The Royal Society for the Prevention of Cruelty to Animals v Sharpe & others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PETER SMITH |
| Judgment Date | 19 February 2010 |
| Neutral Citation | [2010] EWHC 268 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC09C02731 |
| Date | 19 February 2010 |
[2010] EWHC 268 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Peter Smith
Case No: HC09C02731
Penelope Reed (instructed by Withers LLP) for the Claimant
Derek Marshall (instructed by Donnelly & Elliott) for the First and Second Defendants
Keith Gordon (instructed by Anthony Gold) for the Third Defendant
Hearing dates: 11th February 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Peter Smith J:
INTRODUCTION
This judgment arises out of the hearing of the Claim Form issued by the Claimant in this action. The Claimant (“RSPCA”) is the residuary legatee under the will of George Mason (Deceased) dated 19th January 2005. He died on 18th June 2007 and the First and Second Defendants were appointed his executors.
At the end of the hearing I indicated that the application for construction of the will in the terms put forward by the RSPCA was to be dismissed and that I would give reasons for that dismissal in writing.
THE WILL
By his will after revoking all previous wills and testamentary dispositions he appointed Mr & Mrs Sharp to be his Executors and Trustees. The clauses of the will which are relevant for the purpose of the dispute are clauses 3-6 which I set out below:—
“ 3. I GIVE the amount which at my death equals the maximum which I can give to them by this my Will without Inheritance Tax becoming payable in respect of this gift:
(a) as to seventy-eight percent (78%) to the said NORMAN JAMES SHARP and PATRICIA DAPHNE SHARP as shall survive me and if more than one in equal shares absolutely (b) as to twenty-two percent (22%) to JOHN EDWARD MASON of 4 Jervis Avenue Freezywater EN3 6LT absolutely
4. I GIVE my property situate and known as 39 Malvern Road Gosport in Hampshire PO12 3LH to the said NORMAN JAMES SHARP and PATRICIA DAPHNE SHARP as shall survive me and if more than one jointly and equally absolutely and I direct that the Inheritance Tax (if any) payable on my death in respect of the property and all costs of the registration of the said NORMAN JAMES SHARP and PATRICIA DAPHNE SHARP as proprietors thereof shall be payable out of my residuary estate.
5. SUBJECT TO the payment of my just debts funeral and testamentary expenses and the legacies given by this my Will or any Codicil hereto I GIVE DEVISE AND BEQUEATH the residue of my estate of whatsoever nature and wheresoever situate (which said estate and property and the property for the time being representing the same and herein referred to as “my residuary estate”) unto my trustees upon trust to sell the same or any part thereof or to retain the same or any part thereof in its actual state of investment or condition at the time of my death.
6. MY TRUSTEES shall stand possessed of my residuary estate upon trust for the Royal Society for the Prevention of Cruelty to Animals of Causeway Horsham West Sussex RH12 1HG for its general purposes and I direct that the receipt of the secretary treasurer or other proper officer shall be a sufficient discharge to my trustees.”
The Deceased and Mr Sharp met in the Merchant Marine in the Second World War and became lifelong friends. Mrs Sharp also became a lifelong friend at a later stage. The Third Defendant John Edward Mason is the Deceased's brother and sole surviving relative.
SIZE OF THE ESTATE
The deceased had £771,178 standing in Bank and Building Society accounts and £12,832 in cash. In addition he owned the property (“the Property”) 39 Malvern Road Gosport Hampshire the subject of the devise in clause 4 of the will. That was valued at £169,000 for probate purposes.
ADMINISTRATION BY THE DEFENDANTS
The First and Second Defendants administered the estate on the basis that the gift in clause 3 amounted to £300,000 (the nil rate band prevailing at the time) and the Property worth £169,000 passed to the First and Second Defendants. That left residue of £482,820.20 for the Claimant subject to inheritance tax (“IHT”) of £112,667. That analysis resulted in a residuary legacy to the RSPCA of £370,153. It gave a pecuniary legacy under clause 3 to the First and Second Defendants of £234,000 a pecuniary legacy to the Third Defendant of £66,000 and the Property to the First and Second Defendants (under clause 4) of £169,000.
The Claimant does not accept that that is the correct construction of the will.
CLAIMANT'S CONTENTIONS
The Claimant's case is that the way in which the Defendants have construed the gift in clause 3 is clearly wrong. It was submitted on its behalf that the gift in clause 3 can only comprise the balance of the unused nil rate band for IHT (if any) at the date of the Deceased's death and in order to ascertain that the gift in clause 4 has to be taken into account. This construction means that the first £169,000 of the nil rate band was to be applied to clause 4. This meant that the balance of the nil rate band was only available for the legacy under clause 3. This meant that the legacy in clause 3 is subject to reduction depending on the value of the Property in clause 4 as at the date of the death.
It was accepted by Ms Reed QC who appears for the RSPCA that any increase in the value of the Property between the date of the will and the death would pro rata reduce the amount passing under clause 3. Once the value of the property reached the nil rate band level there would be no legacy passing under clause 3.
The effect of this is that at least until the value of the property exceeds the nil rate band the estate as a whole will not pay any IHT.
The result of the argument is that the amount of IHT payable on the present figures will be reduced from £112,667 to nil. The competing figures are set out in the schedule below:—
|
| Per Defendants | Per Claimant |
|
| £ | £ |
| D1, D2 – clause 3 | 234,000 | 102,180 |
| D1, D2 – clause 4 | 169,000 | 169,000 |
| D3 | 66,000 | 28,820 |
| C | 370,153 | 651,820 |
| HMRC | 112,667 | NIL |
| Total | £ 951,820 | £ 951,820 |
It was submitted on the behalf of the Claimant the Deceased would desire to achieve this because this is the most tax efficient way of construing the will and thereby minimising tax. It is important not to overlook however in my view 2 further results. First it meant that by applying the nil rate band first to the devise under clause 4 the pecuniary legacy under clause 3 is correspondingly reduced. Whilst that saves tax as...
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