In this article we review some of the recent case law on the time limits for bringing a claim for financial provision under section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”). We also consider how recent developments fit within the wider context of these types of claims and comment on their implications for estate planning and post-death disputes.

In the most recent case of Re Bhusate [2020], the High Court upheld a decision to allow a widow to bring a claim for financial provision some 25 years and nine months beyond the time limit set out in the 1975 Act. This judgment follows a recent trend of courts permitting financial provision applications out of time, in particular where the merits of the underlying claim are strong and the assets within the estate have not been distributed.

The 1975 Act time limit

Section 4 of the 1975 Act stipulates the time limit within which a claim under the 1975 Act can be brought:

An application for an order under section 2 of this Act shall not, except with the permission of the court, be made after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out.

The purpose of the six month window, as explained by Henderson J (as he then was) in McNulty v McNulty [2002], is to provide “a measure of protection to personal representatives and a measure of certainty to beneficiaries by enabling the estate to be distributed once the six-month period has elapsed”.

The circumstances in which the courts will give permission for claims brought outside of that time period are not specified in the 1975 Act itself.

Relevant case law

Without legislative help, case law has provided most of the guidance on when out-of-time applications will be allowed.

Traditionally, the question of whether a court will permit a 1975 Act claim to be brought out of time has been exercised on the basis of seven guidelines laid down in Re Salmon [1981] and affirmed in Berger v Berger [2013].

  1. The court’s discretion is unfettered but must be exercised judicially in accordance with what is right and proper.
  2. The onus is on the applicant to show sufficient grounds for the granting of permission to apply out of time.
  3. The court must consider whether the applicant has acted promptly and the circumstances in which he/she applied for an extension of time after the expiry of the time limit.
  4. Were negotiations begun within the time limit?
  5. Has the estate been distributed before the claim was notified to the defendant?
  6. Would dismissal of the claim leave the applicant without recourse to other remedies?
  7. Looking at the position as it is now, has the applicant an arguable case under the 1975 Act if the application is allowed to proceed?

Two recent cases have shown somewhat of an evolution in the court’s approach to applications for permission to bring a 1975 Act claim. In Begum v Ahmed [2019], an application brought by an elderly widow against the estate of her husband was rejected, primarily on the basis that she did not provide a sufficient explanation for the delay in bringing the application seeking permission (Berger guideline 3), which was 16 months out of time. In Cowan v Foreman [2019], an application for permission brought 17 months late was dismissed by Mostyn J on the grounds that: (i) Mrs Cowan’s underlying claim for reasonable provision had no real prospect of success (guideline 7); (ii) no “good reasons for the substantial delay” to making her claim had been provided (guideline 3); and (iii) the time limit imposed by s.4 was to be applied strictly and in line with other procedural time limits, despite the existence of a standstill agreement between the parties.

However, both cases were appealed and both times the Court of Appeal overturned the lower court’s decision. In Begum, the panel considered that permission should be allowed because (i) the merits of the underlying claim were strong (guideline 7), (ii) there was a lack of alternative remedy for the applicant (guideline 6) and (iii) the claim would not cause real prejudice to the defendant beneficiaries (guideline 5).

In Cowan, the Court of Appeal found that the time limit under the 1975 Act is not akin to procedural time limits in the CPR and so should not be applied on the same strict basis. Instead, s.4 provides the court with the power to permit an out-of-time claim to proceed. In addressing the substance of the application, the panel found that: (i) Mrs Cowan’s claim had a real prospect of success (guideline 7); (ii) there was minimal prejudice to the defendant beneficiaries as no funds would need to be returned (guideline 5); and (iii) much of the delay had been justified and explained by Mrs Cowan (guideline 3).

These cases appear to evidence a shift, first towards allowing claims generally but also against applying the time limit overly rigorously. Further, the courts appear to have been most interested in a claim’s underlying merit and an absence of prejudice to beneficiaries.

Facts in Re Bhusate

Following the appeal decisions above came the High Court case of Re Bhusate. Mrs Bhusate was the widow and administrator of her husband’s estate, which entirely comprised the marital home. Mr Bhusate had died intestate on 28 April 1990 and a grant of probate was taken out on 12 August 1991.

Mrs Bhusate had initially negotiated with her stepchildren in relation to a sale of the house. These discussions foundered and no sale was achieved. Many years passed until in 2016 the stepchildren intimated to Mrs Bhusate that they were going to seek possession of the house. In 2018, Mrs Bhusate brought proceedings claiming a beneficial interest in the property and for provision under the 1975 Act, some 25 years and nine months out of time under s.4.

Mrs Bhusate’s claims to an interest in the home were struck out. The stepchildren successfully argued a limitation defence against her rights on intestacy and struck out the other claims for a proprietary interest. Mrs Bhusate’s application for permission to bring a claim under the 1975 Act was dealt with separately.

Judgments in Re Bhusate

In granting Mrs Bhusate permission to make a claim under the 1975 Act, Chief Master Marsh considered the Berger guidelines and, in summary, concluded that:

  1. the merits of Mrs Bhusate’s claim were “very strong” (guideline 7);
  2. the delay in bringing her application was explained, in part, by the lack of agreement from her stepchildren to sell the home (guideline 3);
  3. the estate had not been distributed (guideline 5); and
  4. if permission under s.4 was not granted, Mrs Bhusate would be left with no remedy and no benefit from her husband’s estate, leaving her homeless (guideline 6).

On appeal to Deputy Judge Edwin Johnson QC in the High Court, the stepchildren argued that Chief Master Marsh had erred in his conclusions. Specifically, the appellants said that it was wrong to find that Mrs Bhusate’s claim was arguable, that the delay was “unexplained and extortionate” and that the court should have considered Mrs Bhusate responsible for her own situation giving rise to the claim.

In his judgment, the Deputy Judge first addressed how s.4 should be interpreted. Applying the Court of Appeal decision in Cowan, he held that s.4 conferred on the court a “power” with unfettered discretion to allow stale claims “where it is just to do so”. (It is noteworthy that this reasoning chimes closely with Berger guideline 1.) Put another way, s.4 is not, the Deputy Judge continued, a mandatory guillotine on claims brought too late.

On the substance of the appeal, the Deputy Judge considered that the Chief Master was correct in his determination on all grounds. The appeal was therefore dismissed.

Implications of Re Bhusate

The effect of this case is perhaps to strengthen the trend towards allowing applications to be brought out of time. This decision may therefore be of particular interest to potential applicants who have found themselves out of time, whether due to the current pandemic or otherwise.

In applying the Berger guidelines, Re Bhusate, alongside the recent Court of Appeal decisions, also provides a clear indication of the direction in which the courts are tending to approach these applications. In particular, it seems clear that the courts will always be concerned with the merits of the underlying claim (guideline 7); if an applicant cannot show any prospect of success at the eventual claim, the courts will (understandably) be unwilling to assist.

Further, the existence of a satisfactory explanation and justification for the delay (guideline 3), as well as a lack either of prejudice to the beneficiaries (guideline 5) or of an alternative remedy for the applicant (guideline 6), are repeatedly appearing in judgments as decisive factors.

Applicants should keep these guidelines in mind when considering an application, and the focus and quality of evidence to be filed in a permission application, after six months has passed.

However, it is worth noting that, while the Master and the Deputy Judge drew heavily from settled law in dealing with the application, the facts of Re Bhusate were so striking (a point expressly noted by the Deputy Judge) that practitioners and applicants should not jump to conclude this to be an opening of the floodgates. Re Bhusate may well prove to be a solitary high-water mark as to the extent of permissible delay.

Standstill agreements

Standstill agreements – a popular tool used by litigants to pause limitation clocks and avoid protective claims – came under scrutiny in some of the recent 1975 Act judgments.

In his decision at first instance in Cowan, Mostyn J, working on the basis that s.4 was a procedural time limit, held in obiter that “it is not for the parties to give away time that belongs to the court”. He continued: “if it is indeed common practice [to agree standstill agreements], then I suggest that it is a practice that should come to an immediate end”.

On appeal, Lady Justice Asplin held in her leading judgment that Mostyn J was correct to conclude that the power to extend a time limit under s.4 “belongs to the court, and that any agreement not to take a point about delay cannot be binding”. However, she added (as with King LJ in her concurring judgment) that ‘without prejudice’ negotiations should be encouraged to limit the issue of unnecessary protective proceedings, from which it might reasonably be inferred that the courts should be lending their support to sensibly negotiated standstill agreements that provide the opportunity for such negotiations.

Nonetheless, Mostyn J’s message appears to have been heard, as 2019 reportedly saw an increase in the number of protective claims being issued by potential 1975 Act applicants. Despite the apparent encouragement from the Court of Appeal for parties to use standstill agreements in appropriate circumstances, the general position remains that the effectiveness of any such agreement is at the court’s discretion. In these circumstances, the prudent litigant may elect to bring a protective claim (which is then stayed) as the only way to ensure the right to claim under the 1975 Act is not lost.

Commentary

In 1975 Act claims, the court may make an order for financial provision to an applicant where it is satisfied that the laws of intestacy or a deceased’s will (or both) do not provide reasonable provision. Applicants are most commonly spouses, former spouses, civil partners and children, with spouses and civil partners having the most leverage under the 1975 Act; the test for what is reasonable financial provision is for them much broader and closer to what would be achieved on a hypothetical divorce/separation.

For that reason, the 1975 Act places practical limits on testamentary freedom which cannot easily be circumvented. The very broad nature of the court’s discretion under the 1975 Act makes it difficult to eliminate the risk that a claim might be successful (if only in part), even if the merits are dubious. These recent cases on time limits – which, as noted at the start of this article, were intended to give comfort to administrators of estates and their beneficiaries – serve further to highlight that risk: claims which are very far out of time can succeed if the court is convinced the claim is one which should not be shut out merely because of the statutory time limit.

Further uncertainty is caused by the judicial commentary as to the efficacy of standstill agreements. While such agreements must assist in further persuading a court to exercise its discretion to allow an out of time claim, they cannot be relied upon to maintain an absolute right to bring an action under the 1975 Act.

The present global situation is causing many people to revisit their estate planning. When doing so, English-domiciled settlors and testators should consider the position very carefully before electing to make no or limited provision under their will for those who may have good claims under the 1975 Act. This is particularly the case for spouses and civil partners, but also for children of married parents who, following the recent decision of FS v RS and JS [2020], have found the door to life-time maintenance claims firmly shut and so may consider the 1975 Act claim as an alternative route to financial provision. To do otherwise is to increase substantially the risk of litigation, including for many years after their death and irrespective of the presence of absence of a standstill.