Max Lewis of 29 Bedford Row summarises the main points of the Supreme Court's judgment
Max Lewis, 29 Bedford Row
Unlike many other systems of law, English law by and large allows people to leave their money on death to whomever they want. Most other jurisdictions (and nearly all European jurisdictions) take a very different view. For them, in general terms, property belongs to the family, members of which have automatic rights on death. It is very difficult to disinherit in those legal systems. In England, it is very easy.
Ilott concerned the will of Mrs Jackson, Mrs Ilott's mother. They had been estranged for over 25 years, after Mrs Ilott had left home aged 17 to live with her boyfriend (whom she later married). Mrs Jackson died in 2004 with an estate valued at £486,000. By her will, she gave £5,000 to the BBC Benevolent Fund, but left the remainder to be divided between three animal charities; the Blue Cross, the RSPCA and the RSPB. Mrs Ilott knew she had no expectation under her mother's will.
But Mrs Ilott was in a very bad financial position; only just over the breadline. She received means-tested benefits. Ambitiously she brought a claim against her late mother's estate in which she asked for £186,000 to buy her home (under the right to buy scheme), £53,000 to add on an extension, £173,000 for a capitalised income fund (£10,000 pa for life) and £41,000 for renovations – a total of £453,000. The trial judge, DJ Million at the PRFD, awarded her £50,000, being roughly the capital required to allow her an income (with her own earning capacity) of £4,000 pa. The Court of Appeal interfered, in part, because they thought DJ Million had not made enough allowance for the fact that Mrs Ilott would lose benefits income if she received that much capital. They, exercising their discretion afresh, ordered that Mrs Ilott should receive a sum sufficient to buy her home. The charities appealed to the Supreme Court.
The four key parts of the Inheritance (Provision for Family and Dependants) Act 1975.
Giving the unanimous decision of the Supreme Court, Lord Hughes identified four key features to the 1975 Act:
1. There is no automatic right to provision. The will (or the law of intestacy) applies unless and until an application is made and then granted.
2. Only a limited class of people can apply – spouses/civil partners, cohabitants (who have lived together for at least 2 years), children (whether adult or minor) and those who were actually being maintained at the point of death.
3. Apart from spouses or civil partners, the law will only provide sums required for maintenance - they have no general claims beyond that.
4. The test of reasonable provision is objective. What matters is the result that is created by the will or by the law on intestacy. Why that result is created is an important, but fundamentally background feature. Given that so much can change between the date of the will and the date of death, perfectly reasonable intentions can result in unfairness when the financial position has changed in the intervening years, and vice versa.
It is important to remember at all times that questions of "fairness" do not come into the court's consideration at any point. The 1975 Act is about needs and not about entitlements.
"Reasonable financial provision" and "maintenance"
What is "maintenance" in this context? It is not as we family lawyers understand it. Lord Hughes confirms the pre-existing case law, saying at paragraphs 14-15:
14. The concept of maintenance is no doubt broad, but … it cannot extend to any or every thing which it would be desirable for the claimant to have. It must import provision to meet the everyday expenses of living.
15. The level at which maintenance may be provided for is clearly flexible and falls to be assessed on the facts of each case. It is not limited to subsistence level. Nor, although maintenance is by definition the provision of income rather than capital, need it necessarily be provided for by way of periodical payments, for example under a trust. It will very often be more appropriate, as well as cheaper and more convenient for other beneficiaries and for executors, if income is provided by way of a lump sum from which both income and capital can be drawn over the years, for example on the Duxbury model familiar to family lawyers (see Duxbury v Duxbury (Note)  Fam 62).
Clearly that might extend to housing in some cases, but the statutory power is to provide maintenance, not confer outright capital. Munby J made this point in Re Myers  EWHC 1944 (Fam) – where there is sufficient capital to achieve the housing of a claimant in a position of need, money ought to be settled on trust to allow for a life interest in a property, albeit with a power of advancement designed to cater for the possibility of care expenses in old age.
Maintenance can extend to "capital costs". Lord Hughes was clear at paragraphs 40-41 that maintenance could well include the purchase of essential household items. He commented that Mrs Ilott had made a strong case for the cost of items, "which could properly be described as necessities for daily living", including white goods, curtains and replacement of worn out beds.
Needs and the "moral claim"
Needs are contextual. The factors which the court needs to assess when looking at the needs of any given claimant are set out in section 3 of the Act. Section 3(1)(g) provides a catch-all consideration of "any other matter … the court may consider relevant". Lord Hughes said this at paragraphs 19 - 20:
19. Next, all cases which are limited to maintenance, and many others also, will turn largely upon the asserted needs of the claimant. It is important to put the matter of needs in its correct place. For current spouses and civil partners (section 1(2)(a) and (aa)), need is not the measure of reasonable provision, but if it exists will clearly be very relevant. For all other claimants, need (for maintenance rather than for anything else, and judged not by subsistence levels but by the standard appropriate to the circumstances) is a necessary but not a sufficient condition for an order. Need, plus the relevant relationship to qualify the claimant, is not always enough. In In re Coventry the passage cited above [dealing with the freedom of testamentary distribution] was followed almost immediately by another much-cited observation of Oliver J:
"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."
20. Oliver J's reference to moral claim must be understood as explained by the Court of Appeal in both In re Coventry itself and subsequently in In re Hancock […] He meant no more, but no less, than that in the case of a claimant adult son well capable of living independently, something more than the qualifying relationship is needed to found a claim, and that in the case before him the additional something could only be a moral claim. That will be true of a number of cases. Clearly, the presence or absence of a moral claim will often be at the centre of the decision under the 1975 Act.
Lord Hughes dealt with "the moral claim" in two key passages. First at paragraph 22:
22. […] It may be less obvious, but is also true, that the circumstances of the relationship between the deceased and the claimant may affect what is the just order to make. Sometimes the relationship will have been such that the only reasonable provision is the maximum which the estate can afford; in other situations, the provision which it is reasonable to make will, because of the distance of the relationship, or perhaps because of the conduct of one or other of the parties, be to meet only part of the needs of the claimant.
Second, at paragraph 35, Lord Hughes said this (and it is worth reading in full):
35. The District Judge did not make the suggested or any error in taking into account the nature of the relationship between the deceased and the claimant. In many cases this will be of considerable importance. If, by contrast with the present case, the claimant were a child of the deceased who had remained exceptionally and confidentially close to her mother throughout, had supported and nurtured her in her old age at some cost in time and money to herself, and if she had been promised many times that she would be looked after in the will, it could not be said that the judge was required first to assess reasonable financial provision on the basis of some supposed norm of filial relationship, neither particularly close nor particularly distant, and then to lift the provision by an identified amount to recognise the special closeness between the two ladies. But without going through any such exercise, and yet adhering to the concept of maintenance, a judge ought in such circumstances to attach importance to the closeness of the relationship in arriving at his assessment of what reasonable financial provision requires. In the paragraphs leading up to the one criticised by the Court of Appeal, this Judge had dutifully worked his way through each of the section 3 factors. The long estrangement was the reason the testator made the will she did. It meant that Mrs Ilott was not only a non-dependent adult child but had made her life entirely separately from her mother, and lacked any expectation of benefit from her estate. Because of these consequences, the estrangement was one of the two dominant factors in this case; the other was Mrs Ilott's very straitened financial position. 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. As it was, the judge was perfectly entitled to reach the conclusion which he did, namely that there was a failure of reasonable financial provision, but that what reasonable provision would be was coloured by the nature of the relationship between mother and daughter.
The question of reasonable financial provision (much like a fair distribution on divorce) is to be assessed on a case by case basis. There is no yardstick, nor could there ever be. But the relationship between the level of need which is unmet and the inter vivos relationship between the testator and beneficiary is a very important factor. Everybody can always assert that some need of theirs remains unmet in any situation. The degree to which a qualifying claimant can look to an estate to plug the gap is a value judgement. Referring to it as the "moral" element in a claim is somewhat question-begging, but it is a process which the Supreme Court in this case has explained and endorsed.
The judgments of Lord Hughes and Baroness Hale do not extend the law much further and this case does not represent a radical departure from established practice. The Court of Appeal had felt that DJ Million had not properly considered the impact of his award on Mrs Ilott's benefits position and had made other errors of principle, allowing it to substitute its own discretion. The Supreme Court disagreed. He had; and as a result, although the Court of Appeal were minded to be more generous to Mrs Ilott than DJ Million, there was no space to interfere with the exercise of his discretion.
Several important points do come out of the judgment though:
1. The Supreme Court reiterates that the Act requires a two-stage test: (a) is there a failure to make reasonable financial provision and, if so, (b) what order should be made? These considerations clearly overlap, but they are separate propositions. If the answer to (a) is no, the court does not turn to (b) at all.
2. "Reasonable financial provision" is not to be judged from the perspective of whether the testator acted reasonably. The primary question is the financial outcome generated either by the will or the impact of intestacy.
3. The relevant date for assessing whether a claimant has been left with reasonable financial provision is the date of the hearing, not the date of the will, of death, or some other date.
4. In non-spouse cases, it is preferable to meet housing needs by way of life interest under a trust with powers of advancement if the claimant has care needs.
5. Although the Act talks about maintenance, capital costs (replacement furniture and items that have a day to day use) can be covered.
6. Needs are contextual. The Act requires a single assessment by the judge of what reasonable financial provision should be made in all the circumstances of the case. It does not require the judge to fix some hypothetical standard of reasonable provision.
7. The criterion of "moral claim" remains ambiguous. The overarching search is for reasonableness. This does not require a court to make a finding about a hypothetically reasonable standard of living but to look at the nature of the relationship between the deceased and the claimant. It is impossible to separate that out from the "closeness" in arriving at the assessment of what reasonable provision would have required.
Several questions remain unanswered, and one long-standing problem remains. Imagine that instead of being an only child, Mrs Ilott had a sibling; that that sibling had also been disinherited but had remained very close to their mother throughout the mother's life. There will then be a case for having to exercise a value judgement, expressed in pure cash terms, as between a favoured child and an unfavoured child. That question was not before the Supreme Court, but highlights some of the issues that "the moral claim" gives rise to.
Ultimately, the 1975 Act can require a pure value judgement on the nature of a relationship in life. But, it seems, that is the price the law must pay for protecting the distinctively English freedom of testamentary disposition.
NB: For those who wish to see Lord Hughes explain this judgment in his own words, I would recommend this 10-minute clip of him handing down the summary of his reasons in the Supreme Court: https://www.supremecourt.uk/watch/uksc-2015-0203/judgment.html
29 Bedford Row
15 March 2017