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The Inheritance (Provision for Family and Dependants) Act 1975

Tuesday, 10 November 2009

Family lawyers do not often deal with claims under the Inheritance (Provision for Family and Dependants) Act 1975. When a potential claim under the 1975 Act arises, there are certain areas that they need to be aware of, as there are substantial differences between claims under the 1975 Act and ancillary relief applications.
A claim under the 1975 Act is a claim by a person to become a beneficiary, or a greater beneficiary, of the estate of the deceased. The object of the Act is to bring about a redistribution of the deceased's estate between the beneficiaries and the applicant, on the ground that the disposition of the deceased's estate effected by their will or the law relating to intestacy is not such as to make reasonable financial provision for the applicant. The 1975 Act widened the pool of potential applicants and differentiated between surviving spouses and other classes of applicants, such as mistresses.
The 1975 Act applies in England and Wales, but not in Scotland, which has no corresponding legislation. Proceedings in England and Wales can be commenced in either the Chancery or the Family Division of the High Court, or the County Court. Careful consideration should be given as to where proceedings are issued and heard.
Practitioners should be aware that the Civil Procedure Rules 1998 (as amended) govern procedure, except that the provisions of the Family Proceedings Rules 1991 relating to the drawing-up and service of orders apply. Access to the White Book, or counsel with Chancery experience, is therefore vital. The discretion as to costs is regulated by the CPR and CPR 36 applies, although Calderbank offers can still be made.
The applicant in a 1975 Act claim has to issue their claim on a Part 8 claim form and annex to it a detailed witness statement. This means that a lot of work has to be done preparing the applicant's witness statement before proceedings are issued. It is therefore essential to take a full proof from the client at an early stage.
Tests to be satisfied before an application is made
There are four tests which must be satisfied before an application can be made under the 1975 Act. They are as follows:
1. The deceased must be domiciled in England and Wales at the time of their death.
2. The applicant must come within the category of applicants set out in section 1(1) (a)-(e) of the 1975 Act. In summary, these are:
2.1 the spouse or civil partner of the deceased;
2.2 a former spouse or former civil partner of the deceased who has not formed a subsequent marriage or civil partnership;
2.3 a child of the deceased;
2.4 any person (not being a child of the deceased) who, in the case of any marriage or civil partnership to which the deceased was at any time a party, was treated by the deceased as a child of the family in relation to that marriage or civil partnership;
2.5 any person who immediately before the death of the deceased was being maintained, either wholly or partly, by the deceased.
Practitioners will note that the Civil Partnership Act 2004, which came into force on 5 December 2005, has widened the categories of potential applicants.
3. The applicant must be alive at the time of the application and remain alive until its determination.
4. There are strict time limits for applying under the 1975 Act. The application must be made within six months of the grant of probate or letters of administration. The Court has the power to extend the time limit if an application is made by the applicant. When a claim is made, an official copy of the grant of representation to the deceased's estate must be exhibited to the applicant's witness statement.
Reasonable Financial Provision
Once it has been determined that the applicant is entitled to bring an application, there are two further questions:
1. Is the disposition of the deceased's estate effected by their will or the intestacy laws such as to make reasonable financial provision for the applicant?
2. If not, what will the Court consider would be reasonable financial provision for the applicant bearing in mind the range of possible orders set out in section 2 of the Act.
In answering these two questions, the meaning of 'reasonable financial provision' will differ depending on the status of the applicant. If the applicant is a spouse of the deceased the test is: such financial provision as it would be reasonable in all the circumstances of the case for a husband or wife to receive, whether or not that provision is required for their maintenance. In the case of any other applicant, including a former spouse of the deceased, 'reasonable financial provision' means such financial provision as it would be reasonable in all the circumstances of the case to receive for their maintenance.
Thus, if you are acting for an applicant who is not the spouse or civil partner of the deceased, their claim is limited to maintenance.
A useful analysis of what constitutes "reasonable financial provision" in the context of the interpretation of the section 3(2) divorce cross-check imposed by the 1975 Act is contained in the recent case of Fielden and Graham v Cunliffe [2006]. Wall LJ made it clear that the effect of White v White [2001] was not to give rise to a presumed entitlement to equal division of assets between spouses in the context of 1975 Act cases. Equality was only a yardstick for assessing the fairness and non-discriminatory nature of any division. It could be departed from if there was good reason, such as the brevity of the marriage in this case.
Matters to which the Court is to have regard
When acting for an applicant, it is very important to obtain from them as much information as possible relating to the matters set out in section 3(1) of the 1975 Act. This section sets out the matters to which the Court is to have regard in all cases. Section 3(1) sets out the following:
" (1) Where an application is made for an order under section 2 of this Act, the court shall, in determining whether the disposition of the deceased's estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is such as to make reasonable financial provision for the applicant and, if the Court considers that reasonable financial provision for the applicant has not been made, in determining whether and in what manner it shall exercise its powers under that section, have regard to the following matters, that is to say -
(a) the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future;
(b) the financial resources and financial needs which any other applicant for an order under section 2 of this Act has or is likely to have in the foreseeable future;
(c) the financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future;
(d) any obligations and responsibilities which the deceased had towards any applicant for an order under the said section 2 or towards any beneficiary of the estate of the deceased;
(e) the size and nature of the net estate of the deceased;
(f) any physical or mental disability of any applicant for an order under the said section 2 or any beneficiary of the estate of the deceased;
(g) any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant."
Practitioners will note that there are similarities between section 3 of the 1975 Act and section 25 of the Matrimonial Causes Act 1973. Usually, the applicant will have little or no information about the financial needs and resources of other applicants or beneficiaries, or the nature and extent of the net estate. This should be supplied by the defendant's Personal Representative within 21 days of service of the claim on them.
It is crucial to obtain full details of the applicant's financial needs and resources at an early stage. The applicant's earning capacity will be taken into account. If the applicant is suffering from a disability, it is likely that medical evidence will be required as to its effect on their ability to work and life expectancy. When considering the merits of a 1975 Act claim, the Practitioner must be aware of the effect which receipt of either a lump sum (which is by far the most usual type of award) or periodical payments will have on the applicant's entitlement to any means tested benefits.
It may be the case that the applicant's desire to bring a 1975 Act claim originates from, or is heavily influenced by, matters of conduct. Such issues very rarely have a significant effect on the outcome of a 1975 Act claim. Practitioners should therefore take care to ensure that the applicant's financial dependence and provision are set out in their witness statement as fully and clearly as possible and that matters of conduct are not given undue prominence.
Obligation to maintain
The 1975 Act is primarily concerned with relationships of financial dependence between the applicant and the deceased. The Court of Appeal decision In Re Jennings sub nom Harlow v National Westminster Bank [1994] makes it clear that in order to be taken into account, the obligation to maintain must be one which is still subsisting at the date of the deceased's death. It is not always easy to decide whether a particular incident or chain of events should be regarded as creating an obligation for the purposes of section 3(1)(d) or as 'any other relevant matter' under section 3 (1)(g). Sometimes the decision is clear, as when the deceased has made a promise, not necessarily to the applicant, to leave certain assets to the applicant. Such promises were held to create an obligation in Goodchild v Goodchild [1997] and Espinosa v Bourke [1999].
As in any litigation, it is essential that the applicant be warned about the costs risks and implications of the Part 36 and Calderbank procedures. It must be clearly understood by the client that a 1975 Act claim is litigation between the applicant and the beneficiaries, whose interests will be adversely affected. It is therefore usually hostile litigation (added to the fact that there has been bereavement) and is subject to the normal costs regime which governs adversarial litigation. There is no reason to suppose that an unsuccessful applicant will be allowed to recover their costs out of the estate. Practitioners should note that the new costs rules which came into force in ancillary relief proceedings on 3rd April 2006 do not currently apply to 1975 Act claims, which continue to be governed by the CPR.
Acting for a defendant
When acting for a defendant, the litigation should be conducted along the same lines as it would be on behalf of an applicant. A defendant beneficiary should be aware that they are exposed to the same costs risk as an applicant.
A defence is required to be filed and served by the defendant. However, a beneficiary who either intends to contest the claim, or while accepting the claim has some merit, wishes to protect against having to bear a disproportionate share of the burden of any award, should also prepare a witness statement which deals with any relevant matters to which the Court is directed to have regard, in particular, their financial needs and resources (section 3(1)(c)). Failure to do so and, in particular, failure to provide the Court with financial information is likely to cause the Court to conclude that the beneficiary's resources are more than sufficient to support their current standard of living without recourse to the funds they stand to receive under the deceased's will, intestacy or otherwise.
It is common for a defendant beneficiary to also be a PR of the deceased. An obvious example is a surviving spouse who benefits substantially under the will and has been appointed as an executor. It is vital that a defendant in such a position keeps the two roles separate and complies in full with their duties as the deceased's PR.
The function of the PR is to assist the Court and comply with CPR rule 57.16 (5), supplemented by Practice Direction 57, paragraph 16. This provides that a PR must file with the Court and serve written evidence in answer to the claim and state to the best of their ability:
1. Full particulars of the deceased's net estate;
2. The persons or classes of persons beneficially interested in the estate, giving the names and, in the case of those not already party, the addresses of all living beneficiaries and the value of their interest so far as ascertained;
3. Whether any living beneficiary is a child or a patient;
4. Any facts known to him which might affect the exercise of the Court's power under the Act.
If the case does not settle, the Judge at the final hearing of a 1975 Act claim has to carry out a balancing exercise, taking into account all of the section 3 factors (Espinosa). In an ancillary relief case, the Judge has to balance the competing claims of the husband and wife. However, in a 1975 Act case, the Judge has to balance the much wider claims of the former spouse against the factors relevant to the other applicant/s, the beneficiaries and other persons in a relationship of dependence to the deceased.
If you require advice and assistance in making or defending a claim under the above act then please contact the Head of Private Client at Rollingsons solicitors on 020 7611 4848