RUSSELL L.J. - (1.) THIS is an appeal concerning the valuation for capital gains tax on April 6, 1965, of 98,604 ordinary stock units in R. W. Crabtree & Sons Ltd. owned by the taxpayer, Peter Neville Crabtree. The taxpayer also owned some preference and preferred ordinary stock in the company; but having mentioned that, I need not further consider it. The facts of this case are fully set out in the stated case and the judgment of Pennycuick J. [1970] Ch. 626, and in those circumstances I do not propose to burden this judgment with repetition on them.
(2.) THE method of valuation with which we are concerned is set out in section 44 of the Finance Act, 1965, and the prima facie valuation is by sub -section (1) stated thus : 'Subject to the following subsections, in this Part of this Act market value in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market. But when we come to securities that are quoted on the London Stock Exchange, subsection (3) supplies a measuring rod, and, so far as now material, the terms of sub -section (3) 0 and I read in the extended definition of 'market value' which is found in subsection (1) - are these. In effect it says that in the cases of shares of securities quoted on the London Stock Exchange, the price which they might reasonably be expected to fetch on a sale in the open market shall, except where in consequence of special circumstances prices so quoted are by themselves not a proper measure of the price which the shares of securities might reasonably be expected to fetch on a sale in the open market, be as follows - and then it sets out references, with which I need not concern myself, to quotations in the London Stock Exchange Official Daily List and bargains recorded therein. The first question in this case is : Is it correct as a mater of law to say that there existed on April 6, 1965, in this case, special circumstances in consequence of which the Stock Exchange prices were not by themselves a proper measure of the price that I have just mentioned ? The circumstances relied upon by the taxpayer were that, first of all, the board of R. W. Crabtree & Sons Ltd. had not, prior to April 6, 1965, made public the fact that there had been discussions with Vickers of a possible cash take -over bid by Vickers, discussions which in fact had for the time being been halted in February, 1965; secondly, that the evidence showed that such an announcement would have resulted in the Stock Exchange price on April 6, 1965, being of the order of 51s. rather than 42s. 6d.; and, thirdly, that the evidence of Mr. Gillum of Kleinwort Benson Ltd. was that in his considered opinion the Stock Exchange, and therefore the public, should have been informed of the existence of these discussions or negotiations before April 6.
(3.) THE special commissioners formed the view that there were relevant special circumstances, and then turned to examine the situation under subsection (1). I would observe that a finding that there were relevant special circumstances requires an implicit finding that subsection (1) must throw up an answer other than one based on the Stock Exchange prices, because the special circumstances are only such as have the consequence that the latter - the Stock Exchange prices - are not a proper measuring rod for that to which subsection (1) will lead. On arriving, then, at sub -section (1), the special commissioners considered that the Stock Exchange was 'working in blinkers' (to user their phrase) and was (to use their phrase again) 'shut off from information vital to a realistic assessment of the true value of the stock,' and the Stock Exchange was not therefore to be considered the open market for the purposes of sub -section (1). They then decided on a valuation, which was based on that evidence, to which I have already referred, of what the Stock Exchange price would probably have been had the negotiations been announced before April 6. Here I would stress that we are concerned, as the special commissioners and Pennycuick J. were concerned, not with a conception of the intrinsic value of these shares, but with what price they might reasonably be expected to fetch on a sale in the open market.;