HT-2019-CDF-000012 - [2025] EWHC 1315 (TCC)

The explanation of this head of claim is in paragraph 22 of the Schedule of Loss:

“22.

The sale of the Flats at an earlier date would have enabled the Wilsons to gift the proceeds to their children to buy a home. Rises in value of those homes would not have been subject to VAT. In addition, the Wilsons are now 68 and 63 respectively and gifts at an earlier point would have lessened the risk that those gifts would be subject to IHT on the death of the Wilsons. Insurance is available to cover such risk.”

The first and second sentences of paragraph 22 are not (at least, for me) easy to understand. I am not sure that I understand the case being advanced in them much better after the hearing. It appears to be contended that an early transfer of the flats to the children would have brought greater financial benefit to the children. That may or may not be so. But the children are not parties to the claim. Further, any claim ought to have been quantified. Further still, the head of claim is not pleaded.

The second and third sentences of paragraph 22 are contending, I think, that the defects in the Development meant that the Wilsons could not realise the value of the flats by selling them and were thus prevented from minimising the values of their estates at an earlier date, and that they have thereby incurred the risk of an increased inheritance tax liability on the estates. The quantum of the loss is said to be the cost of buying an insurance policy in respect of that risk. In my judgment, this is not a recoverable head of loss. First, it is not pleaded. Second, it is plainly too remote. There is no reason at all why a developer should be liable in respect of the consequences of a purchaser’s tax planning. (I note, incidentally, that this head of claim is, at the very least, in tension with the basic measure of damages, be that expressed in terms of diminution of value or cost of remedial works. So far as financial losses are concerned, the basic measure of damages seeks to correct the fact that the purchaser has too little by way of monetary value. This head of claim, by contrast, is premised on the purchaser having too much.) Third, the head of claim seems to me to make no sense on its own terms. If the Wilsons were concerned about the inheritance tax position, they could have transferred the flats earlier. I appreciate that they are saying that, were it not for the defects, they could have sold the flats and given the proceeds to the children. But this supposes that the Wilsons did not need to keep the flats or the proceeds for themselves. So a decision to retain the flats until recently was simply a choice they made and has nothing to do with being prevented from divesting themselves of value.

Accordingly, the final entries in the second part of the table will be struck out.