Senior judges divided on approach to 1975 Act limitation principles

Two recent cases have seen the Court take starkly different approaches to applications for permission to issue 1975 Act claims out of time and the practice of entering into standstill agreements.

The case of Cowan v Foreman made waves last month after Mr Justice Mostyn pulled no punches with his criticism of standstill agreements, whereby parties agree to stop the clock running on the limitation period for 1975 Act claims. This practice has always been controversial. Section 4 of the 1975 Act makes it clear that a claim may only be issued after the deadline, 6 months from the obtaining of a grant of representation, with “the permission of the Court”.

It is clear that the Court has always had the ability to overrule a standstill agreement. Mr Justice Mostyn left the parties in no doubt of his view of such agreements, stating: “I was told that to agree a standstill 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. ”The judge's view was that claimants who face a limitation problem should always issue their claim protectively. The judgement has received a mixed reception from practitioners. Some have welcomed judicial clarification to a legal grey-area. But, there has been disappointment, as the advantage of standstill agreements is they allow parties time to negotiate claims without the significant cost of issuing and the emotional stress that formal Court proceedings inevitably involve. Those in the latter camp will welcome the recent ruling in Bhusate v Patel, which came hot on the heels of Cowan. In this case, Chief Master Marsh granted a claimant permission to issue her 1975 Act claim almost 26 years after the expiry of the deadline. In the judgement, he refused to criticise the claimant for the fact that a small portion of the delay was to allow for negotiations between the parties, including a failed mediation.

He stated “the delay in 2017 was not material and the claimant's advisers were right to encourage her to agree to mediation in light of the unhappy family history, and indeed, of the delay”. While not directly relevant to the issue of standstill agreements, Chief Master Marsh's flexible view is at odds with the more draconian approach in Cowan. Despite this, it will still be a bold lawyer who advises their client to rely on a standstill agreement in light of Mr Justice Mostyn's unambiguous judgement. Practitioners will be eagerly awaiting to see if his decision is appealed. Both cases also give useful guidance to the broader issue of applying for permission to issue a 1975 Act claim after the deadline under section 4 has expired. In Cowan, the deceased, Michal Cowan, died in April 2016 with an estate worth approximately £16-million. The deceased's last will created a business property trust, which his wife Mary was one of a number of discretionary beneficiaries, and a residuary trust which had the same beneficiaries but provided Mary with a revocable life interest. Probate was granted in June 2017.

The parties entered into a standstill agreement in January 2018 and the claim was eventually issued in November 2018, almost 18 months after the deadline had expired.

 

Mr Justice Mostyn considered the principles set out by LJ Black in the 2013 case of Berger v Berger, which itself distilled the 1981 Re Salmon decision. The principles are as follows:

1. The court's discretion is unfettered but must be exercised judicially in accordance with what is right and proper.
2. The onus is on the applicant to show sufficient grounds to be granted permission.
3. How promptly the applicant has acted in applying after the deadline and the circumstances of the delay.
4. Were negotiations begun within the time limit?
5. Has the estate been distributed before the claim was notified to the claimants?
6. Would dismissal of the claim leave the applicant without other legal remedies?
7. Does the applicant have an arguable claim if it is allowed to proceed?

Mr Justice Mostyn preferred to view the above principles as a two limb test. First, he asked is there good reason justifying the delay; second, does the claim have sufficient merit to be allowed to proceed? The claimant's concern was that she was at the mercy of the trustees, who could potentially cut her adrift entirely.

Mr Justice Mostyn had no truck with this argument. He considered she did not have an arguable 1975 Act claim, as she was already well provided for because the trustees would follow the deceased's wishes and ensure she was well looked after. He refused to grant her permission on the basis she had failed the second limb of his test. Some might find it surprising that the judge considered a claimant, spouse, who was reliant on the discretion of the trustees to benefit from her husband's estate, had no arguable 1975 Act claim. The judge also made it abundantly clear that her failure to pursue her claim within the time limit, in circumstances where she was aware of how the estate would be distributed, and had received legal advice, was also fatal to her application. In Bhusate, the claimant was the deceased's widow. He died intestate in 1990. The claimant received a statutory legacy under the intestacy rules. She was also one of the administrators. The principal asset of the estate was the deceased's home that he had inherited following the death of his first wife. After the deceased's death, the property was not sold due to a dispute between the widow and four of the Deceased's children from his previous marriage. The matter remained unresolved for many years before proceedings were eventually brought.

Chief Master Marsh determined the widow was statute barred from receiving her legacy in an earlier hearing in late 2018, leaving her with only her 1975 Act claim. The application was hamstrung by the very long delay of some 26 years. However, Chief Master Marsh found this only had a neutral impact on the application. This may appear surprising, but he took into account the fact the claimant was very young when she married the deceased, spoke little English and was pushed around by the deceased's more sophisticated adult children. Chief Master Marsh also found that the other Re Salmon principles favoured granting permission. He considered the widow had a strong 1975 Act claim as a spouse who had received nothing from the estate other than the years she had lived in the property. This was a contentious point in the case. The defendants submitted that the court should consider the situation at death, at which point the widow was well provided for under the intestacy rules and it was only due to her own fault that she now faced receiving nothing.

Chief Master Marsh disagreed, contending he had to consider the facts as they were when the application was made. He also made it clear that the defendants were at least partly to blame for the applicant's failure to administer the estate. When granting permission, he also highlighted the fact the estate had not been distributed and, if the application was rejected, the claimant would have no other legal recourse. On an initial reading it seems odd that one widow's claim issued 26 years out of time was granted permission and the other widow, who was only 18 months late, was not. Ultimately, judicial discretion is unfettered in these applications and the interaction of the various Re Salmon principles can create starkly different outcomes depending on the facts of the particular case in question.

In Cowan, Mr Justice Mostyn was at pains to point out the importance of complying with limitation periods, drawing analogies with the Court's overriding objective to deal with claims expeditiously and the Denton strand of case law in respect of failure to comply with court time limits. Chief Master Marsh, who was referred to Justice Mostyn's decision when reaching his judgement, was not convinced by this train of thought. He stated that the Cowan decision was guilty of conflating principles that were “at best distant cousins”. It is also worth stating that in Cowan, the judge's determination that the claimant did not have an arguable claim was fatal to the application.

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