Before : MR JUSTICE MORGAN Between :

Neutral Citation Number: [2008] EWHC 459 (Ch) IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Case No: HC07C01375 Royal Courts of Justice Strand, London, WC2A 2LL Date: 11/03/2008 Before : MR JUSTICE MORGAN - - - - - - - - - - - - - - - - - - - - - Between : ALAN MICHAEL RIND - and - (1) THEODORE GODDARD (a firm) (2) CHRISTOPHER EDWARD LLOYD (3) CHRISTOPHER HENRY LOVELL (4) PETER JACKSON Claimant Defendants - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Michael Soole QC (instructed by Dechert LLP) for the Claimant Paul Parker (instructed by Reynolds Porter Chamberlain LLP) for the 1 st Defendant Edwin Johnson QC (instructed by Williams Holden Cooklin Gibbons LLP) for the 2 nd,3 rd & 4 th Defendants Mr Justice Morgan: Hearing dates: 17 th, 18 th & 21 st January 2008 - - - - - - - - - - - - - - - - - - - - - Judgment Introduction 1. In these proceedings, the Claimant s claim is for damages against two firms of solicitors for alleged negligence in relation to advice given and transactions entered into in the period 1985 to 1992. The Defendant solicitors have applied for a summary determination of these proceedings and this judgment deals with the many issues which arise on their applications. The facts 2. In this section of the judgment I will set out the facts which are either common ground or are to be assumed for the purposes of the application for a summary determination of the claim. 3. The Claimant s mother was Mrs Sylvia Rind ( Mrs Rind ). Mrs Rind had two children, the Claimant and the Claimant s sister, Mrs Barbara Maister ( Mrs Maister ). 4. In 1965 Mrs Rind became the freehold owner of an office building known as Little Adelphi, situated to the south of the Strand, London WC2.

5. On 21 st July 1986, Mrs Rind wished to make a gift of the freehold of Little Adelphi to the Claimant. The way in which the gift took effect was that Mrs Rind transferred the legal title of the property to Goddard Nominees (Jersey) Limited who held the legal title as nominee for the Claimant. 6. On 22 nd July 1986, the Claimant transferred his beneficial ownership of the property to St James s Properties Limited, in exchange for 5000 shares in that company. Goddard Nominees (Jersey) Limited then held the property as nominee for St James s Properties Limited. 7. On 19 th September 1986, the Claimant, as settlor, created a discretionary settlement known as the Phi Settlement. The potential beneficiaries under the discretionary settlement were any child of Mrs Rind (i.e. the Claimant and his sister Mrs Maister) and the spouses, widows, widowers, children and remoter issue of any child of Mrs Rind. 8. On 21 st September 1986, the Claimant transferred his 5000 shares in St James s Properties Limited to the trustees of the Phi Settlement. At that stage therefore the property was owned freehold by Goddard Nominees (Jersey) Limited as nominee for St James s Properties Limited and 5000 shares in St James s Properties Limited were vested in the trustees of the Phi Settlement. 9. The gift made on 21 st July 1986 by Mrs Rind of Little Adelphi gave rise to a Capital Gains Tax liability of a sum in excess of 2 million. This sum was payable by Mrs Rind. To enable her to pay this sum she borrowed an equivalent amount from Royal Trust Bank (Jersey) Limited ( the Bank ). The Bank s loan to Mrs Rind was secured on Mrs Rind s home in London N2 and was further secured by a charge granted by Goddard Nominees (Jersey) Limited over its freehold interest in Little Adelphi. This charge was granted in around June 1988. 10. In January 1989, Goddard Nominees (Jersey) Limited as freehold owner of Little Adelphi sold the property for a substantial sum. The Bank released the charge granted by Goddard Nominees (Jersey) Limited to enable the sale to take place. The Bank obviously wanted a replacement security for the charge which it had agreed to release. The replacement security was in respect of a cash deposit account held by Goddard Services SA as nominee for the trustees of the Phi Settlement. The amount of the account was equivalent to the amount of the loan then owing by Mrs Rind to the Bank. The account holder was changed to Goddard Nominees (Jersey) Limited in 1994. 11. Following the sale of Little Adelphi, relations between the Claimant and his sister Mrs Maister deteriorated. In 1992, the trustees of the Phi Settlement considered whether steps might be taken to restructure the Phi Settlement in the light of the differences between the Claimant and Mrs Maister. The trustees decided to divide the assets of the Phi Settlement into three equal parts. One third was to be appointed outright to a nominee for the Claimant. One third was to be appointed to the trustees of a new settlement for the benefit of the Claimant and any issue which he might have and for the benefit of the trustees of the Phi Settlement. The remaining one third would be retained within the Phi Settlement and the Claimant would be excluded from benefit in relation to that one third. Appointments to give effect to these decisions were made by deeds dated 27 th July 1992. There was also a resolution by the trustees of the Phi

Settlement on the 13 th July 1992 which they confirmed in writing on the 21 st September 1992 whereby it was resolved that the appointment of one third of the assets of the Phi Settlement for the benefit of the Claimant should include the benefit of the cash account which was held as security for the loan to Mrs Rind. It seems that the validity of the documents drafted to give effect to the decisions of the trustees of the Phi Settlement were questioned by Mrs Maister and persons connected with her in litigation instigated in around July 1992. In that litigation, on 24 th July 1992, the Royal Court of Jersey granted Mrs Maister and others a Mareva injunction prohibiting any dealing with any assets of the Phi Settlement. 12. The Mareva injunction was modified at the end of May 1995. On the 1 st June 1995 the trustees of the Phi Settlement executed an irrevocable deed of appointment by which cash sums were appointed to a nominee for the Claimant and to Mrs Maister. The main sum appointed by the trustees of the Phi Settlement represented the balance on the cash deposit account. On 2 nd June 1995, the nominee for the Claimant and Mrs Maister repaid Mrs Rind s loan to the Bank and took an assignment of the debt secured by Mrs Rind s loan and the benefit of the security over Mrs Rind s home. 13. Mrs Rind died on 10 th September 2000. Her last will was a will dated 15 th September 1989. By that will, Mrs Rind made a large number of specific gifts of various kinds and left her residuary estate on trust for the Claimant and Mrs Maister equally. The executors named in the will renounced probate and the Claimant and Mrs Maister were granted letters of administration, with will annexed, on 14 th June 2001. 14. An IHT 200 form was completed by the Claimant and Mrs Maister and submitted to the Inland Revenue in April 2001. Certain items were omitted from the form or were insufficiently explained to the Inland Revenue. 15. In May 2004, BDO Stoy Hayward LLP ( BDO ) were instructed to make a full voluntary disclosure to the Inland Revenue of all matters relevant to the taxation affairs of the estate of Mrs Rind. On 12 th November 2004, BDO prepared a lengthy report which was provided to the Inland Revenue dealing with those taxation affairs. The BDO report set out a summary of the relevant transactions and considered the correct treatment for IHT purposes of the transactions relating to Little Adelphi. Although, on the face of it, Mrs Rind had transferred the freehold of Little Adelphi in July 1986, which was more than seven years before her death in 2000, BDO considered whether there had been a reservation of benefit by Mrs Rind as a result of some of the transactions to which I have referred. 16. BDO considered it was arguable that the security provided in June 1988 by Goddard Nominees (Jersey) Limited over the freehold of Little Adelphi was not a reservation of benefit by Mrs Rind. However, BDO accepted for the purpose of a settlement with the Inland Revenue that there was a sustainable argument that those circumstances created a reservation of benefit by Mrs Rind over the freehold property as contemplated by paragraph 5(3) of Schedule 20 to the Finance Act 1986. Paragraph 5(3) of Schedule 20 provides that property settled by the donee may be equated with the subject matter of the original gift. 17. BDO then referred to the fact that the original charge over the freehold property was replaced by a charge on the cash deposit account and they referred to the fact that the balance of the deposit account was increased in order to meet the interest liability of

Mrs Rind to the Bank, on account of the fact that she did not pay this interest but it was added to the indebtedness. BDO concluded that from 1989 until 1992 Mrs Rind had a reservation of benefit over the entire assets of the Phi Settlement. 18. BDO then referred to the events of July 1992 and the obtaining of the Mareva injunction which prohibited any dealing with the assets of the Phi Settlement. They advised that the security provided to the Bank by the charge on the cash deposit account was ring fenced at an amount equivalent to the balance of the account at the date of the injunction. They further advised that the reservation of benefit was thereby limited to the value of the account at that point in time and any purported reservation of benefits ceased to extend to the entire assets of the Phi Settlement. The effect was that the cesser of reservation of benefit in respect of the remainder of the assets in the Phi Settlement constituted a Potentially Exempt Transfer (PET) in accordance with section 102(4) of the Finance Act 1986. As Mrs Rind died more than seven years after this PET, no IHT liability arose in that respect. 19. However, there continued to be a reservation of benefit after 1992 in relation to the sums in the cash deposit account at the date of the Mareva injunction. That state of affairs continued until 1 st June 1995 when the loan previously made by the Bank was repaid. The result was that the remaining reservation of benefit over the cash deposit account ceased and Mrs Rind was deemed to have made a PET of the amount of the account on 1 st June 1995. Mrs Rind died within seven years of that PET and accordingly that transfer became chargeable to IHT, although it had been omitted from the IHT 200 form which had earlier been submitted to the Inland Revenue. BDO s calculation of the IHT payable in this way was 690,798 and together with interest the sum due to the Inland Revenue was 767,338 (at the date of their report). That calculation was in due course agreed by the Inland Revenue. 20. For the sake of completeness, BDO pointed out that the arrangements made in June 1995 whereby the nominee for the Claimant and Mrs Maister took over the loan previously provided by the Bank to Mrs Rind resulted in a further reservation of benefit of the amount of the loan plus accrued interest. However, at the date of Mrs Rind s death, she still had a liability, being the amount of the loan including the accrued interest, and if the reservation of benefit which arose in this way together with the indebtedness had both been taken into account, the net effect would have been nil as regards liability for IHT. 21. The position can, perhaps, be described in simple terms in the following way. If there had not been a reservation of benefit in any of the ways described by BDO then the transfer of the freehold by Mrs Rind on 21 st July 1986 would have been a PET and because she survived for more than seven years from 21 st July 1986, the property then transferred would not have formed part of her estate for IHT purposes. Instead, the original reservation of benefit in 1988 and 1989 resulted in the entirety of the assets of the Phi Settlement potentially being brought into account as part of Mrs Rind s estate for the purposes of calculating IHT. The position was improved with the events of July 1992 when there was a PET in relation to all of the assets of the Phi Settlement save for the cash deposit account held as security for payment by Mrs Rind of her loan from the bank. The PET in July 1992 was more than seven years before Mrs Rind s death and so the remainder of the assets of the Phi Settlement were not brought into account as part of her estate for IHT purposes. However, the reservation of benefit in relation to the extent of the deposit account continued until 1 st June 1995

and then ceased but the PET which took place on 1 st June 1995 was less than seven years before Mrs Rind s death and, subject to taper relief, the asset over which there was a reservation of benefit was brought into account as part of Mrs Rind s estate for IHT purposes. 22. The above description of the facts assumes that if there had not been a reservation of benefit as a result of the 1988, 1989 and 1992 transactions then the gift in July 1986 would have been and remained a PET. However, there are other matters which appear from the documents I have seen which indicate that, after 1986, Mrs Rind retained some involvement with Little Adelphi and the assets which came to replace it. Indeed, as will be seen from later passages in this judgment, this continuing involvement on the part of Mrs Rind may be highly relevant when one comes to consider whether the solicitors owed a duty of care to Mrs Rind in relation to the transactions which were effected after 1986. Whether the Claimant s reliance on Mrs Rind s continuing involvement to assist him with some of the matters he wishes to establish is entirely consistent with his claim to damages, which is based on there being no reservation of benefit (apart from the acts and omissions of the solicitors which are said to have been negligent), was not a matter which was explored in argument and it is not appropriate on these summary applications to consider it further. The procedural history 23. This action was brought by the Claimant by a claim form issued on 7 th September 2006. The First Defendant was a firm of solicitors based in London known as Theodore Goddard. The Second, Third and Fourth Defendants were partners in a separate firm of solicitors, based in Jersey, and also known as Theodore Goddard. 24. In his Particulars of Claim, the Claimant pleads that he is the son of Mrs Rind and one of two residuary beneficiaries of her estate pursuant to her last will of 15 th September 1989. He also pleads that he and Mrs Maister are joint administrators of Mrs Rind s estate. His pleading identifies the position of the Defendants and alleges that the Defendants owed a duty of care to the Claimant as one of the intended beneficiaries of the estate of Mrs Rind and, in particular, a duty of care in relation to estate tax planning. The pleading then sets out details of the various transactions relating to Little Adelphi. 25. The Claimant pleads that he personally paid the IHT due as a result of the transaction of 1 st June 1995 being a PET which, in the events which happened, was within seven years of the death of Mrs Rind. The Claimant pleads that the Defendants were negligent and in breach of their duties of care to him. In relation to the transactions in 1988 to 1989, the essential allegation of negligence is that the Defendants structured the transaction in such a way as to give rise to a reservation of benefit and a potential IHT liability. In relation to the 1992 transactions, the essential allegation of negligence is that the Defendants failed to consider adequately or at all the IHT implications of those transactions, namely, that they involved a reservation of benefit. It is also pleaded in relation to the 1988 to 1989 transactions and the 1992 transactions, that the Defendants failed to advise Mrs Rind and/or the Claimant of the consequences of the transaction and failed to advise Mrs Rind and/or the Claimant to structure their affairs in such a way as to avoid a reservation of benefit. The Claimant asserts that he has suffered loss and damage equivalent to the amount of IHT he paid.

26. In response to requests from one or other Defendant, the Claimant has given further information as to the basis of his intended claim. He has made it clear that he is suing in his capacity as residuary beneficiary of the estate of Mrs Rind and he stated that Mrs Maister elected not to join in the action. The Claimant also makes it clear that he does not sue in his capacity as a personal representative of the estate of Mrs Rind or, for that matter, in any other capacity. He also makes it clear that the duty of care which he asserts was a duty owed to himself as a residuary beneficiary of the estate of Mrs Rind and that the loss which he claims was suffered by him in such a capacity. He explains that the amount of IHT agreed with the Inland Revenue had to be paid, that he was not able to get Mrs Maister as his co-administrator of the estate and the other residuary beneficiary to agree to pay half of the tax due and in those circumstances he took the decision that making the payment was in the best interests of the estate and, as all the free cash had been paid out of the estate, he made the payment, as he describes it, in his capacity as a residuary beneficiary of the estate. He also pleads that a reservation of benefit could have been avoided at each stage in the history because Mrs Rind had a variety of other means of providing security for the bank loan and one or other of these means could have been adopted without involving a reservation of benefit in relation to Little Adelphi or assets which could be regarded as connected with Little Adelphi. 27. On 25 th July 2007, the First Defendant applied for summary judgment in favour of the First Defendant pursuant to CPR Rule 24.2 and/or for an order that the Claimant s claim be struck out pursuant to CPR Rule 3.4. This application was stated to be made on the ground that the claim against the First Defendant disclosed no reasonable cause of action and/or had no real prospect of success and the First Defendant knew of no other compelling reason why the disposal of the Claimant s claims against the First Defendant should await trial. 28. On 17 th September 2007, the Second, Third and Fourth Defendants applied for similar relief against the Claimant and on similar grounds to those put forward by the First Defendant. 29. At the hearing, Mr Soole QC appeared on behalf of the Claimant, Mr Parker appeared on behalf of the First Defendant and Mr Johnson QC appeared on behalf of the Second, Third and Fourth Defendants. The rival submissions 30. Mr Johnson, on behalf of the Second, Third and Fourth Defendants, submitted that those solicitors did not owe a duty of care to the Claimant in his capacity as a residuary beneficiary of the estate of Mrs Rind. The only retainer of the Second, Third and Fourth Defendants which is relied upon in the Particulars of Claim is a retainer by Mrs Rind. It is not alleged that there was any relevant retainer of the Second, Third and Fourth Defendants by the Claimant himself. The question therefore arose whether Mrs Rind s retainer of the Second, Third and Fourth Defendants gave rise to a duty of care owed by the Second, Third and Fourth Defendants to a third party, namely, the Claimant. The transactions of which the Claimant complained which took place in 1988 and 1989 (and, if appropriate, 1992) were transactions during the lifetime of Mrs Rind. The transactions did not involve the solicitors advising Mrs Rind on the making of a will. In so far as the solicitors did advise, or assist, Mrs Rind in relation to the making of a will, it is not suggested that the solicitors were in any way at fault in that

respect. There is a distinction between a solicitor advising a client on a lifetime transaction which may have an effect on those interested in the client s estate following the client s death and advice on the making of a will. Mr Johnson contrasted Clarke v Bruce Lance & Co [1988] 1 WLR 881 and Cancer Research v Ernest Brown [1998] PNLR 592 on the one hand with White v Jones [1995] 2 AC 207 on the other. Further, the Claimant was not even a residuary beneficiary under an existing will prepared by Mrs Rind in the period from 1985 and Mrs Rind s last will executed on the 15 th September 1989. In relation to the negligence alleged in 1992, the transaction in 1992 was on the part of the trustees of the Phi Settlement. There was no retainer by Mrs Rind in relation to that transaction. Although the Claimant asserted that the solicitors had a continuing obligation to keep under review the IHT consequences of transactions which related to Little Adelphi, and assets which could be regarded as representing Little Adelphi, that was a bold assertion which should be rejected. 31. Mr Johnson further submitted that even if the solicitors owed a duty of care to the Claimant, and had been negligent, the Claimant had not suffered a loss as a result. The entity which had suffered a loss was the estate of Mrs Rind which became liable for IHT which, allegedly, could and should have been avoided. The loss felt by the estate could affect the position of the Claimant as a residuary beneficiary, depending upon the financial circumstances of the estate but the loss remained the loss of the estate. Similarly, the fact that recovery of that loss by the estate from the solicitor might increase the amount payable to the Claimant as his share of the residuary estate did not affect the proposition that the loss was the loss of the estate and not of the Claimant. This fact also provided a further reason why the solicitors did not owe a duty of care to the Claimant. The solicitors owed a duty of care to Mrs Rind and her estate had suffered the loss. There was therefore no question of the person who had suffered the loss having no claim. 32. In any event, Mr Johnson submitted that any claim which the Claimant might at one time have had for breach of a duty of care owed to him, causing him loss, was long since statute barred. The Claimant s claim was a claim in tort and the relevant limitation period was six years from the date when the breach of duty caused damage of a kind known to the law. On the facts, the damage in this case was suffered when the arrangements were put in place to secure the repayment of Mrs Rind s loan from the Bank by a charge over Little Adelphi. That had happened in 1988. It was possible that the Claimant had not suffered damage until Mrs Rind named him as a residuary beneficiary in her will which she executed on 15 th September 1989. It was pointed out that on the particular facts of this case, the Claimant could not rely upon an extension of the limitation period pursuant to Section 14A of the Limitation Act 1980. I should add that it was common ground that the Claimant could not rely on Section 14A to extend the limitation period to a date after the issue of the claim. If, contrary to these submissions, damage in the present case was only suffered for the first time on the death of Mrs Rind on the 10 th September 2000, the claim was in any event statute barred under the overriding time limit for negligence actions, not involving personal injury, pursuant to Section 14B of the Limitation Act 1980. Section 14B(1) refers to the act or omission which is alleged to constitute negligence. The acts or omissions in 1988 and 1989 were more than fifteen years before the issue of the claim form. It was accepted that any relevant act or omission in 1992 was within that period of fifteen years. However, the harm which the Claimant now says he has suffered was caused in

1988 and 1989 and was not caused by an act or an omission in 1992. What happened in 1992 was that the harm earlier caused was reduced or mitigated, although it was not eliminated. 33. Mr Parker, on behalf of the First Defendant, the London firm of Theodore Goddard, addressed me on the facts as to that firm s involvement as distinct from the involvement of the Jersey firm. The London firm gave Mrs Rind some tax planning advice in 1985 but that retainer had been fully performed in 1985 and 1986. In 1988 and 1989, the London firm was involved in carrying out conveyancing work but no other work for Mrs Rind. Mr Parker submitted that it was not fair, just and reasonable to impose a duty of care on the First Defendant in relation to the consequences of Mrs Rind s retainer of the First Defendant. The Claimant was not a residuary beneficiary until 15 th September 1989. Any damage caused in the present case as a result of the transactions in 1988 and 1989 was suffered by 1989 at the latest and the six year limitation period had long since expired by the time these proceedings were brought. Mr Parker also relied on Section 14B of the Limitation Act 1980. The fifteen year period relevant for Section 14B ran from 7 th September 1991. The First Defendant was not involved in any way with any matter now relevant on or after 7 th September 1991. In particular, it was not involved with the events of 1992. It was understood that the Claimant asserted that the First Defendant was estopped from denying its involvement in 1992 but the plea of estoppel failed, principally because the Claimant could not show that there was any reliance on an alleged representation made on behalf of the First Defendant that it was involved in 1992. 34. Mr Soole on behalf of the Claimant submitted that the only claim that could be brought to recover the real loss that had been suffered in this case was a claim by the Claimant as a residuary beneficiary of the estate of Mrs Rind. Mrs Rind had herself suffered no loss. If she had sued the solicitors for breach of the contract of retainer, she would have been entitled to nominal damages only. She did not have a cause of action in tort against the solicitors. There was no cause of action vested in Mrs Rind which passed to her estate on her death. Thus, if there was no duty of care owed to the Claimant the result would be that the only person who had a cause of action (Mrs Rind as a result of her claim in contract) had suffered no loss and the person who suffered a loss (the Claimant) did not have the benefit of a duty of care. The court would find the existence of a duty of care on the facts of this case in the same way as the House of Lords found a duty of care to exist in White v Jones [1995] 2 AC 207. Mr Soole also relied on the detailed reasoning of the Court of Appeal in Daniels v Thompson [2004] PNLR 638, a case concerning negligent advice in relation to IHT. Although the Claimant was not named as a residuary beneficiary in Mrs Rind s will between 1985 and 15 th September 1989, he was always foreseeably within a class of persons who might be identified by Mrs Rind as a residuary beneficiary. He was sufficiently foreseeable as someone suffering loss as to be within the scope of the duty of care owed by the solicitors. In any event, the question whether the Claimant would foreseeably suffer loss as a result of negligent advice was a fact sensitive matter which should be determined at a trial and not on a summary application. Mr Soole addressed me on the detail of the solicitors involvement in relation to Mrs Rind and submitted that there was a continuing duty in 1988 and thereafter to consider the impact of the transactions in 1988 and 1989 and 1992 on the tax planning advice given to Mrs Rind in 1985 and 1986. Although, on examination of the facts, it emerged that the London firm and the Jersey firm were two separate firms, the First

Defendant, the London firm, was estopped from asserting it was separate from the Jersey firm and was not responsible for the actions of the Jersey firm. The relevant damage in this case was damage suffered by the Claimant which only occurred on the death of Mrs Rind on the 10 th September 2000 which was, just, less than six years before the issue of the claim form on the 7 th September 2006. Duty of care: general considerations 35. The logical place to start in considering the various submissions of the parties is to ask whether the solicitors owed a duty of care to the Claimant as a residuary beneficiary in relation to the estate of Mrs Rind. For present purposes, I will ignore the possible distinctions between the London firm and the Jersey firm. I will also at this stage ignore the fact that the Claimant was not named as a residuary beneficiary in a will of Mrs Rind which was current between 1985 and 15 th September 1989. I will therefore begin by addressing the more fundamental question as to the existence of a duty of care to the Claimant. 36. In the leading cases in which a solicitor has been held to owe a duty of care to an intended beneficiary under an intended will, whether by reason of negligence in relation to the making or non-making of the will, or in relation to advice which was treated as sufficiently connected with the will-making process, the court has been concerned to investigate whether, in the absence of a duty of care owed to the intended beneficiary, there would be an undesirable lacuna in the law. Such a lacuna would arise if it were held that the intended beneficiary had no claim and either the estate of the deceased would have no claim, because it had suffered no loss, or any monies recovered by the estate of the deceased would go to other persons and not to the intended beneficiary: see the facts of White v Jones [1995] 2 AC 207 and Carr- Glynn v Frearsons [1999] Ch 326. 37. Accordingly, for the purpose of considering whether the court ought to find the existence of a duty of care owed by the solicitors to the Claimant in the present case, it is relevant to ask whether a similar lacuna would arise here, in the absence of such a duty, and for that purpose to ask what claims Mrs Rind s estate would have against the solicitors by reason of the alleged negligence in respect of the estate becoming liable to pay IHT. 38. For the purpose of assessing a possible claim by the estate against the solicitors, one would begin by considering whether Mrs Rind and, after her death her estate, had a cause of action in contract against the solicitors and, further, whether Mrs Rind and, after her death her estate, had a cause of action in tort against the solicitors. 39. As regards a possible cause of action in contract, the starting point would be that there was a contract of retainer between Mrs Rind and the solicitor and, on the facts alleged in the Particulars of Claim, the solicitors broke that contract. A question would arise whether Mrs Rind during her lifetime, or her estate after her death, could recover more than nominal damages. For that purpose it would be necessary to reflect on the correct treatment of the fact that Mrs Rind was not liable to pay IHT during her lifetime and the liability to pay IHT arose on her death and was the liability of those representing her estate. Similarly, in relation to a possible claim in tort by Mrs Rind against the solicitors, it would be necessary to consider whether Mrs Rind suffered any damage during her lifetime and whether the estate could claim for damage it

suffered upon Mrs Rind s death by reason of a breach of the duty of care owed to Mrs Rind, which breach occurred during her lifetime. 40. Turning to some of the authorities which might be thought to be relevant, one would start with the decision at first instance in Otter v Church Adams Tatham & Co [1953] 1 Ch 280. In that case, Michael Otter had an interest in certain settled property. It was open to him during his lifetime to bar the entail in the settled property so that he would become absolutely entitled to the property. He (acting through the agency of his mother) sought advice from the defendant solicitors and was negligently advised that he already was the absolute owner of the property and he did not need to execute a disentailing assurance. Michael Otter was then killed. If he had executed a disentailing assurance before his death, the property in question would form part of his estate and would pass on intestacy. Because he had not executed a disentailing assurance prior to his death, the property did not form part of his estate. His personal representative sued the solicitors for a breach of contract in giving him negligent advice. The judge held that there had been a breach of contract. He then considered whether the personal representative of the estate was entitled to more than nominal damages. The judge held that the deceased had been deprived of the opportunity of increasing his estate by executing a disentailing assurance relating to the settled property and therefore upon his death his estate was diminished by that amount. This was the natural adverse consequence of the solicitor s negligent advice. Accordingly, his personal representative was entitled to sue for the diminution of his estate by reason of the solicitor s breach of duty. The correctness of the decision in the Otter case was accepted by the Court of Appeal in Corbett v Bond Pearce [2001] 3 All ER 769: see at [16], [17]. 41. There have been a number of decisions concerning claims in the tort of negligence against solicitors where the legal analysis adopted by the court has involved holding that where a duty of care is owed to a person during that person s lifetime and there is a breach of duty during that lifetime and the breach causes damage which is felt on the death of that person, the estate has a cause of action against the negligent solicitor for that damage. Clarke v Bruce Lance & Co [1988] 1 WLR 881 may be such a case. In that case, the plaintiff s father had granted an option to a third party to purchase specified property at a fixed price on the death of the plaintiff s father or his wife, which ever was the later. The solicitors who advised the plaintiff s father in relation to the grant of the option were alleged to have been negligent in permitting the third party to buy the specified property at a fixed price rather than at market value. On those facts, it was clear that the harm done as a result of the fixed price option would be felt after the death of the plaintiff s father. The Court of Appeal held that the plaintiff s father during his lifetime would have had a cause of action against the solicitors and the personal representatives of the plaintiff s father would have had such a cause of action after the death of the plaintiff s father: see at page 889 d to f. This was part of the reasoning which led the Court of Appeal to hold that there was no duty of care owed by the solicitors to the plaintiff, who was a beneficiary under the will of his father. 42. In Carr-Glynn v Frearsons [1999] Ch 326 the solicitors advising a testator were negligent in that they failed to advise him to sever a joint tenancy of certain property. If he had severed the joint tenancy, his share of the property would have vested in his estate and passed under his will. Because he did not sever the joint tenancy before he

died, the property passed by survivorship to the other joint tenant and no part of the property formed part of his estate. In the event, the Court of Appeal held that the solicitors owed a duty of care not only to the testator but also to the person who was intended to inherit the testator s share in the property under the will. However, the Court of Appeal also held that, prima facie, the solicitors were vulnerable to a claim against them brought by the personal representatives of the estate by reason of the fact that the share of the property did not form part of the testator s estate on death. This conclusion can only have been based upon the reasoning that the personal representatives of the estate had a cause of action by putting together the existence of a duty of care owed to the testator plus the breach of duty during the testator s lifetime and the loss caused to the estate by reason of the fact that the relevant share in the property did not form part of the estate. It was precisely because the solicitors were vulnerable to a claim brought by the personal representatives of the estate that the Court of Appeal addressed the question of how to avoid double liability on the part of the solicitors and double recovery, first by the intended devisee of the share in the property and secondly by the personal representatives. The Court of Appeal was able to prevent double recovery by holding that, if and to the extent that the specific devisee recovered by way of damages the equivalent of what the testator intended the specific devisee to receive under the will, then to that extent the personal representatives of the estate would not be entitled to substantial damages. 43. In Worby v Rosser [1999] Lloyd s Rep PN 972, the Court of Appeal again analysed the facts on the basis that the personal representatives of the estate of the deceased had a good claim in damages by reason of the solicitors negligence during the deceased s lifetime in attempting to prepare a later will which will, following the deceased s death, led to a contested probate action the costs of which came out of the estate. Again this seems to me to be an example of the court finding that the personal representatives of the estate had a cause of action in tort by bringing together a duty of care in tort owed to the deceased in his lifetime together with a breach of that duty during the deceased s lifetime and the incidence of loss to the estate as a result of a contested probate action which could only have arisen following death. 44. In Corbett v Bond Pearce [2001] 3 All E R 769, as indicated above, the Court of Appeal did not doubt the correctness of Otter v Church Adams Tatham & Co [1953] Ch 280 and followed the earlier decisions of the Court of Appeal in Carr-Glynn v Frearsons and Worby v Rosser. In particular, Sir Christopher Slade commenting on Worby v Rosser said at page 779 c to d: For present purposes the significance of this case lies in the fact that the Court of Appeal accepted that in a case where a solicitor s negligence in regard to the preparation or execution of a will was the cause of expensive probate proceedings after the testator s death, this could give rise to a claim for damages against the solicitors at the suit of the testator s personal representatives for the benefit of the estate generally. On the particular facts of that case, the testator s personal representatives would have had a good cause of action for the loss suffered and if they had pursued the claim the solicitor would have been exposed to no double liability.

45. On the strength of these authorities, Mr Johnson submitted to me that there was no lacuna in the present case of the kind detected in White v Jones or Carr-Glynn v Frearsons. Subject to any question of limitation, Mrs Rind s estate could sue the solicitors in contract or in tort for breach of duty and the damages recoverable would be the amount by which the estate was diminished by reason of the liability of the estate to pay IHT. The question as to whether and when such a claim by the estate would become statute barred and the question whether the alleged cause of action, vested in an intended beneficiary, would become statute barred at the same time or a different time did not enter into the equation as to whether there was a lacuna in recovery (in the absence of a cause of action vested in the intended beneficiary). In the present case, the damages recovered by the estate in the way described above would be added to the residuary estate and would find their way to the residuary beneficiaries. It was not necessary to extend the duty of care, owed by the solicitors to their client Mrs Rind, to the Claimant. 46. These submissions, if I accepted them, would result in the conclusion that the solicitors did not owe a duty of care to the Claimant at any relevant time. However, the submissions ignore one vital matter. They do not refer to another decision of the Court of Appeal, namely, the decision in Daniels v Thompson [2004] PNLR 638, to which I now must turn. 47. Daniels v Thompson arose out of facts which have some significant similarities with the assumed facts of the present case. In 1989, a Mrs Daniels was 85 years of age. Her son, Mr Daniels, was the only beneficiary under her will. Mrs Daniels went to the defendant solicitor for advice on reducing the potential liability of her estate for IHT. In 1989, Mrs Daniels owned the freehold of four properties and she lived in one of them. Her preferred option was to transfer that property to her son by way of gift. The solicitor advised Mrs Daniels to take out an insurance policy to protect her estate against the risk of a liability to IHT in the event that she died within seven years of the transfer. The solicitor s advice was on the basis that her estate would not bear IHT on the value of the relevant property if she survived for seven years from making the gift. However, it was intended that Mrs Daniels would continue to reside in the property, otherwise than for valuable consideration, and the solicitor did not advise her that this would amount to a reservation of benefit which would mean that the value of the property would, for IHT purposes, be included in her estate. Mrs Daniels did survive for more than seven years and on her death, the Inland Revenue assessed IHT on the value of her estate, including the value of the relevant property, on the ground that there was a reservation of benefit. Mr Daniels, the son, was the executor of the estate and sued the solicitor for damages in negligence. His claim asserted that he as executor was entitled to claim for breach of the duty owed to his mother with the damages being the extra amount of IHT payable by the estate on her death. 48. The claim form was issued in May 2002 complaining of negligent advice in 1989 and the defendant solicitor pleaded a defence of limitation. The court directed a preliminary issue as to the limitation defence. The judge held that the cause of action in contract accrued when Mrs Daniels executed the gift in favour of her son in August 1989. The judge also held that Mrs Daniels suffered damage on that occasion so that her cause of action in tort also arose in August 1989. A submission by Mr Daniels, that the date of knowledge for the purposes of Section 14A of the Limitation Act 1980 meant that the running of time was postponed, was rejected by the judge. Mr Daniels

appealed to the Court of Appeal but only in relation to the judge s finding as to when the cause of action in tort accrued, in other words, as to when Mrs Daniels suffered damage. The principal arguments were as to whether damage was suffered in August 1989 when Mrs Daniels executed the deed of gift or on her death when the estate became liable for IHT. 49. For the defendant solicitor, various possible dates were identified as to the date when damage was suffered. The solicitor s primary case was the damage was suffered when Mrs Daniels relied on the solicitor s advice and did not take effective steps to make the gift a PET. Alternatively, it was submitted that such loss was suffered seven years before her death when it became inevitable that Mrs Daniels estate would bear tax in relation to the property gifted to Mr Daniels. The solicitor also put forward other ways in which it was suggested that Mrs Daniels had suffered loss. The first was as a result of paying the defendant s fees for services which were of no value. The second date was a possible date when Mrs Daniels might have incurred the expense of taking action to remedy the position created by the defendant solicitor. 50. Mr Daniels case, on appeal, was that the loss was only suffered on Mrs Daniels death because it was at that time that her estate became liable to pay the extra IHT. 51. Although the only issue before the Court of Appeal was as to the date when Mrs Daniels suffered damage so as to complete her alleged cause of action in tort, the Court of Appeal considered whether Mrs Daniels had ever suffered damage at all and thus whether she ever had a completed cause of action in tort. At [34], Dyson LJ held that Mrs Daniels was never at risk of having to pay any IHT. That was a risk to which the estate alone was exposed. Once it was appreciated that Mrs Daniels could never suffer a liability to pay IHT then it became clear that she did not suffer any loss as a result of the defendant s negligence on the facts of that case. Dyson LJ rejected all the various ways in which the defendant solicitor had contended that Mrs Daniels had suffered damage. He held that the detriment she suffered was that the solicitor s negligence frustrated her wish to confer on Mr Daniels the benefit of a reduction in the IHT liability of her estate. He added that this was not a detriment recognised by our law as damage which is capable of assessment in money terms. He referred to White v Jones [1995] 2 AC 207 as a similar case where the estate did not suffer loss but the intended beneficiaries did. At [42], Dyson LJ said that these considerations led to the conclusion that the originally pleaded case was bound to fail because Mrs Daniels never had a cause of action in tort. At [43], he pointed out that the executor s claim was bound to fail. If the loss claimed was not suffered until Mrs Daniels died then she had no cause of action in her lifetime and her executor similarly had no cause of action. Alternatively, if the loss was suffered during her lifetime it must have been more than six years before action brought. At [45], Dyson LJ referred to the possibility that the loss in question could only have been suffered by the estate or possibly the personal representative or the beneficiary under the will. The defendant solicitor contended that one should not extend the White v Jones principle to hold that the solicitor owed a duty of care to the personal representative. But, in any event, the personal representative suffered no loss because the personal representative was entitled to an indemnity for the IHT from the estate. The Court of Appeal had reserved its judgment and all three members of the court prepared draft judgments which were released to the parties. The claimant wished to have the case restored for further oral argument but the request was declined. Dyson LJ also declined a request

by the claimant to amend the Particulars of Claim because the amendment was made too late. 52. In Daniels v Thompson, Carnwath LJ indicated at [56] that he had approached the case with an expectation that the relevant duty of care owed by the solicitor could be sued on by the personal representatives not because there was a separate duty owed to the personal representatives but because one could add together the duty owed to Mrs Daniels and the damage which was in due course suffered after her death by her estate. However, he was persuaded that this was not the right approach although he regarded his ultimate conclusion as paradoxical and unattractive : see [60]. Relevantly for present purposes, at [58] he stated that the court was not dealing with the claim by Mr Daniels in his capacity as a potential beneficiary under the principles in White v Jones. That claim was not before the court even under the proposed amended claim. Carnwath LJ referred to Section 1(1) of the Law Reform (Miscellaneous Provisions) Act 1934. If, as Mr Daniels contended, the damage was only suffered on Mrs Daniels death then she did not have a complete cause of action in tort when she died. Accordingly, there was no cause of action in tort to vest in her estate under Section 1(1) of the 1934 Act. He agreed with Dyson LJ that Mr Daniels had suffered no loss in his capacity as personal representative. He then considered Carr-Glynn v Frearsons [1999] Ch 326 but he pointed out that there was no limitation issue in that case and there was no need for the court to examine the nature of the cause of action which was vested in the personal representatives. In any event, the testatrix in that case would have had a cause of action against her solicitors in contract. 53. The third member of the court, Gray J, held that on the assumption that Mrs Daniels had suffered some damage, that damage must have been suffered when she made the gift to Mr Daniels. If one had to hold that Mrs Daniels suffered an actual detriment, that would have happened when she relinquished her title to the property without achieving the intended benefit of removing the property from the scope of IHT. He said that the real loser was the estate but the negligence did not cause recoverable damage to Mr Daniels in his capacity as his mother s personal representative. Permission to amend the claim should be refused because there was no real prospect of success for a claim by Mr Daniels in his capacity as personal representative. 54. The decision in Daniels v Thompson is the subject of a highly critical note by Janet O Sullivan in (2005) 64 CLJ 29. 55. Having reviewed the authorities, I now return to the question whether there is a lacuna in the present case in that Mrs Rind suffered no loss, so that she had no effective claim against the solicitors, that her estate could not inherit a more valuable claim than Mrs Rind herself had, and that there is no point in extending a White v Jones duty of care to the personal representatives as such because they suffered no recoverable loss, so that a court would wish to consider carefully whether a White v Jones duty should be extended to the residuary beneficiaries in relation to Mrs Rind s estate. The court in Daniels v Thompson did not discuss in any detail Mrs Daniels possible cause of action in contract against the solicitor. They did not say in terms whether such a claim would have entitled her to recover substantial damages or only nominal damages. They did not consider the case of Otter v Church Adams Tatham & Co [1953] Ch 281. Of course, the limitation treatment of such a claim would almost always mean that the claim in contract would not be available. The normal limitation