In the heart of Peterborough

Ilott v Mitson inheritance dispute landmark ruling

20 Mar 2017

Ilott v The Blue Cross and others [2017] UKSC 17

The Supreme Court in Ilott v The Blue Cross and others handed down its decision on 15 March. When the Court of Appeal handed down its judgment media reporting concentrated on the apparently remarkable outcome that a court could go against a testator's wishes and effectively re-write the will. Testamentary freedom is subject to the Act. We must bear in mind that there is a significant difference between testamentary freedom and testamentary wishes. Each of these expressions of a testator's self-determination apply differently in the law created by the Act and the cases decided in the years since it came into force.

The leading judgement in the appeal was given by Lord Hughes. Lady Hale gave a shorter judgment but all judges concurred with one or other of the judgments which allowed the appeal reinstating the first instance decision of District Judge Million.

Much can be said about parental obligation towards adult children. Non-dependant or financially independent children should not be expectant of any disposition some would say. There is a debate about this, and each person's stance may, indeed will, be dependant on their own life experiences, and perhaps, family tradition. As Lady Hale said in the course of the appeal, the reasonableness of any obligation a testator may have towards adult children will be a topic about which reasonable people may reasonably disagree.

Outcomes are dependent on what are described as value judgments, which does sound a rather subjective assessment. It is at the threshold stage that the value judgment is most challenging. Consider the facts of Re Coventry decd and Ilott. No provision was made at all for the applicant son in Re Coventry decd, a son whose circumstances were described as necessitous. He was not dependent in any way, and otherwise had only a blood relationship to call upon for his claim. Without more, said the appeal court, it could not be said that the decision of Oliver J. was unreasonable. In Ilott, the claimant was not dependent (because of the estrangement). Her circumstances could, in the eyes of some, be described as necessitous, but they were no worse than the claimant's in Re Coventry decd.

It has been forty years since the Act came into force. Surprisingly, before the Supreme Court heard this appeal, no case under the Act had reached our highest court.

The Issues in the case were fourfold

Whether the Court of Appeal was wrong to set aside the award made at first instance on the respondent's claim under the Inheritance (Provision for Family and Dependants) Act 1975;

Whether, in deciding to re-exercise the court's discretion to make an award under the 1975 Act, the Court of Appeal erred in taking account of the factual position as at the date of the appeal rather than the date of the original hearing;

Whether the Court of Appeal erred in its approach to the "maintenance" standard under the 1975 Act;

Whether the Court of Appeal was wrong to structure an award under the 1975 Act in a way which allowed the respondent the preserve her entitlement to state benefits;

Whether the Court of Appeal erred in its application of the balancing exercise required under the 1975 Act;

I focus just on a few of these below.

The Facts

Melita Jackson died in 2004 aged 70. By her will, she left the majority of her estate valued at £486,000 to three charities (the appellants). The will made no provision for Mrs Jackson's only child, Mrs Heather Ilott (the respondent). Mother and daughter had become estranged many years before and their attempts at reconciliation had failed.

Mrs Ilott made an application under the Inheritance (Provision for Family and Dependants) Act 1975 for reasonable financial provision from her late mother's estate. In 2007, DJ Million made an award in Mrs Ilott's favour of £50,000. Mrs Ilott appealed against the amount of this award. In July 2015, the Court of Appeal allowed Mrs Ilott's appeal, setting aside DJ Million's award and substituting its own award of (a) £143,000, to enable Mrs Ilott to purchase her housing association home, (b) the reasonable costs of the purchase, and (c) payments up to a maximum of £20,000 structured in a way that would allow Mrs Ilott to preserve her state benefits. The charities appealed to the Supreme Court

Threshold question is a single-staged test

One error made by the Court of Appeal in overturning the District Judge's decision was in saying that the District Judge should have decided what the award should have had he approached it with a hypothetical situation in mind (eg had there been no estrangement) and discounted from there. In fact, what the Act requires is a single assessment of all relevant factors, not a two stage approach as the Court of Appeal suggested should be done.

The Supreme Court endorsed the view that for a claimant to succeed, there must be more than these two factors in the case: necessitous circumstances and a qualifying relationship. The claimant needs to show some additional factor which bites against the legislation and which yields a value judgment in his or her favour. What had become lost in the case (because of the passage of time and the case's litigation history) was that additional factor which led the court to make an award in Mrs Ilott's case in the first place.

Family breakdown

At first instance court time was spent exploring why the estrangement between mother and daughter had occurred and why it had been allowed to last for as long as it did. District Judge Million concluded that the proportionality of the blame lay with the mother. There have been a few cases in the last decade or so which have explored this issue with varying outcomes for the claimant. They are Gold v Curtis, Wright v Waters and Re Garland. In all the cases the court was prepared to explore where 'blame' lay for estrangement or why no provision had been made for the claimant. Lord Hughes in Ilott made this observation near the start of his judgment:

"The test of reasonable financial provision is objective; it is not simply whether the deceased behaved reasonably or otherwise in leaving the will he did, or in choosing to leave none. Although the reasonableness of his decisions may figure in the exercise that is not the crucial test." (Paragraph 2)

And

"The Act does not say that the court may make an order when it judges that the deceased acted unreasonably. That too would be an objective judgment, but it would not be the one required by the Act." (Paragraph 16)

And

"Nevertheless, the reasonableness of the deceaseds decisions are undoubtedly capable of being a factor for consideration within section 3(1)(g), and sometimes section 3(1)(d). Moreover, there may not always be a significant difference in outcome between applying the correct test contained in the Act, and asking the wrong question whether the deceased acted reasonably. If the will does not make reasonable financial provision for the claimant, it may often be because the deceased acted unreasonably in failing to make it. For this reason it is very easy to slip into the error of applying the wrong test. It is necessary for courts to be alert to the danger, because the two tests will by no means invariably arrive at the same answer." (Paragraph 17)

In my view, what the Supreme Court is doing here is warning against allowing the issue of family breakdown to become the dominant factor in the value judgment of whether reasonable provision had been made. In most cases of adult children where there has been estrangement, there will be no dependency and no expectation. In my view, this represents a limiting factor and time spent trying to blame the testator will not necessarily lead to an increase in the award in what is still a claim for maintenance and not more than maintenance.

As a salutary note of caution, in one of the earlier appeals in the case, Eleanor King J. had allowed a cross-appeal by the charities which led to a dismissal of the claim in its entirety. Eleanor King J. had concluded that the District Judge had given too much weight to the unreasonableness of the deceased's decision to make no provision at all. The first appeal to the Court of Appeal set this decision aside because the District Judge had gone through the section 3 factors nevertheless. It is noteworthy that in the course of argument in the Supreme Court it was said that had King J. heard the case at first instance and come to the same conclusion she did on appeal, her decision would not have been appealable.

'Maintenance'

The Supreme Court supported the historical position with regard to maintenance and endorsed the definition given by Brown-Wilkinson J in Re Dennis:

The applicant has to show that the will fails to make provision for his maintenance: see In re Coventry (deceased) ... [1980] Ch 461. In that case both Oliver J at first instance and Goff LJ in the Court of Appeal disapproved of the decision in In re Christie (deceased) ... [1979] Ch 168, in which the judge had treated maintenance as being equivalent to providing for the well-being or benefit of the applicant. The word maintenanceis not as wide as that. The court has, up until now, declined to define the exact meaning of the word maintenanceand I am certainly not going to depart from that approach. But in my judgment the word maintenanceconnotes only payments which, directly or indirectly, enable the applicant in the future to discharge the cost of his daily living at whatever standard of living is appropriate to him. The provision that is to be made is to meet recurring expenses, being expenses of living of an income nature. This does not mean that the provision need be by way of income payments. The provision can be by way of a lump sum, for example, to buy a house in which the applicant can be housed, thereby relieving him pro tanto of income expenditure. Nor am I suggesting that there may not be cases in which payment of existing debts may not be appropriate as a maintenance payment; for example, to pay the debts of an applicant in order to enable a him to continue to carry on a profit-making business or profession may well be for his maintenance.

Maintenance acts as a limiting factor in my view. Complaint was made that the increased award to Mrs Ilott (which enabled her to buy her discounted council house) exceeded ordinary maintenance as explained by the court in Re Dennis. It has been common for capital and houses to be provided for 'maintenance' purposes. Maintenance payments can be capitalised to pay an income (calculated using Duxbury Tables). Houses have been provided by way of settlement rather than for outright ownership. In devising awards in this way, courts have not lost sight of the limiting factor of maintenance: it acts as a restraint on the extent of an award.

Benefits

The reader needs to bear in mind the difference between benefits and credits. It was the benefits only that were at risk being lost in the event an award was made which gave Mrs Ilott capital that exceeded £16,000. The tax credits would remain unaffected.

In the Supreme Court, one of the observations made in the course of argument (by Lord Wilson) was the suggested reading of the Court of Appeal decision that somehow, where a claimant was on benefits, the overall benefit provision represented a platform above which reasonable provision had to exceed. In effect, an award of £50,000 (the lump sum awarded by the District Judge) was of no value unless it left the benefits untouched. However, the award of £50,000 could be used for the purchase of household items (white goods, carpet, furniture) even if it caused an interruption to the benefits. Mrs Ilott had income from benefits but it would not stretch to purchasing just those household items referred to above. Therefore, such an award had utility and value despite its likely impact on benefits for a period. Reliance on benefits does not increase need of itself. The fact that a claimant has an income stream from benefits represents a resource, and if the benefits are means-tested that nuances the claimant's financial position even further.

Overall, the Supreme Court sought to preserve the importance of testamentary freedom. The Act intrudes upon it, but does so in a way which ought to remain within bounds. A proper application of the legislation prevents excessive encroachment on a testator's wishes.

Carl Fender

Regency Barristers Chambers

20 March 2016

Carl Fender