Private Client Titles – June 2006


Adoption – The Basics
The most important requirements for adoption are that the adopter must be over 21 years of age, the child to be adopted must be under the age of 18 and that joint applications to adopt can only be made by married couples and civil partners. Unmarried couples can adopt, but only one person can become the adopter.
People who do not already know the child they wish to adopt usually use an adoption agency. As a first step, the agency will arrange for a social worker to visit and make a home study assessment. As well as assessing the family, they will also take two references and obtain medical information from a GP. After this assessment is made, an adoption panel will make a recommendation and, if the initial application is approved, the process of matching a child to the family begins. If the adoption has not been carried out through an agency, it is necessary to inform the local council of the intention to adopt a child three months before placing the application with the court.
The next stage in the process of legally adopting a child is carried out through the courts. In most cases, applications for adoption orders are made through specialised Adoption Centres. These are courts that have specialist judges and adoption officers who are experienced in the process.
Once the official application has been made, the judge has a number of options. He or she may order that a reporting officer be appointed. This will happen if the current parent or guardian of the child agrees, or appears to agree, to the adoption. The reporting officer will produce a report on matters that may help the court to make a decision on the adoption application. If the parent or guardian does not agree, then a children's guardian is appointed by the court to protect the interests of the child. The children’s guardian will make a report to the court advising on the interests of the child and will represent the child in court. The local authority or adoption agency may also be required to provide a report. This will include details about the prospective family and the child.
About four weeks after the application for adoption, the judge may arrange a hearing called a 'first directions hearing'. At this meeting the judge will consider, amongst other matters, whether the application contains all the correct documentation and when and where the final hearing will take place.
Once an adoption order is granted by the court, the effect is to break all the legal ties between the child and his or her birth family, or current guardian, and transfer those ties to the adoptive parents.
Says <<CONTACT DETAILS>>, “Adoption is a rather lengthy and somewhat bureaucratic process. However, it is in everyone’s interests that adoptions are successful. We can help you to understand and comply with the legal process as well as make any necessary legal arrangements, such as making a new will.
Biology Does Not Make a Parent
Being the biological mother of a child can be of less importance then being the ‘psychological parent’, according to a recent decision of the Court of Appeal.
This surprising conclusion comes as a result of a case in which a mother lost primary custody of her biological children to her lesbian ex-partner. The children were born as a result of anonymous artificial insemination while the couple were together. Under an earlier custody agreement, the two women were granted shared contact with the children. However, their biological mother took the children from the Midlands to Cornwall, in breach of the order. Her former partner then went to court seeking an order that the primary care of the children should be her responsibility. She was successful both in the court and, on appeal, in the Court of Appeal.
“Being the natural parent of a child will not necessarily mean that you will be granted custody in the event of a family breakdown,” says <<CONTACT DETAILS>>. “The court’s first responsibility is to consider the welfare of the child and where psychological attachment to a step-parent or partner is greater than to the biological parent, this can sway the decision.”
This decision has particular implications for civil partners who have children. For advice on all family matters, contact us.
Cohabitation Agreements – Protection for Unmarried Couples
One of the most common myths in English law is that there is such a thing as a ‘common-law marriage’. It simply doesn’t exist and this misapprehension has led the Law Commission to suggest proposals to give additional rights to cohabiting couples. However, the Commission’s final report on this is not due until 2007. Until any changes are made (which could be several years away), cohabitees continue to have few rights. When a marriage or civil partnership breaks up, the rights of the respective partners are relatively clear. When the relationship of a couple who have been living together breaks up, the difference between a legally-recognised partnership and an informal one becomes all too obvious.
For example, on the death of an unmarried partner not only do the intestacy laws make no provision for the bereaved person to inherit from the estate of their partner, but also the surviving partner does not benefit from the exemption from Inheritance Tax that would apply if the deceased’s estate passed to a spouse or civil partner.
Indeed, in order to receive anything at all, the surviving partner may well have to go to court to show that they co-owned assets which in some cases may have been paid for by both partners but were owned in one name only. The surviving partner may also have to show that they qualify for financial provision to be made out of the estate under the Inheritance (Provision for Family and Dependants) Act 1975, which is designed to protect the families of people who die without leaving adequate financial provision for them. In any event, the surviving partner may face severe financial pressure whilst a claim is ongoing, even if it is ultimately successful.
For example, consider the recent case of a woman who had lived with her alcoholic partner for nearly three decades, as man and wife, before moving out, because she feared for her safety, shortly before he died. He left no will. Had they been married the situation would have been simple. However, in this case the woman was forced to go to court to prove her entitlement to financial provision, which was resisted by her late partner’s family.
Another case involved two barristers who had lived together. When they split up, long and expensive court proceedings were necessary to decide the appropriate apportionment of the two properties they owned, both of which were held in the name of one of them.
What can be done to prevent such problems?
One easy and inexpensive solution is to make a cohabitation agreement. This is a contract between two people who live together, which sets out their agreement of the division of their combined assets. It is sensible when cohabiting with anyone, without the protection afforded by marriage or a civil partnership, to enter into a cohabitation agreement so that ‘who owns what’ is clear. This is not only important if a relationship breaks down, but also if one of the partners dies.
What should the agreement contain?
Like any contract, it should state who it is between, how long it is intended to last and that it is intended to be legally binding. If there are particular assets (e.g. your home) which are to be dealt with in a particular way, these should be specifically mentioned and how they are to be dealt with on death or break-up made clear. It is not uncommon for a couple to sell one of their properties when they move in together, with the property they live in being retained in the name of the original purchaser. In such cases, it is sensible to decide if the non-owning spouse’s contribution is to be treated, for example, as a loan or if they are entitled to a percentage of the property value.
The ownership of all significant assets – bank accounts, insurances, specific valuables etc. – should be considered. Details of income and expense sharing arrangements should be included if possible and if there is the intention that one partner should support the other, this should also be mentioned, as should any financial arrangements regarding family members.
Lastly, the agreement can include any other matters that you wish to agree between yourselves – you can even include how the housework is to be shared!
It is obvious that a cohabitation agreement is normally best considered in tandem with your will. There are tax planning and other issues to consider – for example, you might think about writing any death in service benefits or insurances in trust for your partner.
For advice on cohabitation agreements, please contact <<CONTACT DETAILS>>.
Covenant Not Assigned Does Not Survive Sale
Most arguments about covenants placed on land have to do with property developments which are opposed by the owners of neighbouring land.
A recent case involved land which had been split into four plots in the 1950s. The owner of the land sold three of the plots and retained the fourth for her home. The plots she sold were subject to a covenant that any developments had to be approved by the original owner. When she finally sold her own plot, there was no such covenant put on the land.
The owners of one of the plots decided to demolish the building that was on their land and to build a small block of flats. The new owners of the fourth plot of land sought to prevent this by saying that the covenant which was attached to the earlier plot sales was still valid.
The people wishing to build the flats argued that the covenant could not pass to the new owners on their conveyance unless it was expressly assigned. The court agreed. The original covenant had clearly been placed on the first three properties in order to protect the interests of the original owner.
The case shows the need to give careful consideration to covenants when examining conveyances. In this case the covenant belonged, in effect, to the original vendor of the land and did not attach to the subsequent owners of the property (her ‘successors in title’). They were therefore unable to prevent the development.
To ensure that your property purchase does not contain hidden pitfalls, or for advice on any property matter, contact <<CONTACT DETAILS>>.
Different Child Support Rules for Gay People Not an Infringement of Human Rights
The rules for working out child support arrangements under the 1991 Child Support Act contained different provisions for the treatment of the ‘non-resident’ parent (the one who does not normally live with the child), depending on whether that parent was in a same-sex or a heterosexual relationship. These rules come into play when there is a breakdown of the family unit.
According to the House of Lords, the rules did not amount, at least to the extent they operated prior to the introduction of the Civil Partnership Act 2004 (CPA), to adverse discrimination contravening Article 14 of the European Convention on Human Rights (ECHR). A recent case dealt with the rule which combines the income and outgoings of the non-resident parent with those of his or her new partner, for the purpose of assessing liability for Child Support, only when the couple is heterosexual. If the couple is same-sex, the non-resident parent is assessed as if he or she lived alone.
In the case in point, the way the rules used to operate led to the non-resident parent, who was now in a same-sex relationship, contributing in excess of £30 more per week in Child Support than she would have done had the couple been assessed jointly. The House of Lords judged that the rules (prior to the CPA) were an attempt to strike a fair balance between the needs of the children of the separated parents and the new household. The link with the ECHR right to ‘respect for family life’ was too tenuous a link to make the ECHR applicable.
“Under the CPA, the rules are effectively the same for all couples, regardless of sexuality,” says <<CONTACT DETAILS>>. “However, the more general point is that the Lords seem unwilling to apply the ECHR in cases in which the issues do not amount to a strong and direct challenge to human rights.”
Divorce – Pensions Not Like Other Assets
When couples divorce, the value of their respective pensions is one of the assets taken into account when the financial settlement is decided.
However, where the pensions are substantial, this can cause complications. Pensions are not like other assets – they cannot be sold, they cannot rise in value once they start to be taken and they cease to have any value at all on death.
During a recent court case, the Court of Appeal made it plain that it regards pensions as different from other assets. The appeal was brought by a Mr Martin-Dye, who split from his independently wealthy wife in 2003 after sixteen years of marriage. In the High Court, he was awarded 43 per cent of the couple’s assets of £6.3m.
However, Mr. Martin-Dye’s pension fund amounted to over £940,000 – over a third of his share of the assets. His wife’s pension fund, on the other hand, was just over £100,000,a much smaller proportion of her asset share. He regarded this as unfair, hence his appeal against the decision.
The Court decided that the original ruling was unfair. In its view, an adjustment had to be made such that the value of the two funds was combined and the appropriate split made of the aggregate value (i.e. Mr Martin-Dye was to receive 43 per cent of the combined pension value of £1,040,000 and 43 per cent of the remaining assets). In practice, this meant that Mrs Martin-Dye was required to make a considerable ‘balancing payment’ to her ex-husband, in exchange for enhanced pension rights in the future.
Says <<CONTACT DETAILS>>, “The courts are adopting a more sophisticated approach to financial settlements and in cases where pensions are a major asset, ‘pension-sharing’ orders are normal.”
Family Law – Changes Afoot
The Government has announced plans which will radically affect the law relating to marriage breakdown and child support.
The first change is the proposal to abolish the Child Support Agency (CSA). It is to be replaced by a simpler system, which will deal mainly with complex cases and cases in which obtaining payment of support is more than usually difficult. ‘Average’ cases will be expected to be arranged by agreement, using guidelines yet to be published.
The CSA has been subject to an unending tide of criticism throughout its existence, so its demise will hardly be met with sadness. However, there are worries that the new proposals (which will include sending debt collectors after unwilling payers) will leave some of the most vulnerable parents insufficiently protected.
Another move is the launch of a consultative report on proposals aimed at giving unmarried couples legal rights on the break-up of their relationships. At present, couples who are unmarried or who are not civil partners have rights and obligations as regards children, but few rights as regards the assets of the relationship. With over 2 million people living in non-formalised relationships, the lack of any rules regarding the division of assets should these couples break up has caused innumerable problems.
The new scheme is intended to apply to both heterosexual and same-sex couples. It is stressed that it will not be the same as divorce, but will include, for example, provision for claims by partners who make ‘economic sacrifices’. 
The consultation period ends in September, so any legislation is unlikely before 2007 at the earliest. Cohabiting couples who are potentially affected by such considerations could consider making a ‘cohabitation agreement’. Contact <<CONTACT DETAILS>> for advice.
Government Policy on Sham Marriages Breaches Human Rights
For years the Government has been trying to crack down on the use of sham marriages to breach immigration controls. Some people wishing to reside or remain in the UK have used marriage to someone with residency status as a way of avoiding deportation. Recently, several cases were brought before the courts as test cases to see if Government policy as administered since the relevant regulations were introduced in 2005 was compatible with the European Convention on Human Rights (ECHR).
Under the current policy, non-EU citizens who are subject to immigration controls require the permission of the Secretary of State if they wish to be married other than in an Anglican ceremony. Permission is obtained by applying for a licence (cost £135) from a register office. If the application is refused, there is no right of appeal. An Anglican marriage contains numerous safeguards which it was considered would prevent its use for the purpose of sham marriages. The cases were brought on the basis that the system infringed Article 12 of the ECHR (the right to marry) and Article 14 (which prohibits discrimination).
The court judged that the rules did indeed breach both Article 12 and Article 14, making it necessary for the Government to suspend them.
Says <<CONTACT DETAILS>>, “This ruling will come as a relief to many genuine couples who, in practice, faced arranging an Anglican marriage or not being married at all.”
Guidance for Charity Trustees
The regime governing charities has been progressively tightened up over the years, making the scandals that were once not uncommon much more of a rarity. This means that trustees now have to adopt a more professional attitude to the management of a charity’s affairs than was necessary in the past.
The Charity Commission has published guidance for the trustees of charities, stating that they must:
·        have and accept ultimate responsibility for directing the affairs of a charity and ensuring that it is solvent, well-run and delivering the charitable outcomes for which it has been set up;
·        ensure that the charity complies with charity law and with the requirements of the Charity Commission as regulator – in particular ensure that the charity prepares reports on what it has achieved and annual returns and accounts as required by law;
·        ensure that the charity does not breach any of the requirements or rules set out in its governing document and that it remains true to the charitable purpose and objects set out therein;
·        comply with the requirements of other legislation and other regulators (if any) which govern the activities of the charity;
·        act with integrity and avoid any personal conflicts of interest or misuse of charity funds or assets;
·        ensure that the charity is and will remain solvent;
·        use charitable funds and assets reasonably and only in furtherance of the charity’s objects;
·        avoid undertaking activities that might place the charity’s endowment, funds, assets or reputation at undue risk;
·        take special care when investing the funds of the charity, or when borrowing funds for the charity to use;
·        use reasonable care and skill in their work as trustees, using their personal skills and experience as needed to ensure that the charity is well-run and efficient; and
·        consider getting external professional advice on all matters where there may be material risk to the charity, or where the trustees may be in breach of their duties.
If you require advice on any aspect of being a trustee of a charity or any other entity, <<CONTACT DETAILS>> can advise you.
For more information, see
Lords Divorce Cases – Contribution and Expectation Matter
The headline-grabbing decisions in the recent ‘rich list’ divorce cases confirm that the House of Lords is emphasising that marriage is a partnership and that the relative contributions of the couple to the marriage will be relevant to the financial settlement terms on divorce, as will the legitimate expectations of the couple. The judgments will be seized upon by divorcing spouses who have sacrificed their own careers for those of their partner, or those who married with the expectation of a well-to-do lifestyle only to have that prospect dashed. In delivering his judgment Lord Nicholls of Birkenhead stressed that marriages are partnerships of equals and that this principle is as relevant to short marriages as long ones.
In the first case (McFarlane v McFarlane), a wealthy accountant’s wife had given up her own successful career in order to help support her husband’s career and to concentrate on her roles as a wife, and mother to the couple’s three children. Nearly two decades later, the marriage broke down. The House of Lords heard the husband’s appeal against the decision of a lower court that his wife should receive a settlement of £250,000 a year for five years out of the husband’s annual income of £750,000. The Lords decided that Mrs McFarlane should receive the sum of £250,000 annually for life, subject to possible future revision if circumstances change. This judgment confirms that for ‘stay at home’ spouses, any settlement on divorce will not only be based on an assessment of their needs (as has been commonplace in the past), but also on their contribution to the wealth of the family. In addition, in this case the Lords also took account of the loss caused to Mrs McFarlane because she had foregone a career of her own.
In the second case (Miller v Miller), a brief (under 3 years) and childless marriage ended in divorce. The lower court ruled that since the wife had a reasonable expectation of a wealthy lifestyle, she should be given a settlement of £5m from her husband’s fortune, reported as being approximately £17.5m. This ruling was upheld, at least in part because Mr Miller earned a great deal of money during the period of the couple’s marriage. In general, the courts will look somewhat differently on wealth brought into the marriage by each spouse as opposed to the wealth accumulated during the marriage.
The question of the actual conduct of the spouses during the marriage was regarded as being of no importance in these cases.
“These judgments confirm that future expectations are relevant in determining financial settlements on the break-up of a marriage,” says <<CONTACT DETAILS>>. “The contribution of each party to the marriage will also be relevant in the distribution of family assets.”
In his judgment, Lord Nicholls said that ‘in the case of a short marriage fairness may well require that the claimant should not be entitled to a share of the other's non-matrimonial property’. Non-matrimonial property is property brought into the marriage rather than acquired during it. He also emphasised that unless the misconduct by one spouse is ‘such that it would in the opinion of the court be inequitable to disregard it', it cannot be a factor in the financial settlement. This should therefore mean that more divorce cases are settled without the need to go to court and that the negotiations are conducted in a more conciliatory manner.
Needs of Child, Not Parent, Paramount in Divorce
The Court of Appeal has confirmed that when determining financial settlements on the break-up of a family, it is the needs of the children which are paramount, not those of the parents.
The Court was hearing a case in which a mother was appealing against a lower court ruling that the sum of £800,000 should be provided by her former husband to buy a house for her and their daughter to live in until the daughter reached adulthood. The woman had previously given evidence that suitable houses in their neighbourhood cost between £1.2m and £2m. The provision of a house valued at £800,000 would therefore have made it necessary for her to move to another area.
The Court of Appeal confirmed that the judge was in error and had concentrated too much on the needs of the father when deciding the terms of the settlement. The prime objective should have been to consider the needs of the daughter. Moving to a new area would pose a risk to her welfare as she would lose the security of her home and school.
Overseas Credit Card Use – Protection Applies
The Court of Appeal has confirmed that consumers who use their credit cards to purchase goods abroad will be protected by the Consumer Credit Act 1974 in the same way as they are if they purchase goods in the UK.
This means that if the merchant selling the goods is in breach of contract or misrepresents them in any way, the credit card company is required to compensate the customer.
This will apply when:
·        a consumer uses a UK credit card to buy goods while abroad;
·        a consumer orders goods from a foreign supplier while abroad for delivery into the UK;
·        a consumer in the UK buys goods by telephone, mail order or over the Internet which are delivered to a UK address from overseas; or
·        there are face-to-face pre-contract dealings with a foreign supplier who is temporarily in the UK, or with a UK agent of a foreign supplier, but the contract is not completed in the UK.
This decision will be particularly welcome to those who buy goods using the Internet.
Pre-Nuptial Agreements – Should We Have One?
Whilst pre-nuptial agreements have been commonplace in the USA for many years, they have not been widely used in the UK for the simple reason that the courts have refused to recognise them.

However, recent cases in which couples who had made pre-nuptial agreements then went on to get divorced have caused a reawakening of interest in them. In one case the court decided to uphold a contract entered into by a couple who separated after less than two years of marriage and then divorced. The wife was claiming £1.7m from the husband, despite having agreed in the pre-nuptial agreement to settle for less.

An important factor in this case was that both the husband and the wife had the benefit of legal advice when drawing up the agreement prior to their wedding, which was said to have been entered into by the husband with some evidence of lack of enthusiasm. However, the wife was under no pressure to agree to the terms of the settlement, so the pre-nuptial arrangement – which gave her the use of a £1.2m house until their child came of age, a lump sum of £120,000 and an annual payment of £15,000 – was enforced by the court.

Most European countries do recognise pre-nuptial agreements and the Solicitors’ Family Law Association (recently renamed ‘Resolution’) has called on the Government to enact legislation in the UK to make such agreements enforceable in the UK courts.

In deciding whether to take a pre-nuptial agreement into account, the court will consider whether the parties to it had professional advice, how well they understood their financial circumstances and the impact of the agreement, how long ago the agreement was signed and whether any pressure was brought to bear on either party to sign it.
Changes in the family (e.g. the birth of children), in the financial circumstances of either party or lasting illness may also be relevant.
Using a properly-drafted pre-nuptial agreement can be a worthwhile exercise in appropriate circumstances. Contact us if you would like advice on this matter.
Reasonable School Governors Need Not Fear Human Rights Law
Two recent cases will allow school governors to breathe a sigh of relief, as in both cases attempts by students to obtain redress for what they claimed were breaches of their human rights have failed.
In the first case, a thirteen-year-old student took his case to the House of Lords, claiming that his right to education was infringed when he was excluded from school. Abdul Hakim Ali was excluded from the Lord Grey School after allegations were made that he had participated in starting a classroom fire. The case was eventually dropped for lack of evidence, but he was excluded whilst investigations were ongoing and work was sent to him at home.
He claimed that this infringed his right to education under the First Protocol of the European Convention on Human Rights. The Lords, however, judged that the response of the school (which had offered to readmit him when the case against him was dropped) was reasonable and appropriate and so he lost his case.
In the second case, a Muslim teenager lost her appeal in which she had claimed that her former school’s dress code infringed her right to religious freedom. In this case, the student wished to wear a jilbab, but the school’s policy did not allow this. It did, however, allow female Muslims to wear a shalwar kameez.
The Law Lords found that the school uniform policy was reasonable and did permit the expression of religious freedom. That right, according to the Lords, does not accrue in all places at all times.
School governors who implement reasonable policies will take comfort that such policies are unlikely to be attacked successfully using human rights law.
If you have issues regarding your children and their school, contact us for advice.
Ruined Holiday? What to Do
If you are subject to a long delay or the cancellation of your flight when on holiday, the airline is required to give you a leaflet outlining your right to compensation. If the delay or cancellation means that you must rearrange your holiday or incur significant extra cost, make sure you get an exact explanation of the reasons for it. We can give you advice on your rights in these circumstances.
If you suffer from illness or have an accident while on a package tour, make sure you get as much evidence as possible and as quickly as possible. Photographs or films of unsafe areas and unhygienic food preparation areas can be very useful in cases of accidents or illness, for example. Also, make sure your complaints are formally noted in writing and given to the holiday representative and/or the resort manager and make sure you keep a copy. Exchange addresses with any potential witnesses or fellow sufferers.
If you have suffered an accident on holiday or had a holiday ruined by illness which is not your fault, contact us as soon as possible for advice on the next step to take.
Service Company, Not Council, Liable for Defective Equipment
When a person is injured because of defective equipment, who is responsible, the person who owns the equipment being used, or the person who maintains it?
This point was raised in a recent case involving a gym at a local leisure centre. Paul Maguire was using a climbing machine in the leisure centre when the machine failed and he fell backwards and injured himself.
Mr Maguire sued his local authority, Sefton Borough Council, and the firm responsible for the maintenance of the gym equipment. The court heard that the Council had not yet finalised the maintenance contract when the injury occurred, but was intending to and the maintenance contractors had been in and inspected the machines as a preliminary step to the process. The contractors had found no fault with the apparatus.
In the original court case, the judge found both Sefton Borough Council and the maintenance firm liable. The Council appealed, claiming that its duty of care to Mr Maguire was limited because it had implemented a service and maintenance agreement with regard to the equipment. The Council argued that they had done what was reasonable for them to do and they had taken appropriate steps to ensure that the equipment was safe to use. They argued that the maintenance contractors therefore carried the responsibility for the safety of the machine, since they had inspected it and deemed it fit to be used, even though the contract had not yet been finalised.
The Court of Appeal agreed that there was no liability arising between the Council and Mr Maguire under contract law, because the Council had made no implied contractual warranty with him.
Standard Life Flotation
The flotation of mutual insurer Standard Life is set to go ahead following a ‘yes’ vote, with 98 per cent of votes cast in favour of demutualization. The average windfall will be in the region of £1,500, roughly a third of the payout which would have been received had similar proposals a few years ago (which were then opposed by the insurer’s board) not been rejected.
Policyholders who are being issued shares will also be eligible to subscribe for shares at a discount and to bonus shares if they retain their shareholding for twelve months.
Some windfalls will be much greater than the average. If you are in line for a significant share issue, we would recommend that you take professional advice as the shareholding will increase the value of your estate for Inheritance Tax purposes, any dividends may have Income Tax implications and a sale of the shares may create Capital Gains liabilities.
The impact of all of these taxes may be able to be reduced or minimised with planning.
Tenants’ Right to Buy – Covenant Included
Since the passing of the Leasehold Reform Act 1967, tenants under long-term tenancies have been allowed, in normal circumstances, to buy the freehold of the property they rent. This has led to a stream of cases dealing with the appropriate value to place on the freehold reversion of the property for the purpose of setting the selling price.
One of the problems with land is that the title is frequently burdened by covenants, which operate to restrict the rights of the owner of the land – typically by imposing limitations on development or prohibiting certain types of use of the land. Such covenants normally pass from owner to owner.
The Lands Tribunal recently considered whether such covenants had to be included when a property was bought by a tenant. In this case the tenant and the landlord lived in adjacent houses and the tenant wished to acquire the freehold reversion of the house in which he lived. The lease contained a covenant that any new building or extension built on the existing building required the landlord’s consent, which could not be unreasonably withheld. There were similar covenants attaching to a number of properties in the area. The landlord had previously refused consent for an extension proposed by the tenant and at the Valuation Tribunal, the tenant was successful in obtaining a ruling that the covenant should be excluded when the property was conveyed to him. The landlord appealed to the Lands Tribunal.
The landlord’s argument was that the covenant should be included in the conveyance because it was reasonable and protected the amenity value of the landlord’s property (and other local properties) by helping to ensure that any development of the property was appropriate. There was nothing inherently unfair in retaining the covenant attaching to the land. The Lands Tribunal agreed.
Says <<CONTACT DETAILS>>, “A covenant or easement can increase or reduce the value of any property. We can advise you on all property matters.”
Timing Not a Factor in Limiting Litigation Risk
The usual rule in English law is that when there is a court case, the loser pays not only their own costs, but also those of the winner.
This can cause problems when one of the parties to the litigation has few assets, or assets which cannot easily be realised. Many cases have involved people who arrange their affairs so that they have few realisable assets and in some cases this has been done specifically with the litigation risk in mind.
When people who do this want to sue someone, the court can order that they lodge a sum as security for the other side’s costs. The court can make such an order when it considers that it is just to do so and that the claimant ‘has taken steps in relation to his assets that would make it difficult to enforce a costs order against him’. In such a case the sum is then made available to pay the costs of the other side if necessary. This prevents a losing claimant from making himself into a ‘man of straw’ who is unable to pay the other side’s costs.
You would think that there would be a difference between someone who deliberately makes themselves impecunious in anticipation of litigation and someone who has habitually organised their affairs so that they do not have easily-cashed assets.
Recently, this was considered by the court. A claimant was suing a business associate for what he considered to be his share of profits. The claimant had organised his affairs for many years in such a way that his assets were administered by others on his behalf – he did not even have a bank account. The court ruled that he should pay in the sum of £152,000 as security for the defendant’s costs.
He appealed against the decision on the grounds that his affairs had been managed in this way for many years and this was not done in order to put his personal assets beyond reach for the purpose of limiting his risk in litigation.
Judge Sir Francis Ferris could not agree with this logic. Since a claimant controls when he or she starts court proceedings, the fact that his or her affairs were arranged in a certain way before the commencement of the legal action could not give them a ‘get out’. Where it was just to do so to protect a defendant, the order for security would be made.
“The ability to ask for security when it is fair to do so protects defendants from facing a ‘heads I win, tails you lose’ situation when the claimant has insufficient resources to meet costs,” says <<CONTACT DETAILS>>.
When a Little (Criminal) Help for Your Friends Proves Costly
A haulier who assisted in the fraudulent evasion of customs duty has found that crime certainly does not pay when the confiscation of assets is concerned.
The haulier had agreed to help cigarette smugglers bring in a container that contained both cigarettes and tyres on the basis that he could keep the tyres (£10,000 worth). He was to receive no profit from the cigarettes and was not involved in any way in their onward distribution or sale. He arranged all the necessary paperwork and duly arranged the shipping. When the scheme was uncovered and the case came to court, HM Revenue and Customs (HMRC) applied, as is normal, for a ‘confiscation order’ against the haulier. The criminal court awarded them £10,000 – the value of the haulier’s benefit. HMRC appealed to the Court of Appeal and were successful in being awarded over £400,000 – the value of the duty evaded on the entire shipment. The decision was accompanied by a ruling that failure to pay would lead to the haulier being given a sentence of two years in prison. The fact that his personal profit from the scheme was much less was not relevant.
Says <<CONTACT DETAILS>>, “If someone is convicted of a crime leading to financial gain, HMRC have the right to apply for a confiscation order for the whole of the loss they suffer or for the criminal profit and can also confiscate any assets used in the commission of the offence. The authorities are increasingly looking to separate criminals from the proceeds of their criminal activities and part and parcel of this approach is that they are looking to prosecute many financial offences (e.g. tax irregularities) which they might previously have dealt with as non-criminal matters.”
When an Address is Not an Address
The rules regarding the service of documents in legal proceedings are many and complex. Given that documents must be served for a variety of purposes, and if service is not valid the action may well be struck out, this makes it very important that this process is approached with great care.
A recent case considered the question as to whether documents issued by the claimant at the ‘last known residence’ of a defendant would be validly served if the claimant knew that the defendant was no longer living there. There is precedent that in such cases service will be valid, provided the claimant has taken reasonable steps to find out that at the date of service the address was the defendant’s current or last known address.
However, in the case in point, the defendant had never actually resided at the address in question and had the claimant been reasonably diligent in his enquiries, this would have been discovered. The claimant could not have ‘known’ that it was the defendant’s last known address, since the defendant had never resided there. In this case, the documents were not properly served.
When is a Buyer a Trader?
There are considerable differences between the protection offered to buyers of goods who are end-users and those buying for the purposes of trade.
One of the biggest differences applies under the Hire Purchase Act 1964, which gives good title to the buyer of goods bought in good faith but which are still subject to a hire purchase (HP) agreement. This protection only applies where the buyer is not a trader. The most common circumstance where this protection is of benefit is when a car is bought on which it turns out that there is money still owing to the HP company.
Recently, a case arose which, although the circumstances were rather complicated, turned on whether the buyer of seven cars was a trader or not. The cars were bought from a car dealer who was in financial difficulties. The dealer sold the cars on to him at a substantial discount to their open market values. The cars were subject to outstanding liabilities under HP agreements. The buyer was not in the motor trade, but reckoning he knew a bargain when he saw one, thought he could, as a ‘one-off’ transaction, sell the cars on and make a profit.
In the view of the Court of Appeal, the intention to sell them on at a profit was sufficient to mark the man as a trade purchaser within the meaning of the 1964 Act. He did not therefore acquire a good title to the cars, which remained the property of the HP company.
“It is important to realise that for some purposes, the phrase ‘carrying on a business’ can apply to a single transaction,” says <<CONTACT DETAILS>>.
If you are buying goods with the intention of reselling them, not only may there be VAT and tax consequences which should not be ignored, but also your legal protection on the transaction may be limited in the absence of a proper contract. Take advice before you act.
When is a Product Defective?
Over the years, consumer law has been tightened up and among the rights consumers have under the Consumer Protection Act 1987 (CPA) is the right to be protected from the effects of using a defective product.
Normally, determining whether a product is defective or not is fairly straightforward, but a recent case involving Tesco turned on the definition of what ‘defective’ means in a practical sense.
The case was brought by the parents of a child who had been injured by ingesting dishwasher powder which they had bought at Tesco. The dishwasher powder had been fitted with a child-resistant cap, but despite this their 13-month-old child was able to open the plastic container.
The parents claimed that the cap did not meet the British Standard for such items, being inadequate in a number of ways. Accordingly, the injury to the child was a foreseeable result of the inadequacies. The lower court held Tesco liable for the child’s injury, despite their attempt (which was rejected by the court) to share the blame with the child’s mother on the ground that she had left the container where the child could gain access to it.
Tesco appealed the decision. Firstly, the Court of Appeal had to decide whether the injury was a foreseeable result of the cap not being to the appropriate standard. This was problematic, as it was reasonable to assume that the parents would take sufficient steps to make sure that the child could not get access to toxic substances. The fact that the cap was easier to remove than one complying with the British Standard did not make the injury reasonably foreseeable. If that were the case then Tesco’s liability would depend on whether it had breached its statutory duty under the CPA.
The Court of Appeal ruled in Tesco’s favour on the basis that the cap was more difficult to remove than a standard screw cap and all that could be reasonably expected was that it would be more difficult to open than a screw cap.
To obtain compensation in cases such as this, it is necessary to show that the injury was foreseeable and occurred as a result of a breach of the common-law duty of care, or arose because of a breach of a specific statutory duty. Simply because a product is not as good as it might be does not make it defective.
Wrongful Conviction – Compensation Cuts
The Home Office has introduced plans to reduce the amounts payable as compensation to people who are wrongfully convicted of crimes. Among the plans are proposals to scrap discretionary payments and to limit the maximum amount payable for wrongful conviction to £500,000.
It is also intended that those persons whose convictions are overturned within the normal court time limits will receive no compensation at all. This raises the spectre that someone may spend months or even years in jail before their conviction is quashed and receive no compensation whatsoever.
Lastly, there are proposals to limit still further the compensation payable to people who have past convictions for serious crimes or whose ‘conduct has contributed to the situation in which they found themselves’.

Share this article