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Website Articles for December 2009
Stories included
- Car valeters set alarm bells ringing for employers
- Property company was entitled to charge for deed of variation
- Construction firm wins compensation from ‘negligent’ consultants
- New procedure for forming limited partnerships takes effect
- Director personally responsible for paying a company debt
- Moves to improve the process of buying and selling homes
- Cohabiting couples could be granted improved inheritance rights
- Covenant prevents homeowner extending his property
- Baroness Deech calls for pre-nuptial agreements to be legally binding
- Judge was wrong to transfer children’s residence to their father
Car valeters set alarm bells ringing for employers
Firms who hire self-employed sub-contractors may need to re-evaluate some of their contracts following a landmark case in the Court of Appeal involving 20 car valeters.
The valeters were taken on as self-employed contractors by a company specialising in car cleaning services. They had signed contracts which described them as self-employed sub-contractors. Later, after they had been working for the company for several years, they argued that they were effectively employees and so should be given the same rights as other employees, including holiday pay etc.
The company was able to point to its written contract but that wasn’t enough to convince the Court of Appeal.
The Appeal Court judges said the issue was whether the written contract represented the true nature of the working relationship, not only at the time it was drawn up but later when that relationship may have evolved and changed.
In this case it was clear that the valeters were not in business on their own and did not have any customers of their own. They were expected to turn up for work to meet the requirements of the company’s customers and the reality of their situation was that they were employees, despite what a contract drawn up several years ago might say.
The case obviously has serious implications for companies hiring contractors. It’s important to have a written contract but it’s also essential to ensure that it reflects the reality of the working relationship. Otherwise employers may not be able to rely on some written contracts in the event of a dispute as it could be ruled invalid.
If that happens then sub-contractors could gain full employment rights including holiday pay, maternity entitlement, unfair dismissal protection and so on. There may also be tax implications for the employer.
It would be wise for employers to review the contracts periodically, especially those drawn up several years ago, to ensure they reflect the current working practices and can still be relied upon in the event of a dispute.
Property company was entitled to charge for deed of variation
The cost of entering into a deed of variation does not constitute an administration charge under the Commonhold and Leasehold Reform Act 2002.
That was the ruling of the Upper Tribunal (Lands Chamber) in the case of Mehson Property Co Ltd and the lessee of one of its properties.
The lessee decided that she wanted to sell her property but was concerned about some of the terms in the lease relating to repairs to the foundations and also to the right to require the lessor to enforce covenants against other lessees on the estate.
She wrote to Mehson Property asking for a note of the costs involved if she asked for a deed of variation to rectify the problems. The company replied that it would cost £350 for the maintenance clause, £350 for the enforceability clause and £350 (plus VAT) for legal fees.
The reply also stated that the company would accept a reduced fee of £500 for a deed of variation dealing with both issues. This reduced sum, totalling £911.25 including legal fees and VAT, was agreed and a deed of variation was executed to deal with both points.
However, the lessee then applied to the Leasehold Valuation Tribunal (LVT) to have the fee reduced on the basis that it constituted an administration charge. The LVT agreed and ordered that she should receive a refund of £500.
However, that decision has now been overturned by the Upper Tribunal (Lands Chamber). His Honour Judge Huskinson said: “In my judgment a charge for entering into a deed of variation does not constitute an administration charge.”
Please contact us if you would like more information.
Construction firm wins compensation from ‘negligent’ consultants
A construction company is to receive compensation from a firm of consultant engineers who provided negligent advice on a building project.
The engineers had been asked to advise on the kind of foundations needed to support a proposed water treatment works. After carrying out tests, they recommended that a conventional approach with some modifications would be sufficient.
The project went ahead on that basis but it then transpired that the recommended foundations would not meet the required standard and a more expensive approach would have to be taken. This led to considerable extra cost and delays.
The construction company sought damages on the basis that the advice given by the consultants had been negligent.
The court held that the consultants had been in breach of their duty to exercise reasonable skill in carrying out their work. They were ordered to pay compensation for the cost of carrying out the remedial work required to get the project back on track.
They were also ordered to pay more than a third of the construction company’s legal costs.
Please contact us if you would more information about professional negligence issues.
New procedure for forming limited partnerships takes effect
The new procedure for forming limited partnerships came into effect on 1st October.
All new limited partnerships have to include either Limited Partnership or LP at the end of their names.
Applications for registering a limited partnership must specify the firm’s name and be signed or otherwise authenticated by or on behalf of each partner. The applications must also specify the name of each limited and general partner, the general nature of the business and the address of the principal place of business.
Information about the amount of capital contributed by each partner and how it is paid, whether in cash or some other form, must also be given. It is also necessary to announce the term –if applicable – for which the partnership is being entered into, beginning at the date of registration.
Applications have to be made to the registrar for the area of the UK in which the partnership’s principal place of business is to be located.
Once registered, Companies House will issue a certificate to provide proof of the partnership’s formation.
Director personally responsible for paying a company debt
The director of a company in liquidation has been held to be personally responsible for some of its debts.
The company had entered into a contract with a supplier to provide it with meat products. At first the supplier addressed its invoices to the company.
Later, however, the supplier suspected that the company was getting into financial difficulties and started addressing invoices personally to one of the directors.
The company then went into liquidation and so the supplier took action against the director to recover money owed.
It submitted that it had told the director at the time that it was no longer prepared to invoice the company but would only supply products on the basis that it invoiced him personally. It said it had confirmed its position both by letter and in a telephone conversation.
The director claimed that the supplier had merely changed the name on the invoice to avoid confusion with another of its customers. He said he had never been told that he was being invoiced personally.
The court held that on the basis of the available evidence, the supplier’s version of events was more likely to be correct. The director was therefore personally liable to pay the outstanding balance on the invoices.
Please contact us if you would like more information about contractual liability and directors’ duties.
Moves to improve the process of buying and selling homes
The Law Society is looking at ways to improve the process of buying and selling homes for the benefit of consumers.
It plans to publish formal proposals by the end of this year but in the meantime it has been consulting with various individuals, firms and organisations involved in conveyancing.
The general consensus was that while no radical changes are needed, there are some improvements that could be made, particularly in the area of accreditation schemes.
The Law Society has often raised concerns that some professionals involved in conveyancing, such as estate agents, are not strictly regulated in the way that solicitors are.
This has led the society to warn sellers that some estate agents could overcharge them for Home Information Packs (HIPs) which have to be provided when a house is put on the market. A recent investigation by Channel 4 found that some agents were commissioning HIPs from outside providers and then adding more than £100 to the price charged to the consumer.
A Law Society spokesman, Paul Marsh, urged consumers to approach their solicitor before buying a HIP because law firms are strictly regulated and are required to be fully open with clients about their fees.
He also advised sellers to consult their solicitor before filling out the Property Information Questionnaire (PIQs) which are now an obligatory part of HIPs. Mr Marsh said: “PIQs are supposed to provide information for potential buyers about the property, but if they are not completed correctly it could harm the relationship between buyer and seller.
“A solicitor will be able to assist in completing the questionnaire to ensure it is accurate.
"The professional integrity and legal skills which solicitors traditionally bring to the housing market are just as key now as they have always been and probably more important than ever.”
Please contact us if you would like more information about HIPs or any aspect of buying and selling a property.
Cohabiting couples could be granted improved inheritance rights
Cohabiting couples who have lived together for five years could be given the same rights as married couples to inherit their partner’s estate if he or she had failed to make a will.
The proposal has been put forward by the Law Commission as part of a major overhaul of the law relating to wills and intestacy. The Commission points out that many cohabitants believe they already have the same rights as spouses but this is not the case.
As the law stands now, if a person dies intestate – that is, without having made a will – then their cohabiting partner has no automatic right to inherit the estate. Instead, the estate will be divided using a complex process laid down by law. This is the case regardless of how long the couple had lived together and even if they had children together.
In some circumstances, the surviving partner may be able to go to court to challenge the distribution of the estate but it can be difficult and emotionally draining, especially for someone who is still grieving for the loss of their partner.
The Commission is therefore proposing that couples who have a child together or who have lived together for five years or more should have the same rights on intestacy as spouses.
It also proposes that childless couples who lived together for more than two years but less than five should be entitled to half of the share of the estate that a surviving spouse would receive. However, the surviving partner would not receive anything under the intestacy rules if the deceased was still married or in a civil partnership at the time of death.
The Commission also proposes changes relating to married couples. It says: “Where the deceased is not survived by any children (or grandchildren or great-grandchildren), his or her spouse is entitled to everything in the estate up to a maximum of £450,000 but must share anything over that sum with any surviving parent or any surviving brother or sister of the deceased.
“We have proposed changes to the intestacy rules so that a surviving spouse would inherit the whole estate in such cases.”
There are several other proposals and the Commission has launched a public consultation which runs until February. It’s hoped that a draft Bill will be produced within two years.
If the proposals are adopted they will provide the biggest shake-up of intestacy rules for many years and will provide more protection for many people, particularly cohabiting couples.
However, the best way for couples to protect their interests, whether they are married or not, is simply to draw up a will and keep it up to date. That removes all uncertainty and enables you to ensure that your estate is divided exactly according to your wishes.
Unfortunately, tens of thousands of people die each year without having made a will. That’s when the uncertainty and problems arise for their families and loved ones.
Please contact us if you would like more information about making a will.
Covenant prevents homeowner extending his property
A homeowner has been prevented from adding an extension to his property because it is subject to a restrictive covenant forbidding anything that might cause a nuisance.
The man had obtained planning permission for an extension to the house on an estate next to the River Thames. Some of his neighbours objected because they felt that, among other things, it would spoil their views of the river.
They pointed out that the property was subject to a covenant preventing anything that would create a nuisance or annoyance to other homeowners on the estate.
The homeowner submitted that the covenant was only intended to restrict activities at the house which might be construed as being a nuisance or annoyance. It was not designed to include the building of an extension.
However, the Court of Appeal has ruled against him. It held that the covenant was broad enough to mean that the building of an extension would be considered as an “annoyance” to neighbours.
Several properties are subject to covenants of some kind. It is important that homeowners know about them and understand the restrictions they impose before agreeing to buy a property.
Please contact us if you would like more information.
Baroness Deech calls for pre-nuptial agreements to be legally binding
One of Britain’s leading lawyers is calling for pre-nuptial agreements to become legally binding.
Baroness Deech, who is Professor of Law at Gresham College and chairman of the Bar Standards Board which regulates barristers, believes our divorce laws need to be reformed to reflect the changes in our society.
She believes that in particular, the law relating to pre-nuptial agreements, or pre-nups as they are known, needs to be clarified.
At the moment, courts will take them into account if they are considered to be fair and properly drawn up but they are not necessarily binding. This is in contrast to many other countries where the contracts are enforceable.
The Law Commission is carrying out a review to examine the enforceability of pre-nups. In a statement it said: “There is a view that the fact that pre-nuptial agreements are not currently binding may deter people from marrying or entering into civil partnerships in some cases.”
However, the Commission is not expected to publish its report until 2012.
In the meantime, there has been an increasing tendency for courts to give more weight to pre-nups, as in the case earlier this year of German heiress Katrin Radmacher and her former husband, Nicolas Granatino. Before they married they drew up a pre-nup saying that he would not make a claim on her money if they ended up divorcing.
Mr Granatino challenged the agreement when the couple divorced but the Court of Appeal ruled that it should be upheld with only a few modifications. In giving his judgment after the hearing, Lord Justice Thorpe said it was becoming “increasingly unrealistic” for courts to disregard pre-nups.
The Court of Appeal ruling will influence future divorce settlements with the presumption being that pre-nups should be enforced unless there are compelling reasons to doubt their validity. Such doubts might arise if one party signed without getting proper legal advice or if someone failed to disclose all their assets when the contract was being drawn up.
However, Baroness Deech believes it is for Parliament not the courts to clarify the situation.
We shall keep clients informed of developments. In the meantime, couples who draw up pre-nups can be more confident than ever before that their wishes will be followed in the event of a divorce.
Please contact us if you would like more information about pre-nups or any aspect of matrimonial and family law.
Judge was wrong to transfer children’s residence to their father
The Court of Appeal has ruled that a judge was wrong to transfer the residence of three children to their father even though the mother had refused to allow contact in the past.
The father had made an application for contact following the breakdown of the marriage. The mother made allegations about him relating to domestic violence and submitted that he should be barred from having contact.
The judge dismissed the allegations as unfounded and ordered that contact rights should be granted. The mother still refused so the father applied for a residence order.
Shortly before the trial, the mother relented and signed a statement admitting that she had been wrong to refuse contact and accepting that the court should grant a contact order. However, she also asked the court to confirm that the children should continue living with her.
The judge decided that he could not rely on the mother’s new assurances and ordered that residence should be transferred to the father. However, that ruling has now been overturned by the Court of Appeal.
It held that transferring residence from the primary carer in this way should only be done as a last resort. The court had to balance the risks of removing the children from their primary carer, their mother, against the possibility that she might refuse contact again in future.
The judge had got that risk balance wrong and the residence order he made was premature.
Please contact us if you would like more information about family law issues.
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