11. R (on the application of Arndale Properties Ltd) v Worcester City Council
Citation: [2008] All ER (D) 192 (Mar)
Hearing date: 13 March 2008
Court: Queen's Bench Division, Administrative Court
Judge: Sullivan J
Relevant legislation: Planning (Listed Buildings and Conservation Areas) Act 1990, section 69
Summary: town and country planning – conservation area – planning permission
The claimant owned a parcel of land which was within the area of the defendant local planning authority. Located on the land were buildings that had formerly been used by a mail order clothing business, and a sports ground and pavilion that had been the home of Worcestershire County Cricket Club. In 2004, the pavilion and one of the industrial buildings were identified as '”buildings of local interest” and, as a result, were protected by various policies in the relevant local plan. Despite that, the claimant submitted two separate applications to the authority for planning permission to redevelop the site. The applications were refused, and an appeal was lodged in respect of the second application only. In the meantime, the claimant closed the pavilion on the grounds of health and safety, and notified the authority of its intention to have it demolished. In response, the authority requested the Secretary of State to exercise her powers to list the pavilion as a listed building. The request failed, however, demolition works were not permitted to proceed as, by that point, certain birds, which had protected status, had been found nesting on the roof of the pavilion. In July 2006, a planning inquiry was held into the appeal against the second planning application. Members at the inquiry were provided with evidence from two conservation experts. In addition, recommendations were made in relation to a matter described as an “urgent item to the agenda”, namely, whether the claimant's land could form part of a conservation area. In the event, the planning committee accepted the recommendations, and an area which included the claimant's land, known as “Boughton Conservation Area No 19”, was designated as a conservation area. Several months later, the claimant objected to the designated conservation area arguing, inter alia, that its boundary was outside the confines of the authority's planning control. On a review, the authority realised its error, and re-designated the conservation area. The claimant applied for judicial review against both designations.
An issue arose as to whether the authority had misused its powers of designation under section 69 of the Planning (Listed Buildings and Conservation Areas) Act 1990.
The applications would be allowed.
Having regard to the totality of the contemporaneous evidence, it was plain that the authority's initial decision to designate the claimant's land as part of a wider conservation area had been done for the purpose of protecting one particular building, namely, the pavilion, from being demolished. There had been nothing to suggest, as was required by section 69 of the 1990 Act, that proper consideration had been given to the area to be designated, in terms of which parts had special architectural or historic interest, and which parts had to be enhanced or preserved in respect of its character and appearance. Further matters supporting that conclusion could be found by the reasons that had been given for making the issue of conservation area designation as “urgent” at the planning inquiry, and the fact that no prior consultation had been held, on the issue, by the authority. Moreover, the evidence that had been produced at the review could be regarded as a blatant attempt to rationalise the obvious deficiencies of the initial designation.
It followed that in all those circumstances, the designations had to be quashed.
Case annotations in other services: R (on the application of Arndale Properties Ltd) v Worcester City Council [2008] All ER (D) 192 (Mar)
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12. Chartbrook Ltd v Persimmon Homes Ltd and another
Citation: [2008] EWCA Civ 183
Hearing date: 12 March 2008
Court: Court of Appeal, Civil Division
Judges: Tuckey, Lawrence Collins and Rimer LJJ
Summary: contract – construction – contractual term
A development agreement relating to certain land was made between the claimant as owner, the first defendant as developer, the second part 20 defendant (a shareholder and director of the claimant) as adjoining owner and the second defendant as guarantor. The claimant's solicitor took the second part 20 defendant and R, who was also a director and shareholder of the claimant, through the draft agreement and made an attendance note. A dispute arose from a disagreement as to the true construction of schedule 6 to the agreement, which contained provisions as to the price to be paid by the first defendant and, in particular, as to the element of the price labelled as the “additional residential payment” (ARP). Under schedule 6 of the agreement ARP was defined as meaning “23.4 per cent of the price achieved for each residential unit in excess of the minimum guaranteed residential value [MGRUV], less the costs and incentives”. Paragraph 3.3 of schedule 6 principally provided for payment of ground rent value to be payable on the earlier of the date of realisation of the ground rent value “or the date of payment if any of the balancing payment”. In outline, the claimant contended that the ARP was just over £4.6 million, of which £3.9 million odd remained unpaid, whereas the first defendant contended that it was much less and that it had been largely paid or accounted for. The claimant commenced proceedings. It submitted that it was entitled to a 23.4 per cent share of the net proceeds of sale of each residential unit in excess of a minimum guaranteed amount. The defendants submitted that the claimant was to receive either a fixed percentage (23.4 per cent) of the sales revenue or the minimum guaranteed amount, whichever was the greater.
As an alternative to their argument on construction, the first defendant counterclaimed for rectification against the claimant and the second part 20 defendant on the basis of common mistake, or unilateral mistake of which the claimant had been aware before contract, which it had failed to bring to the first defendant's attention. In relation to the construction of the definition of the ARP, the first defendant sought to adduce evidence of the parties' negotiations and argued that, when during negotiations they had been in agreement about a relevant matter, that evidence was admissible since it shed light on what the parties might reasonably have had in contemplation as to the meaning of the words used, essentially using their own private dictionary. Evidence was given by the second part 20 defendant, R, and S. The judge found S to be a careful and realistic witness. The judge concluded that the ordinary meaning of the definition of ARP pointed clearly towards the claimant's rather than the defendants' construction that ARP was a defined term, and that ARP meant 23.4 per cent of an amount calculated by deducting both the MGRUV and the C&I from the price achieved for each residential unit. He further concluded that the adverse effect on third party rights was a compelling reason for not admitting evidence of prior negotiations; and that the first defendant had not proved either of its alternative rectification cases with sufficient clarity. The first defendant appealed against that decision.
It submitted that the claimant's construction gave the claimant a windfall of some £4 million more for its land than it had ever offered and bore no relation to what it had offered and to which the claimant had agreed; that the judge had adopted an unnecessarily restrictive view of the law; and that had he applied the legal principles correctly, he should have given weight to the fact that he had himself found that the claimant had communicated to the first defendant its acceptance of certain offers. It further submitted that the agreement should be rectified; and that under paragraph 3.3 of schedule 6 to the agreement the judge was wrong to find that the “if any” point carried little weight.
The appeal would be dismissed.
(1) (Lawrence Collins LJ dissenting) There was nothing unclear, uncertain or ambiguous about the definition of the ARP in schedule 6 to the agreement. It was clear, certain and unambiguous, and its arithmetic was straightforward. The phrases that were elsewhere defined were accepted as meaning what their definitions provided, and no other word or phrase was said to bear any meaning other than its ordinary one. There was no basis for rewriting the agreement. The commercial force of the argument that the first defendant attached to the “if any” point and to the points based on the use of various words (“minimum” and “guaranteed'”) in the schedule 6 definitions had to be recognised. However, those points could not be regarded as doing the fundamental interpretative work that the first defendant required of them.
(2) The starting point was that “for reasons of practical importance” the law excluded from the admissible background the previous negotiations of the parties.
The policy reasons for a strict application of the rule were not compelling and the judge's emphasis on the effect on third parties as a strong policy reason for the rule could not be accepted. Moreover, the “private dictionary” and '”agreed basis” exceptions were open to the court; and the application of those exceptions was not excluded simply because the words at issue were themselves contained in a definition section. However, subjective intention was not relevant under the head of construction, and in any event, all that the judge had done was to conclude that the first defendant had not proved its rectification claim with sufficient clarity. The instant case was not one for the application of the “private dictionary” or “agreed basis” exceptions because the pre-contract negotiations did not establish a sufficiently clear evidential basis for them. There was no possible basis for a “private dictionary” approach, and to look for an agreed basis in the correspondence and the oral negotiations would be to eliminate any distinction between construction and rectification.
Partenreederei MS Karen Oltmann v Scarsdale Shipping Co Ltd, The Karen Oltmann [1976] 2 Lloyd's Rep 708 considered; Investors' Compensation Scheme Ltd v West Bromwich Building Society, Investors' Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society [1998] 1 All ER 98 considered.
(3) The court would rectify a contract if the evidence was clear and unambiguous that a mistake had been made in the recording of the parties' intention, what that intention was, and that the alleged intention continued in both parties' minds down to the time of the execution of the agreement. When a trial judge's estimate of a witness formed any substantial part of his judgment, his conclusions of fact should be left alone by the appellate court. It was only if satisfied that the trial judge had not taken proper advantage of having seen and heard the witnesses that an appellate court would be justified in interfering.
While the first defendant had a very powerful case for rectification, the instant case was not one in which the judge had overlooked the points in its favour. The judgment had been conspicuously careful and full and had dealt with all the important points put forward on either side. The judge had dealt with the first defendant's argument that S's evidence was inconsistent with his attendance note. He found that the note had simply been an aide memoire. The judge had made a specific finding that S had explained the schedule, and he did so in the light of his finding that S was a credible witness. Accordingly, it was not a finding which warranted interference.
Swainland Builders Ltd v Freehold Properties Ltd [2002] All ER (D) 314 (Apr) considered; Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 All ER (Comm) 140 considered.
Decision of Briggs J [2007] 1 All ER (Comm) 1083 affirmed.
Case annotations in other services: Chartbrook Ltd v Persimmon Homes Ltd and another [2008] All ER (D) 165 (Mar), [2007] 1 All ER (Comm) 1083; Partenreederei MS Karen Oltmann v Scarsdale Shipping Co Ltd, The Karen Oltmann [1976] 2 Lloyd's Rep 708; Investors' Compensation Scheme Ltd v West Bromwich Building Society, Investors' Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society [1998] 1 All ER 98, Swainland Builders Ltd v Freehold Properties Ltd [2002] All ER (D) 314 (Apr); Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 All ER (Comm) 140
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13. City Inn (Jersey) Ltd v Ten Trinity Square Ltd
Citation: [2008] EWCA Civ 156
Hearing date: 6 March 2008
Court: Court of Appeal, Civil Division
Judges: Jacob, Wall and Wilson LJJ
Summary: landlord and tenant – restrictive covenant – covenant benefiting demised land
By a transfer dated 8 May 1962 (the transfer), the Port of London Authority (PLA) transferred some land to a company. The transfer contained a covenant in the following terms: “The transferee for itself and its successors in title covenants with the Transferor and its successors in title […] to the intent that the burden of the covenant may run with the land and bind the land hereby transferred and every part thereof to observe and perform the covenants and stipulations set forth in the Third Schedule hereto”. The Third Schedule to the transfer stipulated, in paragraph 1, that the transferee was not allowed to erect or make external alteration or addition to any building or other erection of any sort upon the land hereby transferred or any part thereof without obtaining written approval to the detailed plans and elevations from the “Estate Officer for the time being of the Transferor”. Paragraph 2 of schedule 3 stipulated that change of use of the land could not be undertaken without obtaining the written consent of “the Transferor'”. Subsequent to the transfer, the land was developed to form a building known as MH, which was later acquired by the claimant company. The defendant company later acquired the neighbouring property, which had been the former head office of the PLA. Thereafter, the claimant secured a resolution from the City Corporation to grant detailed planning permission for the demolition of MH and the construction of a hotel on the site. The PLA also gave consent to the works involved in that exercise. The defendant denied the validity of the consent obtained by the claimant, arguing that the reference to “the Transferor” in each of those paragraphs in schedule 3 was intended as a reference to the successor in title of the PLA at the time of the application for consent, in the instant case, being the defendant itself, with the result that the claimant required the defendant's consent as well. Consequently, the claimant issued proceedings, seeking a declaration that upon the true interpretation of the covenant, the defendant had no right to insist that the proposed works were subject to its consent. The judge granted the declaration sought to the effect the claimant's proposed external alterations or additions to and subsequent change of use of MH did not require the defendant's consent. The defendant appealed.
The defendant submitted, inter alia, that there was no commercial sense for the PLA to be the beneficiary of any of the covenants once it had completely moved away.
The appeal would be dismissed.
On the true construction of the transfer, the parties to the transfer had not contemplated the situation set out by the defendant and simply had not catered for it. The word “Transferor'” in the agreement meant the PLA alone. No successor was contemplated. It was not always the case that in construing a document the court had to assume that the parties had thought of every “what if?” The instant case was such a case.
Decision of Alan Steinfeld QC [2007] All ER (D) 164 (Jun) affirmed.
Case annotations in other services: City Inn (Jersey) Ltd v Ten Trinity Square Ltd [2008] All ER (D) 76 (Mar), [2007] All ER (D) 164 (Jun)
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14. The Royal Bank of Scotland plc v Victoria Street (No 3) Ltd
Citation: [2008] All ER (D) 31 (Mar)
Hearing date: 4 March 2008
Court: Chancery Division
Judge: Lewison J
Relevant legislation: Landlord and Tenant Act 1988
Summary: landlord and tenant – assignment of lease – consent of landlord not to be unreasonably withheld
By a lease dated 29 September 1979, V Ltd let a property to W Ltd. The lease was expressed to be for a term of 42 years from 25 December 1969. Clause 2.15(b) of the lease contained a covenant, inter alia, not to assign the lease without the written consent of the landlord and stated that that consent was to be unreasonably withheld in respect of a respectable and reasonable potential assignee. Clause 2.18(b) provided that the property was to be used for the business of banking or as offices with ancillary car parking. Following various corporate transactions, W Ltd became the claimant bank. The reversion in the property passed to the defendant. The property had been unoccupied for a number of years when, on 3 October 2007, the claimant wrote to the landlord asking it to treat the letter as a formal application for the assignment of the lease to OIB Ltd (the assignee). The proposed assignee was described as a company incorporated on 13 August 2007, and being involved in the provision of professional property services. The letter stated that the assignee intended to use the property as office premises with ancillary parking and that it was prepared to give a three months' rent deposit and to provide references from its directors. The letter concluded with a request that the defendant consider the application urgently. On 10 October, an associated company replied on behalf of the defendant. The application was refused on the basis that the fact that the assignee was newly incorporated meant that it was not a respectable and reasonable potential assignee for the purposes of clause 2.15(b). Following unsuccessful attempts to resolve the ensuing dispute through correspondence, the claimant issued proceedings by which it sought declarations that the defendant had unreasonably withheld consent to the proposed assignment and damages for breach of statutory duty. Subsequently, it sought summary judgment on the claim for declaratory relief.
A number of issues fell to be determined, including (i) whether the letter of 3 October 2007 had been an application for consent to assign the lease; (ii) if so, from whether time had began to run from that date; (iii) whether the Landlord and Tenant Act 1988 placed a duty upon a landlord to facilitate the overcoming of its reservations in respect of a potential assignee; and (iv) whether the defendant had any real prospect of successfully persuading the court that its refusal of consent had been upon reasonable grounds.
The application would be dismissed.
Where a tenant had made an application for consent to assign a lease, the landlord was entitled to make a decision on the basis of that application. The Landlord and Tenant Act 1988 imposed no duty to facilitate a successful application for consent to assign upon the landlord. There was no bar on multiple applications, and it was open to an unsuccessful tenant to reapply in light of the landlord's refusal if he so wished.
In the instant case, the letter of 3 October 2007 had, at face value, been intended as an application for consent to assign the lease. There was no prescribed form for such an application, and, in those circumstances, the letter fell to be treated as a proper application. The defendant refused that application; therefore, time had commenced running and had come to an end with the refusal of consent. However, on the evidence, the claimant had failed to show that the defendant had no real prospect of successfully persuading a court that its refusal of consent had been upon reasonable grounds.
Bates v Donaldson [1895-9] All ER Rep 170 considered; Ashworth Frazer Ltd v Gloucester City Council [2002] 1 All ER 377 considered; Go West Ltd v Spigarolo [2003] 2 All ER 141 considered.
Case annotations in other services: The Royal Bank of Scotland plc v Victoria Street (No 3) Ltd [2008] All ER (D) 31 (Mar); Bates v Donaldson [1895-9] All ER Rep 170; Ashworth Frazer Ltd v Gloucester City Council [2002] 1 All ER 377; Go West Ltd v Spigarolo [2003] 2 All ER 141
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15. Charlton and another v Northern Structural Services Ltd
Citation: [2008] EWHC 66 (TCC)
Hearing date: 3 March 2008
Court: Queen's Bench Division, Technology and Construction Court
Judge: Judge Anthony Thornton QC
Summary: negligence – information or advice – reliance on skill and judgment
The claimants' mortgage company required investigation by a structural engineer into cracking to the rear of an end-of-terrace house before it would offer them a mortgage to buy it. B, who was employed by the defendant, attended and recommended the removal of mature trees in the vicinity of the house in May 2000. He had not dug a trial pit to ascertain that the type of subsoil around the house. The claimants purchased the house and removed the trees. They maintained that further cracking occurred and that they had become worried about the amount of water in the soil. B returned and advised them that the problem with the water was being caused by drains in the area. The claimants’ own investigations ruled out problems with drains or a natural watercourse, and B recommended monitoring of the cracks. He placed some telltales, but only one further reading was recorded. The claimants maintained that the cracks continued to widen during the summer of 2001. By this time, they had removed the plaster from the interior walls that had been affected. The claimants engaged a different structural engineer, who reported in August 2001 that the house was suffering from clay heave caused by the clay in the subsoil around the house, which had been desiccated by the trees, becoming re-hydrated after their removal. He recommended that a period of monitoring should take place. Monitoring commenced in September 2002, and it was concluded in March 2004 that there had only been minute movement in the previous 12 months. There was correspondence between the parties in which the defendant denied liability, any breach of a duty of care and that there had been any loss. The claimants brought proceedings against the defendant in May 2006.
It was accepted that no remedial work to strengthen the foundations of the house could take place due to the possibility of differential settlement between different parts of the house itself and between the house and others in the terrace. The claimant sought damages, inter alia, for the diminution in value occasioned by the stigma of the house being susceptible to structural problems but being unable to carry out remedial works. They relied on a valuation carried out in 2007, prior to the trial, which recorded a £20,000 diminution in value. The claimants also sought damages for the inconvenience and distress that they and their three children had suffered. The defendant maintained, inter alia, that no further cracking had taken place after May 2000, that there was no evidence as to what an arboriculturist would have advised in relation to the trees, and that, in any event, the diminution in value should be assessed at 2000 values, when the claimants had relied on the report. It produced no valuation of its own.
The court ruled:
(1) On the evidence, there had been further cracking since May 2000 due to clay heave that had been occasioned by the removal of the trees. B had negligently failed properly to identify the nature of the subsoil around the house and, as a consequence, failed to exercise reasonable skill and care in making the recommendation to remove the trees and in failing to advise on the potential dangers to the house of re-hydration of the clay subsoil that had been desiccated by those trees.
Furthermore, B failed to identify in his subsequent inspections and monitoring that the property was in the throes of, or at future risk of, clay re-hydration damage. Both an arboriculturist and common sense would have dictated that instant removal should not have been contemplated because of the risk to the house posed by re-hydration of the clay subsoil. Accordingly, the defendant was liable to the claimants in negligence.
(2) There was nothing inherently wrong in principle in valuing a diminution value at a date later than the date of the breach in question. The guiding principles were that the date of valuation had to be reasonable; a date that gave rise to a loss that was directly linked to the breach; a date that resulted from no break in the causal chain; and a date that was not attributable to any failure on the part of a claimant to mitigate their loss.
In the instant case, much of the period between the summer of 2000 and the autumn of 2007 was attributable to the considerable uncertainties caused by B's negligent report and subsequent advice. In those circumstances, given that the damage that was occurring was not obviously structurally significant, it had been necessary to undertake a lengthy period of monitoring and observation before a final and conclusive answer to the problem of damage and repair could be decided. Although those uncertainties had been resolved by the end of 2004 and, thus, proceedings could have been started two years earlier, it was understandable that the claimants, who had modest means and had been faced with adamant denials of liability, breach and loss by insured professionals, had been prepared to rely on less formal means than litigation to pursue their claim until faced with the imminent expiry of that claim's limitation period. In those circumstances, it was reasonable for the claimants to pursue their claim based on 2007 values. Furthermore, the defendant had failed to identify an earlier date for valuation.
Accordingly, the claimants would be awarded £20,000 in respect of diminution in value. However, that sum would not carry prejudgment interest as it was based on current values.
(3) The claimants had lived in conditions of much discomfort and disagreeableness since they had reasonably left the interior walls un-plastered during the monitoring period, at much distress to harmonious family life. As the matter could have been brought to trial two years earlier, their inconvenience and distress was to be assessed over a four-year period.
Accordingly, the fair sum for a family of five would be £5,000, which would also not carry prejudgment interest.
Case annotations in other services: Charlton and another v Northern Structural Services Ltd [2008] All ER (D) 69 (Mar)
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Enabling power: Finance Act 2003
Commencement: 6 April 2008
Summary: The regulations make provision for the exemption from stamp duty land tax of land transactions transferring property on the conversion of an authorised unit trust to, or its amalgamation with, an open-ended investment company.
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Enabling power: Town and Country Planning Act 1990
Commencement: 6 April 2008
Summary: Amends part 2 of schedule 2 to the Town and Country Planning (General Permitted Development Order 1995, which confers permitted development rights in respect of certain development.
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3. Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2008
Number: 2008/647
Enabling power: Building Act 2004
Commencement: 6 April 2008
Summary: Amend the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 in relation to various requirements related to energy performance certificates and recommendation reports.
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Charles Evans, dispute resolution specialist and partner with Norton Rose, said: "Over the next year, I think we will see a considerable increase in cases in the UK in this area, as well as related regulatory activity. The [Financial Services Authority] FSA have already excluded a number of brokers from the industry, and fraud is likely to emerge in view of the changing economic situation."
A Navigant Consulting report published in February reveals that numbers of US federal court sub-prime-related filings are now outpacing the benchmark savings and loan litigation from the early 1990s. Dispute and litigation scenarios include predatory lending, valuation omissions and misrepresentation, loan servicing breach of contract, fraudulent conveyancing, and possibly securities litigation (write-downs) involving securitised mortgages. Lawyers also believe that the mortgage area will face increasing regulation in the US.
In the UK, the FSA says that it is working closely with lenders to deal with an increase in mortgage-related fraud over the last 18 months. This is chiefly involving brokers, conveyancing solicitors, valuers and surveyors, individuals posing as buyers, as well as borrower income statement fraud. The FSA is particularly concerned about organised property scams, typically buy-to-let overvaluations involving corrupt solicitors. The FSA said it completed investigation of only a few of the approximate 200 mortgage fraud cases — largely involving brokers referred to the Authority by lenders — but expected some more results to be made public this year. The FSA also welcomed the National Fraud Strategic Authority, which will start up operations this year, particularly its whistleblowers provisions.
Non-fraudulent regulatory violations in the mortgage area are also on the increase, the FSA said. Some professional bodies also warned of an increase in professional negligence litigation against mortgage professionals resulting from the sub-prime crisis.
"The housing boom in the UK has been such that it is relatively easy to obtain loans on the basis that property values continue to rise but as values go down, that is no longer possible and fraudulent activity that has taken place will now come to light," Evans said.
"The two classic litigation areas we would be dealing with are income statement fraud, where say a friendly accountant has provided details of income which are not strictly true, and valuations, which might not stand up to scrutiny, such as buy-to-lets obtained on the back of deficient valuations or fraudulent valuers’ reports."
The FSA said it will not harden up its principled approach to mortgage regulation, which has been within its ambit for about three years, in the wake of the sub-prime crisis, but will continue to focus on regulatory outcomes.
However, it is expected that the regulator will become more actively involved in checking compliance, Evans said. "This is the first time we have had the FSA regulating mortgages during a downturn in the market, so we are going to see greater scrutiny of what has been going on at lenders or mortgage brokers, but I don’t think this will involve more regulation."
(18/3/08)
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Greater encouragement for zero-carbon home-building moves to spread the numbers of long-term fixed rate mortgages among home-owners, and changes to stamp duty land tax (SDLT) are among the property initiatives outlined through Chancellor Alistair Darling in his recent budget.
However, experts in the industry appear not to be impressed. Robert Bryant-Pearson, chief executive of Allied Surveyors, the UK’s largest independent firm of surveyors, criticised both the specific measures proposed and the way that the Treasury came up with these ideas without much consultation.
"I am greatly disappointed," he said. "Opportunities could have been taken to help first-time buyers more. The Chancellor has to consult with the industry more. Floating ‘pie in the sky’ ideas isn’t going to help."
For instance, the Chancellor has launched a consultation on how to encourage more homeowners to follow the French and Danes in taking out 25-year fixed rate mortgages – and he will report back on the issue in his Pre-Budget Report in late November or early December.
He believes that more uptake of these deals would reduce the number of repossessions – as homeowners would not be subject to rises in interest rates. But Bryant-Pearson said: "This is a red herring."
Mortgage borrowers can already take out 25-year fixed rate deals but only very few have chosen to do so (as the rates have not been attractive). Another proposal on which he throws cold water is the extension of “shared ownership” schemes to include people who can only afford to buy 50 per cent of their home – but, under a deal with their mortgage lender, they rent the other 50 per cent.
At the moment, such buyers have to purchase 75 per cent of the property. "Shared ownership hasn’t captured the imagination of people," said Bryant-Pearson. "You either buy or rent. The halfway house is a muddle."
The Chancellor has tried to extend the green agenda into the property field – notably by extending an exemption for SDLT to new-build flats that are deemed “zero-carbon” emitting. However, this exemption was created in 2007 for houses – and only very few properties benefit from it, as the definition of “zero-carbon” is seen as being very narrow.
Stephen Herring, senior tax partner of accountant BDO Stoy Hayward, said that, while the move may be welcomed in many quarters, "it remains to be seen if the criteria are achievable".
Other measures on SDLT include a number of detailed changes to crack down on avoidance.
"Specific SDLT planning will continue to be appropriate in particular circumstances," said Herring, but the use of certain routes (some Islamic finance arrangements and some “group relief” schemes, for example) has been outlawed with immediate effect.
(13/3/08)
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Peter English of quantity surveyors and dispute resolution practice PJ English Associates represented SGS in its case against Barratt. He said that this case shows just how many unfair payment practices there are in the construction industry and how careful subcontractors have to be nowadays in entering into contracts they may not fully understand or appreciate: "In this instance, both in September 2005 and April 2006, Barratt sent letters giving notice of its intention to deduct a three per cent discount from all payments to SGS with immediate effect. This discount was in addition to any discount that had been agreed under the contract."
Mr English continued: "SGS decided not to accept this imposition and engaged us to fight Barratt. After several months of attempting to persuade Barratt to pay back the wrongly deducted discount, SGS commenced adjudication on 12 January 2008, and the adjudicators’ decision was published on 18 February, some five weeks later. Amazingly, Barratt wrote again to SGS on 28 January 2008 expressing their intention to introduce an immediate discount of three per cent, which would be applied retrospectively on invoices not yet submitted. This letter went on to say: ‘We will assume your agreement to this deduction unless we hear from you to the contrary.’ Both our own research and research undertaken by leading construction bodies leads us to believe that this adjudication is the first of its kind in the industry. It is seen as a landmark decision that could entitle thousands of sub-contractors to claw back 'discounts' and other illegal deductions."
He added: "The adjudicator ordered Barratt to repay the discounts totalling £19,000, plus interest at a monthly rate of eight per cent above base. The payment was received by Southern Glass Services within three days."
According to Mr English, this means that smaller contractors now have a place to go to get justice if any deductions over the past six years have been made illegally. Adjudication is reasonably inexpensive in comparison to other forms of action.
SGS is now advising all other contractors in similar positions to inspect payments made to them against agreed contracts and to start claiming back any unlawful deductions.
Mr English has produced a list of eight tips, which he urges smaller contractors to follow to avoid these kind of legal battles. They include building a relationship with a recognised dispute resolution practice who can deal with issues as they arise, always ensuring that they have an agreement that can at least be evidenced in writing before commencing any performance on the contract.
Understanding their rights under the Housing Grants Construction and Regeneration Act 1996 and, lastly, joining the Confederation of Construction Specialists who are able to give help, guidance and assistance, often for free.
Relevant legislation: Housing Grants Construction and Regeneration Act 1996
(11/3/08)
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4. Credit crunch and interest rates impact conveyancing solicitors
Higher interest rates and the sub-prime crisis have worked their way through to law firm conveyancing practices in the UK, says Tom Bridge, managing partner of Stephensons’ Conveyancing and Probate Department.
"Transactional work has died off quite substantially particularly in the last quarter or so compared with the end of summer, I think most law firms have noticed that now," said Mr Bridge, "and, at the moment, we should be seeing the increase in sales and purchase activity that normally comes in February and March after the traditionally quiet months of December and January, but this year it hasn’t yet reached nearly the same volume as in previous years."
A major cause of the slide in conveyancing work is that the credit crunch and interest rate rises are now preventing first-time buyers from getting into the property market. "First-time buyers are a major component of transactional work. That feeds through to the rest of the industry but now a lot of sub-prime lending has gone by the board altogether and even the main high street lenders are tightening up their lending criteria, which are all factors excluding first-timers."
However, for Stephensons, a substantial increase in re-mortgage work has more than compensated for the weaker conveyancing situation. "There has been a massive increase in that area for us, to the extent that we have transferred some of our people from conveyancing and also recruited new staff."
"We also expect an increase in work for our commercial litigation department because as credit has got more restrictive, there are more businesses and individuals in trouble, "he said. "There are lots of people in the buy-to-let market boom who have overstretched themselves, for example."
"There could also be an increase in litigation against mortgage professionals including mortgage brokers and solicitors," he said. "If lenders have bad debts or if you have borrowers facing repossession, it is inevitable that they will move toward the people who sold them the mortgage or did the conveyancing."
The falloff in transactional work could be worse if the firm – which has a large volume-based conveyancing practice – did not have the wide variety of referral sources, something that smaller firms often lack. "There used to be a traditional reliance on conveyancing work by high street solicitors, but a of that has gone over the last five years with local solicitors finding that their former local real estate agent is panelling out work and with the increased use of the internet. So a lot of smaller law firms will be felling the pinch more at the moment," he said. "In fact, there have been closures and redundancies amongst law firms in the north west because of the decline in transactions."
"However, I don’t believe that the current situation will become anywhere as bad as the last property slump in the late 1980s early 1990s," he said.
(11/3/08)
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Articles
Citation: [2008] All ER (D) 192 (Mar)
Hearing date: 13 March 2008
Court: Queen's Bench Division, Administrative Court
Judge: Sullivan J
Relevant legislation: Planning (Listed Buildings and Conservation Areas) Act 1990, section 69
Summary: town and country planning – conservation area – planning permission
The claimant owned a parcel of land which was within the area of the defendant local planning authority. Located on the land were buildings that had formerly been used by a mail order clothing business, and a sports ground and pavilion that had been the home of Worcestershire County Cricket Club. In 2004, the pavilion and one of the industrial buildings were identified as '”buildings of local interest” and, as a result, were protected by various policies in the relevant local plan. Despite that, the claimant submitted two separate applications to the authority for planning permission to redevelop the site. The applications were refused, and an appeal was lodged in respect of the second application only. In the meantime, the claimant closed the pavilion on the grounds of health and safety, and notified the authority of its intention to have it demolished. In response, the authority requested the Secretary of State to exercise her powers to list the pavilion as a listed building. The request failed, however, demolition works were not permitted to proceed as, by that point, certain birds, which had protected status, had been found nesting on the roof of the pavilion. In July 2006, a planning inquiry was held into the appeal against the second planning application. Members at the inquiry were provided with evidence from two conservation experts. In addition, recommendations were made in relation to a matter described as an “urgent item to the agenda”, namely, whether the claimant's land could form part of a conservation area. In the event, the planning committee accepted the recommendations, and an area which included the claimant's land, known as “Boughton Conservation Area No 19”, was designated as a conservation area. Several months later, the claimant objected to the designated conservation area arguing, inter alia, that its boundary was outside the confines of the authority's planning control. On a review, the authority realised its error, and re-designated the conservation area. The claimant applied for judicial review against both designations.
An issue arose as to whether the authority had misused its powers of designation under section 69 of the Planning (Listed Buildings and Conservation Areas) Act 1990.
The applications would be allowed.
Having regard to the totality of the contemporaneous evidence, it was plain that the authority's initial decision to designate the claimant's land as part of a wider conservation area had been done for the purpose of protecting one particular building, namely, the pavilion, from being demolished. There had been nothing to suggest, as was required by section 69 of the 1990 Act, that proper consideration had been given to the area to be designated, in terms of which parts had special architectural or historic interest, and which parts had to be enhanced or preserved in respect of its character and appearance. Further matters supporting that conclusion could be found by the reasons that had been given for making the issue of conservation area designation as “urgent” at the planning inquiry, and the fact that no prior consultation had been held, on the issue, by the authority. Moreover, the evidence that had been produced at the review could be regarded as a blatant attempt to rationalise the obvious deficiencies of the initial designation.
It followed that in all those circumstances, the designations had to be quashed.
Case annotations in other services: R (on the application of Arndale Properties Ltd) v Worcester City Council [2008] All ER (D) 192 (Mar)
Back to top12. Chartbrook Ltd v Persimmon Homes Ltd and another
Citation: [2008] EWCA Civ 183
Hearing date: 12 March 2008
Court: Court of Appeal, Civil Division
Judges: Tuckey, Lawrence Collins and Rimer LJJ
Summary: contract – construction – contractual term
A development agreement relating to certain land was made between the claimant as owner, the first defendant as developer, the second part 20 defendant (a shareholder and director of the claimant) as adjoining owner and the second defendant as guarantor. The claimant's solicitor took the second part 20 defendant and R, who was also a director and shareholder of the claimant, through the draft agreement and made an attendance note. A dispute arose from a disagreement as to the true construction of schedule 6 to the agreement, which contained provisions as to the price to be paid by the first defendant and, in particular, as to the element of the price labelled as the “additional residential payment” (ARP). Under schedule 6 of the agreement ARP was defined as meaning “23.4 per cent of the price achieved for each residential unit in excess of the minimum guaranteed residential value [MGRUV], less the costs and incentives”. Paragraph 3.3 of schedule 6 principally provided for payment of ground rent value to be payable on the earlier of the date of realisation of the ground rent value “or the date of payment if any of the balancing payment”. In outline, the claimant contended that the ARP was just over £4.6 million, of which £3.9 million odd remained unpaid, whereas the first defendant contended that it was much less and that it had been largely paid or accounted for. The claimant commenced proceedings. It submitted that it was entitled to a 23.4 per cent share of the net proceeds of sale of each residential unit in excess of a minimum guaranteed amount. The defendants submitted that the claimant was to receive either a fixed percentage (23.4 per cent) of the sales revenue or the minimum guaranteed amount, whichever was the greater.
As an alternative to their argument on construction, the first defendant counterclaimed for rectification against the claimant and the second part 20 defendant on the basis of common mistake, or unilateral mistake of which the claimant had been aware before contract, which it had failed to bring to the first defendant's attention. In relation to the construction of the definition of the ARP, the first defendant sought to adduce evidence of the parties' negotiations and argued that, when during negotiations they had been in agreement about a relevant matter, that evidence was admissible since it shed light on what the parties might reasonably have had in contemplation as to the meaning of the words used, essentially using their own private dictionary. Evidence was given by the second part 20 defendant, R, and S. The judge found S to be a careful and realistic witness. The judge concluded that the ordinary meaning of the definition of ARP pointed clearly towards the claimant's rather than the defendants' construction that ARP was a defined term, and that ARP meant 23.4 per cent of an amount calculated by deducting both the MGRUV and the C&I from the price achieved for each residential unit. He further concluded that the adverse effect on third party rights was a compelling reason for not admitting evidence of prior negotiations; and that the first defendant had not proved either of its alternative rectification cases with sufficient clarity. The first defendant appealed against that decision.
It submitted that the claimant's construction gave the claimant a windfall of some £4 million more for its land than it had ever offered and bore no relation to what it had offered and to which the claimant had agreed; that the judge had adopted an unnecessarily restrictive view of the law; and that had he applied the legal principles correctly, he should have given weight to the fact that he had himself found that the claimant had communicated to the first defendant its acceptance of certain offers. It further submitted that the agreement should be rectified; and that under paragraph 3.3 of schedule 6 to the agreement the judge was wrong to find that the “if any” point carried little weight.
The appeal would be dismissed.
(1) (Lawrence Collins LJ dissenting) There was nothing unclear, uncertain or ambiguous about the definition of the ARP in schedule 6 to the agreement. It was clear, certain and unambiguous, and its arithmetic was straightforward. The phrases that were elsewhere defined were accepted as meaning what their definitions provided, and no other word or phrase was said to bear any meaning other than its ordinary one. There was no basis for rewriting the agreement. The commercial force of the argument that the first defendant attached to the “if any” point and to the points based on the use of various words (“minimum” and “guaranteed'”) in the schedule 6 definitions had to be recognised. However, those points could not be regarded as doing the fundamental interpretative work that the first defendant required of them.
(2) The starting point was that “for reasons of practical importance” the law excluded from the admissible background the previous negotiations of the parties.
The policy reasons for a strict application of the rule were not compelling and the judge's emphasis on the effect on third parties as a strong policy reason for the rule could not be accepted. Moreover, the “private dictionary” and '”agreed basis” exceptions were open to the court; and the application of those exceptions was not excluded simply because the words at issue were themselves contained in a definition section. However, subjective intention was not relevant under the head of construction, and in any event, all that the judge had done was to conclude that the first defendant had not proved its rectification claim with sufficient clarity. The instant case was not one for the application of the “private dictionary” or “agreed basis” exceptions because the pre-contract negotiations did not establish a sufficiently clear evidential basis for them. There was no possible basis for a “private dictionary” approach, and to look for an agreed basis in the correspondence and the oral negotiations would be to eliminate any distinction between construction and rectification.
Partenreederei MS Karen Oltmann v Scarsdale Shipping Co Ltd, The Karen Oltmann [1976] 2 Lloyd's Rep 708 considered; Investors' Compensation Scheme Ltd v West Bromwich Building Society, Investors' Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society [1998] 1 All ER 98 considered.
(3) The court would rectify a contract if the evidence was clear and unambiguous that a mistake had been made in the recording of the parties' intention, what that intention was, and that the alleged intention continued in both parties' minds down to the time of the execution of the agreement. When a trial judge's estimate of a witness formed any substantial part of his judgment, his conclusions of fact should be left alone by the appellate court. It was only if satisfied that the trial judge had not taken proper advantage of having seen and heard the witnesses that an appellate court would be justified in interfering.
While the first defendant had a very powerful case for rectification, the instant case was not one in which the judge had overlooked the points in its favour. The judgment had been conspicuously careful and full and had dealt with all the important points put forward on either side. The judge had dealt with the first defendant's argument that S's evidence was inconsistent with his attendance note. He found that the note had simply been an aide memoire. The judge had made a specific finding that S had explained the schedule, and he did so in the light of his finding that S was a credible witness. Accordingly, it was not a finding which warranted interference.
Swainland Builders Ltd v Freehold Properties Ltd [2002] All ER (D) 314 (Apr) considered; Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 All ER (Comm) 140 considered.
Decision of Briggs J [2007] 1 All ER (Comm) 1083 affirmed.
Case annotations in other services: Chartbrook Ltd v Persimmon Homes Ltd and another [2008] All ER (D) 165 (Mar), [2007] 1 All ER (Comm) 1083; Partenreederei MS Karen Oltmann v Scarsdale Shipping Co Ltd, The Karen Oltmann [1976] 2 Lloyd's Rep 708; Investors' Compensation Scheme Ltd v West Bromwich Building Society, Investors' Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society [1998] 1 All ER 98, Swainland Builders Ltd v Freehold Properties Ltd [2002] All ER (D) 314 (Apr); Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 All ER (Comm) 140
Back to top13. City Inn (Jersey) Ltd v Ten Trinity Square Ltd
Citation: [2008] EWCA Civ 156
Hearing date: 6 March 2008
Court: Court of Appeal, Civil Division
Judges: Jacob, Wall and Wilson LJJ
Summary: landlord and tenant – restrictive covenant – covenant benefiting demised land
By a transfer dated 8 May 1962 (the transfer), the Port of London Authority (PLA) transferred some land to a company. The transfer contained a covenant in the following terms: “The transferee for itself and its successors in title covenants with the Transferor and its successors in title […] to the intent that the burden of the covenant may run with the land and bind the land hereby transferred and every part thereof to observe and perform the covenants and stipulations set forth in the Third Schedule hereto”. The Third Schedule to the transfer stipulated, in paragraph 1, that the transferee was not allowed to erect or make external alteration or addition to any building or other erection of any sort upon the land hereby transferred or any part thereof without obtaining written approval to the detailed plans and elevations from the “Estate Officer for the time being of the Transferor”. Paragraph 2 of schedule 3 stipulated that change of use of the land could not be undertaken without obtaining the written consent of “the Transferor'”. Subsequent to the transfer, the land was developed to form a building known as MH, which was later acquired by the claimant company. The defendant company later acquired the neighbouring property, which had been the former head office of the PLA. Thereafter, the claimant secured a resolution from the City Corporation to grant detailed planning permission for the demolition of MH and the construction of a hotel on the site. The PLA also gave consent to the works involved in that exercise. The defendant denied the validity of the consent obtained by the claimant, arguing that the reference to “the Transferor” in each of those paragraphs in schedule 3 was intended as a reference to the successor in title of the PLA at the time of the application for consent, in the instant case, being the defendant itself, with the result that the claimant required the defendant's consent as well. Consequently, the claimant issued proceedings, seeking a declaration that upon the true interpretation of the covenant, the defendant had no right to insist that the proposed works were subject to its consent. The judge granted the declaration sought to the effect the claimant's proposed external alterations or additions to and subsequent change of use of MH did not require the defendant's consent. The defendant appealed.
The defendant submitted, inter alia, that there was no commercial sense for the PLA to be the beneficiary of any of the covenants once it had completely moved away.
The appeal would be dismissed.
On the true construction of the transfer, the parties to the transfer had not contemplated the situation set out by the defendant and simply had not catered for it. The word “Transferor'” in the agreement meant the PLA alone. No successor was contemplated. It was not always the case that in construing a document the court had to assume that the parties had thought of every “what if?” The instant case was such a case.
Decision of Alan Steinfeld QC [2007] All ER (D) 164 (Jun) affirmed.
Case annotations in other services: City Inn (Jersey) Ltd v Ten Trinity Square Ltd [2008] All ER (D) 76 (Mar), [2007] All ER (D) 164 (Jun)
Back to top14. The Royal Bank of Scotland plc v Victoria Street (No 3) Ltd
Citation: [2008] All ER (D) 31 (Mar)
Hearing date: 4 March 2008
Court: Chancery Division
Judge: Lewison J
Relevant legislation: Landlord and Tenant Act 1988
Summary: landlord and tenant – assignment of lease – consent of landlord not to be unreasonably withheld
By a lease dated 29 September 1979, V Ltd let a property to W Ltd. The lease was expressed to be for a term of 42 years from 25 December 1969. Clause 2.15(b) of the lease contained a covenant, inter alia, not to assign the lease without the written consent of the landlord and stated that that consent was to be unreasonably withheld in respect of a respectable and reasonable potential assignee. Clause 2.18(b) provided that the property was to be used for the business of banking or as offices with ancillary car parking. Following various corporate transactions, W Ltd became the claimant bank. The reversion in the property passed to the defendant. The property had been unoccupied for a number of years when, on 3 October 2007, the claimant wrote to the landlord asking it to treat the letter as a formal application for the assignment of the lease to OIB Ltd (the assignee). The proposed assignee was described as a company incorporated on 13 August 2007, and being involved in the provision of professional property services. The letter stated that the assignee intended to use the property as office premises with ancillary parking and that it was prepared to give a three months' rent deposit and to provide references from its directors. The letter concluded with a request that the defendant consider the application urgently. On 10 October, an associated company replied on behalf of the defendant. The application was refused on the basis that the fact that the assignee was newly incorporated meant that it was not a respectable and reasonable potential assignee for the purposes of clause 2.15(b). Following unsuccessful attempts to resolve the ensuing dispute through correspondence, the claimant issued proceedings by which it sought declarations that the defendant had unreasonably withheld consent to the proposed assignment and damages for breach of statutory duty. Subsequently, it sought summary judgment on the claim for declaratory relief.
A number of issues fell to be determined, including (i) whether the letter of 3 October 2007 had been an application for consent to assign the lease; (ii) if so, from whether time had began to run from that date; (iii) whether the Landlord and Tenant Act 1988 placed a duty upon a landlord to facilitate the overcoming of its reservations in respect of a potential assignee; and (iv) whether the defendant had any real prospect of successfully persuading the court that its refusal of consent had been upon reasonable grounds.
The application would be dismissed.
Where a tenant had made an application for consent to assign a lease, the landlord was entitled to make a decision on the basis of that application. The Landlord and Tenant Act 1988 imposed no duty to facilitate a successful application for consent to assign upon the landlord. There was no bar on multiple applications, and it was open to an unsuccessful tenant to reapply in light of the landlord's refusal if he so wished.
In the instant case, the letter of 3 October 2007 had, at face value, been intended as an application for consent to assign the lease. There was no prescribed form for such an application, and, in those circumstances, the letter fell to be treated as a proper application. The defendant refused that application; therefore, time had commenced running and had come to an end with the refusal of consent. However, on the evidence, the claimant had failed to show that the defendant had no real prospect of successfully persuading a court that its refusal of consent had been upon reasonable grounds.
Bates v Donaldson [1895-9] All ER Rep 170 considered; Ashworth Frazer Ltd v Gloucester City Council [2002] 1 All ER 377 considered; Go West Ltd v Spigarolo [2003] 2 All ER 141 considered.
Case annotations in other services: The Royal Bank of Scotland plc v Victoria Street (No 3) Ltd [2008] All ER (D) 31 (Mar); Bates v Donaldson [1895-9] All ER Rep 170; Ashworth Frazer Ltd v Gloucester City Council [2002] 1 All ER 377; Go West Ltd v Spigarolo [2003] 2 All ER 141
Back to top15. Charlton and another v Northern Structural Services Ltd
Citation: [2008] EWHC 66 (TCC)
Hearing date: 3 March 2008
Court: Queen's Bench Division, Technology and Construction Court
Judge: Judge Anthony Thornton QC
Summary: negligence – information or advice – reliance on skill and judgment
The claimants' mortgage company required investigation by a structural engineer into cracking to the rear of an end-of-terrace house before it would offer them a mortgage to buy it. B, who was employed by the defendant, attended and recommended the removal of mature trees in the vicinity of the house in May 2000. He had not dug a trial pit to ascertain that the type of subsoil around the house. The claimants purchased the house and removed the trees. They maintained that further cracking occurred and that they had become worried about the amount of water in the soil. B returned and advised them that the problem with the water was being caused by drains in the area. The claimants’ own investigations ruled out problems with drains or a natural watercourse, and B recommended monitoring of the cracks. He placed some telltales, but only one further reading was recorded. The claimants maintained that the cracks continued to widen during the summer of 2001. By this time, they had removed the plaster from the interior walls that had been affected. The claimants engaged a different structural engineer, who reported in August 2001 that the house was suffering from clay heave caused by the clay in the subsoil around the house, which had been desiccated by the trees, becoming re-hydrated after their removal. He recommended that a period of monitoring should take place. Monitoring commenced in September 2002, and it was concluded in March 2004 that there had only been minute movement in the previous 12 months. There was correspondence between the parties in which the defendant denied liability, any breach of a duty of care and that there had been any loss. The claimants brought proceedings against the defendant in May 2006.
It was accepted that no remedial work to strengthen the foundations of the house could take place due to the possibility of differential settlement between different parts of the house itself and between the house and others in the terrace. The claimant sought damages, inter alia, for the diminution in value occasioned by the stigma of the house being susceptible to structural problems but being unable to carry out remedial works. They relied on a valuation carried out in 2007, prior to the trial, which recorded a £20,000 diminution in value. The claimants also sought damages for the inconvenience and distress that they and their three children had suffered. The defendant maintained, inter alia, that no further cracking had taken place after May 2000, that there was no evidence as to what an arboriculturist would have advised in relation to the trees, and that, in any event, the diminution in value should be assessed at 2000 values, when the claimants had relied on the report. It produced no valuation of its own.
The court ruled:
(1) On the evidence, there had been further cracking since May 2000 due to clay heave that had been occasioned by the removal of the trees. B had negligently failed properly to identify the nature of the subsoil around the house and, as a consequence, failed to exercise reasonable skill and care in making the recommendation to remove the trees and in failing to advise on the potential dangers to the house of re-hydration of the clay subsoil that had been desiccated by those trees.
Furthermore, B failed to identify in his subsequent inspections and monitoring that the property was in the throes of, or at future risk of, clay re-hydration damage. Both an arboriculturist and common sense would have dictated that instant removal should not have been contemplated because of the risk to the house posed by re-hydration of the clay subsoil. Accordingly, the defendant was liable to the claimants in negligence.
(2) There was nothing inherently wrong in principle in valuing a diminution value at a date later than the date of the breach in question. The guiding principles were that the date of valuation had to be reasonable; a date that gave rise to a loss that was directly linked to the breach; a date that resulted from no break in the causal chain; and a date that was not attributable to any failure on the part of a claimant to mitigate their loss.
In the instant case, much of the period between the summer of 2000 and the autumn of 2007 was attributable to the considerable uncertainties caused by B's negligent report and subsequent advice. In those circumstances, given that the damage that was occurring was not obviously structurally significant, it had been necessary to undertake a lengthy period of monitoring and observation before a final and conclusive answer to the problem of damage and repair could be decided. Although those uncertainties had been resolved by the end of 2004 and, thus, proceedings could have been started two years earlier, it was understandable that the claimants, who had modest means and had been faced with adamant denials of liability, breach and loss by insured professionals, had been prepared to rely on less formal means than litigation to pursue their claim until faced with the imminent expiry of that claim's limitation period. In those circumstances, it was reasonable for the claimants to pursue their claim based on 2007 values. Furthermore, the defendant had failed to identify an earlier date for valuation.
Accordingly, the claimants would be awarded £20,000 in respect of diminution in value. However, that sum would not carry prejudgment interest as it was based on current values.
(3) The claimants had lived in conditions of much discomfort and disagreeableness since they had reasonably left the interior walls un-plastered during the monitoring period, at much distress to harmonious family life. As the matter could have been brought to trial two years earlier, their inconvenience and distress was to be assessed over a four-year period.
Accordingly, the fair sum for a family of five would be £5,000, which would also not carry prejudgment interest.
Case annotations in other services: Charlton and another v Northern Structural Services Ltd [2008] All ER (D) 69 (Mar)
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Statutory Instruments
1. Stamp Duty Land Tax (Open-ended Investment Companies) Regulations 2008
Number: 2008/710Enabling power: Finance Act 2003
Commencement: 6 April 2008
Summary: The regulations make provision for the exemption from stamp duty land tax of land transactions transferring property on the conversion of an authorised unit trust to, or its amalgamation with, an open-ended investment company.
Back to top2. Town and Country Planning (General Permitted Development) (Amendment) (England) Order 2008
Number: 2008/675Enabling power: Town and Country Planning Act 1990
Commencement: 6 April 2008
Summary: Amends part 2 of schedule 2 to the Town and Country Planning (General Permitted Development Order 1995, which confers permitted development rights in respect of certain development.
Back to top3. Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2008
Number: 2008/647
Enabling power: Building Act 2004
Commencement: 6 April 2008
Summary: Amend the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 in relation to various requirements related to energy performance certificates and recommendation reports.
Back to topPlease note subscribers can go to LexisNexis Butterworths for further details about all the above SIs. Non-subscribers can sign up for a free trial of the online service.
Features
1. Mortgage fraud litigation
A big jump of mortgaged-related litigation stemming from the disintegrating US sub-prime market may find an echo in the UK.Charles Evans, dispute resolution specialist and partner with Norton Rose, said: "Over the next year, I think we will see a considerable increase in cases in the UK in this area, as well as related regulatory activity. The [Financial Services Authority] FSA have already excluded a number of brokers from the industry, and fraud is likely to emerge in view of the changing economic situation."
A Navigant Consulting report published in February reveals that numbers of US federal court sub-prime-related filings are now outpacing the benchmark savings and loan litigation from the early 1990s. Dispute and litigation scenarios include predatory lending, valuation omissions and misrepresentation, loan servicing breach of contract, fraudulent conveyancing, and possibly securities litigation (write-downs) involving securitised mortgages. Lawyers also believe that the mortgage area will face increasing regulation in the US.
In the UK, the FSA says that it is working closely with lenders to deal with an increase in mortgage-related fraud over the last 18 months. This is chiefly involving brokers, conveyancing solicitors, valuers and surveyors, individuals posing as buyers, as well as borrower income statement fraud. The FSA is particularly concerned about organised property scams, typically buy-to-let overvaluations involving corrupt solicitors. The FSA said it completed investigation of only a few of the approximate 200 mortgage fraud cases — largely involving brokers referred to the Authority by lenders — but expected some more results to be made public this year. The FSA also welcomed the National Fraud Strategic Authority, which will start up operations this year, particularly its whistleblowers provisions.
Non-fraudulent regulatory violations in the mortgage area are also on the increase, the FSA said. Some professional bodies also warned of an increase in professional negligence litigation against mortgage professionals resulting from the sub-prime crisis.
"The housing boom in the UK has been such that it is relatively easy to obtain loans on the basis that property values continue to rise but as values go down, that is no longer possible and fraudulent activity that has taken place will now come to light," Evans said.
"The two classic litigation areas we would be dealing with are income statement fraud, where say a friendly accountant has provided details of income which are not strictly true, and valuations, which might not stand up to scrutiny, such as buy-to-lets obtained on the back of deficient valuations or fraudulent valuers’ reports."
The FSA said it will not harden up its principled approach to mortgage regulation, which has been within its ambit for about three years, in the wake of the sub-prime crisis, but will continue to focus on regulatory outcomes.
However, it is expected that the regulator will become more actively involved in checking compliance, Evans said. "This is the first time we have had the FSA regulating mortgages during a downturn in the market, so we are going to see greater scrutiny of what has been going on at lenders or mortgage brokers, but I don’t think this will involve more regulation."
(18/3/08)
Back to top2. Property experts house multiple complaints with the budget
Measures to affect the property market were one of the underlying themes of the budget – but property experts are barely even giving them one cheer.Greater encouragement for zero-carbon home-building moves to spread the numbers of long-term fixed rate mortgages among home-owners, and changes to stamp duty land tax (SDLT) are among the property initiatives outlined through Chancellor Alistair Darling in his recent budget.
However, experts in the industry appear not to be impressed. Robert Bryant-Pearson, chief executive of Allied Surveyors, the UK’s largest independent firm of surveyors, criticised both the specific measures proposed and the way that the Treasury came up with these ideas without much consultation.
"I am greatly disappointed," he said. "Opportunities could have been taken to help first-time buyers more. The Chancellor has to consult with the industry more. Floating ‘pie in the sky’ ideas isn’t going to help."
For instance, the Chancellor has launched a consultation on how to encourage more homeowners to follow the French and Danes in taking out 25-year fixed rate mortgages – and he will report back on the issue in his Pre-Budget Report in late November or early December.
He believes that more uptake of these deals would reduce the number of repossessions – as homeowners would not be subject to rises in interest rates. But Bryant-Pearson said: "This is a red herring."
Mortgage borrowers can already take out 25-year fixed rate deals but only very few have chosen to do so (as the rates have not been attractive). Another proposal on which he throws cold water is the extension of “shared ownership” schemes to include people who can only afford to buy 50 per cent of their home – but, under a deal with their mortgage lender, they rent the other 50 per cent.
At the moment, such buyers have to purchase 75 per cent of the property. "Shared ownership hasn’t captured the imagination of people," said Bryant-Pearson. "You either buy or rent. The halfway house is a muddle."
The Chancellor has tried to extend the green agenda into the property field – notably by extending an exemption for SDLT to new-build flats that are deemed “zero-carbon” emitting. However, this exemption was created in 2007 for houses – and only very few properties benefit from it, as the definition of “zero-carbon” is seen as being very narrow.
Stephen Herring, senior tax partner of accountant BDO Stoy Hayward, said that, while the move may be welcomed in many quarters, "it remains to be seen if the criteria are achievable".
Other measures on SDLT include a number of detailed changes to crack down on avoidance.
"Specific SDLT planning will continue to be appropriate in particular circumstances," said Herring, but the use of certain routes (some Islamic finance arrangements and some “group relief” schemes, for example) has been outlawed with immediate effect.
(13/3/08)
Back to top3. Landmark victory for subcontractors
Subcontractors won a landmark legal victory recently after glazing contractor SGS succeeded in its legal action against the Barratt group, which ruled that imposing pay cuts on existing contracts without agreement is unlawful.Peter English of quantity surveyors and dispute resolution practice PJ English Associates represented SGS in its case against Barratt. He said that this case shows just how many unfair payment practices there are in the construction industry and how careful subcontractors have to be nowadays in entering into contracts they may not fully understand or appreciate: "In this instance, both in September 2005 and April 2006, Barratt sent letters giving notice of its intention to deduct a three per cent discount from all payments to SGS with immediate effect. This discount was in addition to any discount that had been agreed under the contract."
Mr English continued: "SGS decided not to accept this imposition and engaged us to fight Barratt. After several months of attempting to persuade Barratt to pay back the wrongly deducted discount, SGS commenced adjudication on 12 January 2008, and the adjudicators’ decision was published on 18 February, some five weeks later. Amazingly, Barratt wrote again to SGS on 28 January 2008 expressing their intention to introduce an immediate discount of three per cent, which would be applied retrospectively on invoices not yet submitted. This letter went on to say: ‘We will assume your agreement to this deduction unless we hear from you to the contrary.’ Both our own research and research undertaken by leading construction bodies leads us to believe that this adjudication is the first of its kind in the industry. It is seen as a landmark decision that could entitle thousands of sub-contractors to claw back 'discounts' and other illegal deductions."
He added: "The adjudicator ordered Barratt to repay the discounts totalling £19,000, plus interest at a monthly rate of eight per cent above base. The payment was received by Southern Glass Services within three days."
According to Mr English, this means that smaller contractors now have a place to go to get justice if any deductions over the past six years have been made illegally. Adjudication is reasonably inexpensive in comparison to other forms of action.
SGS is now advising all other contractors in similar positions to inspect payments made to them against agreed contracts and to start claiming back any unlawful deductions.
Mr English has produced a list of eight tips, which he urges smaller contractors to follow to avoid these kind of legal battles. They include building a relationship with a recognised dispute resolution practice who can deal with issues as they arise, always ensuring that they have an agreement that can at least be evidenced in writing before commencing any performance on the contract.
Understanding their rights under the Housing Grants Construction and Regeneration Act 1996 and, lastly, joining the Confederation of Construction Specialists who are able to give help, guidance and assistance, often for free.
Relevant legislation: Housing Grants Construction and Regeneration Act 1996
(11/3/08)
Back to top4. Credit crunch and interest rates impact conveyancing solicitors
Higher interest rates and the sub-prime crisis have worked their way through to law firm conveyancing practices in the UK, says Tom Bridge, managing partner of Stephensons’ Conveyancing and Probate Department.
"Transactional work has died off quite substantially particularly in the last quarter or so compared with the end of summer, I think most law firms have noticed that now," said Mr Bridge, "and, at the moment, we should be seeing the increase in sales and purchase activity that normally comes in February and March after the traditionally quiet months of December and January, but this year it hasn’t yet reached nearly the same volume as in previous years."
A major cause of the slide in conveyancing work is that the credit crunch and interest rate rises are now preventing first-time buyers from getting into the property market. "First-time buyers are a major component of transactional work. That feeds through to the rest of the industry but now a lot of sub-prime lending has gone by the board altogether and even the main high street lenders are tightening up their lending criteria, which are all factors excluding first-timers."
However, for Stephensons, a substantial increase in re-mortgage work has more than compensated for the weaker conveyancing situation. "There has been a massive increase in that area for us, to the extent that we have transferred some of our people from conveyancing and also recruited new staff."
"We also expect an increase in work for our commercial litigation department because as credit has got more restrictive, there are more businesses and individuals in trouble, "he said. "There are lots of people in the buy-to-let market boom who have overstretched themselves, for example."
"There could also be an increase in litigation against mortgage professionals including mortgage brokers and solicitors," he said. "If lenders have bad debts or if you have borrowers facing repossession, it is inevitable that they will move toward the people who sold them the mortgage or did the conveyancing."
The falloff in transactional work could be worse if the firm – which has a large volume-based conveyancing practice – did not have the wide variety of referral sources, something that smaller firms often lack. "There used to be a traditional reliance on conveyancing work by high street solicitors, but a of that has gone over the last five years with local solicitors finding that their former local real estate agent is panelling out work and with the increased use of the internet. So a lot of smaller law firms will be felling the pinch more at the moment," he said. "In fact, there have been closures and redundancies amongst law firms in the north west because of the decline in transactions."
"However, I don’t believe that the current situation will become anywhere as bad as the last property slump in the late 1980s early 1990s," he said.
(11/3/08)
Back to top Articles
1. Money back guaranteed?
Journal: New Law Journal
Citation: 158 NLJ 397
Issue date: 21 March 2008
Authors: Daniel Dovar and Michael Walsh
Relevant legislation: Housing Act 2004
Summary: Addresses what happens if there is a dispute over the return of the deposit under the tenancy deposit scheme introduced by the Housing Act 2004. Since April 2007, landlords letting property on an assured shorthold tenancy have had to protect any deposit taken under the tenancy deposit scheme. Many of those tenancies have already or will be coming to an end in the next few months.
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2. A few words of advice
Journal: Estates Gazette
Citation: 8 March 2008, 196
Issue date: 8 March 2008
Author: Philip Roberts
Summary: Explains the legal terms applied to a person's presence on another's land have specific technical meanings that render them distinct from each other, but that distinction is far from clear. In the legal context “use”, “occupation'” and “possession” are not interchangeable. Instead, these terms represent three grades of presence on another's land.
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3. Exercise caution when changing course
Journal: Estates Gazette
Citation: 8 March 2008, 193
Issue date: 8 March 2008
Authors: Patricia Mellody and Nizar Pabani
Summary: Warns landlords need to ensure the implications of any lease variations are properly considered and that they do not lose valuable covenants from former tenants or guarantors. Any agreement to vary the terms of a lease should be in writing to avoid future disputes over its terms. If the variation of the existing lease constitutes a surrender and re-grant, it will be necessary to consider whether the transaction will be subject to stamp duty land tax.
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4. Unravelling HMOs
Journal: Estates Gazette
Citation: 1 March 2008, 152
Issue date: 1 March 2008
Author: Rod MacLeod
Relevant legislation: Housing Act 2004
Summary: Asks how houses in multiple occupation are to be valued. HMOs pay prove to be a good investment. On 6 July 2006, licensing under the provisions of the Housing Act 2004 was introduced for such properties.
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5. A structural change in the market
Journal: Estates Gazette
Citation: 1 March 2008, 151
Issue date: 1 March 2008
Author: Claire Hughes
Summary: Argues that the Lease Code is just one of many important factors in bringing flexibility to the commercial property market. A year ago the Code for Leasing Business Premises in England and Wales 2007 was published with the endorsement of many industry bodies. A number of flexible letting products had appeared on the market before the code was published.
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6. HIP hype
Journal: New Law Journal
Citation: 158 NLJ 325
Issue date: 29 February 2008
Author: Michael Garson
Summary: Argues that the government's botched roll-out of HIPs is distorting the market.
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