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EWCA reverses Cowan decision on standstill agreements

Thursday, 1 August, 2019

The England and Wales High Court’s decision to deny permission for Michael Cowan’s widow to challenge his estate-planning arrangements has been reversed on appeal.

Cowan died in early 2016, leaving considerable provision for his wife. But he chose to leave most of his GBP16-million estate in trust for her and other family members, for tax-planning reasons. His executors obtained probate of his will in December 2016, after which they continued to discuss matters with Mrs Cowan, who was not happy with the arrangements, which she felt left her financially insecure. She had made a so-called standstill agreement with the executors in order to preserve her option to bring a challenge while negotiations continued, but in November 2018 she decided to launch a claim under the Inheritance (Provision for Families and Dependants) Act 1975. By then, the claim was 17 months beyond the Act’s deadline and she had to apply for court permission.

Despite the standstill agreement, her application to make a late claim was rejected by Mostyn J in the England and Wales High Court in February 2019. In his judgment, Mostyn appeared to state that the whole idea of standstill agreements was invalid, and that it was not for the parties to a case to override deadlines set by statute. The 1975 Act, he said, set a time limit on ‘reasonable provision’ actions in order to safeguard against stale claims.

However Mostyn’s view has now been overturned on appeal. Describing his reasoning as ‘plainly wrong’, the England and Wales Court of Appeal (EWCA) said the Act’s six-month time limit was there only to protect personal representatives when distributing the estate. In this case, the estate had not been distributed. Moreover, Mostyn had failed to take into account the size of the estate, length of the marital relationship, and that Mrs Cowan had no autonomy and no security. He also thought that a claim for outright provision from the estate could not have any merit, and that it would be an actionable breach of trust to defy the deceased’s letter of wishes.

Regarding standstill agreements, the EWCA partially accepted Mostyn’s dictum that the deadline belongs to the court and not to the litigants so that any agreement cannot be binding. However, it said, it would be unlikely that the court would refuse to endorse the standstill approach, because without-prejudice negotiations should be encouraged to avoid the issue of proceedings.

The EWCA accordingly granted Mrs Cowan leave to bring her claim out of time (Cowan v Foreman, 2019 EWCA Civ 1336).

‘It will be a relief for potential claimants to know that the Court of Appeal has overturned this decision’, commented Hannah Mantle of law firm Forsters. ‘It confirms that a delay need not be fatal, especially if the delay is relatively short, there is an arguable case, time has been used for correspondence or negotiation, and the estate has not been distributed.’

Sources