Sunday, 30 August 2009

Concept of value: a dollar is always worth a dollar

The first step in any property settlement is to identify the property pool and to value it.

In this context, there is an interesting discussion of "value" by Justice Perram in the recent decision of the Full Court of the Federal Court in National Mutual v Commissioner of Taxation. The question in the case concerned capital gains tax issues, on a point on which Justice Perram dissented.

Justice Perram's comments about value are universal in their scope and reflect the issue often seen in the family law context- is there a different value of an asset in the hands of this particular person, as opposed to the market in question?

Justice Perram stated:

Value is, I think, an extrinsic quality dependent for its nature upon the
reason the question is being asked and the identity of the person asking it. As
Griffith CJ explained in Spencer v Commonwealth (1907)
5 CLR 431
at 418 where there is ready market for an asset there is much to
be said for the view that the value is likely to be equivalent to the price at
which an exchange occurs between a willing vendor and purchaser. But the
connexion between price and value becomes more elusive when the number of
vendors and purchasers in the market thins and becomes unstable when the
individual qualities of the parties becomes important. Thus, one asset may have
a different value to different purchasers. A house may be worth more to a next
door neighbour because it is blocking the neighbour’s view; listed shares may be
worth more than their market price to a person proposing to launch a takeover
thus giving rise to the premium for control. A related phenomenon is the ability
of minority shareholders, in some circumstances, to obtain more than the market
price for the shares.

Each of those examples shows that the value of an asset depends on the
identity of the person asking the question and the reason it is being asked.
That shows that the notion of value is, therefore, contingent upon the attitude
of observers external to the asset in question. That feature marks value as
different in kind to qualities such as weight or composition and much closer to
qualities such as beauty.

The single exception to this principle which might be admitted is the
case of money itself. Although it is not necessary for the purposes of this case
to express a concluded view, it is possible that value is an intrinsic property
of money and hence part of its state or nature: a dollar is always worth a
dollar.

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