06 September 2017

Lessons from a recent inheritance dispute: everything changes to be the same as before


Paul Hewitt
Partner | UK

A 31 year old estranged daughter has been awarded £30,000 out of her father's modest estate despite her father's clear wishes and the intended beneficiary's own financial difficulties.

It is a case that has generated considerable interest despite the modest value of the estate.

Those defending the principles of testamentary freedom will regret the Judge's willingness to override a will made less than a fortnight before death. They will also regret the Judge's throwaway comment linking his award to the percentage value of the estate. It is that comment rather than Saffman J's otherwise considered judgment working through all the relevant factors which is being seized on by disappointed children.

The case

'First, it is worth noting that the facts of the case with which I am concerned are very similar to those which are applied in the case of Ilott…'

In Nahajec v Fowle, Leeds County Court Chancery Business heard a 1975 Act claim by Elena Nahajac ('Elena') one of the three adult children of the late Stanley Nahajac ('Stanley'). Stanley had left his entire estate of circa £265,000 to a close friend, Stephen Fowle ('Stephen').

Despite Stanley's clear wishes, Stephen's own financial difficulties and evidence of estrangement, Elena, an independent adult, succeeded in her claim.

Background

Stanley separated from Elena's mother around 1998 when Elena was 11.
Elena's evidence was that:

• her father cut off contact, ignoring her childhood letters and not sending birthday or Christmas cards;
• in 2007 she established contact with him but in 2009 he again cut her off, disapproving of her boyfriend; and
• Stanley rebuffed subsequent attempts at contact going so far as to put down the phone when she called to tell him of her mother's death in 2012.

Elena's half-brother, Scott, gave evidence supporting Elena's account of her (lack of) relationship with their father.
Stephen's evidence, as a longstanding and close friend, was that Stanley had never spoken of a relationship with his daughter.

When Stanley made his Will, he also left an accompanying note to the executor stating:
'I have not seen or heard from any of my children in the last 18 years and I do not believe they have any interest in me or my welfare.'
Stanley died on 19 July 2015, less than two weeks after making his Will. Probate issued to Stephen in October 2015.

Elena's other half-brother, Mark, who is unable to work by virtue of ill-health and disability, compromised his own 1975 Act claim for a payment of £22,000.

Elena issued proceedings just within the six month deadline. She sought reasonable provision calculated in the sum of £70,227.
As a child, albeit an adult, Elena is entitled to claim 'reasonable financial provision' which is defined as that which 'would be reasonable in all the circumstances of the case for [her] to receive for [her] maintenance'.

Meaning of maintenance

As the Judge noted, maintenance 'is a broad concept but it cannot extend to any or everything which it would be desirable for the Claimant to have'.

In the Supreme Court in Ilott v Mitson Lord Hughes, who gave the leading judgment, grappled with the meaning of maintenance stating that 'It must import provision to meet the everyday expenses of living.'

He quoted a 1981 case.
'The word 'maintenance' connotes only payments which directly or indirectly enable the applicant in the future to discharge the cost of his daily living at whatever standard of living is appropriate to him. The provision that is to be made is to meet recurring expenses being expenses of living of an income nature.'

Thus maintenance can extend to payment of existing debts.

What question is the Court answering?

The Court is not faced with a question as to whether Stanley had acted unreasonably in making his Will

'but rather whether, looked at objectively his … lack of disposition [for Elena] produces an unreasonable result.'

The Judge again cited Lord Hughes on the question of whether there is a requirement for a moral claim, Lord Hughes stating in Ilott

'In the case of a claimant adult son well capable of living independently, something more than the qualifying relationship is needed to found a claim … Clearly, the presence or absence of a moral claim will often be at the centre of the decision under the 1975 Act.'

And again, quoting from the 1998 Court of Appeal decision in Re Hancock

'… it may be difficult for a child who is able to earn their own living to show that reasonable financial provision has not been made for them without some special circumstances such as a moral obligation.'

Key facts

Section 3(1) of the 1975 Act lists factors that need to be taken into account.
Elena was 31 at the time of the trial, living in rented accommodation. She worked part-time as a retail assistant on a zero hours contract and part-time at a veterinary surgery. Despite holding two jobs she qualified for Working Tax Credit.

She did additional unpaid hours at the veterinary surgery as part of her aspiration to become a qualified veterinary nurse.

She had debts of £6,600 some of which had been generated due to her inability to work during a cervical cancer diagnosis (she also said she suffered depression although there was no evidence this inhibited her from working).

She conceded during trial that once her debts were paid she would be able to live within her means.

Stephen gave evidence of financial difficulty. He had used the estate funds to pay a mortgage and inject funds into his struggling business. However he had also spent £18,000 on two Rolex watches (which he claimed was in line with Stanley's wishes).

In assessing obligations and responsibilities the Judge did say that although Elena was Stanley's daughter 'It does not necessarily follow that there is an obligation or responsibility to support a child who … is of full age and is working.'

The key analysis appears to be the Judge's consideration of the section 3(1)(g) factor, 'any other matter, including the conduct of the Applicant or any other person which in the circumstances of the case the Court may consider relevant'.

This is the sub-section under which the Judge noted issues 'analogous to a moral claim may become relevant'.

In comments echoing Master Bowles' 2001 criticisms in Singer v Isaac of memoranda as 'self-serving documents, being self-justificatory of the deceased's conduct', the Judge in this case focused on two discrepancies in Stanley's note to his executor. The first was the reference to having had no contact for 18 years which did not reconcile with the evidence.

Secondly, 'and perhaps more importantly' the Judge commented, the note stated 'All of my children are of independent means and have or have had their own life and family and are, to my knowledge, sufficiently independent of means not to require any provision from me'.

The Judge said 'it seems incontrovertible that [Elena] who is not leading an extravagant lifestyle was only making ends meet by taking out loans … it is difficult to see how this description could sensibly be applied to her.'

Decision

Lack of provision unreasonable

The Judge's conclusion was that the Will did not make reasonable provision taking into account all the Section 3(1) factors and that although Elena is an adult and independent that her claim was 'based on something more than simply the qualifying relationship'.

Although there was no relationship, that was 'not for want of trying on [Elena's] part … She appeared to have a father who was stubborn and intransigent. That was not her fault'.

Her needs, her aspirations and the size of the estate justified provision notwithstanding Stephen's own financial difficulties.

The Judge did refer to Stanley's wishes as weighing in Stephen's favour but those wishes did not make the lack of provision necessarily reasonable, especially as the reasons included 'a probable misunderstanding of [Elena's] financial position'.

The Judge was also clearly impressed by what he regarded as a 'genuine wish to become a registered veterinary nurse.'

What provision should be made

Having reached that conclusion the Judge then turned to the question of what provision ought to be made.

Elena claimed £70,227 (reduced during the trial to £59,000 on the concession that a student loan would cover some of the costs).
Stephen's counsel argued that without the £6,600 debts Elena would be able to manage and so the maximum award should be to clear the debt.

The Judge concluded that would be a 'fairly frugal existence and would not provide her with any scope to meet any expenses that would be necessary for her to improve her position'. Equally he felt that even discounted to £59,000 Elena's claim was too high. He accepted that only represented 22% of the estate but that was 'to apply the wrong test'.

Ultimately he came out at a capitalised figure of £30,000 as his 'best estimate of the capitalised costs of maintenance for a reasonable time going forward to take into account the possibility, albeit contingent, of the Claimant undertaking a course which ultimately results in her becoming a veterinary nurse and which enables her to look after herself financially if such a course is undertaken'.

The Judge then set out a number of caveats undoubtedly in an effort to show that he has considered all sorts of possibilities and thus rendering the decision pretty much appeal proof even without taking into account the Supreme Court in Ilott v Mitson emphasising the breadth of discretion 1975 Act claims afford a trial judge.

He added
'Had my hands not been tied to a capitalisation of maintenance the award would have been greater but my hands are so tied.'

It is his preceding throwaway comment, contradicting his earlier statement that referring to the value of the claim as a percentage of the estate would be to 'apply the wrong test', which is being seized on by Claimants to bolster their claim

'For what it is worth I note that in terms of the percentage of the value of the net estate, it is 11.3%. Mrs Ilott's award as a percentage of her mother's net estate was within approximately 1% of that.

There is little doubt that many claimants and their solicitors regard that percentage of the estate reference as providing the concrete floor in negotiation.

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