Articles
The nature of the valuation exercise
Was the Land Tribunal justified in treating a probability as a certainty? Evelyn Reid talks to Malcolm Dowden, solicitor and LexisPSL property author about compensation for the compulsory acquisition of land
LNB News 12/08/2009 27
Published date: 12 August 2009
Jurisdiction: UK
Related legislation: Land Compensation Act 1961
Related cases: Spirerose Ltd (in administration) v Transport for London (formerly London Underground Ltd) [2009] UKHL 44, [2009] All ER (D) 324 (Jul)
Related digests: Couple's Home Sale Banned Because of Covenant, LNB News 14/07/2009 35
Relevant companies: Spirerose Ltd
Analysis: In Spirerose Ltd (in administration) v Transport for London (formerly London Underground Ltd) [2009] UKHL 44 there was a probability that planning permission for a valuable re-development of land would have been granted. The Land Tribunal, affirmed by the Court of Appeal, awarded compensation as if permission would be granted. The appellant appealed to the House of Lords, contending that both decisions had misunderstood the way in which the Land Compensation Act 1961 (1961 Act) operated, having equated the reasonable prospect that planning permission would have been granted with it being a certainty.
The question says Dowden, solicitor and LexisPSL property author, "Was whether compensation should be calculated by reference to the value of the land with the benefit of an actual planning consent, or whether the correct basis was the 'hope value' attributable to the likelihood of planning permission being available.
"The Court of Appeal had found that if planning permission would, on the balance of probabilities, be available then compensation should be assessed as if the land actually had the benefit of that consent."
The House of Lords reversed that decision. It said that the grant of planning permission was not to be assumed and only the 'hope value' was to be taken into account in assessing the compensation payable.
Lord Walker said that to transform a probability of planning permission into a certainty on the footing that the civil standard of proof--the balance of probabilities--has been satisfied misunderstands the nature of the valuation exercise required by rule (2) of section 5 of the 1961 Act.
The 'balance of probability' test is concerned only with proof of facts in the context of civil proceedings, says Dowden. He adds: "Valuation, by contrast, is concerned with finding the market value of land at a particular date, taking into account its attributes at that time. The probability of planning consent being obtained is not the same as a 100% certainty that it will be obtained.
"The Court of Appeal was wrong to reach a result that would convert a 51% chance as equivalent to 100 per cent, and the unsatisfactory nature of that result was highlighted by the question of how a 49% chance would be treated. If a 51% chance could be treated as equivalent to 100% then it might follow that a 49% chance should be treated as equivalent to zero per cent. However, the Court of Appeal appears to have preferred an approach to valuation which in that instance would attribute a 'hope value' reflecting a 49% chance.
"The 1961 Act did not mean that the probability of a grant of planning permission could be treated as a certainty. The correct approach is to attribute 'hope value' as a percentage of the full value of the land reflecting the probability of permission being granted, as perceived by the market in a 'no scheme world' (ie excluding any increase or decrease in value wholly attributable to the scheme requiring compulsory acquisition)."
Property rights of cohabiting couples
Could the claimant establish a beneficial interest in the property? Geraldine Morris, solicitor and technical editor of Butterworths Family Law Service Bulletin talks to Evelyn Reid
LNB News 10/08/2009 12
Published date: 10 August 2009
Jurisdiction: UK
Related cases: Stack v Dowden [2007] UKHL 17, [2007] All ER (D) 208 (Apr); Thomson v Humphrey [2009] All ER (D) 280 (Jun)
Analysis: The property rights of cohabiting couples following the breakdown of their relationship often come before the court because there is no clear contractual agreement prior to cohabitation. Lord Hope in Stack v Dowden [2007] UKHL 17 said that the situation is complicated by the fact that "there is no single, or paradigm, set of circumstances" and that the only feature which "these cases have in common is that the problem has not been solved by legislation".
In Thomson v Humphrey [2009] All ER (D) 280 (Jun) the High Court had to consider whether the claimant had a beneficial interest in the property. The defendant purchased a property (the original property) where the claimant and her children lived. Subsequently, the claimant moved out of the original property and in with the defendant. The original property was then sold and the property in issue purchased. At all times the defendant had been the sole registered proprietor of both properties.
Following the breakdown of the relationship the claimant sought to assert a beneficial interest in the property in issue. Morris, solicitor and technical editor of Butterworths Family Law Service Bulletin, says: "Whilst this case does not raise any new points of law it is a reminder of the importance of the parties' intentions and the communication of those intentions. The applicant in the instant case may have expressed a wish to have a beneficial interest in the properties in question but there was a lack of joint intention as evidenced by the cohabitation agreement referred to by the defendant."
As noted by their Lordships in Stack the legislation that enables the court to reallocate beneficial interests in the home and other assets following a divorce does not apply to cohabiting couples. However, Lord Hope said that the "law can, and should, provide the right framework". He argued that a "more practical, down-to-earth, fact-based approach is called for" and that the framework which the law provides should be simple and accessible.
In the instant case Warren J (judgment delivered extempore) applied Stack and concluded that whether taken separately or cumulatively, the evidence relied upon by the claimant to establish that she had had a beneficial interest in either the original property or the property in issue had not met the high burden of proof required of her.
In Stack Baroness Hale of Richmond highlighted the difference between a property with one legal owner and a property legally owned jointly. Morris says: "She went on to suggest a number of factors which may be taken into account in determining the parties' true intentions in addition to any financial contributions to the original purchase, these include any advice or discussions at the time of the transfer which cast light upon the parties' intentions; the reasons why the home was acquired in their joint names; and how the purchase was financed, both initially and subsequently including how the parties arranged their finances (separately or together or a bit of both) and how they discharged the outgoings on the property and their other household expenses."
In the instant case the defendant maintained that he had never had the intention of granting the claimant any interest in either the original property or the property in issue and furthermore the claimant had had no significant input into the purchase or development of the property in issue.
High Court rules against Foxtons
The High Court recently ruled that some of the charges estate agency Foxtons imposes on landlords are unfair. Selena Masson speaks to specialist landlord and tenant lawyer Russell Conway about the case
LNB News 07/08/2009 6
Published date: 7 August 2009
Jurisdiction: UK
Related digests: Not To Let LNB News 28/07/2009 8
Relevant companies: Foxtons
Analysis: Estate agency firm Foxtons recently lost a legal fight against the Office of Fair Trading over terms in its lettings contracts, after Justice Mann ruled that the contracts breached the Unfair Terms in Consumer Contracts Regulations 1999.
Terms in the agreements allowed Foxtons to demand that landlords pay commission after the initial fixed period of tenancy had expired, even if it had no part in persuading the tenant to stay and no longer managed the property.
Unbelievably, the contracts also stated that even after a landlord had sold a property they could still be liable to pay Foxtons – if the sale was to the tenant the estate agent could demand commission even if it had not negotiated the deal.
According to the National Landlords Association, which has been campaigning on the issue for almost two years, more than two-thirds of landlords with a property in and around London, have been charged a renewal fee by an agency.
Legal experts have said that the case has proved a real victory for consumers. Russell Conway of law firm Oliver Fisher is an expert in commercial and residential landlord and tenant matters. He told LexisNexis: "Solicitors had been keen to have a crack at the Foxtons standard terms & conditions of business for years. I had advised any number of clients that they were unfair but it was always difficult to persuade a client to take up the cudgels of litigation.
"I am so pleased that the Court of Appeal has now finally grasped the nettle and said fairly and squarely that the terms as drafted (and indeed as subsequently redrafted) were quite unfair. Importantly the Court of Appeal refuses to allow a commission on a re-let--when the agent has done precisely nothing--and goes on to refuse a commission (Foxtons were charging 2.5 per cent) if the tenant subsequently goes on to buy the property," he said.
Mr Conway added that esate agents need to look again at their contracts: "The Court (Mann J) went on to criticize the 'small-print' in the Foxtons standard contract stating that it was opaque and camouflaged. Letting agents will now be keen to review their documentation to see how compliant it is. The times are long gone when reams of complex small print can be given to a client at the last minute in the hope that all angles are covered by smart legalise."
Mr Conway concluded that plain English in a large font, which is easy to comprehend, will be the new mantra. "The Courts have signaled loud and clear that unfair terms in contracts such as Foxtons will not be allowed. This is a victory for the consumer. Rather a long way down the line but a welcome victory and one, which sounds the death knell of small print."
Shortage of nuclear inspectors hampers UK safety programme
As the UK overhauls its structures for regulating the nuclear sector, an HSE report highlights some of the challenges. Jean McSorley of Greenpeace discusses them with Neasa MacErlean
LNB News 31/07/2009 1
Published date: 31 July 2009
Jurisdiction: UK
Analysis: The Health and Safety Executive (HSE) is reviewing its regulatory framework and capabilities as it prepares to relaunch its Nuclear Directorate next year into an independent regulator, the Nuclear Statutory Corporation (NSC). The NSC will bring together the various responsibilities for the regulation of nuclear power and waste from the different government departments where they now lie.
But a document that it put out itself in early July, "Briefing on the Nuclear Programme", raises serious questions about its own manpower resources. At the moment, it has a team of 166 nuclear inspectors, of whom 16 are aged 60 or over. In two to three years time, that age group will account for 40 inspectors. The HSE estimates that it needs 192 inspectors. It comments that, even with 192 inspectors, it would have "one of the lowest ratios of inspectors to plant in the world". By the summer of 2011, it estimates that it will need at least 228 inspectors.
"It's a recipe for disaster," says Jean McSorley, nuclear specialist and spokeswoman for Greenpeace. "It certainly doesn't inspire any confidence."
There is more focus on the nuclear sector now following the government's January 2008 white paper which paves the way for a new generation of nuclear power stations by 2020. A new repository for nuclear waste is also being planned.
But Greenpeace is concerned about various elements of the new regulatory regime. The government is making "great claims" that the new system "would increase transparency and openness", says McSorley. But she is concerned that these concepts are not being incorporated into the new regulatory rules. "We say that it [the commitment to transparency and openness] should be written into some sort of framework agreement."
For instance, at least one of the current chief nuclear inspectors meets with Greenpeace and other representative groups from time to time. "We want this to be not so much a personal position but a requirement," says McSorley.
Similarly, she has concerns for the regulatory approval system of the new build reactors. The current approach is for the nuclear inspectors to put exclusions and conditions on the draft designs until the final stages when the license is given. The exclusions and conditions would then be lifted, if the operators and vendors [manufacturers] took the necessary steps. But McSorley is concerned that there will be no possibility for external, independent examination of the removal of the exclusions and conditions. The licensing process is "quite a closed system", involving only vendors, operators and inspectors, she says.
Greenpeace wants the UK to look more closely at the way Australia, for instance, has allowed external organisations--like Greenpeace, perhaps, or local community networks--to have a formal right to be consulted and to meet with the senior inspectors. Their representatives would, like McSorley, have to be qualified by a high level of scientific and sector knowledge.
The Briefing on the Nuclear Programme makes uncomfortable reading in parts. It highlights concerns at Sellafield, for instance: "Sellafield continues to provide significant challenge especially in the operational fragility of some of its radioactive waste treatment plant and the lack of progress in decommissioning the highly hazardous redundant plant."
The EU adopted its new Nuclear Safety Directive at the end of June 2009. About 30% of energy in the EU comes from the nuclear sector.
Not to let
Letting arrangements drawn up by estate agents Foxtons have been ruled unfair by a High Court judge who said they were full of traps and time bombs. Property specialist Michael Garson discusses the judgment with Grania Langdon-Down
LNB News 28/07/2009 8
Published date: 28 July 2009
Jurisdiction: England & Wales
Related legislation: SI 1999/2083
Related cases: Chartbrook Ltd v Persimmon Homes Ltd and another [2009] UKHL 38, [2009] All ER (D) 12 (Jul); Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch), [2009] All ER (D) 110 (Jul)
Related digests: Securing exclusive appointments LNB News 25/07/2008 9
Relevant companies: Foxtons
Analysis: The Office of Fair Trading in OFT v Foxtons [2009] EWHC 1681 (Ch) applied to the High Court under the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR") for orders in what it said were unfair terms in contracts made between the estate agent and various landlords.
Foxtons, among many letting agents in London and the South East to run these arrangements, charged customers 11% commission when a tenant continued to occupy the property for longer than the initial term of the lease and an additional 2.5% commission payment if the tenant agreed to buy the property from the owner even if Foxtons had played no material part in the transaction.
Shortly before the hearing Foxtons started to use different terms. However, Mr Justice Mann found that both the old and the new terms were unfair because they disadvantaged customers, were not written in plain and intelligible language and were not prominently disclosed.
Garson, former chair of the Law Society Property Section's executive committee, is a solicitor and managing partner of London-based private client practice Kagan Moss. He is also an estate agent and says: "There are many strands to this judgment. It is difficult at this stage to separate out what people will do; what the judgment means in terms of this particular agreement and other agreements with similar, possibly fatal flaws; as compared to many better drawn agreements which don't have these flaws."
He says the judgment could have very wide implications and could be appealed. "The House of Lords recently ruled in favour of the status quo when construing contract terms in Chartbrook Ltd and another v Persimmon Homes Ltd and another [2009] UKHL 38and this judgment is a complete contradiction of the normal rules for dealing with contracts. If you agree with Mr Justice Mann's reasoning in relation to the way contracts should be looked at under the fairness criteria of recent consumer-facing legislation, then you would be looking at overturning quite a lot of agreements that consumers are tied into with estate agents in relation to providing HIPs, local searches, and conveyancing backed by hidden referral fees."
What is important, Garson says, is that the judge made it clear that not every renewal fee is going to be struck down. "It depends how you do it. If you put prominently on the front sheet of the contract that the fees for introducing a tenant first 12 months is £X; and if they stay on the fee for the next period will be £Y and that if you sell the property to the tenant, the fee will be £Z, it would be very hard to say the landlord didn't know what they were signing up to or could be in any reasonable doubt. These would all become core terms and the regulations don't bite on core terms.
"The essence of Mr Justice Mann's decision was that the renewal fee was not part of the core agreement, which, in principle, I would argue is to misunderstand the nature of a letting fee. The value of introducing a tenant lasts for the period that the tenant remains in occupation of the property so why should the introducer only get a fee for 12 months when the service to the landlord has achieved a revenue stream for 24 months? What the judge is leaving open is that you may validly charge a renewal fee as long as you express it clearly and it is part of the core agreement that the consumer knows they are entering. The trouble with Foxtons' agreement was that the information was all jumbled together."
Some commentators have suggested buy-to-let landlords will be able to claim millions back from estate agents as a result of the judgment. Garson says: "I cannot see as matters now stand that, if you have used the lettings service, paid your bill and then the court decides the terms are unfair, that the judgement allows you to unpick it retrospectively. There are questions of law about that, and indeed the ultimate conclusion of the Foxtons case awaits a further ruling if an agreement is not reached between the parties. The position will remain unsatisfactory without further guidance from the court or OFT as there are so many questions that are left open to future argument between agents their landlord clients. They would be advised to review their terms of business."
Ignoring the magistrate
The High Court recently ruled in favour of a non-resident parent who appealed against a liability order and paid maintenance by way of mortgage repayments as opposed to paying the mother directly. Stephen Lawson, a partner at Warrington firm Forshaws Davies Ridgway who specialises in taking cases against the Child Support Agency, discusses the ruling with Jon Robins
LNB News 23/07/2009 41
Published date: 23 July 2009
Jurisdiction: UK
Related legislation: Child Support Act 1991; Child Maintenance and Other Payments Act 2008
Related cases: Bird v Secretary of State for Work and Pensions and another [2008] EWHC 3159 (Admin), [2008] All ER (D) 250 (Dec); Child Support Agency v Learad Child Support Agency v Buddles [2008] All ER (D) 218 (Jul)
Related digests: CPAG Questions Welfare Reform Bill Measures LNB News 24/03/2009 39; Non-Resident Claim Challenge Heard LNB News 03/07/2009 37
Analysis: In the case of Bird v Secretary of State for Work and Pensions & Anor [2008], the magistrates had made a liability order under the Child Support Act 1991, section 33, against Peter Bird for £4,016.20 for outstanding arrears of child maintenance. However, Bird and the mother of their child had agreed that he would pay the mother's share of the joint mortgage on the former family home in lieu of maintenance.
"This case is significant," says Stephen Lawson, who sits on the family lawyers' group Resolution's national committee for CSA and Maintenance. "It is one of the very few cases where the court has allowed a non-resident parent to challenge the claim made by the CSA that he or she is indebted. In most cases, the courts simply rubberstamp and ratify the figures claimed by the CSA without hearing any evidence or receiving an account breakdown."
Mrs Justice Slade pointed out that the magistrates were "not obliged to make a liability order if they are satisfied that payment was made by the liable person but by a method other than that notified by the CSA".
It is a timely ruling, argues Lawson. "In the first 14 years of the CSA's existence, it has recovered £5bn of maintenance. In the last 12 months alone they have recovered £1.1bn and so they are devoting increasingly huge amounts of resources to enforcement," the lawyer says. "Set against that picture is the fact that every year for the last 12 years the comptroller and auditor general, who audits the CSA's accounts, has given them a qualified certificate of approval because of errors in those accounts."
Lawson argues that the rulings in Birdand the case of R (on the application of the CSA) v Learad and Buddles (2008 )are "particularly significant because you have this huge drive for enforcement which means that the CSA is increasingly applying for liability orders coupled with the fact that there are often errors in the amount that are claimed for by the CSA." He describes the rulings as "constitutionally important otherwise the present practice is allowing the CSA to effectively reverse the burden of proof in debt cases".
Although, Lawson describes the ruling as a "short-lived victory". The solicitor explains that under the Child Maintenance and Other Payments Act 2008, section 25, if a person has failed to pay the Child Maintenance and Enforcement Commission (which replaced the CSA last November) then they might make an order directly against the person in respect of that amount. The application for the order is made administrively as opposed to through the courts, he argues. "They are effectively chopping out the magistrate' court process. In other words, they are not even going to be bothered with the limited protection that people have at the moment."
Repossessions stopped
Pro bono lawyers have welcomed a recent court judgment as 'a landmark ruling' bolstering the new 'section 194' costs regime. Toby Brown, of the Access to Justice Foundation, discusses the case and its implications with Jon Robins
LNB News 23/07/2009 38
Published date: 22 July 2009
Jurisdiction: UK
Related legislation: Legal Services Act 2007
Related digests: A Revised Framework is on its Way LNB News 23/06/2009 52
Relevant companies: Repossessions Stopped
Analysis: Lawyers acting on behalf of the housing charity Shelter have received the first major pro bono costs order in a ruling that will also protect vulnerable families from eviction. "For us the ruling was significant because it was the first substantial order under section 194 of the Legal Services Act 2007," explains Toby Brown.
The Access to Justice Foundation was set up last year to be the beneficiary of money raised under section 194 as well as being "the natural preferred destination" for other pro bono schemes. Toby Brown explains that the legislation, which came into force last October, represents "a significant development in terms of changing the indemnity principle towards costs [...] Before you couldn't get 'pro bono' cost orders because of the indemnity principle as no costs in pro bono cases have been incurred," he explains. "The idea was that you couldn't order a party to cover a cost that they hadn't incurred."
As the barrister explains, under section 194 the Foundation will receive money under such costs orders made by courts when the successful party is represented wholly or partly pro bono. The section effectively overrides the indemnity principle that also restricts costs to no more than the amount the winning side owes its own lawyers. "Previous orders have been modest but this was £20,000 and shows the potential of section 194 to be a source of revenue," Brown says. "This is what we have been waiting for. We know cost orders can be quite large and the more that these substantial orders come in, the more money that can be recycled and the greater impact it can have". As to how such 'pro bono' cost orders gain wider acceptance is "down to how we can raise awareness within the legal profession of this new costs regime", Brown adds.
The case (Redstone v Jackson) was taken by Shelter on a pro bono basis and concerned a family of four who almost lost their home of 20 years in a 'sale and leaseback' scheme. In what is claimed to be the first court ruling of its kind, the judge at Birmingham County Court branded the sale and rent back company Repossessions Stopped 'dishonest' for promising the family they could stay in their home for life. Paul and Amanda Jackson fell into arrears with their mortgage and feared that they would lose their home. They then approached the company Repossessions Stopped who told the couple that they would buy the house off the family, clear the mortgage and let them rent it back. However, the Jacksons were threatened with eviction because the new owner defaulted on the mortgage and was repossessed.
The court ruled that the family could either revert to being owner-occupiers or rent the property for the rest of their lives with their daughter inheriting the tenancy. Shelter's principal solicitor John Gallagher called the ruling "a huge and important victory".
Toby Brown describes the ruling as "a double win for access to justice" insofar as it will protect vulnerable families in future as well as raise money for other pro bono activities. The money raised through the section 194 order reflects the advice and representation given by the Shelter legal team and goes directly to the Access to Justice Foundation. Alongside the Foundation, there is to be a network of regional legal support trusts across England and Wales, modelled on the successful London Legal Support Trust, to distribute funds.
Brown says that charity's trustees are planning to make distribution before the end of the year. "The trustees have set up the distribution principals as to how they will distribute money that comes in under section 194," he says. "There are three ways in which they can do that. Firstly, through national pro bono organisations; secondly via the regional legal support trusts; and through other projects. There is a wide discretion to be strategic--in other words, to think what is the need regionally or nationally and, in particular, look at where there are gaps in provision."
Fraudulent negligence
Lenders and professionals need to be alive to issues of fraud especially in a difficult economic market where fraudsters can be exposed, a recent Commercial Court ruling reveals. Lucy Trevelyan reports
LNB News 20/07/2009 37
Published date: 20 July 2009
Jurisdiction: UK
Related legislation: Civil Liability (Contribution) Act 1978
Related cases: Nationwide Building Society v Dunlop Haywards Ltd and Cobbetts (a firm) [2009] EWHC 254 (Comm), [2009] All ER (D) 189 (Feb)
Related digests: Press Release: Solicitors Regulation Authority Warns Solicitors to be on Guard Against Fraudulent Activity LNB News 29/05/2009 19
Relevant companies: Nationwide Building Society; Dunlop Haywards (DHL) Ltd; Cobbetts
Analysis: A recent Commercial Court ruling provided an interesting insight into the different ways the courts approach the losses attributable to a fraudulent professional and a negligent professional, says Ben Hardiman, associate at Weightmans.
He explains that in Nationwide Building Society V Dunlop Haywards (DHL) Ltd & Cobbetts (A Firm) [2009] EWHC 254, Nationwide lent £11.5m for the purchase of a commercial property that had been fraudulently over-valued by the defendant valuers DHL by around £10m. Nationwide sued DHL and Cobbetts--the solicitors acting on the transaction--alleging the law firm was negligent in failing to identify the fraud and tell the lender.
The court held that Nationwide's losses exceeded £21m, which included the net total of its advances plus interest as well as consequential losses such as wasted staff time, costs arising from adverse publicity and loss of business opportunities. Credit was given for sums recovered against the value of the property and from Cobbetts (which settled their claim with Nationwide for £5.58m) and judgment was obtained against DHL for £15.4m.
The court was asked to consider how much Cobbetts could seek from DHL by way of contribution. The law firm contended that it was entitled to reclaim the £5.58m paid to Nationwide under the Civil Liability (Contribution) Act 1978.
The court ruled that Cobbetts was jointly liable with DHL for the loss of the advances and interest less the value of the property but that Nationwide's consequential losses were too remote to be attributable to the solicitors. The court found that Nationwide's contributory negligence should reduce the £13,200,179 figure by half. This sum of £6,600,090 should be split 80/20 between the valuers and the solicitors leaving Cobbetts with a liability of £1,320,018. This meant Cobbetts was entitled to reclaim £4,264,983 from DHL.
Hardiman says: "The case confirms that negligent professionals should not be prejudiced or tainted simply because they are unfortunate enough to act on the same transaction as a fraudster. Different principles would apply to the calculation of loss in a normal negligence or breach of contract claim and they will continue to apply even though another defendant may have acted fraudulently."
From a lender's perspective, he says, it demonstrates that the losses arising from mortgage fraud are likely to be significant since they do not need to be foreseeable. "One head of loss which Nationwide successfully recovered against the fraudster, for example, was the loss which flowed from the effect of the fraud on the market's confidence in Nationwide (eg less people were prepared to invest which led to falling incomes). This would not normally be recoverable in the context of negligence or breach of contract as it is not foreseeable and is too remote."
One point which the judgment does not deal with, he says, is whether the negligent defendant could rely on a contractual limitation clause in their contractual terms to reduce the cap on the fraudster's liability further (which therefore increases their recovery from the fraudster).
"The fraudster in this case did not have a limitation clause. As a consequence Cobbetts were unable to persuade the court that it would be just and equitable to rely on theirs. Since the fraudster was insolvent, Cobbetts would have been throwing good money after bad to have appealed this element of the decision but it could have made for an interesting argument," he says.
He adds: "What the judgment demonstrates is that lenders and professionals alike--and indeed the lawyers who represent them in subsequently litigation--need to be alive to issues of fraud especially in a difficult economic market where fraudsters can be exposed."
The nature of the valuation exercise
Was the Land Tribunal justified in treating a probability as a certainty? Evelyn Reid talks to Malcolm Dowden, solicitor and LexisPSL property author about compensation for the compulsory acquisition of land
LNB News 12/08/2009 27
Published date: 12 August 2009
Jurisdiction: UK
Related legislation: Land Compensation Act 1961
Related cases: Spirerose Ltd (in administration) v Transport for London (formerly London Underground Ltd) [2009] UKHL 44, [2009] All ER (D) 324 (Jul)
Related digests: Couple's Home Sale Banned Because of Covenant, LNB News 14/07/2009 35
Relevant companies: Spirerose Ltd
Analysis: In Spirerose Ltd (in administration) v Transport for London (formerly London Underground Ltd) [2009] UKHL 44 there was a probability that planning permission for a valuable re-development of land would have been granted. The Land Tribunal, affirmed by the Court of Appeal, awarded compensation as if permission would be granted. The appellant appealed to the House of Lords, contending that both decisions had misunderstood the way in which the Land Compensation Act 1961 (1961 Act) operated, having equated the reasonable prospect that planning permission would have been granted with it being a certainty.
The question says Dowden, solicitor and LexisPSL property author, "Was whether compensation should be calculated by reference to the value of the land with the benefit of an actual planning consent, or whether the correct basis was the 'hope value' attributable to the likelihood of planning permission being available.
"The Court of Appeal had found that if planning permission would, on the balance of probabilities, be available then compensation should be assessed as if the land actually had the benefit of that consent."
The House of Lords reversed that decision. It said that the grant of planning permission was not to be assumed and only the 'hope value' was to be taken into account in assessing the compensation payable.
Lord Walker said that to transform a probability of planning permission into a certainty on the footing that the civil standard of proof--the balance of probabilities--has been satisfied misunderstands the nature of the valuation exercise required by rule (2) of section 5 of the 1961 Act.
The 'balance of probability' test is concerned only with proof of facts in the context of civil proceedings, says Dowden. He adds: "Valuation, by contrast, is concerned with finding the market value of land at a particular date, taking into account its attributes at that time. The probability of planning consent being obtained is not the same as a 100% certainty that it will be obtained.
"The Court of Appeal was wrong to reach a result that would convert a 51% chance as equivalent to 100 per cent, and the unsatisfactory nature of that result was highlighted by the question of how a 49% chance would be treated. If a 51% chance could be treated as equivalent to 100% then it might follow that a 49% chance should be treated as equivalent to zero per cent. However, the Court of Appeal appears to have preferred an approach to valuation which in that instance would attribute a 'hope value' reflecting a 49% chance.
"The 1961 Act did not mean that the probability of a grant of planning permission could be treated as a certainty. The correct approach is to attribute 'hope value' as a percentage of the full value of the land reflecting the probability of permission being granted, as perceived by the market in a 'no scheme world' (ie excluding any increase or decrease in value wholly attributable to the scheme requiring compulsory acquisition)."
Property rights of cohabiting couples
Could the claimant establish a beneficial interest in the property? Geraldine Morris, solicitor and technical editor of Butterworths Family Law Service Bulletin talks to Evelyn Reid
LNB News 10/08/2009 12
Published date: 10 August 2009
Jurisdiction: UK
Related cases: Stack v Dowden [2007] UKHL 17, [2007] All ER (D) 208 (Apr); Thomson v Humphrey [2009] All ER (D) 280 (Jun)
Analysis: The property rights of cohabiting couples following the breakdown of their relationship often come before the court because there is no clear contractual agreement prior to cohabitation. Lord Hope in Stack v Dowden [2007] UKHL 17 said that the situation is complicated by the fact that "there is no single, or paradigm, set of circumstances" and that the only feature which "these cases have in common is that the problem has not been solved by legislation".
In Thomson v Humphrey [2009] All ER (D) 280 (Jun) the High Court had to consider whether the claimant had a beneficial interest in the property. The defendant purchased a property (the original property) where the claimant and her children lived. Subsequently, the claimant moved out of the original property and in with the defendant. The original property was then sold and the property in issue purchased. At all times the defendant had been the sole registered proprietor of both properties.
Following the breakdown of the relationship the claimant sought to assert a beneficial interest in the property in issue. Morris, solicitor and technical editor of Butterworths Family Law Service Bulletin, says: "Whilst this case does not raise any new points of law it is a reminder of the importance of the parties' intentions and the communication of those intentions. The applicant in the instant case may have expressed a wish to have a beneficial interest in the properties in question but there was a lack of joint intention as evidenced by the cohabitation agreement referred to by the defendant."
As noted by their Lordships in Stack the legislation that enables the court to reallocate beneficial interests in the home and other assets following a divorce does not apply to cohabiting couples. However, Lord Hope said that the "law can, and should, provide the right framework". He argued that a "more practical, down-to-earth, fact-based approach is called for" and that the framework which the law provides should be simple and accessible.
In the instant case Warren J (judgment delivered extempore) applied Stack and concluded that whether taken separately or cumulatively, the evidence relied upon by the claimant to establish that she had had a beneficial interest in either the original property or the property in issue had not met the high burden of proof required of her.
In Stack Baroness Hale of Richmond highlighted the difference between a property with one legal owner and a property legally owned jointly. Morris says: "She went on to suggest a number of factors which may be taken into account in determining the parties' true intentions in addition to any financial contributions to the original purchase, these include any advice or discussions at the time of the transfer which cast light upon the parties' intentions; the reasons why the home was acquired in their joint names; and how the purchase was financed, both initially and subsequently including how the parties arranged their finances (separately or together or a bit of both) and how they discharged the outgoings on the property and their other household expenses."
In the instant case the defendant maintained that he had never had the intention of granting the claimant any interest in either the original property or the property in issue and furthermore the claimant had had no significant input into the purchase or development of the property in issue.
High Court rules against Foxtons
The High Court recently ruled that some of the charges estate agency Foxtons imposes on landlords are unfair. Selena Masson speaks to specialist landlord and tenant lawyer Russell Conway about the case
LNB News 07/08/2009 6
Published date: 7 August 2009
Jurisdiction: UK
Related digests: Not To Let LNB News 28/07/2009 8
Relevant companies: Foxtons
Analysis: Estate agency firm Foxtons recently lost a legal fight against the Office of Fair Trading over terms in its lettings contracts, after Justice Mann ruled that the contracts breached the Unfair Terms in Consumer Contracts Regulations 1999.
Terms in the agreements allowed Foxtons to demand that landlords pay commission after the initial fixed period of tenancy had expired, even if it had no part in persuading the tenant to stay and no longer managed the property.
Unbelievably, the contracts also stated that even after a landlord had sold a property they could still be liable to pay Foxtons – if the sale was to the tenant the estate agent could demand commission even if it had not negotiated the deal.
According to the National Landlords Association, which has been campaigning on the issue for almost two years, more than two-thirds of landlords with a property in and around London, have been charged a renewal fee by an agency.
Legal experts have said that the case has proved a real victory for consumers. Russell Conway of law firm Oliver Fisher is an expert in commercial and residential landlord and tenant matters. He told LexisNexis: "Solicitors had been keen to have a crack at the Foxtons standard terms & conditions of business for years. I had advised any number of clients that they were unfair but it was always difficult to persuade a client to take up the cudgels of litigation.
"I am so pleased that the Court of Appeal has now finally grasped the nettle and said fairly and squarely that the terms as drafted (and indeed as subsequently redrafted) were quite unfair. Importantly the Court of Appeal refuses to allow a commission on a re-let--when the agent has done precisely nothing--and goes on to refuse a commission (Foxtons were charging 2.5 per cent) if the tenant subsequently goes on to buy the property," he said.
Mr Conway added that esate agents need to look again at their contracts: "The Court (Mann J) went on to criticize the 'small-print' in the Foxtons standard contract stating that it was opaque and camouflaged. Letting agents will now be keen to review their documentation to see how compliant it is. The times are long gone when reams of complex small print can be given to a client at the last minute in the hope that all angles are covered by smart legalise."
Mr Conway concluded that plain English in a large font, which is easy to comprehend, will be the new mantra. "The Courts have signaled loud and clear that unfair terms in contracts such as Foxtons will not be allowed. This is a victory for the consumer. Rather a long way down the line but a welcome victory and one, which sounds the death knell of small print."
Shortage of nuclear inspectors hampers UK safety programme
As the UK overhauls its structures for regulating the nuclear sector, an HSE report highlights some of the challenges. Jean McSorley of Greenpeace discusses them with Neasa MacErlean
LNB News 31/07/2009 1
Published date: 31 July 2009
Jurisdiction: UK
Analysis: The Health and Safety Executive (HSE) is reviewing its regulatory framework and capabilities as it prepares to relaunch its Nuclear Directorate next year into an independent regulator, the Nuclear Statutory Corporation (NSC). The NSC will bring together the various responsibilities for the regulation of nuclear power and waste from the different government departments where they now lie.
But a document that it put out itself in early July, "Briefing on the Nuclear Programme", raises serious questions about its own manpower resources. At the moment, it has a team of 166 nuclear inspectors, of whom 16 are aged 60 or over. In two to three years time, that age group will account for 40 inspectors. The HSE estimates that it needs 192 inspectors. It comments that, even with 192 inspectors, it would have "one of the lowest ratios of inspectors to plant in the world". By the summer of 2011, it estimates that it will need at least 228 inspectors.
"It's a recipe for disaster," says Jean McSorley, nuclear specialist and spokeswoman for Greenpeace. "It certainly doesn't inspire any confidence."
There is more focus on the nuclear sector now following the government's January 2008 white paper which paves the way for a new generation of nuclear power stations by 2020. A new repository for nuclear waste is also being planned.
But Greenpeace is concerned about various elements of the new regulatory regime. The government is making "great claims" that the new system "would increase transparency and openness", says McSorley. But she is concerned that these concepts are not being incorporated into the new regulatory rules. "We say that it [the commitment to transparency and openness] should be written into some sort of framework agreement."
For instance, at least one of the current chief nuclear inspectors meets with Greenpeace and other representative groups from time to time. "We want this to be not so much a personal position but a requirement," says McSorley.
Similarly, she has concerns for the regulatory approval system of the new build reactors. The current approach is for the nuclear inspectors to put exclusions and conditions on the draft designs until the final stages when the license is given. The exclusions and conditions would then be lifted, if the operators and vendors [manufacturers] took the necessary steps. But McSorley is concerned that there will be no possibility for external, independent examination of the removal of the exclusions and conditions. The licensing process is "quite a closed system", involving only vendors, operators and inspectors, she says.
Greenpeace wants the UK to look more closely at the way Australia, for instance, has allowed external organisations--like Greenpeace, perhaps, or local community networks--to have a formal right to be consulted and to meet with the senior inspectors. Their representatives would, like McSorley, have to be qualified by a high level of scientific and sector knowledge.
The Briefing on the Nuclear Programme makes uncomfortable reading in parts. It highlights concerns at Sellafield, for instance: "Sellafield continues to provide significant challenge especially in the operational fragility of some of its radioactive waste treatment plant and the lack of progress in decommissioning the highly hazardous redundant plant."
The EU adopted its new Nuclear Safety Directive at the end of June 2009. About 30% of energy in the EU comes from the nuclear sector.
Not to let
Letting arrangements drawn up by estate agents Foxtons have been ruled unfair by a High Court judge who said they were full of traps and time bombs. Property specialist Michael Garson discusses the judgment with Grania Langdon-Down
LNB News 28/07/2009 8
Published date: 28 July 2009
Jurisdiction: England & Wales
Related legislation: SI 1999/2083
Related cases: Chartbrook Ltd v Persimmon Homes Ltd and another [2009] UKHL 38, [2009] All ER (D) 12 (Jul); Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch), [2009] All ER (D) 110 (Jul)
Related digests: Securing exclusive appointments LNB News 25/07/2008 9
Relevant companies: Foxtons
Analysis: The Office of Fair Trading in OFT v Foxtons [2009] EWHC 1681 (Ch) applied to the High Court under the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR") for orders in what it said were unfair terms in contracts made between the estate agent and various landlords.
Foxtons, among many letting agents in London and the South East to run these arrangements, charged customers 11% commission when a tenant continued to occupy the property for longer than the initial term of the lease and an additional 2.5% commission payment if the tenant agreed to buy the property from the owner even if Foxtons had played no material part in the transaction.
Shortly before the hearing Foxtons started to use different terms. However, Mr Justice Mann found that both the old and the new terms were unfair because they disadvantaged customers, were not written in plain and intelligible language and were not prominently disclosed.
Garson, former chair of the Law Society Property Section's executive committee, is a solicitor and managing partner of London-based private client practice Kagan Moss. He is also an estate agent and says: "There are many strands to this judgment. It is difficult at this stage to separate out what people will do; what the judgment means in terms of this particular agreement and other agreements with similar, possibly fatal flaws; as compared to many better drawn agreements which don't have these flaws."
He says the judgment could have very wide implications and could be appealed. "The House of Lords recently ruled in favour of the status quo when construing contract terms in Chartbrook Ltd and another v Persimmon Homes Ltd and another [2009] UKHL 38and this judgment is a complete contradiction of the normal rules for dealing with contracts. If you agree with Mr Justice Mann's reasoning in relation to the way contracts should be looked at under the fairness criteria of recent consumer-facing legislation, then you would be looking at overturning quite a lot of agreements that consumers are tied into with estate agents in relation to providing HIPs, local searches, and conveyancing backed by hidden referral fees."
What is important, Garson says, is that the judge made it clear that not every renewal fee is going to be struck down. "It depends how you do it. If you put prominently on the front sheet of the contract that the fees for introducing a tenant first 12 months is £X; and if they stay on the fee for the next period will be £Y and that if you sell the property to the tenant, the fee will be £Z, it would be very hard to say the landlord didn't know what they were signing up to or could be in any reasonable doubt. These would all become core terms and the regulations don't bite on core terms.
"The essence of Mr Justice Mann's decision was that the renewal fee was not part of the core agreement, which, in principle, I would argue is to misunderstand the nature of a letting fee. The value of introducing a tenant lasts for the period that the tenant remains in occupation of the property so why should the introducer only get a fee for 12 months when the service to the landlord has achieved a revenue stream for 24 months? What the judge is leaving open is that you may validly charge a renewal fee as long as you express it clearly and it is part of the core agreement that the consumer knows they are entering. The trouble with Foxtons' agreement was that the information was all jumbled together."
Some commentators have suggested buy-to-let landlords will be able to claim millions back from estate agents as a result of the judgment. Garson says: "I cannot see as matters now stand that, if you have used the lettings service, paid your bill and then the court decides the terms are unfair, that the judgement allows you to unpick it retrospectively. There are questions of law about that, and indeed the ultimate conclusion of the Foxtons case awaits a further ruling if an agreement is not reached between the parties. The position will remain unsatisfactory without further guidance from the court or OFT as there are so many questions that are left open to future argument between agents their landlord clients. They would be advised to review their terms of business."
Ignoring the magistrate
The High Court recently ruled in favour of a non-resident parent who appealed against a liability order and paid maintenance by way of mortgage repayments as opposed to paying the mother directly. Stephen Lawson, a partner at Warrington firm Forshaws Davies Ridgway who specialises in taking cases against the Child Support Agency, discusses the ruling with Jon Robins
LNB News 23/07/2009 41
Published date: 23 July 2009
Jurisdiction: UK
Related legislation: Child Support Act 1991; Child Maintenance and Other Payments Act 2008
Related cases: Bird v Secretary of State for Work and Pensions and another [2008] EWHC 3159 (Admin), [2008] All ER (D) 250 (Dec); Child Support Agency v Learad Child Support Agency v Buddles [2008] All ER (D) 218 (Jul)
Related digests: CPAG Questions Welfare Reform Bill Measures LNB News 24/03/2009 39; Non-Resident Claim Challenge Heard LNB News 03/07/2009 37
Analysis: In the case of Bird v Secretary of State for Work and Pensions & Anor [2008], the magistrates had made a liability order under the Child Support Act 1991, section 33, against Peter Bird for £4,016.20 for outstanding arrears of child maintenance. However, Bird and the mother of their child had agreed that he would pay the mother's share of the joint mortgage on the former family home in lieu of maintenance.
"This case is significant," says Stephen Lawson, who sits on the family lawyers' group Resolution's national committee for CSA and Maintenance. "It is one of the very few cases where the court has allowed a non-resident parent to challenge the claim made by the CSA that he or she is indebted. In most cases, the courts simply rubberstamp and ratify the figures claimed by the CSA without hearing any evidence or receiving an account breakdown."
Mrs Justice Slade pointed out that the magistrates were "not obliged to make a liability order if they are satisfied that payment was made by the liable person but by a method other than that notified by the CSA".
It is a timely ruling, argues Lawson. "In the first 14 years of the CSA's existence, it has recovered £5bn of maintenance. In the last 12 months alone they have recovered £1.1bn and so they are devoting increasingly huge amounts of resources to enforcement," the lawyer says. "Set against that picture is the fact that every year for the last 12 years the comptroller and auditor general, who audits the CSA's accounts, has given them a qualified certificate of approval because of errors in those accounts."
Lawson argues that the rulings in Birdand the case of R (on the application of the CSA) v Learad and Buddles (2008 )are "particularly significant because you have this huge drive for enforcement which means that the CSA is increasingly applying for liability orders coupled with the fact that there are often errors in the amount that are claimed for by the CSA." He describes the rulings as "constitutionally important otherwise the present practice is allowing the CSA to effectively reverse the burden of proof in debt cases".
Although, Lawson describes the ruling as a "short-lived victory". The solicitor explains that under the Child Maintenance and Other Payments Act 2008, section 25, if a person has failed to pay the Child Maintenance and Enforcement Commission (which replaced the CSA last November) then they might make an order directly against the person in respect of that amount. The application for the order is made administrively as opposed to through the courts, he argues. "They are effectively chopping out the magistrate' court process. In other words, they are not even going to be bothered with the limited protection that people have at the moment."
Repossessions stopped
Pro bono lawyers have welcomed a recent court judgment as 'a landmark ruling' bolstering the new 'section 194' costs regime. Toby Brown, of the Access to Justice Foundation, discusses the case and its implications with Jon Robins
LNB News 23/07/2009 38
Published date: 22 July 2009
Jurisdiction: UK
Related legislation: Legal Services Act 2007
Related digests: A Revised Framework is on its Way LNB News 23/06/2009 52
Relevant companies: Repossessions Stopped
Analysis: Lawyers acting on behalf of the housing charity Shelter have received the first major pro bono costs order in a ruling that will also protect vulnerable families from eviction. "For us the ruling was significant because it was the first substantial order under section 194 of the Legal Services Act 2007," explains Toby Brown.
The Access to Justice Foundation was set up last year to be the beneficiary of money raised under section 194 as well as being "the natural preferred destination" for other pro bono schemes. Toby Brown explains that the legislation, which came into force last October, represents "a significant development in terms of changing the indemnity principle towards costs [...] Before you couldn't get 'pro bono' cost orders because of the indemnity principle as no costs in pro bono cases have been incurred," he explains. "The idea was that you couldn't order a party to cover a cost that they hadn't incurred."
As the barrister explains, under section 194 the Foundation will receive money under such costs orders made by courts when the successful party is represented wholly or partly pro bono. The section effectively overrides the indemnity principle that also restricts costs to no more than the amount the winning side owes its own lawyers. "Previous orders have been modest but this was £20,000 and shows the potential of section 194 to be a source of revenue," Brown says. "This is what we have been waiting for. We know cost orders can be quite large and the more that these substantial orders come in, the more money that can be recycled and the greater impact it can have". As to how such 'pro bono' cost orders gain wider acceptance is "down to how we can raise awareness within the legal profession of this new costs regime", Brown adds.
The case (Redstone v Jackson) was taken by Shelter on a pro bono basis and concerned a family of four who almost lost their home of 20 years in a 'sale and leaseback' scheme. In what is claimed to be the first court ruling of its kind, the judge at Birmingham County Court branded the sale and rent back company Repossessions Stopped 'dishonest' for promising the family they could stay in their home for life. Paul and Amanda Jackson fell into arrears with their mortgage and feared that they would lose their home. They then approached the company Repossessions Stopped who told the couple that they would buy the house off the family, clear the mortgage and let them rent it back. However, the Jacksons were threatened with eviction because the new owner defaulted on the mortgage and was repossessed.
The court ruled that the family could either revert to being owner-occupiers or rent the property for the rest of their lives with their daughter inheriting the tenancy. Shelter's principal solicitor John Gallagher called the ruling "a huge and important victory".
Toby Brown describes the ruling as "a double win for access to justice" insofar as it will protect vulnerable families in future as well as raise money for other pro bono activities. The money raised through the section 194 order reflects the advice and representation given by the Shelter legal team and goes directly to the Access to Justice Foundation. Alongside the Foundation, there is to be a network of regional legal support trusts across England and Wales, modelled on the successful London Legal Support Trust, to distribute funds.
Brown says that charity's trustees are planning to make distribution before the end of the year. "The trustees have set up the distribution principals as to how they will distribute money that comes in under section 194," he says. "There are three ways in which they can do that. Firstly, through national pro bono organisations; secondly via the regional legal support trusts; and through other projects. There is a wide discretion to be strategic--in other words, to think what is the need regionally or nationally and, in particular, look at where there are gaps in provision."
Fraudulent negligence
Lenders and professionals need to be alive to issues of fraud especially in a difficult economic market where fraudsters can be exposed, a recent Commercial Court ruling reveals. Lucy Trevelyan reports
LNB News 20/07/2009 37
Published date: 20 July 2009
Jurisdiction: UK
Related legislation: Civil Liability (Contribution) Act 1978
Related cases: Nationwide Building Society v Dunlop Haywards Ltd and Cobbetts (a firm) [2009] EWHC 254 (Comm), [2009] All ER (D) 189 (Feb)
Related digests: Press Release: Solicitors Regulation Authority Warns Solicitors to be on Guard Against Fraudulent Activity LNB News 29/05/2009 19
Relevant companies: Nationwide Building Society; Dunlop Haywards (DHL) Ltd; Cobbetts
Analysis: A recent Commercial Court ruling provided an interesting insight into the different ways the courts approach the losses attributable to a fraudulent professional and a negligent professional, says Ben Hardiman, associate at Weightmans.
He explains that in Nationwide Building Society V Dunlop Haywards (DHL) Ltd & Cobbetts (A Firm) [2009] EWHC 254, Nationwide lent £11.5m for the purchase of a commercial property that had been fraudulently over-valued by the defendant valuers DHL by around £10m. Nationwide sued DHL and Cobbetts--the solicitors acting on the transaction--alleging the law firm was negligent in failing to identify the fraud and tell the lender.
The court held that Nationwide's losses exceeded £21m, which included the net total of its advances plus interest as well as consequential losses such as wasted staff time, costs arising from adverse publicity and loss of business opportunities. Credit was given for sums recovered against the value of the property and from Cobbetts (which settled their claim with Nationwide for £5.58m) and judgment was obtained against DHL for £15.4m.
The court was asked to consider how much Cobbetts could seek from DHL by way of contribution. The law firm contended that it was entitled to reclaim the £5.58m paid to Nationwide under the Civil Liability (Contribution) Act 1978.
The court ruled that Cobbetts was jointly liable with DHL for the loss of the advances and interest less the value of the property but that Nationwide's consequential losses were too remote to be attributable to the solicitors. The court found that Nationwide's contributory negligence should reduce the £13,200,179 figure by half. This sum of £6,600,090 should be split 80/20 between the valuers and the solicitors leaving Cobbetts with a liability of £1,320,018. This meant Cobbetts was entitled to reclaim £4,264,983 from DHL.
Hardiman says: "The case confirms that negligent professionals should not be prejudiced or tainted simply because they are unfortunate enough to act on the same transaction as a fraudster. Different principles would apply to the calculation of loss in a normal negligence or breach of contract claim and they will continue to apply even though another defendant may have acted fraudulently."
From a lender's perspective, he says, it demonstrates that the losses arising from mortgage fraud are likely to be significant since they do not need to be foreseeable. "One head of loss which Nationwide successfully recovered against the fraudster, for example, was the loss which flowed from the effect of the fraud on the market's confidence in Nationwide (eg less people were prepared to invest which led to falling incomes). This would not normally be recoverable in the context of negligence or breach of contract as it is not foreseeable and is too remote."
One point which the judgment does not deal with, he says, is whether the negligent defendant could rely on a contractual limitation clause in their contractual terms to reduce the cap on the fraudster's liability further (which therefore increases their recovery from the fraudster).
"The fraudster in this case did not have a limitation clause. As a consequence Cobbetts were unable to persuade the court that it would be just and equitable to rely on theirs. Since the fraudster was insolvent, Cobbetts would have been throwing good money after bad to have appealed this element of the decision but it could have made for an interesting argument," he says.
He adds: "What the judgment demonstrates is that lenders and professionals alike--and indeed the lawyers who represent them in subsequently litigation--need to be alive to issues of fraud especially in a difficult economic market where fraudsters can be exposed."
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