Newly published figures on agricultural rents are good news for Gloucestershire landowners. The report, published by The Country Landowners Association (CLA), shows that agricultural rents rose by an average of 25 per cent last year. Farm business tenancies and increasing farm profitability are the main factors influencing the rise.
The CLA survey, which covers England, Wales and Scotland, drew data from 1700 rental settlements of over 500,000 acres of farm land with a total annual rent roll of more than £23 million.
The rent rise in 2011 topped increases in the previous two years, with the biggest found in arable and livestock rents. In the last three years, the average rent rise has been around 21 per cent. For an average-sized farm, this has meant a rent increase of some £3,500 per annum.
Types of tenancy
Farm business tenancy (FBT) rents rose by the most – an average of 33 per cent. Agricultural Holdings Act (AHA) rents rose by only 20 per cent: this is no surprise given the restrictive tenure arrangements under AHA agreements.
Regional variations
North East and North West of England: Average rent increase 23 per cent. Average new rent £76 per acre ( £62 in 2010).
East Midlands and Yorkshire: Average rent increase 24 per cent. Average new rent £82 per acre (£62 in 2010).
South West and West of England: Average rent increase 24 per cent. Average new rent £78 per acre.
Eastern England: This region saw the highest average increase of 32 per cent. Average new rent £96 per acre.
Conclusion
FBT rents are clearly rising faster than AHA rents because they are more influenced by strong performance results arising from their ‘open market letting’ nature and flexible terms.
Other factors affecting the buoyancy of the rental sector include the quality of the land and soil (hence why rents in the East of England always hold up well), and the quality and quantity of buildings on the holding.
Another factor is whether or not the holding is equipped. Naturally, equipped holdings continue to yield higher rents than bare land lettings. The majority of rental increases reflect improved profitability and efficiency on farms generally but other factors such as diversification into the installation of renewable energy technology should also be taken into account.
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The term ‘commercial fraud’ is a broad description covering many different activities. Possible causes of action resulting from the fraud might include ‘undue influence’ or ‘abuse of confidence’. Judges have been reluctant to define the term precisely for fear that it may limit the ability of a party to proceed with a claim.
Although the word ‘fraud’ tends to suggest criminality, in fact wronged parties often seek redress through civil and contract law. Criminal fraud is prosecuted by the Crown, and not the wronged party, so there are several advantages to bringing a claim under civil or contract law if you believe you are the victim of commercial fraud. These advantages include:
Of course, there are inherent risks involved in any litigation because there is never a guarantee of success. The pros and cons of bringing a claim for commercial fraud will need to be weighed carefully before proceeding.
Litigation partner Paul Gordon has acted for major clients including Kohler Mira, American Express, Morgan Stanley, GE Capital, and PizzaExpress. He has wide experience in financial services and banking disputes as well as shareholder and partnership matters, commercial supply, agency distribution and franchise contracts and often acts in construction disputes and advises on intellectual property issues.
]]>Specialist solicitor Ruth Baker joins our wills, probate and trusts team this month.
Ruth is a member of The Society of Trust and Estate Practitioners and the Law Society Private Client Section; she is also an associate member of Solicitors for the Elderly.
She advises on all aspects of lifetime estate planning, including the preparation of wills, inheritance tax and the creation of trusts as well as in areas such as powers of attorney, Court of Protection matters and the administration of estates and trusts.
Ruth moved from Harrison Clark LLP where she trained and has worked since qualifying in 2007.
After many successful years, our longest-serving partner Charles Middleton is stepping down as an equity partner at the end of May.
Charles joined Willans as a 22-year old, completed his training with us and became a partner in 1985 while working in litigation. In the late 1980s he moved to head up residential property, where he has built a department with a reputation second to none in the region.
Charles has played an important role in the development of the firm as a whole, helping to oversee our growth from a handful of staff in the mid-1980s to the leading firm we are today with a fine reputation in the region.
After a 30-year career in property law, Charles feels it is time for a change. Having recently re-married, he plans to take a break after withdrawing from the partnership and enjoy some foreign travel.
Charles leaves the running of the department in the safe hands of partner Bridget Redmond and the existing team – Steve Diamond, Suzanne O’Riordan, Simon Hodges and Frank Smith – who will continue to provide a superb service.
We are pleased to say that Charles will not be disappearing completely. After taking a career break, he hopes to return in a consultancy role to undertake special projects.
In the meantime, we wish him well in this new phase of his life.
]]>Businesses must always pursue their own interests during commercial negotiations but there are various legal principles that operate to limit abuse of a strong position. One of these is the law of economic duress, which enables a contracting party to avoid an agreement if illegitimate pressure has been used to induce them to enter into an agreement.
Recent case law confirms that in addition to crimes, torts and breaches of contract, ‘illegitimate pressure’ may even include threats to carry out lawful acts as well as past unlawful acts.
In the case of Progress Bulk Carriers Ltd v Tube City IMS LLC, Tube City chartered a ship from the owners, Progress Bulk. The owners then breached their contract by chartering it to someone else: Tube City could have terminated the agreement.
Tube City suffered losses due to the delay and were likely to suffer huge losses if the shipment was further delayed. The owners promised they would provide a substitute ship and pay compensation for any losses. Tube City accepted this and did not search for an alternative carrier.
The owners then refused to provide a substitute unless Tube City waived all claims against them for damages. This was legal because no binding promise had been made. Tube City agreed under protest but later claimed for their losses and the matter went to arbitration.
The issue was whether the (lawful) threat to refuse to provide a substitute ship satisfied the ‘illegitimate pressure’ requirement for economic duress.
Arbitration
The arbitrators found that threats of lawful action could amount to ‘illegitimate pressure’. On the facts, they found that there was economic duress. They set aside the waiver and awarded damages to Tube City.
The owners applied to the High Court to have the arbitrators’ decision set aside, arguing that their threatened action was lawful and therefore did not amount to ‘illegitimate pressure’ for the purposes of economic duress.
Decision of the High Court
The High Court confirmed the arbitrators’ decision that threats of lawful action could amount to ‘illegitimate pressure’, although this would be unusual, particularly in a commercial context. It is also worth noting that past unlawful acts can also constitute ‘illegitimate pressure’.
Litigation partner Paul Gordon says: “Businesses should be aware that their contracts may be voidable if wrongful pressure is exerted during negotiations. That said, the courts usually prefer to avoid uncertainty in commercial relations and the threat of judicial intervention in commercial agreements may remain limited. As long as you adopt a common-sense approach to commercial agreements, with luck you will not encounter into this area of law.”
]]>This month (April 2012) a new Bill comes into effect, bringing with it wide-ranging changes to time limits for enforcing breaches of planning control in cases of so called ‘deliberate concealment'.
Under present rules, any breach of planning control becomes immune to enforcement action after a fixed time. The limits are:
It is possible to apply for a certificate of lawful existing use or development (known as a CLEUD). This will legitimise the unauthorised use, which then becomes exempt from enforcement action providing there is proof that the breach has been continuous.
The new law introduces a new section into the Town and Country Planning Act that will allow planning authorities to apply to the court for a planning enforcement order. This would give the authority a further year in which to take enforcement action, even if the initial 4- or 10-year period has expired.
Under this new section, the magistrates can only make a planning enforcement order if they are satisfied that the breach had been ‘deliberately concealed’ - thus capturing breaches dating back many years.
It appears that the aim, at this stage anyway, is to target worst offenders such as those in the case of the luxury home disguised as a barn (reported in Law News summer 2011).
However, the changes could affect current and potential property owners. We recommend that you seek our advice to remedy any potential breaches of planning control under the current legislation if at all possible. It goes without saying that applications to legitimise unlawful use will become subject to greater scrutiny in the future.
]]>Are directors entitled to claim ‘joint privilege’ if the company’s lawyers give advice that affects them personally as well as the business itself? A recent case has helped clarify a previously obscure area of the law of privilege.
When proceedings are brought against a company, a claim may also be brought against an individual director. The firm’s lawyers may then be called on to advise in both sets of proceedings. ‘Legal advice privilege’ protects communications between lawyer and client from being disclosed to the other side .
But occasionally a director may not be protected by legal advice privilege in proceedings against him. The other party may argue that the advice is privileged only in relation to the claim against the company - not in proceedings against the director personally.
A director may be able to argue that the legal privilege benefitting the company is in fact joint privilege. Joint privilege, also known as common interest privilege, arises where the advice was clearly intended for directors as individuals as well as for the company.
The case of Ford (R, on the application of) v Financial Services Authority has set out the conditions under which directors may benefit from joint privilege:
In circumstances where these issues arise, we will advise clients accordingly. However, if directors are concerned about potential claims against them as individuals, it would be advisable to seek advice swiftly.
]]>A proposal to make cross-border debt collection much easier was adopted by the European Commission in July 2011. Amy Gates reports on the UK’s decision not to opt in to the regulation.
The Commission recognised that it is presently very difficult for creditors to enforce cross-border debt payments and judgments. The regulation will establish a new procedure (a European Account Preservation Order, or EAPO) for the preservation of bank accounts to enable a creditor to prevent the transfer or withdrawal of the debtor’s assets from any bank account located within the EU. It will be available to individuals and companies as an additional procedure to those existing under national law.
In October last year, the UK government announced that it would not be opting in to the proposed regulation, despite welcoming its aims.
A consultation by the Ministry of Justice had highlighted a number of concerns, not least that the threshold for obtaining an EAPO is too low. They felt an EAPO could cause grave problems for companies being restructured or rescued, thereby increasing their risk of becoming insolvent and also believed the courts should have more discretion as to whether to issue an order.
The government intends to participate in negotiations of the draft regulation in the hope that the UK may opt in after it has been adopted by the member states.
]]>Statutory obligations have been in place for some time now, the most recent being The Control of Asbestos Regulations 2006. They impose a duty on all ‘duty holders’ (eg owners of non-domestic property, landlords, tenants, licensees and, potentially, managing agents) to manage asbestos risk in non-domestic premises.
To be able to manage the risks from asbestos in non-domestic premises, the duty holder is required to carry out a suitable and sufficient assessment to determine whether asbestos or asbestos-containing material is likely to be present in the premises. Where the material is likely to be present, a management plan must be prepared. The plan must determine the level of risk, identify which areas of the premises are affected and identify the measures to be taken for managing the risk.
It is not necessarily safe to assume that, once this exercise has been done, the report and management plan can simply be filed and forgotten about. The penalties that the Health & Safety Executive (HSE) can impose for failure to deal with asbestos properly are severe. In 1999, Brintons Limited were fined £100,000 plus costs for failing to prevent its employees from being exposed to asbestos - despite the company having an otherwise exemplary health and safety record and having taken prompt action to deal with the breach.
In September last year, Marks and Spencer plc was fined £1,000,000 for health and safety offences relating to asbestos removal in two of its stores. While the company had produced its own guidance on how asbestos should be removed inside its stores, the court heard that this was not followed appropriately by contractors during a major refurbishment.
HSE alleged that Marks and Spencer plc failed to ensure that work at its Reading store complied with the appropriate minimum standards set out in legislation and approved codes of practice. They did not allocate sufficient time and space for the removal of asbestos-containing materials at the store. The contractors had to work overnight in enclosures on the shop floor, with the aim of completing small areas of asbestos removal before the shop opened to the public each day. Even though the company had employed reputable contractors to carry out the refurbishment and asbestos removal works, they were not able to escape liability and were heavily fined.
Commenting on the case, the HSE pointed out that the outcome of the case should act as a wake-up call to any organisation carrying out major refurbishment works. Any refurbishment programmes involving asbestos-containing materials must be properly resourced, both in terms of time and money – no matter what. Where this is not done, the HSE will not hesitate to take robust enforcement action.
It is now illegal to use any form of asbestos in the construction or refurbishment of any buildings. However, asbestos was commonly used in construction in the past, and much of what was used is still in place. It constitutes a significant health risk to all those involved in building, renovation or maintenance work. Asbestos is the biggest single cause of work-related deaths in the UK, with an estimated 4,000 people dying every year. Annual numbers of deaths are predicted to go on rising into the next decade.
These predictions have triggered a crisis in the asbestos insurance global market and regulators are ever more concerned to ensure that the risk from asbestos is minimised - ignore it at your peril
]]>If you wish to do something on land that is subject to a restrictive covenant, be aware that planning consent does not override the terms of the covenant – they are two separate regimes.
It is possible to apply to the Lands Tribunal for the restriction to be modified or discharged, providing you can demonstrate one of the statutory grounds.
Often the Lands Tribunal will agree, provided whoever has the benefit of the covenant is compensated financially and the restriction is not in the public interest.
However, in the recent case of Zenios v Hampstead Garden Suburb Trust Ltd, the Lands Tribunal refused to modify a restriction.
Mr & Mrs Zenios had obtained planning permission to extend their house above their garage. The covenantee, Hampstead Garden Suburb Trust (a body whose object is to maintain and preserve the character and amenities of the Suburb) concluded that the development would not be in keeping with the area, and was therefore not in the public interest. Clearly monetary compensation would not have been an adequate remedy for the harm that would have been done to the character of the area.
While the Garden Suburb Trust itself properly took into account the grant of planning permission, they were not bound by it. The Land Tribunal’s refusal to lift the restriction was upheld by the Court of Appeal.
]]>Landlords and management companies will be interested in a recent decision that makes it possible for a landlord to recover legal costs as part of the service charge paid by his tenants, even though there may be no such express provision within the lease.
In the case, Plantation Wharf Management Company Ltd v Jackson and another, the claimant was the management company of Plantation Wharf, a 13-block development containing both commercial units and residential flats.
The defendants were two of the residential tenants who, for two years, had failed to pay the service charge due to the landlord, claiming the sums were unreasonable. The landlord disagreed and sued for the outstanding charges.
Part of the tenants’ argument was that the service charge included legal costs incurred by the landlord in suing his defaulting tenants. They claimed that the lease did not allow this as it did not expressly state that legal costs were one of the landlord’s recoverable expenses.
The Leasehold Valuation Tribunal decided in the tenants’ favour, but the decision was reversed on appeal. Although the words ‘legal costs’ were not contained in the lease, it was still clear that the tenants should be liable for the costs incurred by the landlord in taking action against defaulting tenants and these costs should be collected via the service charge.
This is a good outcome for landlords. In previous cases courts have ruled that there must be clear and unambiguous terms in the lease that allow the landlord to pass on such costs. This new decision broadens the scope for costs recovery and will be helpful for landlords concerned about the cost of dealing with troublesome tenants.
]]>The recent case Thameside Construction Company Ltd v Arthenella Ltd is a reminder of the lawyer’s mantra to tread carefully in direct discussions with the other side, particularly if these involve potential settlement negotiations.
Thameside was appointed by Arthenella to carry out works to a listed Victorian manor house. There was a disagreement over the sum due to Thameside and each side began legal proceedings.
After unsuccessful written offers made via both sides’ solicitors, the MDs of the two companies decided to speak on the phone to try to reach agreement. After this call, Thameside said a settlement had been reached but Arthenella denied it. After hearing evidence from both MDs, the judge found that agreement had indeed been reached, whereby Arthenella was to pay Thameside £275,000 in full and final settlement.
Disputing parties will often try to resolve matters between themselves without legal advisors present. In principle there is nothing wrong with this – they may feel they can speak more freely without lawyers and it can be useful in identifying areas of common ground. On the other hand, it can be risky to settle a case there and then, without time to reflect on what was discussed and the impact it may have on your position.
As a precaution, it is sensible to make it clear beforehand that the settlement negotiations are ‘subject to contract’ and will take binding effect only on entering into a written settlement agreement. This allows time for parties to seek legal advice if necessary and take steps to ensure the deal is certain, and what was intended.
]]>‘Reasonableness’ is one of the most commonly-used words in English law yet the concept is hard to define and usually depends on the facts of the case. But in the event of a dispute, over-reliance on the use of ‘reasonableness’ in an agreement can leave you open to a judge’s interpretation of what is, or isn’t, ‘reasonable’, as happened in this recent case.
Porton Capital Technology Funds sold a company (Acolyte) to 3M under an agreement containing an earn-out mechanism – a device whereby all, or part of, the purchase price is determined by the future performance of the company. The amount payable under the earn-out was 100 per cent of net sales for 2009 up to £41m.
3M agreed to promote Acolyte’s main pharmaceutical product and not cease the business without Proton’s written consent which, crucially, was not to be ‘unreasonably withheld’. In the event, the product performed badly, 3M ceased promoting it, and offered Proton US$1m for their consent to discontinue the business. Porton refused and claimed the maximum earn-out sum of £41m. Was their refusal reasonable?
The High Court ruled that Porton had acted reasonably in refusing consent to cease the business. Key factors in their decision were: the earn-out payments constituted the main sum owed by 3M; previous estimates were considerably higher and Porton reasonably believed that net sales would exceed US$1m; Porton did not have to take 3M’s explanations at face value; and since Porton were not involved in running Acolyte, they had limited knowledge of how it was being run.
As this example shows, commercial agreements should be drafted with precision, addressing all eventualities rather than relying on uncertain concepts such as ‘reasonableness’ to determine important issues. Having a clear-cut understanding in place at the start of a commercial relationship can prevent a shed-load of ambiguity, hassle and legal cost further down the line.
]]>We welcomed the recent decision that ‘business common sense’ should be upheld where contractual wording is unclear.
The court concluded that where the term of a contract could be interpreted in more than one way, business common sense should dictate which meaning was intended.
The case in question was Rainy Sky SA v Kookmin Bank in which an issue arose regarding a bond issued in support of a shipbuilding contract. The shipbuilder had entered into an insolvency procedure (under Korean law) and had defaulted on the contract. The buyer sought to rely on the bond – which included an undertaking to pay ‘all such sums due .. under the contract’. The bank refused to pay. Did the term ‘such sums’ refer only to certain specific payments or to all money owing upon insolvency?
Applying business common sense, The High Court took it to mean the latter. The Court of Appeal reversed the decision, saying the use of common sense should be limited to where it was necessary to avert extreme or irrational meanings of words.
The Supreme Court agreed with the first ruling and held that ‘all sums’ meant ‘all money owing’. Their ultimate aim was to establish what the parties meant.
The decision is reassuring as it confirms that courts should use common sense in establishing what the parties intended to agree. This may save a party from unclear contractual wording. However in practice, the case highlights the general rule that it is cheaper to address issues beforehand than to correct them. If you are concerned that contract terms may be ambiguous, it is better to ensure precise drafting at the outset rather than seek a remedy through costly litigation.
]]>Clients often want to know whether they can bring an action against an individual involved in a company – a sole shareholder or director maybe – even though their contract was with the company.
This can be tricky. In English law, an individual is separate from the company and generally not liable for its wrongdoings. This is often described as ‘the corporate veil’. It is difficult to lift the veil and the protection it affords to the individuals behind the company.
In some circumstances, the courts have been willing to lift the veil. Most often this has been in cases where there has been fraudulent misrepresentation or deceit by an individual involved in the company. That said, even when the courts are willing to lift the veil there are still limits on the nature of the claim.
In the recent case of VTB Capital plc v Nutritek International Corp for example, the court found that a previous judgment, which had lifted the corporate veil to allow a claim in contract, had been wrongly decided.
If you want to ensure you have rights against key individuals involved in a transaction, a simple precautionary measure may be to join them as guarantors and parties to your agreement. A combination of thinking ahead and careful drafting may put you in a much stronger position should a contract go wrong.
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