Gosden & Anor v Halliwell Landau (a firm) & Anor

In a negligence claim concerning the loss of property intended to pass under a tax mitigation scheme, damages were assessed at the date when the claimant would have become entitled to the property, rather than automatically at the date of the negligent sale. The court may depart from the ordinary tort rule where necessary to provide adequate compensation. The assessment must place the claimant as nearly as possible in the position he would have occupied without the breach, while avoiding overcompensation.

A proven inheritance tax liability and necessary sale costs may be deducted. The evidential burden rests on the defendant. Pre-judgment interest ran from the date of loss at an appropriate compensatory rate. An enhanced rate for litigation conduct is exceptional and will usually be unnecessary where costs sanctions and Part 36 are available.

The claimants sued a firm of solicitors and its partner for professional negligence in implementing an estate protection scheme intended to secure the transfer of a property on the death of the deceased with reduced inheritance tax exposure.

In an earlier judgment, the court found a negligent failure to register a restriction protecting the beneficiaries’ interest, but initially rejected causation. The Court of Appeal overturned that conclusion and remitted quantum for assessment on the basis that the property could not have been sold without the claimants’ consent. The issues were the valuation date, deduction for inheritance tax, interest, and a late amendment concerning rental income.

1. Damages and valuation date. The ordinary rule is that damages in negligence are assessed when the loss occurs. The court may depart from that rule where necessary to compensate adequately. The appropriate question is fact-sensitive and is not confined by whether the case resembles an existing reported authority. Applying Smith New Court Securities Ltd v Scrimgeour Vickers [1997] AC 254, Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433 and County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916, the relevant date was the deceased’s death. That was when the first claimant would have become entitled to the property. Valuing it at the earlier sale date would fail to reflect the intervening fluctuation in value; valuing it at the later trial date would be unnecessary.
2. Measure of compensation. The governing objective, confirmed by Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, was to place the claimant as nearly as possible in the position he would have occupied absent the breach. The loss was therefore the property’s value at the deceased’s death, subject to any inheritance tax and sale costs that the defendants proved would necessarily have reduced the claimant’s benefit.
3. Inheritance tax. The defendants bore the evidential burden of proving that inheritance tax would have been payable, the amount payable, and that the estate could not meet it without selling the property. That burden was satisfied. The court inferred that HMRC would have challenged the scheme, that the estate would probably have compromised, and that credit had to be given for pre-owned asset tax. The resulting deduction was £124,683.30.
4. Interest. Interest ran from the deceased’s death to judgment because that was when the claimant became entitled to the property. After judgment, interest ran at the statutory judgment rate under section 17(1) of the Judgments Act 1838. Pre-judgment interest was fixed at 3.5 per cent above base rate as compensation for being kept out of money, taking account of inflation and borrowing costs.
5. Enhanced interest and amendment. Although Perry v Raleys Solicitors [2017] EWCA Civ 314 established that an increased interest rate may be available for inappropriate conduct, such cases are rare and exceptional. The availability of Part 36 and indemnity costs will ordinarily be sufficient. Permission was granted for the late amendment concerning rental income, but that head of claim was abandoned following the inheritance tax conclusion.
6. Disposition. Judgment was entered for the claimants in the agreed sum of £985,299.45. Costs were reserved for a separate ruling.

• Court of Appeal: The earlier first-instance conclusion on causation was overturned in [2020] EWCA Civ 42, and quantum was remitted.
• High Court (Commercial Court): The court assessed damages and entered judgment for the claimants in the sum of £985,299.45.