Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd

The Commissioner of Succession Duties (SA) appealed to the High Court of Australia against a decision of the Supreme Court of South Australia concerning the valuation of shares in D. Clifford Theatres Ltd. for the purposes of succession duty. The deceased's estate included 28,150 ordinary shares in this company, which were not listed on a stock exchange. The Commissioner had valued these shares at 37s. each, but the Supreme Court reduced this valuation to 17s. 6d. per share.

The legal issues before the High Court were: firstly, what test should be applied to determine the value of unlisted shares for succession duty purposes, and secondly, whether the deceased's life-governor's share in a related company, Clifford's Investments Ltd., which conferred significant voting rights, should be taken into account when valuing the D. Clifford Theatres Ltd. shares.

A majority of the High Court (Latham C.J., Rich, Dixon, and Williams JJ., with Starke J. dissenting) held that the appropriate test for valuing unlisted shares was substantially the same as that used for compensation in compulsory acquisition cases, focusing on what a prudent purchaser would pay. This involved considering the company's earning power and assets, with an emphasis on future profits and dividends, adjusted for risk. The Court also unanimously determined that the life-governor's share in Clifford's Investments Ltd., being a share in a separate entity, should not be considered in the valuation of the D. Clifford Theatres Ltd. shares, despite its voting power.

The High Court allowed the appeal, finding that the Supreme Court's valuation of 17s. 6d. per share was unreasonably low and that the Commissioner's assessment of 37s. per share was not excessive. The Court set aside the Supreme Court's order and dismissed the executors' appeal to that court with costs.