Sismey v Salandron [2022] WTLR 281

Analysis

H was married to W, and they had a son, T. They all lived in a property in Derbyshire (the property), which was owned by H. While T was a child and H was working abroad, H met M in the Philippines and formed a relationship with her. H and W separated, and W and T moved out of the property and into one owned by W. H retained the property as his home when in the UK. H and M had a child, J, and after that H, M and J moved to live together in the UK, in the property.

W petitioned for a divorce from H and a consent order in the financial remedy proceedings was approved by the judge and signed by or on behalf of H, W and M. By a recital to the consent order, under which M agreed to forego claims she might have had against him, H undertook:

‘… irrevocably to execute forthwith a Deed in the form annexed [to] this order covenanting with [W] to leave by will to [T] [the property] so as to be binding upon his personal representatives.’

H executed a deed of covenant, which was expressed to be supplemental to the consent order and stated that the covenant was made pursuant to the agreement and undertaking recorded in the order. He covenanted ‘so as to be binding upon his personal representatives to leave irrevocably in his lifetime by will [the property]’ and stated that it was intended that the deed should be enforceable by T.

H then executed a will gifting the property to T and dividing his residuary estate between T and J.

Two years later, after being diagnosed with cancer, H married M. It was common ground that the effect of the marriage was to revoke H’s will. H died intestate, leaving an estate, substantially the whole of which was represented by the property. Subject to the effect of the deed of covenant, M, as his widow, stood to inherit H’s entire estate. M extracted a grant of letters of administration.

T brought a claim seeking specific performance of the covenant made by H in the deed of covenant and/or a declaration of constructive trust. M brought a claim seeking an order for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act).

Was the deed of covenant enforceable?

It was common ground that there were three legal requirements for the enforceability of the covenant: (1) agreement in law; (2) certainty as to subject matter; and (3) compliance with the Law of Property (Miscellaneous Provisions) Act 1989 (the 1989 Act), s2(1). In addition, as T was not a party to the covenant, it needed to be enforceable by him.

1. (1) There was no dispute that T had the necessary standing under Contracts (Rights of Third Parties) Act 1999, s1 and the judge so held.
2. (2) It was also agreed that the deed of covenant amounted to an agreement in law and that there was certainty of subject matter.
3. (3) The only issue was compliance with s2(1) of the 1989 Act.

M argued that the references to the consent order were references to terms of the agreement that were not incorporated into the deed of covenant.

Held:

It was held that the deed of covenant was enforceable. The fact that the deed of covenant stated that it was supplemental to the consent order was a sufficient incorporation for the purposes of s2(2) of the 1989 Act.

If the deed of covenant was not enforceable, did the estate hold the property on constructive trust for T?

For completion, the judge considered the matter in case the deed of covenant was not enforceable. It was common ground that a trust would need proof by T that there had been a common intention by H and W that T would inherit the property on H’s death; that there had been detrimental reliance by W; and that it would be unconscionable for H’s estate to deny T’s interest in the property.

The execution of the deed of covenant showed that there was an express common intention. The dispute was over whether W relied on the agreement to her detriment and whether it was unconscionable for the estate to deny T’s interest.

Held:

The judge held that there was detrimental reliance by W. When consenting to the consent order she changed her position and gave up any right to bring further claims against H. As to unconscionability, although the judge found as a fact that, when M signed the consent order, she raised with H the question of the property being left to both T and J and that H had exerted some pressure on her to sign, it was held that M was nonetheless fully aware of what she was signing, and that the conclusion of the financial remedy proceedings benefited her future status. The deed of covenant was therefore enforceable.

Section 11 of the 1975 Act

Section 11 of the 1975 Act was relevant to M’s family provision claim because H had made a contract by which he agreed to leave property by a will. M applied for the court to order that the property be treated as part of H’s estate, on the basis that H had entered into the deed of covenant with the intention of defeating an application for financial provision under the Act. Under s12 of the 1975 Act, if no valuable consideration was given by any person for the deed of covenant, it would be presumed that the contract was made with the intention of defeating an application for financial provision under the Act.

Held:

It was held that, although H had multiple intentions in reaching his agreement with W, including that W should receive a fair deal in the divorce and that T should receive the property, part of his intention was to defeat any application for financial provision. Central to his thinking was the need to secure the property against claims by third parties, including M. Accordingly, M had established the necessary intention for the purpose of s11(2)(b) of the 1975 Act. But the judge went on to hold that M had failed to discharge the burden on her to prove that W had not given full consideration for the deed of covenant. W had given up her rights under the Matrimonial Causes Act 1973 to claim a half share in the property for herself and/or a pension share or off-set. It was therefore held that M could not establish the condition under s11(2)(c) of the 1975 Act and the application under s11 failed.

Section 10 of the 1975 Act

In case the court ordered that the deed of covenant was unenforceable but went on to order that there was a constructive trust of the property, M applied for an order under s10 of the 1975 Act, to treat the property as part of the estate, on the basis that H had made the agreement with the intention of defeating an application for financial provision under the Act.

Held:

It was common ground that, in substance, the material conditions to be met under s10(2) of the 1975 Act mirrored the requirements in s11(2). Accordingly, M would have failed to prove that full consideration was not given for the disposition.

Discussed:

The judge also discussed the following issues:

1. (1) the position where the value of the property transferred exceeded the value of any valuable consideration given for the purposes of s11 of the 1975 Act (paras [87]-[88]); and
2. (2) the exercise of the discretionary power of the court having regard to ss11(4) and 3 of the 1975 Act (paras [89]-[92]).

JUDGMENT HHJ EMMA KELLY: [1] These two linked claims concern the estate of David John Sismey (‘the Deceased’). By claim PT-2020-BHM-000090, Mr Thomas Sismey, the Deceased’s adult son, seeks specific performance of an agreement within a deed of covenant dated 3 February 2017 (‘the Deed of Covenant’) by which the Deceased agreed to settle by …

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