Background
The pursuers were two daughters of the late Thomas Paterson (the deceased) who died on 21 April 2016. They were not beneficiaries under his will because he had left everything in his estate to his wife provided she survived him for 30 days. Had his wife not survived him for 30 days his estate would have been split equally between his five daughters. His wife subsequently died on 22 November 2016 and her will contained essentially the same provision so the pursuers were beneficiaries under her will along with their three sisters.
The pursuers' complaint related to the deceased's transfer of part of his estate (255 acres of land) to the defender (who was the husband of one of their sisters) in October 2011. The pursuers claimed that the consideration of £420,000 paid by the defender for the land was less that the actual or likely market value, which would have been £1,050,000.
The pursuers sought two remedies. The first was damages (which were based on a fifth each of the difference between the sum paid for the land and the sum they claimed the land was worth) plus one-fifth of the Capital Gains and Inheritance Tax liability which they claimed arose as a result of the disposition from October 2011 together with interest and likely penalties thereon. The second was declarator that the defender was under an obligation to make payments in respect of the aforementioned tax and other sums to each pursuer.
The pursuers had three bases for their claim in damages. The first was intentional delict on the basis of conduct by the defender constituting fraud, the second was facility and circumvention and the third was undue influence. Following the debate in the commercial court, the Lord Ordinary held that (i) the fraud case was irrelevant, (ii) the pursuers had not demonstrated title to sue, and (iii) the remedy of damages was not competent in a claim based on facility and circumvention or undue influence. He also rejected arguments put forward by the defender that the claim has prescribed. The action was dismissed and the pursuers reclaimed to the Inner House with the defender cross-reclaiming the decision regarding prescription.
Title to sue
The pursuers claimed the Lord Ordinary had not carried out a proper analysis of title to sue in a case based on facility and circumvention or undue influence. They said that where a deed granted by a deceased person is challenged on these grounds it will depend upon the deceased having died in a situation where the person challenging the deed became the granter's beneficiary. They accepted the granter's executor would have title to sue and said there could be more than one link in the chain which might include beneficiaries and their issue. What was necessary was for there to be "some legal relation which gives him some right which the person against whom he raises the action either infringes or denies" as referred to in D&J Nicol v Dundee Harbour Trustees 1915 SC (HL) 7. The pursuers claimed that they could be said to be in legal relation because of their position as beneficiaries of the deceased's wife (their mother) who had inherited the deceased's estate and their claim that the defender infringed their right to the full value of the deceased's estate. The pursuers were also said to have an identifiable entitlement to share in an estate which was diminished by the disposition. As regards interest, it was submitted the pursuers' averments regarding the detriment they suffered as a result of the disposition being granted at undervalue were sufficient to found a claim.
The defender claimed the pursuers were in error in suggesting that, as beneficiaries to the estate of a deceased, they had a right to determine what the estate comprised. The only proper legal relation here was a right to inherit from their mother's estate however it was comprised at the time of her death. That was not a right which the defender was said to have infringed. The right which the defender could be said, on the pleadings, to have infringed was the right of the deceased to have decisional autonomy in the conduct of his affairs. Whilst the deceased would have had title to sue in relation to that and it may have passed to his executors it did not pass to the pursuers.
The Inner House agreed with the defender that the right of beneficiaries to a deceased's estate does not amount to a right to determine what the estate constitutes, the right is rather to inherit the estate as it is. The right which the pursuers were alleging to have been infringed was a right of the deceased and not his beneficiaries so title to sue rested with the executor and not the beneficiaries. The court also observed that the deceased's will was not executed until 17 October 2012 which was after the disposition was granted. The pursuers were not a party to any legal relation, as discussed in the Dundee Harbour Trustees case, which gave them a right to sue. Accordingly, the reclaiming motion would have been refused on the lack of title to sue alone.
Although the Inner House considered that the reclaiming motion could have been disposed of on this basis, they went on to consider the issues of remedy and prescription given the submissions made on these issues.
Remedies
For the pursuers it was accepted that no clear authority could be pointed to in order to demonstrate the availability of damages for facility and circumvention or undue influence. However it was suggested that there was no reason in principle why the remedy of damages should not be available for the wrongful acts of facility and circumvention. Facility and circumvention and undue influence should be regarded as a civil wrong and accordingly damages would be competent and should be an alternative remedy to reduction.
The defender's position was that the Lord Ordinary was correct to hold that damages were not a competent remedy in the circumstances of the case. Where the claim of fraud had disappeared and there were no averments of a civil wrong, there was no right to damages. Albeit restitutional remedies such as reduction, an award for enjoyment of benefits of the land since the disposition or possibly pecuniary restitutional remedies to restore unjustified enrichment could exist. It was possible for facility and circumvention and undue influence to arise from innocuous circumstances without any wrongful act. Where there was a wrongful act damages would flow. The deceased's averments did not offer to prove a civil wrong and therefore would only justify a restitutional remedy.
The court observed that the remedy which would normally be sought where it was alleged that a disposition had been obtained by either facility and circumvention or undue influence was reduction of the disposition. They noted that claims for facility and circumvention and undue influence required to be assessed objectively. When looking at the language describing the necessary conduct in cases of facility and circumvention in various texts and authorities, they considered these carried a connotation of moral turpitude. They did not see a justification for suggesting that a person who behaves in this way should not be described as committing a wrong. They agreed with the findings of the Lord Ordinary that there were sufficiently relevant averments of facility and circumvention and undue influence in the pursuers' pleadings. They would have allowed the matter to go to proof in relation to this had it not been for their decision on the other matters.
,Prescription
As part of their challenge to the Lord Ordinary's finding that the matter had not prescribed, the defender submitted that the last date when any wrongful conduct on the part of the defender could have occurred was at the execution of the disposition on 9 October 2011. This was the date on which damnum must have occurred and the prescription period must have started then. It was wrong of the Lord Ordinary to have held that this was only at the date of the mother's death because there was no alteration in the value of the estate either then or at the death of the deceased. The Lord Ordinary ought to have held that any case which the pursuers might otherwise have had prescribed in October 2016 (five years after the disposition). The action was not raised until 28 July 2017. The start of the prescription period could not be postponed by section 11(3) of the Prescription and Limitation (Scotland) Act 1973.
The pursuers argued that the prescriptive period should have started to run from the date when the executor of their mother took office. Before this they were only in the position of parties who could potentially suffer loss. They argued that the Lord Ordinary's decision on prescription was right. Loss could not crystallise until after their mother's death. They also submitted that section 11(3) would have applied because they did not know at the time of the disposition that the land had been transferred for a sum which was a gross under-valuation and reasonable diligence would not have required them to make inquiries at that time. They said that a proof would have been required to determine matters relevant to this.
The Inner House agreed with the defender's submissions. They considered that there was a concurrence of damnum and injuria at the time the disposition was executed in October 2011 as that was the date on which the estate of the deceased was diminished by sale at an alleged under value and the date of the allegedly wrongful conduct. Accordingly, the pursuers' right of action prescribed in October 2016. They considered the pursuers' argument unsound and that section 11(3) did not assist the pursuers.
The reclaiming motion was therefore refused, the defender's cross-reclaiming motion was allowed and absolvitor was granted.
Comments
The Inner House's opinion is very useful in its analysis of three issues which may arise in disappointed beneficiary cases. The conclusions are, of course, largely fact specific. However the clarification as to who may have title to sue in this type of case and the approach to determining the timing of loss are of assistance. In addition, the comments on the availability of damages as a remedy in certain cases in particular are, in particular, very useful. It is helpful to have clarity that damages may be available as a remedy in cases of facility and circumvention or undue influence where appropriate averments are made in pleadings.
