Royal Society for the Prevention of Cruelty To Animals v Sharp & Ors

A professionally drafted will must be construed from its expressed language, read as a whole and in its admissible context. The court should not speculate about the testator’s unproved wishes or presume a misunderstanding of tax law where the wording has a coherent meaning.

Where a gift is limited to the maximum that may be given by the will without inheritance tax becoming payable, the calculation must take account of the other chargeable dispositions made by the will. The order in which clauses appear does not, without clear words, make one bequest subordinate to another. An indemnity costs order remains exceptional and is not justified merely because a beneficiary advances an unsuccessful construction argument.

The testator’s professionally drawn will gave specified proportions of the maximum amount that could be given without inheritance tax to the Sharps and his brother, devised a property to the Sharps, and gave the residue to the RSPCA.

The executors treated the pecuniary gift as the full nil rate band and paid inheritance tax from residue. The RSPCA contended that the gift was limited to the unused balance of the nil rate band after the value of the property had been taken into account.

Peter Smith J rejected the RSPCA’s construction and ordered the respondents’ costs out of the estate on an indemnity basis: [2010] EWHC 268 (Ch). The appeal concerned the proper interrelationship of clauses 3 and 4 and the associated costs order.

1. Appeal allowed. The Court held that clause 3 gave the named legatees only the balance of the inheritance-tax nil rate band remaining after the value of the property devised by clause 4 had been taken into account. The judge’s contrary construction and the indemnity costs order were set aside.
2. Patten LJ, with whom Black LJ agreed, applied the established approach to construction of wills. In the absence of admissible extrinsic evidence, the court had to ascertain the testator’s expressed intention from the language of the will, read as a whole and in context. It was unsafe to speculate about the testator’s personal wishes or to assume that a solicitor had misunderstood inheritance-tax legislation without a textual basis for doing so.
3. The words in clause 3 requiring calculation of the maximum that could be given “by this my Will” required account to be taken of all chargeable transfers effected by the will. The words referring to tax in respect of the gift did not isolate that gift from the aggregate inheritance-tax calculation. The absence from clause 3 of an express direction that tax be borne by residue, contrasted with the express direction in clause 4, supported that construction. The Court applied the charging scheme in Inheritance Tax Act 1984, including the nil rate band in Schedule 1.
4. The Master of the Rolls, concurring, added that clauses in a will are not to be treated as sequentially subordinate merely because one precedes another. Clear words are required before that consequence follows. He also considered that the words “if any” in clause 4, and the references to tax in respect of each gift, had a coherent operation only on the RSPCA’s construction.
5. An indemnity costs order is exceptional. Even if the RSPCA had failed on construction, the mere fact that it had advanced an incorrect interpretation point would not have justified indemnity costs.

• Court of Appeal (Civil Division): Allowed the RSPCA’s appeal, substituted its construction of the will, and set aside the indemnity costs order: [2010] EWCA Civ 1474.
• High Court (Chancery Division): Peter Smith J dismissed the RSPCA’s construction claim and ordered the respondents’ costs out of the estate on an indemnity basis: [2010] EWHC 268 (Ch).