A house was held upon joint tenancy between the deceased and one of his sons. The transfer into joint names took effect just before the deceased married the claimant. They lived at the property with her children. Seven years after the death, the son obtained an order for possession of the house against the claimant widow. In answer, she took out a grant of representation and sought, under the 1975 Act, a transfer to her of the deceased’s half share in the property. The property’s value had increased from andpound;40,000 to andpound;95,000. The judge had held that, if he had been able to do so, he would have transferred the deceased’s half share to the claimant, but found that he could do no more than order payment to her of half of the value of the house at the date of death, namely andpound;20,000.
Held: (Lloyd LJ dissenting) The ‘net estate’ under the 1975 Act included any property treated as part of it by virtue of section 9. No valuation was required. The proportionate share of the property which would have belonged to the deceased, had there been severance, is treated as the share which the court was entitled to treat as part of the net estate and the court was, therefore, empowered to order a transfer of that full half share to the claimant.
Lloyd LJ said that the words ‘at the value thereof immediately before his death’ meant that the judge had been correct to hold that he did not have power to order the full half share of the house to be treated as part of the net estate.
Jacob LJ said that section 1 indicated that ‘the heart and object of the Act’ was to enable reasonable financial provision for an applicant and that purpose should guide the construction of the Act: ‘This case is concerned with section 25(1)(d). This brings within the ‘net estate’ ‘any property’ the subject of a section 9 order. One may therefore reasonably approach section 9 on the basis that it will have the effect of bringing ‘property’ into the net estate. And that is what it essentially says: for what the court is empowered to order under section 9 is that ‘the deceased’s severable share of that property’ (i.e. property held on a joint tenancy before death) be treated as part of the estate.
This is subject to the qualification ‘at the value thereof immediately before his death’. This, read one way, does not make sense: although a share of property will have a value which can be expressed in monetary terms, that value is not itself a share in property. You cannot order ‘a value’ to form part of the net estate. It is a share in property itself which is to be treated as part of the estate. So what is Parliament driving at by the words ‘at the value . . ?’
There are several possible candidates. (i) The property is valued at the date of death (which I shall call ‘andpound;x’). The deceased’s proportionate share of the property if there had been a severance at death is then applied to that value. If there were n joint owners that share will andpound;x/n. That sum of money, is then taken as the ‘property’ somehow to be treated as part of the estate. This is achieved by ordering that the claimant shall have a fixed beneficial share in the property of andpound;x/n, the property being held on a trust for sale between the claimant and defendant(s) or by a charge of andpound;x/n over the property. That is what the judge did, halving the agreed at death value of andpound;40,000, and ordering that the property be held on trust with the claimant having a fixed beneficial share of andpound;20,000. (ii) One asks the valuer also to ascertain the value at the time of the hearing (‘andpound;y’). The fraction of the property which would have belonged to the deceased if there had been severance (1/n) is applied to andpound;x/y. That is then taken as the share of the property to be treated as part of the estate. It is only that proportion which the court is empowered to treat as part of the estate. Here that is 40,000/95,000 divided by 2 – practically 21%. So the court has power to treat a 21% share in the property as part of the net estate. This is again achieved via a trust, but this time the claimant gets a proportionate share rather than a fixed sum. (iii) One does not call in a valuer at all for the section 9 exercise. One takes the proportionate share of the property which would have belonged to the deceased if there had been severance of joint ownership (1/n) and treats that proportion of the property as the share of the property which the court is empowered to treat as part of the estate. Here that would give a half share.
I see no logical reason for selecting candidate (i). It is the least satisfactory solution – it involves the court as in effect treating cash which is not there – a notional sum- as part of the estate when the court is actually only entitled to treat property as part of the estate. This solution does the most violence to the language used. Moreover given that property values can go up or down it produces the completely illogical result that the claimant loses out if property prices rise between death and the decision whereas his co-owner loses out if property prices fall in that period.
Solution (ii) also suffers from irrationality. If there is a rise in property values between death and the hearing, most of that rise would fall outside the net estate. In algebraic terms the figure is andpound;(y-x/yn). If there is a fall, the net estate benefits at the expense of the other co-owners. Why should Parliament want to provide that? Particularly as the whole point of the Act is to make reasonable provision for applicants. Here, for instance, the judge quite rightly took the view that if it were possible the widow should have a half share in the property as she would have done if the question had been resolved at the time of death.
62. Solution (iii) is not merely the most rational, it is the only one which is rational. The happenstance of price movements and the dates of hearing is removed from consideration. The share of the property remains fixed. Of course its value at the date of the hearing is a factor which may be taken into account in the overall assessment of what is to be done (section 3(5)) but that is quite a different question from what property is to be treated as part of the net estate. The solution is even-handed between the other co-owner(s) and the net estate – if property prices rise then each gets a proportionate benefit and if they fall, each gets a proportionate loss.’
He offered alternative explanations of the meaning of the important phrase about ‘value’ in section 9, saying: ‘First there may be more that two joint owners of a property, say n. If the deceased severed his interest just before death he would only get the appropriate proportion 1/n of an interest in the property. And it is only that proportion which can be treated as part of the net estate. On this basis the words are aimed at emphasising that. Strictly they are unnecessary but they are there out of caution to make the position clear.
On this analysis ‘value’ is not speaking of a monetary value at all. It is speaking of a proportionate value of the property. This makes sense since, as I have said, ‘value’ and ‘property’ are different things and it is the property which is treated as part of the net estate. The solution fits with the purpose of the Act. The solution has the merit of avoiding several irrationalities. So it must be regarded as correct since Parliament cannot have intended the irrational. One is trying to arrive at the meaning a rational reader would think a rational writer had intended. Only solution (iii) achieves that.’
Ward LJ said: ‘In so far as the order must relate to ‘the deceased’s severable share of that property, at the value thereof immediately before his death’, the property there referred to must be the same property as that referred to in the opening clause, namely the property in which the deceased person was immediately before his death beneficially entitled to a joint tenancy. This is an important point. Even though a value has to be given to that share at a particular point in time, the subsection does not require that the sum of money representing that value be treated as part of the net estate. It is the property not a sum of money equal to its value which is clawed back into the net estate. The emphasis here is on the property, i.e. the severable share (or part thereof), not its monetary value. Giving the share a value is merely descriptive of the share. The words simply state the fact that immediately before the death of the deceased the value of that severable half share was andpound;20,000.’
He concluded: ‘To treat the value immediately before death as creating a cap is to give the element of value an importance it does not seem to me to deserve. It has the consequence that the value placed on the severable interest dominates and controls the property interest to the extent that it changes the nature of the severable share itself from something certain to something uncertain. If the value was to have such defining influence I would have expected ‘net estate’ for section 9 purposes to be defined in section 25(1)(d) as ‘any sum of money, being the value of the share before death’, not ‘any property’. As already observed, when sums of money are intended to be part of the net estate, section 25 so provides: see section 25(1)(c) . As it is drafted, ‘property’ is the dominant characteristic of the net estate, and it, not value, should be the predominant element. Property should be construed in accordance with its natural meaning as a fixed interest, not a fluctuating one.’
Judges:
Ward, Jacob, Lloyd LJJ
Citations:
[2006] EWCA Civ 942, [2006] 3 WLR 1183, [2007] Ch 109, [2007] 2 All ER 382
Links:
Statutes:
Inheritance (Provision for Family and Dependants) Act 1975
Jurisdiction:
England and Wales
Cited by:
Cited – Lim (An Infant) v Walia CA 29-Jul-2014
The parties disputed a claim under the 1975 Act. Immediately before her death, the deceased had, because of her medical condition, a vested right to bring forward an insurance benefit, but that right had ceased upon her death. The court had found . .
Lists of cited by and citing cases may be incomplete.
Wills and Probate
Updated: 07 July 2022; Ref: scu.243069