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Martin and Martin [2018] EWCA Civ 2866 (Part 2)

Continuation: In the previous article we reviewed the work of the single joint expert in the valuation of the shares of a large family company. One of the contentious aspects of the case was that one spouse was likely to receive largely cash whilst the other retained ownership of the majority of shares in the company. How could fair comparison be made between two very different asset classes?

Judge Mostyn considered that there was no need to make adjustment to recognise that one party received a mixture of more liquid assets and the other shares in a family company. In a memorable phrase he described the difference between the two as being the sound of the auctioneer’s hammer.

The above comment is literally true if we focus on the assumed immediacy of the notional transaction. However, it does not deal with the whole issue. If the value of the shares is not equal to the value in the bank account, we may consider that we need to adjust the discount for illiquidity. However, this does not resolve the problem. Regardless of the size of the discount, there is no alchemy which can change the nature of the asset.