Coventry View

A litigation lawyer's perspective

Posts Tagged ‘Court of Appeal

Forget Civil Partnerships – try Cohabitation Agreements

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You will have noticed the case in the CA today which refused to allow a Civil Partnership between a heterosexual couple  – Steinfeld & Keiden v SoS  I’m not sure quite where this is going or why they wanted a Civil Partnership rather than a marriage, but it is part of a larger question – how to deal with cohabiting couples, who have far fewer legal rights and a lot less protection than they think.

I wrote a piece on this some time ago when there was the suggestion of having a Cohabitation Rights Bill. If you are interested in the legal aspects than by all means go back and have a look. However, the final part of the piece is worth reading again now.

My Solution

I  have a proposal which would make a real difference to cohabitation in future.

Parties intending to live together permanently should enter into a “cohabitaton agreement” which would give them significant enhanced rights. The agreement would not be compulsory but should be encouraged by say tax benefits and social pressure. After a time I would expect it to become normal and for people who did not do so to be a small minority.

The agreement could be fairly short, and merely require the parties to live together and look after each other to the exclusion of third parties. In order to make it more attractive and romantic you could include phrases about “in sickness and in health” and “to love and to cherish”.

The parties should make the agreement by saying the words out loud before some state official and in the presence of at least two independent witnesses. This way there could be no argument about whether they consented to it or not. They may give each other small gifts such as a ring. Then they would all sign a register.  Clearly this will need to be set up beforehand, and they will no doubt get their families and friends to attend. There may be some singing or at any rate music, and everybody will no doubt go off for a few drinks or even a full-scale party afterwards.

The basics would only cost a couple of hundred pounds, although if you wanted to pay more then nobody would stop you. Your parents may well chip in, and of course everybody would dress up. It may become fashionable or indeed standard for the woman to wear a fancy dress of a distinctive colour, and the man would wear a very smart suit which he may have to hire.

Afterwards the parties would have all the rights and privileges of a married couple. As indeed they would be.

You cannot be serious!

Well perhaps not. But I think a lot of people have overlooked the distinction between a marriage and the wedding. You don’t need a vast multi-thousand pound celebration to be married, but you do need to enter into some basic commitments if you are going to live together for the long term. Societies have had marriage for thousands of years and they can’t all be wrong. Perhaps the problem today is that we have the solution to the difficulties of cohabitation right in front of us and can’t see it.

Perhaps this doesn’t help Miss Steinfeld and Mr Keiden, but I can’t do everything.

Written by Coventry Man

21/02/2017 at 11:51

Can I Come In? – Enforcing Suspended Possession Orders

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Now some of you may remember that in a previous life (when I really was Coventry Man) I worked for a firm who acted for some major social housing providers. They, unlike private landlords, usually let properties on assured tenancies (rather than assured shorthold tenancies) and played a much longer game. If a tenant was in arrears then they were quite prepared to let them pay off the arrears by instalments and sometimes they encouraged this by getting possession orders that were suspended on payment of say

“the current rent as it falls due plus the arrears of £800 at the rate of £100 a month, commencing on 1st November.

Now from time to time, indeed surprisingly often, the tenants would fall down on the payments and we would issue a warrant for possession and the tenant would be stirred up by a visit from the merry County Court bailiff who would give them an appointment for eviction in 4 weeks, and the form to apply to have the warrant suspended, so they could rush back to the court and explain to the cynical DJ why they had failed to keep the promises that they had made only a couple of months ago.

This might happen several times before either they got their priorities in order, or the DJ lost his remaining patience and the eviction went ahead.

Now it always surprised me that we could get the warrant issued just on our say-so. We signed the Request and cerified that they were in arrears and that was that. Indeed, if there were more complicated terms, such as the removal of a noisy dog, or the clearing of rubbish from the garden, we still just had to certify that they were in breach. No evidence was needed. Naturally our clients were fair about things, and my colleagues were decent honest and truthful, but I couldn’t help think that not everybody was like that, and that the courts were being very trusting, especially when more and more litigants were doing without lawyers and acting for themselves.

Anyway, things have changed now, and when the bits of the County Court Rules that governed enforcing judgments and warrants (rr25-26) were taken into the CPR in April 2014 (along with RSC 45-47) the powers that be took the opportunity of tigntening things up. I hadn’t noticed because I have moved on and don’t act for social housing providers any more, but it would seem that before you can apply for a warrant for possession after a suspended order you have to get permission by making an application supported with evidence.

The rules are in CPR 83.2 and spell things out pretty clearly:

(1)

This rule applies to—

(d)

warrants of possession.

(2)

A writ or warrant to which this rule applies is referred to in this rule as a “relevant writ or warrant”.

(3)

A relevant writ or warrant must not be issued without the permission of the court where—

(e)

under the judgment or order, any person is entitled to a remedy subject to the fulfilment of any condition, and it is alleged that the condition has been fulfilled; or

(4)

An application for permission may be made in accordance with Part 23 and must—

(a)

identify the judgment or order to which the application relates;

(b)

if the judgment or order is for the payment of money, state the amount originally due and, if different, the amount due at the date the application notice is filed;

(e)

where the case falls within paragraph (3)(c) or (d), state that a demand to satisfy the judgment or order was made on the person liable to satisfy it and that that person has refused or failed to do so;

(f)

give such other information as is necessary to satisfy the court that the applicant is entitled to proceed to execution on the judgment or order, and that the person against whom it is sought to issue execution is liable to execution on it.

(5)

An application for permission may be made without notice being served on any other party unless the court directs otherwise.

Now the problem is that there is no reference to any of this on the form of application for a warrant – N325 – which is the form needed under r83.26. Indeed there are several references in the order that make it look as if nothing has changed:

83.26 (1)

A judgment or order for the recovery of land will be enforceable by warrant of possession.

(2)

An application for a warrant of possession—

(a)

may be made without notice; and

(b)

must be made to—

(i)

the County Court hearing centre where the judgment or order which it is sought to enforce was made; or

(ii)

the County Court hearing centre to which the proceedings have since been transferred.

(4)

Without prejudice to paragraph (7), the person applying for a warrant of possession must file a certificate that the land which is subject of the judgment or order has not been vacated.

(5)

When applying for a warrant of possession of a dwelling-house subject to a mortgage, the claimant must certify that notice has been given in accordance with the Dwelling Houses (Execution of Possession Orders by Mortgagees) Regulations 2010.

(6)

Where a warrant of possession is issued, the creditor will be entitled, by the same or a separate warrant, to execution against the debtor’s goods for any money payable under the judgment or order which is to be enforced by the warrant of possession.

(7)

In a case to which paragraph (6) applies or where an order for possession has been suspended on terms as to payment of a sum of money by instalments, the creditor must in the request certify—

(a)

the amount of money remaining due under the judgment or order; and

(b)

that the whole or part of any instalment due remains unpaid.

You always had to certfy this sort of thing. The difference is that you shouldn’t apply for the warrant at all before you get permission under r83.2(3). Easily overlooked.

Well, what happens if you get it wrong, and haven’t got permission and the court doesn’t notice? Because the issue of a warrant is dealt with by the court office, not the DJ, and court offices are busy understaffed places. Is your warrant invalid, and can the tenant get it set aside? Or can you rely on good old r3.10 that allows the court to fix things when there has been a mess-up by somebody:

3.10 Where there has been an error of procedure such as a failure to comply with a rule or practice direction –

(a) the error does not invalidate any step taken in the proceedings unless the court so orders; and

(b) the court may make an order to remedy the error.

There has been some interest in this among the frantically overworked heroes who represent tenants expecting immenent eviction, as some courts and DDJs had one idea and some had another, and there has now been a decision by the CA in Cardiff CC v Lee [2016] EWCA Civ 1034 .

The CA decided, after some navel-gazing,  that if the failure to apply for permission was “an error of procedure” then an application under r3.10 could put things right. In the particular case the tenant had applied to set aside the warrant anyway without success so the facts had been examined and nothing would be gained by going into things again, so the court below had been right to allow the warrant to go ahead.

Had the failure to apply been intentional however they might have taken a different view. And given there has now been a case in the CA on this point, which is being reported and commented on in interested circles (like here), it is going to be much harder for any landlords who merrily sign the N325 without getting permission to enforce first.

Applications can be made without notice and dealt with on the papers, but it will mean another delay of several weeks in most courts before the order can be enforced in any event.

As usual this is covered in the Nearly Legal blog in a lot more detail that I do here. However, you all know this now, so there’s now one less thing to trip over.

Written by Coventry Man

24/10/2016 at 18:09

Horton v Henry – The Final Round – The Pension Lives!

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I have written about this case and the associated one of Raithatha v Williamson previously here and here. Horton went on appeal to the CA and after a delayed hearing, and then a reserved judgment they have finally come to a conclusion, reported at  Horton v Henry [2016]EWCA Civ 989

And the result was an emphatic win for the preservation of the pension against the attempts by the Trustee in Bankruptcy to get at it.

For those of you who have a life outside these columns the problem they was addressing was whether a pension, which would normally be exempt (by s11 Welfare Reform and Pensions Act 1999) from seizure by a Trustee, could be attacked by making an income payment order under s310 Insolvency Act 1986 requiring the bankrupt who was not yet drawing his pension but was aged over 55 to require his pension provider to pay him a lump sum and then pay it over to the Trustee. And this was given a lot more bite by the abolition of the former 25% cap on lump sums by the pensions reforms in 2015.

There were conflicting decisions from Deputy High Court Judges – in Raithatha the court said you could make such an order, but in 2014 another Deputy High Court Judge said you couldn’t in Horton – and so the CA had to break the tie.

The CA Judgment – the Problem

The lead judgment was given by Gloster LJ and is clear and comprehensive, and compulsory reading for anyone who is relying on it.

The brief facts are that Mr Henry went bankrupt on his own petition with debts of up to £6.5m (the exact figure was disputed). He had generous pension provision, with a SIPP worth about £850,000 and 3 personal pensions giving rise to additional rights at various ages. He was 58 on bankruptcy, and wasn’t receiving any of his pension entitlements because he was being maintained by his family and had no need for them. The trustee made an application under s310 (see above) for orders requiring him to claim his lump sums and pension incomes, which he was entitled to do, being over 55, and pay them over to him. He refused, claiming that these benefits were not income to which he had “become entitled” and derived from funds which were not part of the “bankrupt’s estate” and so not susceptible to these orders. The Judge below agreed.

I won’t set out all the statutory provisions as they are set out in full in the CA judgment. But the argument went:

  • s306 Insolvency Act 1986 provides for the bankrupt’s estate to vest in the Trustee;
  • s283(1) IA defines the bankrupt’s estate as being all his property at the date of bankrupty, apart from certain exemptions, including property excluded by other legislation;
  • s91 Pensions Act 1995 excluded rights under occupatioal pension schemes;
  • s11 WRPA (see above) excluded rights for approved personal pension schemes (such as his);
  • s307 IA allowed the trustee to claim after-aquired assets, but not if they were excluded;
  • nor if they were income and so susceptible to a claim for an income payment order under s310;

s310 is key so I will set it out. It provides:

“Income payments orders

(1) The court may make an order (“an income payments order”) claiming for the bankrupt’s estate so much of the income of the bankrupt during the period for which the order is in force as may be specified in the order.

(1A) An income payments order may be made only on an application instituted–

(a) by the trustee, and

(b) before the discharge of the bankrupt.

(2) The court shall not make an income payments order the effect of which would be to reduce the income of the bankrupt when taken together with any payments to which subsection (8) applies below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.

(3) An income payments order shall, in respect of any payment of income to which it is to apply, either–

(a) require the bankrupt to pay the trustee an amount equal to so much of that payment as is claimed by the order, or

(b) require the person making the payment to pay so much of it as is so claimed to the trustee, instead of to the bankrupt.

(4) Where the court makes an income payments order it may, if it thinks fit, discharge or vary any attachment of earnings order that is for the time being in force to secure payments by the bankrupt.

(5) Sums received by the trustee under an income payments order form part of the bankrupt’s estate.

(6) An income payments order must specify the period during which it is to have effect; and that period–

(a) may end after the discharge of the bankrupt, but

(b) may not end after the period of three years beginning with the date on which the order is made.

(6A) An income payments order may (subject to subsection (6)(b)) be varied on the application of the trustee or the bankrupt (whether before or after discharge).

(7) For the purposes of this section the income of the bankrupt comprises every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled, including any payment in respect of the carrying on of any business or in respect of any office or employment and (despite anything in section 11 or 12 of the Welfare Reform and Pensions Act 1999)[7] any payment under a pension scheme but excluding any payment to which subsection (8) applies[8].

(8) This subsection applies to–

(a) payments by way of guaranteed minimum pension; . . .

(b) payments giving effect to the bankrupt’s protected rights as a member of a pension scheme.. . ..

(9) In this section, “guaranteed minimum pension” has the same meaning as in the Pension Schemes Act 1993.

“protected rights” has the meaning given in section 10 of the Pension Schemes Act 1993, as it had effect before the commencement of section 15(1) of the Pensions Act 2007.”

There are also provisions to allow the recovery of excessive pension contributions under s324A  IA.

The HC Judge summarised the position very succinctly, with the CA’s approval:

“In short, the position since 1999 has been that rights under personal pension arrangements do not in general vest in a trustee in bankruptcy. Nevertheless, as has always been the case with occupational pensions, provision has been maintained for an IPO to be made in certain circumstances. It may be thought that the parenthetical words in section 310(7) were required in order to ensure that the position under personal pension policies did not diverge from that applicable to occupational pension schemes. There was to be no question of the 1999 Act going so far as to protect from creditors all income of a bankrupt even where such income stems from a pension. This was also the case as regards occupational pensions under the 1995 Act: see section 91(4).”

The CA set out the explanatory notes in the appropriate sections of the WRPA which explained what the Act was trying to achieve.

And finally, they quote s311 IA which imposes on the bankrupt a duty to assist the Trustee in the carrying  out of his functions.

The CA Judgment – the Answer

Gloster LJ set out the question as follows:

Whether section 333(1), read in conjunction with section 310, of the Insolvency Act enables a trustee in bankruptcy to require a bankrupt, who has reached the age at which he is contractually entitled to draw down or “crystallise” his pension (but has not done so), to elect to do so, so that the trustee may apply for an IPO under section 310 in relation to the funds drawn, or to be drawn, down;

And the two possible arguments:

i) The first is to argue that, even on the assumption that the bankrupt’s contractual rights to draw down or crystallise his pension after he has reached a certain age do not fall within the description of any “payment in the nature of income ……. to which he from time to time becomes entitled” for the purposes of section 310(7), nonetheless the trustee is entitled under section 333(1) to require the bankrupt to exercise such rights and elect to receive payment. The argument would run that, since one of the functions of the trustee is to obtain an IPO in respect of income that is potentially receivable by the bankrupt during the three-year period so as to satisfy creditors’ claims, the trustee is entitled to require the bankrupt to draw down income from his pension for the purpose of enabling the trustee to carry out his functions under section 310(7) in relation to the income payments under the pension once drawn down.

ii) The second approach (and this was the way in which Mr Davies [for the trustee] principally presented his argument before us, and indeed how the judge dealt with the case at first instance) is to argue that the italicised wording in section 310(7):

“For the purposes of this section the income of the bankrupt comprises every payment in the nature of income …… to which he from time to time becomes entitled,”

meant that, once a bankrupt pension holder had reached the required age, and was accordingly entitled to draw down his pension on request, his vested right to elect to do so, and the subsequent payments which would be made to him by the pension provider, were within section 310(7) and therefore were subject to the IPO procedure. It accordingly followed that, either under section 363(2), section 333 or the general jurisdiction of the court, the bankrupt could be compelled to elect to draw down his pension.

She doesn’t take any time to make up her mind between them:

In my judgment neither of these arguments is correct.

She wastes no time on the first argument – that the Trustee has functions in relation to property that is expressly excluded from the bankrupt’s estate.

It would drive a coach and horses through the protection afforded to a bankrupt’s pension rights by the Insolvency Act and pension legislation if a trustee were able, in effect, to require a bankrupt to make the entirety of his pension available for satisfaction of his creditors’ claims, by the simple expedient of a request under section 333 or a court order under section 363(2), thereby converting excluded property into “income”.

The fact that before bankruptcy pension rights might be accessible to a creditor – as in Blight v Brewster – merely shows the difference caused by an bankruptcy order. They don’t support the argument that the same rules could apply after an order.

The second argument takes more consideration. In essence the question is whether a right to elect to take income is equivalent to payment of the income, under s310(7) IA. But again, the result is the same. Note the italicised words:

The contractual right to elect, by service of a notice on the pension provider, to receive a lump sum or income payment, in the pension context is very different in character from an actual payment or the right to receive that actual payment, once the relevant election has been made. Indeed, normally, until well after the relevant election has been made, there will be no legal right as such to receive any specific payment, particularly in the case of a SIPP, where the fund may comprise assets which are not readily marketable. In the context of section 310, payment and payment to which he from time to time becomes entitled mean just that; payment does not mean a chose in action or a bundle of rights which, if and when exercised, and only then, give rise to the making of a payment or the entitlement to a payment. The language of section 310 is addressed to capturing income; there is no suggestion in the language that it is conferring a power on the court to require the bankrupt to exercise a power – in relation to property expressly excluded from the bankruptcy estate – to generate income.

She points out that the legislation draws a clear distinction between payments under a pension scheme and rights under a scheme. And she concludes:

As with the first argument referred to above, it would drive a coach and horses through the protection afforded to private pensions and rights thereunder by virtue of section 11 of the WRPA, if, by the simple expedient of an application for an IPO, a trustee (subject to satisfying the court that the amount drawn down could be characterised as income and that the IPO did not reduce the bankrupt’s income below what appeared to the court to be necessary for meeting his and his family’s reasonable domestic needs) could in effect obtain payment of the entirety (or almost the entirety) of a bankrupt’s pension fund into the bankrupt’s estate so as to meet the claims of his creditors, notwithstanding that the pension was not in payment. In my judgment, Parliament has decided to draw the balance between, on the one hand, the interests of the State in encouraging people to save through the medium of private pensions (so that in old age or infirmity they will not be a burden on the resources of the State), and, on the other, the interests of creditors in receiving payment of their debts, by the mechanism of sections 342A to 342C of the Insolvency Act which enable a trustee to claw back excessive pension contributions made by the bankrupt where such contributions have unfairly prejudiced the bankrupt’s creditors.

And she decides that Raithatha was wrongly decided, and that Horton was correct, and as the other members of the court (Sir Stanley Burton and McFarlane LJ) agree, the appeal is dismissed.

And the Consequence Is?

Much relief all round. This is the position that everybody thought they were in from the WRPA in 1999 until 2012, and even after that Raithatha was widely disregarded as merely being one decision of a Deputy Judge. A policy decision had been takenin 1999 to protect pensions in the case of bankruptcies and this has been upheld.

A decision the other way would have opened the gates to large numbers of applications by IPs hoping to recover at least enough to cover their own fees from very modest pension funds. Many bankrupts have had some success in the past, and fail towards the end of their working lives, and these are the sort of people who have built up modest pensions, which would be most at risk.

No, a good decision all round.

Given the devastating logic of the CA decision the Trustee looks unlikely to try to appeal to the SC, but if I hear anything about this I will let you know.

As I’m a few days late (the decision was published on 7th October) there are many commenties available on the web. They range from the friendly and extremely practical piece on Debt Camel  to pieces on Lexis Nexis and by Eversheds and many other large firms. And there will be more. But if you’ve got this far you’ve probably read enough.

Written by Coventry Man

13/10/2016 at 23:24

NEWSFLASH – Horton v Henry – the CA Speaks

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And the appeal was dismissed, so Raithatha is overruled. The trustee cannot force a bankrupt to elect to claim his pension. More shortly, but here is the Bailii report.

Written by Coventry Man

11/10/2016 at 10:33

Pensions and bankruptcy – a longer wait

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If you go bankrupt can the Trustee get at your pension? Well if you are over 55 (or even 52) then they might be able to. Or on the other hand they might not. An unsatisfactory state of affairs, brought about by two contradictory decisions of High Court judges – Raithatha v Williamson or Horton v Henry.

Fortunately Horton v Henry is going to the Court of Appeal. Unfortunately the date originally given  – 25/25 Jan 2016 – has not been effective, and the case has been relisted for 21/22 April 2016. So a bit longer to wait.

For more details of the cases see my earlier posts here and here.

Written by Coventry Man

27/01/2016 at 14:43

STOP PRESS – Pension Appeal Approaches

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If you go bankrupt can the Trustee get at your pension? Well if you are over 55 (or even 52) then they might be able to. Or on the other hand they might not. An unsatisfactory state of affairs, brought about by two contradictory decisions of High Court judges – Raithatha v Williamson or Horton v Henry.

Well there should be an answer soon as Horton v Henry is going to appeal in the Court of Appeal and is due to be heard on 26/27 January 2016. No doubt they will take a few weeks to bring out the decision, but it isn’t too long to wait now.

See my earlier piece for more details.

Written by Coventry Man

08/01/2016 at 00:41

Ilott v Mitson – have the CA gone too far?

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Melita Jackson died in 2004 leaving some £486,000. She was a widow and had an only daughter, Heather Ilott, then aged in her 40s, who had 5 children, a husband who only worked part-time, and who relied very largely on state support. Even a small part of her mother’s estate would have been very useful to her. But Melita left all her money to three animal charities, and cut out her daughter entirely.

As you might imagine, there was a considerable history of antagonism between mother and daughter, which started when the daughter eloped at the age of 17. Melita had not supported animal charities during her lifetime, and by all accounts didn’t like animals particularly.

Heather issued proceedings under the Inheritance (Provision for Families and Dependants) Act 1975 on the grounds that the will didn’t provide “reasonable financial provision for her…maintenance” under s1 of the Act.

The courts and lawyers have certainly got value for money out of the death of Mrs  Jackson. The dispute over her will has been before a District Judge who awarded her daughter £50,000, reversed by a High Court Judge on appeal, who dismissed her claim entirely, and then on to the Court of Appeal, resulting in the decision of Ilott v Mitson & Land [2011] EWCA Civ 346. This decided that an adult child could make a claim in these circumstances , and I commented on this decision in my piece at the time. So the case went back before a different High Court Judge who upheld the DJ’s order giving her £50,000, and then back to the CA who have just made the decision reported as Ilott v Mitson [2015] EWCA 797 and awarded her £163,000. A roller-coaster of a case, if a distressingly expensive one, even if Heather has been represented pro bono (ie free of charge) for most of the time.

The CA’s 2015 Decision – the law

The lead judgment is given by Lady Justice Arden, with agreement from Ryder LJ and Sir Colin Rimer. She starts off with a summary of the provisions in the Inheritance etc Act.

  • A child can apply if the will (and/or intestacy) does not make such finacial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for her maintenance. A spouse or civil partner is not limited to “maintenance”. Children are.
  • Maintenance isn’t defined in the Act. But in re Dennis dec’d (1981) it was explained by Browne-Wilkinson J. He said (and the CA approved):

But in my judgment the word “maintenance” connote 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.

  • s2 allows the court to award payments of periodical payments or a lump sum.
  • s3 sets out the factors to take into account in deciding what is reasonable financial provision

3 (1) Where an application is made for an order under section 2 of this Act, the court shall, in determining whether 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 such as to make reasonable financial provision for the applicant and, if the court considers that reasonable financial provision has not been made, in determining whether and in what manner it shall exercise its powers under that section, have regard to the following matters, that is to say—

(a) the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future;

(b)     the financial resources and financial needs which any other applicant for an order under section 2 of this Act has or is likely to have in the foreseeable future;

(c)     the financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future;

(d)     any obligations and responsibilities which the deceased had towards any applicant for an order under the said section 2 or towards any beneficiary of the estate of the deceased;

(e)     the size and nature of the net estate of the deceased;

(f)     any physical or mental disability of any applicant for an order under the said section 2 or any beneficiary of the estate of the deceased;

(g)     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…

  • There are two other factors – the court must take into account the facts as known at the date of the hearing, and it must take into account the applicant’s earning capacity and their financial obligations and responsibilities.

The facts

I don’t normally copy large bits from judgments into my pieces, but here it sets out the facts and the court’s views very clearly:

  • The primary reason why Mrs Jackson made no provision in her will was that she was estranged from the appellant and it is necessary to understand how this came about.
  • The appellant was the only child of Mr and Mrs Jackson, who were married on 3 March 1956. Mr Jackson was killed in an accident at work about three months before the appellant was born. His employer made a substantial payment to Mrs Jackson which she used to pay off the mortgage on the home. She was brought up by her mother.
  • In November 1978, aged 17, the appellant left home without her mother’s knowledge or agreement to live with Nicholas Ilott, whom she later married on 30 April 1983. Throughout her marriage she has lived with her husband at 16 Edward Cottages, Great Munden, Ware, Hertfordshire (“the Property”).
  • Mr Ilott and the appellant have five children. At the time of the trial, two were under 18. At the date of the second hearing before this court, only one of their children lived at the Property but she is shortly going to University away from home. The Property is rented from a housing association but Mr Ilott and the appellant have the right to buy it at a discounted price, held at £143,000 until the end of July 2015. For reasons not explained to us, there had been a substantial drop in the value of the Property.
  • The appellant and Mrs Jackson were estranged. There were three attempts at reconciliation, all of which failed. On the last occasion, it failed because Mrs Jackson took offence that the fifth child had been given the name of the appellant’s paternal grandmother, whom Mrs Jackson did not like. I do not intend to go through the evidence about responsibility for the estrangement. It is enough to say that DJ Million held that Mrs Jackson had acted in an unreasonable, capricious and harsh way towards the appellant but that both sides were responsible for the failure of these attempts.
  • When Mrs Jackson died, she left a will made in April 2002 which made no provision for the appellant or any member of her family. It is common ground that Mrs Jackson had no connection with the Charities during her lifetime. The value of the estate at the date of the trial was £486,000. There has been little change in that amount since the date of the hearing before DJ Million.

And from further down:

  • On appeal, Parker J admitted evidence relating to the appellant’s husband’s attendance at spiritual meetings which was a further source of income. It appears to have been common ground that this income was small and thus made no real difference to the case. Parker J also admitted in evidence a letter from Mrs Jackson to her relatives confirming that the source of funds used to clear the mortgage on her home, which constituted about half the estate, was a payment made by her husband’s employer after his death. This evidence has given rise to argument about whether weight should be attached to the fact that this fund was so derived and whether it was to be inferred that it was intended for the appellant’s benefit.
  • In the course of her judgment, Parker J observed that as a result of the appellant’s straitened circumstances the appellant had never had a holiday, had difficulty affording clothes for the children and was limited in the food she could buy and that much of what she had was old or second-hand (Judgment of Parker J paragraphs 45 to 46).

 The courts below

DJ Million had awarded her £50,000 and Parker J had rejected her appeal from this. It was a matter for a judge’s discretion and so the CA could only upset the decision if the DJ made an error in law, such as applying the wrong test or failing to take into account relevant matters, or taking into account irrelevant matters, or reaching a decision that no DJ should have reached. The mere fact that the judges in the CA would have given the daughter more was not enough. The judge below had to be wrong.

To nobody’s surprise, given the comments that they had made so far, they held that the judge below had been wrong, because he had reduced the award to take account of the daughter’s modest expectations, and because he had failed to properly consider the affect of the award on her benefit entitlement. He had not been helped by a rather unrealistic wish-list put in by the daughter’s legal team at that stage asking, among other things, for enough money to buy her rented house (£186,000) and give her an income of £10-27,000 pa for life. This would exceed the value of the estate. But both decisions were incorrect: you should not have your claim marked down because you have lived modestly, and the benefit position is serious and needs to be properly addressed.

The daughter was receiving tax credits of about £8,000 pa and housing and council-tax benefit of £5,000 pa. If she acquired capital over £16,000 the housing and council-tax benefit (but not the tax credits) would be cut off, and so an award of £50,000 would be spent in a few years in merely making up this loss. That substantially reduced its value, and made it unreasonable. And the CA decided to make the fresh award itself, rather than sending everybody off for a 5th trial.

The CA’s award

This piece is long enough and I’m not going to set out all the arguments in detail. You can read them in the judgment. But the most important factor was the the daughter’s legal team (acting pro bono) had taken a much more realistic view. They were asking for the funds to buy their rented social housing home (now £143,000 with a discount) which would save rent of £4,750 odd pa, and give her the flexibility of moving to a less isolated location in the future, and either a modest capital sum of £50,000, or a modest additional amount to allow her to renew and replace items as they age and break, and have occasional holidays.

The court went through the factors in s3 set out above. They repeated that since re Hancocks dec’d (1998) if not before the courts have made awards to adult children without handicaps. At the end they considered the lack of expectation of benefit, which they considered mrginal, given that the charities had no expectations either (having had no connection with the mother), and the mother’s wishes.

The comments here are worth giving in full:

Mrs Jackson’s testamentary wishes: Ms Stevens-Hoare submits that the judge was wrong to pay such high regard to the deceased’s testamentary wishes. There was no other beneficiary’s needs to which the court had to pay attention. Since the trial judge had found that it was unreasonable to exclude the appellant, there had to be consideration of reasonable provision. Ms Reed submits that DJ Million was correct to have regard to the deceased’s testamentary wishes: see per Oliver J in Re Coventry dec’d [1980] Ch 461 (“An Englishman still remains at liberty at his death to dispose of his own property in whatever way he pleases.”).

In my judgment Parliament has entrusted the courts with the power to ensure, in the case of even an adult child, that reasonable financial provision is made for maintenance only. In my judgment that limitation strikes the balance with the testamentary wishes of the deceased whose estate is used for the purposes of making an award, at least in this case where there is no other claimant apart from the Charities. They have no demonstrated need or expectation.

After some futher consideration of the figures the court awarded £143,000, being the cost of buying the house plus a modest further £20,000 which could be drawn down in stages so as not to affect her benefits.  So she got there in the end.

But?

There has been a lot of concern about the result, especially from charities, who reckon that they might lose a substantial amount of their legacy income from challenges from other family members and the reluctance of testators to take the risk of claims of this sort. An award of £50,000 would have been some 10% of the estate, but this is almost exactly 1/3 of it. And the cost of 5 hearings cannot be cheap either. The published judgment doesn’t give the costs order, but the charities may well have had to pay everybody’s costs all the way. There is some talk of an appeal to the Supreme Court.

For myself, I doubt it. The Inheritance etc Act dates from 1975 and clearly gives the courts power to make awards to provide maintenance to a number of classes of people, including children of the deceased. It doesn’t qualify this power to exclude adult children without disabilities as previous legislation had. If the courts didn’t generally make awards in their favour, then the courts were wrong.  If they want to change this decision then they will have to go to Parliament to do so.

And this case is unusual, in that there were no other beneficiaries, or indeed relatives, to take into consideration. If Heather had a sister then it might not have been unreasonable to have given the sister most of the estate, and very hard to overturn on the facts. Remember, the will can only be attacked if it fails to give reasonable financial provision for a child’s maintenance. If the child, probably in their 50s when their parent dies, is working, and has supported themselves for many years, it will be difficult to prove that this threshold has been reached.

Guidance

It’s hard to add to what I said in my piece from 2011, following this case’s last excursion to the CA:

If a testator wants to exclude a child from their will they ought to consider:

  • Setting out reasons in the will or elsewhere – here there was an explanatory letter but it contained major inaccuracies and was not believed to be true by the courts.
  • Giving reasons for giving more to other beneficiaries: if one brother needs more because of his financial problems it may be reasonable to give the other less.
  • Making a gift sufficient to cover maintenance, if not equality with others.
  • If they are going to give all or much of the estate to charities then at least choosing charities they have a connection with.
  • Considering lifetime gifts – a will, and the Act can only deal with what is left at death. But a gift made with the intention of avoiding an Inheritance claim can be set aside. So care is needed.

The converse applies if such a will is to be challenged. Important points are:

  • Consider what is needed for reasonable financial maintenance.
  • Does the claimant need an on-going subsidy for basic living expenses?
  • Explore what other assets the claimant has, or might expect to get.
  • Look at the evidence of reasons given by the testator very carefully.

Finally

We are all aware of the greatly increased number of Inheritance Act claims, and other challenges to wills, that have been made in recent years. Whether it is the result of the financial downturn in the economy as a whole, or just among litigation lawyers, is a matter of debate. But is is clearly there, and yet the sky has not fallen in.

In Victorian times a father could disinherit his family and leave everything to a charity, or his mistress. That has not been the case for a long time, and most people regard that as progress. Is it wrong to feel that when you die you should look after your family before giving large amounts to charities and others?

PS

The Supreme Court has just (2.3.16) given leave to the charities to appeal from the CA order. The hearing might be 12 months away, but this is clearly not the end of the road, yet.

 

Written by Coventry Man

30/07/2015 at 00:54