Archived News

Case Sounds Foreign Will Warning

A man who died in Barbados leaving a will there as well as a will made in the UK created a problem for his family. The will made in Barbados was drawn up after his English will and contained the usual clause ‘revoking all former wills and testamentary dispositions’. The will contained details of various bequests and dealt with the man’s property in Barbados, but it made no mention of any arrangements for his interment or his UK assets.

The court accepted that the later will was an additional will, intended only to deal with the man’s assets in Barbados, and therefore his English will was the basis under which his other assets should be distributed.

The important issue here for people with assets (such as a holiday home) abroad is that whilst it is normally very sensible to create a ‘local will’, this should specify the assets it covers. In the worst case, an inappropriately drafted will may revoke an earlier English will, but at the very least, as in this case, it may add time and expense to the administration of the estate.

Contact Michael Cutler for advice on estate planning, wills or any related matter.

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Cohabiting Couples – Case Shows Wisdom of Formal Agreements

Setting down on paper their intentions regarding the ownership of assets is not likely to be one of the first things two people think about when they start living together, but a recent case shows the wisdom in such circumstances of making sure that at least some aspects of your arrangements are properly agreed and evidenced.

The case, which reached the House of Lords, concerned the division of the value of a house. The property had been bought by Barry Stack and Dehra Dowden and was in their joint names. They lived together for almost thirty years and had four children, but they eventually parted.

When the house was purchased, Mr Stack paid both the endowment premiums required to repay the mortgage and the mortgage interest. There were two policies, one in his name and one in their joint names. The house cost £190,000, of which Ms Dowden had contributed nearly £129,000 from her savings and the sale of her own house. The couple had lived together in that property for ten years, but it had been owned in Ms Dowden’s name only. During the time they lived in the house they owned jointly, Mr Stack paid £27,000 and Ms Dowden paid £38,435 in capital repayments. The arrangements of the couple were unusual in that their financial affairs were kept completely separate and each was responsible for specific areas of expenditure.

When a property is bought jointly, there is a presumption that it will be owned equally. However, that presumption can be overturned if there is evidence that equality was not the common intention of the owners. Mr Stack claimed he was entitled to a half share in the value of the house. Ms Dowden disagreed.

Lord Hope of Craighead, in his judgment, said, “I do not think that it is possible to ignore the fact that the contributions which they made to the purchase of that property were not equal. The relative extent of those contributions provides the best guide as to where their beneficial interests lay, in the absence of compelling evidence that by the end of their relationship they did indeed intend to share the beneficial interests equally.”

In this case, the fact that the couple’s resources were never ‘pooled’, together with the greater contribution made by Ms Dowden, led the Lords to conclude that her share should be 65 per cent of the total.

Says Alison Whistler, “Cohabiting couples are well advised to have their intentions as regards beneficial ownership of properties they buy properly recorded and evidenced.”

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Compensation Ordered for Duped ‘Dad’

A woman who misrepresented the paternity of her child to her ex-partner, and thereby obtained financial support from him as he believed himself to be the father, was recently ordered to pay him compensation.

The woman gave birth to the child whilst in a relationship with the man. She had assured him that he was the father and he had supported both mother and child. When their relationship later foundered, she disputed that he was the father and a DNA test confirmed that he was not. Subsequent to the results of the DNA test, the man stopped making any payments to her.

The man sued his ex-partner. In the view of the court, the woman had made fraudulent misrepresentations with the intent that the man should rely on them. Since he had suffered a loss because of the misrepresentations, he was entitled to damages. The court also held that he was entitled to special damages on account of money spent on the mother, but not for money spent for the child’s sole benefit.

Says Karen Eves, “Under the provisions of the new Fraud Act, making a fraudulent statement with the intention of benefiting from it constitutes an offence, carrying a maximum sentence of ten years’ imprisonment.”

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Consumer Law Gives Protection in Standard Form Contracts

In many commercial situations, businesses are used to dealing with each other by the use of ‘standard form’ contracts. One of the common instances of the use of such contracts is in the building industry, where construction projects are often governed by standard JCT contracts.

In a recent case, a builder who entered into a standard JCT ‘minor works’ contract with a residential occupier sought to enforce the decision of the adjudicator that he should receive interim payments which had been withheld by the customer. The payments were withheld because of disputes about delays in the work and the quality of some of the workmanship. The withholding of the interim payments was not accompanied by the issuing of withholding notices, which are required under the JCT agreement. The adjudicator therefore ruled that the interim payments were due to be made, because the customer had not complied with the terms of the contract as regards the withholding of payments.

This decision was challenged, using EU consumer law, on the grounds that the contract entered into took away normal standard consumer rights and thereby created an imbalance of rights between the builder and his customer. To rely on the provisions of the contract, it would be necessary for the builder to have specifically drawn the attention of the customer to the relevant terms of the contract. Because this was not done, the court ruled that the stage payments were not payable.

Says John Lennon, “Any business that relies on standard contracts and whose customers are private individuals must make sure that where the contract contains clauses limiting the usual consumer rights, these are brought to the customer’s attention and agreement to them is specifically evidenced. Failure to do so could result in the relevant clauses being considered to be void by the court.”

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Government Proposes Changes to Law on Damages

The Department for Constitutional Affairs has issued a consultation document on the civil law relating to claims for damages. The paper considers making it possible for a wider range of people to bring claims for damages where someone has been killed as a result of the negligence of another. It is proposed to extend the categories of persons considered to be dependants and of those eligible to claim damages for bereavement.

The main proposals are:

• to extend the statutory list of those able to make a claim as a dependant so that it includes ‘any person who was being wholly or partly maintained by the deceased immediately before the death’;
• to include any person who had been living with the deceased as husband and wife (or in an equivalent same sex relationship) for at least two years immediately prior to the accident;
• to extend the list of claimants able to claim bereavement damages to include children of the deceased who were under 18 at the time of the death; and
• to provide for a fixed sum of £5,000 in bereavement damages for each eligible child of the deceased under the age of 18.

Another idea under consideration is the possibility that in the case of injury, the injured person could claim the cost of private medical treatment where appropriate.

The consultation paper can be seen at - http://www.dca.gov.uk/consult/damages/cp0907.htm.

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Holiday Club Warning

As the summer holiday season comes around again, the thought of a permanent arrangement for discounted holidays in the sun could seem attractive, but take care! The Office of Fair Trading (OFT) has warned that there are many bogus ‘holiday clubs’ being marketed.

Holiday clubs are marketed as a more flexible and often lower cost alternative to timeshare ownership, offering worldwide holidays at attractive prices for life. However, warns the OFT, many of these offer little or no real benefit.

The OFT’s advice for avoiding being scammed is to beware any ‘cold call’ over the telephone or being approached whilst on holiday. Typically, a holiday resort tout will offer a free scratch card (all of which will be ‘winners’). To collect the prize, a presentation must be attended at which high-pressure sales tactics may well be used, or you may be lured by the ‘exclusivity’ of the offer.

Techniques used by bogus holiday clubs include:

• presentations that last so long that you are tempted to sign up just because you are desperate to leave;
• making sure you are not left alone to discuss anything with your partner and giving you a very limited time to view the contract; and
• telling you that they have made you a special discounted offer which is only valid for that day, placing you under pressure to sign on the spot.

In practice, many of the holidays that can be obtained after paying thousands of pounds for membership are the same as those which could be booked elsewhere without the need to belong to a holiday club.

Says John Lennon, “Many people who buy a holiday club membership or a timeshare whilst on holiday live to regret it. Given the cost involved, it makes sense to take time to think it over, check out the vendor and take advice on your legal rights.”

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Husband Loses Big Money Decision

The Court of Appeal has ruled against insurance magnate John Charman and confirmed that the UK’s largest-ever divorce settlement should stand.

In September 2006, the Family Division of the High Court ordered that Mr Charman’s former wife Beverly should receive a lump sum of £40m and retain existing assets of £8m already in her own name. To accomplish this, it ordered that a trust set up by the couple should be divided, not retained for the benefit of their children.

The family wealth was estimated to exceed £130m and the couple had been married for 28 years before their divorce. Virtually all of their wealth had been created during that time. Mr Charman had offered his wife a settlement of £20m, unforgettably stating that it was ‘more than anyone could spend in a lifetime’.

The decision confirms that there is a presumption by the courts that ‘assets of the marriage’ (i.e. those that are created during the marriage as opposed to being brought to it by one of the spouses or created after the couple separates) belong to the ex-spouses in equal shares.

The judges were critical of the current law in this area and called for pre-nuptial agreements to be made binding in law. “How much difference this would have made in a case such as this is moot,” says Alison Whistler, “as prior to their marriage, the Charmans were of modest means.”

This decision and similar ones prior to it are not necessarily the ‘bonanza for wives’ that they are being portrayed as in the media. For example, in a recent case in which a wife claimed a share of her husband’s expected future earnings, the claim was rejected as she had not contributed to his success at work. The UK does, however, remain a very attractive place for divorce proceedings to be brought where there is a successful spouse and significant family wealth.

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Oral Agreement Gives Rise to Property Rights

It is a well-established principle of English law that contracts involving land must be made in writing. However, that is not to say that just because an agreement relating to land is not made in writing, it is unenforceable.

One circumstance in which rights over property can be created orally is when a constructive trust arises due to an oral agreement being made with regard to a property. A constructive trust is where a person has responsibility over another person’s property as a result of the operation of law. A recent case illustrates such a circumstance. It involved two men, Mr Oates and Mr Stimson, who bought a house jointly in 1995, each paying an equal share of the mortgage. Mr Oates had financial problems and moved out in 1997. He agreed to sell his interest in the property to Mr Stimson for £2,500 and that Mr Stimson would pay him when he was able. Mr Stimson then took over sole responsibility for making the mortgage payments and for the maintenance of the property.

In 2000, Mr Stimson attempted to pay the £2,500 to Mr Oates. Mr Oates denied that the agreement existed and claimed £50,000 as his share of the value of the house.

The judge accepted Mr Stimson’s evidence that the agreement existed and that by taking over the responsibility for the mortgage payments and repairs he had suffered a detriment. He therefore found that this gave rise to a constructive trust in Mr Stimson’s favour. Once he had paid the £2,500 to Mr Oates, therefore, the full value of the property belonged to him.

Says John Lennon, “This is another example of a dispute ending in litigation which could easily have been avoided had the agreement been properly documented in the first place. Relying on someone else to confirm an agreement for which there is no written evidence is risky at best. If you find yourself in similar circumstances, take legal advice.”

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Proposals to Protect Cohabitees

The number of people who are living together in a relationship but who are neither married nor civil partners continues to rise. Many of these people are probably completely unaware that they have few rights in the event of a break-up of their relationship and that such rights as they do have centre around any children of the relationship. It is estimated that within fifteen years, nearly a third of all households will be made up of cohabitees as opposed to married couples or civil partners.

The problems that the current legal position has left unresolved have led the Law Commission to issue a consultation document called ‘Cohabitation: the Financial Consequences of Relationship Breakdown’, which runs to nearly 400 pages.

According to the Law Commission, a scheme is necessary to set out the respective rights of cohabitees. In the Commission’s view, these rights should be automatic, but couples should be able to ‘opt out’ if they so wish. Accordingly, the scheme would apply to all cohabiting couples unless they specifically elect for it not to. It would necessitate the creation of a ‘cohabitation contract’, which would be required to be in writing, signed and witnessed. It is possible that cohabitation contracts would be required to be made with the benefit of legal advice.

The Law Commission’s proposal is that the scheme should be available to all cohabitants who have children and to those who have cohabited for two years or more, whether or not they have children.

The proposals are that the financial arrangements on the termination of the cohabitation should resemble those currently applied in divorce cases. It is also proposed that the ability to make a claim for financial provision against the estate of a deceased cohabitee should be based on the reasonable expectation of the likely settlement in the event of separation. This would only apply were one of the partners to die without making a will or with a will which made inadequate provision for the surviving partner.

At the moment, there seem to be a number of loose ends in the Law Commission’s proposals, especially concerning the criteria applied in assessing the financial settlements when couples split up.

It is likely that the proposals will be debated for some time yet, so the legislation which will bring them into effect is not likely to appear before 2008 at the earliest. It is also likely to undergo many changes before it reaches the statute book.

“Until the proposals have passed into law, the position of cohabitees is best protected by having a formal written agreement, which should be made with the benefit of independent legal advice on both sides,” saysKaren Eves.

If you are in a cohabiting relationship and are concerned about what happens if your partner dies or the relationship ends, contact us for advice.

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Valuing Annuity Payments for IHT

When a person dies, there is often no right to receive any further payment under an annuity. However, many annuities are sold which have ‘guaranteed minimum payment periods’ – typically five years after the annuity first vests. In such cases, if a person dies before the end of the minimum payment period, further annuity payments will be receivable.

Valuing the right to receive such payments for Inheritance Tax (IHT) purposes can be problematic, but HM Revenue and Customs (HMRC) have an online calculator which provides an estimate of the open market value of the guaranteed annuity payments in straightforward circumstances. This consists of a form requesting the information necessary for the calculation to be made. In the view of HMRC, the estimate given by the electronic calculator constitutes a reasonable estimate of the open market value of the annuity for IHT purposes.

The form can be found at http://www.hmrc.gov.uk/cto/forms/g_annuity.pdf.

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Care Assessment Must Consider Child’s Interests

When a local authority carries out a care assessment to determine the needs of a child, the principal object, which must remain in focus at all times, is the child and his or her needs.

Recently, the court heard a case which involved an autistic child with learning difficulties and health problems. The child’s mother was struggling to cope with looking after him at home and a care assessment was ordered to be carried out.

The assessment found that the mother was having such difficulty coping with the boy that her mental and physical health were being impaired. It concluded that the child should be moved to a boarding school which, having previously assessed him, would be able to cope with him.

The local authority’s education and social services panel met some months later and a second assessment was prepared by a social worker. This concluded that the initial assessment had been unduly influenced by the mother’s claim that she was unable to cope and recommended that an additional support package (largely undefined) be given to enable the child to remain at home.

The mother applied for a judicial review of the decision on her son’s behalf, contesting it on several grounds, but most particularly because the local authority had failed to consider the educational, health and social care interests of the child.

The court agreed that the initial care assessment could be considered to place undue emphasis on the needs of the mother rather than the child, but was of the view that the second assessment’s conclusion, that the ‘package of support’ was preferable for the child to a residential placement, was seriously flawed, especially as the package of support to be provided was ‘woolly’ and largely undefined.

At issue here was not only the extent to which the local authority had properly considered the needs of the child – which is their primary duty in such cases – but also the extent to which it had made a defensible case that its care plan met the child’s needs.

Says Karen Eves, “Local authorities will often suggest plans which avoid residential placements in order to save costs. Where a residential placement is in the child’s best interests, the decision can be fought. A lack of a clear and coherent support strategy should also be called into question as, in practice, vague promises of ‘support packages’ can often fail to amount to much.”

If you are not getting the support you require from your local authority, contact us for advice.

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Cases Show Court Hostility to Poor Behaviour

Three recent cases illustrate the point that even in disputes involving land, the behaviour of a landowner can be an important factor when it comes to the final decision of the court.

In the first case, the claimants (the Owers) went to court to obtain a ruling that their property had a right of way over a track of unknown ownership, which adjoined their property and was the only means of access to it. The track and another adjacent property had originally been part of the same property. When the Owers bought their property, the track was fenced off from the adjoining property. When that property was sold to a Mr Bailey, they allowed the fence to be removed so that he could move in. Subsequently, Mr Bailey claimed title to the land. He blocked the track repeatedly with his tractor and erected gates at the end of it, which he insisted remained shut. This state of affairs persisted for a period of four months before the court could rule on the matter and confirm the existence of the Owers’ right of way. Because Mr Bailey had acted in a spiteful and malicious way, aggravated damages were awarded to the Owers in the sum of £4,500. Damages for loss of amenity were assessed in the sum of £2,000.

In a second case, a company was unsuccessful in obtaining an injunction to prevent interference with its right to light because it had boarded up windows which would have suffered the loss of light throughout the ‘prescription period’. The court awarded a small amount of monetary compensation instead.

In the third case, a landlord who sued a tenant for non-payment of service charges was faced with a counterclaim from the tenant. The tenant successfully claimed that the landlord had failed to make all reasonable endeavours to repair the roof of the building. The court agreed with the tenant and ruled that he should not bear any liability for the roof repairs.

What these cases all show, in different ways, is that in normal litigation cases the courts will look at the behaviour of the parties in a dispute before making its decision. Litigants who wish to have a successful outcome would do well to ensure that their own behaviour cannot be criticised.

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Check Your Will

A recent case has shown the wisdom of checking your will to make sure that it accurately reflects your wishes. Not only can these change over time, but it is possible that your wishes were misunderstood at the drafting stage, as happened in this case. If someone dies and this has happened, it may be possible to go to court to have the will rectified, but this will inevitably involve unnecessary expense and delay.

The circumstances were that a man named Guy Goodman and his wife, Jennifer, wished to buy the property owned by Mr Goodman’s father, Geoffrey. A deal was done whereby Jennifer agreed to buy the property by paying Geoffrey £3,000 per month for 20 years. He agreed to pay her a rent of £1,000 per month, producing a net payment from Jennifer of £2,000 per month.

When Guy and Jennifer had their wills drafted in March 2003, these made provision for a monthly allowance of £2,000 be paid to Geoffrey in the event that they predeceased him. In March 2004, Guy died. Geoffrey and Jennifer disagreed over what his will was intended to accomplish, with the result that Jennifer had to go to court to have it rectified because she argued that it had not been intended to benefit Geoffrey in this way.

In the view of the court, what had occurred (and the solicitor’s testimony confirmed this) was that Guy and Jennifer’s instructions had been misunderstood. The result was a pair of wills (Jennifer’s had the same clause) which gave a legacy when the intention was merely to acknowledge the existing agreement for the purchase of Geoffrey’s property and the rental agreement. The court considered the fact that Jennifer’s will was couched in the same terms as Guy’s and that the legacy was to last only while Geoffrey occupied the property as strong evidence that this was the case, as was the fact that the allowance was equal to the net payment under the agreement.

This case is one which could have been avoided had the wording of the draft wills been carefully considered before they were signed and witnessed. Indeed, had the will been looked at carefully, and the erroneous clause spotted, the writing of a new will or making of an amendment to the existing will would have been straightforward.

If your will was written some years ago, or your family circumstances have altered, it might need to be changed. If you find anything in your will that you do not understand or which does not reflect your wishes, contact Chris Lawn for advice.

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Child Contact – Changes Afoot

The new Children and Adoption Act 2006, which received Royal Assent last summer, makes changes to the way in which contact between divorced parents and their children will be governed.

Under the Act, when deciding on contact arrangements, the court is empowered to make a ‘direction’ requiring the person named to take part in an activity that promotes contact with the child concerned. Such activities could include, for example, counselling or anger management training. A contact activity direction cannot include requiring medical or psychiatric assessment or treatment however.

Contact activity directions cover the interim stage between the commencement of proceedings and the court’s disposal of them. A contact activity direction is made only on a parent of the child and can be made when the contact arrangements are disputed and the habitual residence is in England or Wales.

When such a direction is made, the person who wishes to have contact with the child must comply with it. It must specify both the activity and the person who will provide it. This means that the court must consider not only the suitability of the provider of the activity but also the information about the person being ordered to undertake the activity, to ensure the activity is suitable. Such a direction can be applied for by one of a number of people who have contact with the child, as well as by the child itself.

If the terms of the contact activity direction are breached, the court can make an ‘enforcement order’, which involves the imposition of an unpaid work order (‘community service’). This must be preceded by a warning notice and the court must be satisfied that the enforcement order is necessary to obtain compliance with the contact activity direction. The court must also be satisfied that the effect of the enforcement order is not out of proportion to the seriousness of the breach.

Where the breach of a contact activity direction has a financial implication, the court can order compensation to be paid if financial loss is suffered.

The aim of the changes, which are somewhat more complex and far-reaching than outlined above, is to protect the welfare of children when a couple divorce. It remains to be seen how effective this raft of new legislation will be, as there is no extra resource provision being made available to monitor compliance with contact activity directions.

Our family law department can help you with any aspect of family law.

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Noisy Pubs – What Can be Done?

With many licensed premises opening until late at night, problems of rowdy behaviour by night time revellers can be considerable for people who live in the surrounding area.

If a local pub or club becomes a nuisance to those living nearby, what steps can be taken?

Clearly, one option is to complain to the local authority and to keep complaining if things do not improve. Most licensing committees will put the licence holder under considerable pressure to bring about improvements if complaints continue to be made. Making recordings of the noise or other anti-social behaviour being complained of can strengthen one’s case.

However, before going down the ‘official route’, here are some things you can ask the licensee to do which might help you reach a solution which will preserve goodwill all round. You can request that they:

• put up signs in the car park and near the exits reminding customers that it is a residential area and requesting that noise be kept to a minimum;
• give out sweets or lollipops to customers leaving late at night – the idea being that they are too busy chewing to make noise. This novel approach has proved effective in many instances;
• control the volume of any music they play;
• leave doors shut where possible, so that sound is controlled;
• ask taxi drivers to turn off their engines while they wait and to refrain from sounding their horns on arrival;
• instruct staff and security people to intervene when customers are rowdy; and
• advise households in the neighbourhood in advance when a late licence or function likely to cause extra noise is scheduled.

If all else fails, pressure can be exerted on local environmental health officers. They have the power to bring prosecutions against pubs which create excessive noise between 11pm and 7am, which can lead to fines of up to £5,000. If necessary, a noise abatement notice can be issued. Failure to prevent noise nuisance after the issue of a noise abatement notice can lead to a fine of up to £20,000 and/or six months’ imprisonment for the licensee.

Contact John Lennon for more information.

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Option Agreement Binding on Landlord Despite Rent Arrears

A landlord whose lease contains an 'option to buy' clause cannot avoid selling the property if the tenant exercises the option, even if the tenant is behind with the rent.

A recent case saw a landlord, who refused to sell the freehold of a property to a tenant on these grounds, ordered by the court to complete the sale.

The tenant had a five-year lease over the property which contained an option to buy clause. The tenant wrote to the landlord stating that he wished to exercise the option to purchase the property. The landlord refused to accept the notice and issued proceedings for possession of the property because of the arrears of rent. The tenant went to court for an order of specific performance over the property purchase. A specific performance order is used in cases involving breach of contract, where one party to the contract refuses to perform its obligations under it. The order requires them to perform their contractual obligations as set out in the contract. In this case, the performance required under the contract was the sale of the property to the tenant under the option agreement.

The landlord argued that the tenant’s notice was not validly served and that a clause in the option agreement, which stipulated that the purchase must be completed within two years, was not complied with.

The court rejected these arguments ruling that the option notice was validly served by the tenant and that the clause which said the purchase had to be executed within two years was only part of the legal mechanics of the agreement. Furthermore, the arrears of rent were not relevant.

Accordingly, the landlord was ordered to sell the property to the tenant under the option agreement. On appeal, the Court of Appeal confirmed the judgment.

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Poorer Spouse Must Have Proper Representation

Most of the divorce cases featured recently in the press have been ones where the settlement involved the division of substantial assets between independently wealthy spouses.

In some cases, however, there is a disparity of assets between the divorcing couple and one of the spouses has insufficient funds to obtain proper advice. In such cases a ‘costs allowance’ may be made against the other spouse, requiring them to provide funds so that the other party can be legally represented.

A recent case dealt with such a situation. In this case, the ex-wife was considerably better off than her ex-husband and she had been ordered to make periodical payments to him. She wished to change this and to negotiate a ‘clean break’ agreement, by the making of a single ‘one-off’ payment. The court decided that the ex-husband did not have sufficient assets to obtain proper legal advice, so the judge ordered his ex-wife to pay an additional £10,000 per month for four months to provide him with sufficient money to finance his legal representation until the end of the financial dispute resolution process.

She appealed. She alleged that her ex-husband owed her £36,000 in respect of costs and that he had impoverished himself through unwise litigation. She also alleged that he had not made a full disclosure of his financial affairs.

The chief issue before the Court of Appeal was whether the ex-husband had demonstrated that he could not reasonably obtain appropriate advice and representation without the costs allowance being granted. For example, if he had assets, he would need to demonstrate that they were not realisable or could not be used as security for a loan. Also, the court had to be sure that he was not eligible for public funding of his legal costs.

Although the question of the debt owed to the ex-wife carried weight, the Court of Appeal was of the view that facts had been properly considered by the judge in the lower court and it would not seek to overturn that ruling.

This case illustrates the point that the courts are primarily concerned with making sure that where there is a significant disparity of assets in such cases, the ‘weaker’ spouse does not suffer as a result of being unable to secure proper legal representation. Furthermore, the Court of Appeal is unlikely to change the decision of a lower court provided it has taken proper regard of the facts made available to it.

The Court of Appeal judged that the restriction of the costs allowance to the end of the financial dispute resolution process was a deterrent to spinning out the dispute and did not amount to an improper inducement to settle prematurely.

Says Karen Eves, “In divorce proceedings, having less wealth than your spouse should not prevent you from getting proper legal support.”

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Right to Buy – The Present Position

The right of secure tenants to buy their homes was established under the Housing Act 1980. The original rules have subsequently been amended, however, mainly owing to a growing number of abuses of the system. These mainly involved property speculators who made agreements with secure tenants to the effect that they would acquire their properties under the right to buy provisions, using finance provided by the property speculator who would then purchase the property and rebate to the tenant some of the discount they had received.

The discounts applicable when a tenant exercises the right to buy range from 35 per cent to 60 per cent in the case of flats and from 50 per cent to 70 per cent in the case of houses, although there is sometimes a cap on the maximum discount that can be given.

More recently, the right to buy of tenants subject to an anti-social behaviour order has been limited through the establishment of a ‘demoted tenancy’.

Secure tenants will acquire the right to buy their property after five years but the right to buy with a discount is not without limitations. Firstly, the tenant must covenant not to sell the property within five years, subject to loss of the discount. The amount of discount to be repaid is calculated with reference to the value of the property at the date of resale, so that rising property prices will not produce a windfall profit for the purchasing tenant if they sell in the first five years.

Also, in a bid to prevent property speculators from cashing in on the discounts, a deferred agreement to resell the property to someone else, entered into before the right to buy is exercised or during the five-year period after purchase, will trigger a repayment of the discount.

Furthermore, the right of first refusal to purchase the property remains with a social landlord for ten years after the purchase.

There are a variety of other measures which aim to prevent other abuses of the right to buy legislation.

If you are a secure tenant and are considering the purchase of your home, contact Nessie Orosco–Yousaf for advice.

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Trustee Exemption Clauses – New Approach

The Law Commission has recommended the adoption of a new approach to clauses in trust deeds which limit the liability of paid trustees.

The recommendation requires paid trustees and the persons drafting the relevant trust deed to ensure that the settlor of any trust assets is made aware of any clause in the trust document which excludes or restricts the liability of a trustee for any loss to the trust as a result of breach of trust. This must be done before the trust document is created but will not apply where the settlor has the benefit of independent legal advice or where the trustee is acting in the normal course of business, for example when the trustee is a pension trustee.

The relevant professional bodies (the Law Society, the Institute of Chartered Accountants in England and Wales, etc.) will implement the ruling by making a change to the rule books of their members. The Society of Trust and Estate Practitioners has already done so.

The rule only applies to paid trustees. However, a trustee who receives an indirect benefit as a result of his position could well be considered to be a paid trustee. This might make some unpaid trustees subject to the new regime, possibly without their being aware of it.

Says Michael Cutler, “If you are asked to be a trustee of a trust of any kind, including a charity, you should take legal advice. Trustee positions are not without risk and you should make sure that both an appropriate trust deed and trustee insurance are in place.”

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Violent Fathers – Is the Court of Appeal Too Soft?

Two recent cases show that the Court of Appeal seems unwilling to ‘throw the book’ at violent fathers.

A father with a history of violence, who seriously and persistently breached orders not to molest his former wife, has successfully appealed against four consecutive sentences, of three months' imprisonment each, for contempt of court.

He had damaged property belonging to his ex-wife’s family, sent her threatening letters and threatened to kill her, even after being served with a non-molestation order. Although these were serious matters, the Court of Appeal considered that for him to be given (in effect) a twelve month custodial sentence, when the maximum sentence which could be given was two years’ imprisonment, was too onerous. It ordered that the sentence be reduced to one of eight months' imprisonment.

In another case, the Court of Appeal reinstated an indirect contact order, between a violent father and his child, which had been terminated because of the father’s violence towards his ex-wife. The child’s guardian was convinced that the continuation of the indirect contact would allow the father to trace the whereabouts of his former wife, which was highly undesirable given his propensity to violence towards her. The Court of Appeal was satisfied that the arrangements which were in place were suitable to ensure that this did not happen, so reinstated his right to indirect contact.

Says Karen Eves, “The protection given by the courts to people who suffer violence at the hands of family members and ex-spouses is improving, but it could be bettered. Strong legal representation can help to ensure that such problems are dealt with as quickly and enforced as strongly as possible.”

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Budget Inheritance Tax Grab - April 2006

What was, for many Maidonians, the biggest news of the latest Budget was not mentioned at all by Gordon Brown in his speech, but was buried in the ‘small print’ on pages 65 to 68 of the Budget Notes. This was how the nation found out about the Chancellor’s “alignment” of Inheritance Tax (IHT) on trusts – in fact, the biggest shake-up of IHT in 20 years.

According to Michael Cutler, a partner with Colemans Solicitors of Maidenhead, and a member of the prestigious Society of Trust and Estate Practitioners (STEP),
“The government’s line is that this will affect only 20,000 of the richest people in the country, but that is nonsense. STEP conducted a snap poll just after the Budget – only 11% of the STEP members were able to respond at such short notice, but they alone identified 831,000 of their clients who would be affected! “

The use of discretionary trusts for estate planning or to receive life policy, death in service, or pension money, is not affected at all, but the rules for taxing most other trusts are changing and a wide range of people may be touched by the new rules:-

• If you left money in your Will to children or grandchildren at the age of 25, or any other age over 18 (so they might be expected to be more mature and better-able to manage it), that can mean an extra tax of at least 6% on that money.
• If you left money in your Will in a life-interest trust for a vulnerable adult or child (so someone else can control the capital) that can now attract additional IHT charges.
• If you left money in your Will in a life-interest trust for your spouse (very common in a second marriage, leaving it to the new spouse for life, and then to your children by the first marriage) that can mean you lose the spouse exemption altogether, paying IHT at 40% on everything over the nil-rate band, and then a further 6% charge every ten years, and again when your spouse dies.
• If you put money into a life interest trust or an accumulation and maintenance trust (perhaps to give it to children or grandchildren who are too young to own it), that money can now be subject to the same pattern of 6% IHT charges.
• If you took out life insurance and wrote the benefits in trust using the life company’s standard documents (to ensure that the beneficiary will get the money promptly on your death), the policy money can now attract IHT.

Michael Cutler cautions:
“Don’t panic – yet! An unprecedented coalition of lawyers, accountants, insurers and trust professionals is now lobbying the Treasury for changes to be made before these proposals become law in the summer, so we are not yet quite sure how this will turn out. However, if you think you could be affected, ask your solicitor for advice. Although few people will need to rush to change things before we know the final shape of the new law in the summer, it will be prudent to keep an eye on developments. I will be posting information as it becomes available, on our website at www.colemans.co.uk. Finally, if you have not yet done anything at all to minimise the effect of Inheritance Tax on your estate, the main techniques are untouched by the Budget and there is no need to wait until the summer – you can and should act now!”

Trust and estate specialist Michael Cutler can be contacted at Colemans Solicitors, 21 Marlow Road, Maidenhead SL6 7AA, by telephone on 01628 631051 or by email.

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Short-marriage Widow Sees Financial Provision Cut

A judge who failed to explain how he had reached his decision as to the amount that should be awarded to a widow from her late husband’s estate, in order to allow her to meet her future financial needs, recently found his decision overturned by the Court of Appeal. The widow in question had made a claim under the Inheritance (Provision for Family and Dependants) Act 1975, which allows dependants to apply for reasonable financial provision from the estate of the person on whom they were dependent if appropriate provision is not made in the will.

In this case, the estate was valued at £1.4m and belonged to a man who died 13 months after marrying his cleaner, whom he had only known for six months prior to the marriage.

In the lower court the judge ruled that the widow should receive £800,000 by way of a lump sum, but failed to explain the reasoning behind his decision. The executors appealed on behalf of the beneficiaries, claiming that the award did not reflect a proper balance of interests between the widow and the family. The Court of Appeal found that the judge’s reasoning was flawed in several respects and considered that, given the brevity of the marriage, the original apportionment might not be appropriate.

It was decided that the widow should receive £600,000 which, after tax and legal costs, amounted to approximately 60 per cent of the value of the net estate.

“This case is one of a series of judgments (mainly in the divorce courts) involving short marriages and high value estates,” says Alison Whistler “In circumstances such as these, case law is very persuasive and although settlements must be decided on the relevant facts, the quality of legal representation is of critical importance.”

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Prescott Aims to End ‘Satellite Dish Blight’

Satellite dishes may be very popular, but few if any would argue that they are beautiful. In a bid to square the circle between the negative visual impact of satellite dishes and other antennae and the need for people to have access to digital services, the Office of the Deputy Prime Minister has issued planning guidelines on the siting of aerials and satellite dishes. These are intended to comply with the ‘neutrality of technology’ required by the Communications Act 2003. The regulations will apply to all forms of receiving apparatus.

The present guidelines require that an antenna is sited in such a way as to minimise the impact on the external appearance of the building. This requirement will remain. The additional requirements for dwellings and buildings under 15m in height are:

• up to two antennae are permitted, the larger of which shall not exceed 100cm in any direction and 35 litres in cubic capacity;
• the maximum size for the second (smaller) antenna is 60cm in any linear direction and 35 litres cubic capacity;
• antennae mounted on chimneys are restricted to the smaller of the above sizes. If there is a chimney, the antenna must not rise above it and must not in any event rise more than 60cm above the roof line; and
• if the property has no chimney, the antenna should not rise above the roof line.

The regulations are different for buildings in conservation areas and National Parks, buildings taller than 15 metres, and those located in areas of outstanding natural beauty. Listed buildings continue to require planning consent for the siting of an aerial.

If you require advice on any planning matter contact Mike Stone.

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Lasting Powers of Attorney – Government Reveals Plans

The Government has now outlined its plans for lasting powers of attorney (LPAs). The difference between these new arrangements and the existing enduring power of attorney (EPA) is that an EPA only allows the attorney to deal with the financial affairs of the person granting the power, whereas under the new arrangements the attorney can be allowed to make decisions concerning their health and welfare, if they are no longer able to do so themselves. LPAs will also allow a person to make an ‘advance direction’, commonly referred to as a ‘living will’, specifying in what circumstances they do not wish life-sustaining medical treatment to be given.

Powers of attorney are normally brought into use when a person lacks the ability to make decisions for him or herself. Under the plans, there will be a strict code of conduct for attorneys and any advance directions will have to be made in writing. The guidance sets out the procedures for making and changing an LPA and what needs to be done, in particular, where a living will is incorporated into the arrangements. It also stresses that such arrangements should be kept under regular review.

A period of consultation will now take place with a view to bringing in legislation effective from April 2007.

Says Chris Lawn, “The LPA should make it much easier for families who have to deal with the affairs of persons who are not competent to make their own decisions, especially those suffering from illnesses such as Alzheimer’s disease and senile dementia. People should give consideration to these issues and make sure that if they create an LPA, it is done at a time when their mental competence is not in doubt.”

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Landlords to Lose Right to Retain Deposits

The Government has announced that it is to set up a company to control the deposits paid to landlords by their tenants. The aim is to put an end to the problem caused by unscrupulous landlords who do not return deposits at the end of a tenancy. One in five tenants is said to be aggrieved at how their deposit has been dealt with at the end of their tenancy.

However, critics of the new Tenancy Deposit Scheme (TDS) point out that it does not contain any protection for landlords who find that a tenant has withheld the last month’s rent, which is also said to occur in approximately 20 per cent of cases.

Under the TDS, the deposit will be paid into escrow with the company and an arbitration system set up to resolve disputes between landlords and tenants over the amount of damage done to a property which is attributable to the tenant. Landlords will fund the scheme by payment of a fee and will have no right to the interest earned on the deposit during the period of the tenancy. Landlords who fail to put the deposit into the scheme within 14 days of receipt will be hit with a fine of up to three times the deposit. The Government is also drawing up guidelines as to what constitutes reasonable wear and tear, which is the responsibility of the landlord and not the tenant. The new system is intended to apply to properties rented after 1 October 2006.

For landlords, the TDS will mean extra costs and bureaucracy. For tenants, it will mean assurance that at the end of the tenancy, their deposit will not simply be pocketed by the landlord. Over £740m of deposits are reported to be held by landlords in respect of shorthold tenancies.

Says Andrew Wong, “Landlords will not welcome the additional complexity this will bring, although assurances have been given that the extra cost of the scheme will be low. It is hoped that the new arrangements will give tenants confidence that in normal circumstances deposits will be refunded so there will no longer be an incentive to withhold rent rather than struggle to recover the deposit held by the landlord.”

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Chancellor Declares War on Trusts

The Chancellor has declared war on the use of tax advantaged accumulation and maintenance (A&M) trusts by making them subject to an immediate ‘entry’ tax charge of 20 per cent on lifetime transfers that exceed the Inheritance Tax threshold. By deeming them to be ‘relevant property’ trusts, the 6 per cent ‘periodic’ charge and the ‘exit’ charge when trust assets vest will also apply, except where specific conditions are met. The main exceptions will be trusts arising on death where the beneficiary receives the assets at age eighteen or trusts which are created for the benefit of a disabled person.

Existing A&M trusts which provide that the assets in trust will go to a beneficiary absolutely at 18 – or where the terms on which they are held are modified before 6 April 2008 to provide this – will continue to have the current exemptions. Where they do not, the trust assets will become ‘relevant property’ from 6 April 2008 and the periodic and exit charges will apply.

Contact Michael Cutler for advice on this or any other wealth-protection or trust matter.

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How Divorce Works

The basic requirements for obtaining a divorce in England and Wales are that a couple must have been married for a year, the marriage must be legally recognised under UK law and it must have broken down irretrievably. Irretrievable breakdown must be demonstrated to the court by one of five reasons or 'grounds':

• adultery;
• unreasonable behaviour;
• desertion;
• two years' separation with consent; or
• five years' separation without consent.

In practice, if both parties want to be divorced quickly, then the most common ground on which to proceed is unreasonable behaviour. This is used when there has been no adultery and the parties wish to avoid the delay caused by the last three grounds. Unreasonable behaviour can be evidenced by, for example, violence or mental cruelty as well as more subtle complaints such as the exercise of unreasonable control. To support the claim of unreasonable behaviour, one party must agree to give a brief description of the behaviour in the divorce petition.

It is useful to understand the outline of the process and some of the legal terminology. The party to the marriage who makes the application, or petition, for divorce is known as the petitioner while the other party is called the respondent. The petition for divorce is delivered to, or served on, the respondent. The respondent then has 29 days in which either to admit that the petition is true or to defend the divorce – although defended divorces are very unusual. The respondent agrees by returning an affidavit, a signed statement of the truth, to the court.

Normally, a district judge will then decide on the date of a decree nisi, which is the first step towards the formal divorce. Six weeks after the date set for the decree nisi, the petitioner can apply for the decree absolute. When this is granted, the divorce is final. If the petitioner does not apply for the decree absolute, the respondent may do so three months after that date.

It is beneficial if arrangements concerning any children from the marriage and the split of family assets are agreed without having to go to court. However, it is important to have good legal advice even if these decisions are made amicably. The court will always suggest mediation first in order to reach a mutually acceptable agreement between the parties.

In all, the divorce process is likely to take between five and eight months to complete. It will, however, take longer if there are disagreements over children or money which cannot be settled without the intervention of the court.

Contact Karen Eves for advice on any family law matter.

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