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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Mackintosh+ & Anor v. Morrice & Anor [2006] ScotCS CSIH_43 (05 September 2006)
URL: https://www.bailii.org/scot/cases/ScotCS/2006/CSIH_43.html
Cite as: [2006] ScotCS CSIH_43, [2006] CSIH 43

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FIRST DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord President

Lord Nimmo Smith

Lord MacLean

 

 

 

 

 

 

[2006] CSIH 43

A640/04

 

OPINION OF THE COURT

 

delivered by LORD MacLEAN

 

in

 

RECLAIMING MOTION

 

by

 

(FIRST) MRS. CATRIONA MARGARET MACKINTOSH and (SECOND) ALISON MARY MANN

Pursuers and Reclaimers;

 

against

 

(FIRST) CRAIG MORRICE and (SECOND) MRS. LILLIAS MARGARET MORRICE

Defenders and Respondents:

 

_______

 

 

 

Act: Wolffe; Simpson & Marwick (Pursuers and Reclaimers)

Alt: Murphy, Q.C.; HBM Sayers (Defenders and Respondents)

 

5 September 2006

 

[1] Dr. Charles John Howell Mann and Dr. Evelyn Margaret Fortune Mann, who were married to each other, were killed in a road accident on 24 July 2001 when the car in which they were travelling was in head-on collision with a car driven in the opposite direction by one Philip Alexander Morrice. As a result of the collision, both vehicles burst into flames and the occupants of both died at the scene. The defenders, who are the executors of the late Philip Alexander Morrice, have admitted that the accident was caused by his fault and negligence. The pursuers are the daughters of the late Dr. Charles Mann and the late Dr. Evelyn Mann. They each sue as individuals for £125,000 in respect of loss of society and loss of support. It is averred that they shared the residue of their parents' estate between them. In the third conclusion they sue alternatively as executrices of their parents' estates for payment of the sum of £150,086.40. In the pleadings it is averred that each of the pursuers suffered a loss of one half of this sum as a residuary beneficiary. It is further pleaded that the pursuers suffered a loss as executors of the sum of £2,750 in respect of funeral costs.

[2] The pursuers aver that in 1995 Dr. Charles Mann made a substantial gift of £175,000 to each of them. In 1997 Dr. Evelyn Mann made a further gift of £175,000 to each of the pursuers, which was followed by a further gift of £20,000 to each of them. In view of Dr. Charles Mann's and Dr. Evelyn Mann's life expectancies their gifts were expected to become exempt transfers, respectively, in April 2002 and April 2004. Because of their premature deaths in July 2001 the transfers became chargeable to inheritance tax. The tax free bands of the estates of each of them became largely used by the prior transfers. As a result, there was a substantial increase in inheritance tax payable on their residuary estates, amounting to £150,086.40. It is this sum which the pursuers seek to recover as executrices of their parents' estates. They further aver that they each suffered a loss of one half of that sum as a residuary beneficiary.

[3] The defenders pleaded that the pursuers' averments relating to the alleged losses in respect of increased liability to inheritance tax were irrelevant et separatim lacking in specification, and should not be admitted to probation. The Lord Ordinary accepted that plea by excluding from probation all the averments of loss relating to the increases in inheritance tax payable on the estates of Dr. Charles Mann and Dr. Evelyn Mann, both in respect of the pursuers as individuals and as executrices. The claim for funeral expenses, he pointed out, could properly be brought by the pursuers as relatives of the deceased rather than as executrices. He therefore dismissed the action so far as it proceeded at their instance as executrices. The action was thus restricted to proof of quantum of the loss of society claims and the funeral expenses.

 

The reclaimers' submission

[4] From his interlocutor the pursuers reclaim. Mr. Wolffe moved us to recall the interlocutor of 13 December 2005; to sustain the pursuers' first plea-in-law; to repel the defenders' first plea and to allow parties a proof restricted to quantum of the parties' whole averments. The Lord Ordinary erred in holding that the loss was attributable to a period after death, which was not permitted in terms of section 2 of the Damages (Scotland) Act 1976 (as amended). He also erred in holding that the loss was not capable of being regarded as loss of support in terms of section 1(3) of the 1976 Act.

[5] The deceased, when alive, made substantial capital gifts to the pursuers. These were potentially exempt transfers which would become exempt transfers if the donors survived for at least seven years after the gifts. If, however, death occurred within the seven year period, tax was attracted. It was a tapering tax, depending upon the lapse of time within the seven year period (Inheritance Tax Act 1984 section 7(4)). At the time the band of relief was £275,000. So, the tax charged was materially greater than it would have been but for the accident. The liability for tax fell upon the deceased's personal representatives (IHTA section 200), and it was to be treated as part of the general testamentary and administrative expenses of the estate (IHTA section 211). The Lord Ordinary, in paragraphs [11] and [12] of his Opinion was correct in holding that on the pursuers' averments there was a loss to the deceaseds' estates caused by increased tax.

[6] Mr. Wolffe referred to B.T.C. v Gourley 1958 A.C. 185 for the long-established principle that tax must be deducted from damages which were payable. It also applied where the tax loss was a possible head of claim. Section 2 of the Damages (Scotland) Act 1976 achieved the aim of the underlying policy of the law. Subject to losses which were too remote, the law permitted the victim to be compensated for all the losses he sustained (Duff v Duff, 13 January 1993, Lord Clyde unreported at pp. 2-3). Mr. Wolffe referred to the long title of the Damages (Scotland) Act 1976 and, in particular, its object to amend the law relating to damages recoverable in respect of deaths caused by personal injuries; and to define the rights to damages in respect of personal injuries and death which were transmitted to an executor. Mr. Wolffe submitted that, but for what was excluded in the existing section 2(2), everything else was transmitted to the executor under section 2(1). This was an action arising from personal injuries and death. The claim in respect of the tax loss was not excluded by section 2. Mr. Wolffe referred to paragraphs 4 and 19 of the Scottish Law Commission Report of 1973 and pointed out that a tax loss like the one averred in this case was a foreseeable cause of loss at death. Mr. Wolffe referred to Sommerville v N.C.B. 1963 S.C. 666, in which the intervening death of the pursuer brought an end to his claim for future loss of earnings which was the subject of a minute of tender. As a result of the change of circumstances brought about by the death, the tender could not be accepted. The key to a proper understanding of Daniels v. Thompson [2004] EWCA Civ 307 was that until loss had been sustained there was no cause of action. Loss was sustained only after the death of the testator and no cause of action was vested in her so as to survive for the benefit of her estate. In this case there was personal injury which was immediately actionable, followed by consequential financial losses. The Lord Ordinary erred in holding that the loss here was attributable to a period after death and that it was not transmissible to the executrices. The second ground of appeal should be upheld.

[7] So far as loss of support was concerned, the Lord Ordinary was correct when he said, at paragraph [15], that the amount of loss of support was a question of fact and a matter for the jury. It was for the jury to weigh the imponderables: Dingwall v W. Alexander & Sons (Midland) Limited 1982 S.C. (H.L.) 179 per Lord Justice Clerk Wheatley at page 205. The pursuers were donees, residuary legatees and dependants. But there was no system of support in the life time of the deceased. In this case each parent made a separate gift to each child. In English law there would be no objection to admitting this claim if it were made by the executrices: Davies v Whiteways Cyder Co. 1975 1 Q.B. 262 per O'Connor J. at page 268. The footnote in McGregor on Damages (17th edition) at paragraph 36-038 summarises Davies as follows:

"where monies had come to the dependants by inter vivos gifts of the deceased which were liable to estate duty because made within seven years of his death, it was held in Davies v Whiteways Cyder Co. that the payment of the estate duty constituted the loss of the expectancy of a future pecuniary benefit and was accordingly recoverable, subject to a small discount for the chance that the deceased might not have survived the remainder of the seven-year period. The same situation can still arise with inheritance tax, which has superseded estate duty and taken over from capital transfer tax."

But English law, in any event, was broader in its application to such heads of claim because the provisions of the Fatal Accidents Act 1846 were wider than those of the Damages (Scotland) Act 1976.

 

The respondents' submission

[8] The Lord Ordinary's reasoning between paragraphs [9] and [18] was correct and no error of law had been demonstrated in that reasoning. The claim at common law by the executrices for loss to the deceaseds' estate was based on the increased incidence of tax by reason of the deaths. It was clear that such a claim was competent at common law only if the loss had been suffered by the deceased in their lifetimes. The loss here arose on death. It had to be a loss sustained by the person who was injured. In the present case the donors, that is to say the deceased, did not sustain a patrimonial loss. It was the donees who did. No competent claim could be brought during the deceaseds' lifetimes because there was no loss. Sommerville v N.C.B. vouched that. When a person dies, prospective losses are cut off. On death the claims will be by those relatives who were dependent upon the deceased and actually suffered the loss. Paragraph 6 of the Scottish Law Commission Report of 1973 made it clear that the executor's and dependants' claims were based on the premise that the deceased would have had a right to claim in life. Consistent with what was recommended in the Scottish Law Commission Report in paragraph 19, the Damages (Scotland) Act 1976 in section 1(3) conferred the direct right of recovery upon the relatives in respect of the loss of support they had suffered since the deceaseds' death or were likely to be suffered by them. The deceased person ought to be able to recover losses which occurred in his lifetime but not those which occurred after death, including those consequential upon it. The Lord Ordinary was correct when he said at the end of paragraph [9] of his Opinion that it was an established principle at common law that, where the wrong founded upon caused the death, an executor could only recover patrimonial losses suffered by a deceased during his lifetime.

[9] The pursuers claimed in the action that there were transmitted to them, in terms of section2(1) of the Damages (Scotland) Act 1976 (as amended), the deceaseds' rights to damages in respect of personal injuries sustained by them which were vested in them immediately before their death. There were, however, no such rights on the part of the deceased or either of them. Even if death could be equiparated to personal injuries, there was an inherent contradiction because no right was vested in either of the deceased immediately before death. It was not something which could have been pursued in their lifetime. The executrices had no higher right than the deceased had in their lifetimes. What the Lord Ordinary said in paragraph [11] of his Opinion was entirely correct.

[10] As for the claim for loss of support in terms of section 1(3) of the 1976 Act, averred to be suffered by the pursuers' dependants since the date of the deceaseds' death, the question was what was the support given to them by the deceased in their lifetimes? On that matter there were no averments. The loss was said to arise only after the death and took the form of a diminution in the value of the estate. In counsel's submission this was a claim by residuary beneficiaries dressed up as a claim under section 1(3) of the 1976 Act. The support referred to and founded on was the reduced residue of the estate.

 

Decision

[11] This is a case concerned with deaths which occurred directly and immediately as a result of admitted negligent driving. There is no claim for damages in respect of personal injuries. Neither deceased had in their lifetime a right to damages vested in them in respect of personal injuries. Neither suffered any patrimonial loss in their lifetime as a result of the accident. Where death results from a negligent act, as in this case, relatives or dependants, such as the pursuers, are entitled to claim for loss of society (solatium) and, where it is justified factually, for loss of support. It is, as the Lord Ordinary pointed out, an established principle at common law that, where the wrong founded on caused death, an executor can recover only patrimonial losses sustained by a deceased during his lifetime. So the executor in Sommerville could recover the wages lost by the pursuer up to the date of his death, but not any future loss of wages. Section 2(1) of the 1976 Act provides that there shall be transmitted to the executor of a deceased person the like rights to damages in respect of personal injuries sustained by the deceased "as were vested in him immediately before his death". Conversely, as section 2(2) of the Act provides, any right to damages by way of compensation for patrimonial loss attributable to any period after the deceased's death does not transmit to the executor under section 2. The losses in this case were contingent upon death. As the Lord Ordinary points out, inheritance tax is charged on the death of any person and for there to be any liability to pay tax the deceased must have died. So, the loss to the estates of the deceased caused by the payment of inheritance tax is attributable to a period after death. Both at common law and by statute the claims do not transmit to the pursuers as executrices. The pursuers, as relatives of the deceased, are entitled to damages to compensate them for any loss of support suffered by them as a result of the act or omission causing the deaths. This raises the question, of course, about the levels of support the pursuers received in the lifetime of the deceased and especially in the period up to their deaths. On that subject there are simply no averments. It cannot be said that the deceased, when in life, supported the pursuers in relation to the inheritance tax incidence. What appears to be claimed as a loss of support is a sum representing the diminution in the values of the deceaseds' estates which the pursuers share as residuary legatees. However that is to be regarded, it is not support which the deceased provided for the pursuers during their i.e. the deceased's lifetime. The English statutory provision discussed and applied in Davies v Whiteways Clyde Co. (Fatal Accidents Act 1846 section 2) is quite different and broader in its scope than the applicable Scottish provisions.

[12] We consider that the respondents are well-founded in their submissions. While having some natural sympathy for the pursuers we see no alternative to refusing the reclaiming motion and adhering to the interlocutor of the Lord Ordinary in whose reasoning we are unable to detect any fault.

 

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