Staking a claim: Inheritance Act claims

Two cases from earlier this year provide some useful reminders for practitioners dealing with claims under the Inheritance (Provision for Family and Dependants) Act 1975 (‘the Act’).

The cases of Barbara Lilleyman in Lilleyman v Lilleyman and Lilleyman [2012] EWHC 821 (Ch) and Annemarie Allport in Allport v Allport (unreported) both concerned claims for reasonable financial provision from their late husbands’ estates.

1. Lilleyman v Lilleyman

Mrs Lilleyman, aged 66, was married to Roy Lilleyman for just over two years before his death in January 2010. His estate was worth in the region of £6m. It was, in divorce terms, a ‘short marriage, big money’ case.

By his will, Mr Lilleyman appointed his adult sons of his first marriage as executors and trustees; after various specific gifts and pecuniary legacies, he gave Mrs Lilleyman limited rights of occupation over his half share of the house they lived in together and a second home in his sole name.

Subject to those limited rights, he gave his interest in both properties and the remainder of his estate (including shares in three private family companies worth in the region of £5m) to his sons.

In Mrs Lilleyman’s case, Mr Justice Briggs considered section 3(2) of the Act, in addition to the matters mentioned in paragraphs (a)–(f) of section 1, namely:

1. the provision which the applicant might reasonably have expected ?to receive if, on the day on which ?the deceased died, the marriage had been terminated by a decree of divorce instead of being terminated by death; and

2. the age of the applicant, duration of the marriage, contribution made by the applicant to the welfare of the family and any contribution made by looking after the home and caring for the family.

This is referred to as the ‘divorce cross-check’ and there was lengthy legal debate around this and the requirement to consider the relatively short marriage of Mr and Mrs Lilleyman.

Mr Justice Briggs carefully summarised the divorce principles relevant to Mrs Lilleyman’s claim, and these provide a useful reminder and guide to practitioners who may regularly deal with claims under the Act, but do not frequently consider the law of financial relief on divorce.

Marriage is recognised as an equal partnership and, consequently, the division of property on the breakdown of marriage is based on fairness and non-discrimination.

This leads to three requirements, which Mr Justice Briggs summarised as:

1. needs: meeting every parties’ different financial needs;

2. compensation: addressing any economic disparity between the parties arising from the way they conducted their marriage;

3. sharing: where there is still property available after (1) and (2) are satisfied and whether this extends to all the parties’ property.

Mr Justice Briggs summarised the principles after considering the decisions of leading divorce cases such as Miller v Miller [2006] 2 AC 618, White v White [2001] 1 AC 596 and Charman v Charman [2007] EWCA Civ 503.

Importantly, Mr Justice Briggs considered the ‘equal sharing’ principle established in White v White (later considered in Miller v Miller) and how applicable this was to short marriages.

Lords Nicholls, in Miller v Miller, ?said: “This principle is applicable as ?much to short marriages as to long marriages” and: “In the case of a short marriage, fairness may well require that the claimant should not be entitled to a share of the other’s non-matrimonial property. The source of the asset may be a good reason for departing ?from equality.”

Baroness Hale, in the same case, said in relation to assets which were not ‘family assets’, that the shortness of the marriage might justify a departure from the “yardstick of equality” and recognised that the nature and source of the property and the way a couple lived their lives should be taken into account when deciding how it should be shared.

Importantly, Mrs Lilleyman’s case was not a divorce case and the divorce principles are just a cross-check, but the difference between matrimonial and non-matrimonial property was of importance, because Mrs Lilleyman’s was a ‘short marriage, big money’ case.

Mr Lilleyman’s estate included shares in private companies worth in the region of £5m, in which both the deceased’s sons worked, and their treatment was considered in some detail.

Importantly, Mr Justice Briggs considered:

1. both the deceased’s sons’ financial security may be dependent on preserving the companies from ?the consequences of an award to ?Mrs Lilleyman;

2. Mr Lilleyman had a moral obligation to not undermine their careers with the companies; and

3. the extent to which the value of the companies, and any increase in value during the marriage, should be included within the matrimonial property available for sharing.

Prima facie, applying the cross-check on a divorce in January 2010, the matrimonial property available for sharing would not have included the value of the companies at the date of commencement of the marriage.

The court heard expert evidence concerning the value of the companies, one of which had increased in value by around £550,000 during the marriage.

Mr Justice Briggs was not satisfied that the whole increase could be attributed to “passive economic growth” and found that to a significant extent it could be attributed to Mr Lilleyman’s skill as a businessman. He therefore attributed £250,000 of the increase to Mr Lilleyman’s successful endeavours and added this to matrimonial property available for sharing.

Consequently, in his award, Mr Justice Briggs:

1. provided for Mrs Lilleyman’s housing needs by awarding her Mr Lilleyman’s share of the home in which they lived together, and the transfer of the deceased’s second home or a lump sum representing its value. This was a fair application of the divorce cross-check and reflected the short length of the marriage; and

2. excluded from sharing virtually all of the value of the companies, thus resulting in a “modest burden” on the value of the sons’ interests in the estate.

2. Allport v Allport

David Allport, who died in June 2006, and his wife Annemarie Allport were married for 17 years. The deceased had one adult son, Darren, from his first marriage.

Throughout his marriage to the claimant, Mr Allport had worked in the oil industry and, at the time of the marriage, was the 100 per cent owner ?of two companies, HOH Oilfield Services Limited and HOH Petroleum Services Limited.

The claimant was on the payroll and in her evidence said she was available to entertain clients at any time, although evidence heard at trial from a business colleague of the deceased recalled he could only remember seeing the claimant at the business premises on two occasions and she played no active role in the company.

The deceased left legacies to his mother and niece, the sum of £250,000 and his shares in HOH Oilfield Services Limited (‘the company’) to Darren, and the residue to Mrs Allport.

There was no doubt Mr Allport was a wealthy and successful businessman, even though at times his business suffered during recessions.

The estate accounts showed gross assets at the date of death of £7.3m, comprising, in the main, the couple’s home, cash, horses, the two companies and insurance policies.

Since the date of death, the company traded successfully and expert evidence valued it, shortly before trial, at £8.3m, if sold as a going concern.

Mrs Allport’s counsel, in claiming ?the will failed to make reasonable financial provision for her, put forward a number of options, to include transferring all or part of the company to her, or the creation of two categories of shares to ensure she received an income from the company.

Specifically, when considering the value of the company, it was said that the claimant made no contribution to its establishment and did not contribute to or enhance its value during the marriage. Consequently, HH Judith Hughes QC (hearing the claim in the family division) was not persuaded that Mrs Allport was entitled to shares in the company and found that the company should not be dissipated in order to meet her claim if there was no reason to do so.

Furthermore, if the marriage had been dissolved in 2006, the court ?would have tried to leave the company with the deceased on the basis that ?the wife would have been awarded assets equivalent to the house and a cash ?sum, and possibly a balancing cash sum to provide maintenance, while he ran ?the company.

HH Judith Hughes QC also ?agreed with counsel for Darren that ?this was a case where it was appropriate to depart from the yardstick of equality, in that the assets were provided entirely by the deceased prior to and during ?the marriage.