Do Not Waste this Time: Inheritance Act stand-still agreements
The Inheritance (Provision for Families and Dependants) Act 1975 (“the Inheritance Act”) enables some limited exceptions to the principle of testamentary freedom and provides an option for redress for those dissatisfied with the dispositions made to them in a will.
However, there is a time limit on claims. Pursuant to section 4, applications are required to be made before the end of the period of 6 months from the date of the grant of probate. There is an exception if the court grants permission.
There is a tension between the need for certainty, to resolve disputes quickly and enable executors to get on with their job of realising and distributing assets and permitting parties to engage in sensible and constructive negotiations to avoid the expense and distress of contested litigation.
A recent case before the Court of Appeal, Cowan v. Foreman and others [2019] EWCA 1336 has confirmed that the Court will exercise its discretion to extend time in suitable cases and will give effect to properly constituted “stand-still agreements” in appropriate circumstances.
The mere fact that the appeal had to be brought however, and some of the comments of the judge at first instance, make it clear that managing time limit compliance in civil litigation can be a fraught process and there are different sorts of time limit which require addressing in different ways.
There are certain judicial attitudes and a pervasive culture of enforcement which need to be recognised and managed.
Three specific situations where time limits are important are:
Time bars in normal litigation as governed by the Limitation Act
Procedural time limits under the Civil Procedure Rules
The 6 month provision in section 4 of the Inheritance Act.
The Limitation Act
The Limitation Act is recognised as being procedural: if a limitation defence is not pleaded then the claim can continue. And there are various exceptions involving the discretion of the court and latent damage. Essentially, there may be circumstances where a properly drafted “stand-still Agreement” under which a potential defendant agrees not to take a limitation point on certain conditions, is entirely appropriate. Despite occasional expressions of judicial displeasure under which the court seems to think it is better to pay a £10,000 issue fee and then seek a stay, such agreements are common and, for all practical purposes very useful.
The CPR: a disciplinary jurisdiction
The Civil Procedure Rules seek to apply an overriding objective which includes a concept of allotting to each case an appropriate share of the courts resources while taking into account the need to allocate resources to other cases. The application of this principle can be quite unpredictable. The development of a jurisprudence on the availability of “relief from sanctions”, , originated in the undoubtedly brutal and unyielding philosophy of Mitchell in 2013. It led to the wide but still exacting discretion embodied in the Denton principles first expounded in 2014: there is now a three stage test which still places emphasis on the court’s disciplinary role in policing the need to enforce compliance with rules, practice directions and orders.
The Inheritance Act: a protective jurisdiction
The timebar under Section 4 is its own creature: in principle it is there to protect personal representatives and enable them to carry out their duties.
Significance of the case
Cowan v. Foreman saw the judge at first instance apply principles from the CPR category to a case under the Inheritance Act category. Refreshingly, the Court of Appeal corrected the position.
The facts
The late Michael Cowan has been described as a bin liner tycoon: he made a vast fortune out of plastic bin bags. On death, his estate was worth a little under £16m. Under his will he left the bulk of his estate tied up in trusts of which Mrs Cowan was only a discretionary beneficiary.
Probate of the will was granted on 16 December 2016 and Mrs Cowan felt that she was very much at the mercy of the trustees. Following detailed discussions between highly experienced solicitors, a stand-still agreement and a failed mediation, the application was made on 8 November 2018, making it 17 months out of time.
The decision
Mr Justice Mostyn at first instance dismissed the claim on the basis that no good reason had been shown, essentially applying the Denton principles and treating non-compliance with the time limit as a disciplinary matter. He deprecated stand-still agreements and suggested that their use should cease.
The Court of Appeal in summary held as follows:
Section 4 of the Inheritance Act does not exist to protect the court from “stale claims” as the judge suggested. It is there to provide protection for personal representatives.
There is no disciplinary element to section 4. Lady Justice Asplin confirmed that to have regard to the Denton approach to relief from sanctions when exercising the discretion under section 4 “involves conflating issues that, if they are related, are at best distant cousins”.
The proper approach is to consider all the relevant factors and give them appropriate weight in the particular circumstances of the case.
It is not necessarily true there must be “good reason” for a delay in every case, each case turns on its own facts.
It is necessary to decide whether an applicant’s claim has a real prospect of success (the summary judgment test) rather than a fanciful one. The Court of Appeal found that the judge at first instance had come to some sweeping and erroneous conclusions on this issue.
Stand-still Agreements
As for stand-still agreements, Lady Justice Asplin said this:
“It seems to me that although the Judge was correct to conclude that the effect of section 4 is that the legislature has determined that the power to extend the six- month period belongs to the court, and that any agreement not to take a point about delay cannot be binding, without prejudice negotiations rather than the issue of proceedings should be encouraged. Although the potential claimant will have to take a risk if an application is made subsequently to extend time in circumstances where negotiations have failed, if both parties have been legally represented, it seems to me that it would be unlikely that the court would refuse to endorse the approach.”
Lady Justice King went further and provided useful guidance for the legal profession in such cases:
“[the Court was told that] in parts of the profession the use of stand-still agreements is strongly deprecated. Given that such agreements cannot be binding, the approached favoured by many, ……………, is that which was preferred by the judge; namely that proceedings should be issued within 6 months and, if the parties are conducting negotiations, an agreed application for an adjournment is made to the court at the earliest opportunity.
That this will often be the appropriate course is undeniable but, for my part, I would not wish to go so far as the judge and to say that there is no place for stand-still agreements in what are often highly distressing and sensitive cases and in which a decision to issue is otherwise to be made whilst bereavement is still very raw and emotions high. In such circumstances the issue of proceedings can, rather than providing a safety net if agreement cannot be reached, lead to a hardening of attitudes and a focus on the litigation with the consequent cost to the estate and delay in its distribution.
I agree with Asplin LJ, that whilst the final decision always rests with the court, where there is a properly evidenced agreement to which no objection has been taken by the Executors and beneficiaries, it is unlikely that in the ordinary way, a judge would dismiss an application for an extension of time.
I should stress however, that if parties choose the 'stand-still' route, there should be clear written agreement setting out the terms/duration of such an agreement and each of the potential parties should be included in the agreement. In the event that proceedings have, in due course to be issued, the court should be presented with a consent application for permission to be granted notwithstanding that six months has elapsed.”
Conclusion
So, whilst the case is not necessarily a general blessing for stand-still agreements, it has little relevance to other limitation issues or the availability of relief from sanctions. It does however provide some comfort for those wishing to deal with issues arising from Inheritance Act claims on a measured and sensible basis.
In summary, it is possible to control the process and avoid an unseemly and distressing rush to litigation but you have got to get it right. As a wise man once said: “do not waste this time.”