If you would like to subscribe to Private Client Scotland please email me at james@leglknowledgescotland.com
Outer House case concerning an alleged contract relating to the purchase of a local authority flat at Partick Bridge Street in Glasgow in 1989.
Mr Khosprowpour claimed that he had loaned £8k to Mrs Mackay for the purchase of her flat and that the parties had entered a contract by which Mrs Mackay would remain in the property for the rest of her life without repaying the loan but that Mrs Mackay would make a will transferring it to Mr Khosprowpour on her death. Mrs Mackay also granted a standard security (securing all sums due and which may become due) in favour of Mr Khosprowpour in 1991.
Although Mr Khosprowpour said that Mrs Mackay had originally granted a will passing the property to him, she later executed a new will directing that her executors pay the sale proceeds of the flat to her children (who included Mr Khosprowpour’s former wife).
Mr Khosprowpour sought damages for breach of contract. Mrs Mackay’s executor argued that, as a contract relating to heritage[1], the contract required to be constituted by probative writing (i.e. signed and witnessed) and was consequently not enforceable. On the other hand, Mr Khosprowpour argued that the contract did not relate to heritage but instead was an innominate or unusual contract and, as such, could be proved prout de jure (by any means known to law). Even if that were not the case, Mr Khosprowpour argued that, by virtue of his payment of the funds and Mrs Mackay’s execution of the first will, Mrs Mackay was personally barred[2] from relying on the lack of formalities to resile from the agreement. Conversely, Mrs Mackay’s executor argued the fact that the Standard Security was granted in security of sums due rather than an obligation to include a provision in the will suggested that payment of the funds and execution of the first will were not unequivocally referable to an obligation requiring her to leave the title to the flat to Mr Khosprowpour in her will.
After considering the authorities[3], Lord Turnbull found that the contract related to heritage and, as such, required formal writing for its constitution. However, it was found that Mr Khosprowpour had set out a stateable case regarding personal bar and a proof was allowed to consider whether it could be established.
The full judgement is available from Scottish Courts here.
(NB: see appeal to Inner House here.)
All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.
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[1] As the alleged contract took place in 1989, the Requirements of Writing (Scotland) Act 1995 did not apply and the situation was governed by the pre-1995 Act common law rules on the requirements of writing.
[2] By virtue of the common law rule of rei interventus (where there are important actings by the party seeking to rely on the agreement which are known to and permitted by the other party and which are unequivocally referable to the purported contract.)
[3] In particular McEleveen v McQuillan’s Executrix 1997 SLT (Sh Ct) 46.
So why Private Client Scotland and why now?
Private Client Scotland is something that I have been meaning to get round to over the last few years and now finally have the time to do so. It is also a publication that I believe is needed. A publication that aims to bring together all aspects of private client work from a Scottish perspective.
What does Private Client Scotland aim to cover?
Private Client Scotland will review the latest cases, provide updates on the latest consultations, legislation and official publications and also includes articles, editorials and news items.
What is included in the Preview edition?
The Preview edition of Private Client Scotland includes an editorial which argues for the devolving of control of inheritance tax to the Scottish Parliament. There is also an article on the continuing fall-out from Sheriff Baird’s decision on the validity or otherwise of certain Powers of Attorney. Included in ‘Case reviews’ is the Judgement by Sheriff Valerie Johnston in the long-running dispute as to where Private Mark Connolly is buried. ‘Professional updates’ include a link to the Scottish Law Commission’s report proposing major reform to our law of trusts. Lastly the ‘News items’ section includes stories that range from a dispute over a new crematoria in the Scottish Borders to how Delaware proposes to deal with digital assets on death.
The ‘preview edition’ of Private Client Scotland can be found here.
If you are interested in subscribing to ‘Private Client Scotland’ please email me at: james@legalknowledgescotland.com
Background
Outer House case in which Northern Rock sought damages from the solicitor of one of its customers. Headway Caledonian Ltd borrowed sums from Northern Rock to finance the purchase of a Business Park in Hamilton. In return it granted a standard security in favour of Northern Rock. Some years later, Headway’s solicitor sent a draft discharge of the standard security to Northern Rock requesting that it sign and return the document. In the accompanying email, the solicitor stated that the company intended to sell the subjects and redeem the loan. However, that information was incorrect as Headway only intended to sell part of the subjects and to redeem part of the loan. (The reason for the error was unknown.)
Northern Rock (which had not instructed solicitors to act on its behalf in the transaction) relied on the email and granted the discharge of the standard security. The solicitor then registered it in the Land Register. As a result the loan became unsecured. Headway then became insolvent and the Northern Rock raised an action for damages against the solicitor and her firm in respect of its losses.
The solicitor argued that the lender was a third party to whom she did not owe a duty of care.
Lord Doherty agreed with that argument.
Decision
Whilst a solicitor on one side of a conveyancing transaction will not normally owe a duty to the party on the other side, the law will imply a duty in exceptional circumstances.
The crucial considerations this case were (i) whether it was reasonable in the circumstances for Northern Rock to rely upon the misstatements without checking them by seeking clarification from the solicitor and/or looking at their file; and (ii) whether it ought to have been foreseeable by the solicitor that Northern Rock might reasonably rely upon the misstatements without checking them, and thereby suffer loss.
In favour of the view that there was the requisite foreseeability and reasonable reliance were that the email (i) contained no disclaimer; (ii) had a degree of urgency in its tone; (iii) was communicated directly to Northern Rock, rather than to professional advisers; and (iv) that it came from a solicitor (a trustworthy source).
On the other hand, being a commercial bank, Northern Rock were in no sense vulnerable or dependent. They had the ability to obtain legal advice if they required it. Ultimately though, the critical information had been factual and concerned matters that could have been checked very easily and very quickly by Northern Rock.
Lord Doherty also took into account the fact that the erroneous information in the email conflicted with what had previously been agreed between Headway Caledonian and Northern Rock and that in some respects the email had been vague and ambiguous and, as such, “cried out for further clarification”.
The full judgement is available from Scottish Courts here.
(NB: see appeal to the Inner House here. See also the decision of Lord Woolman allowing the Proof here.)
All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.
I thought I should wait a few days before commenting on the ‘Report of the Smith Commission for further devolution of powers’. I am glad I did given what was contained in the UK Government’s Autumn Statement.
I will though start with the Smith Commission. How do I sum up it up in a few words? Probably easier to start by saying what it is not. It is not ‘devo max’, nor ‘devo plus’ nor ‘home rule’. So what is it? I often refer to the Scotland Act 2012 as ‘Calman minus’. The Smith Commission does though go further than what was recommended by the Calman Commission but not nearly as far as what I have already said it is not. I will come back to this point near the end of this article.
This article primarily looks at the fiscal side of Smith and in particular the tax aspects. The welfare provisions are though interesting, again Smith could easily have gone a lot further, but it does mean that the Scottish Parliament is likely to, not certain to, have enhanced welfare powers albeit from a very low starting point. I suspect we will soon start to hear the first rumblings concerning the creation of the welfare equivalent of Revenue Scotland.
Now to Smith.
In short, after two commissions and three Scotland Acts the Scottish Parliament will still not have complete control of one the five major taxes, may have control of six minor taxes (out of over 20 minor taxes, charges, revenues and duties) and control of the Crown Estate. If nothing else, this makes you wonder how many Commissions and Scotland Acts it will take before the Scottish Parliament will have control of one of the five major taxes.
One of the main recommendations made by Smith concerns income tax. This is from Smith:
“Income Tax will remain a shared tax and both the UK and Scottish Parliaments will share control of Income Tax. MPs representing constituencies across the whole of the UK will continue to decide the UK’s Budget, including Income Tax. Within this framework, the Scottish Parliament will have the power to set the rates of Income Tax and the thresholds at which these are paid for the non-savings and non-dividend income of Scottish taxpayers (as defined by the Scotland Acts). As part of this, there will be no restrictions on the thresholds or rates the Scottish Parliament can set.”
I suspect we will hear a lot more about “English votes for English laws” when the next Scotland Bill is introduced and in particular when income tax is debated. This recommendation is more an example of ‘power retained’ than ‘power devolved’ given all that has been retained by Westminster. See below:
“All other aspects of Income Tax will remain reserved to the UK Parliament, including the imposition of the annual charge to Income Tax, the personal allowance, the taxation of savings and dividend income, the ability to introduce and amend tax reliefs and the definition of income.”
Calman did of course recommended that 50% of income tax on savings and distributions was to have been assigned to the Scottish Parliament. Why 50%. No explanation was given.
“In line with the approach taken for the Scottish rate of Income Tax, the Scottish Government will reimburse the UK Government for additional costs arising as a result of the implementation and administration of the Income Tax powers described above.”
The costs associated with the Scottish Rate of Income Tax have been estimated at approximately £50m. See following report.
So taking Smith at its highest which tax powers will the Scottish Parliament have:
As noted above, Calman also recommended that control of air passenger duty and aggregates levy should be devolved over four years ago.
As with income tax and indeed all newly devolved taxes, the Scottish Government has to reimburse the UK Government for any costs incurred in ‘switching off’ APD and “aggregates levy” in Scotland.
The VAT recommendation has been pretty much ignored and begs the question why not simply assign all VAT revenue? This makes as much sense as when Calman recommended devolving 50% of income tax on savings and distributions.
The Crown Estate is in some ways the most important fiscal recommendation and is long overdue.
So what have ‘they’ said ‘no’ to again?
The ‘big 5’
Other minor taxes, charges, revenues and duties
As to headline figures, this means that the Scottish Parliament will only have control (not complete control) of approximately 30% of tax revenues and 25% of welfare spending. That said, it is not just the number of taxes and how much revenue they raise but also how they interact with other taxes and matters already under the control of the Scottish Parliament.
For example, Westminster could have already and relatively easily devolved substantial tax powers to the Scottish Parliament but has failed to do so. A number of taxes are closely associated with the responsibilities already devolved to the Scottish Parliament which would have given the Scottish Parliament a substantial number of economic levers and the chance to develop policy more effectively.
Below are some examples:
My own submission to Smith can be found here. Given the timescales involved, and the political realities surrounding which powers could be included, I suspect that almost every submission was ignored.
Looking ahead. Nothing is of course certain. Calman proposed six new tax powers and only three made it into the Scotland Act 2012. Will the Smith Commission proposals suffer the same fate?
This is something I wrote a couple of years ago.
“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.”
The opposition to these modest proposals has already begun. UKIP want it stopped entirely. Many in the Labour party are unhappy with the income tax proposal.
Smith also offers no resolution on why the Scottish Police and Fire and Rescue services have to account for VAT. It may though have inadvertently solved another thorny issue and which concerns the UK Treasury’s refusal to transfer attendance allowance funding to the Scottish Parliament since the Scottish Parliament introduced Free Personal and Nursing Care. Control of Attendance Allowance is one of the welfare powers that might be devolved to the Scottish Parliament.
Then there is the UK Government’s Autumn Statement.
George Osborne copied a great deal of the Scottish Government’s proposed Land and Buildings Transaction Tax in his reform of Stamp Duty Land Tax. This was surprising given that the Conservatives had previously attacked the approach taken by the Scottish Government. The main reason for Osborne’s change of direction is I suspect the forthcoming UK General Election and in particular Labour’s ‘mansion tax’ proposal for England and Wales.
Osborne is also proposing that corporation tax, at least in part, is devolved to Northern Ireland, control of business rates is devolved to Wales and a ‘Sovereign Wealth Fund’ is created for the ‘North of England’. The irony of many of these points will not be lost on those who followed closely what was being said in the independence referendum.
Some things are though certain. The ‘vow’ such as it was not delivered. The argument being put forward, and in particular by the Conservative party, is that if you believe in the pooling of resources throughout the UK then this is the ‘maximum’ amount of devolution that is possible within the UK. Not surprisingly this ‘explanation’ was not put forward when Gordon Brown suddenly entered the referendum debate.
Is this the end of the devolution process?
The main ‘NO’ parties felt a line had been drawn after the Scotland Act 1998 and the reconvening of the Scottish Parliament. The general feeling was that whilst tinkering with the devolved powers was acceptable nothing of any real substance would change.
That changed in 2007 with the election of the SNP government. That in turn resulted in the Calman Commission. That again was meant to be a line in the sand. The UK Government felt confident enough to not even bother to include all of the powers recommended for devolving by Calman in the Scotland Act 2012. The election of a majority SNP government and the independence referendum resulted in the ‘vow’ and the Smith Commission.
What does this tell us? Quite simply if Westminster feels the need to create a new line in the sand it will.
So why Private Client Scotland and why now?
Private Client Scotland is something that I have been meaning to get round to over the last few years and now finally have the time to do so. It is also a publication that I believe is needed. A publication that aims to bring together all aspects of private client work from a Scottish perspective.
What does Private Client Scotland aim to cover?
Private Client Scotland will review the latest cases, provide updates on the latest consultations, legislation and official publications and also includes articles, editorials and news items.
What is included in the Preview edition?
The Preview edition of Private Client Scotland includes an editorial which argues for the devolving of control of inheritance tax to the Scottish Parliament. There is also an article on the continuing fall-out from Sheriff Baird’s decision on the validity or otherwise of certain Powers of Attorney. Included in ‘Case reviews’ is the Judgement by Sheriff Valerie Johnston in the long-running dispute as to where Private Mark Connolly is buried. ‘Professional updates’ include a link to the Scottish Law Commission’s report proposing major reform to our law of trusts. Lastly the ‘News items’ section includes stories that range from a dispute over a new crematoria in the Scottish Borders to how Delaware proposes to deal with digital assets on death.
The ‘preview edition’ of Private Client Scotland can be found here.
If you are interested in subscribing to ‘Private Client Scotland’ please email me at: james@legalknowledgescotland.com
“The Inner House of the Court of Session has heard a Special Case raised in respect of the validity of a continuing power of attorney in substantially the same form as that which was in doubt following the opinion of Sheriff Baird at Glasgow in the case of Application for guardianship in respect of W (13 May 2014). The court, which delivered its decision at the conclusion of the hearing on Wednesday 10 December, decided that the form of words used was valid.”
The full statement from OPG (Scot) can be found here.
A link to one of my earlier blogs on this issue can be found here.
The mother of Private Mark Connolly has withdrawn her appeal. This effectively brings this long running family dispute to an end.
Links to my earlier blogs on this matter can be found here. Links to my two two articles published in Journal of the Law Society of Scotland can be found here and here.
So why Private Client Scotland and why now?
Private Client Scotland is something that I have been meaning to get round to over the last few years and now finally have the time to do so. It is also a publication that I believe is needed. A publication that aims to bring together all aspects of private client work from a Scottish perspective.
What does Private Client Scotland aim to cover?
Private Client Scotland will review the latest cases, provide updates on the latest consultations, legislation and official publications and also includes articles, editorials and news items.
What is included in the Preview edition?
The Preview edition of Private Client Scotland includes an editorial which argues for the devolving of control of inheritance tax to the Scottish Parliament. There is also an article on the continuing fall-out from Sheriff Baird’s decision on the validity or otherwise of certain Powers of Attorney. Included in ‘Case reviews’ is the Judgement by Sheriff Valerie Johnston in the long-running dispute as to where Private Mark Connoly is buried. ‘Professional updates’ include a link to the Scottish Law Commission’s report proposing major reform to our law of trusts. Lastly the ‘News items’ section includes stories that range from a dispute over a new crematoria in the Scottish Borders to how Delaware proposes to deal with digital assets on death.
The ‘preview edition’ of Private Client Scotland can be found here.
If you are interested in subscribing to ‘Private Client Scotland’ please email me at: james@legalknowledgescotland.com
