent authority's acquisition of control - Compensation of shareholders - Valuation of shares -
Inasmuch as the expression “as between a willing buyer and a willing seller” in reg. 78 (5.) of the Defence (General) Regulations, 1939, imports, when construed according to its ordinary and natural meaning, the conception of a separate bargain of sale by an individual seller to an individual buyer, a shareholder of an undertaking taken over under reg. 55 of the Regulations of 1939 is prima facie entitled, under reg. 78, to be paid for his shareholding only on the basis of the value of a single share, and no account is to be taken, in assessing the compensation payable to him, of the fact that the competent authority in acquiring all the shares is acquiring, in addition, the exclusive control of the undertaking; for to add to each parcel of shares, as sold separately, a rateable proportion of the added or “control” value of the totality of the shares would be to add to each holding an item of value which the shareholder, as an individual, did not, in fact, possess. Moreover, as shareholders are not, in the eye of the law, part-owners of the undertaking, they are also not entitled to have their shares valued by the method of apportioning among all the shares in the undertaking the value of the undertaking as a whole.
The value of an individual share is not necessarily the price quoted for it on the Stock Exchange. It is open to a shareholder to displace that evidence of value by any other evidence which is directed solely to the value as between a willing buyer and a willing seller of the holding per se.
APPEAL from Morris J.
On March 17, 1943 the Minister of Aircraft Production, as the “competent authority,” made an order under reg. 55 (4.) of the Defence (General) Regulations, 1939, appointing a controller of Short Brothers (Rochester and Bedford), Ld. On March 22, 1943, the competent authority made an order under reg. 78 transferring all the shares in the company to named nominees. The validity of those orders was not challenged. The issued shares of the company were 230,475 5 per cent. redeemable cumulative preference shares of £1 each, 250,000 “A” ordinary shares of 5s. each, and 581,302 ordinary shares of 5s. each. On May 31, 1943, the respondents, the Treasury Commissioners, made an order under reg. 78 (5.) of the Regulations of 1939F1, specifying the prices of the above-named classes of shares at 22s. 3d., 29s. 3d. and 2s. 3d. respectively. The first appellant, the claimant Francisco Samuel Short, was, at the material date holder of 22,958 “A” ordinary shares, and the second appellants, the claimants Lonsdale Investment Trust, Ld., were holders of 3,000 ordinary shares. The claimants gave notices in writing under reg. 78 (7.) claiming that the prices specified in the order in respect of the shares held by them were less than their “value” as provided for in para. (5.) of the regulation. The matter came before an arbitrator, who stated a special case for the opinion of the court.
After setting out the facts substantially as above recited, the arbitrator stated as follows: In the course of the evidence it appeared that the figure of 29s. 3d. a share, the price mentioned in the order of May 31, 1943, was fixed simply by reference to the prices of those shares ruling on the Stock Exchange on the date of the transfer of the shares, namely, March 23, 1943.
For the Treasury it was contended that the proper basis of valuation under reg. 78 was to assume that the Minister had acquired all the shares in individual blocks from individual shareholders on the date of transfer, and, on that assumption, to fix the value of all the shares on the basis of the prices ruling on the Stock Exchange on that date.
For the claimants it was contended that, the transfer effected by the order of March 22, 1943, being a transfer of all the shares in the company, it was improper to fix the value on the hypothesis of the purchase of individual blocks of shares from individual shareholders, and that the appropriate mode of fixing the price of the shares would be, first, to ascertain the value of the whole undertaking and then to determine the proportionate value of the separate classes of shares, and of individual shares within each class.
Following that mode of valuation, the arbitrator came to the conclusion, after considering the evidence, that a fair price for the “A” ordinary shares and for the ordinary shares in the company at the date of transfer would be 41s. 9d. a share.
The question for the opinion of the court concerned the mode of valuation proper to be followed in fixing the price of the shares.
If the court should be of opinion that the contention of the Treasury was correct, the arbitrator awarded that they should pay the respective claimants 29s. 3d. in respect of each of the 22,958 “A” ordinary shares, and the same sum in respect of the 3,000 ordinary shares.
If the court should be of opinion that the contention of the claimants was correct, he awarded that the Treasury should pay the respective claimants 41s. 9d. a share in respect of each of the shares in question.
The arbitrator ordered that if either party should fail to set down the award for argument before the court as a special case within twenty-one days, the Treasury should pay the respective claimants for their shares at 41&S, 9d. a share.
Morris J. heldF2 that the contention of the Treasury was correct. The claimants appealed.
Sir David Maxwell Fyfe, K.C. and Cecil Turner, for the claimants. The scheme of reg. 78...
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