Interpretation of Wills under s21 of the Administration of Justice Act 1982: a recent example Beasant v Royal Commonwealth Society for the Blind and Others (2022)
The requirements for a Will to be valid have long been established since the Wills Act 1837, which states:
- A Will must be in writing and signed by the testator
- The testator must have intended by his signature to give effect to the Will
- The signature is made or acknowledged in the presence of two or more witnesses present at the same time
- Each witness must attest and sign the Will
However, even if a Will has been made in writing, the intention of the testator may not always be clear.
Where
- a) Any part of the Will is meaningless, or
- b) The language used in any part is ambiguous on the face of it, or
- c) Evidence shows that the language used in any part is ambiguous in light of the surrounding circumstances
then s21 of the Administration of Justice Act 1982 (the 1982 Act) allows extrinsic evidence (including evidence of the testator’s intention) to be admitted to assist in the interpretation of a Will.
Previous Guidance: Marley v Rawlings (2014)
Although this was a case which was predominantly pursued on appeal under s20 of the 1982 Act (Rectification), useful guidance was provided on construction of a Will.
Whether the document in question was a commercial contract or a will, the aim was to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context.
A Will therefore should be interpreted no different to a contract, but in the content of a Will, it is possible to adduce evidence of the testator’s actual intention.
The Facts of Beasant v Royal Commonwealth Society for the Blind and Others (2022)
Audrey Anita Arkell died on 17 August 2017. She made a Will dated 27 June 2016.
Mr Beasant and Mr Benjamin Hue Davies (the Second Defendant) were appointed and proved as executors and trustees of the Will.
The Royal Commonwealth Society for the Blind (the Society) was one of the 21 residual beneficiaries of the Estate.
The relevant nil rate band at the time was £325,000. The Estate was worth over £3,000,000.
The Will was drafted by a Mr Vučićević from Allestsons Solicitors
The relevant clause under the Will which was the subject of litigation was clause 4 which stated:
4. I GIVE the Nil-Rate Sum to my trustees on trust for my said friend John Wayland Beasant
4.1 In this clause the ‘Nil-Rate Sum’ means the largest sum of cash which could be given on the trusts of this clause without any inheritance tax becoming due in respect of the transfer of the value of my estate which I am deemed to make immediately before my death
Other relevant provisions of the Will were summarised by the court as follows:
- (iii) Paragraph 5 gives to Mr Beasant “all such property as may be my only or main residence at my death”, that gift being expressed to be “free of inheritance tax and free of any mortgage or charge”.
- (iv) Clause 6 gives to Mr Beasant “free of inheritance tax” all the deceased’s shares in Imperial Brands plc or in any different company or stock which represented the holding of Imperial Brands plc.
- (v) Clause 7 gives to Mr Beasant “free of inheritance tax absolutely” all the deceased’s personal chattels.
- (vi) Clause 8 gives various pecuniary legacies totalling £45,000 to 6 different people, each of them being expressed to be “free of tax”.
- (vii) clause 9 gives the residue of the estate “subject to the payment of my debts and funeral and testamentary expenses and inheritance tax” to the trustees to divide it between 21 organisations, all of which are expressed to have charity numbers. It has transpired since the death that 20 of them are charities but one in fact was not, according to HMRC.
The Issues
The Society argued that Mr Beasant was not entitled to any valuable benefit because he was only entitled to any such sum as part of the nil-rate sum which has not been used up by the other chargeable gifts. The amounts in the non-charitable gifts in clauses 5 to 8 obviously exceeded £325,000.
Mr Beasant argued that the true construction of the Will, in light of admissible extrinsic evidence as to intention, was that the gift was clearly that he should get a tax free sum of £325,000.
Mr Beasant sought permission to rely on a witness statement from Mr Vučićević giving evidence of previous instructions to draft wills and the instruction to the draft the present will and it’s surrounding circumstances.
This was refused by Chief Master Shuman (on 5 February 2021) and the construction of the Will decided in the Society’s favour (on 17 August 2021). Chief Master Shuman concluded that the Will itself was not ambiguous on the face of it or by reference to extrinsic circumstances.
If I step back and look at the evidence before me and what is suggested by Mr Jones, it is clear to me that the desire for IHT efficiency was subordinated to the deceased’s desire to gift shares and the flat to the first defendant. That does not mean that the legacy in clause 4 is in any way ambiguous. What it does reveal is that the deceased understood the IHT position and the value of her assets, and that the drafting of clause 4 is consistent with that so that no ambiguity arises that would enable Mr Jones to pass through gateway (c), and I do not admit the evidence of the will drafter in this case.
Mr Beasant appealed and the matter was heard by Sir Anthony Mann. The two issues to be decided were:
- (a) Is the will ambiguous on its face;
- (b) If not, is it ambiguous in the light of the surrounding circumstances – was the Master correct in holding that it was not?
The Appeal
What does the word ‘ambiguous’ therefore mean?
The judge held that there was ambiguity when words in the Will are capable of having two or more meanings.
Mr Beasant argued that whilst there was no ambiguity in the use of words, there was ambiguity in the effect of the words used.
Whilst the judge accepted this wider concept, he considered that one still has to identify an ambiguity on the face of the language of the will under section 21(1)(b)
The judge concluded that:
Mr Smith’s case under this head fails because he has not demonstrated any language in the will, and particularly in clause 4, which is ambiguous. The words of the gift make sense as a matter of English, and have only one meaning in themselves and in a fiscal context. When placed in the context of the rest of the will they still have only one meaning – they do not, of themselves, bear an alternative one. Mr Smith’s case depends on what is meant by “Nil-Rate Sum”, as he himself said. The problem for him is that that sum is clearly defined in the will. If one looks at that definition it is clear enough, and unambiguous.
The evidence from Mr Vučićević’s witness statement which was admissible included:
- (i) Mr Vučićević said to the testatrix that she could give £325,000 to Mr Beasant free of tax and that this nil-rate sum could be increased in line with any increases in the nil rate band over time.
- (ii) Mr Vučićević reminded his client that due to the nature and size of the legacies it was “kind of likely” that there would be some tax on assets over £325,000.
- (iii) The deceased was advised by Mr Vučićević that his rough assessment was that £180,000 to £190,000 IHT would be chargeable on just the gifts to Mr Beasant, and the deceased said she did not mind that this would be borne by the charities. He provided the basis of his calculation – Mr Baxter satisfied me that this evidence was inadmissible at this stage of the pathway through section 21. The relevant attendance note records that Mr Vučićević noted that this was a significant departure from a previous will.
- (iv) Mr Vučićević looked for a template for what came to be clause 4 and believes he must have used a template from Lexis Nexis. He did not believe he had used such a template before.
- (v) An attendance note of 27th June 2016 records that the testatrix said that Mr Beasant was very prominent in her life and she wished to provide for him.
Mr Beasant’s case was that the evidence showed a misunderstanding as how inheritance tax works because if the Society’s interpretation was adopted, the inheritance tax payable was between £60,000 and £80,000. Mr Vučićević’s calculation of £180,000 to £190,000 of inheritance tax was on the basis that Mr Beasant would get £325,000 as a tax free gift first.
However the judge decide that this error on Mr Vučićević’s part still did not give rise to ambiguity.
The appeal was therefore dismissed.
Final Words
The court did confirm that the error in calculation of inheritance tax could have potentially worked if a claim for rectification under s20 of the 1982 Act (as in Marley v Rawling) had been advanced, but it was not.
Smee & Ford have produced data which shows that the total value of charitable estates in the UK could reach £20 billion by the end of 2022.
The nil rate band has been set at £325,000 since 2009 and is set to remain at that level until 2026, and may be extended to 2028.
The amount of inheritance payable on the chargeable parts of an estate is 40%. This reduces to 36% if you leave at least 10% of the value of your estate which exceeds the nil rate bands to charity.
It is clear from the above that tax planning is very important as most estates usually consisting of property will exceed the nil rate band and will be subject to substantial tax liabilities.
The clause used in Beasant is not uncommon in practice to give the majority of the estate to exempt beneficiaries (charities) and to give a tax free sum to a non-exempt beneficiary.
However, Beasant has shown that the threshold for s21 of the 1982 Act is high, and the courts are reluctant to depart from actual words used in a Will, so you must be clear in the language used to ensure intentions are clear to have the effect intended, especially for tax planning purposes, failing which there will be serious repercussions. For Mr Besant this was the difference between a gift of £0 and a gift of £325,000.
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