News archive

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.)

HMRC’s August 2014 edition of the Trusts & Estates newsletter for trusts and estates practitioners is now available online and can be found here.

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.

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.

“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.

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.

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.

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] (4^th 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.

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.

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.