Summary

Applications to strike out a claim for damages brought against a firm of solicitors for alleged breach of duty of care in tort and contract and for summary judgment on that claim were refused where the firm had failed to show that there were no reasonable grounds for bringing the claims against them.

Facts

The applicant law firm (F) applied to strike out or to obtain summary judgment on a claim for damages brought by the respondent executors (V). V were the executors of the estate of a deceased widow (D) and were trustees and beneficiaries of a residuary estate under D's will. Whilst D was alive, F had acted in relation to the estate of her deceased husband and the affairs of her family's company (W). Arrangements were made for D to acquire further shares in W on the basis that those shares would fall under business property relief (BPR) provisions and attract inheritance tax savings. D died and, by her will, after leaving pecuniary legacies free of inheritance tax, she left a residuary trust fund. It was then discovered that BPR was not available in respect of most of the shares that D had acquired under the arrangements. V commenced proceedings against F for damages to compensate them for the inheritance tax on those shares, on the basis that V had relied on F as D's solicitors; F had voluntarily assumed liability towards V; F owed a duty of care in contract and in tort in accordance with its retainer as D's solicitors; that retainer was to advise on and undertake the allotment of shares to achieve an inheritance tax advantage by the attraction of BPR; F had breached that duty; and D and her estate had suffered a charge of inheritance tax. F submitted that, in relation to the allegation of breach of duty in contract, for W's directors to exercise their powers to achieve an inheritance tax saving for D would not be a proper exercise of the capital-raising power. F further argued that the rule in White v Jones (1995) 2 AC 207 HL that a beneficiary could sue for breach of duty for which the testator could have sued did not apply in the instant case. F contended, in relation to the application for summary judgment, that the only relevant retainer was of F by W concerning the raising of capital.

Held

(1) It was not appropriate to strike out the claim for breach of duty of care in contract. It was arguable that a mistake in inheritance tax planning, although conceivably resulting in only nominal damage during D's lifetime, would occasion substantial damage on her death in respect of which her executors might sue, Otter v Church, Adams, Tatham & Co (1953) Ch 280 Ch D considered. F had not demonstrated that the only legally proper way to raise capital rendered BPR impossible to attain. The claim that F owed D a duty of care in tort on which her executors might sue could not succeed at first instance as D did not suffer recoverable loss, Daniels v Thompson (2004) EWCA Civ 307, (2004) PNLR 33 followed. However, the argument was purely legal as the material facts were equally relevant to the cause of action in contract. Further, it might be that the courts would wish to further consider the analysis. There was a real prospect of establishing that a negligent failure to protect D's estate from an unnecessary charge to tax was the proper subject of a claim by a personal representative, Carr-Glynn v Frearsons (1999) Ch 326 CA (Civ Div) considered. Difficulties arose from treating the estate and the personal representatives as identities distinct from the testatrix. It was not clear how those difficulties would be resolved and it was wrong to strike out a claim in what was a developing field of law. The claim by the trustees of the residuary estate under D's will did not add anything to the analysis but it should not, on that ground alone, be struck out as it was but a differing legal analysis of what were fundamentally the same facts as that in relation to claims by personal representatives and residuary beneficiaries. If the facts on V's pleaded case concerning their claim as prospective executors and beneficiaries based on reliance on the advice were proven, there was a real prospect of them successfully recovering damages for breach of duty. The origins of the principle under White lay in the proper discharge of a retainer to make a will but its implications were being explored on a case-by-case basis. Liability under White might also be impossible as it was also not clear that there was the required conflict of interests as there was a real prospect of establishing that there was a unity of interest between W and D in raising capital in an inheritance tax efficient way, White considered. In relation to the claim in tort, subject to Daniels, it was also not appropriate to strike out V's claim, Customs and Excise Commissioners v Barclays Bank Plc (2006) UKHL 28, (2007) 1 AC 181 followed. (2) In relation to the application for summary judgment, it was not fanciful to suggest that F had been advising D. It could not be said that V's claim of reliance on advice concerning the inheritance tax planning was and would at trial be fanciful and lacked any real prospect of success.

Applications refused