Perth sheriff dismisses man’s £226,000 claim in relation to late father’s estate

Perth sheriff dismisses man’s £226,000 claim in relation to late father’s estate

A Perth sheriff has dismissed an action by a man seeking legal rights in relation to his late father’s estate after he was not nominated as a beneficiary under his testamentary writings.

Ian Harley raised the action against the executrix nominate of the late James Harley’s estate, his widow Beryl Harley. It was averred that he was due the sum of £226,460 based on a valuation of shares in the family business.

The case was heard by Sheriff Gillian Wade QC. RAS MacLeod, advocate, appeared for the pursuer and C O’Neill QC for the defender.

Minority shareholder

The primary moveable asset in Mr Harley’s estate was shares in a company, Alexander Harley Seeds Ltd, which represented 15% of the total number of shares issued. A legal rights calculation relied upon by the pursuer was prepared by a former executor of the estate, solicitor Campbell Watson, who did not make any provision for any minority shareholder discount on the share value. This valuation was used in the inventory for confirmation lodged with Companies House.

It was the position of the defender that, as Mr Harley was a minority shareholder with no control over the company, a minority discount of 75% should be applied to the shareholding. A calculation prepared for the defender valued the pursuer’s claim at just over £61,000. The defender averred that she was willing to settle the claim for this amount. 

Counsel for the pursuer submitted that the valuation in the inventory was the one which had to be used for the purpose of calculating the legal rights claim. Alternatively, the 75% discount proposed by the defender was excessive and decree should not be granted for the lower amount as there was no legal defence to the claim for legal rights per se.

For the defender it was submitted that no legal authority supported a proposition that where a valuation was wrong then the executors are nonetheless bound by it unless there has been an Eik to confirmation. While the pursuer was entitled to his legal rights, the correct value in this case was not determined by the one included in the original inventory. As the reduced sum had been offered as a settlement and remained available, the present action was unnecessary, and dismissal of the action was an available alternative.

Action not necessary

In her decision, Sheriff Wade observed: “It seemed to me that the pursuer’s approach conflated the two very different purposes of the inventory and the confirmation itself. The confirmation is vehicle by which the estate becomes vested in the executors for the purposes of administration of the estate and the inventory places a value on that estate for the purposes of assessing any inheritance tax liability accruing.”

She continued: “The dispute between the parties is really how the shares in AHSL should be valued for the purposes of quantifying the legal rights entitlement of the pursuer. To this end the defender has suggested one method which involves a discount to reflect the fact that the asset is no more than a minority shareholding. The pursuer simply avers that the discount suggested is excessive and does not offer any other mechanism or means by which the court could determine whether the defender’s valuation was appropriate or not.”

Noting that the pursuer’s pleadings did not offer any basis for why the defender’s proposed discount was excessive, the sheriff said: “It is clear to me that this action, as currently pled will not be the appropriate mechanism by which to resolve the central issue between the parties which is the true valuation of the shares as at the date of the testator’s death. If the pursuer’s central proposition is incorrect and in any event not supported by a plea in law then an alternative means of arriving at a valuation must be considered.”

She concluded: “I have considered whether it would be appropriate to grant decree for the lower sum of £61,04.93. However I am not persuaded that this action was necessary to secure that result and the litigation arose entirely as a result of the pursuer’s refusal to accept a valuation short of the sum sued for. In that event there seems to me to be an illogicality in granting a court order compelling the executor to do something which she was intending to do in any event.”

The pursuer’s action was therefore dismissed.

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