It is possible for disappointed beneficiaries of an Estate to make a claim for reasonable financial provision under the Inheritance (Provision for Family & Dependants) Act 1975 (“the 1975 Act”) if they are eligible. A party would consider making such a claim where they receive no provision or they consider the provision they are to receive is insufficient.
Bringing a claim under the 1975 Act is notoriously short
The time scale for bringing a claim under the 1975 Act is notoriously short and so it has been common practice for Solicitors on both sides of a 1975 Act claim to enter into a Standstill Agreement to avoid the necessity of starting court proceedings by the deadline set down in the 1975 Act. The reason for this is that the deadline is only 6 months from the date of a Grant of Representation which can come around very quickly by the time clients have instructed Solicitors after an understandable initial period of mourning their loved one. Three recent cases have left lawyers in a state of some confusion as to whether they can agree for time to “stand still” to help the parties to attempt to settle claims under the I 1975 Act without the need to issue a claim promptly.
Standstill Agreement for 1975 Act claims
A Standstill Agreement is a document which the parties sign to say they recognise the Claimant won’t be starting court proceedings within the 6 month period provided under the 1975 Act and the Defendants agree that they won’t later argue the claim has therefore been started too late or “out of time”. The Agreement could provide for a fixed extension period (e.g. extending the 6 month period to, say, 12 months). Alternatively, the Agreement could be drafted to allow time to standstill indefinitely unless and until either party provides a set period of notice for it to come to an end (e.g. 28 days notice) by which time the claim would need to be started with the Court.
A Standstill Agreement for 1975 Act claims has always been more problematic than for other kinds of claims as the 1975 Act makes it clear that a claim can only be brought “out of time” with the permission of the Court so the Agreement is essentially seeking for the parties to agree between them an issue which should be in the power of the Court. However, until recently, Courts have not taken much issue with these Agreements as they recognise that they are a legitimate means of the parties attempting to resolve matters by settlement without the necessity of Court proceedings (and the costs associated with this) which is something the Courts encourage.
Recent cases and Standstill Agreement
Three recent cases have however brought this issue into the limelight and have yielded entirely different outcomes, unhelpfully.
The first case, in February 2019, was Cowan v Foreman. Mr Justice Mostyn in the High Court ordered in this case that there should be a “robust” application of the power to extend time under the 1975 Act and refused to permit a claim being brought out of time by some 17 months, despite a Standstill Agreement being agreed between the parties. He ordered that the “common practice” of using Standstill Agreements should “come to an immediate end” as “it is not for the parties to give away time that belongs to the Court”. Instead he ordered that parties should start court proceedings and seek the Court’s agreement to a stay of proceedings whilst negotiations take place.
The second case, in March 2019, was Bhusate v Patel where Chief Master Marsh in the High Court allowed a Claimant to bring her claim out of time despite having waited some 25 years to do so! The Master felt that the Claimant had demonstrated “compelling reasons” why permission should be granted under the 1975 Act in this case as she had been “effectively powerless” to do anything sooner given the absence of agreement or engagement by her stepchildren. The Master had read the Cowan judgment and did not agree with Mr Justice Mostyn’s approach.
Clearly the High Court judges could not agree on how lawyers should deal with this issue so Cowan v Foreman was appealed to the Court of Appeal for guidance.
In the meantime, in June 2019 the case of Hendry v Hendry was heard in the High Court by Master Shuman who refused permission for the Claimant to bring her claim out of time by 8 months despite the fact that the parties were engaged in negotiations during that period, in part because the Claimant had an actionable professional negligence claim against her solicitors for failing to start the claim with the Court by the deadline (that being one of the factors the Court must consider when deciding whether to grant permission to bring a claim out of time).
An open-ended Standstill Agreement could be problematic
Now in August 2019, we finally have the Court of Appeal’s clarity on the issue in the appealed case of Cowan v Foreman where the Appeal Judges said the High Court Judge in that case had been “plainly wrong” not to allow Mrs Cowan to bring her claim 17 months out of time. The Judges confirmed that the time limit was not intended to have a disciplinary element and instead the Court needed to consider whether a claim had a real prospect of succeeding rather than a fanciful chance. The Judges said that it was wrong to require a “good reason” justifying a delay and they went on to largely endorse the use of Standstill Agreements because without prejudice negotiations in place of starting court proceedings was to be encouraged. However, the judgment is clear that the Claimant would still be taking a risk in entering into such Agreements as it requires the Court’s later confirmation of permission to bring the claim out of time. The Judges also clarified that Standstill Agreements should be clear and in writing setting out the terms and duration of the standstill and that all potential parties to the claim should be a party to them if they are to be effective. This suggests that open-ended Standstill Agreements may still be more problematic.
The safest route is, therefore, likely to remain that a Claimant should start court proceedings and delay service. However, this clarity from the Court of Appeal is welcomed guidance for lawyers to advise their clients upon the risks associated with the various options given the confusion which the High Court had created over the issue in recent months.