Author: Wellers

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.

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.

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.

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.

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.

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.

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.

In a head-turning decision, the High Court has acknowledged that increased rainfall arising from environmental changes was one cause of excess seepage of water from a landowner’s field into a neighbouring domestic garden.

The garden owner sought an injunction and damages against the landowner, alleging that the increased seepage arose from the landowner’s negligence and amounted to a nuisance. He contended that his garden had, as a result, been transformed into an unkempt carpet of moss and that a number of his trees had died.

Ruling on the matter, the Court found that there had been an increase in the volume of water flowing into the garden from the field. It was damper than it used to be, and ponds tended to form, especially after heavy rainfall. However, the problem was not such as to render the garden waterlogged.

The Court found that the excess water seepage into the garden did not arise from an inefficient drainage system on the landowner’s holding. Rather, it was caused by a combination of the removal of a water-thirsty orchard by the landowner’s predecessor in title and an increase in annual rainfall in the area.

Noting that there should be give and take between occupiers of land, the Court found that the change of use from an orchard to pasture was entirely reasonable. The increased rainfall and the flow of water from higher to lower ground – the garden was at the bottom of a hill – were natural occurrences.

The garden owner’s claim succeeded only in respect of a waterway in the field that had become clogged with vegetation so as to interfere with the operation of his septic tank and soakaway. The landowner was ordered to pay damages equivalent to the costs involved in connecting the tank to the sewerage mains.

Shareholders are obviously liable to pay Income Tax on their dividends, but what if a declared dividend is not – and, in reality, never will be – paid? A tax tribunal pondered that issue in a case concerning an otherwise successful property management company that was saddled with crushing debt servicing costs.

The company was trading well and making good operating profits. Its interest costs in respect of bank loans were, however, so debilitating as to place its business at risk. It was anxious to attract new external equity investors and its sole director took the view that a record of strong dividend declarations would assist in that task.

The company gave a binding undertaking to the bank that it would not make dividend payments to its two shareholders above certain limits. However, with the knowledge of the bank, it formally declared dividends that were well above those limits. The majority of those dividends were never paid, and the relevant funds were instead allocated to inaccessible shareholder accounts with the intention that they would in due course be written back into subsequent company accounts.

HM Revenue and Customs took the view that the shareholders were liable to Income Tax on the declared dividends, as opposed to the much smaller sums that they had actually received. On that basis, back tax demands and late payment penalties, totalling in excess of £60,000, were raised against them.

In upholding their appeal against those demands, the First-tier Tribunal (FTT) noted that the facts of the case were most unusual. It was clear that the shareholders had no immediate right to enforce payment of those parts of the declared dividends that exceeded the agreed limits and that any such payment was deferred until further notice or until mutually agreed.

Had the shareholders been paid dividends beyond the agreed limits, the bank would have been within its rights to suspend all further borrowing and to immediately call in all the company’s indebtedness. In the worst-case scenario, that would have led to a forced sale and foreclosure of the company’s property portfolio.

The FTT concluded that the dividends which were declared, but retained as unpaid and inaccessible, did not give rise to an enforceable right to receive them as income in the relevant tax years or, in the end, at all. The tax demands were overturned and the penalties thereby fell away.

When spouses each make valuable contributions to a long marriage, the general rule is that marital assets should be divided equally in the event of divorce. As an unusual High Court ruling concerning the validity of a French marriage contract showed, however, the sharing principle can be displaced by agreement.

The case concerned a couple who married in France when they were just starting out on their highly successful business careers. Their marriage lasted for over 25 years, yielding three children. Before they tied the knot, however, they signed a French marriage contract which provided that their respective assets would be treated as separate were their marriage to come to an end.

They moved to Britain soon after the wedding and it was here that the wife petitioned for divorce. She asserted that the marital assets should be divided equally between them. The husband, however, pointed to the marriage contract and argued that, by agreement, the sharing principle had no application to the case.

The wife contended that she signed the contract as a necessary stepping-stone to marriage and to give a clear and reassuring message that she was not interested in the husband’s family assets. She said that they pooled their resources during the marriage in line with a shared vision that they would be as one. Her understanding was that the contract merely excluded inherited resources from division.

The Court found, however, that the marriage contract was freely entered into by both wife and husband and that they each had a full appreciation of its implications. The contract was of a type very common in France and had been drafted by the firm of notaries used by the wife’s family.

Nobody had suggested that it was the husband or his family who were pressing for the contract. The wife was extremely intelligent, and the Court had no doubt that the notary would have explained to her the ramifications of the contract in detail. The wife’s claim for financial relief therefore stood to be assessed on the basis of her reasonable needs, rather than the sharing principle.

The Court found that the wife was entitled to exit the marriage with assets worth over £9.4 million, plus her interest in a French property. Her provision amounted to 38.9 per cent of the overall marital assets, which were worth more than £24 million. In the light of the marriage contract and other relevant circumstances, the Court found that the resulting division of assets was correct and appropriate.