Bankruptcy Proceedings During An Inheritance Act Claim

The Inheritance (Provisions for Family and Dependants) Act 1975 (Act) allows certain individuals, such as family members or dependants, to claim a share of a deceased person’s estate if they believe the deceased’s estate does not reasonably provide for them.

When considering a claim made pursuant to the Act, the Court considers several factors, including:

The claimant’s “needs” refer to their financial requirements such as their living expenses, housing needs, income, and any savings they may have. The Court assesses their current and future needs, considering factors like age, health, and earning capacity; with claimants having a greater need and lower income typically receiving a larger award, subject to the size of the estate.

One expense of a claimant may be any debt they have. Debts incurred as a result of essential living expenses and legal costs are likely to be viewed sympathetically by the Court, whereas debts arising from reckless or irresponsible behaviour may be disregarded. The Court will assess the level of debt and take into account the repayments when considering what is an appropriate award. The recent case of Howe v Leck Holdings Ltd required the Court to consider the impact and enforcement of a Claimant’s debt.

Howe v Leck Holdings Ltd

Case background

In this case, the Claimant had initially pursued a claim challenging the validity of her father’s (Deceased) Will, which was unsuccessful. This resulted in the Claimant being held liable for the Executors’ costs, which the Claimant was unable to pay. The Claimant later issued a claim pursuant to the Act against the Deceased’s estate. In the meantime, the Executors assigned their cost award to the Defendant, being the assignee, and the Defendant began taking steps to instigate bankruptcy proceedings. The Claimant sought to set aside those proceedings on the basis of her claim made pursuant to the Act gave rise to a counterclaim.

In considering the application, the Court noted that the Defendant was not a party to the Claimant’s claim made pursuant to the Act, most likely being the reason for the assignment. The Court considered the reality and the close connection between the applications, in particular noting that the claim made pursuant to the Act was previously stayed due to the outstanding debt.

The Court then turned to the prospects of the claim and noted that there are real prospects of the claim succeeding, with there being no suggestion it could be struck out, and further, there are prospects that if successful the award, including the recovery of costs, would exceed the debt owed to the Defendant. On appeal, therefore, the Judge set aside the statutory demand, thus preventing the Defendant from commencing bankruptcy proceedings so as to allow the Claimant’s claim to first conclude.

Comment

This case demonstrates how the Court will consider a person’s debt during a claim made pursuant to the Act, in particular, how the Court will deal with bankruptcy proceedings following previous associated costs orders.