Summary

The court declined to determine summarily a claim that solicitors owed a duty of care in relation to certain estate planning transactions to the claimant as the residuary beneficiary of the estate of his late mother.

Facts

The applicant solicitors (T) applied for summary judgment or the striking out of the claim brought against them by the respondent (R) alleging professional negligence in relation to advice given in relation to certain estate planning transactions. R and his sister were the residuary beneficiaries of the estate of their late mother (M). In 1986 M had made a gift of the freehold of an office building in London by transferring it to Jersey nominees (J) who held it for R. R then transferred his beneficial interest to a company in exchange for shares. He then created a discretionary settlement and transferred the shares to it. The gift by M gave rise to a capital gains tax liability and M borrowed the money to pay that liability. The loan was secured in part by a charge given by J over the freehold of the property. In 1989 the property was sold and the charge over it was replaced by a charge over a cash deposit account held by a nominee for the trustees of the settlement. The settlement was restructured in 1992. The loan was repaid in 1995. M died in 2000. It was accepted for the purpose of a settlement with the Inland Revenue that there had been a reservation of benefit by R over the freehold property, then over the assets of the settlement, and then over the cash deposit account until repayment of the loan in 1995 which resulted in the reservation of benefit ceasing and in a deemed transfer by M of the amount of the account. That was a potentially exempt transfer but M had died within seven years. Following his mother's death, R had paid an amount of inheritance tax said to be due in respect of the transfer. His case against T was that they owed him a duty of care as one of the intended beneficiaries of M's estate and in particular a duty of care in relation to estate planning. T argued that M's retainer of T did not give rise to a duty of care owed to R as a residuary beneficiary of her estate; the transactions during M's lifetime did not involve T advising M on the making of a will; any loss had been suffered by M's estate and not by R; R's claim was statute-barred.

Held

For the purpose of considering whether the court ought to find the existence of a duty of care owed by T to R in the instant case it was relevant to ask whether a lacuna would otherwise arise, White v Jones (1995) 2 AC 207 HL considered. In the light of Daniels v Thompson (2004) EWCA Civ 307, (2004) PNLR 33 and in the light of the possibility that a court at trial might find that there was a lacuna which needed to be filled by extending a White v Jones duty to the residuary beneficiaries in the instant case, the court could not hold that the claim should be dismissed on the ground that there was no such duty of care, Daniels v Thompson considered. (2) It was properly arguable on behalf of R that when T were involved in the events of 1992 they were under a duty to M to consider the question of the implications for M's estate planning of the division of the funds in the settlement. It was also properly arguable that T owed an associated duty of care to R as a residuary beneficiary named in M's last will which she had executed in 1989. A resolution of the issue as to the existence of a duty of care in 1992 depended on a detailed investigation of the facts which could only be conducted at trial. It would therefore be wrong to give summary judgment for T on that issue. It would not be right to give summary judgment for T on the basis that the only duty in 1992 was to the trustees of the settlement. (3) T had strong arguments that a White v Jones duty should not be extended to persons affected by ineffective estate planning because that would be to impose on T a duty to an indeterminate class of potential beneficiaries. However it would not be right on a summary application to dismiss R's claim on that ground. The detailed circumstances needed to be investigated at trial. (4) If R was able to establish breach of a duty of care owed by T, then he would be able to show that he had suffered a loss consisting of the reduction in his share of the residuary estate. (5) The last act of negligence alleged against T consisted of the failure to give advice in 1992 leading to the removal of the reservation of benefit. The 15 year period provided by the Limitation Act 1980 s.14B would run from the 1992 transaction and the claim had been brought within that 15 year period. (6) On the evidence there were two separate partnerships, the London firm and the Jersey firm. The court was not able to hold on a summary application that the second defendant, who was a partner in both firms, had been retained in his capacity as a partner in the London firm only.