Isabelle Addison Mann or Povey v. Dr Gordon Johnstone Robertson Povey as Executor Nominate of the Late William Graham Povey, 9 April 2014 – whether survivorship clause in disposition has automatic effect

Outer House case concerning the effect of a survivorship clause in a disposition.

Mrs Povey and her husband bought a plot of land and built a house on it between 2002 and 2003 (the purchase price and construction costs being contributed in equal portions). The disposition contained special destinations of survivorship by which Mr Povey’s share would pass to Mrs Povey in the event of him predeceasing her and vice versa. In 2008 Mrs Povey signed a power of attorney in favour of her husband (which she understood was to be used only in the event she became unwell). In April 2009 Mr Povey executed a disposition (both on behalf of himself and on behalf of his wife) which purported to revoke the survivorship destinations. Mr Povey died on 23 July 2009. The disposition revoking the destinations was submitted for registration by solicitors purporting to act for Mr and Mrs Povey on 24 July and registered in the Land Register on 27 July 2009 (the solicitors completing a question on the form 2 application so as to indicate that no party to the transaction was subject to any incapacity or disability).

Mrs Povey sought declarator that title to Mr Povey’s share of the property passed to her on his death by operation of the special destination and that she was entitled to be entered as sole proprietor of the subjects in the Land Register. Her stepson (Mr Povey’s son) who was executor of Mr Povey’s estate argued that, in terms of registration of title, there was no automatic completion of title under the special destination and that Mrs Povey only had a personal right which would not be made real until the Keeper registered the change in title. He argued that the 2009 disposition revoking the destination had been registered first.

Lord Doherty agreed with Mrs Povey’s arguments finding that there was no authority to support the stepson’s contention that there was no automatic completion of title under the special destination.

“It is erroneous to suggest that on an institute’s death a substitute acquires only a personal right to the institute’s property, and that his right does not become real until the Keeper alters the entry in the title sheet. That analysis ignores the fact that title to the subjects, including the special destination by the institute to the substitute, is registered in the Land Register before the institute’s death … On the institute’s death the substitute’s contingent right becomes a real right, by virtue of the special destination. His completion of title is automatic. It is not dependent upon the Keeper altering the title sheet to reflect the change.”

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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Janette McVicar v. GED and The Keeper of The Registers of Scotland and Alexander Currie and Nationwide Building Society – whether building society could recover from a victim of fraud unjustly enriched at building society’s expense

Outer House case relating to an alleged fraud. Ms McVicar was the owner of a house in Fernieside in Edinburgh which she had purchased with the aid of a loan from GMAC-RFC which held a standard security over the property. Mr Currie was a former cohabitant of Ms McVicar who she claimed had embarked on a fraudulent scheme under which the house was sold to GED for £110k with the aid of a loan of £80.5k from Nationwide. Ms McVicar’s signature was forged on a disposition of the house to GED and some of the funds (circa £45.5k) from Nationwide were used to pay off the loan in favour of GMAC-RFC. The disposition in favour GED and a standard security over the house in favour of Nationwide were recorded in the Land Register.

Ms McVicar sought: (1) reduction of the disposition in favour of GED and declarator that the entry in the Land Register recording the transfer of the title to GED was inaccurate (2) declarator that the entry in the Land Register recording the security granted by GED in favour of Nationwide was inaccurate and of no effect between Ms McVicar and Nationwide and (3) an order requiring the Keeper to rectify the register so as to delete entries relating to the title transfer and standard security.

Nationwide defended the action. Whilst they did not oppose the orders relating to the disposition and security and rectification of the register, they counterclaimed seeking payment (from Ms McVicar) of the £45.5k which had been used to pay off Ms McVicar’s loan to GMAC-RFC, arguing that Ms McVicar had been unjustifiably enriched by the payment.

Ms McVicar sought dismissal of the counterclaim. She argued amongst other things that Nationwide had a contractual right to recover from GED (Nationwide took the view that there was no reasonable prospect of recovering from GED) and that, if there had been an unjust enrichment of Ms McVicar at Nationwide’s expense, that enrichment was indirect and there was a general rule against recovery in cases of indirect enrichment. On the other hand Nationwide argued that, whilst there was a general rule against recovery in cases of indirect enrichment, there was no absolute bar. There was, they argued, a recognised exception to the general rule which allowed recovery where money/property was obtained by fraud and used to discharge the obligations of another.

Lord Doherty found that Nationwide’s arguments were not bound to fail and allowed a proof before answer.

 The full judgement is available here.

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

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OPG Scotland “Account Reviews” and “Manual Submissions”updates

“9 April 2014

Turnaround Time for Account Reviews

There is currently a 16 – 20 week waiting period for accounts to be reviewed. We apologise for any inconvenience the delay may cause financial guardians.

The Account Review Team are currently working with accounts received on and around 10th December 2013. Financial guardians who have queries regarding their accounts or the waiting time may contact opgreviewteam@scotcourts.gov.uk.

8 April 2014

Power of Attorney (PoA) Update – Manual Submissions

There is currently an 11 week waiting period before your PoA can be processed and returned to you. This week we will be working on PoAs received on and around 23rd January 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 can be found here.

 

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Mehjoo v Harben Barker (a firm) & Anor [2014] EWCA Civ 358 – failure to advise a client about a tax planning opportunity

The England & Wales Court of Appeal has overturned a High Court ruling in in which an accountancy firm’s client was awarded damages against the firm because it had failed to advise him about a tax planning opportunity. The earlier decision caused some controversy and also generated quite a lot of publicity as it seemed to mean that practitioners had a contractual duty to help clients avoid tax by any legal means.

The case concerned an Iranian businessman, Hossein Mehjoo, who retained his Iranian domicile of origin for UK tax purposes. He had previously successfully sued Harben Barker for £1.4m after the firm failed to recommend he use an offshore tax avoidance scheme – known as the Bearer Warrant Scheme (BWS) – in order to reduce his CGT bill.

However, the Court of Appeal ruled that such a decision was not “sustainable” since Harben Barker “were not and had never held themselves out to be specialist tax planners”.

This is from the ruling:

“The reasonably competent accountant setting out to advise Mr Mehjoo of the tax consequences of the sale would not, in my view, have been under any obligation to raise for discussion the claimant’s domicile unless it was relevant to the CGT liability on the disposal. The accountant would have known that it gave Mr Mehjoo no tax advantages in relation to the sale of the BFL shares unless the situs of the shares could be changed. As this was something which HB neither knew or could have been expected to know was achievable, there was no reason to mention the matter still less a liability in negligence for not having done so. Although not in any sense conclusive, it is not insignificant that none of the other firms of specialist tax advisers whom Mr Mehjoo subsequently consulted suggested he should consult a non-dom specialist or raised the possibility of using a scheme like the BWS. None of them has been sued in negligence.”

One final point.  It is not clear if this ruling completely removes the presumption of an accountant’s contractual duty to help a client avoid tax.  The judgement it seems is based more on the fact that Harben Barker could not have been expected to know that their client, as a non-dom, could have switched the situs of the shares without triggering a CGT charge.

The full case report can be found here.

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Gordon Collins v. Carol Anne Sweeney, 13 March 2014 – Common property – absolute right to insist on division and sale

Sheriff Court case concerning the division and sale of a property on Shiskine Drive, Maryhill in Glasgow. Mr Collins and Ms Sweeney each had a one half pro-indiviso share in the property (which was incapable of division). Mr Collins sought a sale of the property on the open market and division of the proceeds. Whereas Ms Sweeney sought an order compelling the sale of Mr Collins share of the property to her arguing that there were equitable considerations which justified the granting of such an order. The principle issue was whether the court could grant decree for the sale to a co-proprietor, against the will of the other proprietor, rather than on the open market.

The sheriff concluded that, even if proved, the equitable considerations did not constitute a defence to Mr Collins’ absolute right to insist on a sale on the open market. Although there was authority for the court to make an order for the sale of a pro-indiviso share to a co-proprietor, this only applied where both parties consented. In the absence of consent, where the property cannot be divided, a co-proprietor has an absolute right to insist upon sale on the open market and cannot be obliged to sell to a co-proprietor against his will.

On appeal Ms Sweeney argued that the sheriff had erred contending, by reference to prior authority[1], that the court was bound to follow a two stage process when giving consideration to an action of division and sale. The first consideration involved recognition that the right to raise and pursue such an action is absolute. However, she also argued that there was a second consideration which involved the full equitable jurisdiction of the court in working out the remedy.

The sheriff principal rejected that argument finding that the reference to the equitable jurisdiction of the court in the prior cases referred to the courts discretion when considering (on an action for division and sale) whether the property can be divided between the parties or whether it cannot be divided and has to be sold (with the proceeds being divided between the parties). However, the court has no discretion to refuse an action for division and sale. Thus, in this case, Mr Collins could insist on upon a division and sale of the property and, as there was no question of the property being divided, the court’s discretion did not arise and a sale of the property had to take place (after which the proceeds would be divided).

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.


[1] Crathes Fishings Ltd v Bailey’s Executors 1991 SLT 747, Anderson v Anderson (1857) 19 D 700 and Brock v Hamilton (reported as a note in Anderson).

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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, 25 March 2014 – whether right to pro indiviso share in shopping centre car park under lease conferred a real right

Outer House case concerning a lease of premises at the Gyle Shopping Centre in Edinburgh under which the 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. Gyle sought declarator from the court to the effect that (1) that the building of the Primark store did not breach the lease and (2) Marks and Spencer had consented to the building of the new store. (Gyle also made a further argument based on personal bar, which would only require to be considered if the Court found in favour of Marks & Spencer on the first two arguments).

A breach of the lease?
The essence of Gyle’s argument was that the right to the car park granted to Marks & Spencer under the lease was not a real right.  In particular they argued that a self-standing grant of tenancy to a pro indiviso share in land could not meet the requirements of a lease conferring a real right. As a consequence they contended that the right was only enforceable against the original landlord (Gyle’s predecessor in title) and not Gyle. Lord Tyre rejected that argument finding that the right in the car park was granted as a pertinent of the lease which conferred a real right enforceable against the landlord’s successors and, as such, the right in the car park was also enforceable against the landlord’s successors. Consequently, building the Primark store in the car park would constitute a breach of Marks and Spencer’s lease.

Consent to the new store?
In the absence of a variation recorded in the appropriate register, the lease could only be varied in accordance with its terms. Gyle argued that Marks and Spencer had approved the building of the store at a meeting of the shopping centre management committee and that the approval had been recorded in the minutes and signed by all of the parties (including Marks and Spencer). However Lord Tyre found that there was nothing in the lease conferring a power to vary the lease upon the management committee. Although he did not require to decide the issue, Lord Tyre also found that the terms of the lease required that a change to the car parking area would require probative (i.e. signed and witnessed) writing.

Having regard to the outstanding issue of personal bar, Lord Tyre put the case out By Order to discuss further procedure.

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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HMRC v The Executors of Lord Howard of Henderskelfe [2014] EWCA Civ 278 – painting is a wasting asset for CGT purposes

The England and Wales Court of Appeal has held that an “Old Master” painting is a “wasting asset” for Capital Gains Tax (CGT) purposes.

The wasting asset in this case was a painting by Sir Joshua Reynolds depicting Omai, a Tahitian brought to England by Captain Cook. The painting had been owned by the Howard family and kept at Castle Howard since 1796, but on 29 November 2001 the executors of the late Lord Howard of Henderskelfe sold it for £9.4 million.

This triggered a large capital gain. The executors claimed an exemption from CGT under s45 of the Taxation of Chargeable Gains Act 1992 (all section references are to the TCGA Act) on the basis that the painting was “plant and machinery’ and consequently a wasting asset within the meaning of s44(1)(c).

HMRC as you would expect considered the sale of the asset to be subject to a capital gains tax charge.

The First-tier Tribunal agreed with HMRC but the executors won their appeal in the Upper Tribunal.

The general rule is that a wasting asset is one with a predictable life expectancy not exceeding 50 years.  However, all forms of “plant and machinery” are wasting assets regardless of the particular asset’s life expectancy. The case therefore hinged on the definition of ‘plant and machinery’.  The classic definition of “plant and machinery” is found in Yarmouth v France (1887) 19 QBD 647: “chattels which are ‘apparatus used by a business-man for carrying on his business’ and ‘which he keeps for permanent employment in his business’”.

The main factor in The Court of Appeal coming to this possibly surprising decision is that when it analysed the TCGA 1992 it could not find any reason to justify excluding the Omai painting from being “plant and machinery”.

The Court of Appeal acknowledged that its judgement may be defying common sense to classify the painting as a wasting asset but advised HMRC that with tax definitions, they must take the rough with the smooth.  I suspect that we may hear that comment being repeated in future cases.

“On the facts of this case, section 44 may have proved inconvenient to HMRC. They must, however, take the rough with the smooth; and this case may be an example of the rough.”

The full judgement, which also outlines in full the relevant parts of the 1992 Act, can be found here.

 

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Development common parts: PMP, Lundin and the Registers of Scotland guidance.

The problem
It has long been common practice for developers to dispose of the common parts to developments by selling individual plots with a right of common property in whatever is left at the completion of the development. (This has the advantage that the developer does not have to decide on the ultimate layout of the development before it starts and has the flexibility to change the layout as building proceeds).

However, in terms of both property law [1] and registration law [2], it is incompetent to convey an area that is indeterminate. Although there have long been doubts about the competence of the practice [3], the practical benefits to developers have meant that it was nevertheless common practice and the common areas of many developments have been described in this way.

PMP
In 2008 the case of PMP Plus Ltd v The Keeper of the Registers of Scotland and others [4] confirmed that the practice is not competent. In that case a developer sold plots in a development with a share in the common areas (which were described as being those areas not exclusively alienated to the home owners) but decided prior to the completion of the development to sell a part of the development (which would otherwise have formed part of the common areas) to PMP for the building of a health centre. The Keeper excluded indemnity in respect of PMP’s title  on the grounds that the home owners may have acquired title to the common parts as a result of the conveyances in their favour. However, the Lands Tribunal for Scotland decided that the home owners did not have an effective title to the common areas due to the absence of a sufficient description.

Update 27
In response to PMP, the Keeper issued update 27 which contained guidance on how the Keeper would deal with applications relating to such developments post PMP. It made it clear that, for developments where the first split off deed/plot sale occurred on or after 3 August 2009 (described as “new developments”) there was a change in policy and, where identification of the common areas depended on completion of the development (or other future uncertain event), the Keeper would no longer show the conveyance of the common areas in the title sheet.

However, for developments where plots had been sold before 3 August 2009 (described as “existing developments”), the Keeper would continue to reflect the terms of the conveyancing showing the conveyance of common areas in the title sheet even where identification of the common areas was dependent on completion of the development (or other future uncertain event). This approach was intended to ensure consistency and equality within developments. It was also intended to take account of the possibility that rights in the common areas may be created when the last plot is sold[5].

Lundin
In June 2013, the Lands Tribunal for Scotland issued the decision in Lundin Homes v Keeper of Registers of Scotland[6]. Lundin went a step further than PMP as it made it clear that the identity of the common areas does not become fixed merely because the last plot in the development has been sold and, where the common parts have been insufficiently described in the original purchases from developers, subsequent sales of the properties will not cure the defect[7].

AI27
Following Lundin, rather than issue a replacement for Update 27, the Keeper issued an “additional information” paper (referred to here as “AI27”) to be read alongside it. This approach can be slightly confusing as some of the guidance in AI27 conflicts with Update 27. The following is an attempt at consolidating the provisions of Update 27 and AI27.

New developments (First registrations)
AI27 makes no change to the guidance issued in Update 27 in respect of “new developments”. In such cases, the Keeper will continue to take steps to remove wording from the title sheets which identifies the common areas by reference a future uncertain event.

Existing developments

First Registrations and transfers of part
As noted above Update 27 takes account of the possibility that rights in the common areas may be created when the last plot is sold.  AI27 acknowledges that, following the decision in Lundin, the occurrence of a future event/sale of the final plot by itself will not create rights in the common areas.

However, AI27 also makes the point that, if a deed is drafted so as to properly identify the common areas, it may[8] (along with the positive effect of registration/“the Midas touch”) have the effect of creating rights in the common areas. The Keeper will therefore consider applications for a first registration or transfer of part within an existing development where there is an attempt to identify the common areas and recommends that solicitors considering this approach should contact pre-registration enquiries.

AI27 makes it clear that, where there is no attempt to identify the common areas, the Keeper will continue to reflect the terms of the conveyancing. This is the same approach as Update 27. However AI27 goes on to suggest that, where a solicitor considers that rights in common have not been validly created in a split off disposition, he or she may wish to reflect that in the deed submitted for registration.

Dealing of a whole
The hierarchy of the headings in Update 27 is slightly confusing and may at first sight seem to indicate that the guidance relating to applications for the registration of the dealing of a whole falls under “new developments”. However, as noted above, the Keeper will remove wording transferring rights in common areas from the title sheets to new developments where it refers to a future uncertain event[9]. Such wording will not therefore arise on a “dealing” occurring in a “new development”. On the dealing of a whole within “existing developments”, Update 27 made it clear that the Keeper’s policy (as with first registrations) will be to make no changes to wording relating to common areas (and not to exclude indemnity). That does not change. However, Update 27 did indicate that completion of the development may create rights in common areas. Whereas, AI27 makes it clear that it will not.

In addition AI27 acknowledges that it may be possible in some cases to fix the problem with some remedial conveyancing. In this regard we are advised that the Keeper will consider applications which attempt to identify the common areas[10].

Vague verbal descriptions (no reference to future uncertain events)
PMP made reference to deeds containing verbal descriptions of common areas which do not specifically identify the common areas by reference to the OS map. Update 27 advises that the Keeper’s policy is, and will continue to be, to reflect the terms of the conveyancing without requiring a full bounding description of or plan delineating such common areas[11]. However, Update 27 also notes comments in PMP to the effect a description without reference to extraneous material might well be thought to be a central feature of a map based registration system and suggests that applicants consider those comments. This advice proved to be well founded as Lundin makes it clear that reference to extraneous material (with the possible exception of other publicly accessible registered titles) for description is incompetent. Consequently, where such wording appears on a registered title it will be superfluous and ineffectual. (However, see comments on prescription below.)

Update 27 also suggests than an applicants may want to request (with the support of a certified plan or deed plan) to have such areas mapped on to the title plan for its interest (albeit indemnity is likely to be excluded unless the other owners and developer are also parties to the plan). No further guidance on this issue was given in AI27.

Sale of potential common areas by developer

Registered titles
This policy on the sale of potential common parts by a developer perhaps represents the biggest change in policy. Update 27 provides that, where a developer was attempting to convey possible common areas, the Keeper would require evidence that the developer’s title to the land being sold was not void or voidable.  That is changed in AI27. In cases where the developer’s title is registered in the Land Register the Keeper will no longer require such evidence and will register titles without exclusion of indemnity.

Sasine titles
However, where the developer’s title and subsequent plots sales have been recorded in Sasines the situation is treated differently as prescription may play a role in creating rights to the common areas[12]. Where the relevant split off deed has been recorded in Sasines, and the title is habile[13] prescription may have cured defects in the title thus giving the owners of individual units in the development title to the common areas. Thus, where a developer is attempting to sell parts of a development in which the dispositions conveying individual plots have been recorded in the Register of Sasines, the developer will require to provide evidence that there is no conflicting possession by persons other than the developer.

Superfluous wording
The Keeper’s policy with regard to “existing developments”[14] will result in superfluous and ineffective wording in registered titles and we are again told that no steps will be taken to remove such wording at present due to the effect of prescription. In addition to its role with regard to Sasine titles, AI27 also refers to the impact of prescription on Land Register titles.

Land Registration (Scotland) Act 2012 and prescription
Whilst prescription does not currently play a part in Land Register titles[15], the Land Registration (Scotland) Act 2012[16], changes that and will allow prescription to run on deeds presented for registration[17]. AI27 advises that the Keeper is currently considering the implications of the 2012 Act. She will not  therefore take steps to rectify the Register (unless she receives an application for rectification) until that consideration is complete.

It may be that the operation of prescription under the 2012 Act helps to shore up titles in need of fortification. However, we should bear in mind that it will also bring about an end to the “Midas touch” (which, where common areas are correctly identified, can presently cure defective descriptions).

Prescription as a cure
Whether under Land Register titles or Sasine titles, it will seldom be that prescription provides a complete fix for the problem and we should also bear in mind some of the limitations of possession to demonstrate title. Whilst a proprietor is likely to be able to show prescriptive possession of the common areas it uses regularly (e.g. a communal bin store), there will be other areas for which it may be hard to show (and harder yet to prove) possession (e.g. communal flower beds). And others that may prove more useful to some people than others (e.g. communal parking bays may not be of too much to a plot owner who doesn’t own a car). Consequently relying on prescription is therefore likely to lead to patchy, inconsistent and unclear ownership of the common areas in developments.

The lack of a share in a communal flowerbed will most likely not be of huge importance to most owners. Carless proprietors are unlikely to be overly concerned about the parking bays until they come to sell the property to someone with a car. However, in all cases a lack of ownership in the common areas is likely be more of an issue if they come to be sold by the developer and used for something the plot owners find undesirable.

Where we are now?
The combination of PMP, Lundin, Update 27 and AI27 leaves us in the following situation.

  • Many units within developments do not include a share of the common areas[18]. Clients and their lenders will require to be advised accordingly.
    • This should be clear from the land certificate on the dealing of property within a “new development”[19]. (Albeit there may be some instances where the applicant has not paid heed to the advice in update 27 and ineffectual vague verbal descriptions which do not identify the common areas by reference to a future event remain on the title.)
    • When involved with first registrations, or dealings of properties in “existing developments”, descriptions will need to be examined carefully. Those purporting to identify and convey common areas by reference to a future event[20] will be ineffective[21]. However, AI27 makes it clear that the Keeper will consider attempts to rectify the situation which do correctly identify the common areas.
  • On a purchase of potential common areas (identified by reference to a future event) from the developer, the Keeper’s approach, after Update 27 but prior to AI27, was to require evidence that the applicant’s title was not void or voidable and would exclude indemnity if not satisfied.  Since AI27:
    • The Keeper will not require such evidence nor exclude indemnity for Land Register titles.
    • But, where plot sales have been recorded in Sasines, she will require evidence that there has been no possession adverse to that of the developer.

 

 

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[1] In terms of the specificity principle, whilst is perfectly competent to acquire a personal right to property which is not yet identifiable, this is not the case with real rights where,  to transfer ownership in a thing, there must be an identifiable thing to be transferred (SLC Report on Land Registration Vol.1 at 6.13).

[2] In terms of s4(2)(a) of the Land Registration (Scotland) Act 1979, an application for registration can not be accepted if it is not “sufficiently described” to enable the Keeper to identify it by reference to the Ordnance Map. Section 6(1)(a) also requires the Keeper to make up a title sheet containing a description of the land consisting of or including a description of it based on the map.

[3] See textbooks written before PMP (eg the third edition of Gretton & Reid’s Conveyancing at para 12-10).

[5] I.e. At that point the final plot is sold, the extent and location of the common areas would become fixed – there no longer being any possibility of the areas becoming part of another plot – and so they could not be said to be described by reference to a future event.  On that reasoning, subsequent sales of the individual plots in the development may also carry a share of the common areas meaning that, when all of the properties in the development had been resold, each would have a share in the common areas and the problem would effectively be cured.

[7]  One reason for this is that Lundin makes it clear that reference to extraneous material, (with the possible exception of other publicly accessible registered titles) in order to establish completion and identify common parts is incompetent. Thus, if the common areas are not sufficiently described in the individual plot sales, completion of the development (and determining when the development is completed in practice may also be difficult) in itself does not assist. Further, although the effect of the “Midas touch” is that an entry on the register cannot be void (meaning that, if a title is registered, that title becomes the actual title even if that does not represent the correct legal position), the Midas principle does not apply to a transfer where there is a failure to comply with the specificity principle.   If no attempt is made to identify the common areas, subsequent transfers of the plots will suffer from the same descriptive affliction as the initial sales and, again, the ‘Midas touch’ cannot cure the defect.

[8] Depending on the particular circumstances (including ownership of the common areas at the time of the application – i.e. does the person seeking to transfer title to the common areas have title to them at the date of the transfer).

[9] However, it may be that “new development” nonetheless contain ineffectual wording relating to common parts: see comments on vague verbal descriptionsbelow.

[10]  Again solicitors are advised to contact pre-registration enquiries in this regard.

[11] Such description could therefore exist in both new and existing titles.

[12] Prescription, of course, has no role to play on Land Register titles at present unless indemnity has been excluded.

[13] The Keeper considers that a title which identifies the common areas by reference to a future uncertain event may well be habile.

[14] There may also be superfluous and ineffectual wording in “new developments as a result of the policy on vague verbal descriptions.

[15] Unless indemnity has been excluded.

[16] Which is expected to come into force towards the end of this year.

[17] Including those registered without an exclusion of indemnity.

[18] This has not changed since PMP.

[19] In some such cases consideration may be given as to whether it is worth attempting to acquire rights in the common areas.

[20] Or vague verbal descriptions which do not identify the common areas by reference to a future event.

[21] Again, there is no change this since PMP.

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Fordell Estates Limited v Deloitte LLP, 21 March 2014 – whether binding agreement reached between surveyors as to dilapidations claim

Outer House case in which Fordell sought £338k from Deloitte it said was due under an alleged agreement relating to a dilapidations claim in respect of a lease of property at 18 Charlotte Square and 4 Charlotte Lane in Edinburgh.

The lease came to an end in March 2012 and before that a schedule of dilapidations was served. A dispute then took place as to the scope and cost of the remedial works required following which surveyors liaised on behalf of each of the parties with a view to reaching a negotiated agreement.

Fordell argued that a binding agreement had been reached between the parties that Deloitte would pay £338k in full and final settlement of the claim. Deloitte argued that there had been no concluded contract because:

  1.     the communications did not record an intention to be bound by the exchange of emails;
  2.     there was no evidence that Fordell would use the money for the dilapidations works;
  3.     the phrase “without prejudice” was used in Deloitte’s surveyor’s emails;
  4.     there was a need for a formal legal document; and
  5.     there was no agreement on a date for payment.

After considering the authorities[1] Lord Malcolm found that the proper approach in such cases was well settled:

“In summary, both parties must have manifested an intention to be immediately bound to all the legally essential elements of the bargain. In assessing this, the court adopts an objective approach, based upon what an informed reasonable person would have understood by the words and conduct of the parties or their agents.”

Lord Malcolm held that the negotiations had not resulted in a concluded contract between the parties. One of Deloitte’s emails contained a condition that Fordell would use the money for the dilapidations works which was not withdrawn and remained unmet. An email which Fordell argued had concluded the bargain did not waive or abandon that requirement. Fordell contended Deloitte were not entitled to require such evidence. However, Lord Malcolm took the view that, whatever the law on dilapidations claims, Deloitte were entitled to insist on such evidence as they wished, and to make it a condition for payment.

Lord Malcolm also took the view that the use of the words “without prejudice” and the need for a formal agreement reflected a shared understanding that neither of the surveyors could bind the parties. That was made clear in the correspondence. At each stage, before making a binding offer, or counter offer, the surveyors had required direct instructions from their respective clients and the words “without prejudice” required to be seen in that context[2]. Lord Malcolm described the lack of agreement regarding a date for payment as a “loose end” but saw it as further demonstration that the parties’ minds had not met on the key aspects of the deal.

Fordell’s claim for payment was dismissed.

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] In particular Baillie Estates Ltd v DuPont (UK) Ltd [2009] CSOH 95.

[2] From the evidence given in court Lord Malcolm also noted that it was clear that Fordell’s surveyor understood that use of the word “without prejudice” would postpone a legally enforceable agreement.

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A few thoughts on Labour’s Devolution Commission

I am surprised that Labour has backtracked on almost all of the tax proposals it made in its interim report.  I did not expect Lamont to be so thoroughly routed by her opponents in her own party on the need to extend the powers of the Scottish Parliament in any meaningful way.  The final report can be found here and my blog on the interim report can be found here.

The final report does not even go as far as the final recommendations made by the Calman Commission.  Calman recommend 6 new tax powers for the Scottish Parliament.  The Scotland Act 2012, often referred to as “Calman minus” only implements 3 of them.

This is from the final report: “We concluded that, for a variety of good reasons, VAT, national insurance contributions, corporation tax, alcohol, tobacco and fuel duties, climate change levy, insurance premium tax, vehicle excise duty, inheritance tax, capital gains tax and tax on oil receipts should remain reserved.” It is not clear from the final report if the Aggregates Levy will be devolved.  What is meant by the Crown Estate recommendation is anyone’s guess.

With regard to the only tax power left standing when the music stopped; income tax.  The interim report said: “In our view, a strong case exists for devolving income tax in full, and we are minded to do so“.  How Labour got from that point to the income tax proposal announced yesterday is again anybody’s guess.  I will come back to that point.

This announcement must also have exasperated those still arguing for “devo plus” and “devomax”.  These proposals are often misunderstood, often intentionally.  ”Devo Plus” would devolve almost all tax and welfare powers.  ”Devo max” goes even further. Remember there are over 25 taxes, charges and duties when comparing the Labour proposal to “devo plus” or “devo max”. The Labour proposal such as it is, when taken together with the recent announcements by the Liberal Democrats and the Conservatives may well prove to be the final straw for those arguing for the devolving of substantial powers for the Scottish Parliament. That I suspect can only be good news for the “YES” campaign.

Johann Lamont was unable to even answer basic questions on the income tax proposal when she was interviewed on Newsnight Scotland.  A link to this interview can be found here.  To be fair, I am not sure if anyone could easily explain the income tax proposal.  If I was the cynical type I might suggest that this looks like a policy that is intentionally created to make sure it never sees the light of day.  I was also interested to hear that she is opposed to tax competition if it involves Scotland.

This is from my chapter in the Hassan/Mitchell publication “After Independence” and titled: “The continuing battle for Scottish tax powers”.   Nothing it seems has changed.

“So how have the opponents of substantial tax powers for the Scottish Parliament been able to ensure that substantial tax powers are not devolved to the Scottish Parliament?  A template can be seen from Calman, what might be called the ”Calman doctrine”. Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”

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