04 September 2018

Inheritance disputes: maintenance for life, with strings


Natasha Stourton
Senior associate | UK

A 66 year old man with disabilities has had his maintenance award confined to a life interest in 50% of his fiancée's estate despite their 20-year relationship.

This follows a judgment in the Supreme Court in 2017 which stated that '[i]f housing is provided by way of maintenance, it is likely more often to be provided by such a life interest rather than by a capital sum'.

Is this fair? Natasha Stourton looks at the recent case of Banfield v Campbell and what it means for similar cases.

The facts

On her husband's death in 1992, Sarah Campbell inherited the family home, 3 Westville Road, free of mortgage. A few years later, she started a relationship with a family friend, Andrew Banfield. Gradually they spent more and more time together and, by 2001, Mr Banfield had moved into the family home. Mrs Campbell's son was 19 years old at the time.

Around this time, Mr Banfield's health deteriorated and he took voluntary redundancy. He was overweight and suffered from type 2 diabetes and spinal depression, the treatment for which left him with severe nerve damage. From 2011 he found it more comfortable to sleep downstairs in a reclining chair and only went upstairs in order to take a shower. No doubt in pain, he was 'at times irascible and adopted a hectoring tone'. Nevertheless, the relationship continued until Mrs Campbell's sudden and unexplained death when she and Mr Banfield were on a holiday flight to the Canary Islands in 2015.

Mrs Campbell's Will left her residuary estate (made up predominately of 3 Westville Road) to her son, James. She left £5,000 to Mr Banfield, referring to him as a 'friend'.

The case

Mr Banfield applied to the Court for further financial provision from Mrs Campbell's estate as a 'cohabitant' under the Inheritance (Provision for Family and Dependents) Act 1975. The Act enables Judges, where appropriate, to award 'such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance'.

At the time of the hearing, Mr Banfield was 66 years old and qualified for Disability Living Allowance. His annual income exceeded his expenditure by £10,782 and he had capital of £277,071. However, he had been dependent on Mrs Campbell for housing. He said he needed £450,000 to purchase a two bedroom flat (including a private garden for his springer spaniel). This would equate to 62% of the £725,000 net estate.

In contrast, James was a 35 year old property developer, living beyond his means. He owned a rental property worth approximately £450,000, which he purchased with the help of a loan from his uncle who was serving a 9 year prison sentence for date rape of an air stewardess he had met on millionairematch.com. James had recently become engaged and said he and his fiancée wanted to purchase a home and start a family.

James claimed that Mr Banfield's housing needs could be met from his own assets or with a limited contribution of £100,000 from the estate.

The decision

The Judge held that 'after a relationship lasting over 20 years, to have left Mr Banfield only £5,000 for his maintenance was not such as to make reasonable financial provision'.

When considering what provision would be reasonable, the Judge (despite recognising that renting is the 'only or preferred option … for many, especially younger people') disregarded the possibility of Mr Banfield renting a property, as it would not be 'reasonable' for him to have to relocate at the end of each tenancy. He also disregarded the possibility of Mr Banfield purchasing a retirement property on an over-60's lease (one which lasts only for the lifetime of the lessee) on the basis that it would be an unwise investment.

The Judge ordered that the family home 'be sold and that Mr Banfield be granted a life interest in one half of the net proceeds of sale which are to be used in or towards providing alternative accommodation'.

Relying on the facts that 'the main asset of the estate was a pre-owned asset owned and inherited by the Deceased before the start of her relationship with Mr Banfield' and that Mrs Campbell 'wanted and reasonably expected to be able to pass on capital to provide or support a start in life' for James, he said that '[t]here is no reason why the estate should provide Mr Banfield with a property to pass on to his relations'.
He said 'where a lump sum is sought involving 50% or more of the estate it is much more likely to be appropriate to make provision for housing by way of a life interest to avoid conferring capital and to avoid depriving the Defendant of capital which would otherwise pass to him'.

Commentary

Does this mean that, following Ilott v Blue Cross, the sole purpose of the 1975 Act really is limited to maintenance during the claimant's lifetime?

At first blush this sounds 'fair', but the reality may be more complicated. Day to day expenses are usually covered by the life interest holder, but what about the cost of more significant repairs to the property? It is in James' interest to preserve the capital value of the property, but most repairs will also benefit Mr Banfield.

Master Teverson was not persuaded that the breakdown in relations between the parties as a result of the litigation meant it was right to make provision in the form of a lump sum. He said that 'once the parties were aware of the outcome of the litigation, and its costs consequences, they could reasonably be expected to work together'. But could forcing parties to have an ongoing relationship for what may be decades after heated litigation be a recipe for disaster?

Natasha Stourton Senior associate | London

Category: Article