The rising price of Access to Justice and how to try to avoid It

Despite opposition from the Law Society, fees payable to the Court to issue proceedings in respect of civil disputes went up considerably this year.

 

 In particular, there was introduced  fee charging as a percentage of the value of the claim for a Court issued claim of 5% for claims in excess of £10,000.00 up to £200,000.00.  At a time when the prices of almost everything else are steady or coming down, the 5% charge for admissions to the Courts means that the fee for a money claim of £50,000.00 has gone up from £310.00 to £2,500.00 an increase of in excess of 700%!

 

 Issuing Court proceedings has always been viewed as a last resort and there is now even more need to try and resolve a dispute without issuing Court proceedings.

 

 A few years ago Pre-Action Protocols for a number of different areas of disputes were introduced together with a Practice Direction (Pre-Action Conduct).  The aims of these are to enable the parties to settle claims before the start of Court proceedings.

 

 The Practice Direction on Pre-Action Conduct was replaced with a new one on 6 April.  This contains many provisions that apply in all cases whether or not a specific Pre-Action Protocol applies.

 

 The objectives include that there be early notification of a claim together with details of what is being claimed, to encourage the parties to exchange information and documentation, to discourage premature issue of Court proceedings when negotiations or a settlement are either in train or possible and to consider Alternative Dispute Resolution (ADR) to assist to a settlement.

 

 A Judge will expect the parties to have exchanged sufficient information and documentation so they understand each other’s position, make decisions about how to proceed and reduce the costs of resolving the dispute.  Only reasonable and proportionate steps should be taken by the parties to identify, narrow and resolve the legal, factual or expert issues.  The costs incurred should be proportionate and if a party incurs disproportionate costs, they will not be recoverable from the other party as part of the costs of the proceedings.

 

 Before issuing Court proceedings, the parties to the dispute should take a number of steps.  A letter should be sent setting out the details of the claim which should be replied to within a reasonable time (14 days to 3 months depending upon the complexity).  The parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing Court proceedings including there being a mediation where a third party facilitates a resolution.  A parties’ silence in response to an invitation to participate (as well as a refusal to participate in ADR) might be considered unreasonable by the Court and so it could order that that party pay additional costs.  Parties are now required to review their respective positions if their dispute has not been resolved after they have taken the above steps.  In all cases, parties are now required to consider the papers and evidence to see if proceedings can be avoided and, at least, seek to narrow the issues in dispute before Court proceedings are commenced.

 

 We would therefore advise that if you have a dispute you instruct us at an early stage so we can ensure that you comply with what is required of you and try to resolve the dispute at a lower cost to you than if Court proceedings are commenced, taking into account the amount of the Court fee to issue proceedings.  If it is not possible to resolve the dispute without Court proceedings being issued, for example because there is no response form the other party, we will advise you in respect of that.  Please contact Keith Parr, Partner, on 01772 253841, kgp@bsglaw.co.uk or by post so you have somebody very experienced in these matters on your side.

 

The impact to you of the latest divorce case of Wyatt v Vince which hit the headlines last week

Always finalise your financial agreements following a divorce by way of a Consent or final Order to prevent your ex-spouse pursuing you in later years for a share of any after acquired assets and to prevent the expense of pursuing or contesting the proceedings.

In the recent Supreme Court case of Wyatt v Vince [2015] UKSC 14 the ex-wife pursued her claim for a financial settlement some 18 years after the Decree Absolute had been granted ending their marriage. Mr. Vince’s business subsequently took off and he became a multi-millionaire.

Mr. Vince made an application to the court to summarily strike out Ms. Wyatt’s claim on the basis that there were no reasonable grounds for bringing the application; and that the application was an abuse of the court's process or was otherwise likely to obstruct the just disposal of the proceedings.

Ms. Wyatt made an application for Mr. Vince to fund her legal costs.

On 14 December 2012 a deputy High Court judge dismissed Mr. Vince's strike-out application and ordered him to make interim periodical payments in respect of legal costs. Mr. Vince appealed, successfully, to the Court of Appeal to have the deputy judge's orders set aside. She appealed to the Supreme Court.

The Supreme Court upheld her appeal. The Judges held that “when an ex-spouse applies for a financial order, the court has a duty under section 25(1) of the Matrimonial Causes Act 1973 ("the 1973 Act") to determine that application having regard to all the circumstances, including the eight matters set out in subsection (2); this assessment is not apt for summary determination.”

On this basis, that it was a proper application to be heard substantively by the court, Mr. Vince also failed in his argument that it was an abuse of process. Subsequently, as Ms. Wyatt was unable to reasonably secure legal services by any other means and it would be unreasonable to expect her solicitors to continue to act without payment until the determination of her substantive application the test for interim periodical payments in respect of legal costs was made out and the original order upheld.

This does not mean that Ms. Wyatt will automatically achieve a final settlement from Mr. Vince but that the court must consider the application as it would any other, taking into consideration the s.25 factors but it does provide a timely reminder to all divorcees who don't have financial orders in place that they should do so to avoid later claims based on wealth acquired after the divorce.

If you feel you are not protected please contact Andie Brown head of our family team for professional advice “clear and simple” on 01524-386500

The Deed of Variation - A Tax Loophole or Not?

There has been a bit of a furore on the Solicitors for the Elderly discussion forum recently following press articles about Deeds of Variation and particularly the Daily Mail’s reference to it as a ‘controversial tax loophole’.  Although a deed of variation can save tax in certain situations, it is basically a device for a beneficiary to record the gift of some or all of his or her interest in a deceased’s estate in favour of another individual or a charity or a trust.  It will be used where the situation after someone’s death is not covered by the terms of the deceased’s will or intestacy and for all sorts of reasons, not necessarily related to tax, it is desirable to change the terms of the deceased’s will. 

The deed of variation sets out how the beneficiary is rearranging or redirecting his or her interest in the estate.  It can be preferable to the beneficiary’s other option of ‘disclaiming’ the gift (where they simply refuse to accept it) as it means that the original beneficiary can choose who (or what) receives it. 

A deed of variation can be helpful where the first to die of an unmarried couple has failed to make a will and the cohabitee would otherwise lose everything to the beneficiaries who were entitled under the intestacy rules.  In these circumstances, the beneficiaries of the intestacy would each have to come to the decision to ‘do the right thing’ as they cannot be made to gift their interest (the deed of variation has to be voluntarily) and the alternative is likely to be a difficult and probably expensive claim against the estate under the 1975 Inheritance Act for the family and dependants. 

It can also be helpful to make sense of the current inheritance tax regime where couples now have a transferable nil rate band.  Prior to the Finance Act of 2006 it was necessary for married couples and civil partners with an estate over the value of one nil rate band to pass some of it to a discretionary trust (if the survivor was likely to need it) or outright to their children or relatives (if the survivor did not) on the first death.  This was an artificial arrangement to avoid a higher inheritance tax bill when the survivor of them died and thankfully it is no longer needed.  However, where a couple have not updated their wills a deed of variation can be useful to pass the estate on to the survivor of them as the couple would have wished if only the tax regime had allowed them to.

The variation is essentially a gift by the original beneficiary under the will or intestacy.   If it is completed within 2 years of the deceased’s death, provisions in the Inheritance Tax Act 1984 and Taxation of Chargeable Gains Act 1992 mean that although the beneficiary is making a gift of his or her interest, that beneficiary will not be responsible for any tax payable as a result of the gift and instead the terms are ‘read back’ into the will. 

In relation to inheritance tax, the reading back provisions mean that the gift is considered as part of the distribution of the deceased’s estate overall.  So, if the total amount transferred to chargeable beneficiaries exceeds the deceased’s nil rate band then tax will be payable, but otherwise it will not.  

It would be rather unusual for a variation to trigger an inheritance tax charge, but it depends on the reasons for doing the variation in the first place.  In cases where the original beneficiary is re-organising the estate to make provision for dependants and relatives, inheritance tax considerations may be secondary to the needs of these individuals. 

I should add, for completeness, that it is only capital gains and inheritance tax that is covered by these reading back provisions.  For income tax purposes, the variation is only effective from the date the deed itself is executed.  Generally, the original beneficiary is assessed on any income produced up to the date of the variation and the new beneficiary after that. 

Hopefully, most people will not require a deed of variation as they will have an up to date will in place that reflects the current situation and includes everyone or everything that should be included.  It is obviously very important to keep checking the terms of your wills (or if you haven’t got one, to make one) to ensure it is up to date.  The deed of variation can be extremely useful and it will always be possible to make one, but whether or not the favourable rules for capital gains and inheritance tax will apply to the variation remains to be seen.  A change in the tax law could remove the advantages of the reading back provisions, so that although an estate can always be varied (or a beneficiary’s interest disclaimed) the ‘tax loophole’ is removed. 

For further information on any aspect of this article please contact Rebecca Lauder, a Partner in our Lancaster office on 01524 386500 or rl@bsglaw.co.uk

Negotiating a Commercial Lease

Commercial leases are complex lengthy documents with even short term lets running to multiple pages.  So, what are the important issues? 

 

This depends on whether you are a landlord or tenant however, remember you both want to create the lease and make it work.  There is undoubted pressure on landlords due to the current economic climate and the surplus of empty properties so it is increasingly important for a lease to be attractive to both parties.

Short term tenancies can be desirable.  Landlords want their properties occupied so a short lease ensures, at least for a while, that the property is making money not costing money and where the tenant is a start-up business there is opportunity to build a business in a particular location but without risky long term financial commitment.  This may also appeal to an older business where, for example, a new office is being established.

Whether a long or short term has been agreed, a break clause can be a useful negotiating tool.  A break clause in a commercial lease allows it to be ended before expiry of the term.  These clauses are usually subject to service of a notice and conditions, e.g.: the rent being paid up to date although it is becoming increasingly common for break clauses to  be subject only to the service of a notice.  Break clauses can be particularly important to a start-up where the viability and success of the business is untested.  A break clause allows a tenant (whether a start-up or established business) to terminate the lease should difficulties arise.

Rent under commercial leases has traditionally been payable on a quarterly basis.  Does it suit both parties better for rent to be payable monthly allowing a landlord more frequent, regular income and a tenant more manageable rent demands?  Would it work for the rent to be paid like Council Tax, i.e.: over 10 months of the year?  This leaves the tenant with, in effect, two ‘rent free’ months in January and February, which are often financially difficult times of the year. 

The economic down turn and the ending of empty property rate relief presents tenants with greater opportunities to negotiate rent free periods at the outset of the lease or to be used as arguments against rent increases where a review is due.  To offset requests for rent free periods, a landlord may be prepared to tidy up a property before a new lease starts as it may be a cheaper alternative.

Landlords should aim to keep their tenants and their properties occupied so if a business is struggling but still viable then flexibility is key.  Would variation of certain clauses in the lease ease pressure on the tenant and keep the property occupied and generating income?

Repairing obligations are also important.  A landlord will usually want a tenant to be responsible for all repairs but the tenant, particularly in a short let, will usually want its responsibility for repairs to be restricted or for internal repairs only.

If you need any help or assistance in this area then contact the Commercial team based in our Lancaster Office on 01524 386500 or email info@bsglaw.co.uk

 

 

MMR - Six Months On

Recent research has revealed that six months after its introduction, UK home buyers hold mixed feelings over the Mortgage Market Review (MMR), which was designed to halt reckless lending.

Potential borrowers were left feeling frustrated at thein-depth questioning process now employed by lenders although the vast majority of respondents felt that MMR was on the whole a ‘good thing for the economy and housing market’, as it would help to ensure a sensible approach to borrowing.

Myhomemove asked over 100 of its home moving clients to share their experiences of applying for a mortgage before and after the introduction of MMR in April 2014. Topping the list of findings was the frustration felt by post-MMR applicants at the level and depth of questions now asked by lenders.

Despite misgivings and since the introduction of MMR, however, successful first time applications resulting in a mortgage offer increased by 156% although the ease of obtaining a mortgage fell by 16%

Doug Crawford, CEO of myhomemove said, "Although people are frustrated at the level of information required by lenders, our survey shows that the majority see the stricter lending criteria as a good thing for the economy and housing market; citing it as a way of ensuring people don’t overstretch themselves, or face the horrible situation of having their home repossessed.”

Although it seems that the new MMR process can feel personal and intrusive, it does seem to suggest that it is robust and productive for many home movers, as the number of repeat applications fell substantially and successful first-time applications soared. BSG as a conveyancing provider, hopes the new system will assist with increasing the transactional process seeing less time spent waiting for a mortgage offer which can ultimately be one of the largest delays in the process.

Cancer Care Cross Bay Walk 2014

 

 

As part of BSG's commitment to supporting charity the staff and partners raised £560.00 through their sponsored walk across Morecambe Bay and office cake sale. Obviously the latter was a requirement after the former!!

Terms and Conditions-Consumer Contracts Regulations 2013

On Friday 13 June the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 came into force.

 

The Regulations regulate most contracts made between a “trader” and a “consumer”.  They will therefore apply to a wide range of contracts made between businesses  and their customers (as consumers) but whether they apply or not will depend upon the nature of the customer and the circumstances in which the contract is made.

 

The Regulations have increased the time a consumer has to cancel their contract with you and there are serious consequences of not complying with the new Regulations. For example it is a criminal offence to fail to inform consumers of the right to cancel, punishable by a fine. Also, if you did not give the customer the time limit and procedures for cancelling, the cancellation period is extended and you will not be able to enforce the contract until you either give the consumer the relevant information or a considerable period has elapsed. This would mean for example that, you would not be able to issue Court proceedings under the contract for payment until the cancellation period has elapsed but the contract will not be void so your customer will still be able to enforce it against you.

 

We  would therefore advise that businesses  instruct the firm to update their paperwork including their terms of Business to ensure that they fully comply. If you would like us to assist you with this process, please contact Keith Parr,  Partner, on 01772 253841, kgp@bsglaw.co.uk or by post.