1. The Pleadings

[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.

2. Submissions

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 (2^nd 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 (17^th 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, had they been mortally wounded but not yet dead, could not have pursued the defenders for the Inheritance Tax which their estates were bound to incur. In terms of section 3A(5) of the 1984 Act (supra), the presumption of exemption flew off immediately before death. Under section 4, if a death occurred, the assumption was that a transfer had been made immediately before death. This was not a case where tax fell due on the individual transfers. Rather, the loss of the potentially exempt transfers had raised the value of the total estate above the "nil" rate band for Inheritance Tax purposes. The simple question was whether there was any reason why, if the deceased could have raised actions for loss arising at the moment of death, the action should be struck out because the loss would arise to the estates. There was not (cf Daniels v Thompson [2004] EWCA Civ 307, Dyson LJ at paras 34, 37 and 48; PNLR 638 at 648, 649 and 651). The pursuers were "eadem persona cum defuncto" (Mitchell v Mackersy (1905) 8F 198).

[8] The second was that the executrices had a claim, which did not depend on transmission from the deceased, but which they could pursue in respect of damage done directly to the executory estates (Stewart v London Midland and Scottish Railway Co. 1943 SC (HL) 19, Lord Thankerton at 28). Thirdly, if there were no claim by the executrices, there remained one for loss of support under section 1 of the 1976 Act (supra). Whether there was loss of support was a broad question of fact (see Cruikshank v Shiels 1953 SC (HL) 1, Lord Normand at 4-5); the legislature having chosen not to define the words in any way. The pursuers had received support from their parents by way of gifts and, but for the actions of the wrongdoer, they would have continued to enjoy the full benefits of the gifts. Now, the estate, which will come to them, will be diminished. There was nothing contrary to Scots law in the approach taken in England (McGregor (supra) para 36-038). Why should the amount of lost inheritance not be taken into account (Taylor v O'Connor 1971 AC 115, Lord Reid at 127)? All losses could be brought within the ambit of "any" loss of support in section 1(3) (see Dingwall v W Alexander & Sons 1982 SC (HL) 179, Lord Justice-Clerk (Wheatley) at 205, Lord Kissen at 219, Lord Robertson at 228). Section 1(5) excluded consideration of inheritance in a particular manner but did not prohibit a claim for a diminution in inheritance tax.

3. Decision

[9] As a generality, at common law an executor has a title to sue for any patrimonial loss suffered by a deceased. A right of action, vested in a deceased at the date of his death, may be pursued by his executor. However, a speciality arises in cases where that right is based upon a wrong causing the death. In that situation, it has long been the case that certain relatives of the deceased are able to claim for loss suffered not by the deceased or his estate but by themselves in the form of solatium etc. and loss of support. This may be regarded as a peculiarity in Scots law, but it has the practical advantage of compensating those actually suffering loss as a result of the death. A succinct description of the history and nature of the principle is given by the Lord President (Cooper) in McKay v Scottish Airways (supra at 263) and bears repetition:

Conversely, it was clear that an executor of a deceased, who did have a derivative or representative right, could not sue for all losses to the deceased's estate. In particular, in this type of action, losses which arose to the estate as a result of the death were not recoverable. Thus, an executor could not claim the wages which, but for his death, the deceased would have earned in his lifetime (Somerville v National Coal Board 1963 SC 666, Lord President (Clyde) at 669). He could not even claim the funeral expenses, which the estate had incurred (McEnaney v Caledonian Railway Co. 1913 1 SLT 373, following upon Leigh's Executrix v Caledonian Railway Co. 1913 SC 838). It is then an established principle at common law that, where the wrong founded upon has caused the death, an executor can only recover patrimonial losses suffered by a deceased during his lifetime.

[10] The Damages (Scotland) Act 1976 (supra) defines the rights to damages in respect of personal injuries and death which are transmitted to an executor (vide the headnote). In its original form, the Act provided:

These provisions did not innovate upon the common law. Section 3 of the Damages (Scotland) Act 1993 (c 5) changed the phraseology of the 1976 Act slightly to the following, leaving the substance of section 2 essentially unchanged so far as relevant to this case:

The section in its current form is not only a restatement of the common law in this area (that is to say of the transmissibility of claims in fatal cases) but it also supersedes it by statutory codification.

[11] Inheritance Tax is charged "on the death of any person" (Inheritance Tax Act 1984 (supra) section 4). Although the tax is charged on the estate of the deceased person "as if, immediately before his death, he had made a transfer of value...of his estate...", for there to be any liability to pay the tax, the deceased must have died. On this basis, any loss in relation to the incidence of Inheritance Tax must be attributable to a period after death. Therefore, both at common law and now under the 1976 Act, any claim for damages in respect of that loss does not transmit to an executor. For this reason, the pursuers' claim, which is based on its transmission from the deceased to them as executrices, must fail. In that regard, this part of the claim, as framed in the condescendence, is phrased partly as if the loss were to the residuary estate of the deceased. Presumably, however, the liability is that of the estate as a whole, the gifts having become chargeable transfers on the occurrence of the deaths within the seven-year period (section 3A(4)). The value of the gifts, after deduction of reliefs, will have resulted in an increase in the net total of the chargeable transfers liable to tax in so far as it exceeds the excepted amount.

[12] It is, as a generality, competent for executors to claim for losses caused to an estate by negligent acts where there has been no transmission to them from the deceased. An obvious example is where the negligent act has occurred after death. There are also situations where an action may be raised for damage caused to an estate as a result of a negligent act happening before death. Claims for patrimonial loss occasioned by breaches of contract are one example, but there are many others which will transmit to executors. In this regard it is not instructive to take much out of English cases in this field, where different rules seem to apply (eg Daniels v Thompson (supra), cf Chappell v Somers & Blake (supra)). In Scotland the executor stands eodem persona cum defuncto and is able to claim successfully for losses caused in many situations to the deceased or his estate or both. However, such claims are outwith the field of loss occasioned by the death of a deceased as a result of a negligent act forming the basis of the action. In that situation, which is the one under consideration here, the distinct principles, mentioned above as having been developed over the last two centuries under the common law and now statute, come into play. These principles do not allow a claim by an executor for loss occurring to the deceased's estate by reason of an increase in Inheritance Tax chargeable as a result of (ie following upon) death. That is not because tax losses are not recoverable, since in many cases they clearly are (e.g. Duff v Duff (supra)). Nor is it because of any lack of foreseeability. When a wrongdoer causes the death of another, it must be reasonably foreseeable that there will be fiscal consequences arising, not least the incidence of Inheritance Tax. Furthermore, the claim does not fail because, upon a construction of the 1984 Act, there has been no loss because the transfers were potentially chargeable prior to death. From a factual point of view, there undoubtedly is a loss to the estates of the deceased in the form of a diminution of value caused by the incidence of tax as a result of the premature deaths. Rather, the claims fail because the loss does not arise during the deceased's lifetime.

[13] The principles in this area permit certain relatives, including children, to claim for loss of support. Having developed these principles, as described by the Lord President (Cooper) (supra), the common law set about determining the class of relatives entitled to claim. It was eventually settled that, for the purposes of establishing a title to sue, a relative would have to show that the deceased actually owed a legal duty to aliment him (Eisten v North British Railway Co. (supra)). However, the relative did not have to establish that the level of support, which he had been obtaining, was simply that necessary to allow him to survive. Once the legal duty to aliment was established, by reference to the relationship between the relative and deceased, the claim would be for the level of support which the relative could prove would have been afforded to him by the deceased but for the death (eg Cruikshank v Shields (supra), cf Quin v Greenock and Port Glasgow Tramways Co. (supra) where the support had not come directly from the deceased). The 1976 Act (supra) sought to expand the class of persons that might claim, by abolishing the rule that a legal obligation of support was required. It did not interfere, however, with the common law idea that what was recoverable was "loss of support" (Dingwall v W Alexander & Sons 1982 SC (HL) 179, Lord Justice-Clerk (Wheatley) at 205).

[14] Section 1 of the 1976 Act provides that:

Sub-section (5) expressly provides that any inheritance by a relative from a deceased's estate is not to be taken into account. In this, and other respects, there are many similarities with what appears to be the position now in England. However, although it may achieve equally equitable results, the law in that jurisdiction reaches its levels of compensation by an entirely separate statutory route, namely the "wide and vague" terms of section 3 of the Fatal Accidents Act 1976 (c 30) as amended (see Davies v Whiteways Cyder Co. (supra), Taylor v O'Connor (supra) and generally McGregor (supra) at para 36-018 et seq). In Scotland the route is compensation to qualifying relatives for "loss of support", by which is meant the amount which they would have received during the deceased's lifetime (i.e. had he not died).

[15] The amount of loss of support is a question of fact. The words do not require definition. They are clear in what they say and have not posed any significant problem so far as their scope is concerned, at least until now. The assessment of that loss is essentially a jury question. There are traditional methods of calculation, which have proved helpful over the years in the ordinary case. Thus, where the deceased has been earning and supporting his family, or other qualifying relatives, out of his income, it has been useful to take an accepted proportion of the net income which might reasonably have been used for family support (i.e. excluding personal expenditure and the like and an element for the deceased's own provision) and apply a multiplier to represent the years between the death and the point at which the support might have ceased. In the case of a spouse, that might have been up until the deceased's potential retirement from employment and, in the case of children, the period may have ended at a point when their education might have been expected to cease and they might have commenced supporting themselves. There were, and are, many variables in such cases. However, what is being assessed is the amount of money which the deceased would have dedicated to the support of his relatives during his lifetime. It does not include any sums after the anticipated date of death of the deceased. These sums, if any, would have been taken care of in the deceased's will.

[16] In relation to the sums given during his lifetime, there seems no particular reason to restrict the amounts to a proportion of the deceased's income from employment or investment. Since the nature of a claim by the deceased's estate and that by his relatives is quite different, the relatives' claim need not bear a direct relationship to the level of lost earnings, which the deceased might have recovered in a personal injuries action if he had not died. If the deceased were in the habit of supporting his relatives out of his capital, or perhaps even out of funds he obtained from others (such as a spouse), these sums might amount to support. Equally, so far as the recipient is concerned, the task is to establish what he would have received from the deceased for his support. In that connection, the money need not have been used for what some might regard as the necessities of life. The issue of fact is simply to determine the amounts which would have been received. If deceased's method of providing support was to transfer large sums of capital to his relatives so as to avoid inheritance tax in due course, these sums might well be regarded as support which was lost on death.

[17] In this case, what is claimed as loss of support is a sum equivalent to the diminution in the values of the estates which the pursuers would have obtained as residuary legatees but for the deaths. Such diminution is not capable of being classified as support to the pursuers which would have been given by the deceased (cf the position in England under the wider statutory provision, McGregor (supra) para 36-038 fn 79 referring to Davies v Whiteways Cyder Co. (supra)). It is not averred that further gifts might have been forthcoming. It is not, and presumably cannot be, asserted that, but for the deaths of the deceased (i.e. if they had still been living) a sum equivalent to the ultimate increased level of inheritance tax would have been provided as support during the deceased's lifetimes. For these reasons the claims for loss of support must fail as irrelevant.

[18] I will therefore repel the pursuers' first plea-in-law and sustain the defenders' first plea-in-law by excluding from probation the words from "In 1995..." to the end of the fourth article of condescendence and from "In 1995..." to "... residuary beneficiary" in the fifth article of condescendence. The final sentence of the sixth article should also be excluded. The funeral expenses claim is properly brought by the pursuers as relatives of the deceased rather than as executrices and, on that basis, as no further relevant case remains at the instance of the pursuers in that capacity, I will dismiss the action in so far as it proceeds at their instance as executrices. The action will proceed to a proof on quantum of solatium etc. and funeral expenses at the instance of the pursuers as individuals.