August 8, 2018Elderly cohabitee wins financial provision claim

Court

Image source: Anthony M.

The Court of Appeal has upheld a High Court Judgement that a deceased’s Will failed to make reasonable provision for a financially comfortable cohabitee’s maintenance under the Inheritance (Provision for Family and Dependants) Act 1975.

The law

Under the Inheritance Act, certain people may make an application to the Court if either a deceased person’s Will does not provide for them, or the deceased died without a Will (i.e., they died “intestate”) and they do not stand to benefit under the rules of intestacy.

For more information on when a claim might be appropriate and who might claim, see our article Inheritance disputes: claims for ‘reasonable financial provision’.

The background

In the present case, the Claimant Mr Warner had cohabited with the Deceased, Mrs Blackwell, for almost 20 years in Mrs Blackwell’s property before her death.

An unusual feature of this case was that Mr Warner was financially comfortable at the time of Mrs Blackwell’s death.

Prior to her death, Mrs Blackwell had made a Will leaving everything to her daughter, Mrs Lewis.

Mr Warner, who was 91 and in poor health, had continued to live in the property following the Deceased’s death and wished to continue doing so. Mrs Lewis did not agree to this unless he bought it from the estate for £425,000 as she wished to sell the property to “the highest bidder, including Mr Warner if that was him”. Mr Warner rejected this offer as he considered this was an overvaluation of the property. He was willing to purchase the property for fair value. The parties could not agree and the case proceeded to a hearing.

County court decision

The case was first heard in the County Court following an application by the daughter seeking possession of the house, damages for trespass or mesne profits and the return of various items in the house.

Mr Warner made a cross-application for relief under the Inheritance (Provision for Family and Dependants) Act 1975. He accepted that he was wealthier than the daughter but sought to keep the house as a roof over his head for a number of reasons, including difficulties with his health and the fact that the house was in a location where he had lived his entire life.

The Recorder (Christopher Gardner QC) found that maintenance of a roof over the applicant’s head came within the definition of maintenance in Section 1(2)(b) of Inheritance Act, and the fact that the Deceased’s Will failed to preserve this meant it failed to make reasonable provision for him.

The matters to which court had regard in exercising its powers under the Inheritance Act (per Section 3 of the Act) included Mr Warner’s physical disability, age, length of time he had lived in the property as his home and the contributions he made.

Other facts that the Recorder considered included the location of the house which was where Mr Warner had grown up and lived for his entire life, and the fact that the house was next to neighbours who took care of him. The Recorder was satisfied that forcing Mr Warner to move should be avoided.

However, considering the interests of the daughter, the Recorder found that it would be unreasonable for her to have to wait until Mr Warner’s demise to realise her interest in the property.

Mr Warner was therefore awarded an option to acquire the Deceased’s home for £385,000 (the higher of two expert valuations of the property).

High court decision

The case then went to the High Court on appeal by the deceased’s daughter (Lewis v Warner [2016] EWHC 1787 (Ch)). She had three grounds for appeal, as follows:

i) Although he appeared to direct himself appropriately as regards the law applicable to Mr Warner’s claim under the Act, the Recorder failed to apply it in accordance with either judicial guidance or the facts, and as a result came to utterly wrong conclusions in respect of the merits of the claim:

ii) The Recorder fell into error in treating Mr Warner’s claim as a claim under section 1(1)(e) of the Act, finding merit in it on the basis of a finding that he was being maintained by Mrs Blackwell without paying any or any sufficient heed to the evidence or even considering the necessary balancing exercise; and

iii) The Recorder exceeded his powers by making an order which he had no power to make.

Newey J upheld the County Court’s decision, treating the three grounds for appeal as follows:

i) Utterly Wrong Conclusions point – Mrs Lewis argued that the purpose of the Inheritance Act was to enable applicants to ask for reasonable financial provision and this imposed an obligation on Mr Warner to satisfy the Court that he had financial needs which, unreasonably, were not met by the Deceased’s Will. In other words, as Mr Warner was financially comfortable, he had no need to continue living in the property and the fact that he wished to live there was not sufficient to find it unreasonable that no provision was made for him to remain there.

Whilst Newey J. accepted that the meaning of ‘financial provision for maintenance’ would in most cases involve a transfer of value from the estate, maintenance could include other forms of assistance with the requirements of daily life. If a person needed something to sustain a reasonable quality of life, providing it could be “maintenance” regardless of that person having substantial financial means.

ii) Section 1(1)(e) point – Newey J stated that on this point, the Recorder’s judgment was simply making the point that the fact that the Will did not contain anything to allow Mr Warner to remain at the property meant that it had failed to make reasonable financial provision for his financial maintenance within the meaning of section 1(2)(b).

iii) The “No Power” Point – There were two elements to this ground for appeal – the first being that the Court could not use its powers under Section 2 of the Inheritance Act to order an estate asset to be transferred at full market value and second, if Mrs Lewis was obliged to transfer the property to Mr Warner then the Recorder should have made an order requiring that Mr Warner pay for his occupation up to the date of transfer.

On the first element, Newey J noted that it was open to the Recorder, having decided that the Deceased’s Will failed to make reasonable provision for Mr Warner, to give effect to that decision by exercising his powers under Section 2 of the Act to compel Mrs Lewis to transfer the house to Mr Warner. Regarding the second element, Newey J noted that the figure of £385,000 (being the higher of the two professional valuations) was already quite generous to Mrs Lewis and it was therefore understandable that the Recorder saw no need to compensate her any further.

Newey J held that exceptionally, maintenance could extend to an arrangement for full consideration. A person could be in need of financial provision for their maintenance where they had substantial means but their money could not secure them what they actually needed. In conclusion, an arrangement such as an option to acquire for full consideration as in this case could amount to financial provision for a person’s maintenance. The appeal by Mrs Lewis therefore failed.

Court of Appeal decision

The Court of Appeal upheld both the County Court order and the High Court decision (Lewis v Warner [2017] EWCA Civ 2182).

It held that the Recorder was correct to reach the conclusion that the Deceased’s Will did not make reasonable financial provision for Mr Warner’s maintenance.

The Court remarked of the earlier case of Ilott v Blue Cross:

“There are clear indications in Lord Hughes’s judgment in Ilott to the effect that the broad concept of “maintenance” in section 1(2)(b) of the 1975 Act can extend to the provision of a house in which the applicant can live, albeit that it might most often be provided by way of a life interest.”

The Court further noted that:

“Although whether or not the applicant has a moral claim is often central to decisions under the 1975 Act (see paragraph 20 of Ilott), and although Mr Warner accepted that he had no such claim, this was a case where, in the Recorder’s evaluation, the absence of a moral obligation was outweighed by what was required to preserve the status quo for a very old and infirm person, who had been kept in a suitable house by the deceased for the nearly 20 years of their relationship.”

Although the Court had regard to the principles of testamentary freedom, it found that the Recorder’s balancing of the interests of Mr Warner and the daughter, Mrs Lewis, and finding that Mr Warner’s needs outweighed the proper interests of Mrs Lewis.

Comments

This was an unusual case as the Claimant, Mr Warner, was already financially well off. It is therefore unusual that he would need to apply to the court on the basis that the Deceased’s estate did not make reasonable financial provision for him.

Reasonable provision under the Act very often means such financial provision as it would be reasonable in all the circumstances of the case for the Claimant to receive for his maintenance.

However, in this case, the remedy was not financial as such, but was instead an option allowing the Claimant to purchase the property he had called his home for the past 20 years at full value. The Claimant had sufficient means to purchase some other property, but his needs as a very elderly person dictated that this property was best suited for him and to move could have undesirable consequences.

The case confirms that an order for sale at full consideration (i.e. an order for something that did not involve the transfer of assets from the estate) could constitute maintenance, and such an order is within the court’s jurisdiction under the Inheritance Act 1975. The Courts accepted that there might be occasional cases in which a Claimant’s needs were for some particular property, and where the precise financial value of that property was less important to the Claimant than the property itself.

Per Ilott v The Blue Cross, these type of claims may raise difficult individual questions under the 1975 Act, which have to be resolved on a case-by-case basis.

If you would like to know whether you can challenge a Will or make a claim against an estate, please visit our section on contesting a Will or get in touch using the form below:

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