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The Application of S11 of The Inheritance Act 1975 in Sismey v Salandron (2021)

Although the Inheritance (Provision for Family and Dependents) Act 1975 is over 45 years old, in 2021 it was the first time that section 11 of the Act was litigated in court. The case of Sismey v Salandron (2021) has wide implications for contentious probate and trust law as well as family and insolvency.

Section 11

Section 11 governs contracts to leave property by Will and states:

(1) Where an application is made to a court for an order under section 2 of this Act, the applicant may, in the proceedings on that application, apply to the court for an order under this section.

(2) Where on an application under subsection (1) above the court is satisfied—

(a) that the deceased made a contract by which he agreed to leave by his will a sum of money or other property to any person or by which he agreed that a sum of money or other property would be paid or transferred to any person out of his estate, and

(b) that the deceased made that contract with the intention of defeating an application for financial provision under this Act, and

(c) that when the contract was made full valuable consideration for that contract was not given or promised by the person with whom or for the benefit of whom the contract was made (in this section referred to as “the donee”) or by any other person, and

(d) that the exercise of the powers conferred by this section would facilitate the making of financial provision for the applicant under this Act,

then, subject to the provisions of this section and of sections 12 and 13 of this Act, the court may make any one or more of the following orders, that is to say—

(i) if any money has been paid or any other property has been transferred to or for the benefit of the donee in accordance with the contract, an order directing the donee to provide, for the purpose of the making of that financial provision, such sum of money or other property as may be specified in the order;

(ii) if the money or all the money has not been paid or the property or all the property has not been transferred in accordance with the contract, an order directing the personal representatives not to make any payment or transfer any property, or not to make any further payment or transfer any further property, as the case may be, in accordance therewith or directing the personal representatives only to make such payment or transfer such property as may be specified in the order.

Background

David John Sisley started a relationship with Sheila Sismey in 1984 and they married in 1988. They had a son in 1993, Thomas Sismey.

David started a relationship with Marissa Salandron in 2002. David and Sheila separated in 2005. David and Marissa had a son in 2008, John Sismey.

In February 2013 a decree nisi was granted following David’s petition for divorce from Sheila. In February 2017 the family court approved a consent order which was to conclude the financial remedy proceedings between the parties. Part of the agreement was that David would execute a Deed of Covenant to leave in his Will to Thomas the property at 3 Birch Vale, Derbyshire (which David had purchased in his sole name in 1986).

David made a Will on 12 March 2017 which gifted this property to Thomas. The residuary estate was then left in equal shares to his two sons.

David and Marissa married in October 2019. The marriage obviously revoked the earlier Will and unfortunately no further Will was made before David died in on 28 January 2020.

The estate was worth about £200,000 with the property valued at about £190,000.

As David died intestate, Marissa was due to inherit his entire estate. She obtained letters of administration in May 2020.

The Claims

Thomas issued a claim for specific performance of the Deed of Covenant dated 3 February 2017 or in the alternative a constructive trust arising from the Deed.

Marissa issued a claim for financial provision under section 2 of the 1975 Act and an order under s11 or s10 that despite the Deed or a constructive trust, the property should form part of David’s estate.

The Issues

Judge Emma Kelly was called upon in the Chancery Division of the Birmingham District Registry to decide the following:

(1) Is the Deed of Covenant enforceable by Thomas against Marissa?

(2) If the Deed of Covenant is unenforceable, does the estate nonetheless hold the Property on constructive trust for Thomas?

(3) Subject to the above, what, if any, consequential orders are required?

(4) If the Deed of Covenant is enforceable, are the conditions in s.11(2) of the 1975 Act made out? In particular:

a) Did the Deceased make the Deed of Covenant with the intention of defeating an application financial provision under the 1975 Act?

b) When the Deed of Covenant was made, was full valuable consideration not given or promised by Sheila or by any other person?

c) Would the exercise of powers conferred by s.11 of the 1975 Act facilitate the making of financial provision for Marissa?

(5) If the conditions in s.11(2) are made out, to what extent does the value of the Property to be transferred exceed the value of any valuable consideration?

(6) If the s.11(2) conditions are made out and the s.11(3) cap does not apply or can be quantified, should be court exercise the discretionary power taking into account s.11(4) and s.3 of the 1975 Act?

(7) If the Deed of Covenant is unenforceable but the Property is held on constructive trust for Thomas, are the conditions in s.10(2) of the 1975 Act made out?

The Decision

The judge accepted that the Deed of Covenant was enforceable when read in conjunction with the Consent Order so as to incorporate all the terms of the agreement including consideration.

The judge accepted that there was no presumption that the Deed was made with the intention of defeating a 1975 Act application, given that Sheila was giving up claims including against David’s pension.

The judge did however conclude that David has multiple intentions at the time:

  1. The Deceased intended to ensure he was financially secure on divorce.
  2. The Deceased also intended that Sheila receive a fair deal from the settlement acknowledging that it was his relationship with Marissa that had led to the marriage ending.
  3. The Deceased also intended that Thomas receive the Property by way of an inheritance. There are multiple references throughout the Deceased’s email exchanges where he refers to his intention to safeguard the Property for the benefit of Thomas.

The judge was persuaded by Marissa that “part of the Deceased’s intention was to defeat any application for financial provision or at least to reduce the amount of provision which might otherwise be granted. Central to achieving the Deceased’s aim of ensuring Thomas obtained the Property was the need to secure the Property against claims by third parties. I agree with the submission made by Marissa that the common theme throughout the negotiations that continued over many years was how to safeguard the Property against future claims.”

This was because by the time of detailed negotiations between David and Sheila in 2012, David was living with Marissa in the property and they had a son together.

However, the court did not agree with Marissa that full valuable consideration was not given by Sheila. She stated that, “The giving up by Sheila of her rights under the Matrimonial Causes Act 1973 to claim for a half-share in the Property and/or for a pension share or off-set was a real sacrifice on her part.”

In conclusion Thomas won his claim as the Deed was found to be enforceable and Marissa failed in her claim to prove that nil consideration was given – the property therefore fell outside David’s estate and could not be clawed back to satisfy Marissa’s 1975 Act application.

Final Words

The judge went behind the ratified consent order as she held there was evidence that there was collusion between David and Sheila during the negotiations. On completely different facts, this means that there is now the possibility that subsequent claims can nullify any settlement reached in divorce proceedings and/or that such orders made could be set aside under insolvency rules for being transactions made at an undervalue. Family practitioners will have to be alive to these possibilities when advising clients and clients will need to ensure they have the right legal representative to advise them accordingly.

If you’re seeking legal advice relating to jointly owned property disputes please call our highly experienced property dispute experts on 0808 252 5231 to talk through your situation with us. Alternatively, you can request a call back online.