The Unreasonble, capricious and harsh? The effect of Illott v Mitson on testamentary disposals

In July there was a great deal of excitement in the press about the case of Ilott v Mitson [2015] EWCA Civ 797. Headlines such as “Your will can be ignored, say judges” (Telegraph) and “Judge rules mother's will can be overturned despite it going against her wishes” (ITV news) may have given the impression that a radical change had been wrought upon testators everywhere by the Court of Appeal. However this is not so.

The case is based very much on its facts. Mrs Jackson died in 2004 and left the vast majority of her estate to three animal welfare charities. Her only daughter, Mrs Ilott, was left out of the estate altogether. They were estranged when the daughter was 17 (in 1978) and, despite attempts at reconciliation, remained so throughout Mrs Jackson’s life. The estate was worth in the region of £500,000.

The issue arising overall was therefore whether, under the provisions of the Inheritance (Provision for Families and Dependants) Act 1975 (the “Act”) Mrs Ilott was entitled to any provision and, if so, to what sum was she entitled?

The Act has always enabled children of the deceased, whatever their age, to seek provision.

By section 1 a child of the deceased may apply for an award of “such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance” from of the estate.

Their position is the same as that of former husbands/ wives, cohabitees, a child of the family, and any dependants. It is less favourable than the husband or wife, who can apply for an award which is “reasonable in all the circumstances of the case… whether or not that provision is required for his or her maintenance”.

In this context, maintenance means “payments which, directly or indirectly, enable the applicant in the future to discharge the cost of his daily living at whatever standard of living [which] is appropriate to him [or her]” (Re Dennis (decd) [1981] 2 AER 140, 145-146) By section 2 the court is empowered to make various orders, including periodical payments, lump sum, property transfers etc.

The factors to which the court must have regard when exercising any discretion are set out in section 3, and include the resources and needs of the applicant, the resources and needs of the beneficiaries, the obligations and responsibilities of the deceased, the size and nature of the estate and any other relevant matter.

The question which the Court of Appeal was called to determine was whether the quantum awarded by the lower court was appropriate. In order first to qualify under the Act, the court has to determine the threshold question – whether the will made reasonable provision for the complainant. In this case the District Judge found that Mrs Jackson had been “unreasonable, capricious and harsh” in her actions towards Mrs Ilott in excluding her from her will. The estrangement was apparently not the responsibility of Mrs Ilott.

This appears to have been relevant when the Court of Appeal came to decide the question of quantum.

District Judge Million had awarded Mrs Ilott £50,000 in an effort, apparently, to provide her with an annual income of under £4,000 per year. This was due to the fact that Mrs Ilott was reliant on state benefits. The District Judge applied the level of benefits as the cap regarding her “reasonable needs” for maintenance, taking into account her (limited) earning capacity. In so doing, the DJ did not take any account of the effect of his order, namely that by reason of the £50,000 lump sum Mrs Ilott would lose all of her means-tested benefits (as the savings cap for receipt of benefits is £16,000). Therefore unless Mrs Ilott spent around £34,000, she would be worse off than before.

The Court of Appeal overturned DJ Million’s order, having determined the fundamental errors were to assume that the level of state benefits was appropriate for the level of maintenance awarded under the Act. [para 35]. Arden LJ held that while this calculation could have been appropriate, no reasons were given which explained the limitation of the award, so as to enable Mrs Ilott to challenge it if appropriate. Secondly the DJ had no idea what the impact of his award of £50,000 lump sum would be on Mrs Ilott and her family [para 36]. He made an assumption but did not establish the factual position, as he could have done, either at the hearing or subsequently [para 41].

Consequently, the Court of Appeal overturned the award, and decided to re-exercise the discretion itself. This was in part because of the length of time since the death of Mrs Jackson and the complex and lengthy procedural history of the claim (the Court of Appeal had heard the case before, and this was the fifth hearing). Due to Mrs Ilott’s reliance on benefits, the Court of Appeal awarded her the cost of purchasing her home (which she had the option of doing) from her housing association landlord, and the option of a further capital sum of up to £20,000.

In reaching their decision, the Court of Appeal was persuaded that Mrs Ilott’s income was not reasonable financial provision – in particular she had no savings and had no pension provision, had had no holidays and no provision for clothing for herself and her husband in her budget which formed part of the evidence before the DJ. The effect of the award would be a capitalised sum and for Mrs Ilott to keep her tax credits (“if those benefits are not preserved then the result is that achieved by DJ Million’s order in this case: there is little or no provision for maintenance at all” [para 60]), whilst saving the state the cost of her housing, calculated at around £5,000 per annum by way of Housing Benefit).

While the media were exercised by this case, and the potential risks for testators, in fact as can be seen this case was heavily fact-dependant. The only other beneficiaries were charities to whom Mrs Jackson had no previous connection, the estrangement was apparently not down to Mrs Ilott’s conduct, Mrs Ilott had lived for decades in straightened financial circumstances, the DJ had failed to take into account the impact of his award on her tax credit entitlement and had wrongly held that the state benefits sums to which Mrs Ilott was entitled amounted to reasonable provision for maintenance as defined in the Act.

While this case will undoubtedly be useful for some applicants, the circumstances in which it may be applied are by no means wide-ranging, and comfort as to this case’s limited application can and should be offered to those involved in formalising their will.

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