*Schlumberger Holdings Ltd v Electromagnetic Geoservices AS
Citation: [2009] All ER (D) 228 (Feb)
Alternative citations: [2009] EWHC 58 (Ch)
Hearing date: 19 January 2009
Court: Chancery Division, Patents Court
Judge: Mann J
Representation: Michael Silverleaf QC and Hugo Cuddigan (instructed by Freshfields Bruckhaus Deringer LLP) for the claimant.Guy Burkill QC and Geoffrey Pritchard (instructed by Lovells LLP) for the defendant.
Abstract: Patent – Petition for revocation. Chancery Division: The claimant oil exploration company's petition for the revocation of three patents concerned with oil exploration technology succeeded where, inter alia, all three patents were obvious over the prior art.
Keywords: Patent – Petition for revocation – Obviousness – Anticipation – Patents concerned with oil exploration technology – Claimant oil exploration company seeking revocation of patents on ground of anticipation and obviousness – Whether patents valid – Patents Act 1977, sections 3, 14(3), 72(1).
Summary: The Patents Act 1977 provides, so far as material: '3. An invention shall be taken to involve an inventive step if it is not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art by virtue only of section 2(2) above (and disregarding section 2(3) above) [...] 14(3) The specification of an application shall disclose the invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the art [...] 72 (1) Subject to the following provisions of this Act, the court or the comptroller may [...] by order revoke a patent for an invention [on the application of any person (including the proprietor of the patent)] on (but only on) any of the following grounds, that is to say-- [...] (c) the specification of the patent does not disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the art;'
The patents in the instant proceedings, patents 019, 887 and 640, which were owned by the defendant Norwegian company, related to technology intended to be deployed in oil exploration. The technology was known as controlled source electro-magnetism or magnetics (CSEM). Patent 019, which had a priority date of February 2000, claimed an invention in the form of a method of detecting hydrocarbon layers under the seabed by means of measuring resistivities and claiming to detect a particular wave from a hydrocarbon layer which was not present in a less resistive layer. Patent 887, which had a priority date of August 2000, built on that and claimed to improve detection by measuring and comparing signals from inline and broadside transmission/reception, and again detecting the hydrocarbon layer. Patent 640, which had a priority date of march 2003, claimed an improvement in procedures by carrying out the invention in the 019 patent and refraction (not reflection) seismic surveys at the same time and at the same location (as opposed to at different times at the same location).
The claimant, another company involved in (inter alia) oil exploration, sought the revocation of all three patents on the grounds of anticipation and/or obviousness pursuant to the Patents Act 1977. The relevant prior art consisted, inter alia, of: (i) a paper published in 1991 by Dr Chave, which was a reference work for geo-physicists and, inter alia, described CSEM (Chave); (ii) a paper published in 1996 and again in 1998 entitled 'The Ramesses experiment' (Ramesses) which referred, among other things, to standard CSEM techniques for mapping resistivity; and (iii) a paper published by Professor Sinha in 1999 entitled 'Controlled source EM sounding: Survey design considerations for hydrocarbon applications' (Sinha).
The following issues, inter alia, fell to be determined: (i) the identity of the skilled addressee in respect of patent 019 in particular; (ii) the nature of the common general knowledge; (iii) anticipation in respect of patents 019 and 887; (iv) obviousness in respect of patents 019 and 887; and (v) the nature of the common general knowledge in respect of patent 640, and whether patent 640 was obvious in the light of that common general knowledge.
The application would be allowed.
(1) The wording of the Act did not provide a lot of support for the proposition that there could be two skilled addressees, one for obviousness (and, it was to be supposed, construction) and another for sufficiency. The statute seemed to point strongly to the same persons being the skilled addressee throughout, and for all purposes. That accorded with common sense and principle and produced a sensible result. Further, the skilled addressee was a notional construct for the purposes of the statute. He or she, or the constituents of the team, were not identified by finding some actual equivalent in the real world. Obviously the real world provided a context, but the absence of any involvement of a specialist with a team was not necessarily determinative of the appropriate addressee of the patent. Further, one looked at the addressee of the document, not just those people who constituted actual teams in the real world. Logically and conceptually one had to set up the team, so that the inventiveness of the alleged new invention could be tested. The team was notionally set up by looking at the terms of the patent, not at the distillation of what was said to be the invention in it (see [53], [55], [58] and [62]-[63] of the judgment).
Sections 3, 14(3) and 72(1) of the Act used the same expression throughout in describing the skilled addressee, and there was no verbal basis for distinguishing between the person or persons who fulfilled the requirements of section 3 and those who fulfilled the requirement for sections 14 and 72. The reference to the art had to be to the art relating to the invention. It would not make a lot of sense for the art in sections 14 and 72 to be the art of implementation but not the invention itself (see [54] of the judgment).
In the context of the instant case, the person with the knowledge and experience should not be taken to be just the kind of person who, in the real world, constituted the usual team (which would therefore not include a CSEM specialist). In order to utilise the invention at all a CSEM specialist had to be engaged; the whole technique involved the use of CSEM. Accordingly, the skilled addressee in the present case would be a team, comprising a geophysicist and a CSEM specialist (see [62], [72] of the judgment).
Catnic Components Ltd v Hill and Smith Ltd [1982] RPC 183 applied; Inhale Therapeutic Systems Inc v Quadrant Healthcare plc [2001] All ER (D) 211 (Jun) applied; Jalon v GAO [1995] Case No. T 0422/93 considered; Horne Engineering Co Ltd v Reliance Water Controls Ltd [1999] All ER (D) 592 considered; Minnesota Mining and Manufacturing Co v ATI Atlas Ltd [2000] All ER (D) 1629 considered.
(2) The concept of common general knowledge was designed to encapsulate all that which should be treated as being known to the deemed skilled person, against which inventiveness or obviousness could be measured. So either something was part of the knowledge or it is not; it was either treated as known, or it was not. If it was treated as known then it was part of the body of knowledge. If the word 'latent' was intended to suggest something that should not be treated as known, then it was not part of the common general knowledge at all. However, it was right to bear in mind the mindset of the skilled addressee. If that mindset was such that it was believed that a particular piece of knowledge had no relevance to the industry, then the realisation that it could be applied was capable of being an inventive step. That did not make that knowledge latent, or something other than deemed knowledge (see [125] - [126] of the judgment).
Chave was one of the seminal works with which a CSEM expert would be familiar by 2000, and its principles would be known as principles. As such, the principal thrusts of the paper were part of the common general knowledge. Further, the evidence established (so far as exploration geophysicists were concerned) not a positive view (akin to a mindset) that CSEM had no part to play in oil exploration, but an absence of an appreciation that it could. The industry was being reasonably well served by seismic techniques, and in those circumstances had not had great cause to look at (for example) CSEM (see [120], [129] of the judgment).
(3) There were two ways in which anticipation could occur. First, if the prior art described something falling within its scope then, assuming that the description was enabling, the claim was anticipated. Second, the claim would also be anticipated if it could be shown that the inevitable result of carrying out what was described in the prior art would be a product or process falling within the scope of the claim (see [140] of the judgment).
In the instant case, Chave did not closely or immediately relate the underlying physics in patent 019, or its observable effects, to the operating field of that patent. A considerable process of filtration would be necessary in order to get close to the invention. That would not, of itself, be a bar to anticipation if the relevant acts were sufficiently clearly set out but they were not, and even if the filtration were carried out one would then have to add elements which did not explicitly appear in the context of an elaboration of the effects of the physics. Nor would carrying out the techniques inevitably lead to performing the invention.
The techniques were not sufficiently linked to the direct detection in the invention and accordingly the claimant's attack on patent 019 on the ground of anticipation failed. In relation to patent 887 and the submission that it was anticipated by Ramesses and Sinha, although it was true that both pieces of prior art relied on the difference between the inline and broadside signals, each went on to deal with it in a context different to the claims in the patent. Further, claims one and two involved at least two elements not anticipated by Ramesses and although Sinha was more expressly referable to one of the patent's focal points, namely, hydrocarbons, it still concentrated on the effects of conducive layers and not resistive ones, contrary to the thrust of the patent 887 (see [141]-[142], [288]-[294] of the judgment).
The claimant's attack on patents 019 and 887 on the ground of anticipation failed.
General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1972] RPC 457 applied; Inhale Therapeutic Systems Inc v Quadrant Healthcare plc [2001] All ER (D) 211 (Jun) applied.
(4) In ascertaining whether a patent was void for obviousness, the correct approach was to identify the skilled addressee, identify the inventive step, identify the differences between the inventive step and the subject over which the patent was said to be obvious, and consider whether the differences would be steps obvious to the skilled addressee (see [144] of the judgment).
In respect of patent 019, the inventive concept was the application of the CSEM techniques described in Chave to the search for, or identification of, hydrocarbon-bearing layers. Chave did not go so far as to apply its techniques specifically to that end, but it contained all the other elements short of that. In the circumstances, the application of the Chave modelling technique to potentially hydrocarbon-bearing layers was obvious. In respect of the attack on patent 887 on the ground of obviousness over Ramesses and Sinha, the material in that paper, particularly when combined with Sinha, was such that it was obvious to take the studies of relative conductivity and apply it to map layers of relative resistivity (which was inherent in the process anyway), and apply that to the search for hydrocarbons (to which Sinha made express reference). In respect of the attack on the light of all the evidence, the inventive step would be one that the skilled person would see as obvious (see [145], [147], [298] of the judgment).
The claimant's attack on patents 019, 887 on the ground of obviousness succeeded (see [147] of the judgment).
Pozzoli SPA v BDMO SA [2007] All ER (D) 275 (Jun) applied.
(6) In respect of the attack on patent 640 on the ground of obviousness over the application for patent 019, it was plainly right that where two techniques were to be employed, it was obvious to do them together if it made practical sense. Carrying out the two techniques, CSEM and seismic, simultaneously was an obvious extension from the application for patent 019 and accordingly, on that footing patent 640 was obvious over the patent 019 application. Further, the relevant passage in the patent 019 application in fact set out part of the common general knowledge. Therefore, the idea of combining the two techniques was part of that common general knowledge. Accordingly, patent 640 was obvious over the common general knowledge (see [318]-[319] of the judgment).
The three patents fell to be revoked. None of the amendments proposed would amend to a valid patent and were therefore disallowed (see [330] of the judgment).
Alison Pryor, Barrister
Published Date
24/02/2009
*Landlord Protect Ltd v St Anselm Development Company Ltd
Citation: [2009] All ER (D) 216 (Feb)
Alternative citations: [2009] EWCA Civ 99
Hearing date: 20 February 2009
Court: Court of Appeal, Civil Division
Judge: Waller, Wilson and Stanley Burnton
Representation: John Furber QC (instructed by McGrigors LLP) for the claimant. Martin Rodger QC (instructed by Guy Clapham & Co) for the defendant.
Abstract: Sale of land – Leasehold interest. Court of Appeal, Civil Division: The claimant's appeal against the dismissal of his claim for the return of a deposit paid under a contract for sale, which he had rescinded, was allowed where the landlord's requirement of a personal guarantee on an assignment by the claimant was unreasonable under the terms of the lease.
Keywords: Sale of land – Leasehold interest – Contract - Condition – Subject to landlord's consent to assignment being obtained – Claimant contracting to purchase head lease from defendant – Proposed assignment requiring consent of landlord – Head landlord requiring that claimant provide guarantee of obligations subsequent to it assigning – Whether requirement of landlord reasonable.
Summary: At an auction sale held in July 2006, the claimant company contracted to purchase the defendant's head leasehold interest in a block of residential flats. A deposit was duly paid. By clause 2(s) of the lease, the head landlord's consent was required to the assignment of the lease to the claimant. The sale contract incorporated the 1 May 2002 edition of the Common Auction Conditions published by the Royal Institute of Chartered Surveyors. Under General Condition 9.3(b) a buyer, if properly required under the terms of the lease, had to provide guarantees, a rent deposit or other security. The claimant was a dormant company which had never traded and could therefore provide no accounts or bank references.
The head landlord was only prepared to give its consent to the proposed assignment if the claimant's sole director, R, was prepared to guarantee the claimant's obligations as assignee of the head lease.R was only willing to offer a guarantee if it was limited to a period of three years. Following proceedings in which it was held that the head landlord had not acted unreasonably in rejecting the offer of a guarantee limited in duration to a period of only three years, the dispute over the precise terms of the guarantee continued. The head landlord's solicitors submitted a draft licence which included a guarantee to be provided by R. By clause 6.6, the guarantee was to be released on a subsequent assignment with the head landlord's consent 'provided that a reasonable alternative security is provided by the assignee pursuant to such subsequent assignment'. That formulation was unacceptable to the claimant and, in October 2006, it gave notice to the defendant rescinding the sale contract and requiring the return of its deposit on the ground that the head landlord's requirements as to the form of guarantee to be provided by R had been unreasonable.
On 5 December, the defendant served a notice to complete upon the claimant and, when it refused to comply, on 2 January 2007, the defendant treated the claimant as in repudiatory breach of its obligations under the sale contract and proceeded to forfeit its deposit. The claimant issued proceedings seeking the return of its deposit. The judge held that the head landlord's requirement of the condition had been reasonable and dismissed the claimant's claim. The claimant appealed.
The claimant submitted, inter alia, that clause 6.6 was unreasonable because it only came into effect after an authorised assignment, and, notwithstanding that the landlord had given consent to the assignment, gave the landlord the right to refuse to release the guarantor if the landlord considered that there was no reasonable alternative security for the performance of the covenants of the new lessee.
The appeal would be allowed.
As a matter of law, it was, in general, unreasonable for a landlord to require a guarantee of the liabilities of an assignee to extend beyond the period during which the assignee was liable to the landlord by privity of estate (see [19] of the judgment).
In the instant case, clause 6.6 envisaged two requirements for the release of a guarantor: a subsequent assignment with consent and the provison of reasonable alternative security. The landlord was not reasonably entitled to add the second requirement for release of the guarantor. The head landlord's position was unreasonable because it would always be entitled to refuse to consent to a further assignment if the proposed assignee was not of sufficient substance or was unable, or unwilling, to provide adequate security for the payment of rent and the performance of the lessee's covenants. Therefore, the landlord was entirely protected against an assignment to an insubstantial assignee. clause 6.6 increased the protection the landlord enjoyed under the lease, which was the right to refuse consent not the right to refuse to accept the discharge of the assignor's guarantor. Accordingly, the landlord's requirement of a personal guarantee was unreasonable under the terms of the lease and was not properly made for the purposes of clause 9.3(b) of the sale contract (see [23], [27] of the judgment).
The claimant was entitled to rescind the contract and to the return of the deposit.
Mount Eden Land Ltd v Straudley Investments Ltd [1996] NPC 138 applied.
Decision of Judge Hodge QC [2008] All ER (D) 89 (Jul); reversed.
Alison Blood, Barrister
Published Date
20/02/2009
Statutory instruments
Control of Trade in Endangered Species (Fees) Regulations 2009
LNB News 17/03/2009 64
Published date: 17 March 2009
Jurisdiction: England; Scotland; Northern Ireland; Wales
Enactment citation: SI 2009/496
Commencement date: 6 April 2009
Legislation affected: SI 1997/1421 revoked
Enabling power: Finance Act 1973, section 56(1), (2)
Abstract: SI 2009/496: New fees for certificates relating to import and export permits and old fees increased
Summary: Revoke the Control of Trade in Endangered Species (Fees) Regulations 1997, SI 1997/1421, which previously specified fees payable in relation to applications for import permits, export permits and re-export certificates specified in Council Regulation 338/97/EC. Further detail on the protection was provided in Commission Regulation 865/06/EC.
Increase the fees the Secretary of State charges for applications for licences issued by him for the trade in or movement of animals and plants and their parts and derivatives protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora. Multiple new fees are introduced for permits previously uncharged for.
Approval of Code of Management Practice (Residential Management) (Service Charges) (England) Order 2009
LNB News 13/03/2009 12
Published date: 13 March 2009
Jurisdiction: England
Enactment citation: SI 2009/512
Commencement date: 6 April 2009
Enabling power: Leasehold Reform, Housing and Urban Development Act 1993, sections 87, 100
Abstract: SI 2009/512: Royal Institution of Chartered Surveyors (RICS) code of practice approved.
Summary: Gives approval to a code of practice prepared by the Royal Institution of Chartered Surveyors (RICS) on the management of residential properties in respect of which the tenants pay service charges.
The code of practice sets out what is regarded as best practice for management in the private residential leasehold sector, as well as highlighting any legislative requirements that managers need to comply with.
The Order withdraws approval for a previous code of practice on the management of service charges for residential properties which was approved by a previous Order (the Approval of Codes of Management Practice (Residential Property) Order 1996, in so far as that code relates to properties managed in England.
Planning and Compulsory Purchase Act 2004 (Commencement No 11) Order 2009
LNB News 05/03/2009 71
Published date: 5 March 2009
Jurisdiction: England
Enactment citation: SI 2009/384
Enabling Power: Planning and Compulsory Purchase Act 2004, sections 121, 122
Abstract: SI 2009/384: Local planning authorities' powers to decline to determine applications for planning permission extended from 6 April 2009.
Summary: Brings into force on 6 April 2009, in relation to England, the Planning and Compulsory Purchase Act 2004, section 43, so far as it is not already in force.
The provisions inserted by that section (into the Town and Country Planning Act 1990 and the Planning (Listed Buildings and Conservation Areas) Act 1990) relate to the power to decline to determine overlapping applications for planning permission, listed building and conservation area consents.
From 6 April 2009 a local planning authority's existing powers to decline to determine applications for planning permission is extended. Also applies to applications for listed building consent and conservation area consent and the prior approval of a local planning authority for development which is permitted by virtue of a development order. A local planning authority may refuse to determine a planning application where it has refused two similar applications and there has been no appeal to the Secretary of State in the two year period preceding the submission of the application.
Housing and Regeneration Act 2008 (Commencement No 3) Order 2009
LNB News 05/03/2009 72
Published date: 5 March 2009
Jurisdiction: England; Wales
Enactment citation: SI 2009/363
Enabling power: Housing and Regeneration Act 2008, section 325
Abstract: SI 2009/363: Secretary of State may dissolve the Housing Corporation from 16 February 2009.
Summary: Brings into force on 16 February 2009 the Housing and Regeneration Act 2008, section 64, which enables the Secretary of State to make provision for the dissolution of the Housing Corporation.
Non-Domestic Rating (Unoccupied Property) (England) Regulations 2009LNB News 04/03/2009 5
Published date: 4 March 2009
Jurisdiction: England
Enactment citation: SI 2009/353
Commencement date: 1 April 2009
Legislation affected: SI 2008/386 amended
Enabling power: Local Government Finance Act 1988, sections 45 (1), (d), (9), 143(2)
Abstract: SI 2009/353: Any unoccupied property with a rateable value of less than £15,000 will not generate liability to empty rates in the financial year 2009/10.
Summary: Amends the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 so that any unoccupied property with a rateable value of less than £15,000 owned by either business or the public sector will not generate liability to empty rates in the financial year 2009/10. It is estimated that this could increase the cost of relief from empty property rates by £205 million during 2009/10.
Non-Domestic Rating (Small Business Rate Relief) (England) (Amendment) Order 2009
LNB News 04/03/2009 6
Published date: 4 March 2009
Jurisdiction: England
Enactment citation: SI 2009/354
Commencement date: 1 April 2009
Legislation affected: SI 2004/3315 amended
Enabling power: Local Government Finance Act 1988, sections 43(4B), (a), 143(1), (2)
Abstract: SI 2009/354: Property occupiers may obtain small business rate relief from the date of first occupation rather than having to wait for 1 April in the following financial year.
Summary: Removes the requirement that, to be eligible for small business rate relief, a ratepayer must occupy a hereditament with a rateable value of no more than £21,499 in Greater London, or £14,999 outside Greater London, on the first day of each financial year in which relief is sought. It does this by amending the Non-Domestic Rating (Small Business Rate Relief) (England) Order 2004, which prescribes the conditions for entitlement to small business rate relief.
Also makes consequential amendments to the 2004 Order so that the rateable value of the hereditament in respect of which a ratepayer is seeking relief must still be no more than £21,499 in Greater London, or £14,999 outside Greater London, on every day for which relief is actually sought.
The amendments made by this Order apply for the purposes of applications for small business rate relief in respect of days in the financial year which begins on 1 April 2009 and subsequent financial years.
Articles
Property: Beg, borrow or steal?
LNB News 20/03/2009 12
Published date: 18 March 2009
Author: Edward Peters
Journal name: New Law Journal
Journal date: 13 March 2009
Journal citation: 159 NLJ 381
Jurisdiction: England; Wales
Abstract: New Law Journal, Issue 7360: Can a mortgage fall within the Consumer Credit Act?
Summary: Considers recent case developments in mortgage possession and adverse possession.
The intricacies of the Consumer Credit Act 1974 legislation continue to throw up questions as to whether or not particular mortgages fall within its scope. In appropriate circumstances, a squatter can be estopped from asserting that he has acquired title by adverse possession.
A line in the sand
LNB News 13/03/2009 34
Published date: 12 March 2009
Author: Julie Cameron
Journal name: Taxation
Journal date: 12 March 2009
Journal citation: Taxation, 12 March 2009, 239
Jurisdiction: England; Scotland; Northern Ireland; Wales
Abstract: Taxation, 12 March 2009: What level of property income triggers the requirement for a self-assessment tax return?
Summary: Considers a lack of clarity in the guidance for both customers and HMRC officers on property income. There are no stated income limits on HMRC's R40 guidance notes. Internal guidance for HMRC officers does indicate this limit, but does not specify whether to take account of gross or net income.
100,000 Homeowners could be saved from repossession
LNB News 05/03/2009 64
Published date: 5 March 2009
Jurisdiction: UK
Related cases: Cheltenham and Gloucester Building Society v Norgan [1996] 1 All ER 449
Related digests: LNB News 23/02/2009 10
Abstract: A new report has found that courts are failing to apply a little-known law that would stop lenders from repossessing the homes of thousands of borrowers. Claire Robinson speaks to the author of the report Natalie Elphicke.
Analysis: According to a new report by the Centre for Policy Studies (CPS), Save 100,000 Homes from Repossession, judges dealing with repossession cases are unaware of an obscure law that allows borrowers to spread repayments over their whole remaining mortgage term rather than forcing them to pay up in just a couple of years. The report's author estimates that as many as 100,000 homeowners could be saved from losing their homes if the law was applied to them.
Under current guidelines, borrowers in arrears are usually ordered to pay up within two to four years, or face repossession. However, in the majority of cases this usually results in borrowers losing their home because the term is too short.
Natalie Elphicke, author of the CPS' report, is a banking partner in law firm Addleshaw Goddard specialising in infrastructure finance, project finance and housing finance. She told LexisNexis News: "The report considers how the courts could help more people stay in their homes during this housing recession. During and after the last housing recession it was the court process which did most to help households in need. The courts have an important role to play in balancing family need, hardship and ability to pay based on individual circumstances and the commercial and contractual right of a defaulted lender to recover payment from its security. Their importance should not be overlooked in the current housing recession."
The CPS is now calling on the Government to alert courts to the law but said the little-known law should only apply in cases where the courts believe a borrower would be able to maintain their repayments.
Ms Elphicke added that there is a high degree of judicial discretion in deciding civil claims and this judicial discretion allows a court to postpone, adjourn, stay or suspend a claim for possession. "In the context of mortgage arrears, the Courts may allow a mortgage possession order to be suspended over a period which the Court considers 'reasonable' and on such conditions as to payment as the Court decides. The basis for deciding a "reasonable period" was established in the Court of Appeal Norgan case. That said, the starting point for the exercise of judicial discretion is the consideration of repayment over the remaining period of the mortgage."
Ms Elphicke said that at the moment the courts are asked to consider the Pre Action Protocol agreed with lenders, which looks at what hoops the lender has to jump through to be 'fair' to gain possession. "However, the law allows judges to look through the other end of the telescope, at the borrower's ability to repay over what could be a much longer period. In many cases that is more likely to produce an outcome which allows a householder to stay in their homes and repay their arrears over a much longer period."
Rescue scheme will force banks to make mortgage loans
LNB News 27/02/2009 27
Published date: 27 February 2009
Jurisdiction: England & Wales; Northern Ireland; Scotland
Related legislation: Building Societies Act 1997
Related digests: LNB News 26/02/2009 1; LNB News 26/02/2009 6; LNB News 26/02/2009 7
Relevant companies: Lloyds Banking Group, Royal Bank of Scotland (RBS)
Abstract: The Treasury has launched the Asset Protection Scheme for banks which have large volumes of toxic assets on their balance sheets. Martin Bishop of Pinsent Masons tells Neasa MacErlean why banks will want to be cautious about going into the scheme.
Analysis: The government's unveiling of its Asset Protection Scheme (APS) may have been overshadowed by the row over the pension of former Royal Bank of Scotland chief executive Sir Fred Goodwin - but it is an extraordinary development and one that could be seen in years to come as a landmark in the history of UK financial services. 'It is a massive step,' says Martin Bishop, banking and finance partner at Pinsent Mason. 'The idea is to give the public and investors confidence about the status of the bank's assets.' Essentially, the taxpayer will take on most of the risk of assets put into the scheme (such as leveraged loans and structured credit assets).
From a legal point of view, the issues and scope of these APS contracts are also remarkable. Each bank that enters the scheme signs a contract in which it gives various undertakings in return for participating. In the Treasury's words, each bank will have to make 'full and accurate disclosure' about the state of their assets, agree to a 'sustainable long-term remuneration policy' and enter into 'legally binding agreements to increase the amount of lending they provide to homeowners and businesses'.
The lending issue alone may make joining the scheme unattractive, says Bishop: 'There will be a real focus on this issue. Banks will be thinking hard about going into the scheme to avoid having a lending policy imposed on them. The banks attitude to this will depend on the terms of the commitment actually required. But at the moment, most banks are being very conservative, conserving their assets and restricting lending.' He fears that a bank which is forced to lend under these terms could end up taking on loans that competitors outside the scheme would see as uncommercial in the current difficult market.
The Royal Bank of Scotland (RBS) was the first bank to sign up and, in exchange for having £325 billion of toxic assets covered by the state, it has agreed to lend £9 billion in mortgages and £16 billion in business loans in 2009. This would represent a huge increase on its 2008 UK retail lending - up 20 % on mortgage lending (from £7.5 billion) and up 12 times on business lending (from £1.3 billion). If mortgage lending stays at its January 2009 level of £12.4 billion (according to the Council of Mortgage Lenders), RBS would account for 6 % of new mortgage loans granted during the year.
The Lloyds Banking Group was due to sign up to the APS the day after it was launched but agreement was delayed. It would be no surprise if the lending requirement were one of the stumbling blocks.
On the subject of pay and bonuses, Bishop is phlegmatic. Remuneration issues are 'an emotive issue', he says. There has been outrage recently at the prospect of bonus payments for bank staff. But Bishop says that many junior bank staff get an element of income in the form of performance-related pay which can be called a bonus. 'To link these payments with the sort of bonus that senior management or a handful of traders have got is unfair in a way.' Again he thinks that banks joining APS could be at a commercial disadvantage if the rules are too tough on remuneration. 'Banks won't want to have a situation where they are losing capable people to competitors,' he says.
Bishop believes that media and public opinion has changed significantly in the last decade. He recalls the days of the late 1990s and early 2000s when banks were originating the assets that have now turned toxic. 'If banks decided not to participate in these transactions they would not have produced the sort of returns that shareholders were demanding,' he says. 'The banks that adopted more conservative and risk averse strategies were out of favour with investors.'
Banks have until the end of March to sign up to the APS. At the moment, they need to have at least £25 billion of eligible assets to join but the Treasury might reduce that threshold if it feels it is appropriate. The problem is a banking one. Building societies were very restricted in their use of options, swaps and derivatives by the Building Societies Act 1997.
Government under pressure over farmers IHT relief
LNB News 27/02/2009 25
Published date: 27 February 2009
Jurisdiction: England & Wales; European Union; Northern Ireland; Scotland
Related digests: LNB News 05/06/2008 19; LNB News 24/09/2008 59
Abstract: The UK Government has until the end of March to decide if it will extend Agricultural Property Relief to cover farms across the EU and EEA, after being threatened with legal action by the European Commission. Michael Parker of the National Farmers Union tells Neasa MacErlean why he hopes the Government will comply.
Analysis: The UK Government appears to face a choice between extending Agricultural Property Relief (APR) on Inheritance Tax (IHT) to cover farms in the EU and EEA (European Economic Area) zones or dropping it altogether. On January 29 the European Commission gave notice to the UK that it considers the present arrangement 'discriminatory' and could refer the UK to the European Court of Justice if 'no satisfactory response' is made by the UK before the end of March.
Michael Parker, head of tax at the National Farmers Union, is hoping to meet the farming specialists at H M Revenue & Customs (HMRC) shortly to discuss the issue. "Potentially it could be quite damaging," he says. "This is a very important relief because it allows the continuity of family farm businesses. We would be greatly concerned if this important relief were jeopardized for genuine farming businesses, wherever they are farming." he says.
The statement from the European Commission is clear: "The limited scope of the relief may dissuade taxpayers from investing in agricultural and forestry property outside the UK. Consequently, the Commission considers that the United Kingdom's legislation, in its current state, is not compatible with the free movement of capital provided by Article 56 EC Treaty and Article 40 of the EEA Agreement."
There are concerns that the UK will be disinclined, particularly in a time of recession, to spend yet more Government money on extending a UK tax relief. However, if organisations such as the National Farmers Union put pressure on the Government it could be difficult for the Treasury to say no. Having spent £37 billion rescuing banks in October alone, the Government could find it hard to defend taking a tough stance on farmers. If campaigners for farmers were successful, they might well hope to hear a formal announcement in the Budget on April 22 or in the accompanying papers.
The sums involved may not be very large. While the 08/09 cost of APR is expected to be about £190 million, according to HMRC estimates, the cost of protecting charitable legacies against IHT is expected to be over 40 % higher at £270 million. And the cost of the APR relief is only 1 % of the cost of tax relief on pension scheme contributions (which amounts to £20,000 million).
One issue that HMRC will be looking closely at is the inter-relationship between APR and Business Property Relief. In some cases it may be able for farmers to get relief under Business Property Relief if they could not get it from APR.
In early February HMRC published interim guidance on the chapter of its IHT manual that covers APR. Of particular interest to tax experts is the guidance on farmhouses--an issue that has been frequently under the spotlight in recent years. Parker says "We welcome this updated guidance, which takes account of recent tax cases."
Play it again SAM
LNB News 25/02/2009 40
Published date: 25 February 2009
Jurisdiction: England & Wales; Northern Ireland; Scotland
Related legislation: Consumer Credit Act 1974
Related digests: LNB News 05/01/2009 79; LNB News 06/02/2009 70
Abstract: Thousands of UK homeowners with Shared Appreciation Mortgages (SAMs) are challenging Barclays and HBoS over what they claim are 'unfair' loan agreements. Claire Robinson speaks to litigation solicitor Paul Jonson about the case.
Analysis: In what is thought to be the first real test of the changes to the Consumer Credit Act 1974, a group of up to 8000 homeowners have brought a Group Action arguing that the changes make it possible for them to sue their lenders over the 'unfair' loans.
The group is being represented by RWP Solicitors, who have issued a Letter Before Action to the two lenders, Barclays and HBOS, in regards to the SAMs, which were sold in 1997 and 1998.
As a result of the forthcoming court case the homeowners are either wanting to secure a reduction in the percentage of the appreciation of the value of their homes payable to the lenders or the introduction of a cap on the amount of the appreciation payable to the lenders.
Typically, under a SAM the homeowner benefits as the interest is frozen. In exchange the bank receives up to 75 % of the appreciation in the value of the property in the 10 years prior to when it is sold as well as having the original sum borrowed repaid. However, ten years on and many homeowners now find themselves locked into their homes, unable to raise enough money to buy a new property from the sale of their current one after paying the banks their share of the appreciation.
Under the new act if the court rules that the relationship between a creditor and a debtor is unfair to the debtor, it has the power to vary the terms of the SAM. Paul Jonson is a partner in the litigation department of London law firm Pannone. He told LexisNexis News there is very little case law in this area, meaning that the new statutory provisions are essentially untested. "The relevant sections of the Consumer Credit Act 1974 (140A and 140B) came into force on 6 April 2007, and were only effective in relation to pre-existing agreements (that is, retrospectively) from 6 April 2008. Therefore, this action may be the first real test of the new provisions."
Mr Jonson added the new powers are actually extremely wide, allowing a court to determine that the relationship between a lender and a borrower arising out of a credit agreement is unfair because of (among other things) the terms of the agreement. "If the court makes such a finding it can alter the terms, reduce the amount payable and order a refund. The remedy that these claimants are seeking is a reduction in the percentage payable to the bank or a cap on the total amount. Those remedies fall squarely within the discretion of the court. The key issue will be whether the court determines that the agreements were unfair, having regard to 'all matters it thinks relevant'. However, the court may decide that these SAMs simply turned out to be a bad bargain, rather than inherently unfair. We can expect the banks to take a very robust approach."
Citation: [2009] All ER (D) 228 (Feb)
Alternative citations: [2009] EWHC 58 (Ch)
Hearing date: 19 January 2009
Court: Chancery Division, Patents Court
Judge: Mann J
Representation: Michael Silverleaf QC and Hugo Cuddigan (instructed by Freshfields Bruckhaus Deringer LLP) for the claimant.Guy Burkill QC and Geoffrey Pritchard (instructed by Lovells LLP) for the defendant.
Abstract: Patent – Petition for revocation. Chancery Division: The claimant oil exploration company's petition for the revocation of three patents concerned with oil exploration technology succeeded where, inter alia, all three patents were obvious over the prior art.
Keywords: Patent – Petition for revocation – Obviousness – Anticipation – Patents concerned with oil exploration technology – Claimant oil exploration company seeking revocation of patents on ground of anticipation and obviousness – Whether patents valid – Patents Act 1977, sections 3, 14(3), 72(1).
Summary: The Patents Act 1977 provides, so far as material: '3. An invention shall be taken to involve an inventive step if it is not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art by virtue only of section 2(2) above (and disregarding section 2(3) above) [...] 14(3) The specification of an application shall disclose the invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the art [...] 72 (1) Subject to the following provisions of this Act, the court or the comptroller may [...] by order revoke a patent for an invention [on the application of any person (including the proprietor of the patent)] on (but only on) any of the following grounds, that is to say-- [...] (c) the specification of the patent does not disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the art;'
The patents in the instant proceedings, patents 019, 887 and 640, which were owned by the defendant Norwegian company, related to technology intended to be deployed in oil exploration. The technology was known as controlled source electro-magnetism or magnetics (CSEM). Patent 019, which had a priority date of February 2000, claimed an invention in the form of a method of detecting hydrocarbon layers under the seabed by means of measuring resistivities and claiming to detect a particular wave from a hydrocarbon layer which was not present in a less resistive layer. Patent 887, which had a priority date of August 2000, built on that and claimed to improve detection by measuring and comparing signals from inline and broadside transmission/reception, and again detecting the hydrocarbon layer. Patent 640, which had a priority date of march 2003, claimed an improvement in procedures by carrying out the invention in the 019 patent and refraction (not reflection) seismic surveys at the same time and at the same location (as opposed to at different times at the same location).
The claimant, another company involved in (inter alia) oil exploration, sought the revocation of all three patents on the grounds of anticipation and/or obviousness pursuant to the Patents Act 1977. The relevant prior art consisted, inter alia, of: (i) a paper published in 1991 by Dr Chave, which was a reference work for geo-physicists and, inter alia, described CSEM (Chave); (ii) a paper published in 1996 and again in 1998 entitled 'The Ramesses experiment' (Ramesses) which referred, among other things, to standard CSEM techniques for mapping resistivity; and (iii) a paper published by Professor Sinha in 1999 entitled 'Controlled source EM sounding: Survey design considerations for hydrocarbon applications' (Sinha).
The following issues, inter alia, fell to be determined: (i) the identity of the skilled addressee in respect of patent 019 in particular; (ii) the nature of the common general knowledge; (iii) anticipation in respect of patents 019 and 887; (iv) obviousness in respect of patents 019 and 887; and (v) the nature of the common general knowledge in respect of patent 640, and whether patent 640 was obvious in the light of that common general knowledge.
The application would be allowed.
(1) The wording of the Act did not provide a lot of support for the proposition that there could be two skilled addressees, one for obviousness (and, it was to be supposed, construction) and another for sufficiency. The statute seemed to point strongly to the same persons being the skilled addressee throughout, and for all purposes. That accorded with common sense and principle and produced a sensible result. Further, the skilled addressee was a notional construct for the purposes of the statute. He or she, or the constituents of the team, were not identified by finding some actual equivalent in the real world. Obviously the real world provided a context, but the absence of any involvement of a specialist with a team was not necessarily determinative of the appropriate addressee of the patent. Further, one looked at the addressee of the document, not just those people who constituted actual teams in the real world. Logically and conceptually one had to set up the team, so that the inventiveness of the alleged new invention could be tested. The team was notionally set up by looking at the terms of the patent, not at the distillation of what was said to be the invention in it (see [53], [55], [58] and [62]-[63] of the judgment).
Sections 3, 14(3) and 72(1) of the Act used the same expression throughout in describing the skilled addressee, and there was no verbal basis for distinguishing between the person or persons who fulfilled the requirements of section 3 and those who fulfilled the requirement for sections 14 and 72. The reference to the art had to be to the art relating to the invention. It would not make a lot of sense for the art in sections 14 and 72 to be the art of implementation but not the invention itself (see [54] of the judgment).
In the context of the instant case, the person with the knowledge and experience should not be taken to be just the kind of person who, in the real world, constituted the usual team (which would therefore not include a CSEM specialist). In order to utilise the invention at all a CSEM specialist had to be engaged; the whole technique involved the use of CSEM. Accordingly, the skilled addressee in the present case would be a team, comprising a geophysicist and a CSEM specialist (see [62], [72] of the judgment).
Catnic Components Ltd v Hill and Smith Ltd [1982] RPC 183 applied; Inhale Therapeutic Systems Inc v Quadrant Healthcare plc [2001] All ER (D) 211 (Jun) applied; Jalon v GAO [1995] Case No. T 0422/93 considered; Horne Engineering Co Ltd v Reliance Water Controls Ltd [1999] All ER (D) 592 considered; Minnesota Mining and Manufacturing Co v ATI Atlas Ltd [2000] All ER (D) 1629 considered.
(2) The concept of common general knowledge was designed to encapsulate all that which should be treated as being known to the deemed skilled person, against which inventiveness or obviousness could be measured. So either something was part of the knowledge or it is not; it was either treated as known, or it was not. If it was treated as known then it was part of the body of knowledge. If the word 'latent' was intended to suggest something that should not be treated as known, then it was not part of the common general knowledge at all. However, it was right to bear in mind the mindset of the skilled addressee. If that mindset was such that it was believed that a particular piece of knowledge had no relevance to the industry, then the realisation that it could be applied was capable of being an inventive step. That did not make that knowledge latent, or something other than deemed knowledge (see [125] - [126] of the judgment).
Chave was one of the seminal works with which a CSEM expert would be familiar by 2000, and its principles would be known as principles. As such, the principal thrusts of the paper were part of the common general knowledge. Further, the evidence established (so far as exploration geophysicists were concerned) not a positive view (akin to a mindset) that CSEM had no part to play in oil exploration, but an absence of an appreciation that it could. The industry was being reasonably well served by seismic techniques, and in those circumstances had not had great cause to look at (for example) CSEM (see [120], [129] of the judgment).
(3) There were two ways in which anticipation could occur. First, if the prior art described something falling within its scope then, assuming that the description was enabling, the claim was anticipated. Second, the claim would also be anticipated if it could be shown that the inevitable result of carrying out what was described in the prior art would be a product or process falling within the scope of the claim (see [140] of the judgment).
In the instant case, Chave did not closely or immediately relate the underlying physics in patent 019, or its observable effects, to the operating field of that patent. A considerable process of filtration would be necessary in order to get close to the invention. That would not, of itself, be a bar to anticipation if the relevant acts were sufficiently clearly set out but they were not, and even if the filtration were carried out one would then have to add elements which did not explicitly appear in the context of an elaboration of the effects of the physics. Nor would carrying out the techniques inevitably lead to performing the invention.
The techniques were not sufficiently linked to the direct detection in the invention and accordingly the claimant's attack on patent 019 on the ground of anticipation failed. In relation to patent 887 and the submission that it was anticipated by Ramesses and Sinha, although it was true that both pieces of prior art relied on the difference between the inline and broadside signals, each went on to deal with it in a context different to the claims in the patent. Further, claims one and two involved at least two elements not anticipated by Ramesses and although Sinha was more expressly referable to one of the patent's focal points, namely, hydrocarbons, it still concentrated on the effects of conducive layers and not resistive ones, contrary to the thrust of the patent 887 (see [141]-[142], [288]-[294] of the judgment).
The claimant's attack on patents 019 and 887 on the ground of anticipation failed.
General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1972] RPC 457 applied; Inhale Therapeutic Systems Inc v Quadrant Healthcare plc [2001] All ER (D) 211 (Jun) applied.
(4) In ascertaining whether a patent was void for obviousness, the correct approach was to identify the skilled addressee, identify the inventive step, identify the differences between the inventive step and the subject over which the patent was said to be obvious, and consider whether the differences would be steps obvious to the skilled addressee (see [144] of the judgment).
In respect of patent 019, the inventive concept was the application of the CSEM techniques described in Chave to the search for, or identification of, hydrocarbon-bearing layers. Chave did not go so far as to apply its techniques specifically to that end, but it contained all the other elements short of that. In the circumstances, the application of the Chave modelling technique to potentially hydrocarbon-bearing layers was obvious. In respect of the attack on patent 887 on the ground of obviousness over Ramesses and Sinha, the material in that paper, particularly when combined with Sinha, was such that it was obvious to take the studies of relative conductivity and apply it to map layers of relative resistivity (which was inherent in the process anyway), and apply that to the search for hydrocarbons (to which Sinha made express reference). In respect of the attack on the light of all the evidence, the inventive step would be one that the skilled person would see as obvious (see [145], [147], [298] of the judgment).
The claimant's attack on patents 019, 887 on the ground of obviousness succeeded (see [147] of the judgment).
Pozzoli SPA v BDMO SA [2007] All ER (D) 275 (Jun) applied.
(6) In respect of the attack on patent 640 on the ground of obviousness over the application for patent 019, it was plainly right that where two techniques were to be employed, it was obvious to do them together if it made practical sense. Carrying out the two techniques, CSEM and seismic, simultaneously was an obvious extension from the application for patent 019 and accordingly, on that footing patent 640 was obvious over the patent 019 application. Further, the relevant passage in the patent 019 application in fact set out part of the common general knowledge. Therefore, the idea of combining the two techniques was part of that common general knowledge. Accordingly, patent 640 was obvious over the common general knowledge (see [318]-[319] of the judgment).
The three patents fell to be revoked. None of the amendments proposed would amend to a valid patent and were therefore disallowed (see [330] of the judgment).
Alison Pryor, Barrister
Published Date
24/02/2009
*Landlord Protect Ltd v St Anselm Development Company Ltd
Citation: [2009] All ER (D) 216 (Feb)
Alternative citations: [2009] EWCA Civ 99
Hearing date: 20 February 2009
Court: Court of Appeal, Civil Division
Judge: Waller, Wilson and Stanley Burnton
Representation: John Furber QC (instructed by McGrigors LLP) for the claimant. Martin Rodger QC (instructed by Guy Clapham & Co) for the defendant.
Abstract: Sale of land – Leasehold interest. Court of Appeal, Civil Division: The claimant's appeal against the dismissal of his claim for the return of a deposit paid under a contract for sale, which he had rescinded, was allowed where the landlord's requirement of a personal guarantee on an assignment by the claimant was unreasonable under the terms of the lease.
Keywords: Sale of land – Leasehold interest – Contract - Condition – Subject to landlord's consent to assignment being obtained – Claimant contracting to purchase head lease from defendant – Proposed assignment requiring consent of landlord – Head landlord requiring that claimant provide guarantee of obligations subsequent to it assigning – Whether requirement of landlord reasonable.
Summary: At an auction sale held in July 2006, the claimant company contracted to purchase the defendant's head leasehold interest in a block of residential flats. A deposit was duly paid. By clause 2(s) of the lease, the head landlord's consent was required to the assignment of the lease to the claimant. The sale contract incorporated the 1 May 2002 edition of the Common Auction Conditions published by the Royal Institute of Chartered Surveyors. Under General Condition 9.3(b) a buyer, if properly required under the terms of the lease, had to provide guarantees, a rent deposit or other security. The claimant was a dormant company which had never traded and could therefore provide no accounts or bank references.
The head landlord was only prepared to give its consent to the proposed assignment if the claimant's sole director, R, was prepared to guarantee the claimant's obligations as assignee of the head lease.R was only willing to offer a guarantee if it was limited to a period of three years. Following proceedings in which it was held that the head landlord had not acted unreasonably in rejecting the offer of a guarantee limited in duration to a period of only three years, the dispute over the precise terms of the guarantee continued. The head landlord's solicitors submitted a draft licence which included a guarantee to be provided by R. By clause 6.6, the guarantee was to be released on a subsequent assignment with the head landlord's consent 'provided that a reasonable alternative security is provided by the assignee pursuant to such subsequent assignment'. That formulation was unacceptable to the claimant and, in October 2006, it gave notice to the defendant rescinding the sale contract and requiring the return of its deposit on the ground that the head landlord's requirements as to the form of guarantee to be provided by R had been unreasonable.
On 5 December, the defendant served a notice to complete upon the claimant and, when it refused to comply, on 2 January 2007, the defendant treated the claimant as in repudiatory breach of its obligations under the sale contract and proceeded to forfeit its deposit. The claimant issued proceedings seeking the return of its deposit. The judge held that the head landlord's requirement of the condition had been reasonable and dismissed the claimant's claim. The claimant appealed.
The claimant submitted, inter alia, that clause 6.6 was unreasonable because it only came into effect after an authorised assignment, and, notwithstanding that the landlord had given consent to the assignment, gave the landlord the right to refuse to release the guarantor if the landlord considered that there was no reasonable alternative security for the performance of the covenants of the new lessee.
The appeal would be allowed.
As a matter of law, it was, in general, unreasonable for a landlord to require a guarantee of the liabilities of an assignee to extend beyond the period during which the assignee was liable to the landlord by privity of estate (see [19] of the judgment).
In the instant case, clause 6.6 envisaged two requirements for the release of a guarantor: a subsequent assignment with consent and the provison of reasonable alternative security. The landlord was not reasonably entitled to add the second requirement for release of the guarantor. The head landlord's position was unreasonable because it would always be entitled to refuse to consent to a further assignment if the proposed assignee was not of sufficient substance or was unable, or unwilling, to provide adequate security for the payment of rent and the performance of the lessee's covenants. Therefore, the landlord was entirely protected against an assignment to an insubstantial assignee. clause 6.6 increased the protection the landlord enjoyed under the lease, which was the right to refuse consent not the right to refuse to accept the discharge of the assignor's guarantor. Accordingly, the landlord's requirement of a personal guarantee was unreasonable under the terms of the lease and was not properly made for the purposes of clause 9.3(b) of the sale contract (see [23], [27] of the judgment).
The claimant was entitled to rescind the contract and to the return of the deposit.
Mount Eden Land Ltd v Straudley Investments Ltd [1996] NPC 138 applied.
Decision of Judge Hodge QC [2008] All ER (D) 89 (Jul); reversed.
Alison Blood, Barrister
Published Date
20/02/2009
Statutory instruments
Control of Trade in Endangered Species (Fees) Regulations 2009
LNB News 17/03/2009 64
Published date: 17 March 2009
Jurisdiction: England; Scotland; Northern Ireland; Wales
Enactment citation: SI 2009/496
Commencement date: 6 April 2009
Legislation affected: SI 1997/1421 revoked
Enabling power: Finance Act 1973, section 56(1), (2)
Abstract: SI 2009/496: New fees for certificates relating to import and export permits and old fees increased
Summary: Revoke the Control of Trade in Endangered Species (Fees) Regulations 1997, SI 1997/1421, which previously specified fees payable in relation to applications for import permits, export permits and re-export certificates specified in Council Regulation 338/97/EC. Further detail on the protection was provided in Commission Regulation 865/06/EC.
Increase the fees the Secretary of State charges for applications for licences issued by him for the trade in or movement of animals and plants and their parts and derivatives protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora. Multiple new fees are introduced for permits previously uncharged for.
Approval of Code of Management Practice (Residential Management) (Service Charges) (England) Order 2009
LNB News 13/03/2009 12
Published date: 13 March 2009
Jurisdiction: England
Enactment citation: SI 2009/512
Commencement date: 6 April 2009
Enabling power: Leasehold Reform, Housing and Urban Development Act 1993, sections 87, 100
Abstract: SI 2009/512: Royal Institution of Chartered Surveyors (RICS) code of practice approved.
Summary: Gives approval to a code of practice prepared by the Royal Institution of Chartered Surveyors (RICS) on the management of residential properties in respect of which the tenants pay service charges.
The code of practice sets out what is regarded as best practice for management in the private residential leasehold sector, as well as highlighting any legislative requirements that managers need to comply with.
The Order withdraws approval for a previous code of practice on the management of service charges for residential properties which was approved by a previous Order (the Approval of Codes of Management Practice (Residential Property) Order 1996, in so far as that code relates to properties managed in England.
Planning and Compulsory Purchase Act 2004 (Commencement No 11) Order 2009
LNB News 05/03/2009 71
Published date: 5 March 2009
Jurisdiction: England
Enactment citation: SI 2009/384
Enabling Power: Planning and Compulsory Purchase Act 2004, sections 121, 122
Abstract: SI 2009/384: Local planning authorities' powers to decline to determine applications for planning permission extended from 6 April 2009.
Summary: Brings into force on 6 April 2009, in relation to England, the Planning and Compulsory Purchase Act 2004, section 43, so far as it is not already in force.
The provisions inserted by that section (into the Town and Country Planning Act 1990 and the Planning (Listed Buildings and Conservation Areas) Act 1990) relate to the power to decline to determine overlapping applications for planning permission, listed building and conservation area consents.
From 6 April 2009 a local planning authority's existing powers to decline to determine applications for planning permission is extended. Also applies to applications for listed building consent and conservation area consent and the prior approval of a local planning authority for development which is permitted by virtue of a development order. A local planning authority may refuse to determine a planning application where it has refused two similar applications and there has been no appeal to the Secretary of State in the two year period preceding the submission of the application.
Housing and Regeneration Act 2008 (Commencement No 3) Order 2009
LNB News 05/03/2009 72
Published date: 5 March 2009
Jurisdiction: England; Wales
Enactment citation: SI 2009/363
Enabling power: Housing and Regeneration Act 2008, section 325
Abstract: SI 2009/363: Secretary of State may dissolve the Housing Corporation from 16 February 2009.
Summary: Brings into force on 16 February 2009 the Housing and Regeneration Act 2008, section 64, which enables the Secretary of State to make provision for the dissolution of the Housing Corporation.
Non-Domestic Rating (Unoccupied Property) (England) Regulations 2009LNB News 04/03/2009 5
Published date: 4 March 2009
Jurisdiction: England
Enactment citation: SI 2009/353
Commencement date: 1 April 2009
Legislation affected: SI 2008/386 amended
Enabling power: Local Government Finance Act 1988, sections 45 (1), (d), (9), 143(2)
Abstract: SI 2009/353: Any unoccupied property with a rateable value of less than £15,000 will not generate liability to empty rates in the financial year 2009/10.
Summary: Amends the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 so that any unoccupied property with a rateable value of less than £15,000 owned by either business or the public sector will not generate liability to empty rates in the financial year 2009/10. It is estimated that this could increase the cost of relief from empty property rates by £205 million during 2009/10.
Non-Domestic Rating (Small Business Rate Relief) (England) (Amendment) Order 2009
LNB News 04/03/2009 6
Published date: 4 March 2009
Jurisdiction: England
Enactment citation: SI 2009/354
Commencement date: 1 April 2009
Legislation affected: SI 2004/3315 amended
Enabling power: Local Government Finance Act 1988, sections 43(4B), (a), 143(1), (2)
Abstract: SI 2009/354: Property occupiers may obtain small business rate relief from the date of first occupation rather than having to wait for 1 April in the following financial year.
Summary: Removes the requirement that, to be eligible for small business rate relief, a ratepayer must occupy a hereditament with a rateable value of no more than £21,499 in Greater London, or £14,999 outside Greater London, on the first day of each financial year in which relief is sought. It does this by amending the Non-Domestic Rating (Small Business Rate Relief) (England) Order 2004, which prescribes the conditions for entitlement to small business rate relief.
Also makes consequential amendments to the 2004 Order so that the rateable value of the hereditament in respect of which a ratepayer is seeking relief must still be no more than £21,499 in Greater London, or £14,999 outside Greater London, on every day for which relief is actually sought.
The amendments made by this Order apply for the purposes of applications for small business rate relief in respect of days in the financial year which begins on 1 April 2009 and subsequent financial years.
Articles
Property: Beg, borrow or steal?
LNB News 20/03/2009 12
Published date: 18 March 2009
Author: Edward Peters
Journal name: New Law Journal
Journal date: 13 March 2009
Journal citation: 159 NLJ 381
Jurisdiction: England; Wales
Abstract: New Law Journal, Issue 7360: Can a mortgage fall within the Consumer Credit Act?
Summary: Considers recent case developments in mortgage possession and adverse possession.
The intricacies of the Consumer Credit Act 1974 legislation continue to throw up questions as to whether or not particular mortgages fall within its scope. In appropriate circumstances, a squatter can be estopped from asserting that he has acquired title by adverse possession.
A line in the sand
LNB News 13/03/2009 34
Published date: 12 March 2009
Author: Julie Cameron
Journal name: Taxation
Journal date: 12 March 2009
Journal citation: Taxation, 12 March 2009, 239
Jurisdiction: England; Scotland; Northern Ireland; Wales
Abstract: Taxation, 12 March 2009: What level of property income triggers the requirement for a self-assessment tax return?
Summary: Considers a lack of clarity in the guidance for both customers and HMRC officers on property income. There are no stated income limits on HMRC's R40 guidance notes. Internal guidance for HMRC officers does indicate this limit, but does not specify whether to take account of gross or net income.
100,000 Homeowners could be saved from repossession
LNB News 05/03/2009 64
Published date: 5 March 2009
Jurisdiction: UK
Related cases: Cheltenham and Gloucester Building Society v Norgan [1996] 1 All ER 449
Related digests: LNB News 23/02/2009 10
Abstract: A new report has found that courts are failing to apply a little-known law that would stop lenders from repossessing the homes of thousands of borrowers. Claire Robinson speaks to the author of the report Natalie Elphicke.
Analysis: According to a new report by the Centre for Policy Studies (CPS), Save 100,000 Homes from Repossession, judges dealing with repossession cases are unaware of an obscure law that allows borrowers to spread repayments over their whole remaining mortgage term rather than forcing them to pay up in just a couple of years. The report's author estimates that as many as 100,000 homeowners could be saved from losing their homes if the law was applied to them.
Under current guidelines, borrowers in arrears are usually ordered to pay up within two to four years, or face repossession. However, in the majority of cases this usually results in borrowers losing their home because the term is too short.
Natalie Elphicke, author of the CPS' report, is a banking partner in law firm Addleshaw Goddard specialising in infrastructure finance, project finance and housing finance. She told LexisNexis News: "The report considers how the courts could help more people stay in their homes during this housing recession. During and after the last housing recession it was the court process which did most to help households in need. The courts have an important role to play in balancing family need, hardship and ability to pay based on individual circumstances and the commercial and contractual right of a defaulted lender to recover payment from its security. Their importance should not be overlooked in the current housing recession."
The CPS is now calling on the Government to alert courts to the law but said the little-known law should only apply in cases where the courts believe a borrower would be able to maintain their repayments.
Ms Elphicke added that there is a high degree of judicial discretion in deciding civil claims and this judicial discretion allows a court to postpone, adjourn, stay or suspend a claim for possession. "In the context of mortgage arrears, the Courts may allow a mortgage possession order to be suspended over a period which the Court considers 'reasonable' and on such conditions as to payment as the Court decides. The basis for deciding a "reasonable period" was established in the Court of Appeal Norgan case. That said, the starting point for the exercise of judicial discretion is the consideration of repayment over the remaining period of the mortgage."
Ms Elphicke said that at the moment the courts are asked to consider the Pre Action Protocol agreed with lenders, which looks at what hoops the lender has to jump through to be 'fair' to gain possession. "However, the law allows judges to look through the other end of the telescope, at the borrower's ability to repay over what could be a much longer period. In many cases that is more likely to produce an outcome which allows a householder to stay in their homes and repay their arrears over a much longer period."
Rescue scheme will force banks to make mortgage loans
LNB News 27/02/2009 27
Published date: 27 February 2009
Jurisdiction: England & Wales; Northern Ireland; Scotland
Related legislation: Building Societies Act 1997
Related digests: LNB News 26/02/2009 1; LNB News 26/02/2009 6; LNB News 26/02/2009 7
Relevant companies: Lloyds Banking Group, Royal Bank of Scotland (RBS)
Abstract: The Treasury has launched the Asset Protection Scheme for banks which have large volumes of toxic assets on their balance sheets. Martin Bishop of Pinsent Masons tells Neasa MacErlean why banks will want to be cautious about going into the scheme.
Analysis: The government's unveiling of its Asset Protection Scheme (APS) may have been overshadowed by the row over the pension of former Royal Bank of Scotland chief executive Sir Fred Goodwin - but it is an extraordinary development and one that could be seen in years to come as a landmark in the history of UK financial services. 'It is a massive step,' says Martin Bishop, banking and finance partner at Pinsent Mason. 'The idea is to give the public and investors confidence about the status of the bank's assets.' Essentially, the taxpayer will take on most of the risk of assets put into the scheme (such as leveraged loans and structured credit assets).
From a legal point of view, the issues and scope of these APS contracts are also remarkable. Each bank that enters the scheme signs a contract in which it gives various undertakings in return for participating. In the Treasury's words, each bank will have to make 'full and accurate disclosure' about the state of their assets, agree to a 'sustainable long-term remuneration policy' and enter into 'legally binding agreements to increase the amount of lending they provide to homeowners and businesses'.
The lending issue alone may make joining the scheme unattractive, says Bishop: 'There will be a real focus on this issue. Banks will be thinking hard about going into the scheme to avoid having a lending policy imposed on them. The banks attitude to this will depend on the terms of the commitment actually required. But at the moment, most banks are being very conservative, conserving their assets and restricting lending.' He fears that a bank which is forced to lend under these terms could end up taking on loans that competitors outside the scheme would see as uncommercial in the current difficult market.
The Royal Bank of Scotland (RBS) was the first bank to sign up and, in exchange for having £325 billion of toxic assets covered by the state, it has agreed to lend £9 billion in mortgages and £16 billion in business loans in 2009. This would represent a huge increase on its 2008 UK retail lending - up 20 % on mortgage lending (from £7.5 billion) and up 12 times on business lending (from £1.3 billion). If mortgage lending stays at its January 2009 level of £12.4 billion (according to the Council of Mortgage Lenders), RBS would account for 6 % of new mortgage loans granted during the year.
The Lloyds Banking Group was due to sign up to the APS the day after it was launched but agreement was delayed. It would be no surprise if the lending requirement were one of the stumbling blocks.
On the subject of pay and bonuses, Bishop is phlegmatic. Remuneration issues are 'an emotive issue', he says. There has been outrage recently at the prospect of bonus payments for bank staff. But Bishop says that many junior bank staff get an element of income in the form of performance-related pay which can be called a bonus. 'To link these payments with the sort of bonus that senior management or a handful of traders have got is unfair in a way.' Again he thinks that banks joining APS could be at a commercial disadvantage if the rules are too tough on remuneration. 'Banks won't want to have a situation where they are losing capable people to competitors,' he says.
Bishop believes that media and public opinion has changed significantly in the last decade. He recalls the days of the late 1990s and early 2000s when banks were originating the assets that have now turned toxic. 'If banks decided not to participate in these transactions they would not have produced the sort of returns that shareholders were demanding,' he says. 'The banks that adopted more conservative and risk averse strategies were out of favour with investors.'
Banks have until the end of March to sign up to the APS. At the moment, they need to have at least £25 billion of eligible assets to join but the Treasury might reduce that threshold if it feels it is appropriate. The problem is a banking one. Building societies were very restricted in their use of options, swaps and derivatives by the Building Societies Act 1997.
Government under pressure over farmers IHT relief
LNB News 27/02/2009 25
Published date: 27 February 2009
Jurisdiction: England & Wales; European Union; Northern Ireland; Scotland
Related digests: LNB News 05/06/2008 19; LNB News 24/09/2008 59
Abstract: The UK Government has until the end of March to decide if it will extend Agricultural Property Relief to cover farms across the EU and EEA, after being threatened with legal action by the European Commission. Michael Parker of the National Farmers Union tells Neasa MacErlean why he hopes the Government will comply.
Analysis: The UK Government appears to face a choice between extending Agricultural Property Relief (APR) on Inheritance Tax (IHT) to cover farms in the EU and EEA (European Economic Area) zones or dropping it altogether. On January 29 the European Commission gave notice to the UK that it considers the present arrangement 'discriminatory' and could refer the UK to the European Court of Justice if 'no satisfactory response' is made by the UK before the end of March.
Michael Parker, head of tax at the National Farmers Union, is hoping to meet the farming specialists at H M Revenue & Customs (HMRC) shortly to discuss the issue. "Potentially it could be quite damaging," he says. "This is a very important relief because it allows the continuity of family farm businesses. We would be greatly concerned if this important relief were jeopardized for genuine farming businesses, wherever they are farming." he says.
The statement from the European Commission is clear: "The limited scope of the relief may dissuade taxpayers from investing in agricultural and forestry property outside the UK. Consequently, the Commission considers that the United Kingdom's legislation, in its current state, is not compatible with the free movement of capital provided by Article 56 EC Treaty and Article 40 of the EEA Agreement."
There are concerns that the UK will be disinclined, particularly in a time of recession, to spend yet more Government money on extending a UK tax relief. However, if organisations such as the National Farmers Union put pressure on the Government it could be difficult for the Treasury to say no. Having spent £37 billion rescuing banks in October alone, the Government could find it hard to defend taking a tough stance on farmers. If campaigners for farmers were successful, they might well hope to hear a formal announcement in the Budget on April 22 or in the accompanying papers.
The sums involved may not be very large. While the 08/09 cost of APR is expected to be about £190 million, according to HMRC estimates, the cost of protecting charitable legacies against IHT is expected to be over 40 % higher at £270 million. And the cost of the APR relief is only 1 % of the cost of tax relief on pension scheme contributions (which amounts to £20,000 million).
One issue that HMRC will be looking closely at is the inter-relationship between APR and Business Property Relief. In some cases it may be able for farmers to get relief under Business Property Relief if they could not get it from APR.
In early February HMRC published interim guidance on the chapter of its IHT manual that covers APR. Of particular interest to tax experts is the guidance on farmhouses--an issue that has been frequently under the spotlight in recent years. Parker says "We welcome this updated guidance, which takes account of recent tax cases."
Play it again SAM
LNB News 25/02/2009 40
Published date: 25 February 2009
Jurisdiction: England & Wales; Northern Ireland; Scotland
Related legislation: Consumer Credit Act 1974
Related digests: LNB News 05/01/2009 79; LNB News 06/02/2009 70
Abstract: Thousands of UK homeowners with Shared Appreciation Mortgages (SAMs) are challenging Barclays and HBoS over what they claim are 'unfair' loan agreements. Claire Robinson speaks to litigation solicitor Paul Jonson about the case.
Analysis: In what is thought to be the first real test of the changes to the Consumer Credit Act 1974, a group of up to 8000 homeowners have brought a Group Action arguing that the changes make it possible for them to sue their lenders over the 'unfair' loans.
The group is being represented by RWP Solicitors, who have issued a Letter Before Action to the two lenders, Barclays and HBOS, in regards to the SAMs, which were sold in 1997 and 1998.
As a result of the forthcoming court case the homeowners are either wanting to secure a reduction in the percentage of the appreciation of the value of their homes payable to the lenders or the introduction of a cap on the amount of the appreciation payable to the lenders.
Typically, under a SAM the homeowner benefits as the interest is frozen. In exchange the bank receives up to 75 % of the appreciation in the value of the property in the 10 years prior to when it is sold as well as having the original sum borrowed repaid. However, ten years on and many homeowners now find themselves locked into their homes, unable to raise enough money to buy a new property from the sale of their current one after paying the banks their share of the appreciation.
Under the new act if the court rules that the relationship between a creditor and a debtor is unfair to the debtor, it has the power to vary the terms of the SAM. Paul Jonson is a partner in the litigation department of London law firm Pannone. He told LexisNexis News there is very little case law in this area, meaning that the new statutory provisions are essentially untested. "The relevant sections of the Consumer Credit Act 1974 (140A and 140B) came into force on 6 April 2007, and were only effective in relation to pre-existing agreements (that is, retrospectively) from 6 April 2008. Therefore, this action may be the first real test of the new provisions."
Mr Jonson added the new powers are actually extremely wide, allowing a court to determine that the relationship between a lender and a borrower arising out of a credit agreement is unfair because of (among other things) the terms of the agreement. "If the court makes such a finding it can alter the terms, reduce the amount payable and order a refund. The remedy that these claimants are seeking is a reduction in the percentage payable to the bank or a cap on the total amount. Those remedies fall squarely within the discretion of the court. The key issue will be whether the court determines that the agreements were unfair, having regard to 'all matters it thinks relevant'. However, the court may decide that these SAMs simply turned out to be a bad bargain, rather than inherently unfair. We can expect the banks to take a very robust approach."
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