Divorce Without Pain © : Case Study 4
Note that the case studies mentioned in this blog have been anonymised and particular details changed so as to avoid any chance of recognition or attribution.
'Divorce Without Pain ©' were consulted by three solicitors - each instructed on behalf of separate parties to a family dispute. The issue concerned property, money and possessions following the death of a 28 year old man. The parties were his parents, brother and sister; his girlfriend; and the trustees under his Will.
Jake, a soldier with HM Forces, died just after his 28th birthday following a short illness. Leading to his death he had cohabited with his girlfriend/partner Terri for four years. They had no children. The relationship between Terri and Jake's family had been fraught, resulting in Jake, his parents and his siblings being estranged for some time. Jake's parents blamed Terri for the family difficulties. Jake's brother Tom supported his parents in their view, Jake's sister Emily being a little more sympathetic to Terri's situation.
Before Jake left home five years earlier, he had made a Will, an unusual but important step for a then twenty three year old solider. At that time he was not in a significant relationship and had made provision for his parents Norman and Irene, his brother and sister, Tom and Emily, and left small bequests for his twin nephews Rick and Kye, sons of his brother Tom.
The reason for Jake's Will became clear. Jake's parents, Norman and Irene had taken Inheritance tax advice and as a consequence, disposed of fairly large parts of their estate to their three children, believing that they would survive them. The share that Jake received had provided a very substantial payment for his apartment; and it was this into which Terri had moved four years earlier, selling her own flat and pooling their resources. Jake's apartment had remained in his sole name. There was a dispute as to what had happened to the modest equity coming from Terri's flat.
Whilst 'Divorce Without Pain' as facilitators are not obliged to steer cases in accordance with strict legal principles, it is important to know that a number of legal points arise in situations like this. First, the validity of the Will. In this case, Terri did not challenge its validity, however she asserted that she was financially maintained by Jake and that the terms of the Will could be challenged under sections 1(e) and 2 of the Inheritance (Provision for Families and Dependants) Act 1975 so as to make provision for her. Second, Terri asserted under the Trusts of Land and Appointment of Trustees Act 1996 that she had a part-interest in Jake's apartment by virtue of her contributions and Jake's promise that she would be given a legal share of the property. Of interest, the Law Commission has recently recommended that the law relating to cohabitees should be changed http://www.justice.gov.uk/lawcommission/publications/intestacy.htm, although this is still at the recommendation stage.
The 'Divorce Without Pain' mediators quickly established that Terri was wanting to remain in the apartment and to avoid any part of its value, or any of the contents of the apartment passing under Jake's Will. Norman and Irene contended that the apartment only existed because they had sold their interest in an investment property to transfer money to Jake for its purchase. Their point was that this was family money and had not been contributed to by Terri. Tom, Jake's brother supported his parents and pointed out that unless the apartment was sold, not only would he loose out, but also would his twin sons, Rick and Kye. Emily had some sympathy for Terri, believing that she should receive some support from Jake's estate, but that what Terri was seeking was far too much. Terri's answer to the family was that she had sold her own flat and that the proceeds of sale had effectively been shared by her and Jake on the basis that she would acquire an interest in his apartment. She was for saying that she would not have sold up and moved in without such an assurance. The trustees had a financial duty to ensure that Jake's estate was administered properly, and as the terms of his Will had been challenged, were involved but not directly participating.
In this case two mediators worked together in a co-mediation model. Both were experienced in family property issues and versed in Trusts law. The parties selected the co-mediation model because of their number (Norman, Irene, Emily, Tom, Terri, a trustee and their respective legal representatives). It was clear that with two mediators, no-one would be left waiting for any significant period of time, and the momentum of the mediation could be kept going. The parties also elected to attempt to resolve all of the issues in one day, for which the co-mediation model is ideal. The two mediators were very used to working seamlessly together, albeit with different personalities and complementary styles. Both mediators moved between all of the parties, sharing between the two of them all of the information that came into their possession. Under this model, the mediators will work side by side, and separately, depending on the stage of the process.
The one common intention of all of the parties was to avoid litigation if at all possible. The parties' solicitors estimated, should the matter have to go to trial before a judge, that their joint legal bills would exceed £60,000. This would probably fall to be paid by the estate, and only the balance of what was left would be available for distribution. Using the co-mediation model, the total cost of the facilitation was £2,500 plus VAT.
The parties realised that they each had a different view of the both the facts and the law. Only a judge could determine whether Jake had indeed promised Terri that she would acquire an interest in the apartment. This would be a critical aspect of any trial, because should Terri have successfully proved such common intention, she could assert a proprietary interest. Certainly it appeared that Terri had contributed £10,000 from the sale of her own flat to the joint finances. Moreover, following her redundancy from work (those monies having been spent before Jake's death), she had in fact become dependant on Jake's financial support. This could provide good reason for a judge to vary the terms of Jake's Will.
In the light of the differences of points of view and positions, it was decided that a solution should be driven by pragmatism rather than conjecture about legal outcomes.
Due to the amount of equity (value after borrowing) in the apartment, it was clear that the apartment would have to be sold to accommodate a compromise. Whilst at first this was resisted by Terri, after careful thought she conceded the point. The parties had been advised by the mediators to obtain advice on tax liability (which they had done) and to agree a valuation of the apartment (which they failed to do). However, they followed the mediators' advice and jointly instructed a property agent who advised the current attainable market valuation. The simple question was how best to divide the equity.
After all borrowing on the apartment, outstanding bills (including legal, valuation and mediation costs) discharged, and taxation liability paid, the parties agreed that there would be about £100,000 remaining. The parties agreed that they would vary the terms of Jake's Will to provide £30,000 to Terri, £10,000 each to Norman, Irene, Emily and Tom, and the remainder of about £30,000 to be placed in trust for the grandchildren. It was also agreed that, save for personal items belonging to Jake and certain items of antique family furniture and paintings, Terri would retain the contents of the apartment.
The mediators observed that the question of legal costs made this a dispute that could not have been litigated. If legal costs up to and including a two day trial had been (as their solicitors suggested) in the region of £60,000 - the value of the estate would have been reduced to about £40,000 before sharing. In the circumstances of the case it was highly unlikely that any one party would have succeeded outright, thus gaining a prized but illusive costs order. In the event, the family retained @ £70,000 worth of assets and Terri the remaining £30,000. Importantly, the family were able to move a significant part of Jake's estate into trust for the grandchildren. The grandchildren's fund alone was ⅔ the total fund that would have been available after a trial.
Interestingly, despite the conflict both before Jake's death and following it, the parties both shook hands and hugged at the end of the agreement signing. Both Norman and Irene said, "We lost our precious son, but we have felt for the first time that we have gained a daughter in law".