In a case which is likely to have wide reaching effect to many current and future claims under the Inheritance (Provision for Family & Dependants) Act 1975 (“the Act”) Mr Justice Mostyn has refused an application to permission to bring a claim under the Act out of time
Section 4 of the Act provides that “an application for an order under section 2 of this Act shall not, except with the permission of the court, be made after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out”.
Mary Cowan (“Mary”) made an application under Section 4 of the Act seeking to extend time to bring a claim under the Act for reasonable financial provision following the death of her husband, Michael.
Michael died on 9 April 2016, aged 78. Mary was 74 at the time.
A grant of probate was obtained by his executors on 16 December 2016.
Mary’s application was made on 18 November 2018. This six month time limit had expired on 16 June 2017 and so her application was made nearly 17 months out of time.
Factors to be applied
Whilst Section 4 does not give any specific guidance as to how the court should approach an application for permission to extend time but common law has distilled a number of principles which should be considered.
Fundamentally, the court must be satisfied that the applicant has demonstrated good reasons for justifying the delay and that she has a claim of sufficient merit to be allowed to proceed to trial.
Mary and Michael’s relationship began in 1991. However, it did not become open cohabitation until after his separation from his wife first in 1994. They split their time between California and London. In February 2016 Michael was diagnosed with a brain tumour. He knew it was fatal. As a consequence, he was prompted to do two things. Firstly, to marry Mary on 8 February 2016 and secondly, to make a new will on 24 March 2016 (accompanied by a letter of wishes).
Under his final will Michael set up two testamentary trusts. One was a business trust with various beneficiaries and the other a trust where Mary was the primary beneficiary during her lifetime. Michael’s estate at the date of his death amounted to a little under £16m and the trusts were designed to avoid, so far as was possible, the consequences of inheritance tax.
The trustees had full discretion over both trusts. However, Michael’s accompanying letter of wishes clearly identified his intentions which he hoped and expected his trustees to follow, namely that under the business trust he wanted two funds of £500,000 to be set aside to provide education and support for his grandchildren and a safety net for his son, daughter-in-law and his stepsons and their families. Subject to that, he wanted the trustees to regard Mary as the principal beneficiary of both trusts during her lifetime.
In addition to the trusts, shortly before his death Michael had transferred $400,000 into a joint account for him and Mary. On his death, there remained the sum of $375,000 which passed to Mary by way of rights of survivorship.
Following Michael’s death an agreement was also reached with a trustee of one of the trusts that Mary would receive a regular monthly payment of $17,250. This agreement was reached in April 2017 but backdated to the date of Michael’s death and so the first payment was for £207,000 to cover the intervening months. In August 2018 this monthly payment was increased by agreement of $26,250.
Despite these financial arrangements, Mary sought to allege that Michael’s will failed to make reasonable financial provision for her.
rounds for the application
Mary contended that she was confused and stressed by the financial arrangements that had been put in place. She asserted that the method of payments may expose her to US taxes which she did not understand. She also alleged that she did not believe the trustees would carry out Michael’s wishes as regards additional discretionary payments under the trusts. To this end she sighted an example of a failure to pay medical expenses amounting to a little under $28,000 for recent knee surgery. In essence, Mary alleged that she lacked security as the ownership of the assets were not in her name and therefore absolute control of them was at the mercy of the trustees who could cut her adrift at any time with no access to any further money.
Merits of the claim
Mr Justice Mostyn disagreed with Mary’s counsel’s argument regarding lack of security. He said this was tantamount to saying that every widow had an entitlement to outright testamentary provision from her husband. This would, in effect, introduce a form of forced spousal heirship unknown to the law in this country.
In addition, he found that there was no evidence before the court to suggest that the trustees would not honour Michael’s wishes and ensure that all Mary’s reasonable needs would be met until her death.
In all the circumstances, he found that she did not have a claim which had real prospects of success.
Reasons for delay
In addition, Mr Justice Mostyn held that Mary had not demonstrated any good reasons for the very substantial delay in bringing the claim.
He did not accept Mary’s evidence as regards when she first became aware of her right to be able to make a claim under the Act. However, regardless of this, it was common ground between the parties that they had entered into a “standstill agreement” whereby the trustees agreed not to take the point regarding Mary’s failure to bring a claim within 6 months pending receipt of a letter of claim.
Mr Justice Mostyn expressed surprise that such agreements were apparently common place for claims under the Act but because of the “supposed moratorium” he was prepared to ignore the period of delay up to 1 May 2018 when the letter of claim was received. However, this was not the case in relation to the further period despite the ongoing negotiations between the parties.
As regards standstill agreements generally, he went on to say:
“if it is indeed common practice, then I suggest it is a practice that should come to an immediate end. It is not for the parties to give away time that belongs to the court. If the parties want to agree a moratorium for the purposes of negotiations, then the claim should be issued in time and then the court invited to stay the proceedings while the negotiations are pursued. Otherwise it is, as I remarked in argument, simply a cock a snook at the clear Parliamentary intention.”
He also made it clear that a time limit that had already expired should never in the future rank as a good reason for delay.
Whilst the decision as regards the merits of this claim are as ever fact specific and are therefore unlikely to have any significant impact on any other case in the future, this is not the case with the decision as regards the application for permission and specifically the question of standstill agreements. Whilst Mr Justice Mostyn may have expressed his surprise in relation to the same it is a fact that these are commonly entered into by parties to avoid the question of issue of proceedings in circumstances where claims are being investigated and/or negotiations taking place.
Indeed, there may be many cases already subject to a standstill agreement where consideration is now going to have to be given as to whether to issue proceedings, and if so, if the grounds for delay are going to be considered justified by the court. Certainly, if you are currently subject to a standstill agreement you would be well advised to press on and issue proceedings without further delay. Your claim may already be prejudiced but surely further delay will only to increase such prejudice?
We understand that although Mr Justice Mostyn refused to permission to appeal his order, Mary is intending to appeal the same. It is not known at this stage when such appeal is likely to be heard.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.