Feature

posted 4 Feb 2004 in Volume 9 Issue 2

Developments in Inheritance Act claims

In the second of two articles for ECA, Giles Harrap, a barrister at Pump Court Chambers, notes recent developments and current concerns in the context of the law relating to family provision on death. Readers will note the helpful inclusion of some previously unreported cases. These provide insight into current judicial thinking that appears to emphasise certain socio-economic issues and has been impacted upon by the important ancillary relief case of White v White.

Who succeeds? Tackling the problem of the adult child

Basic questions

When a claim or possible claim by an adult child against the estate of a parent is being considered, the first question for a court or legal adviser is whether the disposition of the deceased’s estate effected by the will (or the law relating to intestacy) is not such as to make reasonable financial provision for the claimant, that is, such financial provision as it would be reasonable for the claimant to receive for their maintenance. Only if the will or the intestacy rules fail to make such provision may the court proceed to consider the second question: what financial provision should the claimant receive for their maintenance? So much is clear from Sections 1(2)(b) and 2 of the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”).

A High Court judge nearly overlooks “the first hurdle”

The need to re-state the obvious is illustrated by the extraordinary case of Robinson v Fernsby and Scott-Kilvert [2003] EWCA Civ.1820. In that case the High Court judge who decided the case at first instance was of the view that the 44-year-old claimant’s resources, including those that she would receive from her mother’s estate if no order were made, were insufficient to meet her reasonable maintenance requirements, and he initially concluded that the will had failed to make reasonable financial provision for her. He initially sent out a draft judgement awarding her the sum of £60,000, being the capitalised difference between her needs and her resources. The will gave her 50 per cent of residue of a net estate of £330,000. The claimant had already received £205,306 on account just over a year before her mother died. The other 50 per cent of residue passed to the 16-year-old child of the claimant’s deceased brother. On reconsideration, the judge concluded that his initial approach was wrong. He said (at [2003] WTLR 529): “The fact that the claimant’s reasonable maintenance requirement cannot be satisfied out of her savings and other sources of financial support currently available to her, including what she can expect to receive out of the deceased’s estate, is not sufficient in itself to justify the making of an order under the Act ….”

In his final judgement, he concluded that the claim failed because it was not unreasonable that the will provided for the claimant to receive no more than 50 per cent of the estate. Despite the disappointment felt by the claimant, the Court of Appeal refused to interfere with the final conclusion of the judge.

The essential task of the court in these cases was neatly summarised by Peter Gibson LJ at paragraph 119: “In assessing whether the disposition of the deceased’s estate effected by her will was not such as to make reasonable provision for the claimant, the judge had to take into account the matters specified in s.3(1)(a)-(g) [of the Act] and they included every matter, which in the circumstances of the case the court considered relevant. The task of the court inevitably involves weighing the various factors for and against the claimant’s claim.”

No requirement of a “moral obligation” or special hurdle for adult children

The task of the court under the Act cannot be cut short by writing into the Act a gloss that is not there. Three cases in the late 1990s destroyed the common misconception that an adult child of full capacity could only succeed in a claim under the Act if he could establish a “moral obligation or other special circumstance”. The cases were Hancock, deceased [1998] 2 FLR 346; Pearce, deceased [1998] 2 FLR 705; and Espinosa v Bourke [1999] 1 FLR 747. In those three cases, the Court of Appeal pointed out that that Coventry, deceased [1980] 1 Ch 461 had decided no such thing. The task of the court in assessing the claims of adult children is that prescribed by the words of the statute summarised by Peter Gibson LJ in Robinson.

Practical assessment

The vital first step in assessing a claim by an adult child, as in any other, is to ascertain all the relevant Section 3 factors. They are “determinative” and “a complete list” as noted by Aldous LJ in Espinosa v Bourke [1999] 1 FLR 747 at 759 and 760. Do not, like the trial judge in Espinosa v Burke, focus on obligations, let alone on “moral obligations”, to the exclusion or near exclusion of all else. As stated in Robinson, the matters the court may take into account include “any matter, which in the circumstances of the case the court may consider relevant”. In Robinson, the deceased had expressed the view that she wished the claimant to receive a larger share of her estate than her grandson. The Court of Appeal held that the judge had rightly taken the deceased’s view on this into account, but upheld his decision that the view expressed by the deceased should not prevail.

The next step is to make the assessment involved in answering the question posed at the outset of this article having regard to the Section 3 factors. In most cases, as Butler-Sloss LJ pointed out, citing and approving the insight of Sir John Knox in Hancock, deceased, the court has to engage in a balancing exercise among the many factors to which Section 3 requires the court to have regard. Thus in Espinosa v Burke at 757H, Butler-Sloss LJ weighed up all the factors and held that reasonable financial provision had not been made for a 55-year-old married daughter who in the last year of the deceased’s life had spent most of her time in Spain with the man she eventually married and with whom she set up a small business, because on the facts her straitened circumstances, the obligations of the deceased towards her following a promise to her mother and the lack of competing need, outweighed the adverse factors set out.

In Espinosa v Burke, the court repeated that “if the applicant is of working age, with a job or capable of obtaining a job, which would be available, the factors in favour of his claim for financial provision may not be of much weight in the scales”. But, such earning capacity is not decisive. It is only a feature of the case that may have that effect. In Coventry in the late 1970s it did have the effect of causing the balance to come down clearly against the applicant – especially in view of the fact, often ignored, that the claim was made against a very modest estate that passed in its entirety to his elderly and relatively impecunious mother – the deceased’s estranged widow. The facts in Espinosa v Burke [1999] 1 FLR 747 were very different – there was a substantial estate and a lack of competing needs and these features clearly contributed to the balance coming down firmly in favour of the applicant – see 757-758.

Taking into account social and economic change

Apart from the lesson that all the Section 3 factors should be weighed in the balance, Espinosa v Burke [1999] 1 FLR 747 also taught the lesson that attention should be paid to the significant economic and social changes that have occurred since Coventry. Commenting on the submission that an adult child who is capable of working does not need maintenance, Aldous LJ in Espinosa v Burke at 760H said: “In these days where persons without qualifications find it difficult to obtain employment, the court should not approach the question of what is the appropriate maintenance with any pre-conceived view.”

Although unemployment may have fallen significantly since then, the point remains a valid one in the sense that those who have no qualifications at least find it difficult to obtain employment that is sufficient to yield a viable income to obtain housing and maintain a family. This affects the balancing exercise through the range of potential applicants. I hope readers will find it useful if I mention some unreported cases. I do so to try to illustrate the somewhat dry statement of principle set out above.

Provision for the young adult through education and training

Section 3(3) requires the court to have regard not only to the manner in which the applicant was being educated or trained, but also to the manner in which he might expect to be educated or trained. Re Hocking, deceased CA transcript 12/6/97 was a case where awards to two young adult daughters of the deceased were upheld. Emma aged 20 at death and 22 at the hearing before the judge had, by the time of the trial, just completed four years at university. The judge topped up her grant for the university period and made an award to cover the five months after leaving to allow her time to get a job. He awarded her £4,000. Lucy was 16 at death and 18 at the hearing. She obtained a place at university and was hoping to undertake one-year teacher training afterwards. Again the judge made an award that topped up her grant over the four-year period. He awarded her £8,000. The abolition of grants, the effective withdrawal of local authority support for post-tertiary education training and the prospect of increasing university fees will all need to be brought into the balance. More recently, a district judge gave a 15-year-old school girl £57,000 to see her through medical school as well as ordinary school and a High Court judge gave a small child £30,000 (discounted for early receipt) to see her through higher education.

Provision for adult in his twenties who missed out on training

In 1999, a district judge awarded £9,625 to the 26-year-old son of the deceased from a net estate of £530,000 to see him through a plumbing course. The effective disposition under the last will was that, after legacies totaling £70,000, residue would be divided equally between five legitimate children. No provision was made for the claimant under the will. On appeal, a High Court judge added £50,000 to the award to enable the son to house himself, his cohabitant and their baby on the ground that his position in the labour market and hence his capacity to borrow had been much weakened by lack of training.

Those approaching or in retirement

In Hancock, deceased [1998] 2 FLR 346 a daughter of the deceased who had been married at 19 and later divorced was 58 at the date of death of the deceased and living with a man on benefits. She was 69 at the date of the hearing before the judge. The judge’s award of £3,000 a year from an estate of £663,000 was upheld although the judge found no moral obligation was owed to her. What do they get? The spouse’s claim to accumulated capital On a claim by a spouse, Section .3(2) of the Act requires the court to have regard to: “The provision which the applicant might reasonably have expected to receive if on the day on which the deceased died, the marriage, instead of being terminated by death, had been terminated by a decree of divorce.” So the decision of the House of Lords in White v White [2001] 1 AC 596, which had a revolutionary impact on ancillary relief claims, has repercussions for surviving spouses who make a claim under the Act of 1975.

The developments in ancillary relief claims

The speech of Lord Nichols in White noted a number of matters that are of importance in claims under the Act. They are that:

There should be no discrimination in favour of the money-earner and against the home-maker and the child carer;
More often than not, achieving a fair outcome will not result in equal division, but so as to ensure the absence of discrimination, equality should be departed from only if, and to the extent that, there is good reason for doing so;
The rule that where assets substantially exceed needs the value of the wife’s claim should be confined to satisfying her reasonable needs for housing and income was wrong;
Applying a “requirements” based assessment had been demonstrated to have been unfair in cases of very long marriages where the wife was elderly, had little expectation of life and, therefore, modest requirements;
Where resources exceed need, a wife’s desire to have funds to pass to the next generation was at least as valid as that of her husband.

In divorce cases, levels of award have risen dramatically in cases where assets exceed needs. In Lambert v Lambert [2003] Fam 103, Thorpe LJ reviewed the cases since White. He described Lambert itself as “a text book case”. The parties had been married for 23 years, had two children and the £20m available for distribution between them had all been generated during the marriage. The Court of Appeal awarded the wife 50 per cent of the assets saying (at 155): “There must be an end to the sterile assertion that the breadwinner’s contribution weighs heavier than the homemakers.”

Application to claims by widows under the Act

In applying these cases to claims by widows under the Act, it should be remembered that the fiction of divorce is not to be treated as the pre-eminent consideration and certainly should not be seen as imposing any upper limit on claims under the Act – see Re Krubert (decd) [1997] Ch 97 at 106. In Adams v Lewis [2001] WLTR 493 the marriage lasted 54 years. The wife, aged 86, had borne the deceased 12 children. The judge held that the observations in White applied to an inheritance claim by a surviving spouse, held that a legacy of £10,000 and the facility for the trustees to provide a suitable residence for her were not reasonable provision and ordered that the home valued at £150,000 or roughly half the estate should be awarded to the wife.

McNulty v McNulty [2002] WTLR 737 was an application by a widow. The judge granted the application and having regard to the position on divorce awarded the 77-year-old widow of a 37-year marriage £175,000 to give her a capital fund from the estate of £240,000. At paragraph 85 the judge performed the White equality cross check – it yielded £105,000. He rightly noted that the great difference between divorce and death is that both parties have to be provided for on divorce but only one on death; so under the 1975 Act it will often be appropriate to award a higher sum than the divorce award. He proceeded to award £175,000 rather than the £105,000 yielded by the equality cross check.

Cutting out claimants

In Re Nathan [2003] 1 WLR 827 John Martin QC sitting in the Chancery Division reiterated that a condition to the effect that a beneficiary who challenges a will loses the benefits given to him in the will is, in principle, valid. He further held that a condition that deprives others as well as the challenger of provision is valid – in that case the charity MIND would have been the innocent losers but for an “uncertainty” argument.

John Martin QC expressly rejected an argument that a condition depriving a claimant or others of a benefit under the will on a claim being made under the 1975 Act would be bad as a matter of public policy. He pointed out that, as happened in the Nathan case, such a condition does not prevent a claim being made. A claimant has his statutory right to make a claim whether the condition operates or not and the court will take into account the operation of the condition in deciding whether there has been a failure to make reasonable provision and if so what to award.

He concluded that the English courts regard freedom of testamentary disposition as a matter of public policy that should be weighed against any argument that it is contrary to public policy to deter a claimant from making a claim under the 1975 Act.

Procedural developments

Pre-action behaviour

As from 1 April 2003, a new expanded paragraph 4 of the Practice Direction on Protocols came into force to govern pre-action behaviour in cases not covered by an approved protocol. There is no approved protocol for the resolution of Inheritance Act claims, so the new paragraph 4 regime applies to such cases.

Proceedings and the service of evidence

Once proceedings have begun, the requirements of Part 8.5 as to the service of evidence are extremely stringent. Since Part 57 came into force on 2 December 2002 there can be no doubt that an old fashioned Order 99 witness statement by claimant, followed by a witness statement by defendant, followed by directions for exchange of supporting evidence is not permitted by the rules. Part 57.16 simply applies Part 8 procedure and its rules as to exchange of evidence. By Part 8.5(1): “The claimant must file any written evidence on which he intends to rely when he files his claim form”; and by Part 8.5(3): “A defendant who wishes to rely on written evidence must file it when he files his acknowledgment of service”. The only concession to the old regime is that Part 57 allows 21 days to acknowledge service and file evidence. The provisions rely on the pre-action letters of claim and responses being sufficient to identify the evidence that needs to be adduced.

And, finally, what to avoid…

The potential consequences of abuse of the caveat procedure, non-compliance with Practice Direction on Protocols and the rules contained in Part 8, were revealed in re Parnall [2003] WTLR 997. Solicitors for the applicant entered a caveat, failed to provide pre-action disclosure and failed to serve evidence with the claim form as required by the rules. The defendants applied to strike out. The judge dismissed the application but on terms that the claimant paid all the costs from entry of the caveat to publication of the judgement and directed the applicant’s solicitors to show cause why a wasted costs order should not be made*.

* This case will be considered in-depth by Sidney Ross in the next issue of ECA.

Giles Harrap is available at 3 Pump Court, Temple, London EC4. Telephone 020 7353 0711 E-mail clerks@3pumpcourt.com Also at 31 Southgate Street, Winchester and 5 Temple Chambers, Temple Street, Swindon.