Berry & Anor v IBS-STL (UK) Ltd & Anor

Section 75F of the Charities Act 1993 is not confined to gifts made directly to a charity. Its purpose may apply where trustees hold the property and must confer the charitable benefit. However, the statutory mechanism operates only where the will expresses a gift to the transferor charity. If the charity had ceased to exist before the testator’s death, and the will limits beneficiaries to charities existing at death, no gift to that charity arises for statutory transfer. A replacement-charity clause may then operate according to its terms, including a trustee discretion guided by a non-binding expression of wishes.

The claim concerned the residuary estate of Elizabeth Longman. Her will divided the residue between named charities existing at her death and provided a power to select substitute charities where a named charity had ceased to exist, amalgamated or changed its name.

International Bible Society (UK) had transferred its assets to the first defendant before the testatrix died, and the merger had been registered. The first defendant later entered liquidation. The executors sought directions on whether the remaining share passed to the first defendant under section 75F of the Charities Act 1993, or whether they could exercise the substitute-charity power.

1. The court held that section 75F was not restricted to a direct pecuniary gift to the transferor. The provision’s purpose was to ensure that property intended for a charity followed it into the merged entity, and that purpose was equally engaged where trustees were interposed to confer the benefit.

2. The statutory condition was nevertheless absent. The will operated at the testatrix’s death and selected only charities then in existence. International Bible Society (UK) had ceased to exist before that date. The will therefore did not express a gift to it, and there was no gift capable of being converted by section 75F into a gift to the first defendant.

3. The sixth share consequently fell within clause 6.3. That clause applied where a named charity had ceased to exist and gave the trustees an absolute discretion to select substitute charitable institutions. The reference to amalgamation did not exclude mergers which resulted in the charity no longer existing for the purposes of clause 6.1.

4. The trustees had exercised their discretion with close regard to the non-binding wish that substitute charities should have purposes as close as possible to those of the former charity. There was no apparent conflict of interest. In light also of the observations in The Public Trustee v Cooper [2001] WTLR 901 at 925, the court approved the proposed distribution.

5. The judgment confirmed that paragraph 8 addressed the meaning or ambit of section 75F, now re-enacted as section 311 of the Charities Act 2011.