Can a divorce settlement be threatened by the Inheritance (Provision for Family and Dependants) Act 1975 (the “Inheritance Act”)?

The High Court considered, for the first time, Section 11 of the Inheritance Act in the case of Sismey v Salandron [2021] All ER (D) 25.

The Court held that the divorce settlement the deceased had agreed in 2017 with his former wife was ‘collusive’. Full valuable consideration had been obtained by the deceased in agreeing to leave his property by will to their son as he had bought off the risk of his former wife seeking a share of his large pension.

In this case, the son of the deceased sought to enforce a promise made to him by his late father in a divorce settlement that he would leave him his property by way of his will. Here, the deceased:

1988. had married his third wife in 1988. This was the marriage that resulted in the birth of the son, being the claimant in these proceedings;
1989. had engaged in an extra-marital relationship, which led to the breakdown of his marriage in or around 2005;
1990. and his third wife progressed with divorce proceedings, which resulted in a consent order being approved by the Family Court in 2017;
1991. agreed in the consent order to leave his property by will to the claimant. The deceased even signed a deed of covenant to this effect. This was also countersigned by the deceased’s then girlfriend, now spouse, also a defendant to the proceedings;
1992. received a cancer diagnosis in 2019 and married his fourth wife, who is the defendant to these proceedings.

It is common ground that the deceased’s fourth marriage revoked the will that had been prepared by the deceased. It was also established that the marriage had taken place in order that the defendant could take advantage of the widow’s benefit contained within the deceased’s pension policy.

Upon the deceased’s death, this left the widow as the sole beneficiary of the estate. Despite the terms of the divorce settlement, the son had no claim against the deceased’s property and sought specific performance of the agreement or, alternatively, a finding that there was a constructive trust arising in his favour in relation to the property.

In response, the deceased’s new wife sought to defend the claim on the basis that the marriage meant the divorce agreement was unenforceable and the deed of covenant (to which she was a witness) did not comply with the requirements of Section 2(2) of the Law of Property (Miscellaneous Provisions) Act 1989. Alternatively, the deceased’s new wife claimed she was entitled to reasonable financial provision from the property and under Section 11 of the Inheritance Act that property left by will should be considered and/or used to provide for her financial provision, which she claimed included the property in this case.

The High Court agreed with the deceased’s son that the provisions in the deceased’s will were enforceable, and he should inherit the property. Although there was evidence that the deceased had put in place steps so that no application could be made for financial provision from his estate, the deceased’s new wife could not show that no financial consideration had been provided by the deceased’s former wife at the time.

The Court reviewed a series of emails in which it found evidence of ‘collusion’ which led to them looking behind the terms of the divorce settlement and decide whether it had been fair. In doing so, the presumption that the court should take the compromise of contested divorce proceedings, being the value of the property to be transferred to the son by the deceased’s will, was dis-applied. It was also confirmed that the deceased had received full and valuable consideration in the divorce settlement as he had bought off the risk of his former wife seeking a sharing order over his sizeable pension.

This is a ground-breaking case insofar as Section 11 of the Inheritance Act had not previously been litigated. This decision now leaves an air of uncertainty when it comes to reaching a settlement in divorce on terms that property is to be left by will where the following conditions can be applied:

1. where 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;
2. that the deceased made that contract with the intention of defeating an application for financial provision under the Inheritance Act;
3. 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 or by any other person; and
4. that the exercise of the powers conferred by this section would facilitate the making of financial provision for the application under the Inheritance Act.

Equally, there are new considerations for insolvency practitioners. The case widens the chances of the courts setting aside approved divorce settlements on the basis that they are transactions at an undervalue.

Had the deceased’s new wife been successful with her claim, there would have been no provision left for her son or his former wife to renegotiate. Going forward, it is important to consider the divorce agreement and that these can be set aside where there is a strong application for reasonable financial provision by those eligible to bring a claim under the Inheritance Act. This ground-breaking case serves as an unsettling reminder that should the conditions of Section 11 of the Inheritance Act be met, a well-drafted divorce settlement has the potential to be unravelled and set aside in favour of a claimant seeking reasonable financial provision.