Confusion in the English High Court over out of time Inheritance Act claims

The English High Court has recently issued two apparently inconsistent judgments in relation to out of time claims brought under the Inheritance (Provisions for Family and Dependants) Act 1975 (the "1975 Act"). We consider these further below.

On 26 February 2019 in Cowan v Foreman [2019] EWHC 349, the English High Court decided that it would not exercise its discretion to extend the statutory period for a widow to bring a claim for reasonable financial provision under the 1975 Act against her late husband's estate. This was despite an agreement between the parties that attempted to circumvent the deadline. This case appeared to reinforce the Court's strict approach to statutory deadlines in cases of disputed inheritance.

However, on 7 March 2019, in Bhusate v Patel & Ors [2019] EWHC 470, Chief Master Marsh granted permission to bring a claim under the 1975 Act despite the claim being issued over 25 years after the six-month deadline had expired. This appears to be in direct conflict with the Cowan v Foreman decision taken less than a month earlier. These two decisions are considered further below.

Cowan v Foreman

Background

Mrs Mary Cowan and her late husband had been living together since 1994, although only married shortly before his death in April 2016. On his death, Mr Michael Cowan left an estate worth nearly £16 million. Mr Cowan was described as being 'plainly devoted' to Mrs Cowan, and the terms of his will were expressly designed to meet her every reasonable need for the rest of her life. Mr Cowan's will was accompanied by a letter of wishes which further showed his intention to provide for Mrs Cowan.

There was no outright provision for Mrs Cowan in his will, the structure of which was designed to avoid the impact of inheritance tax. Instead, Mrs Cowan was made the main beneficiary of two trusts, with a life interest in one of them, under which she received regular monthly payments of approximately $20,000.

Mrs Cowan sought to bring a claim for reasonable financial provision under Section 2 of the 1975 Act, on the basis that the structure of Mr Cowan's will did not leave her with reasonable financial provision. The basis of Mrs Cowan's claim was that the structure of the will put her at the mercy of the trustees and may expose her to US taxes which she did not understand.

Probate of Mr Cowan's will was granted on 16 December 2016, making 16 June 2017 the expiry date of the six month period for making an application for reasonable financial provision under Section 2 of the 1975 Act. Mrs Cowan did not bring her claim until 8 November 2018, 17 months late, and as such required the Court's permission under Section 4 of the Act to be able to do so.

Section 4 of the 1975 Act states that:

"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."

Judgment

Mr Justice Mostyn concluded that the Court must be satisfied of two things before permission could be granted using its discretion under Section 4 of the 1975 Act:

1.         That the Claimant has shown good reasons justifying the delay

2.         That the Claimant has a claim of sufficient merit to be allowed to proceed to trial

Mrs Cowan was found to have failed on both limbs. Mrs Cowan had been aware of the six month time limit and there had been a significant period of delay in bringing the application without good reason. Mostyn J stated that the limit of excusable delay should be measured in weeks or, at most, a few months. The trust arrangement, whereby Mrs Cowan received approximately $20,000 per month, meant that Mrs Cowan had failed to show her claim had sufficient merit. Mostyn J raised his concerns that, if Mrs Cowan's claim were to succeed, it would in effect introduce a form of forced heirship unknown to the law.

Mostyn J, referring to the earlier judgment in Nesheim v Kosa [2006] EWHC 2710 (Ch), identified a number of reasons for the six month rule:

• To avoid the unnecessary delay in the administration of estates caused by the tardy bringing of proceedings under the 1975 Act;
• To avoid difficulties where distributions of an estate are made before proceedings are brought, requiring possible recoveries from beneficiaries;
• To protect beneficiaries from being vexed by a stale claim, whether or not the estate has been distributed; and
• To spare the Court from being burdened with stale claims which should have been made much earlier.

In addressing the stand-still agreement between the parties to extend the six month time period, Mostyn J made clear that the use of such stand-still agreements should come to an immediate end. It was held that it is not for the parties to give away time that belongs to the Court. If the parties want to agree an extension, the claim should be issued within the statutory time period and then the Court be invited to stay the proceedings while negotiations continue.

It is understood that Mrs Cowan has sought permission to appeal this decision.

Bhusate v Patel & Ors

Background

Mr Bhusate died intestate on 28 April 1990 leaving behind five children by his first marriage and one child by his third wife, the claimant. Mrs Bhusate only spoke very broken English and left school at 11 unable to read or write. There was said to have been considerable ill-feeling between Mr Bhusate's five children by his first marriage and Mrs Bhusate.

On Mr Bhusate's death, Mrs Bhusate was entitled to a statutory legacy and a one half share of the residuary estate in trust for her absolutely. The main asset of the estate was the family property, 62 Brookside Road, which was held on trust for the estate by the administrators appointed to administer Mr Bhusate's estate, Mrs Bhusate, and one of her step-daughters.

As the sale of 62 Brookside Road could not be agreed, Mrs Bhusate continued to live there following Mr Bhusate's death although the property remained in his sole name. The administrators failed to administer the estate at any point following Mr Bhusate's death. As such, Mrs Bhusate brought a claim in 2017 for the whole beneficial interest in the family property and for payment of the statutory legacy and capitalised life interest. Both claims were struck out; the former on the basis that it was bound to fail and the latter on the basis that her entitlement was statute barred. The result of this was that the claimant was left with no inheritance from her husband's estate and no interest in the matrimonial home. This led Mrs Bhusate to bring a claim under Section 4 of the 1975 Act for reasonable financial provision.

Judgment

Chief Master Marsh concluded that Mrs Bhusate had demonstrated compelling reasons for the Court to exercise its discretion under Section 4 in her favour, stating that the Court is required to exercise an unfettered discretion judicially in accordance with what is right and proper.

The Chief Master dismissed arguments that an application under Section 4 required a 'trigger event' in order to explain the delay. Instead, he confirmed that there needs to be an explanation for the application for permission and the applicant must show sufficient grounds for granting the application. The decision made clear that the sufficiency of the grounds would be highly fact sensitive and will vary widely from case to case. It was also noted that what those grounds may be is not constrained by statute, although the longer the delay the more compelling the grounds must be.

The grounds for being permitted to make her application 25 years and 9 months out of time were:

• The merits of her claim under the 1975 Act as Mr Bhusate's spouse were very strong;
• The delay in bringing the claim has been explained; there was a significant imbalance between Mrs Bhusate, who was lacked money, experience and understanding, and her well-educated and comfortably off step-children. Mrs Bhusate was left effectively powerless to do anything in the absence of engagement from her step-children;
• Mrs Bhusate had tried to take action earlier; the step-children obstructed the sale of 62 Brookside Road in 1994 by insisting on a sale price they agreed on and then did nothing for a further 23 years until Mrs Bhusate commenced proceedings in 2017, when they successfully challenged her claim on a limitation point; and
• This application was Mrs Bhusate's last resort; if it were not granted the claimant would be left homeless with no remedy and no benefit from her husband's estate.

Comment

The judgments in Cowan v Foreman and Bhusate v Patel are not easy to reconcile. The former saw Mr Justice Mostyn say that a delay of 17 months is intolerable, as such appearing to act as a reminder that the Court's attitude towards bringing applications relating to disputed inheritance is a strict one; applications should be made promptly and not beyond the prescribed statutory period. In contrast, the latter decision saw Chief Master Marsh say that a delay of over 25 years is acceptable, as such suggesting that the legislation is much more flexible.

It may be that the different financial positions of the claimants influenced the Court in each case. The applicant in Cowan v Foreman was not in a position of financial hardship and was still able to benefit from her husband's estate, whereas the applicant in Bhusate v Patel would have been left homeless and with no benefit from her husband's estate despite repeated efforts over 25 years which were unsuccessful due to opposition from her step-children.

While it was commonly accepted that exercise of the court's discretion will be based on whether there are good reasons justifying the delay and whether the claim is of sufficient merit, the different directions of these decisions means that the law lacks clarity. As such, advising on the merits of any such application under the 1975 Act will be difficult until further clarification has been given by the Court. Notwithstanding the leniency granted in Bhusate, claimants would be well advised to make any claims under the 1975 Act promptly and to assume that, absent very compelling circumstances, any out of time claim is unlikely to be permitted.