| Accessibility information

Back to Latest NewsArchived News - 2009

Personal Law

Failure to Pay Instalments on Time Means Contract Void

When times are hard, there is always the temptation to delay payments to those owed money and, in many cases, the main disadvantages of this will be a cooling of one’s relationship with the supplier and possibly some deterioration in service received.

However, there are some payments for which ‘time is of the essence’ and, in such cases, failing to make the payment on time may have unfortunate results.

In a recent case, a buyer of a company agreed to purchase the shares in instalments and was taken to court by the vendor after failing to make the agreed payments. The contract did not have a clause which made the date of payment of the essence of the contract. The vendor alleged that the failure to pay the instalments as agreed breached the contract and entitled him to terminate it.

The vendor had the choice of either serving a notice making time ‘of the essence’ and requiring the purchaser to comply with the contract terms within a stated time, in which case failure to comply would terminate the contract, or, alternatively, if he was satisfied that the buyer’s actions demonstrated an intention not to perform its obligations under the contract, the vendor would be entitled to terminate the contract.

In this case, the vendor treated the contract as terminated once the second instalment in payment for the shares was not received. He took possession of the company and managed it for his own benefit.

This action led to a predictable claim by the purchaser and counterclaim by the vendor.

The case originated in the Bahamas but went as far as the Privy Council, where the vendor’s claim was upheld.

Says John Lennon of contracts, especially those dealing with payments to be made in instalments. Secondly, it illustrates the fact that the courts will prefer to protect the right of the ‘wronged’ party to terminate a contract where payment terms are not met. This is particularly important in contracts of insurance – so make sure your premiums are paid on time. If you are late, you may find that the insurer terminates your cover, especially if you make a claim under the policy.”

Back to the top

Failure to Reserve Rights Means Landlord's Plans Stymied

A landlord, which wished to add an extra floor to maisonettes it owned, recently came unstuck because the drafting of the leases for the maisonettes was insufficiently precise.

The landlord’s attempt to develop the property was opposed by the top-floor tenant. Firstly, he argued that the roof space above his flat (to which he had no access) was part of the premises demised to him under the lease. Secondly, he argued that the development would result in him suffering a loss of light, because his flat had three skylights.

The court agreed that the tenant’s lease did include the roof space and roof, despite the fact that there was a landlord’s obligation to repair the roof within the terms of the lease. The lease referred to the roof and walls of the premises and, furthermore, the skylights were clearly integral to the design of the tenant’s flat.

The tenant’s first ground for objection was successful. Although this meant that his argument regarding loss of light did not need to be heard, it is likely that the tenant would have been successful on that ground also.

In this case, the original lease had clearly not been drafted with any thought of a future addition of an extra storey in mind. Had it been, the landlord would have reserved sufficient rights to enable it to undertake the works. The tenant was therefore in a position to prevent the development.

When negotiating leases or contracts it is important to think ahead to make sure that any future rights required are preserved as well as those needed presently. Contact us for assistance in the negotiation of legal agreements and the preparation of all necessary documents.

Back to the top

Fitness for Purpose - Knowledge Critical

One of the most important principles of law governing buyers and sellers is that an item sold must be fit for the purpose for which it has been supplied. It is unusual for a ‘fit for purpose’ argument to arise in a building dispute, but cases do crop up from time to time.

In a recent instance, a contractor had engaged a subcontractor to supply a pipe to be used in a tunnel. When it was laid, the pipe was bedded in with foam concrete. Due to the highly alkaline nature of the concrete, the pipe burst four years after it was laid. This caused extensive damage and loss to Thames Water, which owned the tunnel.

The contractor who laid the pipe settled with Thames Water and sought to recover his losses from the subcontractor who supplied the pipe, on the ground that it was not fit for purpose since it was not resistant to the attack. It was argued that the Sale of Goods Act 1979 created the obligation on the supplier to supply a pipe that was reasonably fit for the purpose.

The problem with the contractor’s argument was that the pipe supplied by the subcontractor was specified to be fit for the purpose of carrying water. It could not be shown that any representation had been made that the pipe was fit for use in foam concrete nor, indeed, that the subcontractor knew that it was to be so used. Nor was there any reason why the subcontractor should have known the likely effect of the alkaline environment on the pipe.

Had the contractor specified that the pipe must work in a particular environment, the argument might have succeeded. However, since the pipe was fit for the purpose specified, the claim failed.

“This case illustrates the critical importance of making sure your contracts are carefully worded and include any necessary conditions,” says Sue Jones. Contact us for assistance with your contractual negotiations.

Back to the top

Insolvency and TUPE

HM Revenue and Customs (HMRC) have traditionally taken the view that where the nature of a business is such that it must trade from a property (for example, a pub or a care home), where the use of specially adapted premises is concerned, the amount of goodwill in the business which is ‘extra’ is likely to be small. The argument in essence is that much of any ‘super profit’ earned by the organisation (on which a payment of goodwill could be justified) is likely to be due to its position or some other physical factor.

This is important because the apportionment of the proceeds of sale between different assets can potentially have implications for Income Tax, Corporation Tax, Capital Gains Tax, Value Added Tax and Stamp Duty Land Tax.

However, a change in approach by HMRC means that they may now consider there to be more ‘free’ goodwill than previously recognised. A new Practice Note acknowledges problems with the apportionment of sales proceeds of ‘trade related property’… (e.g. public houses, hotels, petrol filling stations, cinemas, restaurants, care homes etc.). It advises that in these cases there can be particular difficulties in identifying the sum attributable to goodwill, which in these cases is normally fundamental to the apportionment.

This view is backed up by the sometimes large difference in value between a business sold as a going concern and the disposal of the various assets piecemeal – in which case the goodwill value normally ‘goes with’ the property.

Says Sue Jones, “In any purchase or sale of a business, the goodwill valuation affects the price and, even if not considered specifically, the apportionment between assets of different classes can have profound implications.”

Back to the top

Insolvency and TUPE

Whilst the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) operate to protect the employment law rights of employees when there is a relevant transfer of a business or part of a business, Regulation 8(7) provides that where insolvency proceedings are analogous to bankruptcy proceedings and have been instituted with a view to liquidation of the assets of the business, the transfer provisions of TUPE do not apply. In such circumstances, employees do not automatically transfer to the new owner and any dismissals are not automatically unfair.

In a case concerning a ‘pre-pack’ administration (Oakland v Wellswood (Yorkshire) Ltd.), whereby a business goes into administration with a prospective purchaser already in place, the Employment Appeal Tribunal (EAT) considered Mr Oakland’s appeal against the Employment Tribunal’s finding that he could not bring a claim of unfair dismissal because the transfer provisions of TUPE did not apply in his case and he did not have sufficient service with his new employer to bring a claim. Mr Oakland was a director of Wellswood (Yorkshire) Ltd. (Oldco), which traded as a wholesaler in fruit and vegetables. By mid-2006, the company was in financial difficulties. It approached a major creditor, Gilbert Thompson (Leeds) Ltd. (GTL), as a potential buyer and sought the advice of an insolvency practitioner. It was agreed that administration was the most appropriate course of action. GTL was not willing to purchase Oldco as a going concern but decided to incorporate Newco as a wholly owned subsidiary of GTL. Newco would acquire the assets of Oldco and five of its seven employees, including Mr Oakland.

On 6 December 2006, the sale of the assets to Newco was completed and administrators were appointed to Oldco.

There are three statutory objectives of administration, contained in the Insolvency Act 1986. These are:

  1. Rescuing the company as a going concern; or
  2. Achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration); or
  3. Realising any property in order to make a distribution to one or more secured preferential creditors.

In the view of the administrators, the first objective had not been achievable in Oldco’s case. Any further period of trading, whilst a buyer was sought, would most likely have resulted in further losses, thereby further reducing the funds available to creditors.

Newco subsequently dismissed Mr Oakland, who brought a claim of unfair dismissal. In considering his appeal, the EAT held that the administration had been instituted with a view to the eventual liquidation of Oldco’s assets and Regulation 8(7) of TUPE therefore applied. As a result, Mr Oakland did not transfer to Newco and his continuity of employment was not preserved under TUPE.

Says Sue Jones, “In the EAT’s view, its decision was in accordance with Regulation 8(7), which seeks to bring about the rescue of a failing business when the alternative would be any prospective purchaser being deterred because of the effects of the protection afforded by TUPE. Each case will be determined on the individual facts and, if the EAT’s view is the correct one, will depend on the intention of the administrator regarding the transfer of an insolvent business. However, we would urge caution. This decision conflicts with guidance produced by the Department for Business, Enterprise and Regulatory Reform and may well be challenged.”

Contact Sue Jones for advice on any employment law matter.

Back to the top

Late Filing Fees Hike for Companies

Companies filing their accounts after the due date will pay a bigger late filing penalty from 1 February 2009. The increases in the charges are substantial and are intended to reflect the increase in inflation between 1992 and 2007.

Private companies are required to file their accounts within 10 months of the end of the accounting period. Those that file late, but within a month of the due date, will be fined £150. There is an ascending scale of charges if the filing is further delayed. Missing the deadline by more than 6 months will lead to a fine of £1,500.

Public companies must file their accounts within 7 months of the end of the accounting period (6 months for accounting periods starting on or after 6 April 2008). Failure to file by the due date will lead to a fine of £750. Again, an ascending scale applies. Missing the deadline by more than 6 months will lead to a fine of £7,500.

Contact Sue Jones if you need advice on any company law matter.

Back to the top

Make Your Arguments at the Right Time

In a recent case, a claim was made for summary judgment after an adjudicator made a decision regarding a construction dispute. The defendant tried to resist the judgment by claiming that it had received a large amount of new evidence, relating to the claim, which had not been taken into account in the adjudication process and that this omission prevented it from being able to defend the claim effectively. It was argued that this constituted a denial of natural justice. The contention was that the claim was not ‘crystallised’ and thus the adjudicator did not have jurisdiction over it.

One of the observations of the Court was that a failure to complain about a breach of natural justice during the course of the adjudication will be persuasive evidence that there has been no breach. Therefore, making that argument to defend against the subsequent enforcement proceedings will be a lost cause.

The moral of the story is to be sure to make your arguments at the right time. Failing to advance early on in the proceedings a line of argument on which your case depends can be an expensive error.

We can advise you on all commercial and civil disputes.

Back to the top

Pre-Signed Document Invalid

A recent tax case should sound a warning bell for those in the habit of signing documents which may subsequently be amended. HM Revenue and Customs discovered that documents used in a tax avoidance scheme had been pre-signed by a participant. The documentation had taken several months to finalise, so a signature page was signed before the draft documentation was finalised and had subsequently been appended to the new documentation.

The court was unimpressed. In spite of the fact that the second set of documents accomplished the same thing as the drafts, the detailed terms of the agreements had changed. The final version of the documents was not executed by the signatory and therefore the documents were void.

Correct procedure is important when dealing with all legal documentation. ‘Pre-signing’ may also carry a risk of fraud. It is always advisable to make sure you have a contemporaneously created copy of documents you sign.

Back to the top

Tenancies and Insolvency – Landlords Take Note

Businesses in financial difficulties are increasingly seeking ways of ridding themselves of extra costs and, in many cases, premises let in more promising economic times are viewed as a substantial and avoidable liability, especially for businesses which have expanded too quickly.

One of the more common ways for a business to be structured on a more profitable basis is to arrange to take the profitable parts into a new business by doing a ‘pre-pack’ administration – a procedure whereby the business, or part of it, is transferred to a new entity. Prior to this, the business will be placed into administration, which imposes a moratorium on legal processes, such as the landlord’s right to make the lease forfeit by peaceable re-entry.

The argument for pre-packs is that they maximise the chance of salvaging the business and preserving employment. On the downside, the creditors of the original business are often left nursing losses.

From the landlord’s perspective, a tenant which undertakes a pre-pack may well leave the rented unit behind if it is uneconomic to retain it, thus leaving the landlord facing the prospect of finding a new tenant and a loss of rental income.

If the new business wishes to retain the unit, there may be scope for the landlord to negotiate with the new occupier with regard to arrears of rent as well as adherence to the lease covenants.

The good news for landlords is that in most cases they should be entitled to retain a rent deposit paid by a tenant that goes into administration.

We can help you negotiate with tenants in difficulties and administrators. Contact Mike Stone for advice.

Back to the top

Valuation Not Binding if Not All Parties Agree

In the present market, it is likely that there will be many instances of shareholders in unquoted companies, which are often owned and managed by a small group of people, selling their shares to other shareholders. The main problem in such instances is almost always the question of the valuation of the shares.

Sometimes, a company’s Articles of Association will contain a mechanism outlining the steps to take in such circumstances. Alternatively, and more commonly, a shareholders’ agreement will have been entered into. In either case, unless a valuation formula has been set out, the shares which are changing hands will have to be independently valued and this is where the problems usually start.

In a recent case heard by the Court of Appeal, a minority shareholder who had been a director of a company was required, by the Articles of Association of the company, to sell his shares as a result of leaving the company. Independent valuers, a large firm of accountants, were appointed by the company. When they delivered their valuation of the ex-director’s shares, he disagreed with it.

The circumstances were that the company had appointed the accountants and signed the letter of engagement. The ex-director maintained the stance that he was reserving his position and refused to sign the letter of engagement.

The argument turned on whether the accountants were validly appointed to value the shares. In the view of the Court, they had not been validly appointed under a tripartite agreement and the ex-director was therefore not bound by their valuation.

Lord Justice Mummery commented that the issue ‘…would not have arisen if the Articles had contained the provision commonly included in the Articles of Association, in the context of invoking the compulsory transfer provisions, that the value of the shares is to be determined by the auditors of the company. The auditors of the company are already in office. The issue of a disputed appointment would not arise’.

As this case illustrates, buyouts of minority shareholders are often subject to dispute, even in those instances where relations between the shareholders are relatively cordial. It is sensible to think about such things early on in the life of a small company as once it becomes successful, delay normally makes things more difficult.

Contact Sue Jones for advice on all matters relating to company law and the purchase and sale of businesses.

Back to the top

Age Discrimination and Selection for Redundancy

In Rolls Royce plc v Unite the Union, Rolls Royce contended that the length of service criterion in collective agreements relating to redundancy, entered into with the trade union, amounted to unlawful indirect age discrimination against younger employees under the Employment Equality (Age) Regulations 2006. The outcome of this case will be important for all employers considering making redundancies.

There were no issues of fact to be determined and the case was heard in the High Court at the request of both parties. It concerned two collective agreements, regarding redeployment and redundancy, which provided for an ‘assessment matrix’ for use when selecting employees for redundancy. This was designed to enable the company and its employees to be able to restructure ‘flexibly and peaceably’. There were five measured criteria for which points were awarded, one of which was length of continuous service. Those with the fewest points would be selected for redundancy.

The High Court ruled that the length of service criterion adopted did discriminate against younger employees but it could be objectively justified as a proportionate means of achieving a legitimate business aim – i.e. that if a redundancy exercise were necessary, it would be carried out ‘peaceably’ and in a way that was perceived as fair. The scheme was therefore covered by Regulation 3(1) of the Employment Equality (Age) Regulations. The Court was of the view that ‘the criterion of length of service respects the loyalty and experience of the older workforce and protects the older employees from being put onto the labour market at a time when they are particularly likely to find alternative employment hard to find’.

In addition, the Court ruled that giving points for long service as one part of a redundancy selection matrix conferred a benefit on the employee concerned as it might lead to the retention of employment which would otherwise be lost. As such, it was probable that this would be regarded as reasonably fulfilling a business need within Regulation 32(2), which simply requires the employer to justify the impact of an age related award made only to employees whose length of service exceeds five years.

Says Sue Jones, “This decision clarifies the position regarding the use of length of service when selecting employees for redundancy. Adopting a scheme where length of service is just one of a number of criteria used to arrive at a fair selection process is likely to enable the employer to defend an age discrimination claim. However, a scheme based solely on ‘last in, first out’ is unlikely to be justifiable.”

However, the judge gave Rolls-Royce permission to appeal his ruling on the ground that it was ‘clearly an important point for both parties’.

Back to the top

Auditors Pay Price for Incorrect Share Valuation

An ex-director of a company has been awarded substantial damages against the company’s auditors, after he showed that the firm had negligently undervalued his shareholding when he was required to sell the shares back to the company on ceasing to work for it.

When he was an employee, he had purchased the shares at £250 per share. When he left the company, the auditors valued his shares at £128 each. The shares were sold to other shareholders. Later, the director discovered that other employees had been able to dispose of their shares at higher values and the company was sold for a substantial sum.

The man claimed the valuation placed on the shares by the company’s auditors was far below the proper market value at the time and that there were factors which the auditors should have taken into account in their valuation, including likely future outcomes, which they did not.

After hearing expert evidence, the court ruled that the appropriate value to have used was £635 per share, leaving the auditors facing a liability to the former director of £507 per share.

“This case raises two points that are worthy of mention,” says Sue Jones. “The first is that had a mechanism setting out how the shares were to be valued when being repurchased been agreed and documented at the outset, there would have been no ground on which to bring an action. Secondly, it is important when giving an expert opinion to be careful to make sure it is both objective and well thought out – it may not be a very good idea for the company’s auditors to carry out the valuation in cases such as this. If you are asked for an expert opinion, it is normally a good idea to decline if the subject is one which is outside your sphere of expertise.”

Contact us if you need advice on any corporate or employment law matter.

Back to the top

Be Careful What You Agree!

A case involving a dispute over the tenancy under various leases of industrial units in East Sussex, which were used for the preparation of airline meals, illustrates the importance of being careful what you agree to.

Although the circumstances were rather convoluted, the nub of the issue was that due to planning issues surrounding the smell created by the tenant’s business, it was unclear whether the tenant would be able to remain in occupation of the buildings.

Although the tenant wished to remain where it was, it claimed to have sent to the landlord notices to terminate the leases. The landlord claimed not to have received them. The tenant also sought out alternative premises, which it let on a weekly basis, in case the planning decision went against it.

The tenant claimed that the landlord had agreed verbally to grant three-year leases on some of the units. The landlord claimed no such agreement was reached.

Reviewing the contemporaneous evidence, such as correspondence and board minutes, the court was able to conclude that the three-year leases had been created.

In this instance, there was copious supporting documentation, which is by no means always the case. One point that is clear is that if documents are being created on which it may be necessary to rely, it is important to send these to the other party to the negotiation in a form which confirms they have been delivered.

Contact Mike Stone for advice on any commercial property or landlord and tenant matter.

Back to the top

Can’t Get Paid by A? Try B!

One of the less well-known ways in which a business or person who is owed money by someone who fails to pay can obtain payment is by the use of a Third Party Debt Order (TPDO). In essence, this is a court order which requires someone (B) who owes money to another (A) to pay you instead, when A owes a debt to you. Usually, B is a bank or building society.

A TPDO can be applied for at any time after you have obtained judgment against A in court. An order will not be made unless A has failed to pay the amount of the judgment when it was due or has failed to pay one or more of the instalments due under the terms of the judgment.

The application for a TPDO is examined by the court and, if granted, you and B will be sent a notice. A week later, the notice is sent to A. This stops A from being able to circumvent the order by moving cash out of an account before the order is put into effect.

Once notice of the order has been served on B, it serves to freeze money held on A’s account on the day the notice is received by B. So, for example, if the order is received by B on Tuesday, money paid into the account on Wednesday will not be frozen. This makes the planning of the timing of service important.

At a later date, a hearing is held to confirm that the money frozen is to be paid to you.

If B is not a bank or a building society, they must let you and the court know within seven days if they claim not to owe A any money or to owe less than the sum claimed. If you wish to dispute this, you must file your written evidence with the court not less than 3 days before the hearing.

If B is a bank or building society, it will supply information regarding the accounts held by A and will confirm that the sum it holds on A’s account is sufficient to pay the sum due or advise the balance if not. It will also advise if it is entitled to retain any sum to offset A’s liabilities to B.

A can file an objection to the order not less than 3 days before the hearing is due to take place. The objection must be in writing and A must send you a copy. The judge will hear A’s objections at the hearing. If A is an individual, rather than a business, and can prove that he and his family are suffering hardship in not being able to meet day to day living expenses as a result of an amount or amounts being frozen, then a hardship payment order may be made which will ‘unfreeze’ some of the frozen money. Where A is a business, it must prove that real prejudice would be suffered by not having access to the money.

TPDOs will not normally be issued where A has become insolvent.

If you are having trouble collecting debts due to you, we may be able to help. Contact John Lennon for advice.

Back to the top

Delayed Lump Sum Payments on Divorce

With property prices decreasing, delayed lump sum payments in divorce settlements must be dealt with particularly carefully.

The problem occurs when the net value of a property is decided during ancillary relief proceedings but subsequently changes as a result of fluctuations in the economy. When a couple divorce, it is commonly agreed that one party will remain in the matrimonial home and the other will receive half the value of the property over a given period of time, with the outstanding monies due being subject to interest. If the house subsequently changes in value during the payment period, there can be unfairness for one party or the other.

In general, this is the risk one takes when a sum is agreed by way of settlement. However, this risk can be controlled. If the payment of a lump sum is as a share of more widely ranging assets, then it should be subject to interest. If the payment is to compensate for a share of a property, then it should be linked in some way to property prices. This may seem complicated, but it promotes fairness for both parties. It is desirable to use an index of property prices in your area and to set the amount to be paid based on prices at the date of the agreement. The base amount is then fixed by the order and can be varied to take account of any fluctuations in the property’s value.

If this precaution is taken, once an order has been made, the effects of inflation or deflation will not normally be a justification for an application to alter it. This, in any event, is difficult to persuade the court to do. In one case, in which a wife was to receive a lump sum for her share in the house, the payment was not made for a long time because her husband intentionally delayed the sale of the property during a period of rising house prices. In this instance, the wife succeeded in obtaining a revised settlement. However, the reason for this was the deliberate obstruction by the husband of the sale of the property, not the effect that the increase in house prices had on the wife.

Having expert legal representation will enable you to achieve the best result from your ancillary relief proceedings. Contact Karen Eves for advice on any family law matter.

Back to the top

Easements - What They Mean at the Time

One of the problems with easements is that their meaning may not always be obvious.

An easement is the right to use someone else’s land for a purpose. For example, an easement might allow a person access to their neighbour’s land in order to undertake repairs to their property.

In a recent case, the owners of a property in St Ives faced difficulties because of the nuisance caused by the behaviour of customers of a nearby beer garden. This could be reached via a rear entrance by way of a passageway across the property owner’s land. An easement over the passageway was contained in a 1921 conveyance and it provided that the passageway could be used to go to and from the property now being used as a beer garden, stipulating that the right existed ‘as now used by the vendor’.

The owner of the passageway sought to prevent drinkers from using it because of the nuisance they created. He relied on the terms of the easement, arguing that it was not applicable to the current use being made of the neighbouring property. In 1921, the premises had been a fishmonger’s shop – a very different use from running licensed premises.

The judge held that at the time the easement was created, the use of the passage would have been limited to suppliers, the fishmonger’s staff and trade customers. Accordingly, a ‘general’ right of access did not apply. This view was supported by the Court of Appeal.

In this case, the argument was successful because the use for which the easement was originally granted no longer prevailed. It is important to remember that where an easement exists that was granted many years ago, the right may or may not still exist. The easement has to be considered in context.

If you are experiencing problems caused by other people using your land, we may be able to help. Contact Mike Stone.

Back to the top

E-Conveyancing - Where Are We Now?

Anyone who has bought or sold a residential property has probably wondered why the conveyancing process takes so long. Surely, in this digital age something could be done to ‘speed up the searches’ and generally make the whole experience easier and less stressful?

Plans to transform the paper-based conveyancing process in England and Wales were first mooted in 1998. Land Registry was subsequently given the task of developing a system whereby all those involved could deal with each other electronically and, to this end, the Land Registration Act 2002 established laws to enable this.

The aim was to set up a central e-conveyancing service allowing linked participants to use electronic documents, requisitions and signatures and co-ordinating the key milestones of exchange, completion and updating the title register. The problem of delays in payments was to be solved by setting up an Agent Bank into which each party to the transaction would deposit the necessary funds for simultaneous release. There was to be a Chain Matrix – a web-based notice board showing the status of buyers and sellers in dependent ‘chains’.

Over 10 years later and after several consultation exercises, where are we now?

The conveyancing system in England and Wales is the most complex in Europe, so to make electronic conveyancing secure was never going to be easy.

Some services which will eventually form part of the comprehensive e-conveyancing system are now available. For example, professional users can gain instant access to information on more than 20 million registers of title covering the majority of properties in England and Wales. Some simple applications can now be made online for the same fee as a paper application. For a fee, members of the public can also download copies of entries or a title plan for a particular property. Electronic Discharges enable very high volume lenders to remove legal charges from the land register. Following redemption of a legal charge affecting registered land, a lender’s computer updates the Land Register automatically.

The idea of an Agent Bank has been scrapped, however, and Land Registry’s development of a Chain Matrix prototype was ‘seeding the market’ for a private investor to ‘grow the project’.

In early 2008, Land Registry and PISCES, a not-for-profit organisation set up to promote the rapid take-up of e-commerce for the benefit of the property industry and its customers, began collaborating on the best way forward. The intention is to introduce new services in stages. 2009 should see electronic transfers between banks and Land Registry, with conveyancers following in 2010.

A burning issue is whether or not the e-security issues can be overcome so as to minimise the risk of fraud, so electronic change of ownership is likely to be a long way off.

If it materialises, a swifter conveyancing system will take some of the stress out of moving house. We can help you ensure your property sale or purchase runs as smoothly as possible. Contact Brian Regler.

Back to the top

Executors be Warned

HM Revenue and Customs (HMRC) have quietly made a change to their policy regarding Inheritance Tax (IHT) that could leave executors of estates facing unexpected IHT liabilities.

The new risk results from the way HMRC intend to deal with estates in which gifts (‘gifts inter vivos’ in the parlance) are made in the seven years prior to death. Such gifts are called ‘potentially exempt transfers’ in IHT terminology, because they affect the IHT position unless the donor survives seven years after making the gift.

HMRC have previously raised any enquiries about gifts inter vivos within 60 days after the papers relating to the estate have been filed. The new policy abolishes this time limit, meaning that HMRC could potentially instigate an investigation into the gifts made prior to death several years after the estate tax returns are filed. If they find undeclared gifts, IHT may be payable on them.

This has potentially very serious implications for executors as not only may they be personally liable for any IHT that subsequently becomes payable, but also penalties can be levied. This could all take place years after the estate has been wound up and the assets distributed to the beneficiaries.

Furthermore, it makes it wise to conduct a proper review of the deceased’s financial records relating to the seven years prior to the death and to retain the records in case there is an enquiry.

Back to the top

Making the Boundaries Clear

Boundary disputes may often seem trivial – unless, that is, you become embroiled in one yourself, in which case they tend to assume gargantuan proportions. Unfortunately, they are also depressingly common. This is due to the fact that boundaries in England have not always been precisely defined.

Since mid-October 2003, it has been possible to file a precise plan (on payment of a small fee) with the Land Registry, to show exactly where your boundary lies. Unless you have obtained the agreement of the adjacent landowners in advance, you also normally have to serve a notice on them that this has been done. If they do not object, within twenty days, the application to register the boundary will usually succeed and the plan will be accepted as showing the true boundary, with your title documents amended accordingly if necessary.

Needless to say, there are limitations on this. For example, third party rights must not be infringed. There is also a right for the owners of adjoining land to object to the plan.

For more information on boundary registration, see the Land Registry website at http://www.landreg.gov.uk or contact us. In particular, if you receive a notice that one of your neighbours is intending to register their boundary, do not delay in checking the notice and, if necessary, take advice as soon as possible.

Back to the top

Planning Permission is Only Part of the Story

If you are considering building an extension to your property, you may think that it is simply a matter of getting planning permission and finding a builder. A recent case shows, however, how important covenants affecting property can be in determining whether developments of any kind can go ahead.

The case involved an upmarket housing estate called Heron Island, which is near Reading. The estate is adjacent to the Thames. One of the homeowners wanted to build a three storey extension to his property that would have partially obscured the view of the river for some of his neighbours. The neighbours objected to the planning application. The planning inspector’s opinion was that whilst there would be some loss of view for one household, this did not result in a material diminution in living standards. There is no general right in law to a view. The planning application was granted on appeal.

The objectors then used a different line of attack. The properties were conveyed with a covenant prohibiting owners from doing anything which would constitute a ‘nuisance or annoyance’ to the other owners on the estate. One owner in particular argued that he put great store on his river views, which would be greatly curtailed by the extension. Also, the windows in one aspect of the development would interfere with his privacy. Other owners gave evidence that their views of the river would be partially obscured.

One of the more interesting aspects of this case was that the obstruction of the view was minor. However, the judge, who visited the estate and had the benefit of seeing computer-generated evidence, had to decide the question ‘would reasonable people, having regard to the ordinary use of their houses for pleasurable enjoyment, be annoyed and aggrieved by the extension?’ On that basis, he concluded, “In my view the three storey red brick extension would trouble the minds of the ordinary sensible English inhabitant of any of those three houses and in those circumstances it does constitute an annoyance within the meaning of the covenant.”

If you are concerned about the effect that a planned development in your neighbourhood may have on you, contact us for advice.

Back to the top

Pre-Nuptial Agreements - Parliament Must Act if Law to Change

Pre-nuptial agreements are persuasive, not binding, in English law and look set to remain that way for the foreseeable future, following a decision by the Privy Council, which stated that ‘the validity and effect of ante-nuptial agreements is more appropriate to legislative rather than judicial development’.

The decision not to enforce a pre-nuptial agreement was taken by the Privy Council in a hearing involving two US Citizens who are resident in the Isle of Man. The case was the first substantial one following the referral of the law on pre-nuptial agreements to the Law Commission last year.

Accordingly, any alteration in the law relating to pre-nuptial agreements will have to await a change in the law by Parliament.

However, the Law Lords agreed that an agreement entered into after a marriage is contracted (a ‘post-nuptial’ agreement) would generally be enforceable, provided there was no exploitation of a dominant position by one of the parties to it. Such an agreement should always be made with the benefit of independent legal advice on both sides.

The position remains, therefore, that a pre-nuptial agreement which has been properly drafted with legal advice taken on both sides, whilst not binding, is persuasive to the court regarding a couple’s intentions for the distribution of their assets should their marriage fail. Accordingly, a ‘pre-nup’ will, in many cases, be worth consideration, especially where the family assets are very substantial.

If a pre-nuptial agreement is not made, it is sensible for married couples who are able to do so to consider making a post-nuptial agreement, which will normally be effective if the appropriate conditions are met.

Says Alison Whistler, “Putting in writing how family assets should be distributed in the event that a marriage fails may sound unromantic, but it can save much bitterness as well as money if the worst does come to the worst. We can advise you on the creation and negotiation of pre- and post-nuptial agreements.”

Back to the top

Serial Litigators - What Can Be Done?

For most people who have obsessive interests, these run to no more than compulsive DIY, recording the numbers of railway engines, collecting stamps or similar harmless pastimes.

Unfortunately, the compulsion of some people is not so benign, even if their behaviour is legal. For lawyers and their clients, few can cause such disruption as the serial litigator or ‘vexatious litigant’.

A vexatious litigant is someone who becomes convinced about the rightness of their cause as regards some legal matter and determines to pursue it through the courts no matter what the cost to them or the hapless subject of their suit.

Despite rebuff after rebuff in the courts, they will seek to renew their action or start new actions to prove the correctness of their position, no matter how frequently they are advised that their case has no merit. They will normally claim that ‘it is a matter of principle’ or that they must take action to prevent their being victimised in some way by the unfortunate target of their misguided ire.

Frequently, the vexatious litigant will start many actions against a variety of people, making numerous allegations and causing considerable unnecessary distress and expense.

Fortunately, in the UK, the Attorney General has the right to petition for an order banning the vexatious litigant from carrying out litigation and from acting as a ‘litigation friend’ for others. A litigation friend is a person who acts for someone else (a child or someone who lacks mental capacity to act for himself). If the petition is granted, an order will be made banning the person from issuing proceedings in the courts in England and Wales without the permission of the court.

Don’t put up with anyone pursuing a legal vendetta against you: contact us for advice.

Back to the top

Shared Residence Does Not Create Priority Housing Need

When the court makes a shared residence order relating to the children of a divorced couple and one of the couple is homeless, does that then make that parent a ‘priority need’ case for social housing?

The House of Lords recently considered this question and concluded that, in such circumstances, the answer is ‘no’.

The case arose when a father was ordered to leave the family home but a shared residence order was made in respect of three of the couple’s children. The order stipulated that the children should spend alternate weekends and half of their school holidays with each parent.

The father, who was homeless, argued that this made him a priority case for social housing on the ground that he was a person ‘with whom dependent children…might reasonably be expected to reside’.

In the view of the Council, it could not be expected to provide a second home for the family, despite the expressed view of the court that it was in the interests of the children to have two homes. There was a wider social policy issue and it could not allocate its housing resources on the basis of the decisions of the family court.

The Lords concluded that to determine the allocation of a scarce resource such as housing on the basis proposed would not be a rational social policy and that Parliament could not have intended such an approach when framing the legislation.

Custody of children and the need to have a family home are major issues on family break-up. Whether you live in owned or rented housing, good legal advice is essential.

Back to the top

Stay Where You Are!

The Court of Appeal has issued a ruling relating to residence orders that will have implications for a number of divorced couples.

The case dealt with a child whose divorced parents had a shared residence order over her.

The girl’s mother wished to move from London to Chew Magna, near Bristol, where she had been offered a job. The girl’s father, a Serb, claimed the move would seriously interfere with his role in her upbringing and that it was part of a plan by the mother to disrupt his relationship with his daughter.

Hearing an appeal against the original decision, Lord Justice Wall said, “In each case what the court has to do is to examine the underlying factual matrix, and to decide in all the circumstances of the case whether or not it is in the child’s interest to relocate with the parent who wishes to move.”

In the view of the Court, the father had played a substantial role in his daughter’s life and the move was not in the girl’s best interests. The fact that the residence order was a shared one as opposed to a sole residence order did not alter the way the Court had to consider the issues.

Family breakdown always presents practical, as well as emotional, problems. Karen Eves can advise you on dealing with the legal issues and help you negotiate a fair settlement.

Back to the top

Thousands Face Driving Bans Under New Totting-Up Proposals

Practically everyone moans about the standard of driving seen on the roads, but few drivers will welcome a proposal, contained in a recent Department for Transport consultation paper, which would allow the police to levy ‘on the spot’ penalties on drivers, without court proceedings, for an increased range of motoring infractions.

Under the proposals, which are designed to reduce the paperwork burden on the law enforcement agencies, all that would be necessary for a driver to be given a fixed three-point penalty notice is the say-so of a police officer. What is different about the proposed regime, compared with the current one, is that such penalties will be able to be levied for offences that may not be clear-cut, such as failing to give a signal or careless driving.

This raises the spectre that a driver could be banned from driving without ever appearing in court and on the basis of evidence which might not be sustainable were the case to be brought to trial. A fixed penalty notice can be contested in court but, if this is done, the penalties are more severe if a conviction is obtained, as is likely in most cases.

In practice, drivers with few points on their licence are unlikely to contest even a contentious penalty – a decision they may come to regret under the new scheme. It is thought that the new proposals, if implemented, could lead to thousands more drivers being given driving bans.

Back to the top

Court Costs – Loser Doesn’t Always Pay

It is normally the case that the loser pays his own legal fees and those of the winner when a case is decided in court. Sometimes, however, the court may conclude that it is fair for costs to be shared. Even more infrequently, a costs order can be made against someone who is not even a party to the proceedings. This can occur when the proceedings are carried out on behalf of someone else.

A recent case illustrates one way this can arise. The receiver of a company carried out litigation on behalf of the company, which was insolvent. The aim of the litigation was to secure a larger payout for the secured creditors of the company. The receiver lost. The company which was the named party in the action, being insolvent, was unable to pay the costs. In such cases, the court will normally award costs against the receiver or the secured creditors who would have been the ultimate beneficiaries had the court’s decision gone the company’s way. In this instance, the court awarded costs against the receiver.

Another circumstance in which costs may not follow the decision is where a claimant exaggerates a claim, but subsequently wins a much lower level of damages. In such cases, especially if the winner was uncooperative or guilty of improper conduct in the course of the litigation (for example, refusing mediation or offers of settlement) the court may award a proportion of costs to the loser.

Clients who are concerned that if they win their case the other party in litigation may not be able to pay their costs can apply to the court to require the other side to deposit a security for costs.

We can advise you on the best course of action in any legal dispute.

Back to the top

Covenant Rights Need Not Continue

A bungalow owner who wished to replace a flat roof with a pitched roof found himself in court recently when his neighbour sought to rely on a fifty-year-old covenant ‘not to make any addition or enlargement or alteration’ to the bungalow without the consent of the vendor. The covenant stipulated that such consent would not be unreasonably withheld. The sale documents also contained a covenant prohibiting the building of anything other than a single bungalow on the property.

In this case, however, the vendor concerned was the original owner of the bungalow and the adjacent property. The adjacent property had been sold to a new owner years previously and the covenant was not stated to extend to successors in title.

The question before the court, therefore, was whether the new owner of the adjacent property could enforce the covenant. He argued that the commercial reality of the covenant was such that the benefit of it must be intended to pass to successors in title. The bungalow owner argued that the covenant had been restricted to the original vendor (who had died in 1977) and thus was not enforceable by the new owner.

Looking at the documents of sale, the court found that these were tightly drafted and there were other references to successors in title where appropriate. The court was not inclined to re-write the contract. The original vendor had created the covenant to protect her own position only. On her death, the covenant ceased to have any effect – otherwise, any future alterations to the bungalow would be rendered impossible because permission could not be given. The court described such a possibility as ‘astounding’.

A covenant relating to land is normally written to include successors in title. However, in this case, the covenant was written in terms which clearly distinguished between the vendor and the successors in title to the vendor’s land. Accordingly, the distinction between the rights of the vendor and the vendor’s successors in title was clear.

Says Mike Stone, “This case shows that when they are properly drafted, covenants may be able to be used more flexibly than you might think.”

Contact us for advice on all property and planning problems.

Back to the top

Credit Crunch – Tips for Clients

Although this is not strictly ‘legal material’ we thought clients might welcome some tips on managing their household finances during these straitened times.

Cutting Fuel Costs

Despite the recent falls in prices, the cost of fuel is still considerably higher than it was just a couple of years ago. Shopping around between different providers may well produce decent savings, as may agreeing a ‘bundled’ deal to obtain your energy supplies from a single source. There are a number of comparison websites on the Internet which may help you make a decision.

Of course, one way to reduce your energy costs is a simple, old-fashioned reduction in use. For example, if you have fireplaces which are open but never used, a chimney balloon may significantly reduce your energy consumption by reducing the draft through the chimney. A one or two degree reduction in the thermostat settings of your central heating and a five to ten degree reduction in the temperature of your hot water will produce immediate savings, as will taking simple steps such as turning off lights in rooms which are not occupied, turning timed water and heating on a little later and off a little earlier (although in some properties it might be almost as cheap to keep the heating on), not leaving windows and doors (external and internal) open unnecessarily and turning electronic devices off at night rather than leaving them on standby.

Investments that can offer fast returns in terms of reduced energy bills include using ‘low consumption’ light bulbs, installing loft insulation and draft proofing. The economic benefit of more sophisticated changes, such as switching to a condenser boiler, installing cavity wall insulation, solar panels and the like, are more difficult to calculate and should be considered carefully before purchase.

Living Within Your Budget

Make a budget, based on the costs you can’t avoid and those you can. Make sure that your ‘avoidable’ costs are known and that you control them. However, if you know you will need something in a year or so, it might make sense to consider buying it when prices are being slashed (as they are for many goods, especially expensive items), rather than waiting for the market (and prices) to rebound.

Shopping

It is claimed that a quarter of all food bought from UK supermarkets is thrown away. Look at your shopping habits and eliminate waste as far as possible. Make sure you are aware of ‘2 for 1’ and similar offers on goods you use frequently, but remember that a saving in the cost of goods may be lost in additional travel costs. Being aware of prices offered by different retailers for the items you want to buy is recommended – but avoid impulse buying. Buying on the Internet may be a good idea, especially if your normal ‘weekly shop’ involves driving and if you tend to buy on impulse. Planning meals in advance and buying only what is needed for them is a very effective way to reduce waste.

Making Your Money Work for You

With interest rates falling, financial institutions have been cutting the rates they pay to savers. Check the rates your savings are earning – you may be surprised by how quickly the attractive interest rates used to tempt new investors are reduced.

Similarly, look at the costs of financial products you buy – insurances, your mortgage etc. There may well be savings to be made.

Benefits

Nearly one fifth of all state benefits are not claimed, especially those made available for families and the elderly. Make sure you claim any benefits to which you are entitled. The Benefits Helpline website may be helpful as a starting point.

Make Sure You Have a Will and an LPA!

You may think this is an odd suggestion, but having an up to date will may prevent your estate incurring unnecessary costs (and possibly avoidable tax liabilities) in the unfortunate event of your demise. Similarly, creating a Lasting Power of Attorney (LPA) will be hugely beneficial in the event that you are unable to administer your own affairs and need someone else to look after them for you.

More importantly, however, having the right documentation in place speeds up administration, which can be very important. Most wills and LPAs are relatively straightforward to prepare. Contact Michael Cutler for advice.

Back to the top

Disclosure of Information in Family Cases

In a recent case, a local authority claimed that it was proper for documents relating to a father’s possible sexual misconduct to be disclosed to experts who had been instructed in the course of care proceedings. The council’s argument was that whether the allegations were false or not, they represented significant events in the history of the family’s life and should therefore be considered. The parents of the child who was the subject of the proceedings opposed the release of the documents, claiming that the records contained allegations which had never been subject to criminal or family proceedings, were never proved and had not resulted in any charges.

The leading authority on the disclosure of documents in children’s cases is the Court of Appeal decision Re R (Care: Disclosure: Nature of Proceedings). The conclusions drawn in that case were that in general the disclosure of documents is inappropriate in such cases, but the Court retains the power to order ‘specific discovery’ (i.e. disclosure of specified documents). Unless the documents to be included are of real importance and relevance, they are not to be disclosed. The onus is on the party wanting to include records to prove that they are a necessary factor in their case.

Applying these principles, the parents’ appeal was allowed. The Court held that to allow the inclusion of the records would not be in the interests of the child. Also, the local authority could not introduce material regarding allegations that it had not pursued or proved at an earlier stage. If the material had already been deemed irrelevant to the judge’s task, it could not justifiably be regarded as needing to be examined by the experts.

In the Court’s view, it could harm relations between the local authority and the parents were the local authority to include and send to the experts any information that would ultimately be seen as unjust and prejudicial.

If you require legal advice on any family law matter, Alison Whistler can assist you.

Back to the top