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England and Wales High Court (Family Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> Cowan v Foreman & Ors [2019] EWHC 349 (Fam) (25 February 2019) URL: http://www.bailii.org/ew/cases/EWHC/Fam/2019/349.html Cite as: [2019] 1 FLR 1191, [2019] EWHC 349 (Fam), [2019] WLR(D) 454, [2019] WTLR 441 |
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FAMILY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
MARY JANE COWAN | Claimant | |
and | ||
(1) MARTIN JOHN FOREMAN | ||
(as executor of the estate of Michael Cowan and as trustee of the Business Property Trust and the Residuary Trust in the Will of Michael Cowan dated 24 March 2016 and as trustee of the Michael Cowan Foundation) | ||
(2) FARRER & CO TRUST COMPANY | ||
(as trustee of the Business Property Trust and the Residuary Trust in the Will of Michael Cowan dated 24 March 2016) | ||
(3) TIMOTHY COWAN | ||
(4) MARINA COWAN | ||
(5) AMANDA COWAN | ||
(6) GERALD MUSIAL | ||
(7) ROBERT MUSIAL | ||
(8) JAMES ANTHONY TRAFFORD AND JAMES ANTHONY JOHN BEAZLEY | ||
(as trustees of the Michael Cowan Foundation) | ||
(9) BRYONY LOUISE ANDREE COVE | ||
(as executor of the estate of Michael Cowan) | Defendants |
____________________
Tracey Angus QC (instructed by Charles Russell Speechlys)
for Defendant (1)* & Defendants (8)
Richard Wilson QC (instructed by Farrer & Co) for Defendants (1)**, (2) & (9)
Defendants (3)-(7) did not attend and were not represented
* in his capacity as a trustee of the Michael Cowan Foundation
** in his capacity as executor of the estate of Michael Cowan and as trustee of the Business Property Trust and the Residuary Trust in the Will of Michael Cowan dated 24 March 2016
Hearing dates: 18-19 February 2019
____________________
Crown Copyright ©
Mr Justice Mostyn:
"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."
"Before leaving the relevant legal principles, it is in my judgment also relevant that the limitation period which has now expired in this case is one imposed under the Inheritance Act. It is both of a special type in the sense that it confers upon the court a discretionary power to permit a claim to be made out of time on well-settled principles and it exists for a particular purpose, namely to avoid the unnecessary delay in the administration of estates to be caused by the tardy bringing of proceedings under the Act and to avoid the difficulties which might be occasioned if distributions of an estate are made before proceedings are brought, requiring possible recoveries from beneficiaries if those proceedings once brought are successful "
That is plainly a good reason for the existence of the limitation period, but it is, surely, not the only reason. Litigation is intrinsically stressful and extremely expensive. The time limit must be there to protect beneficiaries from being vexed by a stale claim, whether or not the estate has been distributed. Similarly, the time limit must be there to spare the court from being burdened with stale claims which should have been made much earlier. A robust application of the extension power in section 4 would be consistent with the spirit of the overriding objective, specifically CPR 1.1(2)(d) ("dealing with the case expeditiously"), 1.1(2)(e) ("allotting the case an appropriate share of the court's resources") and 1.1(2)(f) ("enforcing compliance with rules"). It would also echo the ever-developing sanctions jurisprudence exemplified by Denton & Ors v TH White Ltd & Ors [2014] EWCA Civ 906, [2014] 1 WLR 3926. The fact that the time limit is contained within the statute rather than in a procedural rule is also of significance.
"Section 4 does not give any guidance as to how the court should approach an application for permission but there is no dispute between the parties as to the judge's formulation of the correct approach to such an application. He distilled what he called "the following propositions" from Re Salmon [1981] Ch 167 and Re Dennis [1981] 2 All ER 140:
"(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 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 Defendants?
(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 Inheritance Act if I allowed the application to proceed?"
"Orders under rule 6.15(1) and, by implication, also rule 6.15(2) can be made only if there is a "good reason" to do so. The question, therefore, is whether there was a good reason to order that the steps taken on 22 October 2009 in Beirut to bring the claim form to the attention of the respondent constituted good service of the claim form upon him. The judge held that there was. In doing so, he was not exercising a discretion but was reaching a value judgment based on the evaluation of a number of different factors."
So here.
i) He left some relatively modest pecuniary bequests to his son, daughter-in-law and stepsons.ii) He put all of his business interests which qualified for 100% IHT business property relief into a "business property trust". This was a discretionary trust of which the beneficiaries were the claimant, other members of his family, a charitable foundation (which then was virtually empty and of which the first and eighth defendants are trustees), other charities and any persons added by the trustees.
iii) He gave his personal chattels to the claimant.
iv) He gave all the rest of his property to a residuary trust of which the beneficiaries would be the same as for the business property trust, but subject to a revocable life interest in favour of the claimant. There was power to advance capital to the claimant from that part of the residuary fund from which the claimant was entitled to income (i.e. all of it absent a partial revocation).
"I would like her to receive an income from the trust and to the extent that capital needs to be released for her needs please consider generously any such requests."
"She will therefore be entitled to income and occupation of any properties during her lifetime from the Residuary Fund.
It is my general wish that Mary be able to stay in the Santa Barbara property for as long as she wishes, and that income should be produced, to be supplemented by capital where required, to ensure Mary maintains a standard of living at a reasonable level to include the payment of medical bills, provision for care in old age and so on.
It would also be my wish that Mary be assisted and her legal fees be paid in relation to taking such steps as she may need in order for the trust to benefit from UK spousal exemption from inheritance tax. As I understand it she may have to elect to be treated as UK domiciled for inheritance tax purposes for a few years after my death. To the extent this leads to additional tax being paid on her personal estate in the United States following Mary's death, I expect my estate to compensate her beneficiaries to make up for this. I do not wish her family to be financially disadvantaged by reason of her capturing inheritance tax relief in the UK."
"I was horrified, in the light of Martin and Bryony's assurance and Michael's wishes, when on 5 December 2017 Farrer and Co emailed Jerry querying the invoices I have submitted to them for payment. I have not been reimbursed for those costs"
This is more than a little unfair. The email of 5 December 2017 read as follows:
"We are really pleased that Mary is now recovering nicely and no longer requires full homecare.
We can see from the invoices that you are asking for a payment of $27,870.16 from the trusts to cover the costs of Mary's home care assistance and physical therapy from October to December.
It was our understanding that Mary's monthly budget was matching her expenditure even with the additional care costs given she has not undertaken her usual day-to-day activities whilst recuperating, but we may have misunderstood.
Please could you clarify the extent to which the sum of $27,870.16 is not covered by the monthly budget (received to date and potentially in the future) as well as the extent by which the homecare and physio is already met by medical insurance (private and state insurance). I note the physio is covered by the state from January. As trustees Martin and I remain happy to help but we do need to fully understand the figures before resolving any additional payment"
No reply has ever been received to this email. It was perfectly reasonable for the trustees to establish that there was no overlap between the monthly sums paid and these additional costs, as well as to find out what was covered by insurance. Indeed, in an email written on 7 December 2017 Dora Clarke of Withers writing on behalf of the claimant stated that "in fact that email has been very helpful in terms of advancing her understanding". Yet this episode seems to be the high-watermark of the claimant's case that the trustees cannot be trusted to deal with her and her future needs fairly.
"I spoke with this potential client about a probate in the UK. His mother, Mary, was married to the decedent, whose will provide for two testamentary trusts. One is a business trust with various beneficiaries, and the other is a trust where Mary is the primary beneficiary, followed by other discretionary beneficiaries. The trustees have full discretion over both trusts.
The trust value is about $30 million pounds (sic), but Mary and her kids are concerned that the trustees are not providing enough information and that they are not providing enough funds for Mary to live on.
They asked if we could take a look at the documents and advise as to whether they have any recourse or rights to demand information as to assets, income, etc and whether Mary can request additional funds if necessary.
Also, if they want to contest the trust, what are the applicable time limitations? They want to make sure no statutes of limitation are blown." (Emphasis in original)
"Provided Michael Cowan was domiciled in England and Wales at the date of his death, the (sic) Mary could bring a claim against his estate, as his widow, under the Inheritance (Provision for Family and Dependants) Act 1975. The time limit for her to bring such a claim is 6 months from the date of the grant of probate i.e. before 16 June 2017, although the court would have discretion to extend this deadline. However, I would have thought that this would really be unnecessary and that everything can be worked out with the Trustees."
"I went back and forth with the need for this claim. I kept hoping for the best, that we would have a breakthrough and be able to communicate openly and honestly with the trustees. This appears to have been naive and has added a huge amount of stress to all of our lives. When it came to my mother's health care costs, it was not a question for me anymore."
When cross-examined about the reference to "this claim" Robert attempted to retreat from what was a plain admission that he had known about a possible claim under the 1975 Act and its time limits for a long time. I am afraid I did not find this at all convincing. It is obvious that he, his brother and his mother were made well aware by virtue of Helen Cheng's conversation with Robert of the need to make the claim by 16 June 2017 if they were seriously intending to do so.
"It transpires that [Mary] had not understood the implications of Michael's will. Mary had very clearly been under the impression (from Michael) that she was going to receive outright provision from the estate.
The reality of her situation, namely that she only has a defeasible life interest in the residuary estate, no real security in her own home because the trustees own it through a company, and no actual interest in the BPR trust, has hit her hard. Similarly difficult to grasp has been the fact that you and Martin have absolute discretion. Her anxiety has been compounded by your 5 December 2017 email querying payments of invoices for her recent medical expenses, although in fact that email has been very helpful in terms of advancing her understanding.
Meanwhile it also transpires that she has very little by way of assets in her own name.
The upshot is that I have advised Mary that she is entitled to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
This is the first time that bringing a claim on the basis reasonable financial provision has not been made for her as Michael's widow, particularly in light of their lengthy relationship, has been mentioned to her. She would like time to understand the ramifications and, through Withers, explore resolution without having to litigate.
I am sure that avoiding litigation is in everyone's best interest. However, you will be aware that Mary is outside the six month limit for bringing a claim without the court's permission. Thus, while her strong preference is to avoid litigation, she understands she may be disadvantaged if she does not issue a claim promptly now that she has been alerted to the potential.
Please confirm that the Trustees will not seek to take advantage of any delay whilst we advise Mary on her claim and explore resolution with the trustees."
"In the first instance, I can confirm that the executors of Michael's estate… and the trustees of the two trusts established by Michael's will… will not take a point on the six-month deadline having passed pending receipt of a letter of claim"
I was told that to agree a stand-still agreement 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. If the parties want to agree a moratorium for the purposes of negotiations, then the claim should be issued in time and then the court invited to stay the proceedings while the negotiations are pursued. Otherwise it is, as I remarked in argument, simply to cock a snook at the clear Parliamentary intention.
"Under this "public conscience" test, the application of the illegality defence was not discretionary in law. But it was clearly discretionary in nature. In substance it called for a value judgment about the significance of the illegality and the injustice of barring the claimant's claim on account of it."
A similar descriptive conflation can be found in Ilott v The Blue Cross & Ors [2017] UKSC 17, [2018] AC 545 a case about an award made under section 2 of the 1975 Act. Traditionally, the exercise under section 2 had been analysed as falling into two parts, the first stage being evaluative and the second discretionary: see In re Coventry [1980] Ch 461 at 487 per Goff LJ. However, in Ilott at [24] Lord Hughes was of the view that the second stage was "best described" as evaluative rather than discretionary.