Former Wife's Entitlement to Late Husband's Estate

Background

The deceased, David John Sismey (“David”) and his first wife, Sheila separated in 2005.  Negotiations in relation to the terms for a financial settlement were ongoing for many years and in the meantime, the deceased met a new partner, Marissa who he subsequently married in October 2019.  The couple had one child, John, born in October 2008.  David and Sheila also had one son, Thomas, now aged 28 years old.

In February 2017 the court approved a consent order concluding the financial agreement between David and Sheila.  By 13(i) of the recitals to that order, David undertook to “irrevocably to execute forthwith a deed in the form annexed this order covenanting with [Sheila] to leave by will to [Thomas] [the Property] so as to be binding upon his personal representatives”, the Property being 3 Birch Vale, Belper, Derbyshire, a property which David had purchased in his own name in 1986.

Sheila and Thomas had vacated the Property following Sheila’s separation from David and moved into a property which she had purchased using inheritance monies from her parents.  Sheila understood by agreeing to the consent order she would have no claim on the Property which David retained as his home.  Marissa also signed a statement at the bottom of the order confirming that she had “read and understood the contents of this proposed court order, and confirm that I do not claim any beneficial interest in respect of [the Property].”

By a deed of covenant of the same date, David covenanted to “so as to bind his personal representatives to leave irrevocably in his lifetime by will [the Property]” for the benefit of Thomas.  Paragraph 1 of the preamble to the deed stated “… and is supplemental to an Order made in the Nottingham Family Court dated … in case number …”.

In March 2017 David also executed a will.  By clause 5.1 of that will he gifted the Property to Thomas.  By clause 7.1 of the will the residuary estate was left equally to Thomas and John.  This will was revoked as a result of David’s marriage to Marissa.

The parties’ financial positions

It was accepted between the parties that the reason for David and Marissa’s marriage was to enable her to receive the widow’s benefit of his pension worth several hundred thousand pounds. Marissa also had personal savings of about £20,000.00 and shortly before his death David had transferred the sum of £29,000.00 to her.  In addition to the lump sum pension payment upon David’s death she received his life insurance and the contents of a joint bank account which brought the totality of her savings up to about £79,000.00.  She also owned properties and land in the Philippines worth about £14,000.00.  Her income comprised her widow’s pension of about £1,100.00 per month and a modest income of about £800.00 per month which was unlikely to increase whilst John was still a minor.  She also received child benefit of just under £85.00 per month.

Thomas’ financial position comprised savings of about £71,000.00 (which included 50% of the sale proceeds of a separate property which had featured in his parents’ divorce settlement) and his pension scheme.  He was employed as a police constable.

Matters thereafter

In July 2019 David was diagnosed with terminal cancer.   He died on 28 January 2020.  As a result of the revocation of his will, David died intestate and his estate fell to be distributed in accordance with the Intestacy Rules.  David’s estate was modest, the net value being some £203,243.00, with the Property forming £190,000.00 of that figure.  Subject to the effect of the deed of covenant, Marissa, as David’s spouse, stood to inherit the entirety of his estate pursuant to the Intestacy Rules.  In May 2020 Marissa obtained a grant of letters of administration and transferred the Property into her sole name.  She and John remained living in the Property as they had done since 2012, having lived in the Philippines prior to this date. 

The claims

In proceedings issued by Thomas, he sought specific performance of the agreement in the deed of covenant.  Alternatively, he argued that a constructive trust had arisen in his favour as a result of the deed of covenant and he sought a declaration that the Property was held on trust for him and an order requiring Marissa to transfer it to him.

Marissa defended the claim asserting that the deed was unenforceable as a result of a failure to comply with Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 (“the Property Act”) and further denied that a constructive trust had arisen.  She also argued that she should be entitled to claw-back the Property to form part of the net estate pursuant to Section 10 of the Inheritance Act.

Marissa also brought separate proceedings herself wherein she sought an order for reasonable financial provision under the Inheritance Act in the event that the court found in Thomas’ favour on either of his claims.  Insofar as the court were to conclude that the deed was enforceable she also sought an order under Section 11 of the Inheritance Act that the Property nonetheless formed part of the net estate and should not be transferred to Thomas. 

What did the court decide?

The court found that the deed of covenant was enforceable on the basis that the words ‘supplemental to an order’ set out in the first paragraph in the preamble to the deed were sufficient to incorporate the other terms of the consent order under the Property Act.  In the judge’s view the objective reader would be left in no doubt that the deed should not be read in isolation to the order and that the deed was in addition to the order with both documents needing to be construed together to obtain a full understanding.

In the alternative, the court held that the facts would have given rise to a constructive trust in favour of Thomas. 

As regards Marissa’s claim, the court concluded that David had made the contract with the intention of defeating Marissa’s claims under the Inheritance Act on the basis that it was central to his aim in the divorce negotiations to secure the Property against claims from Marissa.

As a consequence it was necessary for the court to give consideration to the question of whether full valuable consideration had been given for the agreement.  Marissa contended that there was clear evidence of collusion between David and Sheila designed to affect her adversely by putting the Property out of her reach or indeed any other third party.  Such collusion, said Marissa, resulted in Sheila not providing full valuable consideration.

The court held that giving up a claim for financial remedy as Sheila did would be taken to be good consideration unless some vitiating factor could be shown such as fraud, misrepresentation or collusion.  There was a vitiating factor in this case – David and Sheila had colluded together in the divorce negotiations to adversely affect Marissa.  In the circumstances, the judge was entitled to dis-apply the presumption and consider whether, as a matter of fact and law, full valuable consideration had been given.  On the basis that the settlement had enabled David to keep his valuable pension, he had received sufficient consideration for the agreement to leave the Property to Thomas.

Conclusion

In the circumstances, the court concluded that the property was held on trust for Thomas and the Section 11 claim under the Inheritance Act was dismissed.  Whilst Marissa could establish a number of the elements for such an order her claim failed for want of proof that full valuable consideration was not given.  The Property was not therefore available as an asset of David’s estate eligible to service her claim under the Inheritance Act.

As to her claim for reasonable financial provision under the Inheritance Act, given that she was already in receipt of all the other modest assets in David’s estate there were no other assets upon which her claim could be founded.

Accordingly, the court ordered that the Property be transferred to Thomas.