Out of time financial provision claims under the 1975 Act - further clarity from the English Court of Appeal?

In the recent case of Begum v Ahmed [2019] EWCA Civ 1794, the Court of Appeal granted permission for the Appellant to bring a claim 12 months out of time to apply for financial provision under section 4 of the Inheritance (Provision for Family and Dependants) Act 1975 (the "Act"), where refusing permission could have rendered the Appellant homeless. This is the latest in a run of recent cases on out of time claims under the Act, and the second Court of Appeal decision on the issue. Our blog posts on these previous decisions are available here and here, and you can listen to our podcast on recent cases on financial provision here. The Court gave helpful guidance on the principles which judges should apply when determining whether to exercise their discretion to extend the statutory time limit, and confirmed as correct the approach taken in Cowan v Foreman [2019] EWCA 1336 that CPR jurisprudence should not be used to inform the court's exercise of its discretion under the Act.

Factual Background

Mr Khan died in 2015. His will (the "Will") appointed his daughter, (the Respondent) as his personal representative and left his entire estate to her. The Will made no provision for Mr Khan's wife (the Appellant) who since 1993 resided in the property which formed the entirety of Mr Khan's estate (the "Property"). Probate was granted in April 2016, and the six month time limit to apply for financial provision out of the estate under the Act expired in October 2016.

The Respondent sought possession of the Property. In correspondence in June 2016, the Appellant's solicitors referred to her entitlement to financial provision under the Act, and to a challenge to the Will on grounds that Mr Khan lacked testamentary capacity at the relevant time. The Appellant then ceased to instruct her solicitors and no claim for financial provision was made within the six month deadline. In November 2016 the Respondent issued possession proceedings in respect of the Property. The Appellant then reinstructed her previous solicitors and sought to defend the claim based on the Will's invalidity, but made no reference to claims under the Act. It was only in October 2017 that the Appellant's solicitors made an application seeking permission to apply for financial provision under the Act out of time. The question before the first instance Judge was whether to grant permission to bring that claim 12 months out of time.

The law

Statutory framework

Section 2 of the Act gives the Court a power to make financial provision out of the deceased's estate, if the deceased failed to make reasonable financial provision for the applicant. The Court's power is wide and can include the transfer of property to the applicant. Section 1 permits the deceased's spouse to make such an application for financial provision under the Act.

Section 4 of the Act imposes a time limit on when such applications for financial provision may be made, and states that "an application for a 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".

Exercise of discretion

The Act gives the Court an unfettered discretion to extend the time limit, but gives no express guidance on how the discretion should be exercised. The Court of Appeal reviewed recent case law in this area and distilled the following principles applicable to the Court's exercise of the section 4 discretion:

1. The section 4 power exists to avoid "unnecessary delay in the administration of estates to be caused by tardy bringing of proceedings under the Act and to avoid difficulties which might be occasioned if distributions of an estate are made before proceedings are brought, requiring possible recoveries from beneficiaries if those proceedings … are successful" (see Nesheim v Kosa [2006] EWHC 2710). The discretion should not normally be exercised in a way which undermines the purpose of the time limit, and it will always be material to ask whether bringing the claim out of time will cause delay in the proper administration of the estate, or have the potential to interfere with distributions which have already been made.
2. Factors such as (1) how promptly and in what circumstances the applicant has sought the Court's permission after the expiry of the time limit, (2) whether negotiations have been commenced within the time limit, (3) whether the estate has been distributed before the claim has been made/notified, and (4) whether a refusal to extend the time limit would leave the claimant without redress (see Re Salmon (deceased) [1981] 1 Ch 167) will, in most cases be important in the exercise of the discretion. However, these guidelines should not be treated as rigid templates at the risk of other important factors potentially being overlooked.
3. Considering any clear prejudice to the party seeking the extension if leave is withheld, and the prejudice to the other party if leave is granted will be relevant in the exercise of the discretion, with prejudicial delay being accorded more weight.
4. It is wrong in principle to draw on cases decided under the CPR (in particular the relief from sanctions jurisprudence) to inform the exercise of the discretion under the Act. This is in line with the approach taken in the recent Court of Appeal decision in Cowan v Foreman.
5. An application should not be granted where the applicant does not have a real prospect of success on the merits of the claim under the Act. How much further the merits of the case should be taken into account should depend on how clearly the facts emerge at the stage when the discretion is being exercised. In a case where the claim will turn on disputed issues of fact which cannot be resolved without trial, the Court should not conduct a mini-trial at the interim stage, however, where the Court is able to form a clear view of the merits, it is relevant and just to take that view into account. (see Smith v Leesley (unreported) Court of Appeal transcript 1 June 1986, McNulty v McNulty [2002] WTLR 737 and Cowan v Foreman)

Decision

The District Judge concluded that the Appellant had not made out a substantial case for it being just and proper for the Court to exercise its statutory discretion under section 4 of the Act to extend the six month time limit. The Appellant appealed on the ground that the Judge's decision was flawed both (1) in taking into account irrelevant matters; and (2) for failing to take into account relevant ones. The Court of Appeal found that the first instance Judge's decision was flawed for the following reasons:

1. Delay in commencing proceedings - It was highly relevant to consider whether the delay in commencing the proceedings had resulted in any delay in the administration of the estate, and whether the estate had in fact been distributed. The Court acknowledged that there was a lengthy delay in issuing the proceedings under the Act, and that the absence of a good explanation for the delay was something the first instance Judge was bound to take into account. However, the Judge erred in failing to analyse the effect of that delay. Given that the validity of the Will was under challenge in any event, there was no prejudice caused by the fact that the action under the Act was not started sooner.
2. Risk of Appellant losing her home - The Judge below seems to have completely discounted the fact that the Appellant was at risk of losing her home of 25 years if the extension of time was refused, on the basis that the Property would have been sold had it not been for the Appellant's actions. The Court of Appeal concluded that the Judge was wrong to reach this conclusion. Although it was true that had the Appellant abandoned her challenge of the validity of the Will, the Property would have been sold, that claim was one which she was entitled to bring and which has yet to be determined.
3. Procedural failings of Appellant's solicitors - The Judge wrongly weighed in the balance the procedural failings of the Appellant's solicitors. The Court of Appeal concluded that these failings did not render the delay in bringing the claim worse or more weighty, and that the Judge fell into the error of conflating the CPR jurisprudence with that of the exercise of the discretion under section 4 of the Act (see Cowan v Foreman).

Court of Appeal's exercise of discretion

Having found that the first instance decision was flawed, the Court of Appeal decided to exercise the section 4 discretion afresh and considered that this was a clear case for the discretion to extend time to be exercised for the following reasons:

1. No prejudicial delay - From the Appellant's solicitors' letter from June 2016 it must have been clear to the Respondent's advisers that the Appellant was contemplating bringing a claim under the Act. Whilst no negotiations were begun within the six month time limit, the claim was notified to the Respondent. The Appellant did not have legal representation between July – December 2016, during which period the time limit expired. During the period between January – October 2017, when the testamentary capacity challenge to the Will was already on foot, but the claim under the Act has not yet been brought, the Respondent could not have sold the Property in any event, so the failure to bring the claim under the Act could not have caused any real prejudice. Once the claim under the Act was brought in October 2017, the two proceedings could be processed in tandem. Accordingly, whilst there was indeed significant, unexplained delay in bringing the claim under the Act, it did not cause any real prejudice to the Respondent.
2. Merits of the Appellant's case – The merits of the Appellant's case were strong on the basis of undisputed facts, and those merits ought to be taken into account when deciding whether to exercise the discretion. It was accepted that (1) the Appellant was the spouse of the deceased, (2) she has lived in the Property as her sole residence since the 1990s, (3) she is disabled, and (4) no financial provision was made for her in the Will. Counterarguments on the merits of the Appellant's claim were considered unlikely to defeat her claim altogether.
3. Availability of alternative remedy - The Appellant might not have had any alternative remedy if the time extension were refused, as her challenge to the validity of the Will was weaker than her claim under the Act, and it was unclear whether she would have the resources to pursue it in the absence of Legal Aid. She also had no obvious action against her solicitors given that she had no solicitors instructed at the time when the statutory time limit expired.

The Court of Appeal concluded that "there was an unexplained delay which caused no real prejudice to the Respondent, and in which it is tolerably clear that refusing permission will defeat a strong claim under the Act for the Appellant to retain her home" and that in the circumstances if was "just and proper" to extend the time. The Court of Appeal therefore allowed the appeal, set aside the first instance decision and granted an the extension of time under section 4 of the Act.

Comment

The Court of Appeal's decision provides a useful summary of the factors judges should consider when determining whether to exercise the discretion under section 4 of the Act and their relative weight. The decision also helpfully confirms the approach taken in Cowan v Foreman, namely that jurisprudence on procedural rules should not be relied upon in the context of the section 4 discretion.

We have seen a series of first instance decisions in the last few months which applied a somewhat inconsistent approach to out of time applications under the Act. Following the decision in Cowan v Foreman and Begum v Ahmed, there are now two Court of Appeal authorities providing some clarity in the approach. Although the six-month statutory deadline will not be extended lightly, the Court of Appeal decisions indicate that the courts may be more willing to do so than some of the previous first instance decisions had suggested.