Death crash tax claim fails, says appeal court
7 Sep 06
Judges uphold dismissal of executors' claim based on inheritance tax clawback
An additional inheritance tax charge caused by an unexpectedly early death cannot be reclaimed in damages by the executors in an action based on the death, the appeal court has confirmed.
The First Division under Lord President Hamilton upheld a decision by Lord Carloway (reported on The Journal Online, http://www.journalonline.co.uk/news/1002573.aspx) rejecting this part of a claim by sisters Catriona Mackintosh and Alison Mann whose parents Charles and Evelyn Mann were killed in a road crash.
Within the seven years before they died, Dr and Mrs Mann had made substantial cash gifts to each of their daughters which became subject to a tax charge when they died.
In their action against the executors of the other driver, Philip Morrice, who was also killed, the daughters tried to recover an equivalent amount as part of their damages on the basis that but for the accident, their parents would have survived beyond the seven year cut off point for an inheritance tax charge.
Delivering the opinion of the court, Lord MacLean said it was an established principle at common law that, where the wrong founded on caused death, an executor could recover only patrimonial (financial) losses sustained by a deceased during his lifetime.
Under the Damages (Scotland) Act 1976, there 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, any right to damages by way of compensation for patrimonial loss attributable to any period after the deceased's death did not transmit to the executor.
As the Lord Ordinary pointed out, he said, inheritance tax was charged on death 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 was attributable to a period after death.
The daughters made no case as individuals for loss of support and however the tax claim was regarded, it was not support which the deceased provided for the pursuers during the deceased's lifetime.
"While having some natural sympathy for the pursuers", he concluded, " 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."
The court's decision can be read at http://www.scotcourts.gov.uk/opinions/2006CSIH43.html .