News archive

“HM Revenue & Customs (HMRC) have today published:

• new form IHT205 (2011) – Return of estate information [England, Wales and Northern Ireland]
• new IHT206 (2011) – Notes to help you fill in form IHT205 (2011)
• revised form IHT217 – Claim to transfer unused nil rate band for excepted estates

The new forms IHT205 (2011) and IHT206 (2011) Notes should be used when the person died on or after 6 April 2011. The main changes to the form are to the pension’s questions which have been simplified. You will also see the form and notes look different as they have been rebranded.

The revised IHT217 replaces the current version of the form and should be used where the person died on or after 6 April 2010.”

The Forms and Notes can be found here.

Outer House case in which Mrs Cooper sought reduction of a standard security (in so far as) granted by her in favour of the Bank of Scotland over her share of the home she shared with her husband. Mrs Cooper argued that her husband had procured her signature of the security by misrepresentation and that the bank had neither advised her of the consequences of signing the document nor advised her to take independent legal advice.

Background
The Coopers’ had granted a standard security over their house in favour of the Bank of Scotland in 2002 (securing the present and future debts of both/either of them). At about the same time Mr Cooper obtained an overdraft from the Bank of Scotland for his business and, when the business overdraft grew to £72k, granted a personal guarantee in favour of the Bank of Scotland in January 2006 (in effect securing the business debt over the house). At the end of 2006 the house was re-mortgaged in favour of the Halifax. Due to an oversight (there was still outstanding business debt), and despite an instruction to the contrary, the security in favour the Bank of Scotland was discharged. In March 2007 the Bank of Scotland wrote to the Coopers asking them to sign a fresh security in respect of the business debt. Mr Cooper had failed to tell Mrs Cooper about the overdraft and personal guarantee. When the fresh security arrived, he gave Mrs Cooper the second page only and asked her to sign it telling her only that it related to the mortgage and that the higher monthly payments would pay off the mortgage more quickly.

Arguments
Mrs Cooper based her case on the principles arising from Smith v. Bank of Scotland[1] in which it was found that a bank may owe a duty to warn a potential cautioner of the consequences of entering into a proposed obligation and advise him or her to take independent advice where:

“the circumstances of the case are such as to lead a reasonable man to believe that owing to the personal relationship between the debtor and the proposed cautioner the latter’s consent may not be fully informed or freely given…”

In order to have an obligation set aside, the cautioner must show[2] (1) that an actionable wrong has been perpetrated by the principal debtor (2) that the creditor was in bad faith and (3) that the obligation was undertaken gratuitously.

The Bank of Scotland argued that, because Mrs Cooper had been liable for Mr Cooper’s business debts before the discharge (in error) of the 2006 security, the Bank had no reason to believe that her consent to the 2007 security was not freely given. Further, they argued that reducing the security would give a windfall benefit to Mrs Cooper and put her in a better position than she would otherwise have been by allowing her to escape from the obligations previously incumbent upon her merely because of the erroneous discharge of the 2002 security.

Decision
Lord Tyre found had that Mrs Cooper was entitled to a reduction of the standard security. The grant of the standard security by the pursuer was gratuitous (i.e. there was no obligation on Mrs Cooper to grant it). Having accepted that Mr Cooper had misrepresented the purpose and effect of signing the security to Mrs Cooper, it was also found that Mr Cooper had committed an actionable wrong. The Bank of Scotland were also found not to have acted in good faith as there was no evidence that either they or their solicitors took any steps whatsoever to bring to the pursuer’s attention the consequences for her of signing the standard security. The letter sending the security for signature had been in bland terms and conveyed an impression that the execution of the security was something of a formality. There was also no mention of the need for Mrs Cooper to obtain independent legal advice.

The discharge of the 2002 security had not been gratuitous as it had been granted in consideration of repayment of the loan then outstanding. The bank did not attempt to argue that the discharge could have been reduced on the ground of a unilateral uninduced error on the part of the bank (or their solicitors). There was no obligation on Mrs Cooper to grant the 2007 security at the time she signed it. That was the time to have in mind when determining whether restoration of the position was possible. Consequently, Lord Tyre held that the reduction of the 2007 security should not be refused on the basis that it would fail to restore the parties to the position they had been in prior to the granting of the security.

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.

Listed below are the taxes, duties and charges that Westminster has so far refused to pass control to the Scottish Parliament.

Petition for Judicial Review in which Trump International sought to challenge the Scottish Government’s decision to grant permission for an offshore wind farm near its golf resort at Menie in Aberdeenshire[1].

Trump argued that the Scottish Government:

1. should have held a public inquiry before reaching its decision; and
2. should not have granted consent in terms of s36 of the Electricity Act 1989 as the wind farm developer did not hold a licence to generate electricity.

Public inquiry
Trump contended that the Scottish Government’s failure to hold a public inquiry would raise in the mind of the fair-minded and informed observer a real possibility that the decision-maker was biased.

S36 argument
Trump founded on the decision in Sustainable Shetland v The Scottish Ministers in which Lady Clark found that consent to build a wind farm could not be granted to developers who did not already hold a licence to generate electricity.

Decision
Lord Doherty rejected these arguments. The decision not to hold a public inquiry had been lawful (the Minister has a wide discretion as to whether or not to hold a public inquiry) and Trump had not set out any objective justification as why it indicated bias. As regards s36 of the 1989 Act, Lord Doherty disagreed with the interpretation taken by Lady Clark in Sustainable Shetland and found that the Act conferred power on the Scottish Government to grant s36 consent even though Aberdeen Offshore did not have a licence to generate electricity.  Trump’s petition was dismissed.

The full judgement is available from Scottish Courts here.

(See also appeals to the Inner House and Supreme Court.)

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

The England and Wales High Court has stopped a local authority selling an elderly lady’s house to pay for her care fees, because her daughter kept a room in the house and had invested in maintaining it while living elsewhere.

This is from a report of the case from STEP:

“After a long correspondence the case eventually came to court in January. The court’s decision turned on the exact wording of paragraph 2(1)(b)(ii) of Schedule 4 of the National Assistance (Assessment of Resources) Regulations 1992 and whether Glen Walford’s relationship with Sunnydene fell within it. The relevant passage states that the value of any premises is to be disregarded for a residential care fees assessment if it is ‘occupied in whole or in part as their home by the resident’s other family member or relative who is aged 60 or over’. This test is further qualified by Section 7 of the CRAG [Charging for Residential Accommodation Guidance] rules.

Surprisingly, this is the first occasion that this particular issue has come before the courts. In the event, Mr Justice Supperstone, ruled that Worchestershire had applied the test incorrectly by looking at actual occupation or permanent residence at the time of Mary Walford’s admission into care. It had also not properly considered the submissions made by Glen Walford regarding her long-term relationship to the property, to which she ‘has a degree of attachment both physical and emotional’. He duly quashed the council’s decision to impose a charge on Sunnydene, and ordered it to reconsider its assessment.”

This decision is also important for us here in Scotland as similar rules apply.   Guidance on these rules from the Scottish Government can be found here.

More on this from STEP can be found here and the full case report can be found here.

Our DIY training session on property auctions in Scotland is now available. It  includes slides, speaker’s notes and a detailed handout covering the following:

• a general guide to sales by auction in Scotland;
• process and procedures at auction sales;
• the important general and special conditions;
• conflict between the auctioneer’s general conditions and those issued by the firm;
• considerations from both buyer’s and seller’s perspectives;
• the differences between auction sales in Scotland and England; and
• VAT implications where there is a TOGC.

The course objectives can be seen here.

It is priced at £40 and can be purchased below:

By clicking the link below I accept the terms and conditions

The First-tier Tribunal has held that a deceased businessman’s trading estate management company did not qualify for inheritance tax business property relief as its activities were predominately investment related.

The business owned a plot of land with a disused factory which had been converted into a trading estate with units rented for light industry and offices. As well as letting the land, the family managed the site and provided various facilities for those on the site including electricity, fax services, free parking, a full-time manager on site and a forklift truck and use of a full-time driver.

This is from the report of the decision of the tribunal:

“The non-investment services provided by the Company include the  forklift truck service and the provision of office type facilities. We do not consider that those additional services predominate when considering the activities of the Company as a whole. Even if we were to take out the Burdens side of the business, the real nature of the business remains an investment business exploiting the land by granting tenancies and licences. Most of the income from additional services relates to re-charges for electricity, telephone and postage. The income from the other additional services is very modest compared to the licence fee income. Considering the facts by reference to the nature of the activities and the income produced by those activities puts the Business Centre well towards the investment end of the spectrum.”

The full report can be found here.

Background
Outer House case concerning a lease of premises at Corstorphine Road Retail Park in Edinburgh. Aviva were the Landlords and McDonald’s, the tenant. McDonald’s operated a restaurant with a drive through from the premises. Aviva entered an agreement with Costa for the construction of a coffee shop with a drive through to be situated on the car park. In terms of the lease with McDonald’s, McDonald’s consent was required for such an arrangement. McDonald’s refused consent and the question for the court was whether McDonald’s refusal of consent was unreasonable.

Arguments
Before coming to a decision, McDonald’s sought information from Aviva on the impact of the proposals on traffic and parking and instructed expert advice from ADL Traffic Engineering Limited. ADL advised that, following construction of the coffee shop, the car park would not be fit for purpose at peak times and the development would impact negatively on McDonald’s. Following that advice, McDonald’s concluded that the proposals would materially adversely affect its trade and refused consent.

Aviva obtained a report from its own engineer Dougall Baillie Associates (DBA) which indicated that sufficient parking would remain after construction of the Costa store. They argued that McDonald’s should have been aware of the DBL report and it was not reasonable for them to rely solely on the ADL report.

Decision
After noting that the onus was on Aviva to demonstrate that the refusal was unreasonable, not on McDonald’s to prove the opposite, Lord Malcolm found that Aviva had failed to show that any reasonable tenant would have granted consent. In all the circumstances there was nothing unreasonable in McDonald’s choosing to follow ADL’s views. The court did not require to decide whether it agreed with the refusal of consent or the reasons for it. McDonald’s did not need to demonstrate that the expert advice was correct, nor justify the conclusions upon which the decision to refuse consent was based. The only question was whether McDonald’s had acted in a reasonable manner. In that regard, Lord Malcolm said the following:

“[McDonald’s] did not “expert shop”, nor tailor matters to obtain the advice it wanted. There was no need for [McDonald’s] to seek another view, nor to place the ADL report before DBA before reaching a decision on what to do. There was no obligation upon [McDonald’s] to come to its own independent view on the traffic impact of the DBA proposals. It was entitled to rely on the advice received from ADL. There was nothing unreasonable about the conclusions on which the refusal of consent was based.”

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.

I have just read a very interesting article in the latest STEP magazine titled: “Dawn of the iPhone will”.  The article outlines the development of informal wills in Australia and in particular how the Supreme Court of Queensland held that an electronic will saved on to a smartphone should be admitted to probate (confirmation).

As the article states, we are likely to have to increasingly deal with informal wills of the electronic nature in years to come.   This is an issue that we will also have to do deal with here in Scotland.

More generally, a recent talk I gave on “What happens to digital assets on death?” can be found here.

The average person it is claimed now has more than 10 online accounts, including social media, shopping and bank accounts.  These obviously contain a great deal of personal information and have value whether it is financial or sentimental.

What though happens to these assets on death?  If you would like to find out more about this issue please contact: james@legalknowledgescotland.com

Outer House case in which a property developer sought damages from his solicitors in respect of professional negligence.

The developer argued that, as a result of the solicitors’ negligence (in failing to advise him correctly), he entered a contract to sell land which was conditional on him obtaining planning permission (for residential development) within a period of 12 months and which made provision for the purchaser to withdraw from the contract if planning was not contained within the period but contained no corresponding provision allowing the developer to withdraw in the same situation. Consequently, when the developer failed to obtain planning permission, he was unable to withdraw from the contact and, as a result, and claimed that he was unable to accept an offer from an alternative purchaser at a higher price.

After considering the evidence of various witnesses, Lord Brodie found that the developer had failed to show that the solicitors were guilty of a failure to exercise reasonable care. Although the solicitors’ had given no direct advice to the developer himself, Lord Brodie held that the solicitors had given advice on the effect of the clause to the developer’s father who he found to be acting as an agent for the developer with actual authority to conclude the missives on his behalf. Lord Brodie accepted evidence to the effect that the developer’s father had repeatedly given instructions to the solicitors[1]

in the past (on behalf of, and with the knowledge of, the developer) and noted:

“It may be that there was no express agreement between father and son conferring the authority of the latter on the former. Indeed I would be surprised were that so. What is more probable is that they developed a way of working over a series of transactions, without ever formalising it. They were practical men operating in a very dynamic environment who were, reasonably enough, interested in making money in a booming market. Neither had much interest in “paper work”.”

The full judgement is available from Scottish Courts here.

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