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The Court’s decision in the recent case brought against the clearing banks, in which it was argued that their system of charging customers was subject to the terms of the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations), has been widely touted as a massive victory for the customers of banks. However, a closer examination of the ruling suggests it is not quite such a one-sided victory as might be thought. The case was brought by disgruntled customers who argued that unauthorised overdraft and similar charges constitute penalties, rather than commercial restitution for the increased costs incurred by the banks. The case took place in the context of an investigation by the Office of Fair Trading (OFT) into the charging policies of banks. The banks succeeded in their argument that their terms are in ‘plain, intelligible language’ (although possibly in very small print). When this is the case, the Regulations do not allow an assessment of the fairness of the ‘price or remuneration…’. The argument here is that the Regulations should not apply to a contract the terms of which are clear and unequivocal and agreed to by both sides. The banks argued that since the charges which are the subject of the dispute constitute the price for the banking services offered, they are exempt from assessment. However, the court could not accept that point. The additional charges were not for the services provided (i.e. operating the bank account in the normal way), but for the failure of the customer to adhere to the contract. Accordingly, in the view of the Court, an assessment of their fairness should still apply because the charges being looked at by the OFT fall outside those normally received by the banks in exchange for the services they supply. The banks have therefore failed to halt the OFT enquiry into their charges to retail customers. An appeal against this decision is likely to be heard this autumn. Meanwhile, the OFT’s investigation will continue. However, in one regard, the banks have won a significant victory in that it is accepted that their contractual terms are clear and enforceable. On 7 July another hearing will decide whether other terms imposed on customers by the banks, that were not dealt with in the previous judgment, constitute penalties. English law does not allow the enforcement of penalties for breaches of contract, limiting the amount payable for breaches of contract to the sum necessary to put the offended party in the position they would have been in had the breach not occurred. Partner Note For further information please contact Kate Barnes Rogue debt collectors face tough new rules in a Government bid to improve consumer protection in this contentious area. This is because of changes to the Consumer Credit Act 2006 (CCA) which have recently come into effect. Chief among the new powers given to the Office of Fair Trading (OFT) is the ability to fine debt collectors up to £50,000 for infractions and to impose limitations on the licences under which they operate. Another major change is the removal of the limit of £25,000 above which the CCA did not previously apply. This means that even large loans (including those currently in existence) are now governed by its provisions. The OFT has also imposed more stringent criteria for the granting of a licence to operate as a debt collector. In October, further changes to the CCA will require lenders to provide borrowers with additional information, including annual statements. Partner Note For further information please contact Kate Barnes Estate agents must do more for their money than simply show a potential purchaser around a property, following a recent decision of the Court of Appeal. When a Mrs Bicknell signed a standard sole-agency agreement with Foxtons Ltd. to sell her £1.4 million home, she agreed, among other things, to pay the agency 2.5 per cent of the sale price if contracts were exchanged ‘with a purchaser introduced by us [Foxtons]’. In June 2005, Foxtons showed a Mr and Mrs Low around the house three times but, after initially showing interest in the property, the couple took no further action. In July, Mrs Bicknell ended the sole agency arrangement and agreed a multiple agency deal with Foxtons at 3 per cent commission. She then appointed a second firm, Hamptons International, at a 2.25 per cent commission rate. In October, Hamptons spoke to the Lows and persuaded them to view the house again, eventually securing an offer of £1.15 million for the property. The offer was accepted and the purchase was completed in January 2006. Hamptons duly submitted an invoice for their commission and received payment. When Foxtons learned of the sale, however, they also sought to be paid a commission. When payment was refused, they commenced court proceedings. The lower court decided in favour of Foxtons on the basis that the Lows were a purchaser introduced by Foxtons and this alone was sufficient to secure their right to a commission. On appeal, the question of the meaning of ‘a purchaser introduced by us’ was again raised. The Court of Appeal held that Mrs Bicknell was not required to pay Foxtons for their initial, unsuccessful introduction. In order to charge commission, an agent must be the effective cause of the sale. Simply introducing a property to a person who eventually becomes the purchaser is not sufficient. Had the reverse been true, Mrs Bicknell would have been in the unusual position of having to pay two agencies a commission for the same sale. Partner Note For further information please contact Kate Barnes The Government has announced that it is extending the temporary provisions for first day marketing whereby a property can be put on the market without a Home Information Pack (HIP) provided one has been commissioned and paid for and is expected to be in place within 28 days. Originally, the dispensation was to end for properties marketed after 31 May 2008 but the date has now been postponed to 31 December 2008. The temporary dispensation that applies to leasehold properties, whereby the only compulsory document in the HIP is a copy of the lease, will also continue until the end of the year. This change has been made because the Government has instituted a new consultation process following industry complaints about the additional costs and delays being experienced when obtaining the documents necessary for inclusion in a HIP for a leasehold property. It is expected that the rules relating to the contents of HIPs for leaseholds may well change significantly between now and 31 December. If you are buying, selling or letting a property, we can assist you to make sure the necessary legal work is carried out promptly, professionally and economically. Partner Note For further information please contact Lorraine Moser If you have family wealth that you wish to protect, the joy at the prospect of one of your children getting married or entering into a civil partnership may be tempered somewhat by a touch of trepidation in case the relationship doesn’t last, particularly if a large settlement of assets is to be made on the happy couple. In such circumstances, the use of a pre-nuptial agreement (‘pre-nup’) is likely to make a great deal of sense. Legally speaking, such agreements are still rather a grey area. However, the judge in a leading case on the subject has most helpfully suggested a number of criteria which would assist the courts in deciding whether or not a pre-nup should be regarded as enforceable. The most important of these from the perspective of the parties to a pre-nup are:
For a pre-nup to achieve the desired object, it must be properly drafted and put into place in the correct circumstances. In particular, both parties to it should have the benefit of independent legal advice. If you are concerned that a relationship might not have a happy ending, we can assist you to help protect your family’s assets from the depredations of an ex-spouse or civil partner. Contact Julia Korona. Partner Note See also the recent Crossley v Crossley [2007] EWCA Civ 1491. Landowners who wish to prevent their land becoming part of the public highway should take note of two recent decisions in the House of Lords. The cases dealt with what constitutes a landowner’s ‘sufficient intention’ not to allow their land to be dedicated as a public highway. Land can become a public highway by being added as such to the Definitive Map maintained by the county council, provided an application is made. The Definitive Map shows publicly accessible bridle ways, footpaths and byways and once entered onto the Map, the status of the highway is conclusively proved. For property owners who do not wish their land to become open to the public, the correct strategy is therefore one of prevention. Until recently, all that was necessary to prevent an application for the Definitive Map to be altered was for the landowner to write to the council opposing it or to demonstrate some prior right over the land in question (i.e. that it is let to someone else). However, the Lords’ decisions mean that this is no longer sufficient. It is now recommended that any landowners who wish to oppose an application, or to prevent one being made, consider taking further measures, such as erecting appropriate signs advising that the land in question is not a public right of way and obstructing paths. Trespassers should be advised that the land concerned is not open to the public. It is recommended that evidence should be retained of all measures taken. If land is used as a public right of way for 20 years without steps being taken by the landowner to preserve their right to exclusive use of the land, and without demonstrable intent to oppose dedication of the land as a public highway, the right to prevent the land concerned being dedicated as such will be lost. “Landowners are also advised to review periodically the status of any measures they have put in place (e.g. signs and obstructions) and to repair or replace them as necessary. This will enable them to demonstrate their continuing intention to retain their exclusive rights over the land, should the question arise.” Partner Note For further information please contact Robert Sainsbury or Emma Coke In recent years, increased mobility and growing rates of home ownership have meant that ever-larger numbers of people nowadays inherit properties from relatives who lived many miles away. Similarly, many buy-to-let properties have been purchased in areas with a large student population, miles away from where their owners live. In such cases, when the time comes to sell the property, it is often difficult for the usual process of showing it to prospective purchasers to be carried out by the owner. In such circumstances, it is quite common for a property to be sold at auction. If you are considering selling a property by this method, here are some steps you can take to help make sure your sale goes as smoothly as possible. Well before the auction is planned, make sure you put together the necessary documentation, such as the Home Information Pack. Make a list of the information a prospective buyer will find useful, such as the age of the central heating system, wiring etc. and include any guarantees. Set your reserve price, which is the lowest price you will accept for the property. If the reserve is not met at auction, the property will not be sold. The reserve price should therefore be reasonable as if the property does not sell, there will still be costs to meet for the marketing of the property and the related legal work. You should also decide when you want the completion date to be. The contract to buy and sell is created when the auctioneer's hammer falls and the deposit is payable immediately, with the completion normally a few weeks later. Work out your plan B. In the present market, property is becoming more difficult to sell, so do not assume that the property will inevitably sell at auction. It may not. Make sure, therefore, that you are prepared for the possibility that after the auction, the property will still be yours. Vacant properties do qualify for rate relief, but other costs (such as insurance) may rise. We can assist you with all legal matters relating to buying and selling property. Contact Lorraine Moser The danger of cohabiting without making an express agreement as to how the title to property is to be held has again been underlined by a recent case. It concerned a woman who had lived with a man for several years in a house which was registered in their joint names and financed by a mortgage. However, there was no document recording the couple’s respective shares in the ownership of the property. The man had paid the deposit on the house from his own funds and also paid the mortgage repayments. He also paid other costs relating to the property, such as rates and utility bills. The couple had children and the woman, who worked, spent the majority of her income on them and the maintenance of the family. The couple drew up wills leaving their estates to one another. When their relationship broke down, the man argued that whilst he intended that his partner should inherit the property on his death, he had not intended it to be owned in equal shares. In court the judge decided that ownership of the house should be apportioned by the respective contributions of each party to its purchase. Since the woman had made no contribution, her share was nil. She appealed to the Court of Appeal, asserting that a beneficial joint tenancy had been created with her rightful share being 50 per cent. The man argued that his intention had been only that she would inherit the property if he predeceased her and they were still a couple on his death. The Court of Appeal found that the judge in the lower court had erred in considering the couple’s respective contributions to the cost of the property as representing their intentions with regard to its ownership. The fact that the property was jointly owned justified the assumption that both were beneficial owners. The ownership split had to be determined by the intentions of each party and the important issue was that the relevant intention was the intention understood by the other party. Furthermore, the respective contributions of each party could not be conclusive. The man’s intentions were not made clear. His argument that his partner’s share should be a lesser sum did not rest on logic and he could not demonstrate that the couple had shared the common intention that her share should be other than a half of the total. In this case, had there been documentation created when the property was purchased to show how it should be owned, there would have been little room for dispute. The fact that there was no evidence of any such agreement made it possible for the case to go all the way to the Court of Appeal. If you buy a property with someone else, having the agreed basis of ownership documented is inexpensive and easy to do. Contact Lorraine Moser for advice. Partner Note Thwaites, the Blackburn-based brewery which owns 400 pubs, has won a victory which will bring cheer to licensees, but may cause consternation for those who live near busy pubs that open well into the night. It illustrates that objections to extended licensing hours based on the nuisance caused must be accompanied by evidence that this is in fact the case. In the decision in point, the High Court ruled that a decision by magistrates to cut the opening hours of Thwaites’ Saughall Hotel in Saughall Massie on Merseyside was not based on evidence. The pub had initially been granted a licence by Wirral Council to open until 1 am on Friday and Saturday and until midnight during the rest of the week. The Saughall Massie Village Conservation Society appealed to the local Magistrates’ Court against the decision on the ground that the extended hours would lead to excessive noise and disorder. The magistrates agreed and reduced the hours. Thwaites appealed to the High Court, arguing that the objection was based on speculation rather than evidence, as there had not been any complaints of noise nuisance, and also that the decision of the magistrates was contrary to the philosophy of the Licensing Act and the restrictions placed on Thwaites were unnecessary to promote the licensing objectives. The judge agreed, reinstating the original decision of the Council. The effect of the decision will be to make it easier for licensees to defeat objections to extensions where these are based on speculation rather than evidence. The decision is a blow for people living in areas which they feel will be blighted by a decision to allow late-night opening of a pub or club. Whilst there may be other arguments for opposing an application for extended licensing hours, doing so solely on the basis of a nuisance for which there is no evidence is unlikely to be successful. A more successful strategy might involve collecting evidence of existing problems (such as noise or anti-social behaviour) arising from the premises and making complaints to the authorities regarding them. We can advise you as to what action to take to oppose licensing applications, planning applications or other undesirable proposals that concern you. Partner Note For further information please contact Helen Korfanty An executor who ‘went too far’ recently found himself liable for the legal costs of beneficiaries under the will who sued him for his failures in administering the estate. The circumstances were that the estate of a lady who died in 2006 came to be administered by a friend, who was the executor. Her will provided that another friend had the right to live in her house for life, after which the estate would pass to three charities for animals. The charities, becoming aware of their entitlement under the will, demanded information about its administration from the executor and were supplied with a copy of the will and a letter purported to be signed by the friend indicating that she wished to remain in the house. Incomplete information was provided in response to the charities’ repeated enquiries and the executor provided them with a valuation of the house far lower than one which they had obtained independently. Unsatisfied, the charities investigated further and discovered that the house was in fact occupied by the executor. The other friend had actually been living in sheltered accommodation for some time and had no intention of returning to the house. The charities, as beneficiaries, applied to the court to remove the executor and to have him replaced by an independent professional executor. The executor claimed he was administering the estate as the deceased would have wished. The court acceded to the charities’ requests and ordered the executor to pay their costs. In this case, there is no doubt that the executor’s actions were not acceptable. Had a professional co-executor been appointed, his behaviour would have been preventable. It is often a surprise to executors how aggressive charities can be when pursuing their own ends. In the space of little over a year (probate was granted in December 2006 and the case reached court 13 months later), the charities had clearly incurred considerable expense in sending repeated solicitors’ letters and having their own valuation of the property carried out. The appointment of an independent professional executor would undoubtedly have led to substantial additional costs. In different circumstances, the real loser might well have been a family member who stood to inherit a share of the residue of the estate. The lesson to be learned here is to be careful in your choice of executor and to whom you leave your estate. Administering an estate is an onerous and time-consuming exercise and having demanding residuary beneficiaries can add to an executor’s difficulties. It is often preferable to leave to charity a fixed sum, but the problem there is that specific bequests are met before the residue of the estate is distributed and in some circumstances (for example when significant care costs are incurred) that may mean that the specific bequests are met and there is little or nothing left for the residuary beneficiaries. Normally, the most sensible arrangement to make is to appoint a spouse, partner or friend as executor and a solicitor as co-executor. This usually permits the estate to be administered quickly and cost-effectively. Contact us for advice on any matter relating to your will or on questions relating to the administration of an estate. Partner Note For further information please contact David Cocksedge or Alison Damant Discretionary trusts are commonly set up to provide for family members whose lifestyles present challenges to the settlors of the trust. They work by transferring assets to trustees, who are then at liberty to use the assets as they see fit for the benefit of the beneficiaries. The key point is that trustees of a discretionary trust are not required to give any specific sum (or indeed, any sum at all) to a beneficiary if, in the opinion of the trustees, doing so would not benefit those for whom the trust was set up. This makes discretionary trusts a good vehicle to use when the settlor wishes to provide for a feckless child but fears that they may squander any assets which come under their control. However, trustees are not a law unto themselves. Under English law a beneficiary is entitled to see documents, such as trust deeds and supplementary documents, unless they fall into one of the categories of what are termed ‘exempted documents’. The settlors of such trusts often give the trustees guidance on their intentions by means of a ‘wish letter’. This is not part of the formal trust documentation, but is intended to guide the actions of the trustees in relation to the trust assets and the beneficiaries. A recent case dealt with an argument concerning such a letter. The three beneficiaries of a trust requested the court to require the trustees to disclose to them the contents of the wish letter written to the trustees by the settlor. The trustees considered that the exercise of their powers was inherently confidential and appealed against the decision of the lower court that they should disclose the contents of the letter. In the Court’s opinion, ‘it was axiomatic that a document brought into existence for the sole or predominant purpose of being used in furtherance of an inherently confidential process was itself properly to be regarded as confidential’. However, Mr Justice Briggs went on to say that, “trustees should in general regard a wish letter…as invested with a confidentiality designed to be maintained, relaxed, or if necessary abandoned, as they judge best serves the interests of the beneficiaries and the due administration of the trust.” Partner Note For further information please contact David Cocksedge or Alison Damant The new Capital Gains Tax (CGT) regime was introduced on 6 April 2008. At that time the old scheme, based on the taxation of capital gains with a partial allowance for inflation and a reduction (in effect) for holding assets for longer periods, was abolished. The link between the rate of tax payable and the taxpayer’s marginal rate of income tax was also abolished. The ‘tax free’ lower band is retained, with £9,600 of an individual’s chargeable gains currently tax free. The new scheme features a flat rate of CGT of 18 per cent, with specific reliefs, the most important of which is entrepreneur’s relief, the most important aspects of which are as follows:
In certain circumstances, trustees may also benefit from the relief where qualifying assets are held in trust. However, there are a number of restrictions to the availability of entrepreneur’s relief. If you are considering disposing of assets or require assistance with any matter to do with the preservation of family wealth, contact us for advice. Partner Note For further information please contact David Cocksedge or Alison Damant If the will of a relative on whom you are financially dependent fails to make provision for you, it is possible to apply to the court under the Inheritance (Provision for Family and Dependants) Act 1975 (PFDA) for it to be altered. An example can be seen in a recent case concerning a man who died in 2001. His will gave his widow the right for life to live in the family house (which was in his name). The house was worth £340,000. The goodwill in his business he left to his four sons. All his other assets were put in trust to be held equally by his widow and his sons. This arrangement left his widow with a place to live but an inadequate income. The widow applied to the court to vary the will on the ground that it had failed to make sufficient financial provision for her. The main issue in point was the value of the business, which had been effectively built up jointly by the man and his sons, who had all worked in it throughout their adult lives. Oddly, no formal valuation of the business was undertaken. However, the judge placed a value on the estate of between £1.15 million and £1.35 million. It was therefore a straightforward matter for him to decide that the widow’s needs had not been provided for properly under the will. A clean break was sought and the judge awarded her the matrimonial home absolutely (i.e. it was transferred into her sole ownership) and a lump sum of £410,000. “This case clearly only came to court because the family could not agree the matter between themselves. If they had been able to do so, the will could presumably have been altered by a deed of family arrangement,” says <<CONTACT DETAILS>>. “The net effect of the dispute (leaving aside the legal bills) was to give the widow more than half of the estate – a result which was probably not the one anticipated by the sons and possibly a more beneficial outcome for her than might have been agreed through negotiation rather than recourse to the court.” If your will fails to make adequate provision for a dependant, it may be subject to legal challenge. If you are the dependant of a person who has died and as a result of their death you will be financially distressed, you may be able to obtain relief under the PFDA. Contact us for advice in either case. Partner Note For further information please contact David Cocksedge or Alison Damant It is a common problem for families that relatives procrastinate over the making of a will or changing one made previously which has become inappropriate for whatever reason. This can continue for years until there is a sudden loss of mental capacity, perhaps because of a stroke or similar illness, or until a gradual loss of mental capacity becomes severe enough that the possibility of making a will is seemingly lost forever. Where no will has been made, families may blanch at the thought of the estate eventually being dealt with under the intestacy rules, which do not operate in a way that many people would expect or consider to be fair. Where there is an unsuitable will, family politics may prevent it from being rectified, after the death, by the making of a deed of family arrangement. Such circumstances may lead to manifest unfairness or a situation which is known to be at variance with the wishes of the person when they were still mentally capable. Few families seem to know that in appropriate circumstances an application can be made to the Court of Protection for a statutory will to be created. An application may be made by anyone who might be expected to be provided for by the incapacitated person if they had made a will when mentally capable. In some circumstances, permission to make an application may have to be sought from the Court. There is one main limitation to the statutory will. It cannot deal with immoveable property situated outside England and Wales, so a holiday home in Spain (or even Scotland) cannot be dealt with by a statutory will. One aspect of the application is that where there is an existing will, the application must name as a respondent any person or organisation which stood to benefit under the existing will. The procedure therefore is not a solution to the perceived problem of, for example, an earlier decision to make a main beneficiary of a will a person or charity of which the family does not approve. The procedure itself is fairly lengthy and involves a great deal of form-filling and the production of evidence of intentions, but with professional advice it can be accomplished relatively promptly. The incapacitated person does not have to be present for the will to be created or witnessed and their signature is not required. If you have a problem like the one referred to above, we may be able to help. Contact David Cocksedge or Alison Damant for advice. It is by no means uncommon for people to have money in accounts which they or their relatives have forgotten about and the scale of the problem is illustrated by the fact that National Savings and Investments (NS&I) reports that it has £435 million in dormant accounts and bonds. An extra £23 million sits in unclaimed Premium Bond wins. However, help is at hand. A website set up by the British Bankers’ Association, the Building Societies Association and NS&I will allow the tracing of lost or dormant accounts to be simplified. If you think you may have a forgotten or dormant account you can no longer find, look at http://www.mylostaccount.org.uk. Partner Note For further information please contact David Cocksedge or Alison Damant. | ||