By Tara McInnes, Senior Associate in Shoosmiths' Disputed Wills and Trusts Team
Tara McInnes practises exclusively in disputed Wills, Trusts and estates and is listed as a ‘Next Generation Lawyer’ in the Legal 500 directory.
As most legal practitioners specialising within the Private Client field will be aware, there are strict time limits for applicants to bring certain types of claims against an estate. For example, an applicant seeking to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”) for reasonable financial provision from the Deceased’s estate has only six months from the date of the Grant of Probate in which to issue proceedings for their claim. However, the court has a discretion to permit an eligible applicant to bring their claim out of time in accordance with section 4 of the Act.
This article considers the two recent cases of Bhusate v. Patel and others [2019] EWHC 470 (Ch) and Cowan v. Foreman and others [2019] EWHC 349 (Fam), in which the High Court has sought to provide (somewhat conflicting) guidance as to when the court might exercise its discretion to extend time in these types of cases. For those practising in this area, Cowan is especially relevant given that the court has advocated the use of its inherent jurisdiction to decide on limitation issues, irrespective of whether the parties have agreed to extend time through a standstill agreement.
Standstill agreements have the effect of suspending or extending a statutory or contractual limitation period. They are common in contractual and commercial litigation, as well as tort, and are often utilised by solicitors to allow the parties more time to resolve matters privately through correspondence or alternative dispute resolution. Before considering whether to advise clients to enter into standstill agreements and prevent time running for a claim, it is necessary to consider the two cases in detail and the court’s conflicting decisions.
Cowan v. Foreman and others
The Claimant was the widow of the Deceased. By the terms of the Deceased’s final Will, she was made a principal beneficiary of two Discretionary Trusts, under which she received a regular monthly income of $17,250 as well as a life interest; such provision being expressly designed to meet the Claimant’s needs for the remainder of her life. The Claimant sought to bring a claim under the Act on the basis that the Trusts left her financially insecure given that provision was subject to Trustees’ discretion.
Probate of the Deceased’s Will was granted in December 2016. However, the Claimant made no attempts to progress her claim until January 2018, at which time she secured standstill agreement with the proposed defendants in order to stop time from running.
In November 2018, court proceedings were issued under s4 of the Act despite the fact that, even with the benefit of the standstill agreement, the Claimant was still 17 months out of time.
The case proceeded to the High Court to consider the issue of whether the Claimant should be allowed to proceed out of time. After reviewing the authorities, the presiding judge, Mostyn J, identified two fundamental issues for the court to consider when deciding whether to permit an applicant to issue a claim out of time under the Act:
1. Whether there are good reasons for the delay; and
2. Whether the claim has sufficient merit to proceed to trial.
He categorised this exercise as the making of a qualitative decision or value judgement, rather than the exercise of an
unfettered discretion. Regarding the first issue, Mostyn J concluded that the Claimant had failed to adduce cogent reasons for the delay, adding that excusable delay should be limited to weeks or a few months at most, absent exceptional circumstances. As to whether the claim had merit, he determined that the Claimant also had no real prospect of success given that there was no evidence to suggest the Trustees would defy the Deceased’s wishes and, what’s more, any attempt to do so would likely be actionable as a breach of trust.
As such, Mostyn J refused to extend the six month period and the claim was not permitted to proceed out of time. Notably, in the course of his judgment Mostyn J disparaged the use of standstill agreements in these cases, commenting: “I was told that to agree a standstill of this nature is “common practice”. If it is indeed common practice, then I suggest that it is a practice that should come to an immediate end. It is not for the parties to give away time that belongs to the court.”
Bhusate v Patel and others
Following the case of Cowan came the Bhusate claim. This matter was also brought by the widow of the Deceased on the grounds that his estate failed to make reasonable financial provision for her.
Following the Deceased’s death in 1990, his widow became entitled to a statutory legacy and a half share of the residuary estate in accordance with the intestacy rules. Given that the Deceased’s estate consisted, for the most part, of one property, the Claimant’s legacy was contingent on the property being sold.
In 1991, the Claimant and the First Defendant (one of the Deceased’s children from a previous marriage) applied jointly for a Grant of Letters of Administration. However, the Deceased’s other children frustrated attempts to sell the Deceased’s property by refusing to agree to the sale price, and subsequently no further steps were taken to administer the estate by either the Claimant or First Defendant for 23 years.
In November 2017, the Claimant issued a variety of claims in relation to the Deceased’s property, as well as a claim for payment of her statutory legacy and capitalised life interest (plus statutory interest), all of which failed.
The Claimant subsequently sought to rely upon a spousal claim under the Act, but 25 years had passed since the Grant was issued. In view of the time which had passed and in light of the decision in Cowan, which had come out only weeks earlier, one might have thought the application to proceed out of time would have failed. Instead, the court found that:
1. The delay in bringing the claim was explicable on the basis that the First Defendant and the Claimant’s other stepchildren, beneficiaries of the Deceased’s estate, had failed to engage with the Claimant’s initial steps to administer the estate. The Claimant’s own culpability was negligible.
2. The merits of the claim under the Act were very strong.
Additionally, Chief Master Marsh noted that, if the application under section 4 was not granted, the Claimant would receive no benefit from her husband’s estate as she had no other remedy available to her. As such, permission to bring the claim was granted.
It is the author’s view that the facts of Bhusate do not (in reality) seem exceptional enough to warrant the 25 year delay, especially when one considers that the Claimant’s financial needs had only arisen because of her failure to administer the estate.
Comment
Bhusate and Cowan do little to help clarify the uncertainty in this area of law or assist practitioners in advising clients on their prospects of success in bringing a claim under the Act out of time. It is notable that Bhusate expressly disapproved of Mostyn J’s reasoning in Cowan as to why the court’s power to permit claims out of time should be applied robustly, namely that this would accord with the overriding objective in Rule 1.1 of the Civil Procedure Rules (i.e. to enable the court to deal with cases justly and at a proportionate cost) as well as the approach to relief against sanctions. This may go some way in reconciling the two cases.
Evidently, what can be taken from these cases is confirmation that each claim is considered on its merits, which is not overly helpful when advising clients. A more definitive conclusion is that substantial delay alone is not enough to defeat an application to apply out of time where a Claimant has a strong case and a reasonable excuse for delay (even if the delay is grossly disproportionate to the standard six month period that Parliament had intended).
Of real practical concern are Mostyn J’s comments in Cowan, pronouncing against the use of standstill agreements. Many practitioners rely on standstill agreements, which enable parties to properly engage with Pre-Action Protocols and the ACTAPS Code, and resolve claims sooner rather than later at minimum cost. Mostyn J’s comments therefore appear to fly in the face of the overriding objective and a party’s ability to resolve claims easily and quickly with minimal costs.
The Bhusate claim provides a slither of hope that in cases where there are good prospects of success, coupled with a sound reason for missing the six month deadline, the court will be sympathetic. These circumstances are quite unusual though and therefore in the vast majority of claims where solicitors have received instructions prior to the expiration of the six month period, the court’s current view is that proceedings will need to be issued to avoid falling foul of the tight deadline and possibly opening the solicitor up to a negligence claim.
Cowan was subsequently appealed. The Court of Appeal handed down its judgment in July 2019 and held that the Claimant was able to bring a claim on the basis that reasonable financial provision had not been made for her, as she did not have a direct interest in her husband’s estate.
The court also held that the Claimant was able to bring her claim out of time, and further that standstill agreements can still be used in Inheritance Act claims, provided that the terms are clearly recorded in writing and the parties have been advised of their effect.
This is good news for parties to this type of dispute, as the six month time limit to bring a claim can cause Claimants to incur unnecessary costs issuing proceedings in order to avoid falling foul of the limitation period.
This blog is featured in the autumn 2019 Edition of the quarterly news digest, Entitlement. Download your free copy of Entitlement for more informative articles and interesting case studies.
Topics: High Court, Entitlement, Disputes
