Dingmar v Dingmar Rev 1

This appeal raises a somewhat puzzling point under the Inheritance (Provision for Family and Dependants) Act 1975, which seems not to have arisen before, on facts which as regards the essential features cannot be unusual, apart from the length of time that elapsed between the relevant death and the trial.

The late Ibrahim Dingmar was the husband of the Claimant and father of the Defendant. He died on 28 June 1997. Immediately before his death he and the Defendant owned a house called 10 Kertland Street, Saddletown, Dewsbury, jointly, as beneficial joint tenants. He and the Claimant lived there, with their two young children. On his death the Defendant became the sole owner of the house by right of survivorship.

The house had originally been bought in 1981 in the joint names of the deceased and his first wife, mother of the Defendant, Rabaibai Dingmar. She died in October 1982, and the deceased then became the sole owner by survivorship. He put it into the joint names of himself and the Defendant, his second son, in July 1985, by way of gift, shortly before he married the Claimant.

There were no assets of any worthwhile value in the deceased’s estate. To the extent that there had been, the Claimant would have been entitled to them (up to the amount of the statutory legacy under the Administration of Estates Act 1925), because the deceased died without having made a will. No grant of representation in relation to the estate was therefore needed at that stage, and none was issued. The Claimant continued to live in the house with her children, as she does to this day. She is now 54 and the children are aged 20 and 18. In 2004 the Defendant claimed possession of the house. Her attempt to resist those proceedings on the basis that she had a beneficial interest of her own in the house failed. An order for possession was made against her.

Also in 2004 the Claimant issued the proceedings in the Dewsbury County Court in which this appeal arises, against the Defendant under the 1975 Act, in which she applied for an order under section 9 of that Act that the deceased’s severable share of the house be treated as an asset of his net estate. On 8 July 2005 she obtained a grant of letters of administration to the estate. The case was transferred to the Leeds County Court, and came to trial before His Honour Judge Behrens on 29 September 2005. By that time it was clear that there was no asset of any value in the net estate, so the Claimant depended on being able to bring part of the value of the house in under section 9 of the Act. The house was agreed to have been worth £40,000 at the date of death, and to be worth £95,000 at the time of the trial.

The judge held that he could not award the Claimant more than half of the value of the house as at the date of death, and he did so. He made it clear that, if he had been able to do so, he would have awarded her a half share of the house, or at least a share of the house corresponding to the proportion that half the value at death bore to the whole current value, in effect 21%. The question on this appeal is whether he could have made one or other of those orders.

The Appellant has been represented before us, as she was before the judge, by Mr Paul Brook. The Respondent was represented before the judge by Mr Lakin, of Counsel. He did not serve a Respondent’s Notice, and took no part in the appeal at any stage. He dispensed with the services of his solicitors and counsel and chose not to attend in person. We have, however, a transcript of the hearing before the judge from which we can see how the matter was put to the judge by Mr Lakin on his behalf.

The issue arises under section 9(1) of the 1975 Act. This is as follows:

The general purpose of the section is clear. A deceased’s former severable share under a beneficial joint tenancy passes to the other one or more joint tenants by survivorship on his death. This provision, new to English law in the 1975 Act, is designed to alleviate the effect of that by allowing the former severable share to be brought into account for the purposes of an order under the Act, subject to certain constraints. The question in the present case arises from the words “the deceased’s severable share of that property, at the value thereof immediately before his death”.

To put this provision in context, on an application by a person within the class identified in section 1, the court may make any one or more of a variety of orders described in section 2(1), “if it is satisfied that the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant”. The orders which the court can make are all expressed to relate to “the net estate of the deceased”. They include orders for the payment of periodical payments or a lump sum, and “(c) an order for the transfer to the applicant of such property comprised in that estate as may be [specified in the order]; (d) an order for the settlement for the benefit of the applicant of such property comprised in that estate as may be so specified”. By virtue of section 2(4), an order under the section may also include consequential provisions for the purposes of giving effect to the order, and for this purpose the court may “order any person who holds any property which forms part of the net estate of the deceased to make such payment or transfer such property as may be specified in the order”.

The meaning of “net estate” is given in the definition section, section 25(1), as follows:

We are concerned with paragraph (d). Section 8, referred to in paragraph (c), deals with property which is the subject of a statutory nomination or of a donatio mortis causa, both being processes operating on death but not through the estate of the deceased and thus, in a way, analogous with the case of a beneficial joint tenancy. Sections 8 and 9 are under the heading “Property available for financial provision”. In each case section 8 requires the subject-matter to be treated as part of the net estate of the deceased, net of inheritance tax, and “to the extent of the value thereof at the date of the death”. The contrast with section 9, which speaks of the value immediately before the death, is explained by the fact that the moment before death is the last time when the deceased, by severing the joint tenancy, could have procured that a half share (or corresponding proportion if there were more than two joint tenants) would pass as part of his estate: see Powell v. Osbourne [1993] 1 FLR 1001.

Sections 10 and 11 are both aimed at counteracting steps taken to defeat an application for financial provision, either by a disposition (section 10) or by a contract (section 11). In each of those cases, subject to requirements set out in the section, the court may order the donee (as defined) to provide, for the purpose of the making of financial provision, a sum of money or property specified in the order. That then comes into the definition of the net estate under paragraph (e) set out above.

The extent of the net estate is directly relevant to the exercise of the court’s discretion as to whether to make any, and if so what, order under section 2. In particular section 3(1), which sets out the matters to which the court is to have regard, mentions at paragraph (e), “the size and nature of the net estate of the deceased”. Subsection (5) of that section provides as follows:

These statutory provisions appear to operate, relevantly, in this way.

If the deceased had a severable share in property held on a beneficial joint tenancy immediately before his death, the court can order that this share be treated as part of the net estate for the purposes of the Act. Such an order is subject to three relevant constraints: an application must be made for the purpose within the time specified in section 9(1), the order can only relate, at most, to the former severable share at its value immediately before the date of the death, and the court has a discretion under the section as to the extent to which it is to be treated as part of the net estate.

If the court makes such an order, the property specified in the order does form part of the net estate for the purposes of the Act, and references to the net estate in, for example, section 2 and section 3(1)(e) are to assets including the property so specified. In particular the court’s powers under section 2(1) are exercisable in relation to a fund which includes (or, in the present case, consists only of) the property so specified. Because the property is in the name of the Defendant, who is not a personal representative of the estate, recourse can and must be had to section 2(4)(a) for the power to make an effective order so as to implement any order for financial provision under section 2(1).

Thus the limit imposed in section 9(1), by reference to value, as regards the extent to which the relevant property can be treated as part of the net estate, has effect through all the other relevant provisions of the Act so as to constrain the court in the exercise of its powers under section 2. Only the property specified in the order under section 9(1), which is directly subject to the limit of value, counts towards the net estate for any purpose under the Act.

The substance of Mr Lakin’s submissions to the judge was to the same effect as the analysis set out above, and the judge accepted the point so put in his judgment.

The judge heard evidence from the Claimant and the Defendant, and considered the merits of the case in accordance with the directions given in the Act. He was satisfied that the effect of the provisions of the law as to intestacy was not such as to make reasonable financial provision for the Claimant, and that he ought to make an order under section 9(1) that the deceased’s former severable share of the house be treated as part of the net estate. He treated the words of section 9(1) referring to the value immediately before the death as limiting the asset which could be treated as part of the net estate to that value, namely £20,000. Having considered all factors relevant under section 3, he decided that he should award the Claimant as much as he could, namely the full value of the asset brought in under section 9(1). It is clear that, had he considered that the Act permitted him to do so, he would have awarded the Claimant the whole of the deceased’s severable share or, at least, a 21% beneficial share in the property. Instead, the relevant part of his order declared that the Defendant shall hold the house on a trust of land “for himself and the Claimant such that the Claimant shall be entitled to an interest in the property by way of fixed beneficial share therein to the value of £20,000”. In effect, the Claimant was given an equitable charge over the house for £20,000.

The judge indicated in his judgment that Mr Brook agreed with Mr Lakin that the judge could not bring the full half share into the net estate under section 9(1). Mr Brook took issue with that. We have seen the transcript of the hearing, which shows that there was a lively debate between the judge and both Counsel. If it matters, which I doubt, it seems to me that it would be wrong to treat anything that Mr Brook said in the course of the hearing as conceding that the order under section 9(1) could not extend to a full half share. He did, however, have some difficulty in putting forward a reasoned submission as to why it could be read as permitting the award of a full half share. He did not put to the judge the more developed argument that he presented on appeal.

Mr Brook showed us what seem to be the only three reported cases in which section 9 has been considered in detail, which were also before the judge: Kourkgy v Lusher(1983) 4 FLR 65 (a decision of Wood J), Jessop v Jessop [1992] 1 FLR 591 (Court of Appeal), and (as already mentioned) Powell v Osbourne [1993] 1 FLR 1001 (Court of Appeal). The present question did not arise for decision in any of those cases, nor in any unreported case of which I am aware. Nourse LJ did say in Jessop, [1992] 1 FLR at 596, that “for the purposes of arriving at a decision in this case the court may treat John Jessop’s severable half-share of 39 Alameda Road, at the value thereof immediately before his death (i.e. at £21,000) as part of his net estate”. That is, therefore, consistent with the judge’s decision. Wood J held, in Kourkgy v Lusher, that the question whether any, and if so what, property should be treated as part of the net estate by virtue of an order under section 9(1) should be addressed before coming to the question whether the dispositions effected by the deceased’s will, or by the law relating to intestacy, or by the combination of both, were or were not such as to make reasonable financial provision for the applicant. That is uncontroversial.

Powell v Osbourne was a decision as to the effect of the words referring to the value. The formerly jointly owned house was to be valued subject to the mortgage secured on it, but the debt was also secured by a jointly owned life policy, which became payable on the deceased’s death and covered the full amount of the secured debt. On that basis the Court of Appeal upheld the judge’s ruling that a half share of the policy was to be treated as part of the net estate, and was to be valued on the basis that the full amount was about to become payable, so that the value of the policy was that full amount rather than the much smaller surrender value, and it cancelled out the secured debt. In that case the importance of the statutory formula was that, the deceased being about to die at the moment which was treated as relevant for the statutory purpose, the policy had to be valued in the light of that fact. That point does not assist on the present facts, because the value of the property itself, and of a half share of it, was not affected by the fact that the deceased was about to die, or by his actual death. The decision does show that the words as to value can have operative effect, at least if a question arises on which the date at which the property is to be valued is significant. There, of course, the result was to increase, rather than to limit, the value of the asset which could be treated as part of the net estate.

The 1975 Act was passed after a review by the Law Commission, which led to the Commission’s Second Report on Family Property: Family Provision on Death, in 1974 (Law Com. No. 61). The report recommended new legislation, with a draft Bill annexed. One of the subjects reviewed was that of the property which should be available for family provision. Property in co-ownership is discussed under this heading at paragraphs 137 to 142 of the report. At paragraph 140 the report said this:

The draft Bill annexed to the Report contained a clause in the terms which were enacted as section 9. The notes to the draft clause do not cast any more light on the provision.

It is noticeable that, whereas the court can allow an application under section 2 to be made even if more than six months have elapsed since the grant of representation to the estate (see section 4), an application for an order under section 9(1) must be made within that six month period, and no extension of time is possible. That is consistent with the recommendation in the report, that a claim against the third party who, after the death, owns the asset should be made, if at all, promptly after the death. What is unusual about the present case is that the application under section 9 came to be made for the first time some seven years after the death, and this was possible because no grant of representation had been taken out in the meantime.

The Law Commission report did not comment on the words referring to the value at the date of the death. If, however, the grant of representation to the estate were to be made fairly soon after the death, and therefore the application under section 9 itself followed not long after the death, it may be that there would not have been a major change in the value of the relevant asset between the death and the hearing of the application. Here, by contrast, the passage of time, and the changes in the property market, led to the value more than doubling by the time of the trial.

Although it does not have the status of an authority, I note that Tyler’s Family Provision, 3rd ed (1997), refers to the point at page 298 as follows:

In the course of an illuminating discussion of section 9, over pages 297 to 303, the editor points out at page 299 that the time limit for applications is designed to protect survivors

The judge considered that he could not order that the full half share, which was the deceased’s severable share of the house before the death, should be treated as part of the net estate, because that would give no effect to the words in the section about its value as at the date of the death. This point was not within the ambit of the permission to appeal given by the judge. However, we permitted Mr Brook to amend his Appellant’s Notice to raise this point, and to argue it accordingly.

Mr Brook submitted that the reference to the value at the date of death should not be taken as limiting, or at any rate as limiting more than is strictly necessary, the width and flexibility of the discretionary power given to the court by the Act to make reasonable financial provision for dependants of the deceased. He pointed out that if, for some particular reason, it would be unfair to the surviving joint owner to allow the applicant to have recourse to the benefit of a substantial increase in value, that would be something that the court would have to have regard to under section 3(1), which has a general provision at paragraph (g): “any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant”. If there had been a decrease in the value between the death and the hearing, for whatever reason, the court would have to consider that in deciding how much, if any, of the value as at the date of death to bring into the net estate under section 9(1) and what, if any, award to make in relation to it under section 2. If, therefore, the surviving owner is able to be protected by the flexibility of the exercise of the court’s discretion in such a case, why should he have the additional protection of a cap on the value of the asset which can be brought into the estate under section 9(1) if there has been an increase in value by the time of the hearing, especially as section 3(5) requires the court, generally, to take into account the facts as known at the date of the hearing, which must include increases as well as decreases in relevant values?

To give some effect to section 9(1), Mr Brook submitted that the only purpose for which the limitation of value needs to be considered and applied is the case where the court is considering making a lump sum payment order. If, however, the court would make an order for the transfer or settlement of an asset, it can do so without being limited to a given value.

I cannot accept that submission. The court has to know what the value of the net estate is, especially in the case of an application by a surviving spouse, for whom the provision to be made is to be compared with that which would be made if the marriage had been terminated by divorce. Section 3(1)(e) expressly requires the court to have regard to the size and nature of the estate, in considering whether to make any, and if so what, order. It could not be right that the severable share could only be considered at a defined value if the court were considering ordering a lump sum payment, but not if it were considering ordering the transfer or settlement of an asset, such as the share itself. That approach cannot be spelled out of section 3, and would involve anomalously different results, in cases which ought to be comparable, for which no good reason could be advanced. It would result in an inappropriate distortion of the court’s powers as between a lump sum and a property transfer or settlement order.

I see the force of the submission that the definition or limit by reference to value imposed by the relevant words in section 9(1) can itself operate in arbitrary ways, but it does not seem to me that this is an adequate justification for distorting the reading of the Act by holding that the definition applies for some purposes under sections 2 and 3 but not for others under the same sections. For the same reason I cannot, with respect, agree with my Lord Ward LJ’s approach (see paragraph [97] below) that the definition applies for the purposes of section 9(1), but is not relevant when taking into account the matters to which the court has to have regard under section 3, because of section 3(5). It seems to me that this could only be right on the basis that the asset which, under section 9(1), is or can be treated as part of the net estate is the former severable share, rather than that share at its pre-death value.

I can accept that Parliament may not have considered the sort of situation which has occurred in this case, and that, perhaps, if the point had been addressed, the Act might have been differently drafted. It seems to me likely that the purpose of imposing a cap on the relevant value is to protect the surviving joint tenant or tenants. The probable explanation for it is to be found in the expectation that the issue would, and the intention that it should, arise soon after the death, by which time it might be unusual for a major difference in value to have occurred since the death.

Each of my Lords considers that the court can treat the full extent of the former severable share, unlimited as to value, as part of the net estate. With respect, and with some regret, I cannot agree. It seems to me that their approaches, in effect, treat as meaningless the words “at the value thereof immediately before his death”. Their conclusion would be the same even if these words were omitted from section 9(1). Jacob LJ says that the explanation for these words is that they show that all that can be treated as part of the net estate is 1/n, where n is the number of joint beneficial owners immediately before the death. But no reference to value, as at any date, is required to show this. It is inherent in the words “the deceased’s severable share of that property”. That severable share is, inevitably, 1/n. He says that the words referring to value are unnecessary but are there out of caution to make the position clear. If that is what they were intended to do, they would have achieved the opposite. A reference to “value” must be to something capable of being expressed in monetary terms, which necessarily requires the advice of a valuer.

I agree with Jacob LJ that there is or may be a tension within section 9(1), between the idea that the deceased’s former severable share may (to the extent considered just) be ordered to be treated as part of the net estate, and the instruction that this is to be “at the value” immediately before the death, because, as he says, the value of a share at a given time is not the same as the share itself. I do not see that this tension can properly be resolved by disregarding the words referring to value, or by giving them no effect.

Ward LJ would achieve the same result by treating the reference to value as merely descriptive. Again, I have to say, with respect, that this gives the words as to value no meaning or effect. There is no point at all in those words if that is all they are there to do. They are not required for that purpose. The equivalent words in section 8 seem to me plainly to define the value of the money or other property that is to be treated as part of the net estate. Likewise in section 9(1) the words achieve nothing in relation to facts such as these if they do not define the value of the asset, and therefore the asset itself, which can be brought into the net estate. They are prescriptive, not descriptive.

In paragraphs [90] and [92] below, Ward LJ says that a value has to be placed on the asset just before the death. In a case such as Powell v. Osbourne it does matter at what date the asset is valued. But in this case, and the same would be true of most cases, it matters not at all, if the point of the section is to be able to treat an asset which still exists as if it were an asset within the estate. I do not see that this can be an adequate explanation for the inclusion in section 9(1) of the words as to value.

I agree with my Lords that the definition by reference to value can have (as in this case) results which a court may regard as unfortunate, in that the deceased’s widow cannot be given the full half share of the former matrimonial home which the judge below considered would have given her reasonable financial provision. But there may be other cases, for example where (as must be common) the surviving joint tenant is the surviving spouse, in which the protection of a definition, or cap, by reference to the former value, limiting the assets available for financial provision claims by others, may work more fairly. Powell v. Osbourne is a case, albeit in relation to a different factual problem, where those words had a significant effect, beneficial to the applicant. But the words as to value cannot be explained as being relevant only to a special case such as that. I agree with Ward LJ on the point he makes at the end of paragraph [97]. The reason why such a contention as he postulates on behalf of an applicant would not succeed is that section 3(1)(a) requires the court to have regard to the applicant’s financial resources, which would include any increase in the value of the subject of the donatio mortis causa over the amount which is treated under section 8(2) as part of the net estate.

Each of my Lords suggests that inheritance tax may provide the explanation for the reference to value. With respect, I cannot agree with them on this point either. Inheritance tax does have to be considered. Under section 8 it is deducted automatically, because the relevant asset is itself included automatically. Under section 9(2) it is something which the court has to have regard to when deciding what order to make under section 9(1). The value of the asset for inheritance tax purposes is not affected by anything in the 1975 Act, but is governed by the Inheritance Tax Act 1984 (see section 4).

Lord Blackburn in River Wear Commissioners v Adamson(1877) 2 App Cas 743 at 764 set out what he said Lord Wensleydale had described as the golden rule as to statutory construction:

That rule has been applied and adopted on many occasions. One fairly recent example is Stock v Frank Jones (Tipton) Ltd[1978] 1 W.L.R. 231 where the House of Lords felt unable to cure an anomalous result derived from the words of the Act. Lord Simon of Glaisdale said, at 237, in relation to an argument based on the anomaly of the result:

There is a further principle, relevant to the present case, which was enunciated by Brett J in Stone v Yeovil Corporation(1876) 1 CPD 691 at 701 as follows:

In that case itself the inclusion of a single word, “such”, made nonsense of the provision in which it appeared, and the court was therefore able to ignore it. This was followed in a very different statutory context, in McMonagle v Westminster City Council[1990] 2 AC 716, where the House of Lords was able to ignore and treat as being of no effect the words “which are not unlawful” in several sub-paragraphs of a Schedule to the Local Government (Miscellaneous Provisions) Act 1982 which provided for the control of sex establishments.

The words as to value are there in section 9(1), and similar words are used in a comparable way in section 8(1) and (2). It does not seem to me that it is legitimate to ignore those words or deprive them of meaning or effect because the court may regret the effect that they would have in this case, or may suppose that if Parliament or the draftsman had thought harder about their effect, the words would not have been included. It is not a case in which those words make nonsense of the provision as a whole, even though they limit, in a way which the court may consider unfortunate (on the facts of this case) the beneficial effect of the section. The case is not comparable to Stone v Yeovil Corporation or McMonagle v. Westminster City Council, where the words used would have frustrated the evident legislative intention unless they were completely ignored. All that the words about value do, on facts such as these, is limit the advantage which an applicant is able to take of the section. With respect, I cannot regard the construction placed on the words by my Lords as open to the court, because they give those words no meaning or effect in a case such as the present. In any event, it is not open to us to treat the words as if they were not there at all, because Powell v. Osbourne is a decision binding on this court that they do have meaning and effect. Granted, the words restrict the beneficial effect of the provision in a case such as this. It is also fair to say that the section might have achieved the Law Commission’s avowed purpose more effectively if the question of value had been treated in different words, sufficient to cover the sort of point considered in Powell v. Osbourne but not to prevent the court from having the power to treats the whole of the deceased’s former severable share as part of the net estate. Even so, it does not seem to me that it can be said that the limit imposed by these words is one which defeats the intention of Parliament.

For those reasons, in my judgment the judge was right to hold that he did not have power to order that the full half share of the house be treated as part of the net estate under section 9(1). I consider that the correct reading of the Act is as set out at paragraph 15 above. It seems to me that the judge could order under section 9(1) that the deceased’s former severable share of the house be treated as an asset of the net estate, at its value immediately before the death of £20,000. Having done as much as he could under that section, he was limited to the same extent as regards any substantive order under section 2, and could not make an order by reference to the full current value of the former half share.

On the other hand, I consider that he could have made an order under which the Appellant became entitled to a 21% beneficial interest in the house. Such an order would have operated as an order under section 2(1)(c) for the transfer to the Claimant of “such property comprised in the estate” as is specified in the order, supplemented by an order under section 2(4)(a) that the Defendant do transfer to the Claimant property so specified. The property to be specified would be a share in the beneficial interest in the house, corresponding to the deceased’s former severable share, but subject to the limitation by value. That limitation prevents the court from making an order in relation to a 50% share, but I see no reason why it should prevent the court from specifying a share which respects that limit. It would do so by making an order in respect of a share in the beneficial interest which did not exceed the proportion which the value of the former half share immediately before the date of death bore to the current value of the whole property. On the evidence that is 20/95, or 21%.

The judge did not articulate his reasons for holding that he was unable to award a 21% share, rather than a £20,000 lump sum, other than to say, during discussion of consequential matters after judgment (and before giving permission to appeal), “I do not see how I can give you 20 95^ths, just because that is the current value”.

If the judge is right, then the effect of the cap on value is not only to constrain the court as regards the value and extent of the property that can be brought into the net estate but also to limit the powers which can be exercised in relation to it under section 2. I do not see any logical basis for such a reading of the section. In my judgment, once the court has decided what property to specify under section 9(1) as being treated as part of the net estate, the court has all the powers in relation to that asset conferred by section 2, just as it does in relation to any other asset comprised in the net estate. I see no reason to doubt that it can exercise the powers to order a property transfer or a settlement of property in relation to the property specified in the order under section 9(1). It may be that the judge was led, by the reference to value, to suppose that what would be the subject of the order under section 9 would be a sum of money. I do not think that is right. What is to be treated as an asset of the net estate by an order under section 9 is, in principle, the former severable share of the property. The fact that it is limited by value affects the size of the share which is available, but does not alter the fact that it is a share. For reasons given above, it seems to me that the value, and therefore the extent, of the share is restricted by the words referring to the value immediately before the death, but that can be respected and implemented fully by making an order by reference to a share of (on the facts of the present case) 21%.

On that basis it seems to me that the correct analysis of the process is this.

The court can make an order under section 9(1) that the deceased’s former severable share of the property be treated for the purposes of the Act as part of the net estate, to the extent of a 21% share, so as to respect the limit of value. The judge should be treated as having made such an order.

Having made such an order, all the relevant powers under section 2 are available in relation to that asset, along with any other asset there may be in the net estate. The court could make a lump sum order if it thought fit. But in a case such as this it seems more appropriate to give the Claimant an interest in the property. That can be achieved by ordering the transfer of a 21% beneficial interest to the Claimant, under both section 2(1)(c) and section 2(4)(a).

In substance, that process could be achieved, as Mr Brook invited the judge to order, by declaring that the Defendant held the property on trust for himself and the Claimant as beneficial tenants in common in proportions as to 79% for himself and as to 21% for the Claimant. If the judge had thought the Act permitted him to make such an order he would have done. In my judgment the Act did permit such a result, and he should have made the order accordingly. I would allow the appeal, though to that extent only, and make such a declaration in place of paragraph 1 of his order, together with, for the sake of correct form, an order under section 9(1) specifying that a 21% share of the property be treated for the purposes of the 1975 Act as part of the net estate of the deceased.

Since, however, my Lords disagree with me and consider that the judge could have awarded the Appellant a half share of the property, not limited by reference to its pre-death value, the appeal will be allowed and, in place of the judge’s order, the court will order, under section 9(1) of the Act, that the deceased’s former severable share of the property, at its value immediately before the death of £20,000, be treated for the purposes of the Act as part of the net estate of the deceased, and will further order, under section 2(1)(c) and 2(4)(a) of the Act, (in place of paragraph 1 of the judge’s order) that the Defendant shall hold the property upon a trust of land for himself and the Claimant as tenants in common in equal shares. Consequential issues will arise in relation to the possession proceedings and under the Trusts of Land and Appointment of Trustees Act 1996, Judge Behrens having set aside the possession order made in the other proceedings. It does not seem to me to be necessary that this court should give any direction as to those matters, but I would urge that the parties endeavour to reach an agreed settlement of those issues rather than incur yet more time and expense in litigation.

I have the misfortune to disagree with Lloyd LJ. I am of the opinion that the court can do what the trial judge wanted to do if he could: award the claimant a half-share in the house. I am grateful to Lloyd LJ for setting out the facts. It is not necessary to repeat them.

I begin by examining how the 1975 Act works. Section 1 provides that where a person domiciled in England and Wales dies and is survived by any of a defined class of persons (e.g., as here, a wife) that person may apply to the court for an order under s.2:

So the heart and object of the Act is to enable “reasonable financial provision” to be made for an applicant. That purpose should guide the construction of the Act.

To emphasise the purpose of the Act, section 2 repeats it, before listing the various kinds of order which the court can make. It reads, so far as is material:

Section 3 provides guidance as to how the s.2 power is to be exercised. A wide discretion is conferred. An important factor is “the size and nature of the net estate of the deceased” (s.3(1)(a). Moreover by s.3(5):

So what the court needs to know is what the “net estate” comprises and what its value is at the time the court exercises its power. Thus the definition of “net estate” is vital. It is provided in s. 25(1):

This case is concerned with (d). This brings within the “net estate” “any property” the subject of a s.9 order. One may therefore reasonably approach s.9 on the basis that it will have the effect of bringing “property” into the net estate. And that is what it essentially says: for what the court is empowered to order under s.9 is that “the deceased’s severable share of that property” [i.e. property held on a joint tenancy before death] be treated as part of the estate.

This is subject to the qualification “at the value thereof immediately before his death”. This, read one way, does not make sense: although a share of property will have a value which can be expressed in monetary terms, that value is not itself a share in property. You cannot order a “value” to form part of the net estate. It is a share in property itself which is to be treated as part of the estate. So what is Parliament driving at by the words “at the value …?”

There are several possible candidates:

The property is valued at the date of death (which I shall call “£x”). The deceased’s proportionate share of the property if there had been a severance at death is then applied to that value. If there were n joint owners that share will £x/n. That sum of money, is then taken as the “property” somehow to be treated as part of the estate. This is achieved by ordering that the claimant shall have a fixed beneficial share in the property of £x/n, the property being held on a trust for sale between the claimant and defendant(s) or by a charge of £x/n over the property. That is what the Judge did, halving the agreed at death value of £40,000, and ordering that the property be held on trust with the claimant having a fixed beneficial share of £20,000.

One asks the valuer also to ascertain the value at the time of the hearing (“£y”). The fraction of the property which would have belonged to the deceased if there had been severance (1/n) is applied to £x/y. That is then taken as the share of the property to be treated as part of the estate. It is only that proportion which the court is empowered to treat as part of the estate Here that is 40,000/95,000 divided by 2 - practically 21%. So the court has power to treat a 21% share in the property as part of the net estate. This is again achieved via a trust, but this time the claimant gets a proportionate share rather than a fixed sum.

One does not call in a valuer at all for the s.9 exercise. One takes the proportionate share of the property which would have belonged to the deceased if there had been severance of joint ownership (1/n) and treats that proportion of the property as the share of the property which the court is empowered to treat as part of the estate. Here that would give a half share.

I see no logical reason for selecting candidate (i). It is the least satisfactory solution – it involves the court as in effect treating cash which is not there – a notional sum - as part of the estate when the court is actually only entitled to treat property as part of the estate. This solution does the most violence to the language used. Moreover given that property values can go up or down it produces the completely illogical result that the claimant loses out if property prices rise between death and the decision whereas his co-owner loses out if property prices fall in that period.

Solution (ii) also suffers from irrationality. If there is a rise in property values between death and the hearing, most of that rise would fall outside the net estate. In algebraic terms the figure is £(y – x/yn). If there is a fall, the net estate benefits at the expense of the other co-owners. Why should Parliament want to provide that? Particularly as the whole point of the Act is to make reasonable provision for applicants. Here, for instance, the Judge quite rightly took the view that if it were possible the widow should have a half share in the property as she would have done if the question had been resolved at the time of death.

Solution (iii) is not merely the most rational, it is the only one which is rational. The happenstance of price movements and the dates of hearing is removed from consideration. The share of the property remains fixed. Of course its value at the date of the hearing is a factor which may be taken into account in the overall assessment of what is to be done (s.3(5)) but that is a quite different question from what property is to be treated as part of the net estate. The solution is even-handed between the other co-owner(s) and the net estate – if property prices rise then each gets a proportionate benefit and if they fall, each gets a proportionate loss.

So do the words “at the value thereof immediately before his death” rule out this rational solution and force one back to the irrational (ii)? Do the words restrict the power of the court to treat property, namely the severable share, as part of the estate, or is there some other explanation for their presence? With some hesitation I conclude there are possible other explanations.

Firstly there may be more than two joint owners of a property, say n. If the deceased severed his interest just before death he would only get the appropriate proportion 1/n of an interest in the property. And it is only that proportion which can be treated as part of the net estate. On this basis the words are aimed at emphasising that. Strictly they are unnecessary but they are there out of caution to make the position clear.

On this analysis “value” is not speaking of a monetary value at all. It is speaking of a proportionate value of the property. This makes sense since, as I have said, “value” and “property” are different things and it is the property which is treated as part of the net estate. The solution fits with the purpose of the Act. The solution has the merit of avoiding several irrationalities. So it must be regarded correct since Parliament cannot have intended the irrational. One is trying to arrive at the meaning a rational reader would think a rational writer had intended. Only solution (iii) achieves that.

Another possible explanation may lie in taxation considerations. It may be that the words are there so as to define the value for tax reasons. The Act clearly has tax in mind. Section 9(2) provides:

A wider version of the same reason may be that the words are there to make it clear for any relevant purpose, including taxation, that the value is to be taken at the time of the notional severance. Absent a s.9 order the deceased’s interest in the property would simply cease upon death. An order has the effect of bringing property into the net estate – a transfer of property. The reference to value is to make it clear that if you ever need to know the value of what was transferred, that value is to be taken as at the date of death, not some other time, particularly, for instance, the date of the s.9 order itself. The words are there out of an abundance of caution.

Lloyd LJ takes the view that “at the value thereof immediately before his death” must be given some operative meaning – as a cap. He points to he identical words in s.8 dealing with bringing into the net estate a statutory nomination or a donatio mortis causa. There is or may be no inherent contradiction because one can be considering money alone. Even so, however, I see no help in resolving the problem to be derived from s.8 – it poses essentially the same problem without providing an answer.

I accept, of course, the principles of construction set out in the authorities cited by Lloyd LJ. I differ from him for two reasons. First something has got to be done to find the intended meaning because there is a difference between “property” and its value. There is an inherent contradiction which must be overcome somehow. So the problem of finding a meaning is in that unusual context rather than a context where there is no contradiction and just a seemingly bizarre answer. Second I consider that a solution which favours the other co-owners if property values go up but favours the applicant if they go down is so irrational that it cannot be what Parliament intended. I do not think such a result is merely “unfortunate” – it just makes no sense at all. That is why I have striven to account for the words in the way I have.

Were I driven to it I would hold that either “property” or the words “at the value …” are operative, but that both cannot be. I would chose the former as being that which is consistent with the evident general purpose of the Act and with the specific purpose as regards jointly held property set out in the Law Commission’s Second Report on Family Property in 1974 (Law Com No.61):

I would accordingly allow the appeal and award the claimant a half-share in the property.

The order and declaration made by the judge was in these terms:

Although the judge did not actually make any order under section 9 of the Inheritance (Provision for Dependents and Family) Act 1975 (“the Act”), he clearly intended to treat the deceased’s half share in the property, at the value immediately before the death of the deceased of £20,000, as part of the net estate of the deceased. Strictly speaking he should have made a separate order to that effect because a free-standing application under section 9 was before him. This is a quibble of no consequence.

It is clear that the judge wished to transfer that half interest to the applicant by way of making reasonable provision for her but felt he was precluded from making any order for the transfer of a half interest or any interest in the property to her. The question which has exercised us on this appeal is whether there is “property comprised in [the net] estate” which can be the subject of an order for transfer to or settlement for the benefit of the applicant pursuant to s. 2(c) or (d) of the Act and, if so, whether the property is that half share or only 20/95th of it.

Having satisfied itself that the applicant brings herself within the class of applicants permitted by s. 1 of the Act, the court then decides the application by a two-stage process. First, the court must decide whether the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant. If reasonable provision has not been made, then the court embarks on the second stage which is to decide which of the range of orders specified in s. 2 of the Act it is appropriate to make.

At both stages the court is required to have regard to the matters listed in s. 3. At its broadest the court must take into account any matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant. More specifically there is a balance to be struck between the position of the applicant or the applicants and any beneficiaries of the estate and a comparison has to be made between their respective financial resources and financial needs, any obligations and responsibilities which the deceased had towards them and any physical or mental disabilities from which they suffer. Crucial to the enquiry, and important in this appeal for reasons I will give, is the fact prescribed by s. 3(1)(e), namely “the size and nature of the net estate of the deceased”.

The “net estate” is defined in s. 25 of the Act to mean, with emphasis added by me:

If it is satisfied that the disposition of the deceased’s estate is not such as to make reasonable financial provision for the applicant, then at the second stage of the decision-making exercise the court may make any one or more of the following orders pursuant to s. 2:

It will be noted that the powers granted under (c) and (d) are to make orders relating to “property comprised in [the net] estate”. Reading s.2 and s. 25 together there is, therefore, the power to order property adjustment in respect of such property or part of such property as had been treated as part of the net estate by virtue of the order made under s. 9.

Ordinarily the severable share in property held on a joint tenancy would not fall into the estate of the deceased because it will have passed by operation of the law of survivorship to the surviving joint tenant or tenants. The law of survivorship may cause an injustice if it results, as it would do in this case, in there being no property at all available to make provision for an applicant otherwise entitled to relief. S. 25 and s. 9 are intended to alleviate that hardship.

S. 9 provides as follows:

By way of a preliminary analysis of s. 9(1) it seems to me plain that the ordinary meaning of the language supports these propositions:

In a search for the answer to the question which arises on this appeal, one should begin with s. 25 and a definition of “net estate”. I repeat that net estate means any property which is treated as part of the net estate by virtue of an order made under s. 9. The order which should have been made under s. 9 would be that the deceased’s severable half share in 10 Kertland Street, at a value immediately before his death of £20,000, be treated as part of the net estate.

The question then is whether some “property” is referred to in that order and if so what is that property? The plain and simple answer must be that the severable half share is property clearly identified in the order. The interest in the land to which the order refers is that half interest and so that half interest can be the subject of the transfer or settlement.

Do the words “at the value immediately before death of £20,000” alter the nature of that property right so as to convert it from a certain share in a certain property – here a one half share in 10 Kertland Street – to a fluctuating share in that property changing its index value as property prices move up or down? In my judgment, no. The concept of a property interest changing day by day is too bizarre for that to have been the legislature’s intention. But I must analyse the problem more closely.

One must start with the language of s. 9 and at the risk of tedium I repeat the material words:

The first point to note is this. Insofar as the order must relate to “the deceased’s severable share of that property, at the value thereof immediately before his death,” the property there referred to must be the same property as that referred to in the opening clause, namely the property in which the deceased person was immediately before his death beneficially entitled to a joint tenancy. This is an important point. Even though a value has to be given to that share at a particular point in time, the subsection does not require that the sum of money representing that value be treated as part of the net estate. It is the property not a sum of money equal to its value which is clawed back into the net estate. The emphasis here is on the property, i.e. the severable share (or part thereof), not its monetary value. Giving the share a value is merely descriptive of the share. The words simply state the fact that immediately before the death of the deceased the value of that severable half share was £20,000.

There is a further reason for concluding that the words are descriptive and not prescriptive. Punctuation may not be the strongest tool for statutory interpretation but in a troublesome section as this has become, it cannot be ignored. What is stark here is the use of commas at the beginning and end of the phrase “at the value … before death”. The phrase is put in parenthesis. It conveys a very different meaning from a clause reading, “the deceased’s severable share of that property at the value thereof immediately before his death shall be treated as part of the net estate.” When read without the commas there is a composite concept of the share immutably defined by value. Value is then the intrinsically more important feature, not the incidental one suggested by the use of the commas.

It is of course pertinent to ask why it is necessary to ascribe a value to the share as at just before death if the whole severable share, or part of it, is or may be treated as part of the net estate. Is it not enough simply to know the value at the date of the hearing?

In answering this, one should note that in s. 8, the other deeming provision, the property concerned is treated as part of the estate “to the extent of the value thereof at the date of … death.” The reason why the value is to be ascertained under s. 9 immediately before the death of the deceased rather than at his death was explained by Dillon L.J. in Powell v Osbourne [1993] 1 F.L.R. 1001, at p. 1005. It is attributable to the fact that:

A second reason is that it is important to know not only what property is in the estate but also what value it has - or is deemed to have - when it comes in because inheritance tax may be payable and must be deducted to calculate the “net estate” as defined by s. 25. Furthermore adjustments of the payments of inheritance tax may have to be made if the share is brought into the estate depending on the eventual S.2 orders made: see s.19 and s.146 of the Inheritance Tax Act 1984. S. 9(2) itself provides:

It may be said that this is all necessary out of an abundance of caution. Because this share does not actually fall into the estate, indeed because it passes out of his estate on his death and so has no value for him at his death, it seems to me to be necessary to ascribe a value to it - as to all other property in the estate - when by virtue of the s. 9 order it is deemed to be included. The property only comes into the estate by virtue of the court’s order. Without a date for its value being prescribed, it could perhaps otherwise be argued that it must added to the estate not only from the time the order is made but also at the value the share has at the time of the order. Now at least everyone knows the score.

I have been dealing with the construction of s. 9. Upon close analysis some odd features of the section begin to appear. What has to be valued is the deceased’s severable half share (“the deceased’s severable share … at the value thereof” – my emphasis added), not any lesser part of the severable share which the court considers it to be just to order be treated as part of the net estate. Had the latter been the intention, the subsection would have read “may order that the deceased’s severable share of that property to such extent as appears to the court to be just … at the value thereof immediately before his death shall be treated … as part of the net estate.”

This literal construction does create an anomaly. On the one hand it produces an argument in favour of allowing the appeal. Say the judge had decided in the exercise of his discretion to order that only 80% of the deceased’s half share be treated as part of the estate. His order would then read, “80% of the deceased’s half share in 10 Kertland Street, the value of the deceased’s severable share immediately before the death of the deceased being £20,000, be treated as part of the net estate.” In those circumstances the property to be transferred under s. 2 is clearly a 40% share (80% of the deceased’s half) in 10 Kertland Street. The valuation of £20,000 is demonstrably irrelevant. On the other hand, this construction does not sit easily with the view expressed above that a valuation is necessary for avoidance of doubt and for inheritance tax purposes because one would be valuing the whole when only the value of the part is relevant. Although it is ungainly, one can reconcile the difference on the basis that the information set out in the hypothetical order does at least enable the necessary calculations for inheritance tax purposes to be made.

The counter-argument is that these words are not just descriptive of the property at a particular point in time, but definitive of it at all times. The argument is that the £20,000 value operates as a cap so that the interest in the land is defined by the proportion of £20,000 to the value of the property at the time of trial, here 20:95, or 21% as opposed to 50% which was the value of the severable half interest immediately before death. This is such an anomalous result that it must call for compelling reasons to justify it. The startling anomaly is this: the property, an interest in land, will not be a certain interest, a certain share be it one half or one quarter or whatever depending on the number of joint tenants or depending on the proportion treated by the order of the court to be part of the estate, but an interest which fluctuates as property values change. Can this really have been Parliament’s intention? It makes no sense. An applicant has six months to make her s. 9 application and many months may pass before a final hearing can determine the question. What started out as a severable share of one half will have changed in that time. It could have changed dramatically but it is likely to have changed to some extent. It seems odd that one should have to value the interest at the date of the hearing for this purpose but ignore it for calculating the size of the net estate. The purpose of the provision is to do justice between the applicant and the surviving joint tenant and the court cannot deprive this survivor of more than the half share so the survivor is protected to that extent. The court, in the exercise of the wide discretion under sections 2 and 3 can even reduce the applicant’s share if her conduct or her delay justifies it. But there is no fairness in a purely fortuitous windfall created by rising property values accruing slowly to the benefit of the surviving joint tenant. Take the converse case of a fall in value. It is inconceivable that the court would order a lump sum equivalent to the value that the property had immediately before death if it is worth significantly less in the hands of the surviving joint tenant at the time of the order.

The counter-argument seems to depend on the point of construction that the cap must apply in the same way for all purposes under sections 2 and 3. Of course there is force in the point that “net estate” must bear the same meaning in s. 2 as in s. 3. But that must be seen in its context. S. 3(1)(e) is directed at “the size and nature of the net estate of the deceased”. S. 2 is more specific: it is aimed at “such property comprised in the net estate”. For s. 3 purposes one has to ascertain what property is in the estate and then determine its size and nature: for s.2 all one has to do is identify the property.

True it is that a severable interest, at a value immediately before the death of the deceased of £x, is to be treated as part of the net estate by virtue of the s. 9 order, but it does not necessarily follow that the size of the net estate is to be limited to £x plus the value of the other property when considering what orders to make because s. 3(5) enjoins the court as follows:

To treat the value immediately before death as creating a cap is to give the element of value an importance it does not seem to me to deserve. It has the consequence that the value placed on the severable interest dominates and controls the property interest to the extent that it changes the nature of the severable share itself from something certain to something uncertain. If the value was to have such defining influence I would have expected “net estate” for s. 9 purposes to be defined in s. 25(d) as “any sum of money, being the value of the share before death”, not “any property”. As already observed, when sums of money are intended to be part of the net estate, s. 25 so provides: see s. 25(c). As it is drafted, “property” is the dominant characteristic of the net estate and it, not value, should be the predominant element. Property should be construed in accordance with its natural meaning as a fixed interest, not a fluctuating one.

Much as I respect the linguistic interpretation set out in the careful judgment of Lloyd L.J. I cannot agree with him. Reading the Act as a whole there is enough ambiguity for the court to override what may be a literal meaning when its result is to produce palpably absurd and self-evidently capricious consequences. A construction of the Act must be favoured which eliminates the ambiguity and anomaly by allowing common-sense and justice to prevail. For the reasons I have attempted to explain, I would hold that the court is empowered to transfer one half of the property to the applicant and I would allow the appeal and so order. Such a conclusion seems to me fully to give effect to paragraph 140 of the Law Commission Report:

This Act was intended to give effect to that purpose. A teleological approach to the construction of this ambiguous provision confirms my view that the interest which passes, the deceased’s half share, should be capable of being transferred.