Outer House case in which a tenant (Ralph Lauren) of premises on Ingram Street in Glasgow sought to prevent the landlord (the pension fund) from letting a neighbouring unit (Unit 6) to a hairdressing salon on the basis of an obligation contained in a back letter.

The back letter granted by the pension fund provided:

“We shall not grant first lettings of that one of the Commercial Units (as defined in the Lease) known as Unit 6, situated to the north of that one of the Commercial Units let as at the date hereof to All Saints Retail Ltd, to retailers other than high quality fashion retailers as are approved by you (such approval not to be unreasonably withheld or delayed).”

Ralph Lauren sought an interim interdict on the basis that the hairdressing salon was not a high quality fashion retailer. On the other hand, the pension fund argued that, in terms of the back letter, as the hairdressing salon was not a retailer, Ralph Lauren’s permission was not required.

Ralph Lauren contended that the pension fund’s interpretation would permit the landlord to let the premises to anyone who did not sell goods which they argued was an absurd consequence given the context in which the undertaking had been given. As a result, they urged that back letter should be construed in a commercially sensible, rather than a purely literal, way.

However, Lord Glennie agreed with the pension fund’s arguments and found that the letter did not restrict the pension fund with regard to lettings to non-retailers (noting that it was “nigh impossible” to describe a hairdresser as a retailer). Whilst it was “permissible to do some slight violence to the language of a clause in a contract where a literal construction would defeat what is objectively the intention of the parties to it”, there was no basis for applying that approach in this case. There was nothing to suggest that the parties had intended a restriction on all lettings other than high quality fashion retailers. There was no evidence to suggest that a high quality fashion retailer such as Ralph Lauren would consider themselves to be prejudiced by the letting of a neighbouring unit to, for example, a restaurant or a cafe. If they had wished to prevent such a letting it would have been easy to address it in the undertaking.

Lord Glennie came to the conclusion that Ralph Lauren had not shown that they had a prima face case and refused the motion for interim interdict although leave to reclaim was granted.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

A residential hospital for vulnerable adults near Bristol where alleged abuse was secretly filmed by the BBC Panorama programme is to close on Friday.

Castlebeck, which runs Winterbourne View, said the hospital would close on 24 June when the last patients would be transferred to alternative services.

The BBC news report can be found here.

Delivering Sustainable Flood Risk Management, 15 June 2011
Guidance complementing the Flood Risk Management (Scotland) Act 2009. It sets out statutory guidance to SEPA, local authorities and Scottish Water on fulfilling their responsibilities under the Act.

The full document  is available from the Scottish Government website here

Police are trying to establish the circumstances surrounding the death of a Glasgow man whose mother took him to a Swiss clinic to die.

Helen Cowie told BBC Scotland’s Call Kaye show she helped her son Robert, 33, commit suicide after he was left paralysed from the neck down.

Mrs Cowie, of Cardonald, Glasgow, said her son went to Dignitas in October and “had a very peaceful ending”.

The report from BBC News can be found here.

Last December the Scottish Parliament rejected plans to give terminally ill people the right to choose when to die.  Independent MSP Margo MacDonald’s End of Life Assistance Bill aimed to make it legal for someone to seek help to end their life.  The Bill was defeated by 85 votes to 16 with two abstentions.

The Office of the Public Guardian (Scotland) is not currently able to meet its target turnaround time of registering Powers of Attorney within 30 working days from receipt.

Not surprisingly the OPG is receiving a significant amount of telephone calls from customers seeking confirmation that it has received their Powers of Attorney for registration.

The OPG currently estimate that registration should be notified within two months of the Powers of Attorney being sent to the OPG.

Edwin Morgan, who died last year aged 90, is thought to have left the SNP a significant part of his estate.

He became the Scotland’s first national poet – or Scots Makar – in 2004 by then First Minister Jack McConnell.

The report from the BBC can be found here and the Sunday Herald here.

Outer House case considering the meaning of “waste” in terms of the lease of a landfill site near Stranraer.  The lease provided that the tenants (Shanks) were to make royalty payments to the landlords (Landmore) for “inert waste” entering the site.

The question for the court was whether soil which had been brought on to the site for the purpose of capping cells of waste deposited at the site was also “inert waste” and therefore subject to the royalty payment.

Lord Menzies found that the soil was “inert waste”.  In coming to that conclusion, he noted that the exercise was one of construction of a private commercial contact and thus differed from cases in which the courts were construing EU directives or regulations (albeit he noted in passing that the decision he reached was in line with authorities concerned with the interpretation of the EU regime).

The soil came from a construction site on which houses were being built. It was discarded by the developer who paid haulage contractors to take it away and was an unwanted by product caused by the need to provide flat foundations for the houses. Nothing was done to it before it entered the landfill site. As such, Lord Menzies took the view that the soil fell within the ordinary and natural meaning of “waste”. Although it was useful to Shanks, Lord Menzies did not consider that it was appropriate when considering the parties intentions objectively to view the situation from the perspective of the potential user of the material pointing out that anything –or almost anything –can be put to use by someone.

“Having consumed all the meat from a roast leg of lamb, I may discard it into my household rubbish. It is useless to me. My dog may have a different view of its usefulness, and may retrieve it for his own purposes – but despite its usefulness to him, it remains waste.”

The full judgment is available from Scottish Courts here.

 All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Gateshead Talmudical College v HMRC

Upper Tribunal Finance and Tax Chamber 2011 UKUT 131 (TCC) 

This is an appeal by Gateshead College against the decision of the First-tier Tribunal.

The Upper Tribunal concluded that Capital Goods Scheme (CGS) adjustments were required when rental payments and VAT accounting stopped less than two years into a lease and leaseback arrangement.

CGS is a mechanism for regulating deductibility over the “VAT-life” of a capital good.   For VATpurposes a capital good is a developed property.  The scheme operates by ensuring that the deductibility for a property reflects the use to which the property is put over the VAT-life (adjustment period) of the property.

Facts

The main activity of Gateshead College is the provision of education.   The background to this matter is the building of an extension by Gateshead College.  Gateshead College leased these premises to a property company called Starburst Properties Ltd.   Starburst on the same day granted a sublease over the same premises to Gateshead College.   Gateshead College had registered for VAT two months earlier and had described its business as that of “property letting”.   Both Gateshead College and Starburst elected to waive the VAT exemption over these premises.

Gateshead College then took credit for the input tax on its construction costs relating to these premises and this led to a VAT repayment for Gateshead College.   However, after an initial period of less than two years the lease payments and the VAT accounting stopped.   In addition, Starburst was dissolved and struck off the company register.  Gateshead College took no action to forfeit the lease the benefit of which became vested in the Crown as bona vacantia.

HMRC assessed Gateshead College for failure to make adjustments under the CGS and Gateshead College appealed to the First-tier tax Tribunal.

At the First-tier Tribunal HMRC successfully argued that the making of taxable supplies had been reduced to nil once Starburst had been dissolved (as it could not be the recipient of any supplies).  In addition the ceasing in the making of taxable supplies had given rise to the requirement to make a CGS adjustment.   Gateshead College unsuccessfully argued that the continued existence in law of the lease meant that taxable supplies continued to be made after the initial period.

The arguments  

Gateshead College appealed to the Upper Tribunal on the basis that the First-tier Tribunal had erred in law.

Gateshead College made two arguments.  Firstly, it argued that the First-tier Tribunal had been wrong to include that no supplies were being made under the lease because the parties has stopped abiding by its terms and one of the parties had ceased to exist.   Gateshead College contended that it had continued to make supplies despite its failure to seek payment of rent.

Gateshead College also argued that that the First-tier Tribunal had wrongly concluded that an adjustment under the CGS should have been made because of a decrease in the making of taxable supplies.  Gateshead College argued that CGS adjustments are triggered not by the reduction in the value of taxable supplies but by a change in the extent of the use of the capital item for making taxable, as distinct from exempt supplies.

The decision

The Upper Tribunal dismissed Gateshead College’s first argument.   The Upper Tribunal accepted the lease existed as an item bona vacantia but that did not alter the fact that no rent was paid and accounted for after a period of less than two years.   A supply, i.e. rent, was therefore not being made once Starburst was struck off.

With regard to the “change of use” argument.   The Upper Tribunal stated, as had the First-tier Tribunal, that it was “completely untenable” to maintain this argument.  The parties had stopped abiding by the lease and the payment of rent had been abandoned completely.  Gateshead College’s argument that the premises were used exclusively for leasing supplies, despite there being no actual rental charges or payment nor any intention of any being made, could not be sustained.

Changes are being made to the SDLT IT system.  This means online returns cannot be submitted from midnight on Friday 24 June until 7.00am on Monday 4 July.  The reason for this is that HMRC is shutting down the system whilst the changes are made and tested.

The latest information from HMRC is available here.

Scotland’s largest airports have joined together to demand that the UK Government devolves its Air Passenger Duty (APD) to the Scottish Government as part of the Scotland Bill.

The Calman Commission recommended the devolution of APD as part of the Scotland Bill and the Scottish Government has supported this.   However as the UK Government is consulting on changes to aviation duty it has not yet been included in the Scotland Bill.

The press release from BAA Edinburgh can be found here.