First instance, the appeal and “standing still” in claims under the Inheritance Act

Cowan v Foreman [2019] EWCA Civ 1336 has just gone before the Court of Appeal

Introduction

The Inheritance (Provision for Family & Dependants) Act 1975 (“the Act”) allows certain categories of people to bring a claim against a deceased’s estate where ‘reasonable financial provision’ has not been made for them.

If a person falling into one of these categories wishes to bring such a claim, they must do so within six months of the date of a Grant of Representation being obtained. In the event of a failure to do so, a claimant will be required to obtain the court’s permission if they wish to pursue their claim.

It is not uncommon for potential claimants under the Act to seek to agree a standstill agreement, the intended effect of which is to stop time running for the purposes of bringing a claim against an estate. This provides the parties with an opportunity to seek a resolution without proceedings being issued and, failing that, allows the claimant to properly prepare their case. It has generally been thought that this would coincide with the court’s desire for parties to resolve disputes outside of court, limiting the costs to both parties and their use of court resources.

However, the recent decision in Cowan v Foreman & Others [2019] EWHC 349 (Fam) had cast significant doubt on the use of standstill agreements in such claims. This was at odds with the decision of Chief Master Marsh in Bhusate v Patel & Others [2019] EWHC 470 (Ch), in which he said the claimant was “effectively powerless” to do anything sooner in the absence of agreement or engagement by her stepchildren. An application was permitted, despite a delay of over 25 years and 9 months.

Cowan v Foreman [2019] EWCA Civ 1336 has just gone before the Court of Appeal and further valuable guidance has resulted from the appeal which is of importance to potential claimants and defendants under the Act.

What does the Court consider when deciding to grant permission to bring a claim outside of the 6 month period?

The court will take into account the following:

  1. The court’s discretion is not limited but must be exercised in accordance with what is right and proper.
  2. The onus is on the claimant to show sufficient grounds for the granting of permission to apply out of time.
  3. The court must consider whether the claimant has acted promptly and the circumstances in which they applied for an extension of time after the expiry of the time limit.
  4. Whether negotiations commenced within the time limit.
  5. Whether the estate had been distributed before the claim was notified to the defendants.
  6. Whether the dismissal of the claim would leave the claimant without recourse to other remedies.
  7. Looking at the position as it is now, whether the claimant has an arguable case under the Act if the application was allowed to proceed.

Cowan v Foreman & Others – At First Instance ([2019] EWHC 349 (Fam))

The claimant, Mrs Cowan, was the main beneficiary of Mr Cowan’s £16 million estate. Mr Cowan set up two trusts which benefited Mrs Cowan and Mr Cowan’s children and grandchildren. However, Mrs Cowan did not own any property absolutely, so brought a claim under the Act.

A Grant of Probate was obtained on 16 December 2016, with the six month period expiring on 16 June 2017. The application was not made until 8 November 2018, nearly 17 months out of time.

The court refused to exercise its power to allow Mrs Cowan to bring her claim outside of the six month time limit, despite the parties entering into a standstill agreement. Mr Justice Mostyn held that:

  • He struggled to see how Mrs Cowan’s claim, if allowed, was going to result in a successful application (principle (7));
  • There was no good explanation for the delay, given that Mrs Cowan had the means and the support to advance a claim on time and had taken advice prior to the limitation period expiring;
  • The time limit was intended to avoid unnecessary delay and importantly to spare beneficiaries and the court from being burdened by "stale claims";
  • The question of whether to allow a claim to be brought "out of time" was not one of discretion, but a "qualitative decision or a value judgment" (as the court must be satisfied that the claimant has shown (a) good reasons justifying the delay and (b) that she has a claim of sufficient merit to be allowed to proceed to trial);
  • If it is common practice to use a standstill agreement, then it is a practice that should come to an immediate end. It is not for the parties to give away time that belongs to the court. Instead, the claim should be issued in time and then the court invited to stay the proceedings while the negotiations are pursued. Otherwise it is simply to “cock a snook” at the clear Parliamentary intention;
  • In no future case should any privately agreed moratorium ever count as stopping the clock in terms of the accrual of delay. A moratorium privately agreed after the time limit has already expired should never in the future rank as a good reason for delay; and
  • The  limit of excusable delay ‘should be measured in weeks, or at most a few months’.

Cowan v Foreman & Others – On Appeal ([2019] EWCA Civ 1336)

Mrs Cowan appealed the decision at first instance and it was held on appeal that:

  • The concept of a “stale claim” is of little relevance in the context of the Act;
  • Even if Mrs Cowan and her sons were aware of the existence of the Act and the six month time limit, the explanation for the lapse of time in this case was clear. There was no face to face or substantive advice given and Mrs Cowan and her sons felt “out of their depth”;
  • It was not a case in which Mrs Cowan merely changed her mind. It cannot be compared with the situation in Sargeant v Sargeant or Berger v Berger in which ten years and six and a half years respectively had expired since the six month period had expired. There is a proper explanation for the delay, Mrs Cowan acted promptly once her true position was appreciated and advice had been taken, and the negotiations were a significant factor even though they began after the six month period had elapsed;
  • The six month time limit is not to be enforced for its own sake. The time limit is expressly made subject to permission of the court to bring an application after the six months has elapsed. It is designed to bring a measure of certainty for personal representatives and beneficiaries;
  • It is not necessarily true that there must be a good reason for all delay in every case. Each case turns on its own facts and, in each case, the judge is required to weigh the seven factors and to reach a decision.
  • The judge asked the wrong question, namely, whether the deceased’s intentions were reasonable;
  • The judge failed to have proper regard to all the circumstances of the case, including the size of the estate, the length of the relationship, the fact that Mrs Cowan received only the chattels outright, which it is accepted were of nominal value, she had no autonomy, no security and no direct interest;
  • Without prejudice negotiations rather than the issue of proceedings should be encouraged. Although the potential claimant will have to take a risk if an application is made subsequently to extend time in circumstances where negotiations have failed, if both parties have been legally represented, it would be unlikely that the court would refuse to endorse the approach; and
  • The distribution of the estate or lack of it is an important but not a decisive factor and must be considered alongside other relevant factors in evaluating the case as a whole.

Having considered all of the circumstances of this case, the Court of Appeal therefore considered it appropriate to give permission to commence proceedings out of time.

Conclusion

The Court of Appeal did not wish to go as far as the judge at first instance and say that there is no place for standstill agreements in what are often highly distressing and sensitive cases, and in which a decision to issue is otherwise to be made whilst bereavement is still very raw and emotions high. In such circumstances the issue of proceedings can lead to a hardening of attitudes and a focus on the litigation, with the consequent cost to the estate and delay in its distribution.

Whilst the final decision always rests with the court, where there is a properly evidenced agreement to which no objection has been taken by the executors and beneficiaries, it would appear unlikely, as the law now stands following the Court of Appeal decision, that a judge would be unduly critical of a claimant seeking permission to bring a claim outside of the statutory time limit of six months of the date of the Grant of Probate where the existence of a Standstill Agreement had contributed to that delay.

If parties choose the ‘standstill’ route, there should be clear written agreement setting out the terms/duration of such an agreement and each of the potential parties should be included in the agreement. The claimant would be well advised to include confirmation that the defendant would not use the delay or the entering into of the standstill agreement as a basis to oppose any application for permission to bring a claim under the Act after more than six months had passed from the date of the Grant of Probate. In the event that proceedings have to be issued, the court could be presented with a consent application for permission to be granted notwithstanding that six months has elapsed.

For any further information regarding any of the issues raised in these cases or in respect of will disputes generally, please contact David McGuire, Solicitor, on 0161 214 0523 or david.mcguire@weightmans.com, or contact another member of Weightmans’ litigation and disputed wills and estates team.

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