Crabtree v Hinchcliffe (Inspector of Taxes)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Reid, Lord Morris of Borth-y-Gest, Viscount Dilhorne, Lord Donovan, Lord Pearson
Judgment Date27 Oct 1971

[1971] UKHL J1027-1

House of Lords

Lord Reid

Lord Morris of Borth-y-Gest

Viscount Dilhorne

Lord Donovan

Lord Pearson

Hinchcliffe (Inspector of Taxes)

Upon Report from the Appellate Committee, to whom was referred the Cause Crabtree against Hinchcliffe (Inspector of Taxes), that the Committee had heard Counsel as well on Tuesday the 13th, as on Wednesday the 14th, Thursday the 15th and Monday the 19th, days of July last, upon the Petition and Appeal of Peter Neville Crabtree, of Lane End, Boston Spa, Yorkshire, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 13th of November 1970, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioner might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Donald Ellis Hinchcliffe (Her Majesty's Inspector of Taxes), lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 13th day of November 1970, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Reid

My Lords,


The Appellant was assessed to Capital Gains Tax in the sum of £65,695 for the year 1965/6. The Special Commissioners reduced this assessment to £20,819. Pennycuick V.C. dismissed an appeal from their decision but on appeal the Court of Appeal reversed his decision. The Appellant now seeks to have the decision of the Special Commissioners restored.


Section 22 (10) of the Finance Act 1965 provides that gains accruing after 6th April 1965 shall be chargeable gains. So when any property is sold after that date it is necessary to find its value at that date in order to find what part of the price realised was a gain which accrued after that date. Paragraph 22 (2) of the Sixth Schedule requires us to assume that the property was sold on that date and immediately reacquired by its owner at its then market value.


At that date the Appellant owned 98604 ordinary stock units of R.W. Crabtree & Sons Ltd., together with a small number of preferred ordinary and preference stock units. These latter I shall not consider separately. Later in that year Vickers acquired the whole issued capital of the company: they paid 55/- for each ordinary stock unit. The question in this case is what was the market value of these units on 6th April. They were quoted on the London Stock Exchange at 42/6 on that date and the assessment which the Respondent defends is based on the chargeable gains being the difference between those two figures i.e. 12/6 per stock unit.


The Appellant relies on section 44 (3) of the Act. Section 44 provides:

"(1) 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.

(2) In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time:

Provided that where capital gains tax is chargeable, or an allowable loss accrues, in consequence of death and the market value of any property on the date of death taken into account for the purposes of that tax or loss has been depreciated by reason of the death the estimate of the market value shall take that depreciation into account.

(3) Subject to paragraph 22 (3) of Schedule 6 to this Act the market value of shares or securities quoted on the London Stock Exchange shall, except where in consequence of special circumstances prices so quoted are by themselves not a proper measure of market value, be as follows—

( a) the lower of the two prices shown in the quotations for the shares or securities in the Stock Exchange Official Daily List on the relevant date plus one-quarter of the difference between those two figures, or

( b) halfway between the highest and lowest prices at which bargains, other than bargains done at special prices, were recorded in the shares or securities for the relevant date,

choosing the amount under paragraph ( a) if less than that under paragraph ( b) or if no such bargains were recorded for the relevant date, and choosing the amount under paragraph ( b) if less than that under paragraph ( a):

Provided that—

(i) this subsection shall not apply to shares or securities for which some other stock exchange in the United Kingdom affords a more active market; and

(ii) if the London Stock Exchange is closed on the relevant date the market value shall be ascertained by reference to the latest previous date or earliest subsequent date on which it is open, whichever affords the lower market value."


Subsection (3) makes it clear that the Appellant can only escape from the Stock Exchange quotation if on the relevant date there were "special circumstances". Whatever that expression may mean, it must refer to facts which existed at the relevant time. We must take the facts from the Case Stated by the Special Commissioners.


The case has been stated in a form which makes it difficult to determine just what were the facts which the Commissioners found. Paragraph 5 of the Case is as follows:

"5. As a result of the evidence both oral and documentary adduced before us we find the facts set out in paragraph 6 below proved or admitted. Evidence given by Mr. Gillum and Mr. Chandler as to take-over and valuation matters is set out in paragraphs 7 and 8 below."


Paragraphs 6, 7 and 8 are set out in full in [1970] Ch. at pages 628–633. For present purposes it is sufficient to summarise paragraph 6 very briefly. As early as September 1964 there were discussions between representatives of Vickers and Crabtrees. Opinions were expressed that there should be a merger. In January 1965 statements regarding Crabtrees' affairs were handed to Vickers. They included a calculation that the value of Crabtrees' ordinary stock units was then £3 per unit. In February the view was expressed that the only practicable course was for Vickers to make a cash offer. Thereafter for various reasons negotiations proceeded slowly until the end of July. On 11th August agreement was reached. Crabtrees' Board approved and on 18th August a public statement was made. An appendix to the Case shows that as a result there was an immediate increase of about 10s. in the price at which business was done on the London Stock Exchange.


The first argument submitted by the Appellant was that these facts constituted special circumstances because if the public had been aware of the true position at or before the beginning of April the Stock Exchange quotation on 6th April would have been considerably higher. For reasons which I shall give later I reject that argument.


It then becomes necessary for the Appellant to rely on statements made in paragraphs 7 and 8. I have quoted from paragraph 5 where these paragraphs are said to set out evidence as to take-over and valuation matters. Paragraph 7 begins "Mr. Gillum gave evidence before us (which we accepted) to the following effect". Mr. Gillum was a financial expert being connected with Kleinwort Benson Ltd. He only came into the negotiations in August. The crucial passage in paragraph 7 is:

"The Slock Exchange had not in his view been given at that time information as to the negotiations which should have been supplied to it, and he thought that because of this current quotations did not afford any true measure of the value of the Stock Units in question."


If the Appellant could say that the Commissioners found as a fact that information had been withheld when it ought to have been made public, he might well be able to say that that was a special circumstance.


It is most regrettable that the Commisioners framed the Case in this way. It is their function to find the facts, i.e. all the facts which emerge from the evidence led and which are relevant to the contentions of the parties. Expert evidence is no different from any other. They must say what facts they hold that it has proved. They have to narrate evidence if there is a contention that there was no evidence to prove a particular fact which they have found. And it may sometimes be useful to narrate some evidence in other cases, provided that the Commissioners make clear what is narration and what is a finding of fact.


But here it is not at all clear what parts if any of paragraphs 7 and 8 are intended to be findings of fact. I would infer from paragraph 5 that no part is so intended. The words in brackets at the beginning of paragraph 7 seem to indicate that the whole of that paragraph is finding of fact but when in paragraph 12 the Commissioners are summing up, they pointedly refrain from saying that matters had reached a stage when a public announcement would have been appropriate; they only say that a stage had been reached at which in Mr. Gillum's view a public announcement would have been appropriate. And in giving their reasons for their decision they do not appear to found on this.


It cannot be said that the question whether information ought to have been disclosed is a question of law. It must depend on the custom of...

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