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Inheritance Act Claims after White & Miller

Penelope Reed of 5 Stone Buildings analyses the Court's approach to Inheritance Act claims by spouses in the wake of White and Miller.

Inheritance Act Claims after White & Miller

Penelope Reed, 5 Stone Buildings

Introduction
Recent developments in matrimonial finance and in particular the landmark decisions of the House of Lords in White v White and Miller v Miller have been of considerable interest to those who are involved in applications under the Inheritance (Provision for Family and Dependants) Act 1975. The frequently difficult interaction between the award which a spouse might have received on divorce and the provision which is it reasonable for them to receive on death has been the subject of some recent decisions which have gone some way towards clarifying the law.

Nevertheless, there remain a number of difficult issues which the cases have not yet resolved and which I will look at later on in this article.

Statutory Framework
Applications by spouses (and from now on civil partners) have always been different from applications by other claimants. Whether the will makes reasonable financial provision for them has to be judged against what is reasonable and not just what would be reasonable for their maintenance. In addition to the factors under section 3 of the Act which have to be taken into account, in respect of spouses the court has to consider:-

(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;
(c) 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 divorce.

That last factor has always caused some difficulty, not least because sorting out the finances of a divorcing couple involves considering the needs of two living parties whereas there is only one party to the marriage whose needs the Court has to consider in a 1975 Act claim. What is more there had been some suggestion that what the spouse might receive on divorce was an overriding factor . However the case of Re Krubert [1997] Ch. 97 had made it clear that the provision which the Court might make on divorce is only one of the factors which the Court will take into account in deciding on the appropriate provision . However, as was made clear in that case, the award which might have been expected on divorce provides a useful cross check when seeing whether the financial provision awarded is about right.

The Law Commission Report which preceded the 1975 Act made it clear that the claim of a spouse under the Act should be at least equal to that of a divorcing spouse on the family assets and it is useful when considering claims under the 1975 Act to bear that in mind.

White v White and Miller v Miller
Therefore developments in the law of matrimonial finance such as White v White and Miller v Miller inevitably have had an impact on the 1975 Act jurisdiction insofar as it deals with spouses. White v White of course involved a couple who had been married for many years and was a "big money" case. It was held that there was no place for discrimination between husband and wife and their respective roles. A judge has to check his tentative view against the yardstick of equality of division. While there is no presumption of equal division, equality should be departed from only if, and to the extent that, there were good reasons for doing so. The House of Lords also held that there was nothing in the legislation or in the underlying objective of securing fair financial arrangements that justified the conclusion that, in the context of a clean break in a big money case, the available assets of one party became immaterial once the financial needs of the other were satisfied, such that any surplus belonged exclusively to the former.

That case involved a long marriage and a lot of money. How the principle should be applied where the marriage was shorter was the subject of a decision by the House of Lords in Miller v Miller a case which achieved a great deal of publicity. That case involved a marriage of 3 years, an extremely wealthy husband (£27m was a conservative estimate of his fortune) and an award on their divorce of £5m at first instance. The Court of Appeal refused to interfere with that award as did the House of Lords. The appeal in Miller was dismissed and the 'clean-break' award of £5m upheld although the reasoning of the lower courts was criticized in introducing the concept of 'legitimate expectation' and attributing blame to Mr. Miller for the breakdown of the marriage.

The Law Lords made it clear that they viewed marriage as a partnership of equals and that the principle of fairness in the case of White v White is of universal application – however long or short the marriage is. It can no longer be argued that in a short childless marriage a husband simply has to restore the wife to the position she was in before the marriage. In giving judgment, Lord Nicholls made it clear that a wife's entitlement does not only accrue over time and that the White approach should not be confined to long marriages – to do that would introduce the sort of discrimination that White was intended to negate. The Law Lords also confirmed the principle in White that there is to be no discrimination between the breadwinner and homemaker and that each party is entitled to a fair share of the matrimonial assets.

Although White v White was a "big money" case, the Courts seem to have adopted the same approach in cases where the means of the parties are far more modest. In the context of 1975 Act claims, it can often be difficult to rely on the equal division principle in cases where the estate is small. There, a far greater share for the widow might well be justified.

Post-White v White 1975 Act cases
Since White v White there have been a number of reported 1975 Act spouse applications at first instance. In Adams v Lewis the marriage lasted for 54 years and the deceased and the claimant, his widow, had 12 children together. His Honour Judge Behrens awarded the former matrimonial home to the widow and reduced her pecuniary legacy to give her half the assets.

In McNulty v McNulty [2002] WTLR 737 the marriage there lasted over 37 years and was happy. The deceased had a business while the claimant looked after the home. Launcelot Henderson Q.C. (now Henderson J) made an award following the White v White guidelines.

In P v G [2006] 1 FLR 431, decided in December 2004 but only just reported, a number of very interesting points were raised. The case involved a 20 year marriage, an estate worth about £4.5million and a widow who had an entitlement to over £90,000 per annum by way of pension provision. First of all there was argument which was rejected to the effect that the Court needed to undergo a theoretical ancillary relief application taking into account hypothetical tax and historical values. The Court made it clear that ascertaining the provision which might have been made on divorce in general terms (e.g. an equal division of assets) would be enough to carry out the 1975 Act exercise. There was argument before the judge that in big money cases, what the spouse might be awarded on a divorce was really a ceiling beyond which the Court on a 1975 Act application should not go. She did not really deal with that issue but did state that in some 1975 Act cases greater provision than on divorce could be justified.

Fielden and Graham v Cunliffe
How the White v White principle should be applied in the 1975 Act jurisdiction was recently explored by the Court of Appeal in Fielden and Graham v Cunliffe [2005] EWCA Civ 1508. The facts were as follows. Derrick Cunliffe was born on 22 January 1936. He suffered from a physical disability which it seems had been caused during his birth or perhaps childhood. That meant that physically his spine was twisted and he had trouble speaking. His brother Bernard was deaf and dumb. The family home was Chaddock Hall where he lived with his parents until his mother died in 1988. Thereafter he lived with his father who died on 20 May 1999. The family business, Worsley Hall Nurseries and Garden Centre, made little money but was run to provide various members of the family with an occupation. When his father died he left Chaddock Hall to Derrick, and the residue of his estate on discretionary trusts in accordance with the family tradition. One half of the father's partnership interest in the family business was appointed out to Wayne Broadbent, a young man who had been befriended by the family from an early age and had been an employee of the garden centre for many years. One half of the father's residuary estate was appointed out to Derrick and the other half held on trust for Bernard and his family. Not only was Bernard deaf and dumb but so was his wife, Diana, and his son Victor, the third defendant, as well as one of Victor's three children.

After his father's death, Derrick became lonely and although he had a daily woman and a gardener, George Isherwood who had worked for the family for many years, he advertised for a housekeeper in The Lady. Monika Traub who was born in Germany applied for the position and started to work for the Deceased at the beginning of April 2001. Within weeks of starting work Monika had fallen out with the gardener, the daily woman and Wayne. By June 2001 she and Derrick had started to live together and they married on 29th October 2001. The Deceased made his Will dated 25th October 2001 in contemplation of his marriage to her.

Derrick died just a year after he married on 11 November 2002, aged 66. The first and second defendants to the proceedings were the executors appointed by the last will of the deceased dated 25th October 2001 and were partners in Cobbetts, the family solicitors for many years. By that will, the deceased left his residuary estate on discretionary trusts for a class of beneficiaries which included Monika, the children and remoter issue of his brother Bernard who had died on 6 August 2001 (including Victor Cunliffe, who in turn had three infant children); his gardener, George Isherwood; a friend, Caroline Perry; the widow of his brother Bernard, Diana; and the employees of Worsley Hall Nurseries and Garden Centre. He left estate of about £1,400,000 including Chaddock Hall, worth £325,000.

At first instance, His Honour Judge Howarth awarded Mrs. Cunliffe £800,000 in addition to the £225,000 capital she had by survivorship. His reasoning was as follows:-

"65. Subject to that, I must find an appropriate sum of capital which should be awarded to Monica [sic] (Mrs Cunliffe), and doing the best that I can and how much is always one of the most difficult questions a Judge ever has to answer or a barrister to advise upon. Counsel will know that very often within a set of barristers chambers, people will go into each other's rooms and say "We have a claim under the Inheritance Act. These are the facts. How much?" and you will get from members of chambers differing answers over sometimes a quite broad spectrum. For better or worse the case has ended upon before me and no doubt one party will say it is better for them and another party will say it is worse for them, and perhaps they might both say it is worse for them, and if that is so, that would be a very good indication that I have got it about right.

66. The figure I have in mind is £800,000, and that is the amount of the order."

Rather baffled by this decision, the executors appealed. In the Court of Appeal, Wall LJ addressed the reasoning of the judgment:-

"22. The judgment of HH Judge Howarth was extempore. It has an element of informality about it which is, at times, engaging, and the judge undoubtedly mentioned all the relevant statutory criteria. However, it has to be said that the judgment, taken as a whole, is both discursive and unfocused. Moreover, from a forensic standpoint, its principal deficiency, as Miss Bryant for Mrs Cunliffe was forced to acknowledge, is that it lacks any kind of judicial analysis."

The Court of Appeal substituted an award of £600,000 and Wall LJ discussed the impact of the matrimonial finance cases in this jurisdiction. He said:-

"The correct overall approach to a claim under section 1(1)(a) of the 1975 Act
19. There can, I think, be little doubt that in relation to claims for financial provision and property adjustment in proceedings between divorced former spouses, the correct approach for the court to adopt, following the decision of the House of Lords in White v White [2001] 1 AC 596 is to apply the statutory provisions to the facts of the individual case with the objective of achieving a result which is fair, and non-discriminatory. Having undertaken that exercise, a way of assessing the fairness and non-discriminatory nature of the proposed result is to check it against the yardstick of equality of division. There is, however, no presumption of equal division of assets, but as a general guide, in the words of Lord Nicholls of Birkenhead, 'equality should be departed from, only if, and to the extent that, there is good reason for doing so'. He added: 'The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination': - see [2001] 1 AC 596 at 605G.

20. With appropriate adjustments based on the different statutory provisions, I see no reason, in principle, why the White v White approach to marital financial claims should not be applied to proceedings under the 1975 Act brought by a widow, not least because, in any case brought under section 1(1)(a) of the 1975 Act, section 3(2) imposes a statutory cross-check of its own to the provision which Mrs Cunliffe 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 decree of divorce. This sub-section assumes a particular importance in the instant case due to the brevity of the marriage.

21. Caution, however, seems to me necessary when considering the White v White cross-check in the context of a case under the 1975 Act. Divorce involves two living former spouses, to each of whom the provisions of section 25(2) of the Matrimonial Causes Act 1973 apply. In cases under the 1975 Act, a deceased spouse who leaves a widow is entitled to bequeath his estate to whomsoever he pleases: his only statutory obligation is to make reasonable financial provision for his widow. In such a case, depending on the value of the estate, the concept of equality may bear little relation to such provision."

Wall LJ therefore seems to suggest that the divorce approach may not produce the right result in 1975 Act cases. However he does not really say how great a role it will play. What he does appear to suggest is that where there is a short marriage as here terminated by death, the Courts will not necessarily be as ungenerous with a widow as they would be with a wife. He said later on in his judgment:-

"The first point to make is that although this is a short marriage, Mrs Cunliffe entered into it on the basis that her obligations to her husband were of indefinite duration, and could take all manner of forms. He was considerably older than she was. She might well have been expected to spend a number of years nursing an invalid. In short, I think it right to approach the case on the basis that in marrying the deceased, Mrs Cunliffe, like Mrs Miller (see Miller v Miller [2005] EWCA Civ 984, [2005] 2 FCR 713) was entitled to have what Singer J described in the latter case as "a reasonable expectation that her life as once again a single woman need not revert to what it was before her marriage"; (see [2005] 2 FCR 713 at 724, paragraph [41]), and that she could look forward to financial security for the rest of her life. Since the judge expressly disregarded conduct, it is in my judgment appropriate to approach her claim for reasonable financial provision on that basis."

Of course the House of Lords in Miller has now stated that "reasonable expectation" is not the right test. However, it has emphasised that the short duration of the marriage should not affect the sharing of matrimonial assets (although the Lords did not really agree on what was meant by that). In Cunliffe the assets in the estate were not (on any definition) part of the marital acquest. They were assets which Derrick had inherited. However applying the test that a widow after a short marriage might well do better than a divorcing spouse, it is not clear that the decision of the Court of Appeal would necessarily have been different after the House of Lords decision in Miller.

Summary
The message of Cunliffe seems to be that the Courts will be more generous towards a spouse under a 1975 Act claim, particularly in a case such as this which involved such a short marriage, than the divorce courts would have been. It seems to be suggested that since it was not the fault of the spouse that her husband died, the shortness of the marriage should not necessarily have as deleterious an impact on the claim as it would on divorce. The 1975 Act itself of course requires that the court takes into account the duration of the marriage as a discrete factor.

What the cases have yet to assist with is how the divorce factor should be applied in claims, as is often the case, where the claimant is very elderly and there is little authority in the divorce courts to set down what the right order might have been. In Re Krubert the Court saw no need for an elderly widow to have a house outright. Whether that would be the result now does seem doubtful.

Penelope Reed, 5 Stone Buildings, Lincoln's Inn, preed@5sblaw.com