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Grandfather clause in LTCG: Why it may be time to call up your tax lawyer

At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.

The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.

If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London. West Texas Intermediate crude was up 3.8 percent to $40.06 a barrel at 8:13 a.m. in New York.

“The look and shape of the oil industry would likely change over the next five to 10 years as companies emerge from this,” Wood said. “If oil prices stay at these levels, the number of bankruptcies and distress deals will undoubtedly increase.”

Debt repayments will increase for the rest of the decade, with $72 billion maturing this year, about $85 billion in 2016 and $129 billion in 2017, according to BMI Research. About $550 billion in bonds and loans are due for repayment over the next five years.

U.S. drillers account for 20 percent of the debt due in 2015, Chinese companies rank second with 12 percent and U.K. producers represent 9 percent.n the U.S., the number of bonds yielding greater than 10 percent has increased more than fourfold to 80 over the past year, according to data compiled by Bloomberg. Twenty-six European oil companies have bonds in that category, including Gulf Keystone Petroleum Ltd. and EnQuest Plc.

2009 contract law

2009 Contract Law

Q1) Explain the law on capacity to contract. Provide full authority for your answer

In order to enter into a valid contract, both parties must have capacity. Capacity is effected by a person’s age and mental capacity.  The formalities are prescribed in certain contracts set out in the Requirements of Writing (scot) Act 1995.

Minors

Capacity of legal age in Scotland is 16. There are special provisions for those under 16. Anyone over 16 and in full command of their faculties can make contracts. Age of legal capacity (Scotland) Act 1991. This separates a person’s capacity into 3 periods. In general, anyone under 16 is deemed to have no capacity to enter into transactions (parents usual legal representatives) . Children are able to enter a transaction provided two conditions are met; 1) transaction must be of a kind commonly entered into by persons of that age and circumstances. 2) The terms of the transaction must be reasonable. Cumulative. If one is breached transaction is void.

Insane

A person of unsound mind has no contractual capacity. Most “contracts” made by an insane person are void. If a curator bonis has been appointed to manage the insane person’s affairs, the latter has no contractual capacity at all. If a curator has not been appointed and the person’s mental state is fluctuating then his contracts will only be valid if made during a lucid interval. An on-going contract does not necessarily lapse in the event of the supervising insanity of one party

Louden v Elders CB 1923

Dundee meat retailer ordered supply from Liverpool firm while insane, unknown to supplier , certified insane after order but before delivery, CB appointed and cancelled order, supplier sought damages for breach. Held, No liability as contract void.

Contrast with English Law – Hart v Connor 1985

For a breakdown of the laws in America, Florida abogados de accidentes

Mentally unsound P bound to sell land as the other P did not know of incapacity when bargain was made.

Wink v Mortimer 1849 ( find cases)

The common law attitude to long term or perpetual trusts

Q3) “The common law attitude to long term or perpetual trusts was that in general such trusts were upheld. The existing restrictions on trust provisions (in relation to accumulations and successive lifrents) are statutory in origin”. Explain those restrictions and the arguments for their retention or whether they should be reformed or repealed.

In England and Wales, the beneficiary in general is able to claim from the trust the income generated from the property when they turn 18. The law of Scotland differs from this as there is no equivalent entitlement to the income of trust at the age of 18 however, scot law does limit the accumulation period.

https://www.lexisnexis.com/en-us/gateway.page

An accumulation of income has rules derived from the Accumulation Act 1880 and 1848 act. Accumulation is adding income to a capital fund rather than distributing it. This act was introduced to remedy situations when this occurs. An example of this being put to play was illustrated in the Thellusson v Woodford 1805 case. Mr T directed the income of his property to be accumulated during the lives of his children and grandchildren. The accumulation fund amounted to £600,000 which continued over 60 years. The bequest was held to be valid. In order to prevent property being distributed like this in the future, the parliament passed the “The Thellusson Act 1800” to prohibit perpetuities. The courts summaries both of the above acts as serving the purpose to prevent allowing accumulation to continue growing over a certain duration of time in order to generate mass capital for the benefit of a generation yet to come.

Limiting the periods allows the funds to be actually be distributed to a beneficiary rather than being held doing nothing collecting dust. The relevant provisions which deal with the specific periods of time are The Trusts (s) Act 1961 s5 and the Law Reform (Miscellaneous Provision) (S) 1966 s6. Both acts working together, place six possible periods to prevent accumulation. It will be up to the courts to decide which to enact depending on the facts of the case.

Accumulations limited by the Trusts (S) Act 1961 s5 sets out four periods. The first states that if the deed is an inter vivos deed, the accumulation may continue throughout the life of the grantor. If the accumulation continues after death one of the permitted periods may apply however, it can continue if the direction makes a reference to a minority which will not apply the rules of Age of Legal Capacity 1991 Act, instead it will take the definition for section 6 of the act which states a minority is 21, it will continue after death.

Section 5 (b) allows the accumulation to continue for a term of 21 years after the death of the grantor. This is illustrated in Carey’s Trs v Rose 1957 where Mr C directed his trustees to hold the residue of his estate for his son for when he turns 21 however he failed to give direction to the income of the estate. The son was born two years after the death of Mr C which lead to the period amounting to 23 years. The question was whether this was illegal. It was held that any income subsequent to a period of 21 years must fall into intestacy. The direction is void if it’s over 21 years and the person who, if the direction had not been made, would be entitled to the income will receive it.

Section 5 (c) states that the duration of the minority or respective minorities of any person or persons living or in utero at the death of the granter may continue.

And section 5 (d) duration of minority or minorities of any person or persons who, in terms of the will, or settlement, or other disposition directing the accumulation, would, for the time being, if of full age, be entitled to the income directed to be accumulated.
The limitations placed by the Law Reform (Miscellaneous Provisions) (S) Act 1966 s6 are as follows; S6 (a) provides that income may be accumulated for a term of 21 years from the making of the settlement or other disposition and also the duration of the minority of any person living or in utero at the date of the making of the settlement or other disposition at the date of the deed.

In addition to this, Scots law have developed a rule that limits the creation of life rents. This derived from the Entail Amendment Act 1843 (now section 18 of Law reform act 1968)  What this entails is that a life rent can only be created in favour of a person who is alive or in utero at the date when the deed creating the life rent comes into operation. If a life rent is created in favour of any other person, that person is entitled to a right of fee either as soon as the life rent comes into operation or, if later, when he or she attains majority. If not in life when deed comes into operation but is subsequently born, take the life rent until 18 then take capital absolutely to exclusion of intended capital beneficiary

Explain to the trustees the legal principles applicable to the investment of trust funds

Q5) 

Trusts are not confide to the world of wills and family settlements, they have a considerable and increasing relevance in many commercial enterprises such as investment trust funds. However, over the course of time the economic and social nature has evolved so rapidly that the law governing the powers and duties has not been able to keep up. The Scottish Law Commission have stated that the Trusts Act 1964 is out of date, it was examined critically by them and they propose it should be replaced by new statutory provisions which give trustees power to make an investment of any kind if they are entitled to the trust absolutely or beneficially. And that trustees should have the power to acquire land on behalf of a trust.

A trust deed if it involves an investment will have to be adhered to whether it be to invest in a particular area or to avoid certain investments. However, under the Trusts (S) Act 1921 s4 it states that, if the trust deed is silent it gives trustees the power to make “any kind of investment”. This covers heritable property, moveable or incorporeal such as shares. Lord Watson gave his description in the case of Learoyd v Whiteley 1887 he stated that

As a general rule the law requires of a trustee no higher a degree of diligence in the execution of his office than a man of ordinary prudence would exercise in the management of his own private affairs. It is the duty of a trustee to confine himself to the class of investments which are permitted by the trust, and likewise to avoid all investments of that class which are attended with hazard”.

Before the 1921 Act, if there was no power conferred in deed very limited power to invest. The 1921 Act sought to improve situation by conferring certain powers in addition to those in deed provided they did not conflict with deed however, this provision was not really satisfactory. The Trust Act 1961 divides investment of trust into two groups; the narrow range of investments which are fixed securities and wide range such as shares. The act states that if a trustee seeks to invest in a wide range he must firs divide the fund into two parts. This however, was regarded as being a burden and that the “wide range” investments were restricted as it did not include investments to purchase land. A reform was sought by the Scottish Law Commission.

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Law of Succession pt.2

Q2) “The common law attitude to long term or perpetual trusts was that in general such trusts were upheld. The existing restrictions on trust provisions (in relation to accumulations and successive lifrents) are statutory in origin”. Explain those restrictions and the arguments for their retention or whether they should be reformed or repealed.

In England and Wales, the beneficiary in general is able to claim from the trust the income generated from the property when they turn 18. The law of Scotland differs from this as there is no equivalent entitlement to the income of trust at the age of 18 however, scot law does limit the accumulation period.

An accumulation of income has rules derived from the Accumulation Act 1880 and 1848 act. Accumulation is adding income to a capital fund rather than distributing it. This act was introduced to remedy situations when this occurs. An example of this being put to play was illustrated in the Thellusson v Woodford 1805 case. Mr T directed the income of his property to be accumulated during the lives of his children and grandchildren. The accumulation fund amounted to £600,000 which continued over 60 years. The bequest was held to be valid. In order to prevent property being distributed like this in the future, the parliament passed the “The Thellusson Act 1800” to prohibit perpetuities. The courts summaries both of the above acts as serving the purpose to prevent allowing accumulation to continue growing over a certain duration of time in order to generate mass capital for the benefit of a generation yet to come.

Limiting the periods allows the funds to be actually be distributed to a beneficiary rather than being held doing nothing collecting dust. The relevant provisions which deal with the specific periods of time are The Trusts (s) Act 1961 s5 and the Law Reform (Miscellaneous Provision) (S) 1966 s6. Both acts working together, place six possible periods to prevent accumulation. It will be up to the courts to decide which to enact depending on the facts of the case.

Accumulations limited by the Trusts (S) Act 1961 s5 sets out four periods. The first states that if the deed is an inter vivos deed, the accumulation may continue throughout the life of the grantor. If the accumulation continues after death one of the permitted periods may apply however, it can continue if the direction makes a reference to a minority which will not apply the rules of Age of Legal Capacity 1991 Act, instead it will take the definition for section 6 of the act which states a minority is 21, it will continue after death.

Section 5 (b) allows the accumulation to continue for a term of 21 years after the death of the grantor. This is illustrated in Carey’s Trs v Rose 1957 where Mr C directed his trustees to hold the residue of his estate for his son for when he turns 21 however he failed to give direction to the income of the estate. The son was born two years after the death of Mr C which lead to the period amounting to 23 years. The question was whether this was illegal. It was held that any income subsequent to a period of 21 years must fall into intestacy. The direction is void if it’s over 21 years and the person who, if the direction had not been made, would be entitled to the income will receive it.

Law of Succession – Past Paper Help!

Q1) Facility & Circumvention and Undue Influence. Explain both and simple procedures to prevent this.

In Scots law, for a will to be valid it must have been created by a testator who possess two things at the time it was made; capacity and intention to test. For it to formally valid, it must meet the statutory requirements which are laid out in the Requirements of writing act 1995. The decisive factor to raise a case is whether or not the testator’s had been misguided to allow someone else to take advantage of their wishes.  Problems can arise from allegations that the will was made under pressure.

An individual may suffer a degree of mental deterioration which, without amounting to insanity, leaves him vulnerable and easy to take advantage of. When this is the case, three elements must be present at the time the will was made. These are; being in a weakened state of mind, signs of fraud and also lesion. In other words, not being able to freely express his intention to allow personal gain for beneficiary. Lady Smith summarised this in the case of Horne v Whyte 2005 where it was stated that:

“… Three elements are clearly interrelated, they require to be looked at as a whole and the strength of the pursuer’s case on one matter may compensate for weakness on other matters.”

The concept of facility is clear, when an individual can be easily misled who suffers from a weakened state of mind, but not diagnosed with insanity. Where the water becomes clouded is when defining facility. If the testator is under the influence of drugs or alcohol or suffers from a mental illness, facility may arise from these however, it does not automatically qualify the testator to be facile. The facts of each case must be questioned and analysed. Lord Justice Clerk described it as where

“A person is in such a mental state that he is unable to resist pressure and… someone else can mould and fashion his conduct as he pleases.”

Bearing this in mind, the court are not quick to label a testator as facile. The views of medical practitioners hold a heavy weight in the decisions made as their opinions are conclusive. In Rennie v Stephen 1991 it was held that mild dementia was concluded by medical experts to not interfere with a person’s judgement. This highlights how strong medial opinions are, as they are objective.

Thus, the question to be asked will be the testator’s state of mind morally and constitutionally: Openness to machination, not a lack of understanding. The Perception of persuasion is vital in this matter.

Circumvention is defined as fraud or deceit. It is an intimidation operating on the mind as to bring the individual within entire control. This is challenging to prove as, it is generally only witnessed by the testator and by the time the challenge has been brought to light the testator may have already passed. When the alleged facile person is still alive, facility must be proved and also specific acts of circumvention or facts of circumvention for the court to infer. In Parnie v Maclean it was held that the degree of circumvention would depend on the degree of facility.

In the Horne v Whyte 2005 case, a housekeeper who was included in the homeowners will could only have been caused by her circumvention which amended his will. http://legalresearch.westlaw.co.uk