Open-market valuation for estate duty excludes confidential board information and follows the settled Crossman basis.

Estate-duty valuation under section 7(5) of the Finance Act 1894 required the hypothetical open-market price to be assessed on the settled basis in Crossman, treating the shares as subject to their articles but not allowing transfer restrictions to defeat the statutory valuation exercise. Confidential board reports and advice about a prospective public issue could not be assumed to be available to all potential purchasers, because open-market value depends on information generally accessible in the market, not on confidential material from a private placing. On that basis, the lower valuation was sustained and the estate-duty value was reduced.

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Issues: (i) Whether the valuation of shares subject to transfer restrictions for estate duty purposes required departure from the earlier rule in Crossman and treatment of the assumed sale as free from such restrictions; (ii) whether confidential board reports and advice relating to a prospective public issue were to be treated as available to participants in the hypothetical open market for fixing the shares' value.

Issue (i): Whether the valuation of shares subject to transfer restrictions for estate duty purposes required departure from the earlier rule in Crossman and treatment of the assumed sale as free from such restrictions.

Analysis: The statutory test under section 7(5) of the Finance Act, 1894 is the price which the property would fetch if sold in the open market at the date of death. The House declined to overrule the established interpretation that an assumed open-market sale must proceed on the basis that the shares are sold as subject to the articles, while the restrictions that would prevent any open-market sale are not allowed to defeat the statutory valuation exercise. The earlier authority was treated as settled law and as correctly stating the method of valuation.

Conclusion: The earlier rule was maintained and the valuation exercise had to proceed on the settled open-market basis.

Issue (ii): Whether confidential board reports and advice relating to a prospective public issue were to be treated as available to participants in the hypothetical open market for fixing the shares' value.

Analysis: The relevant inquiry was what information would be openly available to all potential bidders in an open market, not what might be obtainable in a private treaty or confidential placing. Although a prudent purchaser of a large block of private-company shares would investigate the company's prospects, confidential board material concerning flotation plans would not be assumed to be disclosed generally, because that would require treating a private, selective disclosure as if it were open-market knowledge. On that basis, the higher figure based on such confidential material could not be sustained.

Conclusion: Confidential board material was not to be assumed available in the hypothetical open market, so the lower valuation was correct.

Final Conclusion: The appeal succeeded and the estate-duty valuation was reduced to the lower figure adopted at first instance, reflecting an open-market valuation that excluded confidential board information.

Ratio Decidendi: For estate-duty valuation under section 7(5) of the Finance Act, 1894, the hypothetical open-market sale must be valued on the basis of information openly available to all potential purchasers, and confidential corporate information not generally disclosed cannot be treated as market knowledge.

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