Private Client Titles ~ Autumn 2008


Animal Damage Liability Depends on What is Expected
The law takes different positions on the responsibility of owners for damage caused by their animals, depending on the type of animal and the circumstances under which the damage occurred. A recent case illustrating this dealt with a road traffic accident caused by a runaway cow.
The cow had escaped from a field and strayed onto a road, where it was hit and killed by the claimant. The claimant was injured and one of the passengers in the car was killed. The claimant sued the cow’s owner under the Animals Act 1971, claiming that the cow had escaped as a result of his negligence. The Act holds owners of animals to be liable for injuries etc. caused by their animals when the injury or damage arises because they have failed to control behaviour which might be expected from the animal in question. The case turned on whether the cow’s owner could reasonably have expected the animal’s behaviour to occur.
The cow had been separated from its calf on the same day it escaped. In such circumstances, a cow’s maternal instincts will often make it restless. However, in order for the cow to get out of the field and onto the road, it had to get over a farm gate and then cross a 12ft cattle grid.
The claimant argued, in effect, that in the circumstances special care should have been taken to make sure the cow was contained securely in the field. The defendant farmer argued that the physical ability exhibited by the cow in clambering over the gate and across the cattle grid was beyond anything he could reasonably have anticipated.
At issue was whether the behaviour was a ‘dangerous behavioural characteristic’ of the animal, in which case the farmer would be liable under the Act. Because the animal was behaving in a dangerous and agitated way because of her maternal instincts, she was in effect a wild animal.
After an appeal to the Court of Appeal, the claim against the farmer failed, the Court taking the view that the farmer could not have anticipated the exceptional physical feats of the cow.
The nub of the law relating to animals is what would be reasonable for their owners to do, bearing in mind the range of likely behaviours of the animal, and the possible effects of the animal being uncontrolled.
If you are hurt by or suffer from a nuisance caused by an animal or animals owned by someone else, contact us for advice.
Partner Note
Bankruptcy and the Family Home
With the economy in poor shape and personal debt still at high levels, the outlook is less than rosy for people who are facing insolvency. Even after the changes made by the Enterprise Act 2002, bankruptcy is still a difficult experience for most bankrupts. This is especially true where the family home is the main asset of the bankrupt’s estate.
The trustee in bankruptcy will normally seek a possession order over the property so that it can be sold to satisfy the claims of creditors.
When deciding whether the possession order is to be granted, the court is obliged to consider:
  • the interests of the creditors;
  • the conduct of any spouse or civil partner (current or past) in contributing to the bankruptcy;
  • the needs and financial resources (if any) of the current or former spouse or civil partner and any children; and
  • the other applicable circumstances of the case.
Where an application for a possession order is made more than a year after the property has vested in the trustee in bankruptcy, the court will normally regard the interests of the creditors as paramount. The 12 month delay between the bankruptcy and the application may give a false sense of security, but does at least allow time for alternative living arrangements to be made if a sale is probable.
An application to resist the possession and sale can be made if there are exceptional circumstances, but consequences for the family arising from the bankruptcy will only very rarely be considered as exceptional circumstances.
Where a delay in paying creditors is unlikely to cause them any prejudice, a case may be able to be made out that the circumstances are exceptional enough to justify the defeat of an application for possession. An example might be when there is a great deal of equity in the property, such that the debts plus interest thereon are likely to be paid in full on an eventual sale. Such an argument might apply where the creditor is HM Revenue and Customs, for example.
Serious illness in the family (not that of the bankrupt personally, except where this creates a need for a family member to remain in the house to look after the bankrupt) may also be regarded as an exceptional factor.
There are a number of other factors that may also constitute exceptional circumstances. If you are faced with a possession application, it is important to take legal advice promptly as there may be other solutions (such as a relative purchasing the trustee in bankruptcy’s interest in the property) which can be explored.
However, the best approach is to take advice as soon as you get into financial difficulty. Normally, the earlier such issues are addressed, the greater the likelihood of a satisfactory outcome – possibly avoiding bankruptcy altogether.
Contact <<CONTACT DETAILS>> for further advice.
Partner Note
There is a good article on this topic in the Solicitors Journal, 5 August 2008 pp 16-17.
Bogus Air Fare Offers to be Banned
New regulations are to be introduced to ensure that ‘the price you see is the price you pay’, when booking cheap flights via the Internet. These will mainly affect low cost airlines which offer extremely low fares that are then subject to myriad extras, some of which (such as taxes and landing fees) are unavoidable.
The regulations will effectively ban ‘fly free’ and ‘fly for £1’ type promotions.
The change follows a finding by the European Commission that up to a third of low cost airline passengers considered that they had been misled over the cost of flights they had booked online.
The pernicious practice of carriers automatically charging for certain extras (such as travel insurance and bag charges) unless you specifically indicate on the booking form that these are not applicable is not covered by the regulations.
Other ‘extras’ charged for by budget airlines are:
  • reserved seats;
  • extra legroom seats;
  • priority boarding;
  • carriage of hold luggage;
  • climate change compensation;
  • checking in at the airport (not online); and
  • snacks and beverages.
When the cost of these extras is added, on some routes it may be less expensive to use a scheduled airline.
Partner Note
European Parliament report on transparent air fares. Legislation approved, 9 July 2008.
Boundary Dispute Highlights Need for Clarity
A recent boundary dispute has illustrated the desirability of ensuring that when a property is sold, the description of it in the conveyance is as clear as possible.
The dispute was over a farmhouse and adjacent fields, which were at one time under common ownership. In 1988 they were sold separately, the farmhouse being sold first and then the fields. The original owner had built a fence between the farmhouse and the fields. Regrettably, the plan, which was marked ‘for information only’, showed the fence as lying within the boundary of the property attaching to the farmhouse. The written description of the property conveyed with the farmhouse was inadequate, but the vendor (who at that time still owned the fields) had covenanted to maintain the fence. This made no sense if the fence were no longer on the vendor’s property.
The subsequent owner of the fields sought to have a declaration made by the court that her land included the land on which the fence stood and to have the copies of the plans filed at the Land Registry altered to show the fence as part of her property, not the farmhouse land. The Court of Appeal agreed that the fence stood on her land and that the boundary shown in the plan should be altered to show her ownership of the disputed land.
The plan of a property is normally only indicative and the extent of the true title is contained in the description of the property. It is therefore very important that conveyances contain accurate and comprehensive descriptions of the property being conveyed and also that documents of title are examined and compared with the filed plan to ensure that any anomalies can be resolved.
We can assist you to ensure that your interests are protected in any property transaction.
Partner Note
Strachey v Ramage [2008] EWCA Civ 804.
Buying Abroad – Considerations
After another cold, wet summer and with dull economic prospects at home, you might be thinking of buying a property abroad or even making a permanent move to foreign climes.
If so, as well as it being essential to take independent and high quality legal advice, there are several other considerations you should be taking into account.
It may be cheaper to get a mortgage in the local currency than in Sterling. Interest rates in the UK are traditionally higher than in most other countries. However, a foreign-currency mortgage carries an exchange rate risk which may be considerable. In August 2007, the Euro was worth 68p. In August 2008 it was worth about 79p. A €150,000 mortgage financed in August 2007 at 5 per cent would cost over £800 more annually at the exchange rate applying one year later.
On the other hand, if the pound falls, the Sterling value of the foreign asset rises. Conversely, if the pound strengthens, the Sterling value of your foreign property falls.
Income Tax
You will need to consider the income tax implications carefully. If you remain UK resident, you will pay UK tax on your world income – no matter where you earn it. If you are not UK resident, you will normally pay tax only on income arising in the UK and will be able to claim double taxation relief. If you have rental or other income abroad, you may well have to prepare and submit a local tax return. The rules for deduction of expenses also differ widely from one country to another, so local professional assistance may be needed to deal with tax compliance.
Inheritance Tax (IHT)
In the UK, liability to IHT is based on your domicile. If you are domiciled in the UK, your world assets are included in your estate for IHT purposes. However, you may well also have an IHT liability in the country in which you have your second home. This is an area which requires very careful planning.
Capital Gains Tax
A UK resident who makes a chargeable gain in a tax year is liable for UK Capital Gains Tax on the gain. Second homes abroad do not qualify for the principal private residence exemption. Furthermore, in most countries such a gain will also be subject to local tax.
In many countries, VAT must be charged on rental income. The VAT registration threshold in most EU countries is much lower than in the UK and penalties for non-compliance tend to be high.
Wealth Taxes
Wealth taxes (specifically, taxes on the value of property) are common. In the USA, for example, the equivalent of local rates is generally charged based on the current market value of properties in the area – so, if a neighbour sells at a good price, your property taxes may well go up.
Transaction Costs
The main additional costs abroad are agent’s and notary’s fees, which are typically much higher than in the UK, and stamp duty, which can also be much higher. In some countries, these can add up to 15 per cent to the cost of a property.
Other Considerations
There are many stories about disasters resulting from problems with the legal title to a property, from the failure by builders or contractors to complete property bought ‘off plan’ or where planning laws mean the loss of the property or its amenity value. However, more prosaic problems, such as intermittent electricity or water supplies, can also be an issue. Having high-quality, independent, local professional advice is essential if one is to avoid such catastrophes.
Lastly, one important aspect which is often overlooked is the local inheritance law. It is almost always worthwhile having a local will if you live or hold substantial assets abroad, but in some countries the laws governing who may inherit are far less flexible than here. One way of circumventing the difficulties this may cause might be to own a property through a company, but in some countries this will produce a tax penalty.
Buying a property abroad may be procedurally straightforward, but the tax and financial effects of foreign property ownership are substantial and there are many potential traps for the unwary. If you are considering buying abroad, take care.
Court Adopts Broad Brush Valuation of Business on Divorce
On divorce, the valuation of a family business is often a highly emotional and contentious issue, so it was unsurprising when the divorce of a couple after 15 years of marriage led to an acrimonious dispute over the value of their successful restaurant business.
The ex-husband valued the total assets (including the business, which he had run for 33 years) at £4.2 million. His ex-wife placed a valuation on the assets of £7.6 million, valuing the business at £5.3 million. She sought 50 per cent of the net assets plus school fees for the children. Her ex-husband offered 42 per cent of the net assets (£1.7 million), although this offer was later reduced.
Each produced an expert witness to back up their respective valuation of the business, which was the main point of dissent. The experts differed, but the main point of contention was whether the valuation should be based on a multiple of six times ‘maintainable earnings’ or nine times.
The judge relied on evidence of transactions in similar circumstances and ruled that the multiplier should be 6.5. He commented that the valuations of experts were of ‘doubtful utility’ because they are a matter of opinion and experts’ opinions differ. He therefore adopted a broad brush approach. Since there were insufficient resources for a ‘clean break’ arrangement to be financed, he ordered that the wife should receive £1.45 million plus periodical payments of £60,000 annually, child maintenance of £20,000 per annum and the cost of the school fees.
Says <<CONTACT DETAILS>>, “Few aspects of the financial arrangements in a divorce can be as contentious as the value of a family business and it is by no means uncommon for quite unrealistic values to be put forward. In many cases, the best overall result is achieved by the use of a single joint expert and sensible negotiation.”
Contact us for advice on all family law matters.
Partner Note
H v H [2008] EWHC 935 (Fam).
Covenant Prohibits Lawful Use
Covenants containing restrictions on the use or development of land can cause problems between neighbours.
Recently, a couple obtained planning permission to build a bungalow on a corner of their land.
Their property was subject to a covenant on development, which prevented them from building a residential property on it without the agreement of their neighbour. This was asked for and denied. The neighbour was of the view that the occupants of the bungalow would have use of the surrounding garden land and this might interfere with her privacy. She was unmoved by the argument that the owners of the existing property could use the land themselves without a bungalow being built and this would have the same effect on her privacy but would not breach the restrictive covenant.
The couple applied to the Lands Tribunal to have the covenant lifted. It refused permission and so they appealed to the Court of Appeal.
The Court upheld the decision of the Lands Tribunal. In its view, the value of the covenant to the neighbour was that her privacy was protected not only by prevention of the building, but also because of the potential use of the surrounding land as a garden. It was not in point that the benefit to her derived from the covenant restricting construction of the building rather than restriction of use of the land in question as a garden.
Says <<CONTACT DETAILS>>, “In this case, the covenant prohibited what was, in effect, a lawful use of the land as a garden. The prohibition was for occupiers of the proposed bungalow, not the couple who owned the land. Their use was not restricted, but the protection operated by prohibiting the construction of the bungalow.”
Partner Note
Duffield v Gandy [2008] EWCA Civ 379.
Estate Agents – Compulsory Redress Scheme Registration
In order to increase consumer protection in house buying, the Government has introduced regulations requiring all estate agents dealing with residential property in the UK to belong to a redress scheme. The new rules apply from 1 October 2008 and require all estate agents to belong to a recognised Ombudsman scheme.
Two existing schemes, operated by the Ombudsman for Estate Agents and the Surveyors Ombudsman Service, have already been approved and a further scheme is under consideration. Estate agents in England and Wales who offer Home Information Packs are already required to belong to an approved redress scheme.
The measures give the Office of Fair Trading greater powers to remove rogue estate agents from the market and give greater investigatory powers to enforcement officers.
Estate agents who fail to register will be subject to a fine and may be banned from operating as estate agents if their transgressions continue.
Partner Note
Announcement by the Department for Business, Enterprise and Regulatory Reform, 1 July 2008.
See also
Estate Agents Face Compulsory Redress Scheme Registration
In order to increase consumer protection in house buying, the Government has introduced regulations requiring all estate agents dealing with residential property in the UK to belong to a redress scheme. The new rules apply from 1 October 2008 and require all estate agents to belong to a recognised Ombudsman scheme.
Two existing schemes, operated by the Ombudsman for Estate Agents and the Surveyors Ombudsman Service, have already been approved and a further scheme is under consideration. Estate agents in England and Wales who offer Home Information Packs are already required to belong to an approved redress scheme.
The measures will give the Office of Fair Trading greater powers to remove rogue estate agents from the market and will give greater investigatory powers to enforcement officers.
Estate agents who fail to register will be subject to a fine and may be banned from operating as estate agents if their transgressions continue.
Partner Note
Announcement by the Department for Business, Enterprise and Regulatory Reform, 1 July 2008.
See also
Fatal Accidents – Court Confirms No Set-Off
When a person is fatally injured, it may be possible to make a claim for compensation under the Fatal Accidents Act 1976 (FAA). When the accident is the fault of another person, it is also normally possible to claim damages from them. In these cases the damages will include, where appropriate, a sum for loss of earnings.
One of the main principles of the British system of tort is that where damages are payable, the intention is to put the claimant in the same position in which they would have been had the event which led to the claim not occurred, not to make them better off. There is no concept of punitive damages.
This has led to the insurers of those found liable for damages in accident cases arguing that the payment they are required to make should be reduced where there is any other form of compensation paid.
Recently, a case came before the Court of Appeal which involved a man who died after being caught in a machine at the paper waste recycling plant where he worked. His employer was prosecuted and the case was serious enough for the managing director of the firm to be imprisoned for 12 months for manslaughter.           
The man’s widow was paid £100,000 from a trust fund set up by her late husband’s employer and a further £129,600 under the employer’s death in service benefit scheme. These payments were discretionary.
The company’s insurers argued that the payments should be set off against the widow’s claim for damages from the company. In court, the judge agreed that the payment from the death in service scheme should be set off, but the trust fund payment should not. The widow appealed.
The Court of Appeal ruled that since both payments were discretionary, neither should be taken into account when fixing the amount of damages payable to the widow. The FAA (Section 4) would exempt them from being taken into account. It states that, ‘In assessing damages in respect of a person's death in an action under this Act, benefits which have accrued or may accrue to any person from his estate or otherwise as a result of his death shall be disregarded’. 
Therefore the payments should be disregarded for the purposes of assessing the damages due to the widow.
Partner Note
Arnup v M W White Ltd. [2008] EWCA Civ 447.
Garden Owner Entitled to Fell Trees
A recent court ruling has confirmed the right of a garden owner to manage his garden without undue interference from the Forestry Commission. The case hinged on the definition of a garden and whether the owner of the property was entitled to treat his garden as such, despite the fact that it had become overgrown and had not been used as a garden for some time.
The case originated because the owner of the land, Michael Rockall, was sent a summons for the offence of felling growing trees without the authority of a licence issued by the Forestry Commission, contrary to section 17 of the Forestry Act 1967. Mr Rockall was convicted, conditionally discharged for 12 months and ordered to pay £750 prosecution costs.
Mr Rockall’s property had become heavily wooded under the previous owner and so he decided to cut down the trees in order to improve the land and restore the garden. Before taking any steps to fell the trees, he contacted the Forestry Commission to find out whether or not any permission was required. On the basis of information sent to him, it was clear that if he was felling trees in a garden he needed neither a licence nor permission.
Once he had cut down the trees, however, Mr Rockall was sent a summons and was subsequently convicted.
On appeal, it was held that because Mr Rockall fully intended to restore the garden and had made this clear to the Forestry Commission, he was entitled to do so and was covered by exceptions in the 1967 Act. The fact that the previous occupiers of the land had failed to maintain the garden was not sufficient grounds for deciding that the land had ceased to be a garden.
The conviction was therefore overturned.
Partner Note
Rockall v Department for Environment, Food and Rural Affairs [2008] WLR (D) 227. See
Good News for Victim of Hit and Run Driver
Uninsured drivers are a menace, but worse still are drivers who are involved in an accident but cannot be traced.
In 1946, the Motor Insurance Bureau (MIB) was established as a private company limited by guarantee for the purpose of entering into agreements with the Government to compensate the victims of negligent uninsured and untraced motorists. Every insurer underwriting compulsory motor insurance is obliged, by virtue of the Road Traffic Act 1988, to be a member of the MIB and to contribute to its funding.
In a recent case, a claim was made by a man who was struck by an unidentified hit and run driver in 1991, when he was three years old. In 1999, his parents became aware that a claim for compensation could be made to the MIB and submitted one on his behalf. The claim was rejected because under the Untraced Drivers’ Agreement (UDA) in operation at that time, the time limit for claims to the MIB for injuries caused by untraced drivers was three years.
When he was 16 years of age, the victim’s parents began proceedings against the MIB, claiming that European law required that the limitations applying to the MIB fund should be no less favourable than those applying generally and, in a ‘normal’ action, the time limit is suspended during the minority of a claimant – in other words, it starts to run only on the 18th birthday of the claimant.
The judge ruled for the claimant and the MIB appealed to the Court of Appeal, which referred the issue to the European Court of Justice (ECJ).
The ECJ considered the position and ruled that the protection given had to be equivalent to that available where the driver is uninsured. The claim would have been admissible at any time prior to the victim’s 21st birthday had the driver been insured or uninsured but identified. The UDA clearly gave less favourable treatment to people injured by a driver who could not be traced.
Accordingly, the claimant was able to proceed with his claim to the MIB.
Many people are unaware of the existence of the MIB fund. For further information, see
Partner Note
Ben Byrne (by his litigation friend) v Motor Insurers Bureau and Secretary of State for Transport [2008] EWCA Civ 574.
Government Acts to Protect Witness Anonymity
Following the well-publicised collapse of a case in which the prosecution evidence was underpinned by a witness who was anonymous, the Government rapidly passed into law the Criminal Evidence (Witness Anonymity) Act 2008.
The Act abolishes the common law rules relating to the power of a court to make an order that the identity of a witness in criminal proceedings be withheld from the defendant (or, on a defence application, from other defendants). It creates ‘witness anonymity orders’, which require ‘such specified measures to be taken in relation to a witness in criminal proceedings as the court considers appropriate to ensure that the identity of the witness is not disclosed in or in connection with the proceedings’.
Three conditions must apply for an order to be made. An order will only be granted:
  • in order to protect the safety of the witness or another person or to
prevent any serious damage to property, or in order to prevent real harm                                              to the public interest (whether affecting the carrying on of any activities in the public interest or the safety of a person involved in carrying on such activities, or otherwise); and
  • where, having regard to all the circumstances, the taking of those measures would be consistent with the defendant receiving a fair trial; and
  • where it is necessary to make the order in the interests of justice by reason of the fact that it appears to the court that it is important that the witness should testify, and the witness would not testify if the order were not made.
Therefore, where it is considered that threats to or intimidation of witnesses is likely, anonymity may now be possible. The move, whilst regarded with alarm by defence lawyers, has been greeted with relief by the Police and Crown Prosecution Service.
Partner Note
The Act can be found at
Is a Beneficial Loan a Detriment?
“Where informal (or no) arrangements are made regarding property ownership or financing, disagreements are often the result,” says <<CONTACT DETAILS>>
Recently, a dispute about ownership of a property arose between a brother and sister. The brother had lived with their mother until her death and at that point had succeeded to the secure tenancy of her council house. Using the ‘right to buy’ legislation, he applied to buy the house. To finance this, he obtained a mortgage and borrowed £5,000 from his sister on the basis that she would be entitled to the repayment of her loan and half the sales proceeds (net of her loan and the mortgage) if the property were sold. She was also paid 5 per cent interest on the loan – a rate below market rates at the time.
The two later fell out and the sister agreed that if her loan were repaid immediately, she would have no further claim regarding the property. This was done. Several years later, the property was sold for £385,000 and the sister claimed she was entitled to half of the net proceeds. Her argument was that the loan constituted a ‘detriment’ to her and there was therefore a ‘constructive trust’ in her favour.
The first question was whether she had suffered a detriment. The court was able to agree that the advancing of a loan on beneficial terms was sufficient to constitute a detriment. Furthermore, under the original agreement, the sister had no control over when her loan was to be repaid. Her argument that the original agreement created a constructive trust in her favour was therefore accepted. That the detriment was not substantial was not in point.
However, the court ruled that her express agreement regarding the repayment of the loan meant that her claim to have an interest in the property wasextinguished.
“The main lesson to be learned from this case,” says <<CONTACT DETAILS>>,“is that doing things on a casual basis is fraught with danger. Had the appropriate documentation been executed at the time of the transactions, there would have been nothing to argue about. If you are entering into an agreement with regard to an asset as valuable as property, it makes sense to get this properly documented at the time it is made.”
Partner Note
Levi v Levi, 12 March 2008.
See Solicitors Journal, 3 June 2008, pp 16-17.
Killer Can Sue for Loss of Earnings
It is not usual for someone to be able to make a claim for loss of earnings during imprisonment but, in an unusual decision, the Court of Appeal has ruled that in some circumstances such a claim may be successful.
The case involved a man who committed manslaughter when suffering from severe depression. The depression was the result of his being involved in the Ladbroke Grove train crash in 1999. Following the crash, he suffered major psychological injury and post-traumatic stress disorder. His personality was changed and he became depressed. In 2001, he stabbed and killed a stranger. He pleaded guilty to manslaughter on the grounds of diminished responsibility and was detained under the Mental Health Act.
The man brought a claim against Thames Trains Ltd. and Network Rail Infrastructure Ltd. for loss of earnings. The defendants argued that their liability must cease at the date of the stabbing. However, the Court ruled that his claim could proceed on the basis that the commission of the criminal act in 2001 was arguably not wholly the fault of the claimant, but could be attributed to the injuries he had sustained in the crash. The claimant would have to prove the defendant’s culpability but, once done, it would then be up to the defendant to show that the claimant’s conviction ‘broke the chain of causation’. Whilst the decision on that matter was one for the trial judge to make, the Court could see no reason in principle why the claimant should not be able to proceed with a claim based on the contributory negligence of the defendants.
Therefore, to the extent to which the man’s loss of earnings following his incarceration was the result of the negligence of Network Rail and Thames Trains, compensation would be due to the claimant.
Says <<CONTACT DETAILS>>, “The Court has ruled that there is no objection in principle to the man’s case being heard. It will be interesting to see to what extent the Court holds the defendants liable for his loss of earnings.”
Partner Note
Gray v Thames Trains and another [2008] EWCA Civ 713.
Loss Calculation Date Must be Reasonable
House purchasers who acted on a structural engineer’s advice, which subsequently proved to be incorrect, were able to claim for their loss based on a valuation made seven years after the event, the court ruled recently.
The mortgage company which was to provide the finance for the purchase required the purchasers to engage a firm of structural engineers to investigate the cause of cracks in the walls of the property and to suggest remedial work. The engineers issued a report to the effect that there was structural movement of the premises. They concluded that the cracking was due to trees growing close to the house and recommended that all large trees within four metres of the property be removed. The purchasers bought the property and removed the trees. However, further cracks appeared over time and the owners instructed a new firm of structural engineers, which concluded that the new cracks were the result of the removal of the trees. Whilst the original cracks had been caused by dehydration of the soil, the removal of the trees had led to the subsequent rehydration of the soil, and this was the cause of the new cracks.
It was established by a period of monitoring that the property was now stable and needed no further remedial work. However, the home owners sued the original firm of engineers for the loss of value of the property that had resulted from its negligence. Once the issue of liability was settled, the question which then arose was what should be the basis for calculating the value of the claim? The loss was valued at £20,000 by an expert valuer and the claim was brought for that sum.
The engineers argued that the loss should not be calculated based on 2007 values (when the valuer’s report was prepared) but on 2000 values, as this was when the negligent advice was given. As property prices had risen considerably in the intervening period, this would be a considerably smaller sum.
The court decided that the homeowners were entitled to £20,000 for the loss in value of their property on the basis that it would have been worth that amount more had the trees not been removed. In the view of the court, provided that the loss relates directly to the breach and the valuation of the loss took place at a reasonable date, ‘there is nothing inherently wrong in principle in valuing a diminution in value loss at a later date than the date of the breach’.
Normally, such damages are calculated based on the loss at the date of the breach. However, in this case the claimants had started their claim without delay once the further cracking had been discovered. In addition, the defendant failed to provide evidence of the value of the loss in 2000. This prevented the judge from using the 2000 value even if he had chosen to do so. In the court’s view, the choice of 2007 as the date on which to base the claim was reasonable.
Partner Note
Charlton and Another v Northern Structural Services Ltd. [2008] EWHC 66 (TCC).
New Road Safety Laws Come into Force
Motorists who kill while avoidably distracted at the wheel will face prison under new road safety laws which came into force on 18 August 2008.
Section 20 of the Road Safety Act 2006 (RSA) creates a new offence of causing death by careless or inconsiderate driving, which covers distractions that can lead to accidents and carries a maximum penalty of five years’ imprisonment. A distraction can be anything which takes a driver’s attention away from the road and which a court rules to have been an avoidable distraction. The definition includes smoking whilst driving, using a mobile phone (whether hands-free or not), listening to music, talking to fellow passengers, drinking, eating, using technological aids and personal grooming.
Section 21 of the RSA creates a new offence of causing death by driving whilst unlicensed, disqualified or uninsured and this carries a maximum penalty of two years’ imprisonment.
Prior to the introduction of these new laws, the maximum sentence for those convicted of causing death by careless, uninsured or unlicensed driving was a maximum £5,000 fine and penalty points on the driver’s licence.
Other changes to road safety law include the following:
  • anyone who fails to provide information about a driver who is caught speeding will be given six points on their licence rather than three. This is in response to numerous false claims by drivers, in an attempt to try to evade liability, that someone else was driving their vehicle at the time;
  • the maximum fine for parents who do not ensure their children wear seat belts has been raised from £200 to £500;
  • anyone convicted for a second time in four years of using a vehicle that is not sufficiently roadworthy will face a minimum disqualification period of six months;
  • failing to stop when indicated to do so by police is now punishable by a fine of up to £5,000, previously £1,000; and
  • it is also an offence not to stop on all roads in England and Wales if requested to do so by Highway Agency Traffic Officers. Officers can also stop vehicles for safety reasons on the motorway.
The latest Highway Code also includes new traffic calming initiatives, advice on wearing high-visibility clothing in the event of a breakdown, a new safety code for beginner drivers and guidance on merging with other traffic.
The Highway Code can be viewed online at
Partner Note
See the Ministry of Justice Press Release at
The Road Safety Act 2006 can be found at
Non-Disclosure Did Not Affect Settlement
In divorce proceedings, it is usual to make a full disclosure of assets and future financial prospects when agreeing the financial settlement. Failing to do so can cause a legal battle, as a recent case illustrates.
It involved a couple who had met at university and married. Both worked for a time, but the wife stopped working when the couple had children, who were aged 10 and 8 at the time of the divorce.
The husband was a stockbroker. Because of the nature of his earnings and the fact that the majority of the couple’s assets were tied up in the family home, a clean break was not achievable. Neither the husband nor the wife had any material assets when they were married, so the question of whether assets were ‘matrimonial’ or ‘non-matrimonial’ assets did not arise.
The court therefore ordered the ex-husband to pay his ex-wife £75,000 per year, plus the children’s school fees and extras, and gave the family home to her with the provision that if it were sold, 24 per cent of the gross sale proceeds would belong to her ex-husband.
Normally, that would have been the end of the story. In this case, however, within a fortnight of the financial provision order being made, the man left his employment for a new job which left him better off.
As a result of this, his ex-wife sought to have the order set aside, her main argument being that he had not disclosed that he was in negotiation for a new position that would make him materially better off. Had she known of it, she would not have agreed to the financial settlement.
The question for the court, therefore, was whether or not the ex-husband was under an obligation to disclose his negotiations. He admitted that he had not, but held that he was under no obligation to do so. He argued that the new job was not a ‘done deal’ and that the negotiations did not affect what he thought was a fair offer to his ex-wife. Furthermore, he considered that disclosure might have been harmful had the job offer not materialised.
In addition, he had originally offered her a percentage of his income (34 per cent up to £350,000 and 10 per cent of any excess). It was she who demanded a fixed sum.
The court ruled that the ex-husband had breached his duty to disclose material information. The question which then needed to be considered was whether the absence of full and frank disclosure led the court to make an order substantially different from that which it would otherwise have made. On this issue, the court ruled that the job offer had not affected the proposed financial settlement – there were still uncertainties in the contract. In addition, had the ex-husband stayed in his previous job, his earnings would also have risen and the difference between what he would have earned in his old job and his earnings in the new job was not substantial enough to set aside the original financial arrangements.
Says <<CONTACT DETAILS>>, “To fail to make a full disclosure in such circumstances is a risky strategy, but in this case it did not backfire. Achieving a just result normally depends on sensible negotiation based on sound legal advice and experience. We can advise you on all family law matters.”
Partner Note
I v I [2008] EWHC 1167 (Fam).
Normal Risks Not Actionable
Health and safety legislation requires that premises are kept safe for both employees and visitors alike. When someone is injured in an accident as a result of a failure by the property managers to maintain premises in a safe condition, they can be prosecuted under the criminal law.
Clearly, there are times when premises have been allowed to remain in an obviously dangerous state and in such circumstances a prosecution is normally successful. However, in many cases, the position is less clear cut and in these circumstances the issue will be decided on whether or not the injury happened as a result of a normal risk of everyday life.
In a recent case, a school headmaster appealed against his conviction under the Health and Safety at Work Act 1974. The case involved a three-year-old child who fell down steps at the school and sustained a head injury. The child contracted MRSA in hospital and died.
The case turned on whether the risk to which the child had been exposed (i.e. falling down the steps) was a real risk which was caused by the conduct of the school. The Court of Appeal found that it was not and so the headmaster’s conviction was overturned.
Partner Note
Regina v Porter, Court of Appeal. Reported  in the Times, 9 July 2008.
Pleural Plaques – Government Proposes Compromise
Pleural plaques are a form of scarring of the lungs caused by their being penetrated by asbestos fibres. Since pleural plaques do not themselves cause any physical symptoms, the House of Lords ruled last year that compensation was not payable to people who have developed them as a result of exposure to asbestos at work.
However, the decision caused considerable disquiet since the development of pleural plaques can be a precursor to the development of a more serious asbestos-related disease. The condition can therefore cause considerable anxiety to anyone diagnosed with it.  
The Government has therefore proposed that in England and Wales, a ‘no-fault’ insurance scheme should be set up to pay compensation to people diagnosed with pleural plaques.
A consultation paper has been launched to consider how such a scheme would operate.
Partner Note
The consultation paper can be found at
Police Not Liable Over Failure to Deal with Threats
The House of Lords has ruled that a police force that fails to deal with reported threats of violence, which subsequently takes place, cannot be sued by the person who suffers the violence.
The ruling follows two attempts to sue the police, one by the family of an optician, who was murdered by a technician whom he had accused of theft, and the other by a man who was attacked with a hammer by his ex-boyfriend. In both cases, the victims had warned the police that serious threats of violence had been made against them and, in both cases, the police failed to take action.
In the first case, the claim was made that the Hertfordshire Police had violated the man’s right to life under article 2 of the Human Rights Act 1998. The claim was accepted by the Court of Appeal and the police force appealed that decision. In the second case, the claim was made that the Sussex Police owed the victim a duty of care under the common law.
In the case of the first appeal, the Law Lords were unanimous that the murdered man’s human rights had not been breached because the police action was appropriate to the facts and circumstances as they understood them. In the second case, the decision was not unanimous, but the majority considered that it could not easily be decided to what extent a common law duty of care existed in relation to protecting the public from criminal injury and that imputing such a duty could adversely affect the performance of the police in carrying out their other duties.
Partner Note
Chief Constable of Hertfordshire v Van Colle [2008] UKHL 50.
Smith v Chief Constable of Sussex Police.
Poor Performance of Pension Does Not Justify Negligence Claim
A recent Court of Appeal decision may be seen as bad news by anyone hoping to benefit from the pensions mis-selling controversy. The Court ruled that an investor cannot sue a financial adviser simply because a private pension has not performed as well as expected.
The case concerned a Mr Clifford Shore, formerly an employee of companies in the Avesta Group and a member of the Avesta pension scheme, which entitled him to a pension of two-thirds of his final salary. Had Mr Shore retired in October 2000, at age 60, he would have received a tax-free lump sum of £155,000 and an annual pension of £54,900 gross under the scheme. Had he retired early, say in January 1997, his lump sum would have been £140,400 and his pension £34,300.
In 1996, Avesta was taken over by British Steel and it was decided that the Avesta pension scheme would be wound up. The Avesta pension scheme members were given three options for their pension funds. These were to transfer them to the British Steel pension scheme, to transfer them to a personal pension, or to leave their pension with Avesta for eventual transfer to British Steel.
At various points, Mr Shore sought advice on these options from financial advisers Sedgwick Financial Services (SFS) and, acting on their advice, eventually transferred benefits valued at £637,507 to a personal pension with insurers Scottish Equitable. When he retired, in October 2007, he received a tax-free lump sum of £146,647 from the fund and a pension of £46,643 per year. To maintain this level of pension until his 75th birthday would have required the underlying fund to make a 12 per cent annual return.
However, on the first triennial review, in 2000, Mr Shore’s maximum pension was reduced to £32,570, owing to a fall in growth rates. By late 2002, his fund value had fallen to £204,000. On the subsequent review in 2003, the pension was reduced to £15,671. The following year, Mr Shore lodged a complaint that SFS had failed to advise him to leave his benefits in the Avesta scheme, where they would have been protected from the effects of the decline in growth rates. As a result, he had suffered a loss. He alleged the advice SFS had given him was negligent.
When the case first came to trial, in 2005, the court accepted SFS’s defence that when the pension fund was transferred in 1997, no loss was made. Although Mr Shore’s benefits were exposed to greater risk, the transfer could have resulted in greater benefits being paid to him, in the event that the market performed as expected.
The court held that for Mr Shore to have sued successfully for negligence, he would have to have substantiated the argument that he had suffered a loss
when the pension fund was first transferred and his claimcould not be based on losses which only became apparent some years later. Mr Shore appealed and the Court of Appeal upheld the original ruling.
“This case illustrates the fact that financial markets can never be relied upon to perform as well as desired,” says <<CONTACT DETAILS>>. “When it comes to important investment decisions such as the transfer of a pension fund, it is vital to consider all possible outcomes, not just the most optimistic.”
Partner Note
Shore v Sedgwick Financial Services [2008] EWCA Civ 863. See and   
Right of Way – Law, Not Intention, Determines Outcome
Where an easement (the ability to use someone else’s land in some way) is granted, it is usual for its terms to state any restrictions which may apply to its use.
Recently, a case came to court where a property was conveyed with a right of way over a pathway over the adjacent property such that access could be obtained to the road from the rear of the property.
The right of way stated that the occupiers of the property had the right of use of the pathway at all times for the purpose of access to or egress from the property for ‘all reasonable use necessary for the proper enjoyment of the property’. Unfortunately for their neighbour, this involved access early in the morning and late at night by visitors. The neighbours took the view that this use was more than was needed ‘for the proper enjoyment of the property’ and sought a ruling to restrict the use of the path.
The judge agreed, ruling that the original purpose of the right of way was to allow access to the rear of the property when access to the front was impracticable. In reaching this decision, he considered two documents which purported to come from the local council (which had sold both properties under the ‘right to buy’ legislation). These stated that the right of way was restricted in various ways. One of these documents, however, was written after the properties had been sold.
On appeal to the Court of Appeal, the decision was reversed. The understanding of the parties at the time of the grant of the right of way was not in point, what mattered was the law which applied. The legal documentation clearly stated that the grant of the right of way applied at all times for the reasonable use of the property. If there had been the intention to limit the right, it should have been contained in the deeds.
“There is no substitute for including any necessary clauses in the original documentation,” says <<CONTACT DETAILS>>. “This involves the vendor and the purchaser thinking through the possible issues and ensuring that any necessary rights or limitations of rights are dealt with at the time.”
Partner Note
Brooks and another v Young and another [2008] CA Civ 22 May 2008.
Tax – Negligence and the Burden of Proof
When HM Revenue and Customs (HMRC) believe that a taxpayer has understated their income, an assessment is raised to collect the tax which they calculate has been underpaid. Once the tax position is finalised, it is usual for a penalty to be imposed.
A restaurateur, who was assessed to tax on under-declared income for six years, recently faced a penalty for negligent submission of tax returns. The returns themselves were appealed in court without success. The taxpayer then appealed to the General Commissioners of Taxes on the grounds that it had not been shown beyond a reasonable doubt that he had negligently understated his income.
The question at issue was whether the Commissioners should apply the civil (‘balance of probabilities’) or criminal (‘beyond a reasonable doubt’) standard of proof in such cases, the taxpayer arguing that the criminal standard of proof was required and HMRC that the civil standard of proof applied.
The High Court considered that there was no doubt that the proceedings themselves were civil, not criminal, and had nothing of the character of criminal proceedings. The standard of proof required was therefore the civil standard.
The Court also considered whether article 6 of the Human Rights Act 1998 (HRA) applied in that the proceedings for penalties in cases such as this would be considered to be criminal proceedings under the Act. However, the HRA does not deal with the burden of proof and the Court was therefore content to rule that the fact that proceedings were criminal in character, for the purposes of article 6, did not mean that they were criminal under domestic law.
On both counts, therefore, the argument that the criminal burden of proof should apply with regard to the penalties failed.
Partner Note
Commissioners v Khawaja [2008] EWHC 1687 (Ch).
The Right to Smoke – Not a Human Right
These days the Human Rights Act 1998 (HRA) underpins the arguments in many cases in which people allege that being treated a certain way means that their human rights have been violated. It was, therefore, only a matter of time before the smoking ban, which was introduced in July 2007, was attacked on the basis of the HRA.

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