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Scottish farmer's daughters fail to force brother-in-law to pay estate taxes

Thursday, 31 January, 2019

A claim by two daughters of Scottish farmer Thomas Paterson on their sister's husband, in respect of taxes due on Paterson's estate, has been rejected by the Edinburgh Court of Session.

Paterson, a dairy farmer, died in April 2016, leaving his entire estate to his wife. Seven months later she too died, leaving her estate to be divided equally among their five daughters.

However, Thomas Paterson had, in 2011, sold a considerable part of his farm to his son-in-law George Wilson for GBP420,000. According to Thomas’ daughter Ilene Anderson, this was a gross undervalue of the land sold, which she claimed was actually worth more than a GBP1 million.

Mrs Anderson and another sister sued Wilson, alleging that the 2011 transaction had created a GBP10,000 capital gains tax liability on Mr Paterson's estate, thus diminishing the value of the five sisters' shared inheritance. She also claimed that the 2011 disposal had disqualified the estate from agricultural property relief and entrepreneurial tax relief, resulting in further loss to the sisters. She further sought damages from Wilson on grounds of undue influence and fraud.

At the commercial court of first instance, all these claims were dismissed on the basis that Mrs Anderson and her sister did not stand in a legal relation to Wilson which gave them some right that he had infringed.

Mrs Anderson appealed to the Court of Session (the Court), which rejected her claim. The Court held that Mrs Anderson's only legal right was the right to inherit from her mother's estate, and Wilson could not be said to have infringed on that right. Any right to complain about the sale of the land rested with Mr Paterson's executor, not his beneficiaries, and beneficiaries have no standing to seek collection of a debt owed to the estate of the deceased.

The Court found that Mrs Anderson's claims were 'vague, inspecific and do not amount to an offer to prove a civil wrong, so there is no remedy in damages'.

Moreover, said the Court, any losses that the property sale caused to Mrs Anderson's inheritance had occurred in October 2011, when the land was sold. She had not begun her action against Wilson until July 2017, and her claim was thus out of time under the Prescription and Limitation (Scotland) Act 1973 (Anderson v Wilson, 2019 ScotCS CSIH 4).