Spc00740

INHERITANCE TAX – DISCLAIMER OF BENEFIT – The Appellant was joint executor and residuary beneficiary of her late husband’s estate – The Appellant paid £1 million to her son who had renounced a legacy of £665,000 under the Will of his step father – The Appellant contended that the payment of £1 million was unconnected with her son’s renunciation – the payment was made in fulfilment of an earlier promise to fund her son’s business ventures – evidence overwhelmingly demonstrated that the renunciation was made in return for  payment of the  £1 million – renunciation no effect made for consideration in monies – Appeal dismissed – section 142(3) Inheritance Tax Act 1984.

SPECIAL COMMISSIONERS

	MRS MARGARET LAU 
	    (THE EXECUTOR OF WERNER LAU DECEASED)  	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Special Commissioner: MICHAEL TILDESLEY OBE	 

Sitting in public in Aberdeen on 27, 28, 29 & 30 January 2009 and in Edinburgh on 13 February 2009

Philip Simpson counsel instructed by Iain Smith solicitors for the Appellant

Roddy Thomson QC counsel instructed by Solicitor’s office of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2009

DECISION
The Issue to be Determined
1.	The parties agreed the following
“Whether a disclaimer signed by Colin Derek Harris  on 23 March 2005 was a disclaimer to which section 142(1) of the Inheritance Tax Act 1984 (hereinafter the 1984 Act) applied, or whether such application was excluded by section 142(3) of the 1984 Act by it being made for consideration in money or money’s worth”.
The Background
2.	Mr Lau died on 6 October 2004. The Appellant was the widow of Mr Lau, and the executrix of his estate. Colin Derek Harris was the Appellant’s only child from a previous marriage. Mr Lau was his stepfather.  Mr Harris was married to Marie Christie on 26 August 2005.
3.	The value of Mr Lau’s estate at death was about £7 million before deduction of funeral expenses, debts, fees and inheritance tax. Mr Lau in his Will dated 22 July 2003 left a legacy to Mr Harris of £665,000. Legacies in the same sum were left to each of Mr Lau’s daughters, Dagmar Bach and Angelika Lau, both of whom resided in Germany. The legacies were free of inheritance tax, which meant that they were grossed up to calculate the inheritance tax payable by the estate.  
4.	Mrs Lau was the residuary beneficiary under the Will. Her share of the estate was valued at around £3 million which was exempt from inheritance tax under the surviving spouse provisions.
5.	According to Mr Harris, he renounced his legacy soon after he learnt of the contents of the will. His renunciation was put in writing on 23 March 2005.  
6.	On 30 September 2005 £3,827,000 was transferred to the Appellant’s bank account from Mr Lau’s estate. The £3,827,000 represented the residue of the estate which included the value of Mr Harris renounced legacy. On or about 3 October 2005 the Appellant transferred £1 million to Mr Harris.
7.	I use the word renunciation instead of disclaimer throughout the decision because that was the word adopted by the parties at the Appeal hearing. Renunciation has the same meaning as disclaimer for the purposes of section 142 of the 1984 Act. Also I have substituted the word the Appellant for Mrs Lau in the extracts from the correspondence referred to in the decision.
The Dispute
8.	The dispute concerned the payment of the £1 million from the Appellant to Mr Harris. The Appellant contended that the £1 million was a gift from her in fulfilment of an earlier promise made by her to fund Mr Harris’ business ventures. Also the gift was in part a wedding present to Mr Harris who had recently married Miss Christie.
9.	The Respondents, on the other hand, contended that Mr Harris’ renunciation was made in return for the £1 million payment. The Respondents relied on correspondence from the Appellant which set out in some detail her proposal to pay £1 million to each of the legatees, Mr Harris and Mr Lau’s daughters, in return for them executing a Deed of Variation renouncing their legacies under the Will.  The Deed was executed in July 2006 under which Mr Harris and Mr Lau’s daughters renounced their legacies, and resolved that the whole free residue of the estate be payable to the Appellant. 
10.	When the Respondents pointed out the provisions of section 142(3) of the 1984 Act which rendered a Deed of Variation ineffective for the purposes of section 142(1) if made for consideration in monies, the Appellant accepted that the Deed of Variation did not apply in respect of Mr Lau’s daughters but declared that Mr Harris’ renunciation was not part of the arrangements to mitigate inheritance tax liability.   The Respondents considered the Appellant’s explanation distinguishing Mr Harris’ renunciation from that of Mr Lau’s daughters fanciful and without substance. In their view there was a direct causal relationship between the payment of the £1 million and Mr Harris renunciation which meant that the renunciation fell foul of the provisions of section 142(3) of the 1984 Act.
11.	The onus was upon the Appellant to demonstrate on the balance of probabilities  that Mr  Harris’ renunciation of the legacy in the sum of £665,000 was not made in return for  payment of the £1million from the Appellant.  
The Appeal
12.	On 8 February 2008 the Respondents issued a Notice determining that section 142(1) of the 1984 Act did not apply to the written disclaimer made on 23 March by Mr Harris having regard to the provisions of section 142(3) of the 1984 Act.
13.	On 29 February 2008 the Appellant appealed against the determination.
14.	On 15 January 2009 the Appellant supplied the Clerk to the Special Commissioners and the Respondents with a Minute of Amendment to the Note of Appeal which had the effect of replacing the grounds of Appeal as set out in the original Note. The Respondents did not object to the amendment but their Counsel reserved his right to make submissions on the lateness of the amendment. I gave my consent to the amendment.
15.	The Appellant’s grounds of Appeal were as follows:
“The Commissioners erred in determining that section 142(1) of the 1984 Act did not apply to the disclaimer identified in the Notice of Determination.
The disclaimer was not made for consideration. There was no agreement or understanding between the Appellant and Mr Harris that if he made the disclaimer he would receive any consideration for that. 
In particular, the payment of £1 million on or around 3 October 2005 was not given by way of consideration for the disclaimer.
The payment was given (a) on account of Mr Harris’ marriage on 26 August 2005 and (b) pursuant to an understanding between the Appellant and Mr Harris reached in or around 2001 that the Appellant would provide all the funding necessary for Mr Harris to start up a business, if he chose to do so.
The Appellant accepts that any such understanding did not constitute an enforceable, unilateral gratuitous obligation under Scots law. This is because it did not satisfy the requirements as to form set down in the Requirements of Writing (Scotland) Act 1995 (the 1995 Act) and it cannot be said that section 1(3) and (4) of the 1995 Act apply so as to make the understanding none the less enforceable.
Notwithstanding that the understanding was not enforceable, it remains the Appellant’s position that whether or not, apart from the 1995 Act, the Special Commissioner finds that there was an actual promise or a mere understanding entered into in 2001, the reasons given above were the reasons for making the payment of £1 million, and that payment was not made by way of consideration for the disclaimer.
Accordingly the determination should be set aside”.
The Law
16.	Section 142(1) of the 1984 Act provides that 
“Where within the period of two years after a person’s death –
(a)	any of the dispositions (whether effected by 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”
17.	Section 142(2) of the 1984 Act provides that
“Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons to the effect that they intend the subsection to apply to the variation”.
18.	Section 142(3) of the 1984 Act provides that
“Subsection (1) above shall not apply to variation or disclaimer made for any consideration in money or money’s worth other than consideration  consisting of the making  in respect of another of the dispositions, of a variation or disclaimer to which that subsection applies”.
Correspondence
19.	A memorandum of the Appellant’s solicitors dated 25 October 2004 entitled Werner Lau’s Executry recorded that
“Meeting with Appellant and Colin Harris. Discussing generally with them regarding the estate. Also discussing re possible Deed of Arrangement and that this would be left meantime until the ingathering of the estate. Obtaining papers etc. Discussing re fee and agreeing that this would be fee’d by Marie and being agreed by Peter Macari and then a restriction of 25 per cent being made thereon”.
20.	An unsigned letter from Appellant’s solicitors to Ms Lau (daughter of the deceased) dated 18 November 2004 stated amongst other matters:
“I will let you know that in terms of the late Mr Lau’s Will you have been bequeathed a legacy of £665,000 free of inheritance tax and other expense but without interest. Settlement of this legacy will be made in due course but we would advise you at the outset the Executors are in discussion concerning your legacy and various other legacies and other terms of the Will. In Scotland it is possible to vary the terms of the Will by means of a Deed of Variation and the usual purpose of this is to alleviate the Inheritance Tax burden either as affecting the Estate itself or as affecting the future burden of tax on the beneficiaries of the Estate. The Appellant is keen to explore this possibility and it would of course be designed not only to alleviate the burden of tax on your father’s estate but also to be of ultimate financial benefit to yourself and the other beneficiaries. We would stress at the outset that whether or not you wish to enter into such an agreement would be at your discretion and you are fully entitled to simply take your legacy under the Will in full. We stress that Appellant’s wish would be to benefit the legatees as well as herself”. 
21.	In a letter dated 25 January 2005 the Appellant’s solicitors advised the Appellant of the effect of entering into a Deed of Variation. The letter stated amongst other matters:
“The letter seeks to layout the effect of entering into a Deed of Variation. You will see from the documents enclosed that if Angelika, Dagmar and Colin (Mr Harris) are prepared to enter into a Deed of Variation then an enhanced figure of £1 million will be paid to them.
The real point for your information is how this will affect you and we draw your attention to the annexation to this letter. As Part 1 we have shown the distribution under the current terms of Werner’s Will. You will receive net after tax is paid and the bequests are grossed up for tax purposes the sum of £3,297,356”.
At part 2 of the note attached you will see that if a Deed of Variation is entered into then allowing for the two bequests x £20,000 and gifts totalling £3 million by you a net figure of £3,634,711.50 will be retained by you.
In essence under a Deed of Variation you are £337,355 better off”.
22.	On the same date of 25 January 2005 the Appellant’s solicitors wrote to each of the legatees including Mr Harris stating amongst other matters the following:
“The Executors of your late father have instructed us to write to you concerning his estate. We attach for your information a copy of the late Mr Lau’s will. As you will see at clause second you have been left free of inheritance tax and other expenses but without interest the sum of £665,000. This sum represents a pre-tax figure of £1,108,333.30.
After due consideration the Executors with the consent and concurrence of the Appellant, as an individual, and in her position as Residuary Legatee, having instructed us to point out to you that an enhanced figure can be paid if what is known as a Deed of Variation is entered into. We enclose for your consideration a draft deed of variation. The document indicates that each of the three beneficiaries renounce the bequests which are made to them. In the event that such a document is agreed signed and accepted by the UK tax authorities then the Appellant will pay each of the beneficiaries from her own resources the sum of £1 million net.
We hope that you will see from the terms of this letter and annexation that it would be beneficial to enter into a Deed of Variation which will legally avoid Inheritance Tax on the bequests to the three main beneficiaries. The Appellant as surviving spouse is exempt from tax on the residue of the estate which passes to her. Under UK tax law there is no IHT eligible from that part of the estate which passes to the surviving spouse.
We therefore suggest that you give serious consideration to entering into a Deed of Variation. It is of course necessary that the UK tax authorities accept the terms of the Deed of Variation and confirm that no tax is payable at which point the necessary documentation will be lodged with the court so that the estate may be ingathered and paid to the Appellant. She will make arrangements to settle the sum of £1million to you. These payments should be regarded as gifts from the Appellant.
23.	On 7 February 2005 the Appellant’s solicitors responded to various queries raised by the legal advisers of the daughters residing in Germany. The letter contained the following passage
I would also say in passing that the Appellant in her capacity as Executrix and one of the beneficiaries is keen to make progress in this matter and it would be helpful for your client’s interest if you would confirm the German tax position with her a soon as practicable and advise as to whether we are to proceed with the Deed of Variation or not. I would say in passing that a substantial delay in making the decision in the matter will likely cause the Appellant as residuary legatee to suggest that the terms of the Will would be simply adhered to and this would cause a substantial loss to the principal beneficiaries”.
24.	On 23 March 2005  Mr Harris wrote to the Appellant’s solicitors advising them of the following:
“Thank you for advising me of the legacy of £665,000 bequeathed to me by the late Werner Lau in terms of  his Will dated 22 July 2003. I write however to advise that I do not wish to accept the legacy and I therefore now hereby formally renounce the said legacy. Please acknowledge safe receipt”.
25.	On 10 August 2005 the Appellant’s solicitors wrote to the Appellant advising her of the arrangements for paying inheritance tax on the estate and confirmation of the Will. Within the letter the solicitors advised that
“Turning to Colin’s (Mr Harris) position I do hold on file a Minute of Waiver in regard to his bequest in terms of the will. I am holding this basically as undelivered pending settlement of any private arrangement between yourself and Colin (Mr Harris)”.
26.	From 25 April 2005 there was a series of correspondence between the Appellant’s solicitors and the German legal advisers for the daughters. The correspondence concerned the various options available to the daughters. The tenor of the Appellant’s  approach was to emphasise the benefits of the Deed of Variation for the daughters and the urgency of the situation having  regard to the two year time limit for executing the Deed.  On the 7 July 2006 the German legal advisers proposed that the Appellant’s solicitors go ahead with preparations for an eventual deed of variation. On 17 July 2006 the daughters formally renounced their legacies in writing and signed the Deed of Variation.
27.	On 19 July 2006 the Appellant’s solicitors wrote to the Respondents making a formal request for the repayment of inheritance tax in the sum of £782,459.02 which was paid on 18 August 2005 in respect of the two daughters’ legacies. The ground for the request was that Mr Harris and the two daughters had formally renounced their legacies and entered into a Deed of Variation to that effect with the result that the whole residue of the estate passed to the Appellant. 
28.	There followed a series of correspondence between the Appellant’s solicitors and the Respondents’ Capital Taxes Offices in Edinburgh. I set out below extracts from the correspondence which were relevant to the Appeal:
(1)	Appellant’s solicitors’ letter dated 18 August 2006:
“No fees have been paid by the Executors to Colin Harris. He renounced his legacy at the outset. We understood that the Appellant as an individual has gifted her son (Mr Harris) £1 million from her own funds”.
(2)	Appellant’s solicitors’ letter dated 11 September 2006:
“The intentions of the parties to the Deed of Variation in executing the deed is to legally avoid inheritance tax”
“The suggestion that a Deed of Variation be entered into was raised by ourselves as law agents to the Executors. As you will see from the correspondence above mentioned that this was disseminated amongst the parties at the earliest possible stage”.
(3)	Respondents’ letter dated 14 September 2006:
“It seems, therefore, that the renunciation, the variation and the gifts back were all part of a series of pre-ordained transactions the net result of which was Angelika, Dagmar and Colin (Mr Harris) recovered the benefit which they purported to give up by the renunciation and the variation. In these circumstances, it would appear that section 142(3) IHTA (which disqualifies  section 142(1) from applying to a disclaimer or variation made for any consideration in money or monies worth) would apply both to the renunciation dated 23 March 2005 and the variation dated 17 June 2006 so that neither falls within the provisions of section 142(1).
(4)	Appellant’s solicitors letter dated 21 September 2006:
“Firstly the Executors accept that section 142(1) will not apply in the circumstances to the variation and this letter will not concern itself with that document.
However, the Executors take exception to the suggestion that section 142(3) applies to the waiver or disclaimer which was signed by Colin Harris on 23 March 2005. For the removal of doubt Colin Harris required to sign the deed of variation since he was referred to in the body of the deceased’s will. That being the case he had no other interest in the variation itself.
It appears that HM Revenue & Customs have jumped to the conclusion that the disclaimer and the payment by the Appellant as an individual to her son (Mr Harris) were linked and that payment was by way of consideration of giving up the bequest in terms of the deceased’s will.
The disclaimer was not dependent on the subsequent gift from the Appellant. That was entirely at her discretion as to the amount, time and indeed if it were ever paid. The Appellant made the gift to her son in the October as a wedding gift. Colin Harris was married at the end of August 2005. The money was gifted to Colin Harris and his wife for the purposes of starting a business, buying a home and for the couple’s honeymoon”.
(5)	Respondents’ letter dated 25 October 2006:
“I confirm that my view remains the same and that the disclaimer by Colin Harris was executed by him in the full knowledge that the Appellant intended to pay him a greater sum from her own resources. The fact that Colin was going to be married later that year, had plans to start his own business  and buy a home strengthens my view that he would  not have renounced his entitlement under his step-father’s will without knowing that he was going to receive consideration from his mother for doing so. This was outlined in the letter sent to him on 25 January 2005”.
(6)	Appellant’s solicitors’ letter dated 21 November 2006:
“The Appellant has considered matters further and does not accept your view on this matter. Colin Harris and his fiancée Marie Christie were about to leave for the USA and had arranged to be married there when Mr Lau took ill. They were required to cancel the trip and plans for the wedding on 3 September 2004. Shortly prior to that time the Appellant had agreed to give her son a sum of money in order that he might set himself up  with a home and purchase a business – effectively in contemplation of marriage since it was anticipated that the couple would then leave the family home where they resided.
Colin Harris had no promise from the Appellant as to what sum if any she was going to give him although he did anticipate that this would be substantial. Colin Harris signed the waiver in regards to his stepfather’s estate in good faith and in the knowledge that his mother would give him a sum of money. However, the precise amount was not known and the date of payment was again not known. The matter was at the entire discretion of the Appellant who could have reneged on her promise or indeed have given whatever sum she felt at whatever time she chose”.
29.	In letters dated 11 December 2006 and 22 December 2006 the parties accepted that their differences could not be resolved and that it would be necessary for a hearing before the Special Commissioners.
The Evidence
30.	I heard evidence over four days from the Appellant and eight witnesses for the Appellant who were extensively cross-examined by Respondents’ counsel. The Appellant and witnesses supplied affidavits and statements which were admitted in examination in chief. The Respondents called no witnesses. A bundle of documents was received in evidence.
31.	 I set out in the following paragraphs a summary of their evidence in support of the Appellant’s case. I analyse the cross-examination, the reliability and weight to be attached to their evidence in my findings of fact, so as to avoid unnecessary repetition.
32.	 The Appellant confirmed that Mr Harris was her only child from a previous marriage. The Appellant had supported Mr Harris throughout his life, paying for his education at school and University, and generally meeting his financial needs. The Appellant supplied details of payments made to Mr Harris and his wife. Mr Harris lived with the Appellant since moving to Scotland some 20 years ago. His wife and child also resided with the Appellant in a large house in Aberdeen, the ownership of which was now in equal shares between the Appellant on the one hand, and Mr Harris and his wife of the other hand. The Appellant had a loving relationship with her son.
33.	The Appellant stated that in October 2005 she gave her son, Colin Harris, £1 million from her personal monies in fulfilment of a promise made to him in 2001 to fund a business. The Appellant felt she should not be supporting Mr Harris now that he was married, and wanted him financially secure for married life. The Appellant testified that the gift of £1 million would be used to fund the costs of a Quiznos franchise acquired by Mr Harris in May 2006.
34.	The Appellant stated that she and Mr Harris were unaware of the terms of her late husband’s Will before he died. On learning the terms of the Will Mr Harris immediately renounced the legacy of £665,000 bequeathed to him. The renunciation was oral which was later confirmed in writing. The Appellant believed that Mr Harris’ motive for renouncing the legacy was that he had no need of the money and was financially secure. The Appellant insisted that she would have given the £1 million regardless of whether Mr Harris had renounced the legacy or not. The timing of the £1 million payment in October 2005 had more to do with the date of Mr Harris’ marriage in August 2006 than with her receipt of £3.8 million from the estate. 
35.	Mr Colin Harris explained that he applied without success for about 50 jobs since obtaining his degree in 2000. In 2001 the Appellant advised him that she would give him funds to start a business. According to Mr Harris, in 2002 he considered a range of franchised businesses including Subway and Papa Johns and made a conditional offer for a post office and general store at Nigg which did not proceed because he was turned down by the Post Office for the position of sub-postmaster.  In May 2006 Mr Harris paid a fee of £15,000 to Quiznos for a franchise, which he terminated early on 3 January 2007 following a settlement agreement with Quiznos Corporation UK Limited.
36.	Mr Harris testified that after learning the terms of Mr Lau’s Will he immediately renounced the legacy bequeathed to him. Further he had no intention of accepting the legacy because he was financially stable and in the process of starting his own business. Shortly after his marriage on 26 August 2005, the Appellant gave him £1 million which was the money promised to him in 2001 to start up a business. Also the payment was in part a wedding gift. 
37.	Mrs Marie Harris was employed by the Appellant’s solicitors as an executries assistant, and married to Mr Harris.  She was aware of the contents of Mr Lau’s Will but bound by client confidentiality. Mrs Harris expanded upon the businesses possibilities investigated by Mr Harris in 2001/2002, which included a tanning studio in Torry and visiting commercial premises on or around Union Street in Aberdeen as potential locations for a franchise. She sought advice from the Appellant’s solicitors about a Subway franchise. Mrs Harris explained that they did not look at business premises in England until after Mr Lau died. Mr Harris intended to operate the Quiznos franchise from premises in the West Midlands, which would have involved them moving home from Aberdeen.
38.	Mrs Harris stated that she and the Appellant’s solicitors were made aware of Mr Harris’ renunciation shortly after the death of Mr Lau. According to Mrs Harris, Mr Harris renounced his legacy in full knowledge that he was already financially secure. The Appellant’s payment of £1 million to Mr Harris was made in respect of an earlier promise to fund his business ventures and as a wedding gift.
39.	Mr Peter Macari was a partner at the Appellant’s solicitors and co-executor of Mr Lau’s estate. Mr Macari resigned from his position as co-executor in early March 2007 as a consequence of a likely dispute with HM Revenue and Customs. Mr Macari explained that he handled the litigious aspects of the dispute concerning Mr Lau’s estate. The executry department of his firm dealt with the ingathering and settlement of the estate.
40.	Mr Macari said he was aware of Mr Harris exploring possible  business ventures for several years. Further he understood that the Appellant would provide the funds for a suitable venture.  Mr Macari testified about details of a meeting with HM Revenue & Customs Officers at which he and the Appellant in their capacity of  executors of Mr Lau’s Will disclosed voluntarily specific assets upon which Mr Lau had not declared for tax in his lifetime because he believed mistakenly that he was domiciled in Germany.
41.	Mr David Morrison was a partner in the firm of Cambell Connon Solicitors in Aberdeen. In May 2002 Mr Harris instructed Mr Morrison in connection with the proposed purchase of Nigg Post Office at an agreed price of £130,000 plus stock at valuation. Mr Harris told Mr Morrison that the Appellant would provide the purchase monies.  In September 2002 Mr Harris indicated to Mr Morrison his interest in shop premises at Torry and in Summer Street, Aberdeen for a sunbed tanning business. Mr Morrison was told by Mr Harris that the costs of purchasing and fitting out the premises might be in the region of £100,000. Neither interest, however, was pursued by Mr Harris.
42.	Mrs Adrienne McDonald and Mrs Dorothy McKenzie were work colleagues of Mrs Harris and together with their respective partners socialised with Mr and Mrs Harris. Their evidence consisted of recollections of conversations with Mrs Harris about the Appellant giving large sums of money to Mr Harris, the efforts of Mr Harris to find a suitable business, and an overview of the value of commercial properties in central Aberdeen.
43.	Mr Peter Christie and Mrs Mary Christie were the father and step-mother of Mrs Harris. Their evidence essentially comprised of Mr Harris seeking potential business ventures and that the Appellant supported Mr Harris’ lifestyle, which they learnt about through contact with their daughter and Mr Harris.
Findings of Fact
44.	I considered that that the evidence of the Appellant, Mr and Mrs Harris and to a limited extent Mr Macari critical to the determination of the dispute. Mr Morrison’s testimony was relevant only insofar as providing an insight of Mr Harris’ pursuit of potential businesses in 2001 and 2002. I attached no weight to the evidence of Mrs McDonald, Mrs McKenzie Mr and Mrs Christie, which was largely derived from conversations with Mrs Harris and related mainly to Mr Harris’ business search in 2001 and 2002. My discussion on the facts is structured under headings which are relevant to the dispute concluding with the facts found.
Mr Harris’ Reason for Renouncing the Legacy
45.	Mr Harris testified that he renounced the legacy because he did not want the money. He considered that he was financially secure and that the Appellant would meet his financial needs. According to Mr Harris at the time he orally renounced the legacy he did not know that the Appellant would give him £1 million. The Appellant believed that Mr Harris refused the legacy because he knew that she would support him. The Appellant could not explain why she chose the sum of £1 million other than it was a nice round sum. The Appellant considered that she was wealthy and could do what she liked with her money.
46.	Mr Harris’ contention that he was financially secure at the time of the renunciation was open to question. He was totally dependent upon the generosity of the Appellant to support his lifestyle. Mr Harris had no independent means of support. His employment prospects were bleak. In the 20 years since leaving school Mr Harris worked for about two years in relatively unskilled jobs. To his credit he gained a University degree and post-graduate qualification but for some reason did not capitalise on his qualifications. Mr Harris researched various business opportunities but none had come to fruition.  Mr Harris owned a flat in Aberdeen which he bought as a development opportunity and for resale. Mr Harris used the £150,000 given to him for the purchase of Nigg Post Office to buy the flat. The value of the flat at the time of the renunciation was not much more than the original purchase price. Mr Harris supplied no documentary evidence of holding substantial savings at the time of the oral renunciation.
47.	Until 2001 the Appellant was reliant upon her husband for financial support. Mr Lau supplied the Appellant with a credit card for her expenditure. The Appellant  became financially independent of her husband on 6 December 2001 when she received £3.5 million from her husband pursuant to a separation agreement following an acrimonious matrimonial dispute. In reality it was Mr Lau who provided for Mr Harris during the majority of his adult life.  Mr Lau’s responsibility for Mr Harris was reflected in his bequest of £650,000 to Mr Harris in his Will. The size of the bequest carried the implication that Mr Lau did not consider Mr Harris to be financially secure.  
48.	The payment of £1 million in October 2005 by the Appellant to Mr Harris was wholly exceptional and uncharacteristic of the level of support given by the Appellant and Mr Lau to Mr Harris. Essentially the Appellant and Mr Lau met Mr Harris’ immediate financial needs, and gave him relatively modest sums of money for cars, holidays, birthdays and Christmas.  The Appellant adduced evidence of just two sizable gifts of money to Mr Harris prior to October 2005. The first was a sum of £150,000 in four instalments between March and June 2002 from the Appellant which was connected with the proposed purchase of Nigg Post Office. The second in 2004, a gift of £30,000 each to Mr Harris and Mrs Harris from Mr Lau from his winnings at a local casino. 
49.	I find Mr Harris’ reasons for renouncing the legacy highly improbable. A legacy of £665,000 free of inheritance tax was a considerable sum of money which would have given Mr Harris financial independence and security for the remainder of his life. His assertions of being financially secure, and money did not matter to him were without factual foundation.  Mr Harris was entirely dependent upon the Appellant for financial support. He had been out of work for most of his adult life, and at the time of his renunciation owned no assets of significant value. If his account was to be believed, Mr Harris took an incalculable risk when refusing the legacy. The Appellant had only become wealthy in her own right following the separation agreement with her late husband in December 2001. Prior to the separation agreement the Appellant and by implication Mr Harris were dependent upon Mr Lau for financial support.  Mr Lau recognised his financial obligations towards Mr Harris with his substantial bequest which guaranteed Mr Harris financial security long after his death. The Appellant, on the other hand, had been in a position since December 2001 to give Mr Harris a substantial sum of money to secure his financial independence. She had made one gift of £150,000 for the proposed purchase of Nigg Post Office. The Appellant phased the payment in four instalments, which suggested that she was more cautious with her money than the image portrayed at the hearing of giving whatever Mr Harris required. The Appellant’s £1 million payment to Mr Harris was made only after receipt of the settlement of £3.8 million from Mr Lau’s estate, which included the gain to her from Mr Harris’ renunciation of his legacy. In these circumstances Mr Harris’ forsaking of a guaranteed £665,000 on an assumption that the Appellant would provide for his future needs was not only reckless but beyond the bounds of reasonable comprehension. 
The Appellant’s Promise to Fund Mr Harris’ Business Ventures
50.	The Appellant’s explanation for giving the £1 million in October 2005 was to discharge her earlier promise to fund a business for Mr Harris, and in part a wedding gift. I will examine in turn each aspect of the explanation.
51.	According to the Appellant, she was concerned about Mr Harris not securing employment after graduating from University despite his efforts. In around 2001 she suggested that he might wish to run his own business, and that she would fund the venture. The Appellant and her witnesses adduced evidence purporting to show that in 2001/2002 Mr and Mrs Harris looked at a range of potential commercial premises on or close to Union Street in Aberdeen (an expensive part of the City) from which to run a business. Mr and Mrs Harris stated that they considered several fast food franchises, a Post Office and general store at Nigg, a tanning studio at Torry, and a courier service. Mr Morrison gave evidence that he had been instructed by Mr Harris in relation to the proposed purchase of the Nigg Post Office, and his advice had been sought in relation to the studio at Torry.
52.	Mr and Mrs Harris gave evidence of taking up a franchise with Quiznos, which sold deli sandwiches. Mr Harris stated that he met Quiznos’ representatives in Edinburgh between March and October 2005. He signed a franchise agreement in May 2006. In November 2006 he instructed Mills and Reeve, solicitors in Birmingham, to progress a lease for a restaurant at Merry Hill Shopping Centre in the West Midlands from which the franchise would operate. Mr and Mrs Harris estimated that the total start up costs of the franchise would be about £225,000, plus an additional £250,000 for the costs of relocating to the Birmingham area. Mr Harris decided not to go ahead with the franchise, which was brought to an end by mutual agreement in May 2007.
53.	The Appellant in its original Note of Appeal submitted that on or about 2001 she undertook and promised to pay a sum in the region of £1 million to Mr Harris as and when he found a business interest in which to invest. The promise amounted to a unilateral gratuitous obligation enforceable under the Law of Scotland. On 15 January 2009 the Appellant acknowledged that the promise did not amount to an unilateral gratuitous obligation because it was not in writing as required by section 1(2)(a)(ii) of Requirements of Writing (Scotland) Act 1995.  Notwithstanding the unenforceability of that promise the Appellant maintained that her pledge to fund Mr Harris’ business was the principal reason for making the payment of £1 million.
54.	The Appellant and her witnesses were unable to provide precise details of the circumstances surrounding the promise. They believed it was given in 2001 but it may have been in 2002. The Appellant stated that no specific amount was mentioned but she would give whatever Mr Harris required to start up a business. The Respondents accepted that there was some sort of discussion between the Appellant and Mr Harris about funding a potential business around 2001 but challenged the details of the commitment given by the Appellant.
55.	The Appellant relied on the evidence of Mr Harris’ search for business opportunities to support her assertion of an open-ended commitment. Mr and Mrs Harris depicted their business intentions in 2002 as wide ranging embracing different opportunities of varying costs. Mr Harris stated that he intended to purchase commercial premises which would significantly increase the start up costs. The evidence, on the other hand, demonstrated that their intentions in respect of potential business opportunities were somewhat limited in scope, cost and time. 
56.	The evidence showed that in 2002 Mr Harris had seriously considered one business which was the Post Office and general store at Nigg, which he agreed conditionally to purchase for the sum of £130,000 plus the value of stock in hand. He sought the advice of his solicitor in respect of a tanning studio at Torry but was put off by the costs of fitting out the studio with the necessary equipment, which was in the region of £200,000. The businesses were not located in prime parts of Aberdeen. They did not involve acquisitions of expensive commercial premises and their purchase costs were in the region of £150,000. 
57.	Mr and Mrs Harris’ evidence in 2001/2002 of giving active consideration to fast food franchises run from commercial properties on Union Street or nearby was unreliable. They adduced no documentary evidence to back up their stated interest in such business ventures. Further the evidence of Mrs Harris’ parents, and work colleagues on the wide search for businesses carried no weight as their knowledge of events was largely derived from conversations with Mrs Harris.  
58.	The evidence of the Appellant’s involvement in the search for business premises was contradictory. Mrs Harris asserted that the Appellant accompanied them on their viewings. The Appellant, on the other hand, stated in her affidavit that she was aware of Mr Harris viewing premises. In her cross-examination the Appellant gave the impression that she left it to Mr Harris, “I was not holding his hands”. 
59.	Following his failure to obtain the position of sub-postmaster in late 2002, Mr Harris made no concerted effort to secure another business except the Quiznos franchise in 2006. He flirted with the idea of a courier business and set up a company in June 2003 to run it. Mr Harris, however, did not progress the project, and application was made in January 2004 to strike off the company from the Register held at Companies’ House.  
60.	Mr Harris’ flagging interest in finding a business was demonstrated by his use of  the £150,000 given to him by the Appellant for the Post Office to purchase a flat  for the purposes of renovation and onward sale, and his return to college in September 2003 for a one year post graduate course.
61.	The facts of the Quiznos franchise were central to the Appellant’s case in respect of its relationship to the £1 million payment and her stated obligation to fund Mr Harris’ business ventures. The affidavits of the Appellant, Mr Harris and Mrs Harris dated April 2007 linked the timing of the £1 million payment to Mr Harris’ acquisition of a Quiznos franchise. The Appellant and Mrs Harris described the franchise as going ahead in their affidavits. Mr Harris claimed that the £1 million was paid in October 2005 as he was in negotiations over the franchise, which required a payment of a deposit.  Their affidavits, however, did not mention that the franchise was about to be ended by Mr Harris, who had received legal advice on the termination in the period between 18 December 2006 to 23 January 2007. 
62.	In her witness statement dated 8 January 2009 the Appellant furnished details of the cost of the Quiznos franchise which would be in the region of £1 million if Mr and Mrs Harris relocated to the West Midlands, and commercial premises were purchased instead of leasing. The Appellant, however, again omitted the salient fact of the franchise ending in May 2007. In his witness statement of 10 January 2009 Mr Harris acknowledged that he had not gone ahead with the franchise, whilst still emphasising the potential high costs of setting up a franchise and relocation. Mr Harris also stated that when the gift of £1 million was made he had not entered into discussions with Quiznos and that the date of the gift was not linked to any particular line of enquiry in relation to purchasing or setting up a business. On 14 January 2009 Mr Harris made a supplementary witness statement in which he sought to retract his evidence of not entering into discussions with Quiznos by replacing discussions with no formal written agreement.  Mr Harris went onto state that he held a meeting with a Quiznos representative sometime after March 2005 but before October 2005. His enquiries with Quiznos were at an early stage and the Appellant’s gift of £1 million was coincidental and, in his view, connected with his overall intention to purchase a business.
63.	The contradictions and omissions in the affidavits and statements casted considerable doubt on the veracity of the Appellant’s assertion that the gift of £1 million was connected with the acquisition of the Quizonos franchise.
64.	 The facts not in dispute regarding the Quiznos franchise were that Mr Harris acquired a franchise to operate in the Manchester area in May 2006 for five years on payment of a fee in the sum of £12,500 plus VAT.  On 28 September 2006 Mr Harris incorporated a company Isandco Four Hundred and Seventy Six Limited (name changed to CDH Securities Limited on 5 October 2006) to run the franchise. In November 2006 Mr Harris instructed Mills and Reeve, solicitors in Birmingham, to negotiate a lease for premises at Merry Hill Shopping Centre in the West Midlands. In December 2006 Mr Harris was taking legal advice on terminating the franchise, which was formally brought to an end on 20 April 2007. 
65.	Mr Harris provided no explanation for his renewed interest in setting up a business after a break of three years from his last proposed venture of a courier business. The period of intense activity in progressing the franchise from end September to December 2006 occurred just after the Respondents’ decision on 21 September 2006 that Mr Harris’ renunciation was made as a consequence of the £1 million payment. 
66.	Mr Harris’ commitment to Quiznos as a serious business proposition was brought into doubt by the speed in which he took advice on terminating the franchise. Also Mr Morrison’s statement revealed that the Appellant in 2006 had instructed him to transfer the title of her home in Aberdeen Street into the joint names of herself and Mr Harris. The transfer was completed on 4 December 2006. The significance of the transfer was that it questioned Mr Harris’ intention to set up home in England to manage a franchise in the West Midlands.  
67.	As at the date of the hearing Mr Harris has not used any of the £1 million payment for the purposes of setting up a business.
68.	 The other aspect of the Appellant’s purported promise to Mr Harris was that she would provide whatever funds he required to set up business. I found in paragraph 48 that the Appellant’s generosity to Mr Harris did not extend to giving him large sums of money. The payment of £150,000 was made in four instalments. In cross-examination the Appellant could not provide an explanation for the instalment payments. Mr Morrison recorded in a memorandum dated 9 September 2002 dealing with the purchase of Nigg Post Office that Mr Harris’ mother will finance the purchase, there are also difficulties there. Mr Morrison was unable to elaborate on the difficulties due to the passage of time. He did state that the difficulties might have been the usual ones connected with a purchase dependent on third party financing. I consider that Mr Morrison’s record of the conversation when viewed in the context of the instalment payments suggested that the Appellant was cautious with her financial support of Mr Harris business ventures.
69.	I make the following findings of fact on the Appellant’s promise to fund Mr Harris’ business ventures:
(1)	The Appellant’s purported promise was not documented. The circumstantial evidence demonstrated that in 2002 the Appellant agreed with Mr Harris to fund a modest business venture in the region of £150,000.
(2)	The agreement was complete on payment of the £150,000 in 2002. There was no ongoing commitment on the part of the Appellant to provide Mr Harris with funds for business ventures. 
(3)	Mr Harris had effectively given up seeking business opportunities after the proposed purchase of Nigg Post Office fell through in 2002. He used the monies given to him for property development on a small scale.
(4)	The Quiznos franchise was not a serious business proposition. Mr Harris had no intention of proceeding with it. The activity in the period September to November 2006 was just after the Respondents rejection of Mr Harris renunciation and undertaken for the purpose of building a case for the Appeal hearing.
(5)	Mr Harris told the truth in his retracted statement of 10 January 2009 when he said  that  he had not entered into discussions with Quiznos when the gift of £1 million was made and that the date of the gift was not linked to any particular line of enquiry in relation to purchasing or setting up a business.
(6)	The payment of £1 million was not made pursuant to a promise by the Appellant or an understanding on her part to fund a business venture for Mr Harris.
 Wedding Gift?
70.	The Appellant’s solicitor in his letter dated 21 September 2006 to the Respondents stated  in effect that the £1 million was a wedding gift:
“The Appellant made the gift to Mr Harris in October as a wedding gift. Mr Harris was married at the end of August 2005. The money was gifted to Mr Harris and his wife for the purpose of starting a business, buying a home and for the couple’s honeymoon”.
71.	In a subsequent letter dated 21 November 2006 the solicitor provided a different rationale for the £1 million payment which shifted from a straightforward wedding gift to a gift made in contemplation of marriage promised shortly before the cancelled  wedding in September 2004:
“Mr Harris and his fiancée, Marie Christie, were about to leave for the USA and had arranged to be married there when Mr Lau took ill. They were required to cancel their trip and their plans for the wedding on the 3 September 2004. Shortly prior to that time the Appellant had agreed to give Mr Harris a sum of money in order that he might set himself up with a home and purchase a business – effectively in contemplation of marriage since it was anticipated that the couple would then leave the family home where they resided”.
72.	The Appellant in her affidavit explained that the timing of the £1 million payment was due to the fact that Mr Harris had just got married and would be going on honeymoon. In cross examination she said that the £1 million was in part a wedding gift, and that the honeymoon had been paid separately by her.
73.	The facts of the wedding were that Mr and Mrs Harris were due to get married on 2 September 2004 in Las Vegas, leaving Scotland on 29 August 2004. When Mr Lau became ill on 24 August 2004 Mr and Mrs Harris cancelled their wedding plans.  On the 26 August 2005 they were married in a private ceremony held locally at Banchory. The Appellant did not attend the wedding, although she knew about it about two days before.  Mr and Mrs Harris told their extended family and friends of their marriage in November and December 2006. They took their honeymoon in Hawaii in January 2006. When challenged in cross-examination the Appellant could not explain why she did not make payment of the £1 million prior or on the date of either the cancelled or actual wedding if it was intended as a wedding gift. The payment of £1 million was by cheque, unaccompanied by a letter suggesting that it was a wedding gift or made in contemplation of marriage.
74.	I find the Appellant’s evidence on the wedding gift unsatisfactory. During the dispute the Appellant adopted several versions of the wedding gift explanation ranging from a straightforward wedding gift to one made in contemplation of marriage which envisaged Mr and Mrs Harris setting up their own home. Her explanations were inconsistent and contradictory. No evidence has been adduced of Mr and Mrs Harris actively looking for a new home. They purchased a three bedroom house with the sale proceeds from the flat for the purposes of renovation and onward sale. Mrs Harris considered the house too small for her needs. Mrs Harris gave the impression in her evidence that she had no intention of leaving the Appellant’s home, which was one of the premier houses in Aberdeen.  The Appellant’s failure to give a reason for not making the £1 million payment either on or before the dates of the cancelled wedding and the actual wedding significantly undermined her assertion that the payment was a wedding gift. I formed the view that the Appellant had latched on to the wedding gift explanation because of the relative proximity of the wedding to the date of the £1 million payment. Her explanation of a wedding gift, however, sat uncomfortably with her insistence that the £1 million payment was made to discharge a promise given in 2001 when a wedding was not on the horizon. I hold that the gift of £1 million was not connected with Mr Harris’ wedding. 
Deed of Variation and Mr Harris’ Renunciation
75.	In her solicitor’s letter of 21 September 2006 the Appellant accepted that the Deed of Variation executed on 17 July 2005, in which Ms Dagmar Bach, Ms Lau and Mr Harris renounced  their legacies under Mr Lau’s Will  was of no effect for the purposes of section 142(1) of the 1984 Act.  Although not explicitly stated in the letter, I infer from the chain of the correspondence with the Respondents that the Appellant accepted the Respondents’ conclusion that the Deed of Variation was part of a series of pre-ordained transactions under which the named beneficiaries would receive consideration for disclaiming their bequests under the Will. 
76.	The Appellant portrayed Mr Harris’ renunciation of his bequest as a discrete act which was not connected with the Deed of Variation. According to Mr Harris, he signed the Deed to assist Mr Lau’s daughters, and on the understanding that the Deed was of no benefit to him since he had already renounced his legacy. 
77.	The Appellant’s depiction of Mr Harris’ renunciation as a separate act unconnected with the events surrounding the Deed of Variation was challenged by the correspondence dealing with Mr Lau’s estate supplied by the Appellant’s solicitors. The correspondence demonstrated that soon after the contents of Mr Lau’s Will became known the Appellant was exploring ways of mitigating inheritance tax liability on the estate. The memorandum of 25 October 2004 indicated that the option of a Deed of Variation was discussed at the first meeting about the Will between the Appellant, accompanied by Mr Harris, with her solicitors. As at 25 January 2005 the Appellant knew that she would be £337,355 better off, if an effective Deed of Variation was executed by the beneficiaries. 
78.	The Appellant instructed her solicitors to write to the beneficiaries on 25 January 2005 explaining that if they renounced their bequests and entered into a Deed of Variation which was accepted by HM Revenue and Customs, she would pay each of them from her own resources the sum of £1 million. Mrs Harris admitted in cross-examination that she had delivered the letter of 25 January 2005 to Mr Harris. In the correspondence the Appellant treated Mr Harris in exactly the same way as the other beneficiaries. Mr Lau’s daughters in turn replicated the process adopted by Mr Harris by signing letters of renunciation as well as executing a Deed of Variation.  
79.	According to Mr Harris he renounced his legacy orally immediately after hearing the contents of will which I assumed to be sometime in October 2004. Mr Harris, however, was vague about the circumstances of the renunciation except that it was made in the presence of the Appellant.  In contrast, the Appellant could not recall the oral renunciation. Mrs Harris insisted that the Appellant’s solicitors were informed about Mr Harris’ renunciation in or around November 2004. Mr Macari, however, disagreed with Mrs Harris’ recollection stating that he was not told about the renunciation until the 25 January 2005 when the letter about the £1 million payment and Deed of Variation was sent to Mr Harris.
80.	Mr Harris and the Appellant testified in cross-examination that they held a conversation before he renounced his legacy in which Mr Harris checked with the Appellant whether she would still pay him the money to fund his business. When Mr Harris received the necessary confirmation from the Appellant he renounced the legacy.
81.	Mr Harris put the renunciation in writing in March 2005 in full knowledge of the Appellant’s proposal to pay the beneficiaries £1 million each from her own resources if they renounced their legacies.
82.	 The Appellant’s solicitors’ letter of 10 August 2005 revealed that they were holding Mr Harris’ written renunciation as undelivered pending settlement of any private arrangement between the Appellant and Mr Harris. The Appellant adduced no evidence to show that the status of the written renunciation had changed from undelivered to delivered.
83.	The Appellant admitted in cross-examination that she knew she would benefit from the saving in Inheritance Tax if the Deed of Variation went ahead. She could not explain why she chose £1 million other than it was a nice round sum. The Appellant considered that it was mere coincidence that the £1 million payment to Mr Harris was of the same amount which was quoted in the letters of  25 January 2005 as an incentive to Mr Harris and Mrs Lau’s daughters to disclaim their bequests under Mr Lau’s Will. She was unable to justify why she made the payment of £1 million within three days of receiving the £3.8 million from the residue of estate. Her response amounted to no more than that it was her choice to pay then. 
84.	I make the following findings of fact:
(1)	Mr Harris sought confirmation from the Appellant regarding financial support before he renounced orally the legacy under Mr Lau’s Will. The renunciation was made in consequence of the Appellant’s confirmation of financial support. I decide on the totality of the evidence that the Appellant’s confirmation concerned the £1 million payment rather than funding for a future business as suggested by Mr Harris.
(2)	Mr Harris’ written renunciation was undelivered, and of no legal effect.
(3)	The correspondence from the Appellant’s solicitors and the circumstances of the payment demonstrated a direct connection between the £1 million payment and Mr Harris’ renunciation of the bequest of £665,000. The Appellant’s evidence denying the existence of a connection was unconvincing and utterly unpersuasive.
The Decision
85.	Section 142(1) of the 1984 Act permits a beneficiary under a Will to renounce a legacy provided it is in writing and made within two years of the death of the person who made the Will. The renunciation is of no effect if it is made for any consideration in money or money’s worth.
86.	Counsel for the parties to the Appeal agreed that the word consideration should be given its ordinary and everyday meaning, namely as something given in exchange for something else or a quid pro quo,
87.	The issue in this case was whether Mr Harris’ renunciation of the legacy of £665,000 under Mr Lau’s Will was made in consideration of the £1 million given to him by the Appellant on 3rd October 2005. The onus was on the Appellant to show on the balance of probabilities that Mr Harris’ renunciation was made for no consideration. 
88.	The determination of the dispute was one of fact. Counsel for the parties accepted that the presumption against donation in Scots law was only relevant if the settled factual position was finely balanced.
89.	Counsel for the Appellant submitted that she and her two principal witnesses, Mr and Mrs Harris, should be found credible. Their evidence clearly proved the essential features of the Appellant’s case which was that the £1 million payment was given partly by way of wedding present and partly by way of providing Mr Harris with the funds he would need to start a business. Counsel contended that if the Appellant established in or around 2001 she had undertaken to provide all the necessary funding to Mr Harris to start a business that was sufficient to prove her case regardless of whether at the time the funding would be around £150,000 to £250,000. Further counsel submitted that it was highly improbable that the Appellant would not give her only son a wedding present bearing in mind her proven generosity to him. Counsel did not consider Mr Harris’ admission that he sought confirmation from the Appellant before renouncing the legacy fatal to the Appeal. In counsel’s view, Mr Harris was just seeking confirmation that the Appellant would fulfil her previous undertaking to provide whatever funds were required for him to start a business.
90.	Counsel for the Respondents contended that the Appellant’s case was fundamentally flawed in two respects. First, the unguarded evidence of the Appellant and Mr Harris about their conversation before he orally disclaimed his legacy demonstrated that his renunciation was made for consideration in monies or monies worth.  Second, Mr Harris’ renunciation did not meet the legal requirements of section 142(1) of the 1984 Act. Mr Harris oral renunciation was not in writing. His written renunciation was held by the Appellant’s solicitor as undelivered, which meant that the legal effect of the renunciation was suspended. Thus Mr Harris had not made a valid renunciation for the purposes of section 142(1) with the result that the Appeal fell at the first hurdle.
91.	Counsel for the Respondents submitted that the wider case pleaded by the Appellant of a prior undertaking to fund a business was not substantiated by the evidence. The testimonies of the Appellant, and of Mr and Mrs Harris were incredible and unreliable. According to counsel the Appellant had failed to show that Mr Harris’ renunciation was for no consideration. Indeed all the reliable evidence showed that there was a causal connection between the renunciation and the payment of £1 million.
92.	I agree with the assessment of Respondents’ counsel that the evidence of the Appellant and of Mr and Mrs Harris was incredible and unreliable.  My examination of the factual matrix for the Appeal as set out in paragraphs 44 – 84 identified the contradictions and omissions in their testimonies. As explained in paragraph 44 I did not give weight to the evidence of Mrs Harris’ work colleagues and friends because it was largely derived from conversations with Mr Harris. Parts of Mr Morrison’s evidence were relevant in shedding light on Mr Harris’ search for business ventures in 2002. Mr Macari was the signatory and ultimately responsible for the correspondence which set out clearly the Appellant’s intentions in respect the £1 million.
93.	 In summary I found the following facts that:
(1)	Mr Harris’ reason of financial security for renouncing the legacy was highly improbable. His assertion that he was financially secure and that money did not matter to him was without foundation. Mr Harris was entirely dependent upon the Appellant for financial support. Mr Harris’ forsaking of a guaranteed £665,000 on an assumption that the Appellant would provide for his future needs was not only reckless but beyond the bounds of reasonable comprehension. The Appellant’s generosity to Mr Harris did not extend to giving him large sums of money. She was more cautious with her money than the image portrayed at the hearing of giving whatever Mr Harris required.
(2)	In 2002 the Appellant agreed with Mr Harris to fund a modest business venture which was satisfied and completed on payment of the £150,000. There was no ongoing commitment on the part of the Appellant to provide Mr Harris with funds for business ventures. Thus the payment of £1 million was not made pursuant to a promise by the Appellant or an understanding on her part to fund a business venture for Mr Harris.
(3)	The £1 million payment was not connected with Mr Harris’ marriage. The Appellant’s explanations for the wedding gift were inconsistent and contradictory which together with her failure to explain not making the payment either on or before the dates of the proposed wedding or the actual wedding significantly undermined her assertion that the payment was a wedding gift in part or in full.
(4)	The correspondence from the Appellant’s solicitors and the circumstances of the payment demonstrated a direct connection between the £1 million payment and Mr Harris’ renunciation of the bequest of £665,000. The Appellant’s evidence denying the existence of a connection was unconvincing and utterly unpersuasive.
94.	My findings revealed the hopelessness of the Appellant’s case, and demonstrate that there was a direct causal link between the payment of the £1 million and Mr Harris’ renunciation. The reality was that on 25 October 2004 the Appellant together with Mr Harris were in discussions with her solicitors about legitimate ways of mitigating the inheritance tax liability on Mr Lau’s estate. The obvious area to target was the bequests to Mr Lau’s daughters and Mr Harris which were net of inheritance tax and carried a tax liability of £1.4 million. The outcome of the discussions was for Mr Lau’s daughters and Mr Harris to renounce their bequests and execute a Deed of Variation to that effect in return for a payment of £1 million each from Mrs Lau. The upshot of this proposed arrangement was that the Appellant would inherit the whole estate of about £6 million except for two minor legacies to Mr Lau’s sisters upon which no inheritance tax would be payable because of the surviving spouse exemption. Further the  beneficiaries including the Appellant would share equally the gain from the saving on inheritance tax, which meant that each would be better off by about £335,000. The striking feature of the arrangement was that Mr Lau’s daughters and Mr Harris were being treated exactly the same which entailed the same process of written renunciation followed by a Deed of Variation. The delay in the execution of the arrangements was due to the German legal advisers for Mr Lau’s daughters satisfying themselves that the proposed course of renunciation and Deed of Variation was to their clients’ advantage.
95.	The surprising aspect of the proposed arrangement was that the Appellant’s solicitors overlooked the provision of section 142(3) of 1984 Act which rendered the proposed renunciation and Deed of Variation of no effect in changing the terms of Mr Lau’s Will.  The slip up regarding section 142(3) was partly explained by that the German advisers for Mr Lau’s daughters would not be familiar with the United Kingdom legal intricacies for Deeds of Variation, and Mr Harris did not appear to take  legal advice independent of the Appellant’s firm of solicitors. 
96.	When the Respondents pointed out the provisions of section 142(3) the Appellant’s solicitors readily acknowledged that the Deed of Variation was of no effect for Mr Lau’s daughters but for some reason the Appellant insisted that Mr Harris was not party to the proposed arrangements.  The Appellant’s justification for distinguishing Mr Harris’ position from that of Mr Lau’s daughters took time to emerge in the correspondence with the Respondents.  In the first letter from her solicitors of 19 July 2006 there was no mention of the background circumstances surrounding Mr Harris’ renunciation. The next letter of 18 August 2006 simply mentioned that the Appellant had given a gift of £1million to Mr Harris. The following letter of 11 September 2006 furnished no further details of the gift. On 21 September 2006 the Appellant’s solicitors on instructions advised the Respondents that the £1 million payment was a wedding gift for setting up a business, buying a home, and honeymoon. No mention was made in that letter of any prior arrangement or understanding. Then on 21 November 2006 the Appellant stated shortly prior to the cancelled wedding in 2004 she had agreed to give her son, Mr Harris, a sum of money for a home and business in contemplation of  marriage. Finally on 22 December 2006 the Appellant’s explanation for the gift was that she undertook to give Mr Harris a sum of money some years ago to be used for the purchase a business. 
97.	The Appellant’s explanation of a prior undertaking to give funds for a business emerged after a period of five months involving six letters to the Respondents. This explanation then took the form of an enforceable, unilateral gratuitous obligation under Scots law in the original Note of Appeal. Following receipt of the Respondents’ Counsel skeleton the Appellant amended her Note of Appeal on 15 January 2009, replacing enforceable obligation with an actual promise or a mere understanding. The absence of a coherent and convincing explanation of the gift of £1 million to Mr Harris which distinguished it from the proposed £1 million payment to Mr Lau’s daughters continued at the hearing with the evidence of the three main witnesses resulting in my findings that their evidence was incredible and unreliable.
98.	Counsel for the Respondents submitted that the blatant unsatisfactory nature of the Appellant’s evidence and her two principal witnesses constituted a deliberate dishonest attempt on their parts to ascribe the £1 million payment to a variety of fictitious reasons. Counsel sought to identify the prime mover in concealing the truth from the Respondents and the Tribunal. Counsel, however, fairly pointed out that the Respondents did not need to establish dishonesty in order to defeat the Appeal, and that on occasions witnesses can delude themselves in believing they are telling the truth even when they are not. Mr Macari in his statement averred to the Appellant’s honesty when she voluntarily disclosed substantial interest not declared for tax by Mr Lau. I conclude that it would not serve any useful purpose in determining whether the three main witnesses were dishonest and the identity of the prime movers for the scheme. I am conscious that unnecessary damage should not be inflicted on existing professional and personal relationships. I consider that my findings on the facts which  led to my conclusion that the Appellant’s case was hopeless, and that there was a direct causal link between the payment of the £1 million and Mr Harris’ renunciation  was sufficient to discharge my responsibilities under the Appeal. 
99.	I now turn to the two alternative submissions out of sequence put forward by Counsel for the Respondents which he described as the first and second short answers, and in his view each of the short answers were decisive in determining the outcome of the Appeal. 
100.	 I am satisfied that Respondents’ counsel’s submission on the validity of Mr Harris renunciation for the purposes of section 142(1) of the 1984 Act was correct. Mr Harris’ oral renunciation did not meet the requirements of the section, which required it to be in writing. Mr Harris’ written renunciation was equally of no effect because the Appellant’s solicitors were holding it as undelivered. The Appellant adduced no evidence that the status of the renunciation had changed from undelivered to delivered. Counsel for the Appellant conceded that an undelivered instrument was of no legal effect. Counsel’s principal objection to the submission was its lateness and that no notice of it had been served upon the Appellant by the Respondents. Counsel for the Respondents, however, pointed out that the reason for the lateness was that the letter of 10 August 2005 from the Appellant’s solicitors which contained the statement regarding the undelivered status was disclosed by the Appellant effectively at the end of the evidence on 30 January 2009. I offered Appellant’s counsel the opportunity to apply for an adjournment to consider the matter but after much thought he declined the offer. I hold that Mr Harris’ renunciation did not meet the requirements of section 142(1) of the 1984 Act, and, therefore, was not capable of varying the terms of Mr Lau’s Will for the purposes of section 142(1) of the 1984 Act.
101.	The first short answer concerned the admissions of the Appellant and Mr Harris about their conversation immediately prior to Mr Harris’ renunciation to the effect that the Appellant confirmed that she would provide him with funds for his business ventures if he gave up the legacy. According to Respondents’ counsel Mr Harris’ admission was sufficient in itself to determine that he renounced the legacy for consideration in money or money’s worth. Counsel for the Appellant argued that the admission was capable of an alternative interpretation, in that Mr Harris was simply seeking confirmation from the Appellant that she would fulfil her earlier promise to finance his business ventures. I conclude that the admission on its own was not sufficient to dismiss the Appeal because the truth of it depended upon whether in fact the Appellant had given an earlier undertaking. I found at paragraph 84(1) that the Appellant’s confirmation concerned the £1 million payment rather than funding for a future business as suggested by Mr Harris. In view of my finding the admission was fatal to the Appellant’s case.
Determination
102.	I find on the substantive Appeal and the two short answers that 
(1)	There was direct causal link between the £1 million payment and Mr Harris renunciation of the bequest under Mr Lau’s Will.
(2)	Mr Harris’ renunciation did not meet the legal requirements of section 142(1) of the 1984 Act, and was of no legal effect.
(3)	Mr Harris sought the Appellant’s confirmation that she would pay him the £1 million before he renounced the legacy.
103.	I, therefore, determine that the disclaimer signed by Colin Derek Harris on 23 March 2005 was made for consideration in money or money’s worth. In accordance with section 224(5) of the 1984 Act I confirm the Respondents’ determination dated 8 February 2008.
104.	I dismiss the Appeal.
105.	I wish to thank counsel for their thorough presentations and in particular their patience and courtesy towards me in explaining aspects of Scots law which I was unfamiliar with.  The outcome of the Appeal did not depend upon an interpretation of Scots law. The presumption against donation did not come into play because the facts found provided an unequivocal answer to the disputed issue.

                               

                                   MICHAEL TILDESLEY OBE
SPECIAL COMMISSIONER
RELEASE DATE: 18 March 2009

SC 3125/2008