Architect Liable for Contractor’s Errors

A couple who engaged a contractor to carry out work on their house have succeeded in their claim against the architect in respect of the cost of putting right defects in the contractor’s work.

The couple bought a five-storey house in Putney in June 2005. Before moving in, they wished to make changes to the layout of the property, in particular the ground and lower ground floors. The house was near the River Thames and the lower ground floor was below ground level at the front of the property. They engaged an architect to redesign the house. Most of the necessary works were carried out by a contractor recommended to them by the architect.

The architect’s firm failed to ensure that the contractor had installed waterproofing, plumbing, mechanical services and electrical installations without defects.

About six weeks after they moved into the house in May 2007, the homeowners discovered extensive damp in the lower ground floor of the house. The problem was assessed by experts, who concluded that the contractor had failed to carry out proper waterproofing. There were also problems with the electrical works and the plumbing. The couple had to move out of the property for more than 18 months while remedial works were completed.

They sought compensation for the cost of remedying the works, as well as consequential losses. The contractor subsequently became insolvent.

The architect defended the couple’s claim against it on several grounds, including that, as a result of the contractor’s financial situation, the problems would not have been remedied even if the architect had detected them. The architect’s terms of engagement contained a clause limiting its liability to ‘the amount that is reasonable for us to pay’ in respect of work carried out by ‘other consultants, contractors and specialists appointed by you’. Such clauses, known as ‘net contribution clauses’, attempt to limit a service supplier’s liability to their ‘share’ of any damage. Where such a clause is not in place, all parties to a contract are jointly and severally liable for any claims resulting from it.

The court found that the architect was unable to rely on the net contribution clause. The term limiting liability in respect of ‘other contractors’ was ambiguous: given that the homeowners were consumers, the court considered the impact of the Unfair Terms in Consumer Contracts Regulations 1999 on their contractual arrangements and concluded that the ambiguity must be resolved in their favour. Whilst the clause would apply to some of the work carried out on the house, it could not apply to the work done by the contractor. Crucial to this decision was the fact that the architect had received a fee from the contractor in relation to the work.

Couple’s Claim for CGT Loss on Holiday Home Succeeds

HM Revenue and Customs (HMRC) may appear a very big battalion indeed but, with the right legal advice, individuals can succeed in overturning their decisions. Exactly that happened in a case concerning a couple who lost over £6 million in a disastrous attempt to buy a luxury holiday home overseas.

The couple entered into a contract to purchase off plan, for $25.9 million, two neighbouring villas on the island of Barbados as a holiday home for their family. They paid a deposit of over $5 million, and stage payments as construction targets were met brought their overall outlay to almost $11.3 million.

However, after the developer experienced cashflow difficulties arising from the 2008 financial crisis, building works were first delayed and then suspended. Although the couple retained rights to the villas, they were of negligible value in that the works were unlikely ever to recommence. The partially built villas stood derelict and the couple had yet to recover any of their money.

The couple, who calculated their joint losses at almost £6.25 million, sought to set that sum off against Capital Gains Tax (CGT) liabilities arising in subsequent tax years. After HMRC refused to allow them to do so, the couple lodged an appeal to the First-tier Tribunal (FTT).

In upholding the appeal, the FTT noted that it was accepted that they had acquired an asset when they contracted to purchase the villas and that they had suffered a commercial loss in that the villas were unlikely ever to be completed. They had paid the relevant sums to acquire, or enhance, their contractual rights and Section 38 of the Taxation of Chargeable Gains Act 1992 thus entitled them to deduct their losses from future CGT liabilities.

Law Overrides Will That Excludes Partner

The law that allows someone who was dependent on a deceased person during their lifetime to make a claim against their estate if there is no, or inadequate, provision for them in the will is one of long standing (the Inheritance (Provision for Family and Dependants) Act 1975). However, many people think it applies only to blood relatives.

That this assumption is incorrect was emphatically confirmed in a recent case in which a 70-year-old woman was awarded £325,000 from the estate of a man with whom she had had a relationship lasting more than 20 years, the last seven of which they had spent together in the man’s home, which was the principal asset of the estate.

His will left his £1 million estate entirely to his two daughters, both of whom are comfortably off. When his former partner made a claim under the Act, they opposed it, contending that the relationship was not one of permanence and substance.

The judge concluded that the man had clearly had a responsibility to his partner and made the award.

Alcoholism and Mental Capacity

In order to make a valid will, you need to know your own mind – and it helps to have a solicitor on hand to advise you. That was certainly so in a case in which a businessman left the lion’s share of his £1 million fortune to a friend and colleague a few weeks before he died from alcoholism.

Against medical advice, the man had discharged himself from hospital ten days before he signed his last will. He left his shareholding in his company – by far his largest asset – to a friend who had worked with him for over 20 years. The friend was also bequeathed 75 per cent of the residue of his estate.

The man’s widow and three sons, who received 25 per cent of the residue, challenged the validity of the will on the basis that the friend had brought undue influence to bear upon him at a time when he was extremely sick and vulnerable.

The High Court acknowledged that the friend, who had made all the arrangements for execution of the will, was in a position to exert influence. In upholding the will, however, it found that he had not overstepped the mark. The man had wished the company that bore his name to carry on after his death and had viewed his friend as presenting the best prospect of achieving that objective.

The friend may have encouraged or even persuaded him to sign the will, but the Court was satisfied that he had done so of his own volition and had not been overpowered. The evidence of the solicitor who had drafted the will – who was convinced that the businessman was of sound mind, although obviously unwell – was also a crucial factor in the case.

Don’t Even Consider a Foreign Adoption Without Specialist Legal Advice

Adopting children from abroad can complete families and be of great benefit to all concerned. However, as a High Court case showed, it is fraught with legal pitfalls and should not be attempted without first taking specialist legal advice.

The case concerned a British citizen who adopted a child in Iran under Iranian law. The child had thrived in the adoptive placement. The parent launched proceedings in London, seeking recognition of the adoption in this country. The Home Office opposed the application on the basis that the criteria for recognition specified in the Adoption and Children Act 2002 had not been met.

Ruling on the matter, the Court noted that Iran has not ratified the Hague Convention on Protection of Children and Cooperation in Respect of Intercountry Adoptions. It is also not one of the countries where adoption is recognised by operation of the Adoption (Recognition of Overseas Adoptions) Order 2013.

The parent was domiciled in Iran at the time of the adoption and it was not disputed that the child had been legally adopted in accordance with the requirements of Iranian law. However, the Home Office argued that adoption in Iran does not have the same essential characteristics as adoption in England and that recognition should, for that reason alone, be refused.

The effect of an English adoption is to sever the legal relationship between the child and his or her biological parents. Section 67 of the Act provides that, if an adoption order is made, the child will be treated as if born to the adopter(s). Adoption orders made in this country can only be revoked in highly exceptional and very particular circumstances and such revocations are extremely rare.

The Court noted that those principles differ starkly from the position under Iranian law, where an adoption order does not extinguish the legal relationship between a child and his or her biological father. The threshold for revocation of Iranian adoption orders is also set at a much less demanding level.

The Iranian adoption had provided the child with much-needed security and stability. However, in refusing to grant recognition, the Court observed that the case turned not on the child’s welfare but on the interpretation of the legal principles through which English law recognises foreign adoptions.

The Court observed that an application for an English adoption order in respect of the child could be made under Section 49(3) of the Act if it could be shown that the child had been habitually resident in this country for 12 months. Any interference with the human rights of the child and the parent arising from the refusal to recognise the Iranian adoption was, in the circumstances, justified.

Residents Blighted by Noise Nuisance Granted High Court Abatement Order

If the tranquillity of your home is blighted by noise or any other form of nuisance, you don’t have to just grin and bear it. In a case on point, the High Court came to the aid of residents who said that their lives were rendered a sleepless purgatory by the noisy operation of a nearby games area and skate park.

Three residents sought an abatement order under Section 82 of the Environmental Protection Act 1990 on the basis that the activities carried on at the public facilities amounted to a statutory nuisance. Their application was, however, resisted by the local authority and rejected by a district judge.

In overturning that decision, the Court found that the judge had drawn a false distinction between noise generated by the intended use of the facilities and noise arising from their anti-social use, such as the playing of loud music. Both were relevant to the question of whether a nuisance had arisen.

Allegations that anti-social activities had rendered residents hypersensitive to the noise were, the Court found, no answer to their application if the noise was such that a person of normal resilience would have considered it unreasonable.

At a further hearing, the residents contended that an order should be made requiring removal of all the facilities’ equipment and the grassing over of relevant areas. The Court, however, noted the judge’s clear view that not all noise emanating from the facilities amounted to a nuisance. In issuing an abatement notice in general terms, the Court hoped that a spirit of compromise would prevail on all sides.

You Are Entitled to Rely on Ostensibly Competent Professional Tax Advice

When it comes to tax matters, there is a tendency for fiscally inexperienced people to simply sign whatever documents their accountants put in front of them. That can be a risky approach but, as a First-tier Tribunal (FTT) ruling showed, there is often an entitlement to place reliance on ostensibly competent professional advice.

The case concerned three former partners in a drain maintenance firm. They had the misfortune to be advised by a small accountancy practice whose principal was subsequently found guilty of cheating the public revenue and jailed. Following the criminal investigation, HM Revenue and Customs (HMRC) formed the view that the firm had underpaid tax in the 2005/6 tax year. On that basis, back demands for substantial sums in Income Tax were raised against the partners.

In upholding their appeal against those demands, the FTT noted that HMRC’s inquiry into the firm’s tax affairs had been inordinately delayed and that memories of relevant events had inevitably faded. Despite the paucity of evidence, it found that the firm’s business was transferred to a company in which the partners held shares on or around 1 April 2005. The partnership thus had no income during the relevant tax year. Late payment penalties were also overturned.

The FTT noted that the partners placed implicit trust in the accountancy practice and, in truth, simply signed any documents put in front of them. Their expertise lay in drainage systems, and they acted wholly responsibly in placing their tax affairs in the hands of the ostensibly competent practice. They were entitled to rely on the practice for the submission of accurate financial information to HMRC and it was no fault of theirs that they had been led by the practice on what amounted to a fiscal frolic.

Foreign Surrogacy Arrangements – High Court Underlines the Hazards

Delays in surrogacy treatment in England may be long but, as a High Court ruling showed, those who look abroad to fulfil their desire for parenthood may well be placing their own and their children’s legal status at risk.

The case concerned a same-sex couple who lived in Thailand, one of whom was British. Desperate to have a family and faced with long waiting lists in the UK, they resorted to a foreign surrogacy agency which they found online. Eggs donated by a Cambodian woman were fertilised using the British parent’s gametes. A surrogate mother was found in Georgia and she gave birth to twins.

However, the couple’s happiness was marred by, amongst other things, delays in uniting them with the children arising from the COVID-19 pandemic. The children were also born prematurely and required neonatal intensive care. Overall, the couple paid more than $76,000 to the agency and the surrogate mother.

Perhaps the greatest difficulty they faced, however, was a continuing question mark over whether they would be recognised as the children’s legal parents under English law. That depended on whether the requirements concerning surrogacy arrangements contained in the Human Fertilisation and Embryology Act 2008 had been met. The couple applied to the Court for formal parental orders in their favour.

Ruling on the matter, the Court noted that the couple were married and that there was a biological connection between the British parent and the children. Despite his residence abroad, the Court was satisfied that he remained domiciled in this country. The surrogate mother’s written consent to the arrangement was not compromised by money she had received. The requirement to also obtain her husband’s consent was dispensed with because he could not be contacted.

Turning to the financial aspects of the arrangement, the Court found that the money paid by the couple clearly went well beyond expenses reasonably incurred in the surrogacy. The Court had a number of concerns about their conduct but ultimately concluded that the payments should be retrospectively authorised. Overall, the welfare of the children, who were much loved and well cared for by the couple, demanded that parental orders be made.

In its decision, the Court emphasised that parents who engage in surrogacy arrangements, particularly abroad, should have a clear understanding about what is required to secure their legal position in relation to any child born. To do otherwise was to place the future of longed-for children at risk and could be viewed as an abdication of responsibility.

Solicitor’s Evidence Decisive in Resolving Bitter Family Inheritance Dispute

Taking legal advice when making your will is more than likely to reap dividends after you are gone. In one case, a solicitor’s wholly reliable evidence proved decisive in resolving an extraordinarily bitter family inheritance dispute.

By his final will, a man left his residuary estate to the sister of a woman with whom he had lived for many years but who predeceased him. The validity of the will was, however, challenged in court by the woman’s two children. They said that the man had treated them as his sons whilst they were growing up and that he would not have wanted to disinherit them.

Arguing that a previous will, under which they stood to benefit substantially, should be admitted to probate, they asserted that the last will was a product of fraudulent calumny on the sister’s part. They contended that she had poisoned the man’s mind against them by casting dishonest aspersions on their characters.

Ruling on the matter, the High Court comprehensively rejected those allegations. As a result of the behaviour of his partner’s children following her death, the man had formed his own unfavourable views of them and their conduct. The formation of those views was entirely uninfluenced by the sister’s conduct.

In reaching those conclusions, the Court placed heavy reliance on the evidence of a solicitor who helped the man prepare the final will. She had interviewed him on his own and advised him independently. Her account, which the Court accepted in its entirety, was that he knew what he was doing and why he was doing it and that he acted as a free agent when he executed the document. The Court pronounced in favour of the final will and directed its admission to probate.

Running a Business from Home? Are You Sure You’re Allowed To?

With many more people running businesses from home in a post-COVID-19 world, the spotlight has inevitably fallen on commonplace restrictions on the use to which domestic premises can lawfully be put. In a case on point, a couple required a tribunal’s authorisation to open a home-based childminding business.

The title deeds to the couple’s home contained two restrictive covenants in common form, the older of them dating back to 1937. Together, they confined the property’s use to that of a private dwelling house and specifically forbade its use for any trade or business. They therefore directly impeded the couple’s proposal to operate an Ofsted-registered childminding business from their home.

Faced with that difficulty, they applied to the First-tier Tribunal (FTT) under Section 84 of the Law of Property Act 1925 to modify the covenants so as to enable them to open their business. They had not sought planning permission to change the use of their home after receiving advice that no such permission was required for a childminding business looking after six or fewer children.

Following a site visit, the FTT expressed concern about traffic and parking issues that might arise from the proposed business use. The couple, however, succeeded in allaying those concerns. Granting the amendments sought, the FTT noted that the character of the area had substantially changed in the many years since the covenants were drafted. It was ultimately satisfied that a small childminding business represented a reasonable use of the property.

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