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Exploring “Reasonable Financial Provision” – Lewis v Warner

On 19th December 2017, the Court of Appeal handed down judgment in the case of Lynn Lewis v Thomas Warner [2017] EWCA 2182 (Civ). The case involved “unusual” and “exceptional” circumstances and was the first time that an application by a cohabitee under the amended s1(1)(ba) and 1(1A) of the Inheritance (Provision for Family and Dependents) Act 1975 (‘the Act’) had reached the Court of Appeal.

In summary, the Court of Appeal confirmed that “reasonable financial provision” for maintenance, within the meaning of the Act, could be satisfied by the making of an order transferring the deceased’s property to her surviving unmarried co-habiting partner for full value, even though he could afford to purchase an alternative property from his own resources and had no expectation of being able to remain in the property after the testator’s death.

In coming to its decision, the Court of Appeal reviewed and relied upon the recent decision in Illot v Blue Cross [2017] UKSC 17, a case in which Brie Stevens-Hoare QC appeared for the respondent.

Background

Mr. Warner was aged 91 at the time of trial. He had been living with his unmarried partner Mrs. Blackwell (‘the deceased’) at her home for almost 20 years at the time of her death. The deceased had made a will but it could not be found and in the circumstances her estate was to pass to her daughter Mrs. Lewis. Mr Warner admitted that in any event he did not believe that the will would have made any provision for him at all, because he was the wealthier of the two and had sufficient financial resources to provide for himself.

The unusual feature of the case was that the property in which the couple had lived had particular but non-monetary value to Mr. Warner. His evidence was accepted by the court at first instance as frank, direct and credible. He explained that he would be very unhappy and stressed if he had to move from the house in which he had spent the happiest 20 years of his life.  He was in poor health with various ailments and his neighbour, who was a doctor, had provided him with an emergency button around his neck that she would immediately respond to. The house was moreover situated in a village where he had lived for his whole life – including the house in which he was born, his previous business and a convenient shop within walking distance. These facts led the judge at first instance to conclude that a result forcing Mr. Warner to move “should be avoided if at all possible”.

Mrs. Lewis for her part did not want the house for herself, but rather she simply wished to maximise its sale value. She therefore wanted vacant possession, with the option to consider renovating and then placing it on the open market. If it happened that Mr. Warner should be the one to buy it, she would have no objection to that on the basis that she would then be satisfied of attaining full value.

At first instance, pursuant to the Act, the court ordered that the property should be transferred to Mr. Warner for £385,000. The parties had a joint expert who had valued the property at £340,000, but Mrs. Lewis then obtained a second valuation at the higher level and indicated in evidence that at that higher level she would be assured of having attained full value. Nonetheless when the order was made Mrs. Lewis was not satisfied and appealed. Her appealed was dismissed in the High Court and then proceeded to the Court of Appeal.

The Court of Appeal’s Decision

The Court of Appeal identified two central questions on appeal: (1) whether the first instance judge had been correct to conclude that the deceased had failed to make reasonable financial provision for Mr. Warner’s maintenance; and (2) whether the first instance judge was entitled as a matter of law to make the order made under the Act.

The leading judgment was given by Sir Geoffrey Vos, Chancellor of the High Court and his conclusion was that the failure to provide for Mr. Warner to remain in the property did indeed amount to a failure to give reasonable financial provision.

The judgment began by repeating with approval a substantial part of the judgment of Lord Hughes in Illot. That judgment had stated that the concept of reasonable financial provision for maintenance was central to the jurisdiction of the court to depart from a will (or the intestacy rules). The concept was broad but tempered by the importance of ensuring that the court does not satisfy mere desires or provide what might objectively be considered a reasonable disposition. It was important to ensure that the court kept its focus of whether reasonable financial provision for maintenance had been made, judged by the factors set out in s3 of the Act. The word ‘maintenance’ was to be stressed and though that word was not to be strictly defined it imported to some degree the concept of ‘need’ – to be judged not by reference to subsistence levels but to the standard appropriate for the circumstances. Lord Hughes’ judgment further referred to the relevance of a ‘moral claim’ for which there was “no requirement” but which might often nonetheless “be at the centre” of a decision under the Act. Such matters were then to be balanced against the competing interests of other beneficiaries.

Back in the present case of Lewis, the Court of Appeal considered the factors listed at s3 of the Act, and in particular the obligations of the deceased toward Mr. Warner (s3(1)(d)); Mr. Warner’s physical disabilities (s3(1)(f)); and Mr. Warner’s age and the length of the period of cohabitation (s3(2A)(a)).

Noting that the concepts of reasonable financial provision and maintenance were broad, the Court of Appeal approved the first instance decision that the provision of a particular roof over a person’s head amounted to the provision of maintenance. Further, taking account of all of the circumstances of the case, and in particular Mr. Warner’s objectively assessed needs, the deceased had not made reasonable financial provision for him.

Turning to the type of order made – for transfer of the property for (greater than) full value – the Court of Appeal again concluded that the court had been entitled to make that order. The appellant’s objection to the order was that in the absence of any value passing from an estate to an applicant under the Act it could not properly be said that the order was making financial provision for maintenance. Such an order therefore fell outside of the jurisdiction of the Act.

The Court of Appeal referred to s2(1)(c) and s2(1)(e) of the Act, noting that those sections granted the power to transfer property, or indeed for property to be acquired for the benefit of an applicant. The court then rhetorically asked whether it would be permissible to transfer a property for £1 less than full value, and thus why the purchase price should matter at all if the concept of maintenance included the transfer of a property, as it clearly did.

The conclusion was that there may be occasional cases in which an applicant’s needs are for some particular property, where the precise financial value of the property is less important than the property itself. This was such a case. Thus, in the “exceptional” circumstances of this case, the order was appropriate.

Comment

It is clear that this case turns upon its own “unusual” and “exceptional” facts.

The result is perhaps unsurprising in the context of those facts. On the one hand a 91-year-old man (93 at the time of the appeal) simply wished to remain in his home with happy memories and supporting neighbours and was prepared to pay full value for the privilege; on the other hand, the deceased’s daughter wanted merely to sell the home for full value but for reasons never clearly explained, would not be satisfied in the absence of an open market sale, even though on her own evidence the order gave her full value for her interest.

From a more technical point of view, however, the decision can only be explained on the basis that the Court took the view that the transfer of a property for (greater than) full value could amount to reasonable financial provision for maintenance. The Act specifically uses the word “financial” and there must be some doubt as to how the provision of a property for explicitly non-monetary advantages could amount to financial provision, particularly when, to the contrary, the estate appeared to financially benefit from an enhanced transfer value.

It will be interesting to see if the definition of ‘reasonable financial provision’ has thus widened and whether we now see an increase in the courts’ willingness to make similar transfer orders in future claims.