England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(SIR OLIVER POPPLEWELL)

		Royal Courts of Justice Strand London, WC2
		21 November 2002

1. LORD JUSTICE RIX: This is an application for permission to appeal, with appeal to follow, from the judgment of Sir Oliver Popplewell given on 31 May 2002. In the circumstances the issues have been fully debated on both sides. The applicants are Mr and Mrs Davenhall. The defendants are a firm of accountants, Blackstone Franks and Co, and an individual at that firm, Subhash Thakrar ("the defendants"). The Davenhalls' claim is one in professional negligence.
2. The Davenhalls had been successful in running a nursing home, Basford, which, on 12 August 1994 they agreed to sell to a company called Finecare for £1.2 million. The completion of that transaction took place in the next month, but the critical date for capital gains tax ("CGT") purposes was the date of agreement. As a result of that agreement, the Davenhalls became liable to CGT in the assessment year 1994/95 on a gain of £440,000 odd. They were formally assessed for CGT in October 1995 and the amount of the liability was agreed in February 1996 at just over £171,000.
3. It was possible entirely to exclude that liability in CGT by means of roll-over relief in the form of reinvestment in a qualifying investment. By reinvesting the £440,000 in shares in a company which carried on a qualifying business, the Davenhalls could relieve themselves of that liability. An investment of some £440,000 would relieve them of the liability in whole and a lesser investment would relieve them of that liability pro rata in part.
4. The Davenhalls were aware of their CGT liability from an early stage and were minded to mitigate it by the use of roll-over relief. Thus it was, in part for those tax driven reasons, that on 24 April 1995 they invested not merely £440,000 but £750,000 in the acquisition of a 20 per cent shareholding in Finecare, the company which had bought Basford, a shareholding which they acquired from Finecare's parent company, a BVI registered company called Finecare Securities Limited ("FSL"). Both Finecare and FSL were operated by the principal of those companies, Mr V J Thakrar. He has the same name as the second defendant but is not related to him.
5. At the time of those transactions, the defendants were accountants to both Finecare and Mr V J Thakrar. They were not, however, the Davenhalls' accountants. Nevertheless, some six months after the Davenhalls made the investment in the shares of Finecare, they retained the defendants to act on their behalf generally as tax advisers and, specifically, in relation to the claim which they wished to make for roll-over relief in relation to the investment they had already made in Finecare.
6. Three great difficulties arose about the Finecare investment from the point of view of the tax legislation providing for roll-over relief. One was that, under the transaction which the claimants had entered into with FSL and Mr V J Thakrar, they obtained a put-option from Finecare and/or FSL which enabled them to enforce the sale of their shareholding five years later, in 2000, at a price in excess of £1 million. The difficulty was that any such repurchase transaction ran foul of the anti-avoidance provisions of the relevant statute.
7. The second difficulty was that, because Finecare was more than 51 per cent owned by FSL, it was not in itself a qualifying vehicle for roll-over relief. The third difficulty was that the anti-avoidance provisions of the statute refused relief to a transaction made on uncommercial terms. The problem there was that although Finecare had some substantial holdings in nursing homes, it also had equally substantial liabilities. It would seem from its accounts that, even at the time of the transaction in April 1995, the shares which the Davenhalls purchased were not worth more (having regard to Finecare's net assets) than some £12,000 to £13,000.
8. In the event, whatever may have been the Davenhalls' confidence in Mr V J Thakrar at the time, their investment in Finecare proved to be disastrous. It is clear, however, that they had high hopes at the time. In July 1998, some three years or more after the investment, Finecare went into to receivership.
9. The Davenhalls' essential claim against the defendants for breach of duty is that, following on their retainer in October 1995, the defendants failed to advise the Davenhalls and warn them of the unsuitability of the Finecare investment as a basis for roll-over relief. Moreover, it is said that the defendants also failed to advise and warn the Davenhalls that, in the light of that unsuitability, they should consider making an alternative investment for the purposes of obtaining that relief. In principle, such an alternative investment was available to the Davenhalls because at an early stage, by January/February 1996, they informed the defendants of their intention to re-enter the nursing home market by acquiring a new property. The defendants were specifically asked to advise the Davenhalls as to whether such a new investment would be better conducted by the Davenhalls themselves in partnership or through some corporate structure. If a corporate structure had been pursued, the Davenhalls could, by subscribing to shares in a new company, Newco, have provided that company with funds to purchase a nursing home. If they had subscribed £440,000, they would have covered their CGT liability in full and if they had subscribed less, pro rata, as I have stated.
10. Although it appears from some of the documents before this court that the defendants were alive to some at least of the problems of the Finecare investment as the basis for roll-over relief, they did not advise or warn the Davenhalls. It is accepted for the purposes of this application that it can be assumed, that being only an assumption, that from shortly after their retainer in October 1995, the defendants were in breach of duty in failing to advise the Davenhalls as alleged.
11. The tax legislation provided that any investment sought to be the basis of roll-over relief had to be made within three years of the agreement pursuant to which the CGT liability in question arose. Those three years, subject to any extension which the Revenue were empowered to give, expired on or by 12 August 1997. In September 1997 the defendants requested an extension from the Revenue. The Revenue replied in terms indicating that they might be willing to give an extension but that was never pursued. In the event, the Davenhalls lost faith in the defendants and switched their instructions to a new firm of accountants, David Hill and Co, as from 1 January 1998.
12. Following the transfer of those instructions, the Davenhalls were advised that the Finecare transaction was in all probability a broken reed and that they should contemplate a new transaction. In February 1997 the Davenhalls had purchased a new nursing home, Brookfield House, in their own names for £560,000. The purchase was financed as to 100 per cent by borrowings from the Davenhalls' bank, the Royal Bank of Scotland ("RBS"), and secured by a mortgage over both Brookfield and the Davenhalls' family residence, Bank Top Farm. In the light of that purchase, the Davenhalls' new accountants advised them of the potential of an alternative scheme for roll-over relief whereby the Davenhalls would set up a new company and would borrow sums with which to subscribe for shares in that company. With those subscribed monies that company could, perhaps with new borrowings of its own, purchase Brookfield from the Davenhalls. Again the magic number for total relief against their CGT liability was £440,000 (or possibly £430,000) but any lesser investment would bring pro rata relief.
13. This scheme was investigated with both the Revenue and with RBS. The Revenue agreed that the scheme would be successful provided no charge was given to RBS over the Davenhalls' shares in Newco. It is common ground for the purposes of this hearing that no roll-over relief scheme would successfully operate if either the Davenhalls' new borrowings were secured on their investment in Newco, or if their borrowings were secured upon the property itself to be transferred to Newco, ie Brookfield. Therefore, new finance had to be raised by the Davenhalls themselves. They had to be in a position to borrow sufficient sums to provide them with the investment for relief and to be able to give such security as the lending bank required, or they had to have other assets available to them which they could realise for the purposes of the Newco investment. On 16 February 1998 the Revenue indicated that they would be willing to give to the Davenhalls a short extension, say four weeks, for the contemplated transaction to be completed. The matter was then investigated with the RBS. Unfortunately, on 12 March 1998 Mr Sneddon, the commercial manager at RBS, wrote to Mr Hill, the accountant, to say that the proposed refinancing transaction did not carry the support of the bank on the ground that the shortfall of security on the side of the Davenhalls personally was too great. Mr Sneddon's letter explained that the Davenhalls' pension policies could not be assigned to the bank and that, although the bank could take some comfort from them by way of background assets, they did not count towards security for the funding. The proposal was a loan of £430,000 secured on the Davenhalls' home (the farm) which was estimated to be worth £350,000. That asset would however only be given, for the purposes of security, a value of 70 per cent of that figure, providing collateral for a loan of only £240,000. The letter pointed out that that left a shortfall of £185,000 if what the Davenhalls were seeking was a loan of £430,000 for the purposes of their investment in Newco. It was clear from the terms of his letter that Mr Sneddon would have liked to have been helpful if he could. He raised the question of whether Newco could buy the farm from the Davenhalls and permit them to continue to live there. He also raised the question of the tax implications of that proposal. For the purposes of this application it is common ground that any such move would run foul of the statute's anti avoidance provisions.
14. On 17 March 1998 the budget announced, inter alia, that roll-over relief was no longer to be made available from the end of that tax year (after 5 April 1998) on new investments in nursing homes. That gave the Davenhalls only a limited time in which to decide whether to take advantage of the Revenue's willingness to give them an extension of time. In the event, they did not ask for any further extension of time and the opportunity for them to restructure the Brookfield investment into Newco so as to earn tax relief expired at the latest on 5 April 1998.
15. It was in these circumstances that the Davenhalls brought their claim against the accountants. Their claim form was issued on 28 September 2001. In their particulars of claim they pleaded a breach of duty from the time of the defendants' retainer onwards and focused on the Brookfield transaction as being the essence of their claim for loss of damage caused by the alleged breach of duty. They also pleaded that the three year period had expired on 12 August 1997 and that no extension was granted by the Revenue. In the light of the facts I have outlined, that was not the whole story, although it was the story during the period of the defendants' retainer as the Davenhalls' accountants.
16. The Davenhalls' solicitors were aware, in outline, about the events of the early months of 1998, but had never seen the documents which were in the files of David Hill & Co, and also with the Davenhalls. They had not considered it necessary to obtain those documents and to ensure that they understood the events down to their very end. So it was that the particulars of claim were pleaded in the way in which they were. However, following a change of solicitors on the part of the defendants, in April 2002 specific inquiry was made of the Davenhalls' solicitors for the files of David Hill & Co.
17. On 10 May 2002 those documents came for the first time into the possession of the defendants' solicitors. Particularly in the light of the way in which the Davenhalls' loss had been pleaded in the particulars of claim, the defendants lost no time in appreciating that there was an opportunity to strike at the heart of the claim by an application under Part 24. They did so on the basis, inter alia, that the Davenhalls were wholly unable to prove any loss in the light of what was alleged to be their own decision not to proceed with a Newco scheme following the Revenue's willingness to extend time into March 1998, and on the basis of abuse of process by reason of non-disclosure of these documents. That application was made within a week of the disclosure of the documents on 17 May 2002. The defendants' evidence followed on 20 May 2002. The claimants' evidence in response, by way of witness statements from a partner in their solicitors and from Mr David Hill, followed on 22 and 24 May. The defendants' evidence in reply came forward on 28 May, and by 30 May the matter came for hearing before the judge. He gave his judgment on 31 May 2002.
18. It was wholly commendable that matters were dealt with so speedily because by that time, Spring 2002, preparations for trial were not only well advanced but all but complete; for instance witness statements and experts' reports had been exchanged and a date for trial had been fixed for 1 July 2002.
19. Although the pleadings focused on the opportunity on the part of the Davenhalls to restructure through Newco the Broadfield purchase which took place on 2 February 1997, there was a general submission made to the judge that the opportunities of Davenhalls to restructure their roll-over relief should be looked at from October 1995 onwards. Nevertheless, both in the light of the way in which the Davenhalls' pleadings and evidence pursuant to those pleadings had been focused for trial, and in the light of the newly disclosed documents relating to the attempt as late as March 1998 to restructure the Brookfield transaction, the focus of the argument before the judge remained on Brookfield, in particular the period February 1997 to March 1998.
20. It was that period which the judge dealt with in his detailed findings in the judgment. It is clear from passages in paragraphs 24 and 27 of the transcript of his judgment that the submission hade been made before him that it was necessary to look to the whole time from October 1995 onwards. Nevertheless, in the penultimate paragraph of his judgment, having found that it was impossible to say that there was any difference in the Davenhalls' ability to finance an investment in Newco between 1997 and 1998, the judge went on to say, "... and there is nothing to suggest that an earlier date is a date to be used". In the final paragraph of his judgment he said:

"It follows, therefore, in my judgment, that the Claimants are not going to be able to show that any damages caused to them by failure in 1998 was caused by the negligence ..."

of the defendants. He came to that conclusion in relation to 1998 because he formed the view that the decision not to go ahead with the Newco transaction was one that the Davenhalls could not avoid by reason of their inability to raise more than £245,000 towards the figure of £430,000. He also formed the view that the matter was no different a year earlier, at the time when Brookfield had been purchased.

21. On today's application, Mr Anthony Mann QC, who appears for Davenhalls, nevertheless takes two new points which were not before the judge:

(1) The Davenhalls could have raised finance, not only by using their home as security which would only have yielded 70 per cent of its value, but also by selling it which would have yielded close to 100 per cent of its value. I say "close to" because there would have been expenses involved in relation to such a sale;

(2) If the Davenhalls had been properly advised in time they would have had the opportunity of investing less than 100 per cent of their gain and obtaining, pro rata, less relief.

22. The first new point was nowhere dealt with in the Davenhalls' evidence, either in the evidence originally prepared for trial or in the evidence prepared for the purposes of the Part 24 application. As for the second point, not only was there no evidence before the judge that that was something which the Davenhalls would have had in mind or have been willing to do, but to some extent there was evidence to the contrary to be found in paragraph 8 of Mr Hill's witness statement, where he said:

"While it may have been possible to borrow a lesser sum [less than £430,000] there were two insuperable difficulties with that course. First, a shortfall on borrowing would have meant that only some measure of reinvestment relief would have been obtained, leaving the Davenhalls with some liability to CGT which they could not meet. Secondly, in the budget on 17 March 1998 ... "

He then referred to the change of law relating to the withdrawal of roll-over relief from nursing home businesses. It is, however, also fair to say that what Mr Hill said was said very much in the context of the Brookfield/Newco scheme being contemplated close up against the deadline in March 1998.

23. Those were Mr Mann's two new points on this application. But he also re-emphasised the Davenhalls' case from the period February 1997 to March 1998 in the context of the Brookfield transaction and back to the earlier period, starting in October 1995, when it is assumed the defendants' breach of duty was close to beginning. Thus Mr Mann submitted that, even before the Davenhalls had committed themselves to the purchase of Brookfield for £560,000, if they had at an early stage been made aware of the need to structure a new roll-over relief transaction, then they would have had the opportunity to contemplate a purchase of a property perhaps less expensive than Brookfield, and they would have had the opportunity to structure a purchase of such a new nursing home through a corporate structure at a time when their opportunities to borrow in the region of £440,000 were better than they turned out to be against the deadline of March 1998.
24. Mr Mann was unable to point to any new assets not contemplated by the judge below. He did submit that, as of late 1995 or 1996, the Finecare investment, although not one which a bank would have been willing to accept as security, might nevertheless have provided a bank with much more comfort than it was able to do in the much darker days of March 1998 when, on the material before the court, it is clear that the nursing home industry had taken a considerable turn for the worse. As we now know, Finecare was only months away from receivership.
25. Mr Mann's essential submissions are to the effect that, either by the sale of the farm, as distinct from using it as security, or by way of a better lending environment deriving from the context of the nursing home industry and the Davenhalls' recent good track record, late 1995 and 1996 presented a better prospect for borrowing than March 1998. Moreover, the Davenhalls would at that earlier time have been in a better position to contemplate a less than 100 per cent reinvestment of the amount of their gain in circumstances where they would still have hopes of emerging from the Finecare investment with fresh funds which in due course, if the Revenue could be kept waiting (and I understand the Revenue are still being kept waiting), the balance of capital gains tax liability could be dealt with in some other way.
26. Therefore, the failure to obtain 100% finance of a borrowing of £440,000, or £430,000, in March 1998, and/or the failure at that time of the Davenhalls to contemplate a partial reinvestment of that amount, should not lead at an interlocutory stage to an inference that the position would have been identical at an earlier time, a fortiori in 1995/1996.
27. In response to these submissions, Mr John Higham QC, on behalf of the defendants, has pointed out that such an approach is not supported in the Davenhalls' pleadings, is not supported in their evidence, was not reflected in the evidence or submissions before the judge and has not been reflected in any new evidence which the Davenhalls had the opportunity of seeking to put either before the judge or on the basis of an application to admit new evidence before this court even at this late stage. All this against a background, he submits, of an original pleading which was wholly misleading in respect to the time limit available to the Davenhalls for the obtaining of tax relief and the failure to give proper disclosure.
28. In these circumstances, Mr Higham submits that a court should show the Davenhalls no sympathy whatsoever. He also relies on the decision of this court in Aylwen v Taylor Joynson Garrett [2002] PNLR 1. In that case Mrs Aylwen's claim was struck out under a Part 24 application on the basis that she could prove no loss. When her appeal came before this court she sought to introduce new evidence. Her case was that, through the negligence of her solicitors she had lost possession of the home, which she had agreed to purchase from her estranged husband, as a result of possession proceedings brought by the mortgagee. The judge found that she could show no loss of market value because she had simply chosen to invest monies neither into the mortgage in order to rescue the home, nor into the purchase of another property, but rather merely to buy a short lease. In those circumstances any loss arose from her own decisions and not from any negligence on the part of her solicitors. It was in that state of the proceedings that she sought to rely before this court upon fresh evidence and an entirely new case relating not to market losses but to the home's unique nature and to a newly pleaded case of tax related losses. The court held that she failed to meet the application of Ladd v Marshall principles in the CPR regime.
29. It seems to me, however, that Mr Higham's reliance on Aylwen, and his general submissions on this application, do not meet the particular facts of the present case. It is perfectly true that if this was a matter of trial, the Davenhalls' evidence on the hypothetical question of what they would have been willing to do and would have done, if they had been advised in time of the defects in the Finecare investment and of the need to contemplate a new roll-over relief structure, can be said to be seriously wanting. But the hearing before the judge below was not a trial, nor is this application a trial. Whatever criticisms can be made of the Davenhalls' existing evidence before the court, they are not seeking on this application to put in new evidence. Therefore, their application must stand or fall by the evidence which is already before the court, which is either good enough or not good enough for present purposes which, I emphasise, are not those of a trial: see Swain v Hillman [2001] 1 All ER 91.
30. The test on Part 24 is whether the Davenhalls can meet the burden of showing a real or reasonable prospect of success at trial. Breach of duty has to be assumed in their favour. The Davenhalls, Mr Mann accepts, bear the burden of showing on the balance of probabilities at trial that they would have expended monies, either the maximum if they could or some lesser sum if that was all they were able to do, on a new roll-over relief structure from October 1995 onwards. If they have a prospect of showing that they would have adopted an alternative structure and would have invested further funds, then they bear the additional burden of showing that they would have had a real or more than speculative chance or possibility of obtaining those funds either from the sale of their home or from using it as security with the bank (see Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 1602).
31. In my judgment there is material already before the court which is sufficient to meet those tests. Albeit the Davenhalls' way of presenting their case is different from the case originally pleaded, it is not incoherently inconsistent with the original pleading. Moreover, although the Davenhall pleaded case is deficient, and although Mr Higham relies on that deficiency as part of the asserted general hopelessness of their position, he made it quite clear that both before the judge and today he eschewed any formal pleading point. There is evidence before the court that from early 1996 onwards the Davenhalls were contemplating a new investment in a nursing home and that the subject had been specifically raised with the defendants. There is evidence before the court that the Davenhalls were at all material times interested and anxious to obtain roll-over relief to set off against their capital gain, and that the defendants knew that. There is also evidence before the court that in August 1998, albeit that is a few months after time had run out, they were seriously considering the sale of their home. Thus, there is a letter before the court dated 20 August 1998, written by Mrs Davenhall to Mr Sneddon at RBS, discussing refinancing possibilities. It stated that she and her husband were seriously considering the sale of their home, less four acres of the land around it, from the proceeds of which they would wish to repay to the bank £250,000 of the loan on Brookfield House and to use the balance to purchase or part purchase a property for themselves. She said at the end of the letter that they were committed to that -- albeit in the end they did not go through with it, and it is not clear how negotiations with the bank continued. Thus it can be said that there is evidence before us, which is all the more influential in that it arose outside the context of this litigation, on that point of the willingness to sell.
32. The question has arisen of where the Davenhalls, with their two teenage children, would live, particularly if they were going to devote not £250,000 but the maximum £350,000 to be derived from the sale of their home, to a roll-over relief scheme. One possibility that has been canvassed before the court is that they would go and live in Brookfield. Mr Higham submitted that that would run foul of the anti-avoidance provisions of the statute, in particular because it provided a benefit to the Davenhalls or because it would mean that the investment was not for a wholly qualified purpose. Mr Mann, by reference to other subsections of the taxing statute, has shown indicated that those points are in themselves highly debatable.
33. It remains difficult to see that the Davenhalls would at any time from October 1995 onwards, indeed from any time after they committed all their cash resources to their unwise investment in Finecare, have been able to put their hands on another £440,000 by way of borrowings or realisation of assets with which to offset the maximum of their capital gain and to obtain maximum relief. Nevertheless, on the evidence before us, it certainly appears possible that they would have been able, if they had so wished, to have made a substantial contribution towards a scheme designed to obtain relief by using their home as security. Even if the March 1998 figure of only 70 per cent security is taken, that is a sum of £245,000. So, can it be said that there is no reasonable prospect that the claimants could show that they would have been willing to use their home as security for a £245,000 investment in a period from October 1995 onwards and at a time before the Brookfield investment, and thus at a time when it may be that a less expensive property than Brookfield at £565,000 could have been settled on as being the kernel of their new investment? I cannot conscientiously say that there is no reasonable prospect of the claimants showing that. Can it therefore be said that they should have no opportunity at trial of making that case because hitherto their evidence has been that they were contemplating only an investment of the full £440,000 or £430,000?
34. I cannot say it should. This is essentially in the realm of hypothesis. Clearly, it is possible to make an inference from the unwillingness of the Davenhalls to proceed in March 1998 and from the late emergence of Mr Mann's new points that at some earlier period the position would have been no different. No doubt there is good cross-examination material in the difficulties in which the Davenhalls find themselves. That cross-examination material can range over the way in which their claim was originally pleaded, the failure in disclosure, Mr Hill's evidence about the two insuperable difficulties in March 1998 and, no doubt, much more. But I see nothing in their case currently, albeit defectively, pleaded to exclude as a matter of incoherency the real prospect of their being able to support the necessarily hypothetical case that, if they had been warned in time of the need to restructure a roll-over relief transaction, they would have been willing to make an investment of something less than 100 per cent of the capital gain in question.
35. In these circumstances, so far as the judgment below is concerned, the position has changed in the light of Mr Mann's two new points and his re-focusing of the argument on the period directly following October 1995. Although the point that one should go back to October 1995 was made to the judge, it is plain from the judge's judgment and from passages in the transcript which Mr Higham has shown us, that that was nowhere near the heart of the judge's concern.
36. In the light of the way in which the judge dealt with that point, and the passages that I have cited from his judgment, it is not even plain to me that the judge was willing to look at the period 1995 onwards as being a relevant period for the purposes of showing causation of loss, as distinct from the period starting with the purchase of Brookfield down to March 1998. Nor is it clear that the judge focused -- and this may well be because of the way in which the matter was argued before him -- on the lesser burden that a claimant faces on that aspect of a claim which is concerned not with proof on the balance of probabilities but on proof for the purposes of a loss of a non-speculative chance. The "loss of opportunity" concept was raised before the judge in argument, but the fact that it does not require proof on the balance of probabilities does not appear to have been emphasised.
37. I also bear in mind the unusual circumstances in which this Part 24 application arose, namely close to trial itself. I think that because the evidence for trial had already been exchanged, the judge was perhaps tempted to think that he was in a better than normal pre-trial position to see the case in the round. In truth, however, the situation was an unusual one: the case was prepared for trial, but so far as loss and damage were concerned on an erroneous (the defendants would say on a misleadingly false) basis which the recently disclosed document had highlighted. The fact that the original case on loss and damage had exploded did not mean, however, that there was not a possible alternative, fall-back position. As I have already said, that fall-back position, which Mr Mann has developed in his submissions today, can live coherently with the explosion of the original thesis. It is, in my judgment, a matter for trial on the evidence of the witnesses, not on the affidavits hurriedly produced for the application, to decide whether that case, which in essence appears to me to have a real prospect of success, ultimately does succeed.
38. In these circumstances, and for the reasons which I have given in relation to the material before the court, I would conclude that permission to appeal ought to be granted and, having heard full argument from both parties, that the appeal ought to be allowed.
39. LORD JUSTICE DYSON: The question that arises on this appeal is whether the Davenhalls have shown that there are real prospects that they will recover substantial damages as a result of the assumed negligence of the defendants. The way in which their case is now put is that, because they were not advised that the investment in Finecare would not be effective to enable them to achieve relief against capital gains tax, they have lost the opportunity of obtaining that relief in whole or in part by other means. That opportunity would only have been available if they could have obtained the funds necessary to obtain relief. That would have depended on whether they would have been able to raise such funds by selling existing assets or borrowing other monies.
40. Mr Mann's two central points are both new:

(1) that the Davenhalls would probably have been willing to sell Bank Top Farm for about £350,000 or borrow monies on the security of that property from RBS; or

(2) that at the very least they would have been willing and able to obtain relief against a substantial part of the capital gains tax liability. These points were not foreshadowed in the pleadings or any of the evidence. However, as Mr Higham points out, there was nothing to stop the Davenhalls from obtaining partial relief in early 1998 and yet they chose not to do so, apparently because there would remain a substantial residual liability to capital gains tax.

41. Mr Higham submits that it is reasonable to infer that the Davenhalls would have been unwilling to accept partial relief at any time between October 1995 and March 1998. Further, there is no evidence that the Davenhalls would have been willing to accept partial relief during the earlier part of this period, still less any evidence from them explaining why they would have acted differently in the earlier part of the period from the way that they acted in March 1998.
42. In my judgment, Mr Higham makes telling points and he identifies real weaknesses in the Davenhalls' case. I hesitated long before coming to the conclusion that this appeal should be allowed, but that is the conclusion I have reached. It is clear that the Davenhalls were anxious throughout the relevant period to obtain the relief. The letter of 20 August 1998 indicates, albeit at a somewhat later period and in a different context, that they were willing to contemplate a sale of Bank Top Farm at that time. More difficult from the Davenhalls' point of view is the question of whether there are real prospects of their showing that they would have accepted partial relief if they were unable to obtain full relief. It may be that the circumstances prevailing in the period from late 1995 through to and including 1997 would have meant that they were willing to do then what they were unwilling to do in early 1998.
43. For these reasons, as well as those which have been fully explained by my Lord, I too would allow this appeal.

Order: Application for permission to appeal allowed. Appeal allowed. Paragraph 1 of the order below to be set aside. Paragraph 2 also to be set aside. Repayment of the sum of £1,000 (or whatever is the agreed figure) plus interest. Costs below to be the defendants' in the case and costs of appeal to be the claimants' costs in the case. (Counsel to provide agreed minute of order)

(Order does not form part of the approved judgment)