In Brief – Walker Morris legal update – September 2016
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When dishonesty falls short of fraud: Supreme Court[...]
Important changes to insurance law in England and Wales have been introduced as of 12 […]
Important changes to insurance law in England and Wales have been introduced as of 12 August 2016. Walker Morris has reported previously on the key points [1] arising from the Insurance Act 2015 and the Third Parties (Rights Against Insurers) Act 2010, here is a review of the Supreme Court’s recent and hotly anticipated judgment in the Versloot Dredging litigation and explain its implications for today’s insurers and insureds.
‘Fraudulent claims’: crucial clarification
The Insurance Act 2015 (the Act) confirms the common law ‘fraudulent claims rule’ that where an insured makes a fraudulent claim, the insurer will not be liable to pay the claim. The Act specifies that, in those circumstances, an insurer can treat the insurance contract as terminated from the time of the fraudulent act, including refusing all liability without having to return the premium to the insured. However, the Act does not define ‘fraudulent claim’, which could alternatively mean a claim which is entirely fabricated; a claim which is genuine but dishonestly exaggerated; or a claim which is genuine but supported by false information (known as a ‘fraudulent device’ or a ‘collateral lie’). The Supreme Court’s decision in the Versloot Dredging litigation [2] has been eagerly anticipated by insurers and insured’s alike, for its clarity on this crucial question.
The background facts are, briefly, that a commercial vessel was damaged irreparably on a voyage from Lithuania to Spain. The owners made a claim under their insurance policy, which covered them against perils of the sea. The claim was genuine, in that a peril of the sea was found to be the cause of the vessel’s loss. However the claim was supported by a lie, told by the owners with the intention of strengthening the claim and accelerating payment. The Supreme Court had to consider whether the owners’ lie meant that this was a fraudulent claim which the common law (and, since 12 August 2016, the Act) would preclude.
Finding for the owners by a 4 – 1 majority, the Supreme Court confirmed that use of a fraudulent device does not amount to a fraudulent claim, and so a genuine claim which is supported by a collateral lie will not be forfeit.
Key points
The following key points arise:
- There is an important distinction between a fabricated or dishonestly exaggerated claim (in which an insured is trying to obtain something to which he is not entitled) and a claim which is supported by a lie which is actually irrelevant to the insured’s genuine entitlement. In the latter circumstances, the lie is dishonest, but the claim is not.
- Whether or not a lie is capable of forfeiting a claim depends upon its relevance to the court in deciding the claim. If the insurer loses nothing as a result of the telling of the lie, because the lie is irrelevant to the existence or amount of the insured’s entitlement and merely embellishes an already justified claim, then the lie is irrelevant and will not invalidate the claim.
- The Supreme Court majority rejected the minority view that there were public policy reasons for finding that the use of fraudulent devices/collateral lies should forfeit claims, because:
- An insurer’s obligation to pay is crystallised on the making of a valid claim. Collateral lies told to speed up payment are irrelevant.
- The fraudulent claims rule is not the same as, and is not as severe as, the contractual duty of utmost good faith. To forfeit an entire, genuine claim by reason of a merely collateral lie would be disproportionately harsh to the insured.
- Telling lies in support of a valid claim is not risk free. An insured using fraudulent devices in this way could potentially open itself up to civil liability in damages to insurers under the tort of deceit and/or to criminal prosecution. Telling lies could also have a detrimental effect on the insured’s credibility, on any legal costs award and, of course, on any future insurance premiums (or indeed the ability to obtain insurance at all).
- The Versloot Dredging case is in line with the spirit of the Act, in that it favours insureds and limits insurers’ right to reject claims.
- In the case of commercial insurance contracts, however, insurers can seek to improve their position by including warnings about the consequences of lying in support of a claim, as well as clear, express provisions which (subject to the requirement of reasonableness) exclude liability in respect of claims supported by fraudulent devices.
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[1] See our earlier briefings on the key aspects of the Insurance Act 2015 and the Third Parties (Rights Against Insurers) Act 2010.
[2] Versloot Dredging BV & Anr v HDI Gerling Industrie Versicherung AG & Ors [2016] UKSC 45

Town and Village Greens: Continuing development
The prospect of Town and Village Green (TVG) applications continues to entice the general public, […]
The prospect of Town and Village Green (TVG) applications continues to entice the general public, to frustrate developers and to hit the legal headlines. With no less than three cases being decided in the Supreme Court in as many years and with the introduction of the Growth and Infrastructure Act 2013, TVG law continues to develop apace. In this article, TVG experts go back to basics to explain the requirements for registering a TVG and provide an update on recent developments.
Back to basics
Historically if you asked someone to picture a village green they would conjure images of people dancing around maypoles, holding village fetes or imagine the sound of ball on willow. Since key provisions of the Commons Act 2006 (CA 2006) have been in force, however, residents and community representatives have been able to apply to local commons registration authorities to register all sorts of open spaces as TVGs. A TVG does not have to be a traditional grassy area – any piece of land which satisfies the statutory requirements can be registered.
Once registered, such land is afforded the highest form of protection, so that it cannot be developed and any development which has commenced prior to registration must be undone. TVG land can only be used for lawful sports and pastimes, which significantly restricts what landowners can do with their land.
Registering a TVG
The key provisions of the CA 2006 are Sections 15(2) and (3), pursuant to which any person may apply to register land as a TVG by satisfying the following:
- A significant number of the inhabitants of any locality, or of any neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years;
And either:
- The use is continuing at the time of the application to register the land (section 15(2)); or
- The application is made within a period of two years if use ceased after 6 April 2007 (section 15(3)).
“Significant number of inhabitants”
This means that the number of inhabitants has to be sufficient to show that the land is in general use, by the local community, for informal recreation (that is, as opposed to occasional use by individuals).
“…of any locality or of any neighbourhood within a locality”
The courts have defined a “locality” as an area capable of being defined by reference to some division of the country known to the law, such as a parish or other local government unit. A “neighbourhood within a locality” must be a cohesive, identifiable, and recognisable area, not being too wide or arbitrary, with some obvious social or geographic characteristic.
“…have indulged as of right”
The land must have been used by local inhabitants “as of right”. The use must therefore have been without force, without secrecy and without permission.
- Without force: for example, if access to the land is gained by breaking a padlock on a gate, the use is not “as of right”.
- Without secrecy: the use must be open, so that a landowner is capable of seeing that the land is being used for recreation.
- Without permission: any form of express permission, for example, by licence or by the erection of notices granting permission, will stop use being “as of right”[1].
The Supreme Court in Lewis v Redcar [2] decided that, if local residents using a site defer to an alternative use, this does not of itself prevent their use being “as of right” and so it does not prevent TVG registration. This case involved local residents on a golf course waiting for players to tee off before walking across land, and it was held that the residents deferring to the golfers did not mean that their use of the land was not “as of right”.
“…in lawful sports and pastimes”
The use must be classed as a lawful sport or pastime. The list of lawful sports and pastimes is extensive and does not just cover traditional pastimes such as village fetes and cricket matches. Activities can also change according to the time of year. This requirement includes general walking and dog walking on the land. However it is not sufficient, for TVG registration purposes, for the applicant to show that land is used for access from A to B; such use is more consistent with the exercise of a right of way only.
“…on the land”
This means that all of the land which is the subject of a TVG application must be so used if the application is to succeed. If only parts of a site are used, then only those parts can be registered.
“…for a period of at least 20 years”
The land must have been so used for at least 20 years. It is not necessary for all of the residents/applicants to have each used the land for the full 20 years; the evidence is to be taken cumulatively. However the use must be continuous and not interrupted for any significant time (albeit it is not necessary to show that the land has been used every day).
Recent developments
Case law deriving from the Commons Act 2006, culminating in Lewis v Redcar in 2010, seemed very much applicant-friendly. At that stage it seemed that many TVG applications were being made by local residents to stop development, rather than on the back of a genuine belief that the land in question was a town or village green.
The Growth and Infrastructure Act 2013 (the Act) went some way to halting this trend by introducing a number of ‘trigger events’ which prevent TVG applications being made in certain circumstances. The Act also introduced provisions allowing landowners to submit statements to the local council which have the effect of bringing to an end others’ use of the land “as of right”. This has proved to be a useful tool for landowners and developers, but it does bear noting that local residents have a one year grace period from the submission of the statement in which they can still make an application to register land as a TVG.
Recent common law decisions have also seen the courts adopt a balanced, common sense approach.
By right or As of right
In 2004 in Beresford [3] the House of Lords had decided that providing benches and mowing grass did not amount to giving permission to use the land. It was concluded that the use by the local residents was actually “as of right” (without permission) and the land was registered as a TVG. The 2014 Supreme Court decision in Barkas [4] however, much to the relief of local councils which may have recreation grounds which they want to develop, has since overruled Beresford. The Supreme Court in Barkas held that if members of the public have a statutory right to use land for recreational purposes then they use that land “by right” and the land cannot be registered as a TVG.
Additional clarification was given on this point when the High Court in Naylor v Essex County Council [5] dismissed an application for judicial review on the grounds that it was not a requirement for the local authority to own a legal interest in the land which had, pursuant to statute, been made available to the public for recreational use regardless of ownership.
Rectification of the register
The cases of Betterment and Paddico [6], heard together in the Supreme Court in 2014, considered whether lapse of time can prevent rectification of the register of town and village greens [7]. The court held that there was no applicable time limit, but instead that the court should decide whether there was any prejudice in rectifying the register to any of the following: local residents; other parties; local authorities; or the fair hearing of the case, and it noted that lapse of time would be a material consideration. It was concluded, in both those cases, that there was no prejudice and that the registers could be rectified.
These cases are helpful in that they pave the way for landowners and developers to consider a challenge to a registered TVG, to rectify the TVG register retrospectively where mistakes have been made.
Statutory powers
In 2015 the Supreme Court in Newhaven [8] overturned the Court of Appeal’s decision to register a beach as a TVG on the basis that registration as a TVG was incompatible with the statutory purpose for which the land was held. This gave developers some hope that land held under a statutory power could not be registered as a TVG. Those hopes were then curtailed somewhat by the decisions of the Court of Appeal in Lancashire County Council and NHS Property Services, but they have now been resurrected (and then some!) by the Supreme Court’s December 2019 decision in the conjoined appeal [9]. That decision effectively provides public authorities who have acquired and held land for statutory purposes with a robust defence to TVG applications.
WM Comment
Walker Morris’ TVG experts are optimistic that recent statutory and common law developments, along with wide-scale acknowledgement of the growing need for housing, infrastructure and other essential development, signal a sensible and sensitive approach to the ever-controversial balance between protecting open land and enabling appropriate development and economic growth.
Update (December 2019)
For information and advice on more up-to-date TVG cases, please see our related briefings:
TVG applications: A simple, informal process?
Statutory Incompatibility and Village Greens
Town and Village Greens: Essex CC’s ‘quay’ to Court of Appeal success
Court of Appeal indicates TVGs now a less effective weapon against development
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[1] providing that 20 year user as of right has not already been established.
[2] R (Lewis) v Redcar and Cleveland Borough Council & Anor (Rev 1) [2010] UKSC 11
[3] R (Beresford) v Sunderland City Council [2004] 1 AC 889
[4] R (on the application of Barkas) v North Yorkshire County Council and another [2014] UKSC 31
[5] [2014] EWHC 2560 (Admin)
[6] Taylor v Betterment Properties (Weymouth) Limited and Adamson & Ors v Paddico (267) Limited [2014] UKSC 7
[7] Section 14 of the Commons Registration Act 1965 (a pre-cursor to modern TVG law) imposed a duty on county councils to maintain registers of common land and town and village greens.
[8] R (on the application of Newhaven Port and Properties Limited) v East Sussex County Council & Anor [2015] UKSC 7
[9] [2019] UKSC 58, and see our more detailed briefing for further information and advice.

Immigration Act 2016 – what do employers need[...]
It is impossible to over-state the importance of employers staying up to date with current […]
It is impossible to over-state the importance of employers staying up to date with current immigration rules and right to work requirements. Getting it wrong can lead to significant fines, reputational damage and, in serious cases, imprisonment.
The Immigration Act 2016 creates a new criminal offence of illegal working. The existing offence of ‘knowingly employing an illegal migrant has been widened to cover situations where an employer has ‘reasonable cause’ to believe that a person is an illegal worker. This change means that the burden of proof for prosecution has lowered significantly and conviction on indictment for this offence has also increased from two to five years imprisonment.
From April 2017, employers will be denied the National Insurance Contributions employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers.
The Act will also introduce a provision whereby, in the case of continued breaches, a notice can be issued to shut down a place of work for up to 48 hours where there is reason to believe that illegal workers are being employed. If the employer can prove that it has conducted the appropriate checks, the “closure notice” may be cancelled. Where it cannot, the business may be placed under special compliance requirements, including a period of continued closure.
Brexit will undoubtedly have an impact on free movement of labour and UK immigration rules generally. The detail of this is yet to be worked out and we will keep you updated via our newsletter and email updates. Walker Morris has a business immigration team who can assist you with any immigration queries or concerns. Please contact David Smedley or Andrew Rayment.

General Data Protection Regulation: What you need to know now
A new regime for all The existing data protection regime is now some 20 years […]
A new regime for all
The existing data protection regime is now some 20 years old and technology has advanced significantly since it came into force in the late 1990s. The General Data Protection Regulation (GDPR) aims to:
- harmonise data protection legislation by the creation of an EU-wide single legal framework;
- recognise and embrace technological advances for businesses (in accordance with the EU’s Digital Single Market Strategy); and
- strengthen citizens’ fundamental data protection rights.
The GDPR will have direct effect in all EU Member States (i.e. it will apply directly in all Member States without the need for any implementation legislation at national level) from 25 May 2018.
Whilst the UK voted to leave the EU on 23 June 2016, the UK will continue to be a Member State, bound by applicable EU laws, for two years from the date a trigger notice is served by the UK Government pursuant to Article 50 of the Treaty on the European Union. As an Article 50 notice has not yet been served, the GDPR will come into force before the UK leaves the EU, which means that UK businesses will be subject to the GDPR for several months before ‘Brexit’.
Even following a Brexit, due to the expanded territorial scope of the GDPR, UK businesses which offer goods or services to EU data subjects or which monitor EU data subjects’ behaviour will be subject to the GDPR.
It is also likely that post-Brexit, the UK will adopt legislation that closely mirrors the GDPR in order to ensure that it is a safe third country, so that EU organisations can continue to transfer EU personal data to the UK.
Responsible data controllers should starting getting to grips with the new data protection regime now.
What you need to know
Briefly, the key changes introduced by the GDPR include:
- Increased enforcement powers. The maximum fine for a data protection breach in the UK is currently £500,000. Under the GDPR, however, there will be a two-tier system:
- fines of up to 2 per cent of annual global turnover or €10 million, whichever is the greater, for violations relating to certain administrative data protection failings; and
- fines of up to 4 per cent of annual global turnover or €20 million, whichever is the greater, for violations relating to certain more fundamental failings, such as breaches of data protection principles, breaches of data subject rights, and so on.
- Record keeping. Instead of registering with the Information Commissioner’s Office (ICO) on an annual basis, the GDPR will require businesses to maintain detailed records regarding their data processing activities.
- Data protection officers (DPOs). The GDPR will require businesses whose core activities involve either the monitoring of data subjects on a large scale or the processing of special categories of data (i.e. sensitive personal data) on a large scale to appoint a DPO, who must be an expert in data protection law.
- Privacy by design and by default. The GDPR contains new rules which require businesses to implement data protection both by design (for example, building-in data protection safeguards when creating new products, services or other data processing activities); and by default (for example, by minimising the amount of data held/processed). There is also a new requirement for businesses to carry out data protection impact assessments to identify privacy risks in new products.
- Data breaches. There will also be a new obligation on organisations to notify data breaches to the ICO without undue delay and where feasible within 72 hours of becoming aware of the breach.
- Security and pseudonymisation. Most data controllers will already implement certain data security measures. The GDPR builds upon this and requires both controllers and processors to implement appropriate technical and organisational measures to ensure a level of security that is appropriate to the risks involved in the processing of personal data. The measures required of businesses handling and storing customers’ data, in particular any sensitive financial data, are likely to be significant.
- Encryption technology is already a fairly commonplace tool for addressing data security, but the GDPR also introduces the concept of ‘pseudonymisation’, also known as ‘keycoded data’. This is where although data has been anonymised, individuals can still be identified through the use of a ‘key’. For example an anonymised list of employees which includes national insurance numbers – knowing which national insurance number belongs to which employee will enable the individuals to be identified.
- Enhanced data protection rights for individuals. Businesses also need to be aware of, and to comply with, the enhanced rights afforded to individual customers under the GDPR. These include:
- Right to be forgotten. Individuals are entitled to have their personal data erased in certain circumstances (for example where the data is no longer necessary in relation to the purpose for which it was collected; where the individual withdraws consent; where the data has been unlawfully processed etc). Where a business removes data pursuant to this right ‘to be forgotten’, the business also has a duty to inform others to whom they have passed the data of the erasure request.
- Right to object to profiling. This is the right for individuals not to be subjected to wholly automated processing for the purposes of evaluating personal aspects such as health, personal preferences, behaviour and movements. Individuals are also able to object to decisions made based solely on automated profiling. This could have implications for some credit check and underwriting procedures.
- Right to data portability. Individuals have the right, in certain circumstances, to receive their data in a structured, commonly used and machine-readable format in order to transfer that data to another controller without hindrance.
- Changes to Subject Access Requests (SARs). The information that individuals can request pursuant to a SAR has been expanded to include the purposes of the processing; the categories of data held; the envisaged period for which data will be stored; the recipients or categories of recipient to whom the data has been or will be disclosed; the sources from which the data originates; the existence of automated decision-making/profiling and the logic involved; and the safeguards in place relating to any transfer of data to a third country or international organisation.
- The time frame for complying with a SAR will also reduce from 40 days to one month and in most cases it will no longer be possible to charge a fee for providing the requested information.
- Responses to SARs should be concise, transparent and in easily accessible form in clear and plain language.
- The ICO has suggested that for organisations which receive large volumes of SARs, they should consider carrying out a cost/benefit analysis of providing customers with access to their personal data online.
- Consent for data processing. Under the GDPR it will be more difficult to obtain consent for data processing. The GDPR requires that consent must be freely given, specific, informed, unambiguous and demonstrated either by a statement or a clear affirmative action. The GDPR also requires that it must be as easy for a data subject to withdraw consent as to give it.
- New obligations for data processors. For the first time, the GDPR introduces direct obligations for data processors, which will be enforced by the levying of fines and other penalties. Data processors will also be liable to compensate individuals whose rights have been infringed.
Next steps
Whilst the GDPR means greater consistency across the EU in data protection rules and regulation, which should be a good thing for both businesses and individuals, it is also likely to mean greater scrutiny, by customers and, where relevant, by regulators.
As the Information Commissioner himself has said, in light of the new increased fines, there are now 20 million reasons for organisations to get compliance with the GDPR right. The key is ensuring that businesses understand in detail how they currently deal with personal data. The best way to do this is to carry out a full information audit which should include a review of:
- what personal data is collected
- where it is collected from, how and why
- where the data is stored
- what security measures are in place to protect the data
- how it is processed and for what purposes
- whether the data is transferred to third parties, if so where are they located and what are they doing with the data
- how long is data kept for
- what consents are obtained for processing
- what procedures are currently in place for dealing with SARs
- any existing privacy notices
- existing contractual arrangements in light of the new data processor obligations.
The results of the information audit should be documented and a gap analysis performed to identify where action needs to be taken to bring processes into line with the GDPR’s requirements. An information audit is a worthwhile investment as it will form the basis of the documentation that businesses will need to keep in respect of their data processing activities.
WM Comment
Although the GDPR will not come into force for nearly two years, there is a lot to do in order to ensure that businesses are compliant with the new regime on 25 May 2018. In the words of the ICO, “Don’t panic, be prepared” and the ICO has already published its 12 step guidance to help organisations begin the process. The ICO is also due to publish further guidance in a number of areas by the end of the year, so it is important for businesses to keep up to date with developments. Walker Morris will be monitoring and publishing updates as and when more information becomes available.
If you have any queries or concerns relating to the GDPR, or if you would like advice and assistance with undertaking an information audit, please do not hesitate to contact Jeanette Burgess, Andrew Northage or any member of Walker Morris’ Regulatory & Compliance Team, who will be very happy to help.

SDLT: 3 per cent supplement on second homes
Since 1 April 2016, all purchases of residential property are potentially within the scope of […]
Since 1 April 2016, all purchases of residential property are potentially within the scope of the supplementary charge to SDLT. If caught, the applicable SDLT rates are increased by 3 per cent. Although, the purpose of the charge was to discourage the purchase of second homes and buy-to-lets, there are various circumstances which could leave the unsuspecting buyer with an unforeseen charge. The purpose of this article is to clarify some of the rules regarding this latest charge and to set out some of the potential traps for the unwary.
Primary Rules
As a basic principle, if, on the day the purchase of a dwelling completes, the purchaser owns or has an interest in more than one dwelling, then that latest purchase is subject to the additional 3 per cent charge. Using a house purchase for £200,000 as an example, this increases the potential charge from £1,500 to £7,500.
There are of course some exceptions to the general rule and:
- purchases where the consideration is less than £40,000 are excluded; and
- only major interests in property are caught by the rules i.e. freeholds and leases which were granted for more than seven years. The rules will cover properties to be constructed or adapted so that off-plan purchases of a major interest are still within the scope.
Furthermore, there are various properties which do not need to counted in determining the number of dwellings owned. These include:
- properties with a market value of less than £40,000 at the relevant date;
- major interests which are themselves subject to a lease with an unexpired period of more than 21 years;
- properties which have been inherited provided that the beneficiary’s interest is no more than 50 per cent – this exclusion lasts for a maximum of three years; and
- annexes (or granny flats) are excluded provided that they are within the grounds of another dwelling and that the value of the annexe represents no more than one third of the total value of the whole.
Replacing a residence
Of course, this can present some problems for those struggling to sell their old home or those who already own multiple residential properties. Therefore, the rules provide some concessions where an individual is replacing their only or main residence.
In summary, the purchase of the new residence must occur within three years of the sale of the old residence. However, if the sale of the old residence occurs in the three years after the purchase of the new residence, the higher rates will need to be paid and subsequently reclaimed once the old property is sold within three years.
The new residence acquired must be intended for use as the individual’s only or main residence. A period of non-occupancy is permitted (e.g. to allow for renovations), but the individual may not rent the property with the intention to take up occupation at a later date. Furthermore, the old property must actually be the individual’s only or main residence at some point during the three-year period prior to acquiring the new property.
‘Only’ or ‘main’ residence is not defined in the legislation and it is not possible to elect which dwelling ought to be treated as such. Therefore, if the individual actually lives in more than one dwelling, the question of main residence must be determined in light of all factors.
Potential pitfalls
In the case of joint purchasers, if one party would be subject to the supplement, then the whole of the consideration is subject to the supplement. This could catch out first time buyers receiving help from parents to buy a first home. To avoid the charge, parents may act as guarantors on the mortgage, but may not take a share in the property.
Similarly, a married couple or civil partners may only have a single only or main residence between them. This rule is only disapplied if a couple is separated and that separation is likely to be permanent. It is worth noting here that, even whilst in the process of separation, if both still have an interest in their former joint home, if either party buys a new home, the supplement will apply even if the new property is to become that party’s only or main residence. Only if that party dispose of their interest in the former joint home within three years will they be able to claim back the supplement. This creates a potential cash flow cost at a time when many couples can do without the extra expense.
Dwellings acquired by companies are always caught by the supplement unless the property is subject to the 15 per cent charge for high value properties (over £500,000). Likewise, trusts are always caught unless there is a qualifying beneficiary with an interest in the dwelling for life or who is entitled to all income from the dwelling. In that instance, whether the supplement applies is determined by reference to the beneficiary.
Properties owned overseas should also be counted in the number of dwellings owned by an individual. This could catch out people moving to the UK who keep their old home overseas and those who own holiday homes. However, the structure of ownership will be important. For example, in some jurisdictions, it is not unusual to hold property via a company and holding shares in that company may not amount to a major interest for the purpose of these rules.
In relation to large scale investment, although the initial government announcements suggested a specific exemption would be introduced to cover this, the government chose not to proceed with this on the basis that they did not expect any materially adverse impact on industry. For those acquiring multiple dwellings, it is worth noting that if the purchase includes six or more dwellings in a single transaction, a purchaser has the choice of treating the purchase as non-residential or a claiming multiple dwellings relief and applying the residential rates. A purchaser in this scenario should undertake a cost comparison.
Finally, it is worth pointing out that timing can be key. Where an individual who does not already own a dwelling is considering multiple purchases, savings can be made by staggering the transactions enabling the first purchase to proceed without the additional supplement.

Law Society practice note on execution of a document using an electronic signature
We are frequently asked what is and what is not permissible in terms of electronic […]
We are frequently asked what is and what is not permissible in terms of electronic signature of documents. The law is not as straightforward in this area as it might be – we summarised the position recently in this article. To assist practitioners and clients alike, the Law Society, in conjunction with the City of London Law Society Company Law and Financial Law Committees, has now published a best practice note.
The practice note is concerned with contracts entered into in a business context rather than with consumers or private individuals.
Examples of electronic signature
The following are listed as examples of an electronic signature:
- a person typing their name into a contract or email concerning the terms of the contract
- a person electronically pasting their signature (e.g. in the form of an image) into an electronic version of the contract
- a person accessing a contract through a web-based signature platform and clicking to have their name inserted into the contract in the appropriate place
- a person using a finger, light pen or touchscreen to write their name in the appropriate place in a contract.
Simple contracts
As there is usually no statutory requirement regarding the execution of simple contracts, the practice note says that a simple contract may be concluded using an electronic signature.
Documents subject to a statutory requirement to be in writing/signed/under hand
- for documents in writing, the Interpretation Act 1978 states that “writing” includes “typing, printing, lithography, photography and other modes of representing or reproducing words in a visible form”. Where the contract is represented on a screen in a manner that enables its terms to be read properly, it will, according to the practice note, be “in writing”
- the test for determining whether something is a signature is whether the mark which appears in a document was inserted in order to give, and with the intention of giving, authenticity to it. For example, typing a name into an email may satisfy the requirement for signature
- a document is generally considered to have been executed under hand if it is executed otherwise than by deed. The insertion of an electronic signature with the relevant authenticating intention would be sufficient for a document to have been executed under hand.
Deeds
Under section 46 of the Companies Act 2006 a document is validly executed as a deed if, and only if, it is duly executed by the company and delivered as a deed. According to the practice note:
- section 44 of the Companies Act 2006, which provides that a document can be validly executed by a company incorporated under the Act by signature by two directors or one director and the company secretary, can be achieved by each of the authorised signatories signing the deed, including by electronic signature, either in counterpart or on the same version (hard copy or electronic)
- delivery can be achieved through electronic signing, although the parties must ensure that the signing arrangements adequately address when delivery takes place (e.g. if the documents are to be held by solicitors pending completion).
Under section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 an instrument is validly executed as a deed by an individual if it is signed by him or her in the presence of a witness who attests the signature. Section 44 of the Companies Act provides that a document can be validly executed by a company if it is signed on behalf of a company by a director in the presence of a witness who attests the signature. The practice note says that where a signatory signs, including electronically, and a witness has sight of this, and the witness signs the attestation clause, including by electronic signature, the deed will have been validly executed. The practice note states that to minimise the evidentiary risk it is preferable for the witness to be physically present when the signatory signs rather than witnessing through a live televisual medium.
Company minutes and resolutions
The practice note states that directors of a company that has adopted the Model Articles or Table A articles may pass a directors’ resolution by the relevant directors signing a resolution using an electronic signature.
Minutes of the proceedings of a general meeting that are signed by the chairman using an electronic signature will constitute evidence of the proceedings and a record of a resolution passed otherwise than at general meeting that is signed by a director or the company secretary using an electronic signature will constitute evidence of the passing of that resolution.
Members’ written resolutions may be signed electronically but, to satisfy the authentication requirements of section 1146 of the Companies Act 2006, must be confirmed in a manner specified by the company. Where no such manner has been specified by the company, the communication must contain or be accompanied by a statement of the identity of the sender and the company must have no reason to doubt the truth of that statement.
Evidential weight
The practice note says that where an electronic signature is challenged the courts should adopt the same approach as they do where a “wet ink” signature is challenged. In other words, the document bearing the electronic signature would be accepted as prima facie evidence that the document was authentic unless evidence was adduced to the contrary.
Corporate authority for electronic signatures
It is possible – albeit extremely unlikely – that a company’s articles of association, or subsequent resolutions, prohibit electronic signatures. Assuming that the articles are silent on the question of electronic signature, there is no need for any resolution or minute authorising electronic, as opposed to wet ink, signatures.
Originals and counterparts
Unless there is a legal requirement to the contrary, it is possible to have originals of the same document in both hard copy and electronic form. Where a document has been executed electronically, there is no need for an additional wet ink version to be created. Where a document has been executed using a combination of electronic and wet ink versions, a composite version may be created, and this will be accepted by the English courts. If an original version of a document executed electronically is required to be produced in evidence, the court will accept an electronic version or a hard copy print out.
Where an undated document is executed electronically, it may be validly dated with the authority of the parties by inserting the date electronically or by printing it out and inserting the date by hand.
Where a document has been executed electronically with each signatory applying their signature to the same file uploaded to the relevant signature platform, this will be treated as one counterpart.
The practice note states that documents executed electronically can be amended in wet ink and, conversely, wet ink documents can be amended electronically.
Conflicts of law issues
Where the governing law of the contract is not English law, the validity of electronic signatures will fall to be determined in accordance with the contract’s applicable law.
If an overseas company executes a contract governed by English law using an electronic signature, provided that the signatory is acting under the authority of the company, that contract will have been validly executed as a matter of English law. Questions as to the authority of the signatory should, however, be referred to overseas counsel for an opinion.
Location of signatory
Occasionally, the place of execution by the signatory may have legal consequences. In view of the difficulties of establishing where this is – relevant considerations include the physical location of the signatory and the location of the server – it may be prudent in these cases to use a wet ink signature.
Property documents
The practice note observes that the Land Registry and Land Charges Registry require a wet ink signature on paper documents submitted to them for registration and also that where stamp duty is payable, HMRC will ordinarily expect a wet ink signature.
Common seals
Where a party wishes to execute a deed by the physical affixing of its common seal, it is unlikely to be able to do this electronically.

Can a warranty also be a representation?
In Idemitsu Kosan Ltd v Sumitomo Co Corp [1], the claimant had purchased shares from […]
In Idemitsu Kosan Ltd v Sumitomo Co Corp [1], the claimant had purchased shares from the defendant seller. The parties had entered into a share purchase agreement (the SPA) which contained a series of warranties by the seller. The purchaser accepted that its claim for breach of warranty was time barred and, instead, brought a claim in misrepresentation on the basis that a claim for misrepresentation was not time barred.
The statements in the agreement on which the purchaser was founding its case were described as “warranties” with nothing in the SPA stating that they were also “representations”. The SPA, as is usual, also contained an “entire agreement” clause pursuant to which the purchaser agreed and acknowledged that it had not relied upon nor been induced to enter into the SPA by any representation or warranty other than as set out in the SPA as a contractual warranty.
Unsurprisingly, the High Court gave judgment for the seller. The Court held that where a contractual provision states only that a party is giving a warranty, that party does not (absent wording to the contrary), by concluding the contract, make any statement that it is actionable as a misrepresentation. The Court said that it would be wrong in principle to read the warranty schedule in the SPA as though it had an existence independent of its function which was to provide content to the seller’s warranties. The presentation of an execution copy of the SPA, complete with warranty schedule, by the seller to the purchaser, did not amount to a representation. Even if this were not the case the purchaser’s claim would have been defeated by the entire agreement clause.
WM comment
This decision is a welcome restatement of the law. The case does highlight the importance, from a seller’s perspective, of using clear language to avoid a statement being construed as a representation. A representation is a statement upon which the counterparty has relied inducing it to enter into the contract. Sellers should therefore avoid wording that suggests the purchaser has entered into the contract in reliance upon any statements in the agreement. A successful claim for misrepresentation may entitle the purchaser to “rescind” the contract, restoring the parties to the position they would have been in had the contract never been entered into. This could be disastrous for the seller. By contrast, the remedy of rescission is not available for breach of warranty.
Additionally, the basis upon which damages are assessed is different for misrepresentation and breach of warranty and there may be cases in which an aggrieved purchaser would recover more through an action in misrepresentation than for breach of contract.
Although not decisive in this case, the judgment also provides a reminder of the importance of including a well drafted “entire agreement” clause in sale and purchase agreements.
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[1] [2016] EWHC 1909 (Comm)

Personal Service Companies under Fire
HMRC has successfully argued that a number of personal service companies (PSCs) which were used […]
HMRC has successfully argued that a number of personal service companies (PSCs) which were used to provide the services of individuals to end-user employers fell within the scope of the Managed Service Companies (MSC) legislation, meaning that HMRC is entitled to recover a backlog of income tax and national insurance contributions from those PSCs. Further, HMRC has stated that if it is unable to recover this debt, it intends to use the extended recovery powers which allow tax to be reclaimed from the directors of the PSCs, the provider of the MSCs and the provider’s directors and associates or any other party that has encouraged or been actively involved in the MSC arrangement.
This is the first case on the MSC legislation to be heard by the Tribunal, and HMRC has indicated its view that this success will pave the way for a number of challenges against similar schemes.
Background
The MSC legislation was introduced in 2007 to strengthen HMRC’s armoury when dealing with individuals who provide their services through intermediary companies in order to achieve an enhanced tax position. Broadly, the MSC rules will apply if a company is used to provide the services of an individual, and an MSC provider is ‘involved with’ that company. If the rules apply, the MSC is obliged to account for income tax and national insurance contributions (IT/NICs) as if the individual were an employee.
Prior to the MSC legislation, this area was governed by the intermediaries legislation (formerly known as the IR35 rules). These rules set out the circumstances when HMRC will treat a PSC as masking a taxable employment relationship between the worker and the employer. Whilst IR35 continues to apply, the MSC legislation strengthens HMRC’s position beyond IR35 because:
- if the MSC test is satisfied, there is no need to establish (on a case by case basis) whether or not the individual has an ’employment’ relationship with the end-user employer; and
- HMRC’s recovery powers are extended so as allow recovery from other parties, including the MSC provider, if recovery is not possible from the MSC itself.
Facts of the Case
In the Christianuyi case [1], five PSCs used the services of a MSC provider (the Provider) in connection with the provision of the services of individuals to ’employers’.
The Provider carried out much of the activity relating to the administration of the PSCs. In particular, the Provider incorporated the companies, provided a registered office and company secretary, invoiced the end-user employers for the individuals’ services, prepared annual accounts, paid corporation tax to HMRC, and managed the payment of dividends to the individuals.
The appellants accepted that the Provider fell within the definition of ‘MSC provider’, and that it was not entitled to benefit from the professional services exclusion (which exempts ordinary legal and accountancy services from charge under the MSC provisions). The appellants argued that the MSC legislation did not apply because the Provider was not ‘involved’ with the PSCs, as detailed in section 61(B) ITEPA 2003.
The Tribunal rejected the appellants’ submission, and held that the Provider was ‘involved’ with the PSCs on the basis that (amongst other things):
- the amount of the Provider’s fee was determined by reference to the amounts received by the PSCs for the workers’ services;
- the individuals did not attend any directors’/shareholders’ meetings and the Provider controlled the amount of the dividend paid to the individuals; and
- the Provider controlled the PSC’s finances by putting in place its banking arrangements, and by deducting tax payments (often significantly in advance of the due date for such payments) and accounting for such tax to HMRC.
On that basis, the Tribunal held that the MSC legislation applied and that IT/NICs were due. HMRC is therefore entitled to raise assessments for IT/NICs against the PSCs. If the debt cannot be recovered against the PSCs or their directors (which may well be the case, as the PSCs are unlikely to hold many assets, and the individual workers involved were all foreign nationals working temporarily in the UK), HMRC is entitled to pursue any party that has ‘encouraged or facilitated the arrangements’. It is therefore expected that HMRC will in due course pursue the Provider for the debt.
Comment
Many PSC arrangements will be under increased scrutiny following this decision. The MSC legislation significantly streamlines HMRC’s recovery process as it removes much of the ‘case by case’ analysis burden associated with IR35. It is believed that many other similar cases were on hold, pending the outcome of this case, and HMRC may now be emboldened to issue assessments and/or follower notices and accelerated payment notices to potential targets.
However another key impact likely to follow this decision has not yet been tested. Assuming that some or all of the amounts in question cannot be recovered from the PSCs, HMRC will then presumably seek to recover this debt from the Provider and also any other party involved in the arrangement, which could potentially include employing businesses or agencies. This area of the legislation has not yet been tested, and it remains to be seen how wide-ranging this recovery power will prove to be.
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[1] Christianuyi Limited and others v HMRC [2016] UKFTT 0272 (TC)

Representations of agents: Beware [inadvertent] exposure to liability
The High Court recently considered whether a company was induced to conclude an agreement by […]
The High Court recently considered whether a company was induced to conclude an agreement by way of misrepresentations made by a third party and, if so, whether the other party to the agreement was liable for the consequences. Gwendoline Davies considers the judgment and the practical implications.
Background
In Monde Petroleum SA v Westernzagros Ltd [1] Monde entered into a consulting services agreement (CSA) with Westernzagros (WZL) concerning the negotiation of an oil exploration and production sharing agreement with the Kurdistan Regional Government (KRG). Monde had the option, under the CSA, to acquire a 3 per cent interest. The consulting services were provided by a Mr Al-Fekaiki, the son of a prominent Iraqi politician.
Following alleged rumours that Mr Al-Fekaiki had “fallen from favour” in the region, WZL served a termination notice in relation to the CSA. After initially resisting, Monde subsequently concluded a termination agreement with WZL under which, in consideration of the payment by WZL of US$ 700,000 (for which Monde had already invoiced WZL), Monde agreed that the CSA was at an end and the parties released each other from all further liabilities. The 3 per cent interest had not vested by this time.
In proceedings in England’s Commercial Court, Monde claimed that its signature was procured by misrepresentation and/or economic duress (the duress plea was later withdrawn). The misrepresentations were alleged to have been made on WZL’s behalf by a Mr Bafel Talabani (Bafel), son of the then President of Iraq and a public official who appeared to have influence over the award of public contracts to WZL.
Monde alleged that Bafel had represented to Mr Al-Fekaiki in a series of telephone conversations that, if Monde agreed to sign, WZL would not only pay the US$ 700,000 (which it otherwise intended to withhold), but would also enter into a new agreement under which Monde would be given the chance to share in WZL’s profits. Monde sought to set aside the termination agreement and/or claim damages. WZL denied making any misrepresentations or that Bafel had any authority to act or speak on its behalf.
The issue
Was Monde induced by WZL to conclude the termination agreement by misrepresentation?
Judgment
It was evident that Monde had various business arrangements with Bafel, including accounting to him for the majority share of the sums it received from WZL (an arrangement of which WZL was unaware); also that WZL often used its own direct channel of communication with Bafel (bypassing Monde and Mr Al-Fekaiki); and that Bafel was involved directly in negotiations between WZL and the KRG.
The factual background is detailed and the judgment lengthy. As a general comment, the judge’s impression was that none of the witnesses of fact – on both sides – told him “the whole, unvarnished truth”.
The judge was satisfied that Bafel had made a number of calls to Mr Al-Fekaiki at the relevant time, during which Mr Al-Fekaiki was persuaded to sign the termination agreement. He also accepted Mr Al-Fekaiki’s evidence that, during the first of those calls, Bafel had told him that the key WZL executives were present, and that he had been asked by them to tell Mr Al-Fekaiki that, if Monde did not sign, WZL did not intend to pay the outstanding invoices.
The judge concluded that Bafel had made the representations, in substantially the same form as alleged. It was Bafel’s promise of securing Mr Al-Fekaiki’s interests, together with the promise of payment of the invoices, which persuaded him to sign.
There was no direct evidence to prove that Bafel made the representations on behalf of WZL. In order to establish that WZL was legally responsible, Monde had to show that WZL either actually authorised Bafel to make the representations, or by its words or conduct represented or permitted it to be represented to Monde that Bafel had that authority. The only direct evidence on the point came from WZL, but the judge found it unsatisfactory and not credible. He noted, however, that the conferring of such authority can be inferred instead from circumstantial evidence. This includes things said by the agent to the other party.
In addition to what Bafel had told Mr Al-Fekaiki about the presence of the WZL executives on the first call, it was also probable that Bafel had heard about the termination notice from WZL – there was no evidence that Mr Al-Fekaiki had told him about it or asked him to get involved. Having considered this, all of the other evidence and the parties’ arguments, the judge found it more probable than not that Bafel was trying to negotiate a new arrangement with WZL for himself and that, during those negotiations, WZL asked him to “clear the decks” by getting Mr Al-Fekaiki to sign the termination agreement. Bafel was therefore acting at WZL’s request, and so with its actual authority. He was not acting on his own, or on Monde’s, behalf.
The judge went on to say that, to the extent Bafel had said more than he was authorised to say, he was simply performing – in an unauthorised manner – the specific task set by WZL. This meant that WZL remained liable for his words and actions. There was clearly a “sufficient connection” between that task and Bafel’s statements to Mr Al-Fekaiki, to make it just that WZL should be held legally responsible [2].
Ultimately, WZL’s wrong caused Monde no substantial recoverable loss. WZL’s termination notice had been defective, because it did not comply with the required notice period. However, since WZL could have served an effective termination notice immediately, that would be sufficient to bring an end to the CSA and, with it, Monde’s three per cent interest.
Other issues
The court was asked to consider a number of other allegations, including that the termination notice was invalid by reason of breach of an implied term of utmost good faith. Please refer to our earlier article for a discussion of this issue.
Points to consider
On a practical note, this case serves as a reminder of the importance of being very clear and careful when dealing with agents, and of being alive to any conduct which could potentially expose a party to liabilities it had not bargained for. This is especially significant when relying on agents operating in unfamiliar territory.
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[1] [2016] EWHC 1472 (Comm)
[2] It is an established principle that liability by way of vicarious responsibility can arise even where the conduct complained of falls outside the agent’s authority. A sufficiently close connection is required between the conduct and the agent’s authorised acts. This “sufficient connection” test is seen in the context of employers being held vicariously liable for the acts of their employees, where there is a sufficiently close connection between the employee’s wrongdoing and the nature of his or her role.