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Reasonable financial provision and maintenance: Almost 3 years after Ilott, where are we now?

judgment

On 15 March 2017, the Supreme Court handed down the much anticipated judgment of Ilott v The Blue Cross and others [2017] 2 W.L.R. 979. An adult child who was estranged from her mother, the deceased, successfully challenged the will that disinherited her.

Facts

Mrs Ilott left home in 1978 at the age of 17 to live with her boyfriend. Her mother had recently been widowed and disapproved of her only child’s decision. Mrs Ilott later married her boyfriend and they have had five children together. Other than the occasional and failed attempt at a reconciliation, there followed a 26-year estrangement from the date of leaving home up until the mother’s death.

The mother had left much of the estate, valued at £486,000, to animal welfare charities to which she had no considerable attachment, and disinherited Mrs Ilott. The decision to disinherit was first made in a 1984 will and letter of wishes. In 2002, the mother’s final will was accompanied by a further letter of wishes which recorded her view that she felt no moral or financial obligation on death to her child. Mrs Ilott’s evidence showed that she had been aware of her mother’s wishes and that her life had not been conducted in such a way as to rely on the expectation of benefitting from the estate.

Mrs Ilott did not lead a lavish lifestyle. Much of the family income consisted of state benefits. She lived in a house rented from the Housing Association. She did not work. Four of the children remained at home. The husband had irregular work as a supporting actor. All told, the annual family income, including benefits, stood at just over £20,000. Analysis of the family’s financial position shows that they were not insolvent and lived within their means; they were however financially restricted in what they could do. Chattels in the family home were badly worn. They had never been on a family holiday. There was no reliable family car.

Law

Mrs Ilott brought the claim under the Inheritance (Provision for Family and Dependants) Act 1975 as an adult child. An adult child may apply to the court for an order under section 2 of the Act:

on the ground that the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant.

Section 2 of the Act provides the Court with a particularly wide remit. As a child claimant:

… ‘reasonable financial provision’… means such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance.

So what is maintenance? In the Supreme Court judgment, after citing leading case law on this point, Lord Hughes observed that:

The level at which maintenance may be provided for is clearly flexible and falls to be assessed on the facts of each case. It is not limited to subsistence level. Nor, although maintenance is by definition the provision of income rather than capital, need it necessarily be provided for by way of periodical payments, for example under a trust. It will very often be more appropriate, as well as cheaper and more convenient for other beneficiaries and for executors, if income is provided by way of a lump sum from which both income and capital can be drawn over the years, for example on the Duxbury model.

Court proceedings

After the mother’s death 2004, Mrs Ilott commenced proceedings. District Judge Million found at trial that the mother’s will did not make reasonable financial provision for Mrs Ilott, but that any financial award should be limited due to the long estrangement and lack of any tangible expectation of benefiting from the will. At first instance Mrs Ilott was awarded £50,000.

The claimant appealed this decision on the basis that the award should have been much higher. The charities cross-appealed. Eleanor King J allowed the cross-appeal. Mrs Ilott duly appealed the decision to the Court of Appeal. The appeal was allowed and remitted the case back to the High Court for a determination on quantum; fantastically, the original award of £50,000 was reinstated.

Mrs Ilott then appealed again to the Court of Appeal, this time being awarded £143,000 to purchase a house and an additional £20,000.

The charities then successfully applied for permission to appeal to the Supreme Court.

The Supreme Court reinstated District Judge Million’s award of £50,000.

Analysis

This case received a substantial level of media interest, the central theme of which appeared to be that, contrary to popular belief, a will could be ignored after the testator’s death.

In response to this, perhaps the best point is found in the first paragraph of the Supreme Court judgment:

Unlike some other systems, English law recognises the freedom of individuals to dispose of their assets by will after death in whatever manner they wish. There are default succession rules in the event of intestacy, but by definition those only come into play if the deceased left no will. Otherwise the law knows of no rule of automatic succession or forced heirship. To this general rule, the statutory system of family provision imposes a qualification. It has provided since 1938 for the court to have power in defined circumstances to modify either the will or the intestacy rules if satisfied that they do not make reasonable financial provision for a limited class of persons. That power was first introduced by the Inheritance (Family Provision) Act 1938 (“the 1938 Act”). The present statute is the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”).

Seen in that context, the law was merely applied to the facts of this case. Mrs Ilott’s financial circumstances made her claim for maintenance particularly acute. However, in handing down its judgment, the Supreme Court appears to have gone some way in ensuring that the wishes of the testator are not to be subsumed and altered by a claim under the Act. The Court chose to set aside a Court of Appeal decision, which had based part of its decision to award Mrs Ilott a considerable sum in excess of the sum awarded at the trial, on the basis that as a person in receipt of state benefits, she fitted within a special category of claimant; the Court of Appeal’s decision had protected Mrs Illot’s state benefits. The judgment of the Supreme Court chose to focus solely on the  provision of maintenance:

He [District Judge Million] confronted the submission for the charities that Mrs Ilott’s maintenance needs should be met by the sum of about £3,000–5,000 to pay for driving lessons and to see her back into work. He concluded that her reasonable needs were significantly greater than simply driving lessons and a small “starter” sum of capital. He accordingly provided a much greater capital sum, saying that there was a significant degree of approximation in it. Since he made clear that the award was limited to take account of the estrangement, and given the arguments put before him, his order is not to be taken as vitiated by erroneous reliance on the level of income produced by the working tax credits and child benefit. It was in fact an award which met many of Mrs Ilott’s needs for maintenance.

The volume of claims being pursued under the Inheritance (Provision for Family and Dependants) Act 1975 is increasing. As with all wills and probate claims, it can be emotionally charged litigation, with ‘principle’ and ‘saving face’ at times being the all-important factors driving the case on.

Parties involved in claims under the 1975 Act are often of limited means and an award of costs in favour of an opponent can have catastrophic consequences for an unsuccessful party. Claimants also carry the burden of paying an issue fee, funding a possible valuation report and often, the cost of mediation.

Therefore, it pays to be prepared.

Do you explain to your client the ATE and funding options available?

Our ATE insurance will always have a deferred and contingent premium – there is no upfront payment and nothing to pay should the claim lose. Temple Funding provides Consumer Credit Act loans at a market-leading rate of 10% pa.

Please call us on 01483 577877 if you would like to discuss how we can help you and your clients.

Jacob White

Jacob White

Underwriter
Read articles by Jacob White

Jacob White

Jacob insures and case-manages a wide range of commercial and Chancery litigation. This involves providing costs solutions to SMEs, large corporates, private individuals and insolvency practitioners.
As an underwriter, Jacob frequently corresponds with leading lawyers and brokers to discuss current cases. He also assists with the development of Temple’s ATE commercial business.
Jacob joined Temple in 2014 after reading History at university. He has since completed the GDL and recently been called to the Bar of England and Wales.

 

Read articles by Jacob White