The Chief Justice of British Columbia (all concur):—As a step in a plan to effect an estate “freeze”, the late William Mann of the City of Vancouver caused the incorporation of Mann Investments Limited. The objects of the Company were to invest in stocks and bonds, debentures, mortgages and similar securities.
The capital of the Company was divided into 990 Class A common shares and 10 Class B common shares with a nominal par value of one dollar each. The Class A and Class B common shares ranked pari passu in all respects, except only the class B shares had voting privileges. At the time of Mr Mann’s death the Class A shares were owned equally by his two children and the Class B shares were owned by Mr Mann. The net worth of the Company was $149,562.03 which represented investments in stocks and bonds.
In valuing the Class B shares for the purposes of the Succession Duty Act of British Columbia, the executors of the estate apportioned the net worth on the basis of shareholdings. As the 10 Class B shares represented one percent of the net worth, the sum attributed to the Class B shares was $1,495.62.
For the purpose of determining the dutiable value of the shares it is common ground that value means the fair market value of the shares.
By letter dated June 9, 1970, the assessor and collector of probate and succession duties assessed the estate on the basis that the deceased was in a position to have sold his voting shares to a third party purchaser, who would have been entitled to a salary and/or administration fee on the assets under his control. The assessor considered that a 4% administration fee of $5,960 would not be unreasonable. The present value of an annual withdrawal of $5,960 for one generation of 20 years would be $81,000 and it was on this basis that the estate was assessed. It may be noted that this basis of assessment is not based on fair market value.
An appeal from this assessment was taken on behalf of the estate of Mr Mann. The appeal was allowed, and on order by Mr Justice Mcintyre the assessment was vacated and a value of $1,495.62 was substituted therefor: see Re Mann Estate, [1972] 5 WWR 23. It is from this order that the Minister of Finance appeals to this Court.
The basis of the appeal is that the trial Judge did not determine the fair market value of the shares, but rather determined the break-up value.
A review of the proceedings does not support this contention. In his reasons the learned trial Judge said:
Whatever tests are applied, however, and whatever considerations are weighed the effort of the valuer must be directed to finding that fair market value in a hypothetical transaction in a hypothetical market.
Again, he also said:
The appellants did furnish evidence of market value.. Mr Stanley, in his efforts to find a hypothetical purchaser, concluded that one could not be found and did not exist. He was unable to envisage one and considered that these shares, then, had no more than a break-up value. I reject the argument by the respondent that Mr Stanley did not consider the market test in his approach. He was merely unable to find upon such consideration the necessary hypothetical purchaser. Mr Patrick, a man experienced in the field, said that from his experience, the market value of shares in companies of this kind and similar kinds tended to stabilize at break-up value. I am thus afforded some evidential support for the break-up value concept and none, in my view, for the $81,000 figure used in the actual assessment and, as I have said, I have rejected Mr Anson-Cartwright’s estimate of $50,000.
This finding must be interpreted in the context of the evidence that was before the trial Judge. So interpreted, in my opinion, the finding means that the market value in this case is the equivalent of the break-up value. Therefore, I conclude that the learned trial Judge did not misdirect himself, but proceeded upon accepted principles and arrived at fair market value. Accordingly, I would dismiss the appeal.