Ilott v Mitson [2015] EWCA Civ 797

Analysis

The appeal concerned the quantification of an award for maintenance pursuant to the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act). Section 1 of the 1975 Act confers the right on, among others, a child of the deceased to apply for an order if the will of the deceased or the intestacy rules did not make reasonable provision for that person. The provision was limited to awards of maintenance.

The appellant, who was an adult, was the only child of the deceased and was raised by the deceased, her father having died about three months before she was born. Following the appellant’s father’s death, his employer made a substantial payment to the deceased which she had used to pay off the mortgage on her home. At 17 the appellant left home without her mother’s knowledge to live at 16 Edward Cottages (the property) with a man, whom she later wed. The property was rented from a housing association by the appellant and her husband and the appellant had the right to buy it at a discounted price. The appellant and her husband had five children, two of whom were under 18 at the date of the trial. At the date of the appeal hearing only one child lived with the appellant and she would shortly be leaving to go to university.

The deceased left a will in which, subject to a legacy of £5,000 in favour of the BBC Benevolent Fund, she left her entire estate to be divided between three charities. The primary reason why the deceased made no provision in her will for the appellant was that she had been estranged from her for some 26 years. The appellant knew that the deceased intended not to leave her any of her estate in her will. Three attempts had been made at reconciliation between the appellant and the deceased, all of which had failed. At first instance it was found that the deceased had acted in an unreasonable, capricious and harsh way towards the appellant but that both sides were responsible for the failure of the reconciliation attempts.

Under the 1975 Act, the court must, before proceeding to quantification, decide whether the will was not such as to make reasonable financial provision for the appellant (the threshold question). At first instance this was decided in the appellant’s favour and the judge made an award of £50,000 in her favour. The judge held that the deceased had unreasonably excluded the appellant from any financial provision in her will despite the appellant’s straitened and needy financial circumstances. The failure to make any provision for her produced an unreasonable result having regard to the appellant’s straitened circumstances. As regards quantification, the judge directed himself that any capitalised sum must be based on income. He rejected the charities’ submission that a capital fund of £3-5,000 was sufficient, considering that too small. He also rejected the appellant’s claim, which exceeded the size of the estate. He rejected the claim for a sum to purchase the property and rejected a claim for a capitalised sum of £10,000 per year for life, saying that there were no figures to show the net effect which took into account the state benefits which the family received. Accordingly, he made his own calculation. He held that the appellant had some earnings capacity but not enough to meet her financial needs. He took her share of the tax credits and held that they could be said to indicate the amount of maintenance which the government accepted as being needed by her to provide her with a reasonable but basic standard of living. He therefore took the level of state benefit as the ceiling on the amount that he could award for the appellant’s maintenance. He rejected the charities’ argument that the appellant’s income was in any event already met by state benefits and should not be replaced by provision out of the deceased’s estate. He then looked at the ‘At a Glance’ tables for 2007-8 and concluded that the sum of approximately £69,200 would be required to provide the appellant with an income of £4,000 per year, holding this to be the appropriate level of financial provision because of the appellant’s earning capacity. He took into account that such work would be poorly paid and she would be likely to continue to require state subsidies for her basic living expenses. Having made that calculation he capitalised the maintenance figure at the lower sum of £50,000. He assumed that the practical consequences of such a large capital payment would be that the family lose most if not all of their benefits. This assumption was correct which led to the outcome of the award being that the appellant was in a worse net position, taking into account her loss of benefits, than she had been prior to the award.

On appeal, the High Court set aside the first instance decision on the threshold question and did not deal with the quantification issue. The Court of Appeal allowed an appeal against the High Court decision and remitted the appeal against the first instance decision on quantification to the High Court, which dismissed that appeal. This judgment concerned the appeal of that decision to the Court of Appeal. The appellant sought sufficient funds to acquire the property and some capital to meet non-housing needs.

The following issues arose for determination:

1. 1. whether there were any errors in the reasoning at first instance on financial provision which meant the judgment should be set aside;
2. 2. if so, whether the court should re-exercise the discretion or remit the matter once more to the trial court; and
3. 3. if the court were to re-exercise the discretion, how it should do so.

The court held, setting aside the first instance decision on quantification and substituting an award of the sum required by the appellant to purchase the property, plus reasonable expenses of acquisition and a further sum to provide a very small additional income to supplement the appellant’s state benefits (by granting an option to receive a capital sum not exceeding £20,000 out of the estate (which could be exercise more than once providing the total sum did not exceed the £20,000)):

1. 1. 1. The court could and should make reasonable financial provision out of the deceased’s estate for the appellant’s maintenance so that her living expenses were relieved without affecting the state benefits on which she relied (at [67]).
   2. 2. The first instance decision was vitiated by legal errors and must be set aside. There were two fundamental errors:
   3. 2.1. First, the trial judge had stated that because of the appellant’s lack of expectancy and her ability to live within her means, her award should be ‘limited’, but had not stated how he had limited the award to reflect those matters. It was wrong in law to state that the award had been limited for those reasons without explaining what the award might otherwise have been and to what extent it was limited by the matters in question. It was a situation in which reasons were required so that the appellant could consider whether the reductions were excessive (which might give her an arguable error for the purposes of any appeal) and it was of the essence of a judicial decision that adequate reasons must be given on material matters (at [35]).
   4. 2.2. Second, the judge was required to calculate financial provision for the appellant’s maintenance, yet he did not know what effect the award of £50,000 would have on her state benefits. The judge’s assumption that the decision would lead to a consequential loss of state benefits undermined the logic of his order since on that assumption (which was correct) the appellant would lose in income terms a greater amount in state benefits than she would gain by the award made in the order. The judge made a working assumption that the effect of a large capital payment (such as the award he ultimately made) would disentitle the family to most if not all of their state benefit. Failure to verify this assumption undermined the logic of the award. The judge had the basic information he needed to verify the assumption. He knew the breakdown of the state benefits. The appellant would lose the right to claim any housing benefit or council tax benefit once she had capital exceeding £16,000 unless it was invested in her dwelling. The £50,000 was intended to represent an annul income of £4,000. The appellant would receive the benefit of this entitlement if she did not spend the award, but it would be less than the housing and council tax benefit which she currently received. If the judge did not understand the effect of his calculations he should have asked for some help from the parties, if necessary, after the hearing (at [36]-[42]).
   5. 3. As regards whether the court should re-exercise the discretion or remit the matter once more to the trial court, the court was in a position to and should proceed to re-exercise the discretion to make the award in favour of the appellant. There had been an exceptional lapse of time between the making of the claim and the appeal. Further, there was not any further evidence that was needed before the making of the award (at [45]).
   6. 4. As regards how the court should re-exercise its discretion:
   7. 4.1. The resources and needs of the charities need not be taken into account. Any money from the estate was a windfall for the charities (at [47]).
   8. 4.2. The fact that the appellant was an adult child living independently had to be taken into account. At a minimum that meant that the court was not concerned to provide her with an income that would fully support her needs (at [49]).
   9. 4.3. There was insufficient evidence that the father’s employer’s payment, from which the matrimonial home forming approximately half of the estate was derived, was intended for the appellant and therefore it became part of the general assets of the deceased to use or dispose of as she chose (at [51(ii)]).
   10. 4.4. The appellant’s lack of expectation of benefit had little weight in the present case. The only beneficiaries were the charities who could have had no expectation either, the deceased having had no connection to them, whereas the appellant was deprived of any expectation primarily because the deceased had acted in an unreasonable, capricious and harsh way towards her only child (at [51(iii)]).
   11. 4.5. As regards the deceased’s testamentary wishes, Parliament had entrusted the court with the power to ensure, in the case of even an adult child, that reasonable financial provision was made for maintenance only. That limitation struck a balance with the testamentary wishes of the deceased whose estate was used for the purposes of making an award, at least in this case where there was no other claimant apart from the charities who had no demonstrated need or expectation (at [51(iv)]).
   12. 4.6. On the facts of the case, the estrangement ought not to deprive the appellant of an award, or even substantially diminish it because:
   13. 4.6.1. although the appellant had been held to be partially responsible for the failure of the attempts at reconciliation, there was no suggestion that she wanted to be estranged from the deceased;
   14. 4.6.2. while the appellant may not have made the choices in life that her mother thought were necessary for her to make a success of her life, she had made a success of her life in other ways through being a mother and homemaker; and
   15. 4.6.3. not only may it be difficult to apportion fault, but there may not have been fault on anyone’s part (at [51(v)]).
   16. 4.7. As regards the resources and needs of the appellant, the court was entitled to look at future as well as present needs. The appellant was in her fifties with no pension. The appellant’s resources, even with state benefits, were at such a basic level that they outweighed the importance that would normally be attached to the fact that the appellant was an adult child who had been living independently for so many years. The existing means of the appellant were not conclusive as to the appropriate level at which the appellant was entitled to be maintained. The first question was whether the current living standard was sufficient. The court’s assessment should not be motivated by a desire to provide an improved standard of living as opposed to a desire to meet the appropriate living needs. The court was not bound to limit maintenance to mere subsistence level. The appellant’s present income was not reasonable financial provision for her maintenance in the context of the application given the restrictions which she had had to impose on her own expenditure and the lack of any provision to meet her future needs, for example, when she grows older or if she suffers any ill-health. Where a party had extra financial needs because they relied on state benefits, which must be preserved, consideration must be given to this. The provision of housing would enable the appellant both to receive a capitalised sum and to keep her tax credits. If those benefits were not preserved the result was that there was little or no financial provision for maintenance at all. The court must balance the claims on the state fairly. The claim of the appellant had to be finely balanced against that of the charities but, since they did not rely on any competing need, they were not prejudiced by what may be a higher award than the court would otherwise need to make (at [51(i)] and [52]-[61]).
   17. 4.8. The right course was to award a sum equating to the cost of acquiring the property, plus the reasonable expenses of acquiring it. In addition, a further sum to provide for a very small additional income to supplement the appellant’s state benefits without the necessity of an equity release. This would not be a large amount because the fact that the appellant was an adult child living independently, the deceased’s testamentary wishes and to a small extent the appellant’s estrangement from the deceased weighed against her claim (at [62]-[64]).

4.9. On appeal, the court should have regard to the facts at the date of the hearing of the appeal, not any earlier date (at [16]).

JUDGMENT ARDEN LJ: Overview [1] This appeal is about the quantification of an award for maintenance pursuant to the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act). On 7 August 2007, DJ Million made an award of £50,000 in favour of the appellant, the adult child of the deceased. On 3 March …

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