The Adult Child Strikes Back (Rochford: Part 36 in Inheritance Act claims)

Shoosmiths won increased provision for an adult child from her father's estate under the Inheritance (Provision for Family and Dependants) Act 1975, achieving all of the costs benefits of the Defendant’s failure to beat the Claimant’s Part 36 offer.

Recorder Williamson QC heard the trial remotely over two days on 21 and 22 January 2021 in the Peterborough County Court. He handed down judgment on 2 February 2021.

The Claimant, Lynne, was her father Kenneth’s only child and their relationship was difficult.  His net estate was worth around £245,000. He gave his daughter £25,000 in his will (note this is a little over the mythical “10%” that some commentators have identified as success for adult children seeking increased provision post Ilott). After legacies, Kenneth left his residuary estate to his sister, Ilva, who stood to inherit around £193,000.

Lynne issued her claim in March 2019 and it took almost two years to reach trial.  Ilva robustly defended the claim, requesting significant disclosure over the course of proceedings, with consequent cost.

Lynne owned her own home and was unable to work due to her health.  She needed increased provision from Kenneth’s estate to meet her income needs, particularly as her income protection plan will expire in 2023.  Ilva did not advance competing needs in her Defence but asserted that Kenneth had made reasonable financial provision for Lynne in his will and denied that Lynne needed increased provision from Kenneth’s estate.

Judgment

Recorder Williamson QC found that Kenneth’s will failed to make reasonable financial provision for Lynne and ordered that Lynne receive:

• An award of £85,000 from Kenneth’s estate in addition to the existing £25,000 provision; and
• her costs – to be paid by Ilva personally.

Ilva was refused permission to appeal.

Without prejudice save as to costs negotiations and their consequences

Lynne made offers of settlement including two Part 36 offers. These were not accepted by Ilva. Ilva did not make any Defendant Part 36 offers.

Because Ilva failed to beat Lynne’s Part 36 offers, Recorder Williamson QC ordered that Ilva had to pay Lynne:

• Interest on the sum of £85,000 from the expiration of the first Part 36 21-day period until the date of payment at a rate of 5%; and
• Interest on Lynne’s costs at a rate of 5% for the same period; and
• A sum of £8,500 pursuant to CPR r36.17(4)(d); and
• An interim payment on account of costs.

Lessons

Ilva is unlikely to be left with much from the estate once Lynne’s legacy, award, costs and interest are paid.

Making sensible early Part 36 offers of settlement will provide:

(a) Defendants with the greatest level of costs protection (in accordance with CPR 36.17).

Claimants with the opportunity to take advantage of the significant financial benefits of CPR 36.17.None of us really know when we go into trial how we will feel when judgment is eventually handed down. However, as early as possible, we do need to consider and use Part 36 to protect our clients and set them up to succeed on costs.

A note on Mediation and negotiated settlement

We have seen reports that this matter was not mediated.  In fact, mediation did take place in September 2020: after the Part 36 offers had been made, and after Ilva had resisted invitations to mediate for over a year, claiming that Lynne’s case was too weak to warrant mediation. Significant costs had been incurred by then, and the trial had been listed.

A party entrenched in his or her position may well find the thought of settlement unpalatable.  However, on balance, the risk that settlement will prove to be the lesser of the evils is such that negotiating settlement is usually the expedient option. We all know that no one walks away from a mediation with exactly what they want: that is how we know that the parties have truly compromised. Our clients need to understand that too. Ilva would have benefitted considerably from a more pragmatic and commercial approach to this dispute, early engagement in meaningful settlement discussions, and recognition of what transpired to be the very real risk that it may not go her way on the day.

This case is a stark reminder of the need to take settlement seriously, no matter how strong you or your client think his or her position is. Inheritance Act claims are notoriously unpredictable and each is decided on its own facts.  Costs can easily escalate and become disproportionate to the value of the estate.  Recorder Williams QC noted when handing down judgment that this was a case that ought to have been settled.

A note on success fees

Recorder Williamson QC took Lynne’s success fee (payable under the terms of her Conditional Fee Agreement with Shoosmiths) into account when calculating his award, preferring Re H [2020] EWHC 1134 (Fam) to the decision in Re Clarke [2019] EWHC 1193 (Ch) on this point.  Shoosmiths secured similar provision in Bullock v Denton (2019) (unreported) – paving the way for Re H and now Rochford - in a successful cohabitee Inheritance Act claim.