English Court considers grounds for out of time claims for financial provision from estates

In a recent decision, Sargeant v Sargeant [2018] EWHC 8 (Ch), the English High Court considered the circumstances in which the English Court will grant permission for out-of-time applications for financial provision from a deceased's estate under the Inheritance (Provision for Family and Dependants) Act 1975 (the "1975 Act"). In the present case, considered further below, the Court held that it would be unlikely to grant permission where an applicant has been aware of the circumstances necessitating an application but has declined to apply to the Court or otherwise seek a variation of arrangements for an extended period of time.  

Background Facts

On 10 May 2005 Joe Sergeant died. He was survived by his wife of 45 years, Mary, their daughter, Jane, and Mary's son (whom he had adopted), Jeff. In his will Joe left his guns and fishing equipment to Jeff, the balance of his chattels and the benefit of a life policy to Mary, and the remainder of his estate to his executors to hold on a discretionary trust for Mary, Jane and Jane's issue. This remaining estate was primarily farmland, which, despite its value (approximately £8m at the time of the application), produced very little by way of income.

Prior to his death, Joe had also provided a (non-binding) letter of wishes to his trustees. In this letter he explained that he wished for Mary, and then Jane following Mary's death, to receive the benefit of the income produced by the estate. Joe also explained that (insofar as it was possible) he wished for the capital assets of the estate to be preserved for the benefit of Jane's children and their issue.

In the years following Joe's death, these wishes were substantially adhered to by the trustees. However the relatively small amount of income produced by the estate meant that Mary found it increasingly difficult to manage financially. From 2009 onwards Mary held a number of meetings with Jane and the other trustees to try to resolve this issue; however they were unable to reach a satisfactory resolution. As a result of this, in July 2017, Mary brought an application under section 1(1)(a) of the 1975 Act for an order under section 2 that provision should be made for her out of the assets of the estate.

Judgment

His Honour Judge David Cooke began his judgment by considering whether Mary should be granted permission to bring her application. Section 4 of the 1975 Act provides a six month time limit in which to bring applications without permission. Therefore, because Mary had brought her application over ten years after the grant of probate, permission from the Court was required. Citing the judgment of Megarry VC in Re Salmon [1981] Ch 167, the Judge set out a number of considerations which should be taken into account when deciding whether permission should be granted. These included (a) what was just and proper, (b) how promptly and in what circumstances the claim had been brought, (c) whether the estate had been distributed, and (d) whether the claimant had any other avenues of redress. It was also necessary to consider whether the claimant had an arguable claim, but this was conceded by the respondents from the outset.

In arguing that permission should be granted, Mary's central contention was that she had not understood that she was merely a discretionary beneficiary and therefore did not in fact own any estate assets herself and that this was why she had not brought her claim at an earlier stage. Mary also argued that she had always relied on the family's professional advisers and that they had never informed her of the option of bringing a claim (although she did not suggest that they had breached any duty to her). It was only after her son had become involved in the matter in 2014 that she became aware of her position and the possibility of seeking a Court order. She argued that in such circumstances, it was just and proper to allow the application to proceed.

However the Judge found Mary's arguments to be unconvincing. In particular he found that when considering Mary's evidence, he had to take into account the fact that it was often contradicted by contemporaneous notes made by the family solicitor, Mr Thompson. These included:

• A note of a call between Mr Thompson and Jeff prior to Joe's death in which Jeff suggested that his mother should be entitled to half the assets. This was evidence both that Jeff was involved in Mary's affairs prior to 2014 and that he understood that his mother had no entitlement to the assets and was merely a discretionary beneficiary.
• A note of a meeting between Mr Thompson, Joe and Mary in 2003 in which the terms of the discretionary trust were discussed at length and in which it must have been apparent that the assets were to be held by trustees rather than Mary in her own name.
• A note of a meeting in 2011 in which Mary and Mr Thompson discussed the fact that she was receiving insufficient income as a beneficiary of the trust and in which Mr Thompson suggested that the trustees should consider selling some of the real property in order to provide cash for Mary's benefit.

He concluded that by 2011 it was 'impossible to believe' that Mary was not aware of the fact she was only a discretionary beneficiary and the implications of this in terms of control of the assets and income. This meant that Mary could not rely on her ignorance of the situation or any assurances as to her financial security made by Joe prior to his death in explaining her delay in bringing a claim.

It was also not a case in which any 'material facts [had] been concealed' or in which Mary had 'been misled'. It was clear that Mr Thompson had repeatedly emphasised that he was an adviser only to the trustees and that if Mary wished to consider her own position she should seek independent legal advice. Mary was entirely capable of seeking this advice and in any event by 2014 had the support of Jeff, an experienced and wealthy businessman, who could have assisted her (and in fact eventually did). Furthermore, once Jeff became involved, there was no good explanation for why it took a further two years to commence proceedings.

Instead it seemed clear that Mary had deliberately chosen to continue the arrangements as set out in Joe's letter of wishes. This was despite the repeated offers of Mr Thompson to support Mary in selling some of the trust assets to provide her with additional income. The case therefore bore substantial similarities to that of Berger v Berger [2013] EWCA Civ 1305, in which the Court of Appeal denied permission to a widow who had delayed taking advice for over six years because she did not wish to disturb family arrangements, despite knowing her financial difficulties were caused by her lack of income from the estate in question.

The Judge therefore denied the application for permission as it would not be just and proper given Mary's extensive and indefensible delay and the legitimate interest of Jane and her children in eventually inheriting the assets. The fact that the failure of the application under the 1975 Act made it more likely that Mary would bring other alternative claims against Jane and the trustees did not change this conclusion.

Comment

This case provides useful guidance on when an out-of-time application under the 1975 Act may be granted permission to proceed. The thrust of the judgment is that such permission will only be granted very rarely. Where a person in a position to bring a claim for financial provision from an estate unreasonably delays in doing so the Court is likely to decline to grant permission to bring an application. This is especially so when (as in this case) the delay is substantial and the applicant has been aware of the facts necessitating an application for some time. However applicants may have a better chance of success in bringing out-of-time applications where they have been unaware of relevant facts, have been misled, or their situation has changed as a result of events outside their control.