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The Inheritance Act and Adult Child Claimants – recent guidance from the Chancery Division

Gwyn Evans, barrister of Tanfield Chambers, explains the court’s judgment in a recent Inheritance Act case involving an estranged adult claimant, reliant on state benefits, and defendants for whom inheritance was a windfall.













Gwyn Evans, barrister of Tanfield Chambers

The Deputy Master's judgment in Wellesley v Wellesley & Ors. [2019] EWHC 11 (Ch) offers helpful answers to various questions concerning the application of the Inheritance (Provision for Family and Dependants) Act 1975 ("the 1975 Act"), such as:

• Will the fact that any inheritance is a windfall for other beneficiaries make it more likely that a court will make an award in favour of a needy adult child, for whom the deceased elected to make limited provision?

• Can an estranged adult child for whom only limited provision has been made establish an entitlement to a percentage of an estate?

• Will the fact that an adult child has needs attributable to care of the deceased's disabled grandchild influence a court to enhance financial provision for the adult child?

• Will a court in considering an Inheritance Act claim made by an adult child award money so as to reduce the claimant's reliance on state benefits?

• How does the court's treatment of state benefits differ as between Inheritance Act claims and financial orders on divorce or dissolution?

Introduction

The claimant, Tara Wellesley, (TW) was one of the two children of the first marriage of the late Garret Wellesley, 7th Earl Cowley. The Earl executed his last will on 6 June 2016, and died a few days later, aged 82. TW had been estranged from him for some 30 years.  She was unhappy with what she had been left from the Earl's estate and as an adult child she made an application for financial provision to the High Court under s 2 of the 1975 Act.


The will


The Earl's estate had a net value of c. £1.3 million. His will provided for its division as follows: -

a) A pecuniary legacy free of inheritance tax of £20,000 to TW;

b) A discretionary trust of his chattels, worth c. £69k, for a pool of beneficiaries being his descendants and unspecified charities;

c) The residuary estate to the executors to pay income to the Earl's fourth wife, the Dowager Countess Cowley, with a power to advance all or part of that fund to her and, subject thereto, as to one half for his son Graham, and the other half to be divided between four of his step-children, whom he had treated as children of the family following his third marriage.

The residuary beneficiaries executed a Deed of Variation in June 2018 so as to utilise the nil-rate inheritance tax band to be held on trust for those beneficiaries.

The residuary estate was worth c. £250k, and its division was to be c. £125k to the Dowager Countess Cowley, c. £63k to Graham, and £15.6k to each of the four step-children residuary beneficiaries.

In proportion to the costs of litigation, therefore, the first point is that the value of the sums available for distribution was not great. In fact, TW had been left more than had been left to four of her step-siblings.

TW commenced her claim in June 2017. An early unmeritorious application for summary judgment was refused, and she was ordered to pay £4,000 in costs. This did not however deter TW from pursuing her claim to trial.


Issues

1. At the trial, TW raised an objection to the value of the estate and sought to cross-examine the executors. The court dealt with this, and an objection by TW to a payment out of the estate, as preliminary issues;

2. TW claimed compensation for distress caused by the alleged executors' lack of neutrality and clarity;

3. TW claimed that reasonable financial provision had not been made in the will: she was unable to meet her needs. She presented her needs as encompassing:

• Sufficient funding to enable her to achieve a qualification in fine art;

• A studio space for her artistic work;

• Funds to enable her to meet day-to-day debts and liabilities, as she said she was left 'out of pocket' each week;

• The cost of applying for British Citizenship (she is a US citizen);

• The cost of purchasing her council property for the benefit of herself and her son, F, who had his own special needs;

• Money necessary to help her to meet her disabled son's needs;

• Money to fund private health care for herself, to include occupational therapy and a care worker.

4. TW contended that she was unemployed, unable to work due to a mental disability and completely dependent on benefits.

5. Relying upon two authorities, TW quantified her claim by applying a percentage to the value of the net estate (10% for her needs, 10% for her son's exceptional needs and potentially 10% for legal costs). Was this an appropriate approach in an 'adult child' case?

Somewhat unusually, TW deployed various human rights arguments in support of both the preliminary issue applications and her substantive claim.


The preliminary issues – value of the estate / payment out of c. £41k

TW's (direct public access) counsel had raised lengthy and substantial queries of the solicitors for the defendants and the executors with respect to a payment out of c. £41k, at least some of which had been to pay the legal fees of the defendants.

TW did not accept that these payments out of the estate had properly been added back in to the net value of the estate, the court hypothesizing that it was the 'percentage' approach to quantification by TW (see below) which was causing her anxiety on this point.

Criticism was being made of the executors, and yet no application for relief had been brought against them. The preliminary issue 'application' was itself simply an email from TW's direct public access counsel to the court.

The email application was refused as being "wholly without merit" (para 31) because: -

1. The estate accounts had been properly compiled;

2. Nothing in the 1975 Act prevented the lawful distribution by the executors;

3. The sums distributed had indeed been added back in to the net value;

4. There was no basis for a complaint as to the executors' conduct;

5. There was no basis in law for the 'distress' claim advanced by TW;

6. The human rights arguments were inapplicable in the civil context (see below).


The Human Rights arguments

First, TW's contended that as a result of Schedule 1, Article 6(3)(d) of the Human Rights Act 1988 ("the HRA") she had a right to question witnesses. Reference was made by TW's counsel to decisions of the ECHR in: -

Regner v The Czech Republic
, Application number 35289/11, dated 19 September 2017 (para 21); and Golder v The United Kingdom, Application number 4451/70, dated 21 February 1975 (para 32).

The court "could not find anywhere" support for TW's proposition that the right to question witnesses was not limited to criminal trials. Consequently, the HRA had no relevance to the preliminary issue.

Second, TW contended that Article 3 of Sch. 1 to the HRA was engaged (prohibition of torture) in that the first six defendants (being the Dowager Countess and the four step-sibling residuary beneficiaries) had subjected her "to cruel and unusual punishment", because her late father had discriminated against her, thereby leaving her "suffering without proper medical treatment … and separated from her …disabled son" (para 57(i)).

Third, TW contended that Article 8 (1) of the HRA was engaged (right to respect for private and family life) as the same defendants "persevere[d] in their endeavours to leave [TW] in abject poverty and thereby [made] it impossible for her to be reunited with her … disabled son" (para 57(ii)).

Fourth, TW contended that she had been deprived of the right to enjoy the property she ought to own, had reasonable financial provision been made by the Earl, by the endeavours of the first six defendants to leave her "suffering in abject poverty", contrary to Article 1 of Schedule 1 Protocol 1 to the HRA (peaceful enjoyment of possessions).

Finally, TW alleged that the first six defendants had persevered in various discriminatory endeavours against TW, because of the deceased's discriminatory view of TW, and these were unfair, unreasonable and contrary to Article 14 of Sch. 1 to the HRA 1988.

None of this, however, held sway. The court concluded that the HRA was not engaged because: -

1. None of the defendants were "public authorities";

2. No submission had been made that the 1975 Act itself was not compliant with the ECHR ("the Convention");

3. The court had not been urged to apply the 1975 Act so as to read and give it effect in a way compatible with Convention rights. Counsel for the first six defendants drew the court's attention to the case of Sanders v Garrett [2005] WTLR 749 in which Master Bowles had been invited to permit a same-sex cohabitee claim under the 1975 Act, but no analogous application had been made here.

4. The court did not accept TW's counsel's submission that it was the court and not the defendants which had duties under the Convention.


Private means to replace state benefits?

Separately, TW argued that "being forced to rely on benefits" was "a breach of her rights under the HRA" (para 68). The court did not accept that the HRA was engaged for the reasons set out above, but, further, even if such rights were engaged, the court did not accept that "it would be a breach to expect her to rely on state benefits so as to justify or require replacement by private means, if available" (para 69).

This is consistent with what is said by the Supreme Court in the judgment of Lord Hughes at para 45 of Ilott v The Blue Cross [2017] UKSC 17 and in Lady Hale's comments that "The law has not, or not yet, recognised a public interest in expecting or obliging parents to support their adult children so as to save the public money." It is also consistent with the references to "benefits-efficiency" in Lady Hale's judgment at para 65 (2) of Ilott.


Quantification: a percentage approach?

TW argued that a "reasonable approach" would be to value the claim as being between 10 and 13% of the estate (despite the "30%" argued for by counsel at para 25 of the judgment).

She prayed in aid of this the first instance decision of the district judge in Ilott v The Blue Cross [2017] UKSC 17 (50k is 10.3% of 486k) and the decision of HHJ Saffman in Nahajec v Fowle [2017] WTLR 1071 (the sum awarded there was 11.3% of the estate).

Although Nahajec v Fowle received coverage in the press in 2017 (and has now made it to the Wills and Trusts Law Reports), the effect of paras 6.1 and 6.2(b) of the Practice Note (Citation of Authorities) [2001] 1 WLR 1001, CA of 9 April 2001 means that this case is not in any event an authority which courts are permitted to follow. This point was seemingly not taken in Wellesley.

The court dismissed the "percentage" line of argument because: -

a.  The authorities cited "say no such thing" (para 50);

b. "[O]ver reliance on previous authorities must be avoided in view of the wholly different factual scenarios". In particular, the legacies here were to relatives, whereas in Ilott they were to charities with whom the deceased had no connection, and the deceased in Ilott had no other relatives: -

"using a percentage in such widely differing circumstances would be wholly inappropriate";

c.  And finally (para 51)

"[i]f parliament had meant a percentage figure … [to be] appropriate, it would have provided so. Such an approach would wholly undermine the freedom of testamentary disposition".


Evidence of fact

TW and the other beneficiaries had between them served at least fourteen witness statements, several of them having written three each. 

Much of what was said in those statements and in oral evidence was relevant to the court's analysis of the timeline (given the estrangement of TW from her father) and of "any other matter, including … conduct" which the court was required to consider under s 3 (1) (g) of the 1875 Act.

The court considered the family history and relationships. It was not impressed with the evidence of TW, who was "prone to exaggeration" (para 95). She had "a strong sense of entitlement as of right", and the court was critical of her presentation of her income and expenditure. The court preferred the evidence of her step-siblings and of Graham, TW's brother, who was open and transparent and "readily admitted his failings" (para 129).


Section 3 (1) factors

Financial resources and needs

TW's evidence as to her financial needs and resources was "unconvincing and inadequate" (para 156). She had "advanced several different accounts of her financial position". The documentary evidence was fragmentary and such of it as there was suggested that TW was in fact "managing her limited resources well" (para 159). TW could live within her means (para 171.1).

The court found that it was unrealistic for TW to consider that setting up a studio as an artist, with its substantial overheads, would improve her financial position, where there was no evidence as to a market demand for TW's art.

The legacy she had been left would help her to meet the cost of her occupational therapy.

It is significant in this case that none of the other beneficiaries were asserting a need for provision from the estate (para 172–173). All were "financially stable [,] so their inheritances are a windfall for them" (para 179).


Obligations and responsibilities of the deceased

The deceased did not consider that he had obligations to the children of the family once they had left home, and none other than TW expected assistance from him after leaving home.


Physical or mental disability

A single joint expert report had been obtained from a consultant forensic psychiatrist, Dr Sahota, who had been asked to advise on TW's possible ADHD, history, lifestyle choices, fitness to work and to give a prognosis. He concluded on balance that TW was fit to work, and with occupational therapy and, possibly, (NHS-provided) CBT, her ability to work may improve further (para 176).

A further report which was not compliant with the expert report provisions in Part 35 was produced by TW, but it did not assist the court any further. TW had failed to evidence other alleged disabilities.

TW told the court that she was currently doing volunteer work for two charities for two half days each week, and that she would struggle to do paid work because of her poor time-keeping (para 107).

Nonetheless, there was "no reason why [TW] could not try to find work".

TW's son was neither a dependant of the deceased nor a beneficiary, and so neither his needs nor his disabilities were taken into account (para 177).


Any other matter, including conduct

The starting point is the deceased's testamentary wishes (para 178, 196).

At the age of 25, TW had rejected her family and what she described as their "aristocratic values" (para 181). TW

"did for some time live … a lifestyle of drink, drugs and bohemia",

and that lifestyle plus TW's

"disruptive influence and behaviour led to her alienation from her father" (para 182).

The deceased had "expected certain standards" of his family "and if they did not conform, they would not have the support and loving home which was there for all" (para 186).

On the facts there was no evidence that TW's step-siblings and brother had contributed to her estrangement from her father (para 189).

TW's attempts at reconciliation "could not tip the balance" in her favour because of the "multitude of factors in play, going back in certain instances many years" (para 194).


Conclusion
Taking account of all of the s 3 (1) factors, Deputy Master Linwood concluded that "TW's conduct in terms of her responsibility for the extremely long estrangement for almost all of her adult life, with no reconciliation in prospect, outweighs all of the factors in her favour". The Earl's will did not fail to make reasonable financial provision for her. Even if the court was wrong in that respect, such financial provision as had been made (£20,000) was objectively reasonable.

Practice points for I(PFD)A 1975 Claims

1) This decision demonstrates that in 1975 Act claims by adult children, the court will indeed endeavour to respect the freedom of testamentary disposition, echoing what Lord Hughes said in Ilott:

"It is not the case that once there is a qualified claimant and a demonstrated need for maintenance, the testator's wishes cease to be of any weight."
(Ilott, para 47)

2) Such testamentary freedom was respected in Wellesley even where the legacies under the will would be a windfall for the other beneficiaries (who had no need of the money) and would by contrast have been highly valuable to the claimant.

3) The court did not allow a 'moral' claim advanced by an adult child as part of her own claim for provision for maintaining the deceased's grandchild, even where all parties agreed that the grandchild had "serious health issues" (diabetes, obesity and Asperger's - para 65–66).

4) Care should be taken in the formulation of arguments about freestanding alleged HRA breaches. The HRA did not operate in the manner argued by TW, and, further, it had not been suggested (as it had in Sanders v Garrett [2005] WTLR 749) that the court must read and give effect to the 1975 Act itself in a way compatible with Convention rights.

5) The court clearly rejected a quantification of a 1975 Act claim in terms of a percentage of the net estate.

6) If allegations of impropriety are being made with respect to the executors, then these should be particularised and properly formulated.

7) A maintenance claim stands or falls on preparation of schedules of income and income needs and on documentary evidence of the same. In this case it was easy for the court to find deficiencies and inconsistencies in the evidence, and hence TW was unable to demonstrate her case.

8) Don't expect a court to attach much weight to a medical report obtained unilaterally and in breach of the particular requirements of CPR Part 35.

9) Beware that if you lose an Inheritance Act claim, it is likely that you will be ordered to pay costs. It is not known what the outcome with respect to costs was in this claim, but the defendants had been put to considerable expense and would be entitled to ask for their costs. Don't assume that costs will be paid by the estate – they won't!

10) Don't let emotion cloud your judgment. It may be deeply unfair that a claimant has not received provision under a will, but that does not a winning claim make. Any potential claimant should have a long hard look at the statutory checklist and at the principles derived from the body of Inheritance Act case-law (as to which, Sidney Ross's 2018 book "Inheritance Act Claims" (4th Edition) is excellent) before embarking upon costly, multi-party litigation which may cost substantially more than it may first appear: fourteen (plus) witness statements and a single joint expert report, which must be Part 35 compliant, from a consultant psychiatrist, all come at a price, as does a multi-day High Court trial.

 

Treatment of state benefits – comparison with the matrimonial jurisdiction

How will the court treat state benefits?


The fact that the claimant was reliant upon benefits did not enhance her claim. Following Ilott, Deputy Master Linwood set out two clear propositions in Wellesley: -

1) "there is no authority that in considering a claim under the 1975 Act the court should take the deliberate step of awarding monies to an applicant so as to reduce his or her reliance on state benefits. That would be tantamount to an award being made that otherwise would not be justified under the 1975 Act so as to reduce the burden on the state" (para 72) and

2) "I have no hesitation in finding that potential relief of a burden upon public funds by requiring replacement with private means is not a factor or principle I need take in to account" (para 73).

By way of comparison, this is subtly different from the approach of the court when considering a financial order upon divorce or dissolution, where in applying its discretion under s 25 of the Matrimonial Causes Act 1975, the court is guided by the judgments in Barnes v Barnes [1972] 1 WLR 1381 and Delaney v Delaney [1990] 2 FLR 457.

In Barnes v Barnes, the court determined that: -

1) A court should first arrive at a fair figure for maintenance, disregarding the receiving party's state benefits, and

2) only if that would leave the paying party with a sum which was "quite inadequate" to meet their own financial commitments, at that point it would have regard to whatever state benefits would be available to the receiving party.

This was applied in Delaney v Delaney [1990] 2 FLR 457, where the Court of Appeal found that the husband, who was in a new relationship, was entitled to balance his aspirations for a new future with his responsibilities to his existing family. Considering his financial commitments, there was insufficient left properly to maintain his former wife and children, and therefore "the court may have regard to the fact that … social security benefits are available to the wife and children of the marriage …[and] having such regard, the court is enabled to avoid making orders which be financially crippling to the husband" (at 462).

By contrast, in 1975 Act claims, any state benefits fall to be considered from the outset, and the court (as demonstrated in the various stages of Ilott) may devote considerable energy to preserving them.

(c) Copyright, Gwyn Evans, Barrister, Tanfield Chambers, 22 February 2019