UK: RSPCA v Sharp – Court of Appeal Judgment – Charity’s Right to Protect Interests under Will

Last Updated: 11 January 2011
Article by Jonathan Brinsden and Nicola Evans

The Court of Appeal (Ld Neuberger MR, Patten LJ, Black LJ) has decided in favour of the charity in the RSPCA's appeal in the case of RSPCA v Sharp [2010] EWCA Civ 1474.

The case had caused some concern within the charity sector because of comments made in the first instance judgment which suggested that the charity had been wrong in principle to challenge the interpretation of the Will, and should, in effect, have accepted what it received "whatever the view as to the will" ([2010] EWHC 268 (Ch) at para 26).

The Court of Appeal has made it clear that this approach was wrong, charities being in no greater or lesser position than any other beneficiary under a Will, with the same right to challenge and to expect a correct interpretation and distribution from an estate.

The dispute

The issue in dispute was relatively simple - there were two ways in which a Will could be interpreted. The executors interpreted it in such a way as to increase the amount received by themselves and the testator's brother, decreasing the amount in residue for the charity and causing inheritance tax to be payable on the estate. The charity challenged this interpretation, contending that the Will should be read as a whole, meaning that the pecuniary legacy to the executors and the brother was reduced by a gift of property to the executors, that no inheritance tax was payable on the estate and the gift of residue for the charity was thereby increased.

First instance

At first instance, Peter Smith J considered it "clear" and "plain" that the executors' interpretation was correct, opining that the charity's interpretation could lead to potential results which were "so unlikely as to be incredible".

He went on to say that it was "a matter of regret in my view that this action was ever brought". The judgment implied that the RSPCA was somehow wrong to support an interpretation "the whole purpose and thrust" of which was "to raise its interest under the will by nearly 75%", before concluding:

"In my view the RSPCA whatever the view as to the will ought really to have considered that the residuary legacy that I have determined it is entitled to was generous and ample provision out of this estate. The impact of the arguments on the size of the bequest to the Deceased's brother was quite stark. This action has plainly caused distress to the Defendants and in my view ought not to have been brought."

This caused the judge to take the unusual step of awarding costs to the executors on the higher indemnity basis, rather than the standard basis.

Appeal decision

The Court of Appeal found for the charity unanimously. Unlike the first instance judge, the Master of the Rolls considered the matter "not easy to resolve". The court was hampered by a lack of any extrinsic evidence as to the testator's intentions. It therefore had to decide the matter purely on the drafting of the Will.

Although the Master of the Rolls had initially been persuaded by the executors' arguments, the Court of Appeal found that the charity's interpretation was the one which made sense in the context of the Will, and that the Will should be read as a whole.
For the charity sector, the main point of interest is likely to arise out of the Court of Appeal's comments on the award of costs at first instance. The award of indemnity costs was found not to be justified in this case (Patten LJ) and the Master of the Rolls made it clear that he would have reversed the order (and hence the implication that the charity had acted improperly in bringing the case) even had he found that the first instance judge had reached the correct conclusion on the interpretation of the Will.

The Master of the Rolls stated:

"A beneficiary, whether or not a charity, bringing a claim to establish that a will is being wrongly interpreted to its disadvantage, should be aware that there is a possibility of an adverse order for costs if its claim fails".

But, in this case, the trial judge was "clearly wrong" to make the order for costs on the indemnity basis.

"On the basis of Peter Smith J's conclusions on the meaning of the Will, all the RSPCA had done was to take a point on the interpretation of the Will which was wrong. There was no more, and no less, to it than that and in those circumstances it was simply wrong in principle to make an order against the RSPCA for indemnity costs".

Comment

When charities become involved in legacy disputes, they tend to be subjected to attacks in the media, suggesting that it is not "charitable" to bring or defend a claim under a Will. There often seems to be an underlying feeling that charities should be grateful for anything they receive as against the perceived "rightful" family/friend beneficiaries. This view seemed to be supported by the comments of Peter Smith J in the first instance decision in this case.

Litigation can be a stressful and uncertain process for all concerned. Arguably, it is more so for charities, where the charity trustees have to make decisions, not for themselves, but in the best interests of the charity. In doing this, they should take appropriate advice as to the risks and benefits involved, so that they can make informed decisions. The risks involved include not simply the usual risks of the cost of losing the litigation, but also the reputational risk for the charity. However, the first instance decision here suggested that these risks could be greater for charities which chose to challenge a Will.

The Court of Appeal judgment has made it clear that charity beneficiaries of a Will have the same rights to promote or defend their interests under the Will as any other beneficiary and they should not be criticised unjustly, or penalised on costs, for doing so.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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