England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE ETHERTON)
HC03 C00847 and HC01 C04684

		Strand, London, WC2A 2LL
		11 March 2005

Lord Justice Chadwick:

1. These are appeals from orders made on 1 April 2004 by Mr Justice Etherton in proceedings brought by Jemma Trust Company Limited against Kippax Beaumont Lewis, a firm of solicitors retained (or formerly retained) by the executors and trustees of the will of the late Sir Geoffrey Hulton, Bart. The object of the proceedings is to enforce, for the benefit of Sir Geoffrey Hulton's estate, claims against the solicitors which, it is said, have arisen from advice given (or not given) to the executors in the course of the administration of the estate.
2. Jemma Trust Company Limited claims to be interested, as trustee of a Jersey trust, in the property comprised in the estate. The two individuals, Mr Liptrott and Mr Forrester, who are the executors and trustees of the will, were joined in the proceedings as co-defendants. On the basis that no relief was claimed against them personally they took no part in the proceedings before the judge; and they have taken no part in these appeals.

The underlying facts

3. Sir Geoffrey Hulton died on 20 November 1993. By his last will, dated 5 July 1991, he had appointed his solicitor, Mr Liptrott, and his land agent, Mr Forrester, to be his executors and trustees. Mr Liptrott was then a partner in Kippax Beaumont Lewis. The firm carried on practice at Bolton, in Lancashire. Mr Liptrott and Mr Forrester had acted for Sir Geoffrey for many years; and, in particular, had acted for him in connection with his landed estate at Hulton Park, Bolton. Probate of the will, and a codicil thereto dated 1 May 1992, was granted to the executors out of the Manchester District Probate Registry on 19 April 1994. The value of the estate, as sworn for probate, was in excess of £8.2 million.
4. By clause 7(A) of his will Sir Geoffrey devised his landed estate at Hulton (the "Hulton Land") to his trustees upon trust (i) to permit his wife, Patricia, to occupy a dwellinghouse known as The Cottage together with the adjoining gardens during her lifetime, and (ii) to pay the remaining income to her during her lifetime with power to pay capital to her or for her benefit. Subject thereto (there being no children of the marriage) he gave the Hulton Land to his nephew, Mr Hugh Butterfield, with remainders over in the event that Mr Butterfield should die in the lifetime of the survivor of himself and Lady Hulton.
5. Sir Geoffrey was survived by his wife and by his nephew. But, at the time of his death, Lady Hulton was (by reason of senile dementia) no longer capable of managing her own affairs. On 26 April 1994, shortly after the grant of probate in respect of Sir Geoffrey's estate, her brother, Major Myles Reynolds, was appointed by the Court of Protection to act as her receiver.
6. In the months following the death of Sir Geoffrey Hulton the executors, with the assistance of a barrister, Mr Stephen Marriott, who was then employed by Mr Liptrott's firm, Kippax Beaumont Lewis, began to consider how matters could be arranged so that the liability for inheritance tax potentially payable on the death of Lady Hulton could be mitigated. In particular, they considered whether business property relief might be available in respect of the Hulton Land and, if so, how that relief might best be obtained. The executors consulted specialist tax counsel (Mr Robert Venables QC and Mr Robert Grierson) to advise them. By September 1994 (if not before) Mr Marriott had raised with the solicitor acting for Major Reynolds, a proposal that the trusts of Sir Geoffrey's will might be varied. By the end of 1994 the executors were aware that any deed of variation which affected Lady Hulton's life interest would require the consent of the Court of Protection.
7. Application by the executors, under rule 20(f) of the Court of Protection Rules 1994, for approval of proposals to vary the will was made to the Court on 20 July 1995. It is clear from the letter of that date under cover of which the relevant documents were sent to the Court by Kippax Beaumont Lewis, that Mr Marriott (at least) was well aware that the deed by which the variation was to be effected would need to be executed before 20 November 1995, the second anniversary of Sir Geoffrey's death. That was necessary if advantage were to be taken of the provisions of section 142(1) of the Inheritance Tax Act 1984.
8. The variation proposed – which was to be effected by a deed to be executed by Major Reynolds, acting under an order of the Court of Protection on behalf Lady Hulton, Mr Butterfield and the executors – was the addition of a new clause to the will. That new clause – to be clause 7(C) – would provide that, notwithstanding clause 7(A), if in the exercise of the power conferred by clause 7(A)(ii) the trustees of the will should within two years of Sir Geoffrey's death have paid to Lady Hulton a sum of money (which would be specified in the deed as executed) for her own use and benefit absolutely, then subclause 7(A)(ii) would have effect as if the direction to pay the remaining income of the Hulton Land to Lady Hulton during her lifetime were omitted and the gift over in subclause 7(A)(iii) – and, in particular the gift of the Hulton Land to Mr Butterfield – would, during the remainder of Lady Hulton's life, carry the intermediate income. In substance, although not in form, the proposed variation would have effect as if Lady Hulton had surrendered her life interest in the Hulton Land in return for a capital payment – while preserving the trustees' power to appoint further capital to her during her lifetime. A more conventional partition of the fund comprising the Hulton Land between life tenant and remaindermen (some of whom were unborn) would have required approval under the Variation of Trusts Act 1958. But, for practical purposes, the sum which was to be paid to Lady Hulton by the exercise of the power conferred by clause 7(A)(ii) of the will was the 'price' which Major Reynolds, acting under the direction of the Court of Protection, would require for Lady Hulton's consent to the surrender of her life interest in the Hulton Land.
9. The application for approval came before the Master of the Court of Protection on 24 October 1995. At that date the 'price' had not been agreed with Major Reynolds and his sisters – one of whom, Mrs Monica Cooke, had by then been appointed to act with him as joint receiver. The figure proposed by the executors, with the support of the Official Solicitor, who had been joined to represent the interests of Lady Hulton, was £435,000. That figure was acceptable to Mr Butterfield. But, in the face of opposition by Major Reynolds and Mrs Cooke, the Master refused to approve or direct execution of the deed of variation and dismissed the application.
10. Mr Butterfield appealed. The appeal came before Mr Justice Lightman on 9 November 1995. The 'price' had still not been agreed, and the appeal was opposed by Major Reynolds and his sisters. Mr Justice Lightman adjourned the matter for further evidence. The appeal was restored before Mr Justice Ferris on 15 November 1995. At that stage it was opposed. The judge heard argument throughout that day. But, overnight, agreement was reached as to the amount of the capital payment to be made to Lady Hulton and the opposition was withdrawn. On the basis that the variation was acceptable to Major Reynolds and his sisters Mr Justice Ferris authorised Major Reynolds to execute the deed of variation (with the figure of £750,000 inserted) on behalf of Lady Hulton.
11. The deed of variation, in the form agreed and approved by the Court of Protection, was executed by Major Reynolds, Mr Butterfield and the executors on 16 November 1995. On the following day, 17 November 1995, the executors, in purported exercise of the power conferred by clause 7(A)(ii) of Sir Geoffrey Hulton's will, paid £750,000 to Lady Hulton's receivers. On 5 February 1996 the parties to the deed of variation gave notice to the CTO under section 142(2) of the 1984 Act (as then enacted) of their election that section 142 (1) of the Act should apply to the deed.
12. Section 142(1) of the Inheritance Tax Act 1984 is in these terms:

"Where within the period of two years after a person's death –

(a) any of the dispositions (whether effected by the will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or

(b) the benefit conferred by any of those dispositions is disclaimed,

by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions, this Act shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred."

As Mr Justice Etherton explained, at paragraph 79 of the judgment which he handed down on 1 April 2004, [2004] EWHC 703 (Ch), the object of the deed of variation was to enable Sir Geoffrey Hulton's will to have effect, for the purposes of inheritance tax chargeable under the 1984 Act, as though a life interest in the Hulton Land had never been conferred on Lady Hulton. Although the surviving spouse exemption on Sir Geoffrey's death, conferred by section 18(1) of the Act, would be lost in relation to the Hulton Land, it was thought that the arrangement would have the advantage of avoiding the charge to inheritance tax that would otherwise arise in respect of the Hulton Land on Lady Hulton's death in circumstances in which the executors could reduce or eliminate the charge to tax which would thereby arise on Sir Geoffrey's death by claiming business property relief or agricultural relief.

13. It must have come as a surprise to Kippax Beaumont Lewis, therefore, when they received from the Capital Taxes Office ("the CTO") a letter dated 18 October 1996 in which the writer explained that the view taken by the Office was that, notwithstanding the deed of variation and the payment of £750,000 to Lady Hulton by the executors, Sir Geoffrey's will continued to have effect as conferring a life interest in the whole the Hulton Land on Lady Hulton from his death until the termination of that interest, under the new clause 7(C), on 17 November 1995. The basis for that view was explained in the letter:

"The official view is that the only variation to the original Will was the addition of clause 7(C), i.e. following upon the Section 142 Variation Lady Hulton was still life tenant of the whole of the Hulton Land. On 17/11/95 the Trustees agreed to exercise their discretion in accordance with the specific powers granted to them under the terms of the Will and they advanced £750,000 to Lady Hulton, but this was not part of the agreed Variation and so it had nothing to do with Section 142. As a result of the advance, however, the provisions of the new clause 7(C) swing into play and inter alia Lady Hulton's life tenancy of the Hulton Land is terminated and Hugh Butterfield takes an interest in possession in view of the reference to his contingent interest 'carrying the intermediate income . . .' in the amended clause 7(C). On this basis we would have a potentially exempt transfer claim against Lady Hulton on the termination of her interest in possession, but provided that she survives for seven years this transfer will be an exempt transfer; the spouse exemption due in respect of the Hulton Land on the deceased's death is not affected, as the advance and its consequences do not come under the Section 142 umbrella and so are not deemed to have been made by the deceased at his death."

14. Mr Marriott sent instructions to counsel, seeking advice as to the course to be taken in the light of the letter from the CTO. Mr Venables QC and Mr Grierson gave advice in consultation on 19 November 1996. They followed that consultation with an opinion and draft letter (to be sent to the CTO) on 10 December 1996. At the same time they settled a note of the consultation. It is plain that counsel advised, in trenchant terms, that the view taken by the CTO as to the effect of the deed of variation and the capital payment was wrong; but, nevertheless, they suggested that there might be some advantage to be gained if the Office were to issue a certificate of discharge, under section 239(2) of the 1984 Act, on the basis of that mistaken view. The letter, which was sent by Kippax Beaumont Lewis to the CTO on 19 December 1996, was in these terms, so far as material:

"The Executors had assumed that as a result of the execution of the Deed of Variation, making the Section 142 Election and the advance of £750,000 to Lady Hulton, the Hulton Land devised by clause 7 of the testator's will was deemed to have been comprised in a chargeable transfer of value made by the testator on his death. On that basis, they would have claimed that the value transferred was reduced to nil by the availability of 100% Business Property Relief.

The Executors now appreciate that the official view is that their view is wrong and that nothing has happened to deprive the transfer of value deemed to be made by the testator on his death of its status as an exempt transfer insofar as concerns the Hulton Land. While the Executors are now content to accept that the official view is correct, they naturally wish to ensure that they can safely distribute the Hulton Land Fund without any claim being made on them in the future for Inheritance Tax on it in respect of the testator's death.

We believe that you are able to give a binding assurance as to the position by means of a certificate issued under Section 239(2) of the Inheritance Tax Act. The conditions are satisfied in that the testator made a transfer of value on his death and tax is or may be chargeable on the value transferred, two years have elapsed from the transfer and the application is made by the Executors, who are liable for the tax, if any. It is a further requirement that the applicant delivers to the Board, if the transfer is one made on death, a full statement to the best of his knowledge and belief of all property included in the estate of the deceased immediately before his death. The Executors believe that they have done so.

The Executors would therefore ask you formally to determine that no tax is chargeable on Sir Geoffrey's death insofar as the value transferred by him was attributable to the Hulton Land."

15. It was not until 23 May 1997 that the CTO found time to reply to that letter. In their letter of that date they declined to issue a clearance certificate in respect of the Hulton Land, on the ground that "it is not official practice to issue a Certificate in a taxable estate in respect of an individual asset". But they did give a firm assurance, from which they undertook not to resile, that the Hulton Land was not chargeable to inheritance tax on the death of Sir Geoffrey "by virtue of the surviving spouse exemption, since Lady Hulton was still life-tenant of the whole of the Hulton Land following upon the Section 142 Variation".
16. Kippax Beaumont Lewis took further advice from counsel. Counsel advised that the CTO were probably entitled to refuse to issue a clearance certificate (for the reason given in the letter of 23 May 1997); but settled a letter inviting the Office to reconsider. That letter was sent on 30 June 1997. It had the desired effect. By a letter dated 1 September 1997 the Office agreed that "because of the highly unusual circumstances of this case" a clearance certificate would be issued in respect of the Hulton Land alone. The certificate was issued on 28 October 1997.
17. The reason why the executors were concerned to obtain a clearance certificate, if they could, appears from the note of the consultation on 19 November 1996, settled by counsel, and counsel's opinion of 10 December 1996. Put shortly, the executors were advised that the CTO were wrong in their view as to the effect of the deed of variation. The Office had overlooked the provision, in section 142(4) of the 1984 Act, that:

"Where a variation to which subsection (1) above results in property being held in trust for a person for a period which ends not more than two years after the death, this Act shall apply as if the disposition of the property that takes effect at the end of the period had had effect from the beginning of the period; . . ."

The effect of that provision was that, on the executors paying £750,000 to Lady Hulton in the exercise of the power conferred by clause 7(A)(ii) of the will, the determination of her life interest under the provisions in the new clause 7(C) – which would have taken place within two years of Sir Geoffrey's death – was to be treated as having occurred on his death. That was an argument which the trustees of the will, and their beneficiaries, might wish to advance in the event that the CTO sought to charge inheritance tax in respect of the Hulton Land on Lady Hulton's death within seven years of 17 November 1995 – when, on the view taken in the letter of 23 May 1996, she had made a potentially exempt transfer.

18. But, if that argument were to succeed in the context of resisting a charge to inheritance tax on Lady Hulton's death, there was the obvious danger that the CTO would seek to reopen the question whether inheritance tax should have been charged in respect of the Hulton Land on Sir Geoffrey's death. A certificate of discharge confirming that no inheritance tax was chargeable in respect of the Hulton Land on the death of Sir Geoffrey – on the basis that the transfer on his death was an exempt transfer by reason of section 18(1) of the 1984 Act - would be a powerful weapon in any future battle to prevent the CTO from reopening that question. Counsel advised that it would be open to Mr Liptrott and Mr Forrester to rely, as executors of Sir Geoffrey's will, on a certificate of discharge based on their acceptance (in that capacity) of the analysis in the letter of 23 May 1996, while contending, as trustees of the trusts affecting the Hulton Land, that that analysis was wrong. The settled note of the consultation on 19 November 1996 records Mr Venables' advice that:

" . . . it was essential that we distinguish between Executors and Trustees although in this instance they would be the same individuals. After the administration of the estate had been completed the Executors would become Trustees. The distinction was important as any agreement made by the Executors would not bind them as Trustees."

Counsel considered whether there was any obligation on the executors to inform the CTO that the view expressed in the letter of 23 May 1996 had failed to take account of section 142(4) of the 1984 Act; and advised that there was not. It is inherent in that advice that counsel thought that there was no need to tell the Office that Mr Liptrott and Mr Forrester would feel free, in their capacity as trustees, to take that point in the future.

19. As I have said, a clearance certificate in respect of the Hulton Land was issued on 28 October 1997. On 29 November 1997 Mr Liptrott and Mr Forrester, as executors, executed an assent vesting the Hulton Land in themselves, as trustees, to hold upon the trust for sale imposed by clause 7 of Sir Geoffrey's will.
20. Lady Hulton died on 19 January 1998. On 29 July 1998 Mr Marriott sent to the CTO Inland Revenue Form IHT 100 "completed by the Trustees of the estate of the late Sir Geoffrey Alan Hulton Bt following the death of Lady Mary Patricia Hulton". Schedule 2 to that form referred to the deed of variation dated 16 November 1995 and to the election made in February 1996. It continued:

"3. A Notice of Election and the Deed of Variation was lodged with the Capital Taxes Office, Edinburgh who advised that the Variation was ineffective and that the Deed of Variation had the effect of creating a potentially exempt transfer by Lady Hulton. This interpretation was reluctantly accepted by the executors of Sir Geoffrey Alan Hulton Bt.

4. The Executors of Sir Geoffrey Alan Hulton Bt have vested the assets of the Hulton Land Fund in the Trustees of the Hulton Land Fund.

5. The Trustees of the Hulton Land Fund do not accept that Lady Hulton made a potentially exempt transfer of her interest in the Hulton Land Fund on the occasion of the Deed of Variation on 16^th November 1995. It is the view of the Trustees of the Hulton Land Fund that the deed of Variation was effective."

The suggestion, in the final sentence of paragraph 3, that the CTO view was "reluctantly accepted" by the executors does not sit easily with the advice that the executors should take advantage, if they could, of an obvious mistake.

21. The CTO took the view, initially, that they would not be bound by the clearance certificate in circumstances where it had been given on the qualified basis that it was subject to "the official interpretation of the Will and Deed of Variation" and where "You now seem intent on disturbing that interpretation, albeit selectively". On 5 July 1999 the Office wrote to accept that "the ending of Lady Hulton's interest on 17 November 1995 fell within the provisions of section 142(4) Inheritance Tax Act 1984". On 28 September 1999 it was confirmed, following advice from the Solicitor to the Inland Revenue, "that the certificates of discharge dated 28 October 1997 issued under section 239 Inheritance Tax Act 1984 concerning the Hulton land in respect of the death of Sir Geoffrey Hulton stand, even though the premise upon which they were issued was mistaken".
22. In the result, therefore, the CTO accepted that no inheritance tax was chargeable in respect of the Hulton Land on the death of Lady Hulton, because she had made no transfer of an interest in that land in November 1995; and accepted that they were precluded from charging tax in respect of the Hulton land on the death of Sir Geoffrey by the certificates of discharge which they had been persuaded to issue in October 1997.
23. It appears that, in December 1999, Mr Butterfield, who was resident in Guernsey, established a Jersey settlement (the "Igloo Trust"). He assigned his interest in the Hulton Land to the then trustee of that settlement, Bedell Cristin Trustees Limited. The claimant, Jemma Trust Company Limited, is said to be the current trustee of that settlement. As the judge recorded, at paragraph 55 of his judgment, it was accepted that the claimant was to be regarded as having a sufficient interest to bring the proceedings which were before him, provided that Mr Liptrott and Mr Forrester were joined as defendants in their capacities as executors and trustees. That was done.

The proceedings

24. There were two sets of proceedings before the judge. The first (the "DoV action", HQ01X04325) were commenced by the issue of a claim form in the Queen's Bench Division on 15 October 2001. Those proceedings were subsequently transferred to the Chancery Division and acquired a new reference number, HC03C00847. The claim in the DoV action was for damages suffered by the claimant by reason of the negligence of Kippax Beaumont Lewis in connection with the application to the Court of Protection for approval on behalf of Lady Hulton to the deed of variation.
25. The negligence alleged was set out under nineteen heads, summarised by the judge at paragraph 71 of his judgment. Damages were claimed under two heads. First, it was said that, on the advice of leading counsel, the executors and Mr Butterfield were forced, at the hearing of the appeal before Mr Justice Ferris, to offer a sum (£750,000) in respect of Lady Hulton's life interest "which was substantially in excess of the amount that should properly have been paid, had actuarial evidence been obtained". Second, it was said that unnecessary costs were incurred "both by reason of the failed application to the Court of Protection and by the way the application was dealt with".
26. The judge found that negligence had been established (although not in all the respects alleged). But he held that it was purely speculative whether, even if there had been no negligence, Major Reynolds and his sister, Mrs Cooke, would have accepted or the Court of Protection would have approved a deed of variation which provided for payment to Lady Hulton of less than £750,000. He dismissed the claim in the DoV action.
27. The later proceedings (the "CGT action", HC01C04684) were commenced by the issue of a claim form in the Chancery Division on 29 October 2001. The claim in those proceedings was for damages arising from negligent advice given by Kippax Beaumont Lewis in relation to the treatment of capital gains tax between 1993 and 2001. The solicitors were said to have been negligent in a number of respects; which were summarised by the judge under five heads at paragraph 203 in his judgment. The allegations included negligence in relation to the values placed on the Hulton Land for probate; in failing to advise the executors to assent to the vesting of the assets comprised in Sir Geoffrey's residuary estate in themselves as trustees before the death of Lady Hulton, or in the period between her death and the disposal of the assets; in submitting incorrect tax returns in respect of the estate; and in failing to advise the trustees of the Hulton Land that they should not report the capital gains accruing in respect of disposals of parts of that land. But, in the present context the relevant allegations were (i) that Kippax Beaumont Lewis failed to advise the executors to substitute, for probate values, the actual sale values of three properties comprised within the Hulton Land at Sir Geoffrey's death but sold within the period of three years after his death ("the section 191 point") and (ii) that they failed to advise the executors not to assent to the vesting of the Hulton Land in themselves as trustees before the death of Lady Hulton ("the Hulton Land vesting point"). The latter, it was said, gave rise to "an unnecessary deemed disposal of the Hulton Land on Mr Butterfield becoming absolutely entitled as against the trustees on Lady Hulton's death".
28. Insofar as the allegations of negligence (other than that in relation to the vesting of the Hulton Land) were pursued at trial, the judge rejected each of them or (in the case of the failure to substitute sale values for probate values – the section 191 point) held that it was impossible to say what would have happened if non-negligent advice had been given. But he found negligence on the part of Kippax Beaumont Lewis in failing to advise the executors and trustees competently in relation to the need for, and the capital gains tax consequences of, the November 1997 assent. He directed an enquiry whether any, and if so what, loss had been caused by the negligence which had been established.
29. In a postscript to his judgment, the judge observed that, from all that he had been told, the costs incurred (in excess of £1 million by the first day of the trial) and the time and resources engaged in trying the two actions (a hearing of thirteen days) appeared always to have been disproportionate to the actual damages likely to follow from any findings of negligence. That observation was well made.

The DoV action

30. The judge observed that the criticism, implicit in and underlying the claimant's case in the DoV action, was that the conduct of the executors in taking the central role in promoting the deed of variation and the application to the Court of Protection was wholly inappropriate. The judge held that criticism to be well-founded. At paragraph 90 of his judgment he said this:

"The role adopted by the Executors inevitably placed them in an impossible position of conflict of duties. As Executors, and as Trustees, they owed fiduciary duties to all those beneficially interested in the HLF. The tax planning arrangements, of which the DOV formed the central plank, involved a variation of the trusts of the HLF under the Will by elimination of the life interest in possession of Lady Hulton and an acceleration of the interest of Mr Butterfield. That variation was itself dependent upon the payment of a capital sum to Lady Hulton out of the HLF. In assuming the pivotal role in promoting the DOV, putting forward a specific capital sum to be paid to Lady Hulton as a pre-condition of the elimination of her life interest, and in seeking to persuade the CP to make an order for the execution of the DOV, the Executors placed themselves in a position in which it was quite impossible to satisfy their fiduciary obligations to both Lady Hulton and to Mr Butterfield. "

31. The judge accepted that the executors and Kippax Beaumont Lewis were motivated by the desire to implement what they believed to be the wishes of Sir Geoffrey in relation to the disposition of the Hulton Land: namely, that the immediate overriding consideration should be to ensure that Lady Hulton was properly provided for, and, subject to that, to ensure that the Hulton Land passed to Mr Butterfield as soon and as economically as possible. But, as he pointed out, the executors and their solicitors failed to appreciate that, in promoting the deed of variation, it was almost inevitable that they would find themselves preferring the interests of one of the beneficiaries over the interests of another. The executors failed to appreciate, and the solicitors failed to advise, that the duty of executors and trustees was to uphold the trusts of the will; it was not their duty to promote and drive forward proposals for altering those trusts. The normal approach of executors and trustees in relation to family arrangements was to adopt a neutral or facilitative role. By driving forward the tax saving plan on their own initiative and pursuing an opposed application to the Court of Protection, they managed to give the impression – at least to Major Reynolds and his sisters – that they were negotiating on behalf of Mr. Butterfield. As the judge put it, that was "manifestly inappropriate".
32. Further, as the judge also pointed out, the approach adopted by the executors was inconsistent with advice given by counsel (Mr Venables QC and Mr Grierson). In a Note dated 22 August 1994 they wrote:

"We have carefully considered the most important question of who should institute proceedings . . . in . . . the Court of Protection: it would not be appropriate for it to be the Executors."

That advice was confirmed in a Note sent by counsel to Kippax Beaumont Lewis with a draft of their joint opinion on 24 November 1994; in which it was suggested that the adult beneficiaries – Sir Geoffrey's nephews, Hugh and Neil Butterfield , and his niece, Gillian Peacock, should be the applicants. The judge held that responsibility for what he described as "the misguided approach of the Executors to the DOV and the Application" must lie with Kippax Beaumont Lewis.

33. As I have said, the judge set out the allegations of negligence in the DoV action under nineteen heads. His findings of negligence can be summarised under three heads. First, Kippax Beaumont Lewis were negligent in failing to act in a manner likely to secure the co-operation and support of Major Reynolds and the Reynolds family – paragraph 115 of the judgment. In particular, they were negligent in failing to respond to reasonable requests for information from Major Reynolds; in failing to explain the basis for the application to the Reynolds family; and in failing to negotiate the terms of the proposed deed of variation with Major Reynolds. Second, they were negligent in failing to advise the executors to obtain an actuarial report as to the value of Lady Hulton's life interest in the Hulton Land – paragraph 132 of the judgment. As the judge explained, an actuarial report is a standard – and, usually, an essential – tool in determining a proper division of a fund between those interested in income and those interested in capital: "Such a report should have been obtained before an Application was commenced, for the purpose of attempting to identify an appropriate capital payment to Lady Hulton, and to assist the negotiations with Major Reynolds and the Reynolds family, so that any application to the [Court of Protection] could be on an unopposed basis". Third, Kippax Beaumont Lewis failed to make the application to the Court of Protection promptly; in particular, if, as was submitted on their behalf, they were right to await preparation and production by the accountants of first year estate accounts, they failed to take the necessary steps to ensure that those accounts were produced promptly – paragraphs 141 and 142 of the judgment.
34. Those findings of negligence are not the subject of challenge on the appeal (2004/0949) from the order made in the DoV action. Although Kippax Beaumont Lewis have filed a respondent's notice on that appeal – seeking to uphold the judge's order on grounds other than those on which the judge relied – there is no quarrel with those findings.
35. The judge rejected the allegation that Kippax Beaumont Lewis had been negligent in the preparation of the evidence in support of the application to the Court of Protection. At paragraphs 145 and 146 of his judgment he said this:

"145 It is clear, from what took place before Mr Justice Lightman on 9 November 1995, and from the third affidavits of Mr Liptrott and Mr Forrester which were produced thereafter, that it would have been desirable for fuller affidavits to have been prepared, on behalf of the Executors, at the outset. The context in which the Application came before the Master on 24 October 1995, however, was that Mr McBryde, on behalf of the Official Solicitor, had written to KBL stating that it was for the Official Solicitor, as the representative of Lady Hulton, to decide on matters of principle, and to advise the CP whether or not Lady Hulton could reasonably agree to join in the proposed DOV, and that the Official Solicitor supported the Application on the evidence and on the terms that were placed before the Master on 24 October 1995.

146 In those circumstances, even though Mr Marriott accepted that he was aware that the CP would listen to Lady Hulton's receiver, it was not negligent of KBL to expand the evidence before the Court."

The judge's refusal to find negligence in that respect is the subject of challenge on the appeal.

36. Further, the judge accepted that Kippax Beaumont Lewis were entitled to take the view, in common with Major Reynolds and his sisters, that it would be highly undesirable for Lady Hulton to be examined by a medical practitioner who was unfamiliar to her – so that the medical reports which were available would have to suffice. And he accepted that the solicitors were entitled to assume that the Court of Protection already had sufficient information as to the extent of Lady Hulton's own assets (which would have been supplied to the Court at the time of the appointment of her receiver); and that, in any event, they had requested that information from Major Reynolds, who had failed to supply it. Those findings are not challenged in terms.
37. The judge dismissed the claim in the DoV action on the ground that he was not satisfied that the negligence which he had found was causative of any loss to the claimant. He considered, first, the failure to advise that the executors should obtain an actuarial report. In that context he had the benefit of a report prepared in August 2002 in which the actuary (Mr Pollock) apportioned 4.9% of the value of the Hulton Land to Lady Hulton's life interest. If applied to the probate valuation of the Hulton Land (£5.3 million) that would give a value of the life interest of £312,000. But, as the judge pointed out, that value required considerable adjustment; in respect of the value of the Hulton Land to which any proportion should be applied, in respect of the life expectancy of Lady Hulton as at 1995, in respect of the yield from the Hulton Land, and (perhaps of most importance) to take account of the fact that the value apportioned to the life interest included nothing in respect of the intended saving of inheritance tax (representing some 38% of the value of the land). The judge concluded, at paragraph 161 of his judgment:

"In the light of those adjustments to Mr Pollock's analysis I have mentioned, it is clear that the resultant figure attributable to the interest of Lady Hulton in the HLF would far have exceeded the sum of £275,000 specified in the Claimant's Replies to the Request by KBL for further information. There is no actuarial evidence before me indicating that the resultant figure would have been less than the £750,000 ultimately agreed with Major Reynolds and Mrs Cooke."

That led him to hold that the Claimant suffered no loss as a result of the failure to obtain an actuarial report in connection with the negotiation of the deed of variation and the application to the Court of Protection.

38. The judge held, also, that no loss to the claimant flowed from the delay in making the application to the Court of Protection. An earlier application would not have led to approval of the Court of Protection to a deed of variation which provided for payment to Lady Hulton of less than £750,000; nor would it have avoided the costs of the appeal from the Master.
39. The judge's conclusion that an earlier application would not have avoided the costs of the appeal from the Master was based on his view, expressed at paragraph 177 of his judgment, that it was always highly improbable that the application to the Court of Protection would be granted by the Master (either at all, or at any 'price' less than £750,000) for so long as it was opposed by Major Reynolds and his sisters. As he said, the fact that the application was made by the executors against the opposition of Lady Hulton's receivers would have been sufficient, of itself, "to cause the Court to view the Application with caution and misgivings". Add to that the facts that Lady Hulton had no need of capital, that the capital payment for which the deed of variation provided was merely to provide an inducement for the release of her life interest to Mr Butterfield, and that he was not a blood relative or a person for whom she could be expected to feel any significant moral obligation to provide, and the judge was led to the conclusion that "there was no realistic prospect whatsoever" that the Master would have granted the application on 24 October 1995 in the face of opposition. He said this, at paragraph 178 of his judgment:

"If the Master did not dismiss it out of hand, she would have referred the case to one of the Nominated Judges of the High Court. There is no real or substantial prospect that she would have done otherwise."

It was the judge's view that the executors, and the Official Solicitor, who had supported the application notwithstanding the opposition of the joint receivers, "appear to have approached the Application with a wholly misconceived optimism".

40. At paragraph 182 of his judgment the judge identified what he described as "the critical question":

"The critical question, therefore, on causation and loss is whether, if KBL had conducted themselves in a competent manner, there was a real or substantial prospect that, prior to the hearing on 24 October 1995, there would have been an agreement between the Executors and Lady Hulton's receivers, Major Reynolds and Mrs Cooke, for the payment to Lady Hulton of a sum less than £750,000 as a pre-condition of the extinguishment of Lady Hulton's life interest in the HLF."

The judge held that the Claimant had not made out a sustainable case to that effect.

41. The judge was led to that conclusion by a process of reasoning which included the following steps: (i) the only figure advanced by Mr Butterfield as the amount that he would have had "to pay" to obtain agreement from Major Reynolds was £250,000 (with the possibility of a "slight increase" up to £275,000); (ii) it was clear that Major Reynolds "would never have accepted £275,000, let alone £250,000 . . . as the appropriate capital payment"; (iii) nor would the Court have approved a deed of variation "in which payment of that amount was a condition precedent to the extinguishment of Lady Hulton's life interest"; (iv) there was no evidence that the executors were ever prepared to offer any figure higher than the £435,000 (in the proposal as it was before the Master in October 1995) until the appeal was before Mr Justice Ferris on 15 November 1995; (v) the figure of £435,000 was rejected by the receivers and by the Master on 24 October 1995; (vi) there was no "real or substantial prospect" that, if Kippax Beaumont Lewis had not been negligent in the respect alleged (including those respects in which the judge had found that negligence had not been established) Major Reynolds would have accepted the £435,000 put forward by the executors at the hearing on 24 October 1995; or (vii) that Major Reynolds and Mrs Cooke would have accepted anything less than the £750,000 eventually put forward after the first day's hearing before Mr Justice Ferris.
42. At paragraphs 189 to 195 the judge set out the factors of which he had taken particular account in reaching his conclusion:

"189. The motivation for the DOV was not to benefit Lady Hulton. The motivation was solely the reduction of IHT prospectively payable by the Trustees on Lady Hulton's death, and the acceleration of the interest of Mr Butterfield. The payment of a capital sum to Lady Hulton would not be likely to improve, in any significant respect, her quality or standard of living. She was entitled to the income of the HLF for life and, to the extent that such income was insufficient to meet her expenses, she could rely upon the Executors or Trustees to advance capital to her pursuant to their powers under the Will.

190. Mr Butterfield was not a blood relative of Lady Hulton, and was not a person for whom she or any other members of the Reynolds' family was morally obliged to provide.

191. Further, Major Reynolds was, rightly, dubious about the values placed upon the assets in the HLF by the Executors. Any up to date valuation would, almost certainly, have increased those values, possibly substantially.

192. Major Reynolds was also, rightly, dubious as to the projections of the Executors as to the future income that would be payable out of the HLF.

193. He was also entitled to take into account the anticipated tax benefits that the DOV was intended to achieve, and to claim a portion of those benefits for Lady Hulton.

194. Although Major Reynolds was willing to negotiate, Lady Hulton's sisters had fundamental objections on moral grounds to the alteration of the Will by eliminating Lady Hulton's right to receive the income for life. They took the view that this would be an interference with the intention of Sir Geoffrey, as expressed in the Will. Further, they and Major Reynolds were concerned, rightly, that there were risks for Lady Hulton in giving up a right to income in return for a one-off capital payment which, should it prove in the event to be inadequate for her needs, would leave Lady Hulton relying upon the decision of the Executors whether or not to exercise a discretionary power to advance capital.

195. Further, Major Reynolds and Mrs Cooke, as receivers of Lady Hulton, would not be personally exposed to any adverse order for costs should the Court, notwithstanding their opposition to the Application in good faith, decide to grant the Application. As Mr Ham [counsel for the claimant] accepted in his submissions, unless they acted improperly or for their own personal benefit, they would not be penalised in costs, and the usual order for costs in such cases would apply, namely that the costs be paid out of the Estate.

And the judge went on to say this:

"196 Mr. Ham, in his closing submissions, placed weight on the fact that, in his first affidavit in the Application, Major Reynolds mentioned a figure of £725,000 in connection with the income that Lady Hulton might lose over a 6 year period. Mr. Ham submitted that Major Reynolds "would have been prepared to settle for rather less, because somebody who is talking about horse-trading does not generally open the discussions with his final figure". I reject that submission. It is pure speculation, without any evidential basis. It rests on a figure purely in respect of lost income for a 6 year period, even though the Official Solicitor himself thought that a longer period was appropriate, and was on the basis of the limited information that had been provided by the Executors in breach of their duties to Lady Hulton. It takes no account of all the other relevant factors, including the apportionment of any prospective tax saving which would be achieved by the DOV."

43. It was those matters which led the judge to conclude that it was "purely speculative" whether "even if there had been no such negligence as alleged in the amended Particulars of Claim, including the failure to obtain an actuarial valuation, Major Reynolds and Mrs Cooke would have accepted, or the Court would have approved, a DOV with a condition precedent of a payment to Lady Hulton of less than £750,000".

The appeal from the judge's order dismissing the claim in the DoV action

44. The judge refused permission to appeal from his order in the DoV action. Permission to appeal was granted on paper by this Court (Lord Justice Jacob) on 1 June 2004. The grounds of appeal are put under three main heads: (i) that the judge was wrong in failing to hold that Kippax Beaumont Lewis had been negligent in the preparation of the evidence in support of the application to the Court of Protection; (ii) that the judge was wrong in failing to hold that there was no more than a speculative chance that (but for the negligence of the solicitors) the application to the Court of Protection could have been settled by agreement with the Reynolds family on the basis of a 'price' of less than £750,000; and (iii) that the judge was wrong in failing to hold that there was no more than a speculative chance that (but for the negligence) the costs of the appeal could have been saved.
45. Before addressing these grounds, it is, I think, pertinent to have in mind the statutory framework within which the application to the Court of Protection was made. It is not in dispute that, at the time of Sir Geoffrey's death and thereafter, Lady Hulton was a patient for the purposes of Part VII of the Mental Health Act 1983 – that is to say, she was a person incapable, by reason of mental disorder, of managing and administering her property and affairs (section 94(2) of that Act). She did not, herself, have the capacity to execute the deed by which the dispositions under clause 7(A) of Sir Geoffrey's will were to be varied under section 142 of the Inheritance Tax Act 1984. Nor could the deed of variation be executed by Major Reynolds, as her receiver, without an order of the Court of Protection. Section 99(2) of the 1983 Act provides that :

"A person appointed as receiver for a patient shall do all such things in relation to the property and affairs of the patient as the judge, in the exercise of the powers conferred on him by sections 95 and 96 above, orders or directs him to do and may do any such thing in relation to the property and affairs of the patient as the judge, in the exercise of those powers, authorises him to do."

In that context "the judge" means a "nominated judge" – that is to say, a judge nominated by the Lord Chancellor under section 93(1) of the Act (in practice, a judge of the Chancery Division of the High Court) – the Master of the Court of Protection or a nominated officer (section 94(1) of the Act).

46. Sections 95 and 96 of the Mental Health Act 1983 are in these terms, so far as material:

"95 (1) The judge may, with respect to the property and affairs of a patient, do or secure the doing of all such things as appear necessary or expedient –

(a) for the maintenance or other benefit of the patient,

(b) for the maintenance or other benefit of members of the patient's family,

(c) for making provision for other persons or purposes for whom or which the patient might be expected to provide if he were not mentally disordered, or

(d) otherwise for administering the patient's affairs.

(2) In the exercise of the powers conferred by this section regard shall be had first of all to the requirements of the patient . . . ; but, subject to the foregoing provisions of this subsection, the judge shall in administering a patient's affairs, have regard to . . . the desirability of making provision for obligations of the patient notwithstanding that they may not be legally enforceable."

96(1) Without prejudice to the generality of section 95 above, the judge shall have power to make such orders and give such directions and authorities as he thinks fit for the purposes of that section and in particular may for those purposes make orders or give directions or authorities for –

(a) . . . ;

(b) the sale, exchange, charging or other disposition of or dealing with any property of the patient;

(c) . . . :

(d) the settlement of any property of the patient, or the gift of any property of the patient to any such persons or for any such purposes as mentioned in paragraphs (b) and (c) of section 95(1) above;

. . .

(k) the exercise of any power (including a power to consent) vested in the patient, whether beneficially, or as guardian or trustee, or otherwise.

(2) . . . "

47. It is not, I think, in doubt that a judge, or the Master, sitting in the Court of Protection has power, under section 96(1)(k) of the 1983 Act, to direct or authorise the receiver of a patient to execute on behalf of the patient a deed consenting to the variation of the will of a third party for the purposes of section 142(1) of the Inheritance Tax Act 1984. I differ from the judge in thinking it much less clear that the powers conferred by section 96(1)(b) and (d) are engaged in that context; but that is of no moment. What is of importance is that the powers conferred by section 96(1) of the 1983 Act can only be used for the purposes of section 95 of that Act; that the purposes of section 95(1) are such as "appear necessary or expedient" for achieving the objects set out in paragraphs (a) to (d); and that there is a clear distinction between direction and authorisation under section 96(1). That distinction is reflected in section 99(2) of the Act, to which I have already referred. A receiver shall do all such things in relation to the affairs of the patient as the judge directs him to do; he may do any such thing in relation to the affairs of the patient as the judge authorises him to do.
48. The application in the present case faced a number of formidable difficulties, none of which appear to have been appreciated by the executors or their advisers, Kippax Beaumont Lewis. First, there was no real basis for the exercise of the powers conferred by section 95(1) of the 1983 Act for the purposes described in paragraphs (b) and (c) of that section. Sir Geoffrey's nephews and niece were not within the class of members of Lady Hulton's family; they were collateral relatives – see In re DML [1965] Ch 1133, at 1137D-E. Lady Hulton's own immediate family were opposed to the variation. Nor was there anything to suggest that Mr Butterfield, his siblings and his and their children were persons for whom Lady Hulton might be expected to provide if she were not mentally disordered. Second, it is difficult to see how (within the context of section 95(1) of the Act) Lady Hulton's consent to a deed varying the will of her late husband could be said to be necessary or expedient for administering her affairs. Third, it could not be said that the variation was necessary or expedient for her maintenance (section 95(1)(a) of the Act): her own needs were amply provided for. The only basis for jurisdiction lay in satisfying the Court that the variation was for Lady Hulton's benefit.
49. I find it impossible to see how it could have been thought that the variation, as proposed in the application to the Court of Protection, was for Lady Hulton's benefit; in the sense that she would be materially better off after the trusts affecting the Hulton Land had been varied than under the original trusts. It is important to keep in mind that the variation did not give Lady Hulton any right to the payment of a capital sum. It could not do so if that payment were to come from funds outside Sir Geoffrey's estate (section 142(3) of the 1984 Act); and it could not do so if the payment were to come from funds within the estate without the consent of all the potential remaindermen (a class which included unborn children). The variation did not confer on the executors and trustees a power to pay capital which they did not already have; nor did it oblige the executors and trustees to exercise the power which they did already have. Clause 2 of the proposed deed made that clear.
50. The most that could be said was that the variation made it more likely that the executors and trustees would decide to exercise the existing power in clause 7(A)(ii); because it was only by doing so that they could hope to secure the tax advantages which (as they had been advised) would flow if Lady Hulton's life interest were extinguished before the second anniversary of Sir Geoffrey's death. But, as it seems to me, there was a very real danger that the exercise of the power conferred by clause 7(A)(ii) for the only real purpose for which it was to be exercised – to extinguish Lady Hulton's life interest in the Hulton Land – would (if challenged) be held to be invalid; in that an exercise of the power for that purpose would be seen as a fraud on the power. If, nevertheless, the executors and trustees were advised that it would be a proper exercise of a fiduciary power to pay Lady Hulton a capital sum which she did not need in order to extinguish her life interest so that they could pursue the speculative prospect of avoiding inheritance tax on the basis that the CTO might be persuaded to allow business property relief on Sir Geoffrey's death, the effect would be that Lady Hulton lost her right to the income of the Hulton Land. As I have said, I do not see how it could have been thought that she would be better off in any material sense. I am not at all surprised that, when the appeal came before him on 15 November 1995, Mr Justice Ferris seems to have taken the same view.
51. With these considerations in mind, it was always necessary, as it seems to me, to present the application on the basis that a variation would be for the benefit of Lady Hulton in some sense other than material benefit. There is no doubt that "benefit" has been given a wider meaning in the Court of Protection – see the observations of Mr Justice Ungoed-Thomas in In re W(E.E.M) [1971] Ch 123, 135. He suggested that it would be for the "benefit" of the patient to exercise the powers conferred by section 95(1) of the 1983 Act so as to enable there to be done something which the patient would have wished to do if he had been able to act for himself. He found support for that view in the final words of section 95(2) of the Act: "the judge shall, in administering a patient's affairs, have regard to . . . the desirability of making provisions for obligations of the patient notwithstanding that they may not be legally enforceable".
52. For my part, I would be prepared to assume (without deciding the point) that there could be cases – not falling within paragraphs (b), (c) or (d) of section 95(1) of the 1983 Act – in which the Court of Protection might properly hold that it was for the benefit of the patient (within the context of paragraph (a) of that section) to exercise its powers to direct or approve some transaction which the patient himself would have wished to effect if he had been able to act for himself. But I think that those cases are likely to be rare – in that paragraphs (b), (c) and (d) are likely to cover most cases in which the Court can properly be satisfied that the transaction is one which the patient himself would have wished to effect – and I am very far from persuaded that the proposed variation to Sir Geoffrey's will was one of them.
53. The evidence before the Court of Protection disclosed an acute conflict on the question whether Lady Hulton would have chosen to consent to the proposed variation. Mr Liptrott and Mr Forrester, who had both known Sir Geoffrey for a long time, were confident that he would have wished to take any opportunity to avoid inheritance tax if that could be done without detriment to provision of the care which, as he appreciated, his widow would need after his death; and that she would have wanted to give effect to his wishes in that respect. Major Reynolds and his sisters were equally confident that Sir Geoffrey had regarded his widow's needs as paramount; that he had made his will with the intention and in the belief that those needs should be met in the way for which he had provided; and that her respect for her late husband would have led her to refuse consent to any change in the provision which he had made. Powerful support for that view is found in the affidavit of an old friend, Monsignor John Allen, to whom Sir Geoffrey had spoken about the provision which he had made. He deposed:

". . . Sir Geoffrey was satisfied that by the care he had taken in drawing up the terms of his will he had honoured both his obligations to the Hulton heirs and estate and also to [Lady Hulton]

Sir Geoffrey was a very strong and determined character and not the sort of man to change his mind. Lady Hulton was always of a mind to respect and honour her husband's decisions and judgment, and if she were now to have her faculties restored I cannot imagine her agreeing to a variation of his will."

Those views were echoed in letters to the Court of Protection from the Duke of Norfolk and from Bishop McKenna on behalf of the Archbishop of Liverpool.

54. There were, therefore, strong grounds for thinking that the variation would not have had the consent of Lady Hulton if she had been in a position to give it. It is impossible to predict with certainty how that question would have been resolved if the application had been pursued in the face of continuing opposition from Major Reynolds and his sisters. My own view is that it is extremely unlikely that the Court of Protection would have been persuaded that this was a case in which there was the necessary element of benefit to the patient to found jurisdiction under section 95(1)(a) of the 1983 Act; or that, if that hurdle were surmounted, this was a case in which to make an order directing the receivers to execute a deed of variation against their own wishes and against a background of opposition based on the sincerely held beliefs that had been expressed by those who had known Sir Geoffrey and Lady Hulton over many years.
55. The opposition was withdrawn (at least formally) on 16 November 1995, when the 'price' was increased to £750,000. It is not clear to me whether those who had expressed their views, in the strong terms that they did, as to what Lady Hulton's own wishes would have been if she could have been consulted had altered those views – or, indeed, whether they were ever informed that Major Reynolds had decided to accept the new offer made by the executors and Mr Butterfield. Nor is it clear to me how Mr Justice Ferris was able to come to the view – given the material that was already before the Court of Protection – that a case for the exercise of its powers under section 95(1) of the 1983 Act had been made out.
56. It is said, of course, that the fact that Major Reynolds was prepared to withdraw his opposition once the 'price' had increased to £750,000 is a powerful indication that, for him at least, there was never any point of principle; it was always simply a question of money. So, if he had been approached more sympathetically – or competently – at the outset, he would have been willing to agree the variation at a lower price. There was always a deal to be done at the right price; and better negotiators would have achieved a better deal.
57. The judge regarded that submission as "purely speculative". I agree. There was nothing before the judge to indicate why, if Major Reynolds sincerely believed what he had said in his affidavit evidence as to Lady Hulton's wishes, he was persuaded to withdraw his opposition on 16 November 1995. And, without knowing why he withdrew his opposition on 16 November 1995, it was impossible to hold that he could have been persuaded to withdraw earlier if the 'price' had been right. If, until the end of the first day of the hearing before Mr Justice Ferris, the opposition of Major Reynolds and his family had been based on the sincere belief that Lady Hulton would have been unwilling, as a matter of principle, to consent to a variation of Sir Geoffrey's will – and there was no basis for the judge to reject what they had said in their affidavits, supported, as that evidence was, by the testimony of those whose sincerity could not be called in question – the only conclusion open to the judge was that something had happened on 15 or 16 November 1995 which either altered that belief or led Major Reynolds to think that it no longer provided a sufficient basis for continuing to oppose the application.
58. That is the basis upon which the judge dismissed the DoV action. I think that he was correct to do so. But there is a further reason why, as it seems to me, the claim in that action was bound to fail. As I have said, there is nothing to indicate how Mr Justice Ferris was able to come to the view – given the material that was already before the Court of Protection – that a case for the exercise of its powers under section 95(1) of the 1983 Act had been made out. There is nothing to suggest that he, or another judge in the Court of Protection, would have come to that view if he had been asked to approve a variation which provided for a 'price' of less than £750,000. And without the approval of the Court, the variation could not have been effected, whether or not Lady Hulton's receivers were willing to agree. Incompetent though Kippax Beaumont Lewis undoubtedly were in their handling of the application, there is nothing to suggest that there was ever any real chance that the variation would be approved by the Court of Protection at a price less than £750,000.
59. It follows that I would dismiss the appeal in the DoV action.

The CGT action

60. As I have said, the judge summarised the allegations of negligence made in the CGT action under five main heads. The first of those heads (incorrect tax returns) was compromised by the claimant's acceptance, before the trial, of an offer of indemnity made by Kippax Beaumont Lewis. The second (low probate values) was rejected by the judge on the facts. So, also, was the third (failure to assent to the vesting of residue), which the judge described as "quite hopeless".
61. In relation to the fourth of those heads (the section 191 point), the judge accepted that a reasonably competent solicitor would have considered, and taken advice, whether to take advantage of the provisions of section 191(1) of the Inheritance Tax Act 1984, read with section 274 of the Taxation of Chargeable Gains Act 1992, by substituting the (higher) values obtained on the sale of three properties after Sir Geoffrey's death for the probate values already submitted to the CTO. Mr Marriott was negligent in failing to do so. But the judge held that the claimant had failed to show that it had suffered any loss by reason of that negligence. He held (i) that the probability was that, if Mr Marriott had considered the point, he and the executors would not have risked doing anything which might have given the CTO an excuse to reopen the question whether, notwithstanding the certificates of discharge which had been issued in October 1997, inheritance tax could be charged on Sir Geoffrey's death – and so would not have submitted revised returns based on actual sale values; and (ii) that, if (nonetheless) revised returns had been submitted, the revenue would have challenged the right to rely on section 191 of the 1984 Act for the purposes of capital gains tax in circumstances where (by reason of the certificates of discharge) no inheritance tax was payable on Sir Geoffrey's death in respect of the Hulton Land – and, that, if such challenge had been made, the executors would have abandoned the claim to substitute values under section 191.
62. The allegation under the fifth head (the Hulton Land vesting point) is that Kippax Beaumont Lewis were negligent in failing to advise the executors against vesting the Hulton Land in themselves as trustees before the death of Lady Hulton; in particular, in failing to advise against the assent which Mr Liptrott and Mr Forrester did execute on 29 November 1997, shortly after the certificate of discharge in respect of the Hulton Land had been issued by the CTO (on 28 October 1997).
63. The effect of the November 1997 assent was that on Lady Hulton's death - when Mr Butterfield became absolutely entitled as against the trustees of the Hulton Land under the trusts of clause 7(A) of Sir Geoffrey's will - there was a deemed disposal of the Hulton Land for capital gains tax purposes (section 71(1) of the Taxation of Chargeable Gains Act 1992). Had the assent not been made, the Hulton Land would have remained vested in the executors, as such, and there would have been no deemed disposal and no charge to capital gains tax on Lady Hulton's death (section 62(4) of that Act. It is said that there was no need for an assent to the vesting of the Hulton Land during Lady Hulton's lifetime and that the effect of the unnecessary assent was to give rise to a charge to capital gains tax which could and should have been avoided.
64. The claimant's pleaded case was that Mr Venables QC had advised against early vesting of the Hulton Land unless the executors and trustees were willing to appoint non-resident trustees of the whole fund comprising that land (which they were not). It is not in dispute that advice to that effect was given by Mr Venables and Mr Grierson in a joint opinion dated 28 July 1997. They wrote:

"It could be detrimental in [capital gains] tax terms for the Executors to vest assets in United Kingdom resident trustees now. . . .

Unless the Executors are happy to vest the whole of the Hulton Land Fund in non-resident Trustees now, then, from a capital gains tax point of view, the best course would probably be for the Executors to retain all the assets unless and until it is likely that they will be sold and the sale will involve the Executors realising a more than negligible capital gain."

65. The response to that, at paragraph 11B(a) in the amended defence served on behalf of Kippax Beaumont Lewis, was that that advice was given "in circumstances where it was uncertain whether business property relief would be available on the Hulton Land Fund, and/or whether the Revenue would issue certificates of discharge in relation to the Hulton Land Fund for [inheritance tax] purposes as a result of the deed of variation." That is factually correct. The certificate of discharge had not been issued by July 1997; and, as counsel pointed out in their July 1997 opinion "the Executors cannot as of now be absolutely sure that the CTO will not be able to turn round in future and claim that Sir Geoffrey Hulton was deemed, by the Deed of Variation, to have made a chargeable transfer of value as respect the Hulton Land Fund on his death." There were, therefore, good reasons (in July 1997) for the executors to retain the Hulton Land. While it remained in their hands, as executors, it was a source from which they could discharge the inheritance tax which would be payable on Sir Geoffrey's death if the CTO resiled from the position taken in their letters of 18 October 1996 and 23 May 1997 (to which I have referred earlier in this judgment) and if (in that event) business property relief could not be obtained.
66. But Kippax Beaumont Lewis went on to assert a positive defence. Paragraph 11B(b) of the amended defence was in these terms:

"[Mr Venables'] advice was superceded by events, in which the Revenue wrongly (as is now recognised) treated the variation as a potentially exempt transfer, subsequently confirming the Executors' entitlement to rely on that incorrect decision by letter dated 28 September 1999. In the premises (as Counsel advised) it was necessary and/or reasonable for the Executors to vest the Hulton Land Fund in trustees prior to the death of Lady Hulton:

(i) In order to effect a change of position by the Executors based upon the certificates of discharge to limit or exclude the opportunity for the Revenue to reopen the IHT position; and/or

(ii) In order to enable the trustees to adopt a different position to the Executors on the effect of the deed of variation, and in particular to enable them to argue that it was not a potentially exempt transfer, if it was necessary for them to do so to the general taxation benefit of the Hulton Land Fund and the estate."

67. That pleading evidences some confusion in the mind of the pleader. The decision of the CTO to treat the deed of variation as a potentially exempt transfer did not "supercede" the advice given in the July 1997 opinion. The decision pre-dated the opinion. Nor was the letter of 28 September 1999 of any relevance to the decision to execute the assent in November 1997. Nor did counsel give any relevant advice between the date of the July opinion and the execution of the assent. As was made clear in argument before the judge – and before this Court – the advice relied on was advice given by counsel in the consultation held on 19 November 1996, and confirmed in the note of consultation settled by counsel on 10 December 1996. The defence, in effect, was that, following the issue of the certificate of discharge in October 1997 (or, more accurately, the letter in early September 1997 in which the CTO had first indicated that a certificate would be issued), the executors, and their advisers, Kippax Beaumont Lewis, were bound to look at the position again; and that, in the light of the advice which had been given by counsel in November 1996, it was reasonable for them to regard the advice contained in the opinion of July 1997 as having been overtaken by events. The only relevant event, in that context, was the decision of the CTO to issue the certificate of discharge.
68. The judge identified the defence to the Hulton Land vesting point at paragraphs 268 and 269 of his judgment:

"268. KBL's case, supported by the evidence of Mr Forrester, Mr Marriott and Mr Liptrott is that the 1997 Assent was executed pursuant to the express advice of Mr Venables, and was, in accordance with that advice, an essential step in the proposed strategy to enable the Trustees to contend that, notwithstanding the Certificate of Discharge, the effect of the DOV and IHTA s.142 was that there was a chargeable transfer in respect of the HLF on Sir Geoffrey's death. The strategy, which in the end was successful, was thus to preserve the benefit of the Certificate of Discharge as conclusive that no IHT was outstanding in respect of the HLF on the death of Sir Geoffrey, but to leave the Trustees free to argue that, by virtue of s.142 and the DOV, there was no PET by Lady Hulton in respect of the HLF, and nor was she entitled to a life interest in the HLF immediately before her death.

269 It is KBL's case, and was the evidence of Mr Forrester, Mr Marriott and Mr Liptrott, that, in order to achieve success in that strategy, the Executors vested the HLF in the Trustees, immediately the Certificate of Discharge was granted, so as to enable the Trustees to argue the s.142 point. The critical feature, according to KBL's case and that evidence, was the need to transfer the HLF away from the Executors, who would otherwise have been liable for IHT in respect of the PET on Lady Hulton's death, and to place the HLF and the potential liability to IHT in respect of the PET on Lady Hulton's death in the Trustees, since it was the Executors, and not the Trustees, who had applied for the Certificate of Discharge on the basis of acceptance of the CTO's analysis that s.142 did not apply and that the effect of the DOV was to give rise to a PET by Lady Hulton."

69. Mr Liptrott gave evidence at the trial that he had a clear recollection of advice given by Mr Venables, at the consultation on 19 November 1996, to the effect that an assent was essential if he and Mr Forrester were to argue, on the death of Lady Hulton, against the view expressed by the CTO in the letter of 18 October 1996. It was essential to demonstrate that their capacity, in relation to the Hulton Land, had changed from that of executors to that of trustees; so that they could assert that there was no inconsistency in accepting the CTO view in their capacity as executors and advancing the contrary view in their different capacity as trustees. The judge rejected that evidence. He held that "in the light of the contemporaneous written material" no such advice was given by Mr Venables.
70. It is common ground that, if such advice were given, it was given at the consultation on 19 November 1996. Neither Mr Venables nor Mr Grierson were called to give evidence at the trial. The judge, correctly in my view, placed much weight on the note of the consultation, prepared by Mr Marriott and settled by counsel. As he observed, at paragraph 277 of his judgment:

". . . the note of the consultation went through several drafts. It was prepared by Mr Marriott after careful consideration and revision. The third draft was amended, and approved, as amended, by both Mr Venables and Mr Grierson. Neither Mr Liptrott nor Mr Forrester apparently took exception to the concluded note, as approved by counsel."

The judge pointed out that the note of consultation contained no record of any express advice by Mr Venables or Mr Grierson that, immediately after a certificate of discharge was obtained, the executors should execute an assent of the Hulton Land in favour of themselves as trustees. He held, at paragraph 278, that it was "against all probabilities that a step, described by Mr Marriott and Mr Liptrott as central to counsel's advice and an essential feature of the tax planning scheme, should be omitted from a note produced so carefully and approved by counsel with amendments".

71. Rejection of Mr Liptrott's evidence as to what had been said at the consultation on 19 November 1996 does not, of course, lead necessarily to the conclusion that Kippax Beaumont Lewis, reading the note of that consultation a year or so later (when the certificate of discharge was about to be issued), could not reasonably think that, consistently with the advice recorded in the note, an assent to the vesting of the Hulton Land was of such advantage in relation to the stance which was to be taken in relation to inheritance tax payable on Lady Hulton's death that the potential liability to capital gains tax on a deemed disposal on her death was a price well worth paying. The judge addressed that contention at paragraphs 295 and 296 of his judgment:

"295. Mr Fenwick [counsel for Kippax Beaumont Lewis] submitted that, even if Mr Venables did not advise that it was an essential or necessary part of the tax planning scheme that the HLF should be vested in the Trustees as soon as possible after a Certificate of Discharge was obtained, nevertheless the Executors acted prudently and reasonably in so doing by the 1997 Assent, and KBL acted reasonably in advising the Executors to do so. He submitted that the CGT payable on the deemed disposal of the HLF on Lady Hulton's death was only about £12,500, and the Executors/Trustees were acting reasonably and prudently in exposing the HLF to such a modest charge in order to avoid the potential IHT charge on a failed PET.

296. That submission cannot succeed. The advice of counsel . . . was that the Certificate of Discharge, once granted, would be conclusive and binding on the Revenue as regards all who might otherwise be liable to bear the relevant tax. Mr Fenwick appeared to accept that proposition of law. Further, in the light of the advice of Mr Venables, and the clear terms of IHTA s.201, there was no question of the Executors being liable to meet any IHT in respect of a failed PET of the HLF by Lady Hulton. On the other hand, the 1997 Assent would inevitably give rise to a deemed disposal of the HLF, on Lady Hulton's death, for CGT. There is no agreement between the parties, and no determination by the Revenue, of the amount of the liability to CGT on the deemed disposal of the HLF on Lady Hulton's death. It is difficult to see, in all these circumstances, why it was reasonable for the Executors to take steps which ensured an inevitable charge to CGT, when there was no need to do so in order to avoid a liability to IHT in respect of the HLF. Further, neither the Executors nor KBL ever appear, in fact, to have carried out any analysis in which the various tax consequences were properly weighed before deciding to proceed with the 1997 Assent."

72. The advice that the certificate of discharge, once granted, would be conclusive and binding on the revenue as regards all who might otherwise be liable to bear the relevant tax – to which the judge referred in the second sentence of paragraph 296 – was (as the judge thought) advice given by Mr Prosser QC in a consultation on 23 September 1997. That was before the certificate had been issued; but after the CTO had indicated, in their letter dated 1 September 1997, that a certificate in respect of the Hulton Land alone would be issued. It is clear that, insofar as Mr Prosser gave advice on the point, his advice was directed to inheritance tax chargeable on the death of Sir Geoffrey Hulton. It is also clear that Mr Prosser was not asked to advise whether the executors should assent to the vesting of the Hulton Land in themselves as trustees. The decision to execute an assent in respect of the Hulton Land was taken at a meeting between the executors, Mr Marriott and Mr Butterfield on the morning of 23 September 1997; before the consultation with Mr Prosser in the afternoon of that day. Mr Forrester's note of that pre-consultation meeting records:

"There was a general discussion when it was agreed that the Hulton Land and cash and investments should be 'vested' as soon as the Certificate is received."

73. As I have said, the judge held that there was negligence on the part of Kippax Beaumont Lewis in failing to advise the executors and trustees properly in relation to the desirability, and the capital gains tax implications, of the November 1997 assent. He directed an inquiry as to what loss, if any, had been suffered by the trustees in consequence. But, in relation to the other claims, the judge dismissed the CGT action. He directed that the claimant pay 75% of the costs incurred by Kippax Beaumont Lewis in that action.

The appeal and cross-appeal from the judge's order in the CGT action

74. The claimant filed an appellant's notice (2004/0950) challenging the judge's decision on the section 191 point and, independently, his order as to costs. Permission to appeal was refused by the judge; but granted by this Court (Lord Justice Jacob) on 1 June 2004. In the event, the appeal in relation to the section 191 point was not pursued. The claimant's appeal as to costs has to be considered in the light of the decision of this Court on the cross-appeal.
75. The cross-appeal, by respondent's notice filed on 24 July 2004 (2004/0950A), seeks to challenge the judge's finding that Kippax Beaumont Lewis were negligent in relation to the November 1997 assent in respect of the Hulton Land. Limited permission to cross-appeal was granted on paper by this Court on 21 September 2004 and the limits were extended following an oral hearing on 22 November 2004. Permission to challenge the judge's decision to prefer the written note of the consultation on 19 November 1996 to the oral evidence of Mr Liptrott and others on the question whether or not Mr Venables had advised, in terms, at that consultation in favour of an assent was refused; but Kippax Beaumont Lewis were permitted to contend that the judge had been wrong to interpret the note so as to conclude that no advice in favour of the assent had been given.
76. It is clear that the judge rejected the evidence of Mr Liptrott and Mr Marriott (and, so far as it went, the evidence of Mr Forrester) as to what had been said at the consultation on 19 November 1996 for two main reasons. First, because the note of consultation contained no mention of express advice by counsel that, following the issue of a certificate of discharge in respect of the Hulton Land, the executors should execute an assent vesting the land in themselves in a different capacity – that is to say, as trustees. The judge thought that that advice (if given) was too important to have been omitted from the note. Second, because he thought that it was essential to the case being advanced on behalf of Kippax Beaumont Lewis that counsel had advised, in November 1996, (i) that (absent an assent) the executors, in whom (on that hypothesis) the Hulton Land would remain vested, would be liable to pay the inheritance tax (if any) chargeable on the death of Lady Hulton within seven years of 16 November 1995; and (ii) that there was an obvious risk that the executors, as such, would not be able to take the point that the CTO were wrong in seeking to treat the events of November 1995 as a potentially exempt transfer by Lady Hulton in the circumstances that they had, themselves, sought the certificate of discharge on that basis. And, as the judge held, not only was there no record in the note of consultation that counsel had advised that (absent an assent) the executors, as such, would be liable to pay inheritance tax on a failed potentially exempt transfer made by Lady Hulton, but it was clear that counsel had not given advice to that effect.
77. I have had the benefit of reading the judgment prepared in draft by Mr Justice Lloyd. I respectfully agree with his analysis in relation to the second of the two points to which I have just referred. It is clear that (at the least) counsel contemplated that there would be an assent; and that they advised (on the basis that the Hulton Land had been vested in trustees) that the trustees, and not the executors, would be liable to pay the inheritance tax (if any) chargeable on the death of Lady Hulton. But it does not follow – and counsel did not advise – that (absent an assent) the executors would not be liable to pay that tax (if any). I think that the judge was wrong to reject the oral evidence on the basis of the second of the two reasons which he gave. The thrust of counsel's advice, as it seems to me, was that there would be advantages in having the Hulton Land held by trustees rather than executors: first, because, in that case, the trustees and not the executors would be liable to pay the tax (if any) chargeable on the death of Lady Hulton, and, second, because the trustees would be in a better position than the executors to challenge the basis on which the certificate of discharge had been issued.
78. Nevertheless, I am not persuaded that the judge was wrong to reject the evidence of Mr Liptrott and others that counsel had given positive advice, at the consultation in November 1996, that an assent should be executed if a certificate of discharge were obtained. There are, I think, two reasons why the judge was entitled to reject that evidence. One is the first of the reasons which the judge gave. If that advice had been given it would have found its way into the settled note. The other is that the time for that advice had not arisen. There was no reason for confidence that a certificate of discharge, in respect of the Hulton Land alone, would be issued. The question whether or not to execute an assent could wait until the response to the letter (settled by counsel) which was to be sent to the CTO was known.
79. The better view, as it seems to me, is that counsel advised, in November 1996, on the basis that there might well come a time when it would be sensible for the executors to assent to the vesting of the Hulton Land in themselves as trustees; that there would be advantages in that course, in relation to inheritance tax; and that vesting the Hulton Land in trustees would give rise to a potential capital gains tax charge on Lady Hulton's death (see the manuscript addition to the last sentence of the note, added in Mr Venables' hand, to which Mr Justice Lloyd refers). It is, I think, clear that counsel did not advise against an assent if and when a certificate of discharge had been issued. But I would not, myself, disturb the judge's finding that counsel gave no positive advice that there should be an assent.
80. By September 1997 the position had changed in three respects: (i) the CTO had indicated, in the letter of 23 May 1997, that a certificate of discharge would not be issued in respect of the Hulton Land alone; (ii) Mr Venables and Mr Grierson had advised, in June and July 1997, on the basis that the CTO would be unlikely to move from that position; and (iii) that, in early September 1997, the Office had, in fact, changed its position and had indicated that a certificate of discharge would be issued. In those circumstances it would have been open to the executors, with Kippax Beaumont Lewis, to raise with Mr Prosser at the consultation on 23 September 1997, the question whether or not an assent should be made once the certificate had been issued and (if she were then living) before the death of Lady Hulton. They did not do so. They took the decision to execute an assent without the benefit of Mr Prosser's advice on that point.
81. It might have been said that Kippax Beaumont Lewis were negligent in failing to advise the executors, on the morning of 23 September 1997, to defer the decision whether or not to execute an assent until after Mr Prosser's advice had been obtained in the consultation which was to take place that afternoon; and that they should have put the question to Mr Prosser in order to obtain his advice. But that was not the basis of the complaint made in paragraph 3.2B of the amended particulars of claim in the CGT action; that was not the case which Kippax Beaumont Lewis came to trial to meet; and, if it had been, there might well have been evidence from Mr Prosser as to the advice which he would have given if the question had been put to him. It would not be right to make a finding of negligence against Kippax Beaumont Lewis on the basis of a complaint which was never pleaded.
82. The pleaded case was based on the advice contained in the opinion given by Mr Venables and Mr Grierson on 28 July 1997. But that case was met by the response in paragraph 11B(a) of the amended defence: that advice was given at a time when it was uncertain whether the CTO would issue a certificate of discharge in respect of the Hulton Land alone. By 23 September 1997, when the decision to execute an assent was taken, circumstances had changed. In the changed circumstances there were advantages, canvassed in the note of the consultation on 19 November 1997, to be obtained from vesting the Hulton Land in trustees. Failure to follow the advice in the opinion of 28 July 1997 could not, of itself, be negligent. There was a need to weigh the disadvantage inherent in the potential capital gains tax charge against the perceived advantages in relation to the preservation of the favourable inheritance tax treatment which flowed from the issue of the certificate of discharge.
83. The judge criticised Kippax Beaumont Lewis for failing to carry out any analysis in which the various tax consequences were properly weighed before deciding to proceed with the assent in November 1997. I agree with Mr Justice Lloyd that he was wrong to do so. The point was not in issue in the action and there was no reason to think that it was properly addressed in evidence. But it is reasonably clear that Mr Liptrott, Mr Forrester, Mr Marriott and Mr Butterfield, who were at the meeting at which the decision to proceed was taken, were well aware, in general terms, of the advantages and disadvantages of an assent; and the figures were not so finely balanced as to require detailed analysis. There is no reason to think that they would have reached any other decision if they had spent more time weighing the inheritance tax saving against the potential capital gains tax liability .
84. For those reasons I would allow the cross-appeal. If the cross-appeal is allowed, the basis for the claimant's appeal in respect of the costs order made in the CGT action falls away.

Conclusion

85. I would dismiss the claimant's appeals in both the DoV action and the CGT action. I would allow the cross-appeal in the CGT action and set aside the order for an inquiry.

Lord Justice Wall:

86. I have had the advantage of reading in draft the judgments of both Chadwick LJ and Lloyd J. As to the DoV action, I find myself in complete agreement both with the judge and with the detailed analysis of the appeal from the judge's order made by Chadwick LJ in paragraphs 44 to 59 of his judgment. I add only one observation of my own. In relation to the application before the Court of Protection and the subsequent appeal to Ferris J on 15 and 16 November 1995, I was particularly struck by the circumstances in which the offer of £750,000 came to be made. The position is described in an attendance note following what had plainly been a testing day before Ferris J, who had made it clear that he found it difficult to see how the application gave Lady Hulton any benefit. The note continues: -

"At the end of the hearing a further conference was held at Venables' office and the general view was taken that matters were going against us and that if we continued with the present line of arguments that the case would be turned down.

There was some discussion as to the amount of money that should be offered to make it clear that the proposal was indeed to Lady Hulton's benefit and to satisfy the judge as to overcome his observation that the evidence given in the valuations was in conflict…..

The upshot of the discussion was that Hugh Butterfield said that he would be willing to authorise a payment of £750,000 as opposed to the £500,000 that had been offered via counsel during the day, and it was arranged that this figure should be put to the Official Solicitor and the Receiver prior to the start of the hearing on the second day. "

87. As Chadwick LJ points out in paragraph 58 of his judgment, there is nothing in the papers to indicate how Ferris J was able to come to the view that a case had been made out for the exercise of the court's powers under section 95(1) of the Mental Health Act 1983. What, however, is very clear to me is that Etherton J was plainly right to find (1) that it was always highly improbable that the application, so long as it was opposed, would be granted; (2) that there was no real prospect, had KBL not been negligent, that Major Reynolds would have accepted the £435,000 put forward by the executors at the hearing before the Master on 24 October 1995 (which both she, Major Reynolds and Mrs. Cooke rejected); and (3) that there was no real prospect that Major Reynolds and Mrs Cooke would have accepted anything less than £750,000. Indeed, on the basis of the events of 15 November 1995 as set out in the attendance note, it seems to me that £750,000 was a minimum rather than a maximum figure on the basis of which the proceedings could be salvaged.
88. As to the cross-appeal in the CGT action, my initial and provisional view, at the conclusion of the argument, was sympathetic to the judge's conclusion, given his clear rejection of the oral evidence of Messrs. Forrester, Liptrott and Marriott, and the terms of the settled note of the advice given by leading and junior counsel on 19 November 1996. I am, however, persuaded both by Chadwick LJ's judgment and by Lloyd J's careful analysis; (a) that a vesting of the HLF in trustees following the issue by the CTO of a certificate of discharge under section 239(2) of the Inheritance Tax Act 1984 was, as Chadwick LJ puts it, at the least in contemplation when counsel advised in November 1996; and (b) that the decision to vest after the issue of the certificate but prior to the death of Lady Hulton (with the inevitable consequence of a liability to CGT on her death) was, as Lloyd J puts it, done "in full knowledge of the relevant circumstances and fairly concluding that the game of inheritance tax saving was worth the candle of capital gains tax liability".
89. In these circumstances, I agree that the judge's finding of negligence under this head cannot stand, and that the cross-appeal should be allowed. Despite the fact that we are differing from the judge, to whose careful and comprehensive judgment I would like to pay tribute, I do not think that it would be of any assistance were I to attempt to analyse the position any further. I am equally conscious of the fact that Chadwick LJ and Lloyd J reach their conclusion that the cross-appeal should be allowed by slightly different routes. Since I agree with the result, I do not think it either necessary or appropriate to seek to explore the differences between them. I would, however, on a different point, wish to associate myself with Chadwick LJ's endorsement in paragraph 29 of his judgment of the judge's postscript to his judgment (paragraphs 301-304) relating to the disproportionality between the costs, time and resources taken up by the case, and the actual damages likely to flow from any findings of negligence.

Mr Justice Lloyd:

90. I agree with Lord Justice Chadwick that the Claimant's appeal in the DOV claim should be dismissed. I consider that the judge's dismissal of that claim was right for the reasons he gave. I also agree that the appeal by Kippax Beaumont Lewis (KBL) in the CGT claim should be allowed. I set out my reasons separately because we are differing from the judge. Since that appeal is to be allowed the Claimant's appeal against the judge's costs order must fall.
91. In the CGT claim, as it stood by the time the judge gave judgment, Jemma had made five allegations of negligence against KBL, although the substance of one of them, relating to inaccurate returns, had been dealt with by agreement between KBL and the executors shortly before the trial. On two others the judge found that there was no negligence, on a third he found that there had been negligence but no loss (and Jemma has abandoned its appeal against the finding of no loss), and only on the fourth did he find that there had been negligence and at least enough proof of loss to order an enquiry. KBL appeals against the finding of negligence in this respect.
92. The allegation arises from the executors' written assent in their own favour as trustees in respect of the Hulton Land Fund (HLF) made on 29 November 1997 when Lady Hulton was alive. It is alleged that KBL was negligent not to advise the executors against doing this. The claim is pleaded in paragraph 3.2B of the Amended Particulars of Claim, which was introduced by the judge's permission on the fourth day of the trial. The essence of it is that Leading Counsel (Robert Venables QC) had advised in an Opinion dated 28 July 1997 that there would be CGT disadvantages of early vesting if (as was the case) the executors were not willing to appoint entirely non-resident trustees and assent in their favour, because after an assent to resident trustees there would be a charge to capital gains tax on a deemed disposal such as would occur when Lady Hulton died and Mr Butterfield became absolutely entitled to the fund as against the trustees.
93. Counsel did give that advice in that Opinion. The defence is that he gave it in relation to a different situation from that which ultimately arose, that he had previously advised that there ought to be an assent in the events which existed by the time of the actual assent, and that this was not negated by his advice in July 1997.
94. Lord Justice Chadwick has explained the circumstances in which the assent was made. As a result of the Deed of Variation, and the subsequent advance which brought to an end Lady Hulton's life interest in the HLF, the Revenue took the position that this gave rise to a potentially exempt transfer by Lady Hulton, so that the HLF was exempt from inheritance tax on Sir Geoffrey's death, because the transfer was to his widow, but that it would be subject to inheritance tax on Lady Hulton's death unless she survived for seven years after the transfer.
95. In fact Lady Hulton died a little more than two years after the termination of her life interest. Therefore inheritance tax ought, on this view, to have been payable. The result of what happened, however, was to secure that the Revenue accepted, in the end, that the termination of the interest in possession did not give rise to a potentially exempt transfer, so that no inheritance tax was payable within the trust, but they also accepted that, because of their previous conduct, albeit on an erroneous basis, they could not charge tax on the correct basis on Sir Geoffrey's executors. Thereby the HLF escaped a liability at 40% on a value of over £5 million.
96. If the executors had not made an assent in favour of themselves as trustees before Lady Hulton's death, it is common ground that there would not have been a charge to capital gains tax on her death in respect of the HLF, whereas in fact there was, on Mr Butterfield becoming absolutely entitled to the Fund as against the trustees of the settlement. That charge is at 23% on the increase in value of the relevant assets between the death of Sir Geoffrey and that of Lady Hulton. The amount remains to be determined. It cannot be anything like as large as the amount of inheritance tax which has been saved.
97. The strategy pursued by Mr Forrester and Mr Liptrott, on the advice of KBL and of Counsel, was aimed at avoiding any inheritance tax charge being imposed on the HLF at all, either on Sir Geoffrey's death or on that of Lady Hulton. This strategy was thought up by Mr Venables, who had also given the advice on which the arrangements made in November 1995 were based. There are some respects in which it might be said that the details of what was done involve a closer attention to form than to substance. In that the whole strategy was based on taking advantage of a mistake on the part of the Inland Revenue, it might seem unattractive in some ways. But the Revenue is able to look after itself, and there has never been any suggestion that any relevant information was withheld from or misrepresented to the Revenue at any stage. The issue before this court, as before the judge, is whether KBL was negligent in failing to advise the Executors against executing an assent of the HLF in favour of themselves as trustees before the death of Lady Hulton.
98. I do not need to set out the history, which Lord Justice Chadwick has described. For the purposes of the appeal by KBL two stages in the history are of central importance.

i) On 19 November 1996, on KBL's instructions, Mr Venables QC and Mr Grierson advised in consultation, the other persons present being Mr Forrester, Mr Liptrott and Mr Marriott. In one respect there is a dispute as to what Counsel advised. In other respects there is no doubt, because Counsel settled a note of their advice. Counsel advised that the Revenue's position was wrong. On that basis they went on to consider whether the Revenue could go back on the position taken. The ideal course was seen as persuading the Revenue to issue a certificate under IHTA section 239, but alternative courses were also considered. Counsel settled the note of their advice on 12 December 1996.

ii) On 28 July 1997 Counsel wrote a Joint Opinion, in the light of the delays that had been encountered as regards a response by the CTO to the request for a certificate under section 239. They had been asked two questions: how long should the executors allow to elapse before arranging for the vesting of the HLF in the name of the trustees, and whether there was any merit in adding an additional trustee when the property is vested in the trustees. I deal with this in more detail at paragraph 126 below.

99. By the end of September 1999, the strategy pursued by the executors and trustees, on Mr Venables' advice, had succeeded. Contrary to all prior expectations the HLF had not been subjected to inheritance tax either on the death of Sir Geoffrey or on his widow's death. However, a capital gains tax charge had been incurred on Lady Hulton's death, which would have been avoided if the executors had waited a few months more before executing the assent.
100. The judge held that Mr Venables had not advised the executors that they should execute an assent of the HLF in their own favour as trustees. That finding is challenged on this appeal. The advice was given, if at all, at the consultation on 19 November 1996. The evidence as to that consists of the witness statements and oral evidence of Mr Forrester, Mr Liptrott and Mr Marriott, and the settled note of the consultation. The point is not dealt with at length in the witness statements, which is understandable because, at the date on which they were made (3 November 2003), there was no allegation in the Particulars of Claim about the assent in respect of the HLF, so that Counsel's advice in this respect was not in issue. That also seems to me to account for KBL's failure to call Mr Venables and Mr Grierson as witnesses. In the light of this the judge's comment at paragraph 294 that it is surprising that KBL did not call Counsel to give evidence seems to me not altogether fair.
101. The judge found all three witnesses to be "doing their best to assist the court to the best of their recollections, knowledge and abilities" (paragraph 63). He said later (paragraph 291) that Mr Forrester's recollection was very poor outside the contents of his witness statement. He made no other comment on Mr Liptrott or Mr Marriott as regards credibility or reliability. In those circumstances Mr Fenwick QC, for KBL, is right to submit that the judge accepted them as honest witnesses, whose reliability called for no particular comment.
102. Mr Forrester was the first of the three to give evidence. He was the land agent to the Hulton Estate. He had said nothing in his witness statement about what led to the assent in respect of the HLF. In cross-examination (Day 8 at page 74) he said he recalled Mr Venables advising that the executors should get the clearance certificate and then vest the estate in themselves as trustees. He was then cross-examined by reference to the note of the consultation and later advice and other documents, not all of which we were shown on the appeal. It is fair to say that, by the end of the relevant part of his cross-examination (Day 8 page 93), he had accepted that he had limited recollection apart from what he had said in his witness statement. He had, however, said specifically at page 74 that he recalled Mr Venables advising that they should vest the property in themselves as trustees once they had the certificate, and this evidence was not challenged in cross-examination.
103. Mr Marriott gave evidence next. He had said in his witness statement, at paragraph 45, that Mr Venables had advised that, after a certificate had been issued, the executors "could" assent the HLF in favour of the trustees. During his cross-examination, the relevant part of which is on Day 10, from page 41 to page 82, he was clear in his evidence that the assent was justified by reference to inheritance tax and on Mr Venables' advice. He was cross-examined by reference to the absence from the settled note of the consultation of any reference to an assent, on the basis that the advice was not given, which he did not accept (see page 51 line 12 to page 54 line 54). In the course of that passage he said that the word "could" in paragraph 45 of his witness statement should have been "should". He was then cross-examined by reference to later documents, including the opinion of 28 July 1997. Nothing in the record of that cross-examination suggests that his evidence about what had been said in consultation on 11 November 1996 was shaken.
104. Mr Liptrott gave evidence on Day 11. He had said this in his witness statement (paragraph 43):

"I went to see Robert Venables and Robert Grierson with Stephen Marriott. Having discussed the matter in depth with Counsel, Counsel's advice was that we should accept the Capital Taxes Office view and the executors should apply for an inheritance tax clearance certificate in respect of the Hulton Land. Once this had been obtained, the executors should immediately consent to the vesting in themselves of the Hulton Land as trustees. Counsel's advice was that the trustees, despite the fact that they were the same people, were not bound by any decision of the executors. It therefore followed that on Lady Hulton's death it was open to the trustees to allege that the Capital Taxes Office was incorrect and that, in fact, the deed was not a potentially exempt transfer but a deed of variation. Counsel advised that once this had been argued successfully the trustees could produce the clearance certificate which would be binding on the Capital Taxes Office."

105. He went on to say that he was worried about the risks of this approach, but after discussion with Mr Forrester and in the light of Mr Marriott's advice, they decided to accept the advice and proceed accordingly. He agreed that the word "consent" in the third sentence of the paragraph quoted above is a slip for "assent".
106. His cross-examination on the point is recorded at pages 48 to 66. Mr Ham Q.C. for the Claimant put to him, as he had done to Mr Marriott, that there was no reference to an assent in the note of the consultation, and that this is hardly likely to have been a mistake given the care devoted to the document and the involvement of at least four lawyers in the process (both Counsel, Mr Liptrott and Mr Marriott), and that the explanation for this is that the advice was not given. Mr Liptrott was very clear and firm that the advice was given. At pages 51 to 52 he reverted to his concern at the course advised being, as he put it, "rather too near the bone". He said that, although there is no express reference to an assent in the note, it is a necessary assumption from what the note does say that there would be an assent. Between page 54 line 16 and page 55 line 9 he repeated that he was certain that the advice was given in consultation. A little later, at page 56 lines 16 to 18, the judge commented that Mr Liptrott "is quite clear about what he understood was being said at the time", and shortly after that Counsel moved on to questions about Mr Venables' later advice.
107. Thus, Mr Ham's case for saying that Mr Venables had not given the advice that the executors should assent in their own favour as trustees, and that the witnesses' evidence that he had done so should not be accepted, is based on the note of the consultation, and in particular the absence from that document of any express reference to an assent. In turn, that was the basis of the judge's rejection of the case for KBL that Mr Venables had given that advice. Mr Fenwick submits that a fair reading of the note itself does not permit this conclusion, quite apart from the question whether it is right to reject the evidence of the witnesses, in particular Mr Liptrott and Mr Marriott, on the point. KBL was given permission to appeal allowing them to argue that the Judge wrongly interpreted the notes of conferences with Counsel so as to conclude that no advice in favour of the 1997 assent was in fact given.
108. The features of the note relevant for present purposes are as follows. Mr Venables advised that the CTO's position was incorrect, and that the events of November 1995 did constitute a variation within IHTA section 142. The executors were not under a duty to tell the CTO of their mistake. On the basis of the CTO's position, and asking whether, if Lady Hulton were to die within 7 years, the CTO could go back on its previous position, it was relevant to enquire who would be liable for the tax, which would be governed by IHTA section 201(1)(a), (b) and (c), but the position was complicated by section 204(7). Probably "the Trustees" would be primarily and ultimately liable for the tax, especially as they would have to render an account within 3 months under section 216(1).
109. Then the note continues as follows:

"RV then advised that it might be possible in this instance to have the best of both worlds.

RV indicated that it was essential that we distinguish between Executors and Trustees although in this instance they would be the same individuals. After the administration of the estate had been completed the Executors would become Trustees. The distinction was important as any agreement made by the Executors would not bind them as Trustees.

RV therefore proposed that the following course of action be adopted:

(i) That KBL on behalf of the Executors write a letter to the CTO to be drafted by RV noting the CTO's view that the transfer was a PET as a result of which the Executors are not liable to tax.

(ii) RV considered that it was essential that we were able to bind the CTO to their ruling and referred to section 239 of IHTA in respect of the same. If the Executors obtain a Certificate of Discharge which can be limited to the Landed Fund only and not the entire estate then this will be binding on the CTO but not on the Executors.

(iii) Once the Certificate of Discharge has been obtained then anybody can benefit from it and not just the Executors.

(iv) If a Certificate of Discharge is obtained then one should examine the position based upon Lady Hulton's life. If she survives for 7 years then there will be no tax to pay in any event. If she fails to survive for 7 years then tax will be payable. The amount of tax will be dependent on how many years she will have survived the transfer.

(v) If a "small" amount of tax is payable then the Trustees may decide to pay the same. If a more substantial sum is due then the Trustees may argue that the transfer was not a PET but a chargeable transfer on Sir Geoffrey's death and it may be that it would be necessary to refer this point to the court to determine whether business relief were available. If however the CTO were bound by the Certificate of Discharge, no tax would be payable.

(vi) It is also the case that if the CTO seek to pursue the tax in future their action would be very likely to be against the Trustees. It is therefore important to seek and obtain from the Revenue a Certificate of Discharge."

110. Counsel also advised on the need to prepare a contingency plan in case a certificate could not be obtained. Mr Venables was recorded as saying that "if the transfer is treated as a PET the Executors should not part with the trust fund by way of advance", because "the Executors/Trustees will be liable for the tax and they have a lien over the trust fund" for the tax. "If they proceed with an advance in such a manner as to part with both the legal and beneficial ownership they may run into difficulties". There was also some discussion of an advance to Mr Butterfield; in the context (in particular because of the reference to an advance of up to half of the trust fund) this must mean an advance under the statutory power in section 32 of the Trustee Act 1925. Mr Venables added a sentence (at the bottom of page 4 of the note) saying that, if such an advance were made, no holdover relief from capital gains tax would be available on the advance. The last sentence of the note of the advice given in consultation is as follows, words added in Mr Venables' handwriting being shown here in italics:

"Finally it was confirmed that no cgt liability will arise as a result of the November 1995 transfer of value, although there will be a disposal for a market value consideration of any assets to which HB becomes entitled, whether by advancement or on Lady H's death."

111. This last passage is a warning of the consequence which has in fact occurred, namely that, on Lady Hulton's death, Mr Butterfield was treated as becoming absolutely entitled to the trust fund against the trustees for capital gains tax purposes, so that there is a tax charge on the notional gain since the death of Sir Geoffrey. It is common ground that this is the position as a result of the executors having assented to the vesting of the HLF in themselves as trustees before Lady Hulton's death.
112. Mr Fenwick submits that, taking the note of advice as a whole, although it does not mention an assent, it is clear that Mr Venables was distinguishing between the position where the relevant property is held by the executors, on the one hand, or by the trustees, on the other, and was assuming that the executors would part with the fund in favour of the trustees in the course of the steps to be taken to implement the strategy, which they would and could only do by an assent.
113. The judge rejected this reading of the note. At paragraph 278 he said that the case made for KBL involves saying that a step which they said was regarded as an essential feature of the scheme was omitted from the note of Counsel's advice, despite the note having been prepared by Mr Marriott, through several drafts, and approved as amended by Mr Venables. He said that it was "against all probabilities" that this point would not have been mentioned specifically in the note if it had been a necessary element of the scheme. He also said that KBL's argument presupposed that, without an assent, the executors would be liable for any inheritance tax on the PET if Lady Hulton died within 7 years, but that, not only does the note not record Mr Venables as advising that they would be so liable, but it is clear that he did not give that advice (paragraphs 279 to 281).
114. Mr Venables is recorded as advising that, while the position was not absolutely clear, the Trustees were likely to be primarily and ultimately liable for the tax on the PET if Lady Hulton died within 7 years. That does not of itself involve saying that the executors are not liable as well, and later in the note (see paragraph 110 above) it says "the Executors/Trustees will be liable for the tax". The judge said that they would not be, because none of the categories of person listed in section 201(1) includes executors while the estate is in the course of administration. He rejected Mr Fenwick's submission that the trustees could only be liable once they had the property vested in them, for which an assent was necessary. He did so on the basis of the income tax case, IRC v. Hawley [1928] 1 KB 578, which held that, when a legatee of shares received them more than a year after the death, he was not treated as receiving all the accrued dividends as income of the year in which the shares became vested in him, but rather, by relation back to the death, in the year in which each dividend accrued.
115. My difficulty with the judge's rejection of this aspect of KBL's case is that it seems to me clear from the note that Mr Venables did advise on the basis that the executors would be liable for the tax on the PET if Lady Hulton died within 7 years, and he did also give advice which presupposes that an assent would be made. Certainly he said that the trustees would be primarily and ultimately liable for the tax. That could only be the case, in practical terms, if the trustees had the property vested in them. The fact of the trustees' liability for the tax gave them the standing to argue that the events of November 1995 did not give rise to a PET. As regards an assent, I accept Mr Fenwick's submission that the sentence added by Mr Venables at the bottom of page 4 of the note, and the final sentence (quoted at paragraph 110 above), are both based on the proposition that the executors would have assented to the property vesting in themselves as trustees, because only if they had done so would the capital gains tax consequences mentioned in those two sentences have arisen.
116. It does not seem to me that, on this appeal, it is necessary to form a view as to the application of IRC v. Hawley to the facts and issues involved in the present case. I can accept that the trustees must have been able to exercise some of their powers as such before a written assent had been made, because it is clear that it was the trustees who had, and exercised on 17 November 1995, the discretionary power to advance funds to Lady Hulton under clause 7(A)(ii) of the Will. They could only do so, in practice, because they knew that, as executors, they were able and willing to release £750,000 from the fund, which they then did by transferring it from the executors' bank account to one held on behalf of Lady Hulton. But this appeal is about the content of Mr Venables' advice, and about the reasonableness of KBL's acts done in the circumstances, not about whether Mr Venables' legal analysis of the position was correct.
117. For these reasons I do not agree with the judge's conclusion that, on a true reading of the note, it is inconsistent with KBL's case. On the contrary, it seems to me that, odd as it may be that the note does not say in terms, after paragraph (iii) quoted in paragraph 109 above, that the executors would assent to the HLF vesting in themselves as trustees after obtaining a certificate, nevertheless the note does assume that there will be an assent after a certificate has been obtained, and it goes on to warn of the very consequence as regards capital gains tax which has now occurred. The second paragraph of the passage from the note quoted at paragraph 109 above seems to me to make it clear that Counsel was addressing the transition from the status of executors to that of trustees, and emphasising the importance of that different status. The passages added at the bottom of page 4 and at the end of the note also show that he was contemplating a position which would arise after an assent had been made. He did not say that the change of status was to be achieved by an assent, but that is commonplace and his instructing solicitors, at any rate, did not require advice as to how the change was to be achieved.
118. The Claimant does not contend that, if Mr Venables gave the advice which KBL say he did, they could not properly rely on it because it was wrong. If it is established that he did give the relevant advice, then it follows that (subject to the effect of his later advice) it was reasonable for KBL to rely on it in relation to the advice they in turn gave to the executors.
119. In the course of argument on the appeal, some attention was given to the question what is needed as regards an assent. As a general proposition, an assent is no more than an act on the part of personal representatives showing that they do not require the relevant asset for the purposes of the administration of the estate, and thereby perfecting the title of the person entitled to the asset under the will: it may be express or implied, including from conduct. As regards the legal estate in land, since 1926 an assent must be in writing: Administration of Estates Act 1925 section 36; this is so even if the assent is by the executors in their own favour as trustees: see Re King's Will Trusts [1964] Ch 542. As regards other assets some other conduct may be necessary, for example doing whatever may be necessary for the beneficiary to become registered as holder of shares. A beneficial interest in land could pass to a beneficiary without a written assent, and towards the end of the note of advice Mr Venables contemplated a position in which the beneficial interest might pass to Mr Butterfield while the legal estate was retained. Such a situation would not be normal, and careful documentation would be likely to be required if it was desired to be able to demonstrate that it had occurred.
120. As Lord Justice Chadwick observed in argument, there must, in fact, have been an assent in respect of the £750,000 which was appointed to Lady Hulton in November 1995, even if nothing was said about it, when that sum was transferred out of the executors' bank account to one held on behalf of Lady Hulton. There could not be a clearer case of an assent by conduct. However, the fact that there has been an assent in respect of one part of a fund does not show that there has been one as regards other parts of the same fund. Nor is it said on either side that there had already been an assent in respect of any other part of the fund before the date on which the written assent was executed.
121. If it was regarded as important to be able to demonstrate to the CTO that the relevant assets had become vested in the trustees, to rely on anything other than a written assent would have been foolhardy, even if it might have been possible, if necessary, to prove it in some other way.
122. Proceeding, therefore, on the basis that, at the time of Counsel's advice at the end of 1996, the HLF was still vested in the executors, it seems to me that the note of advice given in consultation does contemplate that the executors will assent to the vesting of the HLF in their own favour as trustees, if a certificate of discharge were to be obtained. Accordingly it seems to me that the note is consistent with the oral evidence of Mr Marriott and Mr Liptrott. In my judgment the judge was wrong to reject their evidence and to find that Counsel had not advised that the executors should assent once they got the certificate.
123. The judge went on to deal with KBL's alternative case that, even if Mr Venables had not given the advice in question, it was reasonable for the executors to make an assent in order to reinforce the position in favour of securing the possible inheritance tax advantage. At paragraph 296 he said that this argument could not succeed because the certificate was conclusive under section 239. It seems to me that this view, though ultimately accepted on behalf of the Inland Revenue, would have been over-confident if expressed in advance. In their Joint Opinion of 10 December 1996 Mr Venables and Mr Grierson said that the CTO, if shown to be wrong as to the fiscal characterisation of the November 1995 events, would naturally want to go back on their acceptance of the incorrect position, and that the court might be sympathetic to that. They pointed out two technical arguments on which the CTO might be able to rely to say that the certificate was not valid and effective under section 239. In fact these arguments were not run by the CTO, but it seems to me that it was natural to seek to take additional precautions in order to secure the substantial inheritance tax advantage. It might well have seemed provocative for Mr Forrester and Mr Liptrott, having obtained the certificate by accepting the CTO's position, then to turn round and repudiate it, without having divested themselves of the relevant asset as executors and vested it in themselves as trustees, with the advantage of the distinct identity conferred by section 190(3).
124. In their next Joint Opinion, dated 17 June 1997, Counsel considered the position if the CTO did not issue a certificate, in the light of the assurance given by the CTO letter dated 23 May 1997. The advice given does not matter for present purposes, but they did say this in footnote 4: "While we appreciate that if the Hulton Land Fund were to be vested in the trustees tomorrow, they would be the same persons as the executors, they are notionally a distinct body of persons". This seems to me to show, not only that they were proceeding on the basis that the relevant assets were still vested in the executors, there having been no assent as yet, but also that they were envisaging a future assent by the executors to the trustees, by which the trustees would come to hold the trust property.
125. In their next Joint Opinion, dated 28 July 1997, Counsel were again addressing the position if a certificate were not obtained. Mr Ham relies on a number of passages in this Opinion, which he put to the witnesses in cross-examination. The first is this:

"If there were some compelling reason why [the executors] should transfer the Hulton Land Fund to trustees, then at the very least they ought to take a secured indemnity. So far as we can discern, tax considerations apart, there is no compelling reason."

126. They went on to advise about tax implications. They pointed out that one reason for a transfer to trustees would be to save capital gains tax, but that this would only be possible if non-resident trustees were appointed. If, as was the case, the trustees were not prepared to take that course, "it could be detrimental in tax terms for the executors to vest assets in UK resident trustees now" (paragraph 9). "Unless the executors are happy to vest the whole of the Hulton Land Fund in non-resident trustees now, then, from a capital gains tax point of view, the best course would probably be for the executors to retain all the assets unless and until it is likely that they will be sold and the sale will involve the executors realising a more than negligible capital gain" (paragraph 10). As regards inheritance tax, they advised that, "in inheritance tax terms, the question of transfer to trustees, whether UK resident or not, is by and large immaterial" (paragraph 13).
127. Mr Ham's point, on behalf of the Claimant, is that this advice, taken together, shows that there is a good reason for not vesting the HLF in trustees, because of the capital gains tax charge that would arise, and there is no good reason for vesting it in trustees as regards inheritance tax. Therefore, he argues, overall there is no reason to vest at that stage, and that Mr Venables cannot be taken to have advised that it was important to vest the land in the trustees in order to secure the inheritance tax advantage which had previously been discussed. It seems to me that Mr Fenwick's response to this is correct, namely that this opinion was dealing with a situation in which the certificate had not been obtained, and presumably (because of the time elapsed) would not be forthcoming, whereas the previous advice about vesting had been in relation to the opposite situation, of the certificate having been issued. Moreover, the advice in this opinion is all about tax consequences of things yet to be done, whereas the previous advice had been about how to secure a more favourable treatment for tax purposes of things that had already been done. In the light of that, the advice set out in this Opinion does not affect my conclusion, already expressed, as to the advice given in November 1996.
128. The CTO indicated on 1 September 1997 that they would be willing to issue a certificate. On 23 September the executors took the advice of Mr Prosser Q.C. on points arising from the events of November 1995. They decided not to ask Mr Prosser whether they should execute the assent once they had the certificate. Instead, at their meeting before the consultation with him they decided to go ahead, to apply for the certificate and, when it had been received, to make the assent. It is not part of the Claimant's case that KBL were at fault in not insisting that Mr Prosser be asked about this.
129. In Mr Prosser's note of advice, dated 2 March 1998, he advised that probably (60:40) the trustees would succeed in arguing that section 142 did apply to the events of November 1995, so that the CTO's position that they gave rise to a PET was wrong. He said that the CTO might argue in the alternative that the trustees could not turn round and argue that section 142 applied because they agreed otherwise in asking for, accepting, and relying on, the certificate. He considered that the trustees would probably (70:30) succeed in resisting this argument because only the executors had agreed with the CTO position. The trustees had not done so, and the fact that the same individuals were trustees as well as executors made no difference: the trustees were not bound to agree with the view expressed by the CTO and accepted by the executors.
130. Thus Mr Prosser expressed a view as to the trustees' chances of success on this point which is a good deal less confident than that which seems to be attributed to him by the judge at paragraph 296:

"The advice of Counsel, particularly of Mr Prosser, was that the Certificate of Discharge, once granted, would be conclusive and binding on the Revenue as regards all who might otherwise be liable to bear the relevant tax."

131. That statement is part of the judge's reasons for rejecting Mr Fenwick's alternative argument that, even if Mr Venables had not given the advice that the executors should vest the land in themselves as trustees, it was a reasonable and prudent thing for the executors to do in the interests of securing the inheritance tax windfall. He held that it was not necessary, because the certificate was in fact binding. He did not consider separately the question whether, even if not strictly necessary, it was a reasonable and prudent course. It seems to me that to pin all one's hopes on the binding nature of the certificate, absent an assent by which the property had become vested in the trustees, legally a separate entity, would have been a seriously high risk policy. Nothing in Mr Prosser's advice seems to me to support the idea that the executors could and should have relied on the binding nature of the certificate without taking any further steps to make the position more secure. Mr Prosser gave the argument a strong but not overwhelming chance of success, at 70%. Mr Venables had identified at least two technical arguments on which the CTO might rely, and had, reasonably, expressed the view that the CTO's arguments might well be received sympathetically by the court. I therefore disagree with the judge's view that vesting the HLF in the trustees, which gave rise to a charge to capital gains tax, was something which "there was no need to do" in order to avoid a liability to inheritance tax in respect of the HLF. They might have got away with it without having vested the land in the trustees, but in my judgment it was eminently reasonable for this step to be taken in order to enhance as far as possible the prospects of success in the argument.
132. There is a striking contrast, in this respect, with a passage in the judge's judgment dealing with one of the other aspects of the CGT claim, namely that arising from the failure to seek to substitute the sale value of three properties sold within 3 years of the death of Sir Geoffrey in place of the probate values. The judge held that KBL were negligent on this but that their negligence caused no loss. One of the points relevant to the latter issue is dealt with at paragraphs 253 to 255. The judge said that in February 2000 (after the CTO had agreed that the certificate would stand despite its mistaken basis) Mr Marriott was concerned to do absolutely nothing that would imperil the £2 million tax saving that had been achieved. He then said that Mr Marriott's concern that there should be no opportunity for the Revenue to revisit the question of tax on the deaths of Sir Geoffrey or Lady Hulton was perfectly reasonable, bearing in mind that the tax saving which would have been secured by the substitution of the sale price was no more than some £31,000. He therefore concluded that, if the point had been addressed, the conclusion would have been that it was not worth taking any risk whatever of imperilling the £2m tax saving that had been achieved.
133. On that basis, it seems to me that, as regards a stage before that tax saving had been achieved, KBL are all the more entitled to say that they were reasonable in advising the executors to vest the land in themselves as trustees, despite the capital gains tax disadvantage, because it was a reasonable step to put the parties in the best position to argue in favour of the windfall, and the capital gains tax liability, even though not quantifiable in advance, was bound to be modest as compared with the inheritance tax saving that might be achieved.
134. The case for saying that, even if Mr Venables did not advise that an assent should be made, it was reasonable for KBL to advise the executors to proceed in that way, must be tested in the context of the advice which Mr Venables did give, as recorded in the note of advice given in consultation. Even if he did not say that there should be an assent, he did build his strategy on the distinction between executors and trustees, and the ability of the latter to take an opposite stance vis-à-vis the CTO from that which the executors had taken. As it seems to me it would not have been unreasonable for KBL to conclude from that advice that the property ought to be vested in the trustees by an assent, in order to enhance as far as reasonably possible the chances of securing the windfall at which Mr Venables' strategy was avowedly aimed.
135. The judge also said at paragraph 296 that there was no evidence that the executors or KBL had carried out any balancing exercise as between the inheritance tax advantage and the capital gains tax disadvantage. This is not a point pleaded against KBL, nor were any of their witnesses cross-examined about it. In those circumstances it does not seem to be a point which should properly be taken against KBL. It does seem to me that, if it had been pleaded, the answer would have been obvious. The executors' decision was taken at the meeting on 23 September 1997 at Mr Prosser's Chambers. All present were well aware of the prospective capital gains tax liability that would arise, and that it would be at 23% on the increase in value since the death of Sir Geoffrey; that was clear from the Joint Opinion of 28 July 1997 and from the summary of it provided by Mr Marriott to Mr Forrester. They also knew that the inheritance tax liability from which they had the chance of escaping would be at 40% on the value of the whole fund, and would therefore exceed £2 million. In those circumstances I have no doubt that when the executors, in the presence of Mr Butterfield, took the decision in favour of vesting, once the certificate had been obtained, they did so in full knowledge of the relevant circumstances and fairly concluding that the game of the inheritance tax saving was worth the candle of the capital gains tax liability.
136. Mr Prosser said nothing about the question of an assent but this is not surprising, since the point was not raised with him. That being so, I find it surprising that the judge should have relied, at paragraph 292, on the absence from Mr Prosser's note of anything to show that Mr Venables had advised that the executors should assent, in support of his conclusion that Mr Venables had not given that advice. At best, the absence from Mr Prosser's note of any reference to a point on which Mr Venables may have advised but on which Mr Prosser was not asked to advise seems to me altogether neutral.
137. For those reasons, I conclude that the judge's finding of fact was wrong and that he should have accepted the evidence of Mr Forrester, Mr Liptrott and Mr Marriott that Mr Venables did advise in consultation that the executors should assent in their own favour as trustees once a certificate had been issued.
138. I also disagree with his conclusion that, even if Mr Venables did not give that advice, it was not reasonable and prudent for the executors to take this step in the interests of securing the best prospect of a successful argument that no inheritance tax was due, because there had not been a PET but the CTO was precluded by the certificate from seeking to charge tax on the correct basis, namely that there had been a chargeable transfer on the death of Sir Geoffrey.
139. I would therefore allow the solicitors' appeal and dismiss the Claimant's claim on this point, the only one on which the judge found for the Claimant.