In this article, we highlight some of the issues for practitioners to be aware of when dealing with these notoriously difficult types of claims, and set out some top tips to assist in reaching a successful settlement.
We acted for the Claimant, Ms X, in her claim for reasonable financial provision from the estate of her late partner, Mr Y, a wealthy business man.
Ms X and Mr Y were in a relationship for over a decade before Mr Y's tragic death. A few years into their relationship, Ms X moved in to live with Mr Y. At Mr Y's invitation, Ms X gave up her job in order to support him more fully in his business ventures. Mr Y assumed financial responsibility for Ms X and the couple enjoyed an affluent lifestyle and high standard of living, indulging in lavish holidays and a busy and costly social calendar. All of this was funded by Mr Y, who also paid for the vast majority of the couple's daily living expenses and owned their large home in his sole name.
Sadly, Mr Y died unexpectedly. At the time of his death, Mr Y's estate was worth tens of millions of pounds.
Mr Y's Will, made a few years into their relationship, left Ms X only a fraction of his overall wealth and a limited, conditional right to live in their home. The bulk of his multi-million pound estate was left to close family members. Having already given up her job, Ms X had very limited income and could not afford to pay for the costly maintenance and outgoings on their home, previously paid by Mr Y. Needless to say, she also could not afford the holidays or affluent lifestyle they had enjoyed together.
Ms X brought a claim for reasonable financial provision from Mr Y's estate under s.1(1A) of the Act, on the basis that she was in a cohabiting relationship with Mr Y, living as a married couple, for the two year period before his death. As we all know, one of the factors a court would have regard to when considering the level of award in such a case is the standard of living enjoyed during the deceased's lifetime. This became a key focus of the claim.
The defendants mounted a no holds barred defence, challenging everything from the existence of an ongoing quasi-marital relationship, to the number of meals out the couple had each week, and the basis on which Ms X continued to occupy their home.
In the context of such an acrimonious backdrop, how were we able to achieve a successful settlement?
Detailed income and expenditure schedules will form a key part of any case under the 1975 Act, and are likely to be a central focus at mediation. Therefore, it is crucial to ensure that the schedules are thorough, well-evidenced, reflective of reality, and will stand up to close scrutiny. All too often claimants have a tendency to overestimate their spending, without the evidence to support the figures. An unrealistic and exaggerated schedule of expenditure has the potential to undermine even the strongest of claims.
There is enormous benefit in carrying out a forensic analysis of your client's bank statements and other relevant financial documents at an early stage, to create an accurate picture of their current financial position and lifestyle with the deceased. Where bank statements are not available, consider alternative ways to evidence lifestyle, such as clothes receipts, plane tickets and holiday booking confirmations. If no direct evidence is available, obtain equivalent quotations and evidence of current market prices to support your figures.
It is generally accepted that the Duxbury tables are the go-to method for capitalising an annual income shortfall, to calculate the lump sum required for maintenance for the rest of a person's life. However, as you are no doubt aware, the Duxbury tables make a number of assumptions which may not be appropriate for your client.
For example, Duxbury assumes that a person will receive the full state pension on retirement. If a person has not made sufficient National Insurance payments throughout their working life, they will not be eligible to receive the full amount. In this instance, the difference in the amount actually received compared to the full amount available should be factored in as an additional liability. This can be particularly relevant in cohabitee claims where the claimant may have given up work to raise a family with the deceased.
In cases such as this, which are often highly emotive, it is common for personal accusations to be made, family history dredged up and old wounds re-opened. It is true that conduct of the parties can be a relevant factor to be considered by the Court under s.3 of the Act. However, consider whether it is cost-effective or strategically helpful to enter into lengthy correspondence with the other side, exchanging tit for tat on matters which are not relevant to the central claim.
A position often adopted by defendants is that there was no longer, or never was, a relationship akin to husband and wife. This may be a reasonable position to take, and if successfully proved could result in a potential claimant being ineligible to bring a claim, or a reduction in the likely award a Court would make for their maintenance.
However, adopting this stance in the face of strong evidence to the contrary is likely to significantly increase the costs to both parties, who will be required to obtain witness evidence to support their respective positions. It is also likely to entrench positions and can make settlement an unrealistic prospect. This strategy should therefore be approached with caution.
Whilst we all want our clients to go into mediation feeling confident and determined, if the mediation is to have a realistic prospect of succeeding it is also important to manage expectations from the outset.
Mediation is a ultimately a compromise and it is likely that neither side will come away feeling that they have 'won', in the same way they might if successful at trial. Helping your client to understand this in advance can save valuable time and increase the likelihood of a compromise being agreed on the day.
Encourage your client to think realistically about the future; what do they see? How can it be achieved in practice?
Housing is a good example of this. It is common for a cohabitee to want to continue living in the home they shared with the deceased. If the only way this could realistically be achieved is with a life-interest, it may ultimately be in your client's best interests to go for provision for alternative accommodation outright, allowing for a clean-break between the parties. A willingness to compromise on issues which may at the outset have felt like a redline can be helpful in breaking a deadlock and a strong negotiating tool.
Finally, it goes without saying that proportionality should be a key consideration throughout, even with high-value estates. It is easy for costs in particularly acrimonious cases to spiral, and there is a risk that this could present an additional barrier to reaching settlement. Remember that if the claim proceeds to trial, even if your client is successful, it is unlikely they will recover 100% of their costs from the other side if the costs are considered disproportionate.
Taking a realistic and pragmatic approach to bringing or defending a claim of this nature can significantly reduce the legal costs to be incurred, leaving more funds available in the pot to be shared between the parties and increasing the likelihood of a settlement being reached.