Value of ‘works of art’ accepted in lieu of IHT in each of last five years

The total value of cultural items accepted by HMRC under the inheritance tax acceptance-in-lieu scheme for the five years from 2009 to 2013 was just under £125 million. Almost half of which came in the final year.

Full details can be found here.

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OPG (Scotland) “Update on Power of Attorney (PoA) Validity Issue”

This is from the OPG (Scotland) website:

“Further to the opinion expressed by Sheriff Baird, which cast doubt on the validity of powers of attorney drafted in what is a standard form, the Public Guardian has instructed detailed legal advice on the most appropriate option to achieve clarity on this. The Public Guardian wishes a procedure which gives an opportunity for PoA validity issues to be fully explored. Any update will be provided here.”

More on this from can be found here.

An earlier blog on this can also be found here.

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Private Client quarterly ‘Bulletin’ launching in January 2015

If you are interested in subscribing to a quarterly Private Client Bulletin please email me at: james@legalknowledgescotland.com

The Bulletin will review the latest cases, provide updates on the latest consultations, legislation and official publications and include articles and news items.

A preview Bulletin will be published in late October.

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(1) Highland Council v. Scottish Ministers and Combined Power and Heat (Highlands) Limited and (2) Ross Estates Company v. Scottish Ministers and Combined Power and Heat (Highlands) Limited, 28 August 2014 – invalid condition attached to planning permission

Inner House case considering a planning appeal in respect of an application for the development of a waste to energy combined heat and power plant in Invergordon.

The Reporter determining the appeal had granted permission subject to a number of conditions, one of which permitted the power plant to accept a maximum of 100,000 tonnes per annum of waste originating from within the Highland Council area.  However, the condition also stated that a proportion of the waste could originate beyond the Highland Council area.

The Inner House found that the condition was invalid as the reference to the waste from outwith the Highland Council area meant that the permission granted went beyond that which had been applied for (the application had provided for incineration of Highland waste only) and thus beyond what had been considered at the planning inquiry. The developer’s Environmental Impact Assessment had also been drawn up on the understanding that only Highland waste was to be treated at the plant. All of this meant that the planning authority (Highland Council) and the Ross Estates (objectors) had been disadvantaged and their appeal on that basis was held to be well founded.

The court found that the invalid condition was not severable from the rest of the planning decision (on the basis that the planning permission may not have been granted at all if it had been appreciated that the condition was invalid) and so it was not possible to quash only that condition. However, whilst the planning inquiry required to be re-opened, it was unnecessary to rehear the entire case and the inquiry would only have to deal with the invalid condition. If the reporter considered that the condition was essential to the grant of permission he would have to hear evidence and submissions from all of the parties on its merits. If the reporter were to consider the condition, as drafted, not to be essential to the permission, then it was open to him to substitute an amended condition.

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.

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Private Client quarterly ‘Bulletin’ launching in January 2015

If you are interested in subscribing to a quarterly Private Client Bulletin please email me at: james@legalknowledgescotland.com

The Bulletin will review the latest cases, provide updates on the latest consultations, legislation and official publications and include articles and news items.

A preview Bulletin will be published in October.

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Change to OPG (Scot) procedures – Reviewing Accounts

“On 8th September 2014 we introduced a new policy for reviewing accounts.

Solicitors submitting accounts for review will no doubt be aware that our recent and current processing times are lengthy. While we accept that our level of service could be better, it is our experience that the standard of a significant proportion of submitted accounts are incomplete and are not supported with the necessary documentation. These cases require our reviewing officers to spend additional time and effort trying to problem solve, balancing accounts or writing to financial guardians looking for the necessary information.

Therefore, to address issues and help improve our processing times, a new policy will be applied to all accounts submitted after 8th September 2014.

Solicitors are advised that we will be returning all accounts:

  • which do not have a completed account form attached;
  • that are incomplete;
  • that are not in the Public Guardian’s prescribed form. Note that accounts of charge and discharge will no longer be acceptable.

We may also return any/all forms which do not balance (although this will be subject to discretion).

This measure has been taken to reduce the amount of time spent on incomplete accounts and to help improve the standard of accounting submitted. This policy will apply to accounts submitted by lay and professional financial guardians. Solicitors advising prospective financial guardians on their potential role are asked to bring the above information to their attention.”

More on this can be found here.

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@SIPP (Pension Trustees) Limited v. Insight Travel Services Limited, 4 September 2014 –extent of tenant’s repairing obligations on termination of lease

Background
Outer House case relating to the lease of commercial premises in Port Glasgow. @SIPP were the landlords and Insight, the tenants. @SIPP argued that, when the lease came to an end, the premises were not in good and substantial condition and a dispute arose as to the extent of the tenants repairing obligations under the lease.

There were two issues for the court to decide.

  • Whether the tenants’ obligation on termination of the lease was limited to putting the premises into the condition in which they were accepted by it at the commencement of the lease.
  • Whether the landlord was entitled to payment of a sum equal to the cost of putting the premises into the relevant state of repair, regardless of whether it actually intended to carry out any such work.

Decision
Putting and keeping
Lord Tyre began by rejecting @SIPP’s contention[1] that an obligation to keep the premises in good and substantial repair necessarily imports an obligation to put the premises in that condition regardless of its condition at the commencement of the lease. Then, taking a modern approach (which requires the court to consider what a reasonable person would have understood the parties to have meant by the language they used, rather than necessarily imposing interpretation which is grammatical result of the language used) to construction of the relevant clause, Lord Tyre found that the tenant’s obligation was referable to the condition in which they were accepted at the commencement of the lease (and not the condition in which they were deemed to have been accepted).

Remedy for breach of the repairing obligation
Where a tenant breaches its obligation to return the premises to the condition specified in the lease at the end of the term, the landlord is entitled to common law damages for the loss sustained. The landlord will normally argue that that loss amounts to the cost required to put the premises into the specified condition. However, that will not be the measure of the loss in all cases. In some cases the proper measure of loss may be the diminution in the capital value of the subjects[2] and in some cases, for example where the building is to be demolished (for reasons unconnected with the tenant’s breach), the landlord may be unable to show any loss at all.

In this case @SIPP argued that the relevant clause in the lease provided an express right to payment of a sum equivalent to the cost required to put the premises into good and substantial repair and that in exercising that contractual right it was not making a claim for damages for its loss.

However, Lord Tyre found that there was nothing in the relevant clause compelling the interpretation favoured by @SIPP. In the view of Lord Tyre, a lease would require very clear wording to allow a conclusion that the tenant had to pay a sum which bore no relation to that required to compensate the landlord for the loss actually sustained as a result of a breach of the repairing obligation.

As such, Insight were entitled to prove that @SIPP’s loss was equivalent something other than the cost of repair and the case was put out by order for discussion as to further procedure[3].

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.

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[1] This argument was based on the judgment of the Supreme Court in L Batley Pet Products Ltd v North Lanarkshire Council[2014] UKSC 27, however, Lord Tyre found that the reference to putting/keeping the property in good condition related to a commentary on the particular clause used in that case rather than making a general statement/change as to the law.

[2] In this case the estimated cost of the works required was over £1m whereas Insight argued that even if it had carried out all of the works in the schedule of dilapidations, the capital value of the premises would only have increased by £175k.

[3]The question of whether @SIPP would be entitled to recover the cost of the repairs if it could prove an intention to carry out the repairs regardless of the extent to which the cost of the repairs would exceed the increase in capital value of the subjects was left open.

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Private client quarterly bulletin launching in January 2015

If you are interested in subscribing to a quarterly ‘Private Client Bulletin’ please email me at: james@legalknowledgescotland.com

The Bulletin will review the latest cases, consultations, legislation, official publications and news items.

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ELB Securities Ltd v. Alan Love & Prestwick Hotels Ltd, 26 August 2014 – effect of dissolution of tenant on lease of premises

Sheriff court case relating to a lease of premises on Buchanan Street in Glasgow. ELB were the Landlords and Prestwick Hotels Ltd, the tenants.

Background
Prestwick were dissolved in June 2013 and then restored to the register of companies in October 2013. In terms of the Companies Act 2006[1] when a company is dissolved its property (including leasehold property) falls to the Crown as bona vacantia and the Crown must then decide whether or not to disclaim the property. In this case the Crown opted to disclaim the property which (in terms of s1020 of the 2006 Act) had the effect of terminating the lease.  ELB therefore sought to recover possession of the subjects from Prestwick.

The crux of the case was the meaning of s1032(1) of the Companies Act 2006 which provides:

 “The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.”

Arguments
Prestwick argued that the effect of this section was that when it had been restored to the register all matters reverted to the pre-dissolution status quo to the extent that bona vacantia no longer applied to the premises. As such the lease continued and there was no foundation for ELB’s action to recover possession of the premises. The sheriff agreed with those arguments and dismissed ELB’s action.

Decision
However, on appeal, the sheriff principal recalled the sheriff’s decision and found that ELB were entitled to recover possession of the premises. In coming to this conclusion the sheriff principal took account of the uncertainty which would result if the restoration of the company were also to restore the lease. In terms of s1030(4) of the 2006 Act a company can be restored to the register up to 6 years after it has been dissolved. Thus if, for example, a landlord recovered possession of the premises following a dissolution and let it to another tenant, following Prestwick’s reasoning, the new tenant would cease to have any rights to the premises, if (at any point during the 6 year period) the original tenant were restored to the register.

As such, the sheriff principal found that Parliament did not intend that 1032(1) should operate so as to re-write history in an unrestrained manner and that the specific provisions contained in s1020 relating to the termination of the lease should prevail over the general effect of s1032.

With regard to the effect on Prestwick the sheriff principal said the following:

“My decision might be seen as somewhat harsh in so far as [Prestwick] are concerned.  However, I would reject any such criticism.  Firstly, in general terms, the construction placed upon the provisions of the 2006 Act simply serves to highlight the importance to be attached to proper compliance with features such as the regular and timeous lodging of company accounts etc.  Dissolution of a company is rightly associated with very significant consequences not only for the company itself but also for other parties with whom they have contracted.”

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.

[1] Section 1012

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Petition of East Renfrewshire Council for an order under section 75(2) of the Local Government (Scotland) Act 1973, 19 August 2014 – whether court has discretion to allow building on common good land

Background
Outer House case in which East Renfrewshire Council sought an order under s75(2) of the Local Government (Scotland) Act 1973. The Council wanted to build a new school (on what it accepted was inalienable common good land) at Cowan Park in Barrhead.

S75(2) allows the Court to authorise a disposal of common good land on such conditions as it may decide to impose. However, the common law prohibition on appropriation of inalienable common good land remains intact meaning that the court has no discretion to allow a sale[1].

The Council’s plan was to finance the construction using a public/private partnership. The site would be leased by the Council to a company which would in turn grant a sublease to the Council. The Company would then grant a security to a private sector funder. The Council argued that this amounted to a disposal of the land meaning the court had discretion to allow it.

Decision
However, Lord Tyre found that the Council’s proposals could not be described as anything other than an appropriation. As such, the court had no power to authorise it.

In coming to this conclusion Lord Tyre took account of the following factors.

  1. The Council were, at the time of the decision, the proprietors of the site and would remain so during the construction phase, throughout the duration of the lease and sub-lease, and permanently after the termination of the lease and sub-lease.
  2. The Council were also, at the time of the decision, in possession of the site.  Because the lease and sub-lease had the same duration, they would remain in possession of it during the construction phase, throughout the duration of the lease and sub-lease, and permanently after the termination of the lease and sub-lease.  Their occupation would, be subject to the contractual rights of possession, including some exclusive possession during the construction phase, to be granted to the company but those rights were expressly declared not to constitute a lease.
  3. The site would cease to be used by the Council for the purposes of the common good with effect from the commencement of the construction phase.
  4. The company’s creditor would have the rights conferred upon it by the terms of whatever security was granted by the company in its favour.  It was reasonable to assume that either:
    • the creditor, at the time when the security came to be taken, would be aware that a sub-lease in favour of Council had been granted; or
    • if the sub-lease had not yet been granted, the Council would insist upon the creditor consenting to it.

As such, the creditor’s remedies would not include a right to enter into possession[2].

Lord Tyre therefore found it difficult to envisage circumstances in which the Council could ever be deprived of possession of the site.

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.

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[1] See Portobello Park Action Group Association v City of Edinburgh Council, 2013 SC 184

[2] As the “offside goals rule” would apply with the effect that the Banks prior knowledge of the lease would put it in bad faith and prevent it enforcing the security against the Council  (See, for example, Trade Development Bank v Crittall Windows Ltd , 1983 SLT 510.)

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