The number of reported claims brought under the Inheritance (Provision for Family and Dependants) Act (“the 1975 Act”) are relatively few and far between as the nature of such claims means that most cases are settled out of Court, away from the public eye.  The limited reported case law means that 1975 Act claims are uncertain to predict, particularly so when those making the claim are independent adult children.  The case of Ilott v Mitson has attracted a great deal of media attention through its appeals through the courts, the latest judgment, handed down by the Court of Appeal on 27 July 2015, significantly increasing the provision for the applicant – the estranged daughter of Mrs Jackson.  The judgment has helpfully provided an overview of the issues which the court must consider and some comment upon the effect of an award under the 1975 Act may have on those applicants who are in receipt of state benefits (and the effect of any award may have on those benefits).

BACKGROUND

Heather Ilott (“Mrs Ilott”) was estranged from her mother, Mrs Jackson, for 26 years – from the time she left home at the age of 17 to elope until the date of Mrs Jackson’s death.  Mrs Ilott was Mrs Jackson’s only child.  Following her marriage, Mrs Ilott went on to have 5 children. The family had little money, lived in a housing association house and were heavily dependent on state benefits.  Although there were several attempts at reconciliation, at the time of Mrs Jackson’s death, Mrs Ilott and her mother remained estranged.  Mrs Jackson left the majority of her £500,000 estate to a number of charities, with nothing to her daughter.  In a letter accompanying her Will, Mrs Jackson explained her reasons:  mother and daughter had been estranged since the daughter was 17 due to “lifestyle choices”. There was an "irreconcilable rift" between them.

In the second letter left with the Will, Mrs Jackson asked her executors to defend any claim that Mrs Ilott might bring against her estate.

THE PASSAGE OF THE PROCEEDINGS

Initial Claim

Mrs Ilott brought a claim for reasonable provision from her mother’s estate under the 1975 Act.  Although she claimed as an adult child, she was reliant on state benefits and in financial difficulty. At first instance the Court found that Mrs Ilott had not been reasonably provided.  She was awarded £50,000, only 10% of Mrs Jackson’s estate.  Both parties appealed.

The First Appeals

In 2011 the Court of Appeal’s gave its judgment on eligibility and dismissed the charities’ appeal.  In principle the daughter had not been reasonably provided for and was entitled to some financial provision. The Court of Appeal did not decide the amount she should receive. 

Although the judgment made it clear that this decision turned on the particular facts of the case, and although without quantum the picture was incomplete,  it caused some alarm to charities reliant on legacy funding and to potential donors. Claims by adult children were at best uncertain.  Some also feared that the judgment could be construed as opening a channel for adult children to claim an automatic share of their parent’s estate.  In doing so the principle of freedom of testamentary disposition would be limited and the 1975 Act would bring England and Wales closer to the forced heirship rules of many European countries.

The Decision on Quantum

The claim was then returned to the High Court three years later to decide quantum. Mrs Ilott maintained that she should receive a greater award than 10% of the estate. Her arguments included:

  1. that if her lack of expectancy in relation to her mother’s estate had not prejudiced her case that she had not been adequately provided for (the “gateway” stage), it should not prejudice the decision regarding quantum; and
  2. that having found that reasonable provision had not been made, it could not then be reasonable to award a lump sum of £50,000 as this would realise little practical benefit, once the reductive effect upon state benefits was taken into account.

Mrs Ilott asked for half of her mother’s estate.  She argued this amount would be sufficient to re-house her and her family; she would no longer have to rent her property from the housing association and it would also ensure provision for her future.

Mrs Justice Parker dismissed the quantum appeal, confirming that the original award of £50,000 should stand. The considerations in section 3 of the 1975 Act were relevant both to whether adequate financial provision had been made under the relevant will and to the amount that should be awarded made. These considerations would not, however, apply equally to both stages. Mrs Ilott’s lack of expectancy in relation to her mother’s will did not prevent the lack of provision under the will from being unreasonable at the “gateway” stage of the claim, but it would operate to limit the award when it came to quantifying the amount that she should receive.

The judge dismissed the daughter’s argument that she should be re-housed. The Court should not be compelled to make provision for such a significant proportion of the estate simply because an applicant might not otherwise receive sufficient benefit from the award. Given the size of the estate it was not possible to make any award that would take the daughter out of the benefits regime. Mrs Justice Parker confirmed that the purpose of the award was to provide a capital amount to improve the daughter’s circumstances as she saw fit. Due regard must be given to the deceased’s clear intentions.

THE COURT OF APPEAL’S DECISION – JULY 2015

Mrs Ilott pursued a further appeal against the decision to uphold the award of £50,000 and the Court of Appeal handed down its judgment on 27 July 2015.  The Court of Appeal decided that the District Judge had made two fundamental errors which meant that the award for £50,000 should be set aside.  Firstly, the District Judge had not explained how he had limited the award to reflect Mrs Ilott’s ability to live within her means and her lack of expectation to benefit under her mother’s estate.  The Court of Appeal stated that Mrs Ilott should have been provided with reasons to allow her to consider whether these reductions were excessive.  Secondly, the District Judge had been required to calculate the amount that should be provided for Mrs Ilott’s maintenance under the estate.  In making this calculation the District Judge had not known the effect that the award of £50,000 would have on her state benefits.  He made the assumption that a larger capital payment would deprive the family of the majority of their state benefits.  In failing to verify that assumption, the Court of Appeal held that the District Judge had undermined the logic of that award.

Having set aside the £50,000 award given by the District Judge, the Court of Appeal were then faced with considering what level of award was appropriate given the circumstances of the case.  In reaching its final decision the Court took into account the following factors:

  • The very small joint annual income of Mrs Ilott and her husband;
  • The small earning capacity of Mrs Ilott;
  • The expenditure of the family which was very modest; and
  • Mrs Ilott’s future needs as well as present needs.

The Court concluded that Mrs Ilott’s straitened financial circumstances were not conclusive as to the appropriate level at which she was entitled to be maintained.  The Court further determined that Mrs Ilott’s estrangement from her mother ought not to deprive her of an award under the estate (or to substantially diminish it) because it was difficult to apportion fault.  On weighing up the factors listed above, the Court of Appeal decided that Mrs Ilott’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 she was an adult child who had been living independently from her mother for years. 

As such, the Court of Appeal made an increased award of £143,000, to enable Mrs Ilott to purchase her housing association house, in addition to the reasonable expenses of acquiring the property.  She was also awarded the option to take a further maximum capital sum of £20,000, to provide an immediate payment from which her further income needs could be met.  The Court considered that, as a matter of public policy, they were not constrained to treat a person’s reasonable financial provision as being limited by or to their existing state benefits.  The Court decided it could and should make reasonable financial provision for Mrs Ilott out of her mother’s estate for her maintenance so that her living expenses were relieved without affecting the state benefits on which she relied.

COMMENT

The decision introduces an element of uncertainty when considering potential claims by adult children under the 1975 Act.  The decision will present concerns for Will draftsmen, testators  and beneficiaries alike as this case seems to suggest that even in the most strained relationships where testators have a clear and stated desire to exclude a child from benefitting from their estate, should that child be in dire financial circumstances at the date of that parent’s death they appear likely to be able to bring a successful claim against the estate for financial provision. This arguably is limiting the principle of the freedom of testamentary disposition and taking us closer to a regime of forced heirship, albeit one that appears to only benefit those who can demonstrate a financial need. 

Only time will tell if this Judgment will increase the number of claims brought under the 1975 Act by adult children, however in practice the effects of the decision may not be as far-reaching as it may first appear, as the decision is very fact-specific.  A key factor in this decision was the financial need of Mrs Ilott and her family who were heavily reliant on state benefits and the Court weighed this against the case put forward by the charity beneficiaries who were considered not to have a competing financial need.  The decision of the Court may have been very different had Mrs Ilott not been dependent on state benefits or where her needs were weighed against non-charitable beneficiaries.  What the decision of the Court of Appeal does demonstrate is that, when faced with 1975 Act claims,  the Court will continue to balance the competing needs of beneficiaries and/or potential beneficiaries of the deceased’s estate. The impact on the charities in this case is severe and is likely to cause consternation amongst the charity community for the risk that potential litigants may seize on this authority as a justification to bring claims. The charities may seek to take the matter to the Supreme Court in order to avoid that risk.