What’s the difference between the small claims, fast track and multi-track ?

Usually, if a claim has a value of £5,000 or less, it will be dealt with by the small claims track. Where the value of a claim is between £5,000 and £15,000 it will usually be dealt by the fast track and where the value of the claim is more than £15,000 it will be dealt with in the multi track. The ultimate decision on whether a case will go down a particular track is that of the court. Continue reading

Lifetime gifts and potentially exempt transfers

Potentially exempt transfer and residual benefits

One of the most common methods of planning to reduce or eradicate liability for inheritance tax (IHT) is for assets to be given away while a person is alive. If the person transferring the assets survives for 7 years, the gift is free of tax, if he or she dies within 7 years, there is a sliding scale for tax as the asset goes back into the estate.

The biggest single problem when giving away assets is where the person gifting the asset retains some form of residual benefit, such as continuing to live in a property, to receive some income from an asset and so forth, or in retaining any legal rights on the asset. Therefore the transferor is at the mercy of the transferees and if it is found that an income or such like is paid over from the transferee to the transferor, this will be classified as tax avoidance.

As an example of the legal difficulties which can arise, a  recent case dealt with a situation in which a very valuable  leasehold property in Knightsbridge was put into trust and a complex arrangement devised and the trust then sublet the property to a nominee company. This scheme was caught out by a technicality in that certain contractual covenants on the property still placed some legal obligation s on the transferor who therefore still retained some form of interest in the property.

This is a particularly technical example of what can happen, but bearing in mind the Inland Revenue are now particularly aggressive in challenging estates which would otherwise result in payment of IHT, all aspects need to be considered, great care taken, and experienced and specialist legal advice obtained.

Warranties, undertakings & representations

Warranties, Undertakings and Representations

These terms are synonymous with any contract in which any transaction between a buyer and a seller, however, they are often used in the wrong terms and even more common is that they are misunderstood by the buyers and seller themselves.

Quick Definitions

Undertaking

An undertaking is a statement agreeing to do a certain act in the future. The wording of an undertaking doesn’t have to actually include the word “undertake” although it often will.  Other phrases which will be tantamount to an undertaking include “shall” or “agree” for example.

An undertaking however cannot be made on the use of the words “will” or “must do”. These are because the use of the word “will” indicates that the party involved has some intention to complete a certain act rather than an obligation and “must” is ungrammatical and therefore would not be being used in its correct way.

Undertakings are sometimes referred to as a “covenant”, they mean exactly the same thing.

Warranties

A warranty is a statement which is made by a party of a current fact. The receiver of a warranty is able to hold the giver of a warranty liable if at the time that fact was not correct. An example of this can be given is if a seller in an share sale of a company tells the buyer that there is currently no staff suing the company for unfair dismissal and it turns out after the sale that there is in fact two staff who have unfair dismissal cases waiting to be heard at the Employment Tribunal.

Under common law, warrants are described as a term which doesn’t go to the heart of a contract and will only become applicable if there is proved to be a breach. If there is shown to be a breach of a warranty the affected party is able to claim damages.

Breach of warranties do not automatically entitle customers to terminate their agreements under common law, however, they may be able to if they negotiated for an express right to terminate for “material breach” was included in the contract.

Representations

A representation is a statement which may or may not be put into the contract, which is made by one party which has the effect of inducing the other party into entering into a contract.

If it turns out that the statement is not true, the party to which was induced has a claim under the Misrepresentation Act 1967 in which they will be able to rescind the contract or claim damages in tort.

You cannot use a warranty and an undertaking together, a party has to give one or the other and they should be in separate clauses. The same is true for undertakings and representations as they mean mutually exclusive things. However, warranties and representations may be used together.

Legal and Practical Consequences

A party should not use the term “warranty” unless there is no chance that the party will not have the common law right to terminate for a breach of tenancy.

Morality & law

Moral breakdown ?

We have posted on this blog and others our view that, long before the UK riots, there has been a perceptible significant sense that more and more of the public think it’s acceptable to break laws. There seems to be an attitude of “if everyone else is doing it, why shouldn’t I”. This was very much the attitude of the looting in the riots, and reflects other areas such as :-

  • Lying on job applications
  • Inflating income on Self certificate mortgages
  • Inflating insurance claims
  • Bogus personal injury claims

Yet more evidence of this worrying moral decline, which seems to be directly related to rampant consumerism and an attitude that we need to get what we want at all costs (if we keep going this way, where does it end ?) comes from some data regarding speeding and other driving offences.

Research from LV car insurers found that :-

  • 6% of drivers are willing to accept penalty points for driving offences where they were not responsible.
  • 66% of these would falsely accept penalty points to help a friend avoid disqualification.
  • 6% of those that admitted accepting penalty points for others were paid to do it.
  • 4% answered that they do not believe they are breaking the law by accepting penalty points for another person

Putting the above into context, since 2001 this equates to some 300,000 drivers lying.

What do you think about these issues ?

Insurance fraud

Fraud on the increase

Public liability insurance fraud is on the rise at nearly £2 billion a year at present.

Broken down into hard numbers, the ABI discovered over 130,000 cases of suspected  fraud which represents a 9% rise from the previous year and equates to nearly 2,500 insurance fraud claims every week.

Other figures from the ABI report are :-

  • home insurance equated to some 66,000 exaggerated or false claims
  • some 40,000 false claims related to motor insurance
  • Public liability claims relate to personal injury, typically where the claims are exaggerated relating to the ongoing effect of the injury on the ability to work

Fraud is of course nothing new, but it is getting worse, probably due to the difficult economic conditions. In response the ABI has advised that it is planning to set up a centralized fraud register to provide a better database for crosschecking and identifying suspect individuals and claims.