Inheritance Act Claims and Standstill Agreements –  Where Are We Now?

Last year Mr Justice Mostyn’s recommendation in Cowan v Foreman [2019] EWCA Civ 1336 that the practice of parties entering into standstill agreements in Inheritance Act claims be brought “to an immediate end” drew some attention. In current circumstances, with the difficulties in meeting clients face-to-face and conducting mediations and other forms of ADR, the need to buy time before incurring significant litigation costs is likely to become more commonplace. It therefore seems an opportune moment to review the authorities and consider the options available.

Section 4 and Standstill Agreements

Section 4 of the 1975 Act provides:

An application for an order under section 2 of this Act shall not, except with the permission of the court, be made after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out (but nothing prevents the making of an application before such representation is first taken out).

The effect is that claimants have six months from the date of the grant of probate or letters of administration to issue a claim, failing which they require permission from the court.

There are a number of ways to overcome the possible problems presented by section 4. Often a claim is issued in time and then an agreed application for an adjournment or stay is made at an early stage. Alternatively, parties may agree to enter into standstill agreements pre-issue – i.e. the defendants agree that they will not take issue with the delay in issuing should negotiations break down. This was the course adopted by the parties in Cowan.

Cowan v Foreman

Mrs Cowan was the widow of Michael Cowan, who died leaving an estate worth c.£29 million. She was Michael’s second wife and by his Will he set up two discretionary trusts of which she was a beneficiary, but gave her only limited assets outright. Probate was granted to Michael’s executors on 16th December 2016, and therefore the time limit for Mrs Cowan to bring a claim under section 4 expired on 16th June 2017.

A claim was not issued in time. In January 2018 the trustees confirmed that they would not take the limitation point pending receipt of a letter of claim. There followed a period of unsuccessful negotiation, including a failed mediation. On 8th November 2018, seventeen months after expiry of the s.4 period, Mrs Cowan made an application for permission to issue out of time.

The first instance decision – Mr Justice Mostyn’s disapproval

Mostyn, J., was unimpressed by Mrs Cowan’s approach. He identified a two-stage test for s.4 applications. The court must be satisfied that a claimant has shown: (a) good reasons justifying the delay; and (b) that she has a claim of sufficient merit to be allowed to proceed to trial.

His view was that Mrs Cowan failed both limbs of the test. In respect of the second limb, he considered that there was no evidence that the trustees would not honour Michael’s wishes to ensure that Mrs Cowan’s every reasonable need was met from the trusts. In respect of the first limb he said:

I was told that to agree a stand-still agreement of this nature is “common practice”. If it is indeed common practice, then I suggest that it is a practice that should come to an immediate end. It is not for the parties to give away time that belongs to the court. If the parties want to agree a moratorium for the purposes of negotiations, then the claim should be issued in time and then the court invited to stay the proceedings while the negotiations are pursued. Otherwise it is, as I remarked in argument, simply to cock a snook at the clear Parliamentary intention.”

He went on to remark that a moratorium privately agreed after the time limit has already expired should never in the future rank as a good reason for delay, and that “absent highly exceptional factors…the limit of excusable delay should be measured in weeks, or, at most, a few months.”

The Court of Appeal’s more lenient view

In allowing Mrs Cowan’s appeal, the Court of Appeal took a somewhat less stringent approach. It did not adopt Mr Justice Mostyn’s two-stage test and held that a good reason for the delay was not a prerequisite for the granting of permission. The section 4 power might properly be exercised in a strong claim for provision where there was no good reason for a delay in issuing. Whilst Mostyn, J., had been correct to conclude that the effect of s.4 was to confer the power to extend the six-month period upon the court, and any agreement not to take the point about delay could not be binding, without prejudice negotiations were to 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.”

Perhaps the most helpful part of the judgment is the guidance of King, L.J.:

If parties choose the “standstill” 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.”

Implications

Standstill agreements, then, still have a place. In my experience they have become somewhat less “common practice” since Mr Justice Mostyn’s judgment, and whilst the Court of Appeal reopened the standstill route, its reference to potential claimants “taking a risk” is not entirely reassuring.  Any claimant opting for the standstill route would obviously be well-advised to ensure that it meets the conditions identified by Lady Justice King.

Being of a cautious disposition, I favour issuing a claim and then seeking an immediate stay by consent. This has the disadvantage of incurring an issue fee. It also carries the possible risk of a proactive judge listing the application for hearing, although in the current climate and with a presumably ever-increasing backlog of work, the probability of courts listing consent applications seems low. In any event, my view is that these drawbacks are outweighed by the significant benefit of certainty.

More recent decisions

Although not concerned with a standstill agreement, the decision in Re Bhusate (deceased) [2020] EWHC 52 (Ch) to grant permission to a widow to pursue a claim almost 26 years after expiry of the section 4 period seems consistent with the Court of Appeal’s more lenient approach to delay. Re Bhusate is undoubtedly a fact-specific decision, the estate having not been administered despite the deceased having died in 1990. Nevertheless, it may be of some aid to claimants seeking permission under section 4 in arguing that no period of delay should be treated as absolutely beyond the pale if other factors are in their favour.

In Begum v Ahmed [2019] EWCA Civ 1794 The Court of Appeal granted permission to a disabled wife to bring a claim out of time in circumstances where she had been entirely disinherited and stood to lose her home. The period of delay was almost two-and-a-half years, but given the stark circumstances of the claimant perhaps the most surprising aspect of the case is that permission had been refused at first instance.

Tim Jacques accepts instructions in contentious probate and Inheritance Act claims, and has experience of acting for claimants, beneficiaries and personal representatives.