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Date: 24 October 2007
INHERITANCE TAX – After the Pre Budget Report of the 9th October 2007
The proposed changes to Inheritance Tax in the pre-Budget report on 9 October 2007 appear to make it unnecessary in many cases for married couples and civil partners to include nil rate band discretionary trusts in their Wills. Full details of the proposals are being studied. Such trusts may yet remain beneficial for longer term financial planning but these benefits may be of little interest to the majority of families.
The ramifications of this change are not yet entirely clear and further thought will be given to them once the small print has been studied.
One problem which has already become apparent is the question of how evidence will be presented as to the value of the estate of a deceased spouse, possibly one who has already died many years ago.
Fraud Act 2006 – A Warning to the Seller
The Fraud Act 2006 came into force on the 15th January 2007 and has a direct affect on liability for inaccurate replies to enquiries. It introduces an applicable criminal liability for fraud with a maximum sentence of 10 years imprisonment. The general offence may be committed in 3 ways viz:
A Claimant may now successfully allege that a fraud has been committed even if he has not suffered a financial loss, he needs only to demonstrate that he has been put in a situation where he may suffer a loss or is likely to suffer a loss.
False representation is most likely to be relevant in property transactions e.g. a dishonestly made false representation where the person making it intends to make a gain for himself or others or cause loss to another or expose another to risk of loss.
This had particular resonance in a recent case where our client was negotiating to purchase a business and in the course of the pre-contract enquiries and investigations it became apparent that the seller had substantially misrepresented the weekly earnings for the business.
The client therefore withdrew from the transaction before contracting to buy, but having incurred abortive legal and professional fees he suffered loss as a direct result of the fraud e.g. fees which he would not have incurred had he not been induced into the negotiations under false pretences.
At the point of withdrawal from the transaction there was no contractual relationship between our client and the seller. However there remains open to the client an action in the tort of deceit and now also the criminal process under the Fraud Act 2006 described above.
In minor cases it maybe that the threat of prosecution would be effective to bring about a speedy solution
Enforcement of an Oral contract- JUSTICE PREVAILS
Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 states that any contract to dispose of an interest in land has to be in writing and incorporate all expressly agreed terms, and be signed by all of the parties. Otherwise the contract is of no legal effect.
This has on occasion given rise to what is plainly an unfair result.
However in the recent case of Cobbe -v- Yeomans Row 2006, Yeomans Row Management Limited owned a block of flats and verbally agreed with Mr Cobbe, an experienced property developer, that if he obtained planning permission for redevelopment (at his own expense), once permission was granted, Yeomans Row would sell the property to him for £12 million subject to overage provisions for profit sharing. If the property was sold for more than £24 million, a further payment equivalent to 50% of the uplift would become due.
Relying on the oral agreement Mr Cobbe pursued the planning application and was eventually successful.
However, shortly afterwards Yeomans Row told Mr Cobbe that the verbal agreement had lapsed and indeed was void as it did not comply with Section 2 described above. They suggested a revised price for sale to Mr Cobbe of £20 million.
The Judge decided that Yeomans Row had encouraged Mr Cobbe to expend time and money in obtaining planning permission in the expectation that their agreement was binding and that a formal contracts would be exchanged once planning permission were granted. Yeomans Row had assured Mr Cobbe that the property would be his.
Accordingly the judge awarded Mr Cobbe a share in the property based on 50% of the increased value as a result of his having obtained planning permission.
The judgment restores the possibility of seeking redress in such a situation although we would of course advise our clients to seek legal advice before entering into such an agreement.
Clive Vernon
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