Monthly Archives: July 2014

Permitted dependants under Agricultural Occupancy Condition need not be financially

Shortt v Secretary of State for Communities and Local Government & Anor [2014] concerned land owned and occupied by the claimants (“Mr & Mrs Shortt”) at Buckland Manor Farm, Buckland, Broadway, Worcestershire. The Second Defendant (“the Council”) was the local planning authority.

In 1975 the Council granted planning permission to construct a dwelling at Buckland Manor Farm. Planning permission was granted, subject to the following condition (“the Planning Condition”):

“The occupation of the dwelling shall be permitted to persons employed or last employed solely or mainly and locally in agriculture as defined by section 290(1) of the Town and Country Planning Act 1971, or in forestry and the dependants (which shall be taken to include a widow or widower) of such persons.”

The claimants wanted a certificate of lawful use based on the fact that for at least the last 10 years the Planning Condition had been breached by the house being occupied by non dependant children of Mr and Mrs Shortt.

The whole case turned on the meaning of the word “dependant”. The Planning Court could not find any meaning for that word here. Each case would depend upon its own facts.

Looking at the terms of the Planning Condition in context, on an objective basis, the definition of “dependant” in the context of that particular Planning Condition did not require financial dependancy.

In this case the Judge restricted himself to interpreting the particular Planning Condition in that permission as including Mr Shortt and the children regardless of their lack of financial dependency. He declined to give any general interpretation of the term “dependants”.

Consequently, as there had been no ten plus years’ transgression of the Planning Condition, enforcement action could not and could not have been taken against Mr and Mrs Shortt.

The Inspector had been right to find that there had been no breach of the Planning Condition for the necessary ten year period, and he was right to dismiss Mr & Mrs Shortts’ appeal that they were entitled to a Certificate of Lawful Use which could only have been predicated on there having been such a breach.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Application centric view militates against Councils marshalling sites

Warners Retail (Moreton) Ltd v Cotswold District Council [2014] tried to establish that Moreton-in-Marsh could only accommodate one food store (i.e. the claimant’s extended Budgens already granted planning permission) and not also the one proposed by Mintons.

The claimant said the sequential test had been interpreted and/or applied by the Council incorrectly. It claimed that the sites to which the sequential test had been applied had not included the Budgens site because the officers were of the view that “Land at Budgens already benefit[ed] from planning permission for retail development in the form of an extension to the existing store”, and so that land did not need to be considered when undertaking the sequential assessment. The claimant said the Council’s Planning Committee Members would not have appreciated that paragraph 6.41 of the Planning for Town Centres – Practice Guidance on Need, Impact and the Sequential Approach (DCLG, 2009) (“the Guidance”) required the Budgens site to be taken into account.

The Guidance on the sequential approach says:

“6.37 These terms [for the sequential approach] are defined as:

Availability – whether sites are available now or are likely to become available for development within a reasonable period of time (determined on the merits of a particular case, having regard to inter alia, the urgency of the need)…

Suitability – with due regard to the requirements to demonstrate flexibility, whether sites are suitable to accommodate the need or demand which the proposal is intended to meet.

i) Availability

6.41 When promoting a proposal on a less sequentially preferable site, it will not be appropriate for a developer or retailer to dismiss a more central location on the basis that it is not available to the developer/retailer in question

ii) Suitability

6.42 When judging the suitability of a site it is necessary to have a proper understanding of scale and form of development needed, and what aspect(s) of the need are intended to be met by the site(s). It is not necessary to demonstrate that a potential town centre or edge of centre site can accommodate precisely the scale and form of development being proposed, but rather to consider what contribution more central sites are able to make, either individually or collectively, to meeting the same requirements.”

The Planning Court was satisfied that the Budgens site was taken into account by the Council when applying the sequential test.

It’s Planning Officer had reported:

“The Retail Impact Assessment (‘RIA’) indicated that the town could accommodate a further food store of the size proposed in addition to the extant Budgens scheme without having an adverse impact on the vitality and viability of Moreton-in-Marsh commercial centre. The RIA was independently assessed. The Budgens site was not available for further development over and above their approved scheme. Consequently, it could not accommodate the proposed Minton development”.

The Council had been entitled to conclude that the town could accommodate a food store of the size proposed in the Minton application in addition to the approved extension of Budgens.

The Guidance should not be interpreted in a rigid, mechanistic way. It laid down guidelines not tram lines.

Indeed it had not been suggested on the claimant’s behalf that the Budgens site was a suitable alternative site for the Minton proposal.

Adopting the application centric approach in an earlier Supreme Court judgment in the Scottish case of Tesco Stores Ltd v Dundee City Council [2012] the court said “suitability” had to be read in the context of ‘suitable for the development proposed by the applicant’ rather than ‘suitable for meeting identified deficiencies in retail provision in the area’. “The whole exercise” in respect of the issue of suitability “is directed to what the developer is proposing, not some other proposal which the planning authority might seek to substitute for it which is for something less than that sought by the developer.”

However as the Officer’s report had noted the RIA demonstrated that the town could accommodate one additional food store of the size proposed in the Minton application in addition to the approved extension of Budgens, without having an adverse impact on the vitality and viability of Moreton-in-Marsh town centre.

The claimant had failed to establish that the sequential test had been erroneously interpreted and/or applied.

In 2016 the claimant’s appeal was dismissed by the Court of Appeal. The judgement said:

“On a fair reading of the two committee reports as a whole, the sequential test was, in my view, properly understood and lawfully applied.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Estoppel did not save legal mortgage but it was still equitable

In the High Court case of Bank of Scotland Plc v Waugh & Ors [2014] a legal mortgage had been signed by trustees in favour of the bank but the signatures had not been witnessed.

The bank tried to argue that the trustees were estopped from denying that it had been properly executed.

It pointed to a letter the bank had received from a Mr Gray who was solicitor for the trustees, solicitor acting for the bank and one of the trustees.

This said:

“We have had the mortgage deed executed by the trustees and are now enclosing a certified copy of it.”

The bank said this was a clear representation that the legal mortgage had been validly executed.

The bank contended that the triple capacity in which Mr Gray was acting founded the estoppel and that it had relied on the representation by lending the funds on or about 8th August 2003. The bank said the case was on all fours with Shah v Shah [2001] where an estoppel claim was successful.

However the court said this case was indistinguishable from the unfavourable High Court case of Briggs v Gleeds (2014) which I blogged here a short while ago (See Category “Pension Schemes”). That case had given six powerful reasons for not allowing an estoppel where it is clear on the face of the “deed” that it had not been executed in accordance with the Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”).

So the trustees were not estopped from relying on the fact that the legal mortgage was not validly executed as a deed.

However a document, which is otherwise valid, but which fails to take effect as a legal mortgage due to some defect of form may (subject to section 2 of the 1989 Act) still be a good equitable mortgage.

This is based on the court’s power to specifically perform a contract to create a legal interest in land.

Section 2 of the 1989 Act provides:

“(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contract are exchanged, in each.

(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.”

In this case the mortgage was signed by both the trustees and on behalf of the bank. It expressly incorporated the bank’s Standard Terms.

These principles operated to grant the bank’s mortgage some salvation. It was not executed as a deed and thus did not take effect as a legal mortgage. However it was signed by the parties and did contain all the terms that had been agreed. So it took effect as an equitable mortgage.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

On Facts no misrepresentation – or reliance by investor

For a misrepresentation claim to succeed the claimant must show both that a material misrepresentation was made and that he relied on it.

The case that follows illustrates that a sophisticated professional who invests may face higher hurdles here.

In Roberts v Egan [2014] the issues were whether any representation was made and, if so, the extent of the representation. The claimant was an experienced solicitor who had made two investments, each of £204,000, in a scheme involving acquisition and development work on various new shopping centres. The claimant had lost the whole of his investment and now sued the respondent to get it back.

The claimant based much of his claim upon the statements in the three-page report, he alleged to have been attached to an email, and a one-page summary attached to the same email.

The three-page report said “the debt for undertaking the developments would be organised by [the developer, Henry Davidson Developments Limited] via their own bank, RBS in Nottingham, and we will just continue to own the sites but have no responsibility for the development funding throughout the building period”; and the one-page summary of the investment proposal, also prepared by the respondent, contained a further statement that “… the developers will arrange their own bank finance with the LLP making balancing profit payments on completion”.

It was the claimant’s case that these were representations which the making of his investment had relied on BUT that in fact the investment vehicle (“A5”) had ultimately borne the risk of the costs of the development as it provided security in the form of a third party mortgage over the properties in favour of the developer’s bank (NatWest) to cover the possibility that the developer might default on the borrowings that the developer had incurred to fund its development costs.

The claimant said, as a prospective investor, the respondent owed him a duty of care to ensure that the representations made were correct and that he had, in reliance upon those representations, made by the respondent through an intermediary, invested the sum of £408,000 in A5.

The High Court ruled that:

The statement and report were simply outline proposals which had been superseded by more detailed draft funding documentation emailed onto the claimant. It was necessary to take all of the pre-contract communications, concerning the investment scheme, made by or on behalf of the respondent to the claimant and view them objectively, in a common sense and realistic fashion, so as to understand what, if any, representation was being made about development funding and the ownership of the sites by A5.

In fact there was no express reference in either the three-page report or the one-page summary to the issue of security. Neither document purported to tell prospective investors about the security position.

The furthest that they went was the statement in the three-page report that A5 would “just continue to own the sites but have no responsibility for the development funding throughout the building period”.

The claimant said there was an implicit misrepresentation there that there would be no third party security over the sites themselves and that there would be no security for development funding over the site.

However the court held that the claimant had not even seen that three page report and that it had not been emailed onto him by the intermediary at the material times.

In any event any qualified solicitor and experienced and astute commercial investor such as the claimant, objectively reading those documents would have appreciated that these were no more than outline proposals, and that matters of detail would have to be addressed in the detailed funding documentation and long-form security documentation that would have to be drawn up and settled before the investment scheme could go ahead. The court found that these had been emailed to the claimant in draft and held that, on the claimant reading them, they would have operated to cancel any misrepresentation or, false impression there may have been earlier.

The High Court held that there was no material reliance by the time the claimant came to make his two investments, upon the statements in the report or the one-page summary.

So the court rejected the claims in misrepresentation on the grounds that there was no material misrepresentation and, if there were, there was no material reliance on them by the claimant.

As an aside the court said that had there been any misrepresentations the court would have ruled them to have been made by the respondent’s limited company rather than by himself acting in person.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Tunnel shaft site’s suitability excluded from compensation

In compulsory purchase the Pointe Gourde principle states that the level of compensation for the compulsory acquisition of land cannot be increased by a change in the value of land which was entirely due to the scheme that the compulsory purchase was needed for. The purpose of the principle was “to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which gives rise to the acquisition.”

Section 5 of the Land Compensation Act 1961 (“the 1961 Act”) requires compensation for compulsory acquisition to be assessed in accordance with 6 rules. Rule (3) says:

“The special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers, or for which there is no market apart from the requirements of any authority possessing compulsory purchase powers.”

The reference to special suitability is of the land itself and not the nature of an interest giving rise to marriage value e.g. the fact that a sitting tenant would pay more than an investor for the freehold to avoid being turned out of the property, would not clothe the land with a special suitability whose value would fall to be ignored under rule (3).

In Miller v Network Rail Infrastructure Ltd [2014] a West Coast Main Line Tunnel Pressure relief shaft was built on the claimant’s land under two licences. The land was later acquired by Network Rail Infrastructure Ltd (“NRIL”) under a compulsory purchase order.

The claimant argued that he had been misled as to the necessity for the shaft and that the acquisition of the related land (“plot 11a”) was to enable NRIL to avoid having to go to the trouble and expense of having to remove the pressure relief shaft. He said that was a value to NRIL and that he was entitled to compensation reflecting that value. Rule (3) had no application because the land had no special suitability for the shaft because a shaft in that position was wholly unnecessary.

NRIL satisfied the Upper Tribunal (Lands Chamber) (“the Tribunal”) that the shaft had been necessary as they did have realistic plans for 140mph trains.

NRIL successfully argued that the land for the pressure relief shaft was specially suitable for the purpose of using, maintaining and gaining access to the shaft because it was the land upon which the shaft had been built under licence. No other land was suitable for that purpose because the shaft was not, and could not be, on other land. The pressure relief shafts had to be equidistantly placed over the old rail tunnel.

The claimant had been incorrect to say plot 11a had been acquired to enable NRIL to avoid having to remove the pressure relief shaft. The shaft had been constructed under two licences for which the claimant would have been paid licence fees. The claimant accepted that, if there was no fraudulent misrepresentation, NRIL could not be required to remove the shaft once constructed. The Tribunal found no fraudulent misrepresentation, accordingly there could be no enhancement to the value of the claimant’s land because NRIL would never have had to pay him anything further to retain the shaft.

But neither of the licences gave NRIL any right to use, maintain or gain access to the shaft and NRIL had had to acquire the shaft land under the compulsory purchase order to be able to use it.

So an enhanced value due to NRIL’s special interest in purchasing the land could not be given to plot 11a over and above the amount the land would have fetched if sold in the open market.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Artificial SPVs were qualifying leasehold enfranchisement tenants

The Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) was intended to allow long term residential tenants of apartments in a building (“participating tenants”) to club together to purchase their landlord’s interest at a price determined in accordance with the 1993 Act (“collective enfranchisement”). However the 1993 Act says no “participating tenant” can hold more than 2 flats.

In Westbrook Dolphin Square Ltd v Friends Life Ltd [2014] Westbrook Dolphin Square Ltd (“Westbrook”) was the tenant of all the flats in the building under one long lease, so it created a structure to bring about a collective enfranchisement within the 1993 Act.

To do this it set up 612 new companies (“SPVs”). Each held leases of 2 flats. They all served notice on the respondent to collectively enfranchise for £111 million. No collective enfranchisement has matched or exceeded the scale of this.

WB Dolphin Square LLC (“LLC”), was owned by investors. The shares in each of the SPVs, and Westbrook were held as to 50% of the voting deferred shares by the LLC and as to the other 50% by another Jersey company, Dolphin Square Holdings Ltd (“Holdings”). LLC owned 100% of their non-voting ordinary shares. Thus the voting rights in the SPVs were held equally between LLC and Holdings with neither of them “controlling” the SPVs.

The respondent’s challenges to the Westbrook scheme fell under three categories:

1. The corporate structure.

The High Court agreed that the arrangement was a highly artificial one whose sole purpose was to qualify to pursue a collective enfranchisement claim.

Had the SPVs and LLC been “associated companies” within the meaning of the 1993 Act, all the SPV tenancies would have had to be ignored as qualifying tenancies. However the court accepted that the SPVs were not associated companies. Though they had a similar shareholding, no person held a majority of the voting rights, no person had the right to appoint directors and no person had control by agreement with others. All the voting and control rights were split equally between LLC and Holdings, because each had 50% of the voting rights. There was no agreement (or other arrangement) which gave either LLC or Holdings control. Nor was Holdings under the control of LLC because its shares were held by the trustees of a discretionary trust. Those trustees were independent and those trustees were not the nominees of anyone.

The court and Westbrook here accepted that there was no particular commercial purpose behind the scheme other than the enfranchisement purposes of getting around sections 5(5) and 5(6) of the 1993 Act which would have otherwise prevented such closely linked companies from enfranchising.

It was carefully set up to avoid any SPV having more than 2 flats, as to have let any of them have 3 or more would have prevented that SPV from being a qualifying tenant at all.

No superior corporate entity was allowed control of the SPVs but the arrangement preserved the economic benefits of the leaseholdings for the benefit of the group (in substance for LLC).

The respondent submitted that viewing the legislation purposively, Parliament had not intended the right of collective enfranchisement to be available where flat leases were granted solely for the purpose of avoiding sections 5(5) and 5(6) of the 1993 Act.

The court accepted that Parliament had targeted people (whether investors or not) who had three or more flats. But had used narrow wording eschewing anti-avoidance measures covering, for example, a person who had the beneficial interest in three flats each held by separate trustees, or an individual who owned three companies, each of which held the long lease of a flat. Wider definitions such as the definition of “associate” in the Insolvency Act 1986 would have been available to it yet Parliament had not adopted such a definition. It had stayed with the narrower wording. So the SPVs were not disqualified from being participating tenants.

As the scheme stayed the right side of the 1993 Act’s Associate Company rule it was a matter of interpretation whether the SPVs were “qualifying tenants” – and neither the structure under which the SPV was held, nor, the purpose of that structure could prevent them being such.

2. Price

The respondent said Westbrook’s Initial Notice specified an unrealistically low price and was therefore invalid. The court said that the figure of £111 million was a genuine opening offer. It was certainly not absurdly low.

3. Non – residential use

Under the Act more than 25% of the floor area of the building as a whole being put to non-residential use would have prevented a claim for collective enfranchisement.

The respondent had not in its original Counter Notice raised this challenge. It had been thought that omission would prevent the respondent from using it at court.

The court nevertheless entertained the issue but calculated that the non-residential parts of the building were within the 25% limit.

The court’s detailed investigation embraced the building’s offices, flats, company lettings, a champagne bar and restaurant and a health and fitness centre/spa. Some of the flats were only let for very short periods indeed.

Wider Implications

In most buildings, each of the flats are let on long leases so the rights to collective enfranchisement are held by all the occupying tenants. However with the expansion of privately rented accommodation more apartment blocks will be held on head leases with a multitude of shorter term tenancies similar to Westbrook beneath them. This may open the way to more head tenants, like Westbrook, being able to set up enfranchisement schemes in the future. Proposed letting structures may need to address this.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Zurich insurance claim survived accepting insolvent developer’s repudiation

In Bache & Ors v Zurich Insurance Plc [2014] the new property buyers benefited from an insurance policy which said:

“We will pay where, due to the developer’s bankruptcy, liquidation or fraud, the developer fails to complete the construction of the new home in accordance with the requirements and the buyer loses a deposit paid to the developer under the terms of the purchase contract for the new home, we will at our option

(a) Pay the reasonable cost of completing the home to the original specification; or

(b) Pay to the buyer the amount of any such lost deposit.”

The Claimants treated the non-commencement and non-completion of Block A as repudiatory and sought recovery of their deposits.

Zurich refused to pay out because the vendor was in administration and not yet in liquidation. Though it did later go into liquidation.

Looking at the commercial purpose underlying the insurance the High Court declined to accept as significant a temporal difference between those purchasers, such as the Claimants, who treated the non-commencement and non-completion of Block A as repudiatory, and those purchasers who did not do so but simply waited until the liquidation.

Zurich had paid and would pay out on the latter. This implied that the timing was important. However, the court rejected this as a distinction without a commercial difference.

The reality was that the construction project was never going to be completed by the vendor – particularly during the recession. There was no obvious or logical reason why there should be a distinction between the two types of purchaser i.e. the purchaser who was prepared to wait or who could not be bothered to do anything about the failure to complete the work and the purchaser who felt that he or she could not wait, possibly, for a very long time.

A purchaser in the latter category could only try to secure the recovery of his or her deposit by accepting any repudiation on the part of the developer vendor.

The commercial reality, envisaged as at the date of the insurance policies in question, was that the purchasers’ right to secure the return, by the vendor, to the purchasers of the deposits would only arise on either a repudiatory failure by the vendor to start or complete the development, or a refusal or inability on the part of the vendor to complete the long leases.

In practice the latter case would only arise where the flat construction had been substantially completed. So the parties to the policy must be taken to have foreseen the possibility of the deposits being recoverable by the purchasers from the vendor if the latter had repudiated the agreements for lease by being unable or unwilling to proceed with construction of the flats.

Furthermore the policy wording had to be construed in this way to enable it to fulfill its commercial purpose for it would be relatively uncommon that the formal bankruptcy or liquidation caused the developer’s inability to complete the construction. Mostly the developer’s inability to complete will be the actual or impending insolvency of the developer which will lead to either a creditor or lender or the developer itself putting the developer into liquidation.

Whilst the final liquidation of the developer would finally rule out any theoretical possibility of the developer actually completing the development, the underlying cause of the failure to complete the development would be the actual or impending insolvency of the developer beforehand.

The court did accept that the insolvency of the vendor was not in itself an event which engaged the policy. The relevant section of the policy was not engaged unless and until there was a bankruptcy, liquidation (including dissolution) or fraud. Otherwise, there would have been no need to mention those contingencies.

However the fact that the insured purchasers have accepted a repudiation on the part of the developer vendor was not in any way a bar to recovery under the policy after liquidation had occurred because the failure of the developer “to complete the construction” was not reliant on their being “a subsisting contractual obligation”. That would require an unnecessary gloss on the word “fail” and in effect require the addition of words. The words: “the developer fails to complete the construction” meant simply that the developer did not complete the construction. It tied in with the Introduction to the policy which summarised the commercial purpose of the relevant part of the policy. If there was an ambiguity as to what “fails to” meant then it should be construed in favour of the insured.

The case would have been decided the same whether or not the developer was insolvent at the time of the acceptance of the repudiation.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Did Bank assurances postpone liability under guarantee?

In Bank Leumi (UK) Plc v Akrill [2014] the respondent (“the bank”) sought summary judgment against the appellant (“Mr Akrill”) on two personal guarantee claims totalling £3,840,493.83 including interest and costs to be assessed, if not agreed.

Mr Akrill was a property developer through a group of companies known as the Manor Group. He was the sole beneficial owner of each of the group companies.

The bank agreed to fund the Manor Group buying and developing Clarence Flour Mill (“Manor Mill”) in Hull. Mr Akrill was told that a personal guarantee would be necessary but Mr Akrill alleged that the bank’s regional manager told him that he was in “no danger” because the loan would be no more than 60% of the value of the property and that the bank would seek to recover any monies owing in the first instance from the borrower and by enforcing its security over assets within the Manor Group, and would only look to enforce the personal guarantee against Mr Akrill in the event of a shortfall.

Mr Akrill contended that this assurance was important to him, and that without it he would not have been prepared to offer a guarantee for the full amount of the loan. He accepted that, with hindsight, he should have ensured that the bank documents reflected that assurance. The regional manager denied making the representations which Mr Akrill attributed to him and having such a conversation.

Mr Akrill later signed a further guarantee of an overdraft facility and, again, said he did so in reliance on another assurance from the regional manager by phone while he was travelling home with his wife. Mr Akrill said he was told the bank would not call it in and that that persuaded him to sign the guarantee.

The bank placed particular reliance on Clause 18 of the personal guarantees and the cases on similar provisions:

“The Guarantor [Mr Akrill] hereby acknowledges that it has not relied on any warranties or representations made by or on behalf of the Bank in entering into this Guarantee………….”

Finally, the signature pages of the guarantees warned Mr Akrill as follows:

“By giving the Guarantee you might become liable instead of or as well as the Debtor.

You should seek independent legal advice before entering into the Guarantee.”

Each of the guarantees was on the face of them executed by Mr Akrill as a deed in the presence of his solicitor. In signing each of them, the solicitor confirmed, in the bank’s standard template wording, that it had been executed by Mr Akrill in his presence and after he had explained its contents to Mr Akrill.

Despite this wording, Mr Akrill said that in each case he signed the personal guarantee at his home and then sent it to the solicitor. He also maintained that the solicitor did not advise him on the contents of either document. There was no evidence before the court from the solicitor confirming or denying this testimony.

The relevant Manor Group facility was not repaid on 30 November 2011 and remained unpaid.

Mr Akrill relied on the representations he alleged the regional manager made to him as creating collateral warranties which prevented the bank from calling upon the guarantees before seeking redress from Manor Group companies and realising its security over their assets.

Mr Akrill said that since the bank had done neither, it could not sue him under the guarantees.

The bank replied that this defence was bound to fail given the terms of the guarantees including, in particular, clause 18, and the principles the decided cases required to be applied in considering such terms.

Refusing the bank summary judgment the Court of Appeal said the sharp conflict between the evidence or Mr Akrill and the regional manager could not be resolved without cross examination. The circumstances of the guarantees’ execution and witnessing also needed looking into further. Additionally the evidence of Mr Akrill’s wife that she overheard the conversation between Mr Akrill and the regional manager, needed to be taken into account. Mr Akrill’s case, though unlikely to succeed, was not wholly implausible.

So the first instance judge was wrong to conclude that Mr Akrill had no real prospect of establishing that the regional manager made him the representations he claimed he relied on. The Court gave Mr Akrill conditional leave to defend and directed that the application be remitted to the High Court for consideration of the appropriate conditions to impose.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Rates valuation officer not bound by Valuation Tribunal’s wrong facts

Once the Valuation Tribunal has decided a rateable value, that is the rateable value of the hereditament. The Valuation Officer (“VO”) cannot proceed on the basis that the rateable value is wrong, because that rateable value has been fixed in accordance with the procedures laid down by the Local Government Finance Act 1988 (“the 1988 Act”).

The way it can be established that such a rateable value is wrong is to make an appeal to the Upper Tribunal (or possibly by asking the Valuation Tribunal to review its own decision on the basis that it was reached on an erroneous understanding of the facts).

Unless a material change of circumstances provides a basis for a reconsideration of the entry in the list, the VO is bound to accept the entry whatever doubts he entertains about it, because his duty to maintain an accurate list exists inside a hierarchical framework of adjudication and appeal which he must respect.

It would undermine the whole system of appeals if the VO was entitled to impose his own view of the “correct” rateable value whenever he was satisfied that a Valuation Tribunal decision was wrong for whatever reason.

Even if out of time for an appeal a VO can appeal against the the Valuation Tribunal’s decision out of time. Such an appeal is not available, as of right, but first needs an application to the Upper Tribunal for an extension of the time for giving notice of appeal under rule 24(5) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.

That application will trigger a judicial determination which may or may not allow an appeal to proceed, but that process will take account both of the VO’s desire to maintain the accuracy of the list and of the public interest in finality, and respect the statutory adjudication scheme.

No such application was made in the Upper Tribunal (Lands Chamber) Case of Mrics (Valuation Officer) Re: White Waltham Aerodrome [2014] which follows.

In 2005 the Berkshire Valuation Tribunal based the rates assessment of some aircraft hangars on an erroneous square meterage resulting in a low charge. The aircraft hangars each had an area of 910m2. But the Berkshire Tribunal decided that the area of each of the hangars was 217.9m2.

Then the ratepayer applied to the VO to add some offices to the hereditament. That resulted in a modest agreed increase.

When it came to preparing the draft 2010 revaluation the VO took the opportunity to correct the square meterage error resulting in a much higher assessment. The ratepayer tried to argue that the VO had not been entitled to reopen the low square meterage figure established by the 2005 Berkshire Valuation Tribunal. It also pointed out that some portacabins present in 2005 had left the site.

The Upper Tribunal (Lands Chamber) ruled that when the VO becomes aware of a material change of circumstances he is under a duty to alter the rating list to represent the new rateable value to reflect that change.

That gave effect to the VO’s duty to maintain an accurate list. The VO must value the hereditament in accordance with the provisions of paragraph 2 of Schedule 6 to the 1988 Act.

Contrary to the contentions of the ratepayer here, where there has been a material change of circumstances the VO is not restricted to adjusting the Valuation Tribunal’s determination by assessing the sum which must be added to or taken from the previous rateable value solely to reflect the impact of the material change, but is required to undertake the single valuation exercise of determining the rateable value of the hereditament as it now exists in light of those changed circumstances.

A mistake of fact made by the Valuation Tribunal need not be perpetuated and the VO is entitled to start from scratch, but giving appropriate weight to the Valuation Tribunal’s decision.

In most cases the starting point will be the original entry in the list, and the appropriate way to apply the statutory criteria, given the change of circumstances, would be to adjust the original figure. However, such valuation technique would be the means to implement the valuation criteria in paragraph 2 of Schedule 6, and NOT a substitute for those criteria.

However where it was obvious to the VO that the original entry in the list determined by the Valuation Tribunal was based on a mistaken understanding of the facts that would be an exceptional case entitling the VO to deviate from using the original entry in the list as his starting point.

But even if the Tribunal was wrong on this, the rateable value, which was altered by the VO on 29 October 2009, was not a rateable value determined by the Valuation Tribunal, but was rather the value agreed between the parties in July 2008, following the merger of the office building into the Airfield hereditament.

At that time the VO’s revaluation was a figure agreed by the parties, and represented the rateable value of a hereditament which, by the merger of the offices into the airfield, was itself materially different from the hereditament which had been valued by the Valuation Tribunal in its decision of 19 March 2008.

So in any event the 2010 revaluation, based on the corrected hangar square meterages, was actually an alteration to a rateable value in the rating list, which had resulted from an agreement between the VO and the ratepayer, and not from a Valuation Tribunal decision. So it did not, in any event, involve the constitutional and jurisdictional considerations which might have attended the VO interfering with a decision of the Valuation Tribunal.

So the VO’s appeal was allowed.

The blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Bankrupt son’s assets not shielded from creditors by trust

Property held by a bankrupt on trust for another person does not form part of the bankrupt’s assets that can be seized and sold by their trustee in bankruptcy for creditors.

In the absence of evidence to show a different interest, the starting point is that the beneficial interest in the assets is the same as the legal interest. The onus is on the person asserting the separation of legal and beneficial interests to prove it by convincing evidence.

If it’s alleged that the interest arises by way of a common intention trust, the whole of the circumstances must be looked at to determine whether such an interest exists, and (if relevant) the extent of it.

The necessary intention may be found from express words spoken or written, or by inference from the actions of the parties (as in the case of a resulting trust found on the basis of contribution to the purchase price).

But in deciding what inferences are to be drawn from conduct, the court must look at the relevant conduct as a whole.

In the High Court case of Thandi v Sands & Ors [2014] a son had become bankrupt in 2011. His father now alleged that the properties he owned were held by that son on bare trust for the father and so did not form part of the assets owned by the son beneficially as well as legally.

The father said that the son had executed a declaration of trust in his favour in 2003 to that effect.

Whilst the court accepted that the father had provided all or substantially all the finance for buying the initial properties, the court found that the declaration of trust had only been executed in 2006.

The court was wary of the parties’ evidence of their intentions as given in court regarding it as self serving evidence of subjective intention to substantiate a trust that they thought would assist them to keep the family assets away from the son’s creditors.

The most reliable evidence of the father and son’s actual intentions was what could be inferred from what they actually did. Whilst the father chose to have the properties all transferred to, or purchased in the name of his son, the son holding them on trust was by no means the only possible intention, particularly in the context of the acquisition and management of family assets and family wealth.

It was equally possible that the father had intended to build up a portfolio of assets that his son would own, or that would be regarded as assets of the family to be dealt with in future as they might agree or as the father might secure using his influence as head of the household.

Neither such arrangement would have given rise to a trust in the father’s favour.

The contemporary objective evidence clearly showed that all the properties were, from purchase, treated as belonging to the son beneficially.

They were presented in that way to third parties whenever the true beneficial ownership might be relevant. Those third parties included various mortgage companies he applied to with statements of his assets, income or status as a sole trader. In particular, the major applications to Mortgage Express and Nationwide were on that basis. Also his tax returns were consistent only with his being the beneficial owner of the income arising from those properties, and therefore with him and not his father being the beneficial owner of those properties.

No trust was recorded on the title of any of the properties, nor was there any evidence that any of the solicitors were told of any trust at the time they were bought.

So the assets were not held on trust for the father and were owned by the son beneficially as well as legally. As such they vested in the trustee in bankruptcy and were available to that trustee to sell to pay the proceeds to the secured and unsecured creditors respectively.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.