Monthly Archives: May 2015

Almost total rebuild exceeded permitted development rights

The “enlargement, improvement or alteration of a dwelling-house within the curtilage of that dwelling-house” is permitted development as part of Schedule 2 Part 1 of the Town and Country Planning (General Permitted Development) Order 1995 (“GPDO”). It is set forth in Class A and is subject to restrictions.

Under section 58 of the Town and Country Planning Act 1990 the GPDO grants deemed planning permission.

To benefit from this right to planning permission there must a dwelling-house to be enlarged, altered or improved.

The complete replacement of one building by another is not “enlargement, improvement or alteration” of the original building for those purposes.

Thus, the question of whether or not what has occurred, has been an exercise of permitted development rights, or the removal of the original dwelling-house and its replacement by rebuilding with a new dwelling-house, is a question of fact and degree.

It may well be that it is possible to arrive at what, in effect, is a new edifice by stages, each stage of which can be said to be an “improvement”.

In the High Court case of Arnold v Secretary of State for Communities and Local Government [2015] the only elements of the original dwelling that remained were parts of the walls of the western wing. That was to say, part of the south facing wall (to the top of ground floor windows), the two storey west facing gable (partly tile-hung) and a small section of supporting ‘return’ wall on the northern elevation.

The rest of the dwelling, including all the slabs, footings and foundations, other than those remaining beneath the walls of the ‘original’ building, were new building works that had taken place since work started in September 2011.

The court said the issue was whether or not, as a matter of fact, they were staged extensions to an existing dwelling, which were arguably development permitted by the GPDO, or, in reality, the construction of a new dwelling, with the integration of a few remaining walls.

The court said the planning inspector had been entitled, on the evidence, to conclude that the latter had happened.

The court said that to benefit from the permitted development rights, the parent dwellinghouse development must be retained.

So, the Inspector had been entitled to examine the extent of the demolition. Again, on the evidence the inspector had been entitled to conclude that the works went beyond permitted development.

if, prior to completion of the proposed exercise of permitted development rights, the parent development is lost, then the entitlement to that permitted development is lost even if some works that might be regarded as an implementation of permitted development rights occurred when the parent dwellinghouse existed, prior to its loss.

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

VAT wrongly invoiced and paid could be recovered from HMRC direct

It sometimes happens that VAT is invoiced by a supplier and paid by a customer, where it should not have been, and the supplier duly pays the VAT over to HM Revenue and Customs (“HMRC”).

HMRC are not allowed to refund the VAT to the supplier, who charged it, where that would “unjustly enrich” that supplier.

Nor would it be right to restore the VAT to the customer if the customer has, in fact, already recovered the amount of the VAT as input credit against the VAT it has charged the “end user”.

In the EU Court of Justice case of Reemtsma Cigarettenfabriken GmbH v Ministero delle Finanze [2008] it was recognised that there may be special circumstances where the customer or the end user should have the right to reclaim the wrongly paid VAT back direct from HMRC.

This was endorsed in the UK courts in the Court of Appeal decision of Investment Trust Companies (In Liquidation) v The Commissioners for Her Majesty’s Revenue and Customs [2015] .

In the recent High Court case of Premier Foods (Holdings) Ltd, R (on the application of) v HM Revenue and Customs & Anor [2015] those circumstances where that the supplier had gone into administration so that any refund to the supplier would have been shared by all the creditors of that company, and not just gone back to the out of pocket customer.

The court found those circumstances sufficient to warrant the customer being able to reclaim the wrongly paid VAT direct from HMRC.

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

Compulsory Purchase: Valuation of land in a notional “No Scheme” World

The valuation of land that is acquired for development under a Compulsory Purchase Order (“CPO”) (“the subject land”) must ignore any increase or diminution in the value of that land which is attributable to the development of any other land which is also acquired for development under that CPO that would not be likely to have been carried out but for that CPO.

This is to exclude from calculating compensation, increases or reductions in value attributable to the scheme involving the compulsory purchase.

This is based on the principle in Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947].

To apply these rules of valuation, you must first determine the existing planning status of the subject land.

Sections 14-16 of the Land Compensation Act 1961 (“the 1961 Act”) contained a series of assumptions about planning permission which had to be made for the purpose of valuing the subject land in assessing compensation.

These assumptions were additional to any actual planning permission in force (s.14(2)) and did not exclude “hope value” based on the prospect of permission for a development beyond the developments for which planning permission was to be assumed under sections 15 and 16 (section 14(3)).

Section 15 assumed that permission for development was granted in accordance with the acquiring authority’s proposals and the same assumption was made under sections 16(1)-(3) if the subject land formed part of the site to be developed in accordance with the then current development plan.

In each case section 16(6) of the 1961 Act required the valuation to assume that planning permission would be granted subject to such conditions as might reasonably be expected to be imposed.

The fact that these sections assumed a planning permission being in place did not mean it was to be assumed that permission for some other kind of development would not be granted. Expert evidence would help decide that in each case.

But section 16(7) operated to limit the extent to which planning permission for the subject land was to be assumed to be granted by creating a fiction in which the overall redevelopment scheme had been cancelled in respect of, but only in respect of, the subject land: i.e. as if the landowner had succeeded at the public inquiry in persuading the Inspector to omit the subject land from the CPO.

But there was no requirement to assume that the CPO would not have gone ahead in respect of the remainder of the CPO land or that the development of the scheme would not have proceeded without the subject land.

Section 16(7) was not a valuation disregard, but it was part of the valuation process. It might in some cases have required the assumption that planning permission for the relevant development would not be granted. There would be cases, such as roads and other linear transport proposals, where the notional exclusion of the subject land might have required it to be assumed that the scheme would not have gone ahead.

In J S Bloor (Wilmslow) Ltd v Homes and Communities Agency [2015] the owner of the subject land would have perceived himself to be in a relatively strong position with regards to having to make or avoiding contributions to the loop roads and other service connections under the redevelopment scheme (“the KBP Scheme”). The land would therefore have a substantial value based on an expectation of planning permission for a residential development linked to a proposed spine road.

But such value would all have been attributable to the development of the KBP Scheme on the adjoining land and would therefore fall to be disregarded.

The Court of Appeal found that any value due to a possible self contained development of the subject land, independent of the KBP Scheme, and using a nib of its own land for highway access was not attributable to the KBP Scheme on the adjoining land so as to require it to be disregarded under section 6 of the 1961 Act. But in seeking to exclude any diminution in value attributable to that development it was necessary to make a notional adjustment to the planning policies which continued to apply to the subject land at the valuation date.

This was because, in the imaginary planning environment conjured up by sections 14-16 of the 1961 Act, the KBP scheme would severely diminish the planning prospects for an independent development on the subject land. So the task for the valuers and the tribunal had to be to devise a way of excluding or disregarding the KBP Scheme’s impact on that independent value. That could only be done by further modification to the actual planning situation whereby the valuers assume that the KBP scheme and its supporting policies were no longer in place.

The real issue was whether the tribunal had struck the balance, between the “no KBP scheme universe” and the actual planning position, in the right place.

It was not simply a matter of watering down the strict application of the existing and emerging development plan but otherwise leaving the allocation for development of the subject land in place.

What the tribunal should have done was to consider the planning potential of the subject land without regard to the KBP Scheme and it’s underlying policies (policy EC/6 and developing policy EC/7) and therefore its effect on value.

The effect of section 6(1) was that the tribunal needed to consider what wider planning policies (which were not specific to the scheme) would have been likely to have applied in a “no KBP Scheme world”, including in particular PPG3, and to have assessed whether there was any real chance of planning permission being granted for an independent residential development of the subject land under those policies. That approach would have struck the appropriate fair balance between the general public interest and the individual interest as was required under the 1961 Act.

The assumption that policy EC/6 and developing policy EC/7 continued to apply was based on a wrong application of section 6(1) of the 1961 Act and the valuation calculated on that basis must be set aside.

Since the valuation date in this case the relevant provisions of the 1961 Act have been replaced and re-cast by the provisions of the Localism Act 2011.

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

Construction: availability of adjudication depends on nature of dispute not nature of remedy claimed

A claim for restitution can exist where there is no contract. There may be no contract because there was never agreement on the price. There the basis for claim is usually “unjust enrichment”. That is a different cause of action from breach of contract.

In a contractual dispute, where there has been a total failure of consideration, a party may recover the sums he has paid – as a claim for restitution instead of damages. In short the claim would be “for restitution”, but, would be based, not on unjust enrichment, but on “a total failure of consideration amounting to a breach of contract”.

In ISG Retail Ltd v Castletech Construction Ltd [2015], ISG Retail Ltd (“ISG”), had made an advance payment to Castletech Construction Ltd (“CC”) of £35,000 plus VAT. In return CC had provided nothing of value to ISG, so that, in breach of contract, there had been a “complete failure of consideration” by CC. So the adjudicator ordered CC to repay that sum forthwith.

CC said that the adjudicator had no jurisdiction to do what he did. Paragraph 1 of Part I of the Scheme for Construction Contracts (SI No 649 of 1998) (“the Construction Scheme”) confers the right on any party to a construction contract to refer to adjudication “any dispute arising under the contract”. CC said that ISG’s restitutionary claim was not made “under contract” because restitutionary claims are not made under contracts, they are made “in equity”, restitution being an equitable remedy – and as such the adjudicator had no jurisdiction/power to decide it under the Construction Scheme.

The High Court said CC had confused the dispute and the remedy.

The scope of the jurisdiction of the adjudicator had been determined by the nature of the dispute identified in the Notice of Adjudication, not by the nature of the restitutionary remedy claimed.

Here there was a total failure of consideration which is almost invariably the result of a breach of contract unless performance of the contract has been “frustrated”.

There was nothing in the Construction Scheme that deprived an adjudicator of the power to grant relief by way of restitution if that was an available remedy for the breach of contract in question.

It being established that the dispute arose from a breach of contract and was therefore within his jurisdiction, the adjudicator could award any remedy within his power – such as the payment of a sum of money – which the claimant was entitled to for breach of contract.

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

No room for implied trust and confidence condition

A recent case raised whether and in what circumstances a contract may be subject to an implied term or condition that it will only continue in existence for so long as a relationship of mutual trust and confidence subsisted between the parties.

In the High Court case of Chelsfield Advisers LLP v Qatari Diar Real Estate Investment Company & Qatari Diar Development Company (UK) Limited [2015] the claimant (“Chelsfield”), the First Defendant (“QDREIC”) and the Second Defendant (“QDDC”) entered into a “Development Fees Agreement” (“DFA”) relating to the relocation of the US Embassy. The DFA provided that Chelsfield and QDDC would enter into a “Development Management Agreement” (“DMA”) for the provision of development management services.

It said that in the event that Chelsfield and QDDC (acting reasonably and with all due expediency and in good faith) had not agreed the terms of the DMA within 5 months they were to be determined by an Expert.

On the same day, QDDC entered into a contract with the US government for the purchase of the old embassy and its leaseback pending relocation of the embassy in 2018.

QDREIC and QDDC later gave notice that:

– they intended to treat their relationship with Chelsfield under the DFA, and the DFA, as at an end; and

– they would not enter into the DMA; and

stated that they had lost all trust and confidence in Chelsfield’s “ability to deliver what is contemplated of [Chelsfield] under the DFA and the DMA” on the following grounds:

(1) “[We] have become increasingly concerned about your capability to deliver the development management services on the terms contemplated by the DFA or at all”;

(2) “Our attempts to agree the terms of the DMA with you have been frustrated such that we had to refer the determination of the terms to an independent expert”; and

(3) “Your financial position is poor and you also have not been able to satisfy us that your organisation currently has the capability to manage the development of this world renowned listed building”.

The court said applying an objective as opposed to a subjective test to those grounds, they were no basis for there having been such a breakdown of trust and confidence as would justify QDREIC and QDDC treating the relationship between the parties or the DFA as being at an end, or refusing to enter into the DMA.

Ground (2) was covered by the express terms of the DFA. Under Clause 3.2, both QDDC and Chelsfield were obliged to negotiate reasonably, with all due expediency and in good faith; and, in the event that such negotiations did not enable them to agree all the outstanding terms of the DMA within 5 months, each of them could refer the matter to an Expert for him to decide.

Chelsfield’s failure to agree terms, which resulted in the invocation of the agreed contractual mechanism for resolving the matter, was not said to be unreasonable, tardy, or lacking good faith, so it was difficult to see how it could reasonably be regarded as giving rise to such a breakdown.

Similarly with the first part of Ground (3), the financial position of Chelsfield was expressly addressed in the DFA. If Chelsfield’s covenant strength deteriorated materially, Clause 4.2 obliged it to provide QDDC with reasonable security for the potential repayment of the Advance Planning Payment; and also Clause 13 entitled QDDC to terminate the DFA based on various insolvency events concerning Chelsfield. Also, requirements concerning Chelsfield’s ongoing financial strength were matters that the parties could seek to address in the terms of the DMA, and, in default of agreement, put to the Expert for him to determine (Clause 3.3).


– the parties had delineated those protections, and

– no breach of any term of the DFA was alleged,

it was difficult to see how Chelsfield’s allegedly poor financial position could reasonably be regarded as giving rise to such a breakdown.

As to the second part of Ground (3) viewed objectively, any such concerns could be met by the terms of the DMA, either being resolved by agreement between QDDC and Chelsfield, or, failing agreement, determined by the Expert.

Given the large potential for protections for QDDC in the DMA concerning Chelsfield’s capabilities: (a) objectively, trust and confidence should not be lacking; and (b) all reasonable grounds on which they might break down could be catered for by those terms.

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

Brothers had operated all family properties and businesses as co-owners

The recent case of Bhushan & Ors v Chand [2015] concerned a family property dispute.

In the early period it was a traditional family under the close control of the head of the household, initially the husband and after his death his wife. All the sons of the family continued to pay over their wages to their mother who controlled the family’s money. The family home was transferred into her name, and it’s successor was bought in her name.

The mother received money from various sources and simply mixed it and applied it as she thought fit for the family’s benefit, either for daily expenses or in acquiring assets she expected to benefit her sons later.

The High Court said the mixing of funds under her control would make her the beneficial owner of the money each of her sons paid to her.

When an asset such as a house was bought with that money, the ownership of that asset would depend on her intention as expressed at the time, and was not to be treated as relating back to the respective contributions to the mixed fund.

It was the defendant brother’s case that he was or had been entitled either to the whole or some ascertainable share of the beneficial interest in the assets purchased from that fund merely because of his having paid an indeterminable part of the price out of his wages. The High Court said that was insufficient.

But neither had the claimant brothers established a general intention that there be common ownership of all the assets bought from the outset.

The High Court said insofar as assets were bought in his name from that fund, the prima facie position would be that they were legally and beneficially his, if no contrary intention at the time of purchase was proved.

However, if such a property was later sold and the money paid back to the mother, then ownership of that money would vest in her, again, subject to a contrary intention at that time being proven.

In that early period, there was no sufficient evidence of a contrary intention.

But later as the children grew older the evidence of what the family actually did overwhelmingly supported them having agreed to work together in business and build up assets in common.

All of the claimant brothers worked in the joint enterprise family clothes business much more consistently with being owners than with them being four unpaid employees dependant on generosity from a lead family member.

Investments were purchased from the funds of the family business for each brother without regard to their ostensible ownership of the business. The proceeds of those investments were used to buy properties which were not always owned by the same family members. Rental income from properties and cash accumulated were aggregated and applied without distinction as to their origin.

Whatever the distinctions as to ownership presented to outsiders, these did not correspond with the way the properties, businesses and their income were treated between the family members.

The nominal ownerships of the family businesses and the rental properties bore no relationship to the way in which the income and proceeds derived from them were used.

The decisions to use those funds were taken by family members other than the ostensible owners. Those members did not do so as assistants or secretaries to any lead family member.

When a major financial issue arose from the compulsory purchase of one of the properties, it was described to the professionals acting as being owned by all five and the proceeds obtained were predominantly reinvested in a club owned on the same basis.

Finally, there was evidence of arrangements between the brothers, supporting the existence of a common intention trust in that the defendant had acknowledged the existence of such an arrangement by discussing the division of assets, and, by beginning to compile his own list of the assets to be divided.

Anyone wanting to show a common intention constructive trust must have relied to his detriment on the agreement he, or she, argues existed.

That was easy here as each of the brothers himself worked in the various businesses bought or established, in circumstances where, prima facie, he would not otherwise be entitled to any reward from those businesses or interest in the assets.

In the circumstances it was unnecessary to go on to consider the doctrine of proprietary estoppel or the precedents set by the court decisions based on the previous case of Pallant v Morgan.

In any case the facts would not fit easily with Pallant v Morgan since there was no suggestion that one or more brothers had the opportunity to acquire particular properties but had instead stood back in favour of another.

An agreement for joint ownership fitted more easily with a common intention trust than a promise of an interest in the property of another.

Their respective cross entitlements under that ownership remained to be settled – being complicated by the fact that for some time the defendant had been operating the club and the other brothers had been operating the other businesses.

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

Unnecessary Section 106 Contributions offended CIL Regulations

Regulation 122(2)(a) of the Community Infrastructure Levy Regulations (CIL) 2010 provides that:

“A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is:

(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

(c) fairly and reasonably related in scale and kind to the development.”

In the High Court case of Midcounties Co-Operative Ltd, R (on the application of) v Forest of Dean District Council Trilogy & Anor [2015] the Claimant said that the Defendant planning authority adopted an inconsistent and therefore irrational approach to contributions being required under a section 106 agreement; and/or (b) there was a breach of Regulation 122(2)(a).

Special complaint was made against paragraphs of the Planning Officers’ report in which it was stated :

on the one hand that the section 106 contributions were:

– “necessary” to make the development acceptable in planning terms; and
– directly related to the development; and
– fairly and reasonably related in scale and kind to the development

even though they would not overcome or offset the impact of the scheme on the
town centre

and were therefore compliant with Regulation 122; and

on the other hand that even without the section 106 benefits
the grant of planning permission was justified here despite the conflicts with
planning policy.

Given that the second of these assertions was repeated several times in the Officer’s Report, the Claimant said the section 106 benefits were NOT actually “necessary” in order to render the development acceptable and Regulation 122 had been infringed.

The Court said that in fact nowhere in the Officers’ report had it been explained why the section 106 benefits were “necessary” to make the development acceptable.

To the contrary, the report explained elsewhere that the section 106 benefits could be ignored and the development would still be acceptable in planning terms.

Accordingly, the approach taken by the planning authority to the balancing judgment infringed the CIL regulations and so was flawed by an error of law.

Nor would the Court exercise its discretion to decline to quash the planning permission on this ground.

The balancing judgment was for the planning authority. The Court could not anticipate what the outcome would be if the planning authority undertook the exercise in accordance with a legally correct approach. It may be different.

So the planning permission was quashed on this ground. It was quashed on another ground too but this one would have sufficed.

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

Improvement notice relating to apartment block should have been served on tenants

Where an apartment block is managed by a Right to Manage (“RTM”) Company who can a local housing authority serve an improvement notice on requiring work? Can an improvement notice still be validly served on the landlord under paragraph 4(2) of Schedule 1 to the Housing Act 2004 (“the Housing Act”)?

In the Upper Tribunal (Lands Chamber)case of Hastings Borough Council v Braear Developments Ltd [2015] Hastings Borough Council served an improvement notice requiring work to the common parts on Braear Developments Limited, the freeholder, and on the RTM Company.

Previous freeholders had granted long leases of the five first, second and third floors flats in the building, for a term of 99 years. The leases of the flats granted rights over the only means of access. Four of the five flats in the building were sublet on assured tenancies by the lessees. The fifth flat was not let, but if it were, the recipient of the rack-rent would be the lessee.

The Tribunal said looking at the building as a whole, the “person in control”, in the statutory sense of the person(s) in receipt of the rack rents, were the lessees of the five flats.

It would be wrong to ascribe a notional rack-rent to the common parts of the building, when there is no realistic possibility of such a rent being received.

The persons in control of the building were the lessees of the five flats.

Collectively they received the rack-rent of the building. So they satisfied the description in section 263(1) of the Housing Act.

Neither the respondent, as freeholder, nor the RTM Company could be served with an improvement notice in relation to any part of the building.

The freeholder did not qualify to receive the notice as the “person in control” of a House in Multiple Occupation (“HMO”) because it did not receive the rack-rents of the premises and so did not match the description in section 263(1) of the Housing Act. The RTM Company was in the same position.

Nor were either of the freeholder or the RTM a “person managing the building” within section 263(3) of the Housing Act. The respondent received a ground rent from the lessees, but no rent from persons who were in occupation as tenants or licensees of parts of the premises. The RTM Company received no rent at all.

So, in relation to the building as a whole, paragraph 2 of Schedule 1 to the Housing Act required the improvement notice to be served on the lessees collectively, and, to the extent that work was required within any individual flats, it required each lessee of those flats to be served with the notice requiring that work.

Paragraph 2 of Schedule 1 to the Housing Act applies only to HMOs which are not licensed. So where a building is an HMO subject to licensing it would normally be expected that an improvement notice would be served on the person holding the licence.

This building was subject to licensing as an HMO but it was not licensed.

Had the RTM Company obtained an HMO licence under Part 2 of the Act, as it should, it would have been the appropriate person on whom an improvement notice ought to be served under paragraph 1 of Schedule 1. As it had failed to do so the notice was to be served on the lessees collectively under paragraph 2.

There may be circumstances where a local housing authority could, and might have to, serve an improvement notice in relation to common parts either on the freeholder or on some or all of the lessees of flats. Each case would turn on which of those owners “ought to take the actions specified in the notice” in the circumstances. For example, where an RTM company has the management the freeholder would have no power to undertake works and no entitlement to recoup the costs of works from lessees.

Here, the better course would be to direct any improvement notice at those lessees who are members of the RTM company and who are therefore collectively able to control the RTM company’s decisions. Usually the RTM company would be able to carry out the works and to recoup their costs under service charges.

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

Mortgage: Solicitor had failed to give surety necessary advice

In Royal Bank of Scotland v Etridge (No.2) [2001] (“Etridge”) the House of Lords considered the obligations and rights of lenders and sureties where the surety is to provide security for the borrowing of another person where that person might be in a position to exert undue influence over the surety.

The common situation is that of a wife mortgaging her interest in the matrimonial home to secure bank borrowing by her husband.

There the House of Lords was concerned to identify the minimum requirements necessary to protect the surety from granting a charge over property without fully understanding the nature and effect of the proposed transaction, and to ensure that the surety took the decision whether to provide security freely and of their own will.

Where a solicitor is advising someone mortgaging property or giving a guarantee to secure another’s debts, the requirements set by Etridge and their responsibilities are:

1. before acting, to consider whether there is any conflict of duty or interest and what is in the best interests of the surety;

2. to confirm the identity of the surety and explain to the surety the reason for the solicitor’s involvement, which is to counter any later allegation of undue influence or failure to understand the transaction and its implications;

3. to confirm that surety agrees to the solicitor so representing and advising the surety;

4. to explain and advise at a face-to-face meeting, without the borrower being present, and in appropriately non-technical language.

Other principles

1. The bank instructs the solicitor but the solicitor should be chosen by the surety. Cost and the fact a solicitor/client relationship pre-exists are important factors so the same solicitor may act for the borrower, the surety and the bank. BUT, the legal and professional duties that the solicitor assumes when accepting instructions to advise the surety, are owed to the surety alone and the solicitor must be satisfied that he can give the surety the necessary advice fully, carefully and conscientiously. If the provision of that service may be inhibited, the solicitor must cease acting for the surety and so inform the bank; and,

2. the core minimum advice to be given and involvement of the solicitor is:

(a) to explain the nature of the documents and the practical consequences for the surety if (s)he signs them (mainly loss of the property made available as security and/or, where a guarantee is being provided, being bankrupted);

(b) to explain the seriousness of the risk involved entailing:

(i) an explanation of the purpose, amount and principal terms of the new facility,

(ii) an explanation that the bank may increase the facility or change its terms or grant a new facility without referring back to the surety,

(iii) an explanation of the surety’s liability under any guarantee,

(iv) discussion of the surety’s means, the value of any property being mortgaged, and whether (s)he or the borrower have other assets with which to make repayment if the transaction fails). So routinely, the bank must provide the solicitor with financial information about the borrower so that the financial risks to be assumed by the surety may be properly explained to the surety. The relevant information will vary but as a minimum should be the borrower’s current indebtedness, the limit of any current facility, and the limit and terms of any proposed facility;

(c) to explain that the surety has a choice and that the choice is the surety’s alone. This will be informed by the borrower’s and the surety’s present financial circumstances, including their present indebtedness and financial facilities available to them discussed at 2(b)(iv) above;

(d) to ascertain whether the surety wishes to negotiate with the bank (eg to re-prioritise the order in which the bank may call upon securities and/or to fix the upper limit of the surety’s exposure at a lower level) and, if so, whether (s)he wishes to do so directly with the bank or with the bank through the solicitor; and

(e) to verify whether the surety wishes to proceed and, if so, to get the surety’s authority to write to the bank to confirm the explanation the solicitor gave the surety.

Before advising the surety, the solicitor should get any information needed from the bank (if missing from the bank’s instructions).

If the above requirements, are complied with, the bank can accept, rely upon and, if need be, enforce the surety’s security and/or guarantee.

Where the solicitor has been properly retained, the bank can assume that the solicitor has done the job properly.

If the solicitor’s advice is poor that is a matter between the surety and the solicitor.

However, if the bank ought to have realised from facts known to it that the surety has not received the appropriate advice, Etridge says any bank, proceding with the security, would do so at its own risk.

A lender might lose the benefit of security obtained in good faith, if the lender ought to have known that the surety’s concurrence to it had been got by a third party’s misconduct (more often than not the borrower’s).

A bank is put on inquiry whenever a wife offers to stand surety for her husband’s debts as (1) the transaction may well not be to the wife’s financial advantage and (2) such transactions carry a substantial risk of the husband has committing a legal or equitable wrong in getting the wife to stand surety, which may entitle the wife to set aside the transaction.

More generally, a bank is put on inquiry where (1) the transaction is not on its face to the surety’s financial advantage and (2) the relationship between the borrower and the surety causes a substantial risk that the borrower could and did exert undue influence in getting the surety to provide a guarantee or security.

The surety must therefore inform the bank of the chosen solicitor’s identity. There has to be a balance between independence on the one hand and practicality and avoidance of unnecessary financial outlay on the other.

In the High Court case of HSBC Bank Plc v Brown [2015] the court looked behind the solicitor’s certificate and found that he had failed to take any of the steps and to give the core minimum advice specified in Etridge. So the bank’s claim for possession was dismissed and the mortgage was declared unenforceable.

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

Planning: Secretary of State had placed unwarranted reliance on neighbourhood plan assessments

In the High Court case of Gladman Developments Ltd v Aylesbury Vale District Council [2014] a decision to “make” a neighbourhood plan was challenged basically because it was claimed that the law did not allow a neighbourhood plan to include policies for the allocation of housing sites and the drawing up of settlement boundaries until such time as the local planning authority had adopted a local plan containing strategic housing policies to address the objectively assessed housing needs of the district. Gladman’s challenge was unsuccessful. The High Court judge ruled:

(i) Paragraph 8(2)(e) of schedule 4B to the Town and Country Planning Act 1990 (“the 1990 Act”) only requires general conformity with the strategic policies of the development plan – if such policies exist. If they do not exist, paragraph 8(2)(e) is not engaged, but that does not prevent a neighbourhood plan being prepared and formally “made”.

(ii) If a local planning authority finds that housing needs in its area are not being met, it should review it’s development plan documents. Once adopted such policies will prevail over any previous neighbourhood plan that is inconsistent with them (section 38(6) of Planning and Compulsory Purchase Act 2004 (“the 2004 Act”)).

(iii) If a neighbourhood plan (or one or more of its policies) gets out of date, that could be a material consideration justifying that plan being departed from and planning permission for development being granted in breach of those policies.

(iv) A neighbourhood plan may contain policies on the location and use of land for housing (or other development) and may address it’s areas local needs but such policies should not be equated with the “strategic policies” of a development plan document. It is not the function of the body responsible for a neighbourhood plan to prepare strategic policies to meet the assessed development needs across a local plan area.

Whilst Gladman’s got leave to appeal they decided not to pursue it.

In the High Court case of Woodcock Holdings Ltd v Secretary of State for Communities And Local Government & Anor [2015] the claimant sought planning consent for 120 dwellings, community facility/office space, and care home and retail units. The Secretary of State had rejected their appeal against refusal.

The court said there was no evidence before the Secretary of State as to whether or when the District Council would carry out an up to date objective assessment of housing need against which to test the proposals in the draft neighbourhood plan or that it would be carried out before the examination of the neighbourhood plan.

There was no legal requiement for such an assessment to be carried out to meet the statutory “basic conditions” for the preparation and approval of a neighbourhood plan.

Neither would the examination of the neighbourhood plan consider whether the policies of a plan were “justified” by a proportionate evidence base (the “soundness” test).

However, in this case the Secretary of State had assumed that the remaining stages of the neighbourhood plan “may show that more land needs to be allocated”.

However given that the District Council had not made any proper needs assessment, and the limited statutory ambit of the process for the preparation and examination of a neighbourhood plan, the Secretary of State had made an assumption, not based upon any evidential or legal justification, which had been the basis of his dismissing the planning appeal.

So on this ground alone the Secretary of State’s decision to refuse the appeal must be quashed.

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