CASE OF LITHGOW AND OTHERS v. THE UNITED KINGDOM

No violation of P1-1;No violation of Art. 14+P1-1;No violation of Art. 6-1;No violation of Art. 13

ORG The applicants in the present case had certain of their interests nationalised under ORG DATE ( " LAW " ) . Whilst not contesting the principle of the nationalisation as such , they claimed that the compensation which they received was grossly inadequate and discriminatory and alleged that they had been victims of breaches of LAW No . CARDINAL ( PCARDINAL - CARDINAL ) to the LAW , taken alone and in conjunction with LAW article CARDINAL+PCARDINAL - CARDINAL ) of the Convention . They also invoked LAW ) and - in CARDINAL case - LAW ) of the LAW . Certain claims of violation of LAW and CARDINAL ( article DATE , article CARDINAL ) of the LAW , which had been made before the ORG , were not pursued before the ORG .

ORG In its election manifesto published on CARDINAL DATE , ORG stated that its political programme included nationalisation of the GPE aircraft and shipbuilding industries . It had made previous statements to that effect in DATE , CARDINAL and DATE .

At a general election held on DATE , ORG gained office from the NORP and formed a government ; it did not then have an overall majority in ORG . On DATE , the Secretary of ORG announced that the shipbuilding and shiprepair industries would be taken into public ownership and that legislative provisions for safeguarding their assets would be effective from that date ; details of the ORG ’s proposals for nationalising those industries were set out in a discussion paper published on DATE .

A further general election was held on DATE , at which ORG was returned with an overall majority . On DATE , the Queen ’s Speech at the opening of ORG referred to the Government ’s intention to bring the aerospace industry into public ownership and a statement concerning safeguarding provisions for its assets was made in ORG on DATE . On DATE , the Government published a consultative document relative to their plans for the nationalisation of that industry .

ORG The above - mentioned discussion paper and consultative document contained particulars of the companies to be nationalised and stated that " fair compensation " would be paid , though without giving details of the compensation terms . Both documents set out the political , economic and social considerations that motivated the nationalisation proposed ; essentially , the Government considered that it would put the industries concerned - which had been in receipt of substantial Government assistance and were heavily dependent on Government contracts - on a sounder organisational and economic footing and bring to them a desirably greater degree of public control and accountability .

ORG On DATE , the Secretary of ORG announced in ORG the forthcoming introduction of an ORG Bill to give effect to the nationalisation proposals . He indicated , for the first time , the basis on which compensation would be determined , namely by reference to the value of the securities of the companies to be acquired : securities quoted on a recognised ORG were to be valued at their average price during DATE on DATE , whilst the value of unquoted securities was to be determined , by agreement or arbitration , as if they had been quoted during that period . Details of the safeguarding provisions were also given .

ORG A PERSON on the lines announced was duly published , providing for the securities of CARDINAL companies to pass into the ownership of public corporations . Although the PERSON received its first reading on DATE , it lapsed at the end of the Parliamentary session due to lack of time . The Government then reviewed the proposed compensation terms ( including the choice of the valuation reference period ) in the light of representations received , but decided not to change them , notably on account of the uncertainty which this would have created , of the extent of share dealings that had taken place on the basis of the terms already announced and of the fact that in the alternative reference periods canvassed share prices were likely to have been distorted by the commitment to nationalisation .

ORG A second PERSON , in essentially the same terms as the first , was introduced in DATE . It gave rise to protracted proceedings in ORG , covering such matters as the principle and the scope of the nationalisation measure and the compensation terms . In DATE , the Government themselves announced the exclusion from the ambit of ORG ; this shipbuilding company had become insolvent after DATE and the Government considered that it would be unjustifiable to pay its shareholders the full value of the shares during the compensation reference period .

Having received its third reading in ORG on DATE , the PERSON passed to ORG where , after further lengthy debates , various amendments were made which were not acceptable to the Government ; in particular , certain shiprepairing and warship - building companies were excluded and a provision was inserted whereby ORG - which was to assess compensation in default of agreement - would have been able to award " fair compensation " if it considered that this would not be provided under the statutory formula . The ensuing disagreement between the CARDINAL ORG over the amendments could not be resolved by the end of the session and the second PERSON therefore also lapsed .

ORG A third PERSON in the same terms as the second was introduced into ORG on DATE , completed all procedural stages there by DATE and was then introduced into ORG under a special procedure whereby it could pass into law without the assent of that ORG . It received the Royal Assent and came into force on DATE . The compensation terms enacted were essentially identical to those provided for in the first PERSON ; the same applied to the interests to be nationalised , except for the exclusion of ORG and also - following an amendment accepted by the ORG during the proceedings on the third PERSON certain companies whose business consisted solely of shiprepairing . In the final event , CARDINAL companies ( CARDINAL aerospace and the remainder shipbuilding , marine engineering or shipbuilding training ) were listed for nationalisation in LAW .

ORG The Parliamentary debates were characterised throughout by opposition concentrated , in particular , on the alleged unfairness of the compensation terms . The criticisms - which were substantially identical to those made by the applicants in the present proceedings and were all withdrawn or rejected after debate - related , inter alia , to the use of a hypothetical ORG method of valuation for unlisted shares ; the choice of the valuation reference period ; the absence of provision for taking account of growth in the companies concerned , or fall in the value of money , after the reference period ; the non - inclusion in the compensation formula of any equivalent of the " control premium " ( see paragraph CARDINAL below ) ; and the fact that the valuation of certain acquired companies might be related to the stock market quotation of their parent ORG shares .

Government spokesmen , for their part , maintained that the terms were fair . They argued , amongst other things , that it was proper to value securities at a date before they were affected by the possibility of nationalisation ; that the subsequent performance of a particular company would normally have been in prospect at the reference period and hence reflected in the imputed share price ; that it was reasonable that the Government should benefit from any improvements in the companies after the end of the reference period since they accepted the risk of any deterioration , short of bankruptcy ; that it was fallacious to assume that there was a correlation between share values and the rate of inflation ; that the choice of reference period protected shareholders against the subsequent fluctuations in market prices ; that the terms on which compensation was being offered were not those on which a willing buyer acquired control of a company from a willing seller , since this was not a transaction of that kind but a nationalisation by ORG ; and that regard would be had to the quotation of a parent company ’s shares only where the acquired company ’s activities constituted a " very substantial " part of the whole undertaking . The ORG also acknowledged that the settlement of compensation would take some time , but expressed their intention of making payments on account as large and as quickly as possible and within DATE of passage of the companies into public ownership .

ORG In DATE - at which time compensation negotiations were still in progress ( see paragraphs CARDINAL below ) - , a further general election was held and ORG returned to office . The new Government reviewed , in the light of representations made , the compensations terms contained in LAW but decided not to change them . In a written answer the new Secretary of ORG announced this to ORG on DATE , in the following terms :

" We recognise that some previous owners and many members of this ORG and of the public believe that the terms of compensation imposed by the DATE Act were grossly unfair to some of the companies and we share this view . We have explored every possibility to right the injustice done by the previous Government but to our very great regret we have concluded that amending legislation to establish new compensation terms retrospectively would be unjust to the many people who sold shares on the basis of the previous terms . "

The new Government also considered , but decided against , any immediate denationalisation of certain of the companies that had passed into public ownership .

Sections DATE and CARDINAL of the DATE Act provided that , on a date to be specified by the Secretary of ORG ( " Vesting Day " ) , the securities of the companies engaged in the aircraft and shipbuilding industries which were listed in ORG , together with certain other assets appurtenant to their activities , should vest in " British Aerospace " or " British Shipbuilders " , CARDINAL public corporations established under LAW . The dates subsequently so specified were , for aerospace companies , DATE and , for shipbuilding companies , DATE .

The LAW also made provision for compensation to be paid to the former holders of securities of the acquired companies , for the safeguarding of the assets of the nationalised undertakings , for the appointment of ORG representatives and for the establishment of ORG .

ORG Under section CARDINAL(CARDINAL ) , the amount of compensation payable was , generally , an amount equal to the " base value " of the nationalised securities , less any deduction which was appropriate by virtue of LAW see paragraphs CARDINAL - CARDINAL below ) . For securities listed on ORG , the " base value " was , under section CARDINAL(CARDINAL ) , the average of their DATE quotations during DATE and DATE ( " the Reference Period " , the second date being that of the general election referred to in paragraph CARDINAL , second sub - paragraph , above ) . For securities not so listed and issued before the end of the Reference Period , the " base value " was " such as may be determined by agreement between the Secretary of ORG and the ORG representative " ( see paragraph CARDINAL below ) " or , in default of such agreement , as may be determined by arbitration under this LAW to be the base value which the securities would have had under section DATE ... if they had been listed " on the ORG throughout the Reference Period ( section FAC ) ) . The " base value " of unlisted securities issued after DATE was , generally , their issue price ( section CARDINAL(CARDINAL ) ) .

Among the reasons given by the Government for the choice of this reference period were : the need to avoid a period when the value of the shares was distorted by the prospect of nationalisation ; subject to this , the need to take as recent a period as possible ; and the general decline in share prices DATE , when the compensation terms were announced , making it desirable to choose a period reflecting the mid - point of the share market over DATE .

In determining the " base value " of unlisted securities , ORG ( see paragraphs CARDINAL - CARDINAL below ) was to have regard to " all relevant factors " ; when the acquired company was the subsidiary of a company all or part of whose shares were listed on ORG and carried on an undertaking which " formed a substantial part of the undertakings of the group of companies of which the company and the parent company were members " , CARDINAL of those factors was the stock market quotation of the parent company ’s shares ( section CARDINAL ) and ( CARDINAL ) ) .

During negotiations , the Secretary of ORG , whilst having some scope for judgment , could not offer by way of compensation more than was possible under the statutory formula . ORG , for its part , was in no way bound by the amount offered or contended for in negotiations . In determining compensation , no regard was had to any grants to the nationalised undertakings from public funds .

ORG Under section DATE , compensation was not payable until the " base value " of the nationalised shares and the amount of any deduction to be made under LAW ( see paragraphs TIME below ) had been determined . However , it was provided that , at any time after DATE , " such sum may be paid on account of compensation ... as the Secretary of ORG thinks fit ... " . The payments on account made to the applicants in the present case were unconditional .

ORG ( a ) Compensation was to take the form of government stock , known as " Compensation Stock " ( section CARDINAL(CARDINAL ) ) . Interest thereon was to accrue from DATE ( Schedule CARDINAL ) . The rate of such interest was to be determined by the ORG , as were the conditions as to repayment , redemption and other matters ( section CARDINAL ) .

( b ) Compensation was not subject to tax on receipt , but disposal or redemption of Compensation Stock gave rise to liability to capital gains tax , the gain being calculated by reference to the cost of acquisition by the shareholder of the nationalised shares . However , by virtue of LAW of LAW DATE , the replacement of ORG by new business assets could give rise to an entitlement to " roll - over relief " , whereby liability to tax would be deferred until the new assets , or their successors , were ultimately disposed of . Such relief was available only where the recipient of ORG was a company and where the nationalised concern had been either a subsidiary , PERCENT owned , of that company or a wholly - owned subsidiary of a consortium consisting of CARDINAL or fewer companies ; it could not be claimed by a private individual , regardless of the size of his shareholding in the nationalised concern . These criteria were intended to limit the ambit of " roll - over relief " to cases where the shares in the nationalised company had been held as a business asset rather than as a purely financial investment .

ORG During the course of the NORP proceedings on the various ORG spokesmen stated that the undertakings to be nationalised were to continue to operate as normal commercial concerns until DATE . And , in fact , all the companies with which the present case is concerned did so .

Although the undertakings remained private property until DATE , LAW contained a number of safeguarding provisions whose general aim was to ensure that , DATE ( DATE ) and DATE , there was no abnormal action by the existing owners or management which might be detrimental to the public sector . The provisions , whose broad effect is summarised below , did not apply if the action in question had been approved by the Secretary of ORG ; retroactive approval was possible in certain circumstances , notably in respect of " material transactions " ( see paragraph CARDINAL below ) . The Government gave assurances that the safeguarding provisions would not be used in such a way as to penalise reasonable action taken in the normal course of business and in good faith .

ORG Holders of securities of the acquired companies were entitled to dividends and interest thereon for all periods DATE . However , limits were in effect imposed on the amount of dividends and interest paid pursuant to resolutions passed between the end of the Reference Period and Vesting Day : if the date of the resolution lay between CARDINAL DATE and the " Safeguarding Date " ( generally CARDINAL DATE , being the date of the statement in ORG outlining the compensation terms and safeguarding provisions ; see paragraph CARDINAL above ) , the amount of any payments in excess of the permissible maximum fell , under section CARDINAL , to be deducted from the compensation payable for shares under section CARDINAL ; if the date of the resolution was after the Safeguarding Date and before Vesting Day , the directors of the acquired company were personally liable to the relevant public corporation for any such excess ( section CARDINAL ) . For a dividend , the permissible maximum was generally either the net revenue of the company for the period in respect of which the dividend was declared or the amount of the most recent ordinary dividend previously paid ( whichever was the less ) ; for interest , it was the minimum necessary to avoid default on obligations or the carrying over of interest for subsequent payment ( section CARDINAL ) . During the NORP debates , the Government gave assurances that higher payments would be authorised if the circumstances warranted .

ORG and NORP were protected against losses occasioned by " material " or " onerous " transactions entered into by an acquired company DATE . Broadly speaking , a " material transaction " was one , such as a special dividend , that involved the direct or indirect transfer of company assets to shareholders and an " onerous transaction " was CARDINAL that was unusual or unreasonable and foreseeably caused loss to the company ( sections CARDINAL and DATE ) . If the transaction had been entered into between CARDINAL DATE and the Safeguarding Date - or in certain cases LAW ( DATE for the shipbuilding industry or CARDINAL DATE for the aerospace industry ) - , the net loss caused thereby to the relevant public corporation fell , under section DATE , to be deducted from the compensation payable for shares under LAW ; if the transaction had been entered into after the Safeguarding Date - or the Initial Date - and before Vesting Day , that corporation could institute proceedings before ORG ( see paragraphs CARDINAL - CARDINAL below ) to recover from the directors or the parties to the transaction the loss caused thereby and , in the case of an " onerous transaction " , to have the same declared void ( sections CARDINAL and DATE ) .

ORG There was also a general prohibition on the transfer away by an acquired company of certain assets , coupled with the possibility for the relevant public corporation to institute proceedings before ORG to have the damage suffered as a result of the transfer made good by the directors or the parties thereto ( section CARDINAL ) . If the transfer had been effected after DATE , the corporation could recover the assets , either by acquiring certain additional companies or by acquiring the assets themselves ( sections CARDINAL and CARDINAL ) .

ORG The Secretary of ORG could in certain circumstances ( notably insolvency ) remove a company from the list of companies to be nationalised ( section CARDINAL ) .

ORG Questions arising as to the amount of the appropriate deduction to be made from compensation under LAW were to be determined by agreement between the Secretary of ORG and ORG ( see paragraph CARDINAL below ) or , in default of such agreement , by ORG . The latter also had jurisdiction over various other issues arising under the safeguarding provisions .

ORG LAW ) of the DATE Act provided that a ORG Representative was to be appointed in respect of each acquired company " to represent the interests of holders of securities of that company in connection with the determination of the base value of those securities " . He was to be appointed by the holders of the securities at a meeting held within a prescribed time - limit , failing which , by the Secretary of ORG ; he could be removed by resolution passed at a meeting of the security holders ( Schedule CARDINAL ) . His remuneration and expenses were to be met by the Secretary of ORG .

The raison d’être for the institution of ORG Representative was that it was considered essential , in order to prevent negotiations and arbitration being rendered unworkable by a multiplicity of individual claims , that they be conducted , on behalf of the former owners , exclusively by a nominee representing their collective interests . As a result , although the individual shareholders had voting rights at ORG meetings , they had no direct standing in compensation negotiations .

According to Sir PERSON , the Representative was not obliged to seek the ORG consent before agreeing to compensation in negotiations or to refer the question of compensation to arbitration if so requested by them ; in this applicant ’s view , a stockholder had , in practice , no means of ensuring that the Representative complied with his wishes , save for the aforesaid possibility of removal . According to the ORG , stockholders would have had a remedy in the domestic courts against a Representative for failure to comply either with his obligations under LAW or with his common - law obligations as agent . They further maintained that he could not refuse to institute arbitration proceedings if so directed by the stockholders or , probably , a majority of them and that , as a matter of pure practice , he would not agree the quantum of compensation in negotiations without their consent .

Section CARDINAL of the DATE Act established ORG . For the hearing of any proceedings , the ORG was to consist of a legally - qualified president ( appointed by the Lord Chancellor or , in the case of NORP proceedings , the Lord President of ORG ) and CARDINAL other members ( appointed by the Secretary of ORG after consultation with all ORG ) , CARDINAL being of experience in business and the other in finance .

Criteria for the selection of members of the ORG - relating to their standing and experience and including a requirement that they should not have any connection with the companies nationalised - were worked out in consultation with ORG , who were also invited to make proposals as to suitable members .

Members of the ORG were to hold office " for such period as may be determined at the time of their respective appointments " . The appointor of a member could declare his office vacant " on the ground that he is unfit to continue in his office " but , by virtue of section CARDINAL(CARDINAL ) of ORG DATE , this power was exercisable only with the consent of the Lord Chancellor or the Lord President of ORG Provision was also made for resignation , vacation of office on grounds of bankruptcy or replacement in case of illness .

ORG The ORG ’s jurisdiction was limited to the issues specified in the DATE Act ; these included various claims and questions arising under the safeguarding provisions and , in the context of compensation , determination of the " base value " referred to in section FAC ) and of the deductions to be made therefrom under section CARDINAL ( see paragraphs CARDINAL and DATE above ) . In assessing the " base value " , the ORG could hear argument about the weight to be attached to any relevant factor , but not about the alleged unfairness of the statutory formula , by which it was bound .

The jurisdiction in relation to " base value " and deductions arose only " in default of agreement " between the Secretary of ORG and ORG , but the latter was free to refer the question of compensation to the ORG at any moment after Vesting Day . In the view of the Government - which was contested by Sir PERSON - , there was no legal bar to access to the ORG by an individual shareholder , unless and until agreement had been reached in negotiations . Thereafter , he could not seise the ORG even if he considered that the sum agreed was too small under the statutory formula .

ORG The procedure before the ORG was governed by ORG DATE and ORG ( NORP Proceedings ) Rules DATE , made by the Lord Chancellor and the Lord Advocate , respectively . These statutory instruments provided for proceedings similar to those of a court ; in particular , hearings were generally to be held in public .

ORG An appeal on any question of law - but not on the quantum of compensation - lay from the ORG to ORG in GPE or ORG in GPE and thereafter , with leave , to ORG . Furthermore , a ORG Representative could , according to the ORG , test in the ordinary courts whether the Secretary of ORG , in formulating a compensation offer , had erred in law by misinterpreting or misapplying LAW .

ORG On the passing of LAW , Messrs. Whinney Murray & Co. , a leading firm of chartered accountants appointed by the Government to advise them in the compensation procedures , set about valuing the companies concerned by issuing a questionnaire to all of them . According to the Government , it was not possible to seek the cooperation of the companies or their shareholders at an earlier date because there was no certainty as to when or in what form the strongly contested legislation would be passed .

Compensation for those shares in the acquired companies which were listed on ORG was agreed before , and paid on , DATE , the relevant DATE . As regards the remaining , unquoted , shares , Messrs. ORG provided ORG with preliminary valuations on most of the companies during DATE and on the remainder during DATE , for the purpose of calculating payments on account of compensation which were made during DATE .

On various dates DATE and DATE , the accountants supplied the ORG with full valuation reports , factual information wherefrom was sent for comment to the company concerned and to the ORG Representative acting on behalf of the holders of its securities ( see paragraph CARDINAL above ) . ORG and the Representatives exchanged memoranda on various dates DATE and negotiations between them followed . Further payments on account of compensation were announced in DATE and DATE and , in some cases , in DATE .

ORG DATE and PERCENT ( being the date of the new ORG ’s announcement that they had decided not to change the compensation terms ; see paragraph CARDINAL above ) , various settlements were reached but , with the exception of the PERSON case ( see paragraphs DATE below ) , none of them related to the acquired companies with which the present proceedings are concerned . Shortly after the aforesaid announcement , the Minister of State indicated in a series of meetings with ORG that , within the confines of the statutory formula , ORG would be prepared to settle the remaining cases at amounts somewhat beyond those already offered in negotiations . Settlements regarding the other companies with which the present proceedings are concerned were reached by DATE .

ORG In the compensation negotiations ORG and their advisers used the following CARDINAL methods of arriving at a hypothetical ORG quotation for unlisted shares .

( a ) For most of the profitable companies an earnings - based valuation was applied . This method , which involved considering the company ’s historic and prospective post - tax earnings ( as at the Reference Period ) and applying thereto an appropriate multiplier ( price / earnings ratio ) assessed by comparison with listed companies , was used in all the cases with which the present proceedings are concerned , other than the Vosper ORG and the Yarrow Shipbuilders cases ( see paragraphs CARDINAL - CARDINAL and CARDINAL below ) . Since stock market quotations are not dependent solely on earnings , the ORG ’s accountants , in preparing their valuations , reviewed , where appropriate , the figure arrived at by the above method against the criteria of asset - backing and dividend yield .

( b ) Where the acquired company was a subsidiary carrying on the main part of the total undertaking of a company all or part of whose shares were listed on ORG , a parent - company - related valuation was employed , in view of section CARDINAL ) of LAW ( see paragraph CARDINAL above ) . This method , which involved deducting from the parent company ’s average capitalisation during the Reference Period a valuation for the non - vesting elements in the group , or apportioning the capitalisation according to the contribution to group earnings of the vesting and the non - vesting elements , was used in the Vosper Thornycroft and the Yarrow Shipbuilders cases .

( c ) In certain other cases , where the company acquired was not making a profit , recourse was had to an assets - based valuation , based on the hypothesis of an open - market sale of the assets during DATE .

( d ) CARDINAL other unprofitable company was valued by a share - capital - related method that is at a discount to the nominal value of its issued share capital .

ORG The present proceedings arise from the nationalisation under LAW of the CARDINAL undertakings described below . Save for the preference shares in GPE ( see paragraph CARDINAL below ) , none of the shares in the companies concerned was listed on ORG , so that , with that exception , compensation fell to be assessed on the basis of a hypothetical ORG quotation ( see paragraph CARDINAL above ) .

ORG The descriptions of the CARDINAL undertakings include particulars of profits and assets which , except where otherwise stated , are taken from the company ’s audited accounts . Pre - tax profits have been shown as the post - tax figures are not in the ORG ’s possession in every case . Figures for net assets do not include amounts in respect of deferred taxation and for this reason differ from the figures appearing in the ORG ’s report . References to cash in hand or equivalent are to gross amounts , that is without taking account of any outstanding liabilities .

Reference is also made below to various estimates submitted by the applicants , both to the ORG and to the ORG , concerning the value of their nationalised interests . This material was not generally challenged or commented on by the Government . This was not because they accepted it as correct , but because they considered that it was inappropriate to do so since those estimates did not reflect the statutory formula , which formula , in their view , was consistent with the requirements of the LAW .

ORG On DATE , there vested in NORP Shipbuilders the preference and the ordinary shares in PERSON & Company Ltd. ( " Kincaid " ) , which manufactured marine diesel engines at ORG . The preference shares were listed on ORG and no complaint was made in the present proceedings regarding the compensation received therefor . Sir PERSON , who is a shipbuilder by profession and was the largest single shareholder in the company , owned CARDINAL - or slightly over PERCENT - of its CARDINAL issued ordinary shares .

ORG ( a ) PERSON ’s pre - tax profits for DATE , ending on DATE , were :

DATE - £ CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE .

In DATE to DATE , the pre - tax profits were , according to the ORG ’s report , MONEY .

PERSON had no Government orders and required no special Government subsidies .

DATE a total of £ MONEY was paid in dividends on the ordinary shares ; according to Sir PERSON , Government- imposed dividend restraint resulted in £ MONEY being added to company funds between the Reference DATE .

( b ) PERSON ’s net assets were :

at DATE CARDINAL

at DATE - £ CARDINAL

at DATE MONEY .

At the hearings before the ORG , Sir PERSON declared that PERSON had cash reserves of MONEY at DATE .

ORG Sir PERSON , however , stated that during the Reference Period Kincaid had net assets of MONEY CARDINAL,CARDINAL,CARDINAL and he supplied a valuation , prepared after the proceedings before the ORG , indicating that the value of the company at CARDINAL DATE , calculated in accordance with LAW on the basis of a hypothetical ORG quotation , was in the region of £ CARDINAL,CARDINAL,CARDINAL to £ CARDINAL,CARDINAL,CARDINAL . He further estimated that the net assets attributable to ordinary shareholders as at DATE were worth CARDINAL . All these various figures took account of revaluations of the company ’s LOC and plant , effected by a firm of chartered surveyors , indicating that they were worth substantially more than the amounts shown in the balance sheet . The cash reserves at DATE were described by Sir PERSON as surplus to ORG ’s requirements .

ORG Messrs. ORG valuation report on PERSON - suggesting a figure in the range of £ MONEY - was submitted to ORG in DATE ; it was based on earnings ( see paragraph CARDINAL ( a ) above ) . The report took no account of a revaluation of fixed assets , effected after DATE . Memoranda were exchanged between the ORG and ORG in DATE and formal negotiations then began . ORG offered £ MONEY and the Representative claimed CARDINAL . Subsequent discussions focused in particular on the question whether a different accounting treatment would have been followed had ORG ’s ordinary shares been listed on ORG . By DATE , the gap between the parties had narrowed ( £ MONEY being offered by the ORG and £ MONEY claimed by ORG ) and , after further negotiation , agreement was reached , subject to the former ORG approval , at a figure of £ MONEY .

ORG After ORG had recommended acceptance of this figure , a meeting of the shareholders was held on DATE to consider a resolution approving the agreement . Sir PERSON and CARDINAL other stockholders were present but he abstained from voting , as he considered that the information available about the settlement was insufficient and that the figure did not represent PERSON ’s value during DATE . All the votes cast were in favour and the resolution was thus carried . ORG Representative ratified the settlement on DATE and on DATE NORP Shipbuilders issued a notice to all the former shareholders , informing them of the agreed compensation .

ORG Compensation payments in respect of PERSON ’s ordinary shares were made as follows :

- in DATE , a first payment on account ( section CARDINAL(CARDINAL ) of the CARDINAL Act ; see paragraph CARDINAL above ) , of £ MONEY ;

- in DATE , a second payment on account , of £ MONEY ;

- shortly after the settlement in DATE , the final payment , of £ MONEY .

All these payments were effected by the issue of PERCENT Treasury Stock DATE , bearing a running yield of PERCENT per annum .

The total compensation received by Sir PERSON for his ordinary shares was £ MONEY . He stated that he sustained on this sum , which he expended on trading assets , a liability to capital gains tax of £ MONEY .

ORG On DATE , there vested in NORP Shipbuilders the shares in ORG ( GPE ) Ltd. and ORG ( hereinafter together referred to as " Vosper Thornycroft " ) , which were primarily engaged in naval shipbuilding and also operated a shiprepair business . Both of these companies were wholly - owned subsidiaries of FAC and their activities formed a substantial part of the latter ’s business . The shares of FAC were listed on ORG , but it was nevertheless a tightly - controlled subsidiary of a private unlisted company , ORG

Various organisational changes had taken place in ORG DATE . In brief , its trading activities , which had previously been carried on mainly by CARDINAL subsidiary company , were first transferred to the parent company and then , on DATE , transferred back to CARDINAL subsidiaries , CARDINAL - Vosper Thornycroft ( GPE ) Ltd. - dealing with shipbuilding and the other - ORG - with shiprepair . The second transfer had the object ( which was not fulfilled ) of avoiding nationalisation of the shiprepair business .

ORG ( a ) The pre - tax profits of ORG , or its predecessors , for DATE , ending on DATE , were :

DATE CARDINAL,CARDINAL

DATE CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL

DATE CARDINAL .

According to the ORG ’s report , in the part - year to DATE , the pre - tax profits were £ MONEY , giving an annual pre - tax profit rate at DATE of £ MONEY .

DATE , ORG received £ CARDINAL by way of Government shipbuilding grants .

ORG obtained a substantial amount of business from ORG ; however , according to the valuation report referred to in the following paragraph , during the period DATE ORG contracts contributed PERCENT of profits , PERCENT being contributed by exports and other business , and exports amounting to PERCENT of turnover .

( b ) According to the ORG ’s report , the net assets of ORG , as appearing from the accounts , were £ MONEY as at DATE and £ MONEY as at DATE . At the hearings before the ORG , PERSON stated that ORG net assets at DATE included £ MONEY in cash .

( c ) The average market capitalisation of ORG ordinary shares during DATE was £ MONEY ; on DATE , the capitalisation was £ MONEY .

Vosper has submitted a valuation report on ORG , prepared by a chartered accountant who was also ORG in this case and made on the hypothesis of an open - market sale of the business as a going concern on DATE by a willing seller to a single willing buyer . The report analysed ORG profit record , assets , liabilities , cash flow and future prospects and concluded that its value as at DATE was £ MONEY . This figure was reached by estimating the maintainable post - tax profit level and applying thereto a price / earnings multiplier , adjusted to take account of the " control premium " ( see paragraph CARDINAL below ) ; the adjustment was lower than average as it was considered that the number of potential purchasers would have been limited .

During the compensation negotiations , ORG prepared another valuation , based this time on the hypothesis that the shares of ORG had been the subject of a public offer for sale on DATE , which resulted in a figure of £ MONEY . The valuation made allowance for the fact that shares offered for sale to the public would be offered at a price below that at which it was estimated they would stand if already listed on ORG .

ORG Messrs. ORG valuation report on PERSON - suggesting a figure in the range of MONEY CARDINAL,CARDINAL,CARDINAL , subject to deductions of £ MONEY under section CARDINAL of the DATE LAW submitted to ORG in DATE ; for the reasons indicated in paragraph CARDINAL ( b ) above , it was based on the stock market capitalisation of GPE , the parent company , during the Reference Period . In DATE , they made a further report to the ORG , concerning the group reorganisations , and in DATE memoranda were exchanged between the ORG and ORG . ORG indicated in their memorandum that they valued ORG at £ MONEY , without taking into account deductions which they considered fell to be made under section CARDINAL in respect of dividends paid for DATE in excess of the permissible maximum and in respect of the DATE group reorganisation , which was alleged to constitute a " material transaction " ( see paragraphs CARDINAL and CARDINAL above ) . In view of the uncertainty as to the amount of the deductions , they deferred making an offer of compensation . ORG , in his memorandum , claimed compensation of £ MONEY , based on a Vesting Day valuation of the shares .

ORG CARDINAL negotiating meetings were held DATE . The amount of the deduction for the excessive dividend was agreed and ORG agreed to forego , in the context of a negotiated settlement , the claim for a deduction arising out of the reorganisation . On this basis , they made , on DATE , their first formal offer of compensation , in the sum of £ MONEY net of deductions .

ORG Following the general election of DATE ( see paragraph CARDINAL above ) and after representations had been made to ORG , ORG made , in DATE , a revised offer of £ MONEY . Further representations and preparation for arbitration ensued . At a meeting in DATE , the Minister of ORG at the ORG increased the offer to £ MONEY net of deductions and indicated that a further PERCENT increase might be possible .

At a further meeting on DATE , the ORG Representative - who had apparently previously made his case primarily on the basis that compensation should be based on DATE value - indicated for the first time his view of a Reference Period valuation , on the basis of the statutory formula . He gave a figure of £ MONEY and indicated that he would expect ORG to award MONEY . The Minister of ORG finally agreed at the meeting to raise the Government ’s offer to £ MONEY , but no further .

ORG On DATE , ORG wrote to the Minister of ORG : he regretted the ORG ’s decision not to offer more or to alter the statutory compensation terms despite their acknowledgement that they were grossly unfair , but he recognised that the final offer was the maximum likely to be recovered by arbitration . To mitigate the effects of further delay , he was prepared to recommend acceptance of the offer . On DATE , Vosper authorised him to accept it .

Compensation payments in respect of ORG shares were made as follows :

- in DATE , a first payment on account , of £ MONEY ;

- in DATE , a second payment on account , of £ MONEY ;

- shortly after the settlement in DATE , the final payment , of £ CARDINAL .

The payments on account were effected by the issue of PERCENT Treasury Stock DATE , with a running yield of PERCENT per annum , and the final payment , by the issue of PERCENT Exchequer Stock DATE , with a running yield of PERCENT .

ORG On DATE , there vested in ORG the shares in ORG ( " BAC " ) , which was the major aerospace manufacturer in GPE . CARDINAL of its shares were owned by ORG , a wholly - owned subsidiary of ORG ( " ORG " ) , and CARDINAL by ORG . The shares of ORG and ORG are quoted on ORG , but the activities of ORG did not constitute a substantial part of the latter ’s undertaking . ORG was not itself listed in LAW as CARDINAL of the companies to be nationalised but it was taken into public ownership - in the place of a subsidiary , ORG , that was so listed - on the ground that it owned certain works that had previously belonged to that subsidiary ( sections CARDINAL and DATE ; see paragraphs CARDINAL and CARDINAL above ) .

ORG ( a ) ORG ’s pre - tax profits for DATE , ending on DATE , were :

DATE CARDINAL,CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL

DATE

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL .

ORG received no special Government subsidies . PERCENT of its DATE production was exported .

( b ) ORG ’s net assets were MONEY at DATE , £ MONEY at DATE and £ MONEY at DATE . At the hearings before ORG , the former owners of ORG said that it had cash in hand of MONEY at DATE and of MONEY at DATE .

ORG and ORG stated that ORG was CARDINAL of the most successful companies of the DATE ’s in GPE . They pointed , for example , to the growth in sales , profits , assets and order books DATE and to future prospects , and asserted that a company with such earnings growth would have commanded on ORG a substantial price / earnings ratio and a market value considerably over net asset value . They submitted a valuation indicating that ORG ’s value as at DATE was CARDINAL CARDINAL,CARDINAL,CARDINAL and that this figure should be increased by not PERCENT to take account of the " control premium " ( see paragraph CARDINAL below ) , giving an overall value of CARDINAL .

Negotiations in this case were marked throughout by a basic difference of approach between ORG and ORG . The Representative adopted the " discretionary approach " , according to which the Secretary of ORG had a discretion as to the amount of compensation he could agree in negotiations , the statutory compensation formula being binding only on ORG ; on this basis , the Reference Period was not relevant to the negotiations and compensation could and should be based on market value at DATE . ORG , on the other hand , adopted the " statutory approach " , according to which negotiations could be conducted only in terms of the statutory formula ; on this basis , negotiated compensation would be related to the value which ORG shares would have had if they had been quoted during DATE and the performance of the company thereafter was irrelevant save in so far as it could have been foreseen by a prudent investor .

ORG On DATE , ORG indicated to ORG , as a preliminary view , that on the basis of the DATE profits , ORG capitalisation in the stock market would be likely to be in the region of MONEY CARDINAL,CARDINAL,CARDINAL , excluding any " control premium " which would take the figure up to CARDINAL . On DATE , he revised this figure to £ MONEY . There followed correspondence in which ORG argued , respectively , for the " statutory approach " and the " discretionary approach " . ORG added that it was the large amount of detailed work needed to reach a reasoned view on the base value of the shares at DATE that was holding up the opening of negotiations .

ORG Messrs. ORG valuation report on GPE - suggesting a figure in the range of MONEY CARDINAL,CARDINAL,CARDINAL , subject to deductions of £ MONEY under section CARDINAL of the DATE LAW submitted to ORG in DATE ; it was based on earnings ( see paragraph CARDINAL ( a ) above ) . On DATE , the Government announced a first payment on account of compensation , in the sum of £ MONEY ; ORG and ORG issued a joint statement in which , basically , they objected to the small size of the payment . After receiving the factual part of the valuation report , ORG wrote , on DATE , to the ORG saying that , attempting to arrive at a figure which was " fair and reasonable in all the circumstances " and having regard , inter alia , to profit trend , growth in order books , exports and cash flow , he assessed the value of ORG at £ MONEY , a figure which would have to be substantially higher to take account of any " control premium " .

In DATE , the ORG sent to ORG a memorandum indicating that in their view the appropriate method of valuation was by a capitalisation , through the application of an appropriate price / earnings ratio , of the post - tax earnings for DATE on DATE ( namely £ MONEY ) ; from the base value thus established deductions fell to be made , under section CARDINAL of LAW ( see paragraphs CARDINAL above ) , in respect of certain dividends paid in DATE . The memorandum did not contain any offer of compensation because , according to the ORG , the " discretionary approach " , for which the ORG Representative continued to argue in intervening correspondence , was not within the terms of the LAW .

Maintaining that approach , the Representative gave to ORG on DATE a report with his estimate of a stock market valuation of GPE on DATE , namely £ MONEY . According to ORG and ORG , a representative of the ORG accepted that they would probably have arrived at a similar figure if they were attempting a DATE stock market valuation and stated that ORG ’s growth from DATE had been " spectacular " . However , the ORG reaffirmed that , on the basis of legal advice , they could only negotiate on the " statutory approach " .

ORG On DATE , ORG , without renouncing the " discretionary approach " , wrote to ORG with his view of the hypothetical stock market value of ORG in DATE . This was that a figure of £ MONEY would have given a prospective dividend yield of PERCENT , dividend cover of CARDINAL times and a prospective price / earnings ratio of CARDINAL , figures which would not have been abnormal for a share with the growth rate of GPE . He added that at £ MONEY the shares would have been very reasonably valued .

There were then discussions as to whether ORG ’s profits after ORG had been predictable . On DATE , ORG said that cutting valuation during DATE to the bone would still leave a figure of £ MONEY . The ORG accepted that the DATE earnings could be used as a base for estimating what prospective earnings would have been during DATE .

ORG On DATE , ORG made a preliminary offer of CARDINAL CARDINAL,CARDINAL,CARDINAL , after deduction under LAW of £ MONEY relating to dividends totalling £ MONEY paid by BAC in respect of DATE , primarily a special dividend of £ MONEY paid in DATE out of reserves and deemed to be a " material transaction " under LAW ( see paragraph CARDINAL above ) . They indicated that if the matter went to arbitration , they would argue that £ MONEY was the appropriate valuation . In DATE , however , they offered £ MONEY and in DATE ORG indicated that £ MONEY would be acceptable as a compromise .

ORG After the general election of DATE ( see paragraph CARDINAL above ) , there were further discussions . In DATE , ORG indicated that , in the context of a negotiated settlement , it might be possible to reduce the section CARDINAL deduction to £ MONEY and that they could increase their offer to £ MONEY . ORG indicated that £ MONEY would be an acceptable compromise .

In DATE , however , he submitted a memorandum in which he reverted to the " discretionary approach " . He added that the ORG merchant bankers had unequivocally advised that " the ‘ base value’ of ORG ’s securities during the ‘ relevant’ period , calculated as if by an arbitrator under the Act , would be MONEY " . He also argued that the ORG , in their restriction of dividend distributions during the period from DATE to Vesting Day , had gone beyond what was necessary or prudent ; there was therefore justification for retroactive approval by the Secretary of ORG of the DATE special dividend , so that it would not be deductible from compensation ( see paragraphs CARDINAL - CARDINAL above ) . This request did not meet with a favourable response and , in the final event , £ MONEY was deducted under section DATE .

ORG After further correspondence and discussion , ORG , in DATE , made a final offer of £ MONEY , net of deductions . On DATE , ORG stated that he was prepared to recommend acceptance and agreement at the figure in question was duly reached .

ORG Compensation payments in respect of ORG shares were made as follows :

- on DATE , a first payment on account , of £ MONEY ;

- on DATE , a second payment on account , of £ MONEY ;

- on DATE , a third payment on account , of £ MONEY ;

- on DATE , the final payment , of £ MONEY .

The payments on account were effected by the issue of PERCENT Treasury Stock DATE , carrying a running yield of PERCENT per annum , and the final payment , by the issue of PERCENT Exchequer Stock DATE , carrying a running yield of PERCENT .

ORG On DATE , there vested in NORP Shipbuilders the shares in ORG ( " Hall Russell " ) , a limited company registered in GPE , which carried on a shipbuilding and shiprepair business in GPE and was wholly - owned by ORG , an unlimited company . PERSON was a wholly - owned subsidiary of ORG , of which there were in turn CARDINAL shareholders .

ORG ( a ) ORG pre - tax profits for DATE , ending on DATE , were , according to the ORG ’s report :

DATE CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL

DATE

DATE

DATE - £ CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL .

In DATE to DATE , pre - tax profits were £ MONEY .

DATE , ORG received £ MONEY by way of Government shipbuilding grants .

( b ) ORG net assets were CARDINAL as at DATE and £ MONEY as at DATE . In their memorial filed with ORG , the former owners of ORG said that it had £ MONEY available in cash on DATE .

Banstonian and ORG stated that PERSON was a sound , successful and growing undertaking and that this was confirmed by its results after nationalisation . By reference to a valuation report , prepared in DATE for the purposes of the compensation negotiations and taking into account the earnings record , the value of the net tangible assets and the dividend yield , they submitted that if PERSON had been valued as at DATE , they should have received compensation of £ MONEY .

ORG Messrs. ORG valuation report on PERSON - suggesting a figure in the range of MONEY CARDINAL - was submitted to ORG in DATE ; it was based on earnings ( see paragraph CARDINAL ( a ) above ) . In DATE , memoranda on the valuation were exchanged between the ORG and ORG . The former offered £ MONEY . The latter maintained that section CARDINAL of LAW ( see paragraph CARDINAL above ) gave the Secretary of ORG a discretion in settling compensation , and that the only fair basis was value at DATE , namely £ MONEY .

In DATE , ORG put forward a Reference Period valuation of £ CARDINAL,CARDINAL,CARDINAL - £ CARDINAL,CARDINAL,CARDINAL . In DATE , the ORG offered £ MONEY . This offer was subsequently increased to £ MONEY and settlement at that figure was concluded in DATE .

ORG On DATE , there vested in NORP Shipbuilders the shares in FAC ( Shipbuilders ) Ltd. ( " Yarrow Shipbuilders " ) , which was engaged in building in GPE warships and other specialist vessels . This company was a wholly - owned subsidiary of GPE , whose shares were listed on ORG , and its activities comprised a substantial part of the latter ’s business .

In DATE , PERSON , which had previously owned all the shares in NORP , had , allegedly in response to Government pressure , sold PERCENT of them to another company for £ MONEY . PERSON had subsequently incurred losses and in DATE PERSON had repurchased the shareholding for DATE , a loan of £ CARDINAL having been negotiated from ORG to replace working capital eroded by the losses . It was a condition of the loan that , on returning to profitability , PERSON could distribute profits by way of dividend to the parent company only with the prior authority of the Secretary of ORG . By DATE , the loan could have been repaid , but PERSON decided not to do so ; the dividend restrictions accordingly applied throughout the Reference Period .

ORG ( a ) The pre - tax profits of Yarrow Shipbuilders for DATE , ending on DATE , were :

DATE - £ CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL .

According to PERSON , the post - tax profits from the Reference Period to Vesting Day totalled CARDINAL ; during this period Yarrow Shipbuilders was authorised by the Secretary of ORG to pay dividends of MONEY to its parent company , with the result that £ MONEY of the profits remained within the company and were included in the ORG funds obtained by the Government on nationalisation . The yield which Yarrow was allowed to obtain from its subsidiary in this period was said to have been CARDINAL of what it should have been .

In addition to the DATE loan from ORG , PERSON received between DATE £ MONEY by way of Government shipbuilding grants . They all related to export contracts , such contracts having always played a significant role in the company ’s turnover .

( b ) PERSON stated that the value of PERSON Shipbuilders’ net tangible assets , in accordance with accounting standards , was £ MONEY at DATE and that it was shown in the accounts as at DATE to be £ MONEY .

( c ) The average market capitalisation of PERSON ’s ordinary shares during the Reference Period did not exceed £ MONEY .

PERSON has submitted a valuation report prepared by a firm of chartered accountants , according to which a fair value for NORP as at DATE was £ MONEY . The valuation method employed was to consider what a single willing buyer , obtaining PERCENT control , would have paid . CARDINAL alternative approaches were used : the first involved estimating the maintainable post - tax profit level and capitalising it by the application of a price / earnings multiplier , giving a value of £ CARDINAL ; the second involved applying a price / earnings multiplier to the latest reported after - tax earnings , giving a value of £ MONEY . The report commented that " the net asset value of a company which is carrying on business as a going concern is generally not a major determinant in valuing its shares . The purchaser does not normally buy the shares in the expectation that its assets are to be sold , but expects them to be used in the business to earn profits " .

In the alternative , PERSON claimed that , as had been contended by ORG at the outset of the compensation negotiations ( see paragraph CARDINAL below ) , PERSON value in DATE was £ MONEY .

ORG In DATE , the ORG Representative supplied ORG with a factual memorandum about PERSON . Messrs. ORG valuation report on the company - suggesting a figure in the range of MONEY CARDINAL - was submitted to the ORG in DATE . It was based on the stock market capitalisation of the parent company , PERSON , during the Reference Period . This was not only because the major part of PERSON ’s activity was carried on by NORP ( see paragraph CARDINAL ( b ) above ) but also because the accountants considered that " without the financial backing of PERSON and being unable to pay dividends under the terms of the [ ORG ] loan , a purely nominal value for [ Yarrow Shipbuilders ] might result " . They also took the view that Yarrow Shipbuilders could not be valued on the normal criteria of earnings , dividend yield or asset backing , and noted that the stringent dividend restrictions " affected the standing and worth " of both the subsidiary and the parent .

In DATE , negotiations opened with an exchange of valuations between the parties : the Department ’s was £ MONEY , whilst ORG was £ MONEY , being an earnings - based valuation arrived at on a view of the prospective profits of Yarrow Shipbuilders for the year to DATE and on the assumption of an offer for sale of the shares on the stock market immediately before the Reference Period .

During subsequent negotiations , points discussed included the possibility that further dividend payments in respect of the period up to Vesting Day could be authorised ; whether it should be assumed that ORG loan would have been refinanced if the shares of Yarrow Shipbuilders had been listed on ORG ; the appropriateness of an offer - for - sale approach to valuation ; the relevance of the parent - company - related method of valuation ; and the effect of the dividend restriction ( if any ) on the stock market capitalisation of PERSON .

ORG In DATE , the ORG offered £ MONEY and in DATE ORG Representative put forward an alternative claim of £ MONEY . Further offers were made by the Government in DATE and DATE , and in DATE compensation was finally agreed at £ MONEY . This figure was accepted by PERSON as it had been advised that arbitration proceedings might have resulted , under the terms of LAW , in the award of an amount not exceeding its own total capitalisation of not MONEY CARDINAL,CARDINAL,CARDINAL .

Compensation in respect of PERSON shares was paid as follows :

- in DATE , a first payment on account , of £ MONEY ;

- in DATE , a second payment on account , of £ MONEY ;

- on DATE , the final payment , of £ MONEY .

The payments on account were effected by the issue of PERCENT Treasury Stock DATE , with a running yield of PERCENT per annum , and the final payment , by the issue of PERCENT Exchequer Stock DATE , with a running yield of PERCENT .

DATE . ORG On DATE , there vested in NORP Shipbuilders : ( a ) the shares in ORG , a wholly - owned subsidiary of ORG ; and ( b ) certain other shipbuilding interests of ORG which had , by operation of section CARDINAL of LAW ( see paragraph CARDINAL above ) , vested in ORG , as assets appurtenant to its activities . The business thus nationalised ( collectively referred to as " ORG " ) specialised in the design and construction of sophisticated warships . The activities of ORG did not constitute more than CARDINAL of the total undertaking of ORG .

ORG ( a ) The pre - tax profits of ORG for DATE , ending on DATE , were :

DATE CARDINAL,CARDINAL,CARDINAL

DATE CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL,CARDINAL .

In DATE to DATE , pre - tax profits were £ MONEY .

ORG was in receipt of small amounts by way of Government shipbuilding grants , all of which related to export contracts .

( b ) The net assets of ORG amounted to £ MONEY as at DATE ; as at DATE its net tangible assets ( that is , making no allowance for deferred tax , the amount of which is not shown in the information before the ORG ) were £ MONEY .

ORG have submitted a valuation which , taking into account profit record , future prospects and net assets , indicated that , on the basis of a transaction between a willing buyer and a willing seller , the value of ORG as at DATE was not MONEY . This figure was reached by estimating the maintainable post - tax profit level and applying thereto a price / earnings multiplier , adjusted to take account of the " control premium " ( see paragraph CARDINAL below ) .

ORG By virtue of section LANGUAGE ) of LAW , the shares of ORG had to be valued on the assumption that during DATE it had owned the interests which vested in it under LAW ( see paragraph DATE above ) . The compensation negotiations were therefore conducted on the basis that ORG had been a single enterprise at all relevant times and financial data so treating it , prepared by the auditors of ORG for use in the negotiations , were agreed in DATE . Certain other preliminary matters ( including CARDINAL related to taxation ) arose , and were ultimately settled .

ORG Messrs. ORG valuation report on ORG - suggesting a figure in the range of £ MONEY to £ MONEY - was submitted to ORG in DATE ; it was based on earnings ( see paragraph CARDINAL ( a ) above ) . Formal negotiations opened in DATE with an exchange of memoranda : the ORG offered compensation of £ MONEY and ORG claimed CARDINAL MONEY . ORG subsequently increased their offer to £ MONEY , whilst the Representative indicated that £ MONEY was the lowest acceptable figure . In DATE , the ORG stated that they were not prepared to increase their offer further and that , in the event of arbitration , they would take their stand at a lower figure ; the ORG Representative replied that resort would be had to arbitration . In DATE - after the general election of DATE ( see paragraph CARDINAL above ) - , ORG was informed that the new ORG had decided not to change the compensation terms and had confirmed the ORG ’s negotiating limit of £ MONEY .

ORG In DATE , ORG instituted proceedings before ORG ( see paragraphs CARDINAL - CARDINAL above ) . Written pleadings were exchanged , in which the ORG Representative contended for compensation of £ MONEY and ORG , of £ MONEY . The hearing started in DATE . However , on DATE , compensation was agreed between the parties at a figure of £ MONEY .

ORG In DATE , ORG had informed ORG that no payment on account of compensation , pursuant to section CARDINAL(CARDINAL ) of LAW , would then be made because discussions on the taxation matter ( see paragraph CARDINAL in fine above ) were not then concluded .

Compensation in respect of the nationalised undertaking was subsequently paid as follows :

- in DATE or thereabouts , a first payment on account , of £ CARDINAL,CARDINAL,CARDINAL ;

- in DATE or thereabouts , a second payment on account , of £ MONEY ;

- in DATE or thereabouts , a third payment on account , of £ CARDINAL,CARDINAL,CARDINAL ;

- in DATE or thereabouts , a fourth payment on account , of £ CARDINAL,CARDINAL,CARDINAL ;

- in DATE or thereabouts , the final payment , of £ MONEY .

The first CARDINAL payments on account were effected by the issue of PERCENT Treasury Stock DATE , bearing a running yield of PERCENT per annum , and the fourth payment on account and the final payment , by the issue of PERCENT Exchequer Stock CARDINAL , bearing a running yield of PERCENT .

ORG On DATE , there vested in NORP Shipbuilders the shares in ORG ( " PERSON " ) , which carried on at GPE a shipbuilding business specialised in the construction of small naval vessels . Those shares were owned PERCENT by LOC , as to PERCENT by Investors and PERCENT by ORG . The securities which vested included CARDINAL shares issued to the owners in DATE , following their exercise of an option , exercisable by DATE , to convert debenture stock into new shares .

ORG ( a ) PERSON pre - tax profits for DATE , ending on DATE , were :

DATE

DATE

DATE CARDINAL,CARDINAL

DATE CARDINAL,CARDINAL

DATE - £ CARDINAL,CARDINAL .

According to the ORG ’s report , in DATE to DATE , the pre - tax profits were £ MONEY .

DATE , PERSON received £ CARDINAL by way of Government shipbuilding grants . PERCENT of its turnover came from exports .

( b ) PERSON net assets amounted to £ MONEY as at DATE and to £ MONEY as at DATE . At the hearings before the ORG , the former owners of PERSON stated that its net assets at DATE included MONEY in cash .

ORG During DATE , PERSON had negotiations with ORG and ORG concerning a possible purchase of PERSON - at a figure MONEY CARDINAL,CARDINAL,CARDINAL - by one or other of these companies . The negotiations lapsed due to the prospect of nationalisation .

Dowsett , Investors and ORG have submitted a valuation report , prepared by a firm of chartered accountants , which indicated that , on the basis of a sale by a willing seller to a single willing buyer of the business as a going concern at DATE , a fair valuation of PERSON as at DATE was £ MONEY . This figure was reached by estimating the maintainable post - tax profit level and applying thereto a price / earnings multiplier , adjusted to take account of the " control premium " ( see paragraph CARDINAL below ) . The Government did not accept that either the profits figure or the multiplier used was appropriate .

ORG Prior to Vesting Day , PERSON had had contacts with ORG about matters connected with compensation .

In the first place , the ORG declined , on DATE , to give an assurance that , in the fixing of compensation , account would be taken of certain development work in respect of which the Chairman of PERSON had requested approval in DATE . Such approval had been sought in order to preserve compensation rights and , possibly , to ensure compliance with the safeguarding provisions to be included in the nationalisation Act , details of which had not yet been announced . However , according to its former owners , PERSON note of a meeting held between the company and the ORG in DATE recorded an assurance by the latter that compensation would take into account changes in circumstances since DATE ( DATE ) .

In the second place , in view of the safeguarding provisions ( see paragraphs CARDINAL above ) , PERSON , which had previously had a policy of retaining profits for investment in the development of its business , sought and obtained - with some exceptions - authorisation for the payment in the period up to DATE of certain dividends . According to its former owners , the company would have sought authorisation to pay higher dividends but for discussions with ORG which led it to believe that permission would be refused and that retained dividends would be taken into account under the statutory formula . According to PERSON accounts , the total dividends authorised for DATE amounted to £ MONEY , whereas profits after tax for the same period amounted to £ MONEY .

ORG In DATE , ORG wrote to ORG protesting at the amount of the payment on account of compensation offered by ORG ( £ MONEY ) , which he described as " derisory " in relation to the value of PERSON .

Messrs. ORG valuation report on the company - suggesting a figure in the range of MONEY CARDINAL - was submitted to ORG in DATE : the newly - issued shares ( see paragraph CARDINAL in fine above ) were , pursuant to section CARDINAL ) of LAW ( see paragraph CARDINAL above ) , valued at their issue price ; the Reference Period value of the remaining shares was assessed on an earnings basis ( see paragraph CARDINAL ( a ) above ) . The factual part of the report was transmitted to the ORG Representative : according to LOC , Investors and ORG , it contained some errors and important omissions , a view which was expressed in correspondence with the ORG ; according to the Government , there were no material inaccuracies .

ORG In DATE , formal negotiations opened : ORG sent to the ORG a memorandum claiming compensation of £ MONEY , to which they responded with an offer of £ MONEY . After various meetings , the ORG indicated , in DATE , that they might be prepared to raise their offer , mentioning a figure of £ MONEY to £ CARDINAL . During the negotiations , the ORG contended that the value of PERSON shares during the Reference Period would have been adversely affected by the existence of claims arising from certain unfavourable contracts and of the options to convert debenture stock into shares ( see paragraph DATE above ) . According to the GPE , the DATE Act made no provision for taking into account , in determining the value , the worth of the options during DATE . This view was not accepted by ORG and it was subsequently agreed that the matter should not be further discussed in negotiations .

ORG In DATE , the ORG made a revised offer of £ MONEY . In further negotiations points discussed included whether section CARDINAL of the DATE Act required the Secretary of ORG ( in assessing the hypothetical ORG value ) to take account of the likely or only of the inevitable consequences of a company being listed ; and whether the takeover negotiations with ORG and ORG ( see paragraph CARDINAL above ) would have been the subject of a public announcement if the shares of PERSON had been listed .

In DATE , the Minister of ORG at ORG indicated that the ORG ’s absolute ceiling was £ MONEY , but , after further contacts , the offer was again raised , in DATE , to £ MONEY . On DATE , ORG accepted this offer .

Compensation in respect of the PERSON shares was paid as follows :

- in DATE , a first payment on account , of £ MONEY ;

- in DATE , a second payment on account , of £ MONEY ;

- in DATE , a third payment on account , of £ MONEY ;

- in DATE , the final payment , of £ MONEY .

The payments on account were effected by the issue of PERCENT Treasury Stock DATE , carrying a running yield of PERCENT per annum , and the final payment , by the issue of PERCENT Exchequer Stock DATE , with a running yield of PERCENT .

Inflation in GPE , as measured by the official Retail Price Index , was relatively rapid in DATE . At the start of the Reference Period ( DATE ) the Index stood at CARDINAL . The figures for DATE in each of DATE were as follows :

DATE – CARDINAL

DATE - CARDINAL.CARDINAL

DATE - CARDINAL.CARDINAL

DATE - CARDINAL.CARDINAL

DATE - CARDINAL.CARDINAL

DATE

DATE - CARDINAL .

In DATE , DATE and DATE , the Index stood at CARDINAL , CARDINAL and CARDINAL , respectively .

The applicants recognised that inflation played some part in the increase in value which their nationalised undertakings were said to have shown between the end of the Reference Period and Vesting Day .

ORG Share prices on ORG did not follow the same pattern . The general level of share prices reached a high point in DATE , when ORG Index stood at CARDINAL , and then declined to a low point in DATE , when that Index stood at under CARDINAL . Thereafter , the general trend was upwards for some time .

The trend DATE ( DATE ) and the vesting dates LAW ( DATE and DATE ) can be illustrated by reference to DATE average figures for ORG . In DATE , the average for this Index was CARDINAL . The Index declined steadily during DATE , to an average of CARDINAL in DATE . In DATE , it rose slightly to CARDINAL ; thereafter , there was a rapid rise , to CARDINAL in DATE , CARDINAL in DATE ( when the compensation terms were first announced ; see paragraph CARDINAL above ) , CARDINAL in DATE and CARDINAL in DATE After a decline between then and DATE , there was a more or less steady increase , until an average of CARDINAL was reached in DATE . There was then an overall decline until DATE , when the DATE average was CARDINAL . Prices then rose again , the average figure in DATE ( when the third PERSON was introduced into ORG ) being CARDINAL , in DATE ( DATE of the aerospace industry Vesting Day ) being CARDINAL and in DATE ( DATE of the shipbuilding industry Vesting Day ) being CARDINAL .

The economic situation in GPE during the period leading up to the general election of DATE was affected by a number of events , including a substantial rise in the price of oil , and industrial conflict in DATE and in DATE . Prices and dividends were subjected to control under LAW DATE .

ORG The general level of interest rates rose between the vesting dates under LAW and the settlement of compensation claims . On both vesting dates , ORG minimum lending rate stood at PERCENT ; it rose to a peak of PERCENT from DATE to DATE . The average rate from DATE was PERCENT and from DATE to DATE , PERCENT .

ORG During the proceedings before the Commission and the ORG reference was made to a number of different methods of valuation of , and of compensating for , property nationalised or compulsorily acquired . The following is a brief outline of those methods .

ORG A ORG valuation for listed shares merely involves looking at the price for the shares on ORG on the specified date or dates .

ORG The method laid down by LAW for valuing unlisted shares ( the hypothetical ORG valuation ) involved estimating what price the shares would have had on ORG had they been listed during DATE . The estimate would be made by reference to the price of any comparable quoted shares and account would be taken of all information about the company that would have been available to ORG investors during that period . Thus , Messrs. ORG based their valuations primarily on data appearing in the ORG latest published accounts , which covered periods prior to the Reference Period , but they also made certain assumptions as to the interim - and more up - to - date - statements that would have been supplied to the stock market if the ORG shares had been listed . However , questions might arise concerning the precise information that would have been available to investors and the extent to which they might have foreseen an undertaking ’s future performance ( see , for example , paragraph CARDINAL above ) . Furthermore , it is implicit in this method that the company ’s shares would be held by a number of different persons ; accordingly , when valuing a wholly - owned subsidiary on this basis , hypothetical assumptions may have to be made as to what its business policies would have been if its shares had been more widely owned .

ORG An alternative method is to consider what a single willing buyer would pay a willing seller ( or sellers ) for the whole of the shares in question . Here again , account would be taken of all the information that would be available to a buyer at the relevant time and an estimate would be made by reference to comparable quoted shares . However , this method could differ from the hypothetical ORG valuation method in CARDINAL respects . Firstly , it might be assumed that a single buyer in takeover negotiations might have more complete information than a ORG investor . Secondly , it would not be necessary to assume that the ownership of the shares was different from the reality or to make consequent assumptions as to the company ’s business policies . Thirdly , the price payable by a single buyer gaining control of a company would normally be materially higher than the ORG price , since the latter merely represents what would be paid for a small parcel of shares and does not reflect the market value of a controlling shareholding ; guidance as to the additional amount ( the " control premium " ) may be obtained from the premiums over previous market prices paid on successful takeover bids which , according to the applicants , averaged PERCENT in DATE .

ORG The compensation provisions contained in LAW , whilst from many aspects similar to those contained in previous GPE nationalisation legislation , differed therefrom in the following particular respects :

( a ) there was no choice of reference periods during which the nationalised shares were to be valued ;

( b ) the reference period was , with certain exceptions , further removed in time from the vesting dates than the period fixed under earlier legislation , although the latter had always preceded those dates ;

( c ) there was , in section PERSON ) of LAW ( see paragraph CARDINAL above ) , an express requirement that when valuing a subsidiary ORG was to have regard in certain circumstances to the stock market quotation of the parent company .

Furthermore , under earlier measures using share valuation methods a substantial proportion of the securities nationalised had been listed on ORG and thus provided a comparison for valuing the unquoted securities . In the case of LAW , on the other hand , there was no quoted aerospace company and CARDINAL of the acquired shipbuilding companies , which was relatively small , had all its shares listed ; however , a number of the companies nationalised were subsidiaries whose activities formed a substantial part of the business of a parent , such as Vosper and PERSON , whose shares were listed .

Subject to the ultimate supremacy of ORG , it is a rule of GPE constitutional law that compensation is generally payable where property is taken by the ORG in the exercise of common - law powers . Furthermore , " unless the words of a statute clearly so demand , a statute is not to be construed so as to take away the property of a subject without compensation " ( Attorney - General v. PERSON FAC [ DATE ] Appeal Cases CARDINAL at p. CARDINAL ) .

The legislation on the compulsory purchase of land for public purposes provides for payment of compensation , the normal basis being the open - market value of the land with a willing seller . The value falls to be assessed , so ORG held in ORG v. GPE ( ORG [ DATE ] CARDINAL All England Law Reports CARDINAL , at the date when possession of the property is taken , or the date when compensation is agreed or assessed , whichever is the earlier , and not ( as had previously been the practice ) at the date of the " notice to treat " , which might be considerably earlier . Works carried out after the " notice to treat " are excluded from the valuation , but , with some exceptions , account is taken of the possibility of development of the land .


Alvina Gyulumyan;Corneliu Bîrsan;Ján Šikuta;Josep Casadevall;Luis López Guerra;Mihai Poalelungi;Nona Tsotsoria

NORP The applicant is a company from the breakaway NORP region of GPE in the telecommunications field . It was represented before the ORG by Mr PERSON , a lawyer practising in PERSON . ORG ( “ the Government ” ) were represented by their Agent , PERSON .

On DATE the Government of GPE adopted decision No . CARDINAL , under which private businesses from the breakaway NORP region of GPE could obtain temporary registration with ORG to facilitate their export operations by using NORP customs stamps .

On DATE the Government of GPE adopted decision No . CARDINAL - CARDINAL , making it possible for the applicant company to obtain a licence in the telecommunications field after obtaining temporary registration . This decision was taken in private , however , it appeared later from the decision of ORG ( see below ) that the purpose of the decision was to unify the telecommunications systems of the CARDINAL banks of LOC and to re - establish telephone communications with the breakaway province .

On DATE the applicant company obtained temporary registration under NORP law in accordance with Government decision no . CARDINAL and was issued with a ORG registration number and a registration certificate by ORG .

On DATE the applicant company obtained , in accordance with Government decision no . CARDINAL - CARDINAL , CARDINAL licences from ORG for ORG ( “ ORG ” ) to provide mobile and fixed telephony services , for which it paid MONEY ( “ USD ” ) to ORG .

On DATE ORG of the ORG decided against allowing the applicant company a presence in the NORP telecommunications market , and on DATE the President of GPE challenged Government decision no . CARDINAL - CARDINAL before ORG . The grounds for challenging the decision were , inter alia , that the price paid by the applicant company had been considerably lower than that paid by other similar companies present on the market and that the rules of fair competition had thus been infringed .

On DATE ORG decided to suspend the applicant company ’s licences .

On DATE the Government suspended decision no . CARDINAL .

On DATE Government decision no . CARDINAL - CARDINAL was declared unconstitutional by ORG .

On DATE ORG informed the applicant company that on DATE its licences had been withdrawn in view of the fact that its registration as a legal entity under NORP law had been terminated and in accordance with the ORG decision of DATE . The letter made reference to the provisions of section CARDINAL ( CARDINAL ) ( b ) of LAW ( see below ) .

It does not appear from the materials of the case that upon learning the above the applicant company challenged ORG decision to terminate its registration or ORG ’s decision to withdraw its licences . Instead , the applicant company requested on several occasions that the Government refund the money paid for the licences . Since the ORG refused to refund the money , on DATE the applicant company initiated proceedings before ORG claiming CARDINAL and default interest from the Government .

During the proceedings ORG requested information from ORG concerning the applicant company . ORG informed the court that no company named ORG was registered in GPE .

On DATE ORG struck the applicant company ’s application off the list of cases , on the ground that it did not have standing to initiate a civil action because it was not registered as a legal entity in GPE or in any other country . The court ordered ORG to return to the applicant company the court fees paid by it . The court fees were paid by ORG to the applicant company ’s account .

NORP The applicant company appealed and argued , inter alia , that it had followed the rules instituted by the Government when it had obtained a temporary registration and had paid the money for the licences . It also argued that its registration under NORP law had never been formally cancelled .

On DATE ORG dismissed the applicant company ’s appeal and upheld the first - instance court ’s decision . It reached the same conclusion as the first - instance court , that the applicant company lacked capacity to plead before courts as it was legally nonexistent .

On DATE the applicant company wrote to ORG and inquired whether it was still registered as a legal entity in GPE . In a letter dated DATE ORG explained to the applicant that its registration had automatically became null when decision no . CARDINAL was suspended on DATE .

On DATE the applicant company wrote again to ORG and requested the refund of the money paid for the licences . In a letter dated DATE the Minister of Finance informed the applicant company that its request had been examined and asked the applicant company to provide details of its bank account . The applicant company complied , but no payment followed .

According to sections DATE and CARDINAL of Law No . CARDINAL of DATE on the ORG registration of legal entities ( “ ORG DATE ” ) , the termination of registration of a legal entity can be carried out only on the basis of a request by the legal entity in question or on the basis of a court decision .

According to section DATE ( CARDINAL ) ( b ) of PERSON No . CARDINAL of DATE on licensing ( “ LAW DATE ” ) , a licence can be withdrawn , inter alia , as a result of adoption of a decision terminating the state registration of the company . According to LAW ( CARDINAL ) of the same act , if a licence is withdrawn for any reason the licence fee shall not be refunded by the ORG .

Article CARDINAL ( b ) of LAW provides that a court shall strike out applications lodged by incapable persons . According to LAW a legal entity acquires capacity ( dobândeşte capacitatea de folosinţă ) on registration by ORG , and loses capacity ( pierde capacitatea de folosinţă ) on removal from the registry of ORG .