Ilott: A tale of two stages

The concept of testamentary freedom and potential challenges to wills hit the legal headlines once again this year when in March the Supreme Court granted a group of charities permission to appeal last year's well-publicised Court of Appeal decision in
Ilott v Mitson [2015] EWCA Civ 797.

The decision to allow the appeal is clearly important, and no doubt the outcome will be much anticipated. There is, however, a limit to its importance and its effect on future claims of this nature.

Reasonable financial provision

Ilott involves a claim under the Inheritance (Provision for Family and Dependants) Act 1975. Under the Act, certain categories of persons (including children, spouses and former spouses, and dependants of the deceased) are able to apply to the court for provision from the deceased's estate where the will (or the intestacy legislation) does not make 'reasonable financial provision'
for them.

When considering such a claim, the court
must do so in two distinct stages (Re Coventry [1980] Ch 461):

• The gateway stage: does the deceased's will (or the intestacy legislation) fail to make reasonable financial provision for the applicant? This is an objective test and it is not a question of whether the deceased acted reasonably or was morally wrong in deciding the terms of their will; and

• The evaluative (or quantum) stage: if the gateway stage is met, what (if any) provision from the estate should the court order for the applicant?

What constitutes 'reasonable financial provision' depends on the category of the applicant. For a spouse or civil partner of the deceased, the applicable standard is that which it would be reasonable for the claimant to receive; it is not restricted to maintenance. What a spouse might have been awarded upon divorce is a useful guide.

For all other categories of applicant, reasonable financial provision is that which would be reasonable in all the circumstances of the case for the applicant to receive for maintenance. This 'maintenance standard' is clearly lower than the spouse standard.

At each stage, the court must have regard to the factors in section 3 of the Act, which include (but are not limited to): the financial resources and needs of the applicant, any other applicant, and any beneficiary of the estate; any obligations and responsibilities the deceased had towards any applicant or beneficiary; and the size and nature of the deceased's estate.

The Ilott case

The first instance decision in Ilott dates back to the summer of 2007. Melita Jackson died in 2004, leaving the vast bulk of her £486,000 estate to various charities but nothing to her only child, Heather Ilott, who brought a claim under the Act.

Ilott was married with five children and lived with her husband and youngest four children in a modest three-bedroom housing association property. The family's net income was low and was estimated at trial to be just over £14,000 per annum, with 75 per cent deriving from state benefits.

Ilott had been estranged from her mother for many years and the reasons behind this estrangement and three unsuccessful attempts at reconciliation were considered at length during the proceedings.

The dire financial straits of Ilott in contrast to the relatively sizeable estate weighed in her favour. The trial judge, District Judge Million, found for Ilott and awarded her a lump sum of £50,000.

Gateway stage appeals

The charities did not appeal, but when Ilott appealed against the quantum of the award, the charities cross-appealed, arguing that DJ Million had erred in law by asking himself the wrong question when assessing whether the lack of provision for Ilott was unreasonable.

The cross-appeal was successful, with Mrs Justice Eleanor King finding that DJ Million had reached his decision not on whether the lack of financial provision for Ilott was objectively unreasonable, but by placing too much weight on the deceased's subjective reasons for disinheriting Ilott and on Ilott's poor financial situation (in contrast to the other section 3 factors).

Ilott appealed and in 2011 the Court of Appeal found in her favour, holding that it was plain DJ Million had asked the proper question and also that he had carried out the necessary section 3 factors exercise. The court stressed that great weight must be placed on the value judgment of the first instance judge and that any appellate court should 'think long and hard before coming to a contrary conclusion'.

Evaluative stage appeals

With the original finding of DJ Million in respect of the gateway stage upheld, Ilott continued with her appeal to increase the quantum of the award. DJ Million had considered the income that Ilott and her family were currently receiving from various state benefits, and the lump sum of £50,000 was arrived at by considering the current level of her benefits, while acknowledging that a large capital sum might cause her to lose some or all of those benefits.

The essence of the appeal was that it could not have been reasonable to provide a lump sum that did not in fact provide any real benefit for her, and that a lump sum large enough to enable her to rehouse should have been ordered. While Mrs Justice Parker saw the difficulty in Ilott's position, she did not consider it would be the right approach to say that the award must be substantial enough to meet Ilott's housing need and she could not find that DJ Million was manifestly wrong.

In July last year, the Court of Appeal disagreed and awarded Ilott a rehousing fund of £143,000 and a smaller sum of £20,000 for immediate needs. The court found that DJ Million should not have assessed the level of maintenance based on Ilott's current state benefits and that he was wrong to assess provision for maintenance without considering fully how that provision would affect those benefits. Importantly, the court found that reasonable financial provision for maintenance should be made without affecting Ilott's state benefits.

Current state of play

What the Supreme Court will be deciding relates only to the evaluative stage and the quantum that Ilott should receive. Ilott is an interesting case not only because it raises questions specifically about state benefits and how provision for an applicant should be decided in light of those, but also because the main beneficiaries of the will were charities to which Jackson had little or no connection.

It remains to be seen what importance the Supreme Court will attach to the interests of the charities, which the Court of Appeal considered had no expectation of the money, as it was to them simply a windfall.

The case also raises the issue of how 'maintenance' should be calculated. We know that maintenance should be sufficient to allow the applicant an appropriate standard of living (Re Dennis (deceased) [1981] 2 All ER 140), and Lady Justice Arden in Ilott made it clear that she considered this to be more than a mere subsistence level. This reflects the court's view in Re Coventry that it is neither 'just enough… to get by' nor 'anything which may be regarded as reasonably desirable'. Lord Justice Ryder in Ilott stated that he had not found it necessary to comment further upon how maintenance under the Act is to be construed. The Supreme Court may use this opportunity to do so and judicial clarity on this matter would be welcomed.

The Supreme Court will not be considering DJ Million's ruling (as upheld by the Court of Appeal in 2011) that the will failed to make reasonable financial provision for Ilott. It is this element, given that Ilott was an adult child of the deceased, that has most surprised some commentators and caused vexation to others, but it should not. That is precisely the intention parliament had when it included children, even adult children, as eligible applicants under the Act, and even before Ilott, it was accepted law that an adult child did not have to show that the deceased owed them any moral obligation or that there were other special circumstances to succeed under the Act (see, for example, Re Hancock (deceased) [1998] 2 FLR 346 and Espinosa v Bourke [1999] 1 FLR 747).

Ilott does, however, highlight the case-by-case nature of claims under the Act. The variety of different factors under the Act and how these apply to the specific factual matrices of each case can sometimes make it difficult to draw conclusions from the outcome of any particular case. Ilott also highlights the value judgment made by a first instance judge, who must weigh up these factors, and the reluctance of appellate courts to question these value judgments. Indeed, Lord Justice Wilson (when granting Ilott permission to appeal the order of Eleanor King J) pointed out that had DJ Million dismissed Ilott's claim at first instance, it is extremely doubtful whether she would have succeeded in reversing such a judgment.

Ilott is a significant case, not least as this will be the first time that the Supreme Court will have reviewed the Act, even though the review is limited to the evaluative stage of the process. A review at this level of the gateway stage will have to await another day. SJ

John FitzGerald is a solicitor in the private client and dispute resolution departments at Gordon Dadds