Monthly Archives: July 2015

Party Walls Act restricts works a neighbouring owner can require

In the High Court case of Bridgland v Earlsmead Estates Ltd [2015] the claimant claimed breach of statutory duty in that:

1. Their neighbouring building owner failed to serve on them a notice under section 3 of the Party Wall Act 1996 (“the 1996 Act”), thereby depriving the claimant of the opportunity to avail herself of the counter-notice procedures in section 4 of the 1996 Act. Had the claimant been allowed this opportunity she would have been able to require the works to be performed in such a manner as to prevent the issues of damp arising from the demolition of the building owner’s gable.

2. In breach of section 7 (1) of the 1996 Act the neighbour had failed to carry out their demolition work in such a way as to avoid unnecessary inconvenience being caused to the claimant.

The court found that the claimant had misunderstand the nature and purpose of a counter notice served under section 4. Such “other work” as may be the subject matter of a counter notice is different from the work which the building owner proposes, and a counter notice has nothing to do with the manner in which the building owner’s proposed work is to be carried out.

The purpose of the notice was not to enable an adjoining owner to require that the building owner’s proposed work be carried out in a particular manner, but rather to enable an adjoining owner to require that additional work be carried out by the building owner, for the benefit of the adjoining owner, at the same time as the builder’s owner carried out his own proposed work.

The expense of those additional works would have to be borne by the adjoining owner requesting the additional works, and not by the building owner: section 11(9) of the 1996 Act.

Also a counter notice could only relate to such other work to be carried out on the “party fence wall or party structure” as “may reasonably be required for the convenience of the adjoining owner” (section 4 (1) (a) of the 1996 Act). So such additional works can only be required to be carried out on the party wall itself, and not on the building owner’s land. It does not extend to any further work which the adjoining owner might wish to carry out, or have carried out on his own land either.

A counter notice therefore cannot, and does not, relate to such further work and a counter notice is not a medium for objection to the manner in which the building owner proposes to carry out his works.

So the claimant’s case had been incorrectly premised on the assumption that, had they served a counter notice, then they “… would have been able to require the works to be performed in such a way as to prevent the issues of damp arising”. What specific requirements could the claimants have made in their counter notice? Had there been a disagreement in relation to their requirements, could a surveyor appointed under the 1996 Act have made an award by which he directed the defendant to meet those requirements, and to carry out the works in the manner required by the claimants?” Had a section 4 counter-notice been served requiring French drains to be dug on the claimant’s property, that would have been outside the provisions of the Act.

On the second point the 1996 Act does not contain provisions enforcing performance of the obligation in section 7 (1) but the fact that it contains a specific mechanism or procedure for the resolution of disputes in relation to “any matter” connected with “any work” to which the 1996 Act relates strongly indicated that a breach of such obligation is only actionable through such mechanism or procedure.

In any event a breach of statutory duty is not actionable of itself, but only upon the occurrence of resultant damage. As regards section 3, a failure to serve a party structure notice would be a breach of the relevant statutory duty but it would not constitute the damage itself. Whether in relation to breach of section 3 or section 7, damage would be the physical damage caused by damp penetration to the flank wall of the claimant’s property. This was only likely to have occurred some time after demolition occurred but this could be assessed if the claimants sued the building owner for withdrawing any implied easements of protection their wall had acquired.

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

VAT: Piecemeal asset transfer amounted to TOGC

A transfer of a going concern for VAT purposes is not defined. Widgery J gave some guidance in Kenmir v Frizzell and Others [1968]:

“In deciding whether a transaction amounted to the transfer of a business regard must be had to its substance rather than its form, and consideration must be given to the whole of the circumstances, weighing the factors which point in one direction against those which point in another. In the end the vital consideration is whether the effect of the transaction was to put the transferee in the possession of a going concern the activities of which he could carry on without interruption. Many factors may be relevant to this decision though few will be conclusive in themselves.”

The level of identity between the transferor and the transferee’s workforce is “a strong indicator towards there having been a transfer of a business irrespective of whether there had been any formal agreement to transfer them” (Judge Raghavan in HQ Graphics Limited v The Commissioners for Her Majesty’s Revenue & Customs [2013]).

In the First-tier Tribunal (Tax) Chamber case of Amor Interiors Ltd v Revenue & Customs [2015], Old Mill Furniture Limited operated an upholstery and interior design business. It made a series of 16 sales/transfers of assets to Amor Interiors Limited, which operated a very similar business, between 15 March 2011 and 30 May 2011. Each transfer was covered by a separate consecutive invoice.

Amor Interiors Limited were able to use the same premises and staff available as Old Mill Furniture Limited had used. They had experience of Old Mill Furniture Limited’s identical business.

Old Mill Furniture Limited had financial difficulties at the time of the transactions. It was claimed that they were made to provide Old Mill Furniture Limited with cash flow so that it could continue trading.

A liquidator was appointed to Old Mill Furniture Limited in October 2011.

It was claimed that Old Mill Furniture Limited had continued to trade after the 16 transfers to Amor Interiors Limited but no further evidence was produced of Old Mill Furniture Limited’s continued business or of how it could have traded without the assets it had transferred to Amor Interiors Limited.

HM Revenue and Customs (“HMRC”) disallowed Amor Interiors Limited’s claim for £13,676.32 input tax on its VAT return. HMRC said the input tax related to a series of transactions that HMRC regarded as the transfer of a going concern (“TOGC”).

Amor Interiors Limited contended that the assets were sold in the normal course of Old Mill Furniture Limited’s business and that it did not acquire the whole or any part of Old Mill Furniture Limited’s business as a going concern.

Amor Interiors Limited claimed there had not been a TOGC because Old Mill Furniture Limited intended to continue to trade until it was put into liquidation. But if Old Mill Furniture Limited had continued its business why apparently had no further VAT invoices been raised?

Taking a broad view the Tribunal could not find a credible explanation of how Old Mill Furniture Limited’s upholstery and interior design business could have continued after the transfers, given both the loss of the five employees and the transfer of “all” stock, fixtures and fittings, electrical tools, machines and desks listed on the invoices.

Even if Old Mill Furniture Limited had intended to continue to trade, sufficient assets and staff had been acquired by Amor Interiors Limited to enable it to use them to carry on the same kind of business following the transfers so there had been the transfer of part of its business rather than of the entire business.

Whether you regarded the transfers as a transfer of the whole business or a transfer of part of it, and whatever Old Mill Furniture Limited’s then intention to continue to trade, the conditions in Article 5(1) (b) of the Value Added Tax (Special Provisions) Order 1995 had been met, so that, taken as a whole, the transfers were not supplies of goods or services, and were outside the scope of VAT.

HMRC’s decision to disallow the input tax claim was upheld.

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

Examining planning inspector’s recommendations could extend to rewriting parts of draft local plan

As originally enacted, section 20(7) of the Planning and Compensation Act 2004 (“2004 Act”) provided as follows for inspectors appointed to examine local planning authority local plans:

“(7) The person appointed to carry out the examination must –

(a) make recommendations;

(b) give reasons for the recommendations.”

In IM Properties Development Ltd v Lichfield District Council & Ors [2015] the claimant said that the examining planning inspector had exceeded his powers in recommending the main modifications to the local plan.

However the High Court said section 20(7) – 20(7C), introduced into section 20 by section 112 of the Localism Act 2011, contemplated that changes of substance could be made to the local plan.

Section 20(7C) of the 2004 Act permitted a local planning authority to request an inspector to recommend modifications to a plan in order to make it sound or legally compliant.

The statutory power could extend to the redrafting of text, or the deletion of a particular policy and changes that were either so significant or so extensive that they amounted to re-writing the plan.

The amendments to section 20 increased the opportunity for planning inspectors to recommend changes so as to enable local plans to be found sound.

Hitherto plans would have to be found to be unsound and so unable to proceed to adoption.

The Localism Act 2011 had changed that. There was no limitation in the statutory language preventing a “rewrite” of the local plan, when any change amounted to a rewrite.

The Planning Inspectorate’s Examining Local Plans Procedural Practice 2013 guidance was no way inconsistent with that. Whilst under section 19(2)(a) of the 2004 Act regard must be had to guidance, that guidance must give way to the legislative intention. In any event it did not claim to be exhaustive (e.g. “may consist…” in paragraph 4.24).

Anyway, the nature and extent of the modifications were a matter of judgment for the planning inspector.

The inspector had considered the rival submissions about strategy, and concluded that the release of the green belt sites was consistent with the plan’s urban and key centre strategy. The courts would not interfere with an exercise of planning judgment.

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

Stallholders’ pitch fees at comprehensively organised trade fair subject to VAT

In the First-tier Tribunal (Tax) case of International Antiques and Collectors Fairs Ltd v Revenue & Customs (VAT – EXEMPT SUPPLIES : Land) [2015] various site owners up and down the country normally granted the Company five year licences to use their properties to hold antiques fairs on agreed dates, on an exclusive basis.

The antiques fairs were large scale events which the Company’s marketing materials described as some of the biggest and best attended of their kind in Europe – which clearly required extensive and expert organisation. It took almost 90 staff at Newark and over 40 at Ardingly. Each Exhibitor paid for the benefit of a fully organised fair provided by the Company.

The Company performed all organisation of the fair, including stewards, first-aiders, cleaners, security, parking marshals, electricity, some police attendance, and some availability of banking facilities.

The Company also undertook prior advertising in both trade publications and the local press. This involved one full-time employee, one PR consultant, two other consultants, a graphic designer and two bloggers.

The Tribunal said that the Company’s supply to an Exhibitor was not “a relatively passive activity linked simply to the passage of time and not generating any significant added value”.

In fact, the Company’s activities in organising and running the fair did generate significant added value and were “other activities which are … commercial in nature, … or have as their subject matter something which is best understood as the provision of a service rather than simply the making available of property”.

The test was “whether the contracts, as performed, have as their essential object the making available, in a passive manner, of premises or parts of buildings in exchange for a payment linked to the passage of time, or whether they give rise to the provision of a service capable of being categorised in a different way”.

The economic and social reality was that the over-arching single supply by the Company was not to be treated as a supply of a licence to occupy land, but rather a supply of the opportunity to participate as a seller at an expertly organised and expertly run antiques and collectors fair, one element of which was the provision of the pitch. Accordingly, the correct VAT treatment of the booking fees was a standard rated supply.

The VAT treatment of the supply was self-evidently standard rated once it was established that the other service elements were not ancillary to the provision of the licence.

That was sufficient to decide the appeal against the Company.

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

Planning: Report on emerging Core Strategy was material consideration

In planning the duty to have regard to material considerations applies up to the time the decision maker (in an appeal the inspector) makes his decision.

Under rule 19 of the Town and Country Planning Appeals (Determination by Inspectors) (Inquiries Procedure) (England) Rules 2000, the decision on the appeal is made when the parties are notified of the decision in the decision letter.

That means that up until that time the appeal inspector is seized of the appeal even though he may have submitted his or her decision letter to the Planning Inspectorate (“PINS”) some weeks earlier.

In Wiltshire Council v Secretary of State for Communities and Local Government & Ors [2015] the report of another inspector on the emerging Wiltshire Core Strategy (“EWCS”) cast doubt on the admission made by the Council in the appeal that it did not have five years housing land supply and/or updated the assessment from one of shortfall at the inquiry to one where a different housing situation now appeared likely to be the case.

In short, the report affected the position on housing needs in Wiltshire which were one of the main issues in the appeal. The report also advanced the Core Strategy nearer to adoption so increasing the weight to be attached to it.

The final report on the EWCS was sent to the case officer in the appeal at PINS by email at 0928 on 3 December 2014. It was not forwarded to the relevant appeal inspector before he sent in his decision at 1610 also on 3 December 2014. His witness statement confirmed that at no time was it forwarded to him.

The High Court said that the appeal inspector in this case did not have to follow the findings of his colleague but he needed to take them into account and express reasons for how he dealt with those findings.

The fact that PINS had not even given him the chance to consider them at a time when his decision had yet to be issued meant that that decision to grant planning permission on appeal had failed to have regard to a material consideration and had to 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.

Planning: Council’s assessment of housing needs was unduly “policy on” and so insufficient

On housing, the National Planning Policy Framework (“the NPPF”) differed from the earlier national guidance in two major respects:

1. Consistent with the Localism Act 2011, the NPPF substituted localism for the regional, “top down”, approach to housing strategy, with planning authorities now being required to cooperate with neighbouring authorities to develop housing strategy themselves.

2. The NPPF emphasised the need to significantly increase the supply of housing. Paragraph 47 of the NPPF requires a two-step approach: first, an objective assessment of full needs for market and affordable housing (“FOAN”) (“policy off”), and then secondly a distinct assessment as to whether (and, if so, to what extent) other NPPF policies – including those designed to protect the environment – dictate or justify constraint in planned housing provision (“policy on”).

In Oadby and Wigston Borough Council v Secretary of State for Communities and Local Government & Anor [2015 the Council’s adopted Oadby & Wigston Core Strategy Development Plan Document arrived at housing needs figures which it said were “policy off”.

The Council’s justification for not adopting a FOAN figure incorporating housing needs based on employment projections had been that those needs could be met by increased commuting, coupled with increased housing in the nearby authority of Leicester City for those commuters.

In this case, the developer successfully challenged the Plan as failing to provide an accurate projection of 5 years’ housing supply needs, as required by NPPF, because this was in fact a “policy on” decision by the Council not to meet an element of identified need for housing in the Borough and there was no evidence that that need would in fact be satisfied in any adjacent authority.

Rejecting the Council’s attempt to overturn the developer’s planning permission granted on appeal, the High Court said the Inspector had been right – and, certainly, entitled – to conclude that the Council’s figures for housing requirements for Oadby & Wigston were “policy on” and thus not the appropriate figures to take for the FOAN housing requirement for the relevant five year period. So the Inspector had been entitled to approach the issue of five-year housing land supply on the basis that the FOAN – and thus the relevant housing requirement – was no less than 147 dwellings per annum.

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

Construction: paperwork not clear enough to amount to interim payment applications

In the High Court case of Caledonian Modular Ltd v Mar City Developments Ltd [2015], the defendant denied liability for any part of the amount awarded by an adjudicator. The adjudicator’s decision turned on the date on which the claimant had notified the defendant of the sum due under the letter of intent for the construction project.

On the claimant’s view, the relevant interim payment application was made on 13 February 2015. If that was right, it was common ground that the defendant’s payless notice of 25 March 2015 was out of time and invalid.

But the defendant said that the documents of 13 February were not a claim for or notice of the sum due for payment, and that the claimant’s claim was not made until 19 March 2015. If that view were correct, it was common ground that the defendant’s payless notice of 25 March would be within time and would have provided a complete defence to the claimant’s claim.

If the documents of 13 February did not constitute a fresh application for an interim payment, or a valid payee’s notice no further sums were due from the defendant to the claimant and the adjudicator had been wrong to conclude to the contrary.

The court said:

1. Neither the covering email of 13 February 2015, nor the three documents enclosed with it, stated that they were a new application for an interim payment. The documents said variously that they were a ‘final account application summary’ and an ‘updated account’.

2. A later invoice of 19 March 2015 did not say that it was in any way a default payment notice or that the payee’s notice had originally been provided on 13 February 2015. If that had been the claimant’s position, they would have said so in clear terms.

3. In between the email of 13 February and the invoice of 19 March, the defendant expressly asked the claimant what the 13 February documents were. Unsurprisingly, the defendant was confused as to what, if anything, they were supposed to do with those documents. The claimant’s explanation did not even begin to suggest that the documents of 13 February were in fact an entirely new interim application, or that a fresh claim had been made less than a fortnight after the last, in the middle of the month and not at the month’s end.

In all three documents that the claimant relied on as being applications for interim payment, the claimant had had the opportunity to say clearly that those documents were what they now said they were, namely a new application for an interim payment and/or a payee’s notice, but the claimant failed to do so.

This omission was significant. It suggested that the claimant’s case now, that the documents were in fact a fresh claim, was “something of an afterthought.”

The only other alternative explanation was that the claimant believed that it was in its best interests to be “studiedly vague” about the nature of the documents, so as to set up precisely the argument they advanced successfully in winning the adjudication.

On any view, if they intended to serve a valid payee’s notice on 13 February, they could and should have said that that was what they were doing.

They were even asked a question which, if that had indeed been their intention, required only that simple answer. It was not provided.

Accordingly, the court granted a declaration that the documents of 13 February 2015 were not a valid application for an interim payment, or a valid payee’s notice and that no sums were due in consequence of the adjudication.

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

Commons: Management by the local authority removed need for landowner to communicate permission

If public access to land for recreational purposes was by permission of the land owner, then the use was not as of right.

Where the Local Authority is both land owner and manager of the land under public powers, then, in the absence of unusual circumstances, public use of such land is by permission.

In the Court of Appeal case of Naylor v Essex County Council [2015] the legal issue that arose in the judicial review application was whether the local inhabitants, who certainly used the land as a village green, were doing so by right or as of right such that they could now claim registration of the land as village green.

The land in question was owned by a private company but for many years, possibly from 1974 and certainly from 1989, the District Council had maintained the land as a public amenity for use by local residents and provided services by mowing the lawn, removing litter and erecting dog refuse bins on its perimeters. The inspector had concluded that those functions were probably assumed by the District Council exercising powers under the Open Spaces Act, 1906 which empowered the Council to undertake the care and control of open spaces even if it did not own them.

The claimants said the position was different if the land was owned by a private entity, and the land was only managed by the Local Authority (as here).

The court said the private landowner permitted the public to have access to the land by accepting public regulation over the use of the land.

In those circumstances, further acts of communication by the land owner of permission to the public to enter the land were not necessary since the land owner was content for the communication, to be continued to be done by the Local Authority who were inviting the public on the land on the landowner’s behalf by their acts.

The previous cases about the need for express communication of permission by land owners would remain good where there is no intervention of a public authority in terms of management of the land.

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

Business transfer a TOGC despite Group’s exclusive call on transferee

In order to be a transfer of a business as a going concern (“TOGC”) so as to be relieved from VAT the assets transferred must together constitute an undertaking capable of carrying on an independent economic activity. This is quite different from a mere transfer of assets.

In the Upper Tribunal Tax and Chancery Chamber case of Intelligent Managed Services Limited – v- HMRC [2015], HMRC claimed that the transfer of Intelligent Managed Services Limited (“IMSL”)’s banking support services business, comprising business assets and staff, to Virgin Money Management Services Limited (“VMMSL”), was not a “transfer of a going concern”, so that the transfer constituted supplies of goods and services that VAT should be charged on.

VMMSL were a member of the Virgin Money Group (“VMG”) VAT group.

At the time of transfer to VMMSL IMSL’s business was the business of owning, maintaining,
operating, using, developing and supporting an information technology infrastructure and know how for use by others in banking support. IMSL had developed a banking platform (“banking engine”) for banking processing services for banks.

Following the transfer of the business, VMMSL carried on the same type of business providing banking processing services to another member of the VMG VAT group, Virgin Money Bank Limited (“VMBL”), which provided retail banking services to retail customers. The processing services provided by VMMSL were added into the retail banking services offered by VMBL, which comprised retail banking products, accounts and payment processing services, for which the banking engine was essential. VMMSL only provided services to group companies.

The question was whether the fiction created by the VAT group rules, i.e. that of the single taxable person carrying on that business, in combination with the other businesses of the group, meant that the VMG VAT group was not to be treated as using the assets transferred in carrying on the same kind of business as required of any business successor by the TOGC rules.

The tribunal said that the mere fact that the business transferred was to be carried on, not as a stand-alone business, but as part of the existing business of the group could not make a difference. That was clear from the terms of Article 5(1)(a)(i) of the Value Added Tax (Special Provisions) Order 1995 (“SPO”) itself.

By virtue of the single taxable person fiction, as applied by Section 43(1) Value Added Tax Act 1994 (“VATA”), the group was to be treated as carrying on all the businesses carried on by group companies.

But that fiction did not change the nature of those businesses. They remained separate businesses as a matter of fact.

The fiction did not extend to treating the group as carrying on a different, amalgamated, business in which the separate businesses of the group lost their individual identity.

This was the case whether or not those individual businesses themselves made supplies outside the group. The treatment of such supplies was dealt with separately by Section 43(1)(b) of VATA.

Nor could the position be affected by the fact that Section 43(1) of VATA caused VMMSL’s supplies within the group to be disregarded. Although the VAT effects of those supplies were to be disregarded, the activities of VMMSL and the intra-group transactions it made were not.

The effect of VMMSL being within the VMG VAT group was that it was the group, as the single taxable person, that was treated as the transferee, and it was the group that was treated as carrying on each of the businesses of the group members, but none of the statutory disregards could alter the fact that the group, in combination with its other businesses, continued to use the assets transferred in the same kind of business as that formerly carried on by IMSL.

Accordingly, the transfer by IMSL of the assets of its business to VMMSL satisfied the conditions of Article 5(1) of the SPO, and those supplies were therefore to be treated as neither a supply of goods nor a supply of services and relieved from VAT under the VAT TOGC rules.

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

Constructive trust used to validate verbal land contract

In Ghazaani v Rowshan [2015] Mr Rowshan owned a Leeds property. Dr Ghazaani relied on the doctrine of constructive trusts and/or proprietary estoppel and contended that Mr Rowshan held the Leeds property on constructive trust for him and should be compelled to transfer it to him.

There was an oral agreement under which Dr Ghazaani and Mr Rowshan agreed to exchange the Leeds property for a Tehran apartment together with an equality payment.

There was never any intention to enter into a formal written agreement. Dr Ghazaani and Mr Rowshan were quite content to proceed to completion on the basis of the oral agreement they had reached. At least by November 2011 all of the terms had been agreed between the parties. There were no further terms to be agreed between them.

Being an oral agreement normally Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 would make that agreement void – certainly as regards the Leeds property. It had been a matter of debate how far proprietary estoppel and constructive trusts could be used to get round the hardship and potential for injustice in this section.

In November 2011 Mr Rowshan granted Dr Ghazaani possession of the Leeds property and instructed a tenant of part of it to pay rent to Dr Ghazaani.

Between 2011 and 2012 Dr Ghazaani carried out significant alterations to the first floor of the Leeds property and had converted it into residential accommodation. Dr Ghazaani had spent £10,490 for the labour and a substantial amount was also spent on the materials. Dr Ghazaani retained possession of the first floor flat. He had 3 daughters and it had been occupied from time to time by two who were studying at Leeds University. The Transfer of the Tehran apartment to Mr Rowshan was made by a Transfer registered in November 2011. The 500 million IR equality money was paid to Mr Rowshan.

The High Court said Dr Ghazaani has made out his case for a constructive trust and/or proprietary estoppel and, in the exceptional circumstances, it would be unconscionable for Mr Rowshan to refuse to complete the Transfer of the Leeds property to Dr Ghazaani.

The parties should be put in the position they would have been if the contract had been concluded in November 2011.

So the court ordered Mr Rowshan to Transfer the Leeds property to Dr Ghazaani.

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