Mrs Mary Cowan v Mr Martin Foreman (as executor of the estate of Michael Cowan and as trustee of the Business Property Trust and the Residuary Trust in the Will of Michael Cowan Dated 24 March 2016 (the “Will”) and as trustee of the Michael Cowan Foundation (the “Foundation”)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin,Lord Justice Baker,Lady Justice King |
| Judgment Date | 30 July 2019 |
| Neutral Citation | [2019] EWCA Civ 1336 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B6/2019/0546 |
| Date | 30 July 2019 |
[2019] EWCA Civ 1336
Lady Justice King
Lady Justice Asplin
and
Lord Justice Baker
Case No: B6/2019/0546
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT (Family Division)
The Hon. Mr Justice Mostyn
FD18F00079
Royal Courts of Justice
Strand, London, WC2A 2LL
Miss Penelope Reed QC and Miss Eliza Eagling (instructed by Withers LLP) for the Appellant
Mr Richard Wilson QC (instructed by Farrer & Co) for the First, Second and Fourth Respondents in the case of the First and Fourth Respondents in their capacity as Executors of the estate of Michael Cowan deceased and in the case of the First and Second Respondents in their capacity as trustees of the Business Property Trust and the Residuary Trust in the Will
Miss Tracey Angus QC (instructed by Charles Russell Speechlys LLP) for the First and Third Respondents in their capacity as the trustees of the Foundation
Hearing date: 4 th July 2019
Approved Judgment
INTRODUCTION
This appeal is concerned with the circumstances in which it is appropriate to grant permission under section 4 of the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”) to allow an application for an order under section 2 of the 1975 Act to be made out of time. Under section 2 the court may make any one or more of the orders set out in section 2(1)(a) – (h) if it is satisfied that the disposition of the deceased's estate effected by his/her will or the law relating to intestacy, or a combination of the two, was not such as to make reasonable financial provision for the applicant.
The appeal raises specific issues as to whether it is arguable that a beneficial interest under a discretionary trust rather than outright provision for a spouse is not such as to make reasonable financial provision for the purposes of section 2, and the weight to be given to and relevance of any “stand-still agreement” or moratorium to the effect that a point on delay will not be taken while an out of court settlement is pursued.
The appeal is from the order of Mostyn J dated 25 February 2019 by which he refused the Appellant, Mrs Mary Cowan (“Mrs Cowan”) permission to bring an application out of time pursuant to section 4 of the 1975 Act. The citation for his judgment is [2019] EWHC 349 (Fam).
BACKGROUND
I take the background to this matter in part from the judgment but also from the witness statements and correspondence which were before the Judge and to which we were referred. Although the interpretation to be placed upon some of the events is in dispute, the events themselves are not.
The proposed application under section 2 of the 1975 Act is in respect of the estate of Mrs Cowan's husband Michael Cowan (the “Deceased”), who died on 9 April 2016 aged 78. At the time of the hearing below, Mrs Cowan was 78. Mrs Cowan and the Deceased began their relationship in 1991. In 1994, the Deceased separated from his wife. The Deceased was later involved in high profile divorce proceedings until 2001, which culminated in their assets being shared, leaving the Deceased with just over £7m. The citation in relation to the decision in the divorce proceedings is [2001] EWCA Civ 679. The Deceased had two sons: Andrew, from whom he was estranged, and Timothy. Mrs Cowan had also been married previously and had two sons from that marriage, Robert and Gerald Musial.
Although the Judge did not make findings to this effect, it is not disputed that in 1998 the Deceased asked Mrs Cowan to take early retirement so that they could spend more time together. Mrs Cowan agreed and from that point onwards was largely financially dependent on the Deceased. In 2001, they moved into a new home in Montecito, Santa Barbara County, California, which now forms part of the Deceased's estate. The property in Montecito remains Mrs Cowan's home. From 2001 until the Deceased's death, Mrs Cowan and the Deceased lived between the Montecito property and their home in Hampstead while the Deceased travelled to London to work. Mrs Cowan and the Deceased also travelled often.
In the years following the Deceased's divorce, he rebuilt his fortune successfully so that by the time of his death on 9 April 2016 his estate was sworn for probate at a little over £29m. Mrs Cowan and the Deceased married in February 2016 shortly after the Deceased had been diagnosed with cancer and only shortly before his death. At around that time, the Deceased transferred $400,000 into a joint account in the name of himself and Mrs Cowan. On his death, there was $375,000 remaining in the account which passed to Mrs Cowan by survivorship.
On 24 March 2016, the Deceased made a final will (the “Will”) accompanied by a letter of wishes (the “Letter of Wishes”). In summary, by his Will the Deceased: left pecuniary legacies to his son, Timothy and his daughter-in-law, Marina and to Robert and Gerald Musial; gave his personal chattels to Mrs Cowan; left all his business assets which qualified for 100% inheritance tax business property relief on discretionary trust (the “Business Property Trust”) for a class of beneficiaries including Mrs Cowan, other members of his family, a charity established by him known as the Michael Cowan Foundation (the “Foundation”), other charities and any persons added by the trustees (the “Discretionary Beneficiaries”); and gave the residue of his estate on trust for Mrs Cowan for life but subject to overriding powers of appointment in favour of the Discretionary Beneficiaries and subject thereto for the Foundation (the “Residuary Trust”).
In summary, the following wishes were recorded in the Letter of Wishes: that two funds of £500,000 be set aside in the Business Property Trust, the first to provide education and support for his grandchildren, and the second to provide a safety net for his son, his daughter-in-law, and his stepsons and their families; subject to that, the Will Trustees were to regard Mrs Cowan as the principal beneficiary of the remaining part of the Business Property Trust fund during her lifetime. She was to receive an income and her requests for capital were to be considered generously, and Mrs Cowan should be the principal beneficiary of the Residuary Fund. She was to be entitled to income and occupation of any properties in the Residuary Trust during her lifetime. Her standard of living was to be maintained at a reasonable level to include the payment of medical bills, provision for care in old age and so on. She was also to be reimbursed for any legal fees she incurred in ensuring that the trusts established by the Will benefited from UK spousal exemption from inheritance tax and the estate was to compensate her beneficiaries for any resulting financial disadvantage.
Mr Martin Foreman and Ms Bryony Cove, the First and Fourth Respondents, are the Executors of the Deceased's Will (the “Executors”). Mr Foreman and the Farrer & Co Trust Company, the First and Second Respondents, are the trustees of the Business Property Trust and Residuary Trust (the “Will Trustees”). Mr Foreman, together with Mr James Trafford and Mr James Beazley (respectively the First and Third Respondents) are the trustees of the Foundation (the “Foundation Trustees”).
Probate of the Will was granted on 16 December 2016. The evidence before the Judge was that: the estate was sworn for probate purposes at £29,347,630 (gross) and £29,146,163 (net); the value of the assets in the Residuary Trust totalled approximately £4,752,600 and the value of the assets of the Business Property Trust totalled approximately £15,337,000 to £16,637,100. In her second witness statement of 17 January 2019, Ms Cove, one of the Executors, provided a summary of the Will Trusts. Based upon the information available at that stage, she stated that the Residuary Trust comprised the Montecito property worth £3.3m and £1.45m in an investment account. It seems that the Montecito property in which Mrs Cowan lives and has lived for the last twenty years is owned through a corporate vehicle. The Business Property Trust was comprised of a variety of investments worth around £15.3m. It is not in dispute that the Deceased's chattels were of nominal value.
Although Mrs Cowan met with the Executors/Will Trustees in London on one occasion, otherwise she has remained in Montecito, California and all contact with the Will Trustees has been by email correspondence whether directly, through Mrs Cowan's sons and/or through her US attorney, Peggy Barnes.
On 20 December 2016, shortly after the grant of probate, Mrs Cowan was sent a lengthy email containing the structure and effect of the Deceased's will. This was followed up by a further explanation sent on 20 February 2017. It was at this point that Mrs Cowan and her sons decided that they wished to take advice from a UK lawyer and they were put in touch with Helen Cheng, a private client and tax lawyer with Withers Worldwide in San Diego who in turn sought advice from Withers in London. In an email on 28 March 2017 to her London counterpart, Ms Ms Dora Clarke, Ms Cheng explained that she had been contacted and asked to advise about the Business Property Trust and the Residuary Trust. The email went as follows:
“The trust value is about $30 million pounds, but Mary [Mrs Cowan] and her kids...
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