Judge makes alarming comments about validity of standstill agreements in Inheritance Act claims

In a recent judgment, the High Court has cast doubt on the extent to which the court will recognise standstill agreements in applications under the Inheritance (Provision for Family & Dependents) Act 1975.

The decision

The Claimant is the 78 year old widow of Michael Cowan (the Deceased), whose 2002 big money divorce case was reported when his ex-wife was awarded 38% of his £11m fortune.  The Claimant was the principal beneficiary of the Deceased's £16m estate.  He had, by his will, set up two trusts, primarily to provide for her needs, but also to provide for his children and grandchildren.  The Deceased knew that he was dying when he made his will and specifically instructed the trustees to look generously upon any request by her for capital.  However, the Claimant was concerned that she did not have outright ownership to any property, so she brought a claim under the Act on the basis that the Deceased's will did not provide reasonable financial provision for her.

Probate was granted in June 2017, so limitation under s4 of the Act expired in December 2017.  The Claimant issued proceedings in November 2018 (some 11 months late) and asked the court to exercise its jurisdiction to allow the claim out of time.  The parties had agreed a standstill for the period between December 2017 and May 2018.   Although he agreed to ignore that period for the purpose of assessing the Claimant's application for permission to proceed out of time, Mr Justice Mostyn, sitting in the Family Division of the High Court, made alarming comments about the practice of agreeing standstills:

"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 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.

…I suggest that in no future case should any privately agreed moratorium ever count as stopping the clock in terms of the accrual of delay.  Put another  way, a moratorium privately agreed after the time limit has already expired should never in the future rank as a good reason for delay."

Mr Justice Mostyn urged judges to take a "robust" approach to applications of this nature.  Needless to say, the Claimant's application was refused and she was not permitted to continue with her claim.  The judge refused permission to appeal.

Analysis

Litigators will be keen to argue that this decision is confined to claims under the Act.  Standstill agreements are a common tool widely used by litigators to save costs and, in non-Inheritance Act claims, they seem to work.  Where the relevant limitation period is set out in the Limitation Act 1980, limitation is usually not in issue unless pleaded by the defendant.  Standstill agreements contractually oblige the defendant not to raise a limitation defence, so the claim is able to proceed.  In Inheritance Act claims, though, a claim issued after the limitation period has expired can only proceed with the court's permission (s4 of the Act).  There are obvious public policy reasons for this: to avoid beneficiaries and court being "vexed by stale claims".

For contentious probate practitioners, some comfort is available.  Firstly, the judge regarded the Claimant's claim as weak, which presumably made him less willing to overlook the expiry of the limitation period.  Secondly, although it is not prominent in the judgment, it is obvious from the quote above that the judge was influenced by the fact that the standstill was agreed after limitation expired and the standstill expired some time before the issue of proceedings.  Thirdly, in this case, it appears that the estate had been distributed (albeit by placing the assets into trusts) by the time the claim was brought.   Although not mentioned in the judgment, this is usually a key consideration when deciding applications of this nature.

Whilst the comments are obiter, it remains to be seen whether this decision will be appealed and how it will impact the practice of contentious probate practitioners.  Some firms already avoid agreeing standstills for Inheritance Act claims in order to avoid this situation from arising.  Inheritance Act claimants would be wise to issue their claims and seek a stay as directed by Mr Justice Mostyn or risk their claim being out of time, which, in light of this judgment, would no doubt lead to a professional negligence claim against the solicitors acting.