England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ORDER OF
His Honour Judge Rich QC

		Royal Courts of Justice Strand London WC2
		30th November 1995

LORD JUSTICE PETER GIBSON: This appeal raises questions of some general importance on the valuation for the purposes of capital transfer tax ("CTT") of the share of a partner in a farming partnership the assets of which include an agricultural tenancy of the farm. It is an appeal by the Revenue from a decision of the Lands Tribunal (His Honour Judge Rich Q.C. and Mr. T. Hoyes F.R.I.C.S.) and comes before us by way of case stated.

As long ago as 6 August 1984 John Hedley Walton senior ("the Deceased") died. The executors named in his will were his two sons John Hedley Walton junior ("John") and Frederick Walton ("Frederick") who died in September 1989. The deceased and John carried on a partnership, farming Keepwick Farm ("the Farm"), Humshaugh, Northumberland, which the Lands Tribunal described as a typical Northumbrian hill farm of 459.119 acres with a farmhouse building and 3 farm cottages. At the time of the death of the Deceased, John was 3 6 years old.

The partnership was governed by a partnership agreement dated 16 December 1969. Each of the parties was by clause 12 required to devote the whole of his time to the business and was precluded by clause 13(a) from engaging directly or indirectly in any other business. By clause 13(d) a partner could not assign or mortgage his share or interest in the partnership business. By clause 14 a partner could retire on 6 months' notice. By clause 15 in the event of the death, retirement, bankruptcy, unsoundness of mind or misconduct of a partner, the other partner had the option to purchase the outgoing partner's share at its net value over 5 years.

The freehold of the Farm was owned by the Deceased, John and Frederick in equal shares. By an Agricultural Tenancy Agreement dated 10 March 1971 the freeholders let the Farm to the Deceased and John on a tenancy commencing on 12 May 1969 and continuing from year to year until determined by the freeholders or the partners by 12 months' notice in writing. That Agreement was in standard form. It required one of the partners to live in the farmhouse (John did) and it was not assignable without the consent of the freeholders.

In August 1984 the annual rent of the Farm was £6,000 and it was liable to increase by arbitration on 13 May 1986. In August 1984 the estimated arbitration value was £8,250 per annum and the tender rental value (the rental that would be obtained if the freeholders sought tender bids) was £12,000 per annum. The vacant possession value of the Farm in August 1984 was agreed to be £400,000 whereas the value of the freehold subject to the tenancy was £150,000. It was also agreed that the value of the partnership's prospective claims against the freeholders for statutory compensation for improvements and tenant right (I shall refer to this compendiously as "tenant right") was £40,000. In the light of those figures it is a little inconsistent that it was also agreed that what is sometimes called the "marriage value" and the Revenue called the vacant possession premium ("VPP"), viz. the difference between the value of the land with vacant possession and its value subject to the tenancy, was £200,000, but we are not concerned with that inconsistency.

It is convenient at this stage to set out the statutory provisions contained in the Finance Act 1975, which govern how assets of a deceased are treated for CTT purposes.

By s.22(1) (so far as material):

"On the death of any person after the passing of this Act tax shall be charged as if, immediately before his death, he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death".

S.23 gives, as the meaning of a person's estate, "the aggregate of all the property to which he is beneficially entitled" subject to an immaterial exception.

Valuation is dealt with in s.38(1), which reads (so far as material):-

"Except as otherwise provided by this Part of this Act, the value at any time of any property shall for the purposes of capital transfer tax be the price which the property might reasonably be expected to fetch if sold in the open market at that time".

A Notice of Determination was issued by the Revenue that the value of the Deceased's estate included the value of his interests in the partnership business and in the assets thereof, that the tenancy was such an asset, that the value of the Deceased's share in the partnership was to be taken as 50% of the value of the assets of the partnership business less 50% of the liabilities of the business, further or alternatively that the value of the Deceased's interest was not to be less than the net value payable to him had the partnership been dissolved immediately prior to his death and had John exercised his option to purchase the Deceased's share, that the net value would have included an amount in respect of the tenancy, derived from the larger of (i) half of the open market value of the tenancy and (ii) half of what a landlord would have paid a tenant for a surrender of the tenancy, and that amount was £65,000. That figure was arrived at by valuing the tenancy at half the VPP, viz. £100,000 plus tenant right, viz. £40,000, allowing a 10% discount from the £100,000 "to reflect the assembled nature of the partner's interest in the underlying property" and halving the resultant figure of £130,000. That, it appears, has been the Revenue's normal practice in valuing partnership assets. However the Revenue no longer think it appropriate to allow a discount in the circumstances of this case and therefore value the Deceased's interest in respect of the tenancy at £70,000, though Mr. David Neuberger Q.C. for the Revenue has told us that if the appeal succeeds, tax will not be claimed at a greater rate than if the valuation did not exceed £65,000.

John appealed against that determination. In his Notice of Appeal it was made clear that issue was taken with the Revenue's entire approach to that valuation. It was said that the property comprised in the Deceased's estate which had to be valued in accordance with s.38 was his share and interest in the partnership and not any separate share and interest in the individual assets thereof, and that the tenancy as such did not have to be valued.

The issue before the Lands Tribunal was by agreement:-

"Insofar as the Deceased's interest in the Partnership included an interest in the tenancy ...., what for the purpose of the charge to [CTT] on the Deceased's death is the value of the Deceased's interest in the partnership and its assets so far as attributable[?]"

The Revenue led expert evidence from Mr. Stanton, an experienced valuer of agricultural property, in support of their valuation based on valuing the whole tenancy and then halving the value. John gave evidence which was accepted by the Lands Tribunal. This was that in August 1984 the freeholders would not have been interested in securing the surrender of the tenancy so as to get the Farm in hand nor did they jointly or individually have the available financial resources to make a significant payment for a surrender, that farming was his life and the Deceased's objective had been for the Farm to be farmed by the family members, and that Frederick was the tenant of a similar-sized farm elsewhere to which his financial resources were committed and he would not have wished to disturb the joint occupation of John and the Deceased. John said that he wished to retain the Farm for his own family and that he would not have wanted to share the tenancy and partnership business with an outsider from 1988 onwards.

Their experts gave evidence for John. Mr. Fox, an accountant with wide experience of advising upon the financial and business aspects of landowning and farming, said that it was almost unheard of for there to be an open market bargain transferring a share in a farming partnership where the partners farm as tenants, that there was no real market for such interests but a working farmer might pay a sum to enjoy the apparent profit rent until the next arbitration rent in May 1986. Mr. Hampton, an experienced valuer of interests in agricultural land, gave evidence primarily of the value of the Deceased's share in the partnership; but he also gave evidence on the footing that the entire tenancy had to be valued. Mr. Scrope, an experienced land agent with a detailed local knowledge of farming and land ownership, said that there was no evidence that tenancies of a farm such as the Farm would sell at a premium over and above a market rent, that the landlord had created the subsisting arrangement and would not wish to pay to upset it, that local landlords did not often seek surrenders from tenants and that any value was one of nuisance only and a nominal figure to avoid any third party involvement or exposing the business to outsiders.

The Lands Tribunal found from the evidence that the value of a whole tenancy depended on the circumstances of the parties at the material date, landlords only seeking and paying for the surrender of tenancies when they wished to release the VPP at an early date and tenants only contemplating surrender when their prime objective was not to continue farming; only if aspirations came together might the 50/50 division of the VPP be a realistic interpretation of market behaviour, but they were not the circumstances for valuation in the instant case.

The Lands Tribunal rejected the Revenue's approach of valuing the tenancy as a whole, holding that the property that was the subject of the deemed transfer was an undivided beneficial interest in the tenancy as a partnership asset. They pointed out that the deemed transferee of the Deceased's interest in the partnership would not have an opportunity to offer the tenancy on the open market; it was unassignable save with the consent of the freeholders which might be arbitrarily withheld. Nor could the transferee assign the interest in the partnership without the consent of his partner, John. They concluded:-

"The sole value of the tenancy, as an asset of the partnership, rests upon the extent to which its terms enhance the profits of the partnership because the partners are able to exploit the assets of the partnership without paying a full market rent for the farm".

The Lands Tribunal did not accept an argument by the Revenue based on para. 14(2) of Schedule 4 to the Finance Act 1975 that the net assets of the partnership business had to be valued and divided by two and they also rejected a contention that the freeholder must be taken to be a hypothetical person, who might be expected to want to obtain a realisation of the VPP. They further rejected the argument that John as a special purchaser would pay a premium to exclude a stranger from purchasing the Deceased's share or to realise the VPP.

They considered profit rental valuations for the whole tenancy by Mr. Hampton and Mr. Stanton respectively and arrived at an aggregate value of £12,645 which they halved and rounded down to produce a figure of £6,300 for the Deceased's interest in the tenancy. Although this approach might be said to be inconsistent with the earlier rejection by the Lands Tribunal of a valuation of the entire tenancy, Mr. Derek Wood Q.C. for John did not suggest that this was wrong when the valuation was on the basis of a profit rental, half of which was attributable to each partner.

The Revenue now appeals. By virtue of s.3(4) Lands Tribunal Act 1949 the appeal must be confined to errors of law and Mr. Neuberger has rightly acknowledged that he cannot complain of valuation findings by the Lands Tribunal. The questions for this court were identified in the Case Stated:-

1. Whether the Lands Tribunal were correct in rejecting the proposition that the proper method of valuing all shares in partnerships for all the purposes of the Finance Act 1975 is the "net assets" method of valuation prescribed by para. 14(2)?

2 Whether in the circumstances of the hypothetical sale of the annual agricultural tenancy required to be assumed under s.38 the freeholder of the Farm should be deemed to have all the personal inclinations and characteristics of the actual freeholder or whether he should be assumed to be a hypothetical person?

3. Whether on the findings of the Lands Tribunal concerning the actual desires or inclinations of the owners of the freehold interest in the Farm, the Lands Tribunal were entitled to reject wholly such freeholders or special purchasers of the tenancy prepared to pay a proportion of the VPP in order to acquire the same as an entirety, and/or to reject the owner of the other half share in the tenancy who was also beneficially entitled to a one third interest in the freehold in the Farm as a special purchaser of the Deceased's half share in the tenancy prepared to pay a portion of the VPP in order to be the sole owner thereof?

The Revenue gave notice of an application that the Case Stated be amended to include a fourth question which the Lands Tribunal refused to include among the questions for this court. However Mr. Neuberger did not pursue that application, nor did he address us on question 1, and I need say nothing more about either. In addressing us on questions 2 and 3, he submitted that on a common sense view of the matter it could not be right that where the VPP was as much as £200,000 the tenancy was merely worth the profit rental capitalised at 3 years' purchase. He said that something had obviously gone wrong in the approach of the Lands Tribunal.

There was however a good deal of common ground between the parties on the correct approach to the valuation. It is not in dispute that s.38 requires first the identification of the property to be valued. In this case the Lands Tribunal's finding that it was an undivided beneficial interest in the tenancy as a partnership asset has not been challenged, and it has not been suggested that that interest should be valued together with any other asset, such as the Deceased's interest in the freehold of the Farm. Second, it is agreed that the valuation required by s.38 is on the basis of a hypothetical sale in the open market. Although the statute says nothing about a willing seller or a willing buyer, the concept of the open market automatically implies a willing seller and a willing buyer, each of whom is a hypothetical abstraction. However the willing buyer "reflects reality in that he embodies whatever was actually the demand for that property at that time" (I.R.C. v Gray [1994] S.T.C. 360 at p.372 per Hoffmann L.J.). Whilst both the seller and the buyer are assumed to be willing, neither is to be taken to be over-eager. Each will have prepared himself for the sale, the seller by bringing the sale to the attention of all likely purchasers, and honestly giving as much information to them as he was entitled to give (Lynall v I.R.C. [1972] AC 680 at p. 694 per Lord Reid) and the buyer by informing himself as much as he can properly do. The statute assumes a sale. That means that however improbable it is that there would ever be a sale of the property in the real world, for example because of restrictions attached to the property, nevertheless the sale must be treated as capable of being completed, the purchaser then holding the property subject to the same restrictions (see I.R.C. v Crossman [1937] A.C. 26). It also means that the vendor, if he is offered the best price reasonably obtainable in the market, cannot be assumed to say that he will not sell because the price is too low as inadequately reflecting some feature of the property nor can the purchaser be assumed to say that he will not buy because the price is too high. Because the market is the open market, the whole world is to be assumed to be free to bid. But the valuer will inquire into what sort of person will be in the market for the property in question and what price the possible purchaser would be likely to pay. Again to quote Hoffmann L.J. ([1994] S.T.C. 360 at p.372), "The valuation is thus a retrospective exercise in probabilities, wholly derived from the real world but rarely committed to the proposition that a sale to a particular purchaser would definitely have happened."

With that introduction I turn to the live questions raised by the Case Stated.

Question 2 : Hypothetical Landlord

This question is in my judgment incorrectly worded. On the death of a partner where the partnership assets include an annual agricultural tenancy, s.38 does not require the hypothetical sale of the entire tenancy but only of the deceased partner's interest therein, as the Lands Tribunal themselves found. I shall therefore proceed to answer this question as though the reference to the tenancy were read as a reference to the Deceased's interest in the tenancy.

It was Mr. Neuberger's primary contention that the Lands Tribunal erred in concluding that for the purposes of the valuation exercise one should take the actual landlord with all his attributes rather than assuming a hypothetical landlord who is neither desperate to purchase nor uninterested in purchasing and who is neither in straitened circumstances nor extremely rich. He submitted that as a matter of practical common sense, to admit the evidence of the actual landlord as to his desires and intentions is an unfair and undesirable course.

I readily accept that such evidence may be self-serving, but it is for the tribunal of fact to determine, what, if any, credence should be given to that evidence. The fact that such evidence may be self-interested is not in my judgment sufficient reason to justify the implication that where the property to be valued is a tenancy or an interest in a tenancy the actual landlord is to be treated as stripped of his actual intentions and desires but clothed with hypothetical aspirations. The insuperable difficulty in Mr. Neuberger's path is that there is nothing in the statute to support his contention. The open market hypothesis does not require as a necessary incident of it that the landlord should be hypothetical. In my judgment the statute requires one to assume a sale but it should be assumed to take place in the real world. As was said by Lawton L.J. in Trocette Property Co. Ltd. v Greater London Council [1974] 28 P. & C.R. 408 at p.420:-

"It is important that this statutory world of make-believe should be kept as near as possible to reality. No assumption of any kind should be made unless provided for by statute or decided cases."

The majority decision of this court in the Trocette case is in any event determinative of this question. In that case the claimants were the tenants of a property which they wanted to develop but they needed the concurrence of the respondent landlord. The landlord took the view that the property might be required for highway purposes and told the claimants that it was not prepared to grant a new lease. Nevertheless the claimants applied to the local planning authority for planning permission and when that was refused, served a purchase notice on that authority which accepted that it would purchase the claimants' interest as tenants of the property. By rule (2) of s.5 Land Compensation Act 1961 the compensation to be paid was "the amount which the land if sold in the open market might be expected to realise". The Lands Tribunal to whom the question of compensation was referred held on this point that it was to be assumed that the landlord would grant a new long term lease to enable the development to proceed. The question that arose was formulated by Megaw L.J. (at p.415) thus:-

"Does the value of the claimants' interest, as a matter of law, fall to be assessed by reference to the actual intention of the actual landlord or by reference to the presumed reasonable intention of a hypothetical normal landlord, that is, a landlord who does not possess the special characteristics of the landlord in this case, namely, a local authority with a special planning interest relating to the use of the land in question?"

He said (at p.416):-

"No buyer in the open market is going to offer to pay a price which takes into account the leaseholder's share of the potential "marriage value" if that buyer knows that in fact the freehold owner is either unable or unwilling to do that which it is necessary for him to do in order to create the "marriage value". I see nothing in the legislation .... which compels or permits one to ignore, in assessing compensation for the leasehold interest, evidence of a fact which would be known to the buyers in the market and which would eliminate any question of "marriage value". If the assessment of the value for the purpose of compensation is to be on the basis of ignoring a proven or admitted fact which would have affected the price of an actual sale on the open market, the use of such basis must, I think, be justified by reference to some provision of the legislation."

Cairns L.J. took a different view. But he was in the minority as Lawton L.J. was also of the opinion that the Lands Tribunal erred in law in assuming that the freeholders would be likely to cooperate in releasing the potential value of the site, when the evidence showed that they would do nothing of the kind. He pointed out that any prospective buyer would have made enquiries about the prospect of the freeholders cooperating, but that if no information was available, the buyer might have inferred that the freeholders would be cooperative; but if the buyer knew that they would not be cooperative, the price offered would be on the basis of the value of the site for use for a limited period.

Mr. Neuberger suggested that Lawton L.J. adopted a somewhat middle course between Megaw L.J. and Cairns L.J. I do not agree. At p.422 Lawton L.J. said:-

"In most cases it may well be that the personal characteristics of the parties are irrelevant, but if the evidence in a particular case establishes that buyers would be likely to be put off bidding beyond a certain figure because of the existence of an unusual factor such as the likely refusal to cooperate of a freeholder whose cooperation is essential if the full potential of the premises or site is to be released then the existence of that factor should be taken into consideration in assessing compensation, and this would be so whatever the reason for the existence of that factor might be. The assessment of compensation under rule (2) of section 5 of the Act of 1961 is not concerned with the search for an economic abstraction - a valuer's Holy Grail - but with "... the amount which the land if sold in the open market by a willing seller might be expected to realise: ... " Who are likely to be buyers in such a market will depend on the facts of each case, and what they would be likely to bid, and their reasons for doing so, will also depend on the facts."

In my judgment the reasoning of Lawton L.J. is fully in accord with that of Megaw L.J.

Mr. Neuberger submitted in the alternative that s.38 requires the assumption of a hypothetical landlord unless the actual landlord was a person with a policy known to the market. The freeholders in the Trocette case, he said, were such a person as also would be bodies like the National Trust. But to adopt a question posed by Henry L.J. in the course of argument, does this mean that the well-advised family freeholders should put an advertisement in a newspaper as to the family's policy? This argument, to my mind, founders on the same rock as Mr. Neuberger's primary argument, that is to say, it is not justified by the language of s.38 nor by anything said by the majority in Trocette. It is not necessary for the operation of the statutory hypothesis of a sale in the open market of an interest in a tenancy that the landlord should be treated as a hypothetical person, and it is a question of fact to be established by the evidence before the tribunal of fact whether the attributes of the actual landlord would be taken into account in the market.

I would add that the same logic requires that in the case of a deceased partner owning an interest in a tenancy which is a partnership asset, regard should be had to the actual intention of the actual surviving partner and not to a hypothetical partner.

Question 3 Special purchasers

Mr. Neuberger submitted that even if the freeholders cannot be treated as hypothetical, it did not follow that the VPP would not be unlocked by reason of John and Frederick as freeholders being special purchasers with an interest in paying more than what a person interested in the profit rental would pay, or by reason of the interest of John, as the partner with the interest in the tenancy other than that of the Deceased, John's evidence being that he would have wanted to exclude a stranger as a partner. Mr. Neuberger pointed to the fact that when Frederick died, John bought Frederick's interest in the freehold as he did not want an outsider buying that interest.

The difficulty that I have with this submission is that it is a challenge to the findings of fact by the Lands Tribunal. They were well aware of John's purchase on Frederick's death, but that took place more than 5 years after the Deceased's death and they were entitled to find that that did not affect the position in 1984. They had in mind John's evidence that he would not have wanted to share the tenancy and partnership business in August 1984, but they came to the view that if the stranger was not uncongenial John would have had no incentive to bid up to exclude an uncongenial potential partner, and if the stranger and John were not satisfied they could work with each other, the stranger would not bid. They therefore held that they would not add anything to the valuation based on the profit rental to reflect the likelihood that in the real world John would have been the purchaser of the Deceased's interest in the tenancy. They also considered whether the freeholders would have paid a premium because of the possibility that at some time in the future the freeholders might seek a surrender of the tenancy so as to realise the VPP. But they said that in terms of the price to be paid for the property of the Deceased they regarded that as entirely speculative and exceedingly remote because (a) John and Frederick would have had to change their position, (b) John wanted to continue working the Farm and had no interest in making an additional payment and (c) no surrender could be obtained without the cooperation of John as the owner of the other share in the partnership.

Mr. Neuberger accepted that his submission came down to saying of the Lands Tribunal's decision that it could not be right and that no reasonable Tribunal could have reached that conclusion. I cannot see how that can properly be said of the fully reasoned conclusions of the Lands Tribunal. It was for them to consider who were the special purchasers (if any) in the market and what premium (if any) any special purchaser would be prepared to pay. Their conclusions on these points are factual, and in my opinion were certainly not perverse.

Mr. Neuberger drew attention to 4 authorities.

In C.I.R. v Clay [1914] 3 KB 466 a house fell to be valued on an open market valuation. It had a special value to a special purchaser and the valuer took that fact into account in arriving at an open market value well above what the ordinary purchaser would pay. Sir Herbert Cozens- Hardy M.R. said at p.472, "It is for the referee, whose competence is not challenged, to arrive at a figure. The Court ought not, as a rule, to review his decision on what is in truth a question of fact." Similarly Pickford L.J. at p.480 said of a special purchaser, "The effect on the market of such a purchaser is a matter to be estimated by the referee".

Vyricherla Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302 was again a case where the presence of a special purchaser was held to be a factor which should be taken into account in an open market valuation. But that case turned on its particular facts and in my judgment does not show that the Lands Tribunal erred.

Mr. Neuberger next referred to a decision of the Lands Tribunal under the Leasehold Reform Act 1967, Lloyd-Jones v Church Commissioners (1981) 261 E.G. 471, as an example of a case where the "marriage value" is divided between the lessor and the lessee. But, as Mr. Wood pointed out, that was a decision turning on the particular legislation and on the particular facts one of which was that the tenant, a special purchaser, had declared himself to be a bidder. I can derive no assistance from that for the present case.

Finally Mr. Neuberger relied on the decision of this court in Agricultural Mortgage Corporation v Woodward (1994) 70 P.& C.R. 53. In that case a mortgagor of agricultural property fell into arrears. Shortly before a deadline for clearing his arrears expired and in breach of a contractual obligation the mortgagor granted a tenancy of the mortgaged property to his wife at a market rent, thereby halving the value of the freehold. This court held that the tenancy agreement was a transaction at an undervalue for the purposes of s.423 Insolvency Act 1986, by reason of the substantial benefits conferred on the wife, including the surrender value which it gave her and the ransom position in which it placed her. Mr. Neuberger said that the conclusion of the Lands Tribunal lay uneasily with that decision. Again that case, to my mind, turned on its own very special facts and offers no guidance on how the valuation should have been calculated in the present case.

I would also point out again that the Lands Tribunal had well in mind that the property which fell to be valued in the present case was not the entire tenancy but only the interest in the tenancy as a partnership asset, so that a purchaser of the Deceased's interest could not unlock the value of the VPP without the consent not only of the other partner but also of the freeholders. In my judgment the factual conclusions of the Lands Tribunal were reached without error of law and are unassailable.

For these reasons, which owe much to the Lands Tribunal's careful decision and to Mr. Wood's arguments lucidly presented to us on paper and orally, I would dismiss this appeal.

Lord Justice Henry :

I agree with both judgments.

Lord Justice Evans :

I entirely agree with the judgment of Peter Gibson L.J. and that this appeal should be dismissed.

Mr Neuberger Q.C. for the Revenue submits that "something must have gone seriously wrong" when the interest of the Deceased in the tenancy of a Northumbrian hill farm of 459 acres is valued at no more than £6,500, being two years' purchase of the apparent profit rents until the next arbitration review. He says that account should be taken of the sum of £200,000 which might be realised for the benefit of the landlords and the tenants if the "marriage value" of the two interests was unlocked, meaning the sum which the landlords might be expected to share with the tenant in order to obtain a surrender of the tenancy so that they could then sell the freehold of the farm with vacant possession to a third party for its full market value.

A feature of the present case is that the Deceased himself was part-owner of the freehold, jointly with his two sons Frank and John, he and John as partners being the tenants also.

In these circumstances, a valuation of his interest in the tenancy as an asset of the partnership is established by envisaging a notional sale of that interest in the open market, under the statutory provisions referred to by Peter Gibson L.J. I agree with him that the sale has to take place "in the real world" and that account must be taken of the actual persons as well as of the actual property involved. The Lands Tribunal's figure is not artificial or unreal, but rather the reverse. It reflects the realities of the situation. If the question is the correct one to ask, then it is the correct answer to give.

It is worth noting that the Deceased's interest in the freehold was valued before these proceedings began. The figure, as I understand it, was £50,000, being one third of the value of the freehold subject to the tenancy in question. That figure was established, therefore, on the basis that the tenancy was not surrendered or likely to be surrendered, and without any payment to the tenant in respect of the marriage value. It would be inconsistent in my judgment for the Revenue to claim that the tenancy should then be valued on the opposite assumption, that the tenancy was surrendered or might be surrendered, and the farm sold. I would give this as a short additional reason why their appeal should be dismissed.

Order: Appeal dismissed with costs. Leave to House of Lords refused.