News archive

In this case Mr Moore moved into a property that had previously been let out following his separation from his wife.  Several months later he purchased a property with his new partner and sold the property he had been living in since the separation.

HMRC denied CGT Principal Private Residence (PPR) relief.  PPR relief applies where a person has at any time lived in the property as their sole/main residence. The gain attributable to the last 36 months of ownership will automatically be exempt from CGT.  From April 2014, this will be reduced to 18 months.

The question was whether his occupation of the property he had sold had the necessary degree of permanence, continuity or expectation of continuity.  The tax tribunal held that it did not.

In making their decision the tribunal made particular reference to the lack of evidence, other than council tax bills, regarding the taxpayer’s occupation. Other correspondence went to both his former home and the home of his new partner.  Whilst the tribunal accepted that he had lived in the property, they felt that the lack of evidence suggested that he did not intend to live in the property permanently.

The full judgement can be found here.

A daughter’s decision to move her 88-year-old mother from England into a Scottish care home gave rise to a complex dispute between her children about the jurisdiction of England’s Court of Protection and our Sheriff Court and also a judicial analysis of the meaning of habitual residence in the light of the 2000 Hague Convention on the International Protection of Adults.

It was agreed between the parties that the mother did not have capacity to decide where to live.

Two statements stand out in the decision:

“Habitual residence is, in essence, a question of fact to be determined having regard to all the circumstances of the particular case.  Habitual residence can in principle be lost and another habitual residence acquired on the same day: … “

“In the case of an adult who lacks the capacity to decide where to live, the habitual residence can in principle be lost and another habitual residence acquired without the need for any court order or other formal process, such as the appointment of an attorney or deputy.”

The court found that the mother was not “habitually resident” in England and Wales and therefore in favour of the jurisdiction of the Sheriff Court.

The full judgement can be found here.

Inner House case considering whether additional parties (including the Trump Organisation) could intervene in the case of Sustainable Shetland v The Scottish Ministers which concerned the Scottish Government’s decision to grant planning permission for a wind farm on Shetland.

Background
In the Outer House Lady Clark had, in essence, found that consent to build a wind farm could not be granted to developers who did not already hold a licence to generate electricity (this finding has become known as “the competency question”). As was noted by the Inner House, the competency question has caused a “degree of consternation” amongst wind farm developers.

The Scottish Minister’s sought to appeal the decision of the Outer House. However, although they have indicated that they wish to maintain environmental arguments, Sustainable Shetland have indicated that they do not wish to maintain an argument based on the competency question.

A variety of parties including the Trump Organisation[1], various wind farm developers and the RSPB then sought to intervene in the proceedings in terms of Rules of Court 58.8(2) (which allows parties directly affected by any issues raised in proceeding to intervene) and 58.8A (which allows parties to intervene in order to raise an issue of public interest).

Decision
Rule 58.8(2) – parties directly affected
The Inner house found that Trump and the other wind farm developers could not be said to be directly affected by the issues raised in the proceedings:

 “As a general rule, if a public law decision is challenged, for whatever reason, the range of persons able to enter the process remains limited to those who can show an interest in the outcome of the case; that is to say not in the potential legal reasoning employed by the court in reaching a decision, but in the decision itself. Neither Trump nor AES K2 and the related companies have any interest in the outcome of whether the Shetland windfarm goes ahead.”

Rule 58.8A – issues of public interest
Trump’s application under rule 58.8A also failed. They were not advancing a public interest point. The point which they sought to make was one intended as a protection of their private interests in the marketing of their Menie development.

The Outer House also rejected the RSPB’s application under rule 58.8A noting that, although they had interest in the bird life on the wind farm, they had had the opportunity to intervene in the Outer house proceedings and chose not to do so. Consequently, the Inner House did not consider it appropriate to allow the RSPB to enter the process at the appellate stage under the guise of a public interest intervention. Further, given the positions of Sustainable Shetland and the Scottish Ministers, the court did not consider that any propositions advanced by the RSPB would be likely to assist the court.

The full judgement is available from Scottish Courts here.

Merry Christmas from Legal Knowledge Scotland.

Thank you for all your support during our third year and best wishes for 2014.

Inner House case in which SEPA and others appealed against a decision of Lord Hodge in the Outer House to the effect that the liquidators of Scottish Coal could (1) abandon mining sites and (2) abandon/disclaim the related statutory licences/permits (which in effect allowed the liquidators to avoid onerous obligations requiring restoration of the sites).

SEPA’s arguments
Abandonment of land
SEPA argued that the liquidator did not have the power to abandon or disclaim property.  Whilst a liquidator could disclaim land in the sense of declining to deal with it, the land continued to be owned by the company and the liabilities arising from ownership continued to be enforceable. Lord Hodge, they argued, had been in error when he stated that a liquidator could disclaim “by taking steps to terminate the company’s ownership of the land”.

Abandonment of the statutory licences
With regard to the liquidator’s power to abandon or disclaim the statutory licences:

1. there was no power to “disclaim” in the sense that a liquidator could terminate a licence unilaterally and without reference to the statutory surrender procedures;
2. even if  1. were wrong and a liquidator did have a general power to disclaim property, the scheme laid out in the CARs[1] created a form of licence that could not be renounced in that way, even if other licences could be so renounced; and
3. it had been within the legislative competence of the Scottish Parliament to promulgate the CARs with that effect.

Decision
Abandonment of land
A person can abandon land, in the sense of leaving it physically, intending to give up its use permanently. However, the Inner House found that that was not what was under consideration in this case. What required to be decided was whether a person can “abandon” or “disclaim” ownership of land. There are a number of methods by which a person’s ownership can be terminated: destruction of the land itself, where the owner ceases to exist, by operation of law (e.g. enforcement of a security or a compulsory purchase) or by voluntary transfer to another person. However, there is no legal process whereby a person can transfer land into oblivion. A person cannot abandon the ownership of land in the sense of casting away the real right.

The court also noted the difference between the insolvency regimes in England and Scotland created by s178 of the Insolvency Act 1986, which allows a liquidator in England (but not in Scotland) to “disclaim” onerous property[2].

Abandonment of the statutory licences
The CAR regime prohibits activities which have or are likely to have a significant adverse impact on the water environment. In particular, activities liable to cause pollution are controlled but controlled activities can be carried out by a “responsible person” on the grant of a licence by SEPA. Liquidators are expressly included within the definition of “responsible person”. In addition to being an asset, licences bring with them associated liabilities and can be varied or terminated on application to SEPA which, if it grants an application to surrender a licence, must specify the steps necessary to avoid a risk of adverse impact on the water environment and to leave the water environment in a state that complies with European, UK and Scottish legislation.  On a broad interpretation of the regulations the provisions expressly impose the surrender regime on liquidators[3]. In the view of the Inner House:

“The alternative and narrower interpretation would require the CARs to be read in a way that goes against the ordinary meaning of the language used. Specifically, the CARs do not say that a liquidator is a “responsible person” only for so long as he does not exercise a power to disclaim. Such an interpretation is contrary to the plain meaning of the CARs and ignores the additional problem that a Scottish liquidator does not, in any event, have a general or statutory power to disclaim. It would be a curious construction of an explicit provision that a liquidator is a responsible person and, therefore, responsible for ensuring compliance with the statutory licence, only for as long as he chooses. The narrower interpretation of the CARs is further undermined by the existence of the specific surrender provisions.”

Competence of the CARs
In the Outer House Lord Hodge had the view that the Scotland Act 1998[4] required him to take a narrow interpretation of the CAR regime. However, the Inner House disagreed. Even when taking a broad approach to interpreting the provisions, and although the effects of the provisions would be felt by liquidators of companies being would up in England, the CAR regime dealt with matters which formed part of the law of Scotland and did not form part of the law of England. Also, when considering whether the provisions dealt with reserved matters (i.e. corporate insolvency) the court found:

 “The purpose of the CARs as a whole, and the provisions relating to a liquidator in particular, is an environmental one. Neither the CARs as a whole, nor the provisions relating to liquidators, have as their purpose an insolvency objective. The effect on liquidators of companies possessing a CARs licence is no more than a loose or consequential connection. In all the circumstances, those provisions of the CARs which are said to restrict the power of a liquidator cannot be said to relate to reserved matters.’”

The Inner House allowed the appeal and directed that the liquidators did not have the power to “abandon (otherwise disclaim)” the sites or the statutory licenses.

The full judgement is available from Scottish Courts here.

Outer House Case in which the administrators of Oceancrown Ltd and other associated companies (including Loanwell Ltd and Questway Ltd) sought reductions of the sales of various properties by the companies as gratuitous alienations[1].

Background
The companies in administration were part of a group under the control of a Mr Pelosi. The group was involved in the development and letting of commercial and residential properties. Mr Pelosi had effective control of all of the companies which were operated as one enterprise and operated on the basis of one bank account in the name of Questway Ltd.

Mr Pelosi negotiated the sale of 278 Glasgow Road, Rutherglen to Clyde Gateway Development Limited. On 10 November 2010 Oceancrown disponed 278 Glasgow Road to Strathcroft (then 99% owned by Mr Pelosi) for £762k. On the same day Strathcroft disponed the same property to Clyde Gateway for £2.1m (plus VAT of £367.5k[2]).

The bank’s solicitors were advised that sale of 278 Glasgow Road was part of a series of transactions also involving 110, 210 and 260 Glasgow Road, and 64 Roslea Drive (owned by Oceancrown, Loanwell and Questway and over which the bank held standard securities), the total sale price for which was £2.414m. When the bank’s solicitor (who was unaware of the sale of 278 Glasgow Road to Clyde Gateway) received the sale proceeds, it delivered discharges of the securities. Dispositions were executed (On 24 November 2010) transferring 110, 210 and 260 Glasgow Road to Stonegale Limited (of which Mr Pelosi’s son was the sole shareholder and director) and 64 Roslea Drive to Mr Pelosi’s son. The son then sold 64 Roslea Drive to a third party for £125k. Although no money was paid, the dispositions for the four properties recorded a consideration of £1.652m in total. Stonegale did not dispute that all the funds paid to the bank to discharge the securities came from the purchase of 278 Glasgow Road by Clyde Gateway.

Argument for the administrators
The administrators argued that a large proportion of the money received from Clyde Gateway (in respect of 278 Glasgow Road) was attributed to the other dispositions in order to make it appear that the transfers to Stonegale and Mr Pelosi’s son were made for consideration. In the view of the administrator, the back-to-back sale and transfers had been structured so as to keep £1.7075m out of reach of the bank and to transfer the properties to Stonegale and Mr Pelosi’s son for no consideration. The court was therefore asked to reduce the transfers of 110, 210 and 260 Glasgow Road, and 64 Roslea Drive.

Argument for Stongale
Stonegale argued that the issue for the court was whether the alienations of 110, 210 and 260 Glasgow Road and 64 Roslea Drive, Glasgow were made “for adequate consideration”. Oceancrown, Loanwell and Questway had each received consideration which was paid to their secured lender. The parties agreed that the sums attributed to 110, 210 and 260 Glasgow Road, and 64 Roslea Drive exceeded their market value. The source of the funds was irrelevant. The bank had decided to discharge the security over 278 Glasgow Road on the basis of a valuation it had received and had made a bad bargain. The other transactions were separate. Consideration had been paid to Oceancrown, Loanwell and Questway as they had reduced their indebtedness to the bank.

Decision
Lord Malcolm found otherwise. “Consideration” is “something which is given, or surrendered, in return for something else”[3] No one paid anything for 110, 210, 260 Glasgow Road and 64 Roslea Drive. Oceancrown, Loanwell and Questway did not receive anything in return for the dispositions. They gifted the properties to the disponees. The fact that the bank was misled into using part of the sale price of 278 Glasgow Road to discharge all the standard securities did not supply the missing consideration. If the bank had known that 278 Glasgow Road had been sold for £2.4m, the same overall reduction in bank indebtedness would have occurred, but only the standard security over 278 Glasgow Road would have been discharged. The tranfsfers under challenge were gratuitous alienations. As such, reductions of the dispositions of 110, 210, 260 Glasgow Road were granted and Mr Pelosi’s son was be ordered to repay (to the administrators) the £125k paid to him by the third party for the purchase of 64 Roslea Drive.

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.

HMRC are planning to launch an online inheritance tax service during the 2015-16 tax year. This will allow executors and their representatives to submit IHT accounts via the internet. Interestingly the announcement also refers to “probate” but not “confirmation”. That may mean that it simply did not occur to those making the announcement to consider the situation in Scotland, or as confirmation is primarily a devolved matter that part of the announcement does not apply to Scotland.

That said this is a positive development. More detail will hopefully follow soon and this may mean the beginning of the end for paper inheritance tax forms.

The announcement can be found here (need to scroll down to the the bottom of the page).

Case from the Land Valuation Appeal Court. The Valuation Appeal Committee dismissed an appeal from M&S on the basis that M&S’s written statement in support of its appeal (which had been submitted on the last possible day) did not comply with the Valuation Appeal Committee (Procedure in Appeals under the Valuation Acts) (Scotland) Regulations 1995. M&S then appealed to Land Valuation Appeal Court which allowed the appeal.

In order to comply with the regulations the statement had to intimate three essential points; namely (1) the grounds of appeal; (2) the value for which the appellant contended; and (3) the basis on which that value was arrived at. The court found that it had done so. Although the Assessor argued that the statement failed to specify the ground of appeal, the court noted that the statement contended (amongst other things) that the assessor’s valuation was incorrect and excessive and that M&S’s agents disputed the proposed valuation rate. In the view of the court further elaboration was not required.

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.

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 

Inner House case concerning the construction of an asset sale agreement.

Background
Forest were tenants under a lease. When Forest went into administration the lease was one of the assets for realisation by the administrators. Forest (through its administrators) signed an asset sale agreement with Forever Fuels which related to the sale of property including the lease. In terms of the agreement, £100k became payable to Forest upon delivery of an assignation of the lease and landlord’s consent to the assignation.

Landlords Consent was defined in the asset sale agreement as follows:

 “’Landlord’s Consent’ means the unconditional written consent of the Landlord (and any other relevant party) to the grant of the Assignation of the Seller’s interest in the lease to the Buyer on terms acceptable to the Buyer acting reasonably;”

When it signed the assignation the landlord wrote to Forest’s solicitors consenting to the assignation “only on the basis that” arrears of rent were paid.

Sheriff court decision
In the sheriff court the sheriff came to the conclusion that the £100k was due. The words “on terms acceptable to the Buyer acting reasonably” were indicative of the only circumstances in which a condition of consent would not be regarded as unconditional (i.e. the consent would only be held to be conditional if the buyer (Forever Fuels) was required to do something which was unacceptable to it).

Sheriff principal and Inner House decisions
The sheriff principal disagreed with that interpretation and found that the parties had intended that (for payment to be triggered) the landlord’s consent would have to be free of any condition. As settlement of the rent arrears was not beyond dispute, the landlord’s consent had been conditional. As such the sum of £100k was not payable. The Inner House agreed with the sheriff principal’s reasoning finding that (despite shortcomings and deficiencies in the drafting elsewhere in the agreement) the definition of the term “Landlord’s Consent” was not ambiguous.

The phrase “on terms acceptable to the Buyer acting reasonably” did not qualify “unconditional written consent” but instead qualified “the Assignation of the Seller’s interest” (i.e. to trigger payment, the terms of the assignation document would have to be acceptable to the hypothetical reasonable buyer.)

 “..it is clear that so long as the landlord’s consent is conditional, the buyer’s right to the lease will be incomplete; there will be no consent upon which the buyer can rely in any question with the landlord until the condition is purified. The buyer’s position, in that respect, is the same whether the condition requires action on his part or on that of the seller. It is inconceivable that parties could have intended that the buyer’s position would be protected if the condition was one which he could purify himself but not if it was a condition the purification of which was outwith his power. There is nothing in the agreement which indicates that such absurdity could have been intended. As the March Hare might have observed, “unconditional” simply means what it says.”

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.