Divorcé who incurred CGT on sale of matrimonial home has negligence action against former solicitors dismissed

About this case:

• Citation:
  [2025] SC GLA 75
• Judgment:
  External link
• Court:
  Sheriff Court
• Judge:
  Sheriff D N Taylor

Pursuer Michael Cochrane alleged that as a result of negligence or a breach of contract by Harper Macleod LLP he incurred a loss of £113,518 plus legal fees for instructing new solicitors. The defender maintained that it had not been instructed in relation to tax liability per their agreement with the pursuer, and that the claim had no prospect of success.

The case was heard by Sheriff David Taylor in Glasgow Sheriff Court, with Clair, advocate, appearing for the pursuer and Manson, advocate, for the defender.

Required to renegotiate

The pursuer and his wife separated in 2003 and looked to divorce in 2019. It was agreed at a joint meeting of the couple and their agents that the former matrimonial home, a property the pursuer owned in his sole name in Eyemouth, would be sold and the free proceeds divided in a 55-45 split in Mrs Cochrane’s favour. Subsequently, the pursuer received advice that he would incur CGT liability on the sale of the property.

It was claimed that as a result of this advice the pursuer required to renegotiate the agreement reached with his wife that resulted in a loss. If he had been aware of the CGT liability at the time the original Heads of Terms document was agreed, the issue of CGT having never been brought up in previous meetings with the defender, the agreement could have been structured in such a way as to negate or reduce that liability and still give him the same share of the free proceeds.

The defender submitted that the pursuer’s averments were irrelevant given the terms of the contract between the parties. The Service Agreement dated 26 June 2019 stated that the firm would not provide advice in respect of tax in relation to the separation, and that the pursuer could inform them if he wished to speak to the firm’s personal tax director for tax advice. As the pursuer did not aver that he engaged the defender on a separate basis in relation to tax advice, his averments were irrelevant.

For the pursuer it was submitted that he had made sufficient averments to satisfy the test for pleading a negligence case. The facts as averred gave rise to a duty on the defender to recognise that a CGT liability would arise and that in these circumstances it should refer the pursuer for advice. The court could not be satisfied at this stage that the action would fail.

Not qualified in any way

In his decision, Sheriff Taylor said of the terms of the contract: “The defender agreed to act on behalf of the purser in respect of all matters arising from his separation from his ex-wife. However, the agreement stated that the defender would not provide advice “in respect of tax in relation to this matter”. The terms of the retainer agreed between the parties are straightforward. Applying the approach adopted by Lord Doherty in McMahon v Grant Thornton LLP (2020) a reasonable person in the position of the parties at the time of contracting would not have understood the defender to have contracted to provide tax advice.”

He continued: “The words used in the exclusion, ie ‘in respect of tax in relation to this matter’ are wide. They are not qualified in any way. The submission that tax advice was excluded from the scope of the retainer is reinforced by the fact that the Service Agreement provided a mechanism by which separate tax advice could be obtained. There is no averment that this mechanism was engaged in this case. Neither is there any averment that the obligation to refer the pursuer for tax advice was reasonably incidental to the work which the defender was obliged to carry out in terms of the Service Agreement.”

Considering whether the pursuer had a loss of a chance claim, Sheriff Taylor noted: “The pursuer says that he would have sought, received and acted upon competent tax advice. Yet he does not aver what that advice would have been. Viewed from the perspective of fair notice the pursuer must know what tax advice he would have received. The tax advice he would have received is at the heart of his claim. The defender can legitimately claim to be prejudiced by the lack of specification as it will be unable to put the hypothetical competent advice to its own expert and therefore unable to prepare properly for proof.”

He concluded: “I accept the submission made by the defender that the only averment which the pursuer makes in relation to causation is the averment that but for the defender’s breach the pursuer would have enjoyed a real and substantial chance of at least substantially mitigating a liability in relation to CGT. This averment makes it clear that the pursuer’s claimed loss is his liability to pay CGT. However, he [later] avers that the subsequent deal with his ex-wife was structured in such a way that no CGT was incurred. Read pro veritate the pursuer is offering to prove that the only loss he says he would have incurred but for the defender’s breach was not actually incurred.”

The sheriff therefore sustained the defender’s first plea-in-law and dismissed the action.