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Berger v Berger [2013] EWCA Civ 1305

Appeal from refusal of permission to apply for provision under the Inheritance Act 1975 some six years after the death of the deceased.

The appellant was the wife of the deceased. They had been married for 36 years prior to his death in 2005 (and had lived together for many years prior to marriage). Each had children from previous marriages. The deceased's estate had comprised the former matrimonial home, worth around £2.5m, a half share in a property in Arizona which was jointly owned with the appellant, worth £467k, three properties in London worth around £1.66m in total and a majority shareholding in a property company, the deceased's shares in which being worth around £2.9m. In his will the deceased had devised two of the London properties to various children of the family, had provided for the half share in the Arizona property to pass to the appellant, the former matrimonial home to be held on trust for sale but with provision for the appellant to live there as long as she wished (or to request sale of the property to purchase an alternative property to be held on the same terms), and for the rest of the estate to be held on trust "to pay the income to [the appellant] during her lifetime" and thereafter on trusts for the deceased's two sons. The appellant appointed his sons and the appellant as executors of the will. The appellant and one of the deceased's sons were directors of the company, and the other of the sons was heavily involved in, and effectively a 'de facto' director.

Following the death of the deceased, the property company was run in such a way as to tie up considerable funds in renovating the various properties on a gradual basis. As a result the income available to be provided to the appellant was reduced. Concluding that the income provided was not affording her reasonable provision, the appellant applied for orders under the Inheritance Act 1975. Her explanation for the delay centred around not having advice at an earlier stage about the possibility of a claim and also not wanting to enter into litigation with her stepsons.

As the claim was brought over six months after representations were first taken out in relation to the estate, permission to apply was required and this was dealt with as a preliminary issue. At first instance HHJ Hayward Smith refused to grant permission to apply. The appellant appealed to the Court of Appeal.

Black LJ gave the main judgment of the Court of Appeal. She summarised the legal principles applicable to this type of case, noting the provisions of the Act in relation to the requirements for claims generally at sections 1(1) and 1(2)(a) and the factors to be considered at s3(1) and s3(2), which applies to claims by the spouse of the deceased. It was also noted, as it was a central point in the appeal, that s3(5) provides that the court is required to take into account the facts as known at the date of the hearing. It was agreed that the cases of Re Salmon [1981] Ch 167 and Re Dennis [1981] 2 All ER 140 set out the basic principles to be applied when deciding whether to grant permission to apply more than six months after representation with respect to the estate of the deceased is first taken out.

Applying those principles to this case Black LJ held:

1. In contrast with the trial judge, Black LJ held that the appellant did have an arguable substantive case in the event of permission being granted. By virtue of s.3(2) the court determining a substantive application would have regard to the position had the parties been divorced on the day the deceased died. In the light of White v White [2001] 1 AC 596 it would have been arguable that a divorce court would have effected an equal division of the parties' assets. The other beneficiaries did not have any particular needs which required to be satisfied from the estate. Black LJ concluded that the trial judge had focused on the appellant's needs for the rest of her life rather than having adequate regard to the divorce position.

2. The consequence of the judge having reached an incorrect assessment of the merits of  the appellant's substantive case vitiated his decision and consequently, the Court of Appeal considered afresh the question of the grant of permission.

3. It was not possible on the available evidence to form a reliable view as to whether the appellant had a claim against the sons for breach of trust or otherwise.

4. However, the judge had been right to focus on the very long delay in the appellant bringing proceedings. Even assuming that the appellant had not had advice about a potential Inheritance Act claim by her previous solicitors, her central complaint about not receiving sufficient income had been apparent from the very early days and she had consulted both a solicitor and an accountant in 2005/6. It was not clear why she had only started taking further action in 2011.

5. Most of the authorities in this area are fact specific. This case was distinguishable from Stock v Brown [1994] 1 FLR 840 and McNulty v McNulty [2002] WTLR 737 as her claim had not (as the claims had in those cases) been provoked by a particular event.

6. In all the circumstances it would not be fair to allow the appellant permission to make an application six years after the expiry of the time limit.

Gloster LJ agreed with Black LJ and added that it seemed that the sons had an appreciation of their responsibilities under the will to give proper consideration to whether the trustees should exercise their powers to advance capital or otherwise provide for the needs of the appellant. She encouraged the parties to reach compromise as to future provision so as to avoid the need for future litigation. 

Moses LJ agreed with both judgments.

Summary by Thomas Dudley, barrister, 1 Garden Court Family Law Chambers


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Case No: B6/2013/0474
Neutral Citation Number: [2013] EWCA Civ 1305

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL REGISTRY OF THE FAMILY DIVISION
HIS HONOUR JUDGE HAYWARD SMITH QC
FD12F00477

Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 29/10/2013

Before :

LORD JUSTICE MOSES

LADY JUSTICE BLACK


and

LADY JUSTICE GLOSTER
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Between :

BERGER Appellant

- and - 

BERGER Respondent
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Ms Penelope Reed QC (instructed by Adams Remers LLP) for the Appellant
Mr Michael King
(instructed by Frydenson & Co) for the Respondent

Hearing dates: 9th October 2013.
- - - - - - - - - - - - - - - - - - - - -

Judgment
Black LJ:
1. This is an appeal against an order made by HHJ Hayward Smith QC on 5 February 2013 refusing permission for the appellant to make an application for an order under section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 ("the Act"). The appellant needed permission by virtue of section 4 of the Act because more than six months had elapsed since the date on which representation was taken out in relation to the estate of the deceased.

2. The deceased, who was the appellant's husband, died on 26 June 2005 and probate was granted on 27 January 2006. The appellant could have applied under the Act as of right during a period of six months from that date but it was, in fact, nearly six and a half years before she sought to bring her application, commencing proceedings on 15 June 2012.

3. The appellant is in her mid 80s and in poor health. She contends that the disposition effected by the deceased's will, made in April 2005 shortly before he died, is not such as to make reasonable financial provision for her.  

4. The appellant and the deceased were together for 36 years. They began to live together in 1969. They were married in October 1983 and remained together until the deceased's death.

5. Both spouses had been married before. The appellant has two adult sons and an adult daughter by her first marriage. The deceased had two sons by his first marriage, Jonathan and Julian (whom, for reasons of practicality, I will call by their first names in this judgment). They were small boys when the appellant and the deceased began to live together. They are now both solicitors as was their father before them. One of the sons, Julian, has two children ("the grandchildren") who were 17 and 19 when the matter came before Judge Hayward Smith. The sons and the grandchildren were the defendants to the appellant's application in the court below and are now the respondents to the appeal. As their interests coincide, they have been represented throughout by one counsel, Mr King.

The estate
6. It is necessary to set out what the deceased's estate comprised. I base the approximate values that I attribute below to the assets on the figures that we were told in argument were given for probate purposes. The judge said that the net probate value of the total estate was £7m. My calculation comes to approximately £7.5m. Nothing turns on the difference.

7. The main assets were as follows:

i) The matrimonial home in which the deceased had lived with the appellant was in his name and was said to be worth £2.5m. It is a large property in Surrey with substantial grounds.

ii) The deceased owned a half share in a property in Arizona, the other half being owned by the appellant. His half share was said to be worth £467,000.

iii) The deceased owned three properties in London, two in Kennington Road and one in Fentiman Road. Their value was said to be £1.66m in total.

iv) The deceased was the majority shareholder, and effective owner, of a company ("the company"), the principal activity of which is dealing in and developing residential and commercial property. The value of the shares was said to be £2.89m.

The provisions of the will
8. The will devised one of the Kennington Road properties to the sons in equal shares and the other Kennington Road property to the appellant's adult daughter by her first marriage. Effect has been given to these gifts.

9. The will provided for the deceased's share in the Arizona property to pass to the appellant absolutely, the deceased expressing a wish that upon sale of the property, the appellant should make pecuniary gifts of £20,000 to each of his sons and to her son Robin and her daughter, and of £10,000 to each of his grandchildren and her grandchildren who should be living at his death. In fact, it is thought that this property possibly passed to the appellant by survivorship rather than under the will. It was sold in November 2006 and the share owned by the deceased was transferred into a trust in the USA for tax reasons. The trustees of that trust have a power to advance capital to the appellant and she receives income from the trust shareholdings (which she puts, in §28 of her second witness statement at approaching £27,450 in 2011/2012, see 2/54). She also has had free access to her own share of the proceeds of sale of the property. She gave $100,000 each to two of her own children in 2007 and she has spent part of the money on living expenses.

10. The will provided for the matrimonial home to be held on trust for sale but with provision to enable the appellant to live there for as long as she wished or to request that the property be sold and an alternative property bought for her use on the same terms. The appellant now wishes to move from the Surrey property which has been on the market for some time, the asking price being £4.25m. There was an offer of £3.85m but the prospective purchaser withdrew and purchased another property. The appellant's wish is to move to a flat in central London where she will be near her daughter; she estimates this would cost her between £2m and £3m. She set out for the purposes of her application what her income requirement would be following such a move. The judge said that the figure was £222,540 net per annum which he regarded as "a very inflated figure".

11. The residue of the estate was to be held on trust "to pay the income to [the appellant] during her lifetime" and thereafter on trusts for Jonathan, Julian and the grandchildren, potentially including further grandchildren as yet unborn.

12. The concluding paragraph of clause 8 of the will provided that:

"notwithstanding the above declared trusts my Trustees shall have power at any time during the lifetime of my said Wife and from time to time to pay or apply the whole or such part or parts as they think fit of the capital of my Residuary Estate to or for the benefit of my said Wife absolutely and freed from the trusts hereinbefore contained"

13. Clause 9(a) of the will said that the trustees:

"Shall invest and otherwise deal with the balance of my Residuary Estate with a view to maximising the income therefrom for the benefit of my said Wife ….and shall be under no obligation to keep a balance between capital and income"

14. Clause 9(b) set out the deceased's wish that "my Trustees shall retain my shares in the Company and all freehold and leasehold properties the subject of this clause and shall manage and promote the Company and the said properties for the benefit of my Residuary Estate during such period as they shall consider remunerative so to do" and gave additional powers to the trustees to facilitate the running of the company. They were also given absolute discretion to arrange for the appellant to receive some or all of her income from the residuary estate by way of direct payments from the company or direct payment of rent from any property held on the trusts of the residuary estate if it appeared to be beneficial to do so and the deceased directed that "my Trustees shall use their best endeavours to provide my said Wife with income on a regular (preferably monthly) basis."

15. The deceased appointed the appellant and his two sons to be the executors and trustees of the will. The appellant and Jonathan are also the directors of the company and, whilst Julian is not formally a director, he is much involved in it and has been described as a "de facto director".

The deceased's intentions
16. Further information as to the deceased's intentions in making the provision that he did in the will can be found in a letter that he wrote to Julian in March 2005, the month before the will was signed. He said:

"As you will know, I have appointed Jonathan, Rosana and yourself as Trustees of my Will. It would probably have been more convenient to have appointed Rosana and Jonathan alone in view of the fact that you are living in Italy.

However, I would not wish you to feel in any way excluded but would ask that both you and Jonathan ensure that Rosana receives maximum income during her lifetime, and that both Jonathan and yourself make absolutely sure that the Estate is not involved in the arguments and problems that can so often arise in probate. I shall be watching!"

17. The judge found that "[i]t was clearly the deceased's intention that the Applicant would receive a substantial income from the residue of the estate". It is the way in which the appellant's income has in fact been dealt with that is at the heart of this litigation, the appellant contending that what she has received has been neither sufficient nor the amount she should have received.

The position during the deceased's lifetime

18. The appellant and the deceased had a high standard of living. During his lifetime, the deceased used to raise income from the company by, from time to time, selling one of the properties that it owned and taking the proceeds as dividends although not, it seems, in later years. However, the judge said that in the year before his death, he had still drawn dividends from the company of £150,000.

Events following the deceased's death: general
19. A considerable amount of evidence has been filed dealing with events after the deceased's death. There are conflicts between what is said on the two sides and, because the question of permission was being dealt with as a preliminary issue, the evidence has not been tested nor have findings been made about it. I shall set out the general import of the evidence because it is necessary to have it in mind in making decisions about the case but I do not intend to go into the fine detail. 

Running of the company after the death
20. Since the death of the deceased, the practice adopted in relation to the company has been to retain its properties and refurbish them. In due course, this will increase the rental income derived from them but the appellant's case is that the lack of sale proceeds from company assets has limited the income paid to her, she would say inappropriately. In her witness statement of June 2012 (§35), the appellant said:

"Whenever I have asked the Defendants for money, I am told there is none because all the rental income has been put back into the refurbishment programme. They appear unwilling to modify the refurbishment programme to provide for me, or to sell properties in the Company portfolio to do so." 

21. It is the respondents' case that the legal advice to the executors was that they had a duty to keep a fair balance between the ultimate beneficiaries and those with a life interest, that they ought not to be selling properties and advancing the proceeds to the appellant, and that "maximising income" in the context of a property company meant squeezing as much rental income from the properties by "'proactively managing the property portfolio' potentially to pay dividends through enhanced profitability" (§38 second witness statement of Julian, September 2012, quoting from his memorandum concerning the will and estate). Their view is that in the light of this advice, the appellant could have had no reasonable expectation that assets would be sold and the proceeds given to her. They say refurbishment of the properties has been "rather ad hoc" as opposed to a "refurbishment programme" and that their main goal has been to "try and ensure the flats are kept in good condition in order to maximise rents and reduce void periods" (§85 of Julian's statement of September 2012). Furthermore, they say, the source of funds for the refurbishment has not been rental income but bank borrowing (§87 ibid).

22. In response, the appellant points to the company's accountant's email of 16 November 2005 (2/110) in which he questioned how the improvement to the properties would be funded, whether it would make sufficient difference to the income potential to make it worthwhile, and whether it was "worth the hassle" or whether selling the whole portfolio might be an attractive alternative. 

23. At the time probate was granted, according to the judgment the annual rental income from the company properties was approximately £124,000 (judgment §9); the judge did not say whether this was net or gross. The accounts for the company for the year ended 5 April 2011 show gross rental income of about £260,000, producing a net rental income of approximately £120,000. The judge recorded that the gross rent for the year ended 2012 was £335,000.

24. The appellant has received remuneration from the company as a director since the death of the deceased. The judge said that this had "now risen to £49,000 per annum gross". There is a mortgage of approximately £170,000 on the Surrey property and, in addition to the appellant's director's fees, the company pays the mortgage instalments of approximately £9,400 per annum (judgment §11). The company also paid the salaries of the couple who worked at the Surrey property as housekeeper and gardener at a rate of £33,000 per annum in total (judgment §10) but this ceased, in 2009, for what it is accepted was good reason, and thereafter the appellant herself paid their salaries until they retired in early 2012.

25. The first dividend paid to the appellant was in the company's financial year 2011/2012. The judge recorded that it was £9,170 gross. It is said that it is intended that dividends will now be paid annually in "steadily increasing amounts" (§88 of Julian's second witness statement, 2/38).

26. In resisting the granting of permission to pursue a claim under the Act, the respondents relied upon the fact that the appellant has been, throughout, an executor and trustee and also a director of the company, about whose affairs she has always been informed, they say, and whose board meetings she has attended (§87 of Julian's second witness statement, see 2/38). The appellant responded that she "did not generally understand" and that it "made very little sense to me and most of it went over my head" (§4 of the appellant's second statement, see 2/46).

The appellant's present income and capital
27. From the appellant's 2012 tax return, the judge ascertained that the appellant's total income from all her various sources (including from Arizona) was nearly £96,000 gross, approximately £72,000 net (judgment §11). He gave her capital as £38,000 in the bank here and about $490,000 in the United States, being the remainder of the proceeds of sale of the Arizona property. Her case was that her capital had been depleted by the payment of her expenses which included not only the staff wages of £33,000 per annum from 2009 to March 2012 but also £32,000 per annum for the other outgoings of the Surrey property (judgment §12).  

The explanation for the delay in bringing proceedings under the Act
28. The appellant expressed concern about her income position from relatively soon after the deceased died. That can be seen, for example, from an email dated 3 November 2005 from Mr Acomb, a solicitor who had been appointed by the executors to advise them, in which he summarised the discussion that the appellant and her daughter had had with him a few days before. He recorded that the appellant was "feeling very uncomfortable in relation to [her] own position under the estate" and was "primarily concerned about her income position". Mr Acomb was not able to advise her about her position as a beneficiary and advised her to take separate advice about that if she was not happy with it. The judge referred (§14) to there being "numerous references" to her concerns about income in the papers and no one has contradicted that description.

29. The appellant consulted Decherts, solicitors, on 17 November 2005. They wrote to her on 30 November 2005 setting out the basis on which they would act for her in these terms:

"Our job is to provide guidance to you through the course of the administration of your late husband's estate. We will not be replacing the role of the solicitors to the Executors of the estate, and, in particular, we will not be giving you tax advice (which the estate solicitors will be providing). However, we will be on hand to advise you generally on strategy and tactics as things move along.

We agreed that we would want to avoid, at all costs, litigation or disputes with other family members or the Executors. As a first step, we have drafted a suggested letter for you to send to the solicitors for the Executors in relation to a number of outstanding queries you had." (2/251)

30. The instructions to Decherts were short-lived. In December 2005, the appellant consulted Penningtons who agreed to advise her in her capacity as beneficiary and, to the extent necessary, in her capacity as one of the executors and trustees of the will. Mr Fellingham of Penningtons set out as one of the "problem areas":

"There would be a troubling degree of uncertainty if the residue of [the deceased's] estate continues to be invested in a portfolio of properties and/or shares in a property company. The management of the properties is largely in the hands of Julian and/or Jonathan and the management policy is to spend a significant part of the income on refurbishing the properties or on funding borrowing to enable that refurbishment to take place." (2/199)

31. It is apparent from the correspondence that a restructuring of the arrangements under the will was being discussed, although nothing came of this. For example, Mr Fellingham suggested in his initial letter of 30 December 2005 that a possible solution might be for the company's property portfolio to be split so that the appellant could receive an outright gift of capital from it, giving up her right to income from the rest of the portfolio to Julian and Jonathan. In January 2006, after speaking with Julian, Jonathan, the appellant and her daughter, Mr Fellingham wrote to the appellant again setting out options together with their advantages and disadvantages.

32. Penningtons' file ends, so far as it is relevant, in March 2006. There is no mention in it or in Decherts' file of the appellant being advised as to the existence of the Act or any possible claims she may have under it. The appellant's case is that no one mentioned anything to her about such a claim (see §12 of her second statement, 2/49).

33. The appellant gave an account in her first statement (§13.7 et seq) of how it was that she brought her claim when she did and why it was not commenced earlier. She said that she did not appreciate that her future financial security would remain an issue for so long after the deceased's death and she believed that the respondents would make sure she was all right financially but, over time, it had become clear they would not do so unless forced to do so. She said (§13.8) that "it is also true to say that I have not felt strong enough to do anything which may cause family tensions".

34. Her account was that in summer 2011, her children learned that she had been paying the housekeeper and gardener herself and had not been looked after from the estate and it was brought home to her that her own money was being spent and there was "no certainty about what would become of me financially once there was nothing left" (§13.9). She said she was encouraged to try to do something about it and her daughter informally approached a solicitor for her. For various reasons the solicitor could not act for her but suggested that she instruct an accountant to find out information about the estate which she did, meeting the accountant in August 2011. He suggested she should see a solicitor and she met her current solicitor on 27 October 2011 who also suggested that every effort should be made to find out information about the estate. The accountants pursued the information that was thought to be necessary but it was a slow process. 

35. According to the appellant, her solicitor told her that she may have a claim under the Act and suggested that she seek further advice about it but she was extremely reluctant to get involved in litigation with her step-sons and hoped that if her accountants could get hold of the relevant information about the estate, things could be resolved without it. She said (§13.13) that by the end of February 2012, no information was forthcoming so her solicitor encouraged her to meet his litigation colleague. The first convenient date for this was 27 March 2012. After the meeting, she was still reluctant to claim. The litigation solicitor suggested obtaining advice from counsel. That could not happen until May 2012 because the appellant had a heart attack at the beginning of April 2012.

36. Having received advice from Ms Reed QC (who represented the appellant in front of Judge Hayward Smith and on the appeal), the solicitors wrote to the first and second respondents on 28 May 2012 inviting them to agree that they would not take any point on time if a claim was made under the Act; they were not prepared to agree to that. The appellant said (§13.16) that she therefore felt that she had no choice but to bring the claim to protect her position as best she could. The Jubilee celebrations intervened and the appellant was then in hospital for nearly a week until 12 June 2012. Proceedings were commenced, as I have already said, on 15 June 2012.

The principles to be applied

37. The question under the Act is, of course, whether the will makes reasonable financial provision for the applicant (section 1(1) of the Act). Where the applicant is a spouse, "reasonable financial provision" means "such financial provision as it would be reasonable in all the circumstances of the case for a husband or wife to receive, whether or not that provision is required for his or her maintenance" (section 1(2) (a)). This contrasts with the position of other applicants in relation to whom the focus is such financial provision as it would be reasonable for them to receive for their maintenance.

38. The court has power to make a wide range of orders if it is satisfied that reasonable financial provision has not been made. They are set out in section 2 of the Act and include the outright transfer to the applicant of specified property from the estate and the payment of a lump sum.

39. Section 3(1) of the Act sets out the matters to which the court is to have regard in determining whether the disposition effected by the will is such as to make reasonable financial provision for the applicant and, if the court considers that it is not, in determining whether and in what manner it will exercise its powers under section 2. The list is as follows:

"(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."

40. There is a special provision in section 3(2) which applies, inter alia, where the applicant is the spouse of the deceased. In that case, in addition to the matters specified in section 3(1), the court must have regard to:

"(a) the age of the applicant and the duration of the marriage;

(b) the contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family;

and, in the case of an application by the wife or husband of the deceased, the court shall also, unless at the date of death a decree of judicial separation was in force and the separation was continuing, have regard to the provision which the applicant might reasonably have expected to receive if on the day on which the deceased died the marriage, instead of being terminated by death, had been terminated by a degree of divorce."

41. Section 3(5) has been the focus of attention in this appeal. It provides that:

"(5) In considering the matters to which the court is required to have regard under this section, the court shall take into account the facts as known to the court at the date of the hearing."

42. For completeness, I will mention also section 3(6) which provides:

"(6) In considering the financial resources of any person for the purposes of this section the court shall take into account his earning capacity and in considering the financial needs of any person for the purposes of this section the court shall take into account his financial obligations and responsibilities."

43. Section 4 provides:

"An application for an order under section 2 of this Act shall not, except with the permission of the court, be made after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out."

44. Section 4 does not give any guidance as to how the court should approach an application for permission but there is no dispute between the parties as to the judge's formulation of the correct approach to such an application. He distilled what he called "the following propositions" from Re Salmon [1981] Ch 167 and Re Dennis [1981] 2 All ER 140:

"(1) The court's discretion is unfettered but must be exercised judicially in accordance with what is right and proper.

(2) The onus is on the Applicant to show sufficient grounds for the granting of permission to apply out of time.

(3) The court must consider whether the Applicant has acted promptly and the circumstances in which she applied for an extension of time after the expiry of the time limit.

(4) Were negotiations begun within the time limit?

(5) Has the estate been distributed before the claim was notified to the Defendants?

(6) Would dismissal of the claim leave the Applicant without recourse to other remedies?

(7) Looking at the position as it is now, has the Applicant an arguable case under the Inheritance Act if I allowed the application to proceed?"

45. The judge addressed the questions in paragraphs (3) to (7) above in turn.

46. He concluded that the appellant had not acted promptly in all the circumstances and that there had been no negotiations within the time limit.

47. He recorded that the estate had been administered to some extent but not yet fully administered because the Surrey property and the residue of the estate remain subject to the will trusts. 

48. He considered the possibility of an alternative remedy in the form of an action against the solicitors who advised the appellant in the early days. He said that it was not clear whether she would have had any cause of action against them "because it may be that the ambit of their instructions did not require them to give such advice" but said that that was academic because any potential claim against either firm would now be statute barred. He considered the possibility that there may be a claim against Julian and Jonathan as trustees for failing to carry out the terms of the will and to maximise the income for her, but said that the issue had not been explored in any depth during the hearing although he thought there was enough evidence to indicate that the appellant needed to take advice on that possibility.

49. As to whether the appellant has an arguable case under the Act, the judge took the view that the provision made for her in the will was reasonable, bearing in mind her age and health. He said this:

"Given her age, the life interest was not an unreasonable provision to make, subject to one point. For income, she has to rely on the trustees. If they had faithfully followed the deceased's instructions, this problem may not have arisen but they have not. Was it reasonable for the will to leave the Applicant's income in effect at the mercy of the trustees? The answer is yes, if they followed his instructions. Was the deceased entitled to assume that they would follow his instructions? My answer is probably yes, though I can see a contrary argument." (§40)

50. The judge considered that the absence of negotiations within the time limit, the position as to the administration of the estate and the position with regard to alternative remedies did not "point irresistibly to the dismissal of this claim" (§42). He thought that if he was right that the appellant did not have an arguable case under the Act, that would point to the dismissal of the claim but he said, "it is an issue about which I think reasonable minds might differ". He was however of the view that one factor did point inexorably to the dismissal of this claim and that was the failure to act promptly. He said:

"It is way out of time. Concerns were raised well within the time limit. Solicitors were consulted. No proceedings were started. The lengthy delay, without any good reason, is in my view fatal to this claim."

The appellant's submissions on appeal
51. Ms Reed QC submitted that the judge was wrong to allow the issue of permission to be determined by the failure of the appellant to bring the claim sooner and in his evaluation of the circumstances of the claim generally. She advanced the following arguments:

i) The judge looked at the appellant's situation at the wrong time. He evaluated the provision for her as at the date when the will took effect, as revealed by §40 of the judgment, whereas section 3(5) of the Act requires that the court is to take into account the facts as known at the date of the hearing. Judged at the date of the permission application, the will did not make reasonable financial provision for the appellant because amongst other things it did not meet her income needs and did not reflect what she would have expected to receive on divorce.

ii) The judge was wrong to consider that the appellant did not have an arguable case on the merits. Whilst he did not dismiss the application on this basis, he was heavily influenced by this assessment as can be seen from his distinguishing McNulty on the basis that the merits of the substantive claim were much stronger there.

iii) Weight should have been given to the fact that the appellant had not received advice about the proceedings under the Act from either of the two firms advising her at the outset. Permission was given for a claim in Stock v Brown [1994] 1 FLR 840 where there was a similar delay and the judge was wrong to distinguish that case on the basis that the applicant there had not received any advice at all because this appellant similarly did not receive any advice at all about her right to claim under the Act.

iv) Equally the judge was wrong to consider that Stock v Brown was distinguishable on the basis that there was an intervening factor there, namely the fall in interest rates. There was an intervening factor here too when the burden of having to pay the staff from her own pocket was added to the extended lack of income payments to the appellant from the residuary estate.

v) The judge placed too much reliance on the fact that a small part of the estate had been distributed and not enough on the fact that sufficient remained available to make provision for the appellant without interfering with specific gifts that had taken effect. The fact that distribution was not complete was a crucial factor as Stock v Brown (supra) and McNulty v McNulty [2002] WTLR 737 showed. It was also regarded as important in Re C [1995] 2 FLR 24, as was the size of the estate which, as in the present case, meant that making provision despite appointments having been made was not difficult.

vi) As the court pointed out in McNulty (@ p 767), the time limit in section 4 of the Act is not a disciplinary provision which should be enforced for its own sake but is designed to provide a measure of protection for executors and a measure of certainty for beneficiaries by enabling the estate to be distributed once the six month period has elapsed.

vii) The judge gave insufficient weight to the lack of any alternative remedies available to the appellant. 

The merits of the appellant's substantive case
52. In my view, Ms Reed's submission that the judge was wrong in his assessment of the merits of the appellant's substantive case is well founded. It is impossible at this preliminary stage to take a concluded view about the prospects for a claim under the Act if it were allowed to proceed but I have no doubt that the appellant has an arguable case. Indeed, I am not sure that Mr King for the respondents was really resisting this conclusion by the end of submissions but I will nevertheless explain the reasoning that leads me to this assessment of the merits of the substantive claim.  

53. By virtue of section 3(2), the court determining a substantive application would have to have regard to the provision which the appellant might have received if the parties had been divorced on the day the deceased died. Ms Reed relied on White v White [2001] 1 AC 596 as the guide to how an ancillary relief claim might have been approached in this case. Whilst there is no legal presumption of equal division of the parties' assets on divorce, the House of Lords said that equality should only be departed from if, and to the extent that, there was good reason for doing so. They said that the claimant's financial needs or reasonable requirements should not be regarded as determinative in arriving at the amount of an award and an assessment of financial needs was only one of several factors to be taken into account, particularly when the financial resources of the parties exceeded their financial needs. Lord Nicholls, with whom the others of their Lordships agreed, said:

"As I have been at pains to emphasise, financial needs are only one of the factors to be taken into account in arriving at the amount of an award. The amount of capital required to provide for an older wife's financial needs may well be less than the amount required to provide for a younger wife's financial needs. It by no means follows that, in a case where resources exceed the parties' financial needs, the older wife's award will be less than the younger wife's. Indeed the older wife's award may be substantially larger." (p 609D)

54. He then went on to deal with a further matter arising from observations made in Page v Page 2 FLR 198 (and repeated in Preston v Preston [1982] Fam 17) to the effect that when assessing the amount of a lump sum provision under section 25, it is not legitimate to take into account the wife's wish to be in a position to make provision by will for her adult children. Lord Nicholls said:

"I agree with this proposition to a strictly limited extent. I agree that a parent's wish to be in a position to leave money to his or her children would not normally fall within paragraph (b) as a financial need, either of the husband or of the wife. But this does not mean that this natural parental wish is wholly irrelevant to the section 25 exercise in a case where resources exceed the parties' financial needs. In principle, a wife's wish to have money so that she can pass some on to her children at her discretion is every bit as weighty as a similar wish by a husband…..

In my view, in a case where resources exceed needs, the correct approach is as follows. The judge has regard to all the facts of the case and to the overall requirements of fairness. When doing so, the judge is entitled to have in mind the wish of a claimant wife that her award should not be confined to living accommodation and a vanishing fund of capital earmarked for living expenses which would leave nothing for her to pass on. The judge will give to that factor whatever weight, be it much or little or none at all, he considers appropriate in the circumstances of the particular case." (p 609 G)

55. These passages speak for themselves. It is clear that a divorce court would not have limited its ancillary relief order for the appellant to provision for her various financial needs for the rest of her life even if the almost inevitable result of giving her more than that would be that there would remain a balance at her death which would simply be transmitted to the next generation as part of her estate. It is at least arguable that the starting point for an ancillary relief order in this case, given the very long period during which the appellant and the deceased had been together, would have been a 50:50 division of their assets. Our attention has not been invited to any significant capital brought by either party into the relationship/marriage or any other factor that would steer the court towards a different outcome. The fact that the deceased went out to work and built up the property portfolio through the company whilst the appellant stayed at home and looked after the family, including the deceased's two sons, is of course nothing to the point. Naturally, a divorce court would have had to consider the respective needs of the parties, the liquidity of the assets and any other factors that were relevant but a property owning company such as this one presents much less of a liquidity problem than many companies. A divorce court would undoubtedly have sought to achieve a clean break between the parties, providing each with sufficient capital to house themselves and to produce the income they reasonably needed. Ms Reed argued that the appellant could have expected to get half the assets outright (£3.75m on my figures) and that is certainly a realistically possible outcome. It is difficult to say with any confidence whether she would have been able to continue to live in the Surrey property, which might have absorbed a disproportionate amount of her resources, creating income difficulties.

56. Arriving at a view as to what the applicant might reasonably have expected to receive on divorce is by no means the end of the consideration of whether a will is such as to make reasonable provision. Section 3(2) adds this particular factor to the other factors set out in section 3(1). To an extent, section 3(1) covers similar ground to the ancillary relief regime but it imports different considerations as well, not least the position of the other beneficiaries of the estate, although it is fair to say that this is not a case in which those beneficiaries have particular needs which require to be satisfied from the estate. Furthermore, the court would be looking at the facts as known at the date of the hearing rather than historically as at the date of death (section 3(5) of the Act). Amongst the various implications of this might well be that, in having regard to "any other matter…which in the circumstances of the case the court may consider relevant" (section 3(1)(g) of the Act), the court would take into account that the approach taken to the management of the estate had, for years, been determined without any anticipation of a claim under the Act. 

57. Although he referred to Ms Reed's argument about the outcome on divorce and acknowledged that it was right to have regard to the divorce position, the judge did not set out what his view was about what the appellant might reasonably have expected to receive on divorce (nor indeed about any of the section 3(1) or (2) factors) but simply expressed his conclusion that the provision for the appellant was reasonable "bearing in mind her age and health" and, in particular, that "[g]iven her age" it was not unreasonable to adopt the solution of a life interest. I think we can infer from this that the judge was focussing on the appellant's needs for the rest of her life, without giving adequate consideration to the divorce position which would not have been confined in this way and which would have been likely to be an influential factor in a case such as this.

58. What is the consequence of the judge having reached what in my judgment was an untenable view of the merits? The appellant's case was that the error vitiated the judge's decision. For the respondents it was argued that it made no difference because the judge, thinking that "reasonable minds might differ" on whether the appellant had a claim, did not treat his conclusion that the appellant had no arguable case under the Act as a factor against her; what influenced him was the lengthy delay in commencing proceedings, see §42 of the judgment. Ms Reed responded that we can see that it did in fact influence the judge because he distinguished McNulty (supra) on the basis that the merits of the substantive claim were much stronger there than here (judgment §43). I accept Ms Reed's submission. It would have been very hard for the judge not to be influenced by the merits of the potential claim as he saw them and I think this reference in §43 shows that this feature remained in his mind. His error of approach to one of the factors that was material to the exercise he was carrying out did vitiate that exercise, in my view, and it follows that either the case must be sent back to another judge for the decision to be taken again or we must determine the permission application ourselves. Everyone proceeded on the basis that we would take the latter course and I will therefore move on to a consideration of the other relevant features of the case.

Other factors

59. It is not possible to reach a reliable view as to whether the appellant would have any action against the sons, whether for breach of trust or otherwise. For the sake of argument, I will assume that she would not.

60. Although some gifts under the will have taken effect, the estate has not been fully distributed and the residue is quite large enough, in my view, for it to fund any provision that might be made for the appellant. This is not a case in which beneficiaries would have to give up what they have already received. Ms Reed submitted that this was a "magnetic" factor. Like the fact that the appellant has an arguable case on the merits, it is clearly important but it is not determinative; both of these factors must be considered alongside other relevant factors in evaluating the case as a whole.

61. The judge focussed particularly on the very significant delay in commencing proceedings and in my view he was right to do so. It is for that reason that I went into the history in some detail earlier because, faced with a claim which is as long out of time as this one, a court is bound to search for explanations for the delay in order to consider them as part of all the circumstances of the case. It is worth remembering Sir Robert Megarry VC's words in In re Salmon, decd [1981] 1 Ch 167 @ 175:

"the time limit is a substantive provision laid down in the Act itself, and is not a mere procedural time limit imposed by rules of  court which will be treated with the indulgence appropriate to procedural rules. The burden on the applicant is thus, I think, no triviality: the applicant must make out a substantial case for it being just and proper for the court to exercise its statutory discretion to extend the time."

62. I proceed on the basis that the appellant was not advised by either Decherts or Penningtons about her potential claim under the Act and that her present solicitors were the first to advise her of this. However, her central complaint, namely that she is dependent on the sons for her income and that she has not received either enough for her needs or what was intended by the deceased, has been apparent from the very early days. At that stage, she involved both accountants and solicitors to advise her in her personal capacity and a restructuring of the disposition under the will was discussed. That particular initiative seems to have petered out in 2006 although the appellant continued to voice her anxiety as can be seen, for example, in an email from the accountants, Roffe Swayne, to Jonathan and Julian in February 2007 (2/123). She did not however take any action until accountants were involved in the summer of 2011 and then solicitors.

63. The trigger for the renewed activity in 2011 is not entirely clear and, given that the evidence has not been tested, one can only speculate. The appellant says that she expected things to be sorted out and it was only after the passage of time that she recognised that that was not going to happen (see, for example, §13.8 of her first statement, to which I have referred above). However, by the summer of 2011, the management strategy for the company had been following a settled path for years with the appellant not receiving the income she expected and it is difficult to see why it was at this particular time that she despaired of the situation resolving itself. A significant period of time had also by then elapsed since the company ceased to pay the wages of the housekeeper and gardener in 2009. It seems possible that the action in 2011 may have been associated with the appellant's recognition that it was no longer really feasible for her to live in the Surrey property (as to which see her letter of 8 September 2011 at 2/124). Maybe the impending retirement of her housekeeper and gardener contributed. One simply does not know. What can be said with certainty is that the appellant cannot clearly identify any significant change or extraneous trigger for her action in 2011.

64. Ms Reed submitted that no prejudice will be caused to anyone by allowing the appellant's application to be brought out of time and she sought support by analogy with other cases in which permission under section 4 had been granted, to which I will come shortly.

65. Mr King's response was that if this claim were to be permitted, it would go a long way to removing the time limit in cases where there is a life interest in property and the estate has therefore not been distributed, even where the appellant has acquiesced in the handling of the estate as he submitted the appellant had here. He submitted that she made a deliberate decision not to take proceedings and, from spring 2006, agreed to or acquiesced in everything that was undertaken by the sons (alongside whom she was also a director of the company, an executor and a trustee), including the investment strategy and management of the estate. This had proceeded on the basis that the will's provisions would not be challenged. Many important decisions relating to the running of the company had been taken during this period, he said, including refurbishing properties to enhance the income produced by them, and the sons had put in considerable effort in pursuing this strategy which was now coming to fruition. It was simply too late, he submitted, to seek to disrupt this. He also submitted that the appellant's choice to continue to live in the Surrey property tied up capital, required income expenditure, and precluded sensible investment.

66. Mr King submitted that whilst the primary reason for the strict 6 month time limit for claims under the Act is to enable executors to distribute the estate without liability, it is also important, even where there is to be no immediate distribution (because, for example, life interests are created), that the trustees should have the confidence to be able to administer the estate without the shadow of a potential claim at some uncertain date in the future.

67. It was also pointed out on behalf of the respondents that even once the appellant's present solicitors were instructed it was 7 months before proceedings were commenced, the first intimation of a claim being in May 2012.

68. Can the appellant derive support from the authorities as Ms Reed argued? Mr King rightly argued that decisions in this area are fact-sensitive. I have nevertheless looked closely at the cases upon which Ms Reed relied in order to see what, if any, assistance they offer. Ultimately, I did not find that they helped me to resolve the present case.

69. Stock v Brown [1994] 1 FLR 840 was an application by a widow who was 85 when probate of her husband's will was granted in 1987. She did not attempt to claim until 1993 when a dramatic fall in interest rates and the increasing cost of her care meant that what she got under the will was no longer enough to live on. The widow had never received independent legal advice about the implications of the will or her right to challenge it. It was conceded that she had an arguable case on the merits. The will trustees opposed the grant of permission but the residuary beneficiaries, who had been notified of the circumstances, had not sought to obstruct her application for relief. The widow was granted permission to claim nearly 5 ½ years out of time by the deputy District Judge and an appeal against this to the Family Division was dismissed.

70. It is clear from Thorpe J's judgment that an important factor in his determination was that the trigger for the application lay in "extraneous circumstances", namely the dramatic fall in interest rates. He balanced what he classed as "the exceptional delay" against the "combination of extenuating circumstances and meritorious need" in reaching the conclusion that the grant of permission was appropriate. The present case is different. There are no such extraneous circumstances, sudden or otherwise, in the months preceding the appellant consulting solicitors again in 2011; I do not accept as in the same category the lapse of time and/or the added burden from 2009 of having to pay for the household staff. Nor is the appellant in the fortunate position of there being no active opposition by the residuary beneficiaries.

71. Re C (Deceased)(Leave to apply for provision) [1995] 2 FLR 24 concerned a claim by the deceased's 8 year old illegitimate daughter. Proceedings were begun 18 months after the expiry of the time limit, prior to which there had been a period of almost 2 years from the death (see page 27G). On appeal from the district judge, Wilson J (as he then was) granted permission for the claim to be made out of time.

72. The child's case had merit and it was conceded that an order for substantial provision for her maintenance would be inevitable. Her mother's explanation for the delay was unsatisfactory but the judge said that account needed to be taken of the fact that if permission were to be refused, "the child will suffer as a result of another's fault". The estate had not been distributed and was large enough for the judge to contemplate that provision for the child could be accommodated alongside provision for the beneficiaries. 

73. The fact that the claimant was a child made this case rather different, in my view, and of course the delay was much shorter than that in the present case.

74. In McNulty v McNulty (supra), a claim by an elderly widow in relation to her husband's estate was permitted 3 ½ years out of time.  The matrimonial home passed to the widow by survivorship but the deceased left his interest in his business (including the business premises) to his trustees on trust to pay the widow a weekly income for life and subject thereto to his sons in equal shares absolutely. The sons deliberately withheld relevant information from the probate valuer as a result of which the business premises were valued for probate in January 1995 at £175,000 when the value was, in fact, significantly more. Disputes arose between the widow and her sons in 1995. They stopped paying her weekly income. It was not until June 1998 that she became aware that the potential value of the land was greatly in excess of £175,000. The claim was commenced in April 1999. By the time of the hearing in 2001, the business had been wound up and the land sold for £1.6m.

75. The deputy High Court judge determined that the will did not make reasonable financial provision for the widow. He considered there should be a clean break, with the widow being given a lump sum award, such award not being limited to sufficient to buy an annuity given that this was a claim by a spouse. He granted permission for the claim to be made out of time. The fact that the widow did not discover the true value of the land until June 1998 was clearly material to his thinking; if she had acted promptly thereafter he would have had no hesitation in granting permission. What concerned him was the "inexcusable tardiness" (page 766G) between that discovery in June 1998 and the commencement of the proceedings in April 1999 but, there being no prejudice to the sons, he decided that "in the very unusual circumstances of this case" it was fair and just to allow the claim to be brought out of time.

76. In the instant case, there has been nothing to parallel the deliberate concealment by the sons in the McNulty case of a material fact, the discovery of which provoked the commencement of proceedings. Indeed, as I have said already, it is not easy, on the evidence as it stands, to identify reliably the trigger for the present claim. As with the previous two authorities, I do not therefore think that we can gain much assistance from the decision in McNulty.

Conclusion
77. Taking all the factors in the case together, I would not permit the appellant to make her claim. I give full weight to the potential merits of the claim and to the fact that the estate has not yet been fully distributed and that it is likely that sufficient capital could be found to fund whatever award the appellant might reasonably expect without disturbing any gifts that have already taken effect. I also remind myself that the evidence does not establish that the appellant was advised about the possibility of a claim under the Act when she consulted solicitors in 2006/7. Against these factors must be set not just the fact of the very substantial delay in bringing proceedings but the history during the period since the deceased died. This is not a claim which has been provoked by a particular event, be it something for which the respondents were responsible (as in the late discovery in McNulty of the true value of the land which the defendants had concealed) or something extraneous (such as the dramatic fall in interest rates in Stock v Brown). It appears much more likely that the appellant, who had hitherto understandably not wished to litigate with her family, eventually decided that proceedings were appropriate. We are in no position to test the proposition that she was fully involved in the strategy for and management of the estate over the years but what is clear is that she was actively interested in 2005/2006 when she consulted her own accountants and solicitors and showed herself able to pursue her interests should she have wished to do so. She says that she continued not to agree with the way in which the sons handled matters thereafter but the reality is that for years she took no steps and the respondents continued actively to manage the estate, and in particular the company, without the expectation of a challenge to the will, whilst the appellant continued to live in the Surrey property as she wished to do. In my view, it would not be appropriate, in all of these circumstances, for the appellant to be permitted to make her claim six years after the expiry of the time limit in the Act. 

78. I would therefore dismiss the appeal.

Gloster LJ:
79. I agree. I would add that I have also been influenced in my decision that this is not an appropriate case in which to grant the appellant permission to make her claim six years after the expiry of the relevant time limit, by the additional factor that it would appear, from the evidence, that Julian and Jonathan have an appreciation of their obligations as trustees under the will to give proper consideration to the question whether the trustees should exercise their powers to advance capital or otherwise provide for the needs of the appellant and resolve what she perceives to be the difficulties of her current financial position. I refer in particular in this respect to a letter dated 11 February 2013 from Julian and Jonathan's solicitors, Henry Frydenson & Co, to the appellant's solicitors. I would express the hope that that all three trustees will be able to agree upon what such suitable provision should comprise, so that any further litigation in connection with this estate may be avoided.

Moses LJ:
80. I agree with both judgments.