A mantra drummed into all embryonic litigators is: ‘do not lose sight of commerciality’. The overriding objective of the Civil Procedure Rules being that the Court should be able ‘to deal with cases justly and at proportionate cost’. This is especially so with regard to claims under the Inheritance (Provision for Family and Dependants) Act 1975 (the ‘Act’) where the Court is in essence being asked to conduct a balancing exercise to appropriately redistribute an estate in circumstances where a claimant argues that they have not been adequately provided for.
Background
The case of Bala (Deceased), Re [2023] EWHC 1054 (Ch) is a stark illustration of the danger of ‘pursing through to the end of trial claims of a magnitude which the net estate is on any view not large enough to meet’.
In Bala the deceased, who died at age 53 of metastatic oral cancer, had built up significant assets through running a butcher’s shop and later a supermarket. He left a Will which in simple terms passed his estate to trustees who were to pay the income to the deceased’s widow (being his third wife) for life and thereafter it was to be distributed between the beneficiaries as the trustees saw fit. The beneficiaries being: the deceased’s widow, his mother, his children and his remoter descendants. The deceased had a complex family having married three times and having seven children.
At the time of trial the composition of the estate remained unclear, which Master Brightwell recorded posed a ‘significant difficulty’ in the resolution of the case. Broadly, Master Brightwell worked on the assumption that the value of the estate was likely to be in the region of £1.6 million to £1.7 million, but acknowledged that it ‘could realistically be considerably less’.
To simplify complex proceedings claims under the Act were pursued by:
- The deceased’s third wife being the surviving spouse;
- the surviving infant children of the widow and the deceased (AB and CD); and
- the daughter of the deceased and his first wife who was a protected party (MN). At the time of the litigation MN was 30 years old, suffered from significant physical and mental disabilities, was unable to live independently and understood to have a mental age of around 12 to 14 years.
Although there were named defendants the reality was that the dispute was between the four competing claims against the estate.
The deceased’s widow was found to be an ‘intelligent and capable young woman’ struggling with depression, with parental responsibility for AB and CD.
MN had severe learning difficulties and impaired cognitive ability to the extent that she required support with:
- Personal hygiene;
- managing her routines;
- managing incontinence;
- selecting clothing/footwear appropriate for the weather;
- mobility and pain;
- accessing public transport, shops or recreational facilities;
- interpreting and communicating her needs;
- managing depression and low mood.
Competing claims
Section1(1)(2)(a) of the Act states that reasonable financial provision for a spouse 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”.
The maintenance standard applicable to children is Section1(1)(2)(b) of the Act which states ‘such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance’.
Clearly the Court has an easier task to perform where the estate assets are ample and arrangements can be made to provide for both those in need as well as benefiting the deceased’s intended recipients. Where an estate is more modest it is imperative to keep front of mind throughout, the extent of the assets ultimately available for distribution when considering the competing needs of the parties. Claimants should conduct a realistic assessment of their current and future needs at the outset and must consider how legal costs are to be satisfied.
The reality
The sad reality in this case is that legal costs meant that the estate was not ‘large enough to meet the claimed financial needs’ of either the widow and her children or of MN ‘let alone both of them’. The widow’s costs were said to be £282,000, AB and CD’s £102,000 and MN’s £319,000. Culminating in costs across the parties exceeding £700,000.
Faced with a difficult scenario of competing needs, significant costs and a limited estate Master Brightwell found:
- In the specific circumstances it was appropriate for the claimants’ costs to be paid out of the estate. It is important to remember that this is not a foregone conclusion in claims under the Act and the Court retains full discretion in respect of costs.
- None of the parties adopted a realistic approach, which led to there being insufficient funds to meet the competing claims.
- Provision of a home for the widow and her children was the first priority.
- It was impossible for the estate to meet the accommodation and care requirements of MN which left two possibilities: namely, she would remain in the care of her family or she would be provided for by the estate.
- The strength of MN’s moral claim and nature of her needs meant that some provision should be made for her.
- An award of £550,000 was made to the widow being the minimum sum required to accommodate her and her children (she had sought £750,000).
- The next £300,000 of the net estate to be divided equally between the widow and MN i.e. a maximum award to MN being £150,000.
- Any amount over £850,000 to pass to the widow. It was acknowledged that this provided for a lesser quality of life in financial terms than when the deceased was alive and provided ‘no real capital cushion for the future’. It was based upon the widow having resource to a cheaper property than she considered was reasonable.
- Consideration was given to the impact of an award upon MN’s entitlement to benefits.
- No separate award was made for AB and CD aside from that made to their mother. This was on the basis that their mother had parental responsibility for them and was therefore responsible for meeting their financial needs whilst they were children. Master Brightwell commented that “The income needs put forward on their behalf are the sort of needs that all parents are accustomed to having to meet”. Given the limited funds available it was felt that it would not be appropriate to make an award to the children which the widow could not benefit from.
Conclusion
Given the invidious task before Master Brightwell his Judgment commences with the exhortation to parties embarking on litigation under the Act ‘to consider in advance the potentially devastating consequences of fighting points of marginal relevance at inordinate cost with the effect of depleting a significant estate so that none of the competing claims on it can be fully met’.
This case is a clear reminder of the importance of conducting in the early stages a realistic assessment of need, taking into account the actual resources available to meet that need and any competing claims. It also serves to encourage parties to make genuine attempts to communicate and seek to resolve matters amicably wherever possible and before the issue of costs becomes a hurdle to resolution.
