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17 March 2017 | Comment | Article by Roman Kubiak TEP

Ilott v Mitson:  the fight back of testamentary freedom?

Following a 10 year legal battle, the dispute regarding Melita Jackson’s estate is finally over. The case has of course caught the attention of the media, inspiring headlines such as “your will can be ignored” (Mail and Telegraph) and “…[judges] prove again that our money is not our own” (Mirror).

Roman’s blog following the previous appeal sets out the background to the case.

The appeal made by the charities (Blue Cross, RSPB, and RSPCA) was on the following five grounds:

  1. whether the Court of Appeal was wrong to set aside the judge at first instance’s award;
  2. whether the Court of Appeal erred in taking into account the factual position as of the date of the appeal, rather than the date of the original hearing;
  3. whether the Court of Appeal erred in its approach to the “maintenance” standard;
  4. whether the Court of Appeal was wrong to structure the award to the claimant in such a way which allowed her to preserve her entitlement to state benefits; and
  5. whether the Court of Appeal erred in its application of the balancing exercise between the claimant and the beneficiaries.

For all the fanfare, the case was actually decided rather simply. When the Court of Appeal made their award (where they ordered that Ms Ilott should receive £143,000 plus an option on a £20,000 fund) they held that DJ Million, the judge at first instance, had made two “fundamental errors” (to quote Lady Justice Arden), namely:

  1. he had not properly considered the effect of the estrangement between the deceased and Ms Ilott, and in particular had not considered what award would have been made had they not been estranged; and
  2. he had not properly considered the effect of the £50,000 award on Ms Ilott’s benefits. In particular, Ms Ilott was on means tested benefits, and given that the award could mean that she would no longer received these (at least until she had spent the money) the £50,000 provided arguably no maintenance at all.

The Supreme Court concluded as a matter of fact that DJ Million had made no such errors, and therefore the Court of Appeal was wrong to overturn his decision. Thus the charities were successful in their appeal. The Court of Appeal’s decision was reversed, and accordingly DJ Million’s initial decision reinstated. In other words, Ms Illot’s award was reduced from £143,000 (plus an option on a £20,000 fund) to £50,000.

Over the course of the judgment the Supreme Court – likely conscious that the case will be highly persuasive in future Inheritance Act claims (not least because it is the only such case ever to reach the Supreme Court) – made a number of interesting comments on the claim. Some of the more interesting points are summarised below:

  1. The reasonableness (or otherwise) of the deceased can undoubtedly be a factor in Inheritance Act claims. However, Lord Hughes urged caution in this regard, given the temptation to conflate the separate questions of the reasonableness of the testator’s decisions with that of whether reasonable financial provision had been made for the applicant. The two issues do not necessarily follow each other. He summed up the position where he stated “The deceased may have acted unreasonably, indeed spitefully, towards a claimant, but it may not follow that his dispositions fail to make reasonable financial provision for that claimant, especially (but not only) if the latter is one whose potential claim is limited to maintenance.”
  2. Maintenance is flexible and is to be assessed on the fact of each case. Traditionally, where housing is required, a capital payment, as opposed to a life interest, will generally be preferred. There are good reasons for this: life interests increase costs and do not afford the parties with a “clean break”. Lord Hughes’s comments appear to imply a subtle change to this principle, suggesting that where housing is to be provided by maintenance (i.e. where the claimant is not a spouse) then a life sum may be more appropriate. Indeed, when providing the press release Lord Hughes discussed a payment of a capital “appreciating asset” as “beyond maintenance”, and that a life interest would “usually suffice”. It will be interesting to see to what extent this will be followed.
  3. The presence or absence of a moral claim will often be at the centre of the decision under the 1975 Act. This appears to be a shift towards the 1979 claim of Re Coventry [1980] Ch 461. Previous case law had cast doubt on Re Coventry’s applicability, and therefore the Supreme Court’s ruling in this regard does appear to represent a genuine change, which could have a significant effect on the way judges treat Inheritance Act claims. The gist of Re Coventry is perhaps best summarised by the famous quote of Oliver J in that case: “It cannot be enough to say ‘here is a son of the deceased; he is in necessitous circumstances; there is property of the deceased which could be made available to assist him but which is not available if the deceased’s dispositions stand; therefore those dispositions do not make reasonable provision for the applicant.’ There must, as it seems to me, be established some sort of moral claim by the applicant to be maintained by the deceased or at the expense of his estate beyond the mere fact of a blood relationship, some reason why it can be said that, in the circumstances, it is unreasonable that no or no greater provision was in fact made.”
  4. It had been suggested that where a claimant receives means tested benefits, and these would be reduced or removed altogether should they receive a capital lump sum, then awarding that claimant with such a lump sum would effectively be making them no award at all. The logic is that the claimant in those circumstances would simply live-off that capital lump sum until it was all spent (or at least reduced to the appropriate amount), whereupon the means tested benefits would be reinstated. In other words, they would be no better off. The Supreme Court did not agree with this assessment. In the circumstances of the particular case, a central feature of Ms Ilott’s claim was that given the family’s limited income they were unable to maintain their ordinary domestic equipment, or to carry out the necessary work to their house that they required, or to go on holiday. The Supreme Court appears to suggest that she could spend some or all of the £50,000 award on these, and would therefore suffer less (or no) detriment to her means tested benefits. Whether this contradicts the court’s earlier assertion that the purpose of the act is not to facilitate a “spending spree” is open to debate.
  5. The Court of Appeal’s comments that charities have no expectation of benefit or needs per se should be treated with caution. While they would not of course have a personal need, charities nonetheless depend heavily on testamentary bequests, which is by definition for the public benefit, and will in many cases be for a demonstrably humanitarian purpose. It should not be ignored that in a case such as this an award to the claimant will be to deny the charity those funds.
  6. Finally, and arguably most importantly (indeed the part largely picked up by the press) was the reassertion of the importance of testamentary freedom: in other words, that a testator’s wishes contained within a will should be respected. The Supreme Court felt that the Court of Appeal had put too little weight on this factor. A court considering an Inheritance Act claim should not simply weigh-up the resources of the claimant and of the beneficiaries: instead the exercise of considering whether reasonable provision has been made for the claimant should be with the testator’s wishes firmly in mind. Lady Hale gave a lengthy summing up of the principle at the end of the judgment which is worthy of review.

The case is interesting, and will no doubt be cited routinely in future Inheritance Act claims. It must though be borne in mind that all Inheritance Act claims are decided on their own facts, and therefore it is debateable how helpful the claim is to practitioners when providing clients with advice on the strengths of their respective claims. The charities will no doubt be delighted with the outcome; perhaps more so with future claims in mind than the present case. They were understandably perturbed by the Court of Appeal’s dismissing of their needs, and will be happy that this has now been firmly overruled.

Author bio

Roman Kubiak is a partner and head of the market leading Contested Wills, Trusts and Estates team.

He advises across the whole spectrum of private wealth disputes, with a particular focus on high value, complex and cross-border disputes including: trust disputes, breach of trust claims and applications to remove trustees; will disputes, particularly those with an international element; claims under the Inheritance (Provision for Family and Dependants) Act 1975; and claims for equitable relief under proprietary estoppel, constructive trusts and resulting trusts.

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