Catriona Margaret Mackintosh And Others V. Philip Alexander Morrice's Executors
| Jurisdiction | Scotland |
| Judge | Lord Carloway |
| Neutral Citation | [2005] CSOH 167 |
| Date | 13 December 2005 |
| Docket Number | A640/04 |
| Court | Court of Session |
| Published date | 13 December 2005 |
| OUTER HOUSE, COURT OF SESSION [2005] CSOH 167 | |
| A640/04
| OPINION OF LORD CARLOWAY in the cause CATRIONA MARGARET MACKINTOSH and others Pursuers; against PHILIP ALEXANDER MORRICE'S EXECUTORS Defenders: ________________ |
Pursuers : Wolffe; Simpson & Marwick WS
Defenders : Murphy QC; HBM Sayers
13 December 2005
- The Pleadings
- Submissions
[1]On 24 July 2001, the late Charles and Evelyn Mann were killed in a road traffic accident caused by the negligent driving of the late Philip Morrice. The pursuers are the daughters of the deceased and they sue Mr Morrice's executors for damages as a result of the accident. The third article of condescendence contains a claim, as executrices, for funeral expenses. There are then separate articles of condescendence covering the losses of each pursuer, but they are in almost identical terms as follows:
"The...pursuer has suffered loss of the society of her parents to whom she was closely attached. Additionally she has suffered loss of support. She was a beneficiary of the estate of both [deceased] who died in the common calamity. She and her sister...shared the residue of the estate of their deceased parents equally between them. Both [the deceased] were in good health for their respective ages. In 1995 Dr Charles Mann made a substantial gift of £175,000 to the...pursuer. In 1997 Dr Evelyn Mann made a substantial gift of £175,000 then a further gift of £20,000 to the...pursuer. [The deceased] were expected to survive until April 2002 and April 2004 respectively at which point these gifts would have become exempt transfers. Because of the premature death in July 2001 the transfers became chargeable to Inheritance Tax. As a result the tax free bands of the estates of each [deceased] were largely used up by the prior transfers leading to a substantial increase in Inheritance Tax payable on their residuary estates of £150,086.40. One half of this loss has been suffered by the...pursuer as a residuary beneficiary."
Finally, there is a sixth article which has, as a final averment, the words:
"Alternatively to the pursuers' respective claims as individuals, so far as relates to the claims arising from the charges to Inheritance Tax, the estates of both deceased have suffered charges to tax as a consequence of their premature deaths".
The pursuers each sue for £150,000 as individuals, this sum including, presumably, one half of the increase in Inheritance Tax. Alternatively, they sue as executrices on the estates of both deceased for the £150,086.40.
DEFENDERS
[2]The defenders moved that their first plea-in-law should be sustained by excluding from probation the averments from "In 1995..." to "...residuary beneficiary" in each article of condescendence. They moved that the case should be dismissed, in so far as relating to the pursuers' claims as executrices. Quoad ultra, they submitted, there should be a proof on quantum of the pursuers' claim for, as it is put in the pleadings, loss of society. Alternatively, in relation to the pursuers as individuals, there should be a proof before answer on all the averments, as there were issues about the effect of the accelerated gifts.
[3]The pursuers' case as executrices appeared to be two-fold. First, there was a common law claim in which they sued for loss to the deceased's estates caused by the increased Inheritance Tax charge. This was a claim for the loss of a contingent benefit. Secondly, there was a claim under section 2 of the Damages (Scotland) Act 1976 (c 13) for damages in respect of the personal injuries to the deceased, which each deceased could have claimed had they not died. This included the loss to both deceased as a result of the increased charge. In addition, there was a third claim by the pursuers to the effect that the increased liability for tax produced a loss of support to the pursuers personally under section 1 of the 1976 Act.
[4]So far as the first case was concerned, the first question was whether the loss was recoverable by the pursuers irrespective of when the loss arose. It was a requirement of such a claim that, immediately prior to their deaths, the deceased would have been entitled to bring an action for the same loss (Scottish Law Commission: Report (No. 31) on the Law Relating to Damages for Injuries Causing Death, 1973, pp 3-4, paras 6 and 8; Somerville v National Coal Board 1963 SC 666, Lord President (Clyde) at 669; McEnaney v Caledonian Railway Co. (1913) 2 SLT 293). At common law, the pursuers as executrices could have no better a claim than the deceased had. As the deceased could not have brought an action for an Inheritance Tax loss during their lifetimes, neither could their executrices do so after the deaths. The second question was whether the loss was reasonably foreseeable. If the loss was only of a contingent benefit or spes, and the contingency had failed, was there a loss at all? If there were, it was too remote. This was also applicable to the statutory case. The third question was whether the claim by the executrices was the same as the deceased's right to damages immediately before death in terms of section 2(1) of the 1976 Act. It was not. Section 2(2) provided that a right to patrimonial loss in respect of any period after death was not transmissible. A detriment to the estate occurring on death was not recoverable. It could not have been pursued by the deceased prior to death. Section 4(1) of the Inheritance Tax Act 1984 (c 51) provided that the tax was chargeable on death as if a transfer of value of the estate had been made immediately before death. The primary liability fell on the transferor (section 199). The gifts made by the deceased were "potentially exempt transfers" (section 3A). They remained chargeable transfers and became exempt only on the expiry of the seven-year period. There had been no tax advantage gained, which had been lost. The gifts remained chargeable transfers both before and after the death.
[5]The fourth question arose in relation to the claim for loss of support. Loss of support was not defined. "Support" could not include the hope of a tax advantage? Loss of support envisaged actual loss flowing from a relationship of necessity and mutual support (Quin v Greenock and Port Glasgow Tramways Co. 1926 SC 544, Lord President (Clyde) at 546-7). A tax detriment could not be equated to such a loss. The pursuers appeared to be attempting to introduce the defenders as guarantors of the success of the tax avoidance scheme. The estates of the deceased had already been reduced by the gifts themselves. In a loss of support claim, the relatives could not recover more than the deceased could have done, had he survived (McKay v Scottish Airways 1948 SC 254, Lord President (Cooper) at 264; Eisten v North British Railway Co. (1870) 8 M 980, Lord President (Inglis) at 984). The loss here arose from a failure of tax planning and not because of any cessation of support. The final issue was whether the loss was reasonably foreseeable. If it were regarded as the loss of a contingent benefit, which had failed to materialise, then it would not be fair to impose liability upon the driver of a vehicle causing an accident (see generally Walker: Delict (2nd ed) pp 232, 242-3). This was so even if the position in England, at least under the old Estate Duty regime, was different (Davies v Whiteways Cyder Co. (1975) QB 262, which had been appealed and compromised; McGregor: Damages (17th ed) para 36.038 fn 79).
PURSUERS
[6]The pursuers moved for a proof before answer on the whole pleadings, and otherwise for a proof on the heads of loss of society and funeral expenses. The first question to ask was whether there had been a loss. The answer depended not on a precise construction of the 1984 Act (supra) but on a factual analysis of what happened as a result of the deaths. The pursuers offered to prove that the deceased would have survived for the balance of the requisite seven year periods and would thereby have avoided the substantial tax liability sustained. In any event, section 3A(5) of the 1984 Act contained a presumption that the transfers by gift would be exempt until such time as a death occurred. Whether the loss was contingent or not was beside the point. As a matter of fact, the loss would not have been incurred but for the deaths. In relation to remoteness, there were two propositions. First, a wrongdoer must take his victim as he finds him. He may be liable for higher damages depending upon the wealth of that victim. Secondly, the incidence of tax is not to be regarded as too remote (Simmons v British Steel 2004 SC (HL) 94, Lord Rodger at paras 66-67; British Transport Commission v Gourley 1956 AC 185, Earl Jowitt at 197-8, 202-203, Lord Goddard at 207, Lord Reid at 212, 214-5). It is reasonably foreseeable that a road traffic accident will have tax consequences to the victim. A tax loss may form a head of damages (Duff v Duff, unreported, 13 January 1993, per Lord Clyde at p 2). All the pursuers were doing was trying to recover a loss which, as a matter of fact, had flowed from the negligence.
[7]The loss was not too remote. There was nothing unfair about holding a wrongdoer liable for losses which he causes. It was not acceptable for such losses to disappear into a legal black hole (G.U.S. Property Management v Littlewoods Mail Order Stores 1982 SC (HL) 157, Lord Keith at 177; Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19, Neuburger J at para 16-19). The defenders' contention was that there had been a loss but no one had a title to recover it. The point raised about recovering the lost tax was a novel one, with there being only one case in England in point. There were three possibilities. These were, first, that there was a claim which the deceased could have pursued and which the executrices can therefore take up under section 2 of the 1976 Act (supra). There was no reason why the deceased,...
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