At Thomson Snell & Passmore, we have a well-established Family department and an experienced Contentious Probate team. As a firm, we work collaboratively to achieve the best results for our clients.
Below, we discuss a recent case, demonstrating the overlap between these two areas of law and why internal collaboration and knowledge sharing is crucial to delivering a full service to our clients.
Sismey v Salandron
This case provides the first judicial comment on the operation of Section 11 of the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) and considered the potential pitfalls of contracting to leave property during lifetime in the context of a divorce settlement.
Despite the principle of testamentary freedom in England and Wales, Section 11 of the 1975 Act protects against situations where a testator has dealt with his or her assets during their lifetime so as to defeat what might otherwise be a successful claim for reasonable financial provision out of their estate, by placing those assets outside of the court’s reach.
The deceased divorced his first wife in 2013.
A settlement was approved by the Family Court and the agreement was set out in a consent order. It was agreed between the parties that the former matrimonial home would be left to the son of the marriage, Thomas, and that the deceased’s former spouse would have no claims against the deceased’s pension (which he had subsequently earmarked for his second wife).
In compliance with the promises made in the divorce settlement, the parties entered into a Deed of Covenant formalising the agreement. This was endorsed by the deceased’s new partner who acknowledged that she could make no future claim on the property as a result.
Shortly afterward, the deceased executed a will leaving the property to his son.
In the intervening years, the deceased was diagnosed with terminal cancer and married his new partner so that she would receive the widow’s benefit of his pension upon his death. What the deceased had not appreciated, was that his remarriage had the legal effect of revoking the earlier will, which left the property to his son. The deceased did not make a new will after his remarriage.
The deceased’s son brought a claim against his father’s estate on the basis of a breach of contract.
The deceased’s second wife opposed that application and sought to unravel the divorce settlement, alleging that it was the product of “collusion” between the deceased and his first wife, and that the court should exercise its discretion under Section 11 of the 1975 Act to order that the property be transferred to her.
Whilst the court felt that correspondence between the deceased and his first wife during the divorce negotiations could amount to collusion i.e. there was a clear intention to protect matrimonial assets from claims by future spouses and so could, in principle, be caught by Section 11 of the 1975 Act, the court determined that the deceased’s first wife had provided valid consideration for the promise by foregoing any claims she might otherwise have had in respect of the deceased’s pension.
The son’s application was ultimately successful and the court ordered that the Deed of Covenant took precedence over the second wife’s claim under the 1975 Act.
Until now, Section 11 of the 1975 Act had been a relatively overlooked power available to the court when determining claims for reasonable financial provision out of an estate.
Although the second wife’s argument in this case was ultimately unsuccessful, the judicial consideration of what could amount to “full valuable consideration” may pave the way for further challenges by claimants under the 1975 Act, increasing the prospects for contentious probate lawyers and/or insolvency lawyers to set-aside court-approved matrimonial consent orders, on the basis that they are transactions at an undervalue.
From a family lawyer’s perspective, it serves as a reminder of the scope and, indeed, the existence of claims under the 1975 Act and how this might later impact upon a divorce settlement.
Where a client intends to leave a property by will, careful consideration of how best to preserve assets for a client’s children will need to be at the forefront of the family lawyer’s mind.
This case does not add certainty to the value of settling property by will in the context of a divorce. However, an awareness of the risk will ensure that practitioners take every step to avoid one party losing the benefit afforded to him/her by a matrimonial consent order, in circumstances where the other party to the order is deceased and, therefore, negotiations can no longer take place.