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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Scottish Law Commission calls for major reform of the law of trusts

The Scottish Law Commission has published a major report recommending substantial reform of the law of trusts in Scotland.

This is from the Scottish Law Commission.

“We publish today our Report on Trust Law.  Despite the prominence of trusts in Scots law, the institution is badly served by existing legislation.  The main statute, the Trusts (Scotland) Act 1921, is almost a century old: its structure and language have become antiquated, and the uses to which trusts are put have evolved over that time.  The Act has been heavily amended over the years, leading to a lack of clarity and practical difficulties for trustees and beneficiaries.  The recommendations in our Report will affect all those who use trusts and our draft Trusts (Scotland) Bill is aimed at providing a modern system of trust law, allowing Scotland to compete more effectively in the global trusts world.”

More on this, including the full report can be found here.

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OPG Scotland update on Power of Attorney waiting times

“25 August 2014

Update on Power of Attorney Submissions

There is a waiting period before your power of attorney (PoA) can be processed and returned to you.

  • EPOAR submissions: 24 day waiting period, we are working on PoAs received on and around 18th July 2014
  • Manual submissions: 27 week waiting period, we are working on PoAs received on and around 21st February 2014

If there is a genuine urgency, we will expedite the registration of a PoA ‘on cause shown’. We ask that people respect this service and only use it in cases of true urgency to avoid defeating its purpose.”

More on this issue can be found here.

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“Delaware becomes first US state to give executors broad digital assets access”

Delaware has become the first US state to grant deceased residents’ executors the right to take over their digital assets such as email and social media accounts.   

This is from an article in ars technica.

“While some states, including Idaho and Nevada, have some existing provisions pertaining to limited digital assets for heirs, they are not as broad as the new Delaware law. For now, the state’s version of UFADAA only applies to residents of Delaware, one of the smallest states by population and land area. If other states don’t follow suit soon, people creating family trusts could conceivably use this Delaware law to their advantage, even without residing in Delaware. However, even though many tech companies (including Twitter, Facebook, and Google) are incorporated there, they will not be affected by the new law.”

The whole article can be found here.

A link to an earlier blog on digital assets can also be found here.

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Scottish Government consultation on technical issues relating to succession

The consultation seeks views on jurisdiction and choice of law; wills and survivorship; rights of succession in limited circumstances; bonds of caution and the timescale for a surviving cohabitant to make a claim on a deceased cohabitant’s intestate estate. 

The consultation is open until 7 November.

The consultation can be found here.

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CLP Holding Company Limited v. Rajinder Singh and Parvinder Kaur, 31 July 2014 – whether VAT payable on the purchase price –contract incorporating Standard Conditions of Sale

Case from the Court of Appeal for England and Wales concerning a sale of freehold property in the West Midlands. The central issue for the court was whether VAT was payable on the purchase price.

The Purchase Price was defined in the contract as being £130k (no mention was made of VAT in the definition). However, the contract also incorporated the Standard Conditions of Sale[1] (4th Edition) except where they were in conflict with the express terms of the contract.

Clause 1.4 of the Standard Conditions provides:

“1.4.1   An obligation to pay money includes an obligation to pay any value added tax chargeable in respect of that payment.

1.4.2     All sums made payable by the contract are exclusive of value added tax.”

Contracts were exchanged and the transaction completed in August 2006. CLP, the seller, opted to tax and became liable to pay VAT on the transaction. HMRC raised a notice of assessment in late 2007. In March 2008 CLP’s solicitors wrote to the purchasers’ solicitors indicating that the purchasers were liable to pay the VAT due (£22,750) to CLP. The purchasers failed to pay and CLP raised proceedings against them.

The court noted that the only reasonable interpretation of clause 1.4 was that the purchasers would have liability for any VAT. Also, previous case law provided powerful support for CLP’s argument that the purchase price of £130k was exclusive of VAT and that the purchasers were liable for any VAT due on the transaction.

However, the analysis did not end with the ascertainment of the meaning of clause 1.4; the contract had to be interpreted as a whole in the light of all the circumstances of the parties’ relationship and the relevant facts surrounding the transaction known to them. In that regard the following points were relevant.

It was never suggested that CLP ever communicated to the purchasers that it had exercised the option to tax.

  1. The purchasers were individuals and, whilst the property was commercial, there had never been any suggestion that they were aware or had any reason to suppose that the transaction might be subject to a VAT charge.
  2. The purchase price for the property had been agreed in principle a considerable time before completion and had been paid over by the purchasers to CLP by, at the latest, 2005. There was never any suggestion that VAT might be payable, still less that the purchasers would be liable for it. To the contrary, a letter from CLP’s solicitors in March 2006 contained an express acknowledgement that CLP had received “all of the sale monies of £130,000 on this matter, subject to contract”.
  3. The standard requisitions had asked for details of the exact amount payable on completion and had elicited the response: “Balance of purchase monies”. No hint was given that VAT was or might be payable.
  4. The contract provided that the “Purchase price” was £130k. It contained no indication that this price was exclusive of VAT. Indeed it was clear that this and no other sum was due upon completion because the contract included a table in which details of any “Other payments/ allowances” could have been (but were not) included. Moreover, and importantly, the contract provided that where there was any conflict between the express terms of the contract and the Standard Conditions, the express terms of the contract would prevail.

Taking all these matters into consideration the Court took the view that a reasonable person would have understood the parties to have intended that nothing was or could become payable by the purchasers over and above the specified purchase price of £130k.

Notably, in the particular circumstances of the case, the court found that it was not possible to interpret “Purchase price” as the price exclusive of VAT. As such, it considered that a reasonable person would consider that the express terms of the contract were not reconcilable with clause 1.4 of the Standard Conditions. In those circumstances, the court held that the express terms of the contract had to prevail.

The full judgement is available from BAILII here.

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


[1] Standard terms for the sale of property in England and Wales.

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OPG (Scotland) asks for directions from Glasgow Sheriff Court on Power of Attorney validity issue

This is from OPG Scotland’s website news section.

“31 July 2014

Update on Power of Attorney (PoA) Validity Issue

The Public Guardian has been made aware that the Clydesdale Bank has decided not to pursue its appeal against the decision of the Sheriff at Glasgow. The Public Guardian is conscious that the decision raised a number of issues, including that of the validity of the power of attorney in question. The Public Guardian is in the course of making an application to Glasgow Sheriff Court under s.3 of the Adults with Incapacity (Scotland) Act 2000 in order to obtain directions from the Sheriff on a number of those issues. The procedure to be followed by the OPG should give an opportunity for PoA validity issues to be fully explored. The Public Guardian does not expect to comment further while that application is pending.

Sheriff Baird’s Opinion can be accessed from this link.”

My earlier blog on this issue can be found here.

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The ‘NO’ parties ‘pledge’ on more powers for the Scottish Parliament

One of the major weaknesses of the ‘NO’ campaign is its failure to come up with a credible plan for devolving substantial new powers to the Scottish Parliament.  The talk is of “guaranteed new powers” but not one power is ever named nor when it might be devolved.

In response to the criticism they have received on this issue the ‘NO’ parties have this week come up with a ‘”pledge”.

There are a number of phrases in the “pledge” which should worry those who are considering voting ‘NO’ but who want substantial new powers for the Scottish Parliament.

For a start the word “substantial” is never used.  That in itself is telling when you consider how few tax and welfare powers the ‘NO’ parties are even considering for devolving in their latest reports.  Take tax powers.  There are approximately 25 taxes, charges and duties in the UK. The ”NO’ parties are at best proposing that the Scottish Parliament should have more responsibility, but not complete control, of income tax, possible control of another 1 or 2 minor taxes and partial responsibility for 1 or 2 others and a few welfare powers.

To put this into context.  Even after all of the provisions of the Scotland Act 2012 are implemented the Scottish Parliament will only have control of 4 minor taxes, partial responsibility of income tax and almost no welfare powers.

And remember these are just proposals.

Let’s not forget what happened when the ‘NO’ parties last made a huge fuss of looking at this matter.  The ‘pledge’ does actually mention the Calman Commission.  What is does not mention is that not all of Calman’s recommendations were implemented in the Scotland Act 2012.   Only three of the six tax recommendations made it to the Scotland Act 2012.

What is also often forgotten is how few welfare powers Calman recommended for devolving and that it also argued for some powers to be re-reserved.  The UK Government also refused requests by the Scottish Government to add further powers to the Scotland Act 2012. The requests related to corporation tax, excise duties and the Crown Estate.

Then there is the phrase: “the pooling and sharing of resources”.  This and other similar phrases such as “coordinated across the whole of the UK” are used by those arguing against the devolving of substantial tax and welfare powers to the Scottish Parliament. Expect to see comments such as these from a UK Government spokesman if there is a ‘NO’ vote.    

“There are certain levels of autonomy that are inconsistent with the UK. A unified tax and benefit system is at the heart of a united country. If you start dismantling the tax and benefit system then that is inconsistent with a single country.”

Lastly the phrase “as swiftly as possible”.  You can imagine the priority Westminster will put to this issue in the event of a ‘NO’ vote.

More powers, possibly, substantial powers, not a chance.

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Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 6 August 2014 – whether tenant personally barred from enforcing right in lease

Background
This is an Outer House case concerning a lease of premises at the Gyle Shopping Centre in Edinburgh under which Gyle was the landlord and Marks & Spencer, the tenant.

Gyle entered an agreement with Primark for the erection of a new store on land which included part of a car park. However, Marks & Spencer’s premises were let together with a one-third pro indiviso share of shared areas which included the car park. In an earlier decision Lord Tyre had found that (1) the building of the Primark store would breach the lease with Marks & Spencer and (2) a meeting of the shopping centre management committee approving construction of the new building was not sufficient to vary the terms of the lease.

Arguments
Here Gyle argued that, although the lease had not been varied, Marks & Spencer were personally barred from objecting to the construction of the building as Marks & Spencer’s representatives had agreed to the building at the shopping centre management committee and that Gyle had relied on that agreement with their knowledge.

In particular Gyle argued that M&S was personally barred:

  1. in terms of s1(3) of the Requirements of Writing (Scotland) Act 1995;
  2. in terms of the (pre-1995 Act) common law rule of rei interventus; or
  3. by waiving its right under the lease.

Decision
Lord Tyre rejected those arguments.

The 1995 Act
Lord Tyre found (in accordance with the decision of Lord Drummond Young in Advice Centre for Mortgages v McNicoll[1]) that s1(3) does not apply to leases; noting that s1(3) applies only to separate contracts relating to the land (i.e. transactions giving rise to merely personal rights) and not to dispositions and other deeds which actually effect the creation or transfer of an interest in land (i.e. transactions giving rise to a real right).

Rei interventus
With regard to the common law rule of rei interventus, Lord Tyre found that the (pre-1995 Act) common law rules (relating to both rei interventus and homologation) had been replaced in their entirety by the statutory rules contained in the 1995 Act and did not continue in parallel.

Waiver
On the subject of a potential waiver of Marks & Spencer’s rights in the lease, Lord Tyre said the following:

 “In my opinion, the evidence falls well short of establishing that there has been voluntary, informed and unequivocal waiver by [Marks & Spencer] of its right to prevent the construction and leasing of the building.  It seems to me that [Gyle’s] analysis perpetuates its original error of treating [Marks & Spencer’s] representatives who attended and approved the minutes of Management Committee meetings as equivalent to [Marks & Spencer] itself.  It wrongly characterises the conduct of those individuals as the conduct of [Marks & Spencer].  As I have already held, those individuals were not empowered in terms of [Marks & Spencer’s] lease to take decisions affecting [Marks & Spencer’s] real rights in the Shared Areas.  There was no evidence to indicate that they were even aware of what those rights were, although it was clear that the question of real rights was given no consideration by those representing [Gyle].  Nor was there any evidence of actings on the part of any person within [Marks & Spencer’s] organisation who was truly responsible for taking decisions regarding the variation of real rights under the lease which might induce [Gyle] to believe that [Marks & Spencer] regarded such decision-making as falling within the competence of the Management Committee.”

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] 2006 SLT 591

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Kerr v Mangan [2014] ScotCS CSIH 69 – surviving cohabitant cannot make a claim on land owned outside Scotland

A deceased Scots resident’s land outside Scotland cannot be taken into account when evaluating a surviving partner’s claim on the estate under s29 of the Family Law (Scotland) Act 2006.

This is from the judgement:

Background:

“Anthony Mangan cohabited with Margaret Kerr for twenty–two years before he died on 10 August 2007 but did not marry her.  He did not make a will.  However, the law had changed before he died and Ms Kerr was able to apply to the court for an order for money to be paid to her out of the net intestate estate of the deceased, even although she was not a surviving spouse.  The sheriff awarded her the sum of £5,502 but the sheriff principal, on appeal, decided that a house and land in Ireland which was owned by the deceased was not part of the net intestate estate. The result was that the award was reduced to nil. Ms Kerr now appeals to this court.”[1]

The issue:

“Does “net intestate estate”, in terms of section 29 of the Family Law (Scotland) Act 2006 (“the 2006 Act”), include heritable property outside this jurisdiction?  If it does not, the sheriff principal was correct to reduce the award to nil.  If, on the other hand, it does include such property, then the appellant’s claim will have to be remitted to the sheriff to consider, of new, what award, if any, to make.  I am persuaded, for the reasons explained below, that the deceased’s net intestate estate did not include his Irish property and that the result is, therefore, that no money is payable to the appellant.” [2]

Reasons for decision:

“Section 29 of the 2006 is about rights arising on a “Scottish” death.  In particular, it is about a right that arises where a deceased domiciled in Scotland has died intestate survived by a cohabitant; it gives a right to that cohabitant to ask the court to direct that some part of the estate be distributed to him or her. “Intestate” has to be construed in accordance with the Scots law of succession.  “Legal rights” has to be construed in accordance with the Scots law of succession.  “Prior rights” has to be construed in accordance with the Scots law of succession.  The definition of “net intestate estate” is an updated version of the definition of that phrase as it is used in the Scots law of succession.  The definition of “net intestate estate” accords with the approach that would require to be adopted by an executor–dative, under the Scots law of succession, in determining the extent of the free estate available for distribution to the heirs on intestacy.  The court’s power is limited by reference to an assessment of, amongst other things, what would have been the value of the rights of a surviving spouse under the Scots law of intestate succession.  The order of the court must be directed at the executor-dative appointed under the Scots law of succession, whose powers, duties and liabilities are as provided for by the Scots law of succession.” [35]

“It is, of course, true to say that section 29 does not, of itself, entitle the cohabitant to any part of the estate and it does not make a cohabitant a member of the class of persons upon whom intestate estate automatically devolves under Scots law.  Rather, it gives power to the court to confer benefit on the cohabitant where no such right arose under the Scots law of succession before the 2006 Act.  However, its provisions are clearly designed to enable a member of the family of the deceased who could not previously have benefitted under the Scots of succession to succeed to some part of the estate.  That omission was seen as a flaw. Social circumstances had undergone a transformation since 1964 and statistics showed that many couples, including those who lived in family together for many years, were, for whatever reason, not marrying.  Had they been married, the law of succession would have applied so as to confer a benefit on the surviving spouse in the event of an intestate death.  The same would have applied had they entered a civil partnership. There was a gap that required to be filled in some way; the cohabitant ought to be able to inherit. That was the easy part. Precisely how to fill that gap raised and raises difficult issues of policy, some of which are referred to above. One of the things that was and is, however, clear is that what was identified was a hole in the law of succession. The conclusion that section 29 reformed the law of succession and is, accordingly, a part of the Scots law of succession is inescapable. It is also, I would add, inherently unlikely that Parliament intended to establish a special regime that was independent of other legal categories, for the reasons which Lord Drummond Young explains at paragraphs 45 and 46 below.” [36]

The full judgement can be found here.

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