Contentious Wills & Probate Case Law Roundup 2020: Part I
In Part I of our three-part series of key caselaw updates in contentious wills, Anna Metcalfe discusses the Inheritance (Provision for Family and Dependants) Act 1975.
INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) ACT 1975
Recoverability of success fees
This was a hot topic in April and May 2020. In order to understand the current position it is necessary to consider the background to the recoverability or not of success fees in civil litigation.
Lord Jackson in 2009 recommended that the ability of a successful party to recover their success fee payable to their own solicitors/counsel from the losing party should be removed. This would significantly save costs, yet would still enable parties to have access to justice (albeit they would have to bear the cost of their own success fee from any award made). However he also recommended, by way of balance, that in order that successful parties in personal injury litigation did not miss out, they be compensated with an additional 10% of general damages and that success fees be capped at 25%. There was no similar recommendation for IPFDA claims. One of the reasons for the change was, at the time, it was considered that a losing party’s liability to pay success fees was akin to the replacement of Legal Aid. In the recommendations, Lord Jackson stressed that no changes should be made to legal aid. However as we all know, shortly after this the availability of legal aid in IPFDA claims was eradicated.
Jackson’s recommendations were implemented in s.44 Legal Aid, Sentencing and Punishment of Offenders Act 2012 by way of amendment to s.58(A)(6) Courts and Legal Services Act 1990 which reads:
“A costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement”
What has been troubling the courts recently is how this section is balanced against section 3(1) of the IPFDA which directs the court, when considering whether or not reasonable financial provision has been made for an applicant, and if not, how such should be made, to consider “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”.
Although not dealing with success fees, but the consequences of a failure to beat a part 36 offer, both the substantive ( EWHC 821 (Ch)) and the costs ( EWHC 1056 (Ch)) judgments in Lilleyman v Lilleyman are worth revisiting before we look at the more recent cases. In the substantive judgment, Briggs J agreed with the joint concession of counsel that in considering the needs of the claimant any contingent costs liabilities should be left entirely out of account, however unrealistic this might be (see paragraph 71 of the judgment). The Claimant failed to beat a part 36 offer at the trial. At the costs hearing, it was argued that applying the full consequences of part 36 to the Claimant, would leave her with less than the judge had deemed reasonably required for her maintenance. Briggs J considered this was “a weighty consideration indeed, since the purpose of the court's powers to interfere with testamentary freedom under the Act would thereby be substantially interfered with, by reason of private dealings between the parties of which the court, when exercising those powers, was necessarily wholly unaware.” (paragraph 19)
However, he did not consider this would constitute the ‘injustice’ necessary to depart from the Part 36 regime:
“I am not persuaded that this would, viewed separately, amount to an injustice, within the meaning of Part 36.14(2) and (4) , although it is substantially less than reasonable provision from the estate. The unfortunate reality is that Mrs Lilleyman was, from August 2011, engaged in a high risk venture in which she played for high stakes and, in substance, lost. There was real force in Miss Evans-Gordon's submission that it would be unjust to the defendants to require the costs of the litigation after that time to come out of the estate, in the light of the generous offer which they had made.” (paragraph 21)
Briggs J did however clearly have difficulty with the reality of costs eating into a Claimant’s award and concluded his judgment with these thoughts:
“the potential for undisclosed negotiations to undermine a judge's attempt under the Inheritance Act to make appropriate provision for a surviving spouse is a possible disadvantage of the civil litigation costs regime currently applied to such claims, by comparison with the regime applicable to financial provision on divorce. I consider that those fundamental differences in approach to proceedings having the same underlying objective deserve careful and anxious thought.” (Paragraph 27).
The next stop is Clarke v Allen  EWHC 1193 (Ch), in the High Court. A testator left a life interest to his wife in his will, and gave the remainder of his estate to his daughters. The Claimant sought rescission of an inter vivos gift on the grounds of mistake and then financial provision under IPFDA. Both claims succeeded. The Claimant was funded by way of CFA which included a 100% uplift capped at 25% of monies recovered. She argued that her liability to pay the uplift should be taken into account under s.3 of the IPFDA as a future financial need. Her award was some £700,000. Her uplift was estimated at £192,000. The relevant part of the judgment is from paragraph 192.
The submissions were as follows:
“Mr Ng referred me to s.58A(6) of the Courts and Legal Services Act 1990 …He submits that s.3(1)(a) should not be read as incorporating the above as a) the requirement to consider the financial needs of a claimant is unqualified and b) that sub-section pre-dated the current version of s.58A(6) by almost 40 years. Further, s.58(A) 6 should not extend beyond costs orders in themselves as c) the wording is expressly confined to costs orders and d) clear wording would be necessary to impliedly amend the Act.”
Deputy Master Linwood clearly and succinctly rejected this submission for five reasons:
“Mr Ng's submissions are ingenious but I do not accept them. In my judgment the responsibility for the Success Fees must remain with the party who entered in to the CFA for these reasons:
The calculation of damages is a matter of procedure carried out before costs are concerned. It has never included an element of or for costs;
To permit the interpretation Mr Ng suggests would be contrary to the deliberate policy of the legislature that the losing party should not be responsible for the Success Fee, that policy having been changed from that prior to 19th January 2013 when such fees could be so claimed from the losing party;
It would amount to an increase in damages by way of costs;
It may put a CFA funded litigant in a better position in terms of negotiations due to the risk of a substantial costs burden. Likewise absent negotiations it could lead to grossly disproportionate costs if a contested claim got to trial and the defending party lost;
There is no reason why a claimant seeking reasonable financial provision under the Act should be in a better position than one seeking, for example, damages for personal injury.”
Which, eventually, brings us to the recent cases, the first of which is Bullock v Denton (unreported). On 15th April 2020 HHJ Gosnall sitting in Leeds County Court accepted an argument that a Claimant’s liabilities under a CFA should be considered as part of her financial needs under s.3(1), despite the Defendant arguing that to award the Claimant her CFA costs would be akin to an award of damages against the estate through the back door. Surprisingly, he said that “neither counsel had produced any binding authority on the issue, perhaps because it has not been specifically considered before”. Of course, Clarke (being a High Court case) was in fact binding on him and on point. He did consider Lilleyman but distinguished it on the basis that it related to Part 36 consequences not success fees. He felt ‘additional liabilities’ fell into a different category to normal inter parties costs orders.
HHJ Gosnall considered that the Claimant’s uplift liability was a debt incurred since the death, and given the assessment he had to make should be made at the date of trial, not the date of death, it should be taken into account. He felt if no additional award was made, then the ‘overall aim’ of the IFPDA would be in jeopardy.
However HHJ Gosnall did not award an additional sum to completely cover her success fee. Rather, he said the following:
“Judging from what I saw during the trial, the Claimant’s aspirations were unreasonably high and the Defendants position was both unrealistic and unreasonable. I believe it would be wrong in principle to make an award which effectively indemnifies the Claimant and the best I can do is select a figure for a lump sum award which makes a reasonable contribution toward a sum which I know has been incurred by her. A figure of £25,000…” (paragraph 96)
This award amounted to less than 50% of her success fee. Given HHJ Gosnall’s failure to consider Clarke, arguably this decision is per incuriam. However, this is of less importance since the High Court decision in Re H  EWHC 1134, decided about three weeks later on 7th May 2020.
In Re H the Claimant was an estranged adult child with severe and debilitating mental illness. The estate (approximately £554,000) went to the Deceased’s widow. The Claimant’s success fee was estimated to be around £48,000. She was awarded £138,918 of which £16,750 was awarded as a contribution towards her success fee.
Cohen J considered both Clarke and Bullock. However he followed Bullock, for what he said were “case specific reasons”:
“I accept that it is appropriate for me to consider this liability as part of C's needs. I do so largely for case specific reasons. I am not making a large award (unlike in Re Clarke ). It is not an award that permits of much elasticity. If I do not make such an allowance one or more of C's primary needs will not be met. The liability cannot be recovered as part of any costs award from the other parties. The liability is that of C alone. She had no other means of funding the litigation.
I refer also to the obiter comments of Briggs J (as he then was) in Lilleyman v Lilleyman  1 WLR 2801 where the judge was faced with the risk in an Inheritance Act claim of the award being undermined by the effect of undisclosed negotiation offers…” (Paragraphs 55, 56).
At paragraphs 58 – 60, Cohen J explained the rationale behind the quantum of his additional award for uplift
“But, I recognise that there is a risk of injustice to the estate, in particular if an appropriate Part 36 offer had been made, of which I am necessarily unaware at this stage of proceedings. In addition, I flag up that I do not know the precise terms of the agreement and what is the definition of "success". If my award does not bring about the operation of the uplift, I will revisit this element of the award.
I cannot see how I can avoid some potential (and it is only potential) injustice to either C or the estate. All I can do is mitigate the potential by taking a cautious approach towards this liability.
Bearing that approach in mind and knowing what I do of the case, I cannot envisage how it could reasonably be thought that the chance of failure was a high chance. I propose to allow the figure, as part of C's needs, of £16,750, which approximates to a 25% uplift.”
I find the reasoning behind Cohen J’s decision odd. I do not see how the reasons which he say justify his decision are ‘case specific’ at all. He says that as it is a small award it does not have ‘elasticity’. However, in my opinion any judge who makes an award which is ‘elastic’ under the IPFDA is not correctly applying the legislation, and the relative size of an award is irrelevant as they are (or should be) tailored specifically to Claimants. The liability being that of the Claimant ‘alone’ is similarly not unusual and will apply in most cases. It may well be that she didn’t have the ability to alternatively fund the application, but there doesn’t appear to be any specific discussion of this. Is Cohen J suggesting that success fees may or may not be recoverable depending on the means of the Claimant? Why hadn’t the Claimant made an application for an interim award under s.5 to help fund the litigation? Such was done with the primary aim of being able to continue funding litigation in Weisz v Weisz  EWHC 3101 (Fam). Cohen J doesn’t consider this.
How much of the success fee is recouped appears to be pot luck. In Bullock, it seems a sum shy of 50% was awarded, in Re H, some 25% of the uplift. The judges in both cases appear to suggest that how much is awarded depends on the strength of the applicant’s case.
To me, a glaring omission in Re H is Cohen J’s failure to personally address the policy implications of his decision or the interplay between IPFDA and ordinary civil actions, despite citing the reasoning in Clarke. Cohen J does not say that Clarke was wrongly decided.
I understand the judicial sympathy toward a successful party whose uplift eats into their award, given that it can thwart the goal of achieving reasonable financial provision for the applicant. However, in my opinion Cohen J’s reasoning is flawed and makes it very difficult as practitioners to predict when a judge may award a successful claimant their success fees, and in what proportion.
That is not to say I consider the reasoning in Clarke to necessarily be preferable. Deputy Master Linwood correctly noted the policy reasons weighing against the award of success fees, but it wasn’t clear why these trumped the wording of s.3(1)(a). I also don’t consider his repeated use of the word ‘damages’ to be particularly helpful – the determination of a damages award and an award under the IPFDA require different considerations.
It is clear that a decision of the Court of Appeal is needed to clarify the situation. Currently we have two high court decisions which are inconsistent. As the later decision, I would argue that Re H is the current statement of the law and that success fees can be considered under s.3(1)(a). When acting for Claimants, the point should certainly be taken. However, the awards to date have been modest and any award is likely to be appealable.
The case of Shapton v Seviour  3 WLUK 537 dealt with a particularly unmeritorious claim from an adult child.
The Deceased left his estate to his second wife, Maria. His daughter from an earlier marriage made a claim under the Act. She was 32 years old, married and owned her three bedroom home subject to a mortgage. She and her husband were both employed, albeit she was on maternity leave caring for their two young children. They had £20,000 of debt and she gave evidence that they were unable to afford a holiday, and needed a larger home. She sought £75,000 from the estate.
The estate was worth approximately £268,000, which largely (some 80%) was tied up in the Deceased’s share in the matrimonial home.
By contrast to the daughter’s position, the widow was 56 and suffered from motor neurone disease with an uncertain prognosis. She lived in the matrimonial home which had been significantly adjusted by virtue of her disability, and there was a charge against the home (some £24,000) to pay for the adjustments. Her only income was from the state and from a small pension, and she had some £15,000 savings and a bond with a cash value of £42,000.
Deputy Master Lloyd described the application as ‘absolutely hopeless’ and swiftly determined in the widow’s favour. He criticised the Claimant for being motivated by a sense of ‘entitlement’ as the Deceased’s only daughter.
This case is a reminder that Defendants do not have to ‘buy off’ unmeritorious claims at an early stage. If they have the means to stand their ground all the way to trial, the court is willing to take a robust stance. Pressing for an ENE or FDR can also be a useful tool, particularly where Defendants are concerned that Claimants are receiving no or inadequate advice as to the strength of their claims. Along with the 2019 decision of Wellesley v Wellesley & Ors  EWHC 11 (Ch), this case is a stark warning for adult children Claimants who have perhaps been too optimistic about their prospects of success.
Barkatali v Davies  EWHC 753 (Ch) was an interesting decision in relation to possession proceedings in estates. B had lived in a flat with his partner (the Deceased) as his licensee for 3 years, but had been evicted by the Deceased’s father (the sole beneficiary of the Deceased’s intestate estate) after his death. He sought urgent injunctive relief to reinstate his occupation.
B relied on his potential claim under the Inheritance Act as a cohabitee (and dependent, although it was determined he didn’t qualify in this category). He relied on Lewis v Warner  Ch 450 (where an applicant was permitted to purchase the home he shared with the deceased at full market value, despite being in a position to accommodate himself elsewhere) and argued that relief would be granted under the Act such that he would be entitled to purchase the flat. The judge found that B did not have a realistic prospect of success under the Act because he had not demonstrated a maintenance need for that particular flat. As such, B did not succeed on the ‘serious issue to be tried’ hurdle of American Cyanamid.
The case is interesting as it shows that attempts to seek specific property under the 1975 Act (as in the exceptional case of Lewis v Warner) are very challenging. The court did not even consider the argument that B would gain the property under the 1975 Act met even the low threshold of a serious issue to be tried.
Anna Metcalfe is part of Parklane Plowden’s Tier 1 ranked team for Chancery, Probate and Tax.