· The taxpayer co contracted to sell some properties for £175k. The contract was not completed because the co was unable to show a good title to one of the properties; in consequence, the purchaser repudiated the contract.
· The taxpayer co took the view that the repudiation was the result of negligence on the part of the firm of solicitors who were acting for it in respect of the sale and it issued a writ claiming damages against the solicitors totalling £104,138. The action was compromised by the solicitors.
· Held, A right to bring an action to seek to enforce a claim that was neither frivolous nor vexatious, which right could be turned to account by negotiating a compromise yielding a capital sum, constituted an 'asset' for the purposes of the capital gains tax legislation.
Simpson: Montgomery doesn’t mean that the asset from which a capital sum is derived must be the asset that constitutes its immediate source. One has to look in each case for the real, not nec the immediate, source of the capital sum. Here, the reality of the matter is that the taxpayer derived the money from the right to sue the firm.