Palmer v Lawrence

This is an application under the Inheritance (Provision for Family and Dependants Act) 1975, brought by the widow of the deceased, Mr Donald Alexander Palmer.

The deceased died on 5th March 2010. He was born in 1936. The claimant is now aged 65. They were married in 2007, but had a relationship going back to around 1997.

The deceased’s last will, which was made in contemplation of marriage, appears, on such evidence as I have heard, to have mirrored an earlier will and was therefore made so as to avert problems arising from the revocation of the earlier will by marriage.

By clause 3 of the will he appointed his wife, the claimant, and his nephew, Noel Lawrence, who is the first defendant, to be the trustees of his will and his executors.

A grant of probate has been made in favour of the first defendant with power reserved to the claimant. The claimant did not join in with the taking of that grant because she recognised that her intention to make a claim gave rise to a conflict of interest.

By clause 4 of the will the deceased provided as follows: “I give any house, flat or other dwelling situated in the United Kingdom, whether freehold or leasehold, which I own at the date of my death to my friend Coral Randall” - I interpose to say she is the lady who became his wife, now the claimant - “during her life on condition that she pays all rates, taxes and other outgoings payable in respect of it, keeps it in good repair and condition, reasonable wear and tear excepted, and insures it to its full value against loss or damage from fire and other such risks as my trustees from time to time direct, and after her death to my trustees as part of my residuary estate”.

Under clause 5 of the will the deceased provided as follows: “I give any house, flat or other dwelling situated in Jamaica, whether freehold or leasehold which I own at the date of my death to my sister Gertrude Palmer absolutely free of inheritance tax”.

At the date of the deceased’s death he owned two properties in England and one property in Jamaica. The two properties in England were 25 Cottage Street, which was also the matrimonial home, and 21 Mayfield Road, which has from time to time been (and is now) let.

Accordingly the lifetime interest which the will gave to the claimant extends to those two properties which the parties are agreed have a value of, in the case of Cottage Street, £240,000 and, in the case of 21 Mayfield Road, £165,000.

The deceased also owned a property in Jamaica which at the date of his death (and today) has a value in the region of £88,500, though it is said to be subject to a lease which is described as having a peppercorn rent but which, in truth, has no regular rent at all, in favour of Gertrude Palmer, the deceased’s sister.

I shall proceed on the assumption that it is appropriate to take into account the full value of the Jamaican property in deciding this case. Although there is evidence from the first defendant confirming the lease, no properly signed copy has been produced. Gertrude Palmer is now enjoying the fruits of that property.

It appears that that property had originally been acquired by inheritance by the deceased and Gertrude Palmer jointly, but, for reasons which are not clear, it was subsequently transferred to the deceased’s sole name. For whatever reason that came about, the Jamaican property was in no sense matrimonial property in the sense in which that expression is normally understood. The property was not acquired during the marriage, was not enjoyed as a matrimonial asset, and was neither maintained nor enhanced through the joint efforts of husband and wife. It was acquired a long time before the relationship between the deceased and the claimant ever started.

As regards the UK properties, each was acquired as a result of the deceased’s efforts independently of the relationship with the claimant. It was initially asserted that some £27,000 of the claimant’s money went into one or other of the properties, but as the evidence came out this turned out to be wrong.

A relatively small amount may have been contributed by the claimant in respect of the bathroom fittings and tiling of Cottage Street and something more was contributed in respect of furnishings. Furnishings are, of course, separate from the property itself.

All the deceased’s household possessions in Cottage Street were bequeathed to the claimant absolutely in clause 6 of his will. It is not necessary, therefore, when looking at matters such as furnishings, to enter upon the debate of what was the deceased’s and what was the claimant’s, because either way it all now goes to the claimant, though, as is not unusual, the present value is modest.

A further provision of the will gave the rest of the deceased’s personal chattels to two nieces and the sister I have mentioned, Gertrude Palmer. They can, for present purposes, be ignored because there is nothing of value which falls under that description, though the nieces as well as the sister have been formally joined as parties.

The gift of residue is in clause 7 of the will. The residue is divided into eight equal shares to be distributed as follows: one to a nephew, Louis Dave Linton; one to a cousin, Maxine Palmer; three to a lady described as his goddaughter, Joy Ewing, also known as Francis Ewing; and three to another nephew Noel Lawrence, that is to say the person who has proved the will.

There is evidence before me which suggests strongly that Joy Ewing was believed by the deceased to be his natural daughter. It is not necessary for me to decide whether or not that belief had anything in it but it does explain, on the footing that the deceased held that belief, why the bequest of those three shares was made to her.

The claimant says that this will failed to make reasonable financial provision for her. Section 1 of the 1975 Act specifically gives standing to the spouse of a deceased to apply for an order under Section 2. “Reasonable financial provision” in the case of a spouse means “such financial provision as it would be reasonable in all the circumstances of the case for a husband or wife to receive, whether or not that provision is required for his or her maintenance”.

Maintenance needs are still relevant in the case of a spouse but not the sole criterion. Moreover, the court is enjoined by section 3(2)(b) of the Act to have regard to the provision which the applicant might reasonably have expected to receive if on the day on which the deceased died the marriage, instead of being terminated by death, had been terminated by a divorce order.

It is accepted that the burden of establishing that the will failed to make reasonable financial provision falls upon the claimant and that if, but only if, that hurdle is overcome the court then has a discretion as to what provision is to be made differently from the will.

Dealing with the question of whether or not reasonable financial provision has been made the court is not, strictly speaking, exercising a discretion, but making a value judgment having regard to all the factors set out in Section 3(1)(a)to(g): Re Hancock (Deceased) [1998] 2 FLR 346; Ilott v Mitson [2011] 2 FCR 1.

The factors in (a) to (g) relevant to this case are as follows.

refers to the size and nature of the net estate of the deceased, to which I shall return;

I turn to consider the key matters here: the financial resources and needs of the applicant and the size and nature of the net estate of the deceased. The deceased’s estate is, in very round figures, worth £600,000 and maybe a bit more. There was some double counting in the case of an insurance policy which has to be eliminated from the calculations. I accept the arithmetic of Mr Gore that the assets (leaving aside the properties) consisting of bank accounts, shares, dividends and life insurance policies, amounted to £114,797. He has taken off that, to bring the position up to date, expenditure on 21 Mayfield Road and a notional figure (just under £20,000) for administration costs. That brings us down to a total of, in round figures, £90,000 on his arithmetic. There is a possibility that the costs of administration may be overstated, not in the sense that they have not been incurred but in the sense that they may overlap with litigation costs, which may or may not become part of the costs of the administration, depending on what I subsequently decide. So it is safer, at this stage, to take a figure of £100,000, not £90,000.

The Jamaican property is in round figures worth £88,500 after currency conversion. Cottage Street and Mayfield Road are worth £405,000 between them. So, the combination of £405,000 and £100,000 which is £505,000 and £88,500 brings us up more or less to £600,000.

t is possible that there are other appropriate deductions such as funeral expenses and the like, but they do not ultimately have any significant impact on the result.

So far as the claimant herself is concerned, she also owns some property at 23 Mayfield Road which, as in the case of the deceased’s properties, predates the establishment of the relationship between her and the deceased. Net of mortgage that is worth £86,500. She has also since the deceased’s death received the proceeds of an insurance policy of just in excess of £34,000. She also received the proceeds of a bond which the deceased took out at around the time of the marriage or shortly afterwards in the sum of £75,000 but, having regard to the deteriorating market conditions of the last few years, the sum produced by the bond was £57,463.

Her current resources are depleted by provision that she has had to make for funding these proceedings, which appears to be in the region of £50,000, and for gifts that she made, from an inheritance from her aunt, of some £7,692 to her grandchildren.

Mr Gore, for the defendants, submits that what I should do is look not just at the resources which are, in fact, available to her today, but to the resources which should reasonably be available to her if she had preserved them more prudently, and that I should ignore the costs of the proceedings at this stage because otherwise every family provision claim in the case of someone of modest means would be self-justifying because the means of the claimant would always be reduced by legal costs.

I doubt whether there is a simple answer to that dilemma, applicable in all cases. When the court is faced with what appears to be a justified claim that the will does not make reasonable financial provision, the court may in many cases, when it comes to the exercise of discretion, not be able to ignore the impact either upon the claimant or upon the estate of the costs of determining that claim, though this approach is made more difficult by the practice of making Part 36 or without prejudice offers rather than open offers, so that the court will often not, at the initial stage, have full information on the costs issues. In any event, where the court concludes, leaving aside the impact of costs, that the will does make reasonable financial provision for a claimant, it is difficult to see how a self-induced costs burden can make the reasonable unreasonable.

If, the claimant succeeds, she has made it clear through her counsel, Mr Colbey, that she will seek her costs from the estate. That would reduce the estate. So, if I take into account the reduction of her own assets when considering her present needs, I must also take into account the reduction of the estate’s assets. There is therefore a smaller pot from which to meet any claim. Prospectively that applies to both sides’ costs, though there is no automatic rule these days - far from it - that the costs come out of the estate. In the circumstances, the correct approach in this case is to consider first (leaving out of account the impact of costs) whether the will failed to make reasonable financial provision for the claimant.

Mr Colbey, in responding to Mr Gore’s approach of identifying the resources reasonably available to the claimant, deducted from the bond proceeds a number of items of expenditure which he said was reasonable expenditure of the claimant. This consisted of the provision of a funeral plan, expenditure on Cottage Street and the payment off of various debts of the claimant (credit card balances and a TSB loan) and the provision of a family holiday. This reduced the bond figure to something close to £37,000.

The evidence under a number of these heads was not completely satisfactory, but that does seem to me to be a justified approach on the evidence I have heard.

The claimant also received, as I have said, the proceeds of a Legal & General insurance policy. The amount appears to have been £21,490. There was also the bequest from Aunt Violet of £7,692. The claimant is also due to receive from the estate rent which has been collected in respect of 21 Mayfield Road, (£3,600) and the reimbursement of funeral costs of £3,200. It was also accepted during the course of argument that her acquisition of a Ford Focus motorcar must be regarded as reasonable.

With those adjustments, the assets which Mr Gore says should be in her hands comes to a figure of roughly £190,000. He does not give credit, as it were, for the claimant’s decision to give the Aunt Violet bequest away to the grandchildren. In my judgment that is probably correct. That was a generous decision of the claimant, no doubt prompted by natural love and affection, but which should not be at the expense of this estate and should therefore not be ignored when considering what resources she should have available to her now. The fact that she felt able to pass that bequest on to her grandchildren is also some indication that she was not so financially embarrassed that she could not afford to act as she did.

I also have to consider her income and expenditure. The claimant receives both a state pension and a National Health Service pension of approximately £1,725 per month, taking them both together. She also receives rent from 23 Mayfield Road. Her total monthly income is £2,242.83, according to an income and expenditure form dated 24^th January 2011.

As Mr Gore points out, her pension entitlement will have risen with inflation since that form was prepared, but so, for that matter, will her outgoings, so I am going to ignore that for present purposes.

She lists in this income and expenditure form a number of outgoings and concludes that she has an income shortfall of £498.36 per month. However, included in the outgoings is the monthly payment for the endowment policy that has now fallen in of £130, which she no longer has to make. Additionally, at least one other item in the form is no longer an outgoing. This is a payment of £50 per month, as the credit card debt to which it related has now been paid off. Other outgoings relate to Cottage Street covering council tax, utility bills and the like.

After the death, the claimant initially considered moving from Cottage Street to 21 Mayfield Road. Cottage Street is a four-bedroomed house. 21 Mayfield Road is a smaller bungalow. Cottage Street was not a property which the claimant initially felt she needed to remain in. It is, however, her home and her preference now is to remain there.

Given the provisions of the Trusts of Land and Appointment of Trustees Act 1996to which Mr Gore referred me, in particular Section 11, the practical effect of the claimant’s life interest is that she can largely control (though not exclusively) what is to happen to the two properties. She can choose where to live. She can choose whether to augment her income by renting out the property in which she is not living, or to have that property sold and the money invested in some other way. As things stand the other property, 21 Mayfield Road, is let. The income from that property seems to be at least £600 per month, which, when one adds that to the £130 and £50 which she is no longer paying for the endowment and credit card debt, more than covers the shortfall on her current outgoings.

If, moreover, she were, at some future date, to downsize to the bungalow, one would expect both her outgoings to reduce and the rental income from the more valuable property in Cottage Street to be higher.

She aspires also to have regular holidays in Jamaica, which is where her family come from. That is not an unreasonable aspiration but I do not consider it was the deceased’s duty assuredly to provide for that. But she has the ability, within the assets under her effective control, so to manage things that she can make provision for annual holidays and the like, or maybe more often than that. It depends how the resources available to her under the will are managed, and, as I have said, she is largely, though not exclusively, in control of that.

In addition, so far as Cottage Street is concerned, she lives there with one of her daughters, who is not herself able to make a contribution towards household expenditure. The deceased, however, was under no moral or other obligation to house his wife’s daughters. I do not criticise the claimant for one moment for acting in that way. She is clearly a caring and loving mother who looks after her children. But that is not itself a reason for increasing the burden on the estate.

I am not persuaded in this case, even without taking into account the needs of other beneficiaries, that this will failed to make reasonable financial provision for the claimant.

I have had regard in reaching that conclusion to the order that a divorce court might reasonably have expected to make if, instead of the deceased dying, there had been a divorce on the date of his death. The capital assets of the deceased and the claimant were in each case acquired before the relationship began. Throughout their relationship, they kept their financial affairs separate. It seems to me that the cross-check of equality derived from cases such as White v White [2001] 1 AC 596 would not be particularly helpful in the circumstances of this case. I am not persuaded that the claimant, even on a divorce, would have done substantially better than she does under the will. If, however, I am wrong about that, I remain of the view that, overall, the will still made reasonable financial for the claimant. The position on a notional divorce is only one of the factors to which I am required to have regard.

There are other factors in Section 3, as I have mentioned, which do not cause me to reach a different conclusion but, if anything, support my present conclusion. I have already mentioned the physical disabilities of Joy Ewing, which the deceased was entitled to have regard to, given his obvious closeness to her. He was also close, to a greater or lesser extent, to others of his nephews and nieces, and, on the evidence, regarded his sister more like a mother. Given also what little bit I know about the way in which the Jamaican property came to be inherited by the deceased and his sister, and then transferred to him, I can well understand why he felt it was fair and reasonable to leave her that property.

The first defendant is a lawyer in Miami and he does not claim any special needs. It is clear, however, from his statement of means that he is not a man of great wealth either. Likewise the nephew that I have mentioned, Dave Linton, is certainly not a man of wealth, and would undoubtedly find the bequest made to him, to put it at its lowest, very useful. As regards Maxine Palmer, she also is not a lady of great wealth. She is not in desperate need, but she would undoubtedly benefit significantly from the modest bequest that she has. She has some physical ailments of her own, having been hospitalised on three recent occasions. The sum left to her is not great, no more than £15,000.

In those circumstances no question of my discretion arises because the essential hurdle the claimant has to overcome of establishing that the will failed to make reasonable financial provision for her has not been overcome. The claim is therefore dismissed.