05 July 2022 - Article
English law recognises the right to choose who inherits, known as testamentary freedom. But the Inheritance (Provision for Family and Dependants) Act 1975 (the ’1975 Act’) means certain categories of individuals – including surviving spouses – can apply to court for reasonable financial provision from an estate.
Claims started more than 6 months after the grant of probate need the court’s permission to proceed. Such was the case when Mary Cowan sought provision from the estate of her late husband Michael.
Michael Cowan, a businessman credited with bringing the black bin liner to the UK, met Mary (who lived in California) in a Caribbean airport lounge in 1991. In 2001, after concluding a long divorce battle against his first wife, Michael and Mary bought a home together in Montecito, California.
There followed 15 years of happy cohabitation, before Michael was diagnosed with a brain tumour in early 2016. Mary and Michael married shortly afterwards in February 2016 and Michael died two months later.
He left almost his entire estate, sworn for probate at just under £30 million, on trusts with a default to a Charitable Foundation which has never been active. He also left a letter of wishes which said his Will Trustees were to regard Mary as the principal beneficiary.
The trust structure left Mary (now 78) dependent on the goodwill of the trustees. They own the Montecito house and have the ability to require Mary to leave her home. She is also reliant on them to pay her day to day living expenses and uninsured medical expenses, which in California are a significant factor.
Mary was surprised when she realised she would not receive funds outright, but she initially believed the Will Trustees’ assurances that they would make funds available for whatever she needed. However, in November 2017, already more than 6 months after the grant of probate issued, the trustees questioned her medical expenses.
In December 2017 Mary gave notice that she would bring a claim for reasonable financial provision from the estate. In January 2018, the Will Trustees agreed not to take a point on timing pending receipt of Mary’s letter of claim.
Nearly twelve months of negotiation followed with both the Will Trustees, who agreed a ‘standstill’, and the Charitable Foundation’s trustees.
High Court hearing
After a failed mediation in October 2018 Mary issued her claim. At that point the Will Trustees and the Charitable Foundation trustees said for the first time they objected to Mary being allowed to bring her claim as being out of time.
In February 2019 Mr Justice Mostyn ruled that Mary should not be granted permission because, he said, (i) her claim for reasonable financial provision was bound to fail and (ii) the delay in bringing the claim was not excusable.
He suggested if the trustees failed to follow the Letter of Wishes Mary would be able to sue them for breach of trust. He also condemned the common practice of agreeing a standstill to avoid having to incur the cost of issuing proceedings as ‘cocking a snook at Parliament’. He said the practice should end immediately, causing consternation amongst lawyers and a rush to issue proceedings in matters where standstill agreements had been in place.
Court of Appeal’s decision
The Court of Appeal, which heard Mary’s appeal on an expedited basis in early July 2019, described Mr Mostyn’s judgement as ‘plainly wrong’.
It dismissed the Judge’s suggestion that Mary’s claim was tantamount to ‘forced spousal heirship’, and criticised his failure to pay attention to the length of the relationship, or to her lack of autonomy.
The Court of Appeal also criticised the Judge’s approach to the question of permission as erroneous and incorrectly disciplinary, and said there was a proper explanation for the delay.
Lady Justice King devoted a short supplemental judgment on the subject of solicitors agreeing a moratorium to avoid the need to submit a claim, making clear that solicitors should feel able to make stand-still agreements ‘in what are often highly distressing and sensitive cases’.
The case has far reaching consequences for parties engaged in 1975 Act proceedings.
The Court of Appeal suggests that ‘autonomy’ in one’s financial affairs is a reasonable expectation for a widowed spouse. Provision by way of trusts may be appropriate in some cases, but it would be foolish to assume that the court will consider defeasible or discretionary interests which leave spouses at the mercy of trustees reasonable.
More generally the Court of Appeal has underlined the importance of negotiation and made clear that parties should be encouraged to enter into standstill agreements in order to facilitate resolution.
And thirdly, the Court of Appeal has categorically rejected any idea that the recent tightening of the approach to procedural time limits once proceedings have started has any bearing on the Court’s exercise of its discretion to permit claims outside the statutory six month period set out in the 1975 Act.