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Daejan decision offers good news and bad for landlords

On 6 March the Supreme Court issued its eagerly-awaited decision in the case of Daejan Investments Ltd vs Benson, concerning the rights of leaseholders to be consulted over the cost of works to their buildings.

Daejan Investments Limited is the landlord of a block of shops with flats over in Muswell Hill in London. The case revolved around the fact that the company had failed to comply with the consultation requirements set out in the Landlord and Tenant Act 1985 for work carried out on the five flats in Queens Mansions.

The Act states that landlords must 'consult' with their tenants otherwise face the possibility of not being paid the full cost of works. The original decisions in the Leasehold Valuation Tribunal and Court of Appeal went in favour of the tenants (Benson and others), preventing the landlord from recovering over £200,000 in costs. The landmark decision by the Supreme Court has overturned that, albeit by a majority of three to two.

David Barrett, an associate and property dispute resolution expert at leading national law firm Thomas Eggar LLP, commented: “Landlords will be mightily relieved by the long awaited decision of the Supreme Court handed down. By a majority of three to two, the Supreme Court has overruled the decision of the Court of Appeal, Upper Tribunal, and Leasehold Valuation Tribunal (LVT).

“As a result of the decision, the Supreme Court has widened the discretion of the LVT to grant a landlord dispensation from the consultation requirements which relate to the costs of ‘qualifying works’ payable through service charges.”

In its landlord and tenant blog, Painsmith Solicitors ( said: “The Court has now ruled that, whilst agreeing with the Court of Appeal that the effect on a landlord was not relevant, it was pertinent to take account of the prejudice which any leaseholder may suffer. The Court made clear that the consultation requirements are part of the broader statutory regulation of service charges and ensure that leaseholders do not pay for inappropriate works or pay unreasonable amounts. This is different from transparency per se.”

Dissenting from the judgement, however, Lord Wilson stated: “Lord Neuberger’s conclusion…that the gravity of the landlord’s noncompliance with the Requirements is relevant to dispensation not of itself but only insofar as it causes financial prejudice to the tenant seems to me to subvert Parliament’s intention.”

David Barrett continued: “Whilst tenant advisory groups may feel that landlords will have carte blanche to ignore the statutory procedures, the detailed judgment, delivered by Lord Neuberger, takes a characteristically considered approach to the intention behind the procedures and seeks to clarify the discretionary powers open to the LVT when dealing with such applications.”

Painsmiths agreed: “In practice it seems that dispensation will remain very fact specific. Landlords would in our opinion be foolhardy to think they can simply flout the rules and then subsequently make an application for dispensation. That being said where there is a breach the well advised landlord will be looking to make an application at the earliest opportunity and to consider what reasonable conditions they should offer.”

A more practical spin on the story was offered by leasehold advisor Bernie Wales, who pointed out that the whole process could have been avoided had Daejan complied with the requirement to consult in the first place.

“Whilst this is an obvious disappointment for the leaseholders, who have to pay £46,000 each for major works, the Daejan v Benson case goes to show that not complying with Section 20 consultation procedures can cost a landlord dearly. Daejan can afford £50,000 plus their own costs, but it is a complete waste of money (and 7 or 8 years of legal argument) and could have been avoided.”

Last Updated on Tuesday, 02 April 2013 13:40

Investment manager argues for fall in compensation discount rate, rather than a rise

Picture of Katie Wilson for Your Expert Witness storyOn 12 February Justice Minister Helen Grant has this week stated that initial evidence from consultation period on the discount rate used to calculate deductions from compensation awards may support a rise in the rate.

However, Katie Wilson, advice policy manager at financial advisors Towry (pictured), has called on the Government to reduce the discount rate, to ensure catastrophically injured claimants are adequately compensated for their financial losses.

She explained: "The Government's second consultation period into discount rates...which will address the legal framework for setting the rate, opened this week and its introductory paragraphs include the statement, 'The main criticism of the present law regarding the setting of the discount rate seems to be that the types of investments used as a basis for setting the discount rate are too cautious. Their rates of return are therefore too low. A less risk averse set of investments would, it is argued, be a more realistic reflection of the way that claimants actually invest and a better basis on which to set the discount rate.'

Last Updated on Monday, 18 February 2013 18:09


Privilege confined to legal profession, rules Supreme Court

Picture of Court 2 at the Supreme Court for Your Expert Witness storyOn 23 January the Supreme Court decided by a majority of five to two that legal advice privilege (LAP) – or legal professional privilege (LPP) – only applies to qualified lawyers; that is solicitors and barristers. The decision came as a result of an appeal in the case of Prudential and one of its subsidiaries, and a special commissioner for income tax. Prudential had argued that advice given by its accountant should attract the same LPP as it would have had it been given by a solicitor.

In the introduction to the judgement, Lord Neuberger said: "The specific issue raised by this appeal is whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company is entitled to refuse to comply on the ground that the documents are covered by legal advice privilege (LAP), in a case where the legal advice was given by accountants in relation to a tax avoidance scheme. The more general question raised by this issue is whether LAP extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far LAP thereby extends, or should be extended."

Last Updated on Wednesday, 30 January 2013 18:20


Open the door to talented women leaders, urges Law Society president

Law Society LogoLaw Society president Lucy Scott-Moncrieff has praised the flexible working practices of leading law firms and businesses for opening the boardroom door to talented women.

A major survey of leading lawyers commissioned by the Law Society found that despite big steps forward by many leading firms, some employers are paying mere lip service to flexible working.

The survey, which was conducted by global legal information and practice solution providers LexisNexis and saw nearly 1,200 lawyers respond, aimed to establish the main reasons for few women making partner and even fewer reaching management boards despite soaring numbers of women entering the profession.

Following the survey, a high-level international summit attended by over 130 delegates from top City firms, boutique practices and senior in-house counsel from major corporations including Ashurst, Deloitte, Herbert Smith Freehills and BP produced a series of recommendations aimed at addressing the problem. These include introducing gender targets and embedding flexible working practices in corporate culture.

Law Society president Lucy Scott-Moncrieff said:

'An increasing number of firms have genuinely embraced and adopted modern flexible working practices, allowing better work-life balance. These firms are attracting more talented women and men with boardroom potential.

'But there remains an uncomfortable truth. In some firms, where the opportunities for those wanting to strike a balance between high-flying work and family life are still scarce, men dominate the boardrooms. Unwittingly, these firms may be losing talented women and promoting mediocre men.

'It is not enough to merely pay lip service to the benefits of flexible working. It is not acceptable to consider women who take advantage of flexible working practices as somehow lacking commitment. The risk is that boardrooms will be full of men only some of whose talent warrants their senior positions. If career progression was based on pure merit, some male business leaders and law firm senior partners would never even have seen the paintings on the boardroom wall. This is disappointing for the talented women who lose out, but is also damaging to the organisations which lose what they have to offer.'

Minister for Women and Equalities Helen Grant said:

'Women are at the heart of this country's economic growth strategy. We need to do all we can to make the most of their talents and skills and that means providing them with the support to balance family life and a career.

'That is why the government is addressing the barriers faced by women, to ensure the workplace and, above all, our society match the needs of women in modern Britain. The report published today by the Law Society raises some issues, most importantly flexible and part-time working, which I fully endorse. This is crucial if we want women to stay in the workplace and will help businesses to retain talented staff.

'We also need to encourage and support employers to put the right measures in place. But the way to do this is not through special treatment or mandatory quotas. The evidence shows that our voluntary approach is working; in the past six months women now represent 44 per cent of FTSE100 Board appointments. We are taking the same approach with Think, Act, Report – a voluntary scheme that encourages companies to think about how to offer equal opportunities for women in the workplace. This approach is driving real change with more than 1.2 million employees – 11 per cent of the eligible workforce – now working for companies who support the scheme.'

The report, which details the recommendations and survey findings, was presented at an event hosted jointly by the Law Society and the Interlaw Diversity Forum tonight 10 January 2013 to an audience of nearly 100 people, including senior partners and in-house counsel from top firms including CMS Cameron McKenna, BP and Wragge and Co.

Firms including Ashurst, Eversheds and Hogan Lovells have already introduced targets for the number of women in high-level positions, while seven law firms, including magic circle firm Linklaters, have signed up to the government's Think, Act, Report initiative.

Last Updated on Friday, 18 January 2013 14:50

Bar’s third-party service gets FSA approval

Picture of money for Your Expert Witness storyThe Financial Services Authority (FSA) has granted regulatory approval under the Payment Services Regulations for the Bar Council's scheme to allow barristers to hold client's funds via a third party. The new service, known as BARCO, will allow clients to instruct barristers directly, instead of having to appoint them via solicitors. BARCO will initially involve a limited number of chambers, with a full roll-out expected in the spring.

According to a statement issued on 10 January by the Bar Council: "BARCO provides a straightforward, easily accessible, client-focused facility, whilst maintaining the Bar's high quality and cost-effective services."

BARCO is owned and operated by the Bar Council and provides an escrow service to receive funds from clients under a contractual arrangement, which are required in relation to on-going legal services for legal fees, alternative dispute resolution and other costs for experts' services, disbursements and settlements. The payment of funds from the escrow account is determined by the contract, allowing barristers to offer a full range of legal services without breaching their Code of Conduct by handling client money themselves.

Michael Todd QC, Chairman of the BARCO Committee and immediate past chairman of the Bar, said: "I am delighted that the FSA has granted approval to BARCO. We believe that it will offer an imaginative and unique solution for clients all over the world, making it easier than ever before to work with the Bar, whilst maintaining the Bar's high quality and cost-effective services.

"We look forward to sharing more details about the progress of the first phase in due course."

At the launch of the scheme in September he said: "Demand for barristers' advocacy and advisory services is growing all over the world. Domestic and international clients of all sizes, which regularly turn to the Bar, need a trustworthy and transparent vehicle to manage payment of their legal and litigation costs.

"BARCO is more than simply a bank account. It provides clients with the facility seamlessly to access the full range of the Bar's high-quality services, and it enables the Bar to change its business without changing the way it does business.

"The Bar is a forward-looking and modern profession which can tailor its services to ensure it remains relevant to its diverse and growing client base, and BARCO provides an ideal platform through which the Bar can handle its financial affairs.

"It is a significant investment in the Bar's future. It is good for clients, good for the Bar and good for competition in the legal services market."

Last Updated on Thursday, 10 January 2013 18:17