The Inheritance Act 1975 is considered by the Supreme Court for the first time in Ilot v Blue Cross

April 5, 2017

Ilott v Blue Cross & Ors [2017] UKSC 17 (formerly known as Ilott v Mitson)

This is the first time this country’s highest court has considered the statutory qualification on testamentary freedom. This article is aimed at highlighting some of the material points for practitioners, it is not an introduction to the 1975 Act, nor is it a substitute for reading the judgment.

Facts

Mrs Jackson was estranged from her daughter, the applicant, for 26 years and made no provision for her in her will, leaving her estate to the animal charity appellants: Blue Cross, RSPB and RSPCA. The daughter was in straitened circumstances, living in rented accommodation with 5 children with an income largely from state benefits. The procedural history is set out at the foot of this article.

The questions on appeal

The Supreme Court was not deciding whether DJ Million was correct to find the threshold of reasonable financial provision was met. The charities had been refused permission to appeal that issue to the Supreme Court after the first visit to the Court of Appeal. It was deciding:

  1. Whether the Court of Appeal was wrong to set aside DJ Million’s award?
  2. Whether the relevant date when re-exercising the jurisdiction is that of the initial hearing or the appeal?
  3. Whether the court erred in its approach to maintenance?
  4. Whether the Court of Appeal was wrong to structure its award so as to preserve Mrs Ilott’s state benefits?
  5. Whether the Court of Appeal erred in its application of the balancing exercise under the 1975 Act?

The appeal was allowed and DJ Million’s award of £50,000 restored. Judgment was given by Lord Hughes (with whom the other 6 justices agreed) a supplementary judgment was given by Lady Hale (with whom Lords Kerr and Wilson agreed).

Guidance given

The Approach to 1975 Act claims

  1. the two questions will usually become: (1) did the will/intestacy make reasonable financial provision for the claimant and (2) if not, what reasonable financial provision ought now to be made for him?” [23]. The section 3(1) factors are relevant to both questions and there will in most cases be a very significant degree of overlap between them. There should be no reason for a split hearing [24].
  2. Lord Hughes offered guidance as to the manner of the analysis, including that the Act requires a broad brush approach, there is nothing wrong with a judge setting out the relevant facts, then addressing the two questions without repeating the facts. He explained: “Whether best described as a value judgment or as a discretion (and the former is preferable), both stages of the process are highly individual in every case. The order made by the judge ought to be upset only if he has erred in principle or in law. An appellate court will be very slow to interfere and should never do so simply on the grounds that its judge(s) would have been inclined, if sitting at first instance, to have reached a different conclusion.” [24].
  3. Experienced practitioners will be keenly aware these cases are highly fact sensitive, following this decision it will be harder still to get permission or to succeed in an appeal against the first instance judge’s decision. The case must be on its best footing from the outset, meticulously prepared and attractively presented from the earliest stages.

The meaning of maintenance

  1. Maintenance s principally the provision of income, rather than capital. As per Lord Hughes [14] maintenance: “cannot extend to any and every thing which it is desirable for the claimant to have. It must import provision to meet the everyday expenses of living”, the Court then approved the guidance of Browne-Wilkinson J in In re Dennis, deceased [1981] 2 All ER 140 at 145-146: “‘maintenance’ connotes 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.”
  2. A need for housing, although it will frequently be an expense of everyday living, is unlikely to be met by the transfer of a property to the applicant or the provision of a lump sum to enable them to purchase a house, as per Lord Hughes: “it is likely more often to be provided by such a life interest rather than by a capital sum.” [15 and at 44], Lady Hale explained: ‘It is difficult to reconcile the grant of an absolute interest in real property with the concept of reasonable provision for maintenance: buying the house and settling it upon her for life with reversion to the estate would be more compatible with that.” [65(2)].
  3. Other forms of maintenance may be provided by way of lump sum payment, there is approval of the use of the Duxbury model in 1975 Act claims, to provide income and a draw-down of capital as income [15]. Other examples include: a vehicle to enable an applicant to get to work (also [15]) and to replace “essential white goods, basic carpeting, floor covering and curtains, and the replacement of worn out and broken beds” [40, 64].

The relevance of state benefits

  1. Means tested benefits are lost if an applicant holds capital assets in excess of £16,000. The judgment gives little guidance on the extent to which awards should be structured to preserve benefits. Their receipt is relevant to the applicant’s means [45]. Lord Hughes explained that although 1975 Act awards are not designed to gift the applicant a spending spree ‘necessary replacement of essential household items is not such an indulgence; rather it is the maintenance of daily living. Moreover, how the claimant might use the award of £50,000 was of course up to her, but if a substantial part of it were spent in this way, the impact on the family’s benefits would be minimised, because she could put the household onto a much sounder footing without for long retaining capital beyond the £16,000 ceiling at which entitlement to Housing and Council Tax Benefits is lost.’ [41].
  2. This appears to endorse the spending of at least £34,000 on items such as white goods and curtains in a short period of time. Those advising claimants should approach the point with caution, keeping in mind that the Supreme Court were not determining whether such expenditure would preserve an entitlement to benefits, that there was limited argument on whether it would be effective to preserve the benefits and the public bodies responsible for taking the decision were not parties.

The relevant date for determining reasonable financial provision

  1. It is the date of the hearing, if an appeal court is exercising the discretion afresh the relevant date is the date of the appeal. Whether that has any impact may be influenced by the introduction of new evidence, which is governed by Ladd v Marshall

Estrangement and conduct

  1. The Court of Appeal decision that little if any weight should be given to estrangement, testamentary wishes and conduct was not endorsed [46-7]. The estrangement was ‘one of the two dominant factors in this case; the other was Mrs Ilott’s very strained financial position’ [35]. Lord Hughes explained: “Some judges might legitimately have concluded that the very long and deep estrangement had meant that the deceased had no remaining obligation to make any provision for her independent adult daughter – as indeed did Eleanor King J when it appeared that she had scope to re- make the decision.” [35].
  2. Lord Hughes cautioned against making 1975 Act awards “primarily rewards for good behaviour on the part of the claimant or penalties for bad behaviour on the part of the deceased.” [47] The conduct of the testatrix and claimant in this case will not be unfamiliar to experienced practitioners. Lord Hughes use of ‘primarily’ as a qualification indicates this conduct is a material factor for advisers and first instance judges.

Charity beneficiaries

  1. The Supreme Court rejected the Court of Appeal’s conclusion the charities were not prejudiced by an increased award [46]. The Charities’ claim “was not based on personal need, but charities depend heavily on testamentary bequests for their work, which is by definition of public benefit and in many cases will be for demonstrably humanitarian purposes.” [46]. It might be thought difficult and undesirable for charities to seek to demonstrate their humanitarian purpose and instead rely on their being by definition for the public benefit.

Testamentary wishes and competing beneficiaries generally

  1. More fundamental than the Charities being for the public benefit, was that they were the chosen beneficiaries of the deceased and they did not have to justify a claim on the basis of need under the 1975 Act. The fact that the chosen beneficiaries would be prejudiced by a reduced award could not be ignored [46]. This strengthens the position of all beneficiaries who, like the Charities, are unable to establish financial need.

Relevance for practitioners advising clients

  1. It will remain difficult to advise clients as to likely awards. Their Lordships explained the awards depend on a value judgment of the first instance judge and suggested the following would not have been interfered with on appeal:
    1. No award, because of the long and deep estrangement, absence of expectation, [35 and 65(1)];
    2. An order with the dual benefit of maintaining the applicant and saving the public purse money, including the financial provision for the claimant by way of housing [44, 65(2)]; and
    3. The award made, a lump sum of £50,000 to provide an income of £4,000 per year or to be spent on the replacement of household goods and maintain the claimant’s benefit entitlement [41, 65(3)].
  2. The breadth of that range will make it difficult to predict awards with much accuracy. The resurrection of the relevance of conduct will require evidence on the parties and the deceased’s behaviour sometimes spanning decades, with the consequential lengthening of trials and uncertainty of cases turning on oral evidence.
  3. The judgment will help to narrow the issues in many cases, but the emphasis on value judgment over certainty leaves estates and claimants exposed to uncertain prospects at trial.

The procedural history

  • DJ Million [2007] (as he then was, now a retired circuit judge, a reminder of the duration of this litigation) at first instance found the will did not make reasonable financial provision and awarded Mrs Ilott £50,000.
  • Appeal and cross appeal to Eleanor King J [2009] EWHC 3114 (as she then was, now in the Court of Appeal), allowed the charities cross appeal, exercised the jurisdiction afresh holding there was no lack of reasonable provision, it was therefore unnecessary to hear Mrs Ilott’s appeal as to the size of the award.
  • The Court of Appeal [2011] EWCA Civ 346, reversed King J and directed Mrs Ilott’s appeal be heard by the High Court.
  • Parker J [2014] EWHC 542 (Fam) dismissed the appeal and the £50k award remained.
  • The Court of Appeal [2015] EWCA Civ 797 allowed Mrs Ilott’s appeal and awarded her £143k and the right to draw down a further £20k.
  • The Supreme Court [2017] UKSC 17 allowed the appeal and restored DJ Million’s award of £50k.
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